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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

DATED THIS THE 11TH DAY OF MARCH, 2016

BEFORE

THE HON'BLE MR. JUSTICE ARAVIND KUMAR

COMPANY APPLICATION NO. 1115/2015

BETWEEN: SMT. NANDINI DINESH SHINGTE, W/O SRI.DINESH RAJARAM SHINGTE, AGED ABOUT 56 YRS., R/O. FLAT NO.201, SHIVNERI PLAZA, E WARD, SHIVAJI PARK, KOLHAPUR – 416 001. REP. BY HER GPA HOLDER, SRI.DINESH RAJARAM SHINGTE, S/O LATE DR.RAJARAM DHONDIBA SHINGTE, AGED ABOUT 60 YRS., R/O FLAT NO.201, SHIVNERI PLAZA, E WARD, SHIVAJI PARK, KOLHAPUR – 416 001. … APPLICANT (BY SRI.VISHWANATH.H.M., ADV. ) AND: M/S. N G E F LTD., (IN LIQN), REP. HEREIN BY THE OFFICIAL LIQUIDATOR, ATTACHED TO HIGH COURT OF KARNATAKA, CORPORATE BHAVAN, 12TH FLOOR,

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RAHEJA TOWERS, NO.26-27, M.G.ROAD, BANGALORE – 560 001. (BY SRI.G.C.YADAV, LEARNED OFFICIAL LIQUIDATOR A/W SRI.K.S.MAHADEVAN AND V.JAYARAM FOR OFFICIAL LIQUIDATOR.) …RESPONDENT THIS COMPANY APPLICATION IS FILED UNDER SECTION 446(2) OF THE COMPANIES ACT, 1956, READ WITH RULE 6 AND 9 OF THE COMPANIES (COURT) RULES, 1959, PRAYING THIS HON’BLE COURT TO DIRECT THE RESPONDENT TO MAKE PAYMENT OF RS. 16,22,036/- TOWARDS ARREARS OF RENT TO THE APPLICANT, FROM 01.01.2004 TO TILL THE DATE OF FILING OF THIS APPLICATION, AND ETC.

THIS COMPANY APPLICATION COMING ON FOR ORDERS THIS DAY, THE COURT MADE THE FOLLOWING:

O R D E R

Heard Sri. Vishwanath H.M., learned counsel

appearing for the petitioner and Sri. G.C. Yadhav,

learned Official Liquidator, who has addressed the

arguments on this application with the leave of this

court. Perused the records.

2. The applicant, who is the absolute owner

of the immovable property situated at Shiye Phata,

Old National Highway No.4, Tuluqa, Hatkanangale,

Kolhapur District had undisputedly leased said

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property in favour of the Company (in liquidation) by

executing lease deed dated 30.07.1983 which was

with effect from 01.08.1983, whereunder it was

agreed that rate of rent was Rs.2,500/- p.m. as per

Annexure-A. From time to time, rent is said to have

been enhanced and as on 01.04.1996, the rate of rent

was Rs.6,000/- p.m., which was being paid by the

Company (in liquidation) to the applicant. The copy

of the letter dated 12.01.2000 (Annexure-C) issued

by the Company (in liquidation), which is not in

dispute would also evidence said fact. The company

(in liquidation) was ordered to be wound-up by order

dated 03.08.2004 and Official Liquidator came to be

appointed, and he took charge of the assets of the

Company (in liquidation). Subsequently, on

13.06.2005, a mahazar came to be drawn for taking

possession, inventorization and valuation of the

assets (stocks) of the Company as per mahazar drawn

on date (Annexure-E). At the time of drawing of the

said mahazar, the applicant as well as the

representative of the Official Liquidator apart from

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others were also present. The Official Liquidator

while drawing said Mahazar had directed the present

applicant to safeguard the stocks, which were lying in

the godown. In fact, a communication was also

forwarded by the Official Liquidator on 28.02.2006

(Annexure-F) to the applicant herein to safeguard the

assets lying in the said godown till he takes further

steps in the matter. When this was the factual

position, property in the custody of the court was

being taken care of by the applicant.

3. The Official Liquidator submitted a report in

OLR 284/2015 seeking leave of the court to disclaim

the movables situated in the godown in favour of the

owner of the premises i.e., applicant and this court

while disposing of the said OLR No.284/2015 on

21.07.2015, permitted the Official Liquidator to

disclaim the movables situated at Kolhapur

(belonging to the applicant) apart from permitting the

Official Liquidator to disclaim the movables located in

Ahmedabad and New Delhi. This court had also

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made an observation that insofar as rent and

demurrage which was payable in respect of the goods

being apparently inflated and exorbitant, gave liberty

to the concerned persons to approach this court for

adjudication of their claim and leaving open the said

question. It is also not disputed by the applicant

that at the time of disposal of the OLR- 284/2015

Official Liquidator had sought leave of the court to

disclaim the movables and same had been granted by

this court.

4. Even prior to disposal of the above said

OLR, applicant herein had made a claim before the

Official Liquidator for payment of arrears of rent,

security charges, cost of shifting of the materials and

interest component amounting to Rs.12,35,400/- as

per the representation dated 14.10.2010

(Annexure-G), which was followed-up by a reminder

dated 19.01.2012 (Annexure-H) and representation

dated ‘Nil’ (Annexure-J). Subsequently, on

31.03.2015, applicant made a claim for

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Rs.16,17,984/-, with the Official Liquidator, which is

at Annexure-K. On account of non-payment of said

amount, present application has been filed seeking

for a direction to the Official Liquidator to make

payment of Rs.16,22,036/- and the break-up of the

amounts claimed by applicant reads as under:-

Srl. No

Particulars Amount in Rs.

1. Arrears of rents for the year

01/01/2014 to 31/03/2015 @ Rs. 6,000/- per month

8,10,000/-

2. Towards Security payment @ 2,000/- per month for

Two Security Guards (Day/Night)

6,00,000/-

3. Towards shifting of materials and maintenance

charges

30,000/-

4. Service Tax @ 12.36% on Rs.14,40,000/- (Rupees Fourteen Lakhs Forty

Thousand)

1,77,984/-

Grand Total 16,17,984/-

(In Words:- Rupees Sixteen Lakhs Seventeen

Thousand Nine Hundred Eighty Four Only.)

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5. It is the contention of Mr. Vishwanath,

learned counsel appearing for the applicant that,

Official Liquidator despite repeated reminders, has

not paid the amounts and as such a direction be

issued in that regard.

6. Per contra, Sri. G.C. Yadav, the Official

Liquidator, has vehemently contended that Official

Liquidator has a right to disclaim movables belonging

to the company (in liquidation) which was situated in

the godown in question and this was also intimated

to the applicant by communication dated 07.08.2015

(Annexure-L), whereunder Official Liquidator had

disclaimed all the items and granted liberty to the

applicant to take suitable/appropriate action

regarding demurrage, rentals/repair charges, etc. As

such, he contends that Official Liquidator is not

required to pay the arrears of rent. He further

elaborates his submission by contending there is a

statutory duty cast on the applicant under Sub-

section (4) of Section 535 of the Companies Act, to

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submit an application in writing to the Official

Liquidator by calling upon the Official Liquidator to

decide as to whether he would disclaim the goods and

in the event of Official Liquidator not acting upon

such notice within a period of 28 days after receipt of

such application or such extended period as may be

allowed by the Tribunal by intimating the applicant

that he (Official Liquidator) intends to apply to the

Court for leave to disclaim, then, the Official

Liquidator is deemed to have adopted. He submits in

the instant case, such an application having not been

filed by the applicant before the Official Liquidator,

applicant cannot seek for arrears of rent or any other

amount due to him. He would further submit that

applicant had to first file such an application and

without exhausting the remedy available under sub-

section (4) of Section 535 of the Act has approached

this court and as such application is liable to be

dismissed.

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7. He would further contend that in view of

applicant not having exhausted such remedy and

Official Liquidator having approached this court to

disclaim the goods and lease hold rights and same

having been granted by this court, he contends that

Official Liquidator is not required to pay arrears of

rent. Hence, he seeks dismissal of the application.

8. Having heard the learned advocate

appearing for the applicant and Official Liquidator

appearing in person, this court is of the considered

view that, in order to examine the contentions raised

by the Official Liquidator, it is appropriate to extract

Section 535 of the Act, which reads thus:-

“Sec. 535. Disclaimer of onerous

property in case a company which is

being wound up,-

(1) Where any part of the property of a company which is being wound up consists of-

(a) land of any tenure, burdened with onerous covenants;

(b) shares or stock in companies;

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(c) any other property which is unsaleable or is not readily saleable, by reason of its binding the possessor thereof

either to the performance of any onerous act or to the payment of any sum of money; or

(d) unprofitable contracts;

the liquidator of the company, notwithstanding that he has endeavoured to sell or has taken possession of the property, or exercised any act of ownership in relation thereto, or done anything in

pursuance of the contract, may, with the leave of the [Tribunal] and subject to the provisions of this section, by writing signed by him, at any time within twelve months after the commencement of the winding up or

such extended period as may be allowed by the [Tribunal], disclaim the property: Provided that, where any such property has not come to the

knowledge of the liquidator within one month after the commencement of the winding up, the power of disclaiming the property may be exercised at any time within twelve months after he has become aware thereof or such

extended period as may be allowed by the [Tribunal]. (2) The disclaimer shall operate to determine, as from the date of disclaimer, the rights, interest, and

liabilities of the company, and the

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property of the company, in or in respect of the property disclaimed, but shall not, except so far as is necessary for the purpose of releasing the

company and the property of the company from liability, affect the rights or liabilities of any other person. (3) The Court, before or on granting leave to disclaim, may re- quire such

notices to be given to persons interested, and impose such terms as a condition of granting leave, and make such other order in the matter as the [Tribunal] thinks just.

(4) The liquidator shall not be entitled to disclaim any property in any case where an application in writing has been made to him by any person interested in the property requiring him to decide whether he will

or will not disclaim, and the liquidator has not, within a period of twenty- eight days after the receipt of the application or such extended period as may be allowed by the [Tribunal], given notice to the applicant that he

intends to apply to the Court for leave to disclaim; and in case the property is a contract, if the liquidator, after such an application as aforesaid, does not within the said period or extended period disclaim the contract, 1 [he shall

be deemed to have adopted it]. (5) xxxxx xxxxx xxxxx xxxxx

(6) xxxxx xxxxx xxxxx xxxxx

(7) xxxxx xxxxx xxxxx xxxxx”

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There cannot be any dispute to the proposition that

Official Liquidator can disclaim the rights, interest

and liabilities of a Company (in liquidation) as

provided under Sub-Section (1) of Section 535 of the

Act. Said Provision would indicate that even in the

event of liquidator taking steps to sell the property of

such company or even after exercising ownership of

the property of the company can with the leave of the

court and subject to sub-section (2) to (4) can within

(12) twelve months after commencement of winding-

up or such extended period that may be allowed by

the Court can disclaim any part of the property of the

company which is being wound-up consisting of, - (i)

land of any tenure burdened with onerous covenants;

(ii) shares or Stocks in Companies, (iii) any other

property which is unsaleable or is not readily

saleable; or (iv) if it is unprofitable contracts.

However, if such property which has not come within

the knowledge of the liquidator, then in such an

event, liquidator can within one (1) month, after

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commencement of the winding-up, the power of

disclaiming the property can be exercised at any time

within twelve (12) months, after he acquires

knowledge or becomes aware of it or such extended

period. A bare reading of sub-Section (2) of Section

535 of the Act would clearly indicate that, such

disclaimer would operate from the date of disclaimer,

but such disclaimer shall not operate, except for the

purpose of releasing the company and the property of

the company from liability, affect the rights or

liabilities of any other person.

9. Reading of sub-section(4) of Section 535

would clearly indicate that Liquidator would not be

entitled to disclaim any property in any case where

an application in writing has been made to him by

any person interested in the property calling upon

the liquidator to decide whether he will or will not

claim, and in such case where liquidator does not

within a period of (28) twenty eight days from the

date of receipt of such application or such extended

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period as may be allowed by the court gives notice to

the applicant that he intends to apply to the court for

leave to disclaim and in case the property is a

contract, if the liquidator, after such an application

as aforestated does not within the said period or

extended period disclaim the contract, would be

deemed to have adopted it. In other words he cannot

disclaim where an application has been made to him

by any person interested in the property requiring

him to decide whether he will or will not disclaim

within the period stipulated thereunder. In other

words, where the property is owned by the applicant,

if he opts to seek from the Official Liquidator as to

whether he is disclaiming or not of any property in

his possession, the said provision would operate,

otherwise, it would not.

10. In the instant case namely when facts on

hand are examined it can be seen that, after drawing-

up of the mahazar on 13.06.2005 as per

Annexure-E, the Official Liquidator has intimated the

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applicant by communication dated 28.02.2006

(Annexure-F) indicating thereunder that assets lying

in the premises belonging to the applicant be

safeguarded by the applicant till the Official

Liquidator initiate further steps in the matter. This

would clearly indicate that Official Liquidator has in

equivocal terms intimated the applicant to comply

with the direction namely to take steps to safeguard

the goods lying in the godown. As such, applicant

cannot be expected to approach either Official

Liquidator or the Company Court for a direction to

direct the Official Liquidator either to disclaim or

otherwise. The Official Liquidator himself having

intimated the applicant that he would be taking

further steps in the matter in the year 2006 and,

sleeps over the matter till he files a report in OLR

No.284/2015, Official Liquidator cannot be heard to

contend that applicant had to approach the Company

Court seeking for a direction or applicant should have

made an application before the Official Liquidator

intimating him as to whether he intends to disclaim

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or otherwise, and said situation did not arise at all

since the Official Liquidator himself had directed the

applicant to safeguard the goods till he (Official

Liquidator) take steps in respect of the property

belonging to the company (in liquidation). Hence,

Official Liquidator cannot be heard to contend that

applicant ought to have filed an application under

sub-section (4) of Section 535 of the Act, either before

the Official Liquidator or before the Company Court.

At this juncture itself, it would be appropriate to note

that, once the Official Liquidator takes over the

property to his custody, it would be the property of

Company Court and Official Liquidator would be its

custodian. Hence, no person including the Official

Liquidator, would be entitled to deal with such

property without leave of the Company Court. In

other words, it would be the property of the Court

and it is because of this precise reason, OLR

284/2015 came to be filed by the Official Liquidator

to disclaim the rights and liabilities of the properties

i.e., movables/stocks situated in the godown in

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question belonging to the applicant. To put it

differently, from the date of disclaim is made and is

granted by the Company Court. the liability of the

Official Liquidator does not cease, and it continues to

operate till such disclaim is made and permission is

granted by the Company Court. Hence, contentions

raised by the Official Liquidator requires to be

rejected and accordingly, it stands rejected.

11. Now turning my attention to the claim of

the applicant it is noticed that it is sum of

Rs.16,17,984/- as per representation dated

31.03.2015 (Annexure—K) submitted to the Official

Liquidator. The rent, which has been claimed as

arrears of rent, is for the period from 01.01.2014 to

31.03.2015. The order of winding-up came to be

passed 03.08.2004. Thus, the rent that becomes

payable would be from the date of possession, and

possession is deemed to have been taken by the

Official Liquidator from the applicant on 03.08.2004

and up to the date of disclaiming, came to be ordered

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by this court on 21.07.2015 or it can be safely said

till 31.06.2015, would be for a period of 131 months.

There being no dispute with regard to rate of rent

being at the rate of Rs.6,000/- p.m., claim of the

applicant to the extent of arrears of rent for 131

months at the rate of Rs.6,000/- p.m. would be

maintainable and it would be Rs.7,86,000/-. The

said claim of arrears of rent of Rs.7,86,000/- is

allowed as against the claim of Rs.8,10,000/-.

12. Towards security payment, a sum of

Rs.2,000/- p.m. has been claimed by the applicant.

There are no receipts forthcoming from the Security

Agency issued to the applicant to establish that

amounts had been paid by the applicant to Security

Agency. Though learned counsel would contend that

it was a private Security Agency and as such, receipts

had not been issued by them and such claim cannot

be entertained in the absence of any proof being

tendered with regard to payment of Rs.2,000/- p.m.

and this court would not be in a position to entertain

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such claim or grant any relief in that regard as

claimed by the applicant, Hence, claim of

Rs.6,00,000/- made by the applicant in that regard

i.e., towards security charges stands rejected.

13. Applicant has also made a claim for

payment of Rs.30,000/- towards transportation of

materials from the Company godown which was in

the custody of Official Liquidator, till it was permitted

to be removed. Even in respect of said claim, there is

no bill or receipt or invoice forthcoming issued by any

transporters. As such, said claim also cannot be

entertained and it stands rejected.

14. The fourth claim relates to payment of

service tax @12.6% on Rs.14,40,000/- amounting to

Rs.1,77,984/- Even in respect of payment of service

tax, there is no receipt produced by applicant for

having remitted said tax to the Service Tax

Commissionerate. In that view of the matter, claim

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for Rs.1,77,984/- made by applicant also cannot be

entertained and it stands rejected.

15. Subsequent to the disclaim made by the

Official Liquidator by filing OLR No.284/2015 and

order came to be passed by this court on 21.07.2015

and Official Liquidator was permitted to disclaim

which was intimated to applicant herein by Official

Liquidator on 07.08.2015 (Annexure-L) and pursuant

to same, applicant is said to have sold the stocks

which were located in the godown in question and as

against the valuation made by the approved valuer of

this court for Rs.1,04,000/-, applicant has sold the

stocks for a sum of Rs.1,42,000/-, which is admitted

by the applicant in Para-13 and he has also enclosed

the Demand Drafts (Annexures-N & P) which has

been received by him by way of sale proceeds. In

other words in respect of the claim arising out of the

goods lying in the godown which was in the custody

of the Official Liquidator, the applicant has realized a

sum of Rs.1,42,000/- and same requires to be

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deducted from out of the arrears of rent payable by

the Official Liquidator and balance amount towards

arrears of rent will be payable by the Official

Liquidator to the applicant and same would be

Rs.6,44,000/-, as indicated herein below.

(i) The arrears of rent from 01.08.2004 to 31.06.2015 for 131 months x Rs.6,000/- = Rs.7,86,000/-.

(ii) The amount received or realized by the applicant by sale of stocks

:Rs.1,42,000/-.

(iii) The balance: Rs.6,44,000/-

Thus, applicant would be entitled to a sum of

Rs.6,44,000/- in all from the Official Liquidator.

Hence, the following order:

ORDER

(i) The application is hereby allowed in

part.

(ii) Official Liquidator is hereby directed

to pay a sum of Rs.6,44,000/- from

the funds of the Company (in

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liquidation) within one week from

today without waiting for certified

copy of the order since it is passed

in the presence of Official Liquidator

and after hearing him in person.

(iii) Official Liquidator would be liable to

pay interest @ 11% p.a. on quarterly

rests till the date of payment in the

event of amount is not paid within

one week from today.

SD/-

JUDGE KGR*