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TMI Blog2002 (7) TMI 583X X X X Extracts X X X X X X X X Extracts X X X X ..... made on behalf of various contesting parties a brief recapitulation of historical facts is necessary. 3. On 7-10-1994 this Court (Coram : Mr. Justice M.S. Parikh), had passed a common order in Company Application No. 47 of 1993 with Company Application No. 48 of 1993 with Company Application No. 49 of 1993 in Company Petition No. 72 of 1991. The said applications filed by the heirs and legal representatives of deceased lessor of respective properties being land as particularly described in the applications were for directions to return the land to the said applicants. The Court came to the conclusion that the lease deeds in question were non-determinable, fully transferable and assignable permanent lease deeds, and hence, even if a notice to determine such lease had been given such notice was not valid on correct construction of the lease deed in question. As a consequence, the Court held that the company in liquidation represented by the official liquidator was not a statutory tenant; accordingly, it was not possible to direct the Official Liquidator to hand over possession of the lands in question. However, the Court directed payment of rent of the leasehold lands from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of rights in the lands in question. As the learned counsel for the lessors made a proposal as stated in para 4 of the order dated 14-2-2002, the learned counsel appearing for various secured creditors sought time to seek instructions from their respective clients as this was a policy matter and accordingly, the following order was made : "6. In view of the above, the hearing of this group of matters is adjourned to 5th March, 2002 subject to the following : ( i )Those of the applicants who are agreeable to give up all their rights in the lands in question including their freehold rights, if any, shall submit a without prejudice proposal through their respective advocates to the respective advocates for the secured creditors and to the advocate for the Textile Labour Association with a copy endorsed to the Official Liquidator. This shall be done within one week from today i.e. by 21-2-2002. Where the State of Gujarat and/or ONGC are also parties to any litigation, their advocates shall also be served with a copy of the proposal. ( ii )Upon receiving such proposals, the advocates for the secured creditors, the Textile Labour Association, State Government and ONGC shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot required for the purpose of the affairs of the company, hence, the possession of the land be returned to the lessors. ( c )The Official Liquidator is only a statutory tenant which would not entitle him to sell the leasehold interest of the company and, thus, the Liquidator remaining in possession would be required to keep on paying the rent which would be onerous, and hence, the Liquidator be directed to disclaim the property and handover the possession to the lessor applicants. ( d )That till the rent was being regularly paid there was no right of eviction available with the lessors but at the same time the lessee had only a limited right of sub-letting and permissive user and did not have any right of assignment. That the lessee company could not have created any charge over the demised premises as the lease deed or rent note did not permit such course of action. ( e )That the leasehold interest was not a property which could be treated as an asset of the company and, hence, could not be dealt with. In other words, it was a mere right of possession and nothing more than that. ( f )That the nature of tenancy could be permanent/in perpetuity or for a life-time or for a f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roperty Act, 1882 and the Contract Act, 1872, as the Rent Act was a special statute as against the general law laid down in the other two enactments. In this connection, it was also contended that a lessee/tenant was not entitled to double protection, i.e., under the Transfer of Property Act and the Rent Act, and, thus, also only provisions of the Rent Act would apply. ( n )That even if the Court directed payment of arrears of rent, a statutory tenancy which had come into being by operation of law could not be converted back into contractual tenancy and the lessor was entitled to forfeit lease and the Court could not relieve the lessee from such forfeiture. ( o )That the lessors had reversionary interest and the same was never lost. That the rights conferred on the lessee company could not be exercised by the Official Liquidator as the Liquidator would only come into the picture when an order of winding up was made. Thus, the reversionary interest which remained with the lessor could not be snatched away by the Official Liquidator. ( p )In some of the matters upon reading of the lease deeds it was submitted that the terms of the deed provided an option to the lessor to term ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l lease would continue to operate. ( f )That life-time lease would be co-terminus with the life of company and till date no company has been directed to be dissolved. ( g )That the order of winding up and order of dissolution are two distinct situations/stages and the order of winding up cannot be treated as being equivalent to an order of dissolution. ( h )That the right to disclaim an onerous property is available with the Official Liquidator and it is not open to the lessors to seek direction against the Official Liquidator to disclaim the property. ( i )That section 535(1) of the Companies Act, 1956 ( the Act ) specifies four types of properties and if the property does not fall within any of the four clauses, the Official Liquidator has no right to disclaim. That the leasehold rights would not fall within sub-clause ( b ) or sub-clause ( d ) of section 535(1). That apparently, though clause ( a ) might seem to apply, it will be necessary for the lessor to show that the land in question is burdened with onerous covenant. ( j )That liability to pay rent is not per se onerous covenant; once the financial institutions/mortgagees undertake such liability the same would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... editors insist and the Court permits sale of the property and it is not necessary to deal with such individual mortgages at this stage. ( u )That the provisions of the Rent Act are not intended to apply de hors the contract and other laws as contented by the lessors. 9. Mr. R.M. Desai, appearing on behalf of the Official Liquidator contended that the lease deed had been entered into at a given point of time and for deciding whether the lessors are entitled to resume, the terms of a particular deed will have to be read and interpreted; that it was now settled rule of construction that deed as a whole had to be read for this purpose. Further more, it was submitted that the intention of the lessor at the time when the deed was entered into shall have to be taken into consideration while appreciating the contentions raised on behalf of the legal heirs : ( a )That as directed by the Division Bench of this Court, the applicants will have to establish not only that they are legal heirs of the lessor but also that there are no other heirs or, the other existing heirs have no interest in the property in question. ( b )That the lessors and/or their heirs/representatives cannot b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sor would not be entitled to possession of the land. It was submitted that the Official Liquidator has already expressed his readiness and willingness to pay rent with consent of secured creditors and Textile Labour Association and, hence, the applications filed by the lessors deserve to be rejected. Thus, the interest of the lessors would stand protected and even if the leasehold rights will be sold in future, the purchaser of such leasehold rights will be bound by the terms and conditions of the lease deed. The lessors are not entitled to possession under the provisions of either T.P. Act or the Rent Act or the Companies Act and the leasehold rights being the assets of the company such rights could be sold as laid down in various decisions. 11. Some of the learned advocates appearing on behalf of the lessor-applicants raised a preliminary contention to the effect that, though as directed by the Court, various secured creditors and the Textile Labour Association have been joined as party respondents, as the so called secured creditors have not placed any details about any charge created in their favour by the lessees, such secured creditors should not be heard. That, alternati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question whatsoever, whether of law or fact, relatable to or arising in the course of the winding up proceeding. Sub-section (3) of section 446 provides that, any suit or proceeding filed by or against the company which is pending in any other Court, i.e., the Court other than one which is seized with winding up proceeding was required to be transferred and disposed of by the Court winding up the company regardless of any other law for the time being in force. Sub-section (4) of section 446 is not relevant for the present purpose. It is pertinent to note that the important words in sub-section (3) of section 446 are: notwithstanding anything contained in any other law for the time being in force . In context of these provisions it will become necessary to deal with the controversy raised in this group of petitions. 14. Section 529 vide proviso under clause ( c ) of sub-section (1) stipulates that the security of every secured creditor shall be deemed to be subject to a pari passu charge in favour of the workmen. Therefore, moment the secured creditors come into picture in winding up proceedings, the workmen will follow suit as provided in proviso to section 529(1) clau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... once the Court assumes jurisdiction. It is in this context that an unsecured creditor of the company is not empowered to file a petition against the company by resorting to clause ( b ) of sub-section (2) of section 446. 17. Various decisions which have been cited during the course of hearing will have to be understood and read in the context in which the same have been rendered. The Supreme Court has time and again laid down the guidelines for reading and applying its own decision. ( a ) In the case of Municipal Committee v. Hazara Singh 1975 (1) SCC 794 the Supreme Court dealing with the matter of the provisions of the Food Adulteration Act approved the approach of the Kerala High Court in the following terms : "Judicial propriety, dignity and decorum, demand that being the highest judicial tribunal in the country even obiter dictum of the Supreme Court should be accepted as binding. Declaration of law by that Court even if it be only by the way has to be respected. But all that does not mean that every statement contained in a judgment of that Court would be attracted by article 141, Statements on matters other than law have no binding force. Several decisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any finding of facts it is the principle found out upon a reading of a judgment as a whole, in the light of the questions before the Court that forms the ratio and not any particu-lar word or sentence. To determine whether a decision has declared law it cannot be said to be a law when a point is disposed of on concession and what is binding is the principle underlying a decision. A judgment of the Court has to be read in the context of questions which arose for consideration in the case in which the judgment was delivered. An obiter dictum as distinguished from a ratio decidendi is an observation by Court on a legal question suggested in a case before it but not arising in such manner as to require a decision. Such an obiter may not have a binding precedent as the observation was unnecessary for the decision pronounced, but even though an obiter may not have a bind effect as a precedent, but it cannot be denied that it is of considerable weight. The law which will be binding under Article 141 would, therefore, extend to all observations of points raised and decided by the Court in a given case. So far as constitutional matters are concerned, it is a practice of the Court n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther nomenclature, for parting with the capital asset, namely, the demised premises can only be described as a capital receipt and not a trading receipt. The expression capital asset is defined in section 2(14) to mean property of any kind held by an assessee, whether or not connected with his business or profession, but does not include stock-in-trade, personal effects, agricultural land in India and Gold Bonds and other bonds. Interest in immovable property would, therefore, be property and hence a capital asset..." (p. 12) 20.1 In the case of Shree Chamundi Mopeds Ltd. v. Church of South Indian Trust Association [1992] 3 SCC 1, the Apex Court laid down that leasehold interest of the lessee in the premises leased out to him is a property which can be transferred and can also be attached and sold by way of execution in satisfaction of decree against lessee. In that sense it can be said that the leasehold interest of a company is its property. However, the Court also carved out exception by stating that leasehold interest of the appellant company being a statutory tenancy in the premises leased out, cannot be said to be a property for the purpose of section 22(1) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere the contract of tenancy or lease has not come to an end, by virtue of the terms of the contract. In other words, if the tenant is entitled to possession by virtue of provision of any other statute apart from the Rent Act, such right is not affected by the provisions of the Rent Act and even if there might be a situation where some conditions stipulated in a provision of the Rent Act come to be satisfied, the tenant would yet be entitled to resist the claim of landlord for possession of the premises, if otherwise entitled to de hors the provisions of the Rent Act. A tenant needs no protection against eviction by the landlord so long as he has necessary protection under the terms of the contract entered into with the landlord. A tenant s right to hold over after the termination of the contractual tenancy is different from the right to protection during the contractual tenancy and the two rights must be kept distinct from each other. In case of the former right provisions of the Rent Act come into play, while in case of the later right, ordinary law governing the rights of the tenant and landlord would become applicable. 23. It is settled law that the period of a subsisting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nded that the proviso must relate to contractual lease only. The Apex Court rejected this contention and held that proviso was relatable to the premises held under statutory lease also and not merely to contractual leases. The Court after reproducing extract from earlier decision stated that : "It is beyond doubt that a statutory tenant has every right to enjoy estate or interest in the tenanted premises despite the termination of the contractual tenancy." 27. Another position in law which is well-settled is that merely because company goes in liquidation and liquidator is appointed, the rights of the company vis-a-vis its landlord do not undergo any change and they continue to be governed by subsisting contract. 28. It was contended on behalf of the landlords that where the land was let out for a stated purpose though without fixed period the presumption was that it was intended to create a tenancy for the life-time, i.e., life-time of the company and could not be treated to be a permanent tenancy. In this connection, suffice it to state that the forms in which the tenancy rights are created are not uniform and hence the nature of the tenancy must be determined by co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the company in liquidation including valuable assets like leasehold rights of unexpired portion of the lease. There cannot be any dispute as regards the legal position that the corporate existence of the company in liquidation continues till dissolution and the Liquidator steps into the shoes of the company; he is however, under the control and supervision of the Court and whatever he does, more particularly, in respect of the sale of the assets of the company in liquidation is for the purpose of implementation of the order and under sanction of the Court. In case the Court is not empowered to deal with an asset like leasehold interest of the company in liquidation it may, in a given situation, either give rise to or encourage malpractice by dishonest persons. Hard facts and realities of life have to be taken note of by the Court; normally the properties which are leased out to the company are owned by either Directors or their relations or persons who are substantially amenable to directions of one or more Directors of the company in liquidation. Thus, on the one hand by permitting winding up of the company and on the other hand relieving company of valuable assets by seeking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the affairs of the company and, hence, the Court must pass an order directing the liquida- tor to return the same. As stated hereinbefore the decision of the Court will have to be read in the context of controversy which the Court was called upon to decide. 35.1 The facts of the case before the Supreme Court were that the company therein was a tenant/lessee of the premises of which the appellant before the Court were the landlords. The date of commencement of the lease was not available and it was not the case of the Liquidator that the lease was of a long duration. Upon an order of winding up having been made the Liquidator who was in possession of the premises did not need the premises for carrying on winding up activities nor was the premise required for the business of the company. The learned company Judge therefore directed the Liquidator to give the premises to a third party under a caretaker agreement. It was this action of the company Court which was challenged before the Supreme Court. Therefore, the observations made by the Apex Court directing surrendering of possession to the landlord will have to be understood in that context. In the cases at hand the facts show ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have to be taken into consideration, in each individual case, after the landlord applicant is able to establish not only non-payment of rent, but entitlement to forfeiture and further that he has served a notice for such forfeiture. 38. As already seen hereinbefore section 535, specifically grants a discretion to the Liquidator to seek leave of the Court to disclaim the property, provided it is burdened with onerous covenants. The first question therefore that would arise is, as to whether it would be open to any applicant to seek direction to the Liquidator from the Court that the Liquidator should disclaim the property. The answer has to be in the negative: Section 535(1) specifically states that the Liquidator may with the leave of the Court by writing signed by him disclaim the property. Therefore, the application has to be one which has to be in writing, which has to be signed by the Liquidator and which has to be for disclaimer of the property falling within the four classes of property, particularly described in the said section. In none of the present cases there is any application for disclaimer which would require the Court to determine whether a leave as sought for ..... X X X X Extracts X X X X X X X X Extracts X X X X
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