2008 (6) TMI 354 - HC - Companies Law

Winding up - seeking a direction against the Official Liquidator to forthwith remove the seals put by him on the office premises and permit the applicant, to enter the same and use the said premises as tenant thereof - Held that - Application is dismissed with costs quantified at ₹ 10,000 to be paid by the applicant to the Official Liquidator who, in turn, shall credit the said amount to the account of the Company in liquidation, Costs to be paid within four weeks from today. The Official Liquidator shall forthwith take steps to take over possession of the premises being room No. 33 on the 3rd floor from the applicant along with fittings, furniture and fixtures in the same condition in which it was handed over to the applicant. That shall be done not later than eight weeks from today. The Official Liquidator shall forthwith initiate action to take over possession of the premises on the 5th floor being room Nos. 51 and 52 from M/s. Videocon Appliances Limited along with furniture, fixtures and fittings in the same condition in which it was handed over to them and report compliance not later than eight weeks from today. The Official Liquidator shall forthwith initiate action to determine the market rent to be recovered from the applicant in respect of 3rd floor premises and M/s. Videocon Appliances Limited in respect of 5th floor premises with effect from 13-6-1997 till they are dispossessed and then shall recover the determined amount from the applicant as well as M/s. Videocon Appliances Limited while providing adjustment to them towards the amount already paid by them from time to time towards monthly rent in terms of the agreement or the Court s order, as the case may be, as also to exclude the period during which the premises on 3rd floor remained sealed between 13-4-1999 till 15-10-1999. The applicant as well as its associate company M/s. Videocon Appliances Limited are directed to forthwith deposit the original copies of all the agreements appended to the Application, affidavit in support of the application as well as further affidavit of Shri Bharat More dated 3-12-2007 and produced along with the affidavits filed on behalf of the Official Liquidator, in this Court within eight weeks from today. On depositing the said documents, it would stand impounded and then made over to the Deputy Inspector General of Registration and Deputy Controller of Stamps, Old Custom House, Mantralaya, Mumbai-32 for proceeding against the said documents in accordance with law. All questions in that behalf are kept open to be decided on merits.

Issues Involved:
1. Legality of the lease transaction during the pendency of winding-up proceedings.
2. Validity of the documents (Rent Note and Supplementary Agreement) relied upon by the applicant.
3. Entitlement of the applicant to remain in possession of the premises.
4. Whether the transaction should be validated by the court under Section 536(2) of the Companies Act.
5. Determination of market rent and recovery of the same from the applicant and its associate company.

Issue-wise Detailed Analysis:

1. Legality of the lease transaction during the pendency of winding-up proceedings:
The court addressed whether the lease transaction between the applicant and the Company in Liquidation, executed during the pendency of winding-up proceedings, was valid. Section 536(2) of the Companies Act states that any disposition of the property made after the commencement of winding-up shall be void unless the court orders otherwise. The winding-up action commenced when the Company Petition was presented on 29-10-1996/28-11-1996, and the lease transaction was executed on 13-6-1997. Thus, the transaction is void unless validated by the court.

2. Validity of the documents (Rent Note and Supplementary Agreement) relied upon by the applicant:
The court scrutinized the Rent Note dated 13-6-1997 and the Supplementary Agreement dated 14-1-1998. The Rent Note was found to be suspicious due to the inadequate rent amount of Rs. 2,500 per month for a prime location in Mumbai and the unnatural terms allowing sub-leasing without objection from the lessor. Additionally, the stamp papers used for these agreements were issued in the name of Videocon Leasing and Industrial Finance Limited, not the applicant. The Supplementary Agreement was executed on the same day as the stamp paper was issued in Ahmednagar, raising further doubts about its authenticity.

3. Entitlement of the applicant to remain in possession of the premises:
The applicant claimed possession based on the Rent Note and Supplementary Agreement. However, the court found these documents to be fabricated and not executed in good faith. The applicant's possession was deemed to be based on a void transaction, and thus, they were not entitled to remain in possession.

4. Whether the transaction should be validated by the court under Section 536(2) of the Companies Act:
The court considered whether the transaction should be validated, focusing on whether it was for the benefit of the company or for keeping the company going. The applicant failed to plead or prove that the transaction was executed without knowledge of the winding-up proceedings or that it was in the company's interest. Consequently, the court found no grounds to validate the transaction.

5. Determination of market rent and recovery of the same from the applicant and its associate company:
The court directed the Official Liquidator to determine the market rent for the premises from 13-6-1997 until the applicant and its associate company, Videocon Appliances Limited, are dispossessed. The Official Liquidator was instructed to recover the determined amount while providing adjustments for any amounts already paid.

Conclusion:
The application was dismissed with costs, and the Official Liquidator was directed to take possession of the premises and determine the market rent. The applicant and its associate company were ordered to deposit the original documents in court for further legal action. The court granted a stay of the order's operation for four weeks to allow the applicant to appeal.

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