Companies Act, 1956 – s. 535 – Sick Industrial Companies (Special Provisions Act) 1985 – s. 20 – Second respondent, a company was allotted Industrial premises by the State on lease – The company secured advances from IDBI through equitable mortgages of the leasehold property – Then the company went into liquidation – Pursuant thereto, the High Court appointed a official liquidator – IDBI, through a deed of assignment, unconditionally transferred all loans and advances granted by it, to Stressed Assets Stabilization Fund (SASF), including the loans and securities in relation to the second respondent, the company in liquidation – On the other hand, the premises and properties in question were assigned to the first respondent-WBSIDC by the State – WBSIDC sought possession of the properties and filed application for the same before the High Court – Single Judge of the High Court held that WBSIDC was entitled to possession in view of the lease conditions, which automatically applied, because the original lessee (second respondent) had ceased to use the properties for the purpose originally contemplated i.e. manufacturing activity – Since the conditions of lease had not been complied with, as far as cessation of industrial or manufacturing activity went, the leasehold rights were terminated and as a result, properties were held to be excluded from the winding up process – Appeal preferred by SASF was rejected by the Division Bench of the High Court – On appeal, held: The observations made in Phatu Rochiram Mulchandani v. Karnataka Industrial Areas Development Board (2015) 5 SCC 244:[2014] 3 SCR 710 apply to the facts of this case – The WBSIDC acted within the bounds of law – The finding that since the exercise by the lessor (WBSIDC) of its right to determine the lease attained finality, the mortgagee (represented by the appellant) could not claim rights superior to that of the lessee, is in consonance with settled law – The reasoning and conclusion of the High Court requires no interference.
Dismissing the appeal, the Court
HELD: 1. This court is of the opinion that the reasoning and conclusion of the High Court do not call for interference. The finding that since the exercise by the lessor (WBSIDC) of its right to determine the lease attained finality, the mortgagee (represented by the appellant) could not claim rights superior to that of the lessee, is in consonance with settled law. [Para 10][1087-F-G]
2. There can be no dispute, nor was it contended that a donee or a grantee (as the status of the lessee company in liquidation as in this case) can have no rights in excess of that possessed by the donor or the grantor. The mortgagee (whose shoes SASF has stepped into) of the lessee (second respondent) can have no right greater or better than that of the lessee in terms of the deed of lease. The observations in Phatu Rochiram Mulchandani apply to the facts of this case. [Para 11][1090-H; 1091-A-B]
Phatu Rochiram Mulchandani v. Karnataka Industrial Areas Development Board (2015) 5 SCC 244 : [2014]
3 SCR 710 – relied on.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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