CIVIL Appeal No 2609 of 1983
Appeal by Special leave from the Judgment and order dated the 1st July 1982 of the Bombay High Court in Appeal No 215 of 1981
D V Patel T U Mehta H J Zaveri for the Appellants
As the matter brooked no delay after granting special leave to appeal
we proceeded to hear the appeal on merits
When hearing was over
we pronounced the following order and stated that the reasons would follow
The order reads as under The appeal is allowed and the order made by the learned Single Judge as well as the Division Bench of the Bombay High Court rejecting the Judge s Summons taken out by the appellants is set aside and the Judge s Summons is granted to the extent indicated herein
The appellants shall deposit Rs 150000 by or be fore March 1 1983 in this Court
Respondent No 2 Smt
Sabita V Adapa shall hand over vacant and peaceful possession of the property being a shop Nos
89 on the ground floor of the building formerly known as Jagmohan Building No 2  or as Ayaz Mansion  and now styled as Ram Kutir  situated at Station Road Andheri Bombay 400058 to the liquidator on or before February 28 1983 who shall forthwith hand over possession on March 1 1983 to the appellants after taking a statement from the appellants that they have deposited the amount Rs 1 50 000 in this Court as herein indicated
On respondent No 2 handing over vacant and peaceful possession of the afore mentioned shops to the liquidator by or before February 28 1983 the liquidator shall forthwith refund to her the security deposit of Rs 28800 deposited by the second respondent with the liquidator
Respondent No 2 will be at liberty to remove all furniture and fixtures placed by her in the suit shop without Causing damage to the property
The amount of Rs 1 50 000 to be deposited by the appellants in this Court will with the consent of the appellants be disbursed according to the direction to be given by this Court to the needy and the deserving creditors of the Chit Centre Pvt Ltd already ordered to be wound up 660 by the High Court
Neither the liquidator nor the creditors of Chit Centre Pvt Ltd have any right to claim this amount of Rs 150000 or any part thereof as it is an ex gratia payment made by the appellants for alleviating the misery if any of some of the hard hit creditors of Chit Centre Pvt Ltd The distribution of the aforesaid amount will be at the absolute discretion of this Court
The appeal is allowed to the extent herein indicated with no order as to costs
 These are the reasons
On a winding up petition filed under the  a learned Company Judge of the Bombay High Court made an order on September 23 1974 winding up Chit Centre Private Ltd  Company  for short
The Company had its office in shops bearing Nos 8 and 9 on the ground floor of the building formerly known as Jagmohan Building No 2  or as Ayaz Mansion  now known as Ram Kutir 
On the winding up order being made the official Liquidator who was appointed as Liquidator of the Company while taking possession of the assets of the Company also took possession of the office premises of the Company
It is in this manner that the Liquidator acquired possession of shops Nos 8 and 9 the premises involved in this appeal
Subsequently the Liquidator sought direction of the court on April 25 1979 whether the premises should be let out on lease or licence or whether the furniture and fixtures in the premises should be sold  The Court gave a direction that the premises be given on caretaker basis after obtaining a proper document on a compensation not less than Rs 2 250 per month
Pursuant to this direction the Liquidator invited offers from persons willing to occupy the premises on terms and conditions laid down by the Court
On July 2 1980 the Liquidator sought the direction of the Court whether to accept the offer of Ms Modern Caterers represented by respondent No 2 herein Smt
Sabita V Adapa
The Company Judge by his order dated July 3 1980 directed the Liquidator to accept the offer as modified by the Court of the second respondent
The Liquidator there upon entered into an agreement on July 29 1980 with the second respondent and gave possession of the premises to the second respondent on terms and conditions set out in the agreement
Appellants herein are the Landlords of the building of which the premises involved in this appeal formed part
Appellants took 661 out Judge s summons praying for a direction to the Liquidator to terminate the caretaker s agreement entered into with the 2nd respondent under the directions of the Court and to hand over vacant and peaceful possession of the premises to the appellants
There were other prayers in the Judge s summons with which we are not concerned in this appeal
The learned Company Judge repelled the contention of the appellants that the so called caretakers  agreement entered into by the Liquidator with the 2nd respondent was in contravention of the various provisions of the Bombay Rents Hotel and Lodging House Rates Control Act 1947 as amended in 1973  Rent Act  for short and held that in substance and in form it was a caretaker s agreement which was permissible
Accordingly the learned Judge rejected the Judge s summons in respect of both the prayers
Appellants preferred an appeal to the Division Bench of the High Court
The Division Bench held that appellants were not entitled to the notice in respect of the report submitted by the Liquidator for directions in respect of the premises and further observed that the appellants had no right to the present possession of the premises more so because the appellants had already filed a suit for eviction in the Small Causes Court at Bombay against the official Liquidator and on this short ground the appeal was dismissed
Hence this appeal by special leave
The Company is already ordered to be wound up by the order of the Court dated September 23 1974
The name of the Company clearly spells out the objects for which it was formed
The name of the Company was Chit Centre Pvt
Ltd The Company had undertaken the business of floating prize chit schemes
The nature of business in modern times is sufficiently well known and does not require elaboration
The Company had set up an office for carrying on this business and the office was set up in premises taken on lease
The business of the Company of floating prize chit schemes came to a stand still the moment it was ordered to be wound up
It is not the Liquidators  case that he is carrying on business of the Company which is being wound up with the permission of the Court under sec
457 of the 
457 enables the Liquidators in a winding up by the Court with the sanction of the court amongst others to carry on the business of the Company so far as may be necessary for the beneficial 662 winding up of the Company
If the floating of the schemes for prize A chits came to a stand still the moment the Company was ordered to be wound up there was no question of the business of the Company to be carried on by the Liquidator and that too for the beneficial winding up of the Company
Whether to carry on the business of the Company which is ordered to be wound up is not a matter left to uncontrolled discretion of the Liquidator
The Liquidator undoubtedly has the power under sec
457 to carry on the business of the Company if it is necessary for the beneficial winding up of the Company
And this power can be exercised not at the discretion of the Liquidator but with the sanction of the court
Reliance was placed on In re Batey Ex parte Emmanuel1 wherein it was observed that the power to carry on the business can only be exercised for the purpose of the beneficial winding up of the Company not because the creditors may think that the business will be a very profitable one and that the longer it is carried on the better it will and that they will make a profit from it
Reliance was also placed on Panchmahals Steel Ltd vs Universal Steel Traders2 wherein it was held that amongst others  the Liquidator with the sanction of the court has the power to carry on business of the Company so far as may be necessary for the beneficial winding up of the Company
It is true that the Liquidator cannot carry on business for any other purpose except the purpose for which the power is conferred upon him namely for the beneficial winding up of the Company
He cannot carry on any business on the ground that it would be beneficial to the creditors or the contributors
The jurisdictional fact which must be ascertained and established for the exercise of the power by the Liquidator to carry on business of a Company is that carrying on of the business of the Company is necessary for the beneficial winding up of the Company  However the language of the section being unambiguous and clear one does not need the assistance of precedents to come to a conclusion that the Liquidator with the sanction of the court can carry on the business of the Company only to the extent that such carrying on of the business is necessary for the beneficial winding up of the Company
Let it at once be made clear that there is no order of the Court brought to our notice which accorded the Court s sanction to the exercise of the power to carry on the business of the Company by 663 the Liquidator and we posed a question as to which business of the Company was to be carried on by the Liquidator The business of A floating prize chits scheme has come to a stand still the moment the Company was ordered to be wound up
It is not for a moment suggested that a Liquidator was to float some prize chit schemes or that a pending scheme was to be continued or perused by him
That is not even the Liquidator s case nor was it so contended before the learned Company Judge
The Liquidator has adopted a contradictory posture which the learned Company Judge has unfortunately overlooked
If the Liquidator wanted to exercise power under Sec
457 1 b to carry on business of the Company so far as necessary for its beneficial winding up the business which was to be carried on must be the business of the Company
Giving premises on lease licence or under caretaker s agreement was not the business of the Company
If some other business of the Company was to be carried the use of the office premises would be necessary for carrying on the business of the Company
If possession of the premises was to be retained for carrying on the business of the Company the Liquidator could not have sought the direction of the court to hand over possession under
any nomenclature such as lease licence caretaker s agreement or any other facade to the second respondent
Now if the Liquidator wanted to exercise power under Sec
457 1 b he ought to have with reference to the object clause in the Memorandum of Association of the Company shown that giving on lease or licence or under caretaker s agreement was part of the routine business of the Company
Such is not the case here
In fact as the business has come to a grinding halt the office premises are of no use to the Liquidator
He has therefore devised a scheme by which he can knock out the compensation for the use and occupation of the premises not necessary for the use of the Company in contravention of the Rent Act and unfortunately the Court accorded sanction of this venture of the Liquidator disregarding the relevant provisions of the 
The Company was a tenant or a lessee of the premises of which the appellants are the landlords
The date of the commencement of the lease is not made available to us but it is also not claimed on behalf of the Liquidator that there was lease of long duration
If so the Company was a statutory tenant under the Rent Act
The statutory tenancy confers the right to be in possession but 664 if the tenant does not any more require use of the premises the provisions of the Rent Act and especially Secs
13 and 15 completely prohibit giving the possession of the premises on licence or on sublease
The learned Company Judge therefore spelt out a third way of parting with the possession by the Liquidator namely that he may give the premises to the second respondent under a caretaker s agreement
This caretaker s agreement appears to us to be an euphemism for collecting compensation which is nothing else but the charge for use and occupation of the premises exclusively by the second respondent
Whether it is sub lease or licence does not call for decision
For the purpose of the present proceedings it is enough for us to say that the Company and its Liquidator no more needs
the premises for its own use
The Liquidator does not need the use of the premises for carrying on the winding up activities of the Company because he sought direction for parting with possession
We are not impressed by the learned Judge saving that there is some third mode of parting with possession of the premises exclusively in favour of the second respondent namely caretaker s agreement which appears to us to be a facade to wriggle out of the provisions of the Rent Act
The Rent Act is no doubt enacted for protecting the tenants and indisputably its provisions must receive such interpretation as to advance the protection and thwart the action of the landlord in rendering tenants destitutes
But this does not imply that the court should lend its aid to flout the provisions of the Rent Act so as to earn money by unfair and impermissible use of the premises
And that is what the Liquidator sought to do and the Court extended its help to the Liquidator
This in our opinion is wholly impermissible
The learned Company Judge could not have authorised the Liquidator to enter into such an agreement and therefore his order is liable to be set aside
In the appeal before the Division Bench this aspect was not at all examined because it h stated that this aspect was not canvassed before the Bench hearing the appeal
The point we have examined goes to the root of the matter and therefore we consider it immaterial whether the point was examined at the hearing of the appeal
The learned Company Judge could not have permitted holding on to possession of the premises not needed for efficiently carrying on winding up proceedings
The only course open to him was to direct the Liquidator to surrender possession to landlords and save recurring liability to pay rent
Before we part with this judgment we must 665 take note of one submission that was made on behalf of the respondent
It was said that the creditors and members of the Company in liquidation have suffered huge losses and if the Liquidator would have been permitted to enter into an agreement with the second respondent it would fetch a steady income which would have gone towards mitigating the hardships of the creditors and members of the Company
The accounts of the Company in liquidation were not brought to our notice nor can we permit violation of law howsoever laudable the object of such act may be
However we must record a statement made on behalf of the appellants when the aforementioned argument was being examined by us
It was said that the second respondent was to pay Rs 2500 per month as compensation under the directions of the Court
That would have fetched the Liquidator an income of Rs 30000 per year and deducting the costs expenses and taxes the Liquidator may have been able to realise at least Rs 25000 per year
The learned counsel for the appellants submitted that adopting a multiplier of six assuming that roughly six years was the period for which the agreement would have been renewed from year to year the appellants unconditionally offered to deposit Rs 150000 in the Court to be distributed at the discretion of this Court amongst the creditors of the Company in liquidation
We recorded this offer in our order disposing of the appeal
We are now informed that the amount has been deposited
The Liquidator is accordingly directed to submit the list of the creditors of the Company with the names addresses and claims admitted by him within 4 weeks from today when the matter will appear again on board for directions
These are the reasons which persuaded us to allow the appeal and make the order extracted at the commencement of this judgment
HSK Appeal allowed


Summary:
The respondent official liquidator after being appointed by the Company Judge of the High Court as Liquidator of a Company took possession of the office premises of the Company
The Liquidator sought direction of the Company Judge whether the premises should be let out on lease or licence
The Company Judge gave a direction that the premises be given on caretaker basis
Under that direction the Liquidator entered into an agreement with the second respondent and gave possession of the premises to the second respondent
The appellants who were the land lords of the building OF which the office premises of the Company formed part took out Judge s summons praying for a direction to the Liquidator to terminate the caretaker s agreement and to hand over vacant possession of the premises to the appellants
The appellants contended that the so called caretaker s agreement was in contravention of the various provisions of the Bombay Rents Hotel and Lodging House Rates Control Act 1947 as amended in 1973  Rent Act  for short
The Company Judge held that in substance and in form the agreement entered into by the Liquidator with the second respondent was a caretaker s agreement which was permissible
A Division Bench of the High Court dismissed the appeal preferred by the appellants
Allowing the appeal  HELD The Company Judge could not have authorised the Liquidator to enter into caretaker s agreement with the second respondent
The Liquidator does not need the use of the premises for carrying on the winding up activities of tho Company because he sought direction for parting with possession
The only course open to the Company Judge was to direct the Liquidator to surrender possession of the premises to the appellants664 F B C H 658 Section 4571 b of the gives power to the Liquidator in a winding up by the Court with the sanction of the Court to carry on the business of the Company so far as may be necessary for the beneficial winding up of the Company
If the Liquidator wanted to exercise power under sec
4571 b to carry on business of the company so far as necessary for its beneficial winding up the business which was to be carried on must be the business of the Company
Giving premises on lease licence or under caretaker s agreement was not the business of the Company
Since the Company s business of floating prize chit schemes came to a stand still the moment the Company was ordered to the wound up there was no question of the business of the Company to be carried on by the Liquidator and that too for the beneficial winding up of the Company
661 H 663 C G In re Batey Ex parte Emmanuel 1881 17 Ch
Division 35 and Panchmahals Steel Ltd vs Universal Steel Traders at 722 referred to
The company was a tenant or a lessee of the premises of which the appellants are the land lords
The date of the commencement of the lease is not made available but it is also not claimed on behalf of the Liquidator that there was lease of long duration
If so the Company was a statutory tenant under the Rent Act
The statutory tenancy confers the right to be in possession but if the tenant does not any more require use of the premises the provisions of the Rent Act and especially Secs
13 and 15 completely prohibit giving the possession of the premises on licence or on sub lease
The Company Judge therefore spelt out a third mode of parting with possession of the premises by the Liquidator namely a caretaker s agreement
This appears to be a facade to wriggle out of the provisions of the Rent Act
The Rent Act is no doubt enacted for protecting the tenants and indisputably its provisions must receive such interpretation as to advance the protection and thwart the action of the landlord in rendering tenants destitutes
But this does not imply that the court should lend its aid to float the provisions of the Rent Act so as to earn money by unfair and impermissible use of the premises
663 H 664 A F