2011 (9) TMI 838 - HC - Companies Law

Winding up - application for recalling of the order of winding up company gave an undertaking to the RBI that it would not alienate any of its assets without the prior approval of the RBI - By order dated 14-5-1998 RBI directed company not to sell transfer create any charge or mortgage or deal with its properties and assets - deed of lease was executed by the said company in favour of the appellant - Company Petition was filed by the creditor of the company for its winding up - order was passed for winding up of company Held that - document executed by company (in liquidation) in favour of appellant allowing to take possession was void illegal and inoperative and as such it had no locus standi to remain in possession - Trial Judge directed appellant to deliver possession of property to Official Liquidator - On appeal appellant contended procedure adopted by trial Judge was not in due process of law

Summary

Issues Involved:
1. Whether the procedure adopted by the learned trial judge is in due process of law for passing an order of eviction or not.
2. Whether the decision of the learned trial judge that letting out of the said properties of the company (in liquidation) is void under the provisions of the Companies Act, 1956, is correct or not.

Detailed Analysis:

Issue 1: Due Process of Law for Eviction Order
The appellant argued that the eviction order was passed without due process of law, as no notice for terminating its tenancy was served, and the order was based on a letter for direction rather than a formal judicial proceeding. The court noted that this point was raised for the first time on appeal and not before the trial judge. The official liquidator's letter to the Assistant Registrar of Companies was treated as an application for direction, and the appellant participated in the proceedings by filing an affidavit defending its tenancy claim. The court held that under Section 446 of the Companies Act, 1956, the company court has exclusive jurisdiction to decide all disputes once a winding-up order is passed. The court emphasized that Section 446(2) allows the company court to entertain any claim or question related to the winding-up without the need for a regular suit. The court cited previous judgments to support the view that the procedure adopted was legally valid and aimed at avoiding unnecessary delay and multiplicity of proceedings. Therefore, the contention that the procedure was not in due process of law was rejected.

Issue 2: Validity of Letting Out Properties Under the Companies Act, 1956
The appellant contended that the tenancy was created before the winding-up petition was filed, and thus Sections 531, 531A, and 536 of the Companies Act, 1956, were not applicable. The court examined the sequence of events and noted that the first lease was executed on November 24, 1998, when the company had already given an undertaking to the RBI not to alienate its assets without approval. The court held that this undertaking had legal effect and its breach amounted to a betrayal of the RBI's confidence. The renewal of the lease on November 23, 2001, after the winding-up petition was filed, was deemed void under Section 536(2) of the Companies Act, 1956, which states that any disposition of the company's property after the commencement of winding-up is void unless the court orders otherwise. The court also rejected the appellant's claim of becoming a monthly tenant under the Andhra Pradesh Rent Act, 1960, as the protective provisions of the Act were not in force at the relevant times. The court upheld the trial judge's finding that the leases were void and dismissed the appeal.

Conclusion
The court concluded that the procedure adopted by the trial judge was in due process of law and that the creation and renewal of the leases were void under the provisions of the Companies Act, 1956. The appeal was dismissed with no order as to costs.