A.P.Srivastava, J. - (1.) This is a respondent's appeal against an order of a learned Single Judge of this Court by which he quashed two orders of the Dist. Judge, Varanasi, dated the 1st of October, 1956 and directed that the respondent to the petition must give effect to two previous orders of the District Judge dated the 3rd of September 1956 and the 6th of September 1956.
(2.) The farts of the case so far as they are material for this appeal may be briefly stated. There was a limited company known as the Banaras Cotton & Silk Mills Ltd. Banaras. In the 1st week of May 1955 it was ordered by this Court to be compulsorily wound up. The case was then transferred under Section 164 of the Indian Companies Act (Act VII of 1913) to the Dist. Judge of Banaras. He appointed three persons--Sri C.D. Parikh, Advocate, Sri Raghav Ram Varma, Advocate, and Sri B.L. Tandon, Chartered Accountant (impleaded in this appeal as respondents Nos. 3 to 5 and in the petition as respondents Nos. 2 to 4 and hereinafter referred to as the liquidators)--as official liquidators of the company that had been ordered to be wound up. In February 1956 under the directions of the District Judge an advertisement was published in the papers inviting tenders for taking the mills on lease. Tenders were submitted but none was found to be acceptably. A fresh advertisement inviting further tenders was then published and in response to it four tenders were received including one by Messrs. G.D. Mehrotra and Co., the petitioner (who is now respondent no. 5 and will hereinafter be referred to as the respondent) and one by Ramlal Raja Ram, the appellant (who was impleaded as respondent no. 5 in the original petition and will hereinafter be referred to as the appellant). The respondent offered to pay a monthly rental of Rs. 22,500/- but later on submitted by way of clarification that in addition he would be prepared to pay some amount for the depreciation of the mills as and when determined by the Income-tax Officer. The appellant offered to pay Rs. 28,000/- per month as rent in respect of the weaving section of the mills only. On the 2nd of June 1956, the appellant's tender was accepted under the directions of the District Judge and he further directed the liquidators to execute a lease in favour of the appellant within fifteen days. He however provided that liability to pay the rent was to begin two months after the date of the execution of the lease, or two months after obtaining the Tex Mark licence whichever date was later. The obtaining of the Tex Mark licence was necessary before the working of the weaving section of the mills could be started. For certain reasons, including differences about come of the terms of the lease, the lease in favour of the appellant could not be executed though the period of 15 days which was originally granted for the purpose was extended several times, and the liquidators started negotiations with the respondent so that he may, if he liked, revise the terms of his offer and make them more favourable to the mills. The respondent did this on the 18th August, 1956. On the 3rd of September, 1956, the District Judge finally ordered that if the appellant did not get the lease executed in his favour within two days, the lease would be given to the respondent on the terms and conditions entered in the order of that date. He further ordered that in case the lease in favour of the respondent did not materialise steps were to be taken for the sale of the mills. The respondent was required to deposit two months' rent in cash by way of security. On the 6th of September, 195S, the respondent pointed out to the District Judge that the two days period granted to the appellant for getting the lease executed in his favour had expired and that he was no longer entitled to have the lease made in his favour. The respondent prayed that the lease be granted in his favour as ordered on the 3rd of September, 1956 and that the liquidators be directed to hand over possession to him. This request of the respondent was accepted by the District Judge on the 6th of September, 1956 and he ordered the liquidators to lease out the mills to the respondent and to put him in possession. On the same date the liquidators wrote to the respondent requiring him to get the lease executed and to take possession over the mills. Possession over five godowns and a part of the office of the mills was handed over to the respondent on the same date. According to the liquidators, this was done because the respondent insisted that it being a very auspicious day the delivery of possession must be started on that date. The respondent, on the other hand, contends that as possession had been directed to be delivered to him the delivery of possession was started in ordinary course on that very date. Thereafter disputes arose between the respondent and the liquidators on several points including the preparation and verification of the lists of properties over which possession was to be delivered, the settlement of the terms of the lease and the final approval of the draft lease. The respondent hsd however, in compliance with. tho orders of the District Judge, deposited a sum, of Rs. 57,000, on account of two months' rent, with the liquidators. On the 38th September, 1956 thei respondent applied to the District Judge pointing out that he had complied with the conditions imposed in the order of the 3rd of September, 1956 and had even purchased the requisite general stamp for the execution of the lease. He prayed that the liquidators be directed to execute the lease in his favour. In reply the liquidators pointed out that they had not uptil then been able to ascertain either the financial condition, or the business reputation of the respondent, nor had they been able to ascertain to their satisfaction whether 'G.D. Mehrotra & Co.' was a one-man concern or whether it was a firm, registered or unregistered, or a private limited company. They prayed that the respondent be directed to give proper safeguards regarding the properties that were to be put in his possession and provide a sufficient guarantee for the payment of the rent. The District Judge then ordered that the respondent should "satisfy the liquidators about his financial position before the lease is to be executed and the mills are handed over to them." tie directed the liquidators to set in touch with the respondent for this purpose and to submit a report to him. He extended the 15 days time previously granted to the respondent for the execution of the lease by ten days more. Attempts were then made by the liquidators to ascertain the financial position, and the extent of the business experience of the respondent and also to find out his status i.e. whether G- D. Mehrotra & Co. was a single man concern or whether it was a registered or unregistered firm or a private limited company. In this connection the liquidators referred to the banks named by the respondent and wrote to the respondent himself. According to the liquidators, the attitude of the respondent was unresponsive and the plea he took was that the liquidators had no right to raise the question of his financial status at that stage and that without making any further fuss they should execute the lease in favour of the respondent as directed by the District Judge. Ultimately, on the 1st of October, 1956, the liquidators submitted a report to the District Judge in which they pointed out that in spite of the attempts they had made they had not been able to ascertain the financial status of the respondent or facts relating to his business experience. In that report they said that they had learnt that Messrs. G.D. Mehrotra & Co. was a partnership firm which had no banking account and that in the circumstances they were unable to recommend that the lease should be executed in favour of the respondent and that in their opinion it would be highly detrimental to the interests of; the creditors, share-holders and workers if the properties and assets of the company were handed over to the respondent or a lease was executed in his favour. They recommended that the orders dated the 3rd of September, 1956 and the 6th of September, 1956 be modified and that they be permitted to return the security money deposited by the respondent to him. They pointed out that in the order of the 3rd of September, 1956 they had been directed to take steps for the sale of the mills in case the lease did not materialise and sought directions in the matter. A copy of this report of the liquidators was given to the counsel for the respondent and when the report came up before the District Judge for consideration on the 1st of October, 1956, the liquidators as well as the counsel for the respondent were present. The counsel addressed some arguments to the Court but then prayed that time be given to him, for contacting his client for instructions. This request was not granted and the learned District Judge proceeded to make the first of the two orders passed on the 1st October, 1956 the validity of which was challenged by the appellant in the writ petition out of which this appeal hasi arisen. In that order after referring to the report of the liquidators and the events that had preceded it, the learned District Judge said that he was not satisfied "that the respondent was a party of substantial means who may be entrusted with the mills which is valued in the neighbourhood of several lacs. It is also doubtful if Messrs G.D. Mehrotra & Company has any experience of the running of the textile mills", He felt that any further delay in the disposal of the question of lease would be highly detrimental to the interest of liquidation. He, therefore, amended his orders dated the 3rd of September, 1956 and the 6th of September, 1956 and directed the liquidators not to lease out the mills to the respondent. The sum of Rs. 57,000 which the respondent had deposited in the account of the liquidators was ordered to be returned to him. The District Judge also directed that if the respondent had been put in possession of any portion of the mills, the possession should be taken back from him. The second impugned order of the 1st of October, 1956 was then made. By it the District Judge directed the liquidators that mills be leased out to the appellant who should execute the lease forthwith after getting the terms approved by the Court. He directed the liquidators to hand over possession to the appellant in accordance with the terms approved by the Court. On the same date a draft lease in favour of the appellant was submitted by the Official Liquidators to the District Judge for approval and was duly approved. At the request of the liquidators the appellant deposited a sum of Rs. one lac in the account of the liquidators. This amount included Rs. 57,000/- as security for two months rent and Rs. 43,000/in lieu of a bank guarantee. The lease was thereafter duly executed. The lessee and two of the liquidators signed it on the 1st of October and the 3rd liquidator signed it on the 2nd. Possession over the various parts of the mills was also handed over to the appellant on the 2nd of October, 1956 with the exception of the five godowns that were already in the possession of the respondent.
(3.) The 3rd and the 4th of October were holidays. On the 5th of October, 1956, the respondent filed his writ petition in which he claimed the following reliefs: (1) Issue of any suitable order, direction Or writ including a writ in the nature of a certiorari and quash the orders of the District Judge, Banaras dated the 18th September, 1956 and the 1st of October, 1956 and the lease alleged to have been executed on the 1st of October, 1956 in favour of Ramlal Raja Ram. (2) Issue a suitable direction, order of writ including a writ in the nature of mandamus directing the District Judge of Banaras to execute a lease on the terms and conditions contained in his order dated the 3rd September, 1956 in favour of the petitioner and to deliver possession of the entire mills to the petitioner. (3) Issue a suitable direction order or writ including a writ of mandamus directing the District Judge of Banaras to take back possession of any portion of the mills that may have been delivered to Ramlal Raja Ram. (4) Issue a suitable direction, order or writ in the nature of mandamus directing the District Judge not to disturb the possession of the petitioner over that portion of the mills in respect of which possession had been delivered to the petitioner. (5) Issue any suitable interim order, direction or writ including a writ in the nature of mandamus for the pendency of this petition not to give effect to the lease alleged to have been executed in favour of Ramlal Raja Ram and to maintain the status quo. (6) Grant any other or further relief which may be considered just and convenient in the circumstances of the case. (7) Award costs of this petition to the petitioner.";