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TMI Blog2006 (6) TMI 224X X X X Extracts X X X X X X X X Extracts X X X X ..... or winding up of the Pilot Pen Company (India) Private Limited. The official liquidator was appointed to take charge of the affairs of the company. The property owned by the company in liquidation situate at No. 271, Anna Salai, Teynampet, was leased out to the Tamil Nadu Handloom Weavers' Co-operative Society Limited, Madras (herein after referred to as "Co-optex") since 1973. The tenancy was renewed from time to time. Under orders of this court dated September 5, 1981, the agreed rent was recorded at Rs. 45,000. In C. A. No. 696 of 1984, by order dated September 21, 1984, the agreed fair rent was recorded at Rs. 50,000 from October 1, 1984 to September 30,1987, this court directed the same to be payable by the said lessee. By notice dated September 30, 1987, the official liquidator called upon the lessee to have the fair rent fixed at Rs. 1 lakh and to hand over the possession by vacating the same. The first respondent, however, moved before the Rent Controller seeking fixation of fair rent. It may be noted that this application itself was filed long after the company court was seized of the matter ordering winding up of the company herein. A perusal of the application filed be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l liquidator has further stated that in view of the provisions of section 446 of the Companies Act, the petition filed before the Rent Controller itself was not maintainable. The property is vested with this court as per section 456 of the Companies Act. Hence, prayed for directions as referred to above. The first respondent has filed his counter. The official liquidator has also filed a report showing a statement of accounts of receipt and payment from April 1, 2000 to February 28, 2006. It is stated that the office of the official liquidator has made a total payment of Rs. 1,78,70,227 as on February 28, 2006. It is stated that as on date, a sum of Rs. 8,07,527.54 ( i.e ., Rs. 6,80,439.59 in ordinary account and Rs. 1,27,087.95 in NDD) is available in the bank. It is seen that one Josephine Sanjeevi along with her three daughters owned 2390 equity shares in the company in liquidation. In the counter, it is stated that the company in liquidation is denied of its valuable income from the property. Any scheme for the revival of the company in liquidation, to be undertaken is made to depend upon the will and pleasure of the person in occupation of the company's properties. It is s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the proceedings contemplated therein. In support of this proposition, apart from placing reliance on in the case of S. V. Kondaskar v. V. M. Deshpande [1972] 42 Comp Cas 168 ; AIR 1972 SC 878, learned counsel also placed reliance on in the cases of Damji Valji Shah v. UC of India, AIR 1966 SC 135, Ravindra Iskwardas Sethna v. Official Liquidator, High Court, Bombay [1983] 54 Comp Cas 702 ; AIR 1983 SC 1061 and Smt. Nirmala R. Bafna v. Khandesh Spinning and Weaving Mills Co. Ltd. [1992] 74 Comp Cas 1; AIR 1993 SC 1380. These decisions relate to tenancy rights in the properties belonging to the company in winding up proceedings. Referring to the decision in the case of Allahabad Bank v. Canara Bank [2000] 101 Comp Cas 64 ; AIR 2000 SC 1535 which relates to the jurisdiction of the Debts Recovery Tribunal under the Debts Recovery Act, learned counsel emphasised that the Rent Control Act being a special legislation pertaining to matters dealt with therein, the company court cannot assume the jurisdiction of the Rent Controller even in respect of companies which are under the winding up proceedings. Learned counsel also relied on the decision in the case of Dr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... andari v. Nandlal Bhandari and Sons P. Ltd., AIR 1995 MP 217; [1998] 94 Comp Cas 852 and Sudarsan Chits ( I ) Ltd. v. G. Sukumaran Pillai [1985] 58 Comp Cas 633 (SC). He also referred to the pro visions of section 446(1) read with rules 117 and 118 of the Companies (Court) Rules, 1959, to submit that this court has jurisdiction to have any suit or proceeding transferred to it for consideration on merits. In short, he supported the cause of the official liquidator to have the rent control proceedings, filed by the first respondent set aside and to direct the first respondent to hand over the vacant possession of the premises and direct him to pay mesne profits to the official liquidator to the companies account. In reply to the counter submitted by the learned counsel supporting the case of the official liquidator, Mr. R. Subramaniam, submitted that the con sent order on earlier occasions did not act as estoppel to take recourse to the proceedings under the Rent Control Act. Learned counsel submitted that the question of transferring the proceedings to this court from the rent control court did not arise. He also submitted that in the absence of fair rent fixation, the q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted to any category of suits or any legal proceedings who ever may be the plaintiff. Adverting to the extent of the jurisdiction of the company court, ordering winding up of a company, in the case of Sudarsan Chits ( I ) Ltd. v. G. Sukumaran Pillai [1985] 58 Comp Cas 633 , the Supreme Court held that sub section (2) of section 446 of the Companies Act was introduced to enlarge the jurisdiction of the court which is winding up the company so as to facilitate the disposal of the winding up proceedings. The court held that in the absence of a provision like section 446(2) under the repealed Indian Companies Act, 1913, the official liquidator had the unenviable fate of filing suit to realise and recover the claims and subsisting debts owed to the company. This meant, indefiniteness as well as multiplicity of the proceedings holding up the progress of the winding up proceedings. To save this difficulty, Parliament had provided for summary remedy by conferring jurisdiction on the court winding up the company to entertain petitions in respect of claims for and against the company. Keeping this object in view, the apex court held that (page 638) : "Section 446(2) must receive su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a debt has to rank pari passu with other debts due from the company. It does not mean that the assessment proceedings for computing the amount of tax must be held to be 'such other legal proceedings' as can only be started or continued with the leave of the liquidation court under section 446 of the Act. The liquidation court in our opinion, cannot perform the functions of income tax officers while assessing the amount of tax payable by the assessees even if the assessee be a company which is being wound up by the court. The orders made by the Income-tax Officer in the course of the assessment or re-assessment proceedings are subject to appeal to the higher hierarchy under the Income-tax Act. There are also provisions for reference to the High Court and for appeals from the decisions of the High Court to the Supreme Court and then there are provisions for revision by the Commissioner of Income-tax. It would lead to anomalous consequences if the winding up court were to be held empowered to transfer the assessment proceedings to itself and assess the company to income-tax. The language of section 446 must be so construed as to eliminate such startling consequences as investing the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AIR 1972 SC 878. In the background of the aforesaid decision, it is clear that as per section 446 of the Companies Act it is enough to say that the properties of the company in liquidation vests with the company court. The liquidator as an officer of the court, shall be charged with the duty of representing the company to protect the interest of the company in liquidation, that by the general scheme of section 446, the administration of the assets of the company in liquidation extends over the matter relevant to the distribution of the assets of the company. Section 446 of the Act puts a ban on suits or other legal proceedings to be commenced or if pending on the date of winding up order, to be proceeded with against the company, except by leave of the court and subject to such terms as the court may impose. Sub section (2) of section 446 states that the company court shall have exclusive jurisdiction to entertain or dispose of any suit or proceeding by or against the company, any claim made by or against the company, any application made under section 391 by or in respect of the company, any question of priorities or any other question whatsoever, whether of law or fact, which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rahim [1971] 41 Comp Cas 21 , after examining in detail the decision of the English courts and several High Courts held that the company court had the jurisdiction to grant leave to proceed with the suit or other proceeding against the company in liquidation, even if such leave had not been obtained for commencement of the suit or proceeding. It may be noted even in cases where the leave of the court is not obtained, the proceeding at best be regarded as instituted on the date on which the leave has been obtained from the High court. Dealing with section 171 of the Companies Act, 1913, which is the same as section 446(1) of the Companies Act of 1956, the Supreme Court held that (page 25), "the suit or proceeding instituted without leave of the court may, in our judgment, be regarded as ineffective until leave is obtained, but once leave is obtained, the proceeding will be deemed instituted on the date granting leave". Where a suit filed without obtaining the permission of the court, but which was obtained subsequently, following the above said decision of the Supreme Court, this court held in the cases of Asian Travels India P. Ltd., In re [1990] 3 CLJ 114 and State Bank of Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... legislative intent for this purpose is clear that there can be no impediment in the way of the liquidator of getting involved in unnecessary litigation as there is public accountability after a winding up order has been passed to determine the liquidation proceedings as expeditiously as possible". The court further held that the winding up proceedings were pending for over 20 years, "the tenants of the companies under the winding up proceedings cannot stretch winding up proceedings to suit their personal interest. They have to wind up also, along with the winding up of the company". The case in Virendra Singh Bhandari v. Nandlal Bhandari and Sons P. Ltd. AIR 1995 MP 217; [1998] 94 Comp Cas 852 (MP), relates to a leasing of a property without the permission of the company court by the official liquidator, in that context, the court held that leasing of the property with out the sanction of the court after the liquidation was without jurisdiction. The decision in the case of Visvesvaraya Industrial Research and Development Centre v. Official Liquidator of Rustom Mills and Industries Ltd. [2004] 118 Comp Cas 190 of the Gujarat High Court, relating to the lease of a company, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ight of the liquidator to take possession of the property and to deal with it in the manner required in accordance with the provisions of the Companies Act. This includes the right to move the company court to recover the rent arrears from the tenant in accordance with the provisions of section 446 of the Act. The view I have taken above is fully supported by the decision of the Constitution Bench of the Supreme Court in Rajasthan Financial Corporation v. Official Liquidator [2005] 128 Comp Cas 387 ; [2005] 8 SCC 190 affirming the view in Allahabad Bank v. Canara Bank [2000] 101 Comp Cas 64 ; AIR 2000 SC 1535. The recent decision of the Supreme Court in the case of Rajasthan Financial Corporation v. Official Liquidator [2005] 128 Comp Cas 387 ; [2005] 8 SCC 190, considered the effect of special enactments vis-a-vis the Companies Act. The apex court in the above said decision referred to the decisions in the case of Allahabad Bank v. Canara Bank [2000] 101 Comp Cas 64 ; [2000] 4 SCC 406 as well as the cases of Industrial Credit and Investment Corporation of India Ltd. v. Srinivas Agencies [1996] 86 Comp Cas 255 ; [1996] 4 SCC 165 and A.P. State Financial Corpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance, the apex court recognised the jurisdiction of the institution constituted under the special enactments to the extent of adjudication and thereafter the distribution left to be considered as per the provisions of the Companies Act. The court held that the Debts Recovery Tribunal acting under the 1993 Act would be entitled to order the sale of the properties of the company in liquidation only after notice to the official liquidator and after hearing him and financial corporation acting under section 29 of the State Financial Corporations Act, 1951; could exercise its power only after obtaining the appropriate permission from the company court and acting in terms of the directions issued by this court as regards associating the official liquidator with the sale, fixing the upset price from the reserve price, confirmation of the sale, holding of the sale proceeds and the distribution thereof among the creditors in terms of section 529A and section 529 of the Companies Act. In the context of this decision, the jurisdiction of the Rent Controller in fixing the fair rent and the company court ordering recovery in the case of lessee falling into arrears ordering eviction need to be u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 25 in the judgment in Allahabad Bank v. Canara Bank [2000] 101 Comp Cas 64; [2000] 4 SCC 406; AIR 2000 SC 1535 at page 1544, relating to the jurisdiction of the Debts Recovery Tribunal as well as to paragraphs 40 and 41. However, in view of the subsequent decision of the Supreme Court decided by the Constitution Bench, I do not think that there exist any doubt as regards the provisions of the Companies Act vis-a-vis the other enactments. In the light of the above said reasons that I have given that the Rent Controller jurisdiction is not ousted by reason of section 446 of the Act, the question that survives is as to whether this court should determine the monthly rent at Rs. 1 lakh payable from October 1, 1987, as a rent subject to renewal of lease for ordering eviction. This prayer has been made by the official liquidator as an alternative prayer to the first prayer to direct the first respondent to vacate and hand over the premises and to pay mesne profits at Rs. 1 lakh from October 1, 1987 onwards. The submissions seem to be that irrespective of renewal of lease, the first respondent should pay the price at Rs. 1 lakh fixed as a monthly rent/as a mesne profits and ordered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rection in his report in C. A. No. 227 of 2005. Taking note of the various provisions of Rent Control Act, which provides for the appeal revision and other remedial action, the interest of justice demands at least now that there should be a decision on the fair rent arrived at the hands of this court. This view is taken as an exception, keeping in mind the interest of the company in liquidation and the parties to the litigation. It is stated by the official liquidator in the course of hearing that except for the dues on property tax and a portion on the other statutory dues to the said authorities, all the creditors are satisfied. The properties of the companies are all sold, except the present property, in which the first respondent is having its lease hold interest. Hence, in fitness of things and interest of justice, there cannot be any impediment for this court in taking up fixation of fair rent, as a special exercise, by allowing the parties to let in evidence through affidavits containing details, so that, the parties can address directly on the merits of the claim before this court to have the fair rent fixed. In this connection useful reference made in the decision relied ..... X X X X Extracts X X X X X X X X Extracts X X X X
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