Maharaja Kishangarh Mills Vs Official Liquidator and Another

by the applicant for taking on record the Memorandum and Articles of Association, which is not opposed by the learned counsels for the non-applicants/respondents, the same is allowed. The Memorandum and Articles of Association appended with the application is taken on record.

¶49

Since, all these four company applications share similar facts and common questions of law, they have been heard together and are being disposed of vide this common order.

¶50

For the sake of convenience and ready reference, facts are being referred from the company application no.40/2013:The

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Maharaja Kishangarh Somyag, Mills Co. (Trans.) Ltd. vs. Official Liquidator and Another. It is stated therein that a lease agreement dated 22.01.1943 was executed in between the applicant (for brevity, ‘old company’) and The Maharaja Kishangarh Mills Co. Ltd. (for brevity, ‘new company’) whereby, the old company had leased its plant, machinery, land and building to the new company. A winding up petition no.3/56 came to be filed against the new company which was allowed vide order dated 11.04.1958. The old company filed its five claims on 11.06.1958 before the Official Liquidator (for brevity, ‘OL’). While, the claims no.4 and 5 were accepted, the claims no.1, 2 and 3 were rejected involving the subject properties. Rejection of the claims was assailed by the old company by way of the Civil Miscellaneous Company Appeal No.4/1960 which came to be decided in its favour by the Company Court vide its order dated 04.07.1960. As per the order, possession of the properties was to be handed over to the old company. The D.B. Special Civil Appeal preferred thereagainst came to be dismissed by a Division Bench of this Court vide order dated 16.01.1964. However, a liberty was granted to the OL to file his claim before the Company Court qua the construction raised by the lessee company on the subject property. The old company filed an execution application whereupon, the Company Court, vide its order dated 21.12.1979, observed that the OL was required to carry out direction of the Company Court in the order dated 04.07.1960 in letter and spirit. Thereafter, although, possession of vacant land was handed over by the OL to the old company; but, the constructed portion was not handed over

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whereupon, the Company Court, vide its order dated 15.10.1982, issued a direction to handover possession of the properties with construction thereon alongwith the amount of rent collected during the intervening period to the old company recording a finding that no material could be produced by the OL to show that the construction was made by the new company. Vide order dated 03.11.1995, a Division Bench of this Court dismissed the D.B. Special Appeal Civil No.7/1983 filed by the OL against the order dated 15.10.1982. The Special Leave Petition filed by the OL against the order dated 03.11.1995 was dismissed by the Hon’ble Supreme Court of India vide its judgment dated 23.02.1996. Still, possession of the subject property could not be handed over to the old company whereupon, the Company Court, vide its order dated 25.11.2010 passed in S.B. Company Application No.54/2005 filed by the Official Liquidator, directed payment of rent to the old company and to withdraw Security Guards. Thereafter, the Company Court, vide its order dated 28.07.2011 passed in S.B. Company Application No.24/2011 filed by the old company under Section 446 of the Companies Act, 1956 (for brevity, ‘Act of 1956’) permitted it to take appropriate action against the alleged trespassers and tenants as permissible under the law and the Official Liquidator was directed to cooperate in the matter. Whereupon, the old company filed certain company applications under Sections 446 and 447 of the Act of 1956 including the instant company applications seeking physical and vacant possession of the subject properties from the trespassers/tenants pursuant to various orders passed by the Company Court which

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came to be rejected by the Company Court vide order dated 01.09.2017 and 11.09.2017 respectively. The orders were assailed by the old company by way of various special appeals (civil) most of which came to be allowed by the Division Bench of this Court vide judgment dated 24.07.2018. However, while granting the prayer made in the applications filed by the old company in all the cases other than the contested cases, i.e., Special Appeal Civil No.33/2017, 34/2017 and 36/2017, these matters were remanded back to the Company Court for decision afresh in view of objections raised by the non-applicants therein. The D.B. Special Appeal (Civil) No.40/2017 preferred against dismissal of the company application no.57/2013 came to be decided by the Division Bench vide its judgment dated 21.05.2019 in terms of order dated 01.09.2017. Resultantly, all these four applications are before this Court.

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Learned Senior Counsel for the applicant-old company Shri Anil Mehta, would submit that a Division Bench of this Court has already held that the applications filed by it under Section 446 of the Act of 1956 are maintainable, the company Court has jurisdiction under Section 446 to order for eviction of tenant and bar under Section 18 of the Rajasthan Rent Control Act, 2001 does not come in way as also that symbolic possession of the property does not tantamount to physical possession and these findings have attained finality. Inviting attention of this Court towards the observations made by the Division Bench in its judgement dated 24.07.2018, Shri Mehta submits that the matter was remanded back to the Company Court to appreciate the objection raised by

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the non-applicants qua Section 291 of the Act of 1956 or any objection(s) other than those decided by this Court. Referring to and relying upon the provisions of the Memorandum and Articles of Association of the applicant-company, he would submit that since director(s) of the company is also authorized to sue on its behalf, there was no requirement of having any resolution by the Board of Directors to authorize one of the directors of the company to move the instant application(s). Learned Senior Counsel submits that even otherwise, the Company Court has, in the instant matter, vide its order dated 28.07. 2011 permitted the old company to take appropriate action against the alleged trespassers which has attained finality. He submits that in view thereof also, the objection raised by the non-applicant no.2/trespasser qua Section 291 of the Act of 1956 is not tenable. Learned Senior Counsel submits that from the facts on record, it is apparent that the private non-applicants are trespasser over the subject properties with no right to retain the possession and therefore, appropriate direction be issued for their dispossession.

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Learned counsel for the Official Liquidator, supporting the submissions made by the learned Senior Counsel for the applicants, prayed that appropriate directions be issued for dispossession of the trespassers from the subject property.

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Per contra, learned counsel for the trespassers/nonapplicants submitted that in absence of a resolution by the Board of Directors authorizing one of the directors of the old company to file the instant applications, the same are not maintainable in view of the provisions of Section 291 of the Act of 1956. He further

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submits that they are in possession of the subject properties since the time of their ancestors and cannot be dispossessed. He, therefore, prayed for dismissal of the company applications.

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Heard. Considered.

¶75

A perusal of the judgement dated 24.07.2018 passed by a Division Bench of this Court in the special appeals preferred against the order dated 01.09.2017 passed by the Company Judge dismissing the instant applications filed by the old company under Section 446 of the Act of 1956 reveals that the old company has been held to be entitled to get possession of its immovable properties in accordance with law and it is not in dispute that the subject properties belong to it. The question remains about the right of non-applicants to retain the possession and their objection, on the strength of the provisions of Section 291, qua maintainability of the applications filed by one of the directors of the old company.

¶76

Insofar as objection qua Section 291 is concerned, admittedly, there is no resolution of the Board of Directors. However, indisputably, as per Clause 111(7) of the Memorandum and Articles of Association of the old company, its director(s) is authorized to sue or defend the company in any litigation. In the case of M/s. Nibro Limited Vs. National Insurance Co. Ltd.; AIR 1991 Delhi 25 , involving identical issue, it was held as under:-

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“25. It is well-settled that under Section 291 of the Companies Act except where express provision is

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made that the powers of a company in respect of a particular matter are to be exercised by the company in general meeting in all other cases the Board of Directors are entitled to exercise all its powers. Individual directors have such powers only as are vested in them by the Memorandum and Articles. It is true that ordinarily the court will not unsuit a person on account of technicalities. However, the question of authority to institute a suit on behalf of a company is not a technical matter. It has farreaching effects. It often affects policy and finances of the company. Thus, unless a power to institute a suit if specifically conferred on a particular director, he has no authority to institute a suit on behalf of the company. Needless to say that such a power can be conferred by the Board of Directors only by passing a resolution in that regard.”

¶82

The aforesaid view was reiterated by the Hon’ble High Court of Himachal Pradesh in the case of Apple Valley Resort Vs. H.P. State Electricity Board and Others: MANU/HP/0014/2003 .

¶83

In the case of Menon Ventures Vs. Birla 3M Ltd.; (2005) 127 Company Cases 878 , the Hon’ble Karnataka High Court, while dismissing the appeal and repelling the objection as to competence of the Managing Director of a company to file a complaint under Section 138 of the Negotiable Instruments Act, 1881, on the premise that there was no resolution by the Board of Directors as envisaged under Section 291 of the Act of 1956, held that since, he was authorized to file a complaint/suit under the Memorandum of Association and Articles of Association, the complaint was competent.

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In the backdrop of aforesaid precedential law, this Court has no hesitation in holding that in view of the authorization of any director of the company to institute a suit/litigation under the Memorandum and Articles of Association, the applications are competent even in absence of a Resolution as envisaged under Section 291. Even otherwise, this Court has, vide order dated 28.07.2011, permitted the old company to prosecute the applications filed under Section 446 of the Act of 1956 filed by one of the directors against the alleged trespassers/tenants which has never been challenged till date by any of the parties to the litigation. In view thereof, the objection raised by the nonapplicants as to maintainability of the instant applications qua the competence of the Director who has filed the same, cannot be countenanced.

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Insofar as second limb of objection by the non-applicants is concerned, except making a bald averment in their reply that they are holding the subject properties in their right, neither it is specified under what right they are holding the subject properties nor, any evidence has been placed on record to substantiate the same. For example, in the reply filed by the non-applicant no.2 in the company application no.40/2013, it is stated that the property in dispute was rented out by the earlier owners of the company to Shri Bhagwan Das with a right to sub-lease long before the execution of the agreement dated 22.01.1943 and the predecessors of the answering respondent were in possession of the said premises before the commencement of the winding-up process with the permission of the old directors. However, no

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evidence in support of the aforesaid submissions has been submitted. Further, the reply filed by the Official Liquidator also does not support the aforesaid averments. As per the order-sheet dated 13.12.2024, learned counsel for the persons in illegal encroachment over the subject properties prayed for and was granted two weeks’ time to complete his instructions with regard to reasonable time they wanted to remove it. In view of the aforesaid discussion, it is apparent that the subject properties are under illegal encroachment of the non-applicants over which they have no right to continue with the possession.

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Resultantly, all these company applications are allowed. Illegal encroachment of the non-applicants/encroachers from the subject property is directed to be removed forthwith. The Official Liquidator is directed to ensure dispossession of the encroachers from the subject properties and handover its possession to the applicant-old company within a period of two months from today. He may seek necessary assistance from the local administration/police to carryout the directions. The District Magistrate as also the Superintendent of Police, Ajmer are directed to render all the necessary assistance in accordance with law, if approached.

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(MAHENDAR KUMAR GOYAL),J

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DIKSHA /109-112

Maharaja Kishangarh Mills v. Official Liquidator and Another

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Maharaja Kishangarh Mills v. Official Liquidator and Another

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