1971 (2) TMI 129 - HC - Companies Law

Summary

Issues Involved:
1. Transfer of Tenancy Rights by Official Liquidator
2. Applicability of the Delhi Rent Control Act
3. Status of Company Property During Liquidation
4. Interpretation of "Transfer by Operation of Law"

Detailed Analysis:

1. Transfer of Tenancy Rights by Official Liquidator:
The Official Liquidator sought permission to sell the tenancy rights of a company in liquidation. The landlord opposed this, arguing that the tenancy should be surrendered as the premises were no longer required by the company and the landlord had not received rent since October 1, 1968. The landlord also contended that the tenancy rights were non-transferable under the Delhi Rent Control Act.

2. Applicability of the Delhi Rent Control Act:
The court examined the provisions of the Delhi Rent Control Act, specifically Sections 5, 14, and 16, which restrict the transfer or assignment of tenancy rights without the landlord's written consent. Section 5(3) explicitly states that it is unlawful for a tenant to receive any payment in consideration of the relinquishment, transfer, or assignment of tenancy rights. The court noted that any such transfer by the Official Liquidator would be subject to these restrictions and could render the company liable to penalties under Section 48 of the Rent Act.

3. Status of Company Property During Liquidation:
The court clarified that the property of a company in liquidation does not vest in the court or the Official Liquidator but remains with the company. The Official Liquidator acts as an administrator or agent of the company, and the property is deemed to be in the custody of the court only for the purpose of administration. This distinction was supported by several precedents, including decisions from the Travancore-Cochin High Court and the Supreme Court of India.

4. Interpretation of "Transfer by Operation of Law":
The court rejected the argument that a sale by the Official Liquidator constitutes a "transfer by operation of law." It held that such a sale is a transaction by the company, acting through its Liquidator, and not by the court. The court distinguished between transfers that occur by operation of law, such as those due to death or devolution, and those that require an act of the parties, even if sanctioned by the court. The court cited the decision in Farrow's Bank Limited to support this interpretation, emphasizing that the Liquidator's actions are on behalf of the company and not a result of operation of law.

Conclusion:
The court concluded that the tenancy rights could not be transferred without the landlord's consent, as per the Delhi Rent Control Act. The application by the Official Liquidator to sell the tenancy rights was dismissed, and no order for costs was made. The court upheld the Division Bench's decision, affirming that the sale by the Liquidator is not a sale by operation of law and is subject to all existing liabilities and restrictions.