Skip to content


Official Liquidator Vs. Bhagwat Saran Garg and ors. - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtAllahabad High Court
Decided On
Case NumberCompany Application No. 8 of 1968 and Company Petition No. 13 of 1962
Judge
Reported in[1970]40CompCas657(All)
ActsCompanies Act, 1956 - Sections 446(2)
AppellantOfficial Liquidator
RespondentBhagwat Saran Garg and ors.
Appellant AdvocateA. Banerji, Adv.
Respondent AdvocateS.K. Dongre and ;Rajeshwari Prasad, Advs.
DispositionApplications allowed
Excerpt:
.....6. regarding this last plea, i am fully satisfied that in the present circumstances the official liquidator can legitimately ask the court to give a decision and issue directions under section 446(2) of the companies act, 1956, without the necessity of filing a regular suit against the lessees. 213 the supreme court, construing the precisely similar words used in section 45-b of the banking companies act, has observed that: ' 7. that was a case where the liquidator had served notice on a tenant, terminating his tenancy and calling upon him to vacate the land and hand over possession ;and it was held that on the failure of the tenant to comply, the liquidator was entitled to apply to the high court for relief under section 45-b and the high court could thereupon pass a decree..........of the lease and the official liquidator was not able to give them actual possession of the entire leased premises, they were entitled on this account to a deduction of rs. 2,180 per month from the agreed rent. it has further been suggested that the lessees are entitled to claim compensation from the official liquidator for the inconvenience and damage caused to them by the obstructive tactics of the allahabad bank which interfered with their peaceful enjoyment of the leased property. in addition, 'the lessees have pleaded that they are entitled to retain possession of the premises and cannot be dispossessed unless the official liquidator brings a regular suit for their ejectment.6. regarding this last plea, i am fully satisfied that in the present circumstances the official liquidator.....
Judgment:

W. Broome, J.

1. Two applications require to be disposed of in the liquidation proceedings of the Northern India Oil Industries Limited, which was ordered to be wound up on August 7, 1963, on a petition presented by the Registrar of Companies on May 24, 1962. The first is Company Application No. 8 of 1968 (presented on January 30, 1968), in which the official liquidator had asked the court to direct Bhagwat Saran Garg and Mukat Saran Garg (O.Ps. 1 and 2) to pay up the rent due from them from December 1, 1964, onwards under a lease of the company's properties executed in their favour by the company on November 30, 1961, and extended by the liquidator for a period of two years from December 1, 1966. The second is Company Application No. 4 of 1969 (presented on January 20, 1969), whereby in addition to the prayer in the earlier application for a direction to the lessees to pay up the rent due, the official liquidator has asked for a further direction to be issued to them to hand over possession of the properties forthwith, in view of the fact that the lease has expired on November 30, 1968.

2. By the lease dated November 30, 1961, the Northern India Oil Industries Limited let out to Bhagwat Saran Garg and Mukat Saran Garg the whole of its movable and immovable properties, consisting of an oil mill with its building, the land on which the building stood and the land appurtenant thereto, various ancillary departments (such as paint factory, ice factory, linseed oil plant and soap plant) and all machinery, machine parts and accessories. The lease was to remain in force for a period of five years and the lessees were to pay a sum of Rs. 50,000 annually as rent. The deed further recited that the lessees were entitled to enjoy all the rights that had been enjoyed by the lessor company itself in all these properties, and that with effect from the date of execution of the deed the lessees had been put in possession of all the leased properties.

3. After the winding up order had been passed in August, 1963, the official liquidator attempted to take possession of the company's properties and some portions of the premises were sealed. The lessees, however, maintained that they were entitled to retain possession of the entire premises under the terms of the lease; and as a result, on March 5, 1963, the official liquidator applied to the court to have the lease declared void under Section 531A of the Companies Act. On July 28, 1964, the official liquidator was directed to convert this application into a regular suit and was allowed six weeks for this purpose. On September 18, 1954, however, in order to avoid protracted litigation, the official liquidator with the permission of the court entered into a compromise with the lessees, by which it was agreed that the lease should be extended for another two years, commencing from December 1, 1966, and a corrigendum amending the original lease deed in accordance with this compromise was duly executed on September 8, 1961, containing the following terms :--

(1) That clauses 5 and 16 of the lease deed dated November 30, 1961 be omitted, which read as follows :--

'Clause 5 : That the initial expenses that may have to be incurred towards repairs and replacements in the machineries and their parts for making the mills into a running and workable condition shall be made by the lessees themselves and expenses so incurred by the lessees shall be debited in the account of lessor and shall be adjusted towards the lease rent payable to lessor.

Clause 16 : That in case the mills are closed or the lessees are compelled to vacate the mills during the period of the lease due to any of the lessors or any of its creditors or under orders of any court, the lessees shall have right to recover damages at the rate of Rs. 200 (Rupees two hundred only) per day from the lessor for the remaining period of lease and the lessor shall be liable for damages to the lessees before they are compelled to vacate the same as mentioned above and the lessor shall not be entitled to any compensation for such handing over by the lessees.'

(2) That in view of the fact that the factories and some of the premises of the company have remained locked and sealed from the 1st December, 1962 to this date, i.e., September 20, 1964, the period of lease is extended by another two years commencing from December 1, 1966.

(3) That if the lessees peacefully pay to the official liquidator rent mentioned above reserved in the lease deed for the period 1st December, 1964, to 30th of November, 1966, by the time stipulated therein and the official liquidator is not obliged to bring legal action for the recovery of the same then only the period of the lease will be extended by another two years commencing from 1st December, 1966, under Clause (ii) above; this clause of payment will operate in favour of the official liquidator only.

(4) That the lessor will not be liable for the annual repairs and whitewashing of the premises. It will be the duty of the lessees to carry out the same at their own expenses.

(5) That this corrigendum will take effect from 1st of December, 1961.' This compromise, it may be noted, squared up the amount for the rent due from the lessees up to November 30, 1964, and extended the lease, in a slightly modified form, until November 30, 1968. But up to January 30, 1968, when the first of the applications with which we are dealing was presented by the official liquidator, the lessees had paid nothing towards the rent due from December 1, 1964, in spite of repeated demands.

4. On the issue of notice by the court, however, the lessees appeared through counsel and a statement was made on their behalf (on December 15, 1968) that they acknowledged liability to pay the lease money from December 1, 1964, at any rate up to March 23, 1965, the date on which the properties of the company were sold in execution to the Allahabad Bank (a secured creditor which had elected to stay outside the liquidation proceeding and was realising its dues independently). Time was granted for payment, but out of the amount of Rs. 15,513'70 claimed by the official liquidator for the lease money that accrued between December 1, 1964, and March 22, 1965, the lessees sent a draft for only Rs. 1,619'42 along with accounts purporting to show that nothing more was due.

5. The stand taken by the lessees is that since certain godowns and a section of the mills remained in the possession of the company's creditor, the Allahabad Bank, throughout the period of the lease and the official liquidator was not able to give them actual possession of the entire leased premises, they were entitled on this account to a deduction of Rs. 2,180 per month from the agreed rent. It has further been suggested that the lessees are entitled to claim compensation from the official liquidator for the inconvenience and damage caused to them by the obstructive tactics of the Allahabad Bank which interfered with their peaceful enjoyment of the leased property. In addition, 'the lessees have pleaded that they are entitled to retain possession of the premises and cannot be dispossessed unless the official liquidator brings a regular suit for their ejectment.

6. Regarding this last plea, I am fully satisfied that in the present circumstances the official liquidator can legitimately ask the court to give a decision and issue directions under Section 446(2) of the Companies Act, 1956, without the necessity of filing a regular suit against the lessees. Section 446(2) empowers the court to dispose of 'any claim made by or against the company and any other question whatsoever, whether of law or fact, which may relate tp or arise in the course of the winding up of the company ' ; and in Dhirendra Chandra Pal v. Associated Bank of Tripura Ltd., [1955]25Comp. Gas. 19; A.I.R. 1955 S.C. 213 the Supreme Court, construing the precisely similar words used in Section 45-B of the Banking Companies Act, has observed that:

' Where the liquidator has to approach the court under Section 45-B for relief in respect of matters legitimately falling within the scope thereof, elaborate proceedings by way of a suit involving time and expense, to the detriment of the ultimate interests of the company under liquidation, were not contemplated.'

7. That was a case where the liquidator had served notice on a tenant, terminating his tenancy and calling upon him to vacate the land and hand over possession ; and it was held that on the failure of the tenant to comply, the liquidator was entitled to apply to the High Court for relief under Section 45-B and the High Court could thereupon pass a decree for the tenant's ejectment in exercise of the powers conferred by that section.

8. In the present instance, there is ample justification for the summary disposal of the matters at issue, without resort to the protracted procedure of a regular suit. The lease under which the lessees were holding the company's property has undeniably come to an end and they have not the least semblance of right to continue in possession. I would have had no hesitation, therefore, in passing orders against them under the provisions of Section 446(2), requiring them to vacate the leased premises and to hand over possession to the official liquidator. But I have now been informed by the official liquidator that no useful purpose would be served by his taking possession at this stage, in view of the vacation of the stay of the confirmation of the sale of these premises in favour of the secured creditor, the Allahabad Bank, in consequence of the dismissal of First Appeal No. 20 of 1959 and Civil Revision No. 375 of 1959 by a Bench of this court on March 25, 1970. That sale is now likely to be confirmed and the Allahabad Bank will then be entitled to take possession. The official liquidator has accordingly stated that he no longer presses for the relief of possession.

9. The claim of the official liquidator for rent up to the expiry of the lease on November 30, 1968, and for damages for use and occupation of the premises thereafter may nevertheless be appropriately disposed of under Section 446(2), on the basis of the documents and affidavits that have been filed in these proceedings.

10. As already noted, the plea of the lessees is that they are not liable to pay the whole rent (Rs. 50,000 per annum) that was fixed under the original lease, because the official liquidator has not given them possession of the entire leased premises but has allowed certain godowns to remain in the possession of the Allahabad Bank (the secured creditor of the company). The official liquidator, on the other hand, maintains that whatever was in his possession when the lease was extended and the corrigendum executed was handed over to the lessees, strictly in accordance with the terms of the compromise arrived at in 1964; and that it was fully understood between the parties and accepted by the lessees that the compromise had been duly executed and that complete possession had been delivered, as stipulated. In this connection it is important to examine the terms of the compromise dated September 18, 1964, the relevant clauses of which run as follows :

' (x) That on payment of Rs. 1 7,000 the lessees will be allowed to realise rent including arrears from the tenants and the official liquidator will also remove his seals and locks from the premises sealed by him on 16th and 17th September, 1963, and in doing so the seals and locks put by the Commissioner will also be removed.

(xi) That after the removal of these seals and locks by the official liquidator the lessees will remain in possession of the demised property for the remaining period of the lease and pay from December 1,1964, and onward the rent of Rs. 50,000 reserved in the lease at the time stipulated therein.

11. It is significant that under this compromise the official liquidator has undertaken to remove from the premises only the seals and locks which were affixed by himself or by the Commissioner appointed by the court in the course of the winding up proceedings. There is absolutely no mention of any removal of locks fixed by the Allahabad Bank and no stipulation that any portion of the premises that might be in the possession of the bank should also be handed over to the lessees. It is further to be noted that the lessees have undertaken by this compromise to pay the official liquidator the entire rent reserved in the original lease deed, on the sole condition that he will remove his seals and locks and those of the Commissioner. It is clear from these terms that the lessees entered into the compromise on the clear understanding that they would be given actual possession of only those premises which had been locked and sealed by the official liquidator and the Commissioner and that they would then be liable to pay the entire rent (Rs. 50,000 per annum) to the liquidator.

12. Further proof of the correctness of this conclusion deduced from the terms of the compromise is furnished by the lessee's letter of September 20, 1964 (annexure 'B' to the supplementary affidavit filed by the official liquidator), which is as follows:

' We have to submit that Shri S.D. Misra, J.T.A., of your office came to factory premises at 11-30 a.m. today. He removed all seals put on the locks by you on 15th to 17th September, 1963, as well as the seals put by the Commissioner during December, 1962.

Twelve locks put by the Commissioner have also been removed and taken by Sri Misra Ji. We have got the possession of the entire factory building belonging to Northern India Oil Industries Ltd. (in liquidation) as per compromise agreement dated September 18, 1964. '

13. After they have made such a clear and unambiguous admission, it is not open to the lessees to contend that they did not obtain possession of all that they were entitled to under the terms of the compromise. They have tried to get round the admission by asserting (in the affidavit filed on April 7, 1969) that the letter was written on an assurance given by the official liquidator that actual physical possession of all the premises would be given to them in due course; but this allegation is emphatically denied in the rejoinder filed by the official liquidator on September 15, 1969, and I am not prepared to accept it. It is impossible to believe that experienced businessmen like Bhagwat Saran and Mukat Saran would have signed an acknowledgment that they had ' got possession of the entire factory building......as per compromise agreement dated September 18, 1964,' if they had not got all the possession that they were meant to get under the compromise.

14. I note that shortly before the time came for the execution of the corrigendum the lessees raised this question of their not having been given full possession in certain letters which they addressed to the official liquidator--vide annexures ' A ' and ' D ' dated August 9, 1965, to the counter-affidavit filed in reply to Application No. 8 of 1968. But the official liquidator had straightaway repudiated their suggestion in his reply of August 30, 1965 (annexure ' A ' to the said application), with the following words:

' I may inform you that according to the terms of the compromise which had already been approved by hon'ble the company judge you have agreed to pay the rent of Rs. 50,000 from the period beginning 1st of December, 1964. At the time of the aforesaid agreement you were fully aware that a part of the accommodation was in possession of the Allahabad Bank Ltd. The fact that you will pay the full lease rent in the aforementioned circumstances for the period beginning 1st of December, 1964, was one of the considerations for entering into that compromise. Therefore, your contentions to the contrary cannot be accepted. '

15. Thereafter the lessees seem to have chosen not to pursue the matter and executed the corrigendum on September 8, 1965, without making any attempt to seek a clarification of the terms of the compromise from this court. There can be no doubt that when the compromise was arrived at and possession of the premises was delivered to the lessees in September, 1964, they were fully satisfied with what they got and the objection which they put forward in August, 1965, was nothing but a dishonest afterthought, not seriously pressed at that time but designed to serve as the basis for further moves in the future.

16. I am satisfied that under the terms of the compromise Bhagwat Saran Garg and Mukat Saran Garg are liable to pay the official liquidator the full rent of the premises at the rate of Rs. 50,000 per annum from December 1, 1964, up to the expiry of the lease on November 30, 1968. They cannot claim any exemption from liability after March 22, 1965, on the plea that the properties were sold to the Allahabad Bank on that date, because the confirmation of that sale was stayed by this court up to March 26, 1970, and in fact the sale has not yet been confirmed. They are further liable to pay the official liquidator damages for use and occupation of the premises at the same rate (Rs. 50,000 per annum) from December 1, 1968, onwards : and on all these amounts that have remained unpaid the official liquidator is entitled to claim interest. The amount of Rs. 1,619'42 that has already been paid by bank draft on December 30, 1968 (according to annexure B to Company Application No. 4 of 1969), will of course have to be adjusted; but no further deduction can be allowed.

17. These two applications are therefore allowed, except as regards the prayer for handing over possession, which is no longer pressed by the official liquidator. Under Section 446 of the Companies Act the claim of the official liquidator is hereby decreed against Bhagwat Saran Garg and Mukat Saran Garg for the rent of the leased premises from December 1, 1964, to November 30, 1968, at the rate of Rs. 50,000 per annum, and for damages for the use and occupation of the premises at the same rate from December 1, 1968, up to the date of this order, with interest (past pendenie life and future) on all these amounts at the rate of 6% per annum. (The sum of Rs. 1,619.42 already paid on December 30, 1968, will be adjusted against these dues, when the decree is drawn up). In addition, the official liquidator is awarded a sum of Rs. 200 by way of costs.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //