2006 (2) TMI 296 - HC - Companies Law

Summary

Issues Involved:
1. Review of the Division Bench's order dated 25-11-2004.
2. Leasehold interest and its implications under section 535 of the Companies Act.
3. Rights of the secured creditor (Stressed Assets Stabilization Fund).
4. Determination of lease for breach of terms.
5. Applicability of the West Bengal Government Premises (Tenancy Regulation) Act, 1976.

Issue-wise Detailed Analysis:

1. Review of the Division Bench's Order Dated 25-11-2004:
The application for review is against the Division Bench's order that set aside a company court's decision and allowed the Official Liquidator to occupy the disputed leasehold interest of the company-in-liquidation. The Division Bench had provided an arrangement where the Official Liquidator would pay Rs. 30,000 per month to the appellant until the land was cleared or negotiated terms were obtained.

2. Leasehold Interest and Its Implications Under Section 535 of the Companies Act:
The leasehold interest of the company-in-liquidation was considered an asset. The company court had initially rejected an application under section 535, which deals with the disclaimer of onerous property. The Division Bench's order did not find the lease terms onerous, as the rent was nominal. Therefore, the conditions for disclaiming the leasehold interest under section 535 were not met.

3. Rights of the Secured Creditor (Stressed Assets Stabilization Fund):
The applicant, Stressed Assets Stabilization Fund (SASF), argued that as a secured creditor, their interests were prejudicially affected by the Division Bench's order. SASF claimed that the IDBI had granted substantial loans to the company-in-liquidation, secured by the mortgage of the company's assets, including the leasehold interest. The applicant contended that they were not given an opportunity to present their case before the impugned order was passed.

4. Determination of Lease for Breach of Terms:
The appellant contended that the company-in-liquidation had breached the lease terms, entitling them to immediate possession of the land. The Division Bench did not thoroughly consider whether the lease had been determined in accordance with the law. The court noted that the lessor must show that they had the right to immediate possession due to the company's breach before the winding-up order.

5. Applicability of the West Bengal Government Premises (Tenancy Regulation) Act, 1976:
The appellant argued that the tenancy was governed by this Act, which would allow them to reclaim possession without approaching a Civil Court. However, the court found that the lease was created before the Act came into force, and the Act did not abolish the existing rights of the lessee. The lessor must follow the Act's provisions for determining the lease and taking possession.

Conclusion:
The court found an error apparent in the Division Bench's order, as it directed the Official Liquidator to pay Rs. 30,000 per month without establishing any breach of the lease terms by the company-in-liquidation. The matter was remanded back to the learned Trial Judge for fresh consideration of whether there was any violation of the lease terms and whether the mortgage was created with the lessor's consent. The court emphasized that the lessor must prove the right to reclaim possession due to the company's breach before the winding-up order. The decisions cited by the appellant were found to be inapplicable to the present case. The order of the Division Bench was recalled, and the case was sent back for a fresh decision in light of these observations.