In Re: Soldier United Motor Tpt. ... vs Unknown
2005 Latest Caselaw 948 Del

JUDGMENT

A.K. Sikri, J.

1. One Mr. S.N. Bhalla claiming himself to be the creditor of M/s Soldier United Motor Transport Company Limited (hereinafter referred to as `the company) filed CP No. 64/1978 seeking winding up of the company on the ground that the company owed a debt of Rs. 62,380.65 paise which it was unable to pay. The amount claimed by the petitioner was on account of arrears of rent in respect of the premises bearing No. C2/13, Vasant Vihar, New Delhi let out by the petitioning creditor to the company at a rental of Rs. 1,800/- per month with effect from 7th July, 1974 for the residence of one of its directors. In this petition, winding up order dated 3rd August, 1979 was passed. This order reads as under:

"The petition for winding up of Soldiers United Motor Transport Company (P) Limited must succeed on the short ground that the only asset of the Company consists of certain route permits and the Company is admittedly unable to pay its debts and has indeed failed to pay to the petitioning creditor in spite of a number of opportunities that there given for that purpose. A cheque that was last handed over to counsel for the petitioner has bounced. Shri Khanna who appears for the Company is, therefore, unable to oppose an obvious order of winding up by prays that it may be in a position to make arrangement to pay the petitioning creditor, even though he admits that appropriate directions may be made so that till the winding up order comes into effect, the status quo is maintained with reference to the permits and whatever other assets the Company may possibly hold. Having regard to all the circumstances, I direct that the Company be wound up in accordance with law. However, the order would not be effective for a period of one month and if the Company pays to the petitioning creditor or otherwise compounds with him the claim forming subject-matter of the petition, the winding up order would be deemed to have been rescinded and the petition treated as having been dismissed. The Company is restrained from in any manner alienating or transferring permits or any other office assets during this period. CP 64/78 is disposed of in these terms. There would be no costs."

2. The company could not pay the petitioning creditor the amount claimed by him for which one month period was granted by the aforesaid order and, therefore, winding up order came into effect.

3. The registered office of the company was at 1/9B, Jindal House, Asaf Ali Road, New Delhi. These are also rented premises and were taken on rent by the company from Mr. Suresh Jindal (hereinafter called as `the landlord'). Much prior to filing of the winding up petition by Mr. Bhalla, the other landlord who had given residential premises to the company as noted above, Mr. Jindal, landlord of the premises which was the registered office of the company, filed an eviction petition bearing No. E 485/197 in the year 1976 for eviction of the company. It was filed under the provisions of Section 14(1)(a) of the Delhi Rent Control Act, 1958 (for short `the Rent Act'); the ground being non-payment of rent. This petition was disposed of by the Additional Rent Controller (ARC) vide order dated 16th November, 1978 giving the benefit of Section 14(2) of the Rent Act. By the said order the ARC concluded that the company was in default with regard to the payment of rent non-payment of rent as the ground for eviction from the premises in question was made out. As one opportunity is provided by giving benefit to the tenants for the first default under Section 14(2) of the Rent Act, this benefit was accorded and the company was not evicted.

4. In the meantime, as mentioned above, in CP No. 64/1978, winding up order dated 3rd August, 1979 was passed. On the appointment of the Official Liquidator (OL), he visited the registered office of the company on 8th November, 1980 and took the possession thereof. However, thereafter, CA No. 465/1984 was filed by the former Managing Director of the company and in that application order dated 28th August, 1984 was passed partially staying the winding up order to enable the applicant to seek revival of route permits on behalf of the company and to take steps to revive the activities of the company. It would be necessary to quote this order in entirety:

"Reply has been filed on behalf of the Official Liquidator. Time is sought on behalf of the Petitioning creditor to file reply. Petitioning creditor may file his reply within two days.

Counsel for the applicant who is a former Managing Director of the company states that if the winding up is partially stayed pending the hearing of this application to enable the applicant to seek revival of the route permits on behalf of the company and to take steps to revive the activities of the company, he would be willing to deposit in the account of the company in any bank a sum of Rs. 1,00,000/- and accept and reasonable condition that may be imposed by the court with regard to withdrawal of the amount from the account. He further states that he is willing to enter into an appropriate arrangement with the petitioning creditor in accordance with law. I would, therefore, partially stay the winding up and permit the applicant to act for and on behalf of the company for the purpose of obtaining renewal of the route permits and do all other things that are necessary for the purpose of consultation with the Official Liquidator. This is subject to the condition that the applicant opens a new account on the name of the company and deposits into the said account within two weeks a sum of Rs. 100,000/-. The applicant would enter into appropriate arrangement with the petitioning creditor within the said account of any amount more than Rs. 5,000/- without the prior permission of this court. The petitioner would be allowed access to the premises belonging to the company. The company would not, however, surrender the tenancy or otherwise part with the possession of the premises without the prior concurrence of this court. The company would be allowed to function from the said premises. Liberty to the petitioner to file rejoinder to the reply. List for hearing on 27 September, 1984."

5. The landlord filed CA No. 19/1985 seeking possession of the premises at Asaf Ali Road. This was, however, not allowed in view of partial stay of the winding up of the company. At the same time, direction was given, vide order dated 21st February, 1985 to the company to pay the landlord the current rent regularly. It was also directed that arrears be cleared within a reasonable period. 50% of the arrears for the period up to end of January, 1985 were to be paid within one month and balance arrears of the period were to be paid within next month. Current rent was to be paid as and when it fell due.

6. The company again defaulted in making the payments. The landlord accordingly served notice of demand dated 4th February, 1986 calling upon the company to pay the arrears of rent. As the payment was not made, the landlord again filed an eviction petition being E- No. 240/1986 on 12th April, 1986 under Section 14(1)(a) of the Rent Act. While these proceedings were pending before the ARC, the company filed CA No. 1175/2002 in this court praying for transfer of that case to this court. Vide order dated 9th May, 2003 passed in this application, the said petition was directed to be transferred to this court. Further facts regarding this eviction petition would be noted at the appropriate stage.

7. Reverting back to the winding up proceedings, as already noted above, the winding up order was partially stayed on 28th August, 1984 to enable the ex-Managing Director to seek revival of the route permits on behalf of the company and to take steps to revive the activities of the company.

8. CP No. 31/1993 has been filed under Section 391 of the Companies Act, 1956 seeking sanction to the scheme of arrangement propounded therein. Sh. Harshvinder Singh, propounder is the director. The landlord, namely, Mr. Suresh Jindal has filed objections to this scheme. The OL has also objected to the scheme.

Thus, there are three proceedings pending in relation to the company, namely,

(a) CP No. 64/1978 in which winding up orders dated 3rd August, 1979 were passed and there is partial stay of these winding up orders vide orders dated 28th August, 1984;

(b) CP No. 31/1993 which is a scheme of arrangement proposing to pay up the creditors in a particular manner and seeking sanction thereof, and

(c) Eviction petition filed by the landlord seeking eviction of the company from Asaf Ali Road on the ground of non-payment of rent. It would be in the fitness of things to first deal with CP No. 31/1993 as outcome thereof will have bearing on other proceedings.

CP No. 31/1993

9. In this petition, the propounder has proposed to pay the entire amount in full to the unsecured creditors in a phased manner within a period of three years from the date of sanction of the scheme. It is proposed not to pay any interest to any unsecured creditors. It is also stated that the propounder shall arrange the finances for making payment to the creditors and the company shall pay back the amount to the propounder, once the payment is made to all the creditors from the funds provided by the propounder, with interest at the rate of 18% per annum. It is stated that at the time of winding up of the company it had extremely valuable assets, namely, (a) four buses, (b) two route permits from Delhi to Narela, (c) One mini bus route permit from Delhi Railway Station to Ashok Vihar. It also has valuable office premises at 1/9B, Jindal House, Asaf Ali Road, New Delhi, 26, Sirifor Road, New Delhi (at present illegally with the landlord) and branch office at 2135, Bawana Road, Narela, Delhi. In respect of four buses, it is mentioned that one bus with registration No. DLP 5608 has been taken away by one of the creditors of the company and, therefore, the same is not available. Second vehicle bearing registration No. DLP 4844 has been sold by a creditor which had financed that vehicle on hire purchase basis. The other two vehicles were pledged with the Syndicate Bank and had been parked outside its office under the direction of the said bank. It is averred that as far as the company is aware the aid vehicles have been sold by the bank and the amount has been adjusted towards indebtedness of the company. However, according to the company, it still possesses extremely valuable assets and the route permits and the transport authorities are agreeable to renew the permits. It is proposed to acquire three new vehicles immediately on the sanctioning of the scheme of arrangement. The scheme covers only the unsecured creditors and it is stated that the company will sort out with the secured creditor separately. It is also explained that the company would be needing a sum of Rs. 3,56,000/- immediately for the following purpose which amount will be provided by S. Rakeshinder Singh, Managing Director and S.Harshvinder Singh, Director who are also the principal shareholders of the company:

  a. For three stage carriage vehicles on hire                Rs.  3,00,000/-
   purchase basis, about 25% of the value.
b. Rent for Asaf Ali Road premises payable to               Rs.    31,000/-
   Shri Suresh Jindal.
c. United Investment-Balance payment not settled            Rs.    15,000/-
d. Office expenses and permit fee etc.                      Rs.    10,000/-
                                                            --------------
   Total                                                   Rs.  3,56,000/-
                                                            --------------
 

10. It is also stated that at the directions of this court, meeting of the equity shareholders was held and four equity shareholders of the company having shareholding of 698 shares of Rs. 100/- each approved the scheme.(The issued and subscribed share capital is 1300 shares of Rs. 100/- each i.e. Rs. 1,30,000/-). The meeting of the unsecured creditors was attended personally and by proxy by four creditors entitled together to Rs. 82,932.48 paise . In the said meeting also unsecured creditors approved the scheme. In these circumstances, sanction of the scheme is prayed for.

11. The salient aspects which emerge from the aforesaid narration, may be recapitulated. The company was carrying on the business of transport of passengers and at the time of winding up of the company it had four buses and three route permits, one of them for a mini bus. There are no buses with the company now. Route permits also expired long ago. When this matter was earlier heard on 11th March, 1999, after taking note of these facts the court, inter alia, passed the following order:

"I feel that having regard to the facts and circumstances of the case, when the only valuable asset of the company is stated to be the route permits to ply the buses, before the scheme for revival of the company is considered, let the petitioner satisfy the court that there is some possibility of the route permits being renewed. For this purpose he will have to approach the Directorate of Transport. At this stage, Mr. Khanna, submits that the Transport Authorities may not entertain the application for revival of a route till bus/buses are purchased. He submits that it may be clarified that in case the petitioner purchases some buses but ultimately the scheme for revival is not accepted by the court, the buses, so purchased, in the name of the company, shall not vest in the company. He, however, says that if the scheme is accepted the buses shall, of course, become the asset of the company in liquidation. In my view the stand of learned counsel for the petitioner is fair.

I, accordingly, permit Sardar Harsvhinder Singh, one of the principal shareholders of the company, to pursue the matter with the transport authorities as it is stated that Sardar Rakeshinder Singh has since expired."

Admittedly, even after giving the aforesaid chance the propounders have not been able to get the permits revived. Therefore, today, there are neither any buses with the company nor any route permits to ply the buses. It may also be borne in mind that although in the scheme it is, inter alia, stated that the three stage carriage vehicles on hire purchase basis would be required to be purchased for which Rs. 3 lacs would be needed, the amount of money needed for purchase of buses, keeping in view the price of such vehicles prevailing today, would be substantially and many times higher than the figure projected. Likewise, the arrears of rent in respect of Asaf Ali Road have mounted over a period of time. Therefore, the projection of needing Rs. 3,56,00/- immediately for rehabilitation is clearly off the mark and obsolete. The result is that (a) the company does not have buses; (b) the company does not have route permits and (c) out of the three valuable office premises projected, two are not with the company at present and one premises at Asaf Ali Road is embroiled in litigation as the landlord is seeking eviction thereof. Furthermore, the scheme does not make any provision for settling with the secured creditors. Without the settlement of claims of financial institutions/secured creditors, it would virtually be a non-starter as it would not be possible for the company to function without buying peace with the said secured creditors. What is the present position of the secured creditors' claims is not known as nothing has come on record, particularly in the absence of any provision made in respect of their dues.

In this backdrop, one may note the fact that the shareholders having shares of 698 shares out of 1300 shares only attended the meetings. Likewise, the creditors who were present in the meeting worth Rs. 82,932.48 paise only. This aspect is highlighted only to show that the total number of shareholders and unsecured creditors present in the meetings were much less although I am conscious of the fact that it is the 75% of present and voting shareholders/creditors who are necessary to pass the resolution for sanction of the scheme which formality has been completed.

The Regional Director, in his reply to the petition, has objected to the scheme on the ground that the objects of the scheme cannot be achieved by the propounder unless claims of creditors are settled by the OL under Sections 529, 529-A and 530 of the Act and they are to be paid in full before revival of the company since the company has been ordered to be wound up by this court considering the requirement of Section 447 of the Act. It is also pointed out that the claims of the secured creditors have to be settled and they have to be paid immediately before the revival of the company. The Regional Director has also stated that without having sufficient funds and source of finance for purchase of buses after obtaining route permits and the premises/rented building for preserving the same and for providing employment to 14 persons, seems to be a mere presumption of the propounder of the scheme.

The landlord in his reply to this petition, which is in the nature of objections to the sanction of the scheme, has highlighted same shortcomings, namely, neither the company has any vehicle with it nor any license for route permit to run the same. It has failed to take steps for getting the license revived. The only tenanted premises of which the objector is the landlord, is not being used since August, 1979. It is stated that the scheme is not bona fide and has been filed with a view to retain those premises illegally.

12. In view of what is observed above, the submissions of the Regional Director and the landlord have force. It does not appear to be a workable scheme and it is clear that the company has lost its substratum which is not in business since 1979. Neither there is any viable scheme for start of some business which is propounded nor the scheme is a complete package to settle all the claims of the creditors as the secured creditors are not even included. It is replete with many loose ends and is only a make- belief.

13. I am conscious of the principle of law which have come to be established over a period of time through series of judgments that whenever choice is available to the court between revival of the company and its winding up, the court must as far as possible lean in favor of revival of the company. However, that does not mean that whenever a scheme for revival is filed, the court has to automatically and routinely sanction the same. It is also the duty of the court to satisfy itself that the scheme is genuine and bona fide . The court has also to satisfy about the feasibility, completeness and workability of the scheme. The court does not function as a mere rubber stamp or post office and it is incumbent upon the court to be satisfied prima face about the genuineness of the scheme. If the scheme is intended to be a cloak to achieve some other purpose rather than projected purpose of the revival of the scheme, it would be unfair to the creditors and other persons if such scheme is sanctioned and propounders are allowed to achieve their oblique purpose. In Re., Saroj G. Poddar, (1996) 22 Corpt. L.A.200, the court refused to sanction the proposed scheme after it was found that the entire exercise undertaken by the sponsorer with the support of the workers union was intended to acquire the land of the company for its exploitation. The court also found that the scheme was not genuine but patently fraudulent as it had been evolved as a cloak to cover the misdeeds of the directors to avoid misfeasance proceedings against them.

14. Therefore, I am forced to conclude that neither the scheme propounded is bona fide nor viable and further lacks completeness as well. It cannot be treated as a valid scheme in the eyes of law as it does not deal with all the aspects required for revival of the company. Therefore, I am constrained to dismiss CP No. 31/1993.

CP NO. 64/1978

15. As noted above, in this petition seeking winding up of the company, order dated 3rd August, 1979 was passed whereby the company was ordered to be wound up. On an application filed by the former Managing Director this order for winding up was partially stayed on 28th August, 1984 and registered office of the company, which is the tenanted premises, was directed to be handed over to the ex-management. It was categorically stated in the said order that partial stay was granted with a view to allow the management to seek revalidation of route permits and revival of the company. The management has been unsuccessful in achieving both the objectives. Attempt to have the scheme of arrangement also failed. It is noted, while dismissing CP No. 31/1993, that the company has lost its substratum and there is no scope for revival of this company. In view thereof, order dated 28th August, 1984 is hereby recalled and order dated 3rd August, 1979 gets revived. The OL shall once again take charge of the liquidation proceedings. He shall take possession of the records and assets including the property at Asaf Ali Road, New Delhi immediately. It appears that since the company does not have any assets but there are huge liabilities, the OL shall examine this aspect and submit his report within six weeks, on the administrative side. Since premises are not required for liquidation proceedings, possession thereof shall be handed over to the landlord, Mr. Suresh Jindal.

16. This petition is disposed of in the aforesaid terms.

Eviction Petition E- No. 240/1986

17. Lower Court Record of eviction petition was received but it has not been registered so far. Let it be numbered by the registry.

18. The circumstances under which this eviction petition has been filed by the landlord against the company have already been narrated above. It is a petition for eviction filed on the ground of non-payment of rent and was filed in the year 1986 after serving notice dated 4th February, 1986 on the company calling upon it to pay the rent and on failure of the company to pay or tender whole or part of the arrears of rent legally recoverable from it, within two months from the date of notice of demand having been served on the company in the manner provided in Section 106 of the Transfer of Property Act, 1882. The maintainability and merit of the claim in the petition is challenged by the company on various grounds. It may not even be necessary to go into all these grounds inasmuch as most of these grounds have genesis in the revival scheme filed and the petition seeking sanction to the scheme of arrangement has been dismissed and the winding up orders are revived and in company proceedings itself directions are given to hand over the possession as the premises are not required by the OL for the purpose of liquidation proceedings. The company would not require the tenanted premises any longer, and therefore, this court in winding up proceedings can direct the OL to hand over the premises to the landlord. In CP No. 64/1978, it is ordered that the OL shall hand over the same to the landlord.

19. Dehors the orders passed to this effect in Company petition/winding up proceedings, I am of the view that even otherwise the landlord is entitled to the eviction orders in the present petition filed by him. Admittedly, the ground for non-payment of rent has been proved as there is no dispute that the company fell in arrears and demand notice dated 4th February, 1986 asking the company to pay the arrears of rent was given and the company did not pay the amount within two months of the receipt of the said notice. Vide order dated 16th November, 1978 the company was given the benefit of Section 14(2) of the Rent Act in the earlier proceedings being Suit No. E 485/1976 filed under Section 14(1)(a) of the Rent Act. This judgment is exhibited as A 1/7. The company having enjoyed the benefit once and defaulted in making payment of rent again is liable for eviction. 20. Learned counsel for the company, however, argued that such a petition is not maintainable as before filing the eviction petition, permission of this court under Section 446 of the Act was not obtained. However, this contention has no force in view of enunciation of principle of law to the effect that even if leave of the court is not obtained under Section 446 of the Act, the suit can still proceed and decree can be passed which does not become a nullity for lack of jurisdiction. Leave of the court is not condition precedent to file such a suit and leave can be granted ex post facto . If prior leave is not obtained that does not ipso facto render suit liable to dismissal. Such a leave can be applied subsequently as well.[ See: (i) State of Bihar v. Syed Anisur Rahman and Ors., (1977) 47 Comp.Cas.372 and (ii) Vysya Bank v. Official Liquidator, Shreeniwas Cotton Mills Ltd. (In liquidation), (1995) 84 Comp. Cas. 493. Moreover it is rightly contended by learned counsel for the landlord that no such leave was required since winding up order was partially stayed and thus kept in abeyance and relied upon the judgment of the Kerala High Court in the case of A.M. Padmakshi v. Sudarsan Chits (India) Ltd. and Ors. reported (1987) 62 Comp.Cas.637.

21. Further, under Section 446(3) of the Act, the Company Court has power to transfer itself and dispose of those proceedings. Present petition has already been transferred to this court vide order dated 9th May, 2003, that too on an application filed by the company itself. It cannot be quarrelled that this court definitely has power to deal with this petition and pass necessary orders. Once the petition is transferred no such leave would be required as leave is to be given to continue the proceedings, if those are to be dealt with by some other court and not by the Company Court itself. [See: Punjab National Bank and Anr. v. Punjab Finance Pvt. Ltd. and Ors. (1973) 43 Comp.Cas.350.

22. In any case to set the things at rest, I also grant ex post facto leave to the landlord to continue with these proceedings.

23. Another argument of learned senior counsel for the company was that there was no service of a valid notice as required under Section 14(1)(a) of the Rent Act as notice was not served on the OL. This is a hypertechnical plea, to say the least. When the landlord had sought possession of the premises by filing CA No. 19/1985, it was not granted on the ground that winding up orders had been partially stayed but at the same time direction was given to the company to pay the rent as is clear from order dated 21st February, 1985 passed in the said application. Thus winding up was partially stayed; premises in question were handed back to the erstwhile management by the OL; specific direction was given to the company/management to pay the arrears of rent. After the partial stay of the winding up order on 28th August, 1984, the OL was not performing any role in these proceedings and, therefore, default notice was rightly served on the management of the company.

24. Another ingenuous plea taken is that the rent was not legally recoverable in view of winding up orders passed inasmuch as when the company is in liquidation, rent is not payable. I may point out that this argument was earlier noted by this court on 25th September, 2002 and following observations were made by the court:

"In these circumstances, Mr. Khanna's submission is that default in payment of rent which has occurred during the pendency of winding-up proceedings would be a sufficient defense in law even in cases of a second default. Prima facie I am not in agreement with this proposition. This argument indicates that the present winding-up petition, which has been pending for over a quarter of the century is being continued in order to defeat the landlord's right for eviction."

25. I am inclined to confirm the aforesaid prima facie view. It is stated at the cost of repetition that winding up order was partially stayed and there was no specific direction to the company to pay the rent. The company cannot be allowed to blow hot and cold.

26. The only other submission which is to be considered is as to whether the company is entitled to the benefit of Section 14(2) of the Rent Act. It has already availed that benefit once earlier as well. In the present petition also, the application of the landlord under Section 15(1) of the Rent Act was allowed vide order dated 19th March, 1997 and the company was directed to pay the landlord or deposit in the court the entire arrears of rent from 1st May, 1983 up to date at the rate of Rs. 250/- per month. The company was also directed to continue to pay or deposit future rent at the aforesaid rate month by month by the 15th day of each succeeding month of English calendar.

27. The landlord, in these circumstances, shall be entitled to the eviction orders. In the case of Punjab National Bank, New Delhi v. The Rent Controller, Delhi and Anr. reported as 10 (1974) DLT 209, this court held that if a tenant has already enjoyed the benefit of Section 14(2) he is not entitled to that benefit again having committed three consecutive defaults in payment of rent within the meaning of the proviso to Section 14(2). Orders under Section 15(1) are still to be passed which are not for the benefit of the tenant but for the benefit of the landlord. Again in the case of Subhash Chander v. Arjan Kaur reported as 23 (1983) DLT 48 , this court held that where tenant deposited rent under Section 15(1) and took benefit under Section 14(2), in the second application for eviction under Section 14(1)(a) even if he deposited rent under Section 15(1) he was still liable for eviction. This view was reiterated by this court in the case of Smt. Kamla Devi v. Shri Sadhu Ram reported as 1999 VI AD (Delhi) 649 and in the case of Ashok Kumar v. Ram Gopal reported as 22 (1982) DLT 188.

28. Consequently, the landlord is even otherwise entitled to the orders of eviction and I order accordingly. The possession is to be given to the landlord and the manner in which it should be given, has already been indicated above. This eviction petition is allowed and disposed of in the aforesaid terms.

29. No costs.