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Maneck Noshirwan Kaka and ors. Vs. Official Liquidator, High Court - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtKolkata High Court
Decided On
Case NumberCompany Petition No. 493 of 1979
Judge
Reported in[1986]60CompCas526(Cal)
ActsCompanies Act, 1956 - Section 535(2); ;Companies (Court) Rules, 1959 - Rule 268; ;West Bengal Relief Undertakings (Special Provision) Act, 1972 - Section 3
AppellantManeck Noshirwan Kaka and ors.
RespondentOfficial Liquidator, High Court
Advocates:P.C. Sen, ;Jayanta Mitra and ;D. Choudhuri, Advs.;T.K. Bose and ;Sankar Mitra, Advs.;S.K. Acharya, Adv. General and ;S.C Ukil, Adv.
DispositionAppeal dismissed
Excerpt:
- .....on january 14, 1981, the lic took out a judge's summons, inter alia, praying for an order on the official liquidator directing him to disclaim the leasehold interest of the company in respect of premises no. 12, chowringhee road and no. 1 chowringhee palace, calcutta. the said application was dismissed by the learned company court judge. the lic preferred an appeal against the said order of the learned judge dismissing the application.3. the appeal court, consisting of sabyasachi mukharji and s. c. sen jj., set aside the order of the learned judge and allowed the appeal of the lic and directed the official liquidator to disclaim the property as prayed for by the lic. the lic was given leave to continue the proceedings under the public premises (eviction of unauthorised occupants) act,.....
Judgment:

M.M. Dutt, J.

1. This appeal has been preferred by the three appellants against the judgment and order dated December 20, 1983, of D. K. Sen J. dismissing the application of the appellants under Sections 446 and 466 of the Companies Act 1956.

2. The building being premises No. 12, Chowringhee Road and No. 1 Chowringhee Palace, Calcutta, admittedly belongs to the Life Insurance Corporation of India, hereinafter referred to as ' the LIC '. The said building was in possession of the Ritz Continental Hotels Ltd., hereinafter referred to as ' the company ', by virtue of a deed of lease, dated November 30, 1973, executed by the LIC for a period of 25 years commencing from March 15, 1971, at a rent of Rs. 65,235'85 per month. The company defaulted in payment of rent and other charges to the LIC from April 1, 1974. The LIC by its advocate's letter forwarded to the company a statement of the outstanding dues of the company to the LIC amounting to about Rs. 10,00,000 from April. 1, 1974, up to July, 1976. On July 27, 1976, the LIC terminated the lease of the company in respect of the said building being premises No. 12, Chowringhee Road and No. 1, Chowringhee Palace, Calcutta, by serving on the company a notice calling upon it to quit and vacate and deliver vacant and peaceful possession of the buiding. Thereafter, on March 12, 1977, the LIC also served on the company a statutory notice under Section 434 of the Companies Act. The LIC also filed a winding-up petition before a company court judge of this court and obtained an order for the winding-up of the company. The said order, however, was stayed by the appeal court in the appeal preferred by the company. On March 25, 1980, the company was, however, directed to be wound up on an application for winding-up of one Md. Noor Navi and the official liquidat&r; was directed by the court to take possession of the books, documents and assets of the company. Against that order of winding-up, the company preferred an appeal and also obtained an interim order for stay of winding-up. The application, however, was dismissed by the appeal court on June i 1, 1980, and the ad interim order for stay was also vacated. On January 14, 1981, the LIC took out a judge's summons, inter alia, praying for an order on the official liquidator directing him to disclaim the leasehold interest of the company in respect of premises No. 12, Chowringhee Road and No. 1 Chowringhee Palace, Calcutta. The said application was dismissed by the learned company court judge. The LIC preferred an appeal against the said order of the learned judge dismissing the application.

3. The appeal court, consisting of Sabyasachi Mukharji and S. C. Sen JJ., set aside the order of the learned judge and allowed the appeal of the LIC and directed the official liquidator to disclaim the property as prayed for by the LIC. The LIC was given leave to continue the proceedings under the Public Premises (Eviction of Unauthorised Occupants) Act, 1971. The official liquidator prayed for the stay of the operation of the said order of the appeal court but the appeal court by its order dated February 9, 1983, disallowed the said prayer of the official liquidator. The official liquidator filed a specialleave petition before the Supreme Court against the order of the appeal court. The special leave petition was, however, dismissed by the Supreme Court. Pursuant to the order of the appeal court, D. K. Sen J., by his order dated April 29, 1983, directed the official liquidator to forthwith formally . disclaim the premises in question in favour of the LIC and the latter was directed to provide a godown or a storing space for storing the movable goods in the premises till the title thereto was decided. The appeal of the company against the said order of D. K. Sen J. directing the official liquidator to disclaim the said premises was dismissed by the appeal court by its order dated June 22, 1983. On July 22, 1983, the official liquidator disclaimed in writing the leasehold interest of the company in the said premises and forwarded the same to the LIC.

4. On July 27, 1983, the appellants filed an application under Sections 446 and 466 of the Companies Act before D. K. Sen J., learned company court judge, inter alia, praying for stay of all further proceedings in respect of winding-up of the company and for the stay of the order of disclaimer of the hotel building of the company. Further, it was prayed that the LIC should be directed not to take possession or occupy and/or dispose of in any manner whatsoever the hotel building of the company. D. K. Sen J., by his order dated December 20, 1983, dismissed the said application of the appellants. At this stage, it may be stated that after the appellants filed the sai,d application under Sections 446 and 466 of the Companies Act on July 27, 1983, on the next day, that is, on July 28, 1983, the Government of West Bengal issued a notice under Section 3 of the West Bengal Relief Undertakings (Special Provisions) Act, 1972, hereinafter referred to as the Relief Undertakings Act, declaring the company as a relief undertaking with effect from that date for a period up to January 27, 1984, On the said day, another notification was issued by the State Government under Section 4 of the Relief Undertakings Act. Be that as it may, the appellants being aggrieved by the judgment and order dated December 20, 1983, of the learned judge preferred the instant appeal.

5. Appellant No- 1, Maneck Noshirwan Kaka, claims to be the authorised representative of appellants Nos. 2 and 3, who are contributories as defined under Section 428 of the Companies Act, 1956, in respect of the company. It has been alleged that appellants Nos. 2 and 3 transferred for valuable consideration 10 preference shares and 1,000 equity shares respectively held in the share capital of the company to appellant No. 1. Appellant No. 1 also claims to be the constituted attorney of appellants Nos. 2 and 3.

6. It is the case of the appellants that appellant No. 1 wish the assistance of other financiers proposed to revive and run the hotel business ofthe company in the said premises belonging to the LIC. The appellants also made a proposal to the LIC for liquidation of its dues then stated to be Rs. 80,00,000 on instalment basis, with an initial payment of Rs. 10,00,000 and, thereafter, by yearly instalment of Rs. 5,00,000 per instalment. The LIC did not, however, give any reply to the proposal. Thereafter, the appellants made the said application under Sections 446 and 466 of the Companies Act. It is also the case of the appellants that on January 18, 1983, the appellants made a representation to the Chief Minister of the State of West Bengal wherein it was contended, inter alia, that the hotel might be declared a sick unit for the time being for reorganisation and reopening of the company. It seems that in view of the said representation and of some sort of arrangement between the appellants on the one hand and the State Government on the other, the said notification under the Relief Undertakings Act has been made. We shall have occasion to consider the proposal of the appellants for the revival and running of the hotel business of the company. But before that, we would like to dispose of the contention of the LIC that the appellants had no locus standi to make an application under Sections 446 and 466 of the Companies Act, 1956.

7. According to appellant No. 1, appellants Nos. 2 and 3 assigned their shares in the company to appellant No. 1 for valuable consideration on November 19, 1982, and November 18, 1982, respectively, that is to say, both the transfers were made after the commencement of the winding-up proceeding. It is submitted on behalf of the LIC that by virtue of Section 536(2) of the Companies Act, the transfers are void. In our opinion, there is some substance in the contention of the LIC. The winding-up order has been made on March 17, 1980, and the transfer of shares by appellants Nos. 2 and 3 to appellant No. 1 having been made long thereafter without any direction of the court must be held to be void. It is true that appellants Nos. 2 and 3 are the contributories of the company and the application may be said to be maintainable at their instance. Both the appellants Nos. 2 and 3 were also parties in the application under Sections 446 and 466 of the Companies Act. It is appellant No. 1 who wants to revive the company and run the hotel business. Appellants Nos. 2 and 3 do not seem to be interested in the matter. Moreover, under Section 466, it is discretionary with the court to stay the winding-up proceeding. As the transfer of shares to appellant No. 1 by appellants Nos. 2 and 3 is void, the court may not stay the winding-up proceeding. Theoretically, as appellants Nos. 2 and 3 are also parties, the application under Sections 446 and 466 of the Companies Act is maintainable, but it is not maintainable at the instance of appellant No. 1 alone. In the circumstances, it is now for the court to consider whether the court would stay the winding-up proceeding or not.

8. The proposed scheme of appellant No. 1, which was annexed to the copy of the letter addressed to the Chief Minister of West Bengal dated January 18, 1983, does not inspire any assurance that the dues of the creditor would be paid without much delay. The source of the funds does not appear to be adequate for the purpose of reviving and running the hotel. Appellant No. 1 claims to own and possess assets and properties worth Rs. 40,00,000. There is no clear proof and evidence that really appellant No. 1 owns and possesses assets and properties to the extent of Rs. 40,00,000. It is not correct to say that the bank has given assurance for advancing money to appellant No. 1. Moreover, the appellants have not taken any steps under Section 391 of the Companies Act. The said sum of Rs. 40,00,000 will also be quite inadequate for reviving and running the hotel business. It is the case of the LIC that its dues would be about Rs. 2,00,00,000. It is submitted on behalf of the LIC that it is the endeavour of appellant No. 1 to grab the property of the company and to start the hotel business in the building belonging to the LIC without sincerely wishing to pay all the dues of the LIC. It is not necessary for us to consider this aspect of the case of the LIC, but suffice it to say that we are not at all impressed with the scheme that has been annexed to the letter of the Chief Minister.

9. The principal object of the application under Sections 446 and 466 of the Companies Act is to stay the operation of the disclaimer. In other words, it is the endeavour of the appellants to see that the lease of the company in respect of the building belonging to the LIC continues so that appellant No. 1 can with the support of the State Government carry on the hotel business of the company in the said building. It has been stated already that the appeal court by its order dated October 17, 1982, directed the official liquidator to disclaim the property as prayed for by the LIC. Pursuant to the said order of the appeal court, D. K. Sen J., by his order dated April 29, 1983, similarly directed the official liquidator to forthwith formally disclaim the premises in question. On July 22, 1983, the official liquidator in writing disclaimed all interest in the lease dated May 30, 1973, and forwarded such disclaimer to the LIC, In this connection, it may be recalled that before the winding-up proceeding was started, the LIC also terminated the lease of the company. It is not disputed that the West Bengal Premises Tenancy Act, 1956, is not applicable to the instant case, for the lease of the building in question is over 25 years. It is the contention of the appellants that in view of Rule 268 of the Companies (Court) Rules, 1959, hereinafter referred to as 'the Rules', the disclaimer has not yet been operative. Rule 268 provides as follows J

' Every disclaimer shall be filed in court by the liquidator and shall not be operative until it is so filed. Where the disclaimer is in respect of a leasehold interest, it shall be filed in court forthwith. Notice of the filing of the disclaimer shall be given to the persons interested in the property. The disclaimer shall contain particulars of the interest disclaimed and the statement of the persons to whom notice of the disclaimer has been given. The disclaimer shall be in Form No. 133 and a notice of disclaimer in Form No. 134.

Where a disclaimer has been filed in court, the liquidator shall file a copy thereof with the Registrar of Companies.'

The provision for disclaiming the property of a company which is being wound up is contained in Section 535 of the Companies Act. Under Section 535, only onerous property of the company which is being wound up can be disclaimed by the liquidator of the company with the leave of the court. Leave has to be taken by the liquidator before he can disclaim the property of the company. Section 535(2), inter alia, provides that the disclaimer shall operate to determine, as from the date of disclaimer, the rights, interest and liabilities of the company, and the property of the company, in or in respect of the property disclaimed. So, if the liquidator considers that it would be burdensome on the company to retain any property, he may make an application before the court praying for leave to disclaim such property. Indeed, Rule 263 of the Rules provides for making such an application for leave to disclaim. The court, after hearing the parties and considering the facts and circumstances of the case, may grant leave to the liquidator to disclaim the property. Rule 268, as has been noticed already, provides that every disclaimer shall be filed in court by the liquidator and shall not be operative until it is so filed. On the other hand, Section 535(2) of the Companies Act provides that the disclaimer shall operate to determine as from the date of the disclaimer the rights, interest, and liabilities of the company, and the property of the company, in or in respect of the property disclaimed. Therefore, the combined effect of Section 535(2) and Rule 268 is that the disclaimer will not be operative so long as it is not filed in court, but after it is filed in court, it will become operative from the date of the disclaimer.

10. In the instant case, although the property has been disclaimed by the official liquidator, the disclaimer has not been filed in court. It may be stated here that the official liquidator was against disclaiming the leasehold interest of the company in the building being premises No. 12, Chowringhee Road and No. 1, Chowringhee Palace, Calcutta. Indeed, the official liquidator opposed the prayer of the LIC that the court should direct the official liquidator to disclaim the property. The official liquidatorsucceeded before the learned trial court, but ultimately the appeal court directed the official liquidator to disclaim the property and pursuant to the order of the appeal court, the learned company court judge also directed the official liquidator to forthwith disclaim the property. The official liquidator complied with the order of the court in disclaiming the property, but did not file the disclaimer in court. Now, the question is whether the disclaimer has become operative. Much reliance has been placed on behalf of the appellants on Rule 268 of the Rules. It is submitted that as the disclaimer has not been filed in court, it is not operative. The learned counsel for the appellants submits that Rule 268 is mandatory and, therefore, it must be held that as the official liquidator did not file the disclaimer in court, such disclaimer has not yet taken place in respect of the property in question. We are, however, unable to accept this contention. Here, the disclaimer has not taken place at the instance of the official liquidator. Section 535 of the Companies Act and Rule 268 of the Rules relate to a disclaimer that may be made in accordance with the leave granted by the court to the official liquidator on his prayer to disclaim any property. It will be for the official liquidator to disclaim it. The official liquidator will not, however, be bound to disclaim the property, for the court only grants leave to disclaim and does not direct the official liquidator to disclaim the property. So, after the official liquidator obtains leave from court to disclaim any property, he has to disclaim it by filing the disclaimer in court. He cannot disclaim the property in favour of the owner of the property without putting on record of the case such disclaimer. In other words, the court must be apprised of the fact of such disclaimer by filing the disclaimer in court, otherwise it will not be operative.

11. In the instant case, the disclaimer has been made not at the instance of the official liquidator under the leave of the court, but it has been made at the instance of the LIC. The court had specifically directed the official liquidator to disclaim. The official liquidator was bound to disclaim the property. No option was left to him about such disclaimer. In such a case, if the disclaimer is served on the owner of the property, it will be quite sufficient ; such disclaimer need not be filed in court or may be filed any time thereafter. If, in such a case, it is held that so long as the official liquidator does not file the disclaimer in court, it will not be operative by virtue of Rule 268, in that case, the party in whose favour the disclaimer has been directed to be made and also the company in liquidation might be seriously prejudiced, for the official liquidator, who may be against such disclaimer, as he was in the instant case, may not file the same. In the instant case, the official liquidator has not filed the disclaimer as he was opposed to make such a disclaimer. In our opinion, the official liquidator cannot by his wrongful act set at naught the order of the court. In view of the discussion made above, we are of the opinion that when the court directs the official liquidator to disclaim the property of the company at the instance of a party other than at the instance of the official liquidator, the provision of Rule 268 of the Rules will not apply. In other words, the order of the court directing the official liquidator to disclaim the property will act as the disclaimer of the property even if the official liquidator does not file the disclaimer in court. Therefore, in spite of the fact that the official liquidator has not filed the disclaimer in court, we are of the view that such disclaimer has taken effect from the date the order was made by the appeal court directing the official liquidator to disclaim the property in question or, in any event, the disclaimer has taken place from the date the official liquidator served the disclaimer on the LIC.

12. We have been pressed on behalf of the appellants to consider the effect of the two notifications, one under Section 3 and the other under Section 4 of the Relief Undertakings Act, on the winding-up proceeding, in particular, on the disclaimer. It is not disputed that if the disclaimer had become operative before the said notifications were issued, the Relief Undertakings Act and/or the said notifications will not have any effect on the disclaimer. In view of our finding that the disclaimer has become operative with effect from October 4, 1982, when the appeal court directed the official liquidator to disclaim the property in question, that is to say, long before the two notifications under the Relief Undertakings Act had been made, it is not necessary for us to consider the submissions made on behalf of the appellants with reference to provisions of the Relief Undertakings Act on the assumption that the disclaimer had not been operative. It has been already stated that the appellants are interested in getting rid of the disclaimer of the building where the company used to run the hotel. The appellants are not at all interested in getting a stay of the winding-up proceeding, the disclaimer having become operative. As we have held that the disclaimer has long been operative, we do not think it would be necessary for us to consider the submissions made by the appellants on the basis of the provisions of the Relief Undertakings Act.

13. For the reasons aforesaid, the appeal is dismissed with costs, hearing fee being assessed at 60 Gold Mohurs.

14. The prayer for stay of the operation of this judgment is disallowed.

Ajit Kumar Sengupta, J.

15. I agree.


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