2016 (3) TMI 1029 - SC - Companies Law

Winding up petition - direction to official liquidator to handover possession of the land to the owners - Held that - Insofar as liability under Section 13(1)(k) of the Bombay Rent Act is concerned what is to be noticed is the requirement of unjustified non-user for a period exceeding 6 months which evidently is not be attracted to the present case in view of the pendency of the liquidation proceedings. That apart, Clause 5 of the lease deed which deals with non-user of the leased land does not contemplate eviction on account of such non-user but merely entitles the lessor to receive rent for the period of such non-user of the land. The mere fact that the company has been ordered to be wound up cannot be a ground to direct the official liquidator to handover possession of the land to the owners inasmuch as the company in liquidation continues to maintain its corporate existence until it stands dissolved upon completion of the liquidation proceedings in the manner contemplated by the Companies Act. In the present case it has been repeatedly submitted before this Court by both sides that presently revival of Prasad Mills is a live issue pending before the Gujarat High Court, a fact which cannot be ignored by this Court in deciding the above issue against the appellants.

Summary

Issues Involved:
1. Validity of the lease agreement and its terms.
2. Applicability of the Bombay Rent Act provisions.
3. Default in payment of rent.
4. Unauthorized assignment or sub-letting.
5. Non-user of the leased land.
6. Impact of the company's liquidation on the lease.

Detailed Analysis:

1. Validity of the Lease Agreement and Its Terms:
The lease agreement dated 10.12.1916 was for a period of 199 years. The terms of the lease included conditions for rent payment, non-transferability, and conditions under which the lessor could reclaim possession. The High Court examined these terms in detail, particularly focusing on clauses that allowed sub-letting and the conditions under which the lessee could be evicted.

2. Applicability of the Bombay Rent Act Provisions:
The High Court considered the provisions of the Bombay Rent Act, particularly Sections 12, 13, and 15. Section 13(1) of the Rent Act, which deals with the landlord's right to recover possession, was found to have an overriding effect only over other provisions of the Act and not over the terms of the lease. The High Court concluded that the provisions of the Transfer of Property Act, specifically Section 108(j), were still relevant, allowing the lessee to sublet or assign the lease.

3. Default in Payment of Rent:
The appellants argued that the company in liquidation had defaulted in paying rent, making it liable for eviction under Section 12 of the Rent Act. However, the High Court noted that the secured creditors, including the State Bank of India, were ready and willing to pay the rent. The Court emphasized that no notice as required under Section 12(2) of the Rent Act was served by the landlord, which is a prerequisite for eviction on the grounds of non-payment of rent. Therefore, the tenant retained protection under the Rent Act.

4. Unauthorized Assignment or Sub-letting:
The appellants contended that the official liquidator had assigned the property in violation of Section 13(1)(e) of the Rent Act. The High Court, however, found that the lease deed permitted sub-letting and that no actual assignment had occurred. The Court also noted that the argument of unauthorized assignment was raised only during the appeal and was not part of the original claim. Additionally, the advertisement for the sale of the leased property by the official liquidator did not constitute a completed assignment.

5. Non-user of the Leased Land:
The appellants claimed that the land had not been used for over six years, invoking Section 13(1)(k) of the Rent Act. The High Court found that the non-user was due to the liquidation proceedings, which constituted a reasonable cause. Clause 5 of the lease deed only entitled the lessor to receive rent during the period of non-user and did not provide for eviction.

6. Impact of the Company's Liquidation on the Lease:
The High Court held that the company's liquidation did not automatically terminate the lease. The company in liquidation continued to exist until dissolved as per the Companies Act. The possibility of the company's revival was also a factor, as proceedings for revival were pending before the Gujarat High Court.

Conclusion:
The Supreme Court affirmed the High Court's judgment, holding that the appellants were not entitled to evict the official liquidator on the grounds of non-payment of rent, unauthorized assignment, or non-user of the land. The Court emphasized the need for compliance with the procedural requirements of the Rent Act and the specific terms of the lease agreement. The other civil appeals were remitted to the High Court for fresh consideration based on the principles laid down in this judgment.