1980 (1) TMI 164 - SC - Companies Law

Whether the plaintiffs were estopped from denying the validity of the sale in favour of the Benaras Bank Ltd. and the character of the possession of the Benaras Bank Ltd. and its successors-in-interest? Held that - Appeal allowed. At no point of time did the predecessors-in-interest of the plaintiffs raise the slightest objection to the sale of the leasehold interest. It was thereafter that the defendant obtained the permission of the Municipal Board, Saharanpur, and raised a construction on the land. The plaintiffs themselves admittedly reside nearabout the land in dispute. They did not raise any objection to the raising of the construction. The plaintiffs as well as the defendants appeared to proceed on the common understanding that the defendants had succeeded to the interest of the Patel Mills Ltd., in the leasehold interest. We are, therefore, of the view that the plaintiffs were estopped from contending that the defendant had no interest in land. The only right of the plaintiffs was to receive the rent.

Summary

Issues Involved:

1. Authority of the voluntary liquidator to execute the deed of sale after the dissolution of the company.
2. Applicability of Section 53A of the Transfer of Property Act.
3. Effect of the dissolution of the company on the leasehold interest.
4. Estoppel against the plaintiffs from denying the validity of the sale.

Detailed Analysis:

1. Authority of the Voluntary Liquidator to Execute the Deed of Sale After Dissolution:

The court examined whether the voluntary liquidator had the legal authority to execute the deed of sale after the dissolution of the company. The judgment clarified that once a company is dissolved, it ceases to exist, and the liquidator cannot represent a non-existing company. The Indian Companies Act, 1913, did not provide any provision enabling the liquidator to act on behalf of a dissolved company. The court referenced the case of Pulsford v. Devenish, which emphasized that a liquidator could be sued for negligence but did not imply that a liquidator could represent a dissolved company. Therefore, the voluntary liquidator did not have the jurisdiction to execute the deed of sale dated January 28, 1941, after the company had been dissolved.

2. Applicability of Section 53A of the Transfer of Property Act:

The court found that Section 53A of the Transfer of Property Act was not applicable to the facts of the case. The right under Section 53A is available against the transferor effecting the incomplete transfer and any person claiming under him. The court stated that it is difficult to understand how the successor-in-interest of a lessor can be considered a person claiming under a lessee making an incomplete transfer of the leasehold interest. Thus, the defense under Section 53A was not accepted.

3. Effect of the Dissolution of the Company on the Leasehold Interest:

The court considered the effect of the dissolution of the company on the leasehold interest. It was noted that no term of the lease indicated that it would extinguish upon the dissolution of the company. The court held that if the company had a subsisting interest in the lease on the date of dissolution, such interest must necessarily vest in the Government by escheat or as bona vacantia. The court referenced the settled law in India that the property of a dissolved corporation passes to the Government by escheat or as bona vacantia, subject to any trusts and charges previously affecting it. Therefore, the leasehold interest vested in the Government upon the company's dissolution, making the plaintiffs' suit for possession not maintainable.

4. Estoppel Against the Plaintiffs from Denying the Validity of the Sale:

The court addressed whether the plaintiffs were estopped from denying the validity of the sale to Benaras Bank Ltd. The evidence showed that the predecessors-in-interest of the plaintiffs had accepted rent from the official liquidator of the Benaras Bank Ltd., indicating their acceptance of the bank's rights in the leasehold interest. The plaintiffs and their predecessors did not object to the sale of the leasehold interest or the subsequent construction on the land by the defendants. The court concluded that the plaintiffs were estopped from contending that the defendant had no interest in the land, and their only right was to receive rent.

Conclusion:

The appeal was allowed, and the suit was dismissed with costs throughout. The court made it clear that the plaintiffs have the right to receive rent from the defendants.