STRESSED ASSETS STABILIZATION FUND versus WEST BENGAL SMALL IND. DEVELOPMENT CORPORATION LTD. AND ANR.

Citation: [2019] 13 S.C.R. 1083 · Decided: 21-10-2019 · Supreme Court of India · Bench: ARUN MISHRA · Disposal: Dismissed

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Judgment (excerpt)

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1083
STRESSED ASSETS STABILIZATION FUND
v.
WEST BENGAL SMALL IND. DEVELOPMENT
CORPORATION LTD. AND ANR.
(Civil Appeal No. 4139 of 2008)
OCTOBER 21, 2019
[ARUN MISHRA, VINEET SARAN AND
S. RAVINDRA BHAT, JJ.]
Companies Act, 1956 – s. 535 – Sick Industrial Companies
(Special Provisions Act) 1985 – s. 20 – Second respondent, a
company was allotted Industrial premises by the State on lease –
The company secured advances from IDBI through equitable
mortgages of the leasehold property – Then the company went into
liquidation – Pursuant thereto, the High Court appointed a official
liquidator – IDBI, through a deed of assignment, unconditionally
transferred all loans and advances granted by it, to Stressed Assets
Stabilization Fund (SASF), including the loans and securities in
relation to the second respondent, the company in liquidation – On
the other hand, the premises and properties in question were assigned
to the first respondent-WBSIDC by the State – WBSIDC sought
possession of the properties and filed application for the same before
the High Court – Single Judge of the High Court held that WBSIDC
was entitled to possession in view of the lease conditions, which
automatically applied, because the original lessee (second
respondent) had ceased to use the properties for the purpose
originally contemplated i.e. manufacturing activity – Since the
conditions of lease had not been complied with, as far as cessation
of industrial or manufacturing activity went, the leasehold rights
were terminated and as a result, properties were held to be excluded
from the winding up process – Appeal preferred by SASF was rejected
by the Division Bench of the High Court – On appeal, held: The
observations made in Phatu Rochiram Mulchandani v. Karnataka
Industrial Areas Development Board (2015) 5 SCC 244:[2014] 3
SCR 710 apply to the facts of this case – The WBSIDC acted within
the bounds of law – The finding that since the exercise by the lessor
(WBSIDC) of its right to determine the lease attained finality, the
 [2019] 13 S.C.R. 1083
1083
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1084
SUPREME COURT REPORTS
[2019] 13 S.C.R.
mortgagee (represented by the appellant) could not claim rights
superior to that of the lessee, is in consonance with settled law –
The reasoning and conclusion of the High Court requires no
interference.
Dismissing the appeal, the Court
HELD: 1. This court is of the opinion that the reasoning
and conclusion of the High Court do not call for interference.
The finding that since the exercise by the lessor (WBSIDC) of
its right to determine the lease attained finality, the mortgagee
(represented by the appellant) could not claim rights superior to
that of the lessee, is in consonance with settled law.
[Para 10][1087-F-G]
2. There can be no dispute, nor was it contended that a
donee or a grantee (as the status of the lessee company in
liquidation as in this case) can have no rights in excess of that
possessed by the donor or the grantor. The mortgagee (whose
shoes SASF has stepped into) of the lessee (second respondent)
can have no right greater or better than that of the lessee in
terms of the deed of lease. The observations in Phatu Rochiram
Mulchandani apply to the facts of this case. [Para 11][1090-H;
1091-A-B]
Phatu Rochiram Mulchandani v. Karnataka Industrial
Areas Development Board (2015) 5 SCC 244 : [2014]
3 SCR 710 – relied on.
Case Law Reference
[2014] 3 SCR 710
relied on
Para 8
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 4139
of 2008.
From the Judgment and Order dated 16.10.2007 of the  High
Court  at Calcutta in A.P.O. No. 255 of 2007.
 Ms. Jasmine Damkewala, Sidhartha Barua, Advs. for the
Appellant.
Bhaskar P. Gupta, Sr. Adv., Kunal Chatterji, Ms. Maitrayee
Banerjee, Supratik Sarkar, Sanjoy Kumar Ghosh, Ms. Rupali S. Ghosh,
Avijit Bhattacharjee, Advs., for the Respondents.
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1085
The Judgment of the Court was delivered by
S. RAVINDRA BHAT, J.
1. In this appeal by special leave, an affirming judgment of the
Calcutta High Court (dismissing the appeal, against an order allowing
the respondent’s application under Section 535 of the Companies Act,
1956 (hereafter “the Act”) has been questioned.
2. The appellant (hereafter “SASF”) is a trust, constituted as a
special purpose vehicle (SPV) by the Central Government for acquiring
by transfer, the stressed assets of the Industrial Development Bank of
India (IDBI), to administer and manage the stressed assets and to recover
amounts due, by framing schemes of restru

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