Case: Amritlal Chemaux Limited Vs. Official Liquidator & Another

ORAL JUDGMENT H.L. GOKHALE, J.Heard Mr.Virag Tulzapurkar with Mr. Sakseria for the Appellants. Mr.Chinai appears for Respondent No.1 and Mr. Jain appears for the interveners Mr. Rakesh Maradia and Rasiklal Maradia. 2.This appeal seeks to challenge the order passed by a learned Single Judge (Karnik J.) on 21st December 2001 below the report of the Official Liquidator dated 23rd October 2001 and further resubmitted report dated 29th November 2001 in Company Petition No. 895 of 1998. 3.The facts leading to the impugned order and this controversy are as follows: The Appellants are owners of property known as "Rang Udyan", which is an industrial estate situated at Mahim, Mumbai. Premises on the second floor in Building No.1 of this property were given to one Amar Dye-Chem Ltd. (Presently in liquidation) on leave and license basis beginning from 1st September 1960. These are office premises of the size of 4850 square feet. The Appellants have filed suit in the Court of Small Causes at Bombay for recovery of these premises way back in June 1998. During the pendency of that suit, the said Amar Dye-Chem Ltd. was directed to be wound up by an order passed by a Company Judge of this Court (Lodha J.) on 9th December 1998 in Company Petition No. 895 of 1998. Inasmuch as the Appellants suit for eviction was pending in the Court of Small Causes at Bombay, the Appellants took out Company Application (Lodging) No. 64 of 1999 to seek leave under section 446 of the Companies Act to continue to prosecute that suit. This application was subsequently numbered as Company Application No. 372 of 2000. 4.That application reached before Rebello J. on 12th February 1999. The learned Judge asked the Official Liquidator to inform as to whether he required the premises and wanted to continue in possession thereof and if so, how long. A report was made accordingly thereafter on 3rd March 1999. In prayer (a) of that report, it was prayed that Official Liquidator may be permitted to retain the said premises. It was submitted in the report that the entire premises were not required but only a part thereof was required to be retained for keeping the record of the company until it was completely wound up. Therefore, it was prayed that the compensation may be appropriately apportioned and he may be permitted to pay accordingly. Prayer (b) was an alternative prayer which sought that in the event prayer (a) was to be granted, the Official Liquidator may be permitted to take an advance of Rs. 50,000/- for paying the compensation to the landlord every month. Prayer (c) sought that the leave application moved by the Appellants landlord may be rejected. 5.The Company Application was heard by Nijjar, J. on 1st April 1999 and by his order, the learned Judge recorded the statement of the Liquidator that the premises were required for a period of 2 years. In para 2 of his order, the learned Judge also recorded that the Official Liquidator had stated before him that the premises will be vacated after 2 years. Accordingly, the learned Judge made the report absolute in terms of prayer (a). He allowed prayer (b) also and therefore he held that prayer (c) was redundant. This order is very crucial and therefore we reproduce this order in its entirety. "1. Mr.Gupta states that the premises will be required for a period of two years for conducting the winding-up proceedings. 2. I have perused the report submitted by the Official Liquidator. Heard Counsel for the applicant. In view of the fact that the Official Liquidator has stated that the premises will be vacated after two years, no further orders are required in the application at present, 3. Prayer clause (a) of the Report is made absolute with the aforesaid observations. Prayer (b) is allowed. Prayer clause (c) is redundant in view of the order passed earlier. S.O. for further orders in first week of April 2001." 6.It so happened that Respondent No.1 Liquidator was not regular in paying the compensation. The Appellants therefore took out Company Application No.691 of 1999 and thereon orders were passed on 25th October 1999 and 22nd June 2000 directing Respondent No.1 to make regular payment. In the order dated 25th October 1999, the statement of Respondent No.1 was recorded that he had not taken possession of entire premises. The Respondent No.1 was therefore directed to pay compensation proportionately for part of premises in his possession. The Appellants were permitted to take possession of the premises which were stated to be not in the possession of Respondent No.1. It is not disputed that the Appellants have therefore taken possession of the particular part and it is only a part of the premises which is in possession of the Respondent No.1 now with which we are presently concerned. After the expiry of 2 years under the order passed by Nijjar J. dated 1st January 1999, the possession of this remaining part of premises was not returned to the Appellants which was also expected to be returned after 2 years. Nijjar J. had adjourned the Company Application to first week of April 2001. It reached before Kochar J. on 14th June 2001. when it was submitted on behalf of the Official Liquidator by filing a reply that the remaining part of the premises could not be handed over since certain movables were lying therein and which were to be auctioned and sold. The learned Judge observed that though he appreciated the difficulties expressed by the Official Liquidator, yet the Appellants could not be asked to wait indefinitely to get the possession of the premises which they were lawfully entitled to get. It was submitted before the learned Judge that the Official Liquidator needed 3 months time to auction the goods and to hand over the possession. The learned Judge therefore in para 3 of his order dated 14th June 2001 directed as follows: "The Official Liquidator shall hand over the possession of the suit premises on or before 30th September 2001 irrespective of the fact that the movables are disposed of or not." The learned Judge disposed of Company Application No.372 of 2000. 7.Respondent No.1 - Official Liquidator had made reports on 31st July 2001 and 23rd October 2001 seeking extension of time to hand over the premises by 31st December 2001. In the meanwhile, in November 2001 Respondent No.1 conducted the auction sale of the movables lying in the premises. The Appellants were basically interested in the premises and not in the movables, yet with a view to see to it that this objection does not remain any further, the Appellants participated in that auction and gave the highest bid which came to be accepted by the Liquidator. This bid was for Rs.3,40,000/-. The Official Liquidator accordingly resubmitted his report on 29th November 2001 seeking confirmation of the sale in respect of the movables in favour of the Appellants. 8.When this report came up for consideration before another Single Judge (Karnik J.) on 21st December 2001, two former directors of the company in liquidation Mr. Rakesh Maradia and Mr. Rasiklal Maradia appeared through their counsel and submitted that they were prepared to give a higher bid. Counsel appearing on their behalf submitted that his clients were willing to increase the bid to Rs.4,00,000/-. The learned Judge recorded this statement in para 10 of his order and therefore declined to confirm the sale of the movables. In para 9 of his order, the learned Judge also recorded that when the first of the above referred orders came to be passed on 1st April 1999, the Bombay Rent and Lodging House Control Act, 1942 was applicable. Now that the Bombay Rent Act, 1947 had come to be repealed and replaced by Maharashtra Rent Control Act, 1999 and in view of the changed legal position, the Official Liquidator is now entitled to claim consideration for surrendering possession. The learned Judge therefore directed the Official Liquidator not to hand over possession of the said office premises. It is this order which is under challenge in the present appeal. 9.It is material to note that in this appeal, a notice of motion was moved earlier which came up before another Division Bench (A.P. Shah & Mrs.V.K. Tahilramani, JJ.) on 18th March 2002 and the motion was made absolute in terms of prayer (a). This prayer (a) stayed the operation of the impugned order and therefore it is submitted that in view thereof, the Liquidator was bound to hand over possession of the remaining part of the premises to the Appellants, yet the same was not done. That apart, in the meanwhile, another difficulty cropped up for the Appellants, namely that the suit filed by the Appellants in the Court of Small Causes at Bombay was being taken up for hearing and therefore the Appellants apprehended that the suit will be dismissed for want of leave under section 446 of the Companies Act. An order was therefore passed on 22nd August 2002 and again on 29th August 2002 directing that the Court of Small Causes will not dismiss the suit for want of leave. Although the motion in this appeal was to be heard first, it was agreed amongst the counsel appearing for the Appellants as well as for the Official Liquidator that the appeal itself be heard first and accordingly the appeal is being heard finally. 10.Mr.Tulzapurkar, learned counsel appearing for the Appellants, submitted that the learned Judge (Karnik J.) has clearly gone beyond the report that was made by the Official Liquidator to the learned Judge. The report made by the Official Liquidator on 29th November 2001 had two prayers, Prayer (a) was whether after perusing the valuation report, the highest offer of Rs.3,40,000/- given by the Appellants for the movables should be accepted and then consequential prayer (b), namely in the event answer to prayer (a) was in affirmative, whether to deliver the said movables to the highest offerer. Mr.Tulzapurkar submitted that if this was the report made by the Liquidator, an order was expected accordingly. The report was clearly in line with the orders passed earlier by Nijjar J. and Kochar J. Both the learned Judges had recorded clearly that the Liquidator was to hand over the remaining part of the premises after 2 years. That period had elapsed. Further extension granted was also over. The difficulty raised was that there were movables in the property and they were to be sold. It was only for this limited purpose that extension was granted. Now the auction sale had also been conducted and the order that was sought was acceptance of the bid given by the highest bidder. Mr.Tulzapurkar submitted that the orders of Nijjar J. and Kochar J. had clearly recorded that the Liquidator was to hand over the possession of the premises. The order of Nijjar J. dated 1st April 1999 had recorded the statement of the Official Liquidator that he required the premises for a period of 2 years. The order also recorded that the premises will be vacated after 2 years. It is therefore that the learned Judge had directed that prayer (c) for leave under section 446 of the Companies Act was redundant and made the report absolute in terms of prayers (a) and (b). The order passed by Kochar J. was also in line with this earlier order. That being the position, there was no occasion for the learned Judge (Karnik, J.) to go anywhere beyond the report which was made by the Liquidator and beyond the period of 2 years which was provided by the predecessor judges. 11.Mr.Tulzapurkar submitted that in fact what the learned Judge had done was to review the orders passed by two predecessor judges, of which he did not have the jurisdiction. Besides, as stated above, the prayer of the Liquidator was also not with respect to the premises in any manner whatsoever. It was sought to be contended by Mr.Chinai, learned counsel appearing for the Official Liquidator, across the Bar that the submission on the change in the legal position on the Maharashtra Rent Control Act, 1999 having come into force could be canvassed. Mr.Tulzapurkar appearing for the Appellants submitted that firstly the submission was not tenable in law. This is because under section 3(1)(b) of the Maharashtra Rent Control Act, 1999, the premises of companies with paid up capital over Rs.1 crore were outside the coverage of the Act, and the company in liquidation was one such. Besides, under section 58(2)(a) of the new Act, pending proceedings were not covered thereunder. Therefore, even after the new Act coming in force, it was not permissible for the Official Liquidator to seek consideration for surrendering tenancy. But that apart was a serious submission as such and if the Liquidator wanted to canvass it, surely he would have made the submission in his report and a prayer accordingly to the learned Judge. There was no such report or a submission or a prayer by the Liquidator to the learned Judge and that was quite correct and that was in consonance with the submissions which were made in the earlier reports and the Liquidator could not have made a report contrary to what were the reports made earlier. That being so, the only prayer of the Official Liquidator before the learned Judge was to confirm the auction sale and the learned Judge ought to have confined to that. 12.The learned Judge (Karnik J.) in para 7 of his order, while dealing with the order passed by Kochar J., has observed that it appeared to him that Kochar J. was led to believe that by an order dated 1st April 1999 (of Nijjar J.) Official Liquidator was allowed to retain the possession of the concerned premises for a period of 2 years only. The learned Judge (Karnik J.) indicated that this interpretation (of Kochar J.) was wrong and on account of this "misbelief" that the Official Liquidator was allowed to retain the possession only for 2 years that the subsequent order had been passed by Kochar J. Now as we have seen from the reports made by the Official Liquidator from time to time as also from the order passed by Nijjar J., it was clear that the Liquidator had represented to Nijjar J. and which is what Nijjar J. has recorded in his order that the premises were required for a period of 2 years and also that the premises will be vacated after 2 years. No attempt was made to move Nijjar J. seeking review of that order nor any review of that order was sought any time thereafter. A statement made to the court binds the particular party more so when the party is a public officer. The record of the court with respect to what transpired at the time of hearing as recorded in the judgment of the court is conclusive and that has been held by the Apex Court in the case of Ramdas Naik vs. A.R. Antulay reported in AIR 1982 SC 1249 . This being the position, one cannot read anything other than what is recorded by Nijjar J. in his order of 1st April 1999 and which is what Kochar J. has done while passing his order subsequently. There was no question of the learned Judge (Kochar J.) being led to believe anything erroneously or forming any misbelief as observed in the order of Karnik J. The observations of the learned Judge (Karnik J.) on the resubmitted report of 29th November 2001 were clearly in excess of his jurisdiction and uncalled for. As stated earlier, it was not a review of the order passed by the earlier judges nor was he sitting in appeal and hence it was not open to Karnik J. to have drawn such an inference that his predecessor (Kochar J.) was misled to believe or had formed a misbelief. This being the position, as far as the submission with respect to the return of the premises is concerned, there was no prayer objecting to the return of the premises to the landlord on behalf of the Official Liquidator and there was no occasion for the learned Judge (Karnik J.) to refer to the change in the legal position. The observation of the learned Judge (Karnik J.) in the opening sentence of his impugned order that there was something more than what meets the eye ex-facie in these reports of the Official Liquidator was equally uncalled for. 13.We may also mention that according to Mr.Tulzapurkar, at the highest the premises were required for continuing to retain the movables until they were disposed of. He submitted that now the auction sale has been conducted and even for this purpose also, the premises were required at the highest until 31st December 2001, which period is also over long back. The retention of the premises for any such purpose would be beyond the provision of section 457 of the Companies Act. Mr.Tulzapurkar, learned counsel for the Appellants, relies upon judgment of the Apex Court in the case of Ravindra Ishwardas Sethna vs. Official Liquidator reported in AIR 1983 SC 1061 , wherein the Apex Court has held that after the winding up order, the Liquidator was not supposed to carry on the business of the company in liquidation and utilisation of the premises of the company by letting out the premises etc. was clearly outside the scope and powers of section 457 of the Companies Act. He also relied upon a Division Bench judgment of this court, which is in line with the aforesaid judgment, in the case of Saraswat Co-operative Bank Ltd. vs. Chandrakant Maganlal Shah reported in (2002) 1 All MR 1021. The operative directions are in para 26 and 27 of that judgment. However, in the light of the view that we have taken earlier with respect to the scope of the matter before the learned Judge (Karnik J.), a further deliberation on this is aspect is not necessary. 14.Mr.Chinai, learned counsel appearing for the Official Liquidator, although raised the plea with respect to the change in the Rent Control Law and earlier contended that there was no undertaking to vacate, later on fairly accepted that this plea was not raised in the report of the Liquidator and therefore there was no reason for the learned Judge to go into that aspect and therefore there is no need for us to go into the same once over. The only other submission of Mr.Chinai was that as far as the movables are concerned, a better offer, if available, should always be considered. Inasmuch as the two interveners had given a better offer before the learned Single Judge, we asked Mr.Jain, counsel appearing for the interveners, as to whether they were maintaining the offer of buying the movable for Rs.4,00,000/- in that auction. However, on taking instructions, Mr. Jain made a statement that his clients were not inclined to buy the movables. In view of this conduct of these two interveners, it is clear that their conduct is not bonafide. They appeared before the learned Judge at the last moment. The learned Judge was in fact made to believe that they were seriously interested in buying those movables and it is therefore only due to their intervention that the learned Judge did not confirm the sale of movables in favour of the Appellants. Now when these interveners are asked to maintain their offer, they have declined to do so. In fact, it is these interveners who are responsible for leading the learned Judge to pass the order that he has passed. It is also stated that the submission with respect to the change in the Rent Control Law was advanced on their behalf before the learned Judge though it is very much disputed by the counsel appearing for the Appellants. However, even if that be so on both these counts, namely with respect to the movables as well as with respect to the premises, it is these interveners who led the learned Judge (Karnik J.) to pass the order which he has passed and it has led to this appeal. This entire exercise has become necessary only because of these two interveners who were former directors of the company in liquidation and we do not find it to be a bonafide exercise. It is because of their intervention that the Appellants were required to file this appeal and therefore they will have to bear the costs of this appeal.

Decision:
1[ds]12.The learned Judge (Karnik J.) in para 7 of his order, while dealing with the order passed by Kochar J., has observed that it appeared to him that Kochar J. was led to believe that by an order dated 1st April 1999 (of Nijjar J.) Official Liquidator was allowed to retain the possession of the concerned premises for a period of 2 years only. The learned Judge (Karnik J.) indicated that this interpretation (of Kochar J.) was wrong and on account of this "misbelief" that the Official Liquidator was allowed to retain the possession only for 2 years that the subsequent order had been passed by Kochar J. Now as we have seen from the reports made by the Official Liquidator from time to time as also from the order passed by Nijjar J., it was clear that the Liquidator had represented to Nijjar J. and which is what Nijjar J. has recorded in his order that the premises were required for a period of 2 years and also that the premises will be vacated after 2 years. No attempt was made to move Nijjar J. seeking review of that order nor any review of that order was sought any time thereafter. A statement made to the court binds the particular party more so when the party is a public officer. The record of the court with respect to what transpired at the time of hearing as recorded in the judgment of the court is conclusive and that has been held by the Apex Court in the case of Ramdas Naik vs. A.R. Antulay reported in AIR 1982 SC 1249  . This being the position, one cannot read anything other than what is recorded by Nijjar J. in his order of 1st April 1999 and which is what Kochar J. has done while passing his order subsequently. There was no question of the learned Judge (Kochar J.) being led to believe anything erroneously or forming any misbelief as observed in the order of Karnik J. The observations of the learned Judge (Karnik J.) on the resubmitted report of 29th November 2001 were clearly in excess of his jurisdiction and uncalled for. As stated earlier, it was not a review of the order passed by the earlier judges nor was he sitting in appeal and hence it was not open to Karnik J. to have drawn such an inference that his predecessor (Kochar J.) was misled to believe or had formed a misbelief. This being the position, as far as the submission with respect to the return of the premises is concerned, there was no prayer objecting to the return of the premises to the landlord on behalf of the Official Liquidator and there was no occasion for the learned Judge (Karnik J.) to refer to the change in the legal position. The observation of the learned Judge (Karnik J.) in the opening sentence of his impugned order that there was something more than what meets the eyein these reports of the Official Liquidator was equally uncalledlearned counsel appearing for the Official Liquidator, although raised the plea with respect to the change in the Rent Control Law and earlier contended that there was no undertaking to vacate, later on fairly accepted that this plea was not raised in the report of the Liquidator and therefore there was no reason for the learned Judge to go into that aspect and therefore there is no need for us to go into the same once over. The only other submission of Mr.Chinai was that as far as the movables are concerned, a better offer, if available, should always be considered.Inasmuch as the two interveners had given a better offer before the learned Single Judge, we asked Mr.Jain, counsel appearing for the interveners, as to whether they were maintaining the offer of buying the movable for Rs.4,00,000/in that auction. However, on taking instructions, Mr. Jain made a statement that his clients were not inclined to buy the movables. In view of this conduct of these two interveners, it is clear that their conduct is not bonafide. They appeared before the learned Judge at the last moment. The learned Judge was in fact made to believe that they were seriously interested in buying those movables and it is therefore only due to their intervention that the learned Judge did not confirm the sale of movables in favour of the Appellants. Now when these interveners are asked to maintain their offer, they have declined to do so. In fact, it is these interveners who are responsible for leading the learned Judge to pass the order that he has passed. It is also stated that the submission with respect to the change in the Rent Control Law was advanced on their behalf before the learned Judge though it is very much disputed by the counsel appearing for the Appellants. However, even if that be so on both these counts, namely with respect to the movables as well as with respect to the premises, it is these interveners who led the learned Judge (Karnik J.) to pass the order which he has passed and it has led to this appeal. This entire exercise has become necessary only because of these two interveners who were former directors of the company in liquidation and we do not find it to be a bonafide exercise. It is because of their intervention that the Appellants were required to file this appeal and therefore they will have to bear the costs of this