Holding

The original lease terminated upon liquidation and breach, so no automatic renewal right exists, but a fresh lease may be granted to the purchaser subject to payment of arrears and at the current schedule rates.

Summary

The Kolkata Port Trust had leased premises to Das Reprographics Ltd. for 29 years, with a clause allowing renewal if notice was given and the lessee complied with covenants. The company went into liquidation in 1992, having defaulted on rent and taxes, and the lease terminated as per the deed. The assets of the liquidated company were sold to Efclon Tie‑up Pvt. Ltd., which sought a fresh lease on the same terms as the original lease. The High Court ordered the Trust to grant such a lease after the purchaser cleared arrears, a decision later appealed. The Supreme Court held that the original lease had ended and the purchaser could not claim an automatic right to the land, but in the larger public interest a fresh lease could be granted to Efclon subject to payment of all dues and at the rates prescribed in the current Schedule of the Port Trust Act. Consequently, the appeal was allowed and the Trust was directed to execute a fresh lease on those terms.

Issues considered

The purchaser of the liquidated company's assets can claim the right to the leased land under the original lease.
Whether the High Court was correct in directing the Port Trust to grant a fresh lease on the terms of the original lease deed.

Legislation cited

Major Port Trust Act

Subjects

lease renewalliquidationoption to renewschedule of ratesPort Trustasset saleworkmenfresh leasebreach of covenantsocial justice

Judgment

_, BOARD OF TRUSTEES, PORT OF KOLKATA A
v.
EFCLON TIE-UP PVT. LTD. AND ORS.

MAY 8, 2006
.~

[H.K.SEMA AND DR. AR. LAKSHMANAN, JJ.] B
Lease-Indenture of lease-Entered into by a Company and the Port
Trust-It was stated in the deed that the lessee had the option ofafresh lease
for a further term of 30 years provided a notice stating the same was given
to the Port Trust at least six months before expiration of the subsisting
---';.
lease-Port Trust had also the option of renewing the lease for such further c
period, provided the conditions of the lease deed were fulfilled-It was also
stipulated that in the event ofthe Company going into liquidation or is wound
up compulsorily or voluntarily, the Port Trust would reenter possession and
the lease would be brought to an end-The Company, in a letter, requested
the Port Trust to renew the lease executed in its favour in 1962 for another D
term of 30 years-The Company also stated that it had rental dues and
municipal taxes to be paid which it would clear before the expiry of the/ease
which was subsisting-The Port Trust, however, did not respond to this
letter-The lease expired by ejjlux of time-The Company had still not paid
its outstanding dues-High Court directed the Port Trust to take possession
of the assets of the Company forthwith-Offers for purchase of assets of the E
liquidated company were invited-The High Court accepted the offer made
by a bidder and also approved the agreement whereby the bidder agreed
to reemploy the workmen of the liquidated company-Aggrieved by the
order, United Bank ofIndia filed an appeal in the High Court on the ground
that the sale. of the assets of the liquidated company was conducted with
undue haste and without t1ying to ensure that the maximum price was fetched
F
for the assets of the company-The appeal was dismissed-However, the

- <
High Court directed the Port Trust to grant fresh lease in consonance with
the lease indenture that existed between the Port Trust and the liquidated
company provided the bidder cleared all the outstanding rental dues and
taxes-Correctness of-Held: The option to renew the lease was not validly G
exercised by the company in liquidation-The bidder was the auction
purchaser of only the assets of the company (ftxtures and furniture)-The
land belonged to the Port Trust-Hence the bidder had no automatic right
, ( for renewal of the /ease-However, Social justice demands that the lease in
respect of the factory premises be renewed by the Port Trust in favour of
H
95
96 Sl.!PREME COURT REPORTS l2006] SUPP. 2 S.C.R.

A the bidder so that the operation of the factory thereof can be commenced-
......
Port Trust directed to grant fresh lease to the bidder in the larger interest
of the industry as also the workmen and of the Port Trust subject to the
payment of all arrears and dues together with interest-The lease will be
granted on the basis of the scheduled rate from the date of possession i.e.
04.08.2003.
B
An indenture of lease was entered into by a Company and the
Kolkata Port Trust in respect of a premises. The lease was for a period
of 29 years, 1 month and 25 days. It was stated in the deed that the lessee
may have the option of a fresh lease for a further term of 30 years
provided a notice stating the same was given to the Port Trust at least
c six months before expiration of the subsisting lease. The Port Trust had
the option of renewing the lease for such further period, provided the
covenant conditions were duly performed and the increase in rent is up
to 25%, but not exceeding the rent as per the 'Schedule of Rates'. It was
also clearly stipulated in the lease deed that, if the Company goes into
D liquidation or is wound up compulsorily or voluntarily, the Port Trust
would reenter possession and the lease would be brought to an end.

On 01.08.1991, a letter was written by the Company to the Port
Trust requesting the appellant for considering the renewal of the lease
executed in their favour in 1962 for another term of 30 years. It was also
E stated in that letter that, the Company had rental dues and municipal
taxes to be paid which they would clear before the expiry of the lease
whkh was subsisting. The Port Trust, however, did not respond to this
letter. Another letter was sent by the Company to the Port Trust requesting
for the extension of the lease of the land. The lease deed expired by efflux
of time. The Company had not even then paid its outstanding dues
F thereby it was still in bn:ach of the stipulations in the lease deed.

The Port Trust informed the Company that a certain sum was
outstanding towards rent and taxes including 15% interest and that this
should be cleared before any extension of lease could be considered. The
possession of the assets of the Company was directed to be taken over
G forthwith by the High Court. Subsequently, invitation for offers for
purchasing the assets of the liquidated Company was made. Various
advertisements were issued as per the order of the High Court after
which many offers were made by different parties. The High Court
accepted the offer made by respondent :'llo. 1 and also approved the
agreement entered into by respondent No. I with the workmen of the
H
BOARD OF TRUSTEES, PORT OF KOLKATA v. EFCLON TIE-UP PVT. LTD. 97

liquidated Company to reemploy them_ A
Aggrieved by the order of the High Court, the United Bank of India
filed an appeal in the High Court on the ground that the sale of the assets
of the Company was conducted with undue haste and without trying to
ensure that the maximum price was fetched for the assets of the Company.
The appeal was dismissed. B
An application was moved by the respondents in the High Court for
modification of the order of the High Court stating that the option of
renewal had been found to be validly exercised by the liquidated Company
and, therefore, the Port Trust had no option but to renew the lease in
terms of the indenture of lease which existed between the liquidated C
Company and the Port Trust

The High Court allowed the claim of the respondents and ordered
the Port Trust that, upon the respondent clearing all the outstanding
rental dues and taxes, the Port Trust should grant fresh lease in consonance
with the lease indenture that existed between the Port Trust and the D
Company. Hence the appeaL

The following questions arose before the Court:-

(I) Whether respondent No. I due to the fact of it having bought
over the assets of the Company that was liquidated could E
exercise right over the property (land) which the Port Trust
had, by an indenture of lease, leased to the liquidated Company?

(2) Whether the High Court was correct in granting a fresh lease
to respondent No. I on the terms specified in the original
indenture of lease between the Port Trust and the liquidated F
Company?

Allowing the appeal, the Court

HELD: I. The lease could not he granted to respondent No. I for
the following reasons:- G
a. The option to renew the lease was not validly exercised by the
Company in liquidation. The Company was in breach of
various terms and conditions of the indenture of the lease, inter
alia, relating to non-payment of rent, municipal taxes,
unauthorized construction of land in question etc.; (104-B-C) H
98 SUPREME COURT REPORTS (2006] SUPP. 2 S.C.R.

A b. Respondent No. l was the auction-purchaser of only the assets
of the Company (fixtures and furniture) lying, inter alia, in the
premises in question. lt was incorrect to assume that a further
right to renew the lease deed vested in respondent No. l;
[104-DI

B c. Respondent No. 1 was not the successors-in-interest of the
Company in liquidation qua the right to renew the lease deed;
[104-El

d. lt was the admitted position that the lease deed came to an end
in 1992 and no renewal was granted thereon, particularly,
C since the right to grant renewal was in the discretion of the
Port Trust. Such discretion existed even if the terms and
conditions of the indenture of the lease had not been breached
by the Company in liquidation; (104-E-F)

e. In all fairness the Port Trust had agreed to the grant of a fresh
D lease to respondent No. 1 as per the prevailing rates in the
schedule of rates in the Port Trust which was unacceptable to
the said Company which wanted renewal at the rates prescribed
in the lease deed. (104-G-H]

2. The High Court ought to have seen that the schedule of rent
E changes on the basis of the economic condition that is prevailing at a
given point of time in every economy. Therefore, the rent that is demanded
by the Port Trust from respondent No. 1 now is absolutely fair and
reasonable and the schedule of rent changes has been declared valid by
the High Court. [104-H, 105-AJ

f 3. The High Court should have seen that, in any case, the indenture
of lease clearly provided that if the Company in liquidation was either
voluntarily or compulsorily wound up, then the lease deed would be
brought to an end. In that case, of course, no question of granting
extension of the lease deed would arise. Even if it is assumed that the
extension of lease was to be granted from 1992 onwards the lease deed
G itself would automatically have come to an end by operation of the
express terms of the indenture of lease. [105-Al

4. There is no lease that is subsisting between the Port Trust and
the liquidated Company and hence the claim of respondent No. 1 that
the original lease deed is subsisting thereby giving them an automatic
H right to the land in question is untenable and has no merit. [ 106-AI
BOARD OF TRUSTEES, PORT OF KOLKATA v. EFCLON TIE-UP PVT. LTD. 99

.... 5. The rates that are present in the current Schedule of the Port A
Trust Act in Kolkata should apply. The claim of the respondent that it
should be allowed to pay the rates in accordance with the clause in the
original lease indenture of I 962 is not fair on the Port Trust. Also the
prices that are prevalent in the schedules ofthe Port Trust Act are not based
on profiteering, but on inflationary tendencies. [106-D]
B
6. With regard to the claim of respondent No. I that, ifthe Company
had not gone into liquidation, while renewing the lease, the Company
would have only had to pay 25% over and above the last rent paid under
the original lease for the period of renewal of the same, does not hold
good, as such a renewal need not be contemplated at this point, as the
Company itself is not in existence and also the clause in the original lease c
indenture will come in the way which specifically mentions that if the
company goes into liquidation or is wound up compulsorily or voluntarily,
the Port Trust would reenter possession and the lease would be brought
to an end. [106-F-G]

7. Social justice demands that the lease in respect of the factory D
premises be renewed by the Port Trust in favour of respondent No. I so
that the operation of the factory thereof can be commenced. However, the
lease can be renewed only subject to the payment of all the arrears and
dues together with interest. In the larger interest of the industry as also the
workmen and of the Port Trust, the Port Trust is, therefore, directed to E
grant a fresh lease to respondent No. I subject to the payment of the arrears/
dues together with interest at the rate of 15% p.a. as suggested by the
Kolkata Port Trust in its letters. The Port Trust shall also grant a fresh
lease in favour of respondent No. I on the basis of the scheduled rate from
the date of possession i.e. 04.08.2003. [108-G-H, 109-AJ
F
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2528 of
-; 2006.
;~
From the Judgment/Order dated 1.12.2004 of the High Court of
Judicature at Kolkata in A.C.O. No. 87 of2003 in A.P.O.T. No. 318of1998.
G
T.R. Andhyarujina, Sr. Adv., Ms. Anuradha Priyadarshni, Ms. Swati
Grover, Ms. Sonia Dube, Ms. Indra Sawhney, Advs., with him for the
Appellant.

U.U. Lalit, Vijay Hansaria, Sr. Adv., Jishnov Saha, B.K. Satija, Dhruv
Mehta, Harshvardhan, Yashraj Deora for Mis. K.L. Mehta & Co., Sushi! K. H
100 SUPREME COURT REPORTS [2006] SUPP. 2 S.C.R.

A Tekriwal, Triloki Nath Razdan, Advs., with them for the Respondents. .....
.
The Judgment of the Court was delivered by

Dr. AR. LAKSHMANAN, J. : Leave granted.

This appeal was directed against the final judgment and Order dated
B 01.12.2004 passed by the Division Bench of the High Court at Calcutta in
ACO No. 87 of 2003 in APOT No. 318 of 1998 whereby the High Court
allowed the claim of the respondents herein.

The brief facts of the case are as follows:-

c An indenture of lease was entered into by Das Reprographics (in short
"the Company') and the Kolkata Port Trust (!n short 'Port Trust') in respect
of premises at P-10, Taratola Road, Kolkata. The lease deed stipulated that,
the lease is for a period of 29 years, 1 month and 25 days, w .e.f November
28, 1962 on a monthly rental basis of Rs. 1,049.12. It was stated in the deed
that, the lessee may have the option of a fresh lease for a further term of
D 30 years provided a notice stating the s11me was given to the Port Trust at
least six months before expiration of subsisting lease. According to the deed,
the Municipal Taxes in respect of the land was to be paid by the Company.
The Port Trust had the option of renewing the lease for such further period.
provided the covenant conditions are duly performed and the increase in rent
E is upto 25%, but not exceeding the rent as per the 'Schedule of Rates'.

It was also clearly stipulated in the Lease deed that, ifthe company goes
into liquidation or is wound up compulsorily or voluntarily, the Port Trust
would re-enter possession and the lease would be brought to an end.

F On 01.08.1991. a letter was written by the Company to the Port Trust
requesting the appellant for considering the renewal of the lease executed
in their favour in 1962 for another term of 30 years. It was also stated in
the letter that, the company has rental dues and municipal taxes to be paid
which they will clear before the expiry of the lease which was subsisting.
The Port Trust however, did not respond to this letter. Later on 26. l LI 991,
G another letter was sent by the company to the Port Trust requesting for the
extension of the lease of the land. The lease deed t!xpired on 22.01.1992 by
efflux of time. The company had not even then, paid of their outstanding
dues, thereby was still in breach of the stipulations in the lease deed.

On 07.03.1992, the Port Trust informed the company that a total sum
H of Rs.66,312 was outstanding towards rent and taxes including 15% interest
BOARD OF TRUSTEES, PORT OF KOLKATA "· EFCLON TIE-UP PVT. LID. [DR. AR. LAKSHMANAN, J.] I0 J
d ..
and this should be cleared before any extension of lease could be considered. A
However, by taking into consideration the fact of a large number of workmen
working in the company, the Port Trust asked the company to correct its
breaches so that the extension of lease could be considered.

On 21.12.1994, by an order in Company Petition No.15111986, the
High Court of Calcutta, directed to take possession of the assets of the B
company forthwith. By an order dated 27.08.1997, invitation for offers for
purchasing the assets of the liquidated company was made. Various
advertisements were issued as per the order of the High Court after which
many offers were made by different parties.

The High Court accepted the offer made by the present respondent No.
c
I (Efclon) by an Order dated 16.0 LI 998, for· Rs. 50 lakhs and also on an
agreement made by the respondent with the workmen of the liquidated
company to re-employ them.

Aggrieved by this order of the High Court, United Bank of India filed D
an appeal in the High Court on the ground that the sale of assets of the
company was conducted with undue haste and without trying to ensure that
the maximum price was fetched for the assets of the company. The Division
Bench held on 09.04.2003, that, the finding of the learned single Judge was
correct and thereby confirmed the sale .of all the assets of the company at,
P-10, Taratolla Road, Kolkata. The Division Bench also observed that the E
lease over the land had expired and since the purchaser, Efclon, does not
intend to destroy the character of the factory, it would be desirable that the
Port Trust should grant afresh lease of the Taratola land which has expired
in favour of respondent No. 1 (Efclon). On 11.08.2003, an application was
made by the respondents in the High Court, for the modification of the order F
of the Division Bench dated 09,04.2003, stating that, the option of renewal
has been found to be validly exercised by the liquidated company and
. therefore, the Port Trust had no option but to renew the lease in terms of
the indenture oflease which existed between the liquidated company and the
Port Trust.
G
The High Court while deciding on this matter on 01.12.2004, allowed
the claim of the respondents and thereby ordered the Port Trust that, upon
the respondent clearing all the outstanding rental dues and taxes, the Port
Trust shall grant fresh lease in consonance with the lease indenture that
existed between the Port Trust and Das Reprographics.
H
102 SUPREME COURT REPORTS [2006] SUPP. 2 S.C.R.

A The present appeal before this Court is preferred against this order dated
01.12.2002 of the High Court.

We heard Mr. T.R. Andhyarujina, learned Senior Counsel, appearing
for the appellants and Mr. U.U.Lalit, learned Senior Counsel, appearing for
the respondents and Mr. Vijay Hansaria, learned Senior Counsel appearing
B for the workmen.

Learned Senior Counsel appearing for the appellant submitted that, the
question of renewal of lease deed could not arise owing to the fact that the
option to renew the lease was not validly exercised by the Company in
liquidation as the Company was in breach of various terms and conditions
C of the indenture of lease by having outstanding rental dues and municipal
taxes.

Also the lease deed provided that, ifthe company (Das Reprographics)
was either voluntarily or compulsorily wound up, the lease deed would be
brought to an end. Here since the company has been wound up, the lease
D is presumed to have come to an end and therefore, the question of granting
extension of lease would not arise.

The appellant further submitted that respondent No. I (Efclon) is only
the owner of the assets of the Liquidated Company which includes fixtures
and furnitures. Therefore, they could exercise their rights only over the
E assets of the company and not on the land which is the property of the Port
Trust. Also since the lease had coine to an end, the company has absolutely
no right over the property in question.

Mr. Andhyarujina, submitted that the Port Trust after the order of the
High Court has agreed to grant a fresh lease to the company, as per the
F prevailing rates in Schedule of rates of the Port Trust which are based not
on profiteering, but on inflationar; tendencies. But the High Court granted
fresh lease at the rates prescribed under the lease deed which was drawn in
1962 which is not fair.

Mr. U.U.Lalit, learned senior advocate for the respondents submitted
G referring to the letters written by the company and the Port Trust that the
correspondence would indicate that the company did exercise their option
to renew the lease in the proc1:dure mentioned in the lease and also the letter
by the Port Trust reveals that, it was not the intention of the Kolkata Port
Trust to tenninate the lease but to grant a fresh lease to the lessee upon
H payment of the balance dues.
BOARD OF TRUSTEES, PORT OF KOLKAT Av. EFCLON TIE-UP PVT.LID. [DR. AR. LAKSHMANAN, !.] J03

Mr.U.U.Lalit submitted that, the respondent after acquiring the assets A
of the company entered into a contract with the employees of the liquidated
company for re-employing them, clearly shows that the sole object of the
respondent was to revive and rehabilitate its units and to reemploy its
workmen.

It was further contented by the respondents that renewal of the lease B
must be from the date of expiry of the original lease, and also that the amount
should be in accordance to what was prescribed in the original lease deed
between the Port Trust and Das Reprographics.

Another submission made by the respondent was that, if Das
Reprographics had not gone into liquidation, while renewing the lease, the c
company would have only had to pay 25% over and above the last rent paid
under the original lease for the period of renewal of the same. The Kolkata
Port Trust is now demanding rent at its scheduled rates for a fresh grant of
lease which is three times than the last rent, which will make it impossible
for the respondents to reopen the closed units of the company or to reemploy D
its workmen.

Mr. Vijay Hansaria, learned Senior Counsel, appearing for the workmen
submitted that the Port Trust has no right to refuse formal renewal of the
lease, particularly with the knowledge that the livelihood of a large number
of people are dependant on it. Also that the Port Trust, by allowing the E
erstwhile lessee to continue to occupy the property even after the expiry of
the original terms of the lease and thereby renewed the lease by condl!ct.

We heard all the parties extensively and also went through the
documents placed before us. The issues in this case that deserve discussion
according to us is whether: F

• The respondent No. I (Efclon) due to the fact of them having
bought over the assets of the company that was liquidated
could exercise right over the property (land) which the Port
Trust had by an indenture of lease, leased to the liquidated G
company (Das Reprographics)?

• Whether the High Court was correct in granting a fresh lease
to the respondent No. I (Efclon) on the terms specified in the
original indenture of lease between the Port Trust and the
liquidated company (Das Reprographics)? H
104 SUPREME COURT REPORTS [2006] SUPP. 2 S.C.R.

A In oth.:r words, the question we are really concerned with now
is whether a fresh lease should be granted on the basis of the rates
as subsisting according to the schedule to the major Port Trust or
whether a fresh lease or whether a fresh lease could be allowed to
be executed on the terms and conditions as were existing in the
earlier lease. '·
B
The lease could not be granted to respondent No.I Efclon Tie-up Private
Limited for the following reasons:-

l. The option to renew the lease was not validly exercised by the
Company in liquidation. The Company was in breach of
C various terms and conditions of the indenture of the lease, inter
alia, relating to non-payment of rent, municipal taxes,
unauthorized construction of land in question etc.;

2. Mis Efclon Tie-up Private Limited were the auction purchasers
of only the assets of the company (fixtures and furnituri;;s)
D lying, inter alia, in the premises in question. It was incorrect
to assume that a furthe1 right to renew the lease deed vested
in M/s Efclon Tie-up Private Limited;

3. M's Efclon Tie-up Private Limited were not the successors in
intere~t of the Company in liquidation qua the right to renew
E the lease deed;

4. It was the admitted position that the lease deed cam.:: to an end
in 1992 and no renewal was granted thereon, particularly,
since the right to grant renewal was in the discretion of the Port
Trust, such discretion existed even if the terms and conditions
F of the indenture of the lease had not been breached by the
Company in liquidation;

5. In all fairness the Port Trust had agreed to the grant of a fresh
lease to Mis Efclon Tie-up Private Limited as per the prevailing
rates in the schedule of rates in the Port Trust which was
G unacceptable to the said Company which wanted renewal at
th~ rates prescribed in the lease deed.

The High Court ought to have seen that the schedule o: rent changes
on the basis of the economic condition th~t is prevailing at a given point of
time in every economy. Therefore, the rent that is demanded by the Port Trust
H
BOARD OF TRUSTEES, PORT OF KOLKATA" EFCLON TIE-UP PVT.LTD. [DR. AR. LAKSHMANAN, J.j I05
J
from Efclon now is absolutely fair and reasonable and the schedule of rent A
changes has been declared valid by the Calcutta High Court.

The High Court should have seen that, in any case, the indenture of
lease clearly provided that if the Company in liquidation M.L. Das
Reprographics was either voluntarily or compulsorily wound up, then the
lease deed would be brought to an end. In that case, of course, no question B
of granting extension of the lease deed would arise. Even if it is assumed
that the extension of lease was to be granted from 1992 onwards the lease
deed itself would automatically have come to an end by operation of the
express terms of the indenture of lease.

The lease granted in 1964 did not provide renewal as a matter of right C
and, in fact, the lease ended by efflux of time on 22.01.1992 whereupon no
extension was given. The option for renewal of lease was not given to the
respondent No.3 Company but was given to the Port Trust. The Port Trust
had agreed in fairness to execute a fresh lease deed with respondent No. I.
The rent would not be the market rent and, in fact, would be in consonance
with the schedule of rates framed under the Major Port Trust Act, which have D
the prior approval of the Central Government.

It is also relevant to note that respondent No. I had purchased the assets
of the Company in liquidation excluding the land belonging to the Port Trust.

We are of the opinion that:
E
I. There is no right over the property of the Port Trust existing
with the respondent No. I (Efclon) as claimed by them. In the
present case only the assets of the company which was
liquidated has been bought by the respondents, the land
belonged to the Port Trust. Even according to the original
indenture of lease between the Port Trust and the liquidated F
company, there were clauses which very clearly stated that, the
Port Trust had the option of renewing the lease for such further
period, provided the covenant conditions are duly performed.
It was also clearly stipulated in the Lease deed that, if the
company goes into liquidation or is wound up compulsorily G
or voluntarily, the Port Trust would re-enter possession and
the lease would be brought to an end. In the. present fact
situation, the company in liquidation was clearly in breach of
the covenant conditions by having outstanding rental dues and
tax liability with interest. Also the company did go into
liquidacion and therefore as the lease indenture says, the H
106 SUPREME COURT REPORTS [2006] SUPP. 2 S.C.R.

A original lease has come to an end and the Port Trust is
presumed to have automatically come into possession of the
land in question.

Therefore we hold that, there is no lease that is subsisting
between the Port Trust and the liquidated company and hence
B the respondent No. I (Efclon) claim that the original lease deed
is subsisting thereby giving them an automatic right to the land
in question is untenable and has no merit.

2. To the question as to whether the High Court was correct in
granting a fresh lease to the respondent No. I (Efclon) in
c accordance with the clause stipulated in the original lease
agreement, we are of the opinion that the High Court is correct
as far as the grant of fresh lease is concerned. Coming to the
second part of the question as to whether the rental amount
should be based on the stipulation mentioned in original lease
deed is concerned; we believe that the rates that are present
D in the current Schedule of the Port Trust Act in Kolkata should
apply. We are of the view that, the claim of the respondent
that they should be allowed to pay the rates in accordance to
the clause in the original lease indenture of 1962 is not fair
on the Port Trust. Also we are satisfied that the prices that are
prevalent in the schedules of the Port Trust Act are not based
E on profiteering, but on inflationary tendencies.

3. With regard to the respondent No.l's (Efclon) claim of, if Das
Reprographics had not gone into liquidation, while renewing
the lease, the company would have only had to pay 25% over
and above the last rent paid under the original lease for the
F
period ofrenewal of the same, does not hold good in our view,
as such a renewal need not ·be contemplated at this point, as
the company itself is not in existence and also the clause in
the original lease indenture will come in the way which
specifically mentions that if the company goes into liquidation
G or is wound up compulsorily or voluntarily, the Port Trust
would re-enter possession and the lease would be brought to
an end.
The larger interest of the workmen was canvassed by Mr. Vijay
Hansaria and also by respondent No. I for its own commercial purposes. The
H interest of workmen can be met by the Port Trust's willingness to grant a
BOARD OF TRUSTEES, PORT OF KOLKATA ·,. EFCLON TIE-UP PVT. LTD. [DR. AR LAKSHMANAN, I) I 07

fresh lease of the premises not at the market rate but at the rate prescribed A
in the schedule framed under the major Port Trust Act.

It has now brought to our notice that respondent No. I who are
continuing in possession are now inducting the third parties and seeking to
alienate the property to them. In these circumstances, I.A. No.3 of2006 was
filed by the Port Trust to direct respondent No. I to handover possession of B
the property to the Port Trust. In these circumstances, a contention was also
raised by the Port Trust that they were not required to execute the lease deed
in favour of respondent No. I.

The fact remains that respondent No. I Company remained in possession
of the property. It has now come to the knowledge of the Port Trust that c
despite the fact that no right over the property existed in favour of respondent
No. I. They are not only carrying out unauthorized constructions in the
premises but have also parted with the possession to various individuals and
companies not connected with their own business and are creating third party
rights. Such construction and part of the possession is not only impermissible
in view of the order of stay granted by this Court but in any event was not
D
even permitted under the lease of 1964.

We cannot also, at the same time, close our eyes to the realities. We
have, therefore, to safeguard the interest of the Port Trust, the interest of the
first respondent and the workmen by one stroke of pen. The trade unions
has applied for intervention and is represented by Mr. Vijay Hansaria,
E
learned senior counsel which has a large number of membership of workers
working in Das Reprographics Ltd. (in liquidation). Much water has flown
after the order of liquidation of respondent No.3 Company. Any adverse
orders passed by this Court, at this stage, would affect the right and interest
of the members of the union. The Company was directed to be wound up F
and the Official Liquidator was directed to take charge of the assets and
properties. The assets and properties thereof were put up for sale in terms
of a sale notice made and published on 05.09.1997. In these circumstances,
in an attempt to protect the livelihood of its members, the union entered into
an agreement with respondent No. I providing, inter alia, that respondent
No. I would take necessary steps in Court to purchase the assets and G
properties of the Company and also would assure employment to all the
eligible workers of the Company in phase-wise manner. There are other
conditions with which we are not now concerned. In terms of the
commitment made, respondent No. I participated in the sale of the assets and
properties of the Company and was declared the successful purchaser in H
108 SUPREME COURT REPORTS [2006] SUPP. 2 S.C.R.

A respect thereof by an order dated 16.01.1989. Several other proceedings
were taken by both the parties with which also we are not concerned. It is
stated that in terms of the order, respondent No. I has made payment of the
entire consideration to the Official Liquidator. The intention of the High
Court while passing the orders dated 16.01.1998 and 09.04.2003 is manifest
from the fact thdt while confirming the order dated 16.01.1998 for sale of
B the assets and properties of the Company, the High Court made the same
free from encumbrances and without any liabilities on account of any other
dues. With the revival and rehabilitation of the Company in mind, the High
Court directed that the properties where the factories of the Company are
situate be provided to respondent No. I. The High Court also directed that
c a fresh lease in respect thereof be granted to Respondent No. I presently in
possession of the factory premises. Respondent No. I is also in possession
of the assets and properties located therein. It is also not in dispute that
respondent No. I is not operating the factory for want of former renewal of
the lease. As a result, the right of the members of the workers of the union
has been put in jeopardy. The Port Trust itself allowed the erstwhile lessee
D to continue to occupy the property even after the expiry of the original terms
of the lease.

In our view. the workmen of the Company have a right to earn their
livelihood. The workmen are as such vitally inten~sted in the renewal of the
lease in respect of the property in question. The Port Trust, by its conduct,
E accepted the right of the Company to obtain renewal of the lease. The Port
Trust has never called upon the Company or the official liquidator to vacate
the property. The act of the Port Trust in allowing the respondent to continue
is only a benevolent act of the Port Trust keeping in view the consequences
that can arise if this was not allowed for the large number of workmen of
the company. As such, the lease of the property has been renewed or must
F be deemed to have been renewed as the workmen being interested in the
renewal of the lease of the property. They were also heard through their
senior counsel.

Social justice demands that the lease in respect of the factory premises
be renewed by the Port Trust in favour of respondent No. I so that the
G
operation of the factory thereof can be commenced. However, the lease can
be renewed only subject to the payment of all the arrears and dues together
with interest. We are, therefor<:, inclined in the larger interest of the industry
as also the workmen and of the Port Trust to direct the Port Trust to grant
a fresh lease to respondent No. I herein subject to the respondent No. I
H complying with the terms relating to the payment of the arrears/dues together
BOARD OF TRUSTEES, PORT OF KOLKATA '" EFCLON TIE-UP PVT LTD [DR. AR. LAKSHMANAN, J.] I 09

with interest at the rate of 15% p.a. as suggested by the Kolkata Port Trust A
in its letters dated 07.03. 1992 and 13.04. 1995. The Port Trust shall also grant
a fresh lease in favour ofrespondentNo.l on the basis of the scheduled rate
from the date of possession i.e. 04.08.2003.

In conclusion, we order a fresh lease indenture to be drawn from the
date the company came into possession of the land (i.e.04.08.2003) between B
the Port Trust and the Respondent No. l (Efclon) with regard to the premises
situated at P-10, Taratola Road, Kolkata at the rental rates contained in the
present Schedule of the Kolkata Port Trust Act as soon as the dues of the
liquidated company are discharged with by the respondents.

We are, therefore, directing the Port Trust to inform the Efclon Tie- c
up Private Limited; respondent No. I herein of the rental arrears together with
interest as suggested by the Port Trust in its letters dated 07.03.1992 and
13.04. 1995 within four weeks from the date of this order. In other words,
the Port Trust shall inform the first respondent herein of the rental arrears
from the date of expiry of the earlier·lease (21.01.1992) till the date of the
execution of the fresh lease at the old rate together with interest at the rate D
of 15% p.a. within 4 weeks from the date and upon such intimation the said
dues are to be cleared by the first respondent within 2 weeks thereafter and
upon such dues being cleared, the Port Trust shall grant a fresh lease from
04.08.2003 i.e. the date on which the first respondent was to be in possession
of the property by the official liquidator on the basis of the scheduled rate E
as now prevalent. The rate fixed by the Kolkata Port Trust as per the
scheduled rate will be effective from 04.08.2003. We are inclined to grant
the lease in favour of the respondent No. I who sought renewal of the lease
with the sole object of reviving and rehabilitating its units and to re-employ
its workmen thereof.
F
In the result, the civil appeal stands allowed. However, there shall be
no order as to costs.

V.S.S. Appeal allowed.