2013 (4) TMI 281 - HC - Companies Law

Company in liquidation - Condonation of delay - Subletting - Being inheritors of the original lessors - the official liquidator attempted to sell/dispose of the lease hold rights - Held that - It is clear to us that the contracts in question i.e. the Registered Permanent Lease Deeds dated 23.03.1918 and 03.11.1927 permit and allow the lessee to assign and transfer their rights Acquisition of the lease hold rights in question by the company under liquidation was for value and consideration paid to the earlier lessee - The official liquidator is entitled to encash the capital asset and sell the lease hold rights for payment of dues to the creditors/contributories - The lease hold rights have market value is apparent and established from the fact that auction was held and bids were received - To restitute or return the land in question to the appellants will result in dissipation of an asset of considerable value, to the detriment/loss of the creditors/contributories. Normally an auction purchaser would acquire the lease hold rights with the stipulation or covenants in the perpetual lease. This would not affect the rights of the lessor under the lease deed, subject of course to statutory protection, if any, to the new lessee/purchaser - We do not find any reason to issue notice on the application for condonation of delay - The application for condonation of delay and the appeal are dismissed.

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Validity of perpetual lease deeds and transfer of leasehold rights.
3. Rights of the official liquidator to sell leasehold rights.
4. Applicability of rent control legislation.
5. Alleged violations of lease terms and non-payment of rent.

Detailed Analysis:

1. Condonation of Delay in Filing the Appeal:
The court noted a delay of 47 days in filing the appeal. Before deciding on the application for condonation of delay, the court chose to examine the grounds of appeal on merits. Ultimately, the application for condonation of delay was dismissed along with the appeal.

2. Validity of Perpetual Lease Deeds and Transfer of Leasehold Rights:
The appellants' predecessor-in-interest executed two registered perpetual lease deeds dated 23rd March, 1918, and 3rd November, 1927, in favor of certain individuals, who subsequently transferred their rights to New Commercial Mills Co. Ltd. This company further transferred the leasehold rights to Bharat Vijay Mills Ltd., and eventually to Continental Textile Mills Ltd. The court observed that these transfers were accepted by the appellants' predecessors, and thus, New Commercial Mills Co. Ltd. became the perpetual lessee. The lease deeds explicitly allowed the lessees to assign and transfer their rights without objection from the lessors.

3. Rights of the Official Liquidator to Sell Leasehold Rights:
During liquidation proceedings, the official liquidator attempted to sell the leasehold rights, and an auction was held. The appellants argued that the company in liquidation had no right, title, or interest in the property, and the leasehold rights should revert to them. However, the court noted that the perpetual lease deeds allowed the lessees to transfer their rights, and such transfers had been accepted historically. Therefore, the official liquidator was entitled to sell the leasehold rights to pay dues to creditors/contributories.

4. Applicability of Rent Control Legislation:
The appellants invoked The Bombay Rents, Hotel and Lodging House Rates Control Act, 1947, arguing that it applied to the whole State of Gujarat and barred the transfer of leasehold rights. However, the court found that none of the provisions in Part I and IV of the said Act prohibited a lessee from transferring leasehold rights. Even if Part II of the Act was applicable, the court held that the perpetual lease deeds allowed such transfers, and the official liquidator was not required to surrender the leasehold rights.

5. Alleged Violations of Lease Terms and Non-Payment of Rent:
The appellants contended that there were violations of the lease terms and non-payment of rent. The court acknowledged this contention but noted that no proceedings for ejectment or recovery of possession had been initiated. If rent control legislation applied, specific statutory procedures had to be followed. If the Transfer of Property Act applied, proceedings had to be initiated in civil court. These issues were deemed separate from the present appeal and were not examined further.

Conclusion:
The court concluded that the perpetual lease deeds allowed the transfer of leasehold rights, and such transfers had been historically accepted. The official liquidator had the right to sell these rights to pay creditors/contributories. The application for condonation of delay and the appeal were dismissed, upholding the validity of the leasehold transfers and the official liquidator's actions.

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