• Can recovery of dues be made from directors of Pvt Ltd company if company has no net worth

CASE HIGHLIGHTS

Lessee/Tenant has turned wilful defaulter immediately after executing registered lease deed and has not paid lease rent even for a single day after executing lease deed and it has been almost 5 months now since then.

Lessee has been operating his business successfully even in covid times and under Lockdown as well.

Out of the Two Directors, one has been in Jail since the execution of lease deed on charges of Murder Conspiracy.

Notice has been served to the Lessee to vacate the Premises/Property on 18th March’ 2021 ( Notice Period 3 Months). At the end of the 6th month of non-payment of rent by lessee, Lessor will file a suit demanding possession of the Premises and will file a recovery suit for recovering his dues ( rent for lock-In period of 2 years).


LEASE HIGHLIGHTS

Lease Property/Premises: Hospital 

Lease Term: 9 Years

Lessor/Landlord: Partnership Firm
Lessee/Tenant: Pvt.Ltd.Company

Mandatory Lock-in Period: 2 Years
Type Of Lease Agreement: Registered Lease Deed

Termination Clause : On - Non Payment Of Rent For Consecutive 3 Months by lessee Followed By A Notice Period Of 3 Months

On Non-compliance Of Notice Of Vacation & Handing Over Of Premises/Property By Lessee To The Lessor: 
Possession will automatically be transferred to the Lessor and possession after that period by the lessee will be considered illegal.

On Non- payment Of Rent For Consecutive 6 Months: Double Rent To Commence after 6 months

Security money: 3 Months of Lease Rent
(Already forfeited by the Lessor for non- payment of rent for 3 month)

Recovery Of Dues from lessee
From Law of Land 
( Mentioned in Lease Deed)

QUESTION

1. Can The Lessor/Landlord Recover His Dues by The Law Of Land From A Pvt.Ltd. Company Since Lessee Has Not Been Showing Any Income Or Transaction From His Co. Banking Account And Has Been Accepting Cash/Payments In Individual Accounts Of Relatives Etc.?

2. Can Lessor/Landlord recover dues from Personal assets of the directors of the company (Lessee)?
Asked 3 years ago in Business Law

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8 Answers

The terms and conditions as stated in tge agreement have to be honoured by both the parties irrespective of whether they earn anything or not. That is torally upto the lessee to assess the situation and vacate the premises.

It has to be proved that he was in fact earning and was fudging the account books.

 


A private limited company has to show that it has gone bankrupt and has no assets to pay liabilities. Directors are exempt from Personal liability unless it can be shown that they committed fraud.

Rahul Mishra
Advocate, Lucknow
14107 Answers
65 Consultations

1. The landlord should not go beyond what is prescribed in law.

Whether the lessee/tenant is receiving the income by cash or cheque or bank transaction, the lessor's concern is about the recovery of arrears of rental amount hence he has to adopt the legal procedure for the recovery as laid down in the law instead of probing into the interior or personal details of the lessee. 

2. No. The personal assets of the lessee cannot be attached by the lessor without the court order, he may seek attachment of the lessee's assets before judgment by filing a petition before court in the same eviction suit towards security for the arrears of rental payment. 

T Kalaiselvan
Advocate, Vellore
87183 Answers
2341 Consultations

Directors are not responsible for payment of debts of company 

 

you can obtain court orders for recovery of rent dues 

 

attach bank account or property of company in execution proceedings 

Ajay Sethi
Advocate, Mumbai
96981 Answers
7831 Consultations

1-     It has to be proved that they are earning and they are fudging the account books.

That’s a separate procedure all together.

You can go for recovery of arrears of rental amount by moving to court.

Go for Eviction suit and ask for attachment of the assets (bank accounts, property, Goods).

 

2-     Directors are usually not responsible for payment of debts of company.

Personal assets can not be used to recover unless the personal assets are brought by swindling business money (which is your first question)

Ankur Goel
Advocate, Bangalore
454 Answers

As landlord You will benefit as you would be able to obtain eviction order and possession of property 

 

however you would not be able to recover your dues if company does not have any assets 

Ajay Sethi
Advocate, Mumbai
96981 Answers
7831 Consultations

1. The company only entered into the lease agreement, hence yo can file a suit against the company  making its directors or partners as party representing the company.

2. You may discuss with your advocate about this.

3. You can file an execution petition as per law and execute the decree as per provisions of the law, you can even seek for arrest of the director who is in charge of the company and also can attach the assets o the company whichever is available.

4. The landlord is concerned with the recovery of his dues, hence he should not get deviated from his concept over the developments, he must concentrate on his case before him.

 

T Kalaiselvan
Advocate, Vellore
87183 Answers
2341 Consultations

1. Yes, arrears of rent can be recovered from the company and its directors who singed on behalf of company , if there is not clause for the same.

2. The landlord can file an eviction petition and to recover the arrears of rent against that company 

- The court may order to refund the arrears of rent even after selling the assets of the company if any , but you being the landlord cannot file a compliant against the director for fraud . 

Mohammed Shahzad
Advocate, Delhi
14529 Answers
221 Consultations

Dear Sir/Ma'am, 

1. landlords cannot exercise discretion beyond the ambits of the law. they have to recover the rental arrears without probing into the lessee/tenant's account details. The procedure laid down by the law must be adhered to. 

2. No, the Lessor/Landlord cannot recover dues from the Personal assets of the directors of the company.

3. you cannot file a suit of fraud against the directors since you are a landlord 

4. being the landlord you will benefit from filing of recovery suit. 

5. you can file an eviction petition and recover the arrears against the property. 

Thank You

  • For further assistance, you can book a consultation with me. 
  • If you liked my answer, please give a good rating and leave a review. 

Anik Miu
Advocate, Bangalore
10186 Answers
120 Consultations

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