COMA/421/2007 1/44 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD COMPANY APPLICATION Nos. 421 to 435 of 2007 In OFFICIAL LIQUDATOR REPORT No. 18 of 2003 With COMPANY APPLICATION No. 399 of 2007 For Approval and Signature: HONOURABLE MR.JUSTICE K.A.PUJ ========================================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 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 ? 5 Whether it is to be circulated to the civil judge ? ========================================================= RAMKUMAR SUKHCHANDAN GUPTA - Applicant(s) Versus O.L. OF THE NAVJIVAN MILLS COMPANY LTD. & 4 - Respondent(s) ========================================================= Appearance : COMPANY APPLICATION NOS.421 to 435 OF 2007 MR RS SANJANWALA for Applicant(s) : 1, OFFICIAL LIQUIDATOR for Respondent(s) : 1, MS AMEE YAJNIK for Respondent(s) : 1, MR GAURAV S MATHUR for Respondent(s) : 2 – 5. COMPANY APPLICATION NO.399 OF 2007 MR DS VASAVDA for Applicant(s) : 1, MS AMEE YAJNIK for Respondent(s) : 1, MR GAURAV S MATHUR for Respondent(s) : 2 – 5. ========================================================= CORAM : HONOURABLE MR.JUSTICE K.A.PUJ COMA/421/2007 2/44 JUDGMENT Date : 18/03/2008 COMMON ORAL JUDGMENT 1. Since common issue is involved in all these Company Applications and since they are being more or less heard together, the same are being disposed of by this common judgment and order. 2. The applicants in all these Company Applications have taken out Judge's Summons praying for quashing and setting aside notice dated 5.6.2006 issued by the Official Liquidator calling upon the applicants to vacate the premises, which are unauthorizedly occupied by them, and to hand over the vacant and peaceful possession of the premises to the Official Liquidator, failing which the Official Liquidator will have to initiate action to forcibly remove them from the premises of the Company in liquidation, with police assistance in order to proceed with COMA/421/2007 3/44 JUDGMENT the liquidation proceedings of the Company. The applicants have also prayed for the direction to restrain the respondent from disturbing the possession and use of the shop situated at Navjivan Mills premises of Mouje Village – Kalol, Taluka and District – Gandhinagar. 3. An affidavit in support of respective Judge's Summons is filed by each of the applicants. Mr. R.S.Sanjanwala, learned advocate appears for the applicants in Company Application Nos.421 to 435 of 2007 and Mr. D.S.Vasavda, learned advocate appears for the applicant in Company Application No.399 of 2007. Ms.Amee Yagnik, learned advocate appears on behalf of the Official Liquidator and Mr.Gaurav S. Mathur, learned advocate appears on behalf of the respondent Nos.2 to 5 in all these applications. 4. The brief facts giving rise to the present COMA/421/2007 4/44 JUDGMENT applications are that the applicants are claiming themselves to be the tenants of the respective shops occupied by them, situated at Navjivan Mills premises of Mouje Village – Kalol, Taluka & District – Gandhinagar. It is the say of the applicants that the shops were given either to them or their predecessors on rent by the Company in liquidation. The tenancy rights in the subject premises are evidenced by the documents such as rent note, rent receipt, certification of registration under Bombay Shops and Establishment Act, electricity bill, election card, telephone bills and some miscellaneous documents. 5. It is the say of the applicants that the applicants have been regularly paying the rent for the subject premises as is evidenced by the rent receipt issued by the Company in liquidation and/or the Official Liquidator of the Company in liquidation. The Company or COMA/421/2007 5/44 JUDGMENT the Official Liquidator had not initiated any proceedings against the applicants for recovering possession of the subject premises either before the order of winding up of the company or thereafter. On and from July, 2003 the Official Liquidator stopped accepting rent of the subject premises. However, the amount payable as and by way of rent was sent to the Official Liquidator by demand draft under cover of Registered Post A.D. letter. It is further contended that if there are any arrears of rent, the applicants have shown their readiness and willingness to deposit the same in Court or to pay the same to the Official Liquidator or to the respondent Nos.2 to 5. Even after the sale of the property in favour of the respondent Nos.2 to 5, the applicants have offered rent to respondent Nos.2 to 5 or any one of them. 6. It is the say of the applicants that after the Company was ordered to be wound up, a COMA/421/2007 6/44 JUDGMENT letter dated 14.6.1993 was addressed by Security Officer of the Company in liquidation to the Official Liquidator, enclosing therewith statement giving list of tenants and the rent collected from them. It was, therefore, contended that there was no dispute about the fact that the applicants were tenants of the subject property. 7. It is also the say of the applicants that on or around 10.6.2003 an advertisement was issued notifying sale of land of the company in liquidation. The land put up for sale was described as land admeasuring 95212 Sq. Yds., situated at Kalol, District – Gandhinagar, except records of the Company in liquidation. The sale was on “as is where is whatever there is” basis. The offers received were scrutinized by the Official Liquidator and a report was filed being OLR No.18/2003, inter alia, praying that the sale be confirmed. After considering the report of the Official COMA/421/2007 7/44 JUDGMENT Liquidator, this Court by order dated 28.11.2003 confirmed the sale in favour of Deep Estate (subsequent purchaser) at Rs.4.67 crores. It is also the say of the applicants that though the advertisement described the land as admeasuring 95212 Sq. Yards, the valuation report which was produced before this Court divided the land into two parts, namely, 87759 Sq. Yards ( 73377.21 Sq. Mtrs.) of clear land and 6870 Sq. Yards (5744.42 Sq.Mtrs.) of leasehold land. The building in which shops are situated stand on the leasehold land admesuring 5744.42 Sq.Mtrs. It is, therefore, contended that interest of the area covered by the building in which the applicants' shops were situated, separate valuation was attached by the Official Valuer as well as purchaser and accordingly the prices were quoted. It is further contended that the sale deeds were executed in favour of the purchaser and its three nominees and they have purchased the land obviously on the COMA/421/2007 8/44 JUDGMENT basis of “as is where is” basis, which includes the tenancy rights of all the occupants of the shops situated in 5744.42 Sq.Mtrs. of land. 8. Mr.Sanjanwala submitted that the lands belonging to the Company in liquidation alongwith construction standing thereon which would include the subject property, having been sold, the Official Liquidator has lost control or authority over the said property. The Official Liquidator was, therefore, not entitled to demand possession from the applicants or to take steps for taking possession from the applicants. However, by notice dated 5.6.2006, the Official Liquidator describing the applicants' possession as unlawful, directed them to hand over peaceful and vacant possession to the Official Liquidator threatening that in case of failure to do so, the possession would be taken over under the police assistance. The COMA/421/2007 9/44 JUDGMENT said direction by the Official Liquidator was not in pursuance of any order of this Court nor it is in exercise of any authority or power under the provisions of the Companies Act, 1956. It is further contended that the said directions have been issued at the instance of the respondent Nos.2 to 5, who for the malafide purpose of removing the applicants from the subject premises, persuaded the Official Liquidator to issue public notice dated 5.6.2006. Thus, applicants have contended that the said notice issued by the Official Liquidator is per-se without jurisdiction or authority in law as the Official Liquidator, after sale of the assets has become functus officio and is not entitled to demand possession from the applicants either in law or on the facts of the case. 9. Mr.Sanjanwala submitted that being aggrieved by the notice issued by the COMA/421/2007 10/44 JUDGMENT Official Liquidator, the applicants have filed Company Application No.293 of 2006 before this Court. This Court by an order dated 1.12.2006 allowed the said application. However, OJ Appeal No.71 of 2007 was preferred against the said order by the respondent Nos.2 to 5. Vide order dated 6.8.2007, the Division Bench of this Court has set aside the order dated 1.12.2006 of the learned Company Judge and remanded the matter for fresh decision. Under the said order, all the applicants of the Company Application No.293 of 2006 were directed to file separate individual application. In view of the above referred order, separate individual applications were preferred by the applicants. The applicants have also undertaken to withdraw the Company Application No.293 of 2006 in view of the present separate individual applications. 10. Mr.Sanjanwala, at the out set, raised an COMA/421/2007 11/44 JUDGMENT objection against hearing of all these applications by this Court (Coram: K.A.Puj,J.), being a party to the decision of Division Bench in OJ Appeal No.71 of 2007. This objection is, however, not sustainable as the Division Bench has not expressed any opinion on the merits of the matter. Since the present respondents No.2 to 5 were not parties in Company Application No.293 of 2006 and the learned Company Judge has decided the said application and passed an order, without impleading them as parties and without hearing them, the Division Bench has quashed and set aside the said order with a direction to the learned Company Judge to decide afresh after allowing the applicants to file separate applications and after hearing respondents No.2 to 5 in the matter. Mr.Sanjanwala further raised an objection that scope of remand is very limited and if the applicants were able to produce reliable and cogent evidence at least for the purpose COMA/421/2007 12/44 JUDGMENT of prima facie satisfying the Company Court that they were lawfully inducted tenants in respect of the property in question, they are entitled to the relief sought for in the applications. Detailed inquiry or appreciation of evidence is not envisaged under the said remand order. He has, therefore, submitted that since the applicants produced reliable and cogent evidence in their favour, prima facie establishing that they are lawfully inducted tenants, the respondents may be directed to approach competent Civil Court seeking eviction of the applicants. 11. Mr.Sanjanwala submitted that after the lands of the Company in liquidation were purchased by the respondent Nos.2 to 5 or after the rights were acquired in the said lands by them, the efforts were made by the respondent Nos.2 to 5 to remove the applicants. All efforts to remove the COMA/421/2007 13/44 JUDGMENT applicants were, however, opposed. Some of the applicants have filed Regular Civil Suit No.41 of 2006 in the Court of learned Civil Judge (J.D.) Kalol against Mahendra Kashiram Patel, Jyotindra Ambalal Barot, Ramesh Kashiram Patel, who is President of Kamdhenu Non-trading Association, the present respondent No.4, M/s.Deep Estate Developers Pvt. Ltd., the present respondent No.2 and Shri Amrut Kashiram Patel. The plaintiffs of the said suit have contended that they are the tenants of various shops mentioned in the plaint and that the said defendants by removing roof of certain shops on the first floor are trying to damage the shops of the plaintiffs of the said suit. The plaintiffs of the said suit also filed application Ex.5 for interim injunction restraining the defendants of the said suit from disturbing the use and occupation of the properties of the plaintiffs of the said suit. By an order passed on 5.3.2007, ad-interim injunction was COMA/421/2007 14/44 JUDGMENT granted directing the defendants of the said suit that they shall not remove the roof of the shops of the plaintiffs of the suit and the staircase leading towards the plaintiffs' shops. After bi-parte hearing, trial Court directed status quo to be maintained in respect of the roof and the staircase of the properties, which are subject matter of the said suit. The trial Court while passing the above order has accepted the tenancy rights of the plaintiffs of the said suit. He has, therefore, submitted that in the reply/written statement filed by the defendants of the said suit, the tenancy rights of the plaintiffs of the suit are admitted by the defendants. 12. In the above background of the matter, Mr.Sanjanwala submitted that the notice issued by the Official Liquidator treating the possession of the applicants as unlawful and unauthorized and calling upon them to COMA/421/2007 15/44 JUDGMENT hand over the vacant and peaceful possession of the subject premises is per-se without authority of law and without jurisdiction and de horse the provisions of the Companies Act, 1956. It is further contended that the properties having been sold by this Court, the Official Liquidator has lost control and authority over the subject property and cannot demand possession from the applicants. The possession of the property was not demanded prior to sale in favour of the respondent Nos.2 to 5 and the sale of the subject property was on 'as is whereis whatever there is basis' and hence the notice issued by the Official Liquidator is required to be quashed and set aside. 13. Mr.Sanjanwala further submitted that if at all the respondent Nos.2 to 5 are desirous of obtaining vacant and peaceful possession of the subject property, they are entitled to the remedies in law. It is alternatively COMA/421/2007 16/44 JUDGMENT contended that the Official Liquidator could not have straightway issued notice treating the applicants' possession as unlawful and demanding vacant and peaceful possession from the applicants. If any property of the Company in liquidation is found in possession of the third party, the Official Liquidator has to move appropriate proceedings under the Companies Act, before the Company Court seeking appropriate order in this regard. The action of the Official Liquidator is, therefore, arbitrary and unauthorized exercise of powers and hence the notice is required to be quashed and set aside. 14. Mr.Sanjanwala further submitted that, even otherwise, the applicants are lawful tenants of the subject premises as is evident from the documents produced alongwith their respective applications and are entitled to protection under the Bombay Rents Hotel and Lodging Housing Rates Control Act, 1947. The COMA/421/2007 17/44 JUDGMENT possession of the subject premises as tenant cannot be disturbed otherwise than by following the procedure prescribed by the law. He has therefore submitted that the respondent Nos.2 to 5 ought to be relegated to their remedies in law, if they desire, to have vacant and peaceful possession of the subject property. The issue can better be adjudicated by a competent Civil Court on appreciation of oral as well as documentary evidence that may be led by respective parties. The impugned notices are, therefore, required to be quashed and set aside even on this ground. 15. Mr. D.S.Vasavda, learned advocate appearing for the applicant in Company Application No.399 of 2007, has adopted more or less the arguments and submissions of Mr.Sanjanwala and submitted that the notice issued by the Official Liquidator is barred by period of limitation. The applicant being the ex- COMA/421/2007 18/44 JUDGMENT workmen of the Mills Company and was allotted the premises for his residence and he has been paying rent to the ex-management prior to winding up and thereafter, to the Official Liquidator, he cannot be evicted by the Official Liquidator without due process of law. Mr.Vasavda further submitted that once the property in question having been sold to the respondents Nos.2 to 5 by public auction in pursuance of an order of the Court, the sale became absolute and the title vested in them. The Official Liquidator, thereafter cannot issue any notice for eviction. He relied on the decision of the Hon'ble Supreme Court in the case of B.Arvind Kumar, AIR SCW 4080. He, therefore, prayed for quashing and setting aside the impugned notice and to allow the application filed by the applicant. 16. The Official Liquidator has filed his report on 24.12.2007 in all these Company COMA/421/2007 19/44 JUDGMENT Applications. Based on this report, Ms.Amee Yagnik, learned advocate appearing for the Official Liquidator submitted that there is a specific clause in the conveyance deed, under which the Official Liquidator is not only authorized/empowered but is duty bound to take all such actions as may be necessary for the purpose of granting, conveying and transferring the title and possession of the properties more perfectly and absolutely in favour of the purchaser. She has further submitted that the Division Bench of this Court vide order dated 6.8.2007 passed in OJ Appeal No.71 of 2007 held that the respondent Nos.2 to 5 were necessary parties and the Company Application No.293 of 2006 could not have been decided without joining the respondent Nos.2 to 5 as party respondents and without giving them an opportunity of reasonable hearing and the applicants were not entitled to succeed merely on the ground that the Official Liquidator had become COMA/421/2007 20/44 JUDGMENT functus officio and they were required to show their title to the land and to produce reliable and cogent evidences at least for the purpose of prima facie satisfaction of the Company Court that they were lawfully inducted tenants in respect of the property in question. The Division Bench has decided the said Appeal keeping contentions of the parties open for deciding the controversy by the learned Company Judge on filing separate individual applications by the applicants. 17. So far as merits of the applications and the contentions raised therein are concerned, Ms.Yagnik has submitted that the Company did not execute any lawful and valid lease deed in favour of the applicants and, therefore, they have never been lawful tenants of the Company in liquidation. The applicants have not produced on record any lawfully and validly executed lease deed in their favour or even rent note conferring any right upon COMA/421/2007 21/44 JUDGMENT them to hold or continue to hold possession of the property for ever. The applicants have produced certain documents establishing their possession. In fact, possession is not in dispute, but their right to continue in possession is very much in dispute. The documents produced by the applicants on record, do not and cannot establish any permanent tenancy in their favour or a lawful right to remain in possession. She has further submitted that the Official Liquidator had never admitted or acknowledged the tenancy claim of the applicants. However, since the premises was not required by the Official Liquidator immediately for the winding up purposes, the applicants were not evicted immediately on passing of the winding up order, and a compensation as a license fee was received from some of them. She has, therefore, submitted that the applicants do not have any right, title or interest in the property of the Company and COMA/421/2007 22/44 JUDGMENT they do not have any lawful right to retain the possession of the properties of the Company and the Official Liquidator is duty bound to evict and remove them from their unauthorized and illegal occupation of the properties of the Company so as to enable him to hand over vacant and peaceful possession of the properties of the Company to the purchaser for the purpose of concluding the winding up proceedings. She has, therefore, submitted that the applications deserve to be rejected with further direction to the applicants to hand over vacant and peaceful possession of the premises in their unauthorized and illegal occupation, to the Official Liquidator forthwith. 18. On behalf of the respondent Nos.2 to 5 affidavit-in-reply is separately filed in each of these applications. Mr.Gaurav Mathur, learned advocate appearing for respondents Nos.2 to 5 submitted that the COMA/421/2007 23/44 JUDGMENT applicants are not the tenants nor in lawful possession of the subject premises. The applicants have not produced on record any rent note or agreement in the name of the applicants. The rent receipts issued by the Official Liquidator are not considered to be the valid rent receipts. It was further contended that the Company in liquidation could not have given the premises on lease to the applicants as the shops were situated on the lease hold land. The alleged tenancy was not bonafide tenancy and the alleged rent receipts issued by the Official Liquidator cannot confer any tenancy right nor do they suffice to say that the applicants are tenants of the subject premises. With regard to the dispute raised about the lease hold land, he has submitted that the area of 5744.42 Sq.Mtrs., of lease hold land, sold to the respondent Nos.2 to 5 refers to the land that the Company had acquired on lease. The same does not and cannot mean that the said COMA/421/2007 24/44 JUDGMENT land was given on lease and the sale of the said property on 'as is whereis and whatever there is basis' would be inclusive of the alleged tenancy rights of the applicants. With regard to the averments made about Civil Suit filed before the Kalol Court, he has submitted that the said suit does not pertain to the property claimed by the applicants as the same pertains to City Survey Nos.3159 to 3160 and not the City Survey No.3172, which is being claimed by the applicants. In any case, in the said suit there was no prayer for declaration of tenancy right. Even otherwise, the order dated 5.3.2007 passed by the trial Court is manifestly erroneous since the trial Court has relied on the order dated 1.12.2006 passed by this Court wherein this Court has expressly stated in para-8 that the said order does not express any opinion on merits and does not decide the right and legality of the occupation of the applicants. It is COMA/421/2007 25/44 JUDGMENT further contended that the sale deed clearly provides that the Official Liquidator conveys and assures the said property to the purchasers i.e. respondent Nos.2 to 5, with all rights and privileges appurtenant thereto with the right to or enjoyed therewith without any interruption, obstruction, claim or demand whatsoever at law and in equity. The said Deed further provides that the purchasers i.e. respondent Nos.2 to 5 are assured by the Official Liquidator of use and benefit of the said property as absolute owners thereof, without any interruption, obstruction, claim or demand whatsoever at law and in equity. It is further contended that even at the time of bidding and confirmation of sale of the said property, there were illegal encroachers upon the said property as noted by this Court in the said confirmation order, pursuant to which the sale deed was executed. COMA/421/2007 26/44 JUDGMENT 19. In view of the sale confirmation order and the provisions contained in the sale deed, the Official Liquidator has rightly issued the impugned notices dated 5.6.2006 for eviction, calling upon them to vacate said property from their unauthorized occupation and hand over the vacant and peaceful possession of the premises to the Official Liquidator. He has, therefore, submitted that all these applications deserve to be rejected. 20. After having heard learned advocates appearing for the respective parties and after having gone through the applications, documents attached therewith, report of the Official Liquidator and affidavit-in-reply filed on behalf of the respondents Nos.2 to 5 and after having considered very carefully the relevant statutory provisions contained in the Bombay Rent Act as well as Companies Act, 1956, and the authorities cited before COMA/421/2007 27/44 JUDGMENT the Court, this Court is of the view that none of the applicants before this Court is entitled to the relief claimed in their respective applications. First of all, there is no substance in the argument that the scope of remand order is very limited. As a matter of fact, the applicants are required to show their title to the land. They are supposed to produce reliable and cogent evidence to