Winding up – By Court Discretionary powers – Court has ample power to direct eviction of trespassers from company property – Companies Act, 1956 section 446

The owner of the property which had been rented out to the company in liquidation filed an application u/s. 535 of the Companies Act, seeking a direction to the official liquidator to make over possession of the rented premises with the knowledge that the official liquidator was not in actual possession. The applicant also contended that the official liquidator had no use for the concerned premises for the beneficial winding up of the company and the official liquidator was under a duty and obligation to disclaim the premises in its favour. The applicant also prayed for a direction to the official liquidator to remove the trespassers from the premises and to make over possession to it. The official liquidator accepted the ownership of the applicant and also accepted that the premises was onerous property and contended that it should be disclaimed on “as is where is and whatever there is basis”. Three companies claiming to be sub-tenants of the property sought to intervene in the proceedings, inter alia, contending that they were not trespassers and unless notice was given under the West Bengal Premises Tenancy Act, 1997, they could not be evicted from the premises in which they had sub tenants since the year 1992 in terms of sub-tenancy agreements. It was contented that the company court had the power to order disclaimer of the property but did not have any power of evict the persons in possession; that eviction could not be ordered since the section 446 did not authorise such eviction of sub-tenants; and that the applicant did not mention or plead section 446 of the 1956 Act;

It was held that the company court has ample power to adjudicate and determine all questions that arise in winding up. Such questions include eviction of trespassers from property of the company in liquidation and the company court also can direct eviction of trespassers from the company property by a summary order. But, the company court must follow the law of the land in regard to such eviction. The process is summary but the relevant law to be applied prior to ordering eviction of trespasers is the same law as would have to be applied by any civil court ordinarily trying a suit against a trespasser. Further, a plain reading of the provisions of section 446 of the Companies Act, 1956 make it clear that exercise of the power or jurisdiction is discretionary in nature. Even if the section is not mentioned in the application, in appropriate cases the company court can exercise its power and decide any question whether of law or fact which may relate to or arise in course of the proceedings.

The Hon’ble Court held that the applicant was the owner of the property. The property in question was of no use to the company in liquidation nor could it be used or utilised for the purpose of winding up of the company. Although the official liquidator did not take possession of the premises in question, u/s. 446 of the 1956 Act he would be deemed to have been in possession, as the tenancy right was an asset of the company in liquidation. The applicant was entitled to get the property released in its favour. The official liquidator was to release the property in favour of the applicant.

Further, the company in liquidation was a tenant in respect of the property in question and governed by the provisions of the West Bengal Premises Tenancy Act, 1956. It had inducted the interveners as sub-tenants and realised rents from them. They were in occupation of an area of 1,645 sq.ft. only. The two different agreements disclosed by the interveners stipulated that prior permission of the landlord was obtained for induction of the sub-tenants, but no written permission was ever produced by any of the interveners. Although non production of written consent created doubt considering the prior of occupancy and payment of rent to the company in liquidation, the issue had be resolved in a suit before the company court. The applicant was to be granted liberty to institute a suit against the company in liquidation as well as the interveners for the purpose of resolving the issue and for getting back possession of the property in question. The company court was entitled to entertain such suit u/s. 446(2) of the 1956 Act. The official liquidator was directed to release vacant possession of the undisputed portion of the property to the applicant after removing the tresspassers if any.