1963 (2) TMI 64 - HC - Companies Law

Summary

Issues:
1. Validity of the orders passed by the learned Company Judge regarding the lease of the factory.
2. Jurisdiction of the Court to alter or revoke a contract made by a Company.
3. Interpretation of Section 443(1)(c) and Section 536(2) of the Companies Act, 1956.

Analysis:
1. The appeal was filed against the orders of the Company Judge regarding the lease of a factory by a Company. The Court initially approved the terms of the lease on 9th May, 1961, allowing the lessee an option to renew for five years. Subsequently, on 12th and 19th February, 1962, the Court revoked this approval due to a pending winding-up petition, limiting the lease to one season at a time. The appellant argued that the Court exceeded its jurisdiction by altering the terms of the lease, which were part of a valid contract. The Court noted that the original approval of the lease terms was not supported by any provision of law and set aside all orders related to the lease.

2. The question of whether the Court had the authority to alter or revoke a contract made by a Company was raised. The Court emphasized that once a contract is made, a Company cannot breach it without legal authority. The Court rejected arguments that the Judge had inherent powers to modify the contract, stating that no provision of law was cited to support the alteration of the lease terms. The Court highlighted that the Companies Act does not empower the Court to interfere with a Company's property before a winding-up order is passed, except by appointing a provisional liquidator under Section 450.

3. The interpretation of Sections 443(1)(c) and 536(2) of the Companies Act, 1956 was crucial. Section 443 allows the Court to make interim orders related to a winding-up petition but does not authorize pre-emptive actions regarding a Company's property. Section 536(2) deems dispositions of a Company's property after the commencement of winding up void unless the Court orders otherwise. The Court clarified that Section 536(2) does not apply before a winding-up order is issued and does not support the argument that the Court could approve lease terms before winding up. Ultimately, the Court allowed the appeal, setting aside all previous orders and emphasizing that the contract between the Company and the appellant stands without the Court's approval.

In conclusion, the High Court set aside the orders related to the lease of the factory, emphasizing the limitations on the Court's authority to interfere with a Company's property before a winding-up order is passed and the importance of legal provisions in contract enforcement.