Case: Ravindra Ishwardas Sethna &amp; Another Vs. Official Liquidator, High Court, Bombay &amp; Another

As the matter brooked no delay, after granting special leave to appeal, we proceed to hear the appeal on merits. When the hearing was over, we pronounced the following order and stated that the reasons would follow. The order read as under :The appeal is allowed and the order made by the learned Single Judge as well as the Division Bench of the Bombay High Court rejecting the Judges Summons taken out by the appellants is set aside and the Judges Summons is granted to the extent indicated herein.The appellants shall deposit Rs. 1, 50, 000 by or before March 1, 1983 in this Court. Respondent No. 2 - Smt. Sabita V. Adapa shall hand over vacant and peaceful possession of the property being a shop Nos. 8/9 on the aground floor of the building formerly known as Jagmohan Building No. 2 or as Ayaz Mansion and show styled as Ram Kutir situated at station Road, Andheri, Bombay - 400058 to the liquidator on or before February 28, 1983 who shall forthwith hand over possession on March 1, 1983 to the appellants, after taking a statement from the appellants that they have deposited the amount of Rs. 1, 50, 000 in this Court as herein indicated.On respondent No. 2 handing over vacant and peaceful possession of the aforementioned shops to the liquidator by or before February 29, 1983, the liquidator shall forthwith refund to her the security deposit of Rs. 28, 000 deposited by the second respondent with the liquidator.Respondent No. 2 will be at liberty to remove all furniture and fixtures placed by her in the suit shop without causing damage to the property.The amount of Rs. 1, 50, 000 to be deposited by the appellants in this Court will with the consent of the appellants be disbursed according to the direction to be given by this Court to the needy and the deserving creditors of the Chit Center Pvt. Ltd. already ordered to be wound up by the High Court. Neither the liquidator nor the creditors of Chit Center Pvt. Ltd. have any right to claim this amount of Rs. 1, 50, 000 or any part thereof as it is an ex gratia payment made by the appellants for alleviating the misery if any of some of the hard hit creditors of Chit Center Pvt. Ltd. The distribution of the aforesaid amount will be at the absolute discretion of this Court. The appeal is allowed to extent herein indicated with no order as to costs.These are the reasons.2. On a winding up petition filed underthe Companies Act, 1956, a learned Company Judge of the Bombay High Court made an order on September 23, 1974 winding up Chit Center Private Ltd. (Company for short). The Company has its office in shops bearing Nos. 8 and 9 on the ground floor of the building formerly known as Jagmohan Building No. 2 or as Ayaz Mansion now known as Ram Kutir. On the winding up order being made, the Official Liquidator who was appointed as "Liquidator of the Company while taking possession of the assets of the Company also took possession of the office premises of the Company. It is in this manner that the Liquidator acquired possession of shops Nos. 8 and 9, the premises involved in this appeal. Subsequently, the Liquidator sought direction of the Court on April 25, 1979 whether the premises should be let out on lease or licence or whether the furniture and fixtures in the premises should be sold ? The Court gave a direction that the premises be given on caretaker basis after obtaining a proper document on a compensation not less than Rs. 2250 per month. Pursuant to this direction the Liquidator invited offers from persons willing to occupy the premises on terms and conditions laid down by the Court. On July 2. 1980, the Liquidator sought the direction of the Court whether to accept the offer of M/s Modern Caterers represented by respondent No. 2 herein, Smt. Sabita V. Adapa. The Company Judge by his order dated July 3, 1980 directed the Liquidator to accept the offer as modified by the Court of the second respondent. The Liquidator thereupon entered into an agreement on July 29, 1980 with the second respondent and gave possession of the premises to the second respondent on terms and conditions set out in the agreement.3. Appellants herein are the landlords of the building of which the premises involved in this appeal formed part. Appellants took out Judges summons praying for a direction to the Liquidator to terminate the caretakers agreement entered into with the second respondent under the directions of the Court, and to hand over vacant and peaceful possession of the premises to the appellants. There were other prayers in the Judges summons with which we are not concerned in this appeal.4. The learned Company Judge repelled the contention of the appellants that the so-called caretakers agreement entered into by the Liquidator with the second respondent was in contravention of the various provisions of the Bombay Rents, Hotel and Lodging House Rates Control Act, 1948 as amended in 1973 (Rent Act for short) and held that in substance and in form it was a caretakers agreement which was permissible. Accordingly, the learned Judge rejected the Judge summons in respect of both the prayers. Appellants preferred an appeal to the Division Bench of the High Court. The Division Bench held that appellants were not entitled to the notice in respect of the report submitted by the Liquidator for directions in respect of the premises and further observed that the appellants had no right to the present possession of the premises, more so, because the appellants had already filed a suit for eviction in the Small Causes Court at Bombay against the official Liquidator and on this short ground the appeal was dismissed. Hence this appeal by special leave.

Court's reasoning:
11. The learned Company Judge could not have permitted holding on to possession of the premises, not needed for efficiently carrying on winding up proceedings. The only course open to him was to direct the Liquidator to surrender possession to landlords and save recurring liability to pay rent. Before we part with this judgment, we must take note of one submission that was made on behalf of the respondent. It was said that the creditors and members of the Company in liquidation have suffered huge losses and if the Liquidator would have been permitted to enter into an agreement with the second respondent, it would fetch a steady income which would have gone towards mitigating the hardships of the creditors and members of the Company. The accounts of the Company in liquidation were not brought to our notice nor can we permit violation of law howsoever laudable the object of such act may be. However, we must record a statement made on behalf of the appellants when the aforementioned argument was being examined by us. It was said that the second respondent was to pay Rs. 2500 per month as compensation under the directions of the Court. That would have fetched the Liquidator an income of Rs. 30, 000 per year and deducting the costs, expenses and taxes, the Liquidator may have been able to realise at least Rs. 25, 000 per year. The learned counsel for the appellants submitted that adopting a multiplier of six, assuming that roughly six years was the period for which the agreement would have been renewed from years to years, the appellants unconditionally offered to deposit Rs. 1, 50, 000 in the Court to be distributed at the discretion of this Court amongst the creditors of the Company in liquidation. We recorded this offer in our order disposing of the appeal. We are now informed that the amount has been deposited. The Liquidator is accordingly directed to submit the list of the creditors of the Company with the names, addresses and claims admitted by him within 4 weeks from today when the matter will appear again on board for directions.