The prayer in the writ petition is to issue a Writ of
Certiorari to call for the records relating to the respondent's communication
bearing Ref.No.AD 5/GMP/113/84, dated 15.9.1997 and quash the same.
2. The petitioner is the public limited company; it has its
manufacturing units at five locations in Tamil Nadu including one at SIPCOT
Industrial Estate, Gumidipoondi; Plot No.67 in the Industrial Estate was
allotted in favour of one Minjur Shell Castings Private Ltd.; since it
defaulted in the payment, the respondent took possession and later on the
property was auctioned; the offer given by M/s. Chendur Forge Exports Ltd.,
was accepted by the respondent; on 4.6.1993, the respondent entered into a
long term lease of 99 years with M/s. Chendur Forge Exports Ltd.; by a
further deed of sale, dated 28.7.1993, the respondent sold the lease hold
rights to M/s. Chendur Forge Exports Ltd. together with the partially
constructed factory building and it was put in possession of the land on
27.1.1993. According to Clauses 24 of the Deed, a condition is imposed that
the lessee shall not directly or indirectly transfer, assign, sell, encumber
or part with its interest, either in part or in full, in any manner,
whatsoever without the previous approval of SIPCOT in writing; and it is open
to SIPCOT to grant or refuse approval or to impose any conditions as it
considers necessary. According to Clause 30, any change in the constitution
of the lessee shall have the prior approval of SIPCOT. M/s. Chendur Forge
Exports Ltd. completed the factory and commenced its manufacturing
activities. While so, the petitioner's shareholders and the shareholders of
M/s. Chendur Forge Exports Ltd. agreed to amalgamate the two companies.
Hence, Company Petitions 171 and 172 of 1995 were filed before this Court for
amalgamation. This Court by order dated 11.6.1996 passed an order directing
M/s. Chendur Forge Exports Ltd. to be amalgamated with the petitioner
company. Thereafter, by order dated 20.6.1996 M/s. Chendur Forge Exports
Ltd. was dissolved without being wound up from 20.6.1996. As per the scheme
of amalgamation, approved by the High Court, all assets, business liabilities,
rights and obligations, etc. of M/s. Chendur Forge Exports Ltd. became
vested with the petitioner company pursuant to Sections 391 and 394 of the
Companies Act. The scheme of amalgamation and the consequential merger were
to become effective from 1.4.1995. Under those circumstances, the assets of
M/s. Chendur Forge Exports Ltd. including the lease hold rights of the
property merged with the petitioner. By letter dated 13.3.1996, the factum of
amalgamation was communicated to the respondent. After receiving the
communication, the respondent has sent a letter, dated 7.5.1996, stating that
in view of the retrospective amalgamation, the lease hold rights of the Plot
allotted to M/s. Chendur Forge Exports Ltd. should be now transferred in the
name of the petitioner, subject to payment of current land cost. Accordingly,
a sum of Rs.13,00,750/- was demanded by the respondent as difference in the
land cost(difference in the price paid earlier by M/s. Chendur Forge Exports
Ltd., and the current land cost).
3. According to the petitioner, there was no transfer of
assets on winding up of M/s. Chendur Forge Exports Ltd. since that company
was already dissolved without winding up, and as per the legal fiction under
the Companies Act M/s. Chendur Forge Exports Ltd. has been completely
amalgamated with the petitioner. In spite of such reply, the petitioner
received a letter from the respondent once again demanding the difference in
cost. The petitioner made a representation on 4.8.1 997 to desist from making
any demand. By Order dated 15.9.1997, the respondent called upon the
petitioner to pay the amount within 15 days together with interest at 21% per
annum from December 1996; in case of failure to pay there is also a threat of
action as per the lease deed. Hence the present writ petition to quash that
order.
4. In the counter, filed by the respondent, it is stated that
by lease deed dated 4.6.1993 the plot was leased out to M/s. Chendur Forge
Exports Ltd.; As per clause 9 of the lease deed, the respondent had a right to
cancel the lease for non-compliance of the terms and conditions of the lease
deed. As per clause 30, any change in the constitution of the lessee shall
have the prior approval of the respondent. Clause 2 of the Office Order of
the SIPCOT:
If there is a total change or substantial change (more than 50%) in
the ownership of the unit by transfer of shares to new persons, the current
land cost should be collected. The new incumbent will be asked to pay the
difference in land cost after adjusting the plot deposit paid by the original
promoters.
As per Clause 3, When an existing Unit in the complex
is
merged with another company, the current land cost will be collected and the
new incumbent will be asked to pay the difference inland cost, after adjusting
the plot deposit paid by the original promoters.
M/s. Chendur Forge Exports
Ltd., a major share holder, was holding 52.56% of share before merger and the
same now become 28% after merger. The respondent by letter dated 21.4.1997
informed the company that as per the norms, the petitioner's request for
change of name in the records could not be considered by SIPCOT; the balance
land cost has to be paid; The petitioner is a new incumbent as per the Office
Order of SIPCOT. The contention of the petitioner that there is no transfer,
is not correct. The transfer effected by the vesting order made under Sec.394
of the Companies Act are only transfer inter vivos and not transfer by the
operation of law; the revenue authorities are not bound to make necessary
changes in the revenue records without any additional charges.
5. Mr. P.S.Raman, learned Senior Counsel appearing for the
petitioner, submitted that by an Order of this Court, dated 11.6.1996, M/s.
Chendur Forge Exports Ltd. was amalgamated with the petitioner company.
Therefore, the assets and liabilities of that company has merged with the
petitioner company. In that process, there is no transfer of ownership and
hence the conditions provided under Clauses 24 and 30 of the lease deed do not
come into play and hence the petitioner is not liable to pay the difference of
cost of the land. In support of his argument, the learned Senior Counsel,
referred to a Division Bench judgment of this Court in WP No.35077/02 dated
24.6.2004. In that case, the question was whether the petitioner company was
entitled to the benefits of the deferral sales tax accrued to the amalgamated
company. This Court has held that the amalgamating company was entitled to
the benefit of the interest free deferral scheme granted to the amalgamated
company. He further submitted that the amalgamating company is entitled to
all the benefits of the amalgamated company. Under those circumstances, there
is no need to pay any additional land cost.
6. The learned counsel for the respondent submitted that
there is a change in the ownership of the company and therefore it amounts to
a transfer of the property and as per the lease deed when there is a change or
transfer of ownership, the difference in cost of the land on the date of such
transfer is payable and hence the impugned order is legal and enforceable and
the writ petition has no merits.
7. Admittedly, the land was allotted on lease by the SIPCOT
to M/ s. Chendur Forge Exports Ltd.; the lease agreement between SIPCOT and
M/s. Chendur Forge Exports Ltd. contains certain covenants. The following
Clauses 24 and 30 of the lease deed are covenant running with the land:
"Clause No.24:
The party of the Second part shall not directly or indirectly
transfer, assign, sell, encumber or part with its interest, either in part or
in whole, in any manner whatsoever without the previous approval of the party
of the First part in writing. It shall be open to the party of the First part
to grant or refuse approval or to impose any conditions it considers
necessary;
Clause No.30:
a) Any change in the constitution of the party of the Second part
shall have the prior approval of the party of the first part;
b) any change in the name and address of the Registered Office or
Administrative Office of the party of the Second part should be intimated to
the Party of the first part then and there."
Therefore, whoever succeeds to the rights over the property, these provisions
apply to them. Clause 24 specifically provides that the lessee shall not
directly or indirectly transfer, assign, sell, ..... or part with interest,
either in part or in full, in any manner, whatsoever, and it shall be open to
SIPCOT to grant or refuse approval or to impose any conditions as it considers
necessary. Clause 30 provides that any change in the constitution of the
party of the second part shall have the prior approval of the party of the
first part.
8. In view of these covenants running with the land, when the
constitution of a company has not been approved by SIPCOT, it has a right to
refuse or accept notwithstanding the fact that the Court has granted
amalgamation of the two companies. Clause 24 of the lease agreement
specifically provides that the lessee shall not directly or indirectly
transfer, assign, sell, .... or part with its interest, either in part or in
whole of the land without the previous approval of SIPCOT. By amalgamating
M/s. Chendur Forge Exports Ltd. with the petitioner company, the interest in
the property has been indirectly " transferred or assigned" in whole. Under
those circumstances, it shall be open to SIPCOT to impose any condition as it
considers necessary. The condition that was found necessary by SIPCOT is that
the petitioner must pay the difference in cost.
9. The contention of the petitioner is that the amalgamation
of the two companies (by Court's order) has merged the assets of the two
companies and hence there is no 'transfer' of any right in the land in favour
of the petitioner company. A recent decision of the Supreme Court squarely
applies to the facts of the present case. When the American Company was
amalgamated in the Indian Company, under a scheme of amalgamation, by High
Court under Sections 391 and 394 of Companies Act, and under the Scheme the
whole of the business, property, assets including leases, right of tenancy,
occupancy etc., stood transferred and vested in the Indian Company, the
Supreme Court held in SINGER INDIA LTD., V. CHANDER MOHAN CHADHA (2004 AIR
SCW 5039) that it would make no difference insofar as the applicability of the
Rent Control Act. In that case, the landlord filed a case for eviction on the
ground that the tenant, the American Company, without obtaining any written
consent from the landlord, had parted with the possession of the premises in
favour of the Indian Company. The contention of Indian Company that there was
no transfer of any rights in view of the amalgamation order of the High Court
was rejected. That was held as subletting and hence eviction was ordered.
10. On the same analogy, in the present case, the scheme of
amalgamation would make no difference insofar as the lease agreement between
SIPCOT and M/s. Chendur Forge Exports Ltd. Hence there is transfer of right
in the land in favour of the petitioner. Hence as per the terms of the
agreement the petitioner is bound to pay the difference in price of the
land/plot as demanded by the respondent.
11. The permission for amalgamation is different and it has
nothing to do with the enforcement of the specific clauses in the lease deed.
The amalgamation of the two companies does not alter the terms of the
agreement. It is an indirect transfer of the rights inthe land. Further,
Clause 3 of the Office Order of the SIPCOT provides that when an existing unit
in the SIPCOT Complex is merged with another company, the current land cost
will be collected and the new incumbent will be asked to pay the difference in
land cost, after adjusting the plot deposit paid by the original promoters.
The existing unit was merged with the petitioner company. Therefore, this
clause also enables them to get the difference in cost. Though the lease deed
is of the year 1993, and the Office Order was passed in the year 1994, the
office order is applicable to all the lessees, including the earlier leases.
12. Therefore, the writ petition fails and the same is
dismissed. No costs.
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State Industries Promotion
Corporation of Tamil Nadu Ltd
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