2015 (5) TMI 1243 - HC - Companies Law

Lifting of Corporate Veil - Demand of transfer fee for recording the name of the petitioner-company - Change of name of a company - transfer or not - main case of the petitioners, however, is that change of the name of a company does not constitute transfer of leasehold right or any assets of the company - HELD THAT - I am not entering into the question in this writ petition as to whether the transfer of majority equity holding of a company would result in transfer of assets of the company or not because that is not the lis which has arisen in these two proceedings, though the State has referred to that dispute tangentially. On permitting recordal of Dabur Pharma Limited as the lessee on 15th March, 2005 the State had recognized independent juridical entity of Dabur Pharma Limited as a lessee. Subsequently, change of the promoter group, which eventually led to the change of corporate name, in my opinion, cannot saddle the petitioner company with an independent obligation to pay transfer fee. That would result in combining distinct identity of the shareholders with that of the company, which can be done on certain exceptional circumstances. This dispute does not require lifting of corporate veil - there are no demand for transfer fee can be raised on the petitioner company as a condition precedent for recordal of its name as a lessee, on the ground that there has been transfer of leasehold right. The licence of the petitioner company cannot be withheld under the 2000 Order also for this reason. The authorities are directed to record the name of the petitioner company as a lessee on compliance of all other relevant formalities, if any, in respect of the subject plot and also grant the petitioner company licence in terms of the 2000 Order if the petitioner company is otherwise eligible for such licence - application disposed off.

Issues Involved:
1. Legality of demanding transfer fee for recording change of corporate name.
2. Withholding of license for storage and use of Hexane under the 2000 Order due to non-recognition of the petitioner-company as lessee.

Issue-wise Detailed Analysis:

1. Legality of demanding transfer fee for recording change of corporate name:

In these proceedings, the common petitioner is a company incorporated under the Companies Act, 1956 engaged in the business of manufacture of pharmaceutical products. The unit originally was owned by Pfizer Limited, and through a series of transfers, the leasehold rights eventually came under the petitioner-company. The dispute arose when the petitioner-company applied for recordal of change of name of the lessee in respect of the subject plot. The Estate Manager, Kalyani, Urban Development Department, Government of West Bengal asked for a deposit of Rs. 15,37,66,667/- as transfer permission fee on the basis of a notification dated 18th December, 2007. The core controversy involved in these proceedings is as to whether the authorities are empowered to demand transfer fee for effecting change of name.

The petitioners argued that change of name of a company does not constitute transfer of its assets, and thus no transfer fee is applicable. They relied on several judgments, including Bacha F. Guzdar Vs. Commissioner of Income Tax, Bombay (AIR 1955 SC 74), which held that a shareholder does not acquire any interest in the assets of the company. The same principle was followed in Din Chemicals & Coatings Pvt. Ltd. Vs. The State of West Bengal and Ors., where it was held that transfer of shares does not amount to transfer of leasehold interest.

The State, however, contended that the transfer of the majority equity shares resulted in a transfer of ownership and control of the company, which should be treated as a transfer of assets, including leasehold rights. They relied on a judgment in Re:- Emami Biotech Ltd. & Anr., which held that an order sanctioning a scheme of amalgamation or demerger under Section 394 of the Companies Act is exigible to stamp duty.

The Court held that the consequential act of change of corporate name of the company cannot be treated as transfer of leasehold right of the company, and transfer fee cannot be charged on that incident. The ratio of the judgment in Emami Biotech Ltd. was not applicable as transfer fee was not being charged on any instrument of transfer, but on the basis of request for recordal of change of corporate name. The Court concluded that no demand for transfer fee can be raised on the petitioner company as a condition precedent for recordal of its name as a lessee.

2. Withholding of license for storage and use of Hexane under the 2000 Order due to non-recognition of the petitioner-company as lessee:

The second writ petition involved the refusal to grant a license for storage and use of Hexane under the 2000 Order, mainly on the ground that the company in its present name is yet to be recognized as lessee. The District Magistrate and Collector, Nadia, refused the license on the ground that the change of name resulted in a transfer of leasehold rights, which required payment of transfer fees. The petitioners argued that the District Magistrate acted beyond jurisdiction to raise the issue of transfer of leasehold right while examining the application for license under the 2000 Control Order.

The Court held that the authorities cannot withhold the license under the 2000 Order on the ground of non-payment of transfer fees for recording the change of name. The Court directed the authorities to record the name of the petitioner company as a lessee on compliance of all other relevant formalities and grant the petitioner company the license if it is otherwise eligible.

Conclusion:

The Court quashed the impugned demand for transfer fee and the order of the District Magistrate refusing the license. The authorities were directed to record the name of the petitioner company as a lessee and grant the license within four weeks from the date of communication of the order.

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