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TMI Blog1971 (2) TMI 129X X X X Extracts X X X X X X X X Extracts X X X X ..... not for a fixed period and was, Therefore, subject to the provisions of the Delhi Rent Control Act, 59 of 1958. The said Act will hereafter be referred 'to as the Rent Act. 3. The case of the Official Liquidator who will hereafter be referred to as the applicant, is that the tenant-company is not doing any business nor are the premises otherwise required by him for the beneficial winding up of the company. The said tenancy rights are, however. valuable and are also transferable and are likely to fetch to the company huge amounts if they are ordered to be auctioned or sold by private contract or otherwise, as may be determined by this Court. The application also states that the tenancy rights are still subsisting. Permission for sale of such tenancy has, Therefore, been sought by the applicant. 4. The application is opposed by the respondent who is the landlord, on the ground that since according to the applicant the tenant company is not doing any business nor are the premises otherwise required by the applicant, the same should be surrendered to him as he requires the same for his own use and occupation. It is also stated that as a landlord he has not received rent of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ived :- (1) Subject to the provisions of this Act, no person shall claim or receive any rent in excess of the standard rent, notwithstanding any agreement to the contrary. (2) No person shall, in consideration of the grant, renewal or continuance of a tenancy or sub-tenancy of any premises,- (a) claim or receive the payment of any sum as premium or pugree or claim or receive any consideration whatsoever, in cash or in kind, in addition to the rent; or (b) except with the previous permission of the Controller, claim or receive the payment of any sum exceeding one month's rent of such premises as rent in advance. (3) It shall not be lawful for the tenant or any other person acting or purporting to act on behalf of the tenant or a sub-tenant to claim or receive any payment in consideration of the relinquishments, transfer or assignment of his tenancy or sub-tenancy, as the case may be, of any premises. Sub-section (4) of Section 5 provides for certain exceptions but it is not necessary to read the same as they have no bearing on the point which we have to decide. Section 14 controls the eviction of tenants. Under that Section, one of the grounds on which a decree fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision the Court is bound to cause the assets of the company to be collected and applied in discharge of its liabilities and this provision lends further support to the proposition that a sale made by the Court in discharge of its obligations cannot but be a sale by operation of law. 15. Reliance for this proposition was placed on a Bench decision of Allahabad High Court in the matter of The West Hopetown Tea Company Limited (I.L.R. 12 Allahabad 192)(l) where it was held that the power of the Court under Section 144(c) of the Indian Companies Act (VI of 1882) to give sanction to an Official Liquidator to sell the property of the company, over-rides a private contract against assignment made by the company. On behalf of the trustees under a dead of trust of 11th September 1885, the objection by their counsel was that the lease contained a covenant against assignment without the previous consent of the Lesser and, Therefore, the property could not be sold in view of Sections 10 and 12 of the Transfer of Property Act, 1882. The objection was repelled and it was held that the covenant was not a covenant against assignments by operation of law or against assignments authorised by st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stion arose whether it was a transfer by the tenant thereby depriving the tenant of the protection of Section 12 of the West Bengal Premises Rent Control (Temporary Provisions) Act 17 of 1950, against eviction. It was held that in a compulsory winding up the company is put into liquidation against its will by force of law and the order of the Court and the sale is made by the Liquidator acting under the control of the Court and with its sanction. The sale, Therefore, is really by the Court acting through the Liquidator and is thus a sale against the company's will or a sale in invitum. 18. A contrary view was however taken in re-Farrow's Bank Limited (1921-2 Chancery Division 164)(4) but when the attention of the learned Judges of the Calcutta High Court was invited to that decision it was observed that the Indian law is different from its English counter-part because under Section 179(c) the Liquidator can sell only with the sanction of the Court while in Section 151(2) even read with Section 151(3) of the Companies Consolidation Act, 1908 in England at least, prior sanction of the Court is not required. It essence, Therefore, the transfer under the Indian law is a tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e company. The action is, Therefore, the action of the Court. 22. There are two fallacies in this argument. Firstly, when a company is being wound up its property does not vest in the Court. Secondly, when the property is ordered by the court to be sold the sale is not by operation of law. 23. As regards the first point the contention urged by the learned counsel for the appellant is that the property vests in the court and that is the meaning that he seeks to give to sub-section (2) of Section 456. In this connection he also relies on Section 529 of the: Companies Act which lays down that in the winding up of an insolvent H company, the same rules shall prevail and be observed with regard to-- (a) debts provable; (b) the valuation of annuities and future and contingent liabilities; and (c) the respective rights of secured and un-secured creditors ; as are in force for the time being under the law of insolvency with respect to the estate of persons adjudged insolvent. 24. It is contended that the same rules should, Therefore, apply in the case of property of a company which is being wound up and the property of an insolvent. 25. The argument is devoid of subs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material distinction between the effect of bankruptcy and that of winding up. In the former case the while property of the bankrupt is taken out of him, whilst in the latter case the property remains vested in the title and in fact in the company, subject only to its being administered for the purposes of winding up...... 28. In Employers' Liability Assurance Corporation Ltd v. Sedgwick. Collins and Company Ltd. (1927 A.C. 95 Viscount Cave observed :- ......A company in liquidation, although the administration of its affairs has passed to the liquidator, retains its corporate existence. 29. Reliance on Rule 233 of the Company (Court) Rules, 1959 also does not help the argument of the learned counsel for the applicant. All that the rule says is that for the discharge by the Official Liquidator of the duties imposed by sub-section (1) of Section 467 and the last preceding rule (rule 232) the Official Liquidator shall, for the purpose of acquiring and retaining possession of the property of the company be in the same position as if he were Receiver of the property appointed by the Court, and the Court may on his application enforce such acquisition or retention accordi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Liquidator could not be said to be interested in the result of the appeal because after the compulsory winding up order the property did not vest in him but remained vested in the company and since the company having been substantially represented by all its directors-share holders the failure to implead the company as such or the Official Liquidator, did not render the appeal incompetent. 33. In M/s. Hari Prasad Jayantilal and Co. v. V. S. Gupta, Income Tax Officer Ahmedabad another A.I.R. 1966 S.C. 1481 ( ) which was a case of voluntary winding up by a special resolution passed by the members of the company, it was held that a company which has resolved to be voluntarily wound up may be dissolved in the manner provided by Section 497(5) : till then the company has corporate existence and corporate powers. The property of the company does not vest in the Liquidator; it continues to remain vested in the company ...... The Liquidator appointed in a members' winding up is merely an agent of the company to administer the property of the company for purposes prescribed by the statute. In distributing the assets including accumulated profits the Liquidator acts merely as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the Transfer of Property Act. but for certain exceptions. does not apply to transfers by operation of law but is limited as stated in the Pre-amble to transfers by act of parties. Section 2(d) of the Transfer of Property Act, makes this position quite clear and states that save as provided by Section 57 and Chapter 4 of the Act, any transfer by operation of law or by, or in execution of, decree or order of Court of competent jurisdiction, shall not be effected by the provisions of the Act. The expression transfer by operation of law has been the subject of judicial decisions. As was said in Sailendra Kumar Ray and Another v. The Bank of Calcutta Limited (18 ComC l), in most of the judicial decision, in explaining the meaning of the phrase in a general way an interpretation is given which suggests that it would apply only in cases where certain events not connected with any act on the part of anybody towards making a transfer, happened and the law, operating on those events brings about a transfer. In that connection a reference was made to a decision of the Judicial Committee in Abidunnissa Khatoon v. Amirunnissa Khatoon I.L.R. 2 Cal 327 (^) where their Lordships, after poin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itors) I.L.R. 18 Lah 721). In the case of an ordinary transfer, it is the act of the parties that brings about the transfer and an order of the Court or a provision of law may act on it to complete the transfer. But when no act of the parties is involved and the transfer takes place, say in the case of transfer on death or by devolution or by succession, the transfer is by operation of law. 37. Section 2(d) mentions different sales to which the Transfer of Property Act does not apply but those sales are separate from each other. A sale by the Liquidator is not a sale by operation of law nor is it a sale by an order of the Court. The transaction is between the company acting through its Liquidator and the transferee and an order of the Court is merely a manner provided for the exercise of that power. The sale is still by the company and not by the Court. Section 457 does not have the effect of making the transfer as the act of the Court or a sale by operation of law for under Section 458 it is open to the Court to provide that the Liquidator may exercise any of the powers referred to in sub-section (1) of Section 457 without the sanction or intervention of the Court, although the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after obtaining his consent in writing. But so long as that consent in writing is not given, Section 16(2) states that the premises could not be lawfully sublet. If the tenant has sublet the premises without obtaining the consent in writing of the landlord the tenant becomes liable to be evicted under Section 48(2) and he also becomes liable to be punished with fine which may extend to ₹ 1,000.00. Sub-section 3 of Section 5 renders the tenant or any person acting or purporting to act on his behalf or a sub-tenant claiming or receiving any payment in consideration of the relinquishments, transfer or assignment of his tenancy or sub-tenancy, guilty of an offence and makes its contravention punishable with simple imprisonment for a term which may extend to six months or with fine which may extend to a sum which exceeds the amount or value of un-lawful charge claimed or received under the said sub-section by ₹ 5,000.00 or with both. 41. If the Official Liquidator, Therefore, acting on behalf of the company sublets these premises, Section 1 of the Rent Act would render those premises as not have been lawfully sub-let and Therefore may the sub-tenant or the transferee lia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d up and the Liquidator proceeded to make necessary arrangements for the sale of the lease. He took out a summons in the winding up for a declaration, inter alia, that, notwithstanding covenant restrictive of assignment by the company, the liquidator was entitled to assign the premises without the consent of the landlord. P. O. Lawrence J. held that the Liquidator in selling the property was acting in invitum for the benefit of the creditors, that a voluntary assignment and not an assignment in invitum was contemplated by the restrictive covenant in question, and that the Liquidator was at liberty to sell and assign the term granted by the lease. The Court of Appeal, however, held that the covenant in the lease was binding on the Liquidator in winding up. Lord Sterndale M. R. observed :- But here, as I say, the act is the act of the company acting through its liquidator, who is carrying on its business for the winding up, and who is doing the act which he does strictly on behalf of the company 44. The decision in Ferrow's Bank(4) case was applied in Wright (a Bankrupt) Ex-parte Landau (a Creditor) v. The Trustee 1949 (2) All E LR 605. That was a case of transfer by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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