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Official Liquidator of Globe Associate (P) Ltd. (In Liquidation) Vs. H.P. Sharma - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtDelhi High Court
Decided On
Case NumberCivil Appeal No. 389 of 1969 and Civil Petition Appeal No. 78 of 1968
Judge
Reported in[1973]43CompCas197(Delhi); ILR1971Delhi149
ActsCompanies Act, 1956 - Sections 456 and 457; Transfer of Property Act, 1882 - Sections 2
AppellantOfficial Liquidator of Globe Associate (P) Ltd. (In Liquidation)
RespondentH.P. Sharma
Advocates: B.N. Nayar and; S.K. Mehra, Advs
Cases ReferredLandau (a Creditor) v. The Trustee
Excerpt:
(i) companies act (1956) - section 456 and section 529--scope of--property of company does not as such vest in court--effect of section 529. ; that in sub-section (2) of section 456, it is only the custody of the property of a company that is being wound up which has been held to be deemed to be in the court, the property as such does not vest in the court. ; that so far as section 529 is concerned the rules of insolvency law apply only to some of the matters that have been listed therein. they do not apply to other matters. the assets of the company do not vest either in the court or in the liquidator. ; (ii) companies act (1956), section 457 --sale of tenancy right of company with the permission of the court under --transfer not by operation of law --such a sale not allowed --transfer.....hardayal hardy, j.(1) this case has come up beore us on a reference made by. one of us on an applicaton filed by the official liquidator on 22-10-1969 under section 457(1)(c) of the companies act. 1956 for permission to sell tenancy rights of certain premises viz., basement portion of a building at 4/9 asaf ali road, new delhi which was being held by a company of which the official liquidator was the liquidator appointed by this court on 7-3-1969 in company petition no. 78 of 1968, on a monthly rental of rs. 300.00 (2) it is not disputed that the tenancy held by the company viz. globe associates private limited (now in liquidation) and which will hereafter be referred to as the 'tenant company', was a monthly tenancy and had not been determined by the land-lord, shri h. p. sharma, who.....
Judgment:

Hardayal Hardy, J.

(1) This case has come up beore us on a reference made by. one of us on an applicaton filed by the Official Liquidator on 22-10-1969 under Section 457(1)(c) of the Companies Act. 1956 for permission to sell tenancy rights of certain premises viz., basement portion of a building at 4/9 Asaf Ali Road, New Delhi which was being held by a company of which the Official Liquidator was the Liquidator appointed by this Court on 7-3-1969 in Company petition No. 78 of 1968, on a monthly rental of Rs. 300.00

(2) It is not disputed that the tenancy held by the company viz. Globe Associates Private Limited (now in liquidation) and which will hereafter be referred to as the 'tenant company', was a monthly tenancy and had not been determined by the land-lord, Shri H. P. Sharma, who will hereafter be referred to as the respondent. The tenancy was not for a fixed period and was, thereforee, subject to the provisions of the Delhi Rent Control Act, 59 of 1958.' The said Act will hereafter be referred 'to as the Rent Act.

(3) The case of the Official Liquidator who will hereafter be referred to as the applicant, is that the tenant-company is not doing any business nor are the premises otherwise required by him for the beneficial winding up of the company. The said tenancy rights are, however. valuable and are also transferable and are likely to fetch to the company huge amounts if they are ordered to be auctioned or sold by private contract or otherwise, as may be determined by this Court. The application also states that the tenancy rights are still subsisting. Permission for sale of such tenancy has, thereforee, been sought by the applicant.

(4) The application is opposed by the respondent who is the landlord,on the ground that since according to the applicant the tenant company is not doing any business nor are the premises otherwise required by the applicant, the same should be surrendered to him as he requires the same for his own use and occupation. It is also stated that as a landlord he has not received rent of the premises since October 1, 1968 and as such the applicant or the company is liable to be evicted from the premise's. It is further stated that the tenancy rights are not transferable in view of the provisions of the Rent Act and as such no order for their sale by transfer or assignment etc., can be made by this Court. In support of his contention the landlord relies upon a Division Bench Judgment of this Court (S. K. Kapur & M. R. A. Ansari JJ.) in C. A. No. 183 of 1969 in C.P. No. 97 of 1967, decided on 10th September, 1969 in respect of a sister company. namely. Globe Financiers Private Limited (in liquidation) which was a tenant in possession of a part of this very building at 4/9 Asaf Ali Road, New Delhi.

(5) The respondent's case is fully covered by the afore-mentioned Division Bench judgment of this Court and but for the doubt that has been cast on the correctness of that judgment the case would not have been referred to the Full Bench.

(6) On May 13, 1970 Mr. B. N. Nayyar, counsel for the Official Liquidator argued the case before one of us and it was pointed out that in the matter of The West Hopetown Tea Company Limited (I.L.R 12 Allahabad 192) a contrary view was stated to have been taken by Sir John Edge C. J. and Mr. Justice Straight. The decision of this Court also ran counter to the view taken by a Division Bench of Calcutta High Court in Krishan Das Nandy v. Bidhan Chandra Roy : AIR1959Cal181 . (2) A judgment of S. Rangarajan J. of this Court in Shaniti Pershad Narinder Kumar v. Paras Ram Har Nand Rai (S.A.O. No. 2 of 1969) decided on March 17, 1969,(3) in which the decision of Calcutta High Court had been followed, was also brought to our notice.

(7) Counsel for thei applicant had also referred to some of the sections of the Companies Act, 1956 and rules 232 and 233 of the Companies (Court) Rules, 1959 framed under Section 643(1) & (2) of the Companies Act, 1956 and the provisions contained in Section 5(3) of the Rent Act and had pointed out that there was a case for reconsideration of the Division Bench judgment of this Court.

(8) It was under these circumstances that the matter was referred to a Full Bench and has now come up before us.

(9) For answering this question a view of the provisions of the Rent Act have to be noticed. Sub-sections (1) to (3.) of Section 5 read :-

'5. Unlawful charges not to be claimed or received :- (1) Subject to the provisions of this Act, no person shall claim or receive any rent in excess of the standard rent, notwithstanding any agreement to thei contrary. (2) No person shall, in consideration of the grant, renewal or continuance of a tenancy or sub-tenancy of any premises,- (a) claim or receive the payment of any sum as premium or pugree or claim or receive any consideration whatsever, in cash or in kind, in addition to the rent; or (b) except with the previous permission of the Controller, claim or receive the payment of any sum exceeding one month's rent of such premises as rent in advance. (3) It shall not be lawful for the tenant or any other person acting or purporting to act on behalf of the tenant or a sub-tenant to claim or receive any payment in consideration of the relinquishments, transfer or assignment of his tenancy or sub-tenancy, as the case may be, of any premises. Sub-section (4) of Section 5 provides for certain exceptions but it is not necessary to read the same as they have no bearing on the point which we have to decide. Section 14 controlls the eviction of tenants. Under that Section, one of the grounds on which a decree for eviction can be passed is that a tenant has, on or after the 9th day of June, 1952, sublet, assigned or otherwise parted with the possession of the whole or any part of the premises without obtaining the consent in writing of the landlord. Sub-section (3) of Section 16 provides that after the commencement of the Rent Act, no tenant shall, without the previous consent in writing of the landlord give :- '(a) ...................... (b) transfer or assign his rights in the tenancy or in any part thereof'.

(10) The contravention of sub-section (3) of Section 5 is punishable by Section 48 of the Act.

(11) The question for consideration is whether in view of these provisions of the Rant Act, the Official Liquidator can (a) transfer the tenancy rights of the company without the consent of the landlord and (b) claim or receive any payment in consideration of the transfer or assignment of the tenancy.

(12) As was said by S. K. Kapur J. in the judgment under examination

'THE answer to this question must, to a large extent, depend upon the status of the company after it is wound up.' The contention urged by the learned counsel for the applicant is that under sub-section (2) of Section 456 of the Companies Act 'all the properties and effects of thei company shall be deemed to be in the custody of the Court as from the date of the order for winding up of the company. The property is, thereforee, in custodia legis and, thereforee, vests in the Court itself. Under section 457 of the Companies Act 'The liquidator in a winding up by the Court shall have power, with the sanction of the Court,- '(a) ...................... (b) ........................ (c) to sell the immovable and moveable property and actionable claims of the company by public auction or private contract, with power to transfer the whole thereof to any person or body corporate:, or to sell the same in parcels;'

(13) This section groups under separate heads the power which the Liquidator may exercise with or with the sanction of the Court. Since the power to sanction sale vests in the Court such a sale must be treated as a sale by the Court or by operation of law, rendering the provisions of the Rent Act which place restrictions on transfers and assignments wholly inapplicable.

(14) Section 467 of the Companies Act was also pressed into service and it was said that under the said provision the Court is bound to 'cause the assets of the company to be collected and applied in discharge of its liabilities' and this provision lends further support to the proposition that a sale made by the Court in discharge of its obligations cannot but be a sale by operation of law.

(15) Reliance for this proposition was placed on a Bench decision of Allahabad High Court in the matter of The West Hopetown Tea Company Limited (I.L.R. 12 Allahabad 192)(l) where it was held that the power of the Court under Section 144(c) of the Indian Companies Act (VI of 1882) to give sanction to an Official Liquidator to sell the property of the company, over-rides a private contract against assignment made by the company. On behalf of the trustees under a dead of trust of 11th September 1885, the objection by their counsel was that the lease contained a covenant against assignment without the previous consent of the Lesser and, thereforee, the property could not be sold in view of Sections 10 and 12 of the Transfer of Property Act, 1882. The objection was repelled and it was held that the covenant was not a covenant against assignments by operation of law or against assignments authorised by statute. Sections 10 and 12 came within the group of sections relating to transfer of property by act of parties whereas under Section 144(c) of the Companies Act, 1882, the Court had power to give sanction to a liquidator to sell and that power over- rides a private contract against assignment by the parties.

(16) The next case relied upon by the learned counsel for the applicant is a decision of S. Rangarajan J. in Shanti Perahad Narainder Kumar v. Paras Ram Har Nand Rai (S.A.O. 2 of 1969) decided on March 17, 1969(3). One of the questions raised before the learned Judge was with regard to the sale of tenancy rights of Lakshmi Bank Limited in certain premises. The High Court of Bombay ordered the said bank to be wound up and directed the Official Liquidator to sell the tenancy rights vested in the Bank. The purchaser of the tenancy rights resisted the claim made by the landlord under Section 14 of the Rent Act for eviction on the ground that the premises had been sublet, assigned or otherwise parted with, without his consent in writing and obtained a decree. The purchaser of the tenancy rights applied to the Rent Controller under S. 25 of the Rent Act praying for re-call of the warrants of possession. The application was resisted by the landlord, inter-alia on the ground that the purchaser could not get any valid right under the sale made by the Official Liquidator since the same had been made without his written consent. S. Rangarajan J. held, following the decision of Calcutta High Court, in Krishan Das Nandy v. Bidhan Chandra Roy : AIR1959Cal181 that the language adopted by the Delhi Rent Control Act did not lend any support to the view that there was absolute prohibition on transfer of the tenant's interest even by operation of law. What has been interdicted is only a transfer by a tenant without the consent in writing of the landlord and the penalty imposed by Section 48(2) pertains to such violation. There is no warrant whatever for extending the prohibition against transfers by the tenant to a situation where there is an involuntary violation of the tenancy rights by a Court auction.

(17) In Krishan Das Nandy's case(2). Great Indian Motors Works Limited held the suit premises as a monthly tenant. The said company was ordered to be wound up and the Court directed sale of the property and assets of the company including tenancy rights. The question arose whether it was a 'transfer by the tenant' thereby de- priving the tenant of the protection of Section 12 of the West Bengal Premises Rent Control (Temporary Provisions) Act 17 of 1950, against eviction. It was held that in a compulsory winding up the company is put into liquidation against its will by force of law and the order of the Court and the sale is made by the Liquidator acting under the control of the Court and with its sanction. The sale, thereforee, is really by the Court acting through the Liquidator and is thus a sale against the company's will or a sale in invitum.

(18) A contrary view was however taken in re-Farrow's Bank Limited (1921-2 Chancery Division 164)(4) but when the attention of the learned Judges of the Calcutta High Court was invited to that decision it was observed that the Indian law is different from its English counter-part because under Section 179(c) the Liquidator can sell onlv with the sanction of the Court while in Section 151(2) even read with Section 151(3) of the Companies Consolidation Act, 1908 in England at least, prior sanction of the Court is not required. It essence, thereforee, the transfer under the Indian law is a transfer by the Court or by operation of law and looking to the substance of the matter there is no difference in the character of the sale from a sale in execution A or any other compulsory sale to which the provisos will not apply.

(19) S. K. Kapur J. while dissenting from the view expressed in Krishna Das Nandy's(2) case, held that the decision in Farrow's Bank Limited) applied equally in India and the distinction which the learned Judges of Calcutta High Court sought to make between. the provisions of Section 179(c) of the Indian Act and Section 151(2) read with section 151(3) of its English counter-part, was held to be artificial. The ratio decidendi of the Bench decision of this Court was expressed by S. K. Kapur J. in these words : 'when the Liquidator assigns the tenancy his act is that of the company and, thereforee, the Liquidator acts on behalf of the tenant. If the act of the Liquidator is that of the company it makes no difference to my mind, whether the tenant-company acts through its directors or the liquidator in assigning the tenancy rights. True, that under section 457, the Liquidator can sell property with the sanction of the Court. That, however, is only the manner prescribed for the exercise of that power. But it does not have the effect of making it as the act of the Court or a sale by operation of law.'

(20) It may be mentioned here that Section 179(c) of the Indian Com panics Act, 1913 is almost identical with Section 457(1)(c) of theAct of 1956.

(21) One of the points that emerges from the above discussion is whether the sale by the liquidator is a sale by the Court or by operation of law. The contention urged by the learned counsel for the applicant is that under Section 456(1) as soon as an order of winding up is made the liquidator is required to take into his custody or under his control any property, effects or actionable claim to which the company is, or appears to be, entitled. Under sub-section (2) the property and effects of the company shall be deemed to be in the custody of the Court as from the date of the order for the winding up of the company. The property, thereforee, vests in the Court and if under Section 457(1)(c) the Liquidator is required to sell that property, with the sanction of the Court, the transfer is by operation of law. The Official Liquidator acts on behalf of the Court and not on behalf of the company. The action is, thereforee, the action of the Court.

(22) There are two fallacies in this argument. Firstly, when a company is being wound up its property does not vest in the Court. Secondly, when the property is ordered by the court to be sold the sale is not by operation of law.

(23) As regards the first point the contention urged by the learned counsel for the appellant is that the property vests in the court and that is the meaning that he seeks to give to sub-section (2) of Section 456. In this connection he also relies on Section 529 of the: Companies Act which lays down that in the winding up of an insolvent H company, the same rules shall prevail and be observed with regard to--

'(A) debts provable; (b) the valuation of annuities and future and contingent liabilities; and (c) the respective rights of secured and un-secured cre ditors; as are in force for the time being under the law of insolvency with respect to the estate of persons adjudged insolvent.'

(24) It is contended that the same rules should, thereforee, apply in the case of property of a company which is being wound up and the property of an insolvent,

(25) THE: argument is devoid of substance. In sub-section (2) of Section 456, it is only the custody of the property of a company that is being wound up which has been held to be deemed to be in the Court. 'The property as such does not vest in the Court. So far a. Section 529 is concerned the rules of Insolvency law apply only to some of the matters that have been listed therein. They do not apply to other matters. The assets of the company do not vest either in the Court or in the Liquidator. This distinction has been clearly brought out in a Bench decision of Travancore-Cochin High Court in P. Padamanabha Pillai v. South Indian Match Factory (23 Indian Cases 468) (5) Unlike in the case of Bankruptcy, when the company is wound up the estate does not vest either in the Court or in the Liquidator appointed by the Court, but still remains in the company itself. Section 178 of the. Companies Act, 1913, which is equal to Section 456 of the Companies Act, 1956 only provides' that all the properties and assets of the company shall be deemed to be in the custody of the Court from the date of the order of winding up and that the Official Liquidator shall take into his custody or under his control all the assets of the company. In the case of bankruptcy however, when a person is adjudicated insolvent all his assets vest in the; Court or in the Official Receiver. This is evident from Section 28 of the Provincial Insolvency Act, 1920 where the property of the insolvent vests on the making of an order of adjudication in the Court or in a Receiver and Section 17 of the Presidency Towns Insolvency Act, 1909 where on the making of an order of adjudication, the property of the insolvent wherever situate, shall vest in the official assignee,

(26) The same view was taken about the difference between the effect of winding up and that of bankruptcy in the English law. In re Oriental Inland Steam Company : ex parte Scinde Railway Company (1874) 9 Ch. Appeals 557 ( ') Sir G. Mellish L. J. observed :-

'WINDING up differs from bankruptcy in this. respect. that in bankruptcy the whole estate, both legal and benefcial, is taken out of the bankrupt, and is vested in his trustees or assignees, whereas in a winding up the legal estate still remains in the company.'

(27) Similarly Lord Davey said in New Zealand Loan and Merchantile Agency Company Limited v. Christina Morrison (1898 A.C. 349:-

'..There is a material distinction between the effect of bankruptcy and that of winding up. In the former case the while property of the bankrupt is taken out of him, whilst in the latter case the property remains vested in the title and in fact in the company, subject only to its being administered for the purposes of winding up......'

(28) In Employers' Liability Assurance Corporation Ltd v. Sedgwick. Collins and Company Ltd. (1927 A.C. 95 Viscount Cave observed :-

'......Acompany in liquidation, although the ad- ministration of its affairs has passed to the liquidator, retains its corporate existence.'

(29) Reliance on Rule 233 of the Company (Court) Rules, 1959 also does not help the argument of the learned counsel for the applicant. All that the rule says is that for the discharge by the Official Liquidator of the duties imposed by sub-section (1) of Section 467 and the last preceding rule (rule 232) the Official Liquidator shall, for the purpose of acquiring and retaining possession of the property of the company be in the same position as if he were Receiver of the property appointed by the Court, and the Court may on his application enforce such acquisition or retention accordingly.

(30) It is apparent that it is only for the purpose of acquiring and retaining possession of the property of the company that the position of the Official Liquidator has been equated with that of a Receiver of the property appointed by the Court. It cannot be denied that even for that limited purpose, the powers of the Official Liquidator are those of an ordinary Receiver appointed under Order Xl of the Code of Civil Procedure and that evidently does not provide for the vesting of the property in the Receiver. The property still remains vested in the person or persons to whom it belongs and the Receiver is merely an officer of the Court subject to its control. In the case of an Official Liquidator he is not only an officer of the Court subject to its control and to the proviso to Section 643(2) of the Companies Act, 1956. He is also a mere administrator or agent of the company for the purposes described by the statute,

(31) In the Bank of Scotland v, Macleod 1914 A C 11 Lord Kinnear said at page 321 :-

'AND the doctrine of tantum at tale is inapposite, because of the liquidation of a limited company there is no transference of property to which it can be applied. The effect of the Bankruptcy Act is to divest the bankrupt, and to invest the trustee in the entire estate; and it is not surprising that questions should have arisen as to the extent to which this transference of the legal title might or might not involve a corresponding transference of all equitable' qualifications which might have effected the estate in the hands of the bankrupt. . But the liquidators of a limited company are not vested in the estate to the exclusion of the company. The estate remains vested in the company itself, and the liquidators are mere administrators of it for the purposes prescribed by the statute, and that is for equal distribution among creditors.'

(32) In Ram Rakha Mal & Sons Limited and others v. Surinder Singh Giyani & others A.I.R. 1941 Lah 134 (i) where an Official Liquidator was not made a party to the appeal against a compulsory winding up order it was said by a Bench of that Court (Sir Douglas Young C. J. and Sale J.) that the failure to implead the company as such or the Official Liquidator, did not render the appeal incompetent when the directors of the company who were the sole share-holders had been imp leaded. It was also said that the Official Liquidator could not be said to be 'interested' in the result of the appeal because after the compulsory winding up order the property did not vest in him but remained vested in the company and since the company having been substantially represented by all its directors-share holders the failure to implead the company as such or the Official Liquidator, did not render the appeal incompetent.

(33) In M/s. Hari Prasad Jayantilal and Co. v. V. S. Gupta, Incometax Officer Ahmedabad & another A.I.R. 1966 S.C. 1481 (') which was a case of volnutary winding up by a special resolution passed by the members of the company, it was held that a company which has resolved to be voluntarily wound up may be dissolved in the manner provided by Section 497(5) : till then the company has corporate existence and corporate powers. The property of the company does not vest in the Liquidator; it continues to remain vested in the company ...... The Liquidator appointed in a members' winding up is merely an agent of the company to administer the property of the company for purposes prescribed by the statute. In distributing the assets including accumulated profits the Liquidator acts merely as an agent or administrator for and on behalf of the company. The only difference between the powers of a liquidator in the case of a members' voluntary winding up and in the case of creditors' voluntary winding up is that in the case of compulsory winding up under Section 457(1), the Liquidator in a winding up by the Court shall have the same powers in clauses (a) to (d) of sub-section (1) of Section 457 with the sanction of the Court which a liquidator in a members' voluntary winding up shall have when there is a special resoluaion of the company to that effect. Otherwise, the position in both the cases is the same.

(34) In Ram Lal Rajaram v. G. D. Mahrotra & Co. and others : AIR1958All447 it was said that it was true that when the company was ordered to be wound up the liquidation proceedings had to be conducted under the supervision of the Court. The liquidators, however, possessed a status recognised by the statutes which define their powers and functions. Those powers and functions were not identical with the powers and functions of the Court. The mere fact that some of their powers could be exercised by the Liquidator with the sanction of the Court was not enough to establish their identity between them and the Court... The liquidators might be officers of the Court as they acted under its direction, but strictly they represented not the Court but the company which was being wound up. So long as the company is not dissolved under Section 497 it does not lose its corporate existence and the Liquidator although an officer of the Court carries out its functions merely as an agent or administrator for and on behalf of the company. The contention of the learned counsel for the applicant that the property vests either in the Court or in the Liquidator is, thereforee, wholly un-sustainable.

(35) The next point urged by the learned counsel for the applicant is that regardless of whether the property vests in the Court or in the Liquidator, an order of transfer of the property having been made by the Court the transfer is the result of operation of law and is, there fore, a sale in invitum. This argument appears to have commended itself to the learned Judges of Calcutta High Court. It, however, seems to us, and we say so with great respect, that the meaning of 'transfer by operation of law' has not been correctly construed in that case. It is true that the Transfer of Property Act. but for certain exceptions. does not apply to transfers by operation of law but is limited as stated in the Pre-amble to transfers 'by act of parties.' Section 2(d) of the Transfer of Property Act, makes this position quite clear and states that save as provided by Section 57 and Chapter 4 of the Act, any transfer by operation of law or by, or in execution of, decree or order of Court of competent jurisdiction, shall not be effected by the provisions of the Act. The expression 'transfer by operation of law' has been the subject of judicial decisions. As was said in Sailendra Kumar Ray and Another v. The Bank of Calcutta Limited (18 ComC l), in most of the judicial decision, in explaining the meaning of the phrase in a general way an interpretation is given which suggests that it would apply only in cases where certain events not connected with any act on the part of anybody towards making a transfer, happened and the law, operating on those events brings about a transfer. In that connection a reference was made to a decision of the Judicial Committee in Abidunnissa Khatoon v. Amirunnissa Khatoon I.L.R. 2 Cal 327 (^) where their Lordships, after pointing out, that no transfer by assignment was pretended before them, observed that no incident had occurred on which the law could operate to transfer the estate from the owner and added that there had been no death, no devolution and no succession. On the other hand. Indian decisions appear to have taken 'operation of law' to mean 'operation of law' or the 'law courts.' The case before Chakravartti and Ellis JJ. was one of amalgamation which provided [or transfer of assets under Section 153A of the Companies Act, 1913 and the question had arisen on account of non-compliance with the provisions of Order 21 rule 16 of the Code of Civil Procedure. The said rule provides for notice of an application for the execution of decrees vested in the transferee company and it was held that by virtue of court's order under Section 153A no notice need be given to the transferor company and the judgment-debtors. The order of the High Court under Secaion 153A could not be regarded as an instrument of transfer. Cases of transfer on death or by devolution or by succession were obviously cases where the transfer takes place without any act of the parties. See the case of Mahadeo Baburao Halbe v. Anandarao Shankarraro Deshmukh I.L.R. 57 Bom 513(') and Mathurapore Zamindary Co. Ltd. v. Bhasarain Mandal (I.L.R. 51 Cal 703 But these cases also add purchases at court sales and that appears to be the reason which has commended itself to the learned Judges of Calcutta High Court.

(36) It is no doubt true that under Section 2(d) of the Transfer of Property Act, a transfer by execution of a decree or by order of a. Court of competent juridiction has been placed on the same footing as any transfer by operation of law. But there is a distinction. When property vests in the Official Receiver on insolvency there is a transfer by operation of law and no deed is necessary. But when the Official A Receiver sells the property of the insolvent that has vested in him the sale is a transfer by act of parties to which the Transfer of Property Act applies and a registered deed is necessary if the property is tangible immovable property of the value of Rs. 100.00 and upwards (see Kamsala Narasappa v, Hussain Seb and others : AIR1935Mad55 ('), Gurbakhsh Singh & another v. Sardar Singh & another I.L.R. 16 Lah 173, Lal Khan and another (insolvents) v. B Official Receiver Farozpore & others (Creditors) I.L.R. 18 Lah 721). In the case of an ordinary transfer, it is the act of the parties that brings about the transfer and an order of the Court or a provision of law may act on it to complete the transfer. But when no act of the parties is involved and the transfer takes place, say in the case of transfer on death or by devolution or by succession, the transfer is by operation of law.

(37) Section 2(d) mentions different sales to which the Transfer of Property Act does not apply but those sales are separate from each other. A sale by the Liquidator is not a sale by operation of law nor is it a sale by an order of the Court. The transaction is between the company acting through its Liquidator and the transferee and an order of the Court is merely a manner provided for the exercise of that power. The sale is still by the company and not by the Court. Section 457 does not have the effect of making the transfer as the act of the Court or a sale by operation of law for under Section 458 it is open to the Court to provide that the Liquidator may exercise any of the powers referred to in sub-section (1) of Section 457 without the sanction or intervention of the Court, although the exercise by the Liquidator of such power is subject to the control of the Court. Whether the power is, thereforee, to be exercised with or without the sanction of the Court would make no difference for the purpose of deciding if the sale is by the company. The sale is at all events by the company and the Liquidator merely sells its property for the powers of the Board of Directors and others etc., have ceased and it is the who represents the company.

(38) The second point urged by the learned counsel for the applicant also fails.

(39) Learned counsel for the applicant then referred us to the provisions of Section 108(j) of the Transfer of Property Act and submitted that if the sale is by the company and is not the result of operation of law, section 108(j) allows the tenant to transfer absolutely or by way of mortgage or sub-lease the whole or any part of his interest in the property and any transferee of such interest or part may again transfer it. The only limitation on that power is that the lessee shall not by reason of only such transfer, cease to be subject to any of the liabilities attached to the lease. Since the power of transfer vests in the lessee the only restriction placed by the Rent Act is contained in Sections 5 and 16 of the Act. In this connection our attention was invited to a decision of Assam High Court in Niresh Chandra Das v. Paresh Chandra Routh (A.I.R. 1959 Assam 61)(20) where it was said that Section 108(j) of the Transfer of Property Act provides the right of a lessee is transferable and is saleable and that Section 6(l)(d) of the Assam Urban Areas Rent Control Act, 1955 did not take it out of the purview of Section 108(j). The only restriction which the Assam Act placed on the exercise of this power was that in case the lessee transferred the property without the permission of the landlord he was liable to be evicted from house. It was contended that the section itself assumed that there was a power of transfer in the lessee and as such the section did not render the tenancy rights as non saleable.

(40) It seems to us that the decision does not which the point with which we are concerned in this case. It is true that under Section 14(1) (b) of the Rent Act it is open to a landlord to permit the lessee to sublet, assign or otherwise part with possession of whole or any part of the premises on or after the 9th day of June 1952 after obtaining his concent in writing. But so long as that consent in writing is not given, Section 16(2) states that the premises could not be lawfully sublet. If the tenant has sublet the premises without obtaining the consent in writing of the landlord the tenant becomes liable to be evicted under Section 48(2) and he also becomes liable to be punished with fine which may extend to Rs. 1,000.00. Sub-section 3 of Section 5 renders the tenant or any person acting or purporting to act on his behalf or a sub-tenant claiming or receiving any payment in consideration of the reliquishments, transfer or assignment of his tenancy or sub-tenancy, guilty of an offence and makes its contravention punishable with simple imprisonment for a term which may extend to six months or with fine which may extend to a sum which exceeds the amount or value of un-lawful charge claimed or received under the said sub-section by Rs. 5,000.00 or with both.

(41) If the Official Liquidator, thereforee, acting on behalf of the company sublets these premises, Section 1 of the Rent Act would render those premises as not have been lawfully sub-let and thereforee mae the sub-tenant or the transferee liable to be evicted there from. The action of the Liquidator would also render the company liable to fine under Section 48(2); but if while doing so, the Official Liquidator receives money in consideration of the transfer, or assignment of his tenancy .or sub-tenancy and that is an unlawful charge under S. 5(3) of the Act, the company or the Liquidator, as the case may bs, would become liable to punishment under S. 48(1)(b).

(42) Since the offence under sub-sections (l)(a) and (b) of Section 48 is also a contravention of a statutory provision, apart from the fact that such contravention is punishable, no order of the Court can be made which runs counter to the provision of law. Such an order will not only be opposed to public policy but will also amount to an infringement of a penal provision on the part of the Court. The Court has no right to make such an order. The question, thereforee, is not one of restriction having been placed by the Rent Act on the clear provisions of Section 108(j) of the Transfer of Property Act. but one of an absolute bar. The question also is not one of landlord giving his consent in writing to such transfer, for he may do so for certain reasons of his own. But if the company as a tenant, or the landlord as the Lesser, receives any money in consideration of the transfer, the bar is absolute and that renders the tenancy non-saleable. We can hardly imagine that an Official Liquidator will transfer or sublet the premises to some other person without receiving any con- sideration for the same. In fact, in this case, it is the contention of the Official Liquidator himself that the tenancy rights are valuable and he, thereforee, wants permission of the Court to transfer those rights to some one else and receive consideration for the same.

(43) This takes us to the case in the matter of Ferrow's Bank Limited 1921 Ch. 164 which prevailed and was approved by S. K. Kapur, J. but which was distinguished by the learned Judges of Calcutta High Court in Krishan Das Nandy's case. What had happened in that case was that certain premises were demised to Ferrow' Bank Limited and the lease contained a covenant on the part of the Bank, its successors and assigns, that they would not 'assign the said demised premises or any part thereof without the previous con sent in writing of the Lesser first obtained.' The Bank was ordered to be wound up and the Liquidator proceeded to make necessary arrangements for the sale of the lease. He took out a smmons in the winding up for a declaration, inter alia, that, notwithstanding covenant restrictive of assignment by the company, the liquidator was entitled to assign the premises without the consent of the landlord. P. O. Lawrence J. held that the Liquidator in selling the property was acting in invitum for the benefit of the creditors, that a voluntary assignment and not an assignment in invitum was contemplated by the restrictive covenant in question, and that the Liquidator was at liberty to sell and assign the term granted by the lease. The Court of Appeal, however, held that the convenant in the lease was binding on the Liquidator in winding up. Lord Sterndale M. R. observed :-

'BUT here, as I say, the act is the act of the company acting through its liquidator, who is carrying on its business for the winding up, and who is doing the act which he does strictly on behalf of the company'

(44) The decision in Ferrow's Bank(4) case was applied in Wright (a Bankrupt) Ex-parte Landau (a Creditor) v. The Trustee 1949 (2) All E LR 605. That was a case of transfer by the trustee in bankruptcy and yet Danckwerts J. held that the trustee in bankruptcy even if he obtains the property by operation of law, is not a successor in title of the debtor, that is to say, the tenant.

(45) We are, however, not concerned with the distinction between a Liquidator in a winding up petition and a trustee in bankruptcy in England for the provisions in the Bankruptcy law there may be different. In actual affect, we are not concerned even with the Bankruntcy law in India. All that we are concerned with is whether the sale by the Liquidator is under 'an operation of law' and since we have held that the sale is by the company which is still in existence till it is finally dis-solved and is not by 'operation of law'. The sale is, thereforee, subject to all the liabilities which govern the company.

(46) There is no provision in the Companies Act that the Liquidator shall sell properties of the company free of all restrictive covenants and if law places a restriction on assignment by the assignee including a company, there seems no reason why it should not apply to an assignment when the company has to act through its Liquidator. This is the conclusion which the Division Bench of this Court has reached and we are in complete agreement with that conclusion. We, thereforee, hold that the application field by the Official Liquidator should be dismissed and we order accordingly. But in the circumstances, we do not propose to make any order as to costs.


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