Madhya Pradesh High Court

The State Of M.P. vs M/S Hukumchand Mills Ltd. & Others on 15 March, 2022

Author: Subodh Abhyankar

                                            1                           COMP No.19/2001



            High Court of Madhya Pradesh, Jabalpur
                        Bench at Indore
       Single Bench: Hon'ble Shri Justice Subodh Abhyankar
                       Company Petition No.19/2001
                                The State of Madhya Pradesh

                                          Versus

                      M/s. Hukumchand Mills Limited, Indore & another

                                       *****
Shri Deeraj Singh Panwar, learned counsel for the applicants / Workers' Union
(Hukumchand Mill Mazdoor Karmachari Adhikari Samiti AND Indore Mill
Mazdoor Sandh (INTUC)].
Shri Hitendra Y. Mehta, learned counsel for the Official Liquidator.
Shri Ramesh Chandra Singhal, learned counsel for State Bank of India.
Shri Gaurav Chhabra, learned counsel for Kotak Mahindra Bank.
Shri Raunak Chouksey, learned counsel for IDBI Bank.
Shri Amol Shrivastava, learned counsel for Indore Municipal Corporation.
Shri Jatin Singhal, learned counsel for Industrial Finance Corporation of India
(IFCI) Limited
Smt. Mamta Shandilya, learned Government Advocate for the petitioner / State of
Madhya Pradesh.

                                       *****
                                 ORDER

(Passed on this 15th day of March, 2022)

1) Heard on IA No.2868/2020, an application filed by the Workers'

Union for setting aside Resolution No.65 dated 19.02.2020 of Indore

Municipal Corporation (Non-applicant No.2), seeking the following relief: -

"i) That the present application may kindly be allow and the impugned resolution dated 19/02/2020 may kindly be set aside in the interest of justice.

ii) That, the non-applicant no.2 / Indore Municipal Corporation may be restrained from taking any further action or issuing any order adversely affecting the interest of the applicant workers.

iii) Such other orders in the interest of workers of the company as deemed fit and proper may also be passed."

2) Also heard on IA No.1688/2020, again an application filed by the

workers' union under Rule 9 of the Companies (Court) Rules, 1959 seeking

appropriate directions for calling record of non-applicant No.2 in the matter

of cancellation of lease of land of company under liquidation, seeking the

following relief: -

"i) Directions may kindly be issued to Non-applicant no.2 to explain as to how and why the lease of land of company has been cancelled all of sudden without obtaining leave of this Hon'ble Court;

ii) Directions may kindly be issued to Non-applicant no.2 to produce the record relating to the decision of cancellation of lease for examination by this Hon'ble Court;

iii) Directions may kindly be passed for protecting payment of worker dues.

iv) Interim direction may kindly be passed that any action of cancellation of lease by Non-applicant No.2 would not come in the way of payment of applicant worker dues.

v) Such other orders in the interest of justice of the workers of the company as deemed fit and proper may also be passed."

3) A perusal of the aforesaid reliefs sought in the aforesaid two

interlocutory applications filed by Hukumchand Mill Mazdoor Karmachari

Adhikari Samiti, Indore makes it clear that in both the orders the applicants

have challenged the legality of the resolution dated 19.02.2020 passed by

the Indore Municipal Corporation non-applicant No.2 whereby the grant of

lease in favour of the company under liquidation is sought to be cancelled.

4) Shri D. S. Panwar, Counsel appearing for the applicant has submitted

that the aforesaid resolution dated 19.02.2020, passed by the Corporation

runs contrary to the various orders passed by this Court and has been passed

only with a view to thwart the efforts made by the applicant workers unions

to get justice since last more than 20 years as the compensation, which

ought to have been awarded to them has been scuttled by one or the other

orders passed either by the State Government or the Municipal Corporation.

Following contentions have been made in para 5 of the application, which

reads as under:-

"5. That, the Indore Municipal Corporation have passed resolution no.65 dated 19/02/2020 (Annexure A-1) for cancelling lease of the company under Liquidation. The said action is illegal, contrary to provisions of Law, Principles of Natural Justice and deserves to be set aside on the following grounds and reasons:-

5.1 The resolution dated 19/02/2020 has been unilaterally and one sided passed without any notice to lessee/Company under Liquidation.

5.2 The resolution has been passed without any opportunity of representation and hearing to the Official Liquidator.

5.3 The resolution has been passed without bringing it to the notice of the Company Court despite knowing that the leasehold rights of the lease land is a valuable asset of the Company vested in the Company Court and cannot be interfered with by anyone without leave of this Hon'ble Court.

5.4 The resolution has been passed without notice to the applicant workers union and without payment of worker dues who are secured creditor by virtue of Section 529 of the Companies Act, 1956.

5.5 The leasehold land and building was mortgaged as security to Financial Institutions with consent of Indore Municipal Corporation. The said security operate pari-pasu in favour of the worker. Therefore, no such resolution could have passed without notice, opportunity and consent of applicant workers union.

5.6 The non-applicant no.2/IMC never made any demand of lease rent nor it has filed any claim before the Official Liquidator as such there is no question of violation of lease conditions.

5.7 The lease of the land of Company under Liquidation is 'Perpetual Lease' i.e. for indefinite period.

5.8 The non-applicant no.2/IMC has demonstrated their willingness to take over the land and pay worker dues but no time frame progam has been submitted. On the contrary all possible evasive submissions have been made in the reply.

5.9 That, the non-applicant no.2 have committed contempt of this Hon'ble Court by interfering with the valuable property vested in the court.

5.10 Thus, the impugned resolution dated 19/02/2020 deserves to be set aside."

5) Shri Gaurav Chhabra, learned Counsel appearing for the Kotak

Mahindra Bank has also supported the applications filed by the applicant

union and has also placed on record a synopsis of relevant facts and orders.

Shri Chhabra has drawn the attention of this Court to the fact that in the

present case, the property of the respondent - M/s. Hukumchand Mill

Limited (hereinafter referred to as "the company"), the company under

liquidation was mortgaged with the various bank after a no objection

certificate was issued by the IMC on 22.07.1977 and 19.04.1979

respectively, giving its consent that the property of the Mill can be

mortgaged. It is submitted that only on the aforesaid consent made by the

IMC, the banks have extended the loan facility to the company after

executing the various agreement in this behalf mortgaging the property of

the company with the bank and creating charge. It is further submitted that

vide order dated 29.10.2010, this Court had also directed that the possession

of the property of company be handed over to the D.R.T., Mumbai as on

08.07.2004, a recovery certificate was already issued by the D.R.T.,

Mumbai and subsequently the application I.A. No.6630/2010 filed by one

Devendra Yadav, Advocate and I.A. No.2430/2009 preferred by the State to

institute Civil Suit in respect of the property concerned has already been

rejected by this Court under Section 446 of the Companies Act, also holding

that the State has failed to point out its prima facie right to terminate any

lease in question in which the State is not the lessor. Attention of this Court

was also drawn to the order dated 29.02.2016, passed by this Court on I.A.

No.6436/2015, whereby the Director, Town and Country Planning

Department, Indore was also directed to take appropriate steps on the

application dated 24.12.2014, filed in respect of change of land use within a

period of two months and subsequently the land use has also been changed.

Vide order dated 13.05.2016, this Court observed that on 29.10.2010, the

Debt Recovery Tribunal was directed to proceed ahead with the process of

sale of the assets of the company and the D.R.T. was also directed to

associate the Official Liquidator with the process of sale. It is also

submitted that on 14.10.2019, the change of land use has also been notified

by the State on 13.09.2019, whereas on 19.02.2020, a resolution has been

passed by the IMC cancelling the lease in respect of the land of

Hukumchand Mill which is under challenge in this I.A. Vide order dated

17.12.2020 this Court has already directed the parties to maintain status quo

in respect of the lease in question. Thus, it is submitted that the IMC has

proceeded in utter violation of the orders passed by this Court in cancelling

the lease, especially after giving its consent to the Bank to mortgage the

property.

6) Shri R. C. Singhal, learned Counsel appearing for the State Bank of

India has also supported the case of the applicant - Workers Union and has

also drawn the attention of this Court to the various provisions of Transfer

of Property Act to submit that the action of the Municipal Corporation in

cancelling the lease deed is without any basis and is contrary to the legal

provisions. Counsel has submitted that after the Municipal Corporation

gave its consent to mortgage the property, the Banks relying upon the said

representation of the Municipal Corporation that the property can be

mortgaged, entered into the agreements with the mortgagor i.e. the

Hukumchand Mills and extended the loan facility by creating charge on the

property in question and thus there is a privity of contract between the IMC,

mortgagor company and the various mortgagee banks who are the secured

creditors.

7) Shri Singhal has also drawn the attention of this Court to a decree

dated 30.04.2004, drawn by DRT, Mumbai and it is submitted that after the

decree was drawn which has also attained the finality, the Municipal

Corporation cannot bypass the same by cancelling the lease deed. Counsel

has also drawn the attention of this Court to Sections 52, 53, 70 and 112 of

the Transfer of Property Act as also the Section 115 of the Evidence Act,

which refers to estoppel. Shri Singhal, in support of his submissions, has

also relied upon a decision rendered by Hon'ble Supreme Court in the case

of Allahabad Bank Vs. ARC Holding Limited reported in AIR 2000 SC

3098 wherein it is held that the right of the decree holder has to be firstly

satisfied.

"16. Since all the parties are represented before us, including the Official Liquidator, we grant total period of ten weeks from today, for concluding sale, with the aforesaid condition, including the period of advertisement, receiving offers etc. In case, it is not concluded within this period, the order of the High Court directing the sale of the Company as a "going concern" shall stand set aside. The Official Liquidator will then proceed to sell the assets of the Company first by selling the plant, machinery and other moveable assets and then the other assets in such a manner to fetch the maximum price, keeping the interest of all other creditors. Out of the aforesaid proceeds, first the decree in favour of the appellant Bank should be satisfied and then to proceed to distribute the balance to other creditors in accordance with law. Accordingly the aforesaid two orders of the High Court dated 23-2-1998 and 10-7-1998 stand modified to the extent we have passed this order."

(emphasis supplied)

Reliance has also been placed on another decision in the case of

Shiam Behari Lal Gour and Ors. vs Madan Singh decided on

08.12.1944 reported in AIR 1945 All 293. Thus, it is submitted that the

impugned resolution no.65 dated 19.02.2020, cancelling the lease dated

05.01.1923, executed in favour of the company be quashed.

8) On the other hand, Shri Amol Shrivastava, learned Counsel appearing

for the Municipal Corporation has vehemently opposed the prayer and it is

submitted that the IMC was well within its right to cancel the lease deed as

the whole purpose of granting the lease to company has already come to an

end since the company has already stopped its production and has ceased its

business. It is submitted that the lease was not cancelled earlier as it was in

dispute as to who is the owner of the property and it is only when the final

order was passed by this Court on 04.03.2014, whereby the State's claim of

ownership of the property was rejected, the Municipal Corporation has

asserted its rights. Shri Shrivastava has further submitted that even

otherwise, these interlocutory applications for quashing the resolution dated

19.02.2020 are premature as the resolution has not even attained the finality

as it is only a proposal and all the documents have been sent to the State

Government for its approval and only after it is approved by the State

Government that it would become final which can be challenged by the

applicants at the appropriate stage, if necessary. Thus, it is submitted that on

this ground only the applications are liable to be rejected as there is no

resolution in force as on date cancelling the lease deed issued in favour of

the company.

9) In support of his contentions, Shri Shrivastava has also relied upon a

decision rendered by Hon'ble Supreme Court in the case of Phatu

Rachiram Mulchandani Vs. Karnataka Industrial Area Development

Board reported in (2015) 5 SCC 244 paras 38 and 39.

"37. In the present case, we are confronted with a situation where Company is in liquidation. Thereafter, we have to understand the implication of the provisions of Section 537, which reads as under:

"537. Avoidance of certain attachments, executions, etc., in winding up by Tribunal.--(1) Where any company is being wound up by the Tribunal--

(a) any attachment, distress or execution put in force, without leave of the Tribunal against the estate or effects of the company, after the commencement of the winding up; or

(b) any sale held, without leave of the Tribunal of any of the properties or effects of the company after such commencement, shall be void. (2) Nothing in this section applies to any proceedings for the recovery of any tax or impost or any dues payable to the Government."

38. It is clear from the above that prior permission of the Court is required in respect of any attachment, distress or execution put in force or for sale of the properties or effects of the Company. We are of the opinion that the serving of cancellation notice simpliciter would not come within the mischief of this section as that by itself does not amount to attachment, distress or execution, etc. No doubt, after the commencement of the winding up, possession of the land could not be taken without the leave of the Court. Precisely for this reason the Board had filed the application seeking permission. But according to us no such prior permission was required before cancelling the lease. In fact, it is only after the cancellation of the lease that the Board would become entitled to file such an application under Section 537 of the Act. Had the Board gone ahead further and taken the possession after the cancellation and then approached the Company Judge, the situation which occurred in Karnataka State Electronics Development Corpn. Ltd. v. Official Liquidator would have prevailed. On the other hand, it would have been premature on the part of the Board to approach the Company Judge for permission to resume the land without cancelling the lease in the first instance.

39. We thus, hold that no prior permission was required by the Board for cancelling the lease."

(emphasis supplied)

Reliance is also placed upon Shanker Lal and another Vs.

Narendra Bahadur Tandon reported in AIR 1967 All 405, 1967 37 CC

773 All; Monmohini Dassi Vs. Kali Das Ahiri reported in (1898) 2 Cal

WN 292 (294); Raja Mohammad Amir Ahmad Khan Vs. Municipal

Board of Sitapur reported in AIR 1965 SC 1923p; and Raguram Rao Vs.

Eric. P. Mathias reported in (2002) 2 SCC 624 para 27. Reliance is also

placed upon decisions of Hon'ble Supreme Court in the case of Stressed

Assets Stabilization Fund Vs. West Bengal Small Industries

Development Corporation Ltd. and another [Civil Appeal No.4139 of

2008].

10) Shri Shrivastava has also submitted that Section 537 of the

Companies Act would not be applicable in the present case. Reliance is also

placed in the case of Jabal C. Lashkari and others Vs. Official

Liquidator and others reported in AIR 2016 SC 1601. Shri Shrivastava

has also referred to Sections 446 and 447 of the Companies Act, to buttress

his submissions.

11) In reply to Shri Singhal's submissions regarding applicability

of Transfer of Property Act, it is submitted that there was no privity of

contract between the IMC and the bank and the mortgage agreement was

purely between the bank and the company. Thus, any charge created in

favour of the bank is not binding on the Municipal Corporation. Counsel

has also submitted that even otherwise the Municipal Corporation has fairly

giving an undertaking that if the property in question is allowed to be sold

by the Municipal Corporation on market rate, it would settle the dues of the

workers as its first priority. So far as the applicability of Section 52 and

other provisions of T.P. Act is concerned, it is submitted that as the

Corporation was not a party in any litigation between the bank and the

company, the decree passed in favour of the bank would not be binding on

the Municipal Corporation.

12) Shri Hitendra Y. Mehta, learned Counsel appearing for the Official

Liquidator has also supported the applications in favour of the workers

union and the attention of this Court is also invited to the order passed by

this Court in the case of Senior Manager UCO Bank Vs. M/s. Zoom

Developers Pvt. Ltd. in Company Petition No.9 of 2011 dated

17.06.2019 wherein it is held that once the winding up order is passed and

the provisional liquidator is appointed, then no authority can take

possession of the assets of the company in liquidation without the leave of

this Court. It is submitted that in the case of M/s. Zoom Developers (supra)

also the question of cancellation of lease deed arose between the parties.

Attention of this Court is also drawn to another decision in the case of

Mukund Ltd. Vs. Devidayal Industries Ltd. (in liquidation) reported as

[2017] 203 Comp Case 304 (Bom) to submit that the rights and obligation

of parties to existing lease agreement continue to be binding on both the

parties. Similarly in the case of Shree Chamundi Mopeds Ltd. Vs.

Church of South India Trust Association reported as 1992 (75) CC 440

(SC), wherein the Hon'ble Supreme Court has also promulgated that lease

hold rights in a property can be transferred and the interest of the mortgagor

can also be attached and sold by way of execution in satisfaction of a decree

against the lessee. It is submitted that as many as two decrees have been

passed by the D.R.T. against the company and in execution of the said

decrees the property can be sold for the satisfaction of the decrees and there

is no legal impediment even if the lease is cancelled by the original lessor.

Reliance is also placed in the case of Legal Heirs of Deceased Fakirchand

Ambaram Patel Vs. Official Liquidator, Amruta Mills Ltd. reported in

2003 (116) CC 588. Reliance is also placed in the case of Jabal C.

Lashkari and others Vs. Official Liquidator and others reported in

[2016] 196 CC 486 (SC) para 20. Reliance is also placed in the case of

Metal Tubes and Rolling Mills, In re reported in [2018] 210 CC 184

(Bom).

13) Heard Counsel for the parties and perused the record.

14) So far as the Resolution No.65 dated 19.02.2020 of Indore Municipal

Corporation is concerned, which is sought to be quashed in these

applications, the same read as under:-

**1- vk;qDRk ds i= ds vuqlkj v{ksfirk us mYysf[kr vuqlkj esllZ gqdqepUn fey fyfeVsM dks fey dh [email protected] djus ds fy, rRdkyhu gksYdj LVsV }kjk o"kZ 1923 esa 'khyukFk dSEi bUnkSj fLFkr 42-49 ,dM+ Hkwfe yht ij nh xbZ FkhA dEiuh }kjk Hkwfe dks nks Hkkxks esa ckaVus o _.k ysus dh Lohd`fr ds fy, uxj ikfydk fuxe bUnkSj dks vkosnu i= @ vuqjks/k fd;k tkus ij rRdkyhu gksYdj LVsV }kjk nh xbZ yht dks nks Hkkxks esa foHkkftr fd;k tkdj yht }kjk 30-

74 ,dM+ Hkwfe ,oa 5-75 ,dM+ Hkwfe dh yht MhMh fnukad 13-01-1959 dks fu"ikfnr dh xbZA dkykarj esa esllZ gqdqepUn fey fyfeVsM chekj gks tkus ls izdj.k dh vkbZ-,Q-vkj- dks lanfHkZr gqvk vkSj ch-vkbZ-,Q-vkj- }kjk fnukad 11-01-1991 dks fey ds ifjlekiu dk fu.kZ; ikfjr fd;k x;k gSA ;|fi bl fu.kZ; ds fo:) fey daiuh dh vksj ls ,-vkbZ-,Q-vkj esa vihy dh xbZ Fkh ijUrq fnukad 28-10-1993 dks vihy fujLr dj nh xbZA dEiuh dh vkS|ksfxd bdkbZ fnukad 12-12-1992 ls can gSA orZeku esa dEiuh fiVh'ku dzead [email protected] mPp U;k;ky;] bUnkSj ][k.MihB esa izpfyr gSA

2- uxj fuxe] bUnkSj }kjk o"kZ 1959 esa fu"ikfnr Hkwfe ds iV~Vs esa ;g Li"V 'krZ fy[kh gS fd ;fn dEiuh }kjk yht 'krkZs dk mYya?ku fd;k tkrk gS] iV~Vk dh HkkVd dk Hkqxrku le; ij ugh fd;k tkrk gS vFkok dEiuh dk ifjlekiu gksrk gS vFkok ftl mn~ns'; ds fy, ds fy, Hkwfe fey dks iznku dh xbZ gS] ;fn og mn~ns'; gh lekIr gks tkrk gS] rks uxj fuxe dks mDr Hkwfe ij iqu% izos'k ds vf/kdkj izkIr gks tk;saxsA ;g Hkh mYys[kuh; gS fd gqdqepUn fey bUnkSj dks gksYdj LVSV }kjk yht Hkwfe nh tkdj fey [email protected] dj yksxksa dks jkstxkj miyC/k djk;k tkuk FkkA gqeqpUnz fey] bUnkSj dks nh xbZ yht ¼iV~Vk½ Hkwfe fu/kkZfjr 'krksZ ij rdk;fe fdLe dk gS] vFkkZRk ftl vk'k; ds fy, Hkwfe iV~Vs

ij nh xbZ Fkh og vk'k; lekIr gks pqdk gSA vr% fuxe dh gqdqepUn fey bUnkSj dks 'khyukFk dsEi] bUnkSj dh yht ij nh xbZ Hkwfe 42-49 ,dM+ ij izos'k dk vf/kdkj izkIr gks x;k gSA uxj fuxe bUnkSj }kjk fu"ikfnr Hkwfe ds IkV~Vs esa ;g Li"V 'krZ fy[kh gS fd ;fn dEiuh dk ifjlekiu gksrk gS vFkok ftl mn~ns'; ds fy, Hkwfe fey dks iznku dh xbZ gS] ;fn og mn~ns'; lekIr gks tkrk gS rks uxj fuxe dks mDRk Hkwfe ij iqu% izos'k ds vf/kdkj izkIr gSA mijksDr ds ifjis{; esa gqdqepUn fey fyfeVsM] dh yht Hkwfe dk iV~Vk fujLr djus gsrq Lohd`fr pkgh xbZ gSA 3- fopkjksijkUr vk;qDr ds i= ds layXu la{ksfidk esa n'kkZbZ mijksDRk fLFkfr o vuq'kalk ds izdk'k esa uxj fuxe] bUnkSj }kjk fu"ikfnr Hkwfe ds iV~Vs esa Li"V 'krZ gS fd ;fn dEiuh dk ifjlekiu gksrk gS vFkok ftl mn~ns'; ds fy, Hkwfe fey dks iznku dh xbZ gS] ;fn og mn~ns'; gh lekIr gks tkrk gS] rks uxj fuxe dks mDr Hkwfe ij iqu% izos'k dk vf/kdkj izkIr gks tk;sxk] gqdqepUn fey fyfeVsM bUnkSj }kjk 'krksZ dk ikyu ugh djus ls 'khyukFk dsEi] bUnkSj fLFkr 42-49 ,dM+ dh yht Hkwfe dk iV~Vk fujLr djus dh Lohd`fr loZlEefr ls nh tkrh gSA vk;qDr] fu;ekuqlkj vko';d dk;Zokgh djsA ¼vt; flag u:dk½ v/;{k uxj ikfydk fuxe] bUnkSj fnukad 19-02-2021 (emphasis supplied)

15) At this juncture, it would be apt to reproduce the relevant paras of the

lease dated 05.01.1923 (Annexure I/4) issued by the IMC in favor of the

Company, which read as under:-

"(f) At all times to use the said hereditaments and premises hereby demised and the Mills and factories erected thereon for carrying on only the business of Ginning, Spinning and Weaving cotton and the business of the allied industry or dyeing bleaching cloth printing etc. and for no other purpose or business what so ever.

(g) Not to assign under-let or part with the said premises or any part there of for all or any part of the said term without the consent in writing of the lessor."

(emphasis supplied)

16) It would also be necessary to see the actual consent letters dated

22/07/1977 and 19/04/1979 issued by the IMC in favour of the SBI/Banks

regarding the mortgaging of the properties of the Company, which read as

under:-

**bUnkSj uxj ikfydk fuxe

---------------------- fnukad 22-07-1977 Mk;jsDVj, batkpZ gqdqepUn feYl] bUnkSj

fo"k; ------------------------------- vkidk izkFkZuk i= vken dz- 537 fnukad 21-07-1977 bZ- gksus ls nk[kyk fn;k tkrk gS fd & vk;qDr egksn; ds vkns'kkuqlkj vkidh yht dh tehu bUMfLVª;y MsOyiesUV cSad vkQ bafM;k dh vkSj fxjoh j[kus dh vuqefr nh tkrh gSA

lgk;d f'kYiJ okLrs vk;qDRk bUnkSj uxj ikfydk fuxe

(emphasis supplied)

xxxxxxxxxxxxxxxxxxxxxxx

bUnkSj uxj ikfyd fuxe dk;kZy;

      ----------                                     fnukad 19-04-1979

      vk;qDr]
      bUnkSj uxj ikfydk fuxe        izsf"kr lSdzsVjh]
                             gqdqepUn feYl fyfeVsM
                             bUnkSj
      fo"k; %& gqdqepUn feYl dh yht Hkwfe ckcnA

vkidk i= dzekad 738 fnukad 05-03-196 dk izkIr gksus ls] yht Hkwfe bUMLVªh;y MsoyiesUV cSad vkQ bf.M;k bUMLVªh;y dzsfMV ,UM bUosLVesUV dkjiksjs'ku vkQ bafM;k fyfeVsM] bUMLVªh;y Qk;usUl dkjiksjs'ku vkQ bafM;k] rFkk LvsV cSad vkQ bUnkSj bu pkjks laLFkkuks dh vksj fxjoh j[kus dh vuqefr nh tkrh gSA vk;qDRk] bUnkSj uxj ikfyd fuxe]**

(emphasis supplied)

17) At this juncture, it would also be necessary to see the orders passed

by this Court from time to time in respect of the sale of the properties of the

Company to settle its dues, the same are being reproduced as under:-

Order dated 29.10.2010

"xxxxxxxxxxxxxxxxxxxxxxxxxxxxx The aforesaid judgment delivered by the apex court once again makes it clear that the Debts Recovery Tribunal acting under the Recovery of Debts Due to Banks & Financial Institutions Act, 1993 would be entitled to the sale and to sell the company property through its recovery officer but only after notice to the Official Liquidator or the Liquidator appointed by the Company court after hearing him. Similar view has been taken in other judgments delivered on the subject and no other judgment has been

brought to the notice of this court by learned counsel appearing on behalf of the State of MP, Official Liquidator or by learned counsel appearing on behalf of Municipal Corporation, Indore and therefore keeping in view the judgment delivered by the apex court in the aforesaid cases the Debts Recovery Tribunal through its recovery officer is permitted to proceed ahead in the matter but only after notice to the Official Liquidator. Not only this the recovery officer while proceeding ahead in the matter shall associate the official liquidator with sale, the fixing of the upset price or the reserve price, confirmation of sale, holding of the sale proceeds and the distribution thereof among the creditors in terms of Sec. 529-A and 529 of the Companies Act as well as other statutory provisions governing the field. Resultantly no case for staying the proceedings before the Debts Recovery Tribunal - I, Mumbai is made out in the matter. The Official Liquidator who has been noticed by the recovery officer shall mark his presence in the recovery proceedings No.197/2004 enabling the recovery officer to proceed in accordance with law."

Order dated 04th March, 2014 "IA No.6630/2010 This application has been filed by the State of Madhya Pradesh u/S.446 of the Companies Act seeking permission to institute civil suit before the competent Civil Court against the company in liquidation for determination of lease and declaration of ownership. xxxxxxxxxxxxxxxxxxxxxx [27] So far as ownership right claimed by the State is concerned, the company in liquidation has never claimed itself to be owner of leased land. It only has lease hold right. The ownership dispute is between State and Municipal Corporation and for settling that dispute no leave of the Court is required.

[28] In view of the above, it would not be in the interest of justice to allow the prayer of the applicant State made in this I.A for grant of leave to institute the suit against the company in liquidation for determination of lease and declaration of ownership in the competent civil court. Accordingly, IA No.6630/2010 is rejected.

IA No.2340/2009 [29] This IA has been filed by the State of Madhya Pradesh under Section 535 of the Companies Act, 1956 seeking disclaimer of onerous property by the official liquidator and to direct OL to disclaim his right and possession over the leasehold land of 42.49 acres held by the Company in Liquidation.

[30] Learned counsel for the applicant submits that the land in question was given to the company in liquidation by the lease deed dated 5th January 1923 for a specific purpose and the said purpose has come to an end and lessee was not permitted to assign, sub-let or part with the premises or any part thereof or all or any part of the said land without consent in writing of the lessor and the State being the lessor has a right of reentry.

[35] This court while deciding IA No. 6630/2010 above has given the detail reasons and has held that the company in liquidation is in

possession of the leasehold land by virtue of the two lease deeds dated 13th January 1959 executed by Municipal Corporation Indore in favour of company in liquidation and that even the earlier lease deed of 5th January 1923 was executed by Prime Minister of Holker State and the State of MP has failed to point out any lease executed by it in favour of company. The company in liquidation has only the leasehold rights which are sought to be auctioned in the liquidation proceedings and no lease deed has been executed by the State of M.P. in favour of the company in liquidation. The State of M.P. has failed to point out its prima facie right to terminate any lease in question in which the State is not the lessor. Thus, there is no material before this court to hold that leasehold right of the company are burdened with onerous covenants.

[36] In view of the above, I am of the opinion that IA No.2340/2009 is without any merit which is accordingly rejected."

Order dated 29.02.2016 "IA No. 6436/15 Shri D.S. Panwar learned counsel for applicant.

Shri H.Y. Mehta learned counsel for OL.

Shri V. Atre learned counsel for IFCI.

Shri Gaurav Chhabra, learned counsel for Kotak Mahindra Bank. Shri M. Munshi learned counsel for the Industries Bank. Shri R. Chouksey learned counsel for IDBI Bank.

Shri R. Tiwari learned counsel for ICICI Bank.

Shri A. Naik learned counsel for State of MP.

This IA has been filed by the worker's union seeking a direction to the State for change of land use of land of the company in liquidation situated at 52, Sheel Nath Camp Indore. According to the applicant, the current land use of the land in question is the industrial but now the applicant wants the land use to be changed to commercial or residential so that the land can fetch appropriate price since the price so fetch will have an effect on the claim of the workers.

It is pointed out that applicants have already filed application dated 24/12/14 in this regard and the Director of Town and Country Planning Department is required to consider the said application and take an appropriate decision.

Counsel for State has no objection in deciding the said application. In these circumstances, IA No. 6436/15 is disposed of by directing the Director, Town and Country Planning Department to take an appropriate decision on the application dated 24/12/14 in respect of change of land use within a period of two months from the date of receipt of certified copy of this order. Applicants are directed to submit a fresh copy of application alongwith certified copy of this order." Order dated 13.05.2016 "This Court on 29/10/2010 has permitted the Debt Recovery Tribunal to proceed ahead with the process of sale of the assets of the Company. This Court has also directed the Debt Recovery Tribunal to associate the Official Liquidator with the process of sale.

It is pertinent to note that the State Government was also claiming the ownership of the land and a prayer was made by the State Government for

grant of leave to file civil suit against the Company in-liquidation as well as against the Municipal Corporation claiming title of the land in question. This Court by an order dated 04/03/2014 has rejected the prayer made by the State Government.

It has been brought to the notice of this Court that inspite of repeated advertisements issued by the Debt Recovery Tribunal, the assets have not been sold because the State Government is publishing notices in the news paper that the State Government is the owner of the land in question. It is really unfortunate. There is no declaration of title in favour of the State Government and there is no order passed by any Court declaring the State Government to be the owner of the land and allegedly all possible efforts are being made to ensure that the property of the Company is not sold. Approximately 6000 workers are literally hand to mouth and the efforts of the Debt Recovery Tribunal to sell the land are being frustrated by publishing notices in the news paper.

A large number of workers are present in the Court room and they want to argue the matter. The Court room is full of old people who are not well and who are claiming themselves to be the worker of the Company. This Court cannot ignore the plight of the workers who are fighting for their rights since 1991. The learned counsel for the Official Liquidator has prayed before this Court that the State Government be restrained from publishing notices in respect of the land which is subject matter of the present Company petition.

Resultantly, the Debt Recovery Tribunal is directed to issue fresh notice for auctioning the assets of the Company in-liquidation and the State Government is directed not to issue / publish any such notices claiming the ownership of the land which is the subject matter of the present company petition.

Notice issued by the Debt Recovery Tribunal will also include a clause mentioning categorically that State Government is not the owner of land in question and the lease in respect of the land in question, is renewable by the Municipal Corporation. The Debt Recovery Tribunal shall ensure issuance of fresh advertisement within a period of 15 days from today. The Official Liquidator shall inform the Debt Recovery Tribunal about the order passed today in open Court.

List the matter on 15/06/2016."

Order dated 13.11.2018 "Heard on I.A.No.982/2016 which is an application filed by the workers seeking change of land use of the land of the company in liquidation. Shri D.S.Panwar, learned counsel for the Workers Union submits that there is already an order of this Court passed on 29.2.2016 directing the State to pass an appropriate order on the application for change of land use and the said order has not been complied with till now. He has also submitted that the land in question being a large piece of land earmarked earlier for the industrial purpose the buyers are not coming forward to purchase it as a result of which the workers are suffering since their lawful claims are being delayed.

In the aforesaid circumstances, I am of the opinion, that the State is required to take a decision in respect of change of land use as per its stand before this Court in the reply dated 13.2.2017 without any further delay; hence, I.A.No.982/2016 is disposed of by directing the Commissioner- cum-Director, Town and Country Planning to take an appropriate decision

in respect of change of land use of the land in question in accordance with law having regard to the observation made above within a period of two months from the date of receipt of certified copy of this order."

Order dated 14.10.2019 "Shri R.S. Chhabra learned Additional A.G. has informed that change of land use has now been notified in the Gazette notification dated 13/9/2019, a copy of which has been placed on record of this Court. List after one week on any Monday, as prayed."

18) A perusal of the aforesaid orders starting from 29.10.2010 to

13.11.2018 clearly reveals that serious efforts have been made by this court

to ensure disposal of the properties of the Company so that its dues can be

cleared. It is also apparent that efforts have been made by the State

Government to claim the properties of the Company as their own, and also

claiming themselves as the Lessor of the properties but the same have also

been emphatically negated by this court. It is rather surprising that since the

filing of the Company Petition in the year 2001, the IMC has never thought

to cancel the lease granted to the Company and the contention of Shri

Shrivastava, learned counsel for the IMC that it was waiting for the

outcome of the claim of the State Government is fallacious for the reason

that the State Government came into the arena only in the year 2010 when

the IA No.6630/2010 was filed on their behalf for filing a civil suit and there

is no explanation forthcoming regarding the inaction on the part of the IMC

to not to take any action regarding the cancellation of the lease from 2001 to

2010 which only shows the lack of bona fides on the part of the IMC. The

stand of the Corporation that the consent dated 22/07/1977 and 19/04/1979

issued by the IMC has no consequences and are not binding on the IMC

because it is not a party to the deed of mortgage is nothing short of gross

and shocking to the conscious this court. Such stand on the part of IMC,

which is a State withing the meaning of Art.12 of the Constitution runs

contrary to the Directive Principles of State Policy as enshrined in Part IV

of the Constitution which provides for directive principles of State Policy. A

State which resiles from its own word is a rogue State and cannot expect its

citizen to follow the rule of law.

19) So far as the impugned resolution dated19.02.2021 is concerned, a

perusal of the same reveals that it has emphatically cancelled the lease of

the Company and it cannot be said that it is premature to seek leave of this

court u/s.537 of the Companies Act. The averments made by the IMC in

their reply leaves no manner of doubt about the intention of the IMC is to

take over the land which it allowed to be mortgaged with the banks and

financial institutions, and sell it on its own. In their reply, the IMC has

averred as under:-

"As would be reflected from the resolution, the Indore Municipal Corporation has resolved to cancel the lease of the subject land. It has also been resolved that the Indore Municipal Corporation will develop the parcel of land in coordination with other agencies and put it to use as per the changed land use, so that the maximum value can be obtained from the same. The profits derived from such a venture will firstly be appropriated towards settlement of the dues of the workers of the M/s. Hukumchand Mill. For the same the Indore Municipal Corporation is currently exploring and considering various options and manners in which the subject land can be developed and let out, to maximise revenue and also generate profits which would firstly be utilised for the payment of workers dues and thereafter would add to the public funds and resources."

(emphasis supplied)

20) In such circumstances, this court is of the considered opinion that

the leave of this court as envisaged u/s.537 of the Companies Act would

be necessary to proceed in the manner as has been proposed by the IMC.

In the case of Phatu Rachiram Mulchandani (supra), relied upon by Shri

Shrivastava, learned counsel for the IMC, there was no such situation where

the land in question was already consented to be mortgaged to the Banks by

the owner of the land in favour of the lessee.

This court is also of the considered opinion that the principles of promissory

estoppel would be applicable in full force under the facts and circumstances

of the case. The Supreme Court, in the case of LML Ltd. v. State of U.P.,

reported as (2008) 3 SCC 128 while defining promissory estoppel, has

held, as under:-

"40. Those suppliers, who keeping in view their capacity to supply uninterrupted electrical energy had made a representation and pursuant thereto the consumers had altered their position, cannot be permitted to take a different stand as the doctrine of promissory estoppel would apply against them. The said doctrine is premised on the conduct of party making a representation to the other so as to enable him to arrange its affairs in such a manner as if the said representation would be acted upon. It provides for a cause of action. It need not necessarily be a defence.

41. Application of said doctrine has been analysed by this Court in several judgments. We would only refer to some of them. In Southern Petrochemical Industries Co. Ltd. v. Electricity Inspector & ETIO this Court upon noticing a large number of precedents including State of Punjab v. Nestle India Ltd. opined as under: (Southern Petrochemical case, SCC p. 495, para 121) "121. The doctrine of promissory estoppel would undoubtedly be applicable where an entrepreneur alters his position pursuant to or in furtherance of the promise made by a State to grant inter alia exemption from payment of taxes or charges on the basis of the current tariff. Such a policy decision on the part of the State shall not only be expressed by reason of notifications issued under the statutory provisions but also under the executive instructions. The appellants had undoubtedly been enjoying the benefit of (sic exemption from) payment of tax in respect of sale/consumption of electrical energy in relation to the co-generating power plants."

42. In Express Newspapers (P) Ltd. v. Union of India this Court held: (SCC p. 249, para 179) "179. It would appear that Denning, J. evoked two doctrines: ( 1) that assurances intended to be acted upon and in fact acted upon were binding; and (2) that where a government department wrongfully assumes authority to perform some legal act, the citizen is entitled to assume that it has that authority, and he dismissed the contention that estoppels do not bind the Crown by saying that 'that doctrine has

long been exploded' and that the Crown cannot fetter its future executive action. Professor Wade points out that the proposition about wrongful assumption of authority evoked by Denning, J. was immediately repudiated by the House of Lords in a later case in which Denning, L.J. had again put it forward in Howell v. Falmouth Boat Construction Ltd. It is beyond the scope of this judgment [to enter into a discussion as to] how far Denning, J.'s dictum can still be regarded as part of the common law in England. But there appears to be a school of thought in India laying down that the doctrine of promissory estoppel applies to the Government except under certain circumstances."

(emphasis supplied)

21) In the considered opinion of this court, the IMC, once gave its

unequivocal consent to the banks to mortgage the property leased by it to

the Company, and acting upon the said consent, the Banks have also given

the huge amount which is now running into crores of rupees, cannot be

allowed to resile from its consent on the ground that it was not a party to the

mortgage deed executed between the Company in liquidation and the Bank,

and if it is allowed to happen, it would amount to a fraud being played on

the banks by the IMC.

22) It is true that the lease was conditional that it can be determined if the

purpose for which it has been given has come to an end, or that the

Company has gone into liquidation, but, such conditions have been

overridden by the IMC itself while giving its consent to mortgage the land

of the Company to the Banks, for it does not take a legal expert to form an

opinion regarding the purpose of a mortgage. Mortgage as defined under

s.58 of the Transfer of Property Act,1882, the relevant excerpts of the same

read as under:-

"58. 'Mortgage', 'mortgagor', 'mortgagee', 'mortgage-money' and 'mortgage-deed' defined.--(a) A mortgage is the transfer of an interest in specific immovable property for the purpose of securing the payment of money advanced or to be advanced by way of loan,

an existing or future debt, or the performance of an engagement which may give rise to a pecuniary liability.

The transferor is called a mortgagor, the transferee a mortgagee; the principal money and interest of which payment is secured for the time being are called the mortgage-money, and the instrument (if any), by which the transfer is effected is called a mortgage-deed."

(emphasis supplied)

23) Now, a bare reading of the aforesaid definition of Mortgage clearly

reveals that it is purely for securing the payment of money that the interest

of property is transferred to another party, in such circumstances, can it be

said that it was not the intention of the IMC at the time of giving its

consent? The obvious answer is 'No'. In such circumstances, in the

considered opinion of this court, the IMC cannot wriggle out of the

situation it has found itself in as the principle of promissory estoppel as

enshrined u/s.115 of the Evidence Act, 1872 would be applicable in full

force in the facts and circumstances of the case.

24) As a result, on the aforementioned discussion, this court has no

hesitation to hold that the impugned Resolution dated 19.02.2020 passed by

the IMC is liable to be and is hereby quashed. Further, considering the fact

that even the land use has already been changed as directed by this court, it

is expected from the OLR to proceed expeditiously in the matter as has

already been directed by this court vide order dated 29.010.2010 and other

subsequent orders so that the property can be sold and the dues of the

worker and the Banks can be realized. Since, the Recovery officer and the

IMC are also stake holder in the land/property and are interested to see that

the best value of the property is fetched, the OLR is also directed to take

such assistance from the Recovery officer, the IMC and if necessary, the

Indore Development Authority as has been averred by the IMC in their