The Judgment of the Court was delivered by
Jyotirmay Bhattacharya, J.:— Admittedly, a lease was granted in favour of the petitioner-company by the Governor of West Bengal in respect of an industrial plot measuring about 10.00113 cottahs, being No. 32 in Block EN, Sector-V, Bidhannagore, for a period of 999 years commencing from the date of execution of the said lease deed. The said lease deed was executed on 1st day of January, 1986. The said lease deed contained various restrictive clauses. Presently, this Court is concerned with two of such restrictive clauses which are set out hereunder:-
“No. 8. The lessee shall not assign or transfer the demised land or any part of the demised land and/or the structure erected thereon without the previous permission of the Government in writing. In case of transfer or assignment of the lease, the lessor shall have the right of preemption and upon the exercise of this right the building constructed by the lessee on the land shall be taken over by the lessor at a valuation of the building made by the lessor on the basis of the cost of construction of the building less depreciation at the usual rate or market value thereof, whichever the less. The value of the land will be the amount of the salami or premium paid by the lessee.
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“No. 9. Not to use or allow to be used the land and/or the structure thereon or any part thereof for any purpose other than for the purpose as mentioned in para 1 without the prior permission in writing of the Government or other authority prescribed in that behalf.”
The said plot of land was leased out to the petitioner-company for establishing a manufacturing unit of chemical products. Though, the construction of the said manufacturing unit could not be completed within the stipulated period but such construction was completed as per the modified sanctioned plan within the extended period. Admittedly, the construction which was so made was fit for setting up an infrastructural unit for information technology. The memorandum and articles of the said company were changed by incorporating amendments therein suitable for running a business of information technology in the said set up. Even both shareholders, who promoted the said company, subsequently transferred their shares in favour of strangers who purchased the entire shares held by the two promoter shareholders in the said company.
All these were done without any intimation to the lessor, namely the State Government. Subsequently, the petitioner-company, by its letter dated 27th October, 2005, applied before the respondent authorities for grant of permission to change the use of the said plot of land from setting up a manufacturing unit of chemical products to that of an infrastructure for running the business of information technology, in terms of the Notification being No. 1722-UD/O/M/SL(AL/NR)/8L-8/2004 (pt), dated May 6, 2006. Since the said application of the petitioner-company was kept unattended for a long time, the petitioner-company earlier moved a writ petition being W.P No. 3858 (W) of 2007 which was disposed of by a Learned Single Judge of this Court on 23rd April, 2007 with a direction upon the Principal Secretary, Government of West Bengal, Urban Development Department, to consider and dispose of the said representation of the petitioner-company dated December 20, 2006, in accordance with law by passing a reasoned order within a period of six weeks from the date of communication of His Lordship's said order after giving an opportunity of hearing to the said petitioner-company and after taking into consideration the Notification dated 6 May, 2005, as mentioned above.
In pursuance of such direction passed by His Lordship, the said representation of the petitioner-company was ultimately disposed of by the Principal Secretary on 8 May, 2008, by taking note of the Government Notification dated 6 May, 2005 and the subsequent Notification dated 17 April, 2007. It was held by the said authority that the proposal for change of use of the land and/or regularization of such change, as prayed for by the petitioner, will be permitted and/or made on payment of prescribed fees and penalties. Considering the change of shareholders of the said company, the said authority held that the ownership pattern of the company has also changed as transfer of share by the promoter shareholders to the present shareholders tantamount to transfer of the assets of the company; whether acquired by way of lease or otherwise from one set of persons to the other. Thus, the said authority held that the company is liable to pay transfer fee for change of ownership as applicable, vide Notification dated 1722-UD/O/M/SL(AL/NR)/8L-8/2004 (pt) dated 6 May, 2005, as subsequently modified vide Notification No. 1395-UD/O/M/SL(AL/NR)/8L-8/2004 dated 17 April, 2007. The said authority thus, concluded by holding that the request for change of purpose from chemical industry to IT/ITES industry as prayed by the petitioner-company can be considered on payment of the prescribed transfer fees and the requisite fees for change of use as well as the penalty as prescribed for this purpose. Pursuant to the aforesaid decision taken by the Principal Secretary, the Land Manager, Bidhannagore, Government of West Bengal, by his letter dated 26 June, 2012, requested the petitioner no. 2 namely, the present Director of the petitioner-company, to deposit the permission fees at the rate of Rs. 3,00,000/- per cottah towards transfer of entire change of leasehold right, title and interest in respect of the said plot of land in favour of the two new shareholders. By the said letter the present Director of the said company was further requested to deposit Rs. 1,00,000/- per cottah along with 100% penalty of Rs. 1,00,000/- totaling Rs. 2,00,000/- per cottah for ex-post-facto permission for change of land use purpose from original to IT/ITES.
The legality and/or propriety of the said order passed by the Principal Secretary, on 8 May, 2008, appearing at page 68 of the writ petition and the legality of the letter dated 26 June, 2012 issued by the land manager, Bidhannagore, Government of West Bengal, appearing at page 67 of the writ petition, are under challenge in this writ petition at the instance of the petitioners.
In this background, two questions emerged for consideration by this Court. Those are as follows:-
1. Whether transfer of shares by the shareholders of a company to the stranger purchaser of such share amounts to transfer of assets of the company, whether acquired by way of lease or otherwise?
2. Whether the petitioner's representation for change of use of the said plot of land submitted on December 20, 2006 can be decided on the basis of the subsequent Notification dated 17 April, 2007 when this Hon'ble Court, while disposing of the earlier writ petition, directed the concerned authority to consider the petitioner's said representation in the light of the notification dated 6 May, 2005?
Let me now consider the abovementioned two questions which have been emerged in the aforesaid set of facts; one after another.
Re: Question No. 1.: This question is no longer a Res Integra in view of the decision of this Hon'ble Court in the case of Green Hut Pvt. Ltd. v. State of West Bengal reported in 2010 (CHN) (cal) 607. In an identical situation this Hon'ble Court held by relying upon two decisions of the Hon'ble Supreme Court in the case of Bacha F. Guzdar, Bombay v. Commissioner of Income Tax, Bombay, reported in 1955 SC 74 and in the case of Kapila Hingorani v. State Of Bihar., reported in (2003) 6 SCC 1 that a shareholder has no interest in the property of the company and further that since the company is a juristic person and distinct from shareholders, it is the company which owns the property and not the shareholders. As such, His Lordship held that the transfer of share by the shareholders to the stranger purchaser of such shares does not amount to transfer of the asset from the transferor shareholder to transferee shareholder and thus, it was held that merely because there was transfer of shareholding, it cannot ordinarily be said that there was assignment and/or transfer of the lease. The relevant paragraphs of the aforesaid decision of the Hon'ble Court are set out hereunder.
“13. There is no doubt in my mind that the Government at the time of preparing the terms of lease could not contemplate a situation whereby the five shareholders of the company at the time of execution of the lease would disappear and their shares would be held by three other shareholders. The Government never expressed any intention of entering into a contract with the individual five shareholders but entered into the contract, that is the lease agreement with the company. If it had entered into the lease agreement with those five persons then it could have rightly claimed that there was assignment or transfer of the lease. But the lease agreement was with an incorporated accompany and just because there is change in the membership of the company does not mean necessarily that there is assignment or transfer as the company remains the lessee. The above letter of the Government of west Bengal alleges assignment or transfer of the lease on just this basis.
14. It is true that a company is a different entity from its shareholders. Unless there is express transfer or assignment of a lease by the company in favour of some other party it cannot be ordinarily said that there is assignment or transfer of the lease merely because there is transfer of shareholding. The letter of the Government of West Bengal alleges transfer of shareholding only. It says that by such transfer there is assignment or transfer of the lease in breach of the above covenant. On the basis of the transfer of the allegations in the body of the letter in my opinion no case for transfer of assignment is made out. I hereby declare as such. I also restrain the Government of West Bengal from taking any steps on the basis of the letter dated 10 September, 2009.”
Mr. Sengupta, learned Advocate, appearing for the State respondents, tried to distinguish the aforesaid decision of this Hon'ble court by referring to a decision of the Hon'ble Supreme Court in the case of General Radio and Appliances Co. Ltd. v. MA. Khader (decd) by legal representatives reported in (1986) 60 Company Cases 1013; wherein it was held that transfer of lease from the transferor company to the transferee company by virtue of the amalgamation scheme sanctioned by the Court by an order under Sections 391 and 394 of the Companies Act, 1956 could not be held to be an involuntary transfer effected by the Court of Law and as such transfer of possession of the tenancy by the transferor company (tenant) in favour of the transferee company attracts contravention of the provision of Section 10(ii)(a) of the Andhra Pradesh Act as well as the terms of the Clause 4 of the Rent Agreement and the landlord was entitled to an order of eviction. This conclusion was arrived at by the Hon'ble Supreme Court by taking note of the definition of tenant as defined in Section 2(ix) of the said Act which provided that ‘tenant’ means any person by whom or on whose account rent is payable for a building and includes the surviving spouse, or any son of daughter, of a deceased tenant who had been living with the tenant in the building as a member of the tenant's family upto the death of the tenant and the person continuing in possession after termination of the tenancy in his favour, but Does Not Include a Person Placed In Occupation Of A Building by Its Tenant, Etc.
Let me now consider as to how far the principle laid down in the said decision of the Hon'ble Supreme Court is applicable to the facts of the instant case. I have already indicated above that the case which was before the Hon'ble Supreme Court was a case of amalgamation of the two companies which is not the case before this Court. In case of amalgamation of two companies the transferor company losses its existence and all the property, rights, powers of every description including all leases and tenancy right, industrial, import and all other licences, of the transferor company without any further act or deed are transferred and vested or deemed to be transferred or vested in favour of the transferee company. Thus, in case of amalgamation no doubt the lease-hold interest of the transferor company stands transferred in favour of transferee company but the such transfer is not contemplated in case of transfer of share by the shareholder of the company to the stranger purchasers of such shares, as it was held in Mrs. Bacha F. Guzdar, Bombay v. Commissioner of Income Tad, Bombay (supra) by the Hon'ble Supreme Court that a shareholder who buys share does not buy any interest in the property of the company which is a juristic person entirely distinct from shareholders. It was further held therein that the true position of a shareholder in a company is that on buying shares he becomes entitled to participate in the profit of the company as and when the company declares, subject to articles of association, that the profits or any portion thereof would be distributed by way of dividends amongst the shareholders. It was further held therein that he has further a right to participate in the assets of the company which would be left over after winding up but not in the assets as a whole. In the present case, it is nobody's case that the company was wound up and the assets of the wound up company which were left over after winding up of the said company was transferred by the promoter shareholder in favour of the stranger purchaser. As such, by following the aforesaid decision of the Hon'ble Supreme Court as well as of this Hon'ble Court, this Court has no hesitation to hold that with the transfer of the share by the promoter shareholder to the present shareholder, namely the transferees of such share, the lease hold interest of the company was not transferred from the promoter shareholder to the present shareholder of the said company. The petitioner-company which obtained the said lease from the Government, still remains the lessee of the said plot of land and its leasehold interest in the said plot of land remains unaffected by transfer of share by the promoter shareholders to the present holders. As such, this Court holds that the restrictive clause regarding transfer of the lease hold interest of the lessee in favour of a stranger, sub-lessee or assignee, does not attract in the present case and as a result, the demand for transfer fees for recognizing the alleged transfer of leasehold interest from the erstwhile shareholders of the said company to the present shareholder, is absolutely illegal and unlawful and as such, that part of such demand, which was made by the concerned authority in the impugned order and/or letter as aforesaid, stands quashed.
Let me now consider the other question which is raised for consideration before this Court.
Re: Question No. 2: I have already indicated above that while disposing of the earlier writ petition being W.P No. 3858(W) of 2007 this Hon'ble Court directed the concerned authority to consider and dispose of the petitioner's said representation dated December 20, 2006 by taking into consideration the Notification dated 6 May, 2005. At the time when the said direction was passed by this Hon'ble Court, the said Notification dated 6 May, 2005 was the only Notification which was operating in the field. The subsequent Notification of 2007, which came into operation with the issuance of such notification on 17 April, 2007, was not in existence either at the time when the petitioner submitted its representation before the concerned authority or at the time when the right of the petitioner to get his said application decided in the light of the Notification of 6 May, 2005 was crystallized by the decision of this Hon'ble Court. Thus, when this Hon'ble Court directed the concerned authority to consider the petitioner's said representation in the light of the Notification dated 6 May, 2005 which was the only Notification, which was in operation at the relevant time, this Court holds that the concerned authority acted illegally and also exceeded its jurisdiction by demanding fees for granting permission for change of user of the land at the rate as prescribed in the modified Notification of 2007 in contradiction to the direction passed by this Hon'ble Court.
That apart, the question relating to applicability of the subsequent Notification to the pending representations has also been considered by this Hon'ble Court in an unreported decision in the case of W.P No. 19516 (W) of 2012 (Seven Hill Bytes Pvt. Ltd. v. Kolkata Municipal Corporation); wherein it was held that the fate of the pending applications for transfer of the use of the land should be considered on the basis of the Notification which was in operation as on the date of submission of such application and/or representation before the concerned authority. As such, this Court holds that the demand of the permission fees for change of user of the land from a Non-IT set up to IT set up purpose at the rate as prescribed in the subsequent Notification of 2007 which came in to operation on 17 April, 2007, is illegal and unlawful. As such, that part of the impugned order and/or demand made in this regard by the concerned authority, stands quashed.
The concerned authority is, thus, directed to raise a fresh demand towards the permission fees for change of use of the said land from non-IT set up to IT set up at the rate as prescribed in the Notification dated 6 May, 2005 within two weeks from the date of communication of this order and the permission for change of use of the land will become effective subject to deposit of fresh demanded amount by the petitioner as per the direction given above.
The writ petition is, thus, allowed.
Urgent xerox certified copy of this judgment, if applied for, be given to the parties as expeditiously as possible.