Case: Smt. Nirmala R. Bafna/Kershi Shivax Cambatta Andors Vs. Khandesh Spinning And Weaving Mills Co. Ltd. Andanr./Offici

B.P. Jee B van Reddy, J. 1. Leave granted. 2. The appeal is directed against the judgment of a Division Bench of the Bombay High Court in Appeal No. 777 of 1986 disposing of the appeal preferred by the appellant with certain directions.3. Khandesh Spinning and Weaving Mills Pvt. Ltd. went into liquidation at the instance of a creditor. The order of winding up was passed on September 19, 1984 in Company Petition No.59 of 1984. The official liquidator was appointed as the liquidator for the company.4. The company was the tenant of a flat situated at Church-gate, Bombay. It is a fairly big flat having an area of 3500 sq. ft. The company had its registered office in the said flat until it was shifted to Jalgaon sometime prior to July, 1979.5. The appellant is the sister of one of the directors of the company. Her husband was the Manager of the company. According to her, she entered into an agreement with the company on July 15, 1979 whereunder a sub-tenancy was created in her favour in respect of the said flat except for a small area of 150 sq. ft. which was retained by the company. According to her, the landlord had orally consented to the creation of sub-tenancy in her favour. The rent of the flat payable to the landlord was Rs. 900/- per month. Under the said agreement, the appellant was to pay Rs. 600/- every month to the company. She says further that she was put in possession of the said portion on the date of agreement and has continued in possession ever since.6. The liquidator appointed by court for the company took possession of the entire flat in October, 1984. He sealed it. Against the order of winding up dated September 19, 1984, an appeal was preferred and the operation of the order including the appointment of the liquidator. stayed on October 29, 1984. Soon thereupon, the appellant wrote to the official liquidator (on October 30, 1984) calling upon him to allow her to use the premises in her occupation without any hindrance or disturbance from him. In this letter, she referred to the agreement of sub-tenancy arrived at with the company in or about March, 1979 and stated that the agreement is lying in the said premises sealed by official liquidator and that the exact portion given to her is delineated in the plan annexed to the agreement. She asserted that since the date of agreement, she has been in possession of the premises, paying the agreed rent to the company without any default. The premises were sealed, she said, during her absence and that she discovered the same only on her return from Indore on October 29, 1984.7. The official liquidator delivered possession of the premises to the appellant.8. In the appeal preferred against the order of winding up, a Division Bench of the Bombay High Court, by its order dated January 31, 1985, appointed a provisional liquidator. The appeal was dismissed later on September 9, 1985.9. In November, 1984 the appellant filed a suit, being suit No. 4873 of 1984, in the court of Small Causes for a declaration that she is the lawful tenant and/ or protected sub-tenant of the said flat (excluding the portion reserved for the company) and for an injunction restraining the defendant from interfering with her possession and enjoyment. The sole defendant to the suit was "Khandesh Spinning and Weaving Mills Pvt. Ltd. having its registered office at Station Road, Jalgaon (Maharashtra State)". The appellant also applied for and obtained a temporary injunction against the defend ant-company. Sometime in October, 1985, the official liquidator appeared in the suit on behalf of the defendant and raised an objection that without the leave of the company-court, the suit cannot proceed. Evidently to meet this objection the appellant applied to the company Judge (High Court of Bombay) on March 12, 1986 for grant of leave to proceed with the suit under S. 446 of the Companies Act. The application was registered as Company Application No. 38 of 1986. The official liquidator filed an application under Sub-sec. (3) of S. 446 for transfer of the said suit to the High Court to be tried by the Company-judge, which application was registered as Company Application No. 141 of. 1986. Both these applications came up before the company Judge on August 20, 1986. In a short order the learned Judge dismissed the Company Application No. 38 of 1986 observing that: "the suit instituted by the applicant after the winding up order is collusive and claim is dishonest. The appellant is a sister of one of the directors and claims to have tenancy right in respect of a portion of a companys office. I am not satisfied that a claim even required an investigation. P.C. Judges summons dismissed." 10. No orders were passed on Company Application No. 141 of 1986, presumably because Company Application No. 38 of 1986 was dismissed.11. On August 22, 1986, the official liquidator called upon the appellant to deliver possession of the premises in her possession. Upon the appellants failure to comply with the said demand, the official liquidator obtained an order from the Company-Court, on August 27, 1986, empowering him to take possession of the said premises. The appellant says that in pursuance of the said order the official liquidator again put a seal on the said premises.12. On August 28, 1986 the appellant filed an appeal against the order of the Company Judge dated 20th August, 1986, which was disposed of on September 1, 1986. At this stage, it would be appropriate to notice the reasoning of, and the directions given in the said judgment (impugned herein). After referring to the appellants plea of Sub-tenancy and oral consent of the landlord thereto, the Bench observed, "It is extremely difficult to believe that such consent would be given by the landlord looking into the conditions relating to availability of premises prevailing in Bombay." The Bench observed that for a similar premises, the rent would not be less than Rs. 20,000/-per month and that the alleged agreement of sub-tenancy "appears to be bogus and/or at any rate of extremely doubtful legal validity." The Bench then opined : "however, bogus or fraudulent the agreement between the company and the appellant may appear to be, the claim of the appellant will have to be adjusted (adjudicated?) upon" and that, therefore, leave is to be granted. Accordingly, it granted leave and transferred it; with the consent of both the took notice parties, to High Court. The Bench too of the fact that there are several liabilities outstanding against the company including the claim of workers for salary and provident fund amounts and further that the official liquidator requires a portion of the said flat for storing the books of the company. Having regard to all the said circumstances, grant of leave was made subjected to certain conditions which conditions alone constitute the subject matter of this appeal. They run as follows: "Further the official liquidator is directed to take possession of the said entire premises in which the companys office was originally situated, including the portion of the premises in the occupation of the appellant. The official liquidator, however, will allow the appellant to occupy the area in the said premises which is at present in her possession, save and except for room No. 2 as marked in Exhibit A, as shown in the plan which is put on record by consent of parties .She will however, remain in occupation as agent of the official liquidator pending the disposal of the suit which is transferred to this court, on payment of a monthly compensation of Rs. 7500/ - per month. She will also deposit a sum of Rs. 15,000/ - with the official, liquidator , as security deposit. She will pay the monthly amounts on or before the 10th day of each month, starting from 10th September, 1986. She will deposit the sum of Rs. 15,000/ - on or before 10th October 1986. In the event of her committing any default in the payment of the security amount or any two monthly amounts, the official liquidator to take possession of the premises in her occupation forthwith". 13. It was made clear that "this order is without prejudice to the rights and contentions of the parties in the said suit and is subject to the result of the said suit. It will also be open to the learned Judge hearing the said suit to vary this order in the event of any change of circumstances or to pass any other appropriate interim orders, as may be required." 14. Sri Masodkar, learned counsel for the appellant submitted that the Division Bench was in error in rejecting, on a mere presumption, the appellants case that the landlord had consented to the sub-tenancy in her favour. The landlord himself has come forward with certain applications of his own wherein he has affirmed his oral consent to the sub-tenancy in favour of the appellant. Counsel submitted that the conditions imposed by the Division Bench are contrary to law inasmuch as the protection of Bombay Rent Control Act. Act available to the appellant cannot be ignored or undone merely because the company has gone into liquidation. He submitted that the appellant can be evicted only by an authority under the Rent Control Act on the grounds specified in the Act. The enhancement of rent from Rs. 600/ - to Rs. 7,500/- is equally incompetent for the same reason. He submitted further that the tenancy interest the company had in the said flat is not an asset of the company in liquidation and that, at any rate, the liquidator cannot trade in the said right. He complained that the appellant had a right to be in possession of the said premises in her own right as a sub-tenant, and that the Division Bench acted illegally in converting the appellant into an agent of the official liquidator. The company court had no jurisdiction to direct the official liquidator to take possession of the entire flat including the portion in possession of the appellant, he submitted. 15. Sri Mehta, learned counsel for the official liquidator supported the reasoning and directions given by the Division Bench. He submitted that the story of sub-tenancy is untrue besides being invalid. The story of consent of landlord to the alleged sub-tenancy agreement is equally untrue. The trustee (representing the landlord-trust) acted beyond the authority in consenting to the said sub-tenancy, assuming that there was such a consent. Having regard to the close relationship of the appellant with one of the directors of the company (and the Manager of the company), and in all the facts and circumstances of the case, the directions made by the Division Bench are perfectly just and that this court ought not to interfere with the same. He submitted that the directions made by the Division Bench are discretionary in nature and have been made without prejudice to the rights and contentions of the parties in the said suit. The Bench has further empowered the company Judge to vary the said directions at any time he thinks proper. Having regard to the prevailing rents in Bombay, the location of the flat and all the circumstances of the case, the monthly compensation fixed by the Division Bench is in fact on the lower side, submitted the counsel. 16. At this stage, we must refer to the stand taken by the counsel for the landlord trust. The two SLPs. filed by the landlord trust were posted and heard along with this SLP. Sri G. L. Sanghi, learned counsel for the landlord trust stated before us that the trustees have indeed consented orally to the sub-tenancy agreement between the company and the appellants. We must say that this circumstance was not present before the Division Bench and evidently for this reason that the Bench appears to have rejected the theory of consent of the landlord. We cannot however refuse to take notice of the said statement of the counsel. We do so for the limited purpose of this appeal.17. From the facts narrated above, it would be evident that the rights of the appellant have to be. adjudicated in the suit filed by her which is now transferred to the High Court with the consent of both the parties. Whether the sub-tenancy is true, whether it is valid in law and whether the consent of the landlord is true and valid, are all questions which arise for decision in the suit. We cannot pronounce upon them at this stage. The only question for our consideration is whether the directions given by the Division Bench, extracted hereinabove, are justified in the circumstances of the case and in law.? 18. It is admitted by the official liquidator that the Board of directors of the company had indeed passed a special resolution affirming the agreement of sub-tenancy in favour of the appellant. (In her plaint in Suit No. 4873 of 1984 the appellant has referred to the said special resolution of the Board of directors.) This fact coupled with the statement of the learned counsel for the landlord trust establishes, prima facie, the appellants plea of sub-tenancy. That she was in possession of a major portion of the said flat on the date of appointment of liquidator is also not in dispute. According to the sub-tenancy agreement, the rent payable by the appellant is Rs. 600/ - per month as against Rs. 900/- per month payable by the company to the landlord for the entire -flat. In the above circumstances, we cannot reject, prima facie speaking, the appellants claim of protection of Bombay Rent Control Act. In addition to this factual situation, there are two other circumstances which must be taken into. consideration, viz.,a. The tenancy rights, the company had, in the said flat may not be an asset for the purpose of liquidation proceedings and. b. merely because a company goes in liquidation and a liquidator/ official liquidator is appointed, the rights of the company vis-a-vis its landlord and/ or its tenants, do not undergo any change.19. In view of the above facts and circumstances, we are of the opinion that the directions made by the Division Bench were not really warranted at this stage. The said directions have the effect of dispossessing the appellant from the said premises at an interlocutory stage. The character of her possession has also been altered - she is now permitted to be in occupation of a portion of the flat as the agent of the liquidator. These directions, in our opinion, were not really warranted, at any rate, at this stage of the proceedings, when the rights of the appellant are yet to be adjudicated upon. One important circumstance, which was not present before the Division Bench and which has been brought to our notice is the consent of the landlord to the sub-tenancy in her favour.

Decision:
0[ds]We cannot however refuse to take notice of the said statement of the counsel. We do so for the limited purpose of this appeal.17. From the facts narrated above, it would be evident that the rights of the appellant have to be. adjudicated in the suit filed by her which is now transferred to the High Court with the consent of both the parties. Whether the sub-tenancy is true, whether it is valid in law and whether the consent of the landlord is true and valid, are all questions which arise for decision in the suit. We cannot pronounce upon them at this stage.It is admitted by the official liquidator that the Board of directors of the company had indeed passed a special resolution affirming the agreement of sub-tenancy in favour of the appellant. (In her plaint in Suit No. 4873 of 1984 the appellant has referred to the said special resolution of the Board of directors.) This fact coupled with the statement of the learned counsel for the landlord trust establishes, prima facie, the appellants plea of sub-tenancy. That she was in possession of a major portion of the said flat on the date of appointment of liquidator is also not in dispute. According to the sub-tenancy agreement, the rent payable by the appellant is Rs. 600/ - per month as against Rs. 900/- per month payable by the company to the landlord for the entire -flat. In the above circumstances, we cannot reject, prima facie speaking, the appellants claim of protection of Bombay Rent Control Act. In addition to this factual situation, there are two other circumstances which must be taken intoconsideration, viz.,a. The tenancy rights, the company had, in the said flat may not be an asset for the purpose of liquidation proceedingsmerely because a company goes in liquidation and a liquidator/ official liquidator is appointed, the rights of the company vis-a-vis its landlord and/ or its tenants, do not undergo any change.19. In view of the above facts and circumstances, we are of the opinion that the directions made by the Division Bench were not really warranted at this stage. The said directions have the effect of dispossessing the appellant from the said premises at an interlocutory stage. The character of her possession has also been altered - she is now permitted to be in occupation of a portion of the flat as the agent of the liquidator. These directions, in our opinion, were not really warranted, at any rate, at this stage of the proceedings, when the rights of the appellant are yet to be adjudicated upon. One important circumstance, which was not present before the Division Bench and which has been brought to our notice is the consent of the landlord to the sub-tenancy in her favour. In the light of all the circumstances, we are of the opinion that the directions extracted hereinbefore in para were really not called for, at the interlocutory stage.L. P. No. 15678 ofbe, the liquidator can do so, but we cannot force him to do so, long as the reason given by him for continuing in possession is a relevant one. Secondly, the fact that the proposal of the Rashtriya Girni Kamgar Sangh, who are said to have formed an action Committee of the Khandesh Mill Employees Industrial Production Co-operative Society, for revival of the said Company was an equally relevantdo not know. Suffice it to say that the reasons for which the application filed by the appellant-landlord (and his appeal) have been dismissed cannot said to be irrelevant. We cannot, therefore, interfere with the said orders.