COMA/103/2008 1/42 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD COMPANY APPLICATION No. 103 of 2008 To COMPANY APPLICATION No. 152 of 2008 IN COMPANY PETITION No. 79 of 1989 WITH COMPANY APPLICATION No. 181 of 2008 To COMPANY APPLICATION No. 195 of 2008 IN COMPANY PETITION No. 79 of 1989 WITH OFFICIAL LIQUDATOR REPORT No. 55 of 2008 IN COMPANY APPLICATION No. 73 of 2008 For Approval and Signature: HONOURABLE MR.JUSTICE K.A.PUJ Sd/- ====================================== 1. Whether Reporters of Local Papers may be allowed to see the judgment ? YES 2. To be referred to the Reporter or not ? YES 3. Whether their Lordships wish to see the fair copy of the judgment ? NO 4. Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? NO 5. Whether it is to be circulated to the civil judge ? NO COMA/103/2008 2/42 JUDGMENT ====================================== RAMESHBHAI TANK AND OTHERS - Applicants Versus O.L. OF VIJAY MILLS LTD. - Respondent ====================================== Appearance : 1. Company Application Nos. 103 to 152 & Company Application Nos. 181 to 195 of 2008 MR RS SANJANWALA WITH MR DILIP L KANOJIYA for Applicants. MR JS YADAV FOR OFFICIAL LIQUIDATOR. 2. O.L.R. No. 55 OF 2008 MR JS YADAV FOR OFFICIAL LIQUIDATOR. ====================================== CORAM : HONOURABLE MR.JUSTICE K.A.PUJ Date : 18/03/2008 COMMON ORAL JUDGMENT 1. Since common issue is involved in all these Company Applications and since they are more or less heard together, the same are being disposed of by this common judgment and order. 2. Official Liquidator Report No. 55 of 2008 is a compliance report filed by the Official Liquidator pursuant to the directions issued by this Court in respect of the subject matter of all these Company Applications and hence, the same is also being disposed of by this common judgment and order. COMA/103/2008 3/42 JUDGMENT 3. In all these Company Applications, the applicants have taken out separate Judge's Summons praying for quashing and setting aside the notices issued by the Official Liquidator dated 24.05.2007 and 10.10.2007. The applicants have also prayed for the direction to the Official Liquidator to restrain him from taking possession of the rooms occupied by them and situated on land bearing Survey Nos.410/1/B bearing Final Plot No.46 of T.P. Scheme No. 12 of Ahmedabad. All applicants have filed their separate affidavits in support of Judge's Summons. 4. Mr. R. S. Sanjanwala, learned advocate along with Mr. Dilip L. Kanojiya appears for the applicants and Mr. J.S. Yadav, learned advocate appears for the Official Liquidator in all these Company Applications. 5. It is the case of the applicants in all these Company Applications that by an order dated 07.03.1993 passed in Company Petition No. 79 of 1989, Vijay Mills Limited has been ordered to be wound up by this Court. The Company in liquidation owns land bearing Survey COMA/103/2008 4/42 JUDGMENT No.410/1/B, bearing Final Plot No. 46 of T.P. Scheme No.12 of Ahmedabad. On the said land, Chawl was constructed by the Company in liquidation which is known as Krishna Chawl. The said Chawl was given on rent to various persons. The Chawl is in existence for the last more than 70 years and ever since it was constructed, it was given out on rent to various persons. The persons who were given the Chawl premises on rent were / are not connected with the Company in liquidation and are independent tenants of the Chawl. The applicants are the lawful tenants of the rooms given to them on rent and they have been regularly paying their rent earlier to the Mills Company and thereafter to the Official Liquidator of the Company in liquidation. It is also their say that since they are tenants of the Company in liquidation, they are entitled to protection under the provisions of the Bombay Rent Hotel and Lodging Houses Rates Control Act, 1947. Neither the Mills Company nor the Official Liquidator has initiated any proceedings for recovery of possession of the property on any of the ground permissible under the Bombay Rent Act. The Official Liquidator has not even approached this Court for any orders permitting him to COMA/103/2008 5/42 JUDGMENT recover possession of the premises from the applicant. This Court has also not in any appropriate proceedings passed any order directing the Official Liquidator to take over possession from the applicants. No such order has ever been passed by this Court and no such order has been passed after hearing the applicants, affording an opportunity to show cause against such order. 6. It is also the case of the applicants that all the occupants of the Chawl have been served with the notices dated 24.05.2007 and 10.10.2007 calling upon them to hand over vacant and peaceful possession of the premises in their possession. The said notices issued by the Official Liquidator are wholly without authority in law and without jurisdiction. It is settled position that by virtue of the order of liquidation, the relationship between the landlord and the tenant does not come to an end and the applicants continue to be the lawful tenants of the Mills Company in liquidation. The Official Liquidator has not initiated any legal proceedings against the applicants for taking possession of the premises from the applicants and hence, without any order from this Court, the Official Liquidator cannot demand possession from the COMA/103/2008 6/42 JUDGMENT applicants. 7. All these matters were heard to some extent on 05.03.2008 and 11.03.2008. Though this Court has reserved the judgment on 11.03.2008, it was, however, observed in its order dated 11.03.2008 that it is open for the parties to produce the details with regard to the original occupants of the premises in question, as to whether they have transferred subsequently by way of sub-tenancy or sale and in that case the list of original tenants and the present occupiers of the premises in question be furnished. The Court has also directed to make it clear as to whether all these applicants have paid rent, mesne profit or occupation charges to the Official Liquidator or to the previous Management prior to winding up till this date. The Official Liquidator was also directed to verify his own record and if the list of the original persons occupying the premises on the date when the winding up order is passed, was available, the said list be placed on record and be furnished to Mr. R.S. Sanjanwala, learned advocate for the applicants and necessary details are directed to be placed on record on or before 14.3.2008. COMA/103/2008 7/42 JUDGMENT 8. On 14.03.2008, the Official Liquidator has filed his report along with the list called for by the Court. Mr. R.S. Sanjanwala, learned advocate appearing for the applicants has also filed written submissions and various details were furnished in respect of each of the applicants. He has also furnished statements indicating the application No., name of the tenant, name of the occupant, whether the premises is occupied by the original tenant or by any one else who acquired the possession either by way of sub-tenancy, transfer or inheritance and showing the nature of use of the premises whether by way of shop or residence. 9. Mr. R. S. Sanjanwala has submitted that the applicants are persons presently occupying Krishna Chawl. The said Krishna Chawl is of the ownership of Vijay Mills Limited (In Liquidation). The Company was ordered to be wound up on 07.09.1993. The applications are filed, being aggrieved by the notices issued by the Official Liquidator calling upon the applicants to hand over possession of the Chawl in their possession. He has further submitted that all the applicants or their COMA/103/2008 8/42 JUDGMENT predecessors were tenants of the Company in liquidation before its winding up and thereafter by the Official Liquidator. The statement of affairs filed by the Ex- Directors of the Company in liquidation describes Krishna Chawl as tenanted property. Along with the statement of affairs, the list of documents was also filed by Company in liquidation. A reference to the said list is also found in the notice dated 12.05.1994. Based on the list furnished by the Ex-Management of the Company, notices were issued on 12.05.1994 to the tenants as per the said list calling upon them to pay the rent / compensation to the Official Liquidator. 10.Mr. Sanjanwala has further submitted that the applicants have also produced rent receipts issued by the Ex-Management in favour of the applicants or their predecessors. The rent receipts describe the applicants or the predecessors as tenants and on overleaf thereof certain conditions of tenancy are written. The said document constitute an agreement / rent note. In some of the cases, the applicants have produced a letter / application submitted to the Ex-Management for being inducted as a tenant and an endorsement on the said COMA/103/2008 9/42 JUDGMENT application by the Ex-Management admitting the applicants as tenants is given. The said document also constitutes an Agreement / Rent Note. In any case, the law does not require a written agreement of lease and tenancy can be brought about by an oral agreement between the parties. Reliance is placed on the decision in the case of TIRATH RAM GUPTA V/S. GURUBACHAN SINGH AND ANOTHER, AIR 1987 SC 770. The existence of a rent note is not mandatory and documents such as rent receipts, electricity bills, telephone bills, licensee etc. constitutes a valid evidence of tenancy. Once it is shown that the occupant or the predecessor was lawfully inducted and that the owner has accepted the rent from such person, such person shall be entitled to a protection as tenant of the premises. He has further submitted that it is settled position that merely because Company goes into liquidation and Liquidator / Official Liquidator is appointed, the rights of the Company vis.a.vis its landlord and/or its tenants do not undergo any change. Reliance is placed on the decision in the case of SMT. NIRMALA R. BAFNA AND OTHERS V/S. KHANDESH SPINNING & WEAVING MILLS COL COMA/103/2008 10/42 JUDGMENT LTD., AND ANOTHER, AIR 1993 S.C. 1380. 11.Mr. Sanjanwala has further submitted that it is settled legal position that all tenants in Gujarat would be entitled to protection under the Bombay Rent Hotel and Lodging Houses Rates Control Act, 1947. Sub-Section (1) of Section 12 of the Rent Act restrains the landlord from taking recovery of possession of any premises so long as the tenant pays, or is ready and willing to pay, the amount of standard rent and permitted increases, if any, and observes and performs the other conditions of the tenancy, in so far as they are consistent with the provisions of the Act. He has, therefore, submitted that any tenant pays or is ready and willing to pay the amount of standard rent or permitted increases and observes and performs the other conditions of the tenancy cannot be evicted from the premises. Reliance is placed on the decision in the case of BHAIYA PUNJALAL BHAGWANDDIN V/S. DAVE BHAGWATPRASAD PRABHUPRASAD AND OTHERS, AIR 1963 SC 120 and in the case of VORA ABBASBHAI ALIMAHOMED V/S. HAJI GULAMNABI HAJI SAFIBHAI, AIR 1964 S.C. 1341. COMA/103/2008 11/42 JUDGMENT 12.All the applicants have paid rent till it was being accepted by the Official Liquidator. For subsequent period, letters have been addressed offering the rent and enclosing therewith cheques for the outstanding amounts. In any case, all the applicants are ready and willing to pay the rent and can deposit the outstanding amount, if any. Mr. Sanjanwala has further submitted that in addition to the documents produced on record evidencing tenancy, all the applicants can lead further evidence, documentary as well as oral in support of their claim of tenancy. He has further submitted that under the Bombay Rent Act, all the applicants are entitled to protection against recovery of possession. In case, any of the applicants is found in breach of any of the conditions of tenancy, necessary proceedings will have to be initiated in appropriate Court for recovery of possession. In such proceedings, the breach of conditions of tenancy will have to be pointed out and the applicants would be entitled to an opportunity to dispute the alleged breach and/or raise such contention as may be available in law and oppose the motion for eviction. The Official Liquidator, however, cannot straightway COMA/103/2008 12/42 JUDGMENT demand possession based solely on the fact that the Company, the original owner of the land is ordered to be wound up. He has further submitted that the Official Liquidator has, so far not filed any report / reply dealing with the averments made and/or contentions raised in view of the contentions raised herein above, the applications ought not to be dismissed in limine. 13.Mr. Sanjanwala has further submitted that on 14.02.2008, this Court dismissed Company Application No. 73 of 2008 filed by one Mr. Prahlad Tanaji Patil, also an occupant of Krishna Chawl. The said judgment proceeds on the basis that the said occupant is covered by Section 630 of the Companies Act, 1956 and as such, cannot claim to occupy the premises posing to be a tenant. The said applicant claims that he is in rightful possession and is entitled to protection under the Rent Act. While dismissing the said Company Application, this Court relied upon the judgment in the case of Textile Labour Association V/s. Official Liquidator of Amruta Mills reported in (2005) 126 Company Cases 469 (Gujarat). Against the said judgment, in the matter of Amruta Mills, O.J. Appeal Nos. 72, 73 & 74 of 2004 have COMA/103/2008 13/42 JUDGMENT been filed. By an order passed on 06.02.2004 by the Division Bench of this Court, the appeals have been admitted whereby the interim relief originally granted by the learned Company Judge on 26.11.2004 was extended. The said appeals are pending and interim relief is in force. He has, therefore, submitted that it would be in the interest of justice to admit these applications and await the outcome of the appeals or to order that these Company Applications be heard along with the O.J. Appeals. The judgment which may be delivered in the above Appeal will have a direct bearing on the subject matter of the present applications. 14.Mr. Sanjanwala has alternatively submitted that the applicants have also offered to purchase the premises at the market value. The market value may be determined by this Court after calling for the Valuation Report or by adopting any other method and the applicants shall purchase the property after paying the market value as may be determined by this Court. In similar circumstances, occupants of rented premises have been permitted to purchase the properties at the prevailing market value. He relied on the decision of this Court in COMA/103/2008 14/42 JUDGMENT the case of Official Liquidator of Ambica Mills Limited V/s. Bank of India decided on 21.04.2005 in OLR No. 67 of 2004. 15.Mr. Sanjanwala has further submitted that as directed by this Court vide its order dated 11.03.2008, the list has already been filed. As per the said list, most of the applicants are original tenants and/or their heirs and legal representatives. In 18 cases, the applicants are transferee, who have acquired tenancy rights from the original tenant. Such transfers are not prohibited in law and have been accepted by, either the Company in liquidation or by the Official Liquidator. The transferees are also tenants in possession and assuming for the sake of argument that such transfers furnish a ground for eviction under Section 13 of the Bombay Rent Act, necessary proceedings in this regard will have to be initiated before the appropriate Court giving the persons in occupation an opportunity to defend any motion for eviction. 16.Mr. Sanjanwala has further submitted that the commercial use being made by some of the occupants COMA/103/2008 15/42 JUDGMENT was permitted by the Company in liquidation and there is no prohibition against such commercial use. In any case, the transfer of tenancy or commercial use having been condoned and in view of the acquiescence or waiver by the Company in liquidation or Official Liquidator, would not furnish a ground for eviction. 17.Lastly, Mr. Sanjanwala has submitted that the Company was ordered to be wound up on 07.09.1993 and for a period of 12 years thereafter, the Official Liquidator has recognised the occupants as tenants. In any case, all the occupants have enjoyed possession to the knowledge of the Official Liquidator. No efforts were made by the Official Liquidator to obtain possession. The applicants have thus become owners by adverse possession and cannot be evicted in the manner sought to be done by the Official Liquidator. He has, therefore, submitted that the reliefs prayed for in all these applications deserve to be granted and the applications be allowed accordingly. 18.In his compliance report being OLR No. 55 of 2008, the Official Liquidator has stated that this Court vide order dated 14.02.2008 passed in Company Application No.73 COMA/103/2008 16/42 JUDGMENT of 2008 directed the Official Liquidator to proceed further in respect of the notice dated 10.10.2007 issued by him to 66 occupants of Krishna Chawl of the Company and to get the said premises vacated forthwith. The Official Liquidator was also directed to take help from the concerned Police Station for implementation of the notice issued by him. The Court further observed in its order dated 14.02.2008 that the notice to the occupants of Chawl was issued by the Official Liquidator on 10.10.2007 directing the occupants to vacate the premises within 10 days, but on expiry of the said period of notice, the Official Liquidator has not taken any action and, therefore, it appears to the Court that the Official Liquidator is not giving due weightage to the orders passed or directions issued by this Court. In this regard, the Official Liquidator has stated that after issuance of notice on 10.10.2007, he has received a letter dated 19.10.2007 from the advocate of the occupants stating therein that they are not illegal occupants but they are lawful tenants of the Company and requested the Official Liquidator to withdraw the notice dated 10.10.2007. He has thereafter issued a letter on 23.11.2007 requesting the Advocate of the occupants to furnish copies of rent COMA/103/2008 17/42 JUDGMENT note, agreements, if any, executed by the Company in favour of his clients and also to intimate the dates since when the properties are in their possession. Since no reply was received, he issued another letter on 31.01.2008. Instead of giving any reply or furnishing details, Company Application No.73 of 2008 was filed before this Court. On rejection of the said application, O.J. Appeal was filed before the Division Bench and the Official Liquidator was orally directed without any express specific operating order, not to evict the occupants of the Chawl till 25.02.2008. The Official Liquidator has further stated in his report that there are 66 families occupying the Krishna Chawl on whom the notices dated 10.10.2007 were served by him. Majority of the occupants are staying in the Krishna Chawl with their family and, therefore, the eviction proceedings involve forcible removal of more than 200 persons including ladies and children from the Krishna Chawl. He does not have adequate manpower within his office to forcibly remove such a large number of persons from the Company's premises and even otherwise, if the clerical staff of the office of the Official Liquidator is deployed to physically pull the occupants out of the rooms occupied COMA/103/2008 18/42 JUDGMENT by them and to shift their belongings outside the Chawl, in all probabilities, the life of the officials of the office of the Official Liquidator shall be at risk and there may be a danger of disturbance in the law and order situation. Therefore, he sent a request to the Police Inspector, Saher Kotada Police Station, Ahmedabad requesting him to provide adequate police assistance including ladies police to assist the representative of the Official Liquidator in getting the Krishna Chawl vacated and also to maintain the law and order. He has further stated that on 25.02.2008, Police Inspector, Saher Kotada Police Station informed the Official Liquidator that they are ready to provide police assistance and protection but cannot provide any assistance in removing the goods, articles and any other things and for removing the encroachments and also furnished the list of estimated cost for providing police assistance for getting evicted the quarters of the Company. The Official Liquidator has further stated in his report that on 27.02.2008, he has deputed his persons at Krishna Chawl for vacating the quarters of the Company. However, a representation was made by the occupants stating that stay has been granted in O.J. Appeal No. 17 of 2008 till 03.03.2008 COMA/103/2008 19/42 JUDGMENT against eviction and hence, no further steps were taken by him. 19.The Official Liquidator has filed further report on 13.03.2008 stating that this Court has directed the Official Liquidator vide order dated 11.03.2008 to verify its own record and if the list of the original persons occupying the premises on the date when the winding up order was passed is available, the said list be placed on record and be furnished to Mr. R. S. Sanjanwala, learned advocate appearing for the applicants. Pursuant to the said order, the Official Liquidator has submitted that total 51 occupants as per List A to the report are the original occupants of the quarters on the date of winding up order and 15 occupants as per List B have come in possession of the quarters at Chawl after the date of winding up order. 13 occupants as per List C who were in possession of the quarters as on the date of winding up order are not in possession now. After furnishing this report, he has sought the direction of the Court for further order in the matter. 20.Mr. J. S. Yadav, learned advocate appearing for the COMA/103/2008 20/42 JUDGMENT Official Liquidator has submitted that the distinction sought to be made by the learned advocate appearing for the applicants that the applicants are not the service tenants is absolutely uncalled for and unwarranted. The contention raised is not based on any material or evidence. On the contrary, the evidence is otherwise. The applicants have themselves stated in their letter dated 07.06.2007 addressed to the Official Liquidator that most of the tenants are the ex-workers / employees of the closed Mills Company. As a matter of fact, Krishna Chawl was constructed for the residence of workers / employees of the Mills Company and it was never the intention of the Mills Company to give rooms of this Chawl on rent to any outsider. Hence, the present occupants of the Chawl are either relatives or legal heirs of the ex-workers or employees of the Mills Company or they have directly or indirectly derived their title of whatever worth, from such persons. Hence, provisions of Section 630 of the Companies Act, 1956 equally apply to them. 21.Mr. Yadav has further submitted that the Official Liquidator is entitled to claim possession of the premises COMA/103/2008 21/42 JUDGMENT in question on termination of the lease agreement, if any, as soon as the Company went into liquidation and the employer – employee relationship between the Company in liquidation and the applicants has come to an end. Mr. Yadav has relied on the decision of the Delhi High Court in the case of K. K. Dhawan V/s. Dr. (Mrs.) Promila Suri, reported in All India Rent Control Journal 1998 (1) 181, wherein it is held that relationship of landlord and tenant is created by a contract, mere payment of rent does not necessarily establish the relationship of landlord and tenant. Therefore, on the ground that landlady Mrs. Suri had issued rent receipt in the name of Mr. K. K. Dhawan would not make him a direct tenant of Mrs. Nirmal Kanta Suri. In fact the appellant failed to produce any contract establishing the relationship of landlord and tenant. On the contrary Ex.A-2 is a rent agreement entered