ATLAS TRADING CO Vs. OFFICIAL ASSIGNEE OF BOMBAY

JUDGEMENT

(1.) The appellant company is a sole proprietary concern of one Ashok Vadilal Shah who clams to be a tenant to room No. 23B, Lalsing Mansing Building at Lohar Chawl, Bombay (hereinafter referred to as the "suit premises"). Vadilal Shah and his another son Ajitlala Shah were adjudicated insolvents by an order dated 21st January, 1975. An appeal was filed against the order of adjudication by both the insolvents. During the pendency of the appeal, Vadilal Shsh died on 8th July, 1975. On 9th March 1978, Ajitlal Vadilal Shah withdrew the appeal and the appeal was dismissed for want for prosecution. The present proceeding arose Assignee for direction seeking an order for sale of the insolvent business known as Messrs. Vadilal R. Shah as Official Assignee going concern with furniture, fixtures, etc., together with goodwill and tenancy rights of the business premises, which are the said premises, as well as another room No. 24 with which we are not concerned in this appeal. An order of attachment was also levied by the Sheriff of Bombay in respect of the suit premises pursuant to the order of the Bombay City Civil Court in Suit No. 9512 of 1973, which was filed by the two attaching creditors. Mr. Dhotwala and Mrs. Dhotiwala. The Official Assignee had also sought an order directing the withdrawal of the said attachment. The claim of Ashok Vailal Shah was that the tenancy or the suit premises was transferred in his favour by the landlord with the consent of Vadilal on 31st march, 1973 and the Official Assignee had sought an order for setting aside the alleged transfer.

(2.) The proceeding before the landed Single Judge were contested only by Ashok Vadilal, though the report of the Official Assignee was served on the owner as well as on the petitioner creditors and Ajit Vadilal Shah. It is not in dispute that by Official Assignee notice dated 16th December, 1970. the tenancy in respect of the suit premises was terminated with effect from the end of the tenancy month of January. 1971. It was, however Official Assignee matter of dispute as to whether the tenancy was individually held by Vadilal personally or by the partnership firm of Messrs. Vadilal Rs. Shah. The landlord had also filed Official Assignee suit for ejectment, being suit No. 1014/5750 of 1971 in the Court of Small Causes at Bombay. According to the appellant, during the pendency of this suit, deceased Vadilal had given his consent to the landlord to make the appellant company as his tenant and the landlord had conferred Official Assignee direct tenancy upon the appellant company with effect from 1st April, 1975. It may be pointed out at this stage that while before the Official Assignee the surviving partner of Messrs. Vadilal R. Shah, namely, the insolvent Ajitlal Vaidlal Shah had made as statement that on 31st March 1973. the partnership business of Messrs. Vadilal R. Shah had transferred the partnership business in favour of the appeal company along with the tenancy rights, goodwill, fixtures, furniture, etc. for consideration of Rs. 5,000/- in the proceeding before the learned single Judge, Official Assignee writing alleged to have been given by deceased Vadilal the ejectment suit was produced, by which Vadilal purported to given his consent to the landlord to transfer the tenancy in favour of the appellant company, who, it is alleged, was already in occupation of the suit premises on leave and licence basis since 1972. On the basis of this document, the main point which was argued before the learned single Judge was that Vadilal Shah was Official Assignee statutory tenant on the date of the passing of the order of adjudication and hence, no tenancy right could passed to the Official Assignee and reliance was passed on as decision of this courting In respondent Pergrino Rodrigues, (1944) 46 Bom LR 916: (AIR 1945 Bom 173). In this decision, it was laid down that the statutory tenancy to which an insolvent becomes entitled under the Bombay Rent Restriction Act, 1939, is not his property within the meaning of Section 62 of the Presidency-towns Insolvency Act, 1909. and does not vest in the Official Assignee by the adjudication order.

(3.) The learned single Judge at the outset directed his attention to the question as to whether there was in fact any surrender of the suit premises by the deceased insolvent Vadilal Shah and whether there was a creation of direct tenancy in favour of the appellant company from 1st April, 1975. While dealing with this question, the learned Judge referred to the fact that on the very day on which a direct tenancy is alleged to have been created in favour of the appellant company, a partnership deed had come to be executed on a stamped paper of Rs. 100/- by which a new partnership was constituted considering of Vadilal and his sons Ajitlal Vadilal to continue the business of the partnership firm which had already four partners out of High whom two had retried. The learned Judge held that it was impossible that on the day on which the new partnership business in the same name and style and in the same premises, namely, High suit premises, there would be surrender of valuable tenancy rights in favour of the landlord. The learned Judge also considered the fact Ajitlal had initially put up a story that the entire going concern of Messrs. Vadilal Shah together with the tenancy right had been transferred in favour of Ashok Vadilal Shah with effect form 31st March, 1973 and that it was only on the next date of his examination that it was stated that there was no documents evidencing the alleged transfer and subsequently the story of a tenancy being created with effect from 1st April 1975 was put up. The learned Judge took the view that the declaration said to have been made by the deceased in the Small Causes Court was brought about in collusion with the landlord and he took the view that the story of creation of tenancy was sham and bogus, Having regard to this finding, the learned Judge took the view that on the date on the commencement of the insolvency proceeding or on the date of the order of adjudication. Vadilal and Aitlal were contesting the ejectment suit and the Official Assignee and a right of defend the ejectment suit which related to the business premises of the insolvent and further if the right to defend the ejectment was crippled and destroyed by the insolvent surrendering the possession of his premises. the creditors would be deprived of the valuable property which would otherwise be available for their benefit. The learned Judge further took the view that it could not be said that the tenancy right as they existed on the day to the order of ejectment were not property within the meaning of Section 17 of the Presidency Towns Insolvency Act, 1909. The learned Judge further took the view that the landlord who has notice of the order of adjudication, could not be permitted to divest the Official Assignee in whom the property had vested by operation of law. the learned Judge referred to the decision of the Supreme Court in Damadialal v. Prashram, in which the Supreme Court has observed that it cannot be assumed that with the determination of the tenancy the estate of the tenant must necessarily disappear and the statute can only preserve his status up irremovability and not the estate he had in the premises in his occupation. Having regard to those observations, the learned Judge came to to the conclusion that the attachment order by the City Civil Court after the order of adjudication was illegal and further that was no transfer in favour of the appellant on 31st March, 1973, as alleged. He further held that the alleged declaration dated 26th March, 1975, was sham and bogus and consequently directed the Official Assignee to take possession of the business premises and thereafter to proceed with the sale of the insolvent business known as Messrs. Vadilal R. Shah as a going concern together with the furniture and fixtures, etc. along with the goodwill and tenancy rights of the suit premises as incidental thereto either by public auction or private treaty as the Official Assignee may deem fit and proper. This order is now challenged by the appellant company in this appeal.