Board
Of The Trustees, Port Of Kolkata Vs. Efclon Tie-Up Pvt. Ltd. & Ors [2006] Insc
289 (8 May 2006)
H.K.
Sema & Dr. Ar. Lakshmanan
(Arising
out of S.L.P. (Civil) No. 571/2005) Dr. AR. Lakshmanan, J.
Leave
granted.
This
appeal was directed against the final judgment and Order dated 01.12.2004
passed by the Division Bench of the High Court at Calcutta in ACO No. 87 of 2003 in APOT No.
318 of 1998 whereby the High Court allowed the claim of the respondents herein.
The
brief facts of the case are as follows:- An indenture of lease was entered into
by Das Reprographics (in short 'the Company') and the Kolkata Port Trust (in
short 'Port Trust') in respect of premises at P-10, Taratola Road, Kolkata. The lease deed stipulated
that, the lease is for a period of 29 years, 1 month and 25 days, w.e.f November 28, 1962 on a monthly rental basis of Rs.
1,049.12. It was stated in the deed that, the lessee may have the option of a
fresh lease for a further term of 30 years provided a notice stating the same
was given to the Port Trust at least six months before expiration of subsisting
lease. According to the deed, the Municipal Taxes in respect of the land was to
be paid by the Company. The Port Trust had the option of renewing the lease for
such further period, provided the covenant conditions are duly performed and
the increase in rent is upto 25%, but not exceeding the rent as per the
'Schedule of Rates'.
It was
also clearly stipulated in the Lease deed that, if the company goes into
liquidation or is wound up compulsorily or voluntarily, the Port Trust would
re-enter possession and the lease would be brought to an end.
On
01.08.1991, a letter was written by the Company to the Port Trust requesting
the appellant for considering the renewal of the lease executed in their favour
in 1962 for another term of 30 years. It was also stated in the letter that,
the company has rental dues and municipal taxes to be paid which they will
clear before the expiry of the lease which was subsisting. The Port Trust
however, did not respond to this letter. Later on 26.11.1991, another letter
was sent by the company to the Port Trust requesting for the extension of the
lease of the land. The lease deed expired on 22.01.1992 by efflux of time. The
company had not even then, paid of their outstanding dues, thereby was still in
breach of the stipulations in the lease deed.
On
07.03.1992, the Port Trust informed the company that a total sum of Rs.66,312/-
was outstanding towards rent and taxes including 15% interest and this should
be cleared before any extension of lease could be considered. However, by
taking into consideration the fact of a large number of workmen working in the
company, the Port Trust asked the company to correct its breaches so that the
extension of lease could be considered.
On
21.12.1994, by an order in Company Petition No.151/1986, the High Court of
Calcutta, directed to take possession of the assets of the company forthwith.
By an order dated 27.08.1997, invitation for offers for purchasing the assets
of the liquidated company was made. Various advertisements were issued as per
the order of the High Court after which many offers were made by different
parties.
The
High Court accepted the offer made by the present respondent No. 1(Efclon) by
an Order dated 16.01.1998, for Rs. 50 lakhs and also on an agreement made by
the respondent with the workmen of the liquidated company to re-employ them.
Aggrieved
by this order of the High Court, United Bank of India filed an appeal in the
High Court on the ground that the sale of assets of the company was conducted
with undue haste and without trying to ensure that the maximum price was
fetched for the assets of the company. The Division Bench held on 09.04.2003,
that, the finding of the learned single Judge was correct and thereby confirmed
the sale of all the assets of the company at, P-10, Taratolla Road, Kolkata. The Division Bench also
observed that the lease over the land had expired and since the purchaser, Efclon,
does not intend to destroy the character of the factory, it would be desirable
that the Port Trust should grant a fresh lease of the Taratola land which has
expired in favour of respondent No.1 (Efclon). On 11.08.2003, an application
was made by the respondents in the High Court, for the modification of the order
of the Division Bench dated 09.04.2003, stating that, the option of renewal has
been found to be validly exercised by the liquidated company and therefore, the
Port Trust had no option but to renew the lease in terms of the indenture of
lease which existed between the liquidated company and the Port Trust.
The
High Court while deciding on this matter on 01.12.2004, allowed the claim of
the respondents and thereby ordered the Port Trust that, upon the respondent
clearing all the outstanding rental dues and taxes, the Port Trust shall grant
fresh lease in consonance with the lease indenture that existed between the
Port Trust and Das Reprographics.
The
present appeal before this Court is preferred against this order dated
01.12.2002 of the High Court.
We heard
Mr. T.R. Andhyarujina, learned Senior Counsel, appearing for the appellants and
Mr. U.U.Lalit, learned Senior Counsel, appearing for the respondents and Mr.
Vijay Hansaria, learned Senior Counsel appearing for the workmen.
Learned
Senior Counsel appearing for the appellant submitted that, the question of
renewal of lease deed could not arise owing to the fact that the option to
renew the lease was not validly exercised by the Company in liquidation as the
Company was in breach of various terms and conditions of the indenture of lease
by having outstanding rental dues and municipal taxes.
Also
the lease deed provided that, if the company (Das Reprographics) was either
voluntarily or compulsorily wound up, the lease deed would be brought to an
end. Here since the company has been wound up, the lease is presumed to have
come to an end and therefore, the question of granting extension of lease would
not arise.
The
appellant further submitted that respondent No.1 (Efclon) is only the owner of
the assets of the Liquidated Company which includes fixtures and furnitures.
Therefore, they could exercise their rights only over the assets of the company
and not on the land which is the property of the Port Trust. Also since the
lease had come to an end, the company has absolutely no right over the property
in question.
Mr. Andhyarujina,
submitted that the Port Trust after the order of the High Court has agreed to
grant a fresh lease to the company, as per the prevailing rates in Schedule of
rates of the Port Trust which are based not on profiteering, but on
inflationary tendencies. But the High Court granted fresh lease at the rates
prescribed under the lease deed which was drawn in 1962 which is not fair.
Mr. U.U.Lalit,
learned senior advocate for the respondents submitted referring to the letters
written by the company and the Port Trust that the correspondence would
indicate that the company did exercise their option to renew the lease in the
procedure mentioned in the lease and also the letter by the Port Trust reveals
that, it was not the intention of the Kolkata Port Trust to terminate the lease
but to grant a fresh lease to the lessee upon payment of the balance dues.
Mr.U.U.Lalit
submitted that, the respondent after acquiring the assets of the company entered
into a contract with the employees of the liquidated company for re-employing them,
clearly shows that the sole object of the respondent was to revive and
rehabilitate its units and to reemploy its workmen.
It was
further contented by the respondents that renewal of the lease must be from the
date of expiry of the original lease, and also that the amount should be in
accordance to what was prescribed in the original lease deed between the Port
Trust and Das Reprographics.
Another
submission made by the respondent was that, if Das Reprographics had not gone
into liquidation, while renewing the lease, the company would have only had to
pay 25% over and above the last rent paid under the original lease for the
period of renewal of the same. The Kolkata Port Trust is now demanding rent at
its scheduled rates for a fresh grant of lease which is three times than the
last rent, which will make it impossible for the respondents to reopen the
closed units of the company or to reemploy its workmen.
Mr.
Vijay Hansaria, learned Senior Counsel, appearing for the workmen submitted
that the Port Trust has no right to refuse formal renewal of the lease,
particularly with the knowledge that the livelihood of a large number of people
are dependant on it.
Also
that the Port Trust, by allowing the erstwhile lessee to continue to occupy the
property even after the expiry of the original terms of the lease and thereby
renewed the lease by conduct.
We
heard all the parties extensively and also went through the documents placed
before us. The issues in this case that deserve discussion according to us is
whether:
? The
respondent No.1 (Efclon) due to the fact of them having bought over the assets
of the company that was liquidated could exercise right over the property
(land) which the Port Trust had by an indenture of lease, leased to the
liquidated company (Das Reprographics)? ? Whether the high Court was correct in
granting a fresh lease to the respondent No.1 (Efclon) on the terms specified
in the original indenture of lease between the Port Trust and the liquidated
company (Das Reprographics)? In other words, the question we are really
concerned with now is whether a fresh lease should be granted on the basis of
the rates as subsisting according to the schedule to the major Port Trust or
whether a fresh lease or whether a fresh lease could be allowed to be executed
on the terms and conditions as were existing in the earlier lease.
The
lease could not be granted to respondent No.1 Efclon Tie- up Private Limited
for the following reasons:-
-
The option to
renew the lease was not validly exercised by the Company in liquidation. The
Company was in breach of various terms and conditions of the indenture of the
lease, inter alia, relating to non-payment of rent, municipal taxes,
unauthorized construction of land in question etc.;
-
M/s Efclon
Tie-up Private Limited were the auction purchasers of only the assets of the
company (fixtures and furnitures) lying, inter alia, in the premises in
question. It was incorrect to assume that a further right to renew the lease
deed vested in M/s Efclon Tie-up Private Limited;
-
M/s Efclon
Tie-up Private Limited were not the successors in interest of the Company in
liquidation qua the right to renew the lease deed;
-
It was the
admitted position that the lease deed came to an end in 1992 and no renewal was
granted thereon, particularly, since the right to grant renewal was in the
discretion of the Port Trust, such discretion existed even if the terms and
conditions of the indenture of the lease had not been breached by the Company
in liquidation;
-
In all fairness
the Port Trust had agreed to the grant of a fresh lease to M/s Efclon Tie-up
Private Limited as per the prevailing rates in the schedule of rates in the
Port Trust which was unacceptable to the said Company which wanted renewal at
the rates prescribed in the lease deed.
The
High Court ought to have seen that the schedule of rent changes on the basis of
the economic condition that is prevailing at a given point of time in every
economy. Therefore, the rent that is demanded by the Port Trust from Efclon now
is absolutely fair and reasonable and the schedule of rent changes has been
declared valid by the Calcutta High Court.
The
High Court should have seen that, in any case, the indenture of lease clearly
provided that if the Company in liquidation M.L. Das Reprographics was either
voluntarily or compulsorily wound up, then the lease deed would be brought to
an end. In that case, of course, no question of granting extension of the lease
deed would arise. Even if it is assumed that the extension of lease was to be
granted from 1992 onwards the lease deed itself would automatically have come
to an end by operation of the express terms of the indenture of lease.
The
lease granted in 1964 did not provide renewal as a matter of right and, in
fact, the lease ended by efflux of time on 22.01.1992 whereupon no extension
was given. The option for renewal of lease was not given to the respondent No.3
Company but was given to the Port Trust. The Port Trust had agreed in fairness
to execute a fresh lease deed with respondent No.1. The rent would not be the
market rent and, in fact, would be in consonance with the schedule of rates
framed under the Major Port Trust Act, which have the prior approval of the Central
Government.
It is
also relevant to note that respondent No.1 had purchased the assets of the
Company in liquidation excluding the land belonging to the Port Trust.
We are
of the opinion that:
-
There is no
right over the property of the Port Trust existing with the respondent No.1 (Efclon)
as claimed by them. In the present case only the assets of the company which
was liquidated has been bought by the respondents, the land belonged to the
Port Trust. Even according to the original indenture of lease between the Port
Trust and the liquidated company, there were clauses which very clearly stated
that, the Port Trust had the option of renewing the lease for such further
period, provided the covenant conditions are duly performed. It was also
clearly stipulated in the Lease deed that, if the company goes into liquidation
or is wound up compulsorily or voluntarily, the Port Trust would re-enter
possession and the lease would be brought to an end. In the present fact
situation, the company in liquidation was clearly in breach of the covenant
conditions by having outstanding rental dues and tax liability with interest.
Also the company did go into liquidation and therefore as the lease indenture
says, the original lease has come to an end and the Port Trust is presumed to
have automatically come into possession of the land in question.
Therefore
we hold that, there is no lease that is subsisting between the Port Trust and
the liquidated company and hence the respondent No.1 (Efclon) claim that the
original lease deed is subsisting thereby giving them an automatic right to the
land in question is untenable and has no merit.
-
To the question
as to whether the High Court was correct in granting a fresh lease to the
respondent No.1 (Efclon) in accordance with the clause stipulated in the
original lease agreement, we are of the opinion that the High Court is correct
as far as the grant of fresh lease is concerned.
Coming
to the second part of the question as to whether the rental amount should be
based on the stipulation mentioned in original lease deed is concerned; we
believe that the rates that are present in the current Schedule of the Port
Trust Act in Kolkata should apply. We are of the view that, the claim of the
respondent that they should be allowed to pay the rates in accordance to the
clause in the original lease indenture of 1962 is not fair on the Port Trust.
Also we are satisfied that the prices that are prevalent in the schedules of
the Port Trust Act are not based on profiteering, but on inflationary tendencies.
-
With regard to
the respondent No.1's (Efclon) claim of, if Das Reprographics had not gone into
liquidation, while renewing the lease, the company would have only had to pay
25% over and above the last rent paid under the original lease for the period
of renewal of the same, does not hold good in our view, as such a renewal need
not be contemplated at this point, as the company itself is not in existence
and also the clause in the original lease indenture will come in the way which
specifically mentions that if the company goes into liquidation or is wound up
compulsorily or voluntarily, the Port Trust would re-enter possession and the
lease would be brought to an end.
The
larger interest of the workmen was canvassed by Mr. Vijay Hansaria and also by
respondent No.1 for its own commercial purposes. The interest of workmen can be
met by the Port Trust's willingness to grant a fresh lease of the premises not
at the market rate but at the rate prescribed in the schedule framed under the
major Port Trust Act.
It has
now brought to our notice that respondent No.1 who are continuing in possession
are now inducting the third parties and seeking to alienate the property to
them. In these circumstances, I.A. No.3 of 2006 was filed by the Port Trust to
direct respondent No.1 to handover possession of the property to the Port
Trust. In these circumstances, a contention was also raised by the Port Trust
that they were not required to execute the lease deed in favour of respondent
No.1.
The
fact remains that respondent No.1 Company remained in possession of the
property. It has now come to the knowledge of the Port Trust that despite the
fact that no right over the property existed in favour of respondent No.1. They
are not only carrying out unauthorized constructions in the premises but have
also parted with the possession to various individuals and companies not
connected with their own business and are creating third party rights. Such
construction and part of the possession is not only impermissible in view of
the order of stay granted by this Court but in any event was not even permitted
under the lease of 1964.
We
cannot also, at the same time, close our eyes to the realities. We have,
therefore, to safeguard the interest of the Port Trust, the interest of the
first respondent and the workmen by one stroke of pen. The trade unions has
applied for intervention and is represented by Mr. Vijay Hansaria, learned
senior counsel which has a large number of membership of workers working in Das
Reprographics Ltd. (in liquidation). Much water has flown after the order of
liquidation of respondent No.3 Company. Any adverse orders passed by this
Court, at this stage, would affect the right and interest of the members of the
union. The Company was directed to be wound up and the Official Liquidator was
directed to take charge of the assets and properties. The assets and properties
thereof were put up for sale in terms of a sale notice made and published on
05.09.1997.
In
these circumstances, in an attempt to protect the livelihood of its members,
the union entered into an agreement with respondent No.1 providing, inter alia,
that respondent No.1 would take necessary steps in Court to purchase the assets
and properties of the Company and also would assure employment to all the
eligible workers of the Company in phase-wise manner.
There
are other conditions with which we are not now concerned.
In
terms of the commitment made, respondent No.1 participated in the sale of the
assets and properties of the Company and was declared the successful purchaser
in respect thereof by an order dated 16.01.1989. Several other proceedings were
taken by both the parties with which also we are not concerned. It is stated
that in terms of the order, respondent No.1 has made payment of the entire
consideration to the Official Liquidator. The intention of the High Court while
passing the orders dated 16.01.1998 and 09.04.2003 is manifest from the fact
that while confirming the order dated 16.01.1998 for sale of the assets and
properties of the Company, the High Court made the same free from encumbrances
and without any liabilities on account of any other dues. With the revival and
rehabilitation of the Company in mind, the High Court directed that the
properties where the factories of the Company are situate be provided to
respondent No.1. The High Court also directed that a fresh lease in respect
thereof be granted to Respondent No.1 presently in possession of the factory
premises. Respondent No.1 is also in possession of the assets and properties
located therein. It is also not in dispute that respondent No.1 is not
operating the factory for want of former renewal of the lease. As a result, the
right of the members of the workers of the union has been put in jeopardy.
The
Port Trust itself allowed the erstwhile lessee to continue to occupy the
property even after the expiry of the original terms of the lease.
In our
view, the workmen of the Company have a right to earn their livelihood. The
workmen are as such vitally interested in the renewal of the lease in respect
of the property in question.
The
Port Trust, by its conduct, accepted the right of the Company to obtain renewal
of the lease. The Port Trust has never called upon the Company or the official
liquidator to vacate the property. The act of the Port Trust in allowing the
respondent to continue is only a benevolent act of the Port Trust keeping in
view the consequences that can arise if this was not allowed for the large
number of workmen of the company. As such, the lease of the property has been
renewed or must be deemed to have been renewed as the workmen being interested
in the renewal of the lease of the property. They were also heard through their
senior counsel.
Social
justice demands that the lease in respect of the factory premises be renewed by
the Port Trust in favour of respondent No.1 so that the operation of the
factory thereof can be commenced. However, the lease can be renewed only
subject to the payment of all the arrears and dues together with interest.
We
are, therefore, inclined in the larger interest of the industry as also the
workmen and of the Port Trust to direct the Port Trust to grant a fresh lease
to respondent No.1 herein subject to the respondent No.1 complying with the
terms relating to the payment of the arrears/dues together with interest at the
rate of 15% p.a. as suggested by the Kolkata Port Trust in its letters dated
07.03.1992 and 13.04.1995. The Port Trust shall also grant a fresh lease in favour
of respondent No.1 on the basis of the scheduled rate from the date of
possession i.e. 04.08.2003.
In
conclusion, we order a fresh lease indenture to be drawn from the date the
company came into possession of the land (i.e.04.08.2003) between the Port
Trust and the Respondent No.1 (Efclon) with regard to the premises situated at
P-10, Taratola Road, Kolkata at the rental rates contained in the present
Schedule of the Kolkata Port Trust Act as soon as the dues of the liquidated
company are discharged with by the respondents.
We
are, therefore, directing the Port Trust to inform the Efclon Tie-up Private
Limited; respondent No.1 herein of the rental arrears together with interest as
suggested by the Port Trust in its letters dated 07.03.1992 and 13.04.1995
within four weeks from the date of this order. In other words, the Port Trust
shall inform the first respondent herein of the rental arrears from the date of
expiry of the earlier lease (21.01.1992) till the date of the execution of the
fresh lease at the old rate together with interest at the rate of 15% p.a.
within 4 weeks from the date and upon such intimation the said dues are to be
cleared by the first respondent within 2 weeks thereafter and upon such dues
being cleared, the Port Trust shall grant a fresh lease from 04.08.2003 i.e.
the date on which the first respondent was to be in possession of the property
by the official liquidator on the basis of the scheduled rate as now prevalent.
The rate fixed by the Kolkata Port Trust as per the scheduled rate will be
effective from 04.08.2003. We are inclined to grant the lease in favour of the
respondent No.1 who sought renewal of the lease with the sole object of
reviving and rehabilitating its units and to re-employ its workmen thereof.
In the
result, the civil appeal stands allowed. However, there shall be no order as to
costs.
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