Delhi High Court
Scindia Potteries And Services Ltd. And ... vs Deputy Land And Development Officer, ... on 27 March, 1990
Equivalent citations: 41(1990)DLT261, 1990RLR311
JUDGMENT Mahinder Narain, J.
(1) By this application, the applicants in C.M. 1750 of 1989, made in Civil Writ No. 1295 of 1988, die Union of India, pray that the interim order passed by this Court (Chief Justice R. N. Pyne and Justice G. C. Jain) staying the operation of the re-entry order dated 30-6-1988, on 4-7-1988, be vacated, or alternatively another order be substituted to the effect that : the answering respondents shall not take physical possession of the property in dispute during the pendency of the writ petition. However, the petitioner shall not in? any manner whatsoever, sell, transfer, exchange, lease, encumber, mortgage or change in any manner whatsoever the real and effective ownership and control over the property in dispute. It may be clarified that the shares of Scindia Potteries and Services Ltd. (formerly known as Gwalior Pottery (Delhi) Pvt. Ltd.), shall not be transferred in any manner, whatsoever, legally or equitably, to any third party or entity".
(2) The petitioners, the Scindia Potteries and Services Ltd., had filed the writ petition challenging the re-entry order which had been passed by respondent No. I, being an order dated 30-6-1988. By that order, the respondent, as Lesser, had purported to have determined the lease in favor of the petitioners w.e.f. 30-6-1988. By that order, the petitioners were called upon to hand over possession of the area known as Scindia Potteries to a designated officer of the Land & Development Office of the respondent.
(3) Aggrieved by the said order dated 30-6-1988, the petitioners find Civil Writ Petition No. 1295 of 1988 which came up for admission on 4-7-1988, and on that date, the operation of the impugned order dated 30-6-1988 was stayed till further orders by the Division Bench of this Court.
(4) During the course of arguments, Mr. Vipin Sanghi who appears for the Union of India, has referred to the alleged misuse of the land in question by the petitioners, which had led to the passing of the impugned order dated 30-6-1988. Whether there is misuse or not, is not a matter with which I should be concerned with, as far as this application is concerned, for the reason that if relevant, that matter will be considered at the time of decision of the writ petition. I say "if relevant" for the reason that the petitioners allege that reply to the show cause notice which was sent by the respondents to the petitioners, being reply dated 20-6-1988, was not considered before passing of the order of re-entry dated 30-6-1988. If the order of re-entry is to be set aside after hearing the parties on the writ petition, then obviously the petitioners will enjoy the benefit if the lease which has been executed in their favor. If after hearing the parties, the action of order of re-entry is upheld, then the respondents would be entitled to take further steps in the matter of re-entry of the plot demised by the perpetual lease in favor of the petitioners.
(5) What the applicants are seeking to do .by this application, is to stop the sale or transfer of shares of the petitioners to any other person by the share-holders of the company.
(6) It is well settled that the share-holders of the company are distinct from the company of which they hold shares. It is too well settled since Salomon v. Salomon, 1897 Appeal Cases 22 (HL),(1) that company is separate and distinct legal entity, and this principle has been reiterated and adopted by the Supreme Court in a number of cases.
(7) Mr. P. N. Lekhi on behalf of the petitioners, has pointed out that the Supreme Court has in Mrs. Bacha F. Guzdar v. Commissioner of Income Tax, stated that the share-holders do not own the property of the company; the company is distinct juristic person. Here leasehold rights, are owned by the company and not by the shareholders of the company.
(8) Mr. Vipin Sanahi on behalf of the respondents, is wishing to invoke the principle of lifting of corporate veil for the purpose of determination of who is behind the company, in the instant case. I do not think the said principle, of lifting of corporate veil, can be invoked in this case as from the beginning, perpetual lease of the land which is the subject matter of re-entry order dated 30-6-1988 has been in the name of the one company or the other, and not in the name of its share-holders since the perpetual lease was granted. The present share-holders, perhaps, were not even the shareholders of the company when the perpetual lease was granted to a company named The Development Corporation of India Ltd on 18-1-1921.
(9) Mr. Vipin Sanghi says that the order should be modified also for the reason that by virtue of the provisions of the Delhi Land (Restriction on Transfer) Act, 1972, there is a restraint on sale of lands which have been notified/for acquisition. There was a notice of acquisition with respect of these lands. A writ petition was filed by the petitioner company, questioning that acquisition. A Single Judge of this Court has set aside the acquisition proceedings, but I am told that an appeal against that order is pending. It is for this reason it is urged that sale of shares should not be permitted, as the sale of shares would amount sale of land.
(10) I am not able to accept this contention that sale of shares is sale of land. The effect of sale of shares may result in passing of control over the lands to the person to whom the shares are sold, but shares themselves being moveable, as contemplated by the Sales of Goods Act, and as held by the Supreme Court in Air (53) 1966 Supreme Court 1393 (Commissioner of Income-tax v. Standard Vacuum Oil Co.) (3) that "a share is an interest measured by a sum of money", cannot be land as such. For this reason, the provisions of the. Delhi Land (Restriction on Transfer) Act, 1972 cannot be called in aid for the purposes of seeking modification of the order, and seeking an order restraining sale of shares.
(11) Mr. Vipin Sanghi also referred to the provisions of Section 269 of the Income-tax Act, saying that those provisions will be attracted in case the shares are transferred, and the result of the transfer of shares is that somebody else pets control over the land. When that havens, in that eventuality the authorities under the Income-tax Act would be able to exercise the statutory power, if so advised. But that should not be the reason for me to pass an order, which is sought herein. I would not. like to say anything further on this matter, as it is for the income-tax authorities to take action if and when, and as and when they consider it advisable or proper to do so.
(12) Mr. Vipin Sanghi urges that the act of Court in granting the stay order should not cause prejudice to the Union of India. The way I see it, there is no prejudice to the Union of India. The matter is pending before the Court, and whosoever is in charge of the affairs of the company, which is the petitioner before the Court, will be answerable to this Court, or to the Union of India, in the event of the matter being decided, in favor of the Union of India.
(13) In this view of the matter, I see no reason to modify the stay order, which has been passed in this case.
(14) C.M. 1750 of 1989 is dismissed. No order as to costs.