2004 (2) TMI 368 - HC - Companies Law

Issues Involved:
1. Whether the applicants/landlords can seek vacation of the premises by the official liquidator.
2. Whether the rent payable after the winding-up order should be treated as liquidation expenses.
3. Whether the official liquidator should shift and transfer the goods after preparing appropriate inventories to one place and make arrangements for their sale.
4. The applicability and interpretation of Section 535 of the Companies Act regarding the disclaimer of onerous property.

Issue-Wise Detailed Analysis:

1. Vacation of Premises by Official Liquidator:
The applicants, who are landlords, sought directions for the official liquidator to hand over vacant possession of the premises and pay arrears of rent. The official liquidator argued that the premises were required for storing sophisticated equipment and that shifting them would depreciate their value, thus affecting the interests of creditors and workmen. The court noted that the official liquidator had not paid rent for the premises after the winding-up order and was not utilizing the premises for any purpose other than storage. The court found that the official liquidator's argument of lacking manpower to prepare inventories was insufficient to deprive the landlords of rent or possession of their premises. The court directed the official liquidator to disclaim the properties and prepare inventories of the goods in the presence of representatives from the official liquidator, secured creditors, and the District Magistrates/Presidency Magistrates.

2. Rent Payable after Winding-Up Order as Liquidation Expenses:
The official liquidator stated that rent payable after the winding-up order would be treated as liquidation expenses and paid in priority. The court observed that the official liquidator had not provided details of rent payable for all 167 centers under his occupation, which would amount to a significant liability. The court emphasized that the official liquidator could not continue to incur additional liability of liquidation expenses every month without utilizing the premises effectively. The court directed the official liquidator to take immediate steps for the sale of goods and to disclaim the properties to reduce recurring liabilities.

3. Shifting and Transfer of Goods:
The court considered the suggestion of shifting goods to the Mohali office or other suitable locations. The official liquidator expressed concerns about the availability of space and manpower to manage the transfer of goods from over 150 centers. The court directed that inventories be prepared, and the goods be photographed and packed properly for transportation to designated locations. The landlords were to bear the costs of removal, packing, and insurance of the goods. The official liquidator was tasked with identifying centers in each state for consolidating the goods and taking steps for their sale.

4. Section 535 of the Companies Act - Disclaimer of Onerous Property:
The court examined Section 535, which allows the official liquidator to disclaim property burdened with onerous covenants. The court noted that the contracts between the company in liquidation and the landlords contained onerous covenants, including the payment of monthly rent. The court held that it was within its jurisdiction to rescind such contracts to reduce the burden on the company in liquidation for the benefit of creditors. The court directed the official liquidator to disclaim the properties and prepare inventories of the goods in the presence of representatives from the official liquidator, secured creditors, and the District Magistrates/Presidency Magistrates.

Conclusion:
The court directed the official liquidator to disclaim the properties from his possession, prepare inventories of the goods, and take steps for their sale to reduce the recurring liability of liquidation expenses. The landlords were to bear the costs of removal, packing, and insurance of the goods. The official liquidator was instructed to carry out these directions within two months for the applicants and within six months for other cases. Notice was issued to secured creditors to enable the official liquidator to carry out the directions effectively.

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