2012 (6) TMI 175 - HC - Companies Law

Winding up lease agreement - lessee had a right to sub-lease - petitioning creditor was of a lessee holding over under section 116 of the Transfer of Property Act - petitioning creditor was letting out a part of the properties to the respondent-company - respondent-company stopped paying rent after few months Held that - sub-lessee has long expired. Therefore, the position of the petitioning creditor from 1997 is very precarious. petitioning creditor did not have the title to enter into the agreement dated September 22, 2004, with the company. Winding up petition is not a legitimate means of seeking to enforce payment of a debt which is bona fide disputed by the company. Claim of the petitioning creditor is seriously disputed, cannot be entertained in this winding up application and is to be properly adjudged in an appropriate civil proceeding decided by trial on evidence. Winding up applications are dismissed

Issues Involved:
1. Status of the petitioning creditor post-lease expiry.
2. Validity and enforceability of the agreement dated September 22, 2004.
3. Right of the petitioning creditor to claim rent.
4. Jurisdiction of the court in winding up proceedings based on disputed debt.
5. Principles of estoppel under section 116 of the Indian Evidence Act, 1872.
6. Equitable considerations regarding mesne profits.

Issue-wise Detailed Analysis:

1. Status of the Petitioning Creditor Post-Lease Expiry:
The petitioning creditor, Exhibitors' Syndicate Ltd., was in possession of the properties after the lease expired on July 17, 1997. The court noted that the lease and sub-lease determined by efflux of time on July 17, 1997, and the petitioning creditor did not vacate the properties. The heirs of the deceased owners took no steps for their eviction. The petitioning creditor claimed to be a tenant holding over under section 116 of the Transfer of Property Act, 1882, while the respondent argued that the petitioning creditor was a trespasser.

2. Validity and Enforceability of the Agreement Dated September 22, 2004:
An agreement was made on September 22, 2004, between the petitioning creditor, a director of the petitioning creditor, and the respondent-company. The agreement stipulated a tenancy commencing from October 1, 2004, for a minimum period of 15 years with a monthly rent of Rs. 4.10 lakhs. The court found that since the lease and sub-lease had expired in 1997, and there was no evidence of rent being accepted from the petitioning creditor, they could not be considered a lessee or sub-lessee holding over. Therefore, the petitioning creditor did not have the title to enter into the agreement dated September 22, 2004.

3. Right of the Petitioning Creditor to Claim Rent:
The petitioning creditor claimed entitlement to rent from the respondent-company from January 2005, which the company had not paid. The court noted that the petitioning creditor parted with possession in favor of the company, and another company, Round Up Properties, entered into an agreement with the owners and started collecting rent from June 2005. The court concluded that the petitioning creditor could not claim rent from the company as they did not have any legal right to let out the property post-1997.

4. Jurisdiction of the Court in Winding Up Proceedings Based on Disputed Debt:
The court referred to several judgments, including Mediqup Systems P. Ltd. v. Proxima Medical System GmbH and IBA Health (I) P. Ltd. v. Info-Drive Systems Sdn. Bhd., to emphasize that an order under section 433(e) of the Companies Act is discretionary. The court must determine if the debt is bona fide disputed and if the defence is substantial. The court concluded that the claim of the petitioning creditor is seriously disputed and cannot be entertained in a winding-up application. The appropriate forum for adjudication is a civil proceeding decided by trial on evidence.

5. Principles of Estoppel under Section 116 of the Indian Evidence Act, 1872:
The petitioning creditor relied on section 116 of the Indian Evidence Act, 1872, to argue that the company could not deny the authority of the petitioning creditor. However, the court found that while the principles of estoppel would prevent the company from challenging the petitioning creditor's title, it did not provide a basis for the petitioning creditor to claim rent.

6. Equitable Considerations Regarding Mesne Profits:
The court observed that the petitioning creditor was in possession of the properties before parting with them in favor of the company. The court noted that in any action concerning the rights of the owner, head lessee, or sub-lessee, the question of mesne profit earned by the use of the properties from January 2005 is likely to arise. The court suggested that rents collected from the properties from January 1, 2005, should be set off against any claim for mesne profit against the petitioning creditor to prevent unjust enrichment.

Conclusion:
The court dismissed all the winding-up applications, including C. A. No. 650 of 2011, and emphasized that the petitioning creditor's claim is to be properly adjudged in an appropriate civil proceeding. The court did not pass any order for costs.

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