Karnataka High Court

Official Liquidator Of M/S ... vs M/S Karnataka Industrial Area ... on 5 June, 2023

Bench: Alok Aradhe Hegde, Arhj

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                                                         OSA No. 5 of 2013




                        IN THE HIGH COURT OF KARNATAKA AT BENGALURU

                             DATED THIS THE 5TH DAY OF JUNE, 2023

                                           PRESENT

                            THE HON'BLE MR JUSTICE ALOK ARADHE

                                             AND
                        THE HON'BLE MR JUSTICE ANANT RAMANATH HEGDE

                             ORIGINAL SIDE APPEAL NO. 5 OF 2013

                   BETWEEN:

                   OFFICIAL LIQUIDATOR OF
                   M/S ELECTROMOBILES
                   (I) LTD (IN LIQUIDATION)
                   ATTACHED TO HIGH COURT OF KARNATAKA
                   "CORPORATE BHAVAN", NO. 26-27
                   RAHEJA TOWERS, 12TH FLOOR
                   M G ROAD, BANGALORE - 1.
                                                               ...APPELLANT
                   (BY SRI. REVATHY ADINATH NARDE, ADVOCATE)
                   AND:

Digitally signed   1.    M/S KARNATAKA INDUSTRIAL
by BELUR                 AREA DEVELOPMENT BOARD
RANGADHAMA               NO. 14/3, II FLOOR,
NANDINI                  NRUPATHUNGA ROAD
Location: HIGH           BANGALORE, BY ITS SECRETARY
COURT OF                 SRI R SATHYANARAYANA SINGH
KARNATAKA
                   2.    M/S KARNATAKA STATE FINANCIAL
                         CORPN., KSFC BHAVAN, NO.1/1
                         THIMMAIAH ROAD, NEAR
                         CONTONMENT RAILWAY STATION
                         BANGALORE-52
                         BY ITS AUTHORISED OFFICER
                                                             ...RESPONDENTS
                   (BY SRI. ASHOK N NAYAK, ADVOCATE FOR R1
                      SRI GURURAJ JOSHI, ADVOCATE FOR R2)
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                                                OSA No. 5 of 2013




     THIS OSA IS FILED UNDER SECTION 483 OF THE
COMPANIES ACT, 1956 R/W SECTION 4 OF THE KARNATAKA
HIGH COURT ACT, 1961, PRAYING TO CALL FOR THE RECORDS
IN COMPANY APPLICATION NO.43/2022 IN COMPANY PETITION
NO.16/83 AND EXAMINE THE SAEM AND SET ASIDE THE
ORDER DATED 28.11.2012 PASSED BY THE LEARNED
COMPANY JUDGE IN COMPANY APPLICATION NO.43/2002 IN
COMPANY PETITION NO.16/83 ANNEXURE 'C' AND ETC.

     THIS APPEAL, COMING ON FOR FINAL HEARING, THIS
DAY, ALOK ARADHE J., DELIVERED THE FOLLOWING:

                             JUDGMENT

This appeal, under Section 483 of the Companies Act,

1956 (hereinafter referred to as 'the Act'), has been filed

against the order dated 28.11.2022 passed by the learned

Company Judge.

2. In order to appreciate the appellant's grievance,

few relevant facts needs to be mentioned which are stated

infra:

M/s.Electromobiles (India) Ltd. (hereinafter referred to as

'the Company') filed an application on 10.11.1976 to Karnataka

Industrial Area Development Board (hereinafter referred to as

'the Board') for allotment of land for construction of a factory

for manufacturing two wheelers. The Board, on 26.04.1977,

allotted land measuring 69.25 acres situated in Rayapura

Village and Hubli-Dharwad Industrial Area. However, the land

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in Hubli-Dharwad Industrial Area was under the litigation and

therefore, the possession of the same could not be delivered.

Therefore, the Board made a fresh allotment of land at Belavadi

and Yelawala Hobli, Mysuru Taluk measuring 35 acres 29

guntas to the Company and possession was delivered on

15.02.1979. According to the resolution passed by the Board,

the Company was granted time till 20.10.1982 to implement

the project.

3. The Company, however, failed to implement the

project. Thereupon, the Board, in its meeting held on

07.01.1987, took a decision to cancel the allotment of land

made to the Company and by communication dated

30.01.1987/02.02.1987, the Company was informed about the

decision of the Board to cancel the allotment on account of

non-utilization of the land. The company was asked to

handover the possession of the land in question.

4. Therefore, on 09.04.1987, an order of winding up of

the Company was passed. The Official Liquidator challenged the

order of cancellation to allotment dated 30.01.1987/02.02.1987

in Company Application No.446/1994 which was allowed by the

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Company Judge by an order dated 29.01.1999 and the order

dated 30.01.1987/02.02.1987 was set aside.

5. The aforesaid order was challenged by the Board in

an appeal namely OSA No.11/1999. The Division Bench of this

Court, vide order dated 10.04.2001, inter alia held that the

remedy of the Board is to terminate the lease and apply to the

Company Court for appropriate relief in regard to resumption of

the land. In pursuance of the liberty, granted by the Division

Bench of this Court in the aforesaid OSA, the Board by an order

dated 10.12.2001 terminated the lease granted to the

Company.

6. The Company, thereafter, filed a petition under

Section 446(2)(b) of the Act r/w Rule 9 of the Companies

(Court) Rules, 1959 to permit the Board to give effect to the

order dated 10.12.2001 of termination of lease and to direct

the official liquidator to handover the possession of the land

measuring 40.25 acres allotted to the Company.

7. Learned Company Judge, by an order dated

28.11.2012, inter-alia held that in the absence of any challenge

to the legality and validity of the order of termination dated

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10.12.2001, there is no occasion for the Company Court to

examine the validity of the same. Accordingly, the petition filed

under Section 446 of the Act was allowed and the Board was

granted permission to give effect to order dated 10.12.2001

terminating the lease. The Official Liquidator was directed to

handover the possession of the land in question within three

months.

8. In the aforesaid factual background, this appeal has

been filed.

9. Learned counsel for the Official Liquidator submitted

that since the order of winding up of the Company was passed

on 09.04.1987 and therefore, the order terminating the lease

deed could not have been passed by the Board on 10.12.2001

without seeking leave of the Court. In this connection, learned

counsel for the Official Liquidator has invited the attention of

this Court to Section 446 of the Act. It is further submitted that

the Board ought to have approached the Civil Court seeking

cancellation of the lease-cum-sale deed.

10. On the other hand, learned counsel for the Board

has submitted that the Board has right to resume the land as

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the land was not utilized by the Company for the purpose for

which it was allotted. It is further submitted that the order of

cancellation of allotment, which was issued prior to the order of

the winding up of the Company, was not challenged by the

Official Liquidator and therefore, the order of cancellation of

lease-cum-sale deed was passed in terms of the liberty granted

by the Division Bench of this Court.

11. We have considered the rival submissions made on

both sides and have perused the records.

12. Admittedly, the order dated 10.04.2001 passed by

the Division Bench of this Court in OSA No.11/1999, to which

the Official Liquidator was also a party, has attained finality and

is therefore binding on the parties. Paragraph Nos.9 and 10 of

the aforesaid order reads as under:

"9. The order of cancellation was passed on 30.01.1987 prior to the order of winding up on 9.4.1987. It may not be possible for the Official Liquidator to contend that the Board had no power to terminate the lease prior to the order dated 30.1.1987 is not a termination of lease but cancellation of 'allotment'. when the allotment is on lease-cum-sale basis and possession is delivered to the allottee in pursuance of the allotment, the

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allotted becomes a lease irrespective of the fact whether a lease deed is executed or not. Hence, the Board could not have attempted to resume possession by merely canceling the allotment, without either terminating the lease or initiating action in accordance with law for possession. Hence, we affirm the order of the learned Company holding that the order of cancellation dated 31.1.1987 is unsustainable but on different rounds.

10. The remedy of the Board is to terminate the lease and apply to the Company Court for appropriate relief in regard to the land. If and when such application is filed by the Board seeking permission to initiate legal action for taking back possession or seeking delivery of the land from the court, the Company Court will consider the validity of the action of the Board. Alternatively if the official liquidator makes application seeking a direction to the Board to execute a sale deed, the Board may resist the same, by putting forth its case."

13. Thus, from perusal of the aforesaid paragraphs of

the order of the Division Bench of this Court, it is evident that

the Division Bench of this Court has held that the remedy of the

Board was to terminate the lease and thereafter apply to the

Company Court for appropriate relief in regard to the land in

question. It was further held that if and when such an

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application is filed by the Board seeking permission to initiate

legal action for taking possession or seeking delivery of the

land from the Court, the Company Court will consider the

validity of the action of the Board.

14. In pursuance of the aforesaid liberty granted by the