Case: U.P.State Industrial Dev.Corpn. Ltd Vs. Monsanto Mfg. (P) Ltd.

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.

Reasoning: 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 Honble High Court ought not to have interfered in the matter looking into the public interest involved and Clause 3(p) of the lease deed.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.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.