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In Re: Britannia Engineering Company Ltd. (In Liquidation) - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtKolkata High Court
Decided On
Case NumberCompany Application No. Nil of 1981 in Company Petition No. 452 of 1971
Judge
Reported in[1983]54CompCas277(Cal)
ActsCompanies Act, 1956 - Sections 445(3), 446, 446(2), 456(3), 468 and 535; ;Industries (Development and Regulation) Act, 1951 - Section 18FA(10); ;Companies (Court) Rules, 1959 - Rule 9
AppellantIn Re: Britannia Engineering Company Ltd. (In Liquidation)
Advocates:R. Chowdhury and ;P.K. Das, Advs. ;for Bhalla, Adv.
Excerpt:
- .....ltd.,a-3, gillander house,8, netaji subhas road,post box no. 2045,calcutta-700001. tomr. s. c. bhalla,flat no. 107,trivoli court,calcutta-19.dear sir,we thank for your letter of 4th april, 1972, and we note your agreeing to take over this flat on the same terms and conditions as it was let out to m/s. britannia engineering co. ltd. although we tentatively fixed the tenancy for this flat with another party on better terms, we are quite willing to accept your offer subject to proper lease between us and m/s. maxwell engineering company as also subject to service agreement between m/s. antonie bentz p. ltd. and m/s. maxwell engineering co. as per standard terms of agreement.it is, of course, expected, that as far as electricity charges, service charges and rent charges are concerned,.....
Judgment:

Salil K. Roy Chowdhury, J.

1. This is an application under Section 446 for leave to institute suit and legal proceeding against the official liquidator representing the Britannia Engineering Co. Ltd. in liquidation, in terms of prayer (a) of the judge's summons by M/s. Tinwald Properties, a registered partnership firm and the landlord of Trivoli Court, in respect of flat No. 107 on the 2nd floor of Block 'A', Trivoli Court at No. 1/C, Bullygunge Circular Road.

2. The facts which cannot be disputed are that on or about 31st May, 1969, Britannia Engineering Co. Ltd. was inducted as a monthly tenant in respect of the said flat No. 107 on the second floor of Block A, Trivoli Court, at No. 1/C, Bullygunge Circular Road, at a monthly rent of Rs. 950, service charge Rs. 250 per month and hire charge for fittings at Rs. 150 per month, making an aggregate of Rs. 1,350 per month. The said Britannia Engineering Co. Ltd. also advanced a sum of Rs. 30,000 which was to be adjusted against the monthly rent at the rate of Rs. 500 per month and the company paid rent in terms of the said tenancy agreement up to certain period and, thereafter, it failed and neglected to pay rent in respect of the same. It is alleged in the affidavit being the ground of the present application, affirmed by one Pradip Mehta on 23rd December, 1980, that the company defaulted in making payment of rent and hire charges in terms of the said monthly tenancy agreement since December, 1970, and, thereafter, no payment has been made by the company in respect of the rent and service charges and, as such, the applicant by letter dated 21st October, 1976, addressed to the Authorised Controller of the parent division of the company which was taken over by the Central Govt. under I (D & R) Act, 1951, which replied, as per the reply produced before the court during the hearing by Mr. S.B. Mukherjee, appearing for the applicant, that they were not interested in the said flat as the same was not taken over under the said Act and it did not form part of the industrial undertaking taken over by the Central Govt. of which the Authorised Controller was in possession. It also appears from the correspondence placed before me that one Mr. S.C. Bhalla was allotted the said flat as an employee of the said Britannia Engineering Co. Ltd. by the company while the said company was not wound up or the parent division was not taken over under the I (D & R) Act, 1951. It is quite clear from the correspondence as disclosed by the applicant in its affidavits, being the ground of the present application, and the affidavit-in-reply and also the supplementary affidavit, that the said Mr. Bhalla was occupying the said premises as an employee of the Britannia Engineering Co. Ltd. before it was wound up. It further appears that he is in possession of the said flat of which he is now claiming to be the tenant under the applicant in the name of his firm, M/s. Maxwell Engineering Co. It also appears that he has made certain payments to the applicant and also started depositing alleged rent with the Rent Controller, as would appear from the supplementary affidavit filed by the said S.C. Bhalla affirmed on 9th June, 1981. After this present application was moved, it appeared to me that the said Mr. Bhalla, who was not made a party, should be served with a notice of this application as the order to be made in this application will directly affect him because he is in possession and also claiming to be a tenant under the applicant, and pursuant to the said direction, notice was served on Mr. Bhalla, who appeared before me through Mr. P.K. Das initially and subsequently, Mr. R. Chodhury appeared leading Mr. Das and made submissions. In the affidavit filed by Mr. S.C. Bhalla, affirmed on 2nd April, 1981, in this application, in opposition to the applicant's present application, alleged that the Britannia Engineering Co. Ltd. declared a lock-out on 2nd October, 1970, and discontinued to pay any rent to the applicant and it is alleged by Mr. Bhalla that he entered into a tenancy agreement with the applicant as the sole proprietor of his concern known as Maxwell Engineering. Co. and it is alleged by Mr. Bhalla in the said affidavit that the applicant started accepting rent pursuant to their letter dated 5th April, 1972, and issued rent receipts to Mr. S.C. Bhalla, who is admittedly in possession of the said flat No. 107 in Trivoli Court, Block A. It is also alleged that the applicant refused to accept rent and, thereafter, Mr. Bhalla started depositing rent with the Rent Controller from April, 1977, and he has been depositing the rent up to February, 1981. Bhalla alleged that he became a direct tenant under the applicant in 1972 when Britannia Engineering Co. Ltd. went into liquidation in 1974. Therefore, the alleged tenancy of Mr. Bhalla under the applicant cannot be linked up with the company in liquidation, being Britannia Engineering Co, Ltd. It was also argued by Mr. Das that there was an implied surrender by the company and a fresh tenancy in favour of Mr. Bhalla in 1972. In the said affidavit, he has annexed two rent receipts dated 5th January, 1973, and 9th August, 1973, for Rs. 950 each and also a letter dated 5th April, 1972, which is set out here I

' From :

M/s. Antonie Bentz Pvt. Ltd.,

A-3, Gillander House,

8, Netaji Subhas Road,

Post Box No. 2045,

Calcutta-700001.

To

Mr. S. C. Bhalla,

Flat No. 107,

Trivoli Court,

Calcutta-19.

Dear Sir,

We thank for your letter of 4th April, 1972, and we note your agreeing to take over this flat on the same terms and conditions as it was let out to M/s. Britannia Engineering Co. Ltd. Although we tentatively fixed the tenancy for this flat with another party on better terms, we are quite willing to accept your offer subject to proper lease between us and M/s. Maxwell Engineering Company as also subject to service agreement between M/s. Antonie Bentz P. Ltd. and M/s. Maxwell Engineering Co. as per standard terms of agreement.

It is, of course, expected, that as far as electricity charges, service charges and rent charges are concerned, you will pay up the arrears from the date you agreed to pay such charges directly to us.

Thanking you,

Yours faithfully,

For Antonie Bentz Pvt. Ltd.

(Sd.) Managing director.'

3. From the said affidavit and the said pleading, it appeared to me that Mr. Bhalla was alleging surrender of the tenancy by the company in liquidation and also fresh tenancy being created in his favour by the applicant and, therefore, I directed supplementary affidavits to be filed by the applicant and also reply, by Bhalla. Mr. Bhalla filed a supplementary affidavit on 9th June, 1981, and the applicant dealt with the said supplementary affidavit filed by Pradip Mehta affirmed on 15th June, 1981. From all these affidavits, it appears that Mr. Bhalla alleged that the company by its letter dated 24th November, 1970, because of the closure of their works with effect from 2nd October, 1970, terminated the service of the said S. C. Bhalla with effect from 30th November, 1970. Mr. Bhalla disputed the said termination and contended that he is still in the employment of the company now in liquidation; and as a part of the terms of his employment he is in occupation of the said flat. Therefore, the court has no power to direct him to quit and vacate the said flat. The said contention is not only fantastic both in law and in fact but absurd to be accepted in any way whatsoever. Admittedly, Britannia Engineering Co. Ltd. was wound up in the application, being C.P. No. 452 of 1971, presented by Bengal Ingot Co. Ltd., by an order dated October 4, 1972. Subsequently, various units of the company in liquidation being Britannia Engineering Co. Ltd. were taken over being Mokama unit and the parent division at Titagarh by the Central Govt. under the I (D & R) Act, 1951, as different units of industrial undertakings, and the rest of the company's assets were administered by the liquidator in winding up of the company and subsequently, these were sold by public auction in court. From the present application of the applicant for leave under Section 446, it transpired to the official liquidator for the first time that the company had a monthly tenancy in the said flat at Trivoil Court being flat No. 107 in Block A under the applicant. It is also stated by the official liquidator in the affidavit filed by one Ananda Mohan Ganguly, affirmed on 21st January, 1981, in this application, that the said winding-up order dated 4th October, 1972, was appealed from and stayed and again by an order dated 10th January, 1973, the company was wound up and the official liquidator became the liquidator.

4. Mokama unit of the company in liquidation was taken over by the Central Govt. under the I (D & R) Act, 1951, in 1974 and the Titagarh unit had two divisions, one was the parent division and the other was the Steel Foundry Division. By an order of this court dated 30th November, 1976, leave was granted to the Central Govt. to appoint M/s. Westinghouse Sexby Farmers as Authorised Controller to take over the management of the parent division of the company for a period of five years under Section 18A of the I (D & R) Act, 1951. The Steel Foundry division of the Titagarh unit was not taken over by the Central Govt. and all the assets of the said division were mortgaged to the Industrial Finance Corporation of India and the State Bank of Bikaner and Jaipur over which, ultimately, the official liquidator was appointed receiver in the mortgage suit filed by the secured creditor and it is stated by the official liquidator in the said affidavit that whatever books and records of the company were there, were handed over to M/s. Westinghouse Sexby Farmers Ltd. as per order of the court dated the 30th January, 1976. It is clearly stated by the official liquidator that he has not taken possession of the said flat which is the subject-matter of the present application, being flat No 107 on the second floor of Block A, Trivoli Court, or had any knowledge about it before the present application. In this state of affairs it is quite clear that Mr. S.C. Bhalla was occupying the said flat as an employee of the company, Britannia Engineering Co. Ltd., which was wound up subsequently as hereinbefore stated. It is further stated by Mr. Bhalla that his service was terminated by the company as far back as on 24th November, 1970, with effect from 30th November, 1970. It also transpires from the correspondence annexed by the said Mr. Bhalla in his affidavit affirmed on 2nd April, 1981, which I have set out before and also from the annexure to the affidavit of Pradip Mehta affirmed on 16th April, 1981, in reply to the said affidavit of the said Mr. Bhalla that by the letter dated 22nd September, 1971, the applicant affirmed certain discussion with Mr. Mehta but agreed to pay all arrears of rent in respect of the said flat No. 107 with effect from December, 1970, provisionally, pending settlement with Britannia Engineering Co. Ltd. Again Mr. Bhalla by his endorsement in the copy of the said letter dated 27th September, 1971, by which the applicant agreed to pay electricity bill and service charges from January, 1971, which the applicant will continue to adjust towards rent against the advance paid by Britannia Engineering Co. Ltd. (sic). The letter of the applicant dated 24th September, 1971, also clearly shows that the applicant was writing to Mr. Bhalla that his service with Britannia Engineering Co. Ltd. stood terminated with effect from 31st December, 1970, and, therefore, it was stated by the applicant that once Britannia Engineering Co. Ltd. cancelled their tenancy, the occupation of the flat will be considered unauthorised occupation, involving so many complications and embarrassment to all concerned. It was also mentioned that payment of rent by Mr. Bhalla was not required till the advance paid by Britannia Engineering Co. Ltd. lasts. From the subsequent correspondence which are annexed to the said letter, it is abundantly clear that whatever discussion or arrangement the applicant entered into with Mr. Bhalla, is there any occupation of the said flat was subject to the settlement of the lease matter with Britannia Engineering Co. Ltd., who was admittedly the lessee of the said flat. That is clear from the letter dated 12th May, 1972. annexed to the affidavit-in-reply of Pradip Mehta, affirmed on the 16th April, 1981. The entire trend of the correspondence annexed to the said affidavit clearly shows that Mr. Bhalla was occupying the said premises as an employee of Britannia Engineering Co. Ltd. and money was accepted from him and kept in suspense account subject to settlement with Britannia Engineering Co. Ltd. It further transpires that the company went into liquidation and, therefore, the monthly tenancy in favour of the company is still continuing and the liquidator is the only person who can represent the company in liquidation, which is continuing as the monthly tenant. There is nowhere any document to show that the company in liquidation ever surrendered the tenancy or the tenancy was put to an end and it could not be either in fact or in law, as the company was wound up in 1972. The correspondence annexed by Pradip Mehta on behalf of the company as referred to above clearly show that Mr. S. C. Bhalla was occupying the flat as an ex-employee of Britannia Engineering Co. Ltd. and made payments on account, which was accepted subject to settlement with Britannia Engineering Co. Ltd. In this application when I discovered that the Britannia Engineering Co. Ltd. (in liquidation) of which the official liquidator is in possession in respect of the assets which are not taken over by the Central Govt. under the I (D & R) Act has made this application for leave to file a suit, in order to prevent multiplicity of proceedings, I directed notice to be served on S. C. Bhalla who is occupying the said premises, being an ex-employee of the Britannia Engineering Co. Ltd., now in liquidation, so that the matter can be disposed of in this application under Section 446(2)(a), (b) and (d) of the Companies Act, 1956, and the rights of the parties may be determined. Mr. R. Chowdhury argued that the winding-up proceeding is stayed under Section 18FA of the I (D & R) Act, 1951. He referred to Sub-section (10) and accord^ ing to Mr. Chowdhury, pursuant to the said Sub-section (10), during the management and control by the authorised controller under the said I (D & R) Act, the winding-up proceeding should remain stayed and, therefore, the present application is not maintainable. In my view, there is no substance in the said contention as the flat does not form part of the industrial undertaking, management of which was taken over by the Central Govt. under the I (D & R) Act, 1951. Only the parent division at Titagarh was taken over as an industrial undertaking and the said flat No. 107 in the second floor. Block A of Trivoli Court, has nothing to do with the industrial undertaking taken over under the said Act by the Central Govt. Therefore, Sub-section (10) of Section 18FA of the I (D & R) Act has no application as the said flat is not an industrial undertaking or a concern in relation to the function and control to be exercised by the authorised person of the industrial undertaking which has been taken over, being the parent division at Titagarh. Consequently, the said contention of Mr. Chowdhury caunot be accepted and the said flat, the monthly tenancy of which belonged to the company in liquidation, being Britannia Engineering Co. Ltd., now devolves on the official liquidator and is deemed to be in the custody of the court under Section 456(3) of the Companies Act, 1956, of which the official liquidator is the custodian. It is also admitted by S. C. Bhalla that his service has been terminated as hereinbefore stated in 1970 and still, he is continuing in possession of the said flat which was given to him by the company now in liquidation as an employee for occupation during the period of service with the company, and, as his service is admittedly terminated, he must be held to have no right to continue in occupation of the said flat, the monthly tenancy of which now belongs to the company, in liquidation, viz., Britannia Engineering Co. Ltd. It is immaterial whether the company has paid rent or not but it is admitted that the company had a deposit lying with the applicant and it is further immaterial whether S. C. Bhalla has made payments to the applicant on account of the said flat or not as that cannot terminate the tenancy in favour of Britannia Engineering Co. Ltd., as that can only be terminated in due course of law by serving notice to quit or by a disclaimer by the official liquidator under Section 535 of the Companies Act, 1956, and by an order passed by this court to do so. In this state of affairs, it must be held that S.C. Bhalla is in unauthorised occupation of the said premises and he must be directed to vacate the said premises and deliver possession to the official liquidator. It is also contended by S.C. Bhalla that he is still continuing in the employment of the company in liquidation as he was employed under the parent division, he is deemed to be in the employment under the authorised controller. The said position is not accepted by the authorised controller. No one has come forward to contend that he is an employee of the parent division over which the authorised controller is appointed and, therefore, the said contention of Mr. Bhalla cannot be accepted at all. Further, under Section 445(3) of the Companies Act, 1956, services of all officers and employees of the company are deemed to have been terminated by reason of winding-up. Therefore, Mr. Bhalla pn any account cannot be said to be an employee of the said company in liquidation.

5. In the result the occupation of Mr. Bhalla is unauthorised and he is directed to deliver vacant possession to the official liquidator by the end of this month, being 31st July, 1981. After the vacant possession is delivered, the official liquidator will be at liberty to make an appropriate application as he may be advised either to disclaim or to continue for beneficial winding-up, as the case may be. A point was argued that no relief by way of vacating the said premises by Mr. Bhalla is asked for in this application where only leave has been asked for to file a suit against the official liquidator by the applicant. In my view, that is too technical a plea and the court is to administer justice and to prevent multiplicity of proceedings. When the fact of unauthorised occupation of the company's asset or property by a person is clearly proved before the court, the court has ample power under Section 446(2)(a), (b) and (d) read with Rule 9 of the Companies (Court) Rules, 1959, to pass such order as it may think proper for determining the rights of the parties and it is a fit case where the said power should be exercised in the interest of justice and to shorten the litigation and prevent multiplicity of proceedings. There is also a prayer for further or other orders. The court has ample power under Rule 9 of the Companies (Court) Rules, 1959, to make any order which the facts and circumstances of the case demand. The court has ample power also under Section 468 if it discovers any property in the possession of an ex-employee of a company and admittedly Mr. Bhalla is an ex-employee and was in possession of the said flat No. 107 in Trivoli Court while in service with the company and, therefore, the tenancy is an asset and the property of the company which is still in the wrongful possession of Mr. Bhalla and he can be directed by the court to deliver possession of the same to the official liquidator. Further, it is well settled that the law of procedure is a handmaid of justice and not its mistress and the court can always make an order which is just and proper in the facts and circumstances of a case and it is immaterial, what the prayers are in the application and particularly, in a winding-up proceeding, whenever the court discovers any property of the company in the possession of anybody, particularly an ex-employee of the company in liquidation, the court can direct him to deliver possession of the same to the official liquidator in exercise of the power under Section 468. In this case, exactly the same thing has happened in this application and the facts as disclosed in the affidavits and supplementary affidavits of the applicant and S.C. Bhalla and also of the official liquidator. Whatever amounts the said Bhalla has paid to the applicant must be deemed to be on account of the wrongful occupation and on account of the company in liquidation.

6. Therefore, I am directing the said S.C. Bhalla to vacate the said premises by 31st July, 1981, and deliver vacant possession to the official liquidator on the expiry of the month of July, 1981. There will be no order as to costs.

7. Stay of this order asked for is refused.

8. The official liquidator and all parties to act on a signed copy of the minutes of this order.


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