In the recent judgment by the Delhi High Court, the case of IIPL vs. Official Liquidator revolves around the disclaimer of onerous property. The petitioner, IIPL, sought possession and disclaimed the sub-demised office space in light of the Companies Act. Various legal arguments were presented, including the application of Section 535 of the Companies Act, 1956. Stay tuned for further insights on this significant legal matter.
Facts
- Applicant is entitled to take over possession of the sub-demised office space and parking spaces due to termination of sub-lease agreement with the company (in liquidation).
- Company failed to deliver vacant possession despite multiple demands and acceptance of outstanding dues.
- Applicant filed for arbitration under the Arbitration and Conciliation Act, 1996, and the matter was referred to arbitration by the Calcutta High Court.
- Official Liquidator took possession of the office space and sealed it after the sub-lease termination.
- Applicant and company did not use the office space since October 2011.
- Several legal actions were taken by various parties regarding the possession and outstanding dues of the office space.
- PNB restrained the company from alienating the office space due to outstanding dues.
- Applicant sought legal remedies for possession and payment of dues through winding up petitions and other legal proceedings.
- Arbitration proceedings could not proceed due to various court orders.
- Company did not pay monthly rents and charges leading to termination of sub-lease.
- Applicant filed applications under Companies Act for disclaiming the office space and seeking possession along with outstanding payments.
Arguments
- OL Report No 279/2017 indicated funds of company in liquidation at Rs. 75,000 as of 31.10.2017, with no assets in sub-demised office space.
- Sub-tenancy of premises deemed onerous and burdensome for Official Liquidator due to lack of company assets.
- Counsel for applicant cites Section 535 of Companies Act, 1956, claiming sub-demised office space as ‘onerous property’ to be disclaimed.
- References made to legal precedents supporting disclaimer of onerous properties.
- Counter affidavit by PNB argues against maintainability of applications, citing prior mortgage of premises by company in liquidation for credit facilities.
- PNB secured first pari-passu charge on premises through mortgage due to non-repayment and NPA declaration of company.
- Substantial amount of Rs. 11,98,95,740 due to PNB for principal and interest.
- PNB asserts that other legal actions like attachment under Income Tax or SARFAESI Act do not affect sub-lessor rights of applicant for sub-demised office space.
Analysis
- Section 535 of the Companies Act, 1956 allows for disclaimer of onerous property in case of a company being wound up.
- The applicant-IIPL exercised its option to terminate the sub-lease due to non-payment of rent by the company (in liquidation).
- The registered indenture of sub-lease outlined various financial obligations and charges to be paid by the company (in liquidation).
- The sub-lease agreement permitted the company (in liquidation) to mortgage the sub-leased property with a bank or financial institution, subject to fulfilling all obligations.
- The termination of the sub-lease by the applicant-IIPL led to the cessation of rights of the company (in liquidation) and subsequently the objector-PNB as the secured creditor.
- The legal maxim of ‘nemo dat qui non habet’ (no one gives what he has not got) applies, indicating that no better rights can be passed on than what the sub-lessee originally had.
- The case draws parallels to a similar situation considered by the Supreme Court, where the lease was terminated due to non-compliance with stipulations.
Decision
- Applicant-IIPL granted leave to Official Liquidator to disclaim sub-demised office space of 16523 sq. feet
- Official Liquidator directed to handover possession to IIPL within 45 days
- Official Liquidator to make inventory of furniture, fixtures, fittings and sell or remove them from premises within four weeks
- Decision on payment of Rs. 99,34,879/- left to Official Liquidator to decide based on surplus assets
- IIPL to pay security and incidental charges to Official Liquidator
- CO.APPL 517/2018 to be allowed
Case Title: HARMUNY ENTERTAINMENT PVT LTD Vs. MAHUAA MEDIA PVT LTD (2024:DHC:4335)
Case Number: CO.PET.-213/2012
