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Maratha Mandir Ltd. Vs. Official Liquidator, Golcha Properties, Private Ltd. - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtRajasthan High Court
Decided On
Case NumberCompany Application No. 20 of 1969
Judge
Reported in1969WLN445
AppellantMaratha Mandir Ltd.
RespondentOfficial Liquidator, Golcha Properties, Private Ltd.
DispositionApplication dismissed
Cases ReferredDelhi Motor Co. and Ors. v. U.A. Basrurkar and Ors.
Excerpt:
.....bombay rents, hotel & lodging house rates control act, 1947--section 12--lease for 20 year in terms of consent decree--whether tenancy be determined by notice under section 106 of t.p. act.;the very first term of that decree states that the period of the lease shall be 20 years commencing from october 16, 1958. it follows therefore that the contention of the applicant that it was a monthly tenancy, is quite incorrect and untenable. this, in turn, leads to the conclusion that the tenancy could not be terminated by a notice under section 106 of the transfer of property act and that the applicant is not at all entitled to eject the company under section 12 of the bombay rents, hotel and lodging house rates control act, 1947.;there is every justification for the contention that the..........further been pleaded that 'on this ground also...the plaintiffs are not entitled to maintain this suit'. the company has denied that it has committed a breach of any of the terms of the lease, further, it has pointed that it has spent about rs. 20 lakhs on the construction of the building on the suit premises and has paid the rent at the rate of rs. 5,500/- per month along with the municipal taxes on the basis of the apportionment made by the applicant. the company has specifically denied that it ever occupied the suit premises as a monthly tenant or continued to do so, or that the applicant was or is entitled to terminate the 'said alleged monthly tenancy as alleged or at all'. the plaintiff's claim that it was entitled to forfeit the tenancy and had forfeited it, has also been denied......
Judgment:

P.N. Shinghal, J.

1. This is an application of M/s Maratha Mandir Ltd. under Section 446 of the Companies Act for leave to proceed with suit No. P.A.E. & R. 273/2271 1966 against the Golcha Properties Private Ltd. (hereinafter called 'the Company') in the court of Small Causes, Bombay. The applicant claims to be the owner of the premises described in paragraph 2 of the application, which are admittedly in the possession of the Company. An order was made by this Court on May 10, 1968, for the winding up of the Company and as the aforesaid suit was pending on the date of that order, the applicant has asked for leave to proceed with its trial.

2. A copy of the plaint (Ex. 1) has been appended to the application and it shows that the suit has been raised oh these averments. The applicant gave the use of the suit building, which was then under construction, to the Company under 'an agreement dated 31st October, 1955 on terms and conditions stated in the said agreement'. The Company 'carried out part of the said agreement and committed breaches of the said agreement.' Disputes arose between the parties and a suit was filed by the company in the High Court of Judicature at Bombay in which it was agreed, inter alia, that that applicant 'should grant a lease to the defendants...for a period of 20 years commencing from the 16th day of October, 1958' on the terms stated in the plaint as regards the rent, payment of municipal and other taxes and charges, insurance of the building and equipment, preparation of an inventory of the moveable properties and making of repairs. The applicant has enclosed a, copy of the consent decree (annexure B) and it states the details of the lease at considerable length. It has been pleaded that the Company was guilty of breaking various terms and conditions of the proposed lease as stated in paragraphs 11 to J4 of the plaint. Then it has been stated in paragraph 15 that the lease was for consideration and that payments were made by the company in pursuance of the lease, for some time No lease deed was however executed or registered as required by the law. It has therefore been contended that the Company continued in law only as a monthly tenant and that the applicant terminated the tenancy by a letter of its advocate dated January 10, 1966. It has further been stated that the applicant became entitled to fotfeit the lease and to re-enter the premises. Thus it has been stated (in paragraph 19) that the applicant 'again and finally by their advocate's letter to the defendants dated the 15th March 1966 placed the above facts on record and determined the lease by forfeiting the same and plaintiffs again required the Defendants, within the period specified in the said letter, to remedy the breaches committed by them,' but to no avail so that the 'tenancy of the defendants has been duly determined and/or forfeited by the said notice dated 10th of January 1966'. On the basis of these averments, the applicant has prayed for possession and recovery of arrears of rent and taxes etc.

3. The applicant has also filed a copy of the written statement (Ex 2) of the Company. In it the Company has denied the claim in the suit and specifically pleaded (in paragraphs 1 and 18) that the plaint does not disclose a cause of action. It has also been pleaded, without prejudice to this main contention, that an agreement was made on October 31, 1955, and that a consent decree was passed (as per annexure B) by the High Court of Judicature at Bombay on March 16, 1959, but that the applicant was itself to blame for it 'failed and neglected to execute the 20 years lease in favour of the defendants' even though the Company 'at all times material to this suit (being already in possession) have continued in possession of the said premises in part performance of the said consent terms and the said High Court decree and have also done acts in furtherance thereof and have performed and or are willing to perform the defendant's part of the obligation thereunder'. It has further been pleaded that 'on this ground also...the plaintiffs are not entitled to maintain this suit'. The Company has denied that it has committed a breach of any of the terms of the lease, Further, it has pointed that it has spent about Rs. 20 lakhs on the construction of the building on the suit premises and has paid the rent at the rate of Rs. 5,500/- per month along with the municipal taxes on the basis of the apportionment made by the applicant. The Company has specifically denied that it ever occupied the suit premises as a monthly tenant or continued to do so, or that the applicant was or is entitled to terminate the 'said alleged monthly tenancy as alleged or at all'. The plaintiff's claim that it was entitled to forfeit the tenancy and had forfeited it, has also been denied. In this connection the Company has stated in paragraph 16 of the written s atement that the tenancy 'has not been validly terminated and hence in any event this suit is not maintainable'.

4. On the basis of these pleadings, it has been argued by Mr. Singhvi, learned Counsel for the applicant, that as the Company was in arrears in regard to the payment of the rent and taxes etc. due to the applicant for a period of 6 months or more and had to make the payment within the period of one month after notice, the applicant is entitled to a decree for eviction under Section 12 of the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947. The learned Counsel has placed reliance on Shah Dhansukhlal Chhaganlal v. Dalichand Vhchand Shroff : [1968]3SCR346 in support of his argument. He has also argued that even though this Court has concurrent jurisdiction to try the suit in question, as has been held in In re-Osier Electric Lamp . (In Liquidation) A.I.R. 1969 Cal. 61, it should grant leave for its trial in the Bombay Court as that would be more convenient to the parties. Reference has also been made to the decision in the matter of Subhodhaya Publications Ltd. : AIR1955Mad449 and Balkrishna Mahadeo Vartak and Ors. v. Indian Association Chemical Industries Ltd. A.I.R. 1969 Bom. 41, in regard to the principles and the considerations which should govern the grant of leave under Section 446 of the Companies Act in such cases. Mr. Singhvi has however admitted that the statement in paragraph 4 of the application that the suit is 'now ripe for hearing', is not correct, and that nothing has been done in the case beyond the filing of the written statement.

5. On the other hand, it has been argued by Mr. Joshi, learned Counsel for the Company, that it will be a reasonable exercise of the Court's discretion to refuse the leave asked for as the plaint does not disclose a cause of action. He has also pointed out that the dispute does not involve the rights of any third party and there is no reason why it should not properly be determined in the winding up. Further, the learned Counsel has argued that the Company had paid all the arrears of the rent and the taxes etc. in the Bombay Court and has been paying them regularly. He has made a statement at the Bar that the Company will have no objection if that money is delivered by the Bombay Court to the applicant and that the Company will continue to make similar payments in the future irrespective of the fate of this application. The learned Counsel has submitted that there is, otherwise, no reason why the applicant should not prove its debt according to law by means of a claim before the Official Liquidator. As regard recovery of possession, Mr. Joshi has argued that as the plaint does not disclose a cause of action, there is no chance whatsoever of its success at the trial and it will cause much harassment and put the Company to considerable avoiable expense if the leave prayed for is granted. It has been pointed out that in its written statement the Company has specifically claimed the benefit of the doctrine of port-performance and there is no reason why Section 53A of the Transfer of Property Act should not apply to its benefit when all its requirements have been established, beyond any doubt whatsoever, on the averments made by the applicant in the plaint. The learned Counsel has thus urged that as the Company is entitled to raise the defence in the suit that the lease is for 20 years, there was no occasion at all for the issue of a notice under Section 106 of the Transfer of Property Act, or for invoking Section 12(2) of the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947 or to bring the case within the purview of Sub-section (3) thereof. Such a tenancy would be terminable by efflux of the period of 20 years has been provided in Section 111(a) of Transfer of Property Act, or by any of the other modes mentioned in that section. As regards the applicant's plea of forfeiture on the ground that the Company has committed breaches of certain conditions of the lease. Mr. Joshi has argued that by virtue of the first condition of Section 111(g) of the Transfer of Property Act, the alleged forfeiture could be effective only if it was the case of the applicant that If the Company had committed a breach of any such express condition of the lease as provides, that, on breach thereof, the lessor may re-enter. As there is no such allegation at all in the plaint, it has been argued that the plea of forfeiture is absolutely misconceived and wholly untenable. Further, the learned Counsel has argued that even though it is settled law that the transferor is not entitled to the benefit of Section 53A of the Transfer of Property Act, the applicant has based its claim in the suit on the terms of the unregistered writing evidencing the lease.

6. Now, it cannot be doubted that the power granted to the court under Section 446 of the Companies Act is discretionary; but it mast be exercised reasonably and on the basis of a sound principle, The object of the provision is to safeguard the assets of the Company from fruitless, wasteful or expensive litigation which may be quite unnecessary. Thus in Balkrishna Mahadeo Vartak and Ors. v. Indian Association Chemical Industries Ltd. A.I.R. 1969 Bom. 41, on which considerable reliance has been placed by Mr. Singhvi, it has been held as follows:

The object of the section is to save the Company which is being wound up from unnecessary litigation and to protect its assets equitable distribution amongst its creditors and its share-holders. The consequence of the winding up order, therefore, is that no suit can be filed against, the Company without obtaining the leave of the Court. An application for such leave is therefore; made necessary by the order for winding up. In dealing with such an application the Court has necessarily to consider the interest of the Company and to see that its assets are not wasted in frivolous and unnecessary litigation.

7. The question therefore is whether there is justification for the argument of Mr. Joshi that the plaint filed by the applicant in suit No. R.A.E. & R. 273/2271/1966 in the court of Small Causes, Bombay, does not disclose a cause of action and that the litigation is frivolous and unnecessary and will lead to avoidable wastage of the assets of the Company?

8. The suit has been filed for obtaining (i) possession of the premises and (ii) arrears of rent, mesne profits and municipal taxes etc. with interest. I have taken care to set out the nature and the basis of the main averments in the plaint. The claim for possession has been based on the terms of the consent decree. The applicant has made a mention of those terms which are more advantageous to it, in paragraphs 3 to 8 of the plaint and copy of the entire consent decree has been relied upon and appended to the plaint as Ex. B. Then the applicant has mentioned, in paragraphs 10 to 14, the breaches alleged to have been committed by the Company and it has been pleaded that the applicant was entitled to forfeit the said lease and re-enter the said premises. This has been followed by the assertion in paragraphs 19 and 20 that the applicant has determined the monthly tenancy and forfeited the lease.

9. It is however the applicant's own case that the parties had arrived at an agreement about the terms of the lease & they were incorporated in the consent decree (Ex. B). The very first term of the consent decree is that the period of the lease shall be 20 years commencing from October 16, 1958. As however it is admitted that a lease deed has not been executed in accordance with Section 107 of the Transferr of Property Act the applicant is not in a position to rely on the terms of the consent decree but, as has been urged by Mr. Joshi, there is no reason why it should not be permissible for the Company to protect its possession under Section 63A of the Transfer of Property Act. It will be enough for me to refer, in this connection, to the decision of their Lordships of the Privy Council in Prabodh Kumar Das and Ors. v. Dantamara Tea Co. Ltd. and Ors. A.I.R. 1940 P.C.I 1 and of their Lordships of the Supreme Court in Delhi Motor Co. and Ors. v. U.A. Basrurkar and Ors. : [1968]2SCR720 . In the former case it has been held that the right conferred by Section 53A is a right available only to the defendant to protect his possession and that the Section is so framed as to impose a statutory bar on the transferee; it confers no active title on the transferee who is only entitled to protect his possession. This decision has been approved by their Lordships of the Supreme Court in Delhi Motor Co. and Ors. v. U.A. Basrurkar and Ors. : [1968]2SCR720 .

10. Thus if the applicant's own averments in the plaint go to establish all the requirements of Section 53A of the Transfer of Property Act, there is no reason why it should not be open to the Company to avail of its protection. A perusal of the plaint shows that the applicant has admitted the following facts:

(i) The applicant has contracted in terms of the consent decree (Ex. B), to give the suit premises to the Company on lease (vide Paragraphs 2 to 10 of the plaint

(ii) The lease is for consideration for it has been stated in paragraph 3 of the plaint that the rent was fixed at Rs. 500/- per month, exclusive of taxes and other charges. The other terms of the consideration have been mentioned in the subsequent paragraphs, and paragraph 15 specifically states what other terms were incorporated in the agreement 'by way of consideration' or 'formed part of the consideration of the of the grant of the said lease'.

(iii) The lease was of the immoveable property described in paragraph 1 of the plaint.

(iv) The parties contracted to create the lease by the writing dated October 31, 1.965 mentioned in paragraph 2 of the plaint, and then they 'arrived at consent terms on 25th February, 1959' as stated in the consent decree. The copy of the consent decree filed by the applicant shows that it has been signed on behalf of both the parties.

(v.) A perusal of Ex. B shows further that the terms necessary to constitute the transfer can easily be ascertained with reasonable certainty. The applicant has set out the important terms in the plaint, at some length.

(vi) The applicant gave the 'use of the Building' to the Company on the terms and conditions stated in the agreement (vide paragraph 2 of the plaint), so that the Company has admittedly taken possession of the contract or that, at any rate, it has continued in possession under the terms of the consent decree, embodying the terms of the lease, in part performance of the lease.

(vii) In furtherance of the contract, the Company has paid the rent and the taxes etc. and 'made some further part-payments' (vide paragraphs 11 and 13 of the plaint).

(viii) The contract of lease has, however, not been registered even though it was compulsorily registerable under Section 107 of the Transfer of Property Act.

All these are important requirements of Section 53A of the Transfer of Property Act and they have been fulfiled on the applicant's own admissions in the plaint.

11. Then the Company has stated in paragraph 3 of the written statement (Ex. 2, filed by the applicant) that it has 'performed and/or are willing to perform the defendants part of the obligations.' under the agreed terms. More-ever, it has been admitted by the learned Counsel for the applicant that the Company has deposited all the arrears of the rent taxes and charges etc. in the trial court and, as has been mentioned Mr. Toshi has stated at the Bar that the of the present application.

12. It is therefore quite abvious that all the requirements of Section 53A of the Transfer of Property Act have been fulfilled and there is no reason why the Company should not be entitled to benefit from the following provision of that section:

then, notwithstanding that the contract, though required to be registred, has not been completed in the manner prescribed therefore by the law for the time being in force, the transfer or any person claiming under him shall be debarred from enforcing against the transferee and persons claiming under him any right in respect of the property of the rransferee has taken or continued in posession, other than a right expressly provided by the terms of the contract.

13. In other words, there is no reason why the applicant should not be debarred from enforcing any right in respect of the suit premises other than the right expressly provided by the terms of the consent decree (Ex. B). The very first term of that decree states that the period of the lease shall be 20 years commencing from October 16, 1958. It follows therefore that the contention of the applicant that it was monthly tenancy, is quite incorrect and untenable. This, in turn, leads to the conclusion that the tenancy could not be terminated by a notice under Section 106 of the Transfer of Property Act and that the applicant is not at all entitled to eject the Company Under Section 12 of the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947 on which so much reliance has been placed by its learned Counsel. It has no doubt been stated in the plaint that the tenancy has been forfeited for breach of certain conditions of the lease. But this contention is also clearly untenable under the law. Paragraph 26 of the consent decree states as follows:

26. The lease shall contain the usual provision for forfeiture and re-entry. In the event of difference of opinion between the parties as regards the clause it will also be determined by arbitration as hereinafter provided.

The usual provision is that contained in Section 111 o0f the Transfer of Property Act. According to it, a lease of immoveable property determines, inter alia, by efflux of the time limit thereby as provided by Clause (a), or by forfeiture under Clause (g), that is to say, in case the lessee breaks an express condition which provides that, on breach thereof, the lessor may re-enter. But it has not been alleged in the plaint that there is any such express condition in the present case. On the other hand, a perusal of Ex. 2 shows that there is in fact no such express condition at all, and it must therefore be held that the applicant's claim regarding the forfeiture of the tenancy is quite baseless. It may also be stated that it is not the case of the applicant t hat the lease has been forfeited in any of the other two cases provided in Clause (g) of Section 111 of the Transfer of Property Act.

14. It will thus appear that there is every justification for the contention that the plaint does not disclose a cause of action and that there are no chances whatsoever of its success at the trial. It will therefore cause harassment to the Company and put it to considerable unnecessary expenditure if the leave prayed for is granted. It has to be remembered that the suit does not concern third parties, and the claim for the recovery of arrears of rents, taxes and other dues can be properly determined in the winding up. In fact, as has been stated, the Company has not only paid the earlier dues but has undertaken to pay them in the future as well. There is therefore no reason whatsoever to grant the leave applied for. In the view I have taken, I do not think it necessary to refer to the other arguments of Mr. Joshi.

15. The application fails and is dismissed with costs.


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