LexRAVINDRA ISHWARDAS SETHNA AND ANR. versus OFFICIAL LIQUIDATOR, HIGH COURT, BOMBAY AND ANOTHER
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RAVINDRA ISHWARDAS SETHNA AND ANR.
v.
OFFICIAL LIQUIDATOR, HIGH COURT,
BOMBAY AND ANOT~ER
A!lgust 19, 1983
"
(D. A. DESAI AND V. BALAKRISHNA ERADI, JJ,J
,57
Companies Act, 1956-Sec. 457(1) (b)-:-Power of liquidator to carry on
business of the Company-Interpretation of.
Bombay Rents, Hotel and Lodging House Rates Control Act, 1947 as
amended in 1973-Secs. 13 and 15-lnterpretation of-Statutory tenancy confers
rights of possession-Statutory tenant co1nplete/y prohibited from givirlg possession
on licence, sub-lease or under caretaker's agreement.
The respondent, Official liquidator, after being appointed by the
Company Judge of the High Court, as Liquidator of a Company, took
possession of the office premises of the Company. The Liquidator sought
direction of the Co1npany Judge whether the premises should be let out on
lease or licence. The Company Judge gave a direction that the premises .be
given on caret3ker basis. Under that direction the Liquidator entered intO an
agreement with the second respondent and gave possession of the premises to
the second respondent. The appellants, who were the land-lords of the
building of which the office premises of the Company formed part, took out
Judge's summons praying for a direction to the Liquidator to terminate the
careta~er's agreement and to hand over vacant possession of the P.remises to
the appellants. The appellants contended that the so-called caretaker's agree-
1nent was in contravention of the various provisions of the Bombay Rents,
Hotel, and Lodging House Rates Control Act, 1947 as amended in 1973 ('Rent
Act' for short). The Company Judge held that in substance. at}d in form the
agreement entered into by the Liquidator with the second respondent was a
caretaker's agreement which was permissible. A Division Bench of the High
Court dismissed the appeal preferred by the appellants.
B
c
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Allowing the appeal,
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HELD : The Company Judge could not have authorised the Liquidator
to enter into caretaker's agreement with the second respondent. · The Liqui-
dator does not need the use of the premises for carrying on the winding up
activities of the Company because he sought direction for parting with
possession. The only course open to the Company Judge was to dfrect the
H
l-iquidator to surrender J?Ossession of the premises to the appellants ..
.
!664 F; B-C; HJ
B
658
SUPREME COURT REPORTS
f!9S3] 3 s.c.R.
Section 457(1) (b) of the Companies Act, 1956 gives power to the
Liquidator in a winding up by the Court, with the sanction of the Court to
carry on the busineSs of the Company so far as may be necessary for ~he
beneficial winding up of the Company. If the Liquidator wanted to exercise
power under sec. 457(1) (b) to carry on business of the company so far as
necessary for its beneficial winding up, the business which was to. be carried
on must be the business of the Company. Giving ·premises on lease, licence
or under caretaker's agreement was not the business of the Company. Since
the C0mpany's-business of floating prize chit schemes came to a stand stilJ, the
moment the Company was ordered to the wound up, there was no question of
the business of the Company to be carried on by the Liquidator and that too
for the beneficial winding up of the Company. (661 H; 663 C-G]
In re Batey; Ex parte Emmanuel, (1881] 17 Ch. Division 35 and Panch-
C
mahals Steel Ud. v. Universal Steel Traders, [1976J 46 Company Cases 706 at
722, referred to .
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G
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. The company was a tenant or a Jessee of the premises of Which the
appellants are the land·lords. '.fhe date of the commencement of the lease is
not made available, but it is also not Claimed on behalf of the Liquidator that
there was lease of long duration. If so, the Company was a statutory tenant
under the Rent Act. The statutory tenaricy confers the right to be in possession
but if the tenant does not any more require use ·or the pre1nises, the provisions
of the Rent Act and especiaily Secs. 13 and 15 completely prohibit giving the
possession of the premises on licence or on sub-lease. The Company Judge,
therefore, spelt out a third tnode of parting with possession of the premises by
the Liquidator namely, a caretaker·s agreement. This appears to be a facade
to wriggle out of the provisions of the Rent Act. The Rent Act is no doubt
enacted for protecting the tenants, and indisputably its provisions must receive
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