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TMI Blog2017 (5) TMI 318X X X X Extracts X X X X X X X X Extracts X X X X ..... ession of the property of the company in liquidation to the official liquidator. 2. During the course of the arguments, learned counsel for the official liquidator, however, did not press any relief in so far as declaration of lease deed dated 30th September 1997 executed between the company in liquidation and Modi Rubber Limited as void but pressed only for the relief in so far as the sub-lease dated 20th May 2002 executed between Modi Rubber Limited and Bharat Marketing is concerned. Some of the relevant facts for the purpose of deciding this report are as under:- 3. On 30th September 1997, Modi Stone Limited (in liquidation) executed a Lease Deed in favour of the Modi Rubber Limited in respect of the property of the company situated at Flat No.2, ground floor along with garage in the basement of the building known as "Normandie Co-operative Housing Society, Carmichael Road, Mumbai400 026 on the terms and conditions recorded in the said lease deed. 4. Clause 11 of the said lease deed dated 30th September 1997 provided that lessee shall not sublet, assign, underlet or part with possession of the demised premises or any part thereof or permit the same to be used on leave and li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d will agree to renovate the said flat which will require heavy expenditure on renovation, in excess of Rs. 50 lakh and if it is required to carry out such repairs and renovation, they will have the right of two more extensions beyond the stipulated period on the same terms and conditions as contained in the lease deed dated 30th September 1997. By the said letter dated 12th October 1997, the said Modi Rubber Limited asked Modi Stone Limited to confirm as to whether Modi Stone Limited was agreeable to prepare an addendum to the lease and on that condition, Modi Rubber Limited will incur expenditure in excess of Rs. 50 lakh on renovation of the said flat. 8. It is the case of Modi Rubber Limited that on 18th October 1997, the Modi Stone Limited addressed a letter to Modi Rubber Limited and agreed to confer upon the said Modi Rubber Limited the right to extend the lease by having two more extensions for the same period of 10 years each beyond stipulated period on the same terms and conditions as contained in the lease deed dated 30th September 1997. It was alleged in the said letter that upon exercising the right, the lease period will automatically extend and there will be no need ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt registered a winding up petition on receipt of papers from the BIFR. The said winding up petition came to be accepted by this Court. 13. It is the case of Modi Rubber Limited that on 4th May 2002, the said Modi Stone Limited addressed a letter to Modi Rubber Limited replying to the letter dated 16th April 2002 and requesting Modi Stone Limited to grant written permission in respect of the sub-lease of the said property in favour Bharat Marketing thereby purporting to have granted consent to Modi Rubber Limited for execution of sub-lease in favour of Bharat Marketing. In the said alleged letter, it was mentioned that Bharat Marketing would be made aware of and agree to be bound by the terms of the lease deed dated 30th September 1997 read with deed of confirmation dated 20th May 1999 and this would be mentioned in the sub-lease itself. 14. It was alleged to have been mentioned that the said sub-lease should beside the normal clauses have a stipulation that in case of Modi Rubber Limited did not pay the rent to Modi Stone Limited in terms of lease deed dated 30th September 1997, the rent would be liable to be recovered by Modi Stone Limited directly from Bharat Marketing. It wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be appointed. On 10th January 2003, Modi Stone Limited has alleged to have addressed a letter to Bharat Marketing to pay rent directly to Modi Stone Limited as Modi Rubber Limited had defaulted in paying rent to Modi Stone Limited (in liquidation). On 14th June 2003, Bharat Marketing paid rent directly to the official liquidator. 19. On 31st October 2003, the official liquidator addressed a letter to Bharat Marketing to produce documentary proof as to how the said company was occupying the premises of the company (in liquidation) within seven days from the date of receipt of the said letter and informed that in case of failure, the official liquidator shall take possession of the said premises without further notice. 20. By letter dated 5th November 2003, (wrongly stated as 5th October 2003), Bharat Marketing informed the official liquidator about purported sub-lease dated 20th May 2002 and forwarded a copy thereof to the official liquidator. 21. In the affidavit filed by Bharat Marketing in this Court, it is alleged that Bharat Marketing was paying rent to Modi Stone Limited between January 2003 and May 2003 which period was much after the order of winding up and the appointmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... through its advocate addressed a letter to the official liquidator and referred to the order dated 8th July 2004 passed by this Court directing Bharat Marketing to continue to deposit monthly rent without prejudice to the rights and contentions of the parties. In the said letter, it was alleged that in compliance of the said order, the said company had been paying the rent regularly to the official liquidator. Bharat Marketing called upon the official liquidator to withdraw the said letter dated 4th March 2011. The official liquidator forwarded a copy of the Company Application No.426 of 2009 filed by Modi Stone Employees Union to the advocate of Bharat Marketing and a copy of the order passed by this Court. The said Bharat Marketing through its advocate's letter dated 5th April 2011 forwarded copies of the lease deed dated 30th September 1997 and sub-lease dated 20th May 2002 and also a copy of the confirmation deed dated 20th May 1999 and letter of extension. 27. Bharat Marketing thereafter filed a Company Application No.697 of 2011 inter alia praying for leave under Section 446(1) of the Companies Act, 1956 to file a declaratory suit in the Court of Small Causes, Bombay in res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itiani, learned counsel appearing for the official liquidator invited my attention to the lease deed dated 30th September 1997, alleged sub-lease dated 20th May 2002 and various correspondence referred to aforesaid, the averments made in the declaratory suit filed by Bharat Marketing before the Court of Small Causes and also the affidavits filed by Modi Rubber Limited and Bharat Marketing and other pleadings on record. 32. It is submitted by the learned counsel for the official liquidator that the BIFR had made a recommendation on 25th April 2001 to wind up company in liquidation and forwarded the said order made by the BIFR to this Court. This Court registered a winding up petition by an order dated 24th January 2002. He submits that winding up of the company shall be commenced under Section 441 of the Companies Act, 1956 from the date when the reference is made by the BIFR to this Court. 33. It is submitted that the final order of winding up under Section 536(2) of the Companies Act, 1956 is not relevant. On the date of recommendation of the winding up by the BIFR, the winding up proceedings commences. 34. Learned counsel for the Official Liquidator placed reliance on the judg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Sunita Vasudeo Warke vs.Official Liquidator, 2013(2) Mah.L.J.777 and more particularly paragraphs 10 to 12, 15 and 17 in support of the submission that under section 536(2) of the Companies Act any disposition of the property of the company which has been made after the commencement of winding up proceedings is void unless the court otherwise orders. He submits that unless the transaction is effected bonafide in the ordinary course of current business of company, such transaction cannot be validated. He submits that in this case neither it is pleaded nor proved by Modi Rubber Ltd. that further disposition of the property by it by granting the property on sub-lease in favour of Bharat Marketing in the best interest of the company in liquidation and was in ordinary course of business and was bonafide. It is submitted that even if this court comes to the conclusion that an oral application can be made by the respondents for validating the alleged sub-lease, the respondents have failed to plead and prove that the said transaction was made in ordinary course of business was bonafide and was in the best interest of the company in liquidation. 37. Learned counsel for the Official Liq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s void under section 536(2) of the Companies Act, 1956. 40. Learned counsel for the Official Liquidator also placed reliance on the dictionary meaning of the term 'disposition'. He also placed reliance on the meaning of disposition from the Black's Law Dictionary, Sixth Edition. He submits that according to the dictionary meaning of 'disposition' according to the learned author, even transferring of the property to the care or possession of another also amounts to disposition. He submits that the creation of sub-lease in favour of Bharat Marketing handing over possession thereof to the sub-lessee amounts to disposition under section 536(2) of the Companies Act. 41. Learned counsel for the Official Liquidator also placed reliance on the Words and Phrases and more particularly on the word disposition. He submits that though the property can be dealt within one of the number of ways, the property remain in existence and such dealing with the property would amount to disposition. 42. Learned counsel for the Official Liquidator placed reliance on the judgment of Chancery Division in case of In re J.Leslie Engineers Co. Ltd. (In Liquidation) (1976) The Weekly Law R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obstante provision, the Company Court has jurisdiction to entertain or dispose of any suit or proceedings by or against the company, any claim made by or against the company or even any question of priorities or any other question whatsoever, whether of law or fact, which may relate to or rise in the course of winding up of the company. It is submitted that the Company Court can even transfer the suit filed by the sub-lessee before the Small Causes Court and can try the said suit itself if so desired. 46. It is submitted that since an issue has arisen in these proceedings as to whether the sub-lease created by Modi Rubber Limited in respect of the property of the respondent company in liquidation after commencement of winding up proceedings without leave of the Court, whether such transaction is void or not, the said question can be decided by this Court itself under section 446(2)(d) of the Companies Act, 1956, He submits that any question relating to or arising in course of the winding up of the respondent company in liquidation can be decided by this Court by exercising jurisdiction under the said provision. It is submitted that the Small Causes Court cannot decide whether the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt Court constituted under the provisions of the Maharashtra Rent Control Act. He submits that in the said judgment, this Court has held that under section 446(2)(d) of the Companies Act, the Company Court has jurisdiction to entertain any question of priorities or any other question whatsoever whether of law or fact, which may relate to or arise in course of the winding up of the company. He submits that the Division Bench of this Court in the said judgment has upheld the judgment of the Company Court in the Official Liquidator's Report directing the Ex-directors to hand over vacant and peaceful possession of the premises to the company in liquidation to the Official Liquidator. 50. In his alternate submission, without prejudice to the submissions made aforesaid, it is submitted by the learned counsel for the Official Liquidator that the letters dated 12th October, 1997 and 18th October, 1997 alleged to have been exchanged between Modi Stone Limited and Modi Rubber Limited purporting to agree upon an unilateral right of extension in favour of Modi Rubber Limited are ex-facie back dated. It is submitted that Modi Rubber Limited could not have agreed to enter into principal lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ged valid and subsisting sub-lease. Without prejudice to the aforesaid submissions, it is submitted that in any event neither Modi Stone Limited nor Bharat Marketing has made out a case of tenancy holding over within the meaning of section 116 of the Transfer of Property Act, 1882. It is submitted that insofar as the payment of rent by the said Bharat Marketing to the Official Liquidator is concerned, the said payment is accepted by the Official Liquidator pursuant to the order dated 8th July, 2004 passed by this Court without prejudice to the rights and contentions of the Official Liquidator and thus acceptance of the rent in this situation cannot create any right, title or interest in favour of the alleged sub-lessee. 54. Mr. Samdhani, learned senior counsel for Modi Rubber Ltd. on the other hand submits that even if the Official Liquidator takes control of the assets of the company in liquidation, the assets do not vest in him. He submits that a relationship of lessor and lessee is subject to the terms of the lease deed and are governed by the Transfer of Property Act, 1882. It is submitted that the directions for recovery of possession of the leasehold property sought in the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplied, the lessor cannot unreasonably withheld in the case of respectable and responsible party. He submits that it is not the case of the Official Liquidator that Bharat Marketing is not a respectable and responsible party. He submits that if the lessor unreasonably withholds the permission for creating any of the aforesaid rights in the property, the lessee is automatically relieved of the said obligation. It is submitted that the Official Liquidator has admitted the execution of the lease dated 18th October,1997 between the company in liquidation and Modi Rubber Ltd. Learned senior counsel in support of this submission placed reliance on the judgment of Supreme Court in case of Kamala Ranjan Roy vs. Baijnath Bajoria, AIR 1951 SC (1) and in particular paragraph 9. 57. It is submitted by the learned senior counsel that in the Official Liquidator's report, the Official Liquidator seeks adjudication of the authenticity, validity and legality of letter of extension exchanged between the company in liquidation and Modi Rubber Ltd. and seeks that this court should hold that those letters are anti-dated which allegations cannot be adjudicated upon in this report. Learned senior co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ticular paragraph 10 in support of the aforesaid submission. 60. Learned senior counsel placed reliance on Section 108 (c) of the Transfer of Property Act, 1882 which provides for rights and obligations of the lessor. He submits that consent of the lessor, if any, which is an obligation on the part of the lessor in this case to grant approval for subletting or for creating leave and license would not amount to disposition of the property of the company in liquidation. 61. It is submitted by the learned senior counsel that the consent given in writing on 4th May 2002 by the company in liquidation which was post commencement of winding up was only an administrative formality of giving consent for the purpose of creation of sub-lease which consent was granted in view of the existing covenant of consent which was admittedly part of the lease document which was executed much prior to commencement of winding up and thus cannot amount to disposition of the property of the company in liquidation. He submits that an interest was already created in the property in favour of Modi Rubber Limited with a covenant to create sub-lease. Lease creates an interest in the property. 62. It is submit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judgment of the Supreme Court in the case of Pankaj Mehra & Anr. Vs. State of Maharashtra & Ors., reported in (2000) 2 SCC 756 and in particular paragraphs 7, 8, 14, 15, 17, 18 and 20 in support of the submission that since the sub-lease was granted in favour of Bharat Marketing by the lessee by exercising rights under the lease deed between the lessee and the company in liquidation and the transaction being a bonafide transaction, this Court has an ample power to validate such transaction. He submits that no prejudice of any nature whatsoever is caused to the company in liquidation. He submits that the transaction of the sub-lease is in ordinary course of business and thus the transaction requires validation by this Court by exercising its power under Section 536 of the Companies Act, 1956. 65. Learned senior counsel placed reliance on an unreported judgment of this Court in the case of Pavlova Estates Private Limited Vs. MSTC Limited delivered on 9th May 2014 in Company Application No.80 of 2012 in Company Petition No.1214 of 1999 and in particular paragraphs 21 to 26 in support of his submission that the Company Court has an ample power to consider the transaction carried out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the Modi Rubber Ltd. placed reliance on the judgment of Supreme Court in case of Vishal N.Kalsaria vs. Bank of India and others, AIR 2016 SC 530 and in particular paragraphs 24 and 25 on the consequences of non-registration of a lease agreement. He submits that the tenancy was created orally. Learned senior counsel distinguished the judgment of Calcutta High Court in case of Prudential Capital Markets Ltd. (In Liquidation), In Re (2007) 140 Company Cases 754 (Cal) on the ground that in that judgment there were prohibitory orders passed by the Reserve Bank of India from transferring the property much before presentation of the winding up petition. He submits that in this case, there was no such prohibition against Modi Rubber Ltd. from creating sub-lease in favour of Bharat Marketing. He invited my attention to the paragraphs 44, 50, 54, 56 and 60 of the said judgment delivered by Calcutta High Court. It is submitted that in this case the Official Liquidator has accepted the head-lease as valid and on this ground alone, judgment of Calcutta High Court relied upon by learned counsel for the Official Liquidator is clearly distinguishable in the facts of this case. 70. Mr. Balsara, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dator acts as a trustee of the secured and unsecured creditors and workers. He submits that the claims of 1823 workers are already admitted by the Official Liquidator. The Official Liquidator has adjudicated upon the claims of 158 creditors. He submits that the Official Liquidator acts in the manner provided under the special provisions of the Companies Act, 1956. All the rights of the company in liquidation are sub-ordinate to the powers of the Official Liquidator under the provisions of Companies Act, 1956. He submits that there was no arms length transaction between the lessee and the sub-lessee. The lessee has no interest of whatsoever nature today in the said premises. He submits that the right of lessee under section 108(j) of the Transfer of Property Act are subordinate to the special provisions under the Companies Act, 1956. 73. It is submitted that this court has to consider the interest of creditors and contributories and keep in mind the duties and responsibilities of the Official Liquidator while deciding this matter and not the alleged execution of the sub-lease. The Company court has to protect the interest of contributories such as workers and others which shall pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nding up. 76. In his alternate submission, learned counsel for the Official Liquidator submits that there was no provision in the lease deed that the said lessee Modi Rubber Ltd. was going to create any sub-lease in favour of Bharat Marketing or anybody else. It is submitted that the execution of the sub-lease by Modi Rubber Ltd. is not a continuation of a lease. There is no provision in the lease deed that the sub-lease has to be granted by the lessee in favour of a third party. There is no contractual provision made in the lease deed for creation of the lease/tenancy. There is no thus substance in the submission of the learned counsel of Modi Rubber Ltd. that a permission for creation of sub-lease was already provided in the lease deed itself and more particularly in clause (11) thereof. 77. It is submitted that there is a fundamental change in the situation in view of the commencement of winding up of the respondent company in liquidation. In view thereof, clause (11) of the lease deed could not continue in operation. The rights and obligation of the company in liquidation after the date of commencement of winding up are subject to the provisions of the Companies Act, 1956. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r caretaker or any other basis without the previous consent in writing of Modi Stone Ltd. which shall not be unreasonably withheld in case of a respectable and responsible party. 81. Clause (IV) (1) of the said lease deed dated 30th September 1997 provides for re-entry of the lessor upon demised premises or any part thereof upon determination of the lease deed or in case of any antecedent breach, non-performance or non-observance of any of the covenants, conditions, stipulations or obligations therein if Modi Rubber Ltd. had not made good the breach of covenant in respect of which the re-entry was intended within a reasonable time but not less than 30 days after receipt of such notice. 82. A perusal of the said lease deed clearly indicates that it was not intended in the said lease deed that lessee was permitted to give the said premises on sub-lease in favour of any third party including Bharat Marketing. The said lease deed also did not provide any extension of the lease period. It is also an admitted position that the said lease deed dated 30th September 1997 was not registered. 83. A perusal of the record further indicates that Modi Stone Ltd., now in liquidation had filed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ible for it to renovate the said flat at its cost. By the said alleged letter, Modi Stone Ltd. had alleged to have made a suggestion that if Modi Rubber Ltd. was agreeable to renovate the said flat at its own cost, the parties can come to some mutual understanding in respect of certain clauses in the lease deed. A perusal of the both these letters does not show any acknowledgment on these letters by the alleged recipient of the said alleged letter. 86. Modi Rubber Ltd. has placed reliance on the alleged letter dated 12th October 1997 addressed by Modi Stone Ltd. suggesting that if Modi Stone Ltd. wanted the Modi Rubber Ltd. to carry out renovation at its cost, the lease had to be for a much longer period and therefore, the Modi Rubber Ltd. would like to have the right for having two more extensions beyond the stipulated period as contained in the lease deed dated 30th September 1997. Modi Rubber Ltd. suggested that if Modi Stone Ltd. was agreeable to the said condition, the addendum to the lease may be prepared and sent the same to Modi Stone Ltd. for signature. It was alleged in the said letter that only upon receiving all such documents, the said Modi Rubber Ltd. would renovate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exchanged between the parties recording of the alleged extensions of lease period for 20 years or for automatic renewal of the lease deed. The said Deed of Confirmation was registered. Modi Rubber Ltd. did not produce any proof even before this Court to show that the delivery of various correspondence referred to the aforesaid alleged to have been exchanged with the Modi Stone Ltd. or to show that it had alleged to have incurred expenditure in the sum of Rs. 54.35 lakh on the alleged renovation work. Modi Stone Ltd. has repeatedly admitted that it was not financially in a position to undertake any work. Modi Stone Ltd. had already made an application under Section 15(1) of the SICA before BIFR for declaring the said company as Sick. 90. A perusal of the record further indicates that it is the case of Modi Rubber Ltd. that on 4th May 2002 the said company had requested Modi Stone Ltd. to grant permission in writing to grant the said premises on sub-lease in favour of Bharat Marketing. The said alleged letter dated 16th April 2002 from Modi Rubber Ltd. to Modi Stone Ltd. indicates that in the said letter, Modi Rubber Ltd. had invited the attention of Modi Stone Ltd. to clause 11 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se period for 20 years alleged to have been exchanged between Modi Stone Ltd. and Modi Rubber Ltd. 94. A perusal of the alleged sub-lease dated 20th May 2002 entered into between Modi Rubber Ltd. and Bharat Marketing indicates that there is no reference to any alleged extensions of lease period between Modi Stone Ltd. and Modi Rubber Ltd. Monthly rent alleged to have agreed upon between the parties in respect of the said premises admeasuring about 3000 sq.ft. for commercial use was alleged to have been agreed @ Rs. 48,400/- per month upto 30th September 2003 and thereafter, @ Rs. 53,240/- per month. Admittedly, the said alleged sublease is not registered. 95. A perusal of the said alleged lease deed indicates that the alleged permission to grant the said premises on sub-lease by Modi Stone Ltd. was granted on 4th May 2002 i.e. much after the recommendation of the BIFR dated 25th April 2001 recommending winding up of Modi Stone Ltd. and after registration of winding up petition by this Court against the said Modi Stone Ltd. on 25th January 2002. 96. The question that arises for consideration of this Court is whether the alleged permission dated 4th May 2002 granted by Modi Stone ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not correct in which it was held by the Karnataka High Court that in the winding up proceeding in relation to a matter arising out of the recommendations of BIFR shall commence only on passing of an order of winding up of the company. Admittedly in this case, BIFR had recommended the winding up of the Modi Stone Ltd. on 25th April 2001 and thus the date of such recommendation made by the BIFR has to be considered as the date of commencement of the winding up of Modi Stone Ltd. and not the date of 25th July 2002 which was the date of winding up of the said company by this Court. It is thus clear beyond reasonable doubt that the sub-lease alleged to have been executed between Modi Rubber Ltd. and Bharat Marketing and the alleged permission granted by the Modi Stone Ltd. for grant of sub-lease in respect of the property in question in favour of the Bharat Marketing was after the date of commencement of the date of Modi Stone Ltd. and thus such disposition of the property of the company is ex facie void under Section 536 (2) of the Companies Act, 1956. The judgment of the Supreme Court in the case of NGEF Ltd. Vs. Chandra Developers Pvt. Ltd. (supra) squarely applies to the facts of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at once a winding-up order is passed, the undertaking and the assets of the company pass under the control of the liquidator whose statutory duty is to realize them and to pay from out of the sale proceeds its creditors. Such creditors acquire on such order being passed the right to have the assets realized and distributed among them pari passu. No new rights can thereafter be created and no uncompleted rights can be completed and doing so would be contrary to the creditors' right to have the proceeds of the assets distributed among them pari passu. 103. This Court has also adverted to the another judgment of the Division Bench of this Court in the case of Tulsidas Jasraj Parekh Vs. Industrial Bank of Western India, reported in AIR 1931 BOMBAY 2 in which it has been held by this Court that any bona fide transaction carried out and completed in ordinary course of current business can be sanctioned by the Court. On the other hand, it will not allow the assets to be disposed of at the mere pleasure of the company, and because the fundamental principle of equality amongst creditors cannot be violated. This Court in the said judgment held that even if a disposition of the property ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eneficiary of the said alleged sub-lease in any manner whatsoever. 106. Be that as it may, Modi Rubber Ltd. as well as Bharat Marketing have failed to plead and prove that the said alleged sub-lease in favour of Bharat Marketing was in the interest of the company in liquidation or that the same was in the ordinary course of business. The principles of law laid down by the Division bench of this Court in the case of Sunita Vasudeo Warke Vs. Official Liquidator (supra) squarely applies to this case. I am respectfully bound by the said judgment. 107. In so far as the submission of the learned senior counsel for the Modi Rubber Ltd. that it is not necessary for a party to apply for validation of the transaction before the Company Court under Section 536(2) of the Companies Act, 1956 in writing is concerned, this proposition is not disputed by the learned counsel for the official liquidator. Even if this Court considers an oral application made by Modi Rubber Ltd. or Bharat Marketing for validation of the transaction of the alleged sub-lease between them is considered by this Court, a perusal of the record clearly indicates that none of these parties could demonstrate before this Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tember 1997 but that the Modi Rubber Ltd. noticed the alleged requirement of renovation of the said premises to a large extent which would require expenses of more than Rs. 50 lakh later on. The said Modi Stone Ltd. had already applied under Section 15(1) of SICA before BIFR for declaration of the said company as sick around the same time. In these circumstances, in my view, there is substance in the submission made by the learned counsel for the official liquidator that all these letters alleged to have been exchanged between the parties were ante dated or were placed on record to defeat/ delay an action on the part of the official liquidator to take steps to recover the possession of the property in question from the said Modi Rubber Ltd. or its sub-lessee. 111. A perusal of the record further indicates that though the premises in question is admeasuring 3000 sq.ft. on Carmichael Road which is a prime property in a posh locality and being used for commercial purposes, the sub-lease was granted only on meagre sum of Rs. 50,000/- per month which ex facie shows that the said transaction is fraudulent and is not at arms length. 112. In so f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liquidator under the directions of the Company Court which powers are exercisable by the official liquidator under the Companies Act, 1956. 115. In so far as the submission of the learned senior counsel for the Modi Rubber Ltd. that the directions sought by the official liquidator for recovery of possession from sub-lessee cannot be granted by this Court in the report submitted by the official liquidator but can be considered if at all in the company application on the ground that the report submitted by the official liquidator is in the nature of an administrative direction and not for adjudication of the dispute is concerned, in my view, there is no merit in this submission of the learned senior counsel. Under Section 455 of the Companies Act, 1956 read with Rule 135 and 137 of the Companies (Court) Rules, 1959, the official liquidator is empowered to submit a report in a case where the winding up order is made by the Company Court for appropriate directions and reliefs. The official liquidator is not required to file any suit for seeking any reliefs which can be granted by the Company Court by exercising powers under Section 446(2) of the Companies Act, 1956. All contentious i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cial liquidator not only seeking permission to take possession of the property of the company in liquidation but also seeking declaration that the sale of the property to a third party was null and void. 118. Division Bench of this Court in the case of Sunita Vasudeo Warke Vs. Official Liquidator (supra) had passed the said order in appeal arising out of the official liquidator's report seeking a declaration that the sale of the immovable property of the company in liquidation was null and void and seeking a direction for permitting the official liquidator to take possession of the property of the company in liquidation. 119. Calcutta High Court in the matter of Prudential Capital Markets Ltd. (in liquidation) (supra) has passed an order of eviction of a lessee in respect of the property of the company in liquidation on a letter for direction to such effect filed by the official liquidator. Calcutta High Court after considering several judgment of the Supreme Court and various other Courts decided various rival issues raised even by a third party and declared the lease as void by holding that the lessee was not entitled to any protection to remain in possession of the propert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y mentioned that under clause 11 of the said lease deed, the said premises could not be sub-let without the prior consent in writing of Modi Stone Ltd. and thus a request was made for written permission of Modi Stone Ltd. in favour of Modi Rubber Ltd. to induct a sub tenant in the said premises subject to the consent and approval of Modi Stone Ltd. It was admittedly not provided in the lease deed dated 30th September 1997 that at that point of time, if Modi Rubber Ltd. would propose to grant any sub-tenancy in favour of the Bharat Marketing or any third party, such permission was already granted in anticipation of creating such subtenancy in favour of the Bharat Marketing or any other party in the said lease deed dated 30th September 1997 itself. The submission of the learned senior counsel for Modi Rubber Ltd that in the lease deed dated 30th September 1997 itself, such permission was granted or deemed to have been granted is contrary to the said alleged letter dated 16th April 2002 and also contrary to clause 11 of the lease deed dated 30th September 1997. 122. By that as it may, a perusal of clause 11 of the lease deed dated 30th September 1997 clearly prohibits subletting of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 1997 itself. 125. Be that as it may, the alleged documents produced by Modi Rubber Ltd. and Bharat Marketing itself would defeat their case and would ex facie indicate that the same are back dated and the case of sublease in favour of Bharat Marketing is ex facie false and untenable. 126. Insofar as the judgment of the Supreme Court in case of Nirmala R. Bafna (supra) relied upon by learned senior counsel for Modi Rubber Limited is concerned, the Supreme Court held that merely because the company goes into liquidation and the Official Liquidator is appointed, the rights of the company vis-a-vis its landlord and/or its tenants do not undergo any change. The Supreme Court in the said judgment considered an admitted position by the Official Liquidator that the Board of Directors of the company had passed a special resolution affirming the agreement of sub-tenancy in favour of the appellant therein, who had raised a plea of sub-tenancy in her favour. The Supreme Court prima-facie rendered a finding that the claim of the appellant therein for protection of Bombay Rent Control Act should not be rejected. There was a consent of the landlord to the sub-tenancy in favour of the appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Limited, the owner of the property having been wound up. Reliance placed on the judgment of the Gujarat High Court in case of Kanubhai H. Prajapati & Ors. (supra) by the learned senior counsel for Modi Rubber Limited is misplaced. 129. In my view, there is no substance in the submission of the learned senior counsel for Modi Rubber Limited that even if any breaches are committed by Modi Rubber Limited or by the company in liquidation, there is no consequence of any such alleged breach in view of the fact that there is no right of re-entry provided in the lease deed. A perusal of the lease deed executed between the company in liquidation and Modi Rubber Limited and more particularly clause IV on page 7 of the said agreement clearly indicates that the company in liquidation being lessor was granted right of re-entry upon the demise premises or any part thereof upon the lessee committing any breach or in view of the nonperformance or non-observation of any of the covenant conditions, stipulation or objections contained in the said lease deed. The said power of re-entry was however subject to proviso that the said power was not to be exercised unless and until the lessor would have g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... granted by the company in liquidation much after the commencement of the winding up proceedings. The execution of sub-lease was not concluded before commencement of the winding up proceedings in this case. In my view, the said judgment thus would not assist the case of Modi Rubber Limited or Bharat Marketing in any manner whatsoever. 132. Insofar as the judgment of this Court in case of Pavlova Estates Private Limited (supra) relied upon by the learned senior counsel for Modi Rubber Limited in support of the submission that the Company Court has an ample power to consider the transaction carried out by the company in liquidation in good faith and with honest intention and such transaction if being just and fair while passing an order of validation of the transaction is concerned can be validated is concerned, there is no dispute about this proposition of law. This Court in the said judgment held that the expression "unless the Court otherwise orders" under section 536(2) of the Companies Act, 1956 imposes a duty on the Court, that it must deal with each case on its own facts, and have regard to questions of good faith and honest intention, to do what is just and fair. The company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... month to month tenancy therefore, did not arise. 136. Insofar as the submission of the learned senior counsel for Modi Rubber Limited and the submission of Mr.Balsara for Bharat Marketing that Bharat Marketing has been paying the rent directly to the Official Liquidator which indicates the existence of the tenancy rights in favour of Bharat Marketing is concerned, a perusal of the record clearly indicates that the Official Liquidator has been permitted by this Court to accept the rent directly from Bharat Marketing without prejudice to the rights and contentions of the Official Liquidator and thus the receipt of such rent by the Official Liquidator would not create any right, title or interest of any nature in favour of Bharat Marketing as canvassed by the learned counsel appearing for Modi Rubber Limited and Bharat Marketing. 137. Insofar as the judgment of the Supreme Court in case of Anthony (supra) relied upon by Mr.Samdhani, learned senior counsel for Modi Rubber Limited is concerned, in my view, the said judgment would not assist the case of Modi Rubber Limited in view of the fact that the alleged sub-lease itself was created after the date of commencement of the winding u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f tenancy but has placed reliance on the alleged sub-lease deed. The judgment of the Supreme Court in case of Vilas N. Kalsaria (supra) thus would assist the case of the Official Liquidator and not of Modi Rubber Limited or Bharat Marketing. In this case since the alleged rights in favour of Bharat Marketing itself are void, the Official Liquidator is not required to file any suit for eviction of the alleged sub-tenancy. This Court has ample power to consider the alleged rights of Bharat Marketing while considering an issue whether the said transaction of the alleged sub-lease which is entered into after commencement of the winding up proceedings is void or not. 141. Insofar as the submission of Mr.Balsara, leaned counsel for Bharat Marketing that the complicated issues raised by his client cannot be adjudicated upon in the report filed by the Official Liquidator is concerned, in my view there is no merit in this submission of the learned counsel. Under section 536(2) of the Companies Act, 1956, the Company Court has to decide whether the transaction in question were entered into after commencement of the winding up proceedings or not. Admittedly in this case, Modi Rubber Limited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, 1956. In my view, the Small Causes Court under section 41 of the Bombay Presidency Small Causes Court Act cannot decide the issue as to whether disposal of the property of the company by the company in liquidation or by a third party was after the commencement of the winding up or was otherwise and can declare such transaction as void or validate such transaction by exercising powers under section 536(2) read with section 446(2) of the Companies Act, 1956. 144. In view of non-obstante provision under section 446 read with section 536 of the Companies Act, 1956, such powers can be exercised only by the Company Court and not by the Small Causes Court. In my view, there is thus no substance in the submission of Mr.Balsara that though this Court can declare a transaction as void under section 536(2), the same cannot be done unless the suit filed by Bharat Marketing before the Small Causes Court is transferred to this Court itself. There is also no merit in the submission of the learned counsel for Bharat Marketing that since the suit was filed by Bharat Marketing before the Small Causes Court for declaration of the alleged sub-tenancy after obtaining leave under section 446(1) of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the company in liquidation by giving the so called permission to create the sub-lease after commencement of the winding up proceedings and that also at the meagre sum of Rs. 50,000/- per month rent in respect of 3,000 sq. ft. carpet area in posh locality situated at Carmichael Road used for commercial purposes, is ex-facie fraudulent and could never be considered as bona fide and in the interest of and for the benefit of the company in liquidation. The question of validating such fraudulent transaction by exercising the powers of this Court under section 536(2) in these circumstances in favour of Modi Rubber Limited or in favour of Bharat Marketing does not arise. Modi Rubber Limited has not disputed the case of the Official Liquidator that the company in liquidation and Modi Rubber Limited belonging to the same group. In my view, under section 536(2) of the Companies Act, 1956, the Company Court can declare a transaction carried out not only by the company in liquidation in respect of its property but also in respect of a third party void. All such issues can be decided only by the Company court under the provisions of the Companies Act, 1956. 148. The Supreme Court in case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... giving up property. The meaning of "disposition" as per Words and Phrases is 'in relation to any freehold or leasehold estate, means any disposition of that estate inter vivos, and includes both the grant and the assignment of a lease or under lease'. In my view, reliance placed by Mr. Jagtiani, learned counsel on the definition of "disposition" referred to aforesaid would assist the case of the Official Liquidator in support of his plea that even the said so called sub-lease by Modi Rubber Limited in favour of Bharat Marketing amounts to disposition within the meaning of section 536(2) of the Companies Act, 1956 and thus the said provision would be attracted in the facts and circumstances of this case. 151. The Calcutta High Court in case of Prudential Capital Markets Limited (in liquidation) has considered the similar facts and has held that section 536(2) of the Companies Act, 1956 provides for preservation of all the assets of a company upon commencement of the winding up proceedings, for ultimate distribution thereof amongst the creditors following winding up. It is held that the disposition of its properties and the effects made by a company after commencement of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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