LexPHATU ROCHIRAM MULCHANDANI versus KARNATAKA INDUSTRIAL AREA DEVELOPMENT BOARD & ORS.
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A B [2014] 3 S.C.R. 710 PHATU ROCHIRAM MULCl:IANDANI v. KARNATAKA INDUSTRIAL AREAS DEVELOPMENT BOARD & ORS. (Civil Appeal No. 3803 of 2014) MARCH 12, 2014 [S.S. NIJJAR AND A.K. SIKRI, JJ.] KARNATAKA INDUSTRIAL AREA DEVELOPMENT C ACT, 1966: Lease-cum-sale agreement - Allotment of plots to company for setting up factory/industry - Industry not set up - Company in liquidation - Agreement terminated by Board - 0 Held: Right to purchase the plots m question after the expiry of the lease period could accrue in favour of the Company only on fulfilling the covenants stipulated in clause 2(P) - On Company's failure to do so, Lease Agreement gave right to the Board to determine lease and resume the land - It is, thus, in the nature of Lease-cum-Sale Agreement, which started E with lease- and could culminate into sale - Lease came to be determined by Board because of the breach of covenants of lease agreement - Therefore, it cannot be accepted that Company had become the owner of the plots in question. F Validity of termination notice - Held: Company had committed clear breach in not completing the project and setting up the factory within the time given on the Lease Agreement or the time as extended by the Board - In such circumstances, the Lease Agreement gave a definite right to G the Board to terminate the lease - Board was within its right to terminate the lease as provided in Lease Agreement. H Requirement of prior permission of Company Court before terminating the lease - Notice of cancellation of lease 710 PHATU ROCHIRAM MULCHANDANI v. KARNATAKA 711 INDUSTRIAL AREAS DEVP. BOARD given after the winding up order - Held: Serving of cancellation A notice simplicitor would not come within the mischief of s.537 of Companies Act, as that by itself does not amount to attachment, distress or execution etc - No doubt, after the commencement of the winding up, possession of the land could not be taken without the leave of the Court - Therefore, B no prior permission was required by the Board for cancelling the lease - Companies Act, 1956 - s.537. COMPANIES ACT, 1956: s.536 - Company in liquidation - Resumption of plots C allotted to company, on its failure to set up Factory/industry - Application for permission by Board - Held: Termination notice by the Board is valid - Likewise, order of Company Judge permitting the Board to take possession of land in question is legal and justified. D LOCUS STAND/: Company in liquidation - Cancellation of lease-cum-sale agreement in respect of two plots allotted to Company, for its failure to set up factory/industry - Order of Company Judge E to OL to hand over possession of plots to Board - Challenged by one of the shareholder/Promoter of Company - Held: Appellant is very much concerned IA(ith the outcome of the proceedings in as much as, if the ownership of the land in question vests with the Company, it may reduce his personal F liability, as he has given guarantees to the financial institutions for the loan advances to the Company. Respondent No.2-company was allotted an industrial plot on lease-cum-sale basis for a period of 11 years G under a lease agreement dated 21.12.1984 on certain terms and conditions. On 10.01.1989 the Board assigned an additional plot to the company. However, no lease- cum-sale agreement was executed for the latter allotment. Possession was given to the company on 19-01-1989. H 712 SUPREME COURT REPORTS [2014] 3 S.C.R. A Meanwhile proceedings for winding up were initiated against the company and by order dated 15-01-1996 the company was wound up. Respondent no.1 Board terminated the agreement in respect of the two industrial plots allotted to the company. Subsequently, the Board 8 filed an application before the Company Judge seeking resumption of the two plots. The Company Judge directed the official Liquidator to handover possession of the said tow plots to the Board. The appellant claiming himself to be promoter/share holder of the company c challenged the order in an appeal before the Division Bench of the High Court. The appeal was dismissed. D E F G H In the instant appeal, the questions for consideration before the Court were: Q.1 Whether the Company had acquired the ownership of the two plots in question and, therefore, the Board was precluded from terminating the lease and resuming the plots? OR Whether the property in question continued to be leasehold
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