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TMI Blog1981 (4) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... inition of s. 2(e) of the 1971 Act. The case of the LIC is that because of the various unlawful acts done by the company its possession was unauthorised and it was entitled to seek possession of the premises in dispute and that also these premises were required for its own use. It asked for possession of the premises from the official liquidator. The LIC also claims that the company is in unauthorised occupation since March 31, 1976, and it is, therefore, liable to pay damages to the applicant/LIC. Apparently the official liquidator, to whom request was made to vacate the premises, advised the LIC to seek the leave of the company judge under s. 446 of the Companies Act for initiating the proceedings under the 1971 Act. Hence an application under s. 446(1) was filed by the LIC. As the leave application was opposed by the official liquidator, the LIC made bold and urged before the single judge that though it had filed the leave application in fact it was not necessary to do so as s. 446(1) was inapplicable to proceedings under the 1971 Act. The learned judge also felt that this matter was important enough to require consideration by the Full Bench and that is how the matter has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ides a bar of jurisdiction of civil courts to entertain any suit in respect of eviction of any person who, is in unauthorised occupation of any public premises, or recovery of rent or damages thereof. Thus, under the 1971 Act there is only one procedure available for eviction of a person in unauthorised occupation of public premises and that procedure is to be found in the 1971 Act. The other courts have no jurisdiction in these matters : vide Hari Singh v. Military Estate Officer, Delhi, AIR 1972 SC 2205. It will be immediately clear that the 1971 Act deals with a very limited objective. It only means that if the Act of 1971 was not there, the LIC would have to file a civil suit or go before the Rent Controller for recovery of possession of premises or recovery of rent/damages. What is important to be emphasised is that the Act of 1971 is not a distinct code which has created its own liabilities and rights and has brought forth a new set of rights and liabilities under the said Act not existing before. The 1971 Act deals with the rights and liabilities of the parties under ordinary law but only a new forum and a remedy has been created in respect of public premises. It is this lim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nglish Companies Act, 1862, the object was stated to put all unsecured creditors upon an equality, and to pay them Pari Passu . A landlord who has not put in a distress before the commencement of the winding-up is an unsecured creditor. He can prove against the company under s. 158 for all rent in arrears at the time of his proof, but his right to distrain is taken away by s. 163, unless circumstances exist which, in the opinion of the court, require it to give him leave to distrain under s. 87. Vide In re Oak Pits Colliery Co. [1882] 21 Ch D 322 (CA) at 329. It is thus well established that 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 realise 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 realised and distributed among them pari passu. No new rights can thereafter be created and no uncompleted rights can be completed, for doing so would be contrary to the creditor's right to have the proceeds of the assets distributed among them pari passu. Vide J.K. (Bombay) P. Ltd. v. New Kaiser-I-Hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e often said both here and at the Rolls, that when in winding-up a landlord comes to the court asking for the possession of property which is under the control of the court, and the claim is one against which the liquidator would have no defence, the right course is to order the liquidator to give up possession. It would be a cruel hardship to put the applicant to the expense of bringing an action when the court can see that there is nothing to be tried." Thus, it was clearly recognised that during winding-up proceedings the winding-up court can in a fit case order the delivery of possession back to the landlord. This authority highlights that the matter even of recovery of possession can in appropriate cases be dealt with by the company judge. Thus, in Dhirendra Chandra Pal v. Associated Bank of Tripura Ltd. [1955] 25 Comp Cas 19 (SC), a banking company having gone into liquidation the liquidator filed an application before the High Court under s. 45B of the Banking Companies Act for the ejectment of person, who had become a tenant of the bank of the land belonging to it prior to liquidation. The High Court ordered the ejectment. Thereafter, the tenant filed a suit claiming that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntroller to be within the meaning of s. 171 of the Indian Companies Act, 1913. It is important to make a difference between the proceedings for recovery of possession or recovery of damages which are normally within the purview of ordinary civil courts but are now by a special Act included within the purview of rent legislation and the right to have a standard rent fixed which is right created only because of the rent laws and is not a right available under ordinary laws available to the tenant. It is because the right to have a fair rent determined is a special right created by a statute that it has to be held that these are not proceedings appropriate for a winding up court. The right of a landlord, however, to recover damages in winding-up proceedings if the lease had been determined earlier has been recognised in In re McEwan [1879] II Ch D 572. In I.K. (Bombay) P. Ltd. v. New Kaiser-I-Hind Spg. Wvg. Co. Ltd. [1970] 40 Comp Cas 689), in which the company was in possession of the leased premises, it was held that the question of restoration of possession to the lessor was matter which could be decided in a summary manner without resort to the protracted procedure of a regular ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght to be argued that the word " legal proceedings " should be confined to " original proceedings in a court of first instance, analogous to a suit initiated by means of petition similar to a plaint ". This was summarily rejected by the Federal Court and it was held that no narrow construction should be placed upon the words " or other legal proceedings " under s.171 and that the words can and should be held to cover distress and execution proceedings in the ordinary courts and that such proceedings are other legal proceedings against the company, as contrasted with ordinary suits against the company. In that case, the ITO had sought to recover arrears of tax through the instrumentality of the Collector by resort to s. 46 of the I.T. Act which would put the machinery for collection of arrears of income-tax as arrears of land revenue in motion. The question for decision was whether the ITO should have obtained the leave of the court under s. 171 of the Companies Act prior to taking steps to put into action the machinery under s. 46 of the I.T. Act. The Federal Court in detailed judgment referred to the other provisions of the Companies Act which give only a limited priority to certa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er provision of law but it will be surprising if this power can be exercised in such a way as to defeat the provisions of ss. 228 and 229 of the Indian Companies Act, which provide that an unsecured creditor must prove his debts and all unsecured debts are to be paid Pari passu. The court resolved the problem by holding that s. 49E is a general provision applicable to all assessees and in all circumstances while ss. 228 and 229 deal with the proof of debts and their payment in liquidation. Same is the position of unsecured creditors under the Companies Act, 1956, see ss. 528, 530. In S. V. Kondaskar, Official Liquidator and Liquidator of the Colaba Land and Mills Co. Ltd. v. V. M. DeshPande, ITO [1972] 42 Comp Cas 168 ; 83 ITR 685 (SC), the court held that reassessment proceedings under s. 148 of the I.T. Act are not such legal proceedings as to require that ITO must obtain leave under s. 446(1) of the Act, before commencing such proceeding. It was so held because it was stated that the I.T. Act is a complete code with respect to the assessment and reassessment of income-tax and that it would lead to anomalous consequences if the winding-up court could be held empowered to transfer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceeding for initiating assessment under the I.T. Act as in Colaba's case [1972] 42 Comp Cas 168; 83 ITR 685 (SC). To give an analogy borrowing from the Colaba's case we can understand that if proceedings are taking place under the Excise Act or the Customs Act or the Foreign Exchange Regulation Act before the authorities constituted under those statutes then they would be proceedings which could not appropriately be dealt with by the winding-up court, because rights and liabilities are created by special statutes, and are not rights under the ordinary law. That is why obtaining leave from a winding up court may not be necessary when reference is made by the State Government under s. 10(1) of the Industrial Disputes Act because this power which is specially created by the Industrial Disputes Act is given to the State Government and is not controlled by the Companies Act. See S. K. G. Sugar Ltd. v. Ali Hassan [1957] 27 Comp Cas 168 (Pat). To similar effect is R. G. N. Price, Official Liquidator, Andhra Paper Mills Co. Ltd. v. M. Chandrasekharan, President, Andhra Paper Mills Workers' Union (1951] 21 Comp Cas 251 (Mad), where Rajamannar C. J. speaking for the Bench, held that a de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. This only means that if there is dispute regarding eviction or recovery of rent proceedings with regard to the public premises, it is special Act so far as companies other than winding up are concerned, but will be general, if the company is under winding up where the Special Act would be the Companies Act, on the analogy of Union of India v. India Fisheries P. Ltd. [1965] 35 Comp Cas 669; 57 ITR 331 (SC)). It is true that in case the public premises were occupied by a company which was not under winding up then in view of s. 15 of the Act of 1971 proceedings could take place without leave before the authorities under the Act of 1971. But that position would not prevail in case the winding up company was an occupant of public premises. The legal maxim generalia specialibus non derogant is ordinarily attracted where there is a conflict between a special and a general statute and an argument of implied repeal is raised. See LIC of India v. D. J. Bahadur [1981] 58 FJR 51,80 ; AIR 1980 SC 2181, Para 48. The principle to be applied was said to be " In determining whether a statute is a special or a general one, the focus must be on the principal subject matter plus the particular per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase on the nationalisation of the life insurance business, s. 15 provided for claims to be made before a tribunal constituted under the Nationalisation Act. Section 41 of the LIC Act provided that no civil court shall have jurisdiction upon a matter on which a tribunal was empowered to Act. The insurance company having gone into liquidation objection was taken to proceedings before the Tribunal on the ground that without taking the leave under s. 446 of the Companies Act proceedings could not be started before the tribunal. This plea was negatived on the ground that as the tribunal had been constituted under the LIC Act to entertain the application of the Corporation, the Company Court had no jurisdiction to adjudicate on any matter which the tribunal is empowered to decide and that the provisions of the LIC Act being special will override the provisions of the Companies Act which is an Act relating to companies in general. The obvious distinguishing feature in that case is that the proceedings before the Tribunal constituted under the LIC Act were not in the nature of ordinary proceedings which are entertainable by ordinary courts. The LIC Act had nationalised the insurance busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will not be deemed to be void. But the moment a winding up order is passed, s. 446 of the Companies Act will become applicable, and no proceedings shall be continued or commenced except by leave of the court. The only effect of sub-s. (2) of s. 537, therefore, is that the completed transaction whether by way of sale or in execution proceedings do not become void. But if any further proceedings are to be continued after the winding up order has been passed, s. 446 will have to be complied with. The argument of Mr. Gupta, counsel for the LIC, that only proceedings before the ordinary courts are covered by s. 446 of the Companies Act stands negatived by the decisions in Governor-General its Council v. Shiromani Sugar Mills Ltd. [1946] 16 Comp Cas 71 ; 14 ITR 248 (FC) and Colaba's Case [1972] 42 Comp Cas 168 ; 83 ITR 685. It is not, therefore, correct to say that if any proceedings are to take place before other than ordinary courts the same will be immune from the rigour of s. 446 of the Companies Act. It is no doubt true that in view of these decisions it is possible that a part of the proceedings may be outside the purview of s. 446 of the Companies Act like the assessment proceedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... overy of possession or for recovery of damages, are normally and appropriately such which can be determined by the winding up courts. It is evident that but for the creation of a separate forum the present proceedings are of such a nature which would ordinarily be dealt with by the ordinary courts of law. In such a case leave will have to be obtained even to initiate proceedings against the company. We are, therefore, of the view that in the present case the proceedings before the Estate Officer under the Act of 1971 are such as can appropriately be proceeded with before the ordinary courts, and hence leave to initiate the proceedings has to be obtained from the winding up court. Similar would be the situation in case the proceedings are sought to be initiated before the Rent Controller under the Rent Control legislation. We would, therefore, answer the reference accordingly and hold that leave has to be obtained from the winding up court by the LIC before it can initiate or continue proceedings before the Estate Officer under the Act of 1971. We are saying nothing on the merits because the question whether the leave should be given, and, if so, on what terms, or refused are ma ..... X X X X Extracts X X X X X X X X Extracts X X X X
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