Over 2 lakh Indian cases. Search powered by Google!

Case Details


High Court of Judicature at Allahabad

Case Law Search

Indian Supreme Court Cases / Judgements / Legislation


In The Matter Of M/S Rajinder Steels Ltd. - COMPANY PETITION No. 44 of 1998 [2006] RD-AH 20907 (12 December 2006)


This is an UNCERTIFIED copy for information/reference. For authentic copy please refer to certified copy only. In case of any mistake, please bring it to the notice of Joint Registrar(Copying).


Court No. 30


In the matter of

M/s Rajinder Steels Ltd (In Liquidation)        

Order on application No. 39967 of 2006 filed by State of Chatisgarh and Chhatisgarh State Industrial Development Corporation Ltd. Raipur in the matter of disclaimer of 61.278 acres of lease hold vacant land of the Company (In Liq.) taken on lease, by the company (In Liq.)  from Chhatisgarh State Industrial Development Corporation Ltd. Raipur.

Hon'ble Sunil Ambwani, J.

1. M/s Rajinder Steels Ltd (In Liquidation) was wound up by this Court on 17.5.1999. The winding up order will operate w.e.f. 9.4.1998, when the company petition No. 44 of 1998, on which the company was wound up, was filed.

2. The Ex Directors were absconding. In the proceedings initiated under Section 454 (5) of the Companies Act 1956 for their prosecution for not filing ''Statement of Affairs', some of the Ex Directors have entered appearance. The Court had found from the report of the Company Prosecutor that Ex Directors had siphoned off more than Rupees 800 crores taken on loan from  Banks and Financial Institutions, including IDBI, IFCI, Bank of Baroda & others.

3. The company (In Liq.) was carrying out industrial activity at Kanpur, U.P. and Raipur in Chhatisgarh  and had many other properties, which are in process of being searched out by the Official Liquidator with the help of the Company Prosecutor.  An investigation referred to  C.B.I. is still pending.

4. The Official Liquidator had taken possession of the Kanpur and Raipur plants of the company (In Liq.). He had put to sale  52.640 hectares of the land of the company (In Liquidation) at Raipur on which the factory was established,  along with plant and machinery. The court found unauthorized intervention in sale proceedings at Allahabad and thus allowed the Asset Sale Committee to re-value the properties; invite fresh offer/bid for plant and machinery with 52.640 hectares of land taken on  lease from Chhatisgarh State Industrial Development Corporation Ltd. (CSIDC Ltd.) for sale. M/s Corporate Ispat Alloys Ltd made a highest offer of Rs. 75.50 crores. It deposited the entire amount on which  the plant and machinery with land has been transferred to them. The identified asset at Kanpur have not been sold  so far. In the absence of ''Statement of Affairs', and total non-cooperation from the ex-directors as well as banks and financial institutions the Official Liquidator was not aware of the terms and conditions on which the Company (In Liq.) had taken the land on lease at Raipur.

5. The CSIDC Ltd. has filed an application to make suitable directions for expeditious payment of all the amounts to applicant, and to modify the order dated 18.11.2005 so as to restore back the possession and custody of the land in question ( 61.278 hectares) to the applicant. By order dated 18.11.2005 this Court had directed as follows:-

"Now since the information has been received from the CSIDC Ltd that the company was allotted 113.927 hectares of land, the entire land comes in the custody of the Court through the Official Liquidator. The possession of remaining land measuring 61.278 hectares must be handed over to the Official Liquidator with whatever rights the Company (In Liq.) has over such land.

The CSIDC Ltd is as such directed to provide complete information with regard to allotment, payment of consideration or any litigation over this remaining 61.278 hectares of land, which was allotted to M/s Rajinder Steels Ltd. (In Liq.). Until such time the Court decides over the rights of the remaining land  shall deem to be in possession of the Court. The SIDC Ltd is restrained for allotment or dealing with this remaining land. The Official Liquidator shall communicate this order to State Industrial Development Corporation Ltd without any delay."

6. On 18.9.2006 after hearing Shri S.N. Verma, Senior Advocate assisted by Shri Prabodh Gaur for CSIDC Ltd. and Shri K.M. Sahai for M/s Corporate Ispat Alloys Ltd and Shri Anjani Kumar Misra for Official Liquidator, the Court ordered:-

"1. Heard Shri S.N. Verma, Senior Advocate assisted by Shri Prabodh Gaur for applicants; Shri K.M. Sahai for M/s Corporate Ispat Alloys Limited and Shri Anjani Kumar Misra for Official Liquidator. Shri S.K. Saxena, Official Liquidator is present.

2. Reference orders dated 18.11.2005 and 24.8.2006 the Court has prima facie  found substance in the contention of Shri S.N. Verma, Senior Advocate that the  Chhatisgarh State Industrial Development Corporation Limited Raipur (CSIDC Ltd.) was not aware of the order of liquidation,  and that under Clause-26, the lease shall be deemed to be terminated from the date of  winding up of the company. It was also mentioned in the order that by notice dated 30.7.2005, the  CSIDC Ltd made a demand of Rs.  23, 76, 59, 030.00 from the company (In Liquidation) towards the difference in premium with penalty; lease rent; maintenance charges and street light with penalty after adjustment of security deposits. The matter was adjourned for  CSIDC Ltd to consider the matter of waiver of penalties for taking a final view in the matter.

3. Shri S.N. Verma, Senior Advocate has filed an affidavit of Shri D.R. Wadhwani, General Manager,  CSIDC Ltd revising the dues payable by the company (In Liquidation) in respect of the subject land measuring 61.217 hectares which was held on lease. The affidavit discloses that in the letter addressed by their local counsel Mr. Riaz to the Official Liquidator, the word 'penalty' in paragraph nos. 9 and 10 of the letter was inadvertently typed instead of interest. The  CSIDC Ltd did not add any penalty as prescribed in the notification dated 27.6.1992 and has only charged interest from the outstanding. The revised dues with interest are given in para no. 2 as follows:-

"2. that the entire dues payable to the applicants in respect of the land measuring 61.287 hectares which is subject matter of the present proceedings on calculate as under:-

PRINCIPAL AMOUNT AS ON 17.05.1999 AS ON 31.07.2006

1 Lease Premium due 3,05,09,347.00 3,05,09,347.00

2 Security deposit      24,34,077.00   24,34,077.00

3 Arrears of lease rent/maintenance charges and street light etc.   62,09,479.00 1, 84, 77,407.00

Total 3,91,52,903.00 5,14,20,831.00

INTEREST AS ON 17.05.1999 AS ON 31.07.2006

1 On lease premium 1, 91, 12, 572.00 6, 05, 20, 975.00

2 On Security deposit    15,52,725.00   48,56,357.00

3 On lease rent/maintenance charges and street light    30, 95,132.00  2, 74,04,392.00

Total 2,37,60,429.00 9,27,81,724.00

Grand Total 6,29,13,332.00   14,42,02,555.00

Note: Amount of penalty at the prescribed rate of 2%, which is not being charged. 21,26,730.00 65,23,420.00

4. Shri Anjani Kumar Misra, learned counsel appearing for Official Liquidator and Shri S.K. Saxena, Official Liquidator present in court point out that the winding up order will operate from the date of filing of the company petition. The winding up order dated 17.5.1999  would thus operate from 9.4.1998 when company petition No. 44 of 1998 was filed. According to Shri Misra, the dues calculated by  CSIDC Ltd will require a further down ward revision.

5. Ex Directors are not traceable. It appears that they have left the country without filing statement of affairs. The exact assets and liabilities of the company is still not known to the Official Liquidator. So far the Official Liquidator has sold  52.64 acres of land of the Company (In Liquidation) at Raipur on which the factory was established along with plant and machinery for Rs. 75.5 crores. The identified assets at Kanpur have not been sold as yet.

6. Taking into account the facts and circumstances and submissions made by Shri S.N. Verma, Senior Advocate appearing for  CSIDC Ltd and Shri A.K. Misra for Official Liquidator, I find that the rights of the company (In Liquidation) represented by the Official Liquidator  in respect of 61.278 acres of vacant land taken by the company (In Liq.) for CSIDC on lease are too feeble to be defended and that there is a huge outstanding liability against the company with regard to this land. It is, as such, proposed to disclaim this remaining 61.278 hectares of  vacant leased land at Raipur as onerous property.

7. Section 535 of the Companies Act 1956, provides that where the land of any tenure is  burdened with onerous covenants, the liquidator may, with the leave of the Court and subject to the provisions of this Section, by writing signed by him, at any time within twelve months after the commencement of the winding up or such extended period as may be allowed by the Court, disclaim the property. The disclaimer shall operate to determine the rights, interest, and liabilities of the company, and the property of the company in or in respect of the property disclaimed. The Court, however, before or on granting leave to disclaim, may require such notices to be given to persons interested, and impose such terms as a condition of granting leave, and make such other order in the matter as the Court thinks just.

8. The request of the Official Liquidator to disclaim the property is accepted subject to following conditions:-

a) The Official Liquidator may make an application in writing  signed by him;

b) The  CSIDC Ltd waives the dues including the principal amount and interest of the premium with penalty, lease rent, maintenance charges and street light etc.  after adjustment of security deposit as claimed in para 2 of the affidavit of General Manager, CSIDC Ltd  filed today;

c) A notice  be published in the leading news papers having wide circulation in Uttar Pradesh, Maharashtra,  Madhya Pradesh and Chhatisgarh and  notice be given to all the secured creditors of the company and subject to their objections. The steps be taken in a week, giving six weeks to file the objections, if any.

9. The Official Liquidator shall carry out the advertisements and give notice to all the secured creditors. The CSIDC Ltd  may consider the waiver of all charges. This matter will come up again on 6.11.2006 for hearing.

7. In compliance, the Official Liquidator made an application vide OL Report No. 296 of 2006 as follows:-

"1. That in compliance of the Hon'ble Court order dated 18.9.2006, the Official Liquidator submits his application under Section 535 of the Companies Act, 1956 as under:-

2. That M/s Rajinder Steels Ltd. was ordered to be wound up by this Hon'ble Court vide order dated 18.5.1999.

3. That assets of the company's one unit lying in the State of Chhatisgarh, district Raipur was sold out after taking possession for Rs. 75.50 crores.

4. That M/s Chhatisgarh State Industrial Development Corporation (In short C.S.I.D.C. Ltd.) before bifurcation of the State of Madhya Pradesh. Madhya Pradesh State Industrial Development Corporation  Ltd allotted land on lease to the aforesaid Company (In Liquidation) measuring 113.918 acres, out of which the Official Liquidator has sold out 52.640 Acres of Land with Plant and Machinery etc. for sum of Rs. 75.50 Crores.

5. That 61.278 Acres of lease hold land is vacant land which was taken by the Company (In Liquidation).

6. That C.S.I.D.C. Ltd. has informed the Official Liquidator that a sum of Rs. 23, 76, 59, 30.00 is due from the company (In Liquidation)  towards difference in premium with penalty, lease rent, maintenance charges, street light etc.

7. That in view of the Official Liquidator value of land is less than the liabilities to be paid if sold out. Therefore, under section 535 of the Companies Act, 1956 the Official Liquidator proposes with the leave of this Hon'ble Court and subject to provisions of Section 535 of the Companies Act, 1956 that the aforesaid property be allowed by the Hon'ble Court to disclaim. An advertisement and notice to the secured creditors have already been published in the News paper as per requirements of the Act and the order of the Hon'ble Court."

8. The Official Liquidator issued notices to all the secured creditors and person interested in the matter by sending individual notices and advertisement. He has not received any reply from any person.

9. Shri K.M. Sahai and Shri R.P. Agarwal appearing for M/s Corporate  Ispat Alloys Ltd (CIAL)- the purchaser of the 82.64 hectares of land with plant and machinery  have filed an application with a prayer to allot the remaining land to CIAL. It is stated in the application supported by affidavit of Shri  Anil Kumar Singh that the CSIDC Ltd. has to recover only Rs. 13,82,819.99 even up to  December 2006. The lease rentals were paid by IDBI upto year 2001. No other amount is due as lease rent, maintenance charges and street charges for 61.287 hectares of land. The CSIDC Ltd. had inflated the amount to Rs. 23,76, 59.030 by enhancing  premium, difference in security deposits, penalties and interest. The CSIDC Ltd. vide its letter dated 16.5.2002 had confirmed that they had already received rent, maintenance charges and street light charges upto 31.12.2001 for 113.887 hectares of land belonging to the company (In Liquidation) and had demanded lease rentals, maintenance charges and street light charges for the period 1.1.2001 to 31.12.2002 amounting  to Rs. 5, 13, 927/-. It is contended by CIAL relying upon marginal note,  appended to clause 26 of the agreement that the deemed termination of the lease will apply only in respect of building. It is contended that allotment of this land is extremely necessary for CIAL without which the company would not be able to do business efficiently. It is contended by CIAL that CSIDC Ltd. had allotted land to Chhatisgarh Electricity Company vide order dated 9.12.2005 which also includes 10.186 hectares belonging to RPL. This allotment order is in violation of the orders of the High Court. CIAL has  invoked doctrine of legitimate expectation and promissory estoppel on the grounds that CIAL has preferential and legal rights over the land. All the bidders were told by the Asset Sale Committee on 16/17.8.2005 that the Official Liquidator has received a letter dated 30.7.2005 from CSIDC Ltd. stating that total land of the Company (In Liq.) as lease holds land was 113.887 hectares whereas in the advertisement, only 52.640 hectares of land was offered for sale. The CAIL has got priority as per 1974 Rules for allotment of 61.287 hectares land  as existing working industrial unit requiring land for expansion. The Raipur unit was purchased by CIAL to operate it through expansion and integration without which it was not commercially viable to operate the existing unit. The power plant of Chattisgarh Electricity Company may be installed anywhere else. Blast Furnace of CIAL cannot be installed at other place as hot metal cannot be transported from a distant place to the existing facilities and that CIAL is willing to pay the price on which the land to be leased by CSIDC Ltd. to Chhatisgrarh Electricity Company.

10. The CSIDC Ltd. executed three leases in favour of the company (In Liquidation). The date and area of these leases is given as below:-

Date Area

26.4.1994 52.640 Hectares

02.11.1994 31.106 Hectares

30.09.1996 30.181 Hectares

11. The land  covered by the first lease has been sold  by Official Liquidator with plant and machinery to CIAL. The court is now concerned with the other two leases. Clause 26 of these leases is as follows;

"(For building) 26. If the rent hereby reserved or any part thereof

N.A. shall at any time be in arrears and unpaid for six calender months in the case of land, and two months in the case of premises next after the date whereon the same shall have become due, whether the same shall have been lawfully demanded or not, or if the lessee becomes insolvent and/or goes into liquidation voluntarily or otherwise or if there be any attachment on the said premises or there is a breach or non-observance by the lessee of any of the conditions and covenants therein contained and the lessee fails to remedy the breach within sixty days of the notice in writing given by the lessor or becomes insolvent or enters into an agreement with his creditors for composition of the industry, this lease will be deemed to have been terminated and the lessor may notwithstanding the waiver of any previous cause right of re-entry and without prejudice to any right or remedy of the lessor for recovery of rent remaining due under the lease upon the said land premises and repossesses the same as if this demise had not been made."

12. Shri K.M. Sahai learned counsel for CIAL states that this clause-26 is applicable for building only. The argument does not appeal to the Court.  A bare reading of the clause would go to show that the entire lease would be deemed to be terminated if the lessee becomes insolvent/goes to liquidation voluntarily or otherwise, or becomes insolvent.

13. Shri S.N. Verma, Senior Advocate  submits that Clause 26 operates to terminate the lease with effect from the date of winding up. The Official Liquidator as such was not entitled to take over possession of the land and to keep it for the purposes of liquidation. He has further raised doubts on the applicability of Section 535 for disclaiming the land as onerous property It is submitted by him that once the company (In Liquidation) ceases to hold any right in the land, Section 535  has no application as the Official Liquidator can only disclaim  what belongs to the company and that on which the company (In Liquidation) has any right.

14. Shri S.N. Verma further submits that CIAL has no locus standi to make any application in the liquidation proceeding. The CIAL has filed a writ petition in Chhatisgarh High Court with similar reliefs.  Shri Verma states that CIAL does not have any legitimate expectation for allotment of land nor any such promise was held out to him either in the course of sale or otherwise  to allot the remaining land of the company (In Liquidation), for expansion of industrial activities. Even otherwise, the Official Liquidator could not have  made any such promise to CIAL as the company (In Liquidation) did not possess any right over the remaining land. Shri Verma states that Chhatisgarh Electricity Company has withdrawn its offer for allotment of the land and that the allotment money has been returned to it. The CSIDC Ltd. has not yet decided to allot the land to any one and that the allotment may be made to the eligible and deserving applicant in accordance with the existing rules for allotment.

15. From the objections taken on record, I find that the proceedings under Section 535 of the Companies Act 1956 could not be initiated in the matter. The company (In Liquidation) is not left with any existing rights over the land. The lease deed shall be deemed to be terminated  under Clause 26 of the agreement, and that the Official Liquidator could not take back possession and to hold it for any purpose. Madhya Pradesh State Industrial Development Corporation, the predecessor Corporation of CSIDC Ltd. had given notices dated 2.2.1999 and 24.2.1999 to the company for termination of leases of this remaining land to the Company before it was wound up, through on the ground of non-user, closure of the unit for more than six months and default on payment of rent. The proceedings under Section 535 of the Companies Act, 1956 are as such dropped.

16. The secured creditors and financial institutions have not made any comments on the issue.

17. In the liquidation proceedings, the Company Court has no jurisdiction to consider the rights of the purchaser to the properties over  which the Company (In Liquidation) has no subsisting rights. The CIAL has filed the writ petition in Chhatisgarh High Court. It may, if it is so advised,  pursue the matter in the court of competent jurisdiction in accordance with the law.

18. This leaves the issue of balance lease rentals to be paid  to CSIDC Ltd. Shri S.N. Verma has very fairly stated that the Chairman of CSIDC Ltd. has made a request to the State Government to waive the balance lease rentals, the maintenance charges, street light interest and penalty etc. as there is hardly any chance to recover the same from the assets of the company (In Liquidation) after the claims of secured creditors and workmen to be paid on priority under Section 529 and 529-A of the Companies Act 1956. The Official liquidator has so far realized only Rs. 75.50 crores from the sale of the Raipur unit of the Company (In Liquidation) with plant and machinery and lease hold rights of 52.640 hectares of land. The assets at Kanpur and those assets, which are being searched out, are yet to be sold. There are large dues of  secured creditors including the financial institutions and banks which rank in parity over the dues of CSIDC Ltd.

19. The CSIDC Ltd. has made a claim of Rs. 23, 76, 59, 30/- from the company towards a difference in premium with lease rent, maintenance charges, street light interest etc. The CSIDC Ltd may consider to reduce the claim by adjusting the lease rent which may have been paid by the IDBI upto 2001. In any case the claim shall be subject to admitting the proof of the claim in liquidation proceedings. As and when the remaining properties are sold, the Official Liquidator will advertise calling for proof of claims.

20. On the aforesaid discussion, the proceedings under Section 535 of the Companies Act initiated by order dated 18.9.2006 are dropped. The Official Liquidator will hand over the possession of the remaining 61.278 hectares of lease hold land, of which lease shall be deemed to be terminated from the date of winding up of the company (In Liq.),  to CSIDC Ltd.  The CSIDC Ltd may consider to waive or reduce the premium with penalty, lease rent maintenance, charges street light  etc and submit a revised claim to the Official Liquidator. M/s Corporate Ispat Alloys Ltd does not have any locus standi nor this Court has  any jurisdiction to determine its rights and claims over the remaining land in these proceedings.

21. All the applications on these issues are disposed of. Order  accordingly.

Dated 12.12.2006



Reproduced in accordance with s52(q) of the Copyright Act 1957 (India) from judis.nic.in, indiacode.nic.in and other Indian High Court Websites


dwi Attorney | dui attorney | dwi | dui | austin attorney | san diego attorney | houston attorney | california attorney | washington attorney | minnesota attorney | dallas attorney | alaska attorney | los angeles attorney | dwi | dui | colorado attorney | new york attorney | new jersey attorney | san francisco attorney | seattle attorney | florida attorney | attorney | london lawyer | lawyer michigan | law firm |

Double Click on any word for its dictionary meaning or to get reference material on it.