1981 (7) TMI 187 - HC - Companies Law

Winding up Suits stayed on winding-up order, Custody of company s property, Winding up Delivery of property to liquidator, Powers of Central Government to authorise with permission of High Court to takeover management or control of industrial undertaking

Issues Involved:
1. Application under Section 446 of the Companies Act, 1956, for leave to institute a suit against the official liquidator.
2. Monthly tenancy and rent payment default by Britannia Engineering Co. Ltd.
3. Alleged tenancy agreement with Mr. S.C. Bhalla and his occupation of the premises.
4. Termination of Mr. Bhalla's employment and its impact on his right to occupy the premises.
5. Authority of the court to direct Mr. Bhalla to vacate the premises.
6. Application of Section 18FA of the Industries (Development and Regulation) Act, 1951.
7. Court's power under Section 446(2) and Rule 9 of the Companies (Court) Rules, 1959.

Detailed Analysis:

1. Application under Section 446 of the Companies Act, 1956:
The application was made by M/s. Tinwald Properties seeking leave to institute a suit against the official liquidator of Britannia Engineering Co. Ltd., in liquidation, regarding the tenancy of flat No. 107, Trivoli Court. The court had to determine whether leave should be granted under Section 446 to prevent multiplicity of proceedings and administer justice effectively.

2. Monthly Tenancy and Rent Payment Default:
Britannia Engineering Co. Ltd. was inducted as a monthly tenant in 1969, with an aggregate rent of Rs. 1,350 per month. The company defaulted in rent payments from December 1970, and no payments were made thereafter. An advance of Rs. 30,000 was to be adjusted against the rent at Rs. 500 per month. The applicant communicated with the Authorised Controller, who stated that the flat was not part of the industrial undertaking taken over by the Central Government.

3. Alleged Tenancy Agreement with Mr. S.C. Bhalla:
Mr. Bhalla, an employee of Britannia Engineering Co. Ltd., was allotted the flat and claimed to be a tenant under the applicant through his firm, M/s. Maxwell Engineering Co. He alleged an implied surrender by the company and a fresh tenancy in his favor in 1972. Bhalla provided rent receipts and correspondence to support his claim. However, the court noted that Bhalla's occupation was subject to settlement with Britannia Engineering Co. Ltd., and no formal surrender or termination of the company's tenancy was documented.

4. Termination of Mr. Bhalla's Employment:
Mr. Bhalla's employment was terminated in November 1970. He contested this termination, claiming continued employment and occupation rights. The court found this claim legally and factually untenable, noting that his occupation was unauthorized post-termination. Under Section 445(3) of the Companies Act, 1956, all officers' and employees' services are deemed terminated upon winding-up.

5. Authority of the Court to Direct Mr. Bhalla to Vacate:
The court held that Mr. Bhalla's occupation was unauthorized and directed him to vacate the premises by 31st July 1981. The court emphasized its power under Section 446(2)(a), (b), and (d) and Rule 9 of the Companies (Court) Rules, 1959, to determine the rights of the parties and prevent multiplicity of proceedings.

6. Application of Section 18FA of the Industries (Development and Regulation) Act, 1951:
Mr. Bhalla argued that the winding-up proceeding should be stayed under Section 18FA of the I(D&R) Act, 1951. The court rejected this contention, noting that the flat did not form part of the industrial undertaking taken over by the Central Government. Therefore, Section 18FA(10) had no application to the flat in question.

7. Court's Power under Section 446(2) and Rule 9:
The court reaffirmed its authority to make orders under Section 446(2) and Rule 9 of the Companies (Court) Rules, 1959, to administer justice and address unauthorized occupation. The court directed Mr. Bhalla to vacate the premises and deliver possession to the official liquidator, emphasizing that procedural technicalities should not hinder justice.

Conclusion:
The court ordered Mr. Bhalla to vacate flat No. 107, Trivoli Court, by 31st July 1981, and deliver possession to the official liquidator. The court exercised its powers under Section 446(2) and Rule 9 to prevent multiplicity of proceedings and ensure justice. The stay of the order was refused, and all parties were directed to act on a signed copy of the minutes of the order.

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