PETITIONER:
\nTHE OFFICIAL LIQUIDATORS,U. P. UNION BANK LTD.<\/p>\n
Vs.<\/p>\n
RESPONDENT:
\nSHRI RAMESHWAR NATH AGGARWAL<\/p>\n
DATE OF JUDGMENT:
\n10\/11\/1959<\/p>\n
BENCH:
\nSHAH, J.C.
\nBENCH:
\nSHAH, J.C.
\nGAJENDRAGADKAR, P.B.
\nSUBBARAO, K.<\/p>\n
CITATION:
\n1960 AIR 332 1960 SCR (2) 189
\nACT:
\nCompany Law-Winding up of Bank-Landlord’s claim for rent of
\nbank premises after order of winding up -Official
\nLiquidators calling upon Landlord to take possession of the
\npremises and not using the same for the purposes of winding
\nup-Landlord refusing to take possession-Whether Official
\nLiquidators liable- Indian Companies Act, 1913 (VII of
\n1913), ss. 193, 230, 230(3)-Company Rules framed by the
\nAllahabad High Court r. 97 (Proviso).<\/p>\n
HEADNOTE:
\nThe U. P. Union Bank was in occupation of a building
\nbelonging to the respondent as a tenant. After the passing
\nof the winding up order of the bank the Official Liquidators
\nremoved the offices of the bank from the premises and called
\nupon the respondent landlord to take possession thereof.
\nThe respondent refused to do so as part of the premises was
\noccupied by some trespassers. Thereafter the Official
\nLiquidators did not do any business in the building in
\nconnection with the winding up of the bank. The respondent
\nclaimed the entire rent from the date of the winding up
\norder up to the date on which the Official Liquidators would
\ngive him vacant possession of the premises. The High Court
\nheld that in view of the proviso to r. 97 of the Rules
\nframed by the High Court under the Companies Act the
\nrespondent was entitled to recover the entire rent claimed
\nby him and not pro-rata with the other creditors of the
\nbank.
\nThe proviso to r. 97 of the Company Rules runs thus:
\n” Provided that where the official liquidator remains in
\noccupation of premises demised to a company which is being
\nwound up, nothing herein contained shall prejudice or affect
\nthe rights of the landlord of such premises to claim payment
\n190
\nby the Company or the Official Liquidator of rent during the
\nperiod of the company’s or the Official Liquidator’s
\noccupation.”
\nOn appeal by the Official Liquidators by a certificate of
\nthe High Court:
\nHeld, that the landlord respondent was not entitled to claim
\npriority in respect of payment of rent because the proviso
\nto r. 97 of the Company Rules framed by the High Court
\naffirms the right of the landlord to claim payment of rent
\naccruing due since the date of winding up but does not deal
\nwith the question of priority in payment thereof, and
\nfurther because the building in question did not remain in
\nthe possession of the liquidators for the purpose of
\nliquidation.
\nIn re Oak Pits Colliery Company, 1882 Ch. D. 321, followed.
\nHeld, further, that s. 230 of the Companies Act, 1913, which
\nspecifies categories to which priority in payment should be
\ngiven, does not give priority to rent due to landlord and it
\nis not within the competence of the High Court to give
\npriority by its rules to a category which is not included in
\nthat section.
\nUnder s. 193 the Court has power to order payment of the
\ncosts and expenses of winding in such priority as it thinks
\nfit in cases where the assets are insufficient to discharge
\nthe liabilities, and S. 230(3) empowers the Court to direct
\nthe company to retain such sums as may be necessary for the
\ncosts and expenses of winding up even before discharging the
\ndebts for which priority is given by s. 230.
\nIf a debt can reasonably be described as costs and expenses
\nof winding up the court may direct preferential payment
\nthereof, otherwise only pro-rata payment with the other
\nordinary creditors can be claimed out of the assets of the
\ncompany.<\/p>\n
JUDGMENT:
\nCIVIL APPELLATE JURISDICTION: Civil Appeal No.28 of 1958.
\nAppeal from the judgment and order dated April 17, 1956, of
\nthe Allahabad High Court, in Special Appeal No. 20 of 1954,
\narising out of the judgment and order dated February 10,
\n1954, of the said High Court (Company Jurisdiction), in
\nApplication No. 29 of 1953\/Company case No. 24 of 1949.
\n1959. October 30. H. N. Sanyal, Additional Solicitor-
\nGeneral of India, and N. C. Sen, for the appellant. Rule 97
\nof the High Court Company Rules merely gives the landlord
\nthe right to claim payment of rent and nothing more. It
\ndoes not give any priority to him. The question of priority
\nis dealt with in s. 230 which gives no priority to the
\nlandlord.
\n[Shah, J.–Top priority is given to costs and expenses of
\nwinding up under ss. 193 and 203(3).
\n191
\nWe offered possession to the landlord and we never used the
\npremises for the purpose of liquidation after the winding up
\norder. Therefore the rent claimed by the landlord cannot he
\ntreated to have been incurred as costs and expenses of
\nwinding up.
\nThe real question for decision is whether we used the
\npremises for the purpose of liquidation. It has been found
\nby the High Court that we did not do so. There is a rule
\nunder the English Companies Act which is identical to our r.
\n97 but none of the English cases have gone so far as to make
\nthe liquidators liable for the rent claimed by the landlord
\neven if the premises were not used for the purpose of
\nliquidation.
\nIn re Silkstone and Dodworth Coal and Iron Company, 17 Ch.
\nD. 158, In re Oak Pits Colliery Company, (1882) Ch. D. 21
\nand In re Levy and Company, 1919 Ch. D. 416, cited.
\nThe Oak Pits case definitely holds that the landlord is not
\nentitled to full rent accruing since the commencement of the
\nwinding up if the liquidator has done nothing except abstain
\nfrom trying to get rid of the property. This principle
\nshould be applied in this case and r. 97 should not be so
\ninterpreted as to give any priority to the landlord.
\nA. V. Viswanatha Sastri, Mrs. E. Udayaratnam and S. S.
\nShukla, for the respondent. By a previous order Mootham,
\nJ., who was then dealing with company matters in the High
\nCourt, passed an order to the effect that the landlord was
\nentitled to recover rent from the bank from the date of
\nwinding up to the date when the liquidators would give him
\npossession and thus terminate the tenancy. This order was
\nvirtually passed under S. 45B of the Banking Companies Act
\nand the respondent was entitled to payment according to the
\ntenor of the order which is that he should be paid in full.
\n[Shah, I.-How can a decree drawn up as a result of that
\norder be executed ? The amount has to be proved.]
\nH. N. Sanyal, Additional Solicitor-General of India, and
\nN. C. Sen, in reply. Mootham, J’s order simply purports
\nto declare the liability of the liquidators but does not
\ndecide the question of priority.
\n1959. November 10. The Judgment of the Court was delivered
\nby
\nSHAH J.-The U. P. Union Bank Ltd. (which will ‘hereinafter
\nbe referred to as the Bank) was in occupation as a tenant of
\na building in Agra town belonging to the respondent. at a
\nmonthly rental of Rs. 325 and Rs. 10 as municipal taxes.
\nThe Bank made default in paying the rent accruing due and
\nthe respondent filed suit No. 810 of 1949 in the court of
\nthe Munsiff
\n192
\nat Agra for a decree for rent for three months and obtained
\nan order of attachment before judgment on the movable
\nproperty of the Bank. The Munsiff by his decree dated
\nDecember 2, 1949, decreed the suit, and confirmed the order
\nof attachment before judgment. In the meanwhile, on a
\npetition dated September 13, 1949, the Bank was ordered to
\nbe wound up by the High Court of Judicature at
\nAllahabad and the appellants were appointed liquidators of
\nthe Bank. The employees of the Bank had vacated the
\npremises on September 10, 1949, but the property of the Bank
\nwhich was attached was with the consent of the respondent
\nstored by the Commissioner appointed by the Munsiff’s court
\nin the Banking hall which was sealed by that officer. A
\npart of the premises was, it appears, occupied by some
\ntrespassers. The Official Liquidators called upon the
\nrespondent to take possession of the premises, but the
\nlatter declined to do so unless vacant possession of the
\nentire premises was given to him. On November 30,1950, the
\nrespondent applied to the High Court for permission to file
\na suit for ejectment and for arrears of rent due since
\nSeptember 30, 1949. Mr. Justice Mootham, who heard the
\napplication declined to grant permission holding that the
\nclaim which the respondent intended to put forward against
\nthe Official Liquidators in the course of the proposed suit
\nmay be adjudicated upon in the winding up proceeding, and
\nwith the consent of parties, the learned Judge proceeded to
\ndecide that claim. By order dated August 30, 1951, Mr.
\nJustice Mootham
\nI hold that the petitioner is entitled to recover rent from
\nthe Bank at the rate of Rs. 325 per mensem from 1st October,
\n1949, upto the date on which the Official Liquidators give
\nthe petitioner (the landlord) such possession of the
\npremises as will, in law, terminate the Bank’s tenancy.”
\nAgainst this order, the Official Liquidators preferred an
\nappeal being special appeal No. 17 of 1952, to a Division
\nBench of the High Court.
\n193
\nOn April 23, 1953, the respondent applied to the Joint
\nRegistrar of the High Court to issue a certificate of non-
\nsatisfaction and to transfer the order to the court of the
\nCivil Judge of Allahabad for execution. The Joint Registrar
\nissued a certificate of non-satisfaction of the order and
\ndirected that the same be transmitted to the District Judge,
\nAllahabad, for execution. The respondent filed an
\napplication for execution in the court of the Civil Judge,
\nAllahabad, and obtained an order for attachment of an amount
\nof Rs. 12,000 lying to the credit of the Official Liquid-
\nators in the Allahabad Bank. The Official Liquidators
\nthereupon applied to the High Court praying that the
\nexecution proceedings pending in the court of the Civil
\nJudge, Allahabad, be declared void and the order of
\nattachment of the fund in the account of the Official
\nLiquidators passed by the Civil Judge be quashed. Mr.
\nJustice Brij Mohan Lall, who heard the application held that
\nthe proceeding commenced against the Official Liquidators,
\nwithout the sanction of the court under ss. 171 and 232, cl.
\nI of the Indian Companies Act, 1913, and the attachment
\nordered thereunder were void and directed that the
\ncertificate of non-satisfaction be recalled. Against this
\norder. the respondent preferred a special appeal to the High
\nCourt being appeal No. 20 of 1954. Appeals Nos. 17 of 1952
\nand 20 of 1954 were then heard. Appeal No. 17 of 1952 was
\ndismissed and by an order passed on April 17, 1956, the High
\nCourt partially modified the order of Mr. Justice Brij Mohan
\nLall, and directed the Official Liquidators to pay to the
\nrespondent in full the amount that had fallen due to him
\nafter October 1, 1949.
\nThe High Court was of the view that the Official Liquidators
\nhaving retained the Bank’s premises in their occupation, by
\nvirtue of the proviso to r. 97 framed by the High Court, the
\nrespondent was entitled to receive the rent due to him in
\nfull and was not liable to share the assets of the Bank pro
\nrata with the other ordinary creditors. Against the order
\npassed by the High Court, this appeal has been preferred
\nwith the certificate of the High Court.
\n25
\n194
\nBy his order Mr. Justice Mootham, merely declared the
\nliability of the Bank to pay-the rent accrued due
\nsince October 1, 1949: there is no direction for payment of
\nthe amount, and it is not necessary to consider the plea
\nraised by counsel for the respondent that the order
\nbeing virtually one under s. 45-B of the Banking Companies
\nAct, the respondent was entitled to payment according to
\nthe tenor of the order. The order in terms declares the
\nliability and does not decide any question of priority
\nbetween the respondent and other creditors of the Bank.
\nBy s. 647 of the Companies Act No. 1 of 1957, the winding up
\nof the Bank having commenced before that Act was enacted,
\nthe provisions with respect to the winding up contained in
\nthe Indian Companies Act No. VII of 1913, continue to apply
\nto the Bank in the same manner and in the same circumstances
\nas if Act 1 of 1957 had not been passed. By s. 230 of the
\nIndian Companies Act, 1913, provision is made for payment of
\nspecified categories of debts in the winding up in priority
\nto all other debts; but rent due to the landlord is not one
\nof such debts to which priority is given by s. 230. The
\nHigh Court held that in as much as by r. 97 of the Company
\nRules, it was provided,
\n” When any rent or other payment falls due at stated
\nperiods, and the order or resolution to wind up is made at
\nany time other than one of such periods the persons entitled
\nto the rent or payment may prove for a proportionate part
\nthereof up to the date of the winding up order or resolution
\nas if the rent or payment grew due from day to day:
\nProvided that where the Official Liquidator remains in
\noccupation of premises demised to a company which is being
\nwound up, nothing herein contained shall prejudice or affect
\nthe right of the landlord of such premises to claim payment
\nby the company, or the Official Liquidator of rent during
\nthe period of the company’s or the Official Liquidator’s
\noccupation; ”
\nfor the rent accruing due in respect of the premises which
\nremained in the occupation of the Official
\n195
\nLiquidators, the respondent was entitled to preferential
\npayment. The operative part of the rule deals with the rent
\nor other payment in arrears till the date of winding up. By
\nthe proviso, it is declared that the right of the landlord
\nto claim payment by the company of the rent accruing due
\nthereafter is not to prejudiced. The proviso merely affirms
\nthe right of the landlord to claim payment of, rent accruing
\ndue since the date of winding up. It does not deal with any
\nquestion of priority in payment of debts. By s. 246 of the
\nIndian Companies Act, 1913, power is conferred upon the High
\nCourt to make rules consistent with the Act, and the Code of
\nCivil Procedure concerning the mode of proceedings to be had
\nfor winding up of the company and certain other matters.
\nThe Legislature has by s. 230 prescribed that certain
\nspecified categories of debts shall rank for priority over
\nother debts due by the company and it is not within the
\ncompetence of the High Court to prescribe by rule a category
\nfor priority in payment which is not included in that
\nsection. By s. 193 of the Act, the court has, in the event
\nof the assets being insuffiicient to satisfy the
\nliabilities, indisputably power to make an order for payment
\nout of the assets, of the costs, charges and expenses
\nincurred in the winding up in such order of priority as the
\ncourt thinks fit, and in exercise of the power conferred by
\ns. 230 sub-cl. 3, the court may direct the company to retain
\nsuch sums as may be necessary for the costs and expenses of
\nthe winding up of the company before discharging even the
\ndebts in respect of which priority is prescribed by s. 230.
\nIf therefore, there is a debt which may reasonably fall
\nwithin the description of costs and expenses of winding up
\nof the company, the court may provide for priority in
\npayment of that debt as it thinks just.
\nIn the winding up of the company, it is open to the
\nliquidators to disclaim land burdened with onerous
\ncovenants, of shares or stock in companies, of unprofitable
\ncontracts or of any other property that is unsaleable or not
\nreadily saleable. The disclaimer operates to determine as
\nfrom the date of disclaimer
\n196
\nthe rights, interests and liabilities of the company and the
\nproperty of the company, in or in respect of the property
\ndisclaimed. By s. 230-A, cl. 4, liberty is
\nreserved to persons interested in the property requirng the
\nliquidator to decide whether he will or will not
\ndisclaim. It is also open to the court under sub-s. 5
\nof s. 230-A on the application of any person entitled to the
\nbenefit or subject to the burden of a contract made with the
\ncompany to make an order rescinding the contract on such
\nterms as to payment of damages for non-performance of
\ncontracts. It is evident that on the winding up outstanding
\ncontracts of the company do not become ipso facto
\ninoperative. The contracts remain binding until disclaimed
\nor rescinded in the manner provided by s. 230-A; but the
\nliability incurred under these contracts is merely an
\nordinary debt which ranks for claim to payment pro rata
\nalong with other creditors. If the debt be regarded
\nreasonably as falling within the description of costs and
\nexpenses of winding up of the company, it is open to the
\ncourt to direct that preferential payment in respect thereof
\nbe made; otherwise the debt will be claimable out of the
\nassets of the company pro rata with other ordinary
\ncreditors.
\nDistinction has been made by the courts in England where the
\nrelevant provisions of the Companies Act are substantially
\nthe same that if the liquidator continues in possession of
\nleaseholds for the purpose of the better realization of
\nassets, the lessor will be entitled to payment of the rent
\nin full, as part of the expenses properly incurred by the
\nliquidator; but as observed by Lord Justice Lindley, In re
\nOak Pits Colliery Companys (1).
\n” No authority has yet gone the length of deciding that a
\nlandlord is entitled to distrain for or be paid in full rent
\naccruing since the commencement of the winding up, where the
\nliquidator has done nothing except abstain from trying to
\nget rid of the property which the company holds as lessee.”
\nEvidently a distinction is made between property which
\nremains in the occupation of the liquidator
\n(1) 1882 Ch. D- 321, 331.
\n197
\nafter the winding up when the occupation is shown to be for
\nthe purpose of liquidation and property which merely remain
\nwith the liquidator, he having abstained from trying to got
\nrid of the same and It does not appear or is not -shown that
\nthe property was used for the purpose of winding up.
\nThe High Court held on the fact that the liquidators had
\nremained in occupation of the premises not for the purpose
\nof winding up but ” because they could not think of any
\nsuitable method of getting rid of the premises in spite of
\nall their desire to do so. ” It was pointed out that the
\nBank had closed its business and the liquidators were not
\ncarrying on any business after the winding tip and the
\nproperties were not used by the liquidators for the purpose
\nof liquidation. This conclusion of the High Court on the
\nevidence has not been challenged. The property not having
\nremained with the liquidators for the purpose of
\nliquidation, unless the court passes an order holding that
\nthe debt incurred was part of the costs and expenses of
\nliquidation, the rent accruing due since the date of the
\nwinding cannot be claimed in priority -over other ordinary
\ndebts.
\nWe are therefore unable to agree with the High Court that
\nunder r. 97 of the Company Rules, if the premises remained
\nin the occupation of the liquidators, not for the purpose of
\nwinding up, the landlord is entitled to priority in respect
\nof payment of rent. On the view taken by us, the appeal
\nwill be allowed, the order passed by the High Court set
\naside and the order passed by Mr. Justice Brij Mohan Lall
\nrestored with costs in this Court and in the High Court.
\nAppeal allowed.
\n198<\/p>\n","protected":false},"excerpt":{"rendered":"
PETITIONER: THE OFFICIAL LIQUIDATORS,U. P. UNION BANK LTD. Vs. RESPONDENT: SHRI RAMESHWAR NATH AGGARWAL DATE OF JUDGMENT: 10\/11\/1959 BENCH: SHAH, J.C. BENCH: SHAH, J.C. GAJENDRAGADKAR, P.B. SUBBARAO, K. CITATION: 1960 AIR 332 1960 SCR (2) 189 ACT: Company Law-Winding up of Bank-Landlord’s claim for rent of bank premises after order of winding up -Official Liquidators … Read more<\/a><\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"","fifu_image_alt":""},"categories":[4928],"tags":[],"amp_enabled":true,"_links":{"self":[{"href":"https:\/\/www.kopykitab.com\/blog\/wp-json\/wp\/v2\/posts\/29763"}],"collection":[{"href":"https:\/\/www.kopykitab.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.kopykitab.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.kopykitab.com\/blog\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/www.kopykitab.com\/blog\/wp-json\/wp\/v2\/comments?post=29763"}],"version-history":[{"count":2,"href":"https:\/\/www.kopykitab.com\/blog\/wp-json\/wp\/v2\/posts\/29763\/revisions"}],"predecessor-version":[{"id":115020,"href":"https:\/\/www.kopykitab.com\/blog\/wp-json\/wp\/v2\/posts\/29763\/revisions\/115020"}],"wp:attachment":[{"href":"https:\/\/www.kopykitab.com\/blog\/wp-json\/wp\/v2\/media?parent=29763"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.kopykitab.com\/blog\/wp-json\/wp\/v2\/categories?post=29763"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.kopykitab.com\/blog\/wp-json\/wp\/v2\/tags?post=29763"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}