2010 (7) TMI 269 - HC - Companies Law

Whether it is a lawful sub-tenant inducted by the company in liquidation from the year 1975 with the knowledge and consent of the landlord the applicant under section 535 of the Act and as such its right as sub-tenant should be protected? Held that - The landlord having made an allegation of illegal sub-tenancy and the official liquidator having failed to furnish any material to throw light on the subject in our opinion the learned company court was quite justified in giving liberty to the landlord to institute a suit against the company in liquidation for the purpose of establishing his case for getting back the property on proving that without his written consent an illegal sub-tenancy was created by the company in liquidation. We do not appreciate the submission of Mr. Bose that the grant of such liberty while disposing of an application under section 535 of the Act is not within the competence of the company court. Appeal dismissed.

Summary

Issues:
1. Granting liberty to landlord to institute a suit against the company in liquidation under section 535 of the Companies Act, 1956.
2. Jurisdiction of the company court in granting such liberty.
3. Validity of the grant of liberty while refusing relief under section 535 of the Act.

Analysis:
1. The case involved an appeal by an alleged sub-tenant against an order allowing the landlord to sue the company in liquidation under section 535 of the Companies Act, 1956. The landlord sought disclaimer of the property due to alleged illegal subletting without consent. The sub-tenant claimed lawful sub-tenancy since 1975 with the landlord's knowledge. The court found the official liquidator unable to confirm prior consent for subletting, leading to the grant of liberty to the landlord to file a suit in the company court.

2. The appellant contended that the company court lacked jurisdiction to grant such liberty under section 535 of the Act. However, the court clarified that under section 446(2) of the Act, the company court has jurisdiction to entertain suits against the company in liquidation, especially concerning tenancy issues. As the company was a tenant under the West Bengal Premises Tenancy Act, the court was justified in allowing the landlord to establish the illegal sub-tenancy through a suit in the company court.

3. The court rejected the appellant's argument that granting liberty exceeded the court's competence under section 535. It emphasized that the refusal of the disclaimer prayer due to lack of evidence by the official liquidator justified granting liberty to the landlord to file a suit. The court upheld the discretion of the company court in this matter, concluding that there was no error in granting such leave while denying relief under section 535 of the Act.

In conclusion, the court dismissed the appeal, affirming the decision to grant the landlord liberty to sue the company in liquidation. The judgment highlighted the company court's jurisdiction in such matters and upheld the validity of granting liberty to the landlord despite refusing relief under section 535 of the Companies Act, 1956.