Case: Board Of The Trustees,Port Of Kolkata Vs. Efclon Tie-Up Pvt. Ltd.

An indenture of lease was entered into by Das Reprographics (in short the Company) and the Kolkata Port Trust (in short Port Trust) in respect of premises at P-10, Taratola Road, Kolkata. The lease deed stipulated that, the lease is for a period of 29 years, 1 month and 25 days, w.e.f November 28, 1962 on a monthly rental basis of Rs. 1,049.12. It was stated in the deed that, the lessee may have the option of a fresh lease for a further term of 30 years provided a notice stating the same was given to the Port Trust at least six months before expiration of subsisting lease. According to the deed, the Municipal Taxes in respect of the land was to be paid by the Company. The Port Trust had the option of renewing the lease for such further period, provided the covenant conditions are duly performed and the increase in rent is upto 25%, but not exceeding the rent as per the Schedule of Rates4. It was also clearly stipulated in the Lease deed that, if the company goes into liquidation or is wound up compulsorily or voluntarily, the Port Trust would re-enter possession and the lease would be brought to an end5. On 01.08.1991, a letter was written by the Company to the Port Trust requesting the appellant for considering the renewal of the lease executed in their favour in 1962 for another term of 30 years. It was also stated in the letter that, the company has rental dues and municipal taxes to be paid which they will clear before the expiry of the lease which was subsisting. The Port Trust however, did not respond to this letter. Later on 26.11.1991, another letter was sent by the company to the Port Trust requesting for the extension of the lease of the land. The lease deed expired on 22.01.1992 by efflux of time. The company had not even then, paid of their outstanding dues, thereby was still in breach of the stipulations in the lease deed6. On 07.03.1992, the Port Trust informed the company that a total sum of Rs.66,312/- was outstanding towards rent and taxes including 15% interest and this should be cleared before any extension of lease could be considered. However, by taking into consideration the fact of a large number of workmen working in the company, the Port Trust asked the company to correct its breaches so that the extension of lease could be considered7. On 21.12.1994, by an order in Company Petition No.151/1986, the High Court of Calcutta, directed to take possession of the assets of the company forthwith. By an order dated 27.08.1997, invitation for offers for purchasing the assets of the liquidated company was made. Various advertisements were issued as per the order of the High Court after which many offers were made by different parties8. The High Court accepted the offer made by the present respondent No. 1 (Efclon) by an Order dated 16.01.1998, for Rs. 50 lakhs and also on an agreement made by the respondent with the workmen of the liquidated company to re-employ them9. Aggrieved by this order of the High Court, United Bank of India filed an appeal in the High Court on the ground that the sale of assets of the company was conducted with undue haste and without trying to ensure that the maximum price was fetched for the assets of the company. The Division Bench held on 09.04.2003, that, the finding of the learned single Judge was correct and thereby confirmed the sale of all the assets of the company at, P-10, Taratolla Road, Kolkata. The Division Bench also observed that the lease over the land had expired and since the purchaser, Efclon, does not intend to destroy the character of the factory, it would be desirable that the Port Trust should grant a fresh lease of the Taratola land which has expired in favour of respondent No.1 (Efclon). On 11.08.2003, an application was made by the respondents in the High Court, for the modification of the order of the Division Bench dated 09.04.2003, stating that, the option of renewal has been found to be validly exercised by the liquidated company and therefore, the Port Trust had no option but to renew the lease in terms of the indenture of lease which existed between the liquidated company and the Port Trust10. The High Court while deciding on this matter on 01.12.2004, allowed the claim of the respondents and thereby ordered the Port Trust that, upon the respondent clearing all the outstanding rental dues and taxes, the Port Trust shall grant fresh lease in consonance with the lease indenture that existed between the Port Trust and Das Reprographics11. The present appeal before this Court is preferred against this order dated 01.12.2002 of the High Court.

Court's reasoning:
We are of the opinion that:1. There is no right over the property of the Port Trust existing with the respondent No.1 (Efclon) as claimed by them. In the present case only the assets of the company which was liquidated has been bought by the respondents, the land belonged to the Port Trust. Even according to the original indenture of lease between the Port Trust and the liquidated company, there were clauses which very clearly stated that, the Port Trust had the option of renewing the lease for such further period, provided the covenant conditions are duly performed. It was also clearly stipulated in the Lease deed that, if the company goes into liquidation or is wound up compulsorily or voluntarily, the Port Trust would re-enter possession and the lease would be brought to an end. In the present fact situation, the company in liquidation was clearly in breach of the covenant conditions by having outstanding rental dues and tax liability with interest. Also the company did go into liquidation and therefore as the lease indenture says, the original lease has come to an end and the Port Trust is presumed to have automatically come into possession of the land in questionTherefore we hold that, there is no lease that is subsisting between the Port Trust and the liquidated company and hence the respondent No.1 (Efclon) claim that the original lease deed is subsisting thereby giving them an automatic right to the land in question is untenable and has no merit2. To the question as to whether the High Court was correct in granting a fresh lease to the respondent No.1 (Efclon) in accordance with the clause stipulated in the original lease agreement, we are of the opinion that the High Court is correct as far as the grant of fresh lease is concerned. Coming to the second part of the question as to whether the rental amount should be based on the stipulation mentioned in original lease deed is concerned; we believe that the rates that are present in the current Schedule of the Port Trust Act in Kolkata should apply. We are of the view that, the claim of the respondent that they should be allowed to pay the rates in accordance to the clause in the original lease indenture of 1962 is not fair on the Port Trust. Also we are satisfied that the prices that are prevalent in the schedules of the Port Trust Act are not based on profiteering, but on inflationary tendencies3. With regard to the respondent No.1s (Efclon) claim of, if Das Reprographics had not gone into liquidation, while renewing the lease, the company would have only had to pay 25% over and above the last rent paid under the original lease for the period of renewal of the same, does not hold good in our view, as such a renewal need not be contemplated at this point, as the company itself is not in existence and also the clause in the original lease indenture will come in the way which specifically mentions that if the company goes into liquidation or is wound up compulsorily or voluntarily, the Port Trust would re-enter possession and the lease would be brought to an endIn our view, the workmen of the Company have a right to earn their livelihood. The workmen are as such vitally interested in the renewal of the lease in respect of the property in question. The Port Trust, by its conduct, accepted the right of the Company to obtain renewal of the lease. The Port Trust has never called upon the Company or the official liquidator to vacate the property. The act of the Port Trust in allowing the respondent to continue is only a benevolent act of the Port Trust keeping in view the consequences that can arise if this was not allowed for the large number of workmen of the company. As such, the lease of the property has been renewed or must be deemed to have been renewed as the workmen being interested in the renewal of the lease of the property. They were also heard through their senior counselSocial justice demands that the lease in respect of the factory premises be renewed by the Port Trust in favour of respondent No.1 so that the operation of the factory thereof can be commenced. However, the lease can be renewed only subject to the payment of all the arrears and dues together with interest. We are, therefore, inclined in the larger interest of the industry as also the workmen and of the Port Trust to direct the Port Trust to grant a fresh lease to respondent No.1 herein subject to the respondent No.1 complying with the terms relating to the payment of the arrears/dues together with interest at the rate of 15% p.a. as suggested by the Kolkata Port Trust in its letters dated 07.03.1992 and 13.04.1995. The Port Trust shall also grant a fresh lease in favour of respondent No.1 on the basis of the scheduled rate from the date of possession i.e. 04.08.2003. In conclusion, we order a fresh lease indenture to be drawn from the date the company came into possession of the land (i.e.04.08.2003) between the Port Trust and the Respondent No.1 (Efclon) with regard to the premises situated at P-10, Taratola Road, Kolkata at the rental rates contained in the present Schedule of the Kolkata Port Trust Act as soon as the dues of the liquidated company are discharged with by the respondentsWe are, therefore, directing the Port Trust to inform the Efclon Tie-up Private Limited; respondent No.1 herein of the rental arrears together with interest as suggested by the Port Trust in its letters dated 07.03.1992 and 13.04.1995 within four weeks from the date of this order. In other words, the Port Trust shall inform the first respondent herein of the rental arrears from the date of expiry of the earlier lease (21.01.1992) till the date of the execution of the fresh lease at the old rate together with interest at the rate of 15% p.a. within 4 weeks from the date and upon such intimation the said dues are to be cleared by the first respondent within 2 weeks thereafter and upon such dues being cleared, the Port Trust shall grant a fresh lease from 04.08.2003 i.e. the date on which the first respondent was to be in possession of the property by the official liquidator on the basis of the scheduled rate as now prevalent. The rate fixed by the Kolkata Port Trust as per the scheduled rate will be effective from 04.08.2003. We are inclined to grant the lease in favour of the respondent No.1 who sought renewal of the lease with the sole object of reviving and rehabilitating its units and to re-employ its workmen thereof.