Gujarat High Court
Dhairyasinh P Rajda - Managing Owner vs O L Of M/S Ahmedabad Manufacturing & ... on 27 October, 2015
Author: Vipul M. Pancholi
Bench: Vipul M. Pancholi
O/COMA/371/2009 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
COMPANY APPLICATION NO. 371 of 2009
In COMPANY PETITION NO. 157 of 1995
[On note for speaking to minutes of order dated 29/09/2015 in
O/COMA/371/2009 ]
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DHAIRYASINH P RAJDA - MANAGING OWNER....Applicant(s)
Versus
O L OF M/S AHMEDABAD MANUFACTURING & CALICO PTG MILLS CO
LTD & 12....Respondent(s)
==========================================================
Appearance:
MR SACHIN D VASAVADA, ADVOCATE for the Applicant(s) No. 1
MR BJ TRIVEDI, ADVOCATE for the Respondent(s) No. 3
MR HEMANG M SHAH, ADVOCATE for the Respondent(s) No. 8
MR JT TRIVEDI, ADVOCATE for the Respondent(s) No. 3
MS AMEE YAJNIK, ADVOCATE for the Respondent(s) No. 1
MS JIGNASA B TRIVEDI, ADVOCATE for the Respondent(s) No. 3
NOTICE SERVED for the Respondent(s) No. 4 - 7 , 9 - 13
SERVED BY RPAD - (N) for the Respondent(s) No. 2
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CORAM: HONOURABLE MR.JUSTICE VIPUL M. PANCHOLI
Date : 27/10/2015
ORAL ORDER
Learned advocate for the respondent No.3 has filed this note for speaking to minutes. However, thereafter the respondent No.3 has already filed review application and therefore this note for speaking to minutes does not survive. Accordingly, the same is disposed of.
Page 1 of 2 HC-NIC Page 1 of 34 Created On Wed Oct 28 02:09:33 IST 2015 1 of 34 O/COMA/371/2009 ORDER (VIPUL M. PANCHOLI, J.) ANKIT Page 2 of 2 HC-NIC Page 2 of 34 Created On Wed Oct 28 02:09:33 IST 2015 2 of 34 O/COMA/371/2009 CAV JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD COMPANY APPLICATION NO. 371 of 2009 In COMPANY PETITION NO. 157 of 1995 FOR APPROVAL AND SIGNATURE:
HONOURABLE MR.JUSTICE VIPUL M. PANCHOLI ========================================================== 1 Whether Reporters of Local Papers may be allowed to see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy of the judgment ?
4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India or any order made thereunder ?
========================================================== DHAIRYASINH P RAJDA - MANAGING OWNER....Applicant(s) Versus O L OF M/S AHMEDABAD MANUFACTURING & CALICO PTG MILLS CO LTD & 12....Respondent(s) ========================================================== Appearance:
MR SACHIN D VASAVADA, ADVOCATE for the Applicant(s) No. 1 MR BJ TRIVEDI, ADVOCATE for the Respondent(s) No. 3 MR HEMANG M SHAH, ADVOCATE for the Respondent(s) No. 8 MR JT TRIVEDI, ADVOCATE for the Respondent(s) No. 3 MS AMEE YAJNIK, ADVOCATE for the Respondent(s) No. 1 MS JIGNASA B TRIVEDI, ADVOCATE for the Respondent(s) No. 3 NOTICE SERVED for the Respondent(s) No. 4 - 7 , 9 - 13 SERVED BY RPAD - (N) for the Respondent(s) No. 2 ========================================================== CORAM: HONOURABLE MR.JUSTICE VIPUL M. PANCHOLI Page 1 of 32 HC-NIC Page 3 of 34 Created On Wed Oct 28 02:09:33 IST 2015 3 of 34 O/COMA/371/2009 CAV JUDGMENT Date: 29/09/2015 CAV JUDGMENT
1. The applicant has taken out the judges summons, wherein, he has prayed for the following reliefs:
"1. To please direct the Official Liquidator to return the peaceful and vacant possession of Godown no.1 bearing house no.6/B, Old Hanuman, 2nd Cross Lane, Kalbadevi, Mumbai - 400 002 as the said property is not used by company since December, 1994 and the Company and the Liquidator are in arrears of rent till today.
2. Please direct the Liquidator to pay the rent to the tune of Rs.570/ P.M. with effect from 1/12/1994 till today and continue to pay the same till the vacant and peaceful possession of the subject property is returned to the applicant. The arrears of rent may be directed to be paid with 12% interest.
3. Your Lordships may be pleased to quash and set aside the order dated 10072009 and further be pleased to direct the OL to remove the seals already applied on the premises of present Applicant on 10072009."
2. Heard learned advocate Mr.Sachin D. Vasavada for the applicant, learned advocate Ms.Amee Yajnik for respondent No.1, learned advocate Mr.J.T.Trivedi for respondent No.3 and learned advocate Mr.Hemang Shah for respondent No.8.
3. Learned advocate Mr.Sachin Vasavada appearing for Page 2 of 32 HC-NIC Page 4 of 34 Created On Wed Oct 28 02:09:33 IST 2015 4 of 34 O/COMA/371/2009 CAV JUDGMENT the applicant submitted that the property in question was owned by ancestors of the applicant. Great grandfather viz. Morarji Vallabhji Damji Rajda with his two brothers Mr.Khimji Jayram Damji Rajda and Mr.Meghji Jayram Damji Rajda had purchased the property in question in the year 1886 by way of registered sale deed. Grandfather of the applicant viz. Morarji Vallabhji Damji Rajda had 1/2 share in the immovable property. Subsequently, in the year 1923, by way of conveyance deed dated 11.09.1923 made between Mr.Meghji Jayram Damji and his son Jethabhai Meghji Jayram as vendors of one part and father of the applicant Mr.Parshottam Thakarshi Morarji Rajda and his three brothers as purchasers of other part purchased 1/4th share of said immovable property. Accordingly father of applicant and his three brothers became entitled to 3/4th share in the property in question. Thereafter also, by virtue of consent decree passed by Bombay High Court in Suit No.2774 of 1948 another undivided 1/4th share of Mr.Khimji Jayram Damji came to father of applicant and his three brothers acquired 100% share in the property. It is further submitted by learned advocate Page 3 of 32 HC-NIC Page 5 of 34 Created On Wed Oct 28 02:09:33 IST 2015 5 of 34 O/COMA/371/2009 CAV JUDGMENT for the applicant that on demise of all the brothers of father of the applicant as well as the death of father of the applicant, the property in question vest in 1) Amita Rajda, 2) Madhavi Rajda, 3) Jayant G. Rajda, 4) Muliben G. Rajda, 5) Hemen J. Rajda, 6) Dhairyasinh P. Rajda and 7) Dipti J. Rajda. Thus, all these persons are the coowners of the property in question. It is the case of the applicant that being elder male member in the family, he is managing the affairs of all the properties as one of the coowners and for and on behalf of all the coowners. In this background of the facts of the present case, learned advocate for the applicant submits that Morarji Vallabhji Rajda was the owner of the property in question at the relevant time. Thereafter the said property was given by him on monthly rental basis somewhere in the year 1950 to M/s. Ahmedabad Manufacturing & Calico Ptg. Mills Co. Ltd. When the company was going concern, at that time, ancestors of the applicant used to receive rent regularly from the said company and used to issue rent receipts in the name of the said company. Learned advocate for the applicant has referred to and relied upon the rent Page 4 of 32 HC-NIC Page 6 of 34 Created On Wed Oct 28 02:09:33 IST 2015 6 of 34 O/COMA/371/2009 CAV JUDGMENT receipts issued by the firm of the applicant. At this stage, learned advocate Mr.Vasavada appearing for the applicant submitted that the company in liquidation abruptly stopped paying the rent to the applicant and therefore somewhere in the year 199394, notice was given by the applicant to the said company. The company also gave the reply. However, at that stage, the company was not wound up and the proceedings were pending before BIFR.
4. Learned advocate Mr.Vasavada appearing for the applicant further submitted that the property in question was used as godown and rent per month was fixed at Rs.570/. The aforesaid company paid the rent regularly till December 1994. Thereafter it stopped paying the rent with effect from 01.01.1995. Thereafter, said company was ordered to be wound up by this Court on 16.07.1998. Thereafter, respondent No.1the Liquidator had not taken over possession of the property in question till June 2009 and did not pay any kind of rent of the said premises. He further contended that the applicant received letter from the office of respondentOfficial Liquidator on 02.07.2009 for the purpose of verification of the godown and the Page 5 of 32 HC-NIC Page 7 of 34 Created On Wed Oct 28 02:09:33 IST 2015 7 of 34 O/COMA/371/2009 CAV JUDGMENT inventory lying therein. Thereafter, on 10.07.2009, officials of Official Liquidator visited the premises in question; carried out survey and inspection of the property in question in presence of applicant and also recorded the minutes of the same. Thereafter, possession of the said premises was taken over and seals were applied.
5. Learned advocate Mr.Vasavada for the applicant further referred to the report given by the concerned solicitor alongwith his legal opinion to the Official Liquidator, which is produced at pages 152 and 153 of the compilation. After referring to the same, it is contended that as per the said report, applicant is one of the coowner and is representing all the coowners. It is further stated in the report that company in liquidation is in occupation of the premises as a tenant and not as lessee. Similarly, another advocate appointed by the Official Liquidator has submitted the title clearance report after verifying the revenue records. Learned advocate for the applicant has placed reliance upon the said report, wherein also, at page 251 of the compilation, the said advocate has concluded that the company in Page 6 of 32 HC-NIC Page 8 of 34 Created On Wed Oct 28 02:09:33 IST 2015 8 of 34 O/COMA/371/2009 CAV JUDGMENT liquidation does not have any title to the property in question. At this stage, learned advocate for the applicant also referred and relied upon the revised report dated 26.12.2014 given by the advocate of the Official Liquidator, which is produced at page 309 of the compilation. In the said revised report also, concerned advocate of the Official Liquidator has concluded that the property in question is not under the ownership of company in liquidation and the said company does not have any title to the property in question. Thus, after referring to the documentary evidence on record, learned advocate Mr.Vasavada appearing for the applicant submitted that applicant is entitled to claim for the reliefs prayed for in this judges summons and therefore this application be allowed.
6. Learned advocate for the applicant in support of his aforesaid contentions has placed reliance upon decision rendered by the Hon'ble Supreme Court in the case of Ravindra Ishwardas Sethna and another v. Official Liquidator, High Court, Bombay and another, reported in 1983(4) SCC 269 and more particularly, paragraphs No.5, 6, 9, and 11.
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7. Learned advocate for the applicant thereafter placed reliance upon the order dated 02.05.2012 passed by this Court in the case of Nila Infrastructures Ltd. v. Official Liquidator of Advantage Global BPO Pvt. Ltd., passed in Company Application No.375 of 2011 in Company Petition No. 170 of 2009 and more particularly the observations made in paragraphs No.11, 14, 15 and
17.
8. Learned advocate for the applicant has thereafter relied upon the order dated 14.07.2011 passed by this Court in case of Rachna S Natani v. The Office of the Official Liquidator of Neptune Equipment, passed in Company Application No.356 of 2011 in Company Petition No.91 of 2010, particularly the findings recorded by this Court in paragraph No.10 of the said order.
9. Lastly, learned advocate for the applicant has placed reliance upon the decision rendered by this Court in the case of Visvesvaraya Industrial Research and Devt. Center v. O.L. Of Rustom Mills and Ind. Ltd. and Anr., reported in 2004 (50) SCL 594 Guj. Learned advocate has relied upon observations made in paragraphs No.19 and 20 of the said judgment. Page 8 of 32 HC-NIC Page 10 of 34 Created On Wed Oct 28 02:09:33 IST 2015 10 of 34 O/COMA/371/2009 CAV JUDGMENT
10. On the other hand, learned advocate Ms.Amee Yajnik appearing for the Official Liquidator submitted that M/s. Ahmedabad Manufacturing & Calico Ptg. Mills Co. Ltd. has been ordered to be wound up by this Court by an order dated 16.07.1998 passed in Company Petition No.157 of 1995 and the Official Liquidator attached to this Court has been appointed as liquidator of the said company. The Official Liquidator has been discharging his duties and functions as liquidator of the said Company since then. Official Liquidator received letter dated 12.06.2009 from Morarji Vallabhji Rajda informing that the aforesaid company has been occupying premises in question at monthly rent of Rs.570/. However, the said company failed and neglected to pay rent since 01.12.1994 and the said premises in question let out to the said company has not been used for the purpose for which it was let out since last many years and said premises is kept locked and unused and therefore requested to handover the vacant and peaceful possession of the premises in question. The Official Liquidator therefore vide his letter dated 02.07.2009 fixed up the schedule for taking over possession of Page 9 of 32 HC-NIC Page 11 of 34 Created On Wed Oct 28 02:09:33 IST 2015 11 of 34 O/COMA/371/2009 CAV JUDGMENT the said godown of the company in liquidation and owners of Morarji Vallabhji Rajda were requested to remain present at premises for handing over keys of the godown. In pursuance to the said letter, on 10.07.2009, Official Liquidator deputed an official from his office at the godown of the company in liquidation for the purpose of taking over possession. Learned advocate for the Official Liquidator thereafter submitted that as per the minutes recorded at the premises, it has been revealed that godown was in open condition without shutter being locked and inventory was prepared and accordingly possession of the godown premises in question was taken over by the officials of the Official Liquidator and the said premises in question were sealed and locked. Thereafter learned advocate Ms.Yajnik appearing for Official Liquidator submitted that statement of affairs has not been filed by exmanagement of the company as well as they have not recorded statement under Rule 130 of Company Court Rules and therefore due to nonavailability of details, the Official Liquidator was not having information about the premises in question.
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11. Learned advocate for the Official Liquidator thereafter contended that applicant is one of the coowners and this application is filed by the applicant only without joining the other coowners as party respondents. This application is filed after many years and till 2009, the applicant has not made any correspondence and demanded the rent from the Official Liquidator or possession of the property in question was demanded by the applicant. This Court therefore may not decide the tenancy rights in the present proceedings. The applicant has to file a suit before the competent Court after taking permission of this Court under the provisions of the Companies Act, 1956. The property in question is not put for sale by the Official Liquidator.
12. Learned advocate Mr.J.T.Trivedi appearing for the respondent No.3 at the outset submitted that present application is not maintainable. Applicant is not the only owner of the property in question. Applicant has not joined other owners in the present proceedings for establishing the tenancy rights. The applicant has to approach before the concerned Court at Mumbai and for that purpose only, applicant has to obtain the Page 11 of 32 HC-NIC Page 13 of 34 Created On Wed Oct 28 02:09:33 IST 2015 13 of 34 O/COMA/371/2009 CAV JUDGMENT permission under Section 446 of the Companies Act of 1956 of this Court.
13. Learned advocate Mr.J.T.Trivedi appearing for the respondent No.3 further contended that the property in question is the leasehold property of the company in liquidation and leasehold rights held by the tenant are valuable rights, more particularly, in a megacity including Mumbai and are 'assets' for the purpose of winding up and therefore the possession of the property in question cannot be given to the applicant. The respondent No.3 is one of the secured creditors. Learned advocate further contended that the Official Liquidator be directed to pay off the rent which are due to the landlord and go on paying the same regularly from time to time and ensure that the possession of the property in question is not parted with or otherwise lost. Learned advocate has relied upon provisions contained in Section 535 of the Companies Act.
14. Learned advocate Mr.Trivedi has placed reliance upon the decision rendered by the Hon'ble Supreme Court in case of Smt. Nirmala R. Bafna/Kershi Shivax Page 12 of 32 HC-NIC Page 14 of 34 Created On Wed Oct 28 02:09:33 IST 2015 14 of 34 O/COMA/371/2009 CAV JUDGMENT Cambatta and Others v. Khandesh Spinning and Weaving Mills Co. Ltd. and another/official liquidator and others, reported in AIR 1993 SC 1380, particularly on paragraphs No.19 and 20, which reads as under:
"19. In view of the above facts and circumstances, we are of the opinion that the directions made by the Division Bench were not really warranted at this stage. The said directions have the effect of dispossessing the appellant from the said premises at an interlocutory stage. The character of her possession has also been altered she is now permitted to be in occupation of a portion of the flat as the agent of the liquidator. These directions, in our opinion, were not really warranted, at any rate, at this stage of the proceedings, when the rights of the appellant are yet to be adjudicated upon. One important circumstance, which was not present before the Division Bench and which has been brought to our notice is the consent of the landlord to the subtenancy in her favour. In the light of all the circumstances, we are of the opinion that the directions extracted hereinbefore in para were really not called for, at the interlocutory stage. However, having regard to the particular facts and circumstances of this case, and with a view to safeguard the rights of the Company in the event of dismissal of the aforesaid suit, we direct the appellant to furnish security in a sum of Rupees 5 lakhs by way of a Bank guarantee to the satisfaction of the learned company Judge of the Bombay High Court, within two months from today. The amount already deposited by the appellant in pursuance of the order under appeal shall continue to lie in court. The said amount and the security furnished by her in pursuance of this order shall be subject to the decision in the appellant's suit, now transferred to the Bombay High Court.Page 13 of 32
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20. We make it clear that this is only an interim arrangement pending the suit and shall not reflect upon or affect the merits of the suit or any of the rights and contentions of the parties. In case the appellant fails to furnish the security as directed herein, within the time prescribed, the directions of the Division Bench will revive and come into operation forthwith."
15. Learned advocate Mr.Hemang Shah appearing for the respondent No.8 has supported the arguments canvassed on behalf of learned advocate for the Official Liquidator as well as learned advocate for the respondent No.3.
16. Learned advocate Mr.Sachin Vasavada appearing for the applicant in rejoinder mainly contended that though the applicant has not joined other coowners as party respondents or coapplicants in the present application, all the coowners are aware about the present proceedings and being elder member of Rajda family as well as Managing Owner of the property in question, all owners have reposed confidence on the applicant and therefore the other coowners have filed undertakings and power of attorney in favour of the applicant reposing confidence on him to recover the possession of the property in question from the Page 14 of 32 HC-NIC Page 16 of 34 Created On Wed Oct 28 02:09:33 IST 2015 16 of 34 O/COMA/371/2009 CAV JUDGMENT Official Liquidator. Release deed is also executed in favour of the applicant releasing their shares in favour of the applicant. The said documents are produced at page 163 to 227 of the compilation. He therefore submitted that the present application is maintainable and in view of the submissions canvassed by him, the applicant is entitled for all the reliefs prayed for in the application.
17. I have considered the arguments canvassed on behalf of learned advocates for the parties. I have also gone through the material/documents produced on record. I have also gone through the decisions relied upon by the learned advocates for the parties. From the record, it has emerged that the applicant is one of the coowners of the property in question. The other coowners have filed an undertaking and power of attorney in favour of the applicant, which are produced on record. The other coowners are supporting the applicant and therefore though they are not joined as parties in the present proceedings, because of the undertakings as well as power of attorney given by them, the present application is required to be considered on its own merits. It has Page 15 of 32 HC-NIC Page 17 of 34 Created On Wed Oct 28 02:09:33 IST 2015 17 of 34 O/COMA/371/2009 CAV JUDGMENT further emerged that the property in question was given on rent by the ancestors of the applicant to M/s. Ahmedabad Manufacturing & Calico Ptg. Mills Co. Ltd. The said property was used as a godown by the said company. The said company has paid the rent upto December 1994 regularly. However, the said company has stopped giving rent to the landlord from 01.01.1995. Notice was therefore issued to the said company; to which reply was given by the said company in the year 1995. The said documents are on record. It was informed to the landlord by the said company that the company is before BIFR. Thereafter the said company was ordered to be wound up by an order of this Court passed on 16.07.1998, thereby the Official Liquidator attached to this Court has been appointed as liquidator of the said company. The said liquidator has taken over the possession of the assets and properties of the company in liquidation. However, the exmanagement of the company in liquidation had not submitted statement of affairs, nor the statement was recorded under Rule 130 of the Company Court Rules. Thus, admittedly the Official Liquidator had not taken over the possession of the Page 16 of 32 HC-NIC Page 18 of 34 Created On Wed Oct 28 02:09:33 IST 2015 18 of 34 O/COMA/371/2009 CAV JUDGMENT property in question till June 2009 as per the report filed by the Official Liquidator. The Official Liquidator received letter from the landlord on 12.06.2009, wherein, the landlord demanded the rent and requested the Official Liquidator to handover the vacant and peaceful possession of the property in question. At that time, Official Liquidator came to know that the property in question was given on rent to the company in liquidation. He therefore initiated the process for taking over the possession of the property in question. His officials took over the possession on 10.07.2009 after preparing the inventory and minutes and applied seals on the property in question, since then, the Official Liquidator is having possession of the property in question.
18. From the reports and opinion given by the solicitors and advocates appointed by the Official Liquidator, it is clear that the company in liquidation is in occupation of the premises in question as a tenant and not as a lessee. The first report was given on 10.12.2011 by the solicitor is produced at page 152 of the compilation. Thereafter, another advocate was appointed by the Official Page 17 of 32 HC-NIC Page 19 of 34 Created On Wed Oct 28 02:09:33 IST 2015 19 of 34 O/COMA/371/2009 CAV JUDGMENT Liquidator for giving the title search report. The said advocate appointed by the Official Liquidator submitted his report on 10.10.2014, which is produced at page 246 of the compilation. The advocate appointed by the Official Liquidator has concluded that the company in liquidation does not have any title to the property in question. Said advocate once again gave revised report on 26.12.2014, copy of which is placed on record at page 309. The advocate of the Official Liquidator has given his conclusion as under:
IV. CONCLUSION
6. That upon thorough scrutiny of the documents available and also on basis of the information gathered from the office of the concerned SubRegistrar it appears that the Said Property namely House No.6/8, Old Hanuman Lane, 2nd Cross Lane, Kalbadevi, Mumbai is not under the ownership of M/s. Ahmedabad Manufacturing & Calico Printing Mills Company Ltd (In Liquidation). Hence the Company in liquidation that is M/S. AHMEDABAD MANUFACTURING & CALICO PRINTING MILLS COMPANY LTD (IN LIQUIDATION) DOES NOT HAVE ANY TITLE TO THE SAID PROPERTY.
19. Thus, from the aforesaid reports placed on record, it is clear that the company in liquidation was not owner of the property in question, nor the said property was given on lease by the landlord to the company in liquidation. From the rent receipts as Page 18 of 32 HC-NIC Page 20 of 34 Created On Wed Oct 28 02:09:33 IST 2015 20 of 34 O/COMA/371/2009 CAV JUDGMENT well as other documentary evidence produced on record, it is clear that the landlords have given the property in question to the aforesaid company on rent and company in liquidation was the tenant. Rent was paid regularly upto December 1994 by the aforesaid company. Thus, when the property in question is not of ownership of the company in liquidation, nor the same was given on lease to the company in liquidation, the Official Liquidator cannot be permitted to contend that he will retain the possession of the property in question.
20. Thus, in view of the aforesaid facts of the present case, the question which is required to be decided by this Court is whether this Court can give direction to Official Liquidator to handover the vacant and peaceful possession of the property in question to the applicant and other coowners or applicant can be relegated to file proceedings before the Court at Mumbai, taking up rent matters.
21. For deciding this question, decisions relied upon by the learned advocate for the applicant, rendered by the Hon'ble Supreme Court and this Court, are required to be kept in mind.
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22. In case of Ravindra Ishwardas Sethna (supra), the Hon'ble Supreme Court has held and observed in paragraphs No.5, 6, 9, and 11 as under:
"5. The Company is already ordered to be wound up by the order of the Court dated September 23, 1974. The name of the Company clearly spells out the objects for which it was formed. The name of the Company was Chit Center Pvt. Ltd. The Company had undertaken the business of floating prize chit schemes. The nature of business in modern times is sufficiently well known and does not require elaboration. The Company had set up an office for carrying on this business and the office was set up in premises taken on lease. The business of the Company of floating prize chit schemes came to a stand still, the moment it was ordered to be wound up. It is not the Liquidators' case that he is carrying on business of the Company which is being wound up with the permission of the Court under sec. 457 of the Companies Act.
6. Sec. 457 enables the Liquidators in a windingup by the Court, with the sanction of the court, amongst others, to carry on the business of the Company so far as may be necessary for the beneficial winding up of the Company. If the floating of the schemes for prize chits came to a stand still, the moment the Company was ordered to be wound up, there was no question of the business of the Company to be carried on by the Liquidator and that too for the beneficial winding up of the Company. Whether to carry on the business of the Company which is ordered to be wound up is not a matter left to uncontrolled discretion of the Liquidator. The Liquidator undoubtedly has the power under sec. 457 to carry on the business of the Company, if it is necessary Page 20 of 32 HC-NIC Page 22 of 34 Created On Wed Oct 28 02:09:33 IST 2015 22 of 34 O/COMA/371/2009 CAV JUDGMENT for the beneficial winding up of the Company. And this power can be exercised not at the discretion of the Liquidator but with the sanction of the court. Reliance was placed on In re Batey; Ex parte Emmanuel(1) wherein it was observed that the power to carry on the business can only be exercised for the purpose of the beneficial winding up of the Company not because the creditors may think that the business will be a very profitable one and that the longer it is carried on the better it will, and that they will make a profit from it. Reliance was also placed on Panchmahals Steel Ltd. v. Universal Steel Traders,(2) wherein it was held that amongst others' the Liquidator with the sanction of the court has the power to carry on business of the Company so far as may be necessary for the beneficial winding up of the Company. It is true that the Liquidator cannot carry on business for any other purpose except the purpose for which the power is conferred upon him, namely, for the beneficial winding up of the Company. He cannot carry on any business on the ground that it would be beneficial to the creditors or the contributors. The jurisdictional fact which must be ascertained and established for the exercise of the power by the Liquidator to carry on business of a Company, is that carrying on of the business of the Company is necessary for the beneficial windingup of the Company.' However, the language of the section being unambiguous and clear, one does not need the assistance of precedents to come to a conclusion that the Liquidator with the sanction of the court can carry on the business of the Company only to the extent that such carrying on of the business is necessary for the beneficial windingup of the Company.Page 21 of 32
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...
9. The Company was a tenant or a lessee of the premises of which the appellants are the landlords. The date of the commencement of the lease is not made available to us, but it is also not claimed on behalf of the Liquidator that there was lease of long duration. If so, the Company was a statutory tenant under the Rent Act. The statutory tenancy confers the right to be in possession but if the tenant does not any more require use of the premises, the provisions of the Rent Act and especially Secs. 13 and 15 completely prohibit giving the possession of the premises on licence or on sublease. The learned Company Judge therefore spelt out a third way of parting with the possession by the Liquidator, namely, that he may give the premises to the second respondent under a caretaker's agreement. This caretaker's agreement appears to us to be an euphemism for collecting compensation which is nothing else but the charge for use and occupation of the premises exclusively by the second respondent. Whether it is sublease or licence does not call for decision. For the purpose of the present proceedings it is enough for us to say that the Company and its Liquidator no more needs the premises for its own use. The Liquidator does not need the use of the premises for carrying on the winding up activities of the Company because he sought direction for parting with possession. We are not impressed by the learned Judge saving that there is some third mode of parting with possession of the premises exclusively in favour of the second respondent, namely, caretaker's agreement which appears to us to be a facade to wriggle out of the provisions of the Rent Act. The Rent Act is no doubt enacted for protecting the tenants, and indisputably its Page 22 of 32 HC-NIC Page 24 of 34 Created On Wed Oct 28 02:09:33 IST 2015 24 of 34 O/COMA/371/2009 CAV JUDGMENT provisions must receive such interpretation as to advance the protection and thwart the action of the landlord in rendering tenants destitutes. But this does not imply that the court should lend its aid to flout the provisions of the Rent Act so as to earn money by unfair and impermissible use of the premises. And that is what the Liquidator sought to do and the Court extended its help to the Liquidator. This, in our opinion, is wholly impermissible. The learned Company Judge could not have authorised the Liquidator to enter into such an agreement and therefore his order is liable to be set aside.
...
11. The learned Company Judge could not have permitted holding on to possession of the premises, not needed for efficiently carrying on winding up proceedings. The only course open to him was to direct the Liquidator to surrender possession to landlords and save recurring liability to pay rent. Before we part with this judgment, we must take note of one submission that was made on behalf of the respondent. It was said that the creditors and members of the Company in liquidation have suffered huge losses and if the Liquidator would have been permitted to enter into an agreement with the second respondent, it would fetch a steady income which would have gone towards mitigating the hardships of the creditors and members of the Company. The accounts of the Company in liquidation were not brought to our notice nor can we permit violation of law howsoever laudable the object of such act may be. However, we must record a statement made on behalf of the appellants when the aforementioned argument was being examined by us. It was said that the second respondent was to pay Rs. 2,500 per month as compensation under the directions of the Court. That would have fetched the Page 23 of 32 HC-NIC Page 25 of 34 Created On Wed Oct 28 02:09:33 IST 2015 25 of 34 O/COMA/371/2009 CAV JUDGMENT Liquidator an income of Rs.30,000 per year and deducting the costs, expenses and taxes, the Liquidator may have been able to realise at least Rs. 25,000 per year. The learned counsel for the appellants submitted thatadopting a multiplier of six, assuming that roughly six years was the period for which the agreement would have been renewed from year to year, the appellants unconditionally offered to deposit Rs. 1,50,000 in the Court to be distributed at the discretion of this Court amongst the creditors of the Company in liquidation.
We recorded this offer in our order disposing of the appeal. We are now informed that the amount has been deposited. The Liquidator is accordingly directed to submit the list of the creditors of the Company with the names, addresses and claims admitted by him within 4 weeks from today when the matter will appear again on board for directions."
23. In case of Nila Infrastructures Ltd. (supra), this Court has held and observed in paragraphs No.11, 14, 15 and 17 as under:
"11. In response to the notice issued by this Court, the Official Liquidator filed report dated 12.07.2011. The Official Liquidator, in the said report, has submitted that the inventory and valuation report by the Government approved valuer is received and has also stated that the Official Liquidator has appointed M/s.Roshan Desai & Co. Advocates and Solicitors for verifying the title of the property. In fact, by the said report, in pursuance to the order dated 01.02.2011 passed in Official Liquidator's Report No.144 of 2010, this Court (Coram:
Anant S. Dave, J.), has undertaken the exercise of inventory and valuation reports. The Official Liquidator thereafter, on receipt of the title report dated 16.08.2011 Page 24 of 32 HC-NIC Page 26 of 34 Created On Wed Oct 28 02:09:33 IST 2015 26 of 34 O/COMA/371/2009 CAV JUDGMENT from M/s.Roshan Desai & Co. Advocates and Solicitors, has filed further report dated 14.12.2011. The Official Liquidator, in the said report, has observed thus: "2. Thereafter, Roshan Desai & Co., Advocates & Solicitors submitted a letter dated 16.08.2011 informing that they had perused copy of lease Agreement dated nil registered with the Sub Registrar of Assurances under Serial No.5464 on 31st March, 2008 and on perusal of the lease agreement reveals that premises on 8th Floor & 9th Floor chargeable carpet area 21,840 sq.ft. is permitted to be occupied and used as Licensee by Eleshwar Cooperative Housing Society Ltd. In the opinion of the said Advocate/Solicitor this is only an agreement and to have title to the said office Lease Deed should have been executed and registered.
Only right available to the company in liquidation as licensee is to have a Lease Deed executed in favour of the lessee and in their opinion Company in liquidation has no title. A copy of the letter dated 16.08.2011 is annexed herewith and marked as "AnnexureB".
3. Thereafter, the Official Liquidator placed the said letter dated 16.08.2011 before this Hon'ble Court and the Hon'ble Court directed the Official Liquidator to place detailed title search report of the above Company (In Liqn.) In this connection, the Official Liquidator vide letter dated 12.09.2011 requested Roshan Desai & Co., Advocate & Solicitors to submit detailed title search report of the above Company (In Liqn.) on or before 19.09.2011. Roshan Desai & Co. vide letter dated 15.09.2011 informed the Official Liquidator that they have caused taken searches to be taken of the Revenue Records and SubRegistrar of Assurance. Roshan Desai & Co. intimated it is not possible for them to furnish report by 19th September, 2011. A copy of letter Page 25 of 32 HC-NIC Page 27 of 34 Created On Wed Oct 28 02:09:33 IST 2015 27 of 34 O/COMA/371/2009 CAV JUDGMENT dated 12.09.2011 and 15.09.2011 are annexed herewith and marked as "Annexure C" (Colly.).
4. Thereafter, Roshan Desai & Co., Advocate & Solicitor vide letter dated 20.10.2011 submitted their report and on perusal of the report it is observed as under:
- After perusal of the records and mutation entry can opine that title to the land is of Sambhav Media Ltd., Eleshwar Bodakdev Cooperative Housing Society Ltd. or Pearl Energy & Infrastructures Ltd.
- It is also stated that division of Eleshwar Cooperative Housing Society Ltd., Vejalpur and on the order dated 22nd December, 1999 passed by the Revenue Department, Gandhinagar.
- However, It is clear that Nila Infrastructures Ltd. applicant is not the owner of the land and it is also not clear who is the owner of the construction. That there is no document or evidence to show how Pearl Stockholdings Pvt. Ltd. ownership." ...
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14. Considering the aforesaid factual background, it transpires that initially, the Company under liquidation entered into a lease agreement with Pearl Stockholdings Private Limited, who happened to be the owner of the premises situated on 8th floor as well as the premises situated on 9th floor being Office Nos.9A and 9B. By registered lease agreement dated 31.03.2008, Pearl Stockholdings Private Limited - original lessor, came to be merged with Nila Infrastructure Limited, the present applicant on such scheme of arrangement being approved Page 26 of 32 HC-NIC Page 28 of 34 Created On Wed Oct 28 02:09:33 IST 2015 28 of 34 O/COMA/371/2009 CAV JUDGMENT by this Court in Company Petition No.5 of 2010 connected with Company Application No.426 of 2009 by order dated 29.06.2010.
15. Considering the report of title submitted by the Official Liquidator obtained from M/s.Roshan Desai & Co. Advocates & Solicitors as well as the copy of the title report dated 04.05.2000 given by M/s.H.Desai and Company and the opinion of title dated 04.01.2012 rendered by M/s.M.R. Bhatt and Associates Advocates, the applicant is the owner of the 9th floor in the premises in question. It appears that the ownership of the land belongs to Sambhav Media Limited (formerly known as Pearl Energy and Infrastructures Limited), which is evident from village Form No.7/12. It further appears that the ownership of construction of F.S.I. rights from 2nd floor to 9th floor is of one Eleshwar Bodakdev Commercial Cooperative Housing Society Limited and, by an allotment certificate dated 04.08.2001, the said society has allotted the premises in question i.e. Office Nos.9A and 9B being left Wing of 9th floor admeasuring about 4750 sq.fts. approximately to Pearl Stockholdings Private Limited, the original lessor. The share certificates have also been accordingly issued by the said society in the name of Pearl Stockholdings Private Limited. It further appears that by Entry dated 24.01.2011, in the records of the said society i.e. Eleshwar Bodakdev Commercial Co operative Housing Society Limited, the membership has been transferred in favour of the present applicant.
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17. In view of the above, the applicant being the owner of the premises in question, is entitled to get back the possession of the same."
24. In case of Rachna S Natani (supra), this Court Page 27 of 32 HC-NIC Page 29 of 34 Created On Wed Oct 28 02:09:33 IST 2015 29 of 34 O/COMA/371/2009 CAV JUDGMENT has held and observed in paragraph No.10 as under:
"[10] The Official Liquidator shall take inventory of the material/ movables belonging to the company in liquidation and draw a panchnama. The task of inventory shall be completed on or before 19th July 2011, panchnama is also to be drawn in respect of the said inventory. Thereafter, the applicant shall allot some spaces in the said premises to the Official Liquidator to store the movables and record in question until its disposal. The Official Liquidator shall keep all the movables and record the place in the premises provided by the applicant and take steps for disposal as may be found justified and expedient in the facts of the case. If need be, the Official Liquidator may take service of some valuer and take steps to dispose of the property as early as possible and preferably within a period of two weeks after taking inventory. The Official Liquidator, while removing the seal and handing over the possession of the premises to the applicant, get the receipt/ acknowledgment from the applicant regarding the possession which may be handed over and the applicant is directed to issue receipt/ acknowledgment to the Official Liquidator regarding taking over the possession of the premises."
25. In case of Visvesvaraya Industrial Research and Devt. Center (supra), this Court has held and observed in paragraphs No.19 and 20 as under:
"19. The Official Liquidator being custodia legis of the assets of the Company could not have assigned or transferred the leasehold right of the Company in the demised premises except in accordance with the terms of the lease agreement. The terms of the lease agreement clearly prohibits transfer or assignment of the leasehold right except with Page 28 of 32 HC-NIC Page 30 of 34 Created On Wed Oct 28 02:09:33 IST 2015 30 of 34 O/COMA/371/2009 CAV JUDGMENT the express permission of the Centre in writing. In the instant case, the Official Liquidator had sought direction of the Company Court to allow Dinesh Polyber and Hi Rel to continue in possession of the demised premises in violation of the terms of the lease agreement.
20. Further, as recorded hereinabove, Dinesh Polyber and HiRel have failed to comply with the terms and conditions of the assignment made in their favour by the Official Liquidator on 27th June, 1994. Therefore also, Dinesh Polyber and HiRel have no right to continue in possession of the demised premises and are required to hand over the possession thereof to the Official Liquidator."
26. Thus, in view of the aforesaid decisions rendered by the Hon'ble Supreme Court as well as this Court, in the facts and circumstances of the present case, when it is revealed from the record that the applicant is the coowner of the property in question, a property in question was given on rent by his ancestors to M/s. Ahmedabad Manufacturing & Calico Ptg. Mills Co. Ltd., which was thereafter taken into liquidation by an order passed by this Court in the year 1998 and when the reports given by the solicitors and the advocates of the Official Liquidator revealed that the property in question does not belong to the company in liquidation, the Official Liquidator is not having any Page 29 of 32 HC-NIC Page 31 of 34 Created On Wed Oct 28 02:09:33 IST 2015 31 of 34 O/COMA/371/2009 CAV JUDGMENT right to retain the possession of the said property. The applicant being coowner of the premises in question is entitled to get back the possession of the same.
27. The decision relied upon by the learned advocate Mr.J.T.Trivedi in the case of Smt. Nirmala R. Bafna/Kershi Shivax Cambatta and Others (supra), is not applicable to the facts and circumstances of the present case.
28. Thus, the Official Liquidator is hereby directed to handover peaceful and vacant possession of the property in question after removing the seal to the applicant and coowners, if any, within a period of eight weeks from the date of receipt of this order.
29. The Official Liquidator while removing the seal and handing over the possession of the premises in question to the applicant and other coowners, get the receipt/acknowledgment from the applicant and other coowners, regarding the possession which may be handed over and the applicant is directed to issue receipt/acknowledgment to the Official Liquidator regarding taking over the possession of the premises. Page 30 of 32 HC-NIC Page 32 of 34 Created On Wed Oct 28 02:09:33 IST 2015 32 of 34 O/COMA/371/2009 CAV JUDGMENT
30. However, so far as prayer of the applicant with regard to giving direction to the Official Liquidator to pay the rent to the tune of Rs.570/ per month with effect from 01.12.1994 till filing of the application and thereafter till the vacant and peaceful possession of the property in question is given to the applicant with interest is concerned, the said prayer is not entertained in view of the fact that the applicant has never demanded any rent from the Official Liquidator after the company was ordered to be wound up and after the appointment of the Official Liquidator. It is only on 12.06.2009 for the first time, the applicant has called upon the Official Liquidator to pay the rent and only on the receipt of the said communication, the Official Liquidator came to know about the fact that the company in liquidation was the tenant of the applicant and other landlords. As per the inventory and the minutes of the Panchnama of taking over the possession on 10.07.2009, the premises was open and it is the case of the applicant himself in the affidavit filed in support of the judges summons in paragraph No.4 that before the possession is taken over by the Official Liquidator, the property Page 31 of 32 HC-NIC Page 33 of 34 Created On Wed Oct 28 02:09:33 IST 2015 33 of 34 O/COMA/371/2009 CAV JUDGMENT in question was in fact in possession of the applicant and other coowners. Thus, the applicant is not entitled to get rent from the Official Liquidator as prayed for in the present proceedings.
31. With these observations and directions, this application is partly allowed and disposed of accordingly.
(VIPUL M. PANCHOLI, J.) After judgment is pronounced, learned advocate Mr.B.J.Trivedi requested that this order be stayed for a period of four weeks. Request is accepted. This judgment is stayed for a period of four weeks.
(VIPUL M. PANCHOLI, J.) ANKIT Page 32 of 32 HC-NIC Page 34 of 34 Created On Wed Oct 28 02:09:33 IST 2015 34 of 34