Court-ordered liquidation sale overrides lease clause requiring State consent, Calcutta High Court rules

The State had granted a lease of the disputed land to Himalaya Rubber Products Ltd. in 1978 for an industrial estate.

The lease restricted assignment without the lessor’s written consent.

After the lessee went into liquidation, the property was included among its assets and sold by court-directed auction; the sale was confirmed and a registered deed of assignment was executed in favour of the private respondents in 2011.

The State did not challenge the sale orders or the deed.

When the authorities did not mutate the respondents’ names, they obtained a writ directing mutation.

The State appealed, relying principally on the lease restriction and the absence of its consent

1. Whether the lease restriction requiring the lessor’s written consent to an assignment barred mutation following a court-directed auction and registered assignment in liquidation

2. Whether the State could resist mutation on grounds concerning the liquidation sale when it had not challenged the sale orders or the deed of assignment

3. Whether the principles in Ajar Enterprises Private Limited v. Satyanarayan Somani and State of Kerala v. Joseph and Company applied to the dispute

Section 32 of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA) gives the Act overriding effect over inconsistent laws and instruments having effect by virtue of law; the court held that the lease restriction could not prevail over a court-directed transfer made within the SICA framework.

Clause 2(vi) of the lease restricted assignments by the lessee without the lessor’s written consent, while Clause 2(viii) contemplated the lessee’s winding up without prohibiting vesting in a third party.

Mutation is consequential upon a valid transfer: the mutating authority is not to determine title or the validity of the transfer, and must effect mutation where the requisite formalities are met.

The court distinguished Ajar Enterprises, which concerned renewal of a lease, and Joseph and Company, which concerned a lessee’s unauthorised transfer, rather than a court-directed liquidation sale.

The State’s reliance on Sections 2 and 3 of the Government Grants Act, 1895, was rejected; the court noted that the Act had been repealed by the time the assignment was executed and that the later SICA’s overriding provision governed.

The assignment followed a court-directed auction and was confirmed and registered; the State had not challenged either the sale orders or the deed.

The court therefore held that the lease’s consent restriction, which addressed transfers by the lessee, did not invalidate this court-directed transfer under the SICA framework.

The lease’s winding-up clause also contemplated vesting without imposing a bar on transfer.

Further, the State’s objections to the liquidation process could not be raised for the first time at the mutation stage, and the mutating authority was not the forum to determine title or the transfer’s validity.

The cited precedents did not alter that conclusion because they concerned lease renewal and an unauthorised transfer by a lessee, respectively

The delay in filing the appeal was condoned; the connected application was dismissed.

The time for the State to comply with the mutation direction was extended to 15 November 2026.

There was no order as to costs