Mustafa (Director) 10 January 2012

Lease termination

In our case a Private Limited Company (lessor) has given a lease of an immovable property to another Private Limited Company (lessee) for 999 years, and the lease deed says that the lease is not terminable and also cannot be cancelled on sale of the lessor or its liquidation. Now the lessor is under going liquidation under the Companies Act. Need to know what happens to the lease deed, will the lease automatically end once the company is liquidated inspite of the lease deed saying otherwise or is the lessee protected in manner from cancellation?

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Devesh A. Bhatia (Advocate) 19 June 2012

I understand that this query was posted 5 months ago and my opinion on this may or may not be required now. Still I wanted to share my opinion because this seems to be a question of law.

A lease of its not tranfereable to succesors, legal heirs etc shall cease to exist with the expiry of lessor or lessee. In case of a limited company, which enjoys a perpetual existence, the life comes to an end with liquidation.

Through common understanding when one of the party ceases to exist and legal heirs, executors, succesors are not bound by the agreement the agreeement also comes to an end since the party against whom the agreeemtn is enforceable ceases to exist.

So in my understanding the agreement comes to an end with liquidation of the company.