Official Liquidator taking over third party, the landlords being entitled to the rentals immediately as per terms of the lease deed : Karnataka High Court.

This particular decision is held by the High Court Of Karnataka through the single bench of Justice Suraj Govindraj in the case of N R Ravi V. The Official Liquidator of M/S .Sem India System Private Limited.


The Applicant Claims to be the owner of the property which has been leased out to the company in liquidation on 15/05/2008. As per the terms of the lease agreement, the company in liquidation has deposited of Rs.13,63,000/- and in terms of lease agreement, certain amount was required to be paid as monthly lease rental for the schedule premises.
Though the lease period after a period of Eleven months, the company in liquidation did not hand over the possession of the premises and continued to occupy the same. Subsequently, the company in liquidation stopped the payments of rental and in mean while, winding up proceedings being filed before the court.

Orders and Judgements

The bench noted that the claim now made towards the first floor is only on account of the Applicant not being able to rent out the first floor premises on account of the entire premises being locked up at the instance of the Official Liquidator and the Secured Creditor.

Thus, the Court held that the rentals for the first floor from 15.07.2014 till the handing over of the said possession on 31.05.2017 would have to be paid.

Referring to sections 430, 429A and 476 of the Companies Act 1956, the bench said, “The amount payable by the Company in liquidation as rental due to the landlord until the Official Liquidator takes possession is only a preferential claim. On the Official Liquidator stepping into the shoes of the tenant and the Official Liquidator continuing in possession, the amounts payable would be the cost of winding.Accordingly it allowed the application in part petition and said, “The Official Liquidator is directed to make payment of rentals from 15.07.2014 till the date of handing over, i.e., 30.04.2017 in respect of ground floor and 31.05.2017 in respect of the first floor as costs of winding up within a period of Eight weeks from day from and out of the funds available to the credit of the company in liquidation, if necessary by recovering the said amount from the Secured Creditor.”The rentals payable prior to 15.10.2014, the same would have to be treated as a preferential debt.

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Judgement reviewed by- Mohammed Shoaib

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