Civil Appeal No 575 of 1970
From the Judgment and Decree dated 17 2 1966 of the Allahabad High Court in Special Appeal No 92 of 1960
section section Javali and B R Aggarwal for the Appellant
R K Garg and V J Francis for the Respondent
The Judgment of the Court was delivered by CHINNAPPA REDDY J
Hulas Chand and Bilas Chand original owners of a certain plot of land in Saharanpur granted a permanent lease of the land to Patel Mills Ltd in May 1930
The annual rent 823 was Rs 75 
The lease was empowered to use the land for any purpose whatsoever
The rights of the lessee were expressly made transferable
Though the lease was permanent there was a condition that the lessor could forfeit the lease if the lessee failed to pay rent for three consecutive years
On November 1 1932 Hulas Chand and Bilas Chand transferred their interest to Budh Singh and Jialal
Jugal Kishore became entitled to the rights of Budh Singh and Jialal by purchase under sale deeds dated April 17 1943 and May 11 1943
But Shankerlal and Piareylal present plaintiff filed a suit for presumption against the vendors and Jugal Kishore and as a result of the decree passed in the suit they became entitled to the lessor s interest in the suit plot of land on August 13 1945
Meanwhile the lessee Patel Mills went into liquidation and Mehra was appointed voluntary liquidator of the company on May 11 1937 by a special resolution at a meeting of the creditors of the company
Benaras Bank Ltd was the biggest creditor of the Company
So the liquidator negotiated the sale of all the assets of the Company to the Benaras Bank Ltd for a sum of Rs 70000 and on February 23 1939 executed an agreement of sale after receiving the consideration
The lease hold interest in the suit plot was also included as one of the assets in the agreement of sale
As a meeting held on May 4 1939 the creditors accepted the final report of the voluntary liquidator
The report was sent to the Registrar of Joint Stock Companies and registered on September 9 1939
The company thus stood dissolved with effect from December 9 1939
Subsequently on March 1 1940 the Benaras Bank Ltd itself went into liquidation
The Official Liquidator of the Benaras Bank Ltd found that there was no duly executed deed of transfer executed by the voluntary liquidator of the company in favour of the Benaras Bank Ltd in respect of the lease hold interest in the suit plot of land
At the instance of the official liquidator of the bank Shri Mehra the erstwhile voluntary liquidator of the company executed a deed of sale on January 28 1941 and had it duly registered
On March 9 1943 the official liquidator transferred the lease hold interest in the suit plot of land to the defendant appellant
We have mentioned that Patel Mills Ltd stood dissolved with effect from December 9 1939
Budh Singh and Jialal had earlier ie on April 12 1939 accepted rent from the voluntary liquidator of the company
After the dissolution of the company and the transfer of the lease hold interest by the voluntary liquidator to the Benaras Bank Ltd Budh Singh and Jialal sent a notice dated January 11 1941 to the liquidator of the Benaras Bank Ltd through their lawyer demanding payment of arrears of rent for four years and asserting that the 15 91SCI80 824 lease was forfeited consequent on the lessee s failure to pay rent for a continuous period of three years
The liquidator denied the claim of right of the lessor to forfeit the lease but admitted the claim for rent
Rent was accordingly paid and was accepted by Budh Singh and Jialal
Later on March 21 1946 Jugal Kishore who had purchased the rights of Budh Singh and Jialal also accepted rent from the official liquidator of the Benaras Bank Ltd Shankerlal and Piarey Lal who became entitled to the lessor s interest in the suit plot of land as a result of the decree from pre emption which they obtained against Jugal Kishore and his vendors filed the suit out of which the appeal arises to recover possession of the land
Their case was that the lease hold interest in the land was not validly transferred by the voluntary liquidator and therefore the defendant acquired no right in the land
Several defences were raised
It was claimed that the voluntary liquidator had the authority in law to execute the deed of sale and formally complete a transaction which had already taken place
It was also claimed that the predecessors in the interest of the plaintiffs having accepted rent from the official liquidator of the bank the plaintiffs were estopped from contending that the transfer in favour of the bank was not valid
Section 53A Transfer of Property Act was also invoked as a defence to the action of the plaintiffs
It was lastly pleaded that the plaintiffs had no right to sue for possession as the lease hold interest in the land had escheated to the Government on the dissolution of the Company
The suit was dismissed by the Trial Court
The judgment and decree of the Trial Court were affirmed by the 1st Appellate Court and a learned single Judge of the High Court in second appeal
The learned Single Judge found in favour of the defendant on the question of estopped escheat and authority of the voluntary liquidator to execute the sale deed but found against the defendant on the applicability of section 53A of the Transfer of Property Act
On appeal by the plaintiffs under clause 10 of the Letters Patent a Division Bench of the High Court reversed the judgment and decree of the Subordinate Courts and decreed the suit
The Division Bench held that the voluntary liquidator had no authority to execute the deed of sale after the dissolution of the company and that there was neither estopped nor escheat
The Division Bench also held that section 53A of the Transfer of Property Act did not protect the defendant
The defendant has preferred this appeal after obtaining a certificate from the High Court under article 1331b of the Constitution
The submissions of Shri Javali learned counsel for the appellant on the question of applicability of section 53A of the Transfer of Property 825 Act and the authority of the voluntary liquidator after the dissolution of the company to execute the deed of sale may be easily disposed of
We do not think that section 53A of the Transfer of Property Act is attracted to the facts of the present case
The right under section 53A is available against the transferor effecting the incomplete transfer and any person claiming under him
It is difficult to understand how the successor in interest of a lessor can ever be said to a person claiming under a lessee making an incomplete transfer of the lease hold interest
Nor do we find force in the submission of the learned counsel that the voluntary liquidator had legal authority after dissolution of the company to execute the deed of sale so as to formally complete the transaction which had already been entered into
Reliance was placed by the learned counsel for the appellant on the decision of Farwell J in Pulsford vs Demanish1
In that case a liquidator was guilty of gross dereliction of duty
In the words of Farwell J A more gross dereliction of duty by a liquidator I have seldom heard of
Though in possession of sufficient assets of the liquidating company to pay all its debts in full the liquidator took no steps to ascertain the creditors of the liquidating company or to see that they were paid
Instead he sold the business and assets of the company to a purchasing company who covenanted to pay all the debts and liabilities of the liquidating company
The purchasing company did not pay the debts
The liquidating company was dissolved
The creditors had no remedy by which they could recover their debts
A creditor of the liquidating company sued the liquidator for recovery of damages
It was held that the liquidator was guilty of negligence in the discharge of his statutory duty and was liable in damages to the unpaid creditors of the liquidating company
What was decided in the case was not that a liquidator could represent the erstwhile company after it was dissolved but that a liquidator could be sued in damages for breach of a statutory duty which he had failed to perform while functioning as liquidator
We do not think that this case is of any assistance to the appellant
We are unable to appreciate how after the company was dissolved the liquidator could still claim to represent the company and execute a registered deed of sale
Once the company was dissolved it ceased to exist and the liquidator could not represent a non existing company
If the liquidator was to discharge any duty or perform any function on behalf of the dissolved company he should have express statutory authority
The Companies Act 1913 contained no provision enabling the liquidator to do any act on behalf of a dissolved company
section 209H of the Companies Act 1913 enjoined the liquidator as soon as the affairs of the company were wound up to make up an account of the winding up and to call a gene 826 ral meeting of the company and a meeting of the creditors for the purpose of laying the accounts before the meetings
The liquidator was then required to send to the Registrar a copy of the account and to make a return to him of the holding of the meetings
The Registrar on receiving the accounts and the returns was required to register them an on the expiration of three months of registration the company was to be deemed as dissolved
The only duty cast upon the liquidator thereafter was that under section 244B
It was that the liquidator should on the dissolution of the company pay into the Reserve Bank of India to the credit of the Central Government in an account called the Companies Liquidation Account any money representing unclaimed dividend or any undistributed assets in his hands on the day of dissolution
No other duty was stipulated to be performed by the liquidator under the provisions of the Companies Act 1913 after the dissolution of the company
We are therefore unable to agree with the submission of the learned counsel that the liquidator had the jurisdiction to execute the deed of sale dated January 28 1941 after the company had been dissolved
The next question which we must consider is what was the effect of the dissolution of the company on the lease hold interest which the company had in the land
No term of the lease has been brought to our notice by which the lease would stand extinguished on the dissolution of the company
If the company had a subsisting interest in the lease on the date of dissolution such interest must necessarily vest in the Government by escheat or as bona vacantia
In India the law is well settled that the property of an intestate dying without leaving lawful heirs and the property of a dissolved Corporation passes to the Government by escheat or as bona vacantia
Of course such property will be subject to trusts and charges if any previously effecting its vide Ms Pierce Leslie  Co Ltd vs Violat Ouchterlong Wapshare  Ors1
It is also to be noticed here that section 244B of the Companies Act 1913 as well as section 5552 of the expressly enjoin a duty on the liquidator to deposit on the dissolution of the company into an account in the Reserve Bank of India known as the Companies Liquidation Account any money representing unpaid dividend or undisputed assets lying in his hands at the time of dissolution
The learned counsel for the appellant relied upon the decisions of the Allahabad High Court in Tulshi Ram Sahu  Anr
vs Gur Dayal Singh  Anr2 and Mussamat Ramman Bibi vs Mathura Prasad  Anr3
Both were cases of fixed rate tenancies
As pointed out 827 by the Full Bench in Tulsi Ram Sahu  Anr
vs Gur Dayal Singh  Anr1 one of the incidents of a fixed rate tenancy was that provided by section 18 of the Agra Tenancy Act 1901 which prescribed that a right of occupancy would stand extinguished when a fixed rate tenant died leaving no heir entitled under the Act to inherit the right of occupancy
It followed therefrom that the land had to revert to the landlord and could not go to the Government by escheat
On the other hand in Sonet Kooer vs Himmat Bahadur  ors2
The Privy Council held that on the failure of heirs to a tenant holding land under Mukerrori Tenure there was nothing in the nature of the tenure which prevented the Crown from taking the Mukerrori by escheat subject to the payment of rent to the Zamindar
If the lease hold interest of the company in the land became vested in the government on the dissolution of the company it must follow that the suit at the instance of the plaintiffs was not maintainable
The next question for consideration is whether the plaintiffs were estopped from denying the validity of the sale in favour of the Benaras Bank Ltd and the character of the possession of the Benaras Bank
Ltd and its successors in interest
As already mentioned by us Budhsingh and Jialal sent a notice dated January 11 1941 through their lawyer demanding of the liquidator of the Benaras Bank Ltd payment of arrears of rent for four years and asserting that the lease was forfeited consequent on the lessee s failure to pay rent for a continuous period of three years
The liquidator denied the claim of right of the lessor to forfeit the lease but admitted the claim for rent
The liquidator paid the rent and it was accepted by Budh Singh and Jialal
Later also the evidence shows that Jugal Kishore the purchaser from Budh Singh and Jialal also accepted rent from the official liquidator of the Benaras Bank Ltd This course of conduct of Budh Singh and Jialal and their successor Jugal Kishore clearly indicates the acceptance by them of the position that the Benaras Bank Ltd had succeeded to the rights of the company in the lease hold interest
Further the official liquidator of the Benaras Bank Ltd said first tried to sell the lease hold interest by public auction
When that sale did not fructify because of the failure of the highest bidder to deposit the sale price the lease hold interest was sold to the defendant with the sanction of the Company Judge
At no point of time did the predecessors in interest of the plaintiffs raise the slightest objection to the sale of the leas hold interest
It was thereafter that the defendant obtained the permission 828 of the Municipal Board Saharanpur and raised construction on the land
The plaintiffs themselves admittedly reside near about the land in dispute
They did not raise any objection to the raising of the constructions
The plaintiffs as well as the defendants appeared to proceed on the common understanding that the defendants had succeeded to the interest of Patel Mills Ltd in the lease hold interest
We are therefore of the view that the plaintiffs were estopped from contending that the defendant had no interest in land
The amount only right of the plaintiffs was to receive the rent
The result of our discussion is that the appeal is allowed and the suit is dismissed with costs throughout
It is however made clear that the plaintiffs have the right to receive rent from the defendants
PBR Appeal allowed


Summary:
The original owners of the land in dispute granted a permanent lease of the land to a company
The lessee could use the land for any purpose and could also transfer the leasehold interest
Though a permanent lease the lessor could forfeit the lease if the lessee failed to pay rent for three consecutive years
The lessors interest changed hands twice and by virtue of a decree in a suit for pre emption filed by the respondents they became entitled to such interest
In the meanwhile the company went into voluntary liquidation and the liquidator executed an agreement of sale of all its assets including the leasehold interest in favour of a Bank which was the biggest creditor of the Company
Immediately thereafter the Bank itself went into liquidation
Sometime later the official liquidator of the Bank found that no deed of transfer was executed by the voluntary liquidator in favour of the Bank the erstwhile voluntary liquidator therefore executed a deed of sale in favour of the Bank
Thereafter the official liquidator of the Bank transferred the lease hold interest in the land to the defendant appellant
Before the company went into liquidation the first transferee of the land accepted rent from the voluntary liquidator
After the transfer of the leasehold interest to the Bank the second transferee demanded from the official liquidator arrears of rent for four years and claimed that the lease was forfeited by reason of the Bank s failure to pay rent for a continuous period of three years in terms of the lease
The official liquidator denied the right to forfeit the lease
He however paid rent which was accepted by the lessors
Even subsequently rent was accepted by the lessors
The respondent sued to recover possession of the suit land on the ground that the lease hold interest was not validly transferred by the voluntary liquidator and that therefore neither the Bank nor the defendant acquired any right in the land
The defendants contended that the voluntary liquidator had the authority in law to execute the deed of sale and formally complete a transaction which had already taken place that the predecessors in interest of the plaintiff having accepted rent from the official liquidator were estopped 822 from contending that the transfer in favour of the Bank was not valid and that the lease hold interest in the land had escheated to the Government on the dissolution of the company
The suit was dismissed by the Trial Court and the Appellate Court
On second appeal the High Court decreed the suit holding that the voluntary liquidator had no authority to execute the deed of sale after the dissolution of the company and that there was neither estopped nor escheat
Allowing the appeal  HELD 1
The High Court was right in holding that the liquidator had no jurisdiction to execute the deed of sale after the company had been dissolved
Once the company was dissolved in accordance with the procedure laid down in the Indian Companies Act 1913 it ceased to exist and therefore the voluntary liquidator could not represent a non existent company
If the liquidator was to discharge any duty or perform any function on behalf of the dissolved company he should have express statutory authority to do so which he did not have under the Act
826 D 825 G 2
If the company had a subsisting interest in the lease on the date of dissolution such interest must necessarily vest in the Government by escheat or bona vacantia
It is well settled that the property of an intestate dying without leaving lawful heirs and the property of a dissolved corporation passes to the Government by escheat or bona vacantia
If the lease hold interest of company became vested in the Government on its dissolution a suit at the instance of the plaintiffs was not maintainable
826 E 827 G 3
The successors in interest of the original lessors accepted rent from the official liquidator indicating that they accepted the position that the Bank had succeeded to the rights of the company in the lease hold interest
The official liquidator sold the land to the defendant with the permission of the Company Judge only when he failed to get the highest bid in public auction
At no point of time did the predecessors in interest of the plaintiffs raise an objection to the sale of the lease hold interest
When the defendant obtained permission of the Municipal Board and raised constructions on the land the plaintiffs who resided near about the land did not raise any objection to the constructions
In the circumstances the plaintiffs were estopped from contending that the defendant had no right in the land
Their only right is to receive rent
827 F 828 B