2007 (3) TMI 372 - HC - Companies Law

Summary

Issues Involved:
1. Jurisdiction under section 446 of the Companies Act, 1956.
2. Applicability of the Maharashtra Rent Control Act, 1999.
3. Maintainability of the eviction suit under section 41 of the Presidency Small Causes Court Act.
4. Doctrine of res judicata.
5. Financial implications on the company in liquidation.
6. Grant of leave to file suit.

Issue-wise Detailed Analysis:

1. Jurisdiction under section 446 of the Companies Act, 1956:
The applicant sought leave to file an eviction suit against the Official Liquidator and a sub-tenant under section 446 of the Companies Act, 1956. The Court emphasized that leave to file a suit should be granted where the question at issue cannot be decided in the winding-up proceeding. The primary objective is to protect the assets of the company for equitable distribution among creditors and shareholders, avoiding unnecessary litigation.

2. Applicability of the Maharashtra Rent Control Act, 1999:
The applicant argued that the Maharashtra Rent Control Act, 1999, exempts premises let to companies with a paid-up share capital of Rs. 1 crore or more from its purview. The Court noted that tenancy rights of the company in liquidation are not considered assets for liquidation proceedings, and the rights of the company vis-a-vis its landlord or tenants do not change upon liquidation.

3. Maintainability of the eviction suit under section 41 of the Presidency Small Causes Court Act:
The applicant contended that the suit should be filed under section 41 of the Presidency Small Causes Court Act, as the Maharashtra Rent Act does not apply. The Court held that the Small Causes Court has the jurisdiction to decide its own jurisdiction, and any issues regarding jurisdiction should be determined based on the plaint pleadings.

4. Doctrine of res judicata:
The respondent argued that the application was barred by res judicata due to a previous order by the Company Judge. The Court dismissed this contention, stating that the previous order did not decide the application on merits but merely recorded a concession given by the counsel. As there was no adjudication of rights, the doctrine of res judicata did not apply.

5. Financial implications on the company in liquidation:
The Court considered whether granting leave would strain the financial resources of the company in liquidation. It was noted that the Official Liquidator did not need the premises and had no objection to releasing it. Since the tenancy rights are not assets for liquidation, the financial strain argument was not a factor in deciding the grant of leave.

6. Grant of leave to file suit:
The Court reiterated that leave to file a suit is not granted as a matter of course but is subject to judicial discretion. The suit should not be frivolous, bound to fail, or create unnecessary strain on the company's resources. The Court found that the issues in the suit could not be adjudicated in the winding-up proceedings and granted leave, subject to the condition that any decree obtained would not be executed against the company in liquidation without the Court's leave.

Conclusion:
The application for leave to file the eviction suit was granted, with the condition that any decree obtained would require the Court's leave for execution against the company in liquidation. The Court emphasized the need to protect the company's assets from unnecessary litigation and to ensure that the suit is not frivolous or bound to fail.