‘Liquidator Cannot Retain Unused Premises’ – Bombay High Court Orders Return of Tenanted Property to Landlords in Liquidation Case
Kiran Raj
The Bombay High Court, Single Bench, of Justice Manish Pitale, has adjudicated in favor of landlords seeking possession of premises occupied by a company in liquidation. The court directed the official liquidator to hand over vacant possession of two flats, finding that the premises were not required for the winding-up process.
The case pertains to a dispute over two residential flats—Flat Nos. 4 and 5 in Jaitirath Mansion, Mumbai—rented to Surendra Engineering Corporation Ltd. on a monthly tenancy basis. The applicants, landlords of these premises, sought possession on the grounds that the company in liquidation had ceased operations, defaulted on rent payments, and had no requirement for the flats.
The litigation originated from Company Petition No. 369 of 2015, filed by M/s Alliance Logistics against Surendra Engineering Corporation Ltd. Following the admission of the petition, the court issued a winding-up order on February 16, 2018, and appointed the official liquidator to take charge of the company's assets. On May 19, 2023, the official liquidator took physical possession of the disputed flats, along with Flat Nos. 1 and 2, which were also previously occupied by the company.
The applicants contended that tenancy rights under a monthly rental agreement do not qualify as assets under liquidation and, therefore, should not be retained by the official liquidator. Citing judicial precedents, they argued that the liquidator had no legal basis for withholding possession of the premises, particularly given that the premises were neither utilized nor necessary for the liquidation process.
The official liquidator opposed the application, asserting that the flats were needed to store critical company documents and records. The applicants refuted this claim, arguing that the liquidator had failed to specify why alternative spaces under its control were insufficient for this purpose.
Justice Manish Pitale examined the statutory provisions and case law governing the rights of landlords in liquidation proceedings. The court analysed the scope of Section 446 of the Companies Act, 1956, which empowers the company court to adjudicate disputes involving the company in liquidation. The court noted:
“Tenancy rights cannot be said to be assets of the company in liquidation. The official liquidator cannot retain possession of the premises without justifiable reason.”
The judgement drew support from the Division Bench decision in Modella Woollens Ltd. v. Official Liquidator & Ors., which established that a monthly tenancy does not confer ownership or proprietary interest that can be retained by the liquidator during the winding-up process. The court also referred to Patel Engineering Co. Ltd. v. Official Liquidator and Ravindra Ishwardas Sethna v. Official Liquidator, wherein similar relief was granted to landlords under Section 446.
Addressing the liquidator’s argument that the premises were essential for storing company records, the court observed:
“The official liquidator has failed to substantiate how much space is reasonably required and why other premises in its possession cannot accommodate such records.”
Further, the court noted that the liquidator had not made any documented attempts to utilize the disputed flats for record storage, raising doubts about the necessity of continued possession.
The court also acknowledged that continued possession would impose financial liabilities on the company in liquidation due to unpaid rent. Given that the official liquidator had neither established a need for the premises nor provided clarity on their usage, the court determined that the landlords’ claim for possession was justified.
The court considered precedents from other High Courts, including the Delhi High Court’s decisions in Satinder Pal Singh & Anr. v. Joginder Sethi & Ors. and In Re: Bharat Steel Tubes Pvt. Ltd., which state that courts must scrutinize whether a liquidator genuinely requires premises for the winding-up process. The Punjab and Haryana High Court, in Smt. Kaushalya Aggarwal v. Punwire Paging Services Ltd. (in liquidation), stated that a liquidator's mere assertion of necessity is insufficient without supporting evidence.
The judgment further distinguished the present case from cases such as Reserve Bank of India v. L. M. Devare, Liquidator, where premises were found essential for storing sensitive financial records. The Bombay High Court reiterated that a general statement from the liquidator claiming need does not suffice and that a clear, justifiable requirement must be demonstrated.
Based on its findings, the Bombay High Court issued the following directives:
- The official liquidator shall hand over vacant possession of Flat Nos. 4 and 5 at Jaitirath Mansion, Mumbai, to the applicants within four weeks from the date of the judgment.
- The applicants retain the right to seek possession of Flat Nos. 1 and 2 through separate legal proceedings, as these premises were not the subject matter of the present application.
- The applicants may raise financial claims, including outstanding rent and related dues, as part of the liquidation process.
Advocates Representing the Parties
- For the Applicants: Mr. Simil Purohit, Senior Counsel, along with Ms. Pooja Patil, Mr. Mayank Bagla, and Ms. Siddhi Bhutadia, instructed by Bagla & Associates.
- For the Official Liquidator: Mr. Anirudh Hariani.
- For Noticee No. 2: Ms. Kshamaya Daniel, instructed by Crawford Bayley & Co.
Case Title: Jaikishan Narang, HUF through Karta Mr. Kiran Deepak Nagpal & Ors. v. Surendra Engineering Corporation Ltd. (in liquidation) & Ors.
Case Number: Company Application No. 332 of 2019 in Company Petition No. 369 of 2015
Neutral Citation: 2025: BHC-OS:4039
Bench: Justice Manish Pitale
[Read/Download order]
