advocatemmmohan

My photo

ADVOCATEMMMOHAN -  Practicing both IN CIVIL, CRIMINAL AND FAMILY LAWS,Etc.,

WELCOME TO LEGAL WORLD

WELCOME TO MY LEGAL WORLD - FOR KNOWLEDGE IN LAW & FOR LEGAL OPINIONS - SHARE THIS

Friday, January 30, 2015

Whether by the alleged action the respondents-Companies directly or indirectly had transferred or parted with their interest/benefit under their respective agreements for licence. Whether the respondents-Companies violated the terms as contained in Clause 4(h) of agreement and Clause 3(p)of their lease deed and Whether the respondents-Companies are liable to pay transfer fee for alleged transfer of its own interest.

     Whether  by  the  alleged  action  the  respondents-Companies  directly   or
indirectly had transferred  or  parted  with  their  interest/benefit  under
their respective agreements for licence.
Whether the respondents-Companies violated the terms as contained in  Clause
4(h) of agreement and  Clause 3(p)of their lease deed and
Whether the  respondents-Companies  are  liable  to  pay  transfer  fee  for
alleged transfer of its own interest.=


 In the present case it has not been denied that respondent  company
M/s Super Tannery (India) Ltd. and the other company Super Agro  Tech.  Ltd.
are   family   held   companies   of   the   same   family   having   common
Directors/Promoters. Pursuant to the  order  of  amalgamation  by  the  High
Court the plot of land in question namely A-9, A-10, Industrial  Area  Unnao
Site-II which was allotted to Super Agro Tech. Ltd. became the asset of  the
respondent company M/s Super  Tannery  (India)  Ltd.   As  per  Amalgamation
Scheme, all the property, rights and power of Super Agro Tech. Ltd.,  having
its office at 184/170, Jajmau Kanpur was transferred without further act  or
deed to M/s Super Tannery (India) Ltd. Thus it is clear that  by  the  order
of the Court the premises in question  was  transferred  in  favour  of  the
other Company.
  In view of the aforesaid facts as noticed in  each  case,  we  hold
that the appellant rightly issued notice demanding transfer  fee  from  each
of the respondents and there was no reason for the High Court  to  interfere
with the same.

                                                            REPORTABLE
                        IN THE SUPREME COURT OF INDIA
                        CIVIL APPELLATE JURISDICTION

    CIVIL APPEAL NO.2731 OF 2005


U.P. STATE INDUSTRIAL DEV.CORPN. LTD.                         APPELLANT

                          VS.

MONSANTO MANUFACTURES (P) LTD. & ANR.               RESPONDENTS

WITH

C.A.NO.1310 OF 2006

C.A.NO.1318 OF 2015 (@SLP(C) NO.16404 of 2006)

C.A.NO. 1319 OF 2015 (@SLP(C) NO.5838 of 2008)


                               J U D G M E N T


         Leave granted in SLP (C) No.16404 of 2006  and  SLP(C)  No.5838  of
2008.
2.       The Government of Uttar Pradesh acquired land in various  districts
and conveyed the same to the  appellant-U.P.  State  Industrial  Development
Corporation (hereinafter referred to as, 'the Corporation'  for  short)  for
the purpose of  setting  up  industrial  area.  The  Corporation  thereafter
divided the said land
into plots for leasing  the  same  to  industrial  units.  The  respondents-
Companies, applied to the  appellant-Corporation  for  grant  of  lease.  On
receiving part premium of the plot, the appellant executed an agreement  for
licence and  later  executed  lease  deed  in  favour  of  the  respondents-
Companies. Later the  appellant-Corporation  made  an  allegation  that  the
respondents-companies' share holders transferred their company/their  shares
to new shareholders without  the  consent  of  appellant-Corporation,  which
amounted to transfer of interest, for which transfer levy is required to  be
deposited. Demand notices were issued by the  appellant-Corporation  to  the
respondents-Companies.  Those  demand  notices  were   challenged   by   the
respondents-Companies in  different  writ  petitions  or  suits  which  were
allowed by the Division Bench of the High Court of Judicature  at  Allahabad
by impugned judgments.

3.       In the  aforesaid  cases  the  High  Court  held  that  unless  the
respondents-Companies transfer its right in the plot in question  in  favour
of another legal entity, there is no question to apply clause  4(h)  of  the
Agreement for licence. The High Court  further  held  that  mere  change  in
shareholders or Directors, does not change legal entity of the  Company  and
as such it continues unchanged.

4.       The questions that arise for our  consideration  in  these  appeals
are:
Whether  by  the  alleged  action  the  respondents-Companies  directly   or
indirectly had transferred  or  parted  with  their  interest/benefit  under
their respective agreements for licence.
Whether the respondents-Companies violated the terms as contained in  Clause
4(h) of agreement and  Clause 3(p)of their lease deed and
Whether the  respondents-Companies  are  liable  to  pay  transfer  fee  for
alleged transfer of its own interest.

5.  The facts leading to the cases are as follows:-
Monsanto Manufactures Private Ltd.(A Company registered under the Companies
Act, 1956)
         The respondent-Company applied  to  the  appellant-Corporation  for
grant of lease of plot of  land  bearing  no.38/1-A  situated  in  Sahibabad
Industrial Area, Site No.4 of Tehsil   and  District  Ghaziabad  admeasuring
14,533 square yards for the purpose  of  constructing  an  industrial  unit.
The appellant-Corporation after receiving part  premium  of  the  plot  land
executed an agreement for licence on  12th  June,  1978  in  favour  of  the
respondent-Company. The possession of the  land  was  given  on  12th  June,
1978. After construction of the building of  the  factory,  the  respondent-
Company and the appellant-Corporation  executed  a  deed  of  lease  on  5th
September, 1979 for a period of 90 years. Later,  the  appellant-Corporation
vide letter dated 12th April, 1994 asked the respondent-Company  to  provide
the list of its Directors and shareholders duly certified by  the  Chartered
Accountant.  The  same  was  furnished  by  the  respondent-Company  to  the
appellant-Corporation  on  7th  May,  1994.  According  to  the   appellant-
Corporation the respondent-Company changed the  Directors  and  shareholders
without prior permission and consent of the appellant-Corporation and  since
the respondent-Company was purchased  by  the  present  Directors  from  the
previous Directors. The appellant-Corporation  by  letter  dated  27th  May,
1994 asked for details in order to take necessary action in accordance  with
the terms of the lease deed.  The  respondent-Company  categorically  denied
the allegations levelled by the appellant-Corporation by their letter  dated
27th September, 1994.
6.        By  letter  dated  1st  October,  1999  the  appellant-Corporation
demanded  Rs.25,51,781/-  from  respondent-Company  towards  transfer   levy
charges as the original shareholders of the  respondent-Company  transferred
their entire shareholding and interest to the  new  shareholders  and  there
was change in the Directors of  the  respondent-Company.  According  to  the
appellant such change makes the shifting of the controlling interest of  the
respondent-Company and transfer levy for the  same  was  demanded  from  the
respondent-Company  as  per  the  rules  of  the  Corporation.  The  Company
submitted its reply vide letter dated 8th December, 1999 and reiterated  its
earlier stand to the effect that there is no breach  of  any  terms  of  the
lease deed as no transfer or assignment or sale of premises in question  has
been made.  However, it was  not  accepted  by  the  Corporation,  who  sent
another reminder dated 13th January, 2000 asking the Company to  pay  a  sum
of Rs.25,51,781/- towards transfer levy charges.
         The aforesaid demand  notice  was  challenged  by  the  respondent-
Company before the High Court of Allahabad which by impugned judgment  dated
11th May, 2004 allowed the writ petition.
U.P. Twiga Fiberglass Limited (A  Company  registered  under  the  Companies
Act, 1956)
7.       The appellant-Corporation executed an  agreement  with  respondent-
Company  followed  by  lease  deed  dated  27th  May,  1977  by  which   the
Corporation leased plot nos.9 and 23-A  admeasuring  approximately  1,10,926
square meters of land situated  at  Sikandrabad  Industrial  Area,  District
Bulandshahr,  Uttar  Pradesh  to  the  respondent-Company.   The  lease  was
executed for 90 years.  In the year 1994,  the  respondent-Company  suffered
heavy losses to the  tune  of  Rs.42  crores.   Therefore,  the  respondent-
Company sold almost its entire shares including shares of its promoters  and
shares lying with financial institutions  to  a  foreign  company  known  as
"Rotar India Ltd.". As entire shares of the  respondent-Company  transferred
to Rotar India Ltd., the promoters of the said Company were replaced by  new
promoters/Directors.
8.       According to  the  appellant-Corporation,  in  view  of  the  above
disposal of controlling interest in the venture of  the  existing  allottee,
they were liable to pay transfer levy as per Clause 6(f) of  the  guidelines
of the Corporation pertaining to reconstitution and transfer.
9.       The Corporation vide its letter dated 26th  April,  1995  requested
the respondent-Company to supply list  of  new  shareholders,  list  of  new
Directors  and  copies  of  Memorandum  of  Association  and   Articles   of
Association.  However, it is alleged that respondent-Company  neglected  the
same  and  refused  to  supply  the  documents.  The   appellant-Corporation
thereafter vide letter dated 15th May, 1995 asked the respondent-Company  to
pay a sum of Rs.24,95,835/- towards transfer levy as there was  disposal  of
controlling interest in the venture by  the  existing  allottee.   The  said
demand of transfer levy, according to appellant, was as per lease  deed  and
guidelines of the Corporation pertaining to re-constitution and transfer.
10.      Being aggrieved the respondent-Company filed  suit  bearing  No.876
of 1996 before Civil Judge, Bulandshahr  seeking  permanent  injunction  and
praying for restraining the appellant-Company from claiming  any  amount  as
transfer levy. The appellant  filed  written  statement  and  contested  the
suit.
11.      The Civil Judge, Bulandshahr vide judgment and  decree  dated  23rd
January, 1999 allowed the suit and directed  the  appellant-Corporation  not
to charge transfer levy from the respondent-Company. The Civil  Judge,  held
that the respondent-Company is a legal person and disposal of  its  majority
shares in the name of a foreign Company namely Rotar  India  Ltd.  does  not
change the legal status of the Company and therefore, there is no  transfer.

12.      The appellant-Corporation being  dissatisfied  with  the  aforesaid
order filed Civil Appeal No.45 of 1999  in  the  Court  of  District  Judge,
Bulandshahr  which  was  dismissed  vide  order  dated  15th   July,   2000.
Thereafter, the appellant-Corporation filed Second Appeal  No.1425  of  2000
before the High Court of Judicature at Allahabad and the same  dismissed  by
impugned judgment dated 24th October, 2005.

M/s Enrich Engineering Works Pvt. Ltd.(A Company registered under the
Companies Act, 1956)
13.      One M/s Tyres & Tubes Co. Pvt. Ltd. having its  registered   office
at Scooters India Ltd. Premises, Sarojini  Nagar,  PO  Lucknow  through  its
Directors Shri S.Sounderarajan s/o of late Shri  S.  Srinivasan  applied  to
appellant-Corporation for allotment  of  plots  of  land.   After  agreement
which was followed by lease deed dated 21st December,  1976  the  appellant-
Corporation  allotted   industrial   plot   no.A-4   and   A-5   admeasuring
approximately  40,489  square  yards  and  8.36  square  yards  respectively
situated at site no.2, Rai Bareilly, Uttar Pradesh  to  M/s  Tyres  &  Tubes
Company Pvt. Ltd. The lease was for 90 years.  M/s Tyres &  Tubes  Co.  Pvt.
Ltd. suffered heavy losses and pursuant to its winding  up,  Allahabad  High
Court vide judgment and order dated 9th  January,  1996  appointed  Official
Liquidator. The Official Liquidator sold the properties of M/s Tyres &  Tube
Co. Pvt. Ltd. including right and  interest  on  the  land  in  question  to
respondent M/s Enrich Engineering Pvt. Ltd.  The said sale was  affirmed  by
the Allahabad High Court vide order dated 9th February,  2000.  Pursuant  to
the order of the  Allahabad  High  Court  dated  10th  September,  2003  the
Official Liquidator issued  sale  certificate  dated  12th  March,  2004  in
favour of respondent-Company.
14.      The appellant-Corporation  was  not  a  party  in  the  winding  up
proceedings nor was any notice issued to the  appellant-Corporation  by  the
Official Liquidator.  On  knowing  about  transfer  of  the  rights  of  the
original  allottee-  M/s  Tyres  &  Tubes  Co.  Pvt.  Ltd.,  the  appellant-
Corporation  demanded  transfer  levy  amounting  to  Rs.3,80,621.25/-  from
respondent-Company.  According to the appellant, such demand was  made  from
the respondent-Company, as the said company had purchased M/s Tyres &  Tubes
Co. Pvt. Ltd., with all its assets and liabilities.

15.      Against the demand, respondent-Company preferred  a  writ  petition
being Civil Misc. Writ Petition No.56982 of 2005 before the  Allahabad  High
Court which was allowed by the impugned judgment  dated  27th  April,  2006.
The demand notice was set aside by  the  High  Court  in  view  of  judgment
rendered in another similar case.
M/s Super Tannery (India) Ltd.(A  Company  registered  under  the  Companies
Act, 1956)
16.               The appellant-Corporation entered into an agreement  dated
10th October, 1990 with one M/s Super Agro  Tech  Ltd.  for  setting  up  of
specialty paper  unit  in  industrial  plot  nos.A-9  and  A-10  admeasuring
approximately 45,080/- square meters in Industrial  Area  Unnao  Site-2.  No
right whatsoever in regard to transfer of  said  plots  were  given  to  the
licensee M/s Super Agro Tech Ltd. The  possession  of  the  said  plots  was
handed over on 25th January, 1991 and subsequently lease was also  executed.
 M/s Super Agro Tech Ltd. thereafter did not  set  up  any  specialty  paper
unit and no investment was made.   According  to  the  appellant-Corporation
said licensee M/s Super Agro Tech Ltd. with a view to enrich itself  started
amalgamation proceeding with  the  new  company  namely  M/s  Super  Tannery
(India)  Ltd.-respondent  herein.  The  said  amalgamation  was   a   mutual
understanding between M/s  Super  Agro  Tech  Ltd.  and  M/s  Super  Tannery
(India) Ltd. The Allahabad  High  Court  vide  order  dated  9th  May,  1997
sanctioned the amalgamation in Company Petition No.32 of  1997.  Though  the
land belongs to the appellant-Corporation, it was not made a  party  to  the
said petition. According  to  the  appellant-Corporation,  the  amalgamation
does not  create  any  right  whatsoever  on  respondent-M/s  Super  Tannery
(India) Ltd. over industrial plots  in  question  and  the  said  two  plots
cannot be legally transferred to the new  Company  i.e.  M/s  Super  Tannery
(India) Ltd.
17.                The  respondent-Super  Tannery  (India)  Ltd.   made   an
application for the transfer of the said industrial plot. On  such  request,
the appellant-Corporation demanded transfer  levy  from  M/s  Super  Tannery
(India) Ltd. for transfer of the said industrial plot.  However,  no  amount
was deposited.  The Corporation by notice dated 3rd November, 2001  demanded
a sum of Rs.34,23,954.51/- as on that date from M/s  Super  Tannery  (India)
Ltd. towards transfer levy.  The aforesaid  notice  was  challenged  by  the
respondent-M/s Super Tannery (India) Ltd. by filing a  writ  petition  being
Civil Misc. Writ Petition No.18535 of 2002 before Allahabad High  Court  and
the same was allowed, by the  impugned  judgment  dated  22nd  August,  2007
following the decision rendered in another case.


Case wise stand of the parties and finding of this Court.
Monsanto Manufactures Private Ltd.
18.      Learned counsel for the appellant-Corporation  submitted  that  the
respondent-Company  has  violated  Clause  3(p)  of  lease  deed  dated  5th
September, 1979 entered  into  between  the   said  Company  and  appellant-
Corporation inasmuch as its "Memorandum  of  Association"  and  "Article  of
Association" were  altered  without  the  written  consent  of  Lessor  i.e.
appellant-Corporation. In view of   the same the  appellant-Corporation  has
the right to determine the said lease deed dated 5th September, 1979.
19.      On the other hand, according to counsel for the respondent  as  the
Company has got separate legal status and the Corporation has  allotted  the
industrial plot to it by name and not in the  name  of  its  Directors,  the
Directors being only officials  working  on  behalf  of  the  Company,  mere
change of names of Directors or shareholders does not in any way  or  manner
affect the legality or status of the  respondent-Company.   It  was  further
contended that change of names of Directors, shareholders duly  done  within
the purview of the Companies Act, 1956, does not affect the legal status  of
the respondent-Company and much less there has  been  any  transfer  of  the
site by the Company to any other individual person.
20.      For  deciding  the  issue  involved  in  the  present  case  it  is
necessary to refer certain clauses of  licence  agreement,  lease  deed  and
guidelines issued by the appellant-Corporation which are common in  all  the
cases.
21.      Clause 4(h) of the licence agreement prohibits licensee's  acts  to
directly  or indirectly  transfer, assignment, sale, encumber or  part  with
its interest under the  benefit  of  the  said  Agreement  without  previous
consent in writing of the  Grantor,  relevant  portion  of  which  reads  as
follows:
"4(h). That the Licence will not directly or  indirectly  transfer,  assign,
sell, encumber or part with its  interest  under  or  the  benefit  of  this
Agreement or any part thereof in any manner whatsoever without the  previous
consent in writing of the Grantor and it shall be open  to  the  Grantor  to
refuse such consent or grant the same subject to such conditions as  may  be
laid down by the Grantor in the behalf."

22.      Sub-Clause (p) of Clause 3  of  lease  deed  also  prohibits    any
alteration in the Memorandum and Articles of Association or in  its  capital
structure without the written consent of the  Lessor,  relevant  portion  of
which reads as follows:
"3(p)    That the Lessee  being  a  registered  partnership  firm  declares,
affirms and undertakes that during the subsistence  of  the  terms  of  this
agreement, the said partnership shall not  be  dissolved,  reconstituted  or
wound up, and/or dealt with in any way which may jeopardize the  rights  and
interests of the  Lessor  in  the  matter  of  this  lease,  nor  shall  its
constitution be altered in any  manner  otherwise  written  consent  of  the
Lessor, first and obtained, and it shall not stand dissolved  on  the  death
or insolvency of any of its partners;
                                     OR
         The Lessee being an individual or sole proprietor of a firm,  shall
not allow any person(s) as partner(s) with him  without  the  prior  written
consent of the Lessor;
                                     OR
         The Lessee  being a Company shall not make or attempt to  make  any
alterations, whatsoever in the provisions of its Memorandum and Articles  of
Association or in its capital structure without the written consent  of  the
Lessor, first had and obtained, and the  Lessee  hereby  undertakes  to  get
registered the prescribed particulars of the charge hereunder  created  with
Registrar of Joint Stock Companies  under  Section  126  of  Companies  Act,
1956, within stipulated period.

         While granting its consent as aforesaid the Lessor may require  the
successor in interest of the Lessee to enter into a  binding  contract  with
the Lessor to abide by and  faithfully  carry  out  the  terms,  conditions,
stipulations, provisos and agreements herein contained or such  other  terms
and conditions as the Lessor may, in its discretion,  impose  including  the
payment  by  the  successor-in-interest  such  additional   premium   and/or
enhanced rent as the Lessor may in its discretion think proper. In the  even
of breach of this  condition  the  agreement  shall  be  determined  at  the
discretion of the Lessor.

         Provided that the right to  determine  this  agreement  under  this
clause will not be exercised if the  industry  at  the  premises  has   been
financed by the State Government or the Industrial  Finance  Corporation  of
India or the Industrial Credit and Investment Corporation of India,  or  the
U.P.  Financial  Corporation  or  Pradeshiya   Industrial   and   Investment
Corporation of Uttar Pradesh or any scheduled bank(including the State  Bank
of India) and the said financing body or bodies mentioned  above  decide  to
take over possession or sell, or lease or assign  the  mortgaged  assets  in
exercise vesting in it or them by virtue of the deeds or  deed  executed  in
its or their favour by the Lessee as provided herein  above,  or  under  any
law for the time being in force."

23.      The Corporation has issued guidelines for  transfer/re-construction
in respect of the plots in the industrial area of  the  Corporation.  Clause
6.01(E) of the said guidelines prescribes Transfer Levy and  Clause  6.01(F)
defines transfer. The aforesaid provisions reads as follows:
"6.01(E) Transfer Levy - per sq.m. @ 5% to 15% of the  rate  of  premium  in
fast moving areas and 2.5% to 7.5% of the current  premium  in  slow  moving
areas prevailing on the date of issuance of transfer  approval  letter  will
be  changed  as  applicable.  While  calculating  the  transfer   levy   the
locational charges of a particular plot will  not  be  considered  and  only
basic premium will be taken into account.

 6.01(F) Transfer - Means disposal of controlling interest  in  the  venture
by the existing allottee.  In  the  case  of  reconstitution,  the  existing
allottee retains controlling interest except  in  case,  where  interest  is
transferred to family members as defined in 6.3(iv)(a) below or where  there
is  change  in  the  constitution  of  the  allottee  due  to   inheritance,
succession or operation of law."

24.      In the present case the entire shareholding of Goyal family  headed
by Mr. Amar Nath Goyal in the said company was  transferred  to  the  Mehta-
Lamba Family. The entire list of shareholders, Managing Director  and  Board
of Directors was provided by  Monsanto  to  the  appellant-Corporation  vide
letter dated 7.5.1994.  The record shows that the  original  subscribers  of
shares were  members  of  Goyal  family  and  the  entire  shareholding  was
transferred to Mehta-Lamba family. Therefore, the  original  subscribers  of
shares of respondent No. 1 Company were totally changed.
25.      The "Memorandum of Association" of  a  company  limited  by  shares
mandatorily prescribes in "Table-B" (Table-B of  1956  Act  and  Table-A  of
2013 Act deals  with  Company  Limited  by  shares)  of  the  Companies  Act
mandatorily prescribed that the names,  addresses,  description,  occupation
of subscribers shall be given in Memorandum of Association. In this case  as
the original subscribers of shares were changed in 1994, there was  material
alteration in the "Memorandum of Association" of respondent no. 1 Company.
26.      It was also contended that there was an alteration in "Articles  of
Association" of respondent no. 1  Company  as  well.   The  last  column  of
"Articles of  Association"  also  mandatorily  provides  for  giving  names,
addresses and description of subscribers. In this case, the  subscribers  of
shares has been completely changed from  the  Goyal  Family  to  Mehta-Lamba
Family and hence there was material alteration of "Articles of  Association"
of the respondent no. 1 Company.
27.      In this case, the ownership of a  huge  Industrial  plot  measuring
14,533 sq.  ft.  in  the  prestigious  and  economically  affluent  area  of
Sahibabad (Ghaziabad) has been transferred from Goyal family to  the  Mehta-
Lamba family for  material financial gains, by adopting  clever  means  that
too  without  taking  written  consent  of  the   Lessor   i.e.   appellant-
Corporation.  There are many instances/examples in  which  the  lessee  gets
allotment of huge industrial plots and thereafter sells the  same  for  huge
monetary gains. This adversely affects the aims and objectives of appellant-
Corporation i.e. the planned development of industrial areas  in  the  State
of Uttar Pradesh. The Hon'ble High Court ought not  to  have  interfered  in
the matter looking into the public interest involved and Clause 3(p) of  the
lease deed.
U.P. Twiga Fiberglass Limited
28.      Similar submissions as made in the above  case  were  made  by  the
learned counsel for  the  appellant  in  the  present  case  also.   It  was
contended that  the  respondent-U.P.  Twiga  Fiberglass  Ltd.  has  violated
Clause 3(p) of lease deed dated  27th  May,1977  entered  between  the  said
company  and  appellant-Corporation   inasmuch   as   its   "Memorandum   of
Association", "Articles of Association" and capital structure  were  altered
without the written consent of Lessor appellant-Corporation and in  view  of
the same, the appellant-Corporation has the  right  to  determine  the  said
lease deed dated 27th May,1977.
29.       Per  contra,  according   to   the   respondent,   the   aforesaid
contention(s) are fallacious, misconceived and untenable.   Learned  counsel
for the respondent made the following submissions:
i)       The Lease-Deed dated 27th  May,  1977  has  been  executed  by  the
respondent-company, in  the  capacity  of  a  "lessee".   Consequently,  the
provisions of the Lease-Deed obligate the Lessee/the  Company  and  not  its
shareholder(s);
ii)      The Lease-Deed contains no clause whatsoever, that authorises  such
levy of transfer-fee, nor does it prohibit any change in  the  share-holding
of the respondent-company. Even otherwise, such change in share-holding  was
committed with the express consent and approval of the petitioner;
iii)     Law recognises a categorical distinction between a Company and  its
share-holders, who have otherwise no right whatsoever on  the  assets  of  a
company. Reliance was placed on Constitution  Bench  decision  in  Bacha  F.
Guzdar, Bombay vs.Commissioner of Income Tax, Bombay, AIR 1955 SC 74,  which
observed as follows:
         "A share-holder has got no interest in the property of the  company
though he has undoubtedly a right to participate in the profits if and  when
the company decides to divide them".
And
         "the Company is a juristic person and is distinct from  the  share-
holders. It is the Company which  owns  the  property  and  not  the  share-
holders".

iv)      In a relationship between the Lessor and a Lessee, it is the Lease-
Deed which is paramount and whose contents are binding on the parties.
v)       A  unilateral  guideline  issued  by  the  Lessor  cannot  be  held
applicable or binding to a lessee. On the  face  of  the  lease  deed,  such
guideline has  no  binding  force.  Further,  change  in  share-holding  was
admittedly done with the express consent/approval of the appellant; and
vi)      Any fee, penalty, compensation, damages or transfer charges  to  be
claimed by the lessor from the lessee must necessarily be  provided  in  the
lease-deed. Otherwise, such fee, penalty, compensation, damages or  transfer
charges being beyond the  terms  of  the  Lease-Deed  cannot  be  sought  or
claimed by the Lessor; Thus the levy of transfer-fee as sought  and  claimed
by the appellant is illegal, misconceived and untenable,  being  beyond  the
terms of the lease deed. It is not a transfer  in  law,  since  transfer  in
share-holding does not amount to  any  transfer  in  the  Company's  assets,
immovable or otherwise. It is equally not a  transfer  in  fact,  since  the
provisions  of  the  Lease-Deed  do  not  recognise/nor  prohibit  any  such
transfer.
vii)      The Guidelines and in particular Clause 6.01(F) is not  applicable
in the present case as there has been no "disposal of  controlling  interest
in the venture  by  an  existing  allottee".  Undoubtedly,  the  respondent-
company is the  "existing  allottee"  and  the  respondent-company  has  not
disposed its "controlling interest in the venture". In  other  words,  there
is no transfer even upon a literal construction of the Guidelines.
30.      It is not in dispute that the appellant-Corporation  on  27th  May,
1977 allotted huge plot measuring 1,10,926 sq. mtrs.  to  respondent  no.  1
Company in  the  industrial  area,  Sikandarabad,  Bulandshehar  on  nominal
amount. The respondent no. 1 clearly admitted that it had  a  huge  debt  of
Rs.13,14,00,000/- the different financial institutions  and,  therefore,  it
sold shares of company, its own shares, shares of promoters  and  shares  of
financial institutions to the foreign company, namely, "M/s Rotar Ltd."
31.      The appellant-Corporation in written statement filed  in  Suit  No.
876/1996 clearly and categorically mentioned that  the  shares  of  original
promoters were transferred in the name of new promoters of  foreign  company
and therefore, the  appellant-Corporation demanded list of new  shareholders
and Memorandum and "Articles of Association" of the Company. The  change  of
original promoters shares to the new  promoters  means  the  subscribers  of
shares were  changed  and,  therefore,  there  is  material  change  in  the
"Memorandum of Association" and "Articles of Association" of the Company.
32.      The appellant-Corporation clearly brought on record that  there  is
change in "Capital Structure" of the company and the "Capital structure"  in
common parlance means "debt-equity ratio".  In this case admittedly there  a
huge amount of Rs. 13,14,00,000/- was funded by the  foreign  company,  i.e.
"M/s Rotar  Ltd."  towards  settling  the  debt.   In  this  background  the
appellant alleged that   there is change in  "debt-equity  ratio"  resulting
alteration in the "capital structure" of the company.
33.       There  is  larger  public  interest  involved   in   incorporating
alteration in "Capital Structure" in Clause 3(p) of the  lease  deed.  There
are many instances where the company takes loan from third  parties  on  the
security and land and structure allotted to them in lease, keeping  in  dark
the lessor which amounts to incurring liabilities on  the  property  without
the knowledge of the lessor.  In this case also there  was  huge  amount  of
debt on the company as it  took  loan  on  land  and  building/factory  from
different  financial  institutions.  Therefore,  there  is  public  interest
involved for which consent of lessor was necessary.

M/s Enrich Engineering Works Pvt. Ltd
34.      In this case also similar submission has been made by the  parties.

35.      It is not in dispute that the huge plot of about  40,  489  &  8.35
sq. yards in the industrial area of Rai  Bareilly  (U.P.)  was  allotted  by
appellant-Corporation to M/s Tyres and Tubes Company Pvt. Ltd. As  the  said
company suffered heavy losses, on 9.1.1996 the company  Judge  of  Allahabad
High Court appointed Official Liquidator and perused High Court's  Order  on
12.3.2004 the said company was sold to M/s  Enrich  Engineering  Works  Pvt.
Ltd., by the Official Liquidator.
36.      Learned counsel for the respondent submitted that it was a case  of
reconstitution and  therefore  payment  of  transfer  fee  does  not  arise.
However, such submission can not be accepted in view  of  Clause  6.01(E)  &
(F) of the guidelines.  The fact that there is  a  change  of  hand  of  the
asset  including  the  land  in  question  by  transfer.    Therefore,   the
respondent is liable to pay transfer fee.

M/s Super Tannery (India) Ltd.
37.      Learned counsel for the appellant submitted that the huge  plot  of
45080 sq. mtrs. in Kanpur was allotted  to  M/s  Supre  Ago  Tech  Ltd.  for
establishing and running a "Specialty Paper Industry". In this case, only  a
"License  Agreement"  dated  10.10.1990  was  executed  by  UPSIDC  and  the
admitted fact on record is that no lease deed was executed  by  UPSIDC  with
M/s Super Agro Tech. Ltd.
38.      In view of the above,  M/s  Super  Agro  Tech  Ltd.  was  merely  a
licensee and as per  the  license  agreement  dated  10.10.1990  it  had  no
authority whatsoever to transfer the  said  industrial  land  to  M/s  Super
Tannery (I) Ltd.
39.      On the other  hand,  according  to  the  learned  counsel  for  the
respondents, due to  various  constraints  over  head  costs  and  financial
hardship company became non viable and the major production  activities  was
not feasible to run the company. In order to  avoid  the  future  problem  a
scheme of amalgamation was prepared as per the provisions of  the  Companies
Act, seeking amalgamation under Chapter V of the  Companies  Act.   A  joint
application was filed before the Allahabad High Court.  The High Court  vide
order dated 9.5.1997 allowed the petition for  amalgamation  and  sanctioned
the scheme of amalgamation and ordered that M/s Super Agro  will  be  merged
into M/s Super Tannery (India) Ltd.
40.      In the present case it has not been denied that respondent  company
M/s Super Tannery (India) Ltd. and the other company Super Agro  Tech.  Ltd.
are   family   held   companies   of   the   same   family   having   common
Directors/Promoters. Pursuant to the  order  of  amalgamation  by  the  High
Court the plot of land in question namely A-9, A-10, Industrial  Area  Unnao
Site-II which was allotted to Super Agro Tech. Ltd. became the asset of  the
respondent company M/s Super  Tannery  (India)  Ltd.   As  per  Amalgamation
Scheme, all the property, rights and power of Super Agro Tech. Ltd.,  having
its office at 184/170, Jajmau Kanpur was transferred without further act  or
deed to M/s Super Tannery (India) Ltd. Thus it is clear that  by  the  order
of the Court the premises in question  was  transferred  in  favour  of  the
other Company.
41.      In view of the aforesaid facts as noticed in  each  case,  we  hold
that the appellant rightly issued notice demanding transfer  fee  from  each
of the respondents and there was no reason for the High Court  to  interfere
with the same.
42.      For the reason aforesaid,  we  set  aside  the  impugned  judgments
dated 11th May, 2004 in C.W.P.No.5094 of 2000, 24th October, 2005 in  Second
Appeal No.1425 of 2000, 27th April, 2006 in Civil Misc.W.P.No.56982 of  2005
and 22nd August, 2007 in C.M. Writ Petition No.18535 of 2002 passed  by  the
High Court of Judicature at Allahabad and allow the appeals.

                                               ...........................J.
                                               (SUDHANSU JYOTI MUKHOPADHAYA)



                                               ...........................J.
                              (V. GOPALA GOWDA)
NEW DELHI;
JANUARY 29, 2015
-----------------------
21


No comments:

Post a Comment

Note: Only a member of this blog may post a comment.