Smt. Kaushalya Aggarwal vs Punwire Paging Services Ltd. (in Liquidation)

Hemant Gupta, J.—C. A. No. 367 of 2002, C. A. No. 936 of 2002 and C. A. No. 499 of 2001 along with C. A. Nos. 323, 365, 436 and 636 of 2002 and C. A. Nos. 144, 231 and 784 of 2003 (in C. P. No. 47 of 2000) and C. P. Nos. 101, 110 and 323 of 2002 and C. A. Nos. 115 of 2002, 103 and 467 of 2003 (in C. P. No. 144 of 2000) are being dealt with by this order as common questions of law and facts are raised.

In this bunch of applications, the petitioners are the landlords, premises of whom were taken on rent by the respondent companies in liquidation. The companies in liquidation are Punwire Paging Services Ltd. having its corporate office at B-53, Phast VI, Mohali. M/s. Punwire Mobile Communications Ltd. having its registered office at B-76, Phase VII, Mohali and Punjab Wireless Systems Ltd. having its registered office at Mohali.

For facility of reference, the facts are taken from C. A. No. 367 of 2002 in respect of Punwire Paging Services Ltd., from C. A. No. 936 of 2002 in the case of Punwire Mobile Communications Ltd. and from C. A. No. 499 of 2001 in the case of M/s. Punjab Wireless Systems Ltd.

C.A. No. 367 of 2002 :

The applicant has sought direction to the official liquidator to hand over the vacant possession of the premises situated at Panipat and also to pay arrears of rent to the extent of Rs. 2,84,465 up to March 1, 2002, and future rent up to the date of vacation of the premises at the agreed rate of Rs. 24,255 per month with interest past and future and also to hand over physical possession of the premises.

It has been alleged that by virtue of the lease agreement dated June 19, 1996, premises were let out for a period of ten years at a monthly rent of Rs. 34,000. However, vide supplementary lease dated April 26, 1999, the area of the premises let out was reduced to 1,500 square feet and consequently lease rent was also reduced to Rs. 22,000 with increase in the rent of 5 per cent. every year. It has been pointed out that after the order of winding up was passed by this court, the official liquidator attached to this court has taken over the assets of the company. The office of the respondent is closed for the last one year. The rent has been paid only up to January, 2001. It has been alleged that the premises in question are no more required by the respondent-company for carrying on its business, and therefore, it will be in the interest of the company and also reasonable and fair for the applicant to receive the possession of the premises in question so that the applicant may receive back his valuable property without any further liability on the respondent-company.

In the written statement, the official liquidator has stated that the appropriate remedy for the petitioners is to seek permission of the court u/s 446 of the Companies Act to initiate the eviction proceedings against the company in liquidation. On the merits it has been pointed out that various sophisticated equipment including the antenna, etc. are still located at the premises in question. The official liquidator has stated that he feels that in case the said sophisticated equipment are shifted to another place, it will cause depreciation in its value and would, thus, be against the interest of all the creditors and workmen of the company in liquidation. The premises in question are required for liquidation purposes in order to realise the better value on sale of the sophisticated equipment lying at the premises in question which would be subject to pro rata distribution amongst the workmen and secured and unsecured creditors of the company and Government dues etc. It will not be possible for the official liquidator to vacate the premises in question in the general interest of the body of the creditors and workmen, etc. Rent payable up to the date of winding up would be treated as an unsecured debt and paid accordingly. The rent becoming payable after the winding up order will be treated as liquidation expenses and payable first of all in priority to all other payments as and when the assets of the company in liquidation are realised.

On December 3, 2003, one of the suggestions which was given by the applicant was that the goods lying in the premises rented out to the respondent-company can be shifted to the Mohali office of the company in liquidation which will enable the applicant to make best use of the premises. Counsel for the official liquidator has the apprehension that there may not be physical space for storage of large quantity of goods from more than 150 centres situated all over the country. The parties had taken time to find out the availability of physical space. Subsequently, a report has been filed wherein it has been stated that the premises at B-77, Phase 7, Mohali, belong to M/s. Punwire. The first floor of the said premises had been rented out to M/s. Punwire Mobile Communication Ltd. M/s. Punwire Paging Services Ltd. as also M/s. Punwire Trunking Services Ltd. It has been pointed out that the space is available on the ground floor of the premises where material can be stored but it is not possible to report as to whether the assets lying at more than 150 centres could be adjusted in the said space. It has been pointed out that the inventories at all the 150 centres, are not available with the office of the official liquidator nor is it possible to state whether the goods can be adjusted in the space which is lying vacant in the premises though the vacant space gives an impression of quite a large space being available.

In respect of the premises of B-76, Phase VII, Mohali, it was pointed out that from a visit of the premises from outside it showed that no vacant space would be available. In the entrance room big bags were lying which contained records relating to M/s. Altos India Ltd. as well as M/s. Punjab Power Packs Ltd.

In respect of the premises of B-53, Phase VI, Mohali, it was pointed out that as no much vacant space is available and M/s. Punwire had not let out any party of the said premises to the companies in liquidation.

The official liquidator has also filed an affidavit dated December 8, 2003/ January 7, 2004, wherein it has been stated that the official liquidator is not accepting the suggestion that all assets lying at various centres throughout the country be transferred and stored at the premises available at B-77, Phase VII, Mohali. It has been pointed out that the area of operation of M/s. Punwire Paging Services Ltd. is spread over three States, i.e., Punjab, Haryana and Himachal Pradesh, whereas the area of operation in so far as M/s. Punwire Mobile Communication Ltd. was spread over nine States, i.e., Rajasthan, Uttar Pradesh, Madhya Pradesh, Andhra Pradesh, Gujarat, Tamilnadu, Maharashtra, Karnataka and Kerala. It has further been stated that it is not certain whether the vacant space at the said premises is sufficient or not for adjusting the assets of all the centres which are more than 150 spread all over India. It was submitted that one comprehensive scheme has to be formulated taking into consideration 150 centres even though the applicants have prayed that the court should consider their case alone. It has further been stated that it would be totally impossible for the official liquidator to spare adequate manpower to cope with the work involved in case the suggestion of the landlords is accepted for transfer of goods to the Mohali premises. The official liquidator is also short of adequate manpower and is facing numerous difficulties in effecting the process of winding up proceedings. The official liquidator is giving top priority to getting inventories prepared and valuation done in respect of various companies which have been wound up long time back. The suffering of a few landlords cannot be given priority over the overall and general interest of the creditors, interest of the workmen and Government dues.

The official liquidator has also mentioned that he will write to the official liquidators of the respective States to dispose of the properties of various centres in their respective States through auction or by inviting tenders on "as is where is basis". All the expenses incurred by the official liquidators of the respective States would be paid by the applicants before this court to the official liquidator in the first instance including expenses for advertisement, etc. The payment by the respective landlords would be a precondition for disposal of the properties of the various centres.

The official liquidator has been given permission for the sale of movable and immovable assets of M/s. Punjab Wireless Systems Ltd. (Punwire) on December 4, 2003, by this court. It was suggested that valuation is being got done in respect of the items lying at various centres at random in towns and cities so as to make available an yardstick with the official liquidator of the actual valuation of the said items. The stand of the official liquidator is that on the basis of such valuation the possession of the properties belonging to the landlords would be given to them along with stocks/assets lying in the premises for which the official liquidator would not claim any charge. It has further been stated that in most of the cases, I. F. C. I. and M/s. Punjab State Co-operative Bank Ltd., are having charge over the properties of the said two companies.

C. A. No. 936 of 2002 :

The applicant has sought the vacation of the premises given on rent to the company in liquidation to M/s. Punwire Mobile Communications Ltd., i.e., company in liquidation. It has been pointed out that area measuring about 1,200 square feet situated at Jodhpur was given on a monthly rent of Rs. 10,800 in pursuance of lease deed dated September 15, 1997, subject to increase of 5 per cent. per year from September 1, 1997. The company has paid rent till the month of December, 2000, and thereafter it has defaulted in the payment of monthly rent. The premises of the applicant were sealed by the official liquidator in the month of May, 2002. The official liquidator has not deposited any rent for retaining the premises of the applicant. The applicant has pointed out that only small pieces of equipment belonging to the company are lying at the aforementioned premises. The applicant is prepared to provide a suitable space in the basement of the same building where these materials can be conveniently stored till further orders of the court. The applicant is entitled to vacant possession of the premises on the ground of non-payment of rent.

The official liquidator in reply has pointed out that the machinery and equipment of the company in liquidation are lying in the premises and shifting of that material to the alternative premises would cause depreciation in its value and would thus be against the interest of general body of the creditors including the workmen, etc. It was pointed out that M/s. Punwire Paging Services Ltd. was maintaining 30 centres whereas M/s. Punwire Mobile Communications Ltd. was having 137 centres in nine States. In case the prayer of the applicants is allowed similar applications would be made by landlords of other leased premises of the companies in liquidation. In case the said applications are made, two things would be required to be done, (i) to prepare the inventory of the goods and (ii) either to shift the assets of the company in liquidation to another place or to sell all these assets. Even if a conservative estimate is applied that each step would require minimum of five days including travelling time taken and completion of other formalities and that minimum of two persons would be required from the office of the official liquidator and it would be total 1,670 days for granting similar relief to all the landlords of the company in liquidation. That would be a period of five years. Thus the entire function of the official liquidator would be held up only for the purpose of vacation of the leased premises of the companies in liquidation. It has been pointed out that since the property of the companies in liquidation are spread all over India, therefore, this court has given direction to the District Magistrates/Chief Presidency Magistrate within whose jurisdiction the operational and non-operational offices of the company are situated, to take possession of the offices of the company in liquidation and to hand over the same to the official liquidator vide order dated August 16, 2001, passed in C. A. No. 420 of 2001 in C. P. No. 47 of 2000.

It has been pointed out that the official liquidator is dealing with more than 190 companies in liquidation and he has to deal with a number of directions and comply with numerous formalities in respect of various companies in liquidation. The official liquidator is also attached to the Himachal Pradesh High Court to look after the companies under winding up in respect of the Himachal Pradesh area as well, therefore, it will not be possible for the official liquidator to vacate the premises in question on account of various factors mentioned above. It is submitted that the official liquidator has vacated leased premises in the past in those cases where there were only one or two centres of the company in liquidation and where only some books, etc., had been lying and did not involve the question of shifting of sophisticated/sensitive equipment.

C. A. No. 499 of 2001 :

The applicant has sought direction to the official liquidator to hand over vacant possession of the premises situated at Plot No. B-55 Phase VI, Mohali, taken on lease by the company for a period of five years on August 22, 1991, at a monthly rent of Rs. 1 lakh per month. It was alleged that after the official liquidator came into possession of the company in liquidation the monthly rent has not been paid from June, 1999. The official liquidator in its reply submitted that the petitioner is an unsecured creditor and therefore, the application u/s 446 of the Companies Act is not maintainable. It has further been pointed out that the entire records as well as the various assets of the company are lying at the premises in question. Various equipment relating to the defence of the country including the manufacturing of high frequency wireless sets are lying in the premises in question. It will not be in the interest of the country to move such equipment to any other place. It was also pointed out that the value of the goods will suffer substantially in case the goods are shifted from one place to another.

At the time of hearing of these applications, all the learned advocates appearing for the appellants have undertaken to get prepared the inventories of the goods lying in the premises leased to the company in liquidation in the presence of such representative of the official liquidator, secured creditors or representative of the court and to shift/transport such articles at their cost under a valid insurance cover to any place in India.

I have heard learned counsel for the parties at great length and find that more than 167 centres of the companies in liquidation, i.e., 30 of M/s. Punwire Paging Services Ltd. and 137 of M/s. Punwire Mobile Communications Ltd. are in possession of the official liquidator. The official liquidator has not paid rent of such premises after the order of winding up was passed or after the premises were sealed by the official liquidator. Still further the official liquidator is not utilising the said premises for any purpose except for storage of the goods which are lying as it is. The official liquidator has not prepared inventories of the goods rather has taken a stand that he lacks manpower to prepare the inventories and that he is engaged in many other companies in liquidation to watch the interest of secured, unsecured creditors, workmen and the Government dues.

The questions which arise are : whether the applicant/landlords are concerned with the extent of work being discharged by the official liquidator, whether the applicants can be deprived of the rent for the occupation of the premises by the official liquidator without carrying any activity; whether it is sufficient for the official liquidator to state that the rent after the order of winding up would be paid in priority to the applicants as liquidation expenses ; and whether it would be justified and proper for the official liquidator to shift and transfer the goods after preparing appropriate inventories to one place and to make arrangement for sale thereof.

The official liquidator has not given the details of the rent payable by the official liquidator in respect of 167 centres in occupation of the official liquidator all over the country. However, the basic rent payable excluding agreed yearly increase in respect of the applicants is as follows :

Monthly rent Rent due rent since (Rs.) (Rs.) 1. C. A. No. 367 of 2002, Punwire Paging Services Ltd. 22,000 February, 2001 2. C. A. No. 323 of 2002 11,800 November, 1999 3. C. A. No. 103 of 2003 13,500 August, 1999 4. C. A. No. 110 of 2002 9,000 June, 1999 5. C.A. No. 467 of 2003 11,000 September, 2000 6. C. A. No. 231 of 2003 7,000 -- 7. C. P. No. 101 of 2002 13,225 -- 8. C.A. No. 115 of 2002 14,150 May, 2000 9. C. A. No. 365 of 2002 (M/s. Punwire Mobile Communications) 9,100 January, 2001 10. C. A. No. 323 of 2002 17,250 September, 2001 11. C. A. No. 636 of 2002 37,625 June, 1998 12. C. A. No. 784 of 2003 13,000 February, 2000 13. C. A. No. 936 of 2002 10,800 June, 2001 14. C. A. No. 144 of 2003 15,375 December, 1999 15. C. A. No. 436 of 2002 14,706 -- 16. C. A. No. 499 of 2001 in C. P. No. 226 of 1997, M/s. Punjab Wireless Systems 1,00,000 June, 1999

A perusal of the above chart of 16 premises is indicative of the fact that the rent due and payable by the official liquidator of 167 centres would be in a few lakhs every month. The premises are in possession of the official liquidator for almost three years and that too without payment of rent. The magnitude of liability being incurred by the official liquidator has not got the attention of the official liquidator which it deserved.

In support of their respective contentions, the applicants placed reliance on Ravindra Ishwardas Sethna and Another Vs. Official Liquidator, High Court, Bombay and Another, whereas Mr. Puneet Kansal, advocate, appearing for the official liquidator has relied on para. No. 11 of the aforesaid judgment as well as paras. Nos. 24 and 25 of the judgment reported as Nirmala R. Bafna (Smt)/Kershi Shivax Cambatta and Others Vs. Khandesh Spinning and Weaving Mills Co. Ltd. and Another/Official Liquidator and Others, .

Learned counsel for the respondent has argued that the premises are required by the official liquidator to carry out the winding up activities of the company. The applicants have no legal right to seek vacation of the premises by the official liquidator. M/s. Punwire Paging Services Ltd. and M/s. Punwire Mobile Communications Ltd. are not the owners of any premises at Mohali and therefore the applicants cannot seek shifting of the properties of the company in liquidation to the premises of Punwire Ltd. which is a separate juristic entity, may be it is holding company of these two companies. It has been pointed out that the properties of Punwire is at the stage of sale, therefore, the premises in occupation of Punwire cannot be utilised for storage of goods and such shifting of material will hamper the sale process. It has further been submitted that the applications are not maintainable as it is the official liquidator who can disclaim the property in Form Nos. 124 to 134 appended to the Companies (Court) Rules, 1959. The applicants, have no right to seek disclaimer of the property.

Before adverting to the respective merits of the contentions of the parties, it will be beneficial to reproduce the statutory provisions contained in Section 535 of the Companies Act which contemplate that the official liquidator may disclaim property of the company in liquidation on account of onerous covenants. Sub-section (5) of Section 535 of the Companies Act permit the court on the application of any person who is entitled to the benefit or subject to the burden of a contract made with the company to seek an order rescinding the contract on such terms as to payment by, or to either party of damages for the non-performance of the contract.

"535. Disclaimer of onerous property in case of 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 ;

(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 court 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 court, 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 court.

(2) The disclaimer shall operate to determine, as from the date of disclaimer, the rights, interest, and liabilities of the company, and the 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 require such notice 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 court 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 court, 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, he shall be deemed to have adopted it.

(5) The court may, on the application of any person who is, as against the liquidator, entitled to the benefit or subject to the burden of a contract made with the company, make an order rescinding the contract on such terms as to payment by or to either party of damages for the non-performance of the contract, or otherwise as the court thinks just; and any damages payable under the order to any such person may be proved by him as a debt in the winding up.

(6) The court may, on an application by any person who either claims any interest in any disclaimed property or is under any liability not discharged by this Act in respect of any disclaimed property, and after hearing any such person as it thinks fit, make an order for the vesting of the property in, or the delivery of the property to any person entitled thereto or to whom it may seem just that the property should be delivered by way of compensation for such liability as aforesaid, or a trustee for him, and on such terms as the court thinks just; and on any such vesting order being made, the property comprised therein shall vest accordingly in the person therein named in that behalf without any conveyance or assignment for the purpose :

Provided that, where the property disclaimed is of a leasehold nature, the court shall not make a vesting order in favour of any person claiming under the company, whether as under-lessee or as mortgagee or holder of a charge by way of demise, except upon the terms of making that person--

(a) subject to the same liabilities and obligations as those to which the company was subject under the lease in respect of the property at the commencement of the winding up ; or

(b) if the court thinks fit, subject only to the same liabilities and obligations as if the lease had been assigned to that person at that date ;

and in either event (if the case so requires) as if the lease had comprised only the property comprised in the vesting order; and any mortgagee or under-lessee declining to accept a vesting order upon such terms shall be excluded from all interests in and security upon the property, and, if there is no person claiming under the company who is willing to accept an order upon such terms, the court shall have power to vest the estate and interest of the company in the property in any person liable, either personally or in a representative character, and either alone or jointly with the company, to perform the lessee''s covenants in the lease, freed and discharged from all estates, encumbrances and interests created therein by the company.

(7) Any person injured by the operation of a disclaimer under this section shall be deemed to be a creditor of the company to the amount of the compensation or damages payable in respect of the injury, and may accordingly prove the amount as a debt in the winding up."

In The Official Liquidators, U.P. Union Bank Ltd. (In Liquidation) Vs. Sh. Rameshwar Nath Agarwal, the hon''ble Supreme Court was considering the case where a bank who was a tenant in the premises was ordered to be wound up. The hon''ble Supreme Court considered the various provisions of Sections 193, 230 of the Indian Companies Act, 1913, corresponding to Sections 476 and 530 of the Companies Act, 1956, and held that the rent payable up to the date of winding up order is not one of such debts to which priority is given by Section 530 of the Companies Act. The outstanding contracts of the company do not become ipso facto inoperative after the winding up order is passed. The contracts remain operative until disclaimed or rescinded in the manner provided by Section 230A of the 1913 Act corresponding to Section 535 of the 1956 Act. The hon''ble Supreme Court held as follows (page 117) :

"(6) In the winding up of the company it is open to the liquidators to disclaim land burdened with onerous covenants, of shares or stock in companies, of unprofitable contracts or of any other property that is unsaleable or not readily saleable. The disclaimer operates to determine as from the date of disclaimer the rights, interests and liabilities of the company and the property of the company, in or in respect of the property disclaimed. By Section 230A, Clause 4, liberty is reserved to persons interested in the property requiring the liquidator to decide whether he will or will not disclaim. It is also open to the court under Sub-section (5) of Section 230A on the application of any person entitled to the benefit or subject to the burden of a contract made with the company to make an order rescinding the contract on such terms as to payment of damages for non-performance of contracts. It is evident that on the winding up outstanding contracts of the company do not become ipso facto inoperative. The contract remain binding until disclaimed or rescinded in the manner provided by Section 230A ; but the liability incurred under these contracts is merely an ordinary debt which ranks for claim to payment pro rata along with other creditors. If the debt be regarded reasonably as falling within the description of costs and expenses of winding up of the company, it is open to the court to direct that preferential payment in respect thereof be made; otherwise the debt will be claimable out of the assets of the company pro rata with other ordinary creditors."

In Ravindra Ishwardas Sethna and Another Vs. Official Liquidator, High Court, Bombay and Another, , the official liquidator sought the permission of the company court to let out the premises on lease or licence or to sell the same. The company court granted permission to the official liquidator to enter into a caretaking agreement of not less than Rs. 2,250 per month. The landlord took out judge''s summon praying for a direction to the liquidator to terminate the caretaker''s agreement entered into under the direction of the court and to hand over vacant peaceful possession to the appellant. Such request of the landlord was declined by the company judge as well as by the Division Bench wherein it was held that the landlords have no right of present possession of the premises. In appeal before the hon''ble Supreme Court, the hon''ble Supreme Court held that the official liquidator cannot carry on the business of the company by giving premises on lease, licence or under caretaker agreement which was not the business of the company. Therefore, the stand of the official liquidator that by leasing the premises it would utilise the fund for payment to the creditors is a mere euphemism. The hon''ble Supreme Court held that the learned company judge could not have permitted holding on to possession of the premises not needed for efficiently carrying on winding up proceedings. It is only those proceedings which are beneficial to the interest of the company that could be permitted to be carried out. Therefore, the only course open to the court was to direct the liquidator to surrender the possession to the landlord and save recurring liability to pay the rent. However, the court accepted the offer of the landlord to pay rent for the period of six years as the expected income for the distribution amongst creditors of the company in liquidation.

In Nirmala R. Bafna (Smt)/Kershi Shivax Cambatta and Others Vs. Khandesh Spinning and Weaving Mills Co. Ltd. and Another/Official Liquidator and Others, was inducted as a sub-tenant by the company in liquidation prior to its liquidation. Mrs. Bafna was sister of one of the directors of the company and her husband was manager of the company. She relied upon the agreement of subtenancy. The company court found that the said agreement of sub-tenancy appears to be bogus, but granted leave for the adjudication of the claim of Mrs. Bafna subject to conditions. In appeal against the directions of the Pivision Bench, the hon''ble Supreme Court accepted her appeal as it formed an opinion that merely because a company goes into liquidation and a liquidator/official liquidator is appointed, the rights of the company, vis-a-vis, its landlord and/or its tenants do not undergo any change, and permitted Mrs. Bafna to continue in possession with a direction to furnish security. However, the appeal of the landlord trust seeking vacant possession of the remaining portion from the official liquidator was dismissed as the finding of the learned company judge that the premises were required for liquidation purposes was not found to be irrelevant.

Maneck Noshirwan Kaka and Others Vs. Official Liquidator, High Court, a Division Bench of the Calcutta High Court was considering the scope of Section 535(2) of the Companies Act as well as Rule 268 of the Companies (Court) Rules, 1959. The said case arose as the owner of the premises, i.e., Life Insurance Corporation of India took out a judge''s summon, inter alia, praying for an order on the official liquidator directing him to disclaim the leasehold interest of the company in respect of the premises situated at Calcutta. The application was dismissed by the learned company judge. However, the appeal court set aside the order of the learned company judge and allowed the application of Life Insurance Corporation of India. The Life Insurance Corporation of India was given leave to continue the proceedings under the Public Premises (Eviction of Unauthorised Occupants) Act, 1971. The company court directed the official liquidator to forthwith formally disclaim the premises in question in favour of the Life Insurance Corporation of India and the latter was directed to provide a godown or a storing space for storing the movable goods in the premises till the title thereto was decided. Subsequently a dispute arose whether the property has been disclaimed in favour of the Life Insurance Corporation of India. It was contended that in view of Rule 268 of the Companies (Court) Rules, 1959, the disclaimer has not yet been operative. Rule 268 provides that every disclaimer shall be filed in court by the liquidator and shall not be operative until it is so filed. It was found that since the disclaimer is not at the instance of the official liquidator but instead the court directed the official liquidator to disclaim the property and the official liquidator complied with the order of the court of disclaiming of the property. Therefore, the provisions of Rule 268 will not be applicable when the property of the company is disclaimed at the instance of a party other than at the instance of the official liquidator.

In view of the principles of law discussed above, it is apparent that the company in liquidation has entered into a contract with each of the landlords of 167 centres which is containing onerous covenant on cessation of business of company of payment of monthly rent. Thus, it is within the jurisdiction of the company court to rescind such contract so as to reduce the burden on the company in liquidation for the larger interest of the creditors. In view of the facts mentioned above, the liability of the company after the possession was taken over by the official liquidator is increasing every month. The official liquidator has stated in the reply that such expenses are liquidation expenses. May be the official liquidator is right in declaring the rent of such 167 premises as liquidation expenses but whether it is justified to incur such additional liability every month when the premises are not being put to any better use in any manner. The reason pointed out by the official liquidator that removal of sophisticated equipment will reduce the price is not real. It cannot be disputed that the equipment are required to be handled with care and caution but not that it cannot be removed. They were installed in the premises by transporting them to the premises in dispute. The thing which has been done in a particular manner can be undone as well. Therefore, it is not reasonable to allow the liquidator to continue the premises in his possession only because the equipment are sophisticated. Ways and means are to be found out for shifting of the equipment. The official liquidator just cannot sit and continue to increase the liability of the company. The official liquidator has not shown any steps which he, in fact, has taken in the last three years for either reducing liability or for sale of the property of the company.

In fact the stand of the official liquidator in the additional affidavit is that the possession of the properties lying in the premises would be given to the landlords after assessing the valuation of the said items at random. Still further, it is the stand of the official liquidator that the landlords have to bear the expenses of the sale of the goods lying in their premises as a condition precedent. On the one hand the landlords are craving for rent which has not been paid since the date of winding up order, on the other hand it is the stand of the official liquidator that the sale of the property which is alleged to be secured with financial institution should be made at the costs of the landlords.

Thus, the stand of the official liquidator that over 167 premises are required to carry out the liquidation activity is not justified and cannot be sustained. It is not in the interest of the company, creditors, secured or unsecured to incur the additional liability of liquidation expenses every month any longer. Therefore, the official liquidator is directed to disclaim the properties from its possession in the following manner so as to reduce the recurring liability every month :

In the cases of the applicants :

The official liquidator shall prepare inventory of the goods after opening of the seal of the premises in the presence of the representative of the official liquidator attached to this court or of the High Court where the property is situated, after informing the District Magistrate/Presidency Magistrates and secured creditors to enable them to depute their representative at the time of opening of seals and preparation of inventory.

The applicants who have filed the present applications for disclaiming the tenancy rights will get the equipment, furniture, fixtures and all other property lying in the premises photographed in the presence of such representatives. The landlords shall get the photographs at their costs without removal of the goods from the site.

The applicants shall then cause the removal of equipment such as antennas, etc., at their costs and get it properly packed and insured for transportation to the premises at Mohali or at any other place to be determined by the official liquidator. The official liquidator may take the assistance of the secured creditors to provide suitable accommodation for stock of the goods if not available.

The official liquidator shall take immediate steps for sale of such goods.

In other cases :

The property other than that of the applicants shall also be disclaimed by the official liquidator. The official liquidator shall call upon the landlords to remain present at an appointed date and time for preparing an inventory of the goods in the presence of the landlords or their representative, representative of the District Magistrates/Presidency Magistrates and that of the secured creditors to enable them to depute their representative at the time of opening seals and preparation of the inventory.

The landlords will get the equipment, furniture, fixtures and all other property lying in the premises photographed in the presence of such representatives. The landlords shall get the photographs at their costs without removal of the goods from the site.

The landlords shall then cause the removal of equipment such as antennas, etc., at their costs and get it properly packed and insured for transportation to a place determined by the official liquidator.

The official liquidator shall identify one centre in each State where the goods of the company lying in different centres can be transported. The property of the company lying in different centres in each State shall be transported to that centre. However, if the official liquidator is not able to identify such centre, the goods shall be transported to Mohali or at a place to be identified by the official liquidator with the assistance of the secured creditors. If any of the landlord do not co-operate with the official liquidator, then the official liquidator shall be at liberty to approach the company court for further appropriate direction such as treating the rent falling due after the date of winding up as an unsecured debt.

The official liquidator shall take immediate steps for sale of such goods.

The official liquidator to carry out the above directions effectively, preferably within two months in the case of the applicants and in six months in other cases. Notice be issued to the secured creditors such as IFCI, Chandigarh, IDBI and M/s. Punjab State Co-operative Bank Ltd. Sector 34, Chandigarh, for March 19, 2004, to enable the official liquidator to carry out the above directions effectively.