2001 (7) TMI 1218 - HC - Companies Law

Summary

Issues Involved:
1. Whether tenancy rights of the company in liquidation are capable of being transferred, assigned, or attached.
2. Jurisdiction of the Company Judge in directing the Liquidator to take over the assets of the company contrary to the Division Bench's directions.
3. Applicability of the attachment before judgment under Order 38 of the Code of Civil Procedure.

Detailed Analysis:

1. Transferability and Attachment of Tenancy Rights:
The primary issue was whether the tenancy rights of the company in liquidation could be transferred, assigned, or attached. The court held that the general rule under the Bombay Rents, Hotel and Lodging House Rents Control Act, 1947 (Rent Act) is that tenancy rights are not capable of being transferred or assigned. However, there are exceptions, such as heritability and contractual agreements permitting assignments. The court referred to various judgments, including Gian Devi Anand v. Jeevan Kumar and Chandavarkar Sita Ratna Rao v. Ashalata S. Guram, which recognized the heritability of tenancy rights and the limited exceptions to the prohibition on transfer.

Dr. Naik, representing the Bank, argued that the tenancy rights could be attached based on a Notification under section 15(1) of the Rent Act, which permits transfer or assignment incidental to the sale of a business as a going concern. However, the court found this argument misplaced as the company was defunct and not a going concern at the time the Receiver took possession. Consequently, the tenancy rights were not capable of being attached.

2. Jurisdiction of the Company Judge:
Dr. Naik contended that the Company Judge acted contrary to the Division Bench's binding order by directing the Liquidator to take over the assets. The Division Bench had stayed the orders of the learned Single Judge and the Co-operative Appellate Court, which had modified the attachment order. The court found that the Company Judge was justified in making the order under appeal as the tenancy rights were not assignable or attachable, and the company was not a going concern.

3. Attachment Before Judgment:
The court examined whether the attachment before judgment under Order 38 of the Code of Civil Procedure was justified. The Bank had sought attachment before judgment, appointment of a Receiver, and an injunction. The court emphasized that an order of attachment before judgment has serious consequences and should not be made lightly. It found that the Bank's application lacked specific grounds justifying such an attachment and was based on bald averments. The court concluded that there were no circumstances warranting the attachment before judgment of the company's assets.

Conclusion:
The court upheld the Company Judge's order directing the Liquidator to hand over the land and factory premises to the landlord, as the tenancy rights were not capable of being attached or assigned. The court dismissed the appeals filed by the Bank and the Receiver, finding no fault in the Company Judge's view that the tenancy rights were incapable of being attached. The court also rejected the argument that the Company Judge acted contrary to the Division Bench's directions, as the tenancy rights were not assignable or attachable. The court found no justification for the attachment before judgment of the company's assets and dismissed the appeals with costs.