Case: Associated Building Company Limited and Others Vs. Union of India and Others

instruments, machinery, equipments, automobiles and other vehicles and goods under production or in transit, cash balances, reserve funds, investments and booklets and all other rights and interests in or arising out of such property as were, immediately before the appointed day, in the ownership, possession, power or control of the textile company whether within or outside India and all books of account, registers and all other documents of whatever nature relating thereto."It was contended that the textile undertaking shall be deemed to include all assets, rights, leaseholds, powers, authorities and privileges of the textile company in relation to the said textile undertaking. Relying on this part of the sub-section, Shri Kapadia submitted that even assuming that Tata Mills Limited was occupying a portion of the Bombay House in the capacity as a licensee then even that right to occupy the premises vest in the Custodian. It is not possible to accede to the submission of the learned Counsel. Chapter VI of Indian Easements Act, 1882 deals with subject of licences and section 52 provides that where one person grants to another, a right to do, in or upon the immovable property of the grantor, something which would, in the absence of such right, be unlawful and such right does not amount to an easement or an interest in the property, then the right is called a licence. Section 56 provides that a licence cannot be transferred by the licensee or exercised by his servants or agents. Section 62 provides that the licence is deemed to be revoked where the licence is granted to the licensee for holding a particular office, employment or character, and such office, employment or character ceases to exist. It is well settled that the licence granted is a personal right and is neither heritable nor transferable. Shri Kapadia did not dispute that the licence is not transferable by act of parties but urged that licence can be transferred by operation of law. It is not possible to accede to the submission of the learned Counsel. Sub-section (2) of section 3 provides that the `Textile Undertaking shall be deemed to include rights of the textile company in relation to the textile undertaking and the expression `right must be construed as an enforceable right. It hardly requires to be stated that a transferee of licensee cannot enforce the right to remain in possession as a licensee and not being an enforceable right, the licence cannot be construed as a right to attract the provisions of sub-section (2) of section 3 of the Act. The licence granted by petitioner No. 1 is in the nature of permission to occupy a portion of the Bombay House, and that too, gratuitously. It is impossible to accede to the claim that the permission granted amounts to a right as contemplated by sub-section (2) of section 3 and therefore the Custodian has right to occupy portion of Bombay House.Shri Kapadia submitted that if it is found that the right of occupation of a licensee is not an enforceable right and therefore sub-section (2) of section 3 is not attracted, then it should be held that Tata Mills Limited had a power, authority and privilege to occupy portion of the Bombay House and therefore the Custodian can take over the portion of Bombay House under sub-section (2) of section 3. The submission is devoid of any merit. Once it is found that Tata Mills Limited had no enforceable right, then it is futile to suggest that Tata Mills Limited had a power, authority and privilege as contemplated by sub-section (2) of section 3 and therefore the Custodian can take over possession of Bombay House. Shri Kapadia then submitted that sub-section (2) also provides that the expression `Undertaking includes all properties, movable and immovable, including lands, buildings etc. and the right to occupy portion of Bombay House is an asset which vests in the Custodian. The submission has no merit because in case the contention of the respondents that occupation of portion of Bombay House gratuitously is an enforceable right is not correct, then such occupation cannot be construed as an asset of Tata Mills Limited. In our judgment, the provisions of sub-section (2) of section 3 are not atrracted and consequently, the letter written by respondents on January 16, 1984 demanding possession of undemarcated and unspecified portion of Bombay House was wholly without authority.7.Shri Kapadia referred to decision of Supreme Court reported in A.I.R. 1980 S.C. 1234, (National Textile Corporation Ltd. and others v. Sitaram Mills Ltd. and others), and observations to the following effect:-"The legislation was clearly in furtherance of the Directive Principles of State Policy in Article 39(b) and (c) of the Constitution. In interpreting such a piece of legislation, the courts cannot adopt a doctrinaire or pedantic approach. It is a well known rule of construction that in dealing with such a beneficent piece of legislation, the courts ought to adopt a construction which would subserve and carry out the purpose and object of the Act rather than defeat it."The principles laid down by the Supreme Court are well settled and there cannot be any debate that while considering a beneficent piece of legislation, the courts should adopt the liberal construction. A reference was also made to the decision reported in (1988) 1 Company Law Journal 225 (S.C.), (Doypack Systems Private Limited v. Union of India and others), to point out that the expression in relation to must be construed widely. In our judgment, the reference to the decision is not appropriate. The provisions of sub-section (2) of section 3 are wide in its ambit but it would certainly not include an unenforceable right. For example, if a person hands over his car to the textile mill for gratuitous use then it cannot be claimed that the car is an asset of the undertaking or the user of a car is a right vested in the undertaking and consequently it is open for the Custodian to take possession of the car.

Court's decision (1 = petition accepted / positive for appellant, 0 = rejected / negative): 1

Reasoning from the judgment:
1[ds]It is impossible to accede to the submission. The respondents could not produce any document or any material to indicate that Tata Mills Limited was occupying portion of the Bombay House as lessees. We repeatedly enquired from the learned Counsel for the respondents as to whether there is any document to indicate that the occupation was as a lessee and the learned counsel fairly stated that there is none. In these circumstances, it is futile to claim that Tata Mills Limited was occupying the portion of Bombay House as tenant merely because the return so claims. Both Tata Mills Limited and petitioner No. 1 who were the owners of Bombay House have stated immediately on receipt of the letter that occupation of Tata Mills Limited was gratuitous and Tata Mills Limited had no legal right to remain in occupation. It is, therefore, obvious that the first contention of Shri Kapadia that Tata Mills Limited was in occupation as lessees and right vested in Custodian is required to be turnedis not possible to accede to the submission of the learned Counsel. Chapter VI of Indian Easements Act, 1882 deals with subject of licences and section 52 provides that where one person grants to another, a right to do, in or upon the immovable property of the grantor, something which would, in the absence of such right, be unlawful and such right does not amount to an easement or an interest in the property, then the right is called a licence. Section 56 provides that a licence cannot be transferred by the licensee or exercised by his servants or agents. Section 62 provides that the licence is deemed to be revoked where the licence is granted to the licensee for holding a particular office, employment or character, and such office, employment or character ceases to exist. It is well settled that the licence granted is a personal right and is neither heritable nor transferable. Shri Kapadia did not dispute that the licence is not transferable by act of parties but urged that licence can be transferred by operation of law. It is not possible to accede to the submission of the learned Counsel.) of section3 provides that the `Textile Undertaking shall be deemed to include rights of the textile company in relation to the textile undertaking and the expression `right must be construed as an enforceable right. It hardly requires to be stated that a transferee of licensee cannot enforce the right to remain in possession as a licensee and not being an enforceable right, the licence cannot be construed as a right to attract the provisions of) of section3 of the Act. The licence granted by petitioner No. 1 is in the nature of permission to occupy a portion of the Bombay House, and that too, gratuitously. It is impossible to accede to the claim that the permission granted amounts to a right as contemplated by) of section3 and therefore the Custodian has right to occupy portion of Bombaysubmission is devoid of any merit. Once it is found that Tata Mills Limited had no enforceable right, then it is futile to suggest that Tata Mills Limited had a power, authority and privilege as contemplated by) of section3 and therefore the Custodian can take over possession of Bombay House. Shri Kapadia then submitted that(2) also provides that the expression `Undertaking includes all properties, movable and immovable, including lands, buildings etc. and the right to occupy portion of Bombay House is an asset which vests in the Custodian. The submission has no merit because in case the contention of the respondents that occupation of portion of Bombay House gratuitously is an enforceable right is not correct, then such occupation cannot be construed as an asset of Tata Mills Limited. In our judgment, the provisions of) of section3 are not atrracted and consequently, the letter written by respondents on January 16, 1984 demanding possession of undemarcated and unspecified portion of Bombay House was wholly withoutprinciples laid down by the Supreme Court are well settled and there cannot be any debate that while considering a beneficent piece of legislation, the courts should adopt the liberal construction. A reference was also made to the decision reported in (1988) 1 Company Law Journal 225  (S.C.), (Doypack Systems Private Limited v. Union of India and others), to point out that the expression in relation to must be construed widely. In our judgment, the reference to the decision is not appropriate. The provisions of) of section3 are wide in its ambit but it would certainly not include an unenforceable right. For example, if a person hands over his car to the textile mill for gratuitous use then it cannot be claimed that the car is an asset of the undertaking or the user of a car is a right vested in the undertaking and consequently it is open for the Custodian to take possession of the car.