Jawahar Cooperative Industrial Estate Ltd. Vs Official Liquidator, High Court, Bombay

@JUDGMENTTAG-ORDER

G.H. Guttal, J.@mdashThe short question in this Judge''s Summons is whether the Company which has been ordered to be wound up ceases to hold any interest in the immovable property owned by it as a member of a Co-operative Society, registered under the Maharashtra Co-operative Societies Act, 1960.

2. The Applicant, a Co-operative Society, seeks an order that the Plots Nos. 84 and 85 together with the building standing thereon held by the Company as a member of the Society, be returned to them alongwith the structures. The Vibro Chemi Machinery Pvt. Ltd., hereinafter referred to as the Company, was ordered to be wound up by an order of this Court dated 3rd June, 1985. The Applicants claim that the Company is indebted to them to the extent of Rs. 2,29,708.03 in respect of the outgoings, such as taxes. The Society has lodged its claim for this amount with the Official Liquidator on 5th February, 1986.

3. Two points are urged by the Applicants :-

(i) The bye-laws of the Society - Bye-law No. 6 is in Marathi. A free translation into English is set out in paragraph 4 of this judgment - provide that any individual who applies to have himself adjudicated insolvent or is as undischarged insolvent shall not be eligible to be a member. According to the Applicants, the Company is in such circumstances and therefore, it ceases to be a member.

(ii) The second submission introduced in the Affidavit in Rejoinder is this. The Company having gone into liquidation, its business has come to a standstill. The Official Liquidator does not propose to carry on the business of the Company on the plots in question for the beneficial winding-up of the Company. Therefore, on the authority of Ravindra Ishwardas Sethna and Another Vs. Official Liquidator, High Court, Bombay and Another, , and Kamani Tubes Ltd vs. Official Liquidator of Kamani Brothers Pvt. Ltd fin liquidation), 1984 Mh.L.J. 618 = 86 BLR 92, the Official Liquidator cannot be permitted to continue to occupy the plots and the structures standing thereon.

4. The submission that the Company is a "person" to whom bye-law No. 6 applies stems from a misreading of the bye-law which is in Marathi. The bye-law, when translated freely into English, would read thus :

If any individual applies for having adjudged himself an insolvent or is an undischarged insolvent or has been convicted for an offence not being a political offence or crime involving moral turpitude....such individual shall not be fit for admission to membership of the Society, provided that if a period of five years has elapsed after the completion of the period of such sentence for the crime mentioned above, this disqualification shall not apply.

I have translated the Marathi word" " equivalent to the English word "individual".

5. The bye-law No. 6 has no application to a legal person such as a Corporation. The draftsmen of the bye-laws have used the Marathi word "isamane" which necessarily means "by an individual". The bye-law contemplates that the insolvent referred to therein is a natural person and not a legal person like Corporation. This would be clear from another feature of the bye-laws. Bye-law No. 5 sets out persons eligible for membership. They are : "individual", "private companies", "partnership firm", "co-operative societies" and "the State Government". "Individual" is specified in contradistinction to "Company". Therefore, the bye-law No. 6 which refers to persons as "Isam" is clearly intended to apply to individual human persons and not legal persons.

6. The second point urged by Counsel may now be considered. The powers of the Liquidator u/s 457 of the Companies Act are not limited to carrying on the business of the Company. Clause (c) of sub-section (1) of Section 457 empowers the Liquidator to sell the immovable and movable property of the Company. While considering the two decisions Ravindra Ishwardas Sethna and Another Vs. Official Liquidator, High Court, Bombay and Another, , Kamani Tubes Ltd vs. Official Liquidator and Liquidators of Kamani Brothers Pvt Ltd fin liquidation), 1984 Mh.LJ. 618 - 86 BLR 92 relied upon by the Petitioners, this power of the Official Liquidator to sell the property for the purpose of winding-up will have to be borne in mind. The second fact which should be borne in mind is that the applicant is a Cooperative Society, the business of which is, inter alia, to acquire and own the industrial estates. As a member of the Society, the Company, and therefore, the Official Liquidator has power of disposal over Plots Nos. 84 and 85. There is no absolute prohibition against the transfer of the right to occupation of such property or to transfer the shares provided, the transferee is willing to become member of such Ramesh Himmatlal Shah Vs. Harsukh Jadhavji Joshi, . The member of such Society has interest in the property which he could dispose of without the consent of the Society.''

Consider the two decisions against the background of these facts. In Ravindra Ishwardas Sethna and Another Vs. Official Liquidator, High Court, Bombay and Another, , the Company had its office in the premises held on lease. Therefore, there was no question of the Company having a saleable interest in the property which could fetch a price. Having regard to the Bombay Rent Act, the Company who was a tenant had no transferable interest. The business of the Company was of floating prize chits schemes. The Official Liquidator entered into a caretaker''s agreement with an outsider and handed over possession of the premises to him. The Supreme Court held that since the Official Liquidator was not carrying on business of the Company, he could not, u/s 457 of the Companies Act, enter into such an agreement with an outsider. The judgment has no application for two reasons. Firstly, under clause (c) of sub-section (1) of Section 457 of the Companies Act, the Official Liquidator is entitled to dispose of the property provided, the Company has saleable interest in it. In the present case, unlike the Company concerned in Ravindra Ishwardas Sethna, the Respondent Company as a member of the Society, has saleable interest which the Official Liquidator can sell Ramesh Himmatlal Shah Vs. Harsukh Jadhavji Joshi, .

7. In Kamani Tabes Ltd. vs. The Official Liquidator and Liquidator of Kamani Brothers Pvt. Ltd fin liquidation), 1984 Mh.L.J. 618 = 86 BLR 92 , also, the premises in respect of which the Official Liquidator entered into caretaker''s agreement were held by the Company on lease to which Bombay Rent Act applied. Therefore, the Court held that such a caretaker''s agreement was unfair and impermissible. Since the leased premises were not necessary to the Official Liquidator for the purpose of winding-up, the landlord was entitled to the possession thereof. Here again, the nature of the property which distinguishes the present case, must be borne in mind. The Company is not a lessee of the Applicants. The Company is a member of the Society and having regard to the decision of the Supreme Court in Ramesh Himmatlal Shah Vs. Harsukh Jadhavji Joshi, , the Company can dispose of the property for a price. This distinction in the nature of- the interest of the Company, in the present case, is of a fundamental nature. Therefore, the two Ravindra Ishwardas Sethna and Another Vs. Official Liquidator, High Court, Bombay and Another, ; Kamani Tubes Ltd vs. Official Liquidator and Liquidator of Kamani Brothers Pvt. Ltd fin liquidation) 1984 Mh.L.J. 618 = 86 BLR 92, decisions relied upon by the applicants'' Counsel have no application.

8. The Company as member of the Applicant Society has interest in the two plots and the structures. The Official Liquidator is u/s 457(1)(c) of the Act empowered to sell the plot with the Court''s permission. Therefore, he is not liable to deliver possession of the plots and the structures to the Applicants.

9. In the result, the Judge''s Summons is discharged and the Company Application is dismissed with costs.