IN THE HIGH COURT OF JUDICATURE AT PATNA Company Appeal (DB) No.8 of 2008 1. Amiya Ranjan, S/o Shri Suesh Prasad, Proprietor, M/s A.R.Traders, Shop No.G-2, Avanti Hotel Complex of M/s Jaimangal Ltd., Frazer Road, P.S. Kotwali, District Patna. 2. Soumitra Kumar Ghosh S/o late Chittaranjan Ghosh, Proprietor of M/s Photo Point Shop No.5,6,7 & back portion of the Avanti Hotel Complex of M/s Jaimangal Ltd., Frazer Road, P.S. Kotwali, District Patna. 3. Mritunjay Kumar Singh, S/o Shri Shiv Kumar Singh, Prop. M/s Habitat & Newleenas Library, Shop No.G-4, Avanti Hotel Complex of M/s Jaimangal Ltd., Frazer Road, P.S. Kotwali, District Patna. 4. Ravi Kumar, S/o Shri Om Prakash Prop. M/s Jewar Jewelers, Shop No.G-3, Avanti Hotel Complex of M/s Jaimangal Ltd., Frazer Road, P.S. Kotwali, District Patna. 5. Laxman Prasad, S/0 late Bishwanath Prasad, Prop.M/s Jyoti Studio, Shop No.G-1, Avanti Hotel Complex of M/s Jaimangal Ltd., Frazer Road, P.S. Kotwali, District Patna. 6. Sheikh Siddiqque Samsuddin, S/o Sheikh Wazid Hussain, Prop. M/s Snowsine, Shop No.B-9/A, Avanti Hotel Complex of M/s Jaimangal Ltd., Frazer Road, P.S. Kotwali, District Patna. 7. Pravin Kumar, S/o Shri Kristo Prasad, Partner: M/s Kanak Jewelers, Shop No.B-3, Avanti Hotel Complex of M/s Jaimangal Ltd., Frazer Road, P.S. Kotwali, District Patna. 8. Md. Badre Alam S/o late Md. Samshuddin, Prop: M/s Aristo Tailor, Shop No.B-8, Avanti Hotel Complex of M/s Jaimangal Ltd., Frazer Road, P.S. Kotwali, District Patna. 9. Binod Kumar, Prop.: M/s Ravi Enterprises, Shop No.B- 9, Avanti Hotel Complex of M/s Jaimangal Ltd., Frazer Road, P.S. Kotwali, District Patna. 10. Ramesh Kumar, S/o Shri Ram Janaki Sharan, Prop.: M/s Prinz Electronics, Shop No.B-4, Avanti Hotel Complex of M/s Jaimangal Ltd., Frazer Road, P.S. Kotwali, District Patna. 11. Narendra Kumar, S/o Shri Krishan Lal, Prop.: M/s Sethi Crockerywala Caterer, situated at Back Portion of the Avanti Hotel Complex of M/s Jaimangal Ltd., Frazer Road, P.S. Kotwali, District Patna. 12. Bijoy Kumar Sinha, S/o late Gopal Prasad Sinha, 2 21 9.4.2009 Prop.: M/s Swan Dry Clearners, Shop No.B-2, Avanti Hotel Complex of M/s Jaimangal Ltd., Frazer Road, P.S. Kotwali, District Patna. 13. Smt. Neelam Singh, W/o Shri Jagjit Singh, Prop.: M/s Aditya Marketing Enterprises, Shop No.B-1/A, Avanti Hotel Complex of M/s Jaimangal Ltd., Frazer Road, P.S. Kotwali, District Patna. Interveners/ Appellants VERSUS 1. M/s Jaimangal Ltd. In liquidation through the Official Liquidator, Patna High Court, 4th Floor, Block-A, Maurya Lok Complex, Patna. 2. Shri Jagdish Prasad S/o late Jagannath Pd., C/o Sri A.K.Tiwary, Jamuna Raj Niwas, K.M.Singh Lane, East Boring Canal Road, PS Budha Colony, Patna. Petitioner/ Respondents. -------- This Company Appeal arises out of Company Petition No.10 of 1996 relating to liquidation proceeding in respect of M/s Jaimangal Limited. The Appeal has been preferred by 13 persons who were intervenors in the liquidation proceeding, against order dated 11.4.2008 passed by learned Company Judge whereby he has found the appellants defaulters in payment of licence fee/ rent/ monthly charge in respect of various shops in the basement and ground floor in Avanti Hotel complex in the town of Patna which was constructed by the company in liquidation for the purpose of Hotel complex with some shops at the basement and ground floor. On such finding 3 the learned Company Judge has ordered for eviction of the appellants from the shops under their occupation. On 19.11.2008, an interim order was passed in this Appeal on a prima facie impression that the appellants have been in occupation of their respective shops without paying any licence fee/ rent/ monthly charge for more than 10 years. As per that interim order, the appellants were obliged and bound to pay occupation charges as per Memorandum of Understanding (MOU) between them and the Company in liquidation. On that basis the figure of arrears was estimated to be in excess of Rs.one lakh and the appellants were given liberty to deposit a sum of Rs.one lakh towards the estimated outstanding licence fee/ rent/ occupation charges with the Official Liquidator within one month. It was observed that failure to deposit the amount by the appellants may lead the Court to believe that the appellants are not desirous of keeping the premises and their intention is to prolong the litigation. By another interim order dated 13.1.2009 one Jagdish Prasad one of the original promoters was added as intervenor in the Appeal. The appellants were directed to place on record 4 the details of the amount which each of the appellants is required to pay as licence fee/ rent in the light of the MOU with the BICICO. From the order dated 2.2.2009 and from the undisputed averments made in IA No.7628 of 2008 (wrongly mentioned as IA No.2591/2008 in the order dated 2.2.2009) and the IA No.1503 of 2009 it is clear that only appellant no.6, Sheikh Siddiqque Samsuddin, Proprietor of M/s Snowsine, Shop No.B-9/A, has not complied with the order for depositing Rs. One lakh towards arrears. Initially, appellant no.3, Mritunjay Kumar Singh was also mistakenly treated to be a defaulter but subsequently the matter was fully clarified on the basis of IA No.1503 of 2009 filed by him showing that he had deposited Rs. one lakh within time. Through IA No.7628 of 2008 appellant no.1, 8, 9, 12 and 13 claimed that on calculation of arrears as per MOU with BICICO their arrears was less than Rs.one lakh hence they had kept drafts made for the actual amount of arrears with intimation to the Official Liquidator and were ready to pay the same. Such claim was not opposed and has been accepted by order dated 2.2.2009. They have also not 5 been treated as defaulters in terms of interim order dated 19.11.2008. By their undertaking before this Court they are bound to deposit the admitted arrears to the Official Liquidator. Thus, only appellant no.6, Sheikh Siddiqque Samsuddin will be treated to have defaulted in complying with the interim order of this Court dated 19.11.2008 and, therefore, liable to be treated as a person not interested in continuing with occupation of the shop in question. The basic facts for understanding the main controversy between parties may be noticed in brief. The appellants and in some cases their predecessors in interest were inducted as licensees from 1981 onwards by the Company under a written agreement described as deed of licence. Such deeds were not renewed after 1996 when the Company fell into bad times on account of default in repayment of loan obtained from the Central Bank of India and loan from BICICO, a financial corporation under State Financial Corporation Act. In exercise of statutory powers BICICO took possession of the Hotel complex and in that process also sealed the shops in the premises in occupation of the appellants.To secure repossession in their favour,the 6 appellants entered into a MOU with BICICO on 25.10.1996 at a higher rate of Rs.8.00 per square feet with several other stipulations including a condition that even that rent was not final and the final rent may be determined by the Board of Directors of BICICO which in fact did not fix any other rent as final rent. The sealing of the premises by the BICICO was challenged by the Avanti Complex Shopkeepers Association and others through CWJC No.11170 of 1996 which was allowed by order dated 8.8.1997 by holding that under section 29 of the State Financial Corporation Act, BICICO may be deemed to have obtained only a constructive possession of the property but it could not take forcible physical possession of the premises from the shopkeepers. The appellants, however, admittedly continued to pay rent as per MOU with BICICO till the year 2001. In the meantime, the Central Bank of India obtained a money decree in a suit and for execution of the decree and for recovery of money, it approached the Debts Recovery Tribunal at Patna in the year 2001. It is not in dispute that in the meantime by order dated 5.12.1997 passed in 7 Company Petition No.10 of 1996 the learned Company Judge ordered for winding up of the company M/s Jaimangal Limited. The Debts Recovery Tribunal took notice of all the relevant facts including fixing and appropriation of rent by BICICO and on the basis of figures of rent furnished by the decree holder Bank, passed an order on 30.1.2001 for attachment of the rent due so that it can be adjusted towards liquidating the decreetal dues. All the tenants were also directed by that order to pay the rent through account payee demand drafts in favour of Recovery Officer, Debts Recovery Tribunal, Patna. By that order Sri Jagdish Prasad, certificate debtor no.2 was appointed as receiver for management of the movable properties including collection of rent from the various tenants occupying attached premises. As a receiver Sri Jagdish Prasad was directed to furnish a total list of tenants giving their full name and the present monthly rent payable. That order of the Recovery Officer, Debts Recovery Tribunal, Patna has admittedly not been challenged by anyone including the appellants who were described as tenants and the other interested parties such 8 as Jagdish Prasad. After such order of the Debts Recovery Tribunal, admittedly the shopkeepers including the appellants began depositing rent at the old rate prevailing prior to MOU with BICICO. Such rent was accepted by the receiver as well as by the Recovery Officer of the Debts Recovery Tribunal with no party taking any legal steps. In December 2006, the Official Liquidator informed the learned Company Judge that the entire Hotel Complex was under unauthorized occupation of powerful persons like police officials and it was not possible to take possession and manage the Hotel complex. By order dated 1.12.2006, the learned Company Judge directed the Official Liquidator to take possession of the entire complex as it was reported to be in unauthorized occupation. It also led to sealing of the shops in occupation of the appellants as they were also treated as encroachers. When the premises of the appellants were sealed on 2.1.2007, on 4.1.2007 they filed intervention in the Company Petition No.10 of 1996 seeking appropriate relief. On 9.1.2007, the learned Company Judge ordered 9 that the seal could be reopened in favour of tenants only if they give an undertaking to vacate the premises on completion of sale of the Hotel complex pursuant to the sale notice which was ordered to be issued. The appellants preferred Company Appeal No.2 of 2007 against that order. The appeal was allowed by a Division Bench of this Court on 20.2.2007. The Division Bench noticed the contention on behalf of the appellants that they were ready and willing to pay arrears of rent as directed by the learned Company Judge but in absence of any adjudication either by competent court or by learned Company Judge itself directing for vacation of the premises by the appellants, they should not be asked to give an undertaking to vacate the premises. It held that part of the direction given by the learned Company Judge to give undertakings to vacate the premises was not sustainable in law and that part of order was set aside. Thereafter, the learned Company Judge proceeded to adjudicate in respect of the report of the Official Liquidator that the shopkeepers including the appellants had defaulted in payment of due rent. For this 10 purpose, by an order dated 23.2.2007 the learned Company Judge gave opportunity to the appellants to file necessary pleadings. The sealed premises were opened and handed over to the appellants on their giving an undertaking before the learned Company Judge that on determination by that court about the tenancy right/ occupational right of the appellants in the premises of Hotel Avanti shopping complex, they will discontinue their business and close their respective shops if the decision went against them and if the court found that their further continuance in the premises is illegal. The orders for opening of shops in view of such undertaking are dated 31.5.2007 and 12.7.2007. Thereafter, the required adjudication was done by the learned Company Judge by order under appeal dated 11.4.2008. In that order it has been held that the premises are being held by the appellants as licensees and not as tenants. It has further been held that they are rank defaulters as they have not paid full rent for long period of time at the rate they agreed to pay in the MOU made with BICICO. On many dates, this Court allowed the parties 11 to try and settle their differences by compromise on agreed terms including option for continuance of the appellants in the shops in question on payment of mutually acceptable enhanced rent as the arrears had already been paid by some of the appellants and others had paid upto Rs.one lakh as per interim order of this Court. Unfortunately, the offer of the appellants to enhance the future rent up to a rate of Rs.15 per sq. feet did not lead to any agreement because the developments in the company case show that no sale could be finalized with any outsider and the original promoters only have come forward with a proposal which according to them, requires such reconstruction of the complex which does not permit continuance of the appellants otherwise the whole project will be non-productive. Be that as it may, since the talks for compromise could not succeed, the appeal was heard on merits. On behalf of the appellants a serious challenge was made to the findings of the learned Company Judge that the appellants are mere licensees and that they are rank defaulters in paying rent of the shop premises 12 because they have not paid rent in terms of the MOU with BICICO. Against some shopkeepers it was observed that they have not even paid fee/ rent in the light of deed of licence renewed from time to time. Elaborating the aforesaid submissions it was highlighted that after 1996 the deeds of licence were not renewed by the successor in interest of the original licensees who accepted rent from the appellants treating them to be month to month tenants. However, it was conceded that if the finding about appellants being rank defaulters cannot be successfully challenged, this issue would not matter much because in that event even if it is accepted that the appellants had become month to month tenant the direction for eviction of the appellants cannot be interfered with. In our view also, in the facts of the case, it is not necessary to decide the issue as to whether the appellants are mere licensees or are tenants. However, prima facie, on account of non-renewal of deeds of licence and acceptance of rent from month to month from the appellants by the successors in interest of the licensor, their plea that they are tenants appears to be convincing. 13 As indicated above the main issue falling for determination is whether the learned Company Judge has rightly concluded that the appellants are rank defaulters or whether such findings require interference. The relevant facts noticed above show that the appellants felt legally obliged to pay rent as per MOU till the authority of BICICO was interfered with and rent was attached as per orders of Debts Recovery Tribunal and Sri Jagdish Prasad, one of the promoters of the company, started collecting rent and depositing the same with the Recovery Officer of the Debts Recovery Tribunal. Thereafter, the appellants paid rent at a different rate. According to appellants, this was the rate of rent lawfully payable because it was being paid prior to MOU which was signed by the appellants under pressure and unequal bargaining position when the shops were sealed by BICICO illegally but before such illegality was accepted by the High Court by quashing the action of sealing by BICICO. Secondly, it was submitted that the Recovery Officer and the receiver, Sri Jagdish Prasad accepted the payment of rent at the old rate without raising any protest before the Debts Recovery Tribunal 14 and hence, for all practical purposes this rate of rent became the rate at which rent was last paid by the appellants for deciding the issue of default in payment of rent. Hence, it was submitted that the learned Company Judge committed an error of law as well as of facts in not first deciding the rate of rent which was lawfully payable and was last paid without protest by the appellants and unless such determination was made in accordance with law, no legally valid finding could have been given that the appellants are rank defaulters in payment of rent. On the other hand, on behalf of respondents it was submitted that since rate of rent mentioned in the MOU was by consent and agreement, only that could have been the basis for determining the issue as to whether the appellants are defaulters in payment of rent or not. Hence, according to respondents, the impugned order of learned Company Judge suffers from no error or illegality to warrant any interference. On an anxious consideration of the relevant facts and the settled principles of law, we are of the view that the submissions advanced on behalf of the appellants 15 have considerable merit and they deserve to be accepted. The facts and circumstances under which MOU was arrived at require a deeper consideration on the basis of evidence and circumstances. From the order under appeal, it appears that no such consideration was given to the relevant facts highlighted in the submissions advanced on behalf of the appellants, noticed above. It is also found that in the facts of the case it is necessary to first come to a definite conclusion on the issue as to what was the lawfully payable rent by the appellants before deciding the issue as to whether they are defaulters in payment of rent or not. This was obviously not done. In view of aforesaid discussions and findings, we are left with no option but to set aside the order under appeal and remit the matter back to the learned Company Judge to redecide the relevant issues indicated above as per law. To that extent, this Appeal is allowed. (Shiva Kirti Singh, J.) (Dharnidhar Jha, J.) sk