2020 (10) TMI 1180 - HC - Companies Law

Rearrangement of Shareholding - Demand of sums towards transfer fee - non-utility penalty in respect of plots owned by the petitioner - whether by change of name from TAGROS Chemicals India Limited to TAGROS Chemicals India Private Limited would tantamount to change of name in the company and therefore invite levying of transfer charges? - HELD THAT - What has been done is rearrangement of shareholding within the family without there being a change in the total shareholding of the company. No new separate legal entity has been created - keeping in mind the provisions of Section 23(3) of the Companies Act and Section 14 thereof, what has really happened is that the change in the name of the company is only by adding the word 'private'. As per Section 13(2) of the Companies Act, any change in the name of the company shall be subject to the provisions of sub sections (2) and (3) of section 4 of the Act and shall not come into effect except with the approval of the Central Government in writing. The proviso to the said section says that no such approval will be necessary when the only change in the name of the company is deletion therefrom or addition thereto of the word 'private' consequent on the conversion of any one class of the company to another class in accordance with the provisions of the Act. Thus, any change that is brought about in the name of a company by either deletion or addition of the word 'private' would not require written approval. What appears to be the legal position from reading the aforesaid sections is that mere change in the name of company from public to private would not tantamount to a change in the constitution of the company since this is brought out only with a view for the purpose of complying with the requirements viz-a-viz the government under the Companies Act. There is no change in the constitution thereof. Accordingly, the stand of the corporation for levying of transfer fees is bad. Non utility charges or penalty for non utilisation of plots - HELD THAT - It is evident from reading the notification of the Ministry of Environment and Forests dated 25.08.2009 that the Government of India enforced a moratorium on construction due to the absence of environmental clearance. The moratorium was lifted only after 7 years by a memorandum dated 25.11.2016. No environmental clearance could be obtained and no permission for construction could be granted during this period and as a result of facts beyond the control of the petitioner, the plots remained unutilised. Therefore even the recovery of penalty and non utilisation charges are without authority of law. Merely because in one of the petitions, the petitioner has paid such charges which otherwise he was not obliged to pay in view of the moratorium, that itself would not result in ousting the petitioner from the merits of that petition. The action of the respondent Corporation in demanding transfer fee and non utility penalty in respect of the plots is held to be illegal and contrary to law - Petition allowed.

Summary

Issues Involved:
1. Demand of transfer fee by GIDC.
2. Imposition of non-utility penalty by GIDC.

Detailed Analysis:

1. Demand of Transfer Fee by GIDC:

The petitioner challenged the demand for transfer fees by GIDC, arguing that the change in the company's name from "TAGROS Chemicals India Ltd." to "TAGROS Chemicals India Private Limited" did not constitute a transfer requiring fees. The petitioner contended that the change was merely a compliance with the Companies Act, 2013, and did not alter the company's identity or shareholding structure. They cited Section 23(3) and Section 14 of the Companies Act to support their argument that a mere name change does not affect the company's constitution. Furthermore, they pointed out that similar cases, such as the one at Dahej, did not attract transfer charges.

GIDC, however, argued that the shareholding pattern had changed, thus justifying the transfer fee. They provided a detailed comparison of shareholding percentages before and after the name change, noting that there were changes in the shareholding of certain family members.

The court concluded that the change in the company's name and the rearrangement of shareholding within the family did not constitute a transfer that would attract transfer fees. The court emphasized that no new legal entity was created, and the change was only for compliance purposes. Therefore, the demand for transfer fees by GIDC was deemed illegal and contrary to law.

2. Imposition of Non-Utility Penalty by GIDC:

The petitioner also contested the non-utility penalty imposed by GIDC, arguing that they could not utilize the plots due to a moratorium imposed by the Ministry of Environment and Forests from 25.08.2009 to 25.11.2016. This moratorium prevented any construction activities due to environmental clearance issues. The petitioner claimed that the non-utility penalty was unjustified as the plots remained unutilized for reasons beyond their control.

GIDC contended that the penalty was justified as per their policies, which demanded a 2% non-utilization penalty within two years of the date of offer cum allotment. They provided a breakdown of the penalty calculations and argued that the petitioner had already paid the non-utility penalty in one of the cases, thus the petition should be dismissed.

The court found that the imposition of the non-utility penalty was unjustified given the moratorium that prevented the petitioner from utilizing the plots. The court held that the recovery of the penalty was without authority of law and ordered GIDC to refund the non-utility charges paid by the petitioner in Special Civil Application No. 485 of 2019.

Conclusion:

The court allowed both petitions, declaring the actions of GIDC in demanding transfer fees and non-utility penalties as illegal and contrary to law. The court ordered the refund of the non-utility charges paid by the petitioner in Special Civil Application No. 485 of 2019. The rule was made absolute with no costs.