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2015 (4) TMI 846 - SC - Indian LawsTransfer of company / shares without consent - change of hand of the asset including the land in question - Transfer of Interest in company - Non deposit of Transfer levy - Held that - Monsanto Manufactures Private Ltd. - 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. - 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 - 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 ₹ 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. - 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. - 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.arned 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. - 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. - Decided in favour of appellant.
Issues Involved:
1. Whether the respondents-Companies directly or indirectly transferred or parted with their interest/benefit under their respective agreements for licence. 2. Whether the respondents-Companies violated the terms as contained in Clause 4(h) of the agreement and Clause 3(p) of their lease deed. 3. Whether the respondents-Companies are liable to pay transfer fee for the alleged transfer of their own interest. Issue-wise Detailed Analysis: 1. Transfer or Parting with Interest/Benefit: The Supreme Court examined whether the respondents-Companies transferred or parted with their interest/benefit under their respective agreements for licence. The Court noted that the High Court had previously held that a mere change in shareholders or Directors does not change the legal entity of the Company. However, the Supreme Court found that the changes in shareholders and Directors did result in a transfer of controlling interest, which falls under the definition of transfer as per Clause 6.01(F) of the guidelines issued by the appellant-Corporation. The Court emphasized that such changes in the controlling interest without the prior written consent of the appellant-Corporation amounted to a violation of the terms of the agreement and lease deed. 2. Violation of Clause 4(h) of the Agreement and Clause 3(p) of the Lease Deed: The Court analyzed Clause 4(h) of the licence agreement and Clause 3(p) of the lease deed, both of which prohibit any transfer, assignment, sale, encumbrance, or alteration in the Memorandum and Articles of Association without the prior written consent of the appellant-Corporation. The Court found that the respondents-Companies had altered their Memorandum and Articles of Association and transferred controlling interests without obtaining the necessary consent from the appellant-Corporation. This constituted a clear violation of the terms stipulated in the agreement and lease deed. 3. Liability to Pay Transfer Fee: The Supreme Court addressed the issue of whether the respondents-Companies were liable to pay a transfer fee for the alleged transfer of their own interest. The Court referred to the guidelines issued by the appellant-Corporation, specifically Clause 6.01(E) which prescribes a transfer levy. The Court found that the respondents-Companies were liable to pay the transfer levy as they had transferred controlling interest in the venture without the prior written consent of the appellant-Corporation. The Court held that the demand notices issued by the appellant-Corporation for the transfer levy were justified and should not have been interfered with by the High Court. Case-wise Analysis: Monsanto Manufactures Private Ltd.: The Court noted that the entire shareholding of the Goyal family in Monsanto was transferred to the Mehta-Lamba family without the prior written consent of the appellant-Corporation. This transfer constituted a material alteration in the Memorandum and Articles of Association, violating Clause 3(p) of the lease deed. The Court held that the appellant-Corporation's demand for a transfer levy was justified. U.P. Twiga Fiberglass Limited: The Court found that the respondent-Company had transferred its shares to a foreign company, Rotar India Ltd., resulting in a change in the controlling interest and capital structure without the prior written consent of the appellant-Corporation. This violated Clause 3(p) of the lease deed. The Court upheld the appellant-Corporation's demand for a transfer levy. M/s Enrich Engineering Works Pvt. Ltd.: The Court noted that the assets of M/s Tyres & Tubes Co. Pvt. Ltd. were sold to M/s Enrich Engineering Works Pvt. Ltd. by the Official Liquidator without the appellant-Corporation's consent. This constituted a transfer under Clause 6.01(F) of the guidelines. The Court held that the respondent-Company was liable to pay the transfer fee. M/s Super Tannery (India) Ltd.: The Court found that the amalgamation of M/s Super Agro Tech Ltd. with M/s Super Tannery (India) Ltd. resulted in the transfer of industrial plots without the appellant-Corporation's consent. The Court held that the transfer levy demanded by the appellant-Corporation was justified. Conclusion: The Supreme Court set aside the impugned judgments of the High Court and allowed the appeals, holding that the respondents-Companies were liable to pay the transfer levy as demanded by the appellant-Corporation. The Court emphasized the importance of obtaining prior written consent for any transfer of controlling interest to ensure adherence to the terms of the agreement and lease deed.
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