Varinder Sahni vs Mgrm Net Ltd.
2009 Latest Caselaw 1758 Del

                   IN THE HIGH COURT OF DELHI

                  Company Petition No. 164/2008

                                 Date of decision: 30th April, 2009

          Varinder Sahni                   ... Petitioner
                through: Mr. Pravir Jain, Advocate

                               VERSUS

          MGRM Net Ltd.                      ....Respondent

through: Mr. B. Ghosal, Advocate

CORAM:

HON'BLE MS. JUSTICE GITA MITTAL

1. Whether reporters of local papers may be allowed to see the Judgment? Yes

2. To be referred to the Reporter or not? Yes

3. Whether the judgment should be reported in the Digest? Yes

GITA MITTAL, J

1. This petition under section 433 (e) of the Companies Act, 1956

raises an interesting question of law and facts. The petitioner is

admittedly the owner, landlord of the premises bearing no.C-6/6,

Safdarjung Development Area, New Delhi-16 comprising of a

basement, ground floor, mezzanine, first floor, second floor and

third floor. A registered lease deed dated 1st April, 2003 was

executed between the parties whereby the respondent company

took the entire premises on rent for an initial period of three years

commencing from 1st April, 2003 to 31st March, 2006 with the option

to the respondent company under clause 1.1 to extend the lease for

two more terms of three years each on the same terms and

conditions. The parties had agreed that a fresh lease deed shall be

executed by the parties on the expiry of the period of 36 months

from the date of the agreement. So far as rental was concerned

clause 2.1 of the lease deed set out the following rent schedule :

"2.1 The LESSEE shall pay to the LESSOR the quarterly rent on the following basis : a. First 12 months Rs.5,00,000/- (Rupees five lakhs) per month.

b. Subsequent 12 months after lapse of (a) above, an increase of 3% on the amount paid under (a).

        c.    For subsequent 12 months after the lapse of
        first 24 months an increase of 6% on the rent
        payable under (a) above.
        d.    In the event of the LESSEE extending the
        Lease, the rent payable for the subsequent 36
        months shall be as under:

(i) For the first 12 months an increase of 10% over the base rent payable under (a) above.

(ii) For the subsequent 12 months after lapse of (i) above, an increase of 13% on the rent payable under

(a) above.

(iii) For the subsequent 12 months, an increase of 16% on the rent payable under (a) above."

2. The recitals in lease deed stated that the respondent company

was desirous of taking on lease the premises for its offices for

carrying out the company's business of rendering multiple domain

services using technology etc. The respondents have set up a case

that the petitioner had represented that the premises could be used

for such purpose. The respondent has further urged that with the

knowledge, permission and approval of the petitioner, they caused

construction, improvement, upgradation and furnishing of the suit

premises to carry on their business. An expenditure of

Rs.47,01,528/- is stated to have been incurred for installation of

UPS, EPABX, air-conditioning units and panels while Rs.49,189/-

stated to have been incurred on installation of fire extinguishers. In

addition, the respondent claims that electricity meters were

changed and loads enhanced at an expenditure of Rs.53,955/- for

which the petitioner is stated to have issued a certificate. The

respondent has submitted that it has made a security deposit of

Rs.2,62,500/- to the BSES, Rajdhani for installation of a transformer.

A further payment of Rs.11,33,435/- was made as cost of the

transformer while Rs.3,92,000/- was deposited for enhancement of

the electricity load. The respondent have claimed that they

awarded a contract for restoration work to M/s Ahluwalia Contracts

India Ltd. for a sum of Rs.97,90,797/- and fixtures were done for a

sum of Rs.34,32,234/-

It is an admitted position that the respondent was carrying on

its business from the subject premises.

3. Inasmuch as the lease was to expire on 31st March, 2006, the

respondent sent a letter dated 9th January, 2006 to the petitioner

exercising its option of renewal thereof. The petitioner sent a reply

dated 8th March, 2006 confirming that the respondent had

maintained financial discipline and paid rent in advance on

quarterly basis. However urging that as there was an upward

trend in the Indian economy and the business scenario resulting in

overall increase in rental values, the petitioner called upon the

respondent to make a 30% increase in the rent and pay stamp duty

accordingly to register the lease deed.

4. The respondent objected to this demand for enhancement by

a letter dated 17th March, 2006 drawing the attention of the

petitioner to the terms of the lease.

An impasse resulted. However the respondent voluntarily

paid the enhanced rent between the period 1st April, 2006 to 30th

September, 2006 which was duly accepted by the petitioner.

5. Learned counsel for the respondent has drawn my attention to

a letter dated 17th April, 2006 received from the petitioner wherein

for the first time it was stated that the Supreme Court directives did

not permit the respondent to misuse residential property for

business purposes and called upon the respondent to vacate the

premises. It is contended by Mr. R. Ghosal, learned counsel for the

respondent that with effect from the middle of April, 2006, the

respondent stopped using the premises. It is urged that notices

from the Municipal Corporation of Delhi in this behalf also appeared

in the newspapers threatening sealing of properties and

prosecution of occupants who were misusing the residential

properties.

6. It appears that in the meantime the petitioner had a change of

heart and he addressed a communication dated 10th February, 2007

to the respondent now informing it that the petitioner has been

ready and willing to execute the fresh lease deed at the increase of

15% on the last paid rent in terms of the agreement dated 1 st April,

2003 between the parties. The respondent was called upon to

make payment of arrears at such rate with effect from 1 st October,

2006 up to 31st March, 2007. The petitioner also called upon the

respondent to finalise the draft of the lease agreement. The

respondent was notified that the renewal of the rent agreement for

the premises shall be in accordance with the terms and conditions

laid down by the concerned authorities with regard to the user of

the property in question.

7. A notice dated 16th April, 2007 followed setting out the

account position with regard to payment of the rent in detail and

called upon the respondent to get the formal lease deed executed

and registered. The respondent was called upon to pay the arrears

of rent at the increased rate of Rs.5,50,000/- per month for the

period 1st April, 2006 to 31st March, 2007 with interest at the rate of

18% per annum and to use the leased premises in conformity with

the terms and conditions imposed by the authorities.

No reply was sent nor any steps taken by the respondent to

either clear the arrears or to execute the lease deed.

8. As a result, the petitioner filed a civil suit on 24th May, 2007 on

the original side of this court being CS(OS) No. 983/2007 praying for

a decree of specific performance inter alia making the following

prayer :-

"A. Pass a decree for specific performance in favour of the plaintiff and against the defendants thereby directing the defendants to execute a fresh lease deed in respect of property in question i.e. property bearing no. C-6/6, Safdarjung Development Area, New Delhi-110016, more specifically shown in RED in

the site plan attached for a period of three years with effect from 01.04.2006 in accordance with the terms and conditions as agreed vide registered lease deed dated 01.04.2003 and get the same registered inasmuch as the defendants have already exercised their option for renewal of lease."

9. In the meantime, it appears that certain action was taken by

the Municipal Corporation of Delhi as part of the general drive

against misuser of residential properties in Delhi. The respondent

has contended that on 7th July, 2007, the subject property was

sealed by the MCD.

A request of the respondent to the MCD and the Monitoring

Committee appointed by the Apex Court resulted in an order dated

10th July, 2007 of temporary desealing of the property for 20 days.

This desealing was extended subsequently and by a communication

dated 24th September, 2007, the Municipal Corporation of Delhi

informed the respondent that desealing of the premises for

residential use stood permitted. The respondent was further

notified that mixed land use/commercial activity in the premises

was permissible with the permission of the Municipal Corporation of

Delhi after registration etc. in terms of para 15.9 of the MPD-2021.

It is noteworthy that these documents have been placed by

the respondent on record alongwith its reply.

10. The petitioner filed a written statement and counter claim to

CS(OS) No. 983/2007 opposing the suit prayer and inter alia

contending that the premises had been let out to the respondent

for the purposes of its office. By way of the counter claim, the

respondent also claimed refund of Rs.70,92,000/- on account of

security deposit and rent from March, 2006 to September, 2006

with interest at the rate of 18%. So far as the compensation for

relocating is concerned, the respondent claimed Rs.20 lakhs for the

same and an amount of Rs.50 crores each towards loss of future

clients and goodwill. The respondent also prayed for a declaration

that it was not liable to pay rent to the petitioner for the suit

premises since April, 2006 when the petitioner had sent a letter

dated 17th April, 2006 informing the respondent about the Supreme

Court directives.

This stand and counter claim is the defence of the respondent

to the present winding up petition as well.

11. My attention is drawn to an application being IA No.

13163/2007 filed by the respondent in the CS(OS) No. 983/2007

praying for being permitted to sue as an indigent person of Rule 1

of Order 33 of the Code of Civil Procedure. No court fee has been

paid by the respondent on its counter claim.

12. The petitioner contends that the respondent failed to

discharge its admitted liability and further in the light of the pleas

taken in IA No. 13163/2007, had admitted its inability to pay the

court fees.

13. In these circumstances, the petitioner states that it was left

with no option but to send a legal notice dated 31st October, 2007

informing the respondent that it had failed to clear the arrears of

rent despite repeated requests, demands and the legal notice dated

16th April, 2007. The respondent was also informed that after

expiry of the term of three years 31st March, 2006 of the lease deed

dated 1st April, 2003 on the respondent company was a month to

month tenant in accordance with law. The petitioner notified the

respondent of the termination of its tenancy with effect from the

midnight of 30th November, 2007 and called upon the respondent to

hand over vacant and peaceful possession of the entire premises as

well as to clear the arrears of rent for the period 1st October, 2006

to 31st October, 2007 at the rate of Rs.5,50,000/- per month

amounting to a total of Rs.70,80,000/- with interest at the rate of

18% per annum till realisation. The respondent was notified that

upon the failure of the respondent to meet the notice demand, the

petitioner would be entitled to damages for use and occupation at

the current market rate which was stated to be more than Rs.16

lakhs per month with effect from 1st December, 2007.

14. Before this court, a dispute is raised by the petitioner that

such notice was not received by it. On the other hand, the

petitioner has placed copies of the UPC and the postal receipts of

registration and dispatch as well as photocopy of the receipted

acknowledgment due card to establish service. Mr. Pravir Jain,

learned counsel for the petitioner has also placed before this court

a copy of a letter dated 7th March, 2008 issued by the Department

of Posts confirming that the notice sent by transaction no. 1621 on

2nd November, 2007 from the post office at the district courts stood

delivered on 3rd November, 2007 to the addressee. Inasmuch the

issue with regard to service of this notice does not arise for

adjudication before this court, I refrain from making any

observation with regard to the service of the notice upon the

respondent. However, prima facie, the petitioner appears to have

established dispatch and receipt of the notice to and by the

respondent.

As the respondent still did not pay the arrears of rent and

mesne profits despite the service of the notice, the petitioner

proceeded further in the matter.

15. As a result of the counter claim filed by the respondent and

the notice dated 3rd May, 2008, the petitioner is stated to have

withdrawn its prayer for specific performance and direction to the

respondents to the execute of the registered deed in CS(OS) No.

983/2007.

16. On 8th May, 2008, the petitioner proceeded to file a second

suit bearing CS(OS) No. 1079/2008 praying for eviction of the

respondent, arrears of rent and mesne profits in terms of the notice

dated 31st October, 2007.

17. Learned counsel for the petitioner has drawn my attention

also to a legal notice dated 11th March, 2008 sent to the respondent

under the provisions of 433, 434 and 439 of the Companies Act,

1956 calling upon the petitioner to pay the charges for use and

occupation of the property. Apart from the receipted

acknowledgment due cards, the petitioner has again placed before

this court copies of the certificates dated 1st May, 2008 and 8th May,

2008 issued by the postal authorities confirming that all the notices

stood delivered to the addressee.

The respondent failed to even respond to this notice. The

present petition seeking winding up has been filed in this factual

background.

18. As noticed above, the respondent has opposed the present

petition raising the same defences as raised in the written

statement. It is vehemently urged by Mr. B. Ghosal, learned

counsel for the respondent that the respondent has raised a

counter claim upon the petitioner and hence it is justified in

withholding payment of any amount towards use and occupation

charges. A further submission is made that the filing of the counter

claim by the respondent shows that there is a bonafide dispute

requiring examination by the civil court and for this reason, no

order for winding up of the respondent company can be passed.

The contention on behalf of the respondent is also that it is entitled

to continue to use and occupy the premises in terms of the lease

deed and for this reason, the suit as well as the present petition are

misconceived and are malafide. Much stress is laid on the nature of

activities of the respondent being a company undertaking research

activities and its capabilities in support of the contention that the

respondent company has acted bonafide. The principal submission

is that the petitioner is in breach of the lease deed dated 1st of April,

2003 and has prevented the respondent from using the premises

for the purpose for which it was let out and consequently the

respondent is justified in not paying the rent to it.

19. Having heard learned counsel at length, certain essential facts

which remain undisputed deserve to be set out for purposes of

clarity :

(i) A submission has been made by Mr. Ghosal, learned counsel

for the respondent before this court that in view of the renewal

option under the lease deed dated 1st April, 2003, the respondent is

entitled to continue to occupy the premises till 2012. Such

submission however fails to take notice of the intervening facts

Though the respondent exercised its option of renewal of the

lease deed dated 1st April, 2003 but no fresh registered lease deed

has come into existence after the expiry of the lease deed on 31st

March, 2006. The respondent has opposed the execution of the

registered lease deed despite the filing of the first suit CS(OS) No.

983/2007 for the purpose by the petitioner. The respondent

contested the prayer and has permitted even the three year

extended period to lapse without execution of any further lease

deed. Its status, therefore, after 1st April, 2006 was that of a month

to month tenant and it certainly cannot go back to the terms of the

lease deed dated 1st April, 2003 to claim any rights in respect of the

subject property.

(ii) In terms of the lease deed, the respondent was paying the

increased rent up to 31st March, 2006. Thereafter further enhanced

rent of Rs.5,50,000/- was paid from 1st April, 2006 till 31st

September, 2006. No amount whatsoever has been paid to the

petitioner thereafter.

(iii) The submission of learned counsel for the respondent that it

was prevented from using the premises by the issuance of the

communication dated 17th of April, 2006 by the petitioner is not

supported by the record. The respondent states that Municipal

Corporation of Delhi sealed the premises from 7th July, 2007 till 10th

July, 2007. The sealing of the property by the MCD on 7th of July,

2007 would indicate that the respondent was operating therefrom.

There is no explanation as to why no rent was paid from 1st

October, 2006 till the sealing on 7th July, 2007.

(iv) So far as the sealing of the premises is concerned, the

respondent was informed by the notice dated 10th February, 2007

that renewal of the rent agreement for the premises would be in

accordance with terms and conditions laid down by the concerned

authorities with regard to the user of the property in question. As

per the letter of the MCD dated 24th September, 2007 relied upon

by the respondent, it has been informed that mixed land

use/commercial activity in the premises was permissible with the

permission of the Municipal Corporation of Delhi after registration

etc in terms of para 15.9 of the MPD-2021. The Master Plan is a

statutory document and binding on all parties. No objection was

raised by any authority to the commercial user of the premises till

7th of July, 2007 and even thereafter the manner in which it was

permissible stood clarified to the petitioner by the MCD. The

respondent has taken no steps whatever to get the requisite

registration prescribed by the MCD and for this reason is unable to

use the premises commercially.

(v) The respondent did not notify the petitioner about the sealing

of 7th July, 2007 or its subsequent desealing. No notice under

section 108 (e) of Transfer of Property Act, 1882 was sent to the

respondent.

(vi) Clause 7.1 of the lease deed dated 1st April, 2003 dealing with

force majeure stipulates that in case the said premises or a

substantial part thereof shall at any time during the term be

destroyed or damaged by any act of God, riot and civil commotion,

enemy action and any acts not within the control of the lessee or if

the lessee is unable to gain access to the said premises or a

substantial portion of the said premises are uninhabitable, in any

such event the lessee shall not be required to pay any rent till such

time the said premises are brought to their original condition. In

case they are not so brought back to its original condition within 30

days from the date of such damage or destruction, then the

respondent is entitled to terminate the lease deed.

Admittedly, no such option was exercised by the respondent

at any point of time.

(vii) Between 1st April, 2007 to 7th July, 2007 and after 10th July,

2007, till date, there is no sealing of the premises. Even according

to the respondent, it paid rent lastly at the rate of Rs.5,50,000/-

The respondent admittedly continues to be in the absolute and

exclusive possession of the entire demised premises and it has

failed to pay the charges, whether as rent or, after termination of

the tenancy, as mesne profits.

20. The present petition seeking winding up of the respondent

company has been filed complaining that despite receipt of the

statutory notice, the respondent company has failed to pay and/or

discharge its admitted liability towards the petitioner on account of

rent/mesne profits in respect of the property manifesting that it is

unable to pay its debts. Yet another circumstance pointed out by

the petitioner is the claim of indigency under the provisions of rule

1 order 33 of the Code of Civil Procedure made by the respondent

by way of IA No. 13163/2007 in CS(OS) No. 983/2007 whereby it

had sought exemption from payment of further requisite court fee

in filing its counter claim. It is urged that the filing of such an

application and the pleas therein is a self incriminating admission

on the part of the respondent that it is not in a position to pay its

admitted debts.

21. It now becomes necessary to deal with the primary contention

of the respondent to the effect that it has filed a counter claim for

Rs.1,03,92,85,600/- and consequently is not liable to pay any rent

or charges for use and occupation till the respondent makes

payment thereof. Vehement submissions have been made that the

counter claim of the respondent is justified and bonafide. The same

is also urged as an answer to the present petition. Consequently

the respondent claims that it has made out a valid and good

defence to the present petition.

22. So far as the objection that the petitioning creditor has filed a

suit which disentitles it from maintaining a winding up petition is

concerned, it is well settled that the right to bring a winding up

action is statutorily conferred under Section 433 of the Companies

Act, 1956. However, no person has a statutory right to winding up

of a company incorporated under the Companies Act, 1956. Action

to recover an amounts due and payable by a company and a

petition seeking its winding up are two wholly distinct and

independent remedies. It is not necessary that every petition under

Section 433 of the Companies Act, 1956 ends up in an order of

winding up. Several essential factors as public interest, justice and

convenience enter into the consideration before the prayed for

order results. The nature of the defence and extent of dispute

raised by the respondent also impact adjudication in winding up

action. At the same time, the limitation for seeking the remedy of

recovery against the company continues to run. The two remedies

are not alternative remedies. More often than not, as a matter of

abundant caution, parties do not wait for final decision in one

remedy before invoking the other.

23. I find that a similar issue was raised and decided by this

court in a judgment reported at 1998 (45) DRJ 522 Rishi Pal

Gupta Vs. S.J. Knitting and Finishing Mills Private Limited.

A similar objection taken by the respondent debtor of the company,

was rejected holding as follows :-

"It is now well settled law that the remedy of recovery of money through a civil suit is distinct from that of the remedy provided for winding up of a company for non-

payment of its debt under Section 434 of the Companies Act. In the winding up proceedings the final order passed is to wind up the company which is not only beneficial for the petitioner but is also beneficial to all the shareholders, creditors or contributories of the companies. The purpose of filing a recovery suit and a winding up petition are separate and distinct and therefore, even when a civil suit for recovery of a debt is filed, there is no bar for the creditors to file a petition in the Company Court for winding up of the defaulting company. Therefore, in my considered opinion the company petition filed by the petitioner is maintainable."

24. In view of the above, mere filing of the suit by the petitioner

in order to protect its right and by way of abundant caution

certainly would not prohibit filing of the winding up petition or

preclude the petitioner from maintaining the same.

It therefore has to be held that filing of a counter claim by

itself would not by itself prohibit maintainability of a winding up

petition.

25. In the instant case, a counter claim has been raised in a suit

filed by the present petitioner. Such counter claim has been filed

without payment of court fees and the respondent has failed IA No.

13163/2007 seeking leave to sue as an indigent person. As on

date, it is an admitted position that the applicant has not been

permitted to as an indigent person and consequently it would not

be legally correct for the respondent to contend that its counter

claim is pending.

26. Even assuming that the counter claim of the respondent

seeking damages was maintainable, the question which arises for

consideration is as to whether the respondent can legally hold the

property without making payment of any amount towards the use

and occupation charges. The counter claim alleges that the

petitioner has breached the terms and conditions of the lease deed

dated 1st April, 2003. This lease admittedly expired by efflux of

time on 1st April, 2006. It would, therefore, not be open for the

respondent to utilise the shield of the terms and conditions of this

lease deed as binding the petitioner so far as its occupation after 1 st

April, 2006 is concerned. There is no order directing attachment of

the property on any application filed by the respondent. The

respondent has admittedly paid enhanced rent in respect of the

property from 1st April, 2006 till 31st September, 2006. It, therefore,

has to be held that merely seeking leave to maintain a counter

claim as an indigent person would not enable the respondent to

continue to occupy the premises without payment of any charges.

In view of the above, mere claiming that it has a counter claim

would not by itself disentitle the petitioner from bringing the

present petition.

27. Reliance is placed by Mr. Ghosal, learned counsel for the

respondent on the pronouncements reported at 2001 (107)

Com.Cases 587 QSS Investors Pvt. Ltd. vs. Allied Fibres

Ltd.; 1999 (96) Com.Cases 723 Smt. Vijayalakshmi vs. Hari

Hara Ginning & Pressing; 1998 (92) Com.Cases 356 Azeet

International Pvt. Ltd. v. Himachal Pradesh Horticultural

Produce Marketing & Processing Corpn. Ltd.; 2007 (138)

Com.Cases 422 Euro Containers v. Morepen Laboratories

Ltd. ; 2001 (107) Com.Cases 126 H.Q. Chemicals Ltd. v. Care

Formulators Pvt. Ltd. ; 2003 (114) Com.Cases 721

Rediffusion Dentsu, Young & Rubicam P. Ltd. v. Solidaire

India Ltd. ; 2005 (127) Com. Cases 66 K.C.P. Ltd. v.

Prudential Sugar Corpn. Ltd. ; 1989 (66) Com. Cases 634

State Trading Corpn. of India Ltd. v. Punjab Tanneries Ltd.

and 1990 (68) Com. Cases 506 T. Srinivasa v. Flemming

(India) Apotheke Pvt. Ltd. in support of its objections that the

pendency of the counter claim for adjudication by itself is adequate

defence to the prayer made by way of the present petition. There

can be no dispute with the legal principles laid down in these

precedents.

28. In 1987 (61) Comp. Cases 504 (Cal)(DB) J.N. Roy

Chowdhury (Traders) P. Ltd. vs. Jainti Enterprises, the court

held that where there are claims and cross claims between the

creditors seeking the winding up and the company sought to be

wound up. It was, therefore, held that the debt can be said to be

bonafide disputed and the court will not order the winding up of the

company. The petitioner also relies on 1995 (82) Com.Cases 74

(Kan) Rainbow Enterprises v. India Brewery & Distillery Ltd.

to urge that where disputed questions of fact arise, winding up

cannot be ordered.

29. In 2001 (103) Com.Cases 863 (All) Shadi Lal Enterprises

Ltd. v. Cooperative Co. Ltd. it was held that where complicated

facts arise for consideration, they are not to be gone into in a

winding up petition. In the light of the above discussion, these

pronouncements would have no application to the questions which

have been raised before me.

30. In AIR 1994 (Del) 317 M/s Jwala Pershad Ashok Kumar

Chopra H.U.F. & Anr. vs. M/s Nath Tubes Pvt. Ltd. & Ors. the

court held that in case premises had become incapable of

enjoyment, the tenant would be entitled to suspension of rent.

There can be no dispute with the proposition laid down. However,

no such issue arises before this court as the respondent has not

been able to show it was or continues to be prevented from user of

the premises. If a statutory Master Plan coming into force requires

an application or permission to be obtained, the same would bind

all persons. The respondent has failed to show that it has taken

any steps in this regard. In any case, as noticed above, no notice

under section 108(e) has been issued.

31. Mr. Ghosal, learned counsel for the respondent submits that it

has raised a dispute even before the notice of admission had been

issued. Placing reliance on 1995 (82) Com. Cases 74 Rainbow

Enterprises v. India Brewery & Distillery Ltd. It is argued that

in this background, the present petition is fully misconceived.

So far as the dispute which has been raised in the present

proceedings by the respondent is concerned, I have found that the

same would not justify withholding of the charges for the use and

occupation. In any case, the discussion shows that the respondent

has withheld rent for the period prior to July, 2007 as well for which

there was no dispute at all. The respondent has opposed execution

and registration of a lease deed without any justification as well. In

this background, the principles laid down by the court in this

precedent have no application in the facts and circumstances of the

instant case.

32. So far as the purpose for which the premises were taken on

rent is concerned, I find that though the recitals in the lease deed

dated 1st of April, 2003 record that the respondent wants to take

the premises to run its office, however there is no statement of

purpose in the body of the document as to the purpose for which

the premises were being given on rent. There is also no statement

by the petitioner in the lease that the tenancy has been created for

commercial user by the respondent.

33. Both parties placed reliance on copies of site plans which are

stated to be signed by both parties. These plans are undated.

However it is noteworthy that so far as the floor plan of the first,

second, third floor are concerned, the constructed portions are

described as family lounge, sitting rooms, bed rooms, kitchen, toilet

etc. They are not described as premises intended for a commercial

user.

Mr. Pravir Jain, learned counsel appearing for the plaintiff has

submitted that the commercial user of the ground floor portion has

always been permitted.

34. So far as the legal position is concerned the letter of the MCD

of September, 2007 sets out the same. Learned counsel for the

respondent has urged at length that it had carried out extensive

and expensive alterations and additions to the premises to make it

suitable for use for its office purposes with the consent of the

petitioner. Reliance is placed on clause 3.2 of the lease which

records the confirmation of the lessor that they have complied with

and shall continue to comply with all applicable rules and

regulations. This aspect would not make the position very different.

Firstly, the very fact that extensive changes were required indicates

that the tenant knowingly converted residential premises into

commercial/official premises. This is manifested from the site

plans. Secondly, even assuming that the premises were let out for

the purposes of running of the office, admittedly the same was not

interdicted by any act on the part of either the petitioner or the

Municipal Corporation of Delhi till the lease came to an end on 31st

March, 2006. Thirdly, there can be no estoppel against a legal

requirement.

35. Even after the premises were sealed, the respondent did not

notice the petitioner in accordance with the provisions of sub-

section (e) of Section 108 of the Transfer of Property Act to void the

lease. In 58 (1995) DLT 799 Chander Mohan Jain & Ors. v.

State Bank of Patiala, it was held by this court that so long as the

lease had not been voided, the defendant bank was liable to pay

rent. The defendant bank had contested a rental claim on the

ground that part of the roof had collapsed and the building was

sealed by the NDMC. In these facts, it was held by the court that if

the defendant/tenant was so minded, it had the option of voiding

the lease and it had not been so. The court held that so long as the

lesse has not been voided, the defendant bank continued to regard

itself as a tenant and it is liable to pay the rent.

The position in the instant case is on all fours with the position

before the court in this precedent.

36. Again in yet another pronouncement reported at 1973 (2)

ILR (Del) 540 being in SAO 30/1969 Chamber of Colour &

Chemicals P. Ltd. v. Trilok Chand Jain, this court had held that

the tenant cannot treat a lease as subsisting and suspend payment

of rent. In the light of these well settled principles of law, certainly

in the given facts, the respondent cannot withhold payment of the

charges for the use and occupation by it.

37. The respondent places reliance on the pronouncement

reported at 2001 (103) Com.Cases 863 (All) Shadi Lal

Enterprises Ltd. v. Cooperative Co. Ltd. in support of its plea

that where complicated allegations and counter allegations

requiring trial arise, a winding up petition would not be the

appropriate remedy. There can be no dispute at all with this well

settled principle.

38. It is however equally well settled that so far as the

consideration of a petition under section 433 of the Companies Act

is concerned, the court is not concerned with the quantification of

the arrears but with the existence of the debt. In the instant case,

admittedly the petitioner is liable to make payment of charges

towards rent till its termination and charges for use and occupation

which it has failed to do so. The petitioner has also failed to comply

with the notice for eviction of the subject premises or with the

prayer for arrears of rent/mesne profits made in the suit for

eviction. There is, therefore, no dispute at all so far as existence

of the debt is concerned.

39. An important question arises based on the pleas of the

respondent in IA No. 13163/2007 in CS(OS) No. 983/2007. In this

application filed under the provisions of Rule 1 of Order 33, the

respondent has given details of its financial condition and inability

to pay court fee which can be summed up thus :-

(i) At the stage when the process from research to commercialisation of the development work undertaken by the respondent was going on to fructify, the suit premises were declared as not permitted to be used for office purposes.

(ii) The bulk of the company's assets as on the end of last financial year 2006-2007 were in the state of capital work in progress pending commencement of commercial operation while the balance were assets which included fitting and furniture etc which furnished the subject premises.

(iii) The company is yet to start commercial operation and does not have any regular source of income; does not draw any profit and loss account as reflected in the balance sheet.

(iv) Company's cash and bank balance as on 31st March was only Rs.14,07,012.12 as against pending share money of Rs.35 lakhs. The company has taken further advance share money/amounts from various source to meet its day to day requirements including salaries of employees. Its balance sheet signifies its weak and tight liquidation process.

(v) The nature and business of the company is of a long term nature and the research and resultant IPR cannot be encashed.

(vi) The respondent was not capable to raise funds to pay the required court fee for the counter claim.

On these facts, the applicant sought leave to sue as an

indigent person.

40. The entire defence of the respondent to the present winding

up petition rests on the presumption that it is bound to succeed to

the full extent of its counter claim. No answer could be given by

learned counsel for the respondent to the question as to what

would be the position in case its IA No. 13163/2007 was dismissed.

There is certainly no answer to the query as to where would the

respondent stand if its counter claim was rejected. No relief with

regard to suspension of rent has been sought in any legal

proceedings.

41. In this background, I find that admittedly, the respondent is in

arrears of rent as well as use and occupation charges. Despite the

service of the notice dated 11th March, 2008, the respondent has

failed to make payment of the same. Assuming that the counter

claim raises a valid claim upon the petitioner, the same does not

relate to the period in respect of which the entire arrears have

been claimed in the notice. Admittedly, at best, the respondent

was prevented from user of the premises for the three day period

between the 7th of July, 2008 till its desealing on 10th of July, 2008.

42. There is yet another circumstance which deserves to be

notice. The petitioner herein has filed an application being IA No.

7846/2007 in CS(OS) No. 983/2007 seeking arrears of rent. This

application came up for consideration on several dates before the

court. Mr. Jain, learned counsel for the petitioner submits that this

IA No. 7846/2007 in CS(OS) No. 983/2007 was withdrawn on 6th

November, 2008 as other legal steps stood taken.

43. On the 19th November, 2007 the court observed that as on the

date of passing of the order, the liability of the respondent towards

occupation of the premises even at the rate of Rs.5,50,000/- had

risen to the tune of Rs.60 lakhs. The court observed that it was

strange that if the respondent had become an indigent as claimed

in the application by it, how it could meet its liability for the

occupation of the premises. Learned counsel for the respondent

had taken an adjournment to take instructions from his client

whether they are ready to vacate the suit premises or to pay the

last admitted rent. This matter remains pending till date.

44. In this background, the facts pleaded by the respondent in IA

No.13163/2007 would show that the respondent is not in a position

to make payment of its debts. It has failed to pay the same. The

respondent has failed to comply with the legal requirements for

withholding rent under section 108(e) of the Transfer of Property

Act. Despite service of the statutory notice under section 433 and

434 of the Companies Act, the respondent has also failed to make

the payment to the petitioner. If the respondent was proceeding

bonafide in the matter, nothing precluded it from seeking

appropriate directions for deposit of the rent/charges for use and

occupation in the court and appropriate directions for their

appropriation. On the contrary, the record would show that the

respondent has opposed every bonafide and lgal attempt by the

petitioner.

45. In the light of the above discussion, the present case is

therefore a fit case for admission of the petition.

The petition is ordered to be admitted. Let notice of

publication of the petition be effected by the petitioner in the

"Statesman" (English edition) and "Jansatta" (Hindi edition) in

accordance with Company (Court) Rules, 1959. The Official

Liquidator attached to this court is appointed as the provisional

liquidator of the company with a direction to take over all assets

and records of the company wheresoever located and to proceed in

the matter in accordance with law. The Official Liquidator shall file

its report within two months of taking over possession of assets and

records of the company.

46. There is yet another aspect to the matter. The stand

misguidedly adopted by the respondent is both unreasonable and

unfair. However having regard to the nature of its activities as

propounded by learned counsel and evident from the memorandum

and articles of association of the respondent, I would still like to

give one opportunity to the parties to amicably resolve all issues

arising in this case. For this purpose, I direct that publication of the

citation and appointment of the provisional liquidator shall stand

postponed by a period of four weeks from today.

In the meantime, if it is so inclined the respondent may, within

four weeks from today, approach the petitioner as well as the Delhi

High Court Mediation Centre with a written request for mediation

on the disputes between the parties. The petitioner has consented

to resolution of disputes by mediation on an earlier occasion and it

is presumed by me that the same willingness is still present. If so

approached, the Delhi High Court Mediation Centre shall mediate

between the parties by virtue of the order passed today.

Communication of notice of the date and time of the proceedings to

be conducted by the Delhi High Court Mediation Centre to learned

counsel for the parties shall be deemed adequate notice to parties.

47. In case the respondent does not communicate with the

petitioner and the Delhi High Court Mediation Centre in terms of the

liberty granted herein, it shall be open for the petitioner to proceed

with the publication of the citation within the period granted and

the Official Liquidator shall proceed with the liquidation

proceedings.

48. In case the petitioner is not inclined to make an attempt for

dispute resolution by mediation, it shall file an appropriate

application informing this court of its unwillingness and to take

appropriate steps to effectuate the publication of the citations as

ordered on expiry of a period of four weeks.

49. In case the parties arrive at an amicable settlement, then

subject to and upon compliance with the terms of settlement, the

order of admission of the petition and appointment of the

provisional liquidator shall stand withdrawn.

50. It is made clear that no adverse inference shall follow in case

either of or both the parties are not inclined to seek dispute

resolution by mediation and this option shall be based purely on

the consent and willingness of the parties.

List for further directions on 9th July, 2009.

(GITA MITTAL) JUDGE April 30, 2009 kr