Sudarsan Chits 1 Ltd v. The Official Liquidator — 1988 DIGILAW 178 (KER)

JUDGMENT K. S. Paripoornan, J. 1. C.M.P. Nos. 14297 of 1986 and 6446 of 1987 are filed by M/s Sudarsan Chits (I) Ltd. under Section 446(3) read with Section 391(6) of the Companies Act and Rule 9 of the Company Court Rules. The company is a tenant of the 2nd Respondent in both the cases. In C.M.P. No. 14297 of 1986 the company is a tenant of a building R. No. 5-1-1949, Secunderabad. In C.M.P. No. 6446 of 1987 the company is a tenant of the 2nd Respondent in the said petition of a, building belonging to the 2nd Respondent. The 2nd Respondent in both the petitions have separately initiated proceedings against the company. The company is in arrears of rent to the landlord. So the landlord (the 2nd Respondent in both the petitions) has initiated proceedings against the company, for eviction. The Petitioner states that the 2nd Respondent in both the cases filed the petitions for eviction without the sanction of the Company Court under Section 446 of the Companies Act and so the eviction proceedings initiated are unsustainable and deserve to be dismissed. The prayer in C.M.P. 14297 of 1986 is to transfer R.C. 112 of 1986 on the file of the Rent Controller, Secunderabad to this Court and to stay all further proceedings therein. The prayer in C.M.P. 6446 of 1987 is to transfer and dispose of H.R.C. 26/86, Munsiff's Court, Kolar, and to stay all further proceedings of the said case. The landlord of the Secunderabad building-second Respondent in C.M.P. 14297 of 1986 has filed C.M.P. No. 17300 of 1986 praying for grant of leave for the proceedings already initiated as R.C. 112 of 1986, on the file of the Additional Rent Controller, Secunderabad. 2. In view of the decision of the Supreme Court in Sudarsan Chits (I) Ltd. v. G. Sukumaran Pillai MANU/SC/0037/1984 : A.I.R. 1984 S.C. 1579 the winding up proceedings in respect of the Petitioner-company is effectively subsisting, though it may be inoperative for the time being (page 1583, paragraph 13). Since the winding up order has been made in respect of the Petitioner-company, the question that arises for consideration is whether the proceedings initiated against the Petitioner company for eviction under the Rent Control Act, can be proceeded with against the company without the leave of court? Since the winding up order has been made in respect of the Petitioner-company, the question that arises for consideration is whether the proceedings initiated against the Petitioner company for eviction under the Rent Control Act, can be proceeded with against the company without the leave of court? Counsel for the Respondents contended that no leave of court is necessary for filing a petition for eviction of a company in liquidation. 3. We heard counsel for the Petitioner, Mr. K.P. Dandapani, as also counsel for the Respondents. Our attention was invited to a number of decisions explaining scope of Section 446 of the Companies Act. An identical question as to whether previous sanction of the liquidation court (company court) is necessary to file a petition for eviction of the company in liquidation, under the Kerala Buildings (Lease and Rent Control) Act, came up for consideration in M/s Joshi Trading Co. (P) Ltd v. Essa Ismail Sait I.L.R. 1981 Ker 38 : 50 C.C. 801 : 80 R.G.R. 241. After an exhaustive review of the case law on the subject, and in particular, the decisions of the Supreme Court and the earlier decisions of this Court, Janaki Amma, J observed as follows: It is a well-known matter that the object of Section 446 is to see that the assets of the company are brought under the control of the winding up court to avoid wherever possible expensive litigation and to see all matters in dispute which are capable of being expeditiously disposed of by the winding up court are taken up by that court. This does not however mean that all disputes wherein a company is involved should be proceeded with only by the company court or that if they are pending with other statutory bodies, leave of the company court should be obtained. Matters where collection or distribution of assets are not involved, those which are outside the purview of the winding up court and other courts of law and those which are within the exclusive jurisdiction of other statutory bodies may not come under the purview of Section 446. Matters where collection or distribution of assets are not involved, those which are outside the purview of the winding up court and other courts of law and those which are within the exclusive jurisdiction of other statutory bodies may not come under the purview of Section 446. The learned Judge after referring to the decisions of the Supreme Court and the earlier decisions of this Court further observed at page 50 to the following effect: The Kerala Buildings (Lease and Rent Control) Act confers exclusive jurisdiction on the Rent Control Court under Section 5 to determine fair rent of buildings coming under the purview of the Act and under Section 11 to order eviction of tenants on grounds mentioned therein. Though an appeal lies to the Subordinate Judge, the appellate authority functions as persona designate. Thus the statute confers power on a hierarchy of Officers to discharge functions, which are statutory and exclusive. The winding up court is not expected to discharge them. It is also significant that a proceeding for eviction not being a proceeding pending in a Court is not liable to be transferred and disposed of under Section 446(3) of the Companies Act. Adopting the reasoning in S.V. Kondeskar v. V.M. Deshpande MANU/SC/0336/1972 : A.I.R. 1972 S.C. 878, proceeding for eviction not being a proceeding which can be appropriately dealt with by the winding up court, does not come under the category of "other legal proceeding" in Section 446(1), and therefore, no leave of the winding up court was necessary for proceeding with R.C.P. No. 27 of 1978 filed against the company in liquidation. 4. Counsel for the Petitioner, Mr. Dandapani, invited our attention to a decision of the Delhi High Court reported in Life Insurance Corporation of India v. Asia Udyog (P) Ltd. 1984 (55) CompCas 187 and submitted that the decision of this Court in M/s Joshi Trading Co. (P) Ltd. Case I.L.R. 1981 Ker 38 : 50 C.C. 802 : 80 R.C.R. 241 requires re-consideration. We perused through the said decision with care. In the Delhi decision the question was whether the proceeding before the Estate Officer under the Public Premises (Eviction of Unauthorised Occupants) Act, 1971, which is admittedly by way of a suit, required leave of the winding up court? We perused through the said decision with care. In the Delhi decision the question was whether the proceeding before the Estate Officer under the Public Premises (Eviction of Unauthorised Occupants) Act, 1971, which is admittedly by way of a suit, required leave of the winding up court? It should be stated that the proceedings under the 1971 Act are by way of suit, the learned Judges found that the nature of the proceedings is such that they are ordinarily exercisable by Civil Courts and that the Act of 1971 only created a special forum. On these premises, the court further held that but for the creation of separate forum, the proceeding under the 1971 Act are of such a nature, which Would ordinarily be dealt with by ordinary courts of law and so can be dealt with by winding up courts and leave will have to be obtained to initiate proceedings against the company. On facts we should state that the decision of the Delhi High Court in L.I.C. of India case 1984 (55) Com.Cas 187 is distinguishable. The learned Judges posed" the question at page 198 as follows: Now here is the matter dealing with recovery of premises or for recovery of arrears of damages. If thus the answer is that the proceedings are of such a nature which can normally and appropriately be dealt with by the winding up court the leave has to be obtained; of course, if the proceedings are of a nature which are not normally to be dealt with by the civil courts then leave may not be necessary, like the proceeding for initiating assessment under the I.T. Act as in Colaba's case (1972) 42 Comp.Cas 168 ; 83 I.T.R. 685 (S.C.). To give an analogy borrowing from the Casaba'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 a reference is made by the State Government under Section 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. Later at page 202 the learned Judge has laid down the test in the following terms: The test, therefore, according to us is whether the proceedings are such which can normally and appropriately be the subject-matter of decision of ordinary courts. If they are not, leave need not be obtained excepting of course, when recovery is to be made against the funds of the company. Though Their Lordships posed the question and stated the test in accordance with the decisions of the Supreme Court and the decisions of other courts referred to in the judgment. Their Lordships proceeded to state by way of obiter to the following effect: However, in the matters in which proceeding even though before a different forum than the ordinary courts, are contemplated like under the Act of 1971 or even under the Rent Control Act, these proceedings, which are for recovery 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. With great respect to the learned Judges of the Delhi High Court, we are unable to concur with the above obiter dictum in the said decision. As stated by Janaki Amma, J. in M/s Joshi Trading Co. (P) Ltd. Case I.L.R. 1981 Ker 38 : 50 C.C. 801 : 80 R.C.R. 241 at page 50, the proceeding for eviction under the Rent Control Act is distinct and different and proceedings for eviction cannot normally be determined by the winding up courts. As stated by Janaki Amma, J. in M/s Joshi Trading Co. (P) Ltd. Case I.L.R. 1981 Ker 38 : 50 C.C. 801 : 80 R.C.R. 241 at page 50, the proceeding for eviction under the Rent Control Act is distinct and different and proceedings for eviction cannot normally be determined by the winding up courts. The proceeding under the Rent Control Act is not one which is capable of being withdrawn and disposed of by the winding up court, nor is it a legal proceeding in respect of a matter, in which the company court has got jurisdiction to entertain and dispose of With great respect to the learned Judges, we are unable to concur with the obiter dictum contained at pages 202 and 203 of the report 1984 (55) CompCas 187 extracted herein above. We are of the view that the decision of Janaki Amma, J. in M/s Joshi Trading Co. (P) Ltd. Case I.L.R. 1981 Ker 38 : 50 C.C. 801 : 80 R.C.R. 241 has laid down the law correctly. Following the said decision, we hold that the plea of the Petitioner that sanction of the winding up court should have been obtained before the 2nd Respondent initiated proceedings for eviction of the Petitioner under the Rent Control Act is without substance. In this view of the matter, we see no reason to transfer the proceedings pending against the Petitioner for eviction before the Rent Controller, Secunderabad, which is the subject matter of C.M.P. No. 14297 of 1986. We also see no reason to transfer H.R.C. 26 of 1986 pending before the Munsiff's Court, Kolar, which is the subject matter of C.M.P. 6446 of 1987. Since we have held that sanction of the winding up court is not necessary to file the proceedings for eviction of the Petitioner, no further orders are required in C.M.P. No. 17300 of 1986 filed in C.M.P. No. 14297 of 1986 by the 2nd Respondent (landlord). C.M.P. No 17300 of 1986 is dismissed as unnecessary. 5. The Civil Miscellaneous Petitions are disposed of as above.