Mayfair Housing Private Limited v. Nainraj Enterprises Private Limited (Formerly Nayanraj Investments. Pvt. Ltd.

Bombay HC17 Jul 2013CP/341/2011

Case brief

AI extract

What is this about?

The High Court rejected a company liquidation petition filed to wind up a respondent company. The dispute centered on whether the petitioner vacated leased premises in March 2009 or later, allegedly forfeiting a security deposit. The court held that since winding-up is not for debt recovery and facts are bona fide disputed, the petition was dismissed.

What did the court decide?

The company petition and related company application were rejected.

Mayfair Housing Private Limited Vs Nainraj Enterprises… — Company and Corporate | Bombay HC (2013)

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IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION

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COMPANY PETITION NO. 341 OF 2011 WITH COMPANY APPLICATION (LDG.) NO. 87 OF 2012 IN

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COMPANY PETITION NO. 341 OF 2011

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Mayfair Housing Pvt. Ltd. ... Petitioner.

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V/s.

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Nainraj Enterprises Pvt. Ltd. ... Respondent. (formerly Nayanraj Investments Pvt.Ltd.)

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Mr. P.K. Samdani, Senior Advocate a/with Mr. Nishant Sasidhavan, Ms. Jinal Gogri i/by Mr. Nivit Srivastava for the Petitioner.

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Mr. Rahul Narichania a/with Mr. Sumit Raghani, Mr. Hardik Sanghavi i/by PDS & Associates for the Respondent.

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CORAM : N. M. JAMDAR, J. DATE : 17TH JULY, 2013

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P.C. :

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1 By this Petition, the Petitioner seeks winding up of the Respondent : Nainraj Investments Pvt.Ltd..

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2 The Petitioner is in the business of builders, building contractors, property developers and

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real estate agents. The Respondent Company is in the

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business of investments and deals in shares, stocks,

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debentures etc.. The Respondent Company is registered

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under the provisions of the Companies Act, 1956. The authorized share capital of the Respondent is Rs. Fifty lakhs, divided into Five lakhs equity shares of the face value of Rs.10/- each. The paid-up capital of the Respondent Company is Rs. Five lakhs..

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3 Perusal of the Petition indicates the following facts : An agreement was executed on 1^st July, 2006 between the Petitioner and Respondent Company in respect of the office premises bearing Nos. 401, 402 and 403 in Prime Plaza, Santacruz (W) alongwith eight Car Parking spaces. The Respondent Company had granted premises to the Petitioner on leave and license basis for a period of 33 months, commencing from 1^st July, 2006 and ending on 31^st March, 2009. The terms and conditions of the agreement

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were specified. At the time of the execution of the agreement the Petitioner handed over post dated cheques to the Respondent for the entire period of 33 months and also paid a sum of Rs. One Crore Eighty Lacs only as a security deposit. On 8^th December, 2008, the Petitioner informed the Respondent that they were not interested in renewing the terms of the agreement and further on expiry of the term of agreement, the Petitioner would vacate the premises. The Petitioner requested the Respondent to adjust the license fees and maintenance amounts payable for the month of January,

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February and March, 2009 from the security deposit of Rs. One crore eighty lakhs. The Respondent by its letter dated 22^nd December, 2008 refused the request of the Petitioner to adjust the license fees and maintenance from the fixed deposit and stated that the security deposit will be refunded upon vacating the premises by the Petitioner.

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4 By letter dated 24^th March, 2009, the Petitioner informed the Respondent that they have vacated the premises and sought refund of the security deposit. The Petitioner has relied upon a letter dated 30^th March, 2009 of the Respondent Company, wherein the Respondent Company has stated to have received the possession of the premises from the Petitioner to their fullest satisfaction. This letter is vehemently denied by the Respondent.

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5 It is the case of the Petitioner that the Petitioner thereafter was continuously following up for refund of the security deposit and the Petitioner, in a good faith and in view to maintain cordial relations with Mr. Parekh, the Director of the Respondent Company, did not issue any written communication. It is the case of the Petitioner that during this period, the Petitioner was helping out the Respondent in respect of its other properties. It

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is stated that on 12^th November, 2010, the Petitioner wrote to the Respondent Company, calling upon the Respondent to make payment of the security deposit to the Petitioner. This letter was replied by the Respondent on 6^th December, 2010. By letter dated 6^th December, 2010, the Respondent Company stated that the Petitioner did not vacate the premises and have continued in its unauthorized occupation and therefore, the Respondent is entitled for forfeiting the security deposit. The Respondent Company called upon the Petitioner to pay an amount of Rs. Five crore eighty five lakhs as compensation at the rate of Rs. One lakh per day from 1^st April, 2009 i.e. the date of expiry of the license till the date of the letter. The Petitioner issued notice under sections 433 and 434 of the Companies Act on 11^th January, 2011, which was duly received by the Respondent Company. The Respondent Company by its letter dated 16^th February, 2011 replied to the statutory notice and denied its liability to pay. Thereafter, the present Company Petition has been filed by the Petitioner. The Respondent has filed the reply-affidavit and affidavit -in-surrejoinder. The Petitioner has filed a rejoinder.

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6 The case made out by the Petitioner in the Petition and in the rejoinder is that the Petitioner had vacated the premises on 30^th / 31^st March, 2009 and

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had intimated the said fact to the Respondent. In spite of vacating the premises, the Respondent has not returned the security deposit. It is also a case of the Petitioner that by letter dated 30^th March, 2009, the Respondent Company recorded that they have received possession and since the Respondent Company has not returned the security deposit in spite of they bound to do so, a case for winding-up is made out.

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7 Reply-affidavit has been filed on behalf of the Respondent. In the reply-affidavit it is submitted that an attempt has been made by the Petitioner to fabricate the letter dated 30.03.2009 and on this ground alone the Petition be dismissed. It is submitted that the Petitioner did not hand over possession of the premises on 30^th /31^st March, 2009 as alleged but handed over possession of the Units on two dates i.e. 16^th June, 2011 and 11^th July, 2011. It is the case of the Respondent that under the Clause 5(e) of the agreement since the Petitioner continued in unauthorized use, the Respondent is entitled to forfeit the security deposit and is also entitled to receive compensation at the rate of Rs. One lakh for each day of unauthorized use.

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8 Thus broadly the dispute between the parties centers around the date on which the Petitioner

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handed over possession to the Respondent Company. According to the Petitioner it is on 31^st March, 2009 and according to the Respondent it is on 16^th June/ 11^th July, 2011. Under the terms of the agreement, if the Petitioner continued beyond the expiry of license period unauthorizedly when the Respondent was willing to refund the security deposit, then the Petitioner was liable to pay a penalty of Rs. One lakh per day. If that be so, the Respondent was entitled to as per the terms of the agreement to forfeit the security deposit and claim penalty. This question will have to be determined on the basis of the material that is placed on record by the parties. It is to be kept in mind that the winding-up proceedings are not a suit for recovery of money where evidence can be led and intricate questions of facts can be ascertained. If the Respondent Company is not in a position to show that its defence is plausible then an order of winding-up will not be issued.

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9 Before the rival contentions are dealt

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with it will be convenient to reproduce the relevant clause of the agreement between the parties. Clause 5(e) and (f) of the agreement reads as under :

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“5(e) Upon the expiry or termination of this License Agreement on any ground or for any reason in the event of the Licensee hand over vacant possession of the aforesaid premises upon the expiry

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or earlier revocation of the said leave and license agreement in accordance with the terms of this Agreement subject to the Licensors having conveyed in writing to the Licensee their desire and willingness to refund the said deposit in accordance with clause 1 above, the Licensors shall be entitled to forfeit the said security deposit and in addition to the license fees, to receive and recover from the Licensee compensation at the rate of Rs.1,00,000/- (Rupees One lakh only) for each day of unauthorized use and occupation of the licensed premises as and by way of liquidated damages.

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(f) In the event the Licensors do not refund the said deposit simultaneously upon the Licensee willing to handover the licensed premises to the Licensors, as aforesaid, then the consequences mentioned in para nos. i) and ii) hereunder shall follow :

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i) The Licensee shall (without prejudice to its rights and remedies in law), not be obliged or bound to vacate and give charge of the licensed premises to the Licensor and the Licensee shall be entitled to use the licensed premises without being liable to pay any license fees, outgoings to the Licensors until such time as the Licensors do not refund to the Licensee the said deposit, subject to any deductions as provided in this Agreement; and

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ii) In addition, the Licensors shall be liable to pay to the Licensee interest @ 12% p.a., on the said deposit from the date of termination or expiry of the said License Agreement till the date of refund of the said deposit by the Licensors to the Licensee.”

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Nothing contained herein shall .....”

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10 Both the learned counsels agree that there is error in this Clause in as much as in the sentence

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after “expiry or termination of this License Agreement on any ground or for any reason in the event of the Licensee hand over vacant possession, the word “not” is missing between the words “Licensee” and “hand over”. So according to the learned counsel the sentence should read “in the event of the Licensee not handing over vacant possession”.

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11 The scheme of the Clause 5(e) and (f) indicates that after the expiry of license

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agreement, if the licensee does not hand over vacant possession and the licensor informed its willingness to refund its deposit, then the licensors will be entitled to forfeit the deposit and in addition to the licensee fees, receive and recover the license compensation at the rate of Rs. One lakh per day of its unauthorized use. In the event, the licensor does not refund the security deposit simultaneously upon the licensee willing to hand over possession then the licensee shall be entitled to use the premises without being liable to pay any license fees.

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12 Thus two important facets emerge, firstly, whether the licensor offered to refund the security deposit and whether the licensee actually handed over possession and when. Both the counsel have advanced arguments at length on these two aspects.

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13 One document, if found unquestionable, would considerably strengthen the case of the Petitioner. That is the document / letter dated 30^th March, 2009. The Petitioner has annexed this letter to the Petition which reads that the Respondent Company had acknowledged the fact that the Respondent has taken a peaceful and vacant possession of the premises to their fullest satisfaction on 30^th March, 2009. If this document is held to be unquestionable then it would indicate that the Petitioner surrendered the possession on 30^th March, 2009. This letter is being seriously challenged by the Respondent Company. The learned counsel for the Respondent submitted that the Petitioner has fabricated this letter and by annexing the fabricated letter, the Petitioner has committed fraud on the court and such a Petition does not deserve to be entertained. There is serious acrimony between the parties as regards the inspection of this document.

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14 The original letter dated 30^th March, 2009 is produced on record. On the face of it, this letter is different than the other letters issued by the Respondent Company. The letter-head, quality of paper and even signatures do not match with the other letters. The learned counsel for the Petitioner has accepted the position that this letter is different

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than the other letters issued by the Respondent. The explanation given by the Petitioner in their reply and during the course of argument that the said letter was given to the Petitioner by the Managing Director of the Respondent Company and it is perhaps the Respondent themselves deliberately gave a different letter so that they can take a stand later that the letter is fabricated. The learned counsel for the Respondent contended that it has been a stand of the Respondent through-out that the possession of the premises was not given on time and there was no reason for the Respondent Company to issue such letter. Be that as it may, one thing is certain that this document i.e. the letter dated 30^th March, 2009 cannot be called as an unquestionable one. If that be so then the determination of the above mentioned two facets lie in the realm of assessment of evidence. The court then will have to consider respective merits of the documentary evidence adduced by the parties and their conduct.

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15 The Petitioner by letter dated 8^th December, 2008 had shown its intention to discontinue with the possession of the premises and had requested the Respondent to adjust the amount of monthly license compensation and maintenance charges. The Petitioner had stated that they handed over possession upon

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termination of the license which date was 31^st March, 2009. By letter dated 22^nd December, 2008, the Respondent company stated that the leave and licence agreement would end on 31^st March, 2009 and they will return the security deposit upon the Petitioner restoring the premises in the original condition in which it was handed over. Thus both the Petitioner and Respondent were contemplating the contingencies that would arise upon termination of the agreement. The offer made by the Respondent for return of the security deposit was to take effect when the licence was to be terminated on 31^st March, 2009 and/or return of the possession of the premises. Thus as per the clause 5(e) of the agreement, the Respondent did make an offer for return of the security deposit. If that be so, the Petitioner was under an obligation to vacate the premises upon termination of licence. If the Petitioner did not vacate the premises then as per clause 5(e), the Respondent was entitled to charge a penalty at Rs. One lakh per day in view of this letter and the stand referred to and reiterated in subsequent correspondence. The learned counsel for the Petitioner sought to argue that the offer of return of security deposit should have been made upon termination of licence then only the clause of penalty would apply. In a winding-up Petition, it has to be considered - whether the defence of the Respondent Company is

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probable or it is a mere moonshine. The argument that the letter dated 22^nd December, 2008 was an offer to come into effect after expiry of the agreement is a possible argument to be made. Thus if it is reasonably demonstrated by the Respondent that the Petitioner did not vacate on 30^th /31^st March, 2009 but subsequently and that the Respondent Company was entitled to forfeit the security deposit and levy penalty, then the defence cannot be considered as a mere moonshine.

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16 The next point, therefore, is whether the defence of the Respondent that the Petitioner vacated the premises not in March, 2009 but on June/July, 2011 is a possible defence. The learned counsel for the Petitioner submitted that the documents which are on record clearly show that the possession of the premises was given in March, 2009. The learned counsel submitted that by letter dated 8^th December, 2008, the Petitioner had shown its willingness to hand over vacant and peaceful possession on expiry of the licence period. The learned counsel submitted that thereafter, by letter dated 24^th March, 2009, it was stated that the Petitioner vacated the premises and this letter was duly received by the Respondent. The learned counsel submitted that thereafter, the letter issued on 14^th June, 2010 by the Respondent was

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orally withdrawn. However, the Petitioner by letter dated 12^th November, 2010 places on record that the possession of the premises was already given. The learned counsel submitted that the possession was surrendered in a good faith, relying on the words of the Managing Director of the Respondent Company and in fact from 31^st March, 2009 till 12^th November, 2010, the Petitioner was helping out the Respondent in finding clients for the premises and it was only when the Petitioner became convinced that the security deposit is not being returned, it wrote a letter on 12^th November, 2010. The learned counsel submitted that the Petitioner has placed on record the electricity bills and telephone bills which show that there has been no use of the premises since March, 2009. The learned counsel has also relied on the assessment records of the Mumbai Municipal Corporation, which shows that the possession was handed over on 30^th March, 2009 and thereafter, the basis of levy of taxes has changed. The learned counsel submitted that all these documents clearly go to show that the premises were handed over in March, 2009.

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17 The learned counsel for the Respondent, on the other hand, contended that the Respondent has never accepted the position that the Petitioner has vacated the premises in March, 2009. The learned

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counsel submitted that the possession of the premises was in fact given on 16^th June /11^th July, 2011. The learned counsel submitted that if the Petitioner had vacated the premises in March, 2009 then it is unbelievable that first time the Petitioner will seek return of security deposit in November, 2010 that too in response to the letter dated 14^th June, 2010. The learned counsel submitted that the record of electricity may show less consumption but that does not mean that the possession of the premises was actually handed over to the Respondent. The learned counsel submitted that the assessment record of the Municipal Corporation is based on the information given by the Petitioner and the Petitioner may give any information, which is not binding on the Respondent. The learned counsel submitted that the letters issued by the Petitioner show the position as if the possession is already given even before 30^th March, 2009 and as such documents of the Petitioner are not believable.

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18 The Petitioner in the Petition has stated that the possession of the premises was given to the Respondent on the assurance made by the representative of the Respondent Company that the security deposit would be refunded to the Petitioner shortly. After the possession was given and security deposit was not

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refunded, the Petitioner has written to the Respondent to return the security deposit after a period of one and half years. The explanation for this conduct of the Petitioner is hardly satisfactory. The amount of Rs. One crore eighty lakhs is not a small amount and there would be some documentation at the time of handing over possession or at least a draft or cheque would be obtained. It is not believable that the Petitioner would not write a single letter, seeking return of the security deposit though it is sought to be placed on record that the Petitioner was helping out the Respondent. Being such a large amount at stake there would be some letter on record. The learned counsel for the Respondent is right in contending that if the case of the Petitioner is to be believed then the Petitioner was in a worst condition of having lost the possession as well as the security deposit and if would have certainly made written correspondence. By letter dated 22^nd December, 2008, the Respondent had specifically written to the Petitioner that it were ready to return the security deposit. The Petitioner by letter dated 12^th November stated that it has already vacated the premises and sought return of the security deposit.

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19 Thus the conduct of both the parties will have to be considered as a normal business persons. The Petitioner had lost the possession of the premises and was not returned the security deposit. On the other hand, the Respondent had the security deposit and was in a better position. In these circumstances, it is unbelievable that the Petitioner will not make any attempt to write even a single letter, calling upon the Respondent to return the security deposit. As stated above, once the letter dated 30^th March, 2009 is doubtful, then the matter is in the realm of evidence. The electricity bills and telephone bills may show less consumption but, at the most, it would be that the Petitioner reduced the business from the premises. That however, does not conclusively show that the possession of the premises was given to the Respondent. The learned counsel for the Respondent is right in contending that the assessment record of the Municipal Corporation, based on unilateral information given by the Petitioner, cannot be held against the Respondent.

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20 The burden on the Petitioner to prove that the possession of the premises was given on 30^th /31^st March, 2009 and the burden on the Respondent to show that the possession of the premises was given in June/July 2011 are different. The Petitioner will

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have to unquestionably show that the possession of the premises was given in March, 2009 and or since the Respondent did not return the security deposit the Petitioner was entitled to continue in possession. The Respondent on the other hand will have to show that the possession of the premises was given in June/July 2011 is a possible defence.

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21 The discussion on the documents and conduct of the parties narrated above indicates that there is a doubt as to when exactly the possession of the premises was given. The conduct of the Petitioner coupled with the letters exchanged between the parties does show that the defence of the Respondent that the possession was given in June/July, 2011 cannot be stated to be bogus or moonshine. The matter will thus require a trial and the appropriate remedy is of a suit. The Petitioner has already filed a summary suit and thus all the contentious issues which are sought to be raised in this Petition can be raised by the Petitioner in the summary suit.

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22 Thus to sum up, the letters issued by the Respondent dated 22^nd December, 2008 and thereafter show that the Respondent had offered to return the security deposit upon expiry of the agreement. The defence of the Respondent that since the Petitioner

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did not vacate the premises, the Respondent is entitled to forfeit the security deposit and levy penalty, cannot be considered as moonshine. This issue will require evidence. It is a settled law that winding up proceedings are not akin to a civil trial and the court will not delve in complicated questions of facts. The Apex Court in the case of IBA Health (India) Ltd. vs. Info-Drive Systems, (2010) 10 SCC 553, has laid down that even for admission of the Petition, which has serious consequences, the court must be on guard in not letting winding up proceedings to be a tool for recovery of debts which are bonafide disputed.

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23 In the circumstances, taking over all view of the matter, I do not find that a case for admission of the Petition is made out. It will be open to the Petitioner to agitate its claim in the summary suit, which is already filed.

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24 In the result, the Petition is rejected. 25 In view of the rejection of the Petition itself, nothing survives in the Company Application No. (Ldg.) No. 87 of 2012 and the same is accordingly rejected.

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Mayfair Housing Private Limited v. Nainraj Enterprises Private Limited (Formerly Nayanraj Investments. Pvt. Ltd.

Case brief

What is this about?

What did the court decide?

Mayfair Housing Private Limited v. Nainraj Enterprises Private Limited (Formerly Nayanraj Investments. Pvt. Ltd.

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Cases cited

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