2008 (6) TMI 619 - HC - Companies Law

Summary

Issues Involved:
1. Validity of the transaction under Section 536(2) of the Companies Act.
2. Whether the transaction should be validated by the Court.
3. The nature of the applicant's possession of the premises.
4. The impact of the supplementary agreements and the sponsorship agreement on the applicant's claim.
5. The Official Liquidator's actions and the applicant's response.
6. Determination of market rent and the recovery of possession.

Issue-wise Detailed Analysis:

1. Validity of the transaction under Section 536(2) of the Companies Act:
The Court examined whether the transaction between the Company in Liquidation and the applicant was void under Section 536(2) of the Companies Act. The winding-up action commenced with the presentation of the Company Petition on 29th October 1996/28th November 1996, and any disposition of property made after this date is void unless the Court orders otherwise. The rent note dated 13th June 1997 and the supplementary agreement dated 14th January 1998 were executed during the pendency of the winding-up petition, making the transactions void unless validated by the Court.

2. Whether the transaction should be validated by the Court:
The Court has the discretion to validate transactions if they are in the interest of the company or for keeping the company going. The applicant failed to plead or prove that the transaction was for the benefit of the Company or for keeping it going. The rent note and supplementary agreement did not indicate that they were executed without knowledge of the winding-up proceedings or for the benefit of the Company. Therefore, the transaction could not be validated.

3. The nature of the applicant's possession of the premises:
The applicant claimed possession based on a rent note dated 13th June 1997, which described the premises and terms of lease. The Court found the rent amount of Rs. 2500/- per month for a prime location in Mumbai to be starkly inadequate and preposterous. The agreement's terms, such as allowing sub-leasing, were unnatural and indicated a lack of good faith. The supplementary agreement dated 14th January 1998 was also found to be suspicious and not in good faith.

4. The impact of the supplementary agreements and the sponsorship agreement on the applicant's claim:
The applicant introduced new facts in a further affidavit, claiming a sponsorship agreement dated 7th November 1994 and subsequent agreements acknowledging the Company's liability. The Court found these agreements irrelevant to the rent note and supplementary agreement, which were the basis of the applicant's possession claim. The sponsorship agreement did not entitle the applicant to possession of the premises, and the new claims were inconsistent with the original application.

5. The Official Liquidator's actions and the applicant's response:
The Official Liquidator opposed the application, stating that the lease period had expired and the applicant was not the original tenant. The premises were sealed due to non-compliance with the request to vacate. The applicant claimed that the sealing was high-handed and caused irreparable harm. The Court found the applicant's possession based on a void transaction and not in good faith.

6. Determination of market rent and the recovery of possession:
The Court directed the Official Liquidator to take possession of the premises and determine the market rent to be recovered from the applicant and Videocon Appliances Limited from 13th June 1997. The applicant was ordered to deposit the original documents in Court, which would be impounded and forwarded to the Deputy Inspector General of Registration and Deputy Controller of Stamps for action.

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's possession was found to be based on a void and non-bonafide transaction, and the supplementary agreements did not alter this conclusion. The Court also directed the impounding of the original documents for further legal action.