BENGALURU: Execution of the lease deed by the ex-management of the Mysore Kirloskar Ltd., in liquidation a few days before it was winding up to transfer six acres, 29 guntas of land worth several crores to a related party, Kirloskar Institute of Advanced Management Studies (KIAMS), for a monthly paltry sum of Rs 1,250 for 28 years in Harihara of Davanagere district is nothing but a sham, bogus, fraudulent, and illegal step, said the Karnataka High Court.
The HC directed the Official Liquidator (OL) to take possession of the property and put it for public auction to realise the fair market value for making payment to the creditors.
The court said that the KIAMS may also participate in public auction proceedings, if they so desire. The KIAMS is liable to pay market rent of the assets in its possession from the date of the lease deed till possession is taken over by the OL, for which the approved valuer will assess the market rent of the assets in question, the court added.
A division bench of Justice DK Singh and Justice Venkatesh Naik T passed the order, allowing the Original Side Appeal filed by the OL of the Mysore Kirloskar Ltd., questioning the order dated July 21, 2015, passed by the company Court in the company application.
On July 29, 2011, the OL filed an application before the company court seeking to declare the lease deed as void against the OL as it was executed a few days prior to the presentation of the company's petition before the court, which was on March 14, 2000, and consequential cancellation of the lease agreement. The same was dismissed on the ground that it was barred by the limitation.
Setting aside the dismissal order, the division bench held that the view taken by the company court is an erroneous one and cannot be sustained.
The transaction between the company in liquidation and the KIAMS is not at arm's length but to a related party, and that too against the interest of the company, its creditors, shareholders, etc., valuable properties of several crores have been sought to be given for a pittance to the related party just before presentation of the winding up petition.
Following the lease agreement dated January 22, 2000, for 28 years, by the ex-management of the Mysore Kirloskar Ltd., the KIAMS was put in possession of the total land measuring six acres, 29 guntas bearing Sy.No. 22, a part of Sy.No. 23 and a part of Sy. No.27, and buildings, structures, facilities, amenities, plants and machinery on the land, in Harihar village and taluk.
The company court ordered the winding up of Mysore Kirloskar Limited on April 1, 2004.
A spokesperson of the Kirloskar Institute of Management (KIM) stated that the institute notes the order of the Karnataka High Court’s Division Bench, but strongly disagrees with its findings. "KIM has been operating its campus at Harihar since 1992 i.e., much before the lease deed in question was even executed – and has, over more than three decades, built and operated a distinguished educational institution that has shaped the careers of thousands of students. The campus at Harihar is not merely a piece of land. It is a thriving academic community of students, faculty, and staff, and a matter of considerable public interest as an educational institution in Harihar. We wish to place on record that the characterisation of the lease arrangement as a ‘sham’ transaction is disputed and does not reflect the complete facts and circumstances of the matter. KIM has been in continuous, uninterrupted possession of the land, has paid its dues, and has made substantial investments in developing the land and the institution and its infrastructure over the years."
"The Single Judge of the Karnataka High Court vide its order dated July 21, 2015 had rejected the claims of the Official Liquidator (OL) of Mysore Kirloskar Limited (MKL) and had rendered a finding that the claims of the OL against the lease deed are barred by limitation. It was also held that the OL cannot approbate and reprobate, as the OL has been accepting rents under the lease deed since 2005. This order was appealed by the OL before the Division Bench. We respectfully state that the Division Bench has exceeded the scope of the appeal without affording KIM a fair opportunity to respond and has remained silent on the findings of the Single Judge," the spokesperson said, adding that KIM is in the process of challenging the order before the Supreme Court of India and has faith that the judiciary will do justice after considering the facts and circumstances of the matter.