1968 (2) TMI 51 - HC - Companies Law

Summary

Issues Involved:
1. Term of the lease.
2. Liability for payment of dues to the Corporation.
3. Appointment and remuneration of the receiver.
4. Distribution of machinery and equipment between the company and the Fibres.
5. Payment of municipal taxes and railway dues.

Issue-wise Detailed Analysis:

1. Term of the Lease:
The primary controversy revolved around whether the lease term was fixed at ten years or extended automatically until the Corporation's dues were fully paid. The Court held that the lease term was ten years and no more, expiring on July 15, 1966. The lease did not stand automatically extended beyond ten years, and the Fibres were not liable to pay any dues of the Corporation beyond this period. The Court reasoned that the specific period of ten years in the lease deed indicated a term certain. Clause 1(d) of the lease, which purported to extend the lease automatically, was deemed invalid due to the uncertainty it introduced.

2. Liability for Payment of Dues to the Corporation:
The Fibres were not liable to pay any dues to the Corporation beyond the stipulated ten-year period. The Court noted that the dues of the Corporation had been significantly reduced by the time of the judgment due to payments made by the company from the sale of surplus machinery. The Court also rejected the argument that the lease deed, being part of a court-sanctioned scheme, could bypass the provisions of the Transfer of Property Act, specifically section 105, which requires a lease to be for a certain term.

3. Appointment and Remuneration of the Receiver:
The receiver was initially appointed to manage the dispute over machinery removal and to auction assets to pay off the Corporation's dues. The Court decided that the remuneration and expenses of the receiver should be borne equally by the Fibres and the company. The receivership would terminate upon the completion of the Court's directions, which were to be carried out within one month or within an extended period if allowed by the Bench.

4. Distribution of Machinery and Equipment:
The Court approved an agreed arrangement between the parties for the distribution of machinery and equipment. The premises of the Vikram Cotton Mills were to be handed over to the company. Specific machinery and equipment were allocated to either the company or the Fibres based on the agreement reached during the hearing of the appeals. For example, the 46 old spinning machines and five new spinning machines were to be handed over to the company, while the 11 new spinning machines along with their accessories were to be taken away by the Fibres.

5. Payment of Municipal Taxes and Railway Dues:
The Fibres were held liable for the payment of municipal taxes and railway dues for the period during which the lease subsisted. They also undertook to reimburse the company for any amount decreed against it in respect of ground rent for the said period.

Conclusion:
The Court decided the appeals by confirming the ten-year lease term, resolving the disputes over machinery distribution, and determining the liabilities for receiver expenses and municipal dues. The remuneration and expenses of the receiver were to be shared equally by the Fibres and the company. The Court's directions were to be implemented within one month, with the possibility of an extension if necessary. Each party was ordered to bear its own costs for the appeals.