# NARENDRA BAHADUR TANDON v. ~HANKERLAL (SINCE DECEASED) BY LRS. AND ANR

- **Citation:** [1980] 2 S.C.R. 821
- **Court:** Supreme Court of India
- **Decided:** 1980-01-25
- **Case number:** Civil Appeal No. 575 Of 1970
- **Bench:** N. L. Untwalia, 0. Chinnappa Reddy
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/narendra-bahadur-tandon-v-hankerlal-since-deceased-by-lrs-and-anr-7933
- **Pages:** 8

## Headnote

Lease-Land leased to a company--Company went into voluntary liquidaJion-Land transferred to one of the Creditors, a Bank-Bank went into liqui4ation--Official liquidator of Bank found no deed of transfer executedVoluntary liquidator executed deed of trans/er-If competent to do so-Property
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if passed to state by escheat-Lessor's interest transferred to plaintiffs-Official
liquidator sold land to
defendant-Defendant raised
structures on landC
l'laintiffs never objected to raising of slructures-Plaintif!s, if estopped from
contending that defendant had no right in land.
The original Owners of the land in dispute granted a permanent loose of
the ]and to a company.
The lessee could use the land for any purpose and
couJd also transfer the
leasehold
interest. Though a permanent
lease the
lessor could forfeit the lease if the lessee failed to pay rent for three conseD
.cutive years. The lessors interest changed hands twice and by virtue of a
<lecreee in a suit for pre-emption filed by the respondents they became entitled
to such interest.
In the meanwhile the company went into voluntary liquidation and the
liquidator executed an agreement of sale of all its assets including the Ieaseht)ld interest in favour of a Bank which was the biggest creditor of the Com-
·pany. Immediately thereafter the Bank itself went into liquidation.
Sometime later the official liquidator of the Bank found that no deed of transfer
was executed by the voluntary liquidator in favour of the Bank, the erstwhile
voluntary liquidator therefore executed a deed of sale in favour of the Bank.
Thereafter the officiad liquidator of the Bank transferred the lease-hold interest
"'in the land to the defendant-appellant.
Before the company went into liquidation the first transferee of the land
accepted rent from the voluntary liquidator. After the transfer of the leasehold interest to the Bank the second transferee demanded from the
official
liquidator arrears of rent for four years and claimed that the lease was forfeited by reason of the Bank's failure to pay rent for a continuous period of
three years in terms of the lease. The official liquidator denied the right to
forfeit the lease. He, however, paid rent which was accepted by the lesSors.
Even subsequently rent was accepted by the lessors.
The respondent sued to recover possession of the suit land on the g'round
that the lease-hold interest was not validly transferred by the voluntary liquidator and that therefore neither the Bank nor the defendant
acquired any
right in the land. The defendants contended that the voluntary liquidator had
the authority in law to execute the
deed of sale and formally
complete a
transaction which had already taken place, that the predecessors in interest of
the plaintiff having accepted rent from the official liquidator were estopped
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SUPREME COURT REPORTS
[1980] 2 S.C.R.
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from contending that the transfer in favour of the Bank was not valid
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that the lease-hold interest in the 1'.ind had escheated to the Government 011
the dissolution of the company.
The suit was dismissed by the Trial Court and the Appellate Court. On
s..::ccnd appeal, the High Court decreed the suit holding that the
voluntary
liquidator had no authority to exei.·ute the deed of sale after the dissolution of
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the company_ and that there was neither estopp.::l nor escheat.
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Allowing the appeal,
HELD : 1. The High Court was right in holding that the liquidator had
110 jurisdiction to execute the deed of sale after the company had been dissolved.
Once the company w2s dissolved in accordance with the
procedur'e laid
down in the Indian Companies Act, 1913 it ceased to exist and therefore the
volnntary liquidator could not
represent a non-existent
company. If the
liquidator was to discharge any duty or perform any function on behalf of
the dissolved company he should have express statutory authority to do so,
which he did not have under the Act. [826 D, 825 G]
2. If the company had a subsisting

## Text

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821
NARENDRA BAHADUR TANDON
v.
~HANKERLAL (SINCE DECEASED) BY LRS. AND ANR.
January 25, 1980
[N. L. UNTWALIA AND 0. CHINNAPPA REDDY, JJ.J
Lease-Land leased to a company--Company went into voluntary liquidaJion-Land transferred to one of the Creditors, a Bank-Bank went into liqui4ation--Official liquidator of Bank found no deed of transfer executedVoluntary liquidator executed deed of trans/er-If competent to do so-Property
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B
if passed to state by escheat-Lessor's interest transferred to plaintiffs-Official
liquidator sold land to
defendant-Defendant raised
structures on landC
l'laintiffs never objected to raising of slructures-Plaintif!s, if estopped from
contending that defendant had no right in land.
The original Owners of the land in dispute granted a permanent loose of
the ]and to a company.
The lessee could use the land for any purpose and
couJd also transfer the
leasehold
interest. Though a permanent
lease the
lessor could forfeit the lease if the lessee failed to pay rent for three conseD
.cutive years. The lessors interest changed hands twice and by virtue of a
<lecreee in a suit for pre-emption filed by the respondents they became entitled
to such interest.
In the meanwhile the company went into voluntary liquidation and the
liquidator executed an agreement of sale of all its assets including the Ieaseht)ld interest in favour of a Bank which was the biggest creditor of the Com-
·pany. Immediately thereafter the Bank itself went into liquidation.
Sometime later the official liquidator of the Bank found that no deed of transfer
was executed by the voluntary liquidator in favour of the Bank, the erstwhile
voluntary liquidator therefore executed a deed of sale in favour of the Bank.
Thereafter the officiad liquidator of the Bank transferred the lease-hold interest
"'in the land to the defendant-appellant.
Before the company went into liquidation the first transferee of the land
accepted rent from the voluntary liquidator. After the transfer of the leasehold interest to the Bank the second transferee demanded from the
official
liquidator arrears of rent for four years and claimed that the lease was forfeited by reason of the Bank's failure to pay rent for a continuous period of
three years in terms of the lease. The official liquidator denied the right to
forfeit the lease. He, however, paid rent which was accepted by the lesSors.
Even subsequently rent was accepted by the lessors.
The respondent sued to recover possession of the suit land on the g'round
that the lease-hold interest was not validly transferred by the voluntary liquidator and that therefore neither the Bank nor the defendant
acquired any
right in the land. The defendants contended that the voluntary liquidator had
the authority in law to execute the
deed of sale and formally
complete a
transaction which had already taken place, that the predecessors in interest of
the plaintiff having accepted rent from the official liquidator were estopped
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from contending that the transfer in favour of the Bank was not valid
and'
that the lease-hold interest in the 1'.ind had escheated to the Government 011
the dissolution of the company.
The suit was dismissed by the Trial Court and the Appellate Court. On
s..::ccnd appeal, the High Court decreed the suit holding that the
voluntary
liquidator had no authority to exei.·ute the deed of sale after the dissolution of
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the company_ and that there was neither estopp.::l nor escheat.
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Allowing the appeal,
HELD : 1. The High Court was right in holding that the liquidator had
110 jurisdiction to execute the deed of sale after the company had been dissolved.
Once the company w2s dissolved in accordance with the
procedur'e laid
down in the Indian Companies Act, 1913 it ceased to exist and therefore the
volnntary liquidator could not
represent a non-existent
company. If the
liquidator was to discharge any duty or perform any function on behalf of
the dissolved company he should have express statutory authority to do so,
which he did not have under the Act. [826 D, 825 G]
2. If the company had a subsisting
interest in the lease
on the date of
dissolution, such interest must necessarily vest in the Government by escheat
or bona vacantia. It is well settled that the property of an intestate dying
without leaving lawful heirs and the property
of a dissolved
corporation
passes to the Government
by escbeat
or bona vacantia.
If the lease-hold
interest of company became vested in the Government on its dissolution,
a suit at the instance of .the plaintiffs ·was not maintainable. [826 E, 827 G]
3. The successors in interest of the original lessors accepted rent from the
official liquidator indicating that they accepted the position that the Bank had
succeeded to the rights of the company in the lease-hold interest. The official
liou~dator sold the land to the defendant ·with the permission of the Company
Judge only when he failed to get the highest bid in public auction.
At no
point of time did the predecessors in interest of the plaintiffs raise an objection
to the sale of the lease·hold interest. When the defendant obtained permission
cf the Municipal Board and raised constructions on the land, the plaintiffs
who resided near·about the lurid did not raise any objection to the construe~
tions. In the circumstances the plaintiffs were estopped from contending that
the defendant had no
right in the land. Their
only right is to receive
rent. [827 F-828 Bl
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 575 Of 1970.
From the Judgment and Decree dated 17-2-1966 of the Allahabad
G
High Court in Special Appeal No. 92 of 1960.
S.S. Javali and B. R. Aggarwal for the Appellant.
R. K. Garg and V. J. Francis for the Respondent.
The Judgment of the Court was delivered by
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CmNNAPPA REDDY, J.
Hulas Chand and Bilas Chand, orii;nal
owners of a certain plot of land in Saharanpur, granted a permanent
lease of the land to Patel Mills Ltd., in May, 1930. The annual rent
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N. B. TANDON v. SHANKERLAL (Chinnappa Reddy, !.) 823
was Rs. 75 /-. The lease was empowered to use the land for any purpose whatsoever. The rights of the lessee were expressly made transferable. Though the lease was permanent, there was a condition that
the lessor could forfeit the lease if the lessee failed to pay reht for three
consecutive years.
On November 1, 1932 Hulas Chand and Bilas
Chand transferred their interest to Budh Singh and Jialal.
Jugal
Kishore, became entitled to the rights of Budh Singh and Jialal by
purchase under sale deeds dated April 17, 1943 and May 11, 1943.
But, Shankerlal and Piareylal (present plaintiff) filed a suit for presumption agai'nst the vendors and Jugal Kishore and as a result of the
decree passed in the suit, they became entitled to the lessor's interest
in the suit p:ot of land on August 13, 1945.
Meanwhile the lessee Patel Mills went into liquidation and Mehra
was appointed volun'.ary liquidator of the company on May 11, 1937
by a special resolution at a meeting of the creditors of the company.
Benaras Bank Ltd., was the biggest creditor of the Company. So the
liquidator negotiated the sale of all the assets of the Company to the
Benaras Bank Ltd., for a sum of Rs. 70,000/- and on February 23,
1939 executed an agreement of sale after receiving the considerntion.
Th~ lease-hold interest in the suit plot was also included as on~ of the
assets in the agreement of sale. As a meeting held on May 4, 1939
the creditors accepted the final report of the voluntary liquidator. The
report was sent to tho Registrar of Joint Stock Companies, and regis·
tered on Sep'.cmbcr 9, 1939. The company thus stood dissolved with
effect from December 9, 1939. Subsequently on March 1, 1940 the
Benaras Bank Ltd. itself went into liquidation. The Official Liquidator of the Benaras Bank Ltd. found that there was no duly executed
deed of transfer execu'ed by the voluntary liquidator of the compahy
in favour of the Benaras Bank Ltd. in respect of the lease-hold interest
in the suit plot of land.
At the instance of the official liquidator of the
bank, Shri Mehra the erstwhile voluntary liquidator of the company
executed a deed of sale on January 28, 1941 and had it duly
rqpstcrcd.
On March 9, 1943 the official liquidator transferred tho
lease-hold ihterest in the suit plot of land to the defendant-appellant.
We have mcniioned that Patel Mills Ltd., stood dissolved with
effect from December 9, 1939. Budh Singh and Jialal had earlier, i.e.
on April 12, 1939, accepted rmt from the voluntary liquidator of the
company.
After the dissolution of the company and the transfer of
the lease hold interest by the voluntary liquidator to the Benaras Bank!
Ltd. Budh Singh and Jialal sent a notice dated January 11, 1941 to
the liquidator of the Benaras Bank Ltd. through their lawyer demanding payment of arrears of rent for four years and asserting that the
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lease was forfeited consequent on the lessee's failure to pay rent for a
continuous period of three y2ars. The liquidator denied the claim of
right of the lessor to forfeit the lease but admitted the claim for rent.
Re'nt was accordingly paid and was accepted by Budh Singh and Jialal.
Later, on March 21, 1946, Jugal Kishore who had purchased the rights
of Budh Singh and Jialal also accepted rent from the official liquidator of the Benaras Bank Ltd.
Shankerlal and Piarey Lal who became entitled to the lessor's interest in the suit plot of land as a result of the decree from pre-emption
which they obtained against Jugal Kishore and his vendors, filed the
suit out of which the appeal arises to recover possession of the land.
Their case was that the lease hold interest in the land was not validly
transferred by the voluntary liquidator and therefore, the defendant
acquired no right in the land.
Several defences were raised. It was claimed that the voluntary
liquidator had the authority in law to execute the deed of sale and
formally complete a transaction which had already taken place.
It
was also claimed that the predecessors in the interest of the plaintiffs
having accepted re'nt from the official liquidator of the bank, the plaintiffs were estopped from contending that the transfer in ravour of the
bank was not valid. Section 53A Transfer of Property Act was also
invoked as a defence to the action of the plaintiffs.
It was lastly
pleaded that the plaintiffs had no right to sue for possession as the
lease-hold interest in the land had escheated to the Government
on the dissolution of the Company. The suit was dismissed by the
Trial Court. The judgment and decree of the Trial Court were affirmed by the 1st Appellate Court and a learned single Judge of the High
Court in second appeal. The learned Single Judge found in favour of
the defendant on the question of estoppel, escheat and authority
of the voluntary liquidator to execute the sale deed but found against
the defendant on the applicability of s. 53A of the Transfer of Property Act.
On appeal by the plaintiffs under clause 10 of the Letters
Patent a Division Bench of the High Court reversed the judgment and
decree of the Subordinate Courts and decreed the suit. The Division
Bench held that the voluntary liquidator had no authority to execute
the deed of sale after the dissolution of the company and that there
was neither estoppel nor escheat. The Division Bench also held that
s. 53A of the Transfer of Property Act did not protect the defendant.
The defendant has preferred this appeal after obtaining a certificate
from the High Court under Art. 133(1)(b) of the Constitution.
The submissions of Shri Javali learned counsel for the appellant on
the question of applicability of s. 53A of the Transfer of Property
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N. B. TANDON v. SHANKERLAL (Chinnappa Reddy, l.)
825
Act and the authority of the voluntary liquidator after the dissolution
of the company to execute the deed of sale may be easily disposed of.
We do not think that s. 53A of the Transfer of Property Act is attracted
to the facts of the present case. The right under s. 53A is available
against the transferor (effecting the incomplete transfer) and any person
claiming under him. It is difficult to understand how the successorin-interest of a lessor can ever be said to a person claiming under a
lessee making an incomplete transfer of the lease-hold interest.
Nor
do we find force in the submission of the learned counsel that the
voluntary liquidator had legal authority, after dissolution of the company to execute the deed of sale so as to formally complete the transaction which had already been entered into. Reliance was placed by
the learned counsel for the appellant on the decision of Farwell, J., in
Pulsford v. Demanish('). fn that case a liquidator was guilty of gross
dereliction of duty.
In the words of Foarwell J., "A more gross dereliction of duty by a liquidator I have seldom heard of".
Though in
possession of sufficient assets of the liquidating company to pay all its
debts in full the liquidator took no steps to ascertain the creditors of
the liquidating comp~ny or to see that they were paid. Instead he sold
the business and assets of the company to a purchasing company wh6
covenanted to pay all the debts and liabilities of the liquidating company. The purchasing company did not pay the debts. The liquidating
company was dissolved. The creditors had no remedy by which they
could recover their debts. A creditor of the liquidating company sued
the liquidator for recovery of damages. It was held that the liquidator
was guilty of negligence i'n the discharge of his statutory duty and was
liable in damages to the unpaid creditors of the liquidating company.
What was decided in the case was not that a liquidator could represent
the erstwhile company after it was dissolved but that a liquidator could
be sued in damages for breach of a statutory duty which he had failed
to perform while functioning as liquidator. We do not think that this
case is of any assistance to the appellant. We are ul:J.able to appreciate
how after the company was dissolved the liquidator could still claim
to represent the company and execute a registered de>~d of sale. Once
the company was dissolved it ceased to exist and the liquidator could
not represent a non-existing company. If tl1e liquidator was to discharge any duty or perform any function on behalf of the dissolved
company he should have express statutory authority. The Companies
Act 1913 contained no provision enabling the liquidator to do any act
on behalf of a dissolved company. S. 209 (H) of the Companies Act,
1913 enjoined the liquidator as soon as the affairs of the company were
wound up to make up an account of the winding up and to call a gene-
(!) [1903] 2 Ch. Divn. p. 625.
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ral meeting of the company and a mreting of the creditors for the purpose of laying the accounts before the meetings. The liquidator was
then required to send to the Registrar a copy of tho acconnt and to·
make a return to him of the holding of the meetings. The Registrar
on receiving the accounts and the returns was required to register them
an on the expiration of three months of registration the company was
to be deemed as dissolved. The only duty cast upon the liquidator
thereafter was that under s. 244(B). It was that the liquidator should
on the dissolution of the company pay into the Reserve Bank of India,
to the credit of the Central Government in an acconnt called the Companies Liquidation Account any money representing unclaimed dividend or any undistributed assets in his hands on the day of dissolution.
No other duty was stipulated to be performed by the liquidator under
the provisions of the Companies Act, 1913, after the dissolution of the
company. We are, therefore, unable to agree with the submission of
the learned counsel that the liquidator had the jurisdiction to execute
the deed of sale dated January 28, 1941 after the company had been
dissolved.
The next question which we must consider is what was the effect of
the dissolution of the company on the lease-hold interest which the
company had in the land. No term of the lease has been brought to
our notice by which the lease would stand extinguished on the dissolutio'n of the company. If the company had a subsisting interest in the
lease on the date of dissolution such interest must necessarily vest in
the Government by escheat or as bona vacantia. In India the law is
well settled that the property of an intestate dying without leaving lawful heirs and the property of a dissolved Corporation
pas~2s to the
Government by escheat or as bona vacant/a. Of course such property
will be subject to trusts and charges, if any, previously effecting its
vide M/s. rierce Leslie & Co. Ltd., v. Violat Ouchterlong Wapshare
& Ors.('). It is also to be noticed here thats. 244(B) of the Companies Act 1913, as well ass. 555(2) of the Companies Act 1956 expressly enjoin a duty on the liquidator to deposit, on the dissolution of
the company, into an account in the Reserve Bank of India known as
the Companies Liquidation Acconnt any money representing nnpaid
dividend or undisputed assets lying in his hands at the time of dissolution. The learned counsel for the appellant relied upon the decisions
of the Allahabad High Court in Tulshi Ram Sahu & Anr. v. Gur Dayal
Si11gh & Anr.( 2) and Mussamat Ramman Bibi v. Mathura Prasad &
Anr. ("). Both were cases of fixed rate tenancies.
As pointed out
(I) A.LR. 1969 pp. 843,
(2) I.L.R. 33 Allahabad 111.
(3) 75 Indian Cases 621.
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N. B. TANDON v. SHANKERLAL (Chinnappa Reddy, J.)
827
by the Full Bench in Tulsi Ram Sahu & Anr. v. Gur Dayal Singh
& Anr.,(I) one of the incidentsi of a fixed rate tenancy was that ph\vid·
ed bys. 18 of the Agra Tenancy Act 1901 which prescribed that a right
of occupancy would stand extinguished when a fixed-rate tenant died
leaving no heir entitled under the Act to inherit the right of occupancy.
It followed therefrom that the land had to revert to the landlord and
could not go to the Government by escheat. On the other hand in
Sonet Kooer v. Himmat Bahadur & Ors.(2).
The Privy Council held
that on the failure of heirs to a tenant holding land under Mukerrori
Tenure there was nothing in the nature of the tenure which prevented
the Crown from taking the Mukerrori by escheat, subject to the payment of rent to the Zamindar. If the lease-hold interest of the company
in the land became vested in the government on the dissolution of the
company it must follow that the suit at the instance of the plaintiffs was
not maintainable.
The next question for consideration is whether the plaintiffs were
estopped from denying the validity of the sale in favour of the Benaras
Bank Ltd., and the character of the possession of the Benaras Bank.
Ltd., and its successors in interest. As already mentioned by us
Budhsingh and Jialal sent a notice dated January 11, 1941, through
their lawyer demanding of the liquidator of ·the Benaras Bank Ltd.,
payment of arrears of rent for four years and asserting that the lease
was forfeited consequent on the lessee's failure to pay rent for a conti·
nuous period of three years. The liquidator denied the claim of right
of the lessor to forfeit the lease but admitted the claim for rent. The
liquidator paid the rent and it was accepted by Budh Singh and Jialal.
Later also the evidence shows that Jugal Kishore the purchaser froni
Budh Singh and Jialal also accepted rent from the official liquidator of
the Benaras Bank Ltd. This course of conduct of Budh Singh and
Jialal and their successor Jugal Kishore clearly indicates the acceptance,
by them, of the position that the Benaras Bank Ltd. had succeeded to
the rights of the company in the lease-hold interest. Further, the offi·
cial liquidator of the Benaras, Bank Ltd. said first tried to sell tl_1e leaie·
hold interest by public auction. When that sale did not frustify because
of the failure of the higll'ost bidder to deposit the sale price, the lease·
hold interest was sold to the defendant with the sanction of the Com·
parry Judge.
At no point of time did the predecessors-in-interest of
the plaintiffs raise the slightest objection to the sale of the lease-hold
interest. It was thereafter that the defendant obtained the permission
(1) I.L.R. 33 Allahabad 111.
(2) I.LR. (I) Calcutta 391.
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of the Municipal Board, Saharanpur, and raised construction on the
land. The plaintiffs themselves admittedly reside nearabout the land
in dispute. They did not raise any objection to the raising of the constructions. The plaintiffs as well as the defendants appeared to proceed on the common understanding that the defendants had succeeded
to the interest of Patel Mills Ltd., in the lease-hold interest. We are,
therefore, of the view that the plaintiffs were estopped from contending that the defendant had no interest in land. The amount only right
of the plaintiffs was to receive the rent. The result of our discussion
is that the appeal is allowed and the suit is dismissed with costs throughout. It is, however, made clear that the plaintiffs have the right to
reo~ive rent from the defendl!nts.
P.B.R.
Appeal allowed.
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