2010 (11) TMI 832 - HC - Companies Law

Winding up order due to non payment of lease rent - possession of land - priority over other debts payable by the lessee on its liquidation. - payment of lease rent as liquidation expenses - held that - no legal impediment in handing over of the actual vacant possession of the land by the official liquidator to the appellant-Port Trust as, to reiterate, M/s. Scrapt Traders, as on date, has no right in law to hold on to the said land. - In the face of the categorical finding of the court that the rent payable by the official liquidator must be disbursed before discharging any debts of the company in liquidation, the plea based on section 529A by M/s. Scrapt Traders is also of no avail. - The official liquidator would forthwith deliver vacant physical possession of the land to the appellant-Port Trust and would simultaneously quantify and defray the rent payable to it in terms of the present adjudication.

Issues Involved:
1. Lease rent determination and payment.
2. Possession and transfer of leasehold land.
3. Rights and obligations of the official liquidator.
4. Rights of the auction purchaser (M/s. Scrapt Traders).
5. Claims of secured creditors.
6. Compliance with court orders.

Detailed Analysis:

Lease Rent Determination and Payment:
The appellant, Kolkata Port Trust, leased a plot of land to M/s. HIM Containers Ltd. The lease was terminated due to non-payment of rent, and the company was ordered to be wound up. The official liquidator took possession of the land. The Port Trust claimed rent arrears, which the official liquidator partially rejected. The court held that the rent payable by the official liquidator must be part of the winding-up expenses, to be paid before other debts. The official liquidator was directed to pay the rent at the enhanced rate of Rs. 773 per 100 square meters per month from July 13, 2007, until the actual delivery of possession.

Possession and Transfer of Leasehold Land:
The official liquidator handed over the physical possession of the leasehold land to M/s. Scrapt Traders, the highest bidder in the auction. The court found this transfer unauthorized and directed the official liquidator to retrieve and hand over the vacant physical possession to the Port Trust. The court emphasized that "legal possession" meant "physical possession," rejecting the notion of symbolic possession.

Rights and Obligations of the Official Liquidator:
The official liquidator was found to have acted beyond his authority by transferring possession to M/s. Scrapt Traders without court approval. The court reiterated that the liquidator must hand over the land to the Port Trust and pay the rent as part of the winding-up expenses. The liquidator's failure to comply with court orders was highlighted, and he was warned of penal consequences for non-compliance.

Rights of the Auction Purchaser (M/s. Scrapt Traders):
M/s. Scrapt Traders, having participated in the auction with the knowledge that they would only acquire the right to negotiate for lease renewal, was found to be in unauthorized possession of the land. The court rejected their claim for lease renewal and directed them to vacate the land. Their payments made during the interim were considered compliance with court orders but did not grant them any legal right to the land.

Claims of Secured Creditors:
Secured creditors, including IFCI Ltd., State Bank of India, and Kotak Mahindra Bank, sought modification of interim orders to allow disbursement of sale proceeds. The court acknowledged their claims but prioritized the payment of rent to the Port Trust from the sale proceeds before addressing other debts.

Compliance with Court Orders:
The official liquidator's repeated failure to comply with court orders to hand over possession to the Port Trust was criticized. The court ordered immediate compliance with the delivery of vacant possession and payment of rent, warning of serious consequences for further non-compliance. The court also dismissed appeals by M/s. Scrapt Traders for condonation of delay, reinforcing the urgency of compliance.

Conclusion:
The court partially allowed the appeal, directing the official liquidator to hand over the vacant possession of the leasehold land to the Port Trust and to pay the rent at the enhanced rate from July 13, 2007, until actual delivery. The court emphasized strict compliance with its orders and warned of penal consequences for any further lapses by the official liquidator.

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