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2019 DIGILAW 313 (ALL)

Singh And Sons v. Official Liquidator U. P.

2019-02-06

PANKAJ MITHAL, ROHIT RANJAN AGARWAL

body2019
JUDGMENT : 1. The appellants have preferred this appeal under Chapter VIII Rule 5 of the High Court Rules,1952 against the order dated 31.10.2018 passed by the Company Judge in Company Petition No. 26 of 1996 in the matter of M/s. Sharda Refrigeration Company Private Limited. 2. The Company Judge by the said order inter-alia permitted the Official Liquidator (in short O.L.) to seek the assistance of the Collector, Allahabad to get the property vacated from the unauthorized occupants to be handed over to the auction purchaser thereafter. This direction was issued treating the appellants to be unauthorized occupants of the said property. 3. There is no dispute to the fact that the property in dispute is in the nature of go-downs and portions of plots situate in Village Dulapur, Pargana Jhushi, Tehsil Phoolpur, District -Allahabad and is the property of the company in liquidation. The petition for winding up of the aforesaid company M/s. Sharda Refrigeration Company Private Limited was filed some time in the year 1996 and the company Judge at that time while directing for issuing notice to the said company to show cause why the petition may not be advertised, restrained the company from selling/transferring the land and constructions of plot nos. 120, 130,131 and 133 as aforesaid. 4. The aforesaid interim order dated 23.8.1996 is reproduced herein below for the sake of convenience:- “Issue notice to the respondent company M/s. Sharda Refrigeration Co. Pvt. Ltd., having its registered office at 48/46 A, Baluaghat, Allahabad to show cause why this petition may not be admitted and advertised. The notice will indicate that this matter will come for consideration next before this Court on 25.9.1996 by which date counter affidavit to this petition may be filed. In the mean time, till further orders of this Court, the respondent company is registered from selling/transferring the land and constructions of Khasra plot nos. 133,130,131 and 120 in village Dulapur, Tehsil Phoolpur, district Allahabad.” 5. Subsequently, an order of winding up of the company was passed on 23.8.2004 and the O.L., was appointed as the liquidator. 6. It appears that despite the above interim order dated 23.8.1996 one of the Ex-Directors of the company Rajendra Kumar leased out the aforesaid property in favour of the appellants vide rent agreement dated 4.6.1999 for a period of five years. 6. It appears that despite the above interim order dated 23.8.1996 one of the Ex-Directors of the company Rajendra Kumar leased out the aforesaid property in favour of the appellants vide rent agreement dated 4.6.1999 for a period of five years. The said lease was extended for another period of five years on 1.6.2004 by the said Director which period also elapsed on 30.5.2009. 7. The appellants claim themselves to be in lawful occupation of the aforesaid property by virtue of the aforesaid lease deed as tenants. 8. Pursuant to the winding up order, the assets of the company came into constructive possession of the O.L. The O.L., with the permission of the Company Judge issued auction notice on 9.1.2007 for the sale of the above property. One of the bids of Rachit Gupta and Arpit Gupta, sons of Vijay Kumar Gupta and Ajay Kumar Gupta respectively was the highest and was accepted on 10.10.2012. The auction sale in their favour was confirmed vide Court's order dated 16.5.2013 and the draft sale deed was approved by the Court on 29.3.2017. A sale deed has also been executed in favour of the aforesaid auction purchasers but they have not been put in possession of the same as the appellants are said to be in actual possession. 9. In this back-ground of the facts the appellants approached the Company Judge not to evict them otherwise then following the due procedure of law whereas the auction purchasers applied to put them in possession. At the same time, the O.L, submitted report that he may be permitted to take necessary steps for eviction of the occupants and to put the auction purchasers in possession. 10. It is in the aforesaid facts and circumstances that the impugned order had come to be passed by the company Judge permitting the O.L., to get the property vacated with the assistance of the Collector. 11. We have heard Sri Shashi Nandan assisted by Sri Udayan Nandan, learned counsel for the appellants, Sri Subham Agrawal for the O.L., and Sri Ranjit Saxena on behalf of the auction purchasers. 12. Learned counsel for the appellants submits that the impugned order has been passed without notice or opportunity of hearing to them and not even the copy of the application of the auction purchasers and the report of the O.L., was served upon them. 12. Learned counsel for the appellants submits that the impugned order has been passed without notice or opportunity of hearing to them and not even the copy of the application of the auction purchasers and the report of the O.L., was served upon them. The appellants are lawful occupants of the property as tenants and they are not liable to be evicted without adjudication of their rights or without determination of their tenancy and following the procedure as prescribed in law. 13. Sri Subham Agrawal, learned counsel for the O.L., on the strength of Section 456 and 536 (2) of the Companies Act, 1956 and in view of interim order of the company Judge dated 23.8.1996 & the subsequent order of the winding up dated 23.8.2004 contends no part of the property of the company in liquidation was liable to be transferred either by the company or its Ex-Directors. Therefore, the lease in favour of the appellants is not only illegal but void which confers no right upon the appellants. 14. Sri Ranjit Saxena, learned counsel for the auction purchasers submits that all orders passed by the company Judge from time to time have attained finality even up to the Supreme Court and that since auction sale has been confirmed in their favour, they are entitled to possession over the property from the O.L. In the absence of possession they are suffering immense loss and their entire investment is going waste. The appellants are ex-facie unauthorized occupants who have been set-up with ulterior motives so that the possession of the property may not go out of hands of the Ex-Directors of the company in liquidation. 15. There is no dispute to the fact that on the presentation of the winding up petition an interim order was passed on 23.8.1996 clearly restraining the company in liquidation from selling/transferring the property in question. 16. In view of the said interim order neither the company nor its Directors much less the directors in their personal capacity were competent to make any transfer of the property by any of the modes prescribed under the Transfer of Property Act, 1882 which includes lease. 17. Admittedly, the appellants were granted lease of the property under the agreement dated 4.6.1999 much after winding up petition was presented and a restrain order was passed. 18. 17. Admittedly, the appellants were granted lease of the property under the agreement dated 4.6.1999 much after winding up petition was presented and a restrain order was passed. 18. Section 107 of the Transfer of Property Act specifically lays down that a lease of immovable property for any term exceeding one year can only be made by registered instrument. The record reveals that the said agreement is not a registered document. 19. In view of the aforesaid provision, as the lease is said to be of 5 years it is in violation of the aforesaid provision and can not be recognized in law. Even the further extension of the lease on 1.6.2004 is also by an unregistered document and is not legally enforceable. 20. Thus, in view of the above facts and circumstances, the appellants as per their own claim came into possession of the property in question not only in contravention of the interirn order of the Company Judge dated 23.8.1996 but also under an instrument not legally enforceable in law. 21. This apart, one of the Ex-Directors of the company alone is not a person authorized to transfer or alienate any property of the company. 22. A bare reading of the above agreement would reveal that Rajendra Kumar, Ex-Director had executed the lease/rent agreement in his personal capacity and not as Director of the company or on behalf of the company. 23. In this way, we find that the appellants are not the persons who came in possession of the aforesaid property lawfully on the basis of any legal document rather their possession is illegal and unauthorized. 24. It may be pertinent to mention here that as per Subsection 2 of Section 536 of the Act where a company is ordered to be wound up by the order of the Court, any disposition of the property of the company after the commencement of the winding up shall be void unless the Court otherwise directs. Section 536 is reads as under:- “536. Avoidance of transfer, etc., after commencement of winding up: (1) …............. (2) In the case of a winding up by the tribunal any disposition of the property (including auctionable claims) of the company, and any transfer of shares in the company or alternation in the status of its members, made after the commencement of the winding up, shall unless the tribunal otherwise orders, be void.” 25. (2) In the case of a winding up by the tribunal any disposition of the property (including auctionable claims) of the company, and any transfer of shares in the company or alternation in the status of its members, made after the commencement of the winding up, shall unless the tribunal otherwise orders, be void.” 25. Section 441 (2) of the Act creates a legal fiction and provides that the winding up of the company by the Court/Tribunal shall be deemed to commence at the time of presentation of the petition for winding up. Thus, in the present case the winding up would be deemed to have commenced on 23.8.1996. Therefore, in view of Section 536 (2) of the Act no property of the company in liquidation could have been disposed of or transferred unless ordered otherwise by the Court. There is no order of the Court permitting any transfer in favour of the appellants. 26. In other words, the assets of the company in liquidation or against whom a winding up has commenced can not be disposed of at the mere pleasure of the company or its Ex-Directors. 27. The effect of Section 536(2) read with Section 441 (2) of the Act is as clear as crystal that where a winding up proceedings are subject to the supervision of the Court and had commenced any disposition of the property of the company made after the commencement of the winding up would be void, unless otherwise so directed by the Court. 28. In view of the above, the transfer of the property of the company in liquidation that too by one of the Ex-Directors in his personal capacity by way of lease is void. 29. In view of the above also the possession of the appellants over the property is not lawful but illegal. 30. Section 456 of the Companies Act provides that on the passing of the winding up order and the appointment of the liquidator the O.L., is obliged to take into his custody and under his control the property of the company in liquidation. 30. Section 456 of the Companies Act provides that on the passing of the winding up order and the appointment of the liquidator the O.L., is obliged to take into his custody and under his control the property of the company in liquidation. At the same time, Sub-section (1) and (1A) of Section 456 enables the O.L., or the provisional liquidator to approach the District Magistrate of the area concerned for taking possession of the properties whereupon the District Magistrate after such notice as may deem fit take possession of the property and deliver it to the O.L. 31. The aforesaid Section 456 (1) and (1-A) are reproduced herein below:- “456-Custody of company's property- (1) Where a winding up order has been made or where a provisional liquidator has been appointed, the liquidator or the provisional liquidator, as the case may be shall take into his custody or under his control, all the property, effects and auctionble claims to which the company is or appears to be entitled.” (1A) For the purpose of enabling the liquidator or the provisional liquidator, as the case may be, to take into his custody or under his control, any property, effects or auction able claims to which the company is or appears to be entitled, the liquidator or the provisional liquidator, as the case may be, may by writing request the Chief Presidency Magistrate or the District Magistrate within whose jurisdiction such property, effects or auction able claims of any books of account or other documents of the company may be found, to take possession thereof, and the chief Presidency Magistrate or the District Magistrate may hereupon after such notice as he may think fit to give to any party, take possession of such property, effects, auction able claims, books of account or other documents and deliver possession thereof to the liquidator or the provisional liquidator.” 32. A plain and simple reading of the aforesaid provisions would reveal that the O.L., is under an obligation to take possession of the property of the company in liquidation as soon as an order of winding up is passed and that for the said purpose he may approach the District Magistrate for necessary assistance who upon notice as may deem fit take possession and deliver it to the O.L. 33. The order impugned only permits the O.L., to take assistance of the Collector/District Magistrate, Allahabad for getting possession of the property of the company in liquidation from the unauthorized occupants and to deliver it to the auction purchaser. 34. The aforesaid order is in consonance with the aforesaid legal provisions of law except for the fact that instead of directing for delivery of possession of the property to the O.L., it directs its delivery to the auction purchaser, otherwise there is no error or illegality in the impugned order. The O.L. has very rightly been permitted to take the assistance of the District Magistrate for taking possession of the property of the company in liquidation. 35. Sri Udayan Nandan, learned counsel for the appellants argued that as the appellants are tenants they can not be evicted unless their tenancy is determined in accordance with law. 36. The aforesaid argument is not tenable in law. First, for the reason that the appellants are not the lawful tenants rather they are unauthorized occupants on the basis of a lease which itself is void as held earlier. The unauthorized occupants are not entitled to any protection in law. Moreover, the Act is a special Act and it prevails over the provisions of other enactments of general nature. 37. The said Act provides for the eviction of the occupants form the property by the company in liquidation and for obtaining its possession with the assistance of the District Magistrate as per the mandate of Sub-section (1) of Section 456 of the Act. 38. Learned counsel in support of his above argument has placed reliance upon the decision of the Supreme Court AIR 1984 SC 143 Satish Chand Makhan and others Vs. Goverdhan Das Byas and others to contend that unless a notice is served under Section 106 of the Transfer of Property Act, 1882 the appellants are not liable to eviction. 39. We have perused the aforesaid decision. In the said decision, the claim rested on the fact that the defendants were tenants holding over under Section 116 of the Transfer of Property Act, 1882. 39. We have perused the aforesaid decision. In the said decision, the claim rested on the fact that the defendants were tenants holding over under Section 116 of the Transfer of Property Act, 1882. It was in the light of the above admitted position that that the Court ruled that it was not a case where the occupants were tenants at sufference, rather they were tenants holding over under Section 116 of the Transfer of Property Act, 1882 on month to month basis and, therefore, notice under Section 106 of the Transfer of Property Act, 1882 is mandatory before drawing proceedings for their enactment. 40. In the present case, as has been held earlier, the appellants were not the tenants. The lease deed under which they claim to be tenants has already been held to be null and void. Therefore, their occupation is not that of tenants or tenants holding over as contemplated by Section 116 of the Transfer of Property Act, 1882 but as unauthorized occupants. Therefore, the procedure of termination of tenancy as contemplated by Section 106 of the Transfer of Property Act is not supposed to be followed. 41. In view of the aforesaid, the decision relied upon is of no help to the appellants. 42. One another decision of the Supreme Court (1992) 2 SCC 322 Nirmala R. Bafna (Smt.)/Kershi Sivax Cambatta and others Vs. Khandesh Spinning and Weaving Mills Co. Ltd. and another/Official Liquidator and others which has been relied upon to contend that merely because a company comes into liquidation the right of the tenant does not come to an end is also of no assistance. In the said case, the admitted position was that there was a sub-tenancy agreement between the company as landlord and the tenants/sub-tenants for letting out the flat. It was in this background that the Court held that merely because the company has gone into liquidation and the O.L has been appointed the right of the company vis-a-vis the landlord and the tenant do not undergo any change. 43. In the present case, the situation is entirely different. There is no valid contract of tenancy between the company going into liquidation and the appellants and whatever agreement, if any, was there, it was between the ex-director in his personal capacity and the appellants which has already been held to be null and void. 43. In the present case, the situation is entirely different. There is no valid contract of tenancy between the company going into liquidation and the appellants and whatever agreement, if any, was there, it was between the ex-director in his personal capacity and the appellants which has already been held to be null and void. Thus, as no valid relationship of landlord and tenant has ever come into existence between the company in liquidation and the appellants it can not be held to be still subsisting despite the company going into liquidation. 44. The next submission that no notice was given to the appellants before passing the impugned order is not material at this stage. The Court in the present has only granted permission to O.L., to seek the help of the District Magistrate for obtaining possession. The District Magistrate has not proceeded thereafter. It is presumed that the District Magistrate would proceed in accordance with Sub-section (1A) of Section 456 of the Act and before taking possession of the property from the appellants and delivering it to the O.L, for delivery to the auction purchasers in accordance with law, may if deem fit give notice to the parties. 45. Sub-section (1-A) of Section 456 of the Act contemplates notice to any party if the District Magistrate thinks fit. The appellants may get notice or opportunity of at that stage before taking possession if considered proper or necessary by the District Magistrate. The said stage has not yet arrived as the District Magistrate has not proceeded with the matter. 46. It is settled in law that notice or opportunity of hearing is not an empty formality or should be given as an eye wash. In the present case, even if the Company Judge would have heard the appellants the factual as well as the legal position would not have changed. The appellants would have remained unlawful occupants liable to dispossession. The appellants could not have taken any other plea then what they have taken before us without altering the position in law. 47. The opportunity of hearing accorded to the appellants by us is in the nature of post decisional hearing which is also sufficient to meet the ends of justice. 48. The appellants could not have taken any other plea then what they have taken before us without altering the position in law. 47. The opportunity of hearing accorded to the appellants by us is in the nature of post decisional hearing which is also sufficient to meet the ends of justice. 48. Sri Udayan Nandan lastly submitted that the above order is within the teeth of the earlier order of the company Judge dated 17.2.2006 and it could not have been passed without deciding his earlier application on which the order dated 17.2.2006 was passed. 49. The order impugned in this appeal is certainly not in conflict with any other order of the Company Judge. The Company Judge had previously permitted the O.L. to take proceedings in accordance with law vis-a-vis the eviction of persons in occupation of the property of the company in liquidation. It does not necessarily implies that the O.L. was obliged to draw proceedings by way of civil suit. As the appellants were in illegal occupation of the property, he has rightly taken recourse to proceedings under Section 446 of the Act. The said proceedings are also proceedings in accordance with law. 50. In case any earlier application of the appellants has been left undecided, it is always open for them to press for the decision of the said application before the Company Judge notwithstanding the fact that with the passing of the final order all applications in relation to the subject matter impliedly stand disposed of. 51. In view of the aforesaid facts and circumstances, we find no substance in this appeal and the same is dismissed with no orders as to costs.