2025 (3) TMI 692 - HC - Companies Law

Seeking direction from this Court to the official liquidator to handover vacant and peaceful possession of the said premises which were taken on monthly tenancy basis by the company in liquidation - HELD THAT - The instant application has been filed under Section 446 of the Companies Act. The said provision indeed provides wide powers to the Company Court to pass appropriate orders. The Court has jurisdiction to even entertain and dispose of any suit or proceeding by or against the company as also any claim made by or against the company in liquidation. In the case of Patel Engineering Co. Ltd. v/s. Official Liquidator 2004 (2) TMI 383 - HIGH COURT OF BOMBAY even when eviction proceedings were initiated by the landlord in respect of the premises in question this Court held that such an application by the landlord seeking possession of the premises could not be dismissed because by approaching the Company Court the landlord had invoked an independent and special remedy available to the landlord under the Companies Act. There is substance in the contention raised on behalf of the applicant that under Section 446 of the Companies Act this Court has wide powers with the focus being on examining issues and passing orders with the object of carrying on the winding up proceeding and in that process examining whether the premises are required for the purposes of winding up of the company in liquidation. In the case of Metal Tubes and Rolling Mills v/s. Official Liquidator 2020 (8) TMI 584 - BOMBAY HIGH COURT after referring to a number of judgments of the Supreme Court in this context it was held that the Company Court under Section 446 of the Companies Act has very wide powers to decide all questions that may relate to or arise in the course of winding up of the company. This Court is unable to agree with the learned counsel for the official liquidator that the present application ought not to be entertained as the landlord can institute eviction proceedings. There is substance in the contention raised on behalf of the applicants that in Official Liquidator s Report No. 77 of 2022 the official liquidator has specifically stated that a search of flat Nos. 4 and 5 revealed that there were no books of accounts or records belonging to the company in liquidation. In the face of such material this Court is of the opinion that the bald statement made on behalf of the official liquidator in the affidavit in reply that the premises in question are required for storing books and records of the company in liquidation is nothing but an attempt to somehow cling on to the said premises despite the fact that the premises have been in disuse. The contention raised on behalf of the ex-directors is only stated to be rejected for the reason that perfunctory applications have been filed in these proceedings claiming that the company can be revived. No genuine efforts appear to have been made on behalf of the ex-directors in that direction. In any case as noted herein above the continued burden of rentals is wholly unjustified and in the facts and circumstances of the present case the prayer made on behalf of the applicants deserves to be granted. Conclusion - The official liquidator s claim of needing the premises was not genuine and that the premises were not required for the winding up and liquidation process. Therefore the issue decided in favor of the applicants directing the official liquidator to hand over possession of the premises. Application disposed off.

Summary

ISSUES PRESENTED and CONSIDERED

The primary legal issue considered by the Court was whether the official liquidator is justified in retaining possession of the premises, which were occupied by the company in liquidation on a monthly tenancy basis, or if the premises should be handed over to the applicants, who are the landlords. Specifically, the Court examined the extent of its powers under Section 446 of the Companies Act, 1956, to determine if the premises are required for the beneficial winding up of the company.

ISSUE-WISE DETAILED ANALYSIS

Relevant legal framework and precedents

The Court analyzed Section 446 of the Companies Act, 1956, which provides the Company Court with wide powers to entertain and dispose of any suit or proceeding by or against the company in liquidation. The Court referred to several precedents, including Patel Engineering Co. Ltd. v/s. Official Liquidator and Ravindra Ishwardas Sethna v/s. Official Liquidator, High Court, Bombay, which emphasized the Court's authority to determine if premises are needed for winding up proceedings.

Court's interpretation and reasoning

The Court interpreted Section 446 as granting it broad powers to evaluate the necessity of the premises for the liquidation process. It emphasized that the mere assertion by the official liquidator of needing the premises does not preclude judicial scrutiny of such claims. The Court found that the official liquidator's need for the premises should be strictly construed, and the liquidator's statements should not be accepted without examination.

Key evidence and findings

The Court noted that the official liquidator had taken possession of four flats, including the two in question, but had not utilized them for storing company records or books. The liquidator's affidavit lacked specifics on why the premises were necessary, merely stating a general need for storage. Additionally, the liquidator had previously acknowledged that no company records were found in the flats.

Application of law to facts

The Court applied the legal principles from the precedents to the facts, concluding that the official liquidator had not demonstrated a genuine need for the premises. The Court was persuaded by the applicants' argument that the premises were not being used and that the retention of the premises was unjustified, especially given the financial burden of ongoing rent.

Treatment of competing arguments

The Court considered the official liquidator's reliance on various precedents, including Nirmala R. Bafna v/s. Khandesh Spinning and Weaving Mills Co. Ltd., which involved lease agreements rather than monthly tenancies. The Court distinguished these cases on the basis that the present case involved a monthly tenancy, not a lease. The Court also addressed the ex-directors' argument regarding the potential revival of the company but found it unsubstantiated.

Conclusions

The Court concluded that the official liquidator's claim of needing the premises was not genuine and that the premises were not required for the winding up and liquidation process. Therefore, the Court decided in favor of the applicants, directing the official liquidator to hand over possession of the premises.

SIGNIFICANT HOLDINGS

The Court held that under Section 446 of the Companies Act, it possesses wide powers to evaluate the necessity of premises for liquidation proceedings. It emphasized that the need projected by the official liquidator must be strictly scrutinized, and the Court is not bound to accept the liquidator's assertions without examination. The Court stated: "The ipse dixit of the official liquidator cannot be accepted as gospel truth by the Court and the question as to whether the premises are genuinely needed by the official liquidator, can and must be gone into by the Court exercising such power."

The Court determined that the official liquidator's need for the premises was not genuine and directed the liquidator to hand over possession of the premises to the applicants within four weeks. The Court also reserved the applicants' rights to pursue claims regarding other premises not subject to the present application.