1997 (9) TMI 434 - HC - Companies Law

Summary

Issues Involved:
1. Validity of alleged tenancies.
2. Power of the High Court under Sections 391 and 392 of the Companies Act, 1956.
3. Enforcement of the revival scheme.
4. Jurisdiction of the High Court versus Rent Control Court for eviction.

Issue-wise Detailed Analysis:

1. Validity of Alleged Tenancies:
The primary issue was whether the tenancies in favor of the respondents (tenants) were valid. The official liquidator and secured creditors argued that the tenancies were void ab initio due to a prohibition clause in the agreement between the Company and the Kerala Financial Corporation (K.F.C.). This clause prevented the Company from selling, mortgaging, leasing, transferring, or otherwise disposing of the secured property, including the shops occupied by the tenants. The Court had previously directed the official liquidator to treat the occupants as licensees, not tenants, due to this prohibition. The Court reaffirmed that the validity of the tenancies was crucial for deciding the eviction.

2. Power of the High Court under Sections 391 and 392 of the Companies Act, 1956:
Section 391 allows the Company Court to compromise or make arrangements with creditors and members, while Section 392 empowers the High Court to enforce these compromises and arrangements. The Court cited the Supreme Court's ruling in J.K. (Bombay) (P.) Ltd. v. New Kaiser-I-Hind Spg. & Wvg. Co. Ltd., which established that a scheme sanctioned by the court becomes binding with statutory force and cannot be altered without the court's sanction. Additionally, the Supreme Court in S.K. Gupta v. K.P. Jain highlighted the wide amplitude of the High Court's powers under Section 392 to ensure the proper working of the compromise or arrangement, including giving directions and making necessary modifications.

3. Enforcement of the Revival Scheme:
The revival scheme sanctioned by the Court on 11-4-1996 required the eviction of licensees (including tenants) to complete the scheme. The Court noted that without vacant possession, the revival scheme could not be effectively implemented. The Court emphasized its power under Section 392 to provide directions necessary for the proper working of the compromise, including removing obstacles and impediments.

4. Jurisdiction of the High Court versus Rent Control Court for Eviction:
The tenants argued that the High Court could not order their eviction and that the petitioner should approach the Rent Control Court. They cited previous orders and decisions, including Ravindra Ishwardas Sethna v. Official Liquidator and General Radio & Appliances Co. Ltd. v. M.A. Khader, to support their claim. However, the Court distinguished these cases, noting that the present case involved a revival scheme sanctioned under the Companies Act, which provided the High Court with broad powers to enforce the scheme. The Court concluded that the tenants' contention was unsustainable and that the High Court had the jurisdiction to order eviction under the circumstances.

Conclusion:
The petition was allowed. The Court directed the official liquidator to give vacant possession of the tenanted premises to the Company. The tenants were given three months from 1-9-1997 to surrender the premises either to the official liquidator or to the Company. The Court exercised its powers under Section 392 to ensure the effective implementation of the revival scheme, emphasizing the statutory force of the scheme sanctioned under the Companies Act.