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2015 (5) TMI 440 - HC - Companies LawWinding up - Possession of property by official liquidator - Authority to a company Judge under Section 535 read with Section 446(2) of the Companies Act, 1956 - No notice of the proceedings received - Legislative powers between the Union and the States - Held that - The several judgments of this court in assessing the width of the authority available under Section 446 of the Companies Act instruct that as long as there is a substantial connection of the lis with a company in liquidation, the company court presiding over such liquidation may receive it and adjudicate thereupon. But the authority under Section 446(2) of the Companies Act is not absolute and a later special Act as the Recovery of Debts due to Banks and Financial Institutions Act, 1993 has been seen to have substantially denuded the authority of the company court to address certain matters pertaining to a company in liquidation. However, such analogy is of no relevance in the present context as it is a subsequent State law which is cited here and not a subsequent enactment by the Parliament. The key to the primary issue that has arisen herein may not be so much in discovering that the company court would not have the jurisdiction to adjudicate on a claim of eviction made by the owner of an immoveable property against a company in liquidation or the illegal sub-tenants inducted by the company, whether prior to or after the commencement of its liquidation. Even if it is accepted that such jurisdiction is available to the company court, as the several judgments cited on such aspect instruct, there is an element of discretion available to the company court as to whether or not the jurisdiction should be exercised and the manner in which it should be exercised. As would be evident from the judgment in Tata Steel Ltd. 2007 (12) TMI 284 - HIGH COURT OF CALCUTTA the company court would have been diffident in receiving the claim against an alleged illegal occupant; but when such alleged illegal occupant intervened in the proceedings and insisted on his rights qua the property being adjudicated by the company court, the entirety of the matter was assessed by the company court. When the same genre of claim was made before the company Judge in East India Trading Co. 2010 (7) TMI 269 - HIGH COURT OF CALCUTTA the company Judge declined to entertain the lis as an application that could be addressed in a summary manner and gave liberty to the applicant to file a regular suit before the company court itself. The jurisdiction is surely available, whether it ought to be exercised or not would depend on the nature of the claim. There is no doubt that if the appropriate procedure had been followed in course of CA No. 325 of 2010 to give due notice to these applicants and try the claim of the lessor against these applicants, such adjudication would have had to be regarded as being in accordance with the procedure established by law. Again, if the present application was tried on evidence to adjudicate on the applicants' title to remain in possession of the said premises, that would also have been a fair procedure as established by law. But it was not necessary to undertake the elaborate exercise of a trial on evidence of this application in the context of the summary procedure adopted in course of CA No. 325 of 2010. Since it is evident that the order of January 22, 2013 had the effect of, and ultimately resulted in, dispossessing these applicants from an immoveable property that was admittedly under their possession, without notice to them, CA No. 116 of 2013 is allowed and the order of January 22, 2013, in so far as it provided for the eviction or removal of the applicants from the said premises, is recalled. The lessor is left free to pursue any claim against the applicants herein, but in view of the property having been disclaimed in the lessor's favour by the order dated January 22, 2013 no suit to claim eviction may be instituted by the lessor against these applicants before the company court.As a consequence, the official liquidator will refund the deposit made by these applicants together with all interest accrued thereon within four weeks from date. - Decided in favour of appellant.
Issues Involved:
1. Authority of the company Judge under Section 535 of the Companies Act, 1956. 2. Jurisdiction of the company court in light of constitutional provisions on legislative powers. 3. Dispossession of applicants without notice. 4. Conflict between Section 446 of the Companies Act and Section 12A of the West Bengal Premises Tenancy Act, 1997. 5. Fair procedure and due process of law. Issue-wise Detailed Analysis: 1. Authority of the company Judge under Section 535 of the Companies Act, 1956: The applicants questioned the extent of the authority available to a company Judge under Section 535 of the Companies Act, 1956. They argued that the order passed on January 22, 2013, on a disclaimer application, exceeded the company court's jurisdiction. The court observed that the order directed the Official Liquidator to remove trespassers and hand over vacant possession to the applicant, PDGD Investments & Trading (P) Ltd. The court acknowledged that the lessor (PDGD Investments & Trading) claimed ownership of the second floor of the premises and sought the disclaimer of the property as the company in liquidation had not paid rent and third parties were in occupation. 2. Jurisdiction of the company court in light of constitutional provisions on legislative powers: The applicants argued that the company court's order was in excess of its authority, citing Article 254 of the Constitution, which addresses conflicts between Union and State laws. They contended that the West Bengal Premises Tenancy Act, 1997, which had received Presidential assent, should prevail over the Companies Act. The court noted that the Companies Act is a Union law made in respect of a matter in the Union List, and thus, its provisions would prevail over any conflicting State law. The court emphasized that the authority under Section 446(2) of the Companies Act includes eviction of trespassers from the property of the company in liquidation. 3. Dispossession of applicants without notice: The applicants claimed they were dispossessed from the premises without notice, which violated their rights. The court observed that the applicants were not given notice before the order of January 22, 2013, was passed, leading to their dispossession. The court had earlier directed the restoration of the applicants' possession of the 521 sq. ft. area upon their deposit of Rs. 2 lakh with the official liquidator. The court emphasized the need for fair procedure and due process of law, highlighting that the applicants were not given an opportunity to assert their rights before being dispossessed. 4. Conflict between Section 446 of the Companies Act and Section 12A of the West Bengal Premises Tenancy Act, 1997: The applicants argued that the company court did not have the authority to order their eviction under Section 12A of the West Bengal Premises Tenancy Act, 1997. The court noted that the Companies Act pertains to a matter in the Union List, and its provisions would prevail over any conflicting State law. The court referred to several judgments to support the view that the authority under Section 446(2) of the Companies Act is wide and includes the power to direct eviction. The court concluded that there was no real conflict between Section 446(2) of the Companies Act and Section 12A of the West Bengal Premises Tenancy Act, 1997, as the State law must yield to the Union law. 5. Fair procedure and due process of law: The court emphasized the importance of fair procedure and due process of law. It noted that the applicants were not given notice before the order of January 22, 2013, was passed, leading to their dispossession. The court acknowledged that the applicants had been restored to possession by an ad interim order and emphasized the need to undo the prejudice caused to them. The court concluded that the order of January 22, 2013, should be recalled to the extent it provided for the eviction or removal of the applicants from the premises. The lessor was left free to pursue any claim against the applicants, but no suit for eviction could be instituted before the company court. Conclusion: The court allowed the application (CA No. 116 of 2013) and recalled the order of January 22, 2013, to the extent it provided for the eviction or removal of the applicants from the premises. The official liquidator was directed to refund the deposit made by the applicants with interest, and the lessor was ordered to pay costs to the applicants. The court emphasized the need for fair procedure and due process of law, highlighting that the applicants were not given notice before being dispossessed.
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