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2013 (5) TMI 739 - HC - Companies LawOutstanding lease rentals payable by M/s.Sujala Pipes Private Limited (SPPL), Kurnool to M/s.Monarch Pipes Limited (MPL) - whether SPPL was a lessee of MPL in the light of the clause in the working agreements to the effect that the sums deposited by it shall be adjusted against the cost of acquisition of MPL by SPPL? - MPL was declared sick under Section 15(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 - Contention against filling of application under wrong provision - Held that - The irrefutable fact remains that SPPL utilized the infrastructure of MPL from October 2001 to May 2005 for generating its business and no payment whatsoever was made to MPL for such use of its assets. This Court is also mindful of the fact that SPPL which initially offered Rs.2.80 Crores to takeover the unit of MPL ultimately bought it at a mere Rs.1.2 Crores. SPPL therefore benefited at the cost of MPL at every turn. SPPL would consequently be liable to reimburse MPL for exploitation of its assets with interest at least at this stage. SPPL shall therefore pay interest to MPL at 6% per annum on the sums due. C.A filed under Section 446(2)(b) proceeded on the wrong assumption that this liability was yet to be determined. However, it is within the inherent powers of this Court to substitute the proper and applicable provision even if a wrong provision of law has been relied upon or if the application is filed under a wrong provision of law. Pertinent to note, even an order passed by a statutory authority under a wrong provision of law would be held valid once it is established that such authority had the power to make such order under another provision. This being the position with orders passed by authorities, a party taking recourse to a wrong provision of law while approaching the Court cannot be placed in a worse situation. As pointed out in BORPUKHURIE TEA ESTATE V/s. PRESIDING OFFICER, INDUSTRIAL TRIBUNAL (1978 (3) TMI 182 - SUPREME COURT OF INDIA) charged with the duty of administering justice, have to remember that it is not the form but the substance of the matter that has to be looked into and parties cannot be penalized for inadvertent errors committed by them in the conduct of cases. Once the relief sought is traceable to another source available in law, mere filing of the application under the wrong provision would not have the effect of denuding the party of the right to claim the relief. This Court would therefore be justified in treating an application filed by a party under a wrong provision of law as one filed under the appropriate provision and deal with it accordingly. This Court is of the considered opinion that the matter squarely falls within the four corners of Section 468 of the Act of 1956 and that SPPL stood in the status of a trustee of MPL. SPPL was bound in good faith to account for the amounts which it was liable to pay under its working agreements with MPL, as to which it suffered orders before the BIFR and the AAIFR that attained finality. As Section 468 of the Act of 1956 clearly posits that an application thereunder can be moved at any time after a winding up order is made, the question of the application being barred by limitation would not arise. The arguments advanced in this regard and the decisions relied upon to buttress these arguments are therefore wholly irrelevant. M/s.Sujala Pipes Private Limited, the first respondent, shall pay to M/s.Monarch Pipes Limited the arrears of the monthly rentals/deposits @ Rs.3,50,000/- per month from October, 2001 till 24.05.2005 along with interest at the rate of 6% per annum within four weeks from the date of receipt of a copy of this order.
Issues Involved:
1. Liability of SPPL to pay lease rentals to MPL. 2. Jurisdiction and limitation regarding the claim for lease rentals. 3. Validity and enforceability of working agreements between MPL and SPPL. 4. Maintainability of applications filed by SBI and the Official Liquidator. 5. Applicability of Section 468 of the Companies Act, 1956. Issue-wise Detailed Analysis: 1. Liability of SPPL to Pay Lease Rentals to MPL: The core issue was whether SPPL was liable to pay lease rentals to MPL from October 2001 to May 2005. The BIFR, in its order dated 03.10.2001, directed SPPL to pay lease rentals of Rs.3,50,000/- per month. This order was confirmed by the AAIFR and attained finality. The BIFR's order indicated that SPPL was running MPL's unit on lease and was obligated to make monthly payments. Despite SPPL's contention that it was not a lease but a working agreement, the AAIFR and the courts consistently held that the nomenclature was immaterial and SPPL was liable to make the payments as directed. 2. Jurisdiction and Limitation Regarding the Claim for Lease Rentals: SPPL argued that the application by SBI in 2006 was barred by limitation and that SBI had no locus to maintain the application after the appointment of the Official Liquidator. The court noted that the last payment due under the working agreements would have been in May 2005, and the limitation period would have ended by May 2008. The Official Liquidator's application in 2011 was thus argued to be time-barred. However, the court held that the matter fell within the scope of Section 468 of the Companies Act, 1956, which allows applications to be made at any time after a winding-up order, thus negating the limitation argument. 3. Validity and Enforceability of Working Agreements Between MPL and SPPL: The working agreements dated 01.12.1999 and 01.12.2000 between MPL and SPPL were not approved by the BIFR or SBI, making them non-binding. Despite this, the BIFR allowed the arrangement under these agreements to continue, subject to regular payment of lease rentals. The agreements mentioned that the rentals deposited by SPPL were to be adjusted against the cost of acquisition of MPL, but this condition was not sanctioned by the BIFR. The court concluded that SPPL was obligated to make the monthly payments as per the BIFR's order. 4. Maintainability of Applications Filed by SBI and the Official Liquidator: The court found that C.A.No.1074 of 2006 filed by SBI was not maintainable as it was filed after the appointment of the Official Liquidator. The Official Liquidator's application in C.A.No.1881 of 2011 was initially thought to be barred by limitation but was ultimately considered under Section 468 of the Companies Act, 1956, which allows for applications to be made at any time after a winding-up order. 5. Applicability of Section 468 of the Companies Act, 1956: Section 468 allows the court to require any trustee, agent, or other person holding property of the company to deliver it to the liquidator. The court held that SPPL, by virtue of its arrangement with MPL, stood in the status of a trustee and was obligated to account for the amounts due under the working agreements. The court concluded that the application by the Official Liquidator was maintainable under Section 468, and the question of limitation did not arise. Conclusion: C.A.No.1881 of 2011 was allowed, directing SPPL to pay MPL the arrears of monthly rentals/deposits along with interest at 6% per annum. C.A.No.1074 of 2006 was dismissed as not maintainable, and C.A.No.264 of 2012 was dismissed as it did not survive for consideration.
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