Civil Appeal No28 of 1958
Appeal from the judgment and order dated April 17 1956 of the Allahabad High Court in Special Appeal No 20 of 1954 arising out of the judgment and order dated February 10 1954 of the said High Court Company Jurisdiction in Application No 29 of 1953Company case No 24 of 1949
October 30
H N Sanyal Additional Solicitor General of India and N C Sen for the appellant
Rule 97 of the High Court Company Rules merely gives the landlord the right to claim payment of rent and nothing more
It does not give any priority to him
The question of priority is dealt with in section 230 which gives no priority to the landlord
Shah J Top priority is given to costs and expenses of winding up under sections 193 and 2033
191 We offered possession to the landlord and we never used the premises for the purpose of liquidation after the winding up order
Therefore the rent claimed by the landlord cannot he treated to have been incurred as costs and expenses of winding up
The real question for decision is whether we used the premises for the purpose of liquidation
It has been found by the High Court that we did not do so
There is a rule under the English Companies Act which is identical to our r 97 but none of the English cases have gone so far as to make the liquidators liable for the rent claimed by the landlord even if the premises were not used for the purpose of liquidation
In re Silkstone and Dodworth Coal and Iron Company 17 Ch D 158 In re Oak Pits Colliery Company and In re Levy and Company  cited
The Oak Pits case definitely holds that the landlord is not entitled to full rent accruing since the commencement of the winding up if the liquidator has done nothing except abstain from trying to get rid of the property
This principle should be applied in this case and r 97 should not be so interpreted as to give any priority to the landlord
A V Viswanatha Sastri Mrs E Udayaratnam and section section Shukla for the respondent
By a previous order Mootham J who was then dealing with company matters in the High Court passed an order to the effect that the landlord was entitled to recover rent from the bank from the date of winding up to the date when the liquidators would give him possession and thus terminate the tenancy
This order was virtually passed under section 45B of the Banking Companies Act and the respondent was entitled to payment according to the tenor of the order which is that he should be paid in full
Shah I How can a decree drawn up as a result of that order be executed  The amount has to be proved H N Sanyal Additional Solicitor General of India and N C Sen in reply
Mootham J s order simply purports to declare the liability of the liquidators but does not decide the question of priority
November 10
The Judgment of the Court was delivered by SHAH J
The U P Union Bank Ltd which will hereinafter be referred to as the Bank was in occupation as a tenant of a building in Agra town belonging to the respondent
at a monthly rental of Rs 325 and Rs 10 as municipal taxes
The Bank made default in paying the rent accruing due and the respondent filed suit No 810 of 1949 in the court of the Munsiff 192 at Agra for a decree for rent for three months and obtained an order of attachment before judgment on the movable property of the Bank
The Munsiff by his decree dated December 2 1949 decreed the suit and confirmed the order of attachment before judgment
In the meanwhile on a petition dated September 13 1949 the Bank was ordered to be wound up by the High Court of Judicature at Allahabad and the appellants were appointed liquidators of the Bank
The employees of the Bank had vacated the premises on September 10 1949 but the property of the Bank which was attached was with the consent of the respondent stored by the Commissioner appointed by the Munsiff s court in the Banking hall which was sealed by that officer
A part of the premises was it appears occupied by some trespassers
The Official Liquidators called upon the respondent to take possession of the premises but the latter declined to do so unless vacant possession of the entire premises was given to him
On November 301950 the respondent applied to the High Court for permission to file a suit for ejectment and for arrears of rent due since September 30 1949
Mr Justice Mootham who heard the application declined to grant permission holding that the claim which the respondent intended to put forward against the Official Liquidators in the course of the proposed suit may be adjudicated upon in the winding up proceeding and with the consent of parties the learned Judge proceeded to decide that claim
By order dated August 30 1951 Mr Justice Mootham I hold that the petitioner is entitled to recover rent from the Bank at the rate of Rs 325 per mensem from 1st October 1949 upto the date on which the Official Liquidators give the petitioner the landlord such possession of the premises as will in law terminate the Bank s tenancy
 Against this order the Official Liquidators preferred an appeal being special appeal No 17 of 1952 to a Division Bench of the High Court
193 On April 23 1953 the respondent applied to the Joint Registrar of the High Court to issue a certificate of non satisfaction and to transfer the order to the court of the Civil Judge of Allahabad for execution
The Joint Registrar issued a certificate of non satisfaction of the order and directed that the same be transmitted to the District Judge Allahabad for execution
The respondent filed an application for execution in the court of the Civil Judge Allahabad and obtained an order for attachment of an amount of Rs 12000 lying to the credit of the Official Liquid ators in the Allahabad Bank
The Official Liquidators thereupon applied to the High Court praying that the execution proceedings pending in the court of the Civil Judge Allahabad be declared void and the order of attachment of the fund in the account of the Official Liquidators passed by the Civil Judge be quashed
Mr Justice Brij Mohan Lall who heard the application held that the proceeding commenced against the Official Liquidators without the sanction of the court under sections 171 and 232 cl
I of the Indian Companies Act 1913 and the attachment ordered thereunder were void and directed that the certificate of non satisfaction be recalled
Against this order
the respondent preferred a special appeal to the High Court being appeal No 20 of 1954
Appeals Nos 17 of 1952 and 20 of 1954 were then heard
Appeal No 17 of 1952 was dismissed and by an order passed on April 17 1956 the High Court partially modified the order of Mr Justice Brij Mohan Lall and directed the Official Liquidators to pay to the respondent in full the amount that had fallen due to him after October 1 1949
The High Court was of the view that the Official Liquidators having retained the Bank s premises in their occupation by virtue of the proviso to r 97 framed by the High Court the respondent was entitled to receive the rent due to him in full and was not liable to share the assets of the Bank pro rata with the other ordinary creditors
Against the order passed by the High Court this appeal has been preferred with the certificate of the High Court
25 194 By his order Mr Justice Mootham merely declared the liability of the Bank to pay the rent accrued due since October 1 1949 there is no direction for payment of the amount and it is not necessary to consider the plea raised by counsel for the respondent that the order being virtually one under section 45 B of the Banking Companies Act the respondent was entitled to payment according to the tenor of the order
The order in terms declares the liability and does not decide any question of priority between the respondent and other creditors of the Bank
By section 647 of the Companies Act No 1 of 1957 the winding up of the Bank having commenced before that Act was enacted the provisions with respect to the winding up contained in the Indian Companies Act No VII of 1913 continue to apply to the Bank in the same manner and in the same circumstances as if Act 1 of 1957 had not been passed
By section 230 of the Indian Companies Act 1913 provision is made for payment of specified categories of debts in the winding up in priority to all other debts but rent due to the landlord is not one of such debts to which priority is given by section 230
The High Court held that in as much as by r 97 of the Company Rules it was provided  When any rent or other payment falls due at stated periods and the order or resolution to wind up is made at any time other than one of such periods the persons entitled to the rent or payment may prove for a proportionate part thereof up to the date of the winding up order or resolution as if the rent or payment grew due from day to day Provided that where the Official Liquidator remains in occupation of premises demised to a company which is being wound up nothing herein contained shall prejudice or affect the right of the landlord of such premises to claim payment by the company or the Official Liquidator of rent during the period of the company s or the Official Liquidator s occupation  for the rent accruing due in respect of the premises which remained in the occupation of the Official 195 Liquidators the respondent was entitled to preferential payment
The operative part of the rule deals with the rent or other payment in arrears till the date of winding up
By the proviso it is declared that the right of the landlord to claim payment by the company of the rent accruing due thereafter is not to prejudiced
The proviso merely affirms the right of the landlord to claim payment of rent accruing due since the date of winding up
It does not deal with any question of priority in payment of debts
By section 246 of the Indian Companies Act 1913 power is conferred upon the High Court to make rules consistent with the Act and the Code of Civil Procedure concerning the mode of proceedings to be had for winding up of the company and certain other matters
The Legislature has by section 230 prescribed that certain specified categories of debts shall rank for priority over other debts due by the company and it is not within the competence of the High Court to prescribe by rule a category for priority in payment which is not included in that section
By section 193 of the Act the court has in the event of the assets being insuffiicient to satisfy the liabilities indisputably power to make an order for payment out of the assets of the costs charges and expenses incurred in the winding up in such order of priority as the court thinks fit and in exercise of the power conferred by section 230 sub cl 3 the court may direct the company to retain such sums as may be necessary for the costs and expenses of the winding up of the company before discharging even the debts in respect of which priority is prescribed by section 230
If therefore there is a debt which may reasonably fall within the description of costs and expenses of winding up of the company the court may provide for priority in payment of that debt as it thinks just
In the winding up of the company it is open to the liquidators to disclaim land burdened with onerous covenants of shares or stock in companies of unprofitable contracts or of any other property that is unsaleable or not readily saleable
The disclaimer operates to determine as from the date of disclaimer 196 the rights interests and liabilities of the company and the property of the company in or in respect of the property disclaimed
By section 230 A cl 4 liberty is reserved to persons interested in the property requirng the liquidator to decide whether he will or will not disclaim
It is also open to the court under sub section
5 of section 230 A on the application of any person entitled to the benefit or subject to the burden of a contract made with the company to make an order rescinding the contract on such terms as to payment of damages for non performance of contracts
It is evident that on the winding up outstanding contracts of the company do not become ipso facto inoperative
The contracts remain binding until disclaimed or rescinded in the manner provided by section 230 A but the liability incurred under these contracts is merely an ordinary debt which ranks for claim to payment pro rata along with other creditors
If the debt be regarded reasonably as falling within the description of costs and expenses of winding up of the company it is open to the court to direct that preferential payment in respect thereof be made otherwise the debt will be claimable out of the assets of the company pro rata with other ordinary creditors
Distinction has been made by the courts in England where the relevant provisions of the Companies Act are substantially the same that if the liquidator continues in possession of leaseholds for the purpose of the better realization of assets the lessor will be entitled to payment of the rent in full as part of the expenses properly incurred by the liquidator but as observed by Lord Justice Lindley In re Oak Pits Colliery Companys 1  No authority has yet gone the length of deciding that a landlord is entitled to distrain for or be paid in full rent accruing since the commencement of the winding up where the liquidator has done nothing except abstain from trying to get rid of the property which the company holds as lessee
 Evidently a distinction is made between property which remains in the occupation of the liquidator 1 1882 Ch
D 321 331 197 after the winding up when the occupation is shown to be for the purpose of liquidation and property which merely remain with the liquidator he having abstained from trying to got rid of the same and It does not appear or is not shown that the property was used for the purpose of winding up
The High Court held on the fact that the liquidators had remained in occupation of the premises not for the purpose of winding up but  because they could not think of any suitable method of getting rid of the premises in spite of all their desire to do so
 It was pointed out that the Bank had closed its business and the liquidators were not carrying on any business after the winding tip and the properties were not used by the liquidators for the purpose of liquidation
This conclusion of the High Court on the evidence has not been challenged
The property not having remained with the liquidators for the purpose of liquidation unless the court passes an order holding that the debt incurred was part of the costs and expenses of liquidation the rent accruing due since the date of the winding cannot be claimed in priority over other ordinary debts
We are therefore unable to agree with the High Court that under r 97 of the Company Rules if the premises remained in the occupation of the liquidators not for the purpose of winding up the landlord is entitled to priority in respect of payment of rent
On the view taken by us the appeal will be allowed the order passed by the High Court set aside and the order passed by Mr Justice Brij Mohan Lall restored with costs in this Court and in the High Court
Appeal allowed


Summary:
Sub section 1a of section 58 of the  provides  A stage carriage permit or a contract carriage permit other than a temporary permit issued under section 62 shall be effective without renewal for such period not less than three years and not more than five years as the Regional Transport Authority may specify in the permit
 Sub section 2 provides  A permit may be renewed on an application made and dis posed of as if it were an application for a permit
Provided that      The stage carriage permits of the petitioners were ending on March 31 1958 and they applied to the Regional Transport Authority Bangalore for a renewal of them
The Transport Department of the Mysore State Government opposed such renewal and applied that fresh permits for the routes in question might be granted to it as the State Government intended to nationalise the transport services
The Authority however dismissed the applications of both the contending parties but on appeal its orders were set aside and the matter was remanded for a fresh decision
A scheme under section 68C of Ch
IVA of the Act was in the meantime published and approved by the State Government which was later on quashed by the High Court at the instance of the petitioners
The Authority passed orders renewing the permits of the petitioners for a period of one year from April 1 1958 to March 31 1959
Appeals against the said orders having proved abortive the petitioners applied to the 147 High Court under articles 226 and 227 of the Constitution and those applications were summarily dismissed and certificates to appeal to this Court refused
The petitioners thereupon applied to this Court under article 32 of the Constitution
The question for determination was whether on a proper construction of sub section
1a and sub section
2 of section 58 of the Act read together the period of renewal was to be the same as provided for the grant of permits under the former and the Authority in renewing a permit was bound to specify the period of such renewal
It was contended on behalf of the Department that even supposing that a renewal must be for the same period as provided for the original grant this Court by writ could do no more than quash the order made by the Authority leaving it to decide the question of renewal in accordance with the law as laid down by it
Held per Sinha CJ Imam Wanchoo and Das Gupta JJ that under section 58 of the  properly construed the period for which a permit could be renewed under sub section
2 of that section must be not less than three years and not more than five years as provided for the grant of a permit under sub section
1a thereof and the Regional Transport Authority in exercising its discretion to grant a renewal where it chose to do so must specify the period of renewal accordingly
The words  without renewal  occurring in sub section
1a do not signify a contrary intention
V C K Bus Service Ltd vs The Regional Transport Authority Coimbatore  distinguished
Since in the instant case the intention of the Authority to grant renewal was clear but in doing so it had under a misapprehension of the law limited the renewal to one year only it was open to this Court to sever the legal part of its order from the illegal and quash the latter
R M D Chamarbaughwalla vs The Union of India  and Shewpujanrai Indrasanrai Ltd vs The Collector of Customs   referred to
Since this Court was not bound by the technical rules relating to issue of writs by English Courts a direction in the nature of mandamus must issue requiring the Authority to specify the period of renewal in accordance with the law as laid down by this Court
T C Basappa vs T Nagappa   relied on Per Kapur J
In cases such as the one under review the power of judicial review possessed by this Court under article 32 of the Constitution extends to quashing and not substituting an order in place of what an Administrative tribunal has done or to direct what it should do
All that the Court can do is to quash the order and leave it to the tribunal to reconsider the matter and to exercise its 148 jurisdiction keeping in view the law laid down by the Court
In issuing such orders the courts would act in consonance with the broad and fundamental principles governing the granting of writs in English Law
Consequently even assuming that in renewing a permit the Regional Authority had to do so for a period of not less than three and not more than five years this Court would only quash the orders passed by the Regional Transport Authority in the present case and leave it to that Authority to reconsider the matter in the light of the decision of this Court
Associated Provincial Picture Houses Ltd vs Wednesbury Corporation   The King vs Willesden justices Ex Parte Utley  Veerappa Pillai vs Raman and Raman Ltd and Basappa vs Nagappa   referred to
Shewpujanrai Indrasamrai Ltd vs The Collector of Customs   explained and distinguished
R M D Chamarbaugwalla vs Union of India 1959 SCR 930 held inapplicable
Kochunni vs State of Madras  and United Motors Transport Co vs Sree Lakshmi Motor Transport Co Lid 
distinguished