Himachal Pradesh High Court
M/S Indorama India Pvt. Ltd & Another vs State Of Hp & Others on 31 July, 2023
Author: Vivek Singh Thakur
Bench: Vivek Singh Thakur
IN THE HIGH COURT OF HIMACHAL PRADESH AT SHIMLA
CWP No. 3331 of 2021
Date of Decision : July 31, 2023
.
M/s Indorama India Pvt. Ltd & another
...Petitioners
Versus
State of HP & others ....Respondents
Coram
The Hon'ble Mr. Justice Vivek Singh Thakur, J.
Whether approved for reporting? Yes.
For the Petitioner: Mr. Abhishek Sethi, Mr. Pawan K. Sharma and Mr. Udit Shourya Kaushik, r Advocates, for the petitioners.
For the Respondents: Mr. Anup Rattan, Advocate General, Mr. I.N. Mehta, Senior Additional Advocate General, with Mr. Manoj Chauhan, Mr. Baldev Negi, Additional Advocates General, Ms Seema Sharma, Deputy Advocate General, for the respondents.
Vivek Singh Thakur, J.
Petitioners are Companies registered under the Companies Act and it is claimed that they are sisters concerns.
2. Petitioners have approached this Court for quashing Memo/Communication dated 16.12.2020 (Annexure P-13) issued by respondent No.4 i.e. Deputy/Joint Director, Department of Industries, Single Window Clearance Agency, Baddi, District Solan H.P., whereby petitioner No.2 M/s Indorama Industries Private Limited (IIL) has been directed to ::: Downloaded on - 31/07/2023 20:41:44 :::CIS CWP No. 3331 of 2021 ...2...
apply for transfer of leasehold rights of Plot No.10, Industrial Area, Lodhimajra, District Solan H.P. to petitioner No.1 M/s Indorama India Private Limited (IIPL) on account of transfer of .
Spandex Business/Undertaking/Unit of IIL to IIPL in terms of Scheme of Arrangement sanctioned by National Company Law Tribunal, Kolkata Bench vide order dated 16.03.2021 (Annexure P-9).
3. Prayer for directing the respondents to depict the representative change in name from M/s Indorama Industries Private Limited (formerly Indoroma Industries Limited) to M/s Indorama India Private Limited with respect to Spandex Business/Division of IIL on account of legal vesting thereof by operation of Sections 230 to 232 of the Companies Act, 2013 in their records as well as in the revenue record has also been made.
4. Declaration has also been sought that Spandex Business/Division of IIL has legally vested in IIPL by virtue of judgment/order dated 16.03.2021 passed by National Company Law Tribunal, Kolkata Bench (NCLT), under Sections 230 to 232 of the Companies Act, 2013.
5. As per petitioners, petitioners Companies are sister concerns and by adopting the due process they proposed and approved the Resolution for transfer of Spandex Business/Division from IIL to IIPL after obtaining requisite approval of its shareholders/creditors and in furtherance to ::: Downloaded on - 31/07/2023 20:41:44 :::CIS CWP No. 3331 of 2021 ...3...
that, Board of Directors of petitioners Companies approved the Scheme of Arrangement in respective of meetings of Board of Directors of petitioners Companies held on 9.6.2020 .
(Annexure P-7).
6. Before de-merger of Spandex Business of IIL with IIPL, was producing spandex yarn in the plant commissioned in Plot No.10, Industrial Area, Baddi. H.P. The said plant was leased in favour of IIL by State of HP through Department of Industries vide deed dated 11th January, 2012 (Annexure P-3).
7. Apart from the aforesaid Plot, after granting permission under Section 118 of H.P. Land Revenue Act, 7 bighas land in village Shahpur, Pargana Dharampur, Tehsil Baddi, District Solan was also purchased by IIL on 23.12.2015 whereupon a Housing Colony was constructed by IIL for its workers.
8. Another piece of land measuring 208 square metres situated in village Dabni, Tehsil Baddi, District Solan has also been leased out to IIL by State of HP vide deed dated 27.02.2012 for installation of Power Transmission Tower.
9. A petition under Sections 230 to 232 of Companies Act, 2013 was moved to NCLT Kolkata for sanctioning the Scheme of Arrangement with respect to Spandex Business between the petitioners-Companies.
10. On 27.11.2020, a notice as contemplated under Section 230(5) of Companies Act, 2013 read with Rule 8 of ::: Downloaded on - 31/07/2023 20:41:44 :::CIS CWP No. 3331 of 2021 ...4...
Companies (Compromise, Arrangements and Amalgamation) Rules, 2016 with respect to Scheme of Arrangement between the petitioners Companies was served upon respondent No.4 .
Joint Director, Department of Industries, Single Window Clearance Agency, Baddi, District Solan.
11. No representation or objection, in relation to proposed Scheme of Arrangement between the petitioners Companies, was made to NCLT Kolkata by respondents within stipulated period.
12. However, communication dated 16.12.2020 was received from respondent No.4 with advise to apply for transferring the leasehold rights on account of change of ownership.
13. On 16.03.2021 NCLT Kolkata approved/sanctioned the Scheme of Arrangement vide judgment/order dated 16.3.2021 and it was ordered that all the property/rights and powers pertaining to Spandex Business/Undertaking of IIL be transferred to IIPL without any further act, deed or conveyance.
14. On 20.04.2021, petitioners - Companies made a joint representation to Additional Chief Secretary (Revenue) regarding the endorsement of change of name in revenue record in furtherance to order/judgment dated 16.3.2021 passed by NCLT Kolkata sanctioning the Scheme of Arrangement whereby all property/rights and powers of IIL ::: Downloaded on - 31/07/2023 20:41:44 :::CIS CWP No. 3331 of 2021 ...5...
relating to Spandex Business/Undertaking was ordered to be transferred to IIPL without any further act, deed or conveyance. On the same day, a joint representation was also .
made to the Director of Industries to change the name in the record from IIL to IIPL. Similar joint representations were also submitted to Deputy Commissioner, Solan and Joint Director, Department of Industries, Single Window Clearance Agency, Baddi, District Solan on 22.4.2021.
15. Referring provisions of Section 232 of Companies Act, 2013, it has been contended that NCLT has the power for directing transfer of whole or any part of undertaking, property or liabilities of transferor Company to transferee Company without any requirement of execution or performance of any act, deed or conveyance freed from any charge which shall, by virtue of arrangement, cease to have effect. It has been contended that transfer of property, Spandex Business/Unit/Division along with leased property, is automatic by virtue of law after sanction of Scheme of Arrangement, between the petitioners - Companies, providing such transfer. Therefore, it has been argued that de-merger of Spandex Undertaking of IIL to IIPL cannot be subjected to requirement of filing an application for transfer of leasehold rights from IIL to IIPL and consequently, no charges including the stamp duty provided under the Indian Stamp Act, 1899 or by virtue of provisions of Transfer of Property Act, 1882 are ::: Downloaded on - 31/07/2023 20:41:44 :::CIS CWP No. 3331 of 2021 ...6...
leviable on the transfer of leasehold rights of Spandex Division/Unit from IIL to IIPL because such transfer or vestment of leasehold rights from IIL to IIPL is by operation of .
law, particularly in terms of provisions of Sections 230 to 232 of Companies Act.
16. In response to claim of petitioners - Companies, respondents have submitted that lease deed dated 11.1.2012 has been executed between the State of HP and petitioner No.2 IIL to lease out Land/Plot, in reference, in favour of IIL as per provisions contained in H.P. Industrial Policy 2004 and Rules regarding grant of Incentives, Concessions and Facilities for Investment Promotion in Himachal Pradesh, 2004. The issuance of letter dated 16.12.2020 to petitioners has been justified on the basis of Conditions No.2(v) and 2(vi) of lease deed, which reads as under:-
"2. The lessee for himself, his heirs, executors, administrators and assigns, covenant with the lessor in the manner following that is to say:-
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2(v) The lessee shall not sell, transfer, assign or otherwise part with the possession of the whole or any part of the industrial plot except with the previous consent in writing of the Lessor which he/she shall be entitled to refuse in his absolute discretion, provided that such consent shall not be given for period of ten years from the commencement of this lease unless, in the opinion of the Lessor, exceptional circumstances exist for the grant of such consent.
PROVIDED FURTHER that in the event of the consent being given the Lessor may impose such conditions as ::: Downloaded on - 31/07/2023 20:41:44 :::CIS CWP No. 3331 of 2021 ...7...
he thinks fit and Lessor shall be entitled to claim and recover a portion of the unearned increase in the value (i.e. the difference between the premium paid and the market value) of the industrial plot at the time of sale, transfer, assignment, or parting with the possession, .
the amount to be recovered being fifty percent/thirty percent/twenty percent as the case may be the unearned increase and the decision of the Lessor in respect of the market value shall be final and binding."
2(vi) The Lessor's right to recover fifty percent/thirty percent/twenty percent of the unearned increase and the preemptive right to purchase to an involuntary sale or transfer whether it be by or through an executing or insolvency court."
17. It is also the case of respondents that they had no objection for sanctioning the Scheme of Arrangement arrived at between petitioners - Companies for transferring the Spandex Business/Unit/Division from IIL to IIPL but transfer of leasehold rights shall be governed by Conditions No. 2(v) and 2(vi) of the lease deeds dated 11.1.2012 and 27.2.2012, which provides that respondents - Department is authorized to recover unearned increase even in case of an involuntary sale or transfer through executing or insolvency Court. Further that as per provisions of Clause 2(vi) of the lease deed, in reference, lessor has to pay unearned increase even on the transfer of interest of the transferee/lessee in the property in compliance of orders of Court and, therefore, it has been contended that transferee/lessee is liable to pay unearned increase to lessor if transfer of leasehold rights of the property is intended to be transferred.
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18. Learned counsel for petitioners has submitted that it is a case of de-merger and transfer of a business unit of IIL to IIPL by operation of law and therefore, Clause 2(v) and 2(vi) .
of lease deed shall not be operative in the matter as the provision of Companies Act contained in Sections 230 to 232 shall have precedence over the conditions of lease deed which provides transfer of property without requirement of any further act, deed or conveyance. Thus, it has been contended that requirement of making an application and payment of unearned increase is not applicable in present case.
19. To substantiate claim of the petitioners, reliance has been placed upon pronouncement of the Andhra Pradesh High Court in Valu Pattabhirama Rao and another vs. Sri Ramanuja Ginning and Rice Factory (P.) Ltd. and others, reported in AIR 1984 AP 176 wherein it has been held that on conversion of a partnership firm to a Company, no conveyance deed is required for transfer of property owned and possessed by partnership firm for vestment thereof in newly formulated Company. It has been contended that said judgment has also been approved by the Supreme Court in Jai Narain Parasurampuria (dead) and others vs. Pushpa Devi Saraf & others, reported in (2006) 7 SCC 756.
20. Learned counsel for petitioners has also placed reliance upon judgment of Division Bench of Calcutta High Court in Madhu Intra Limited and another vs. Registrar of ::: Downloaded on - 31/07/2023 20:41:44 :::CIS CWP No. 3331 of 2021 ...9...
Companies, West Bengal and others, reported in 2006(130) Com. Case 510, wherein it has been held that provisions of Companies Act bar the payment of stamp duty on transfer to .
property pursuant to the orders of Company Court. Reference has also been made to judgment of the Supreme Court in case of General Radio and Appliances Co. Ltd vs. M.A. Khader, reported in AIR 1986 SC 1218, wherein the Supreme Court has observed that provisions of Companies Act have an overriding effect over the ordinary law and, thus, by an order sanctioning the amalgamation, the rights, interest and liabilities of the transferor company are transferred to and vested in the transferee company. It has been contended that in view of overriding effect of Companies Act, the orders passed by NCLT are out of the preview of Indian Stamp Act as well as the Transfer of Property Act, 1882 and thus it has been contended that Condition Nos. 2(v) and 2(vi) of Lease Deed referred by respondents, are not applicable in present case.
21. Reliance has also been placed on behalf of petitioners on pronouncement of Division Bench of this High Court in M/s Sozin Flora Pharma LLP vs. State of Himachal Pradesh, reported in AIR 2021 (HP) 44, wherein it has been held that on conversion of Partnership Firm into Limited Liability Partnership, stamp duty and registration fee cannot be levied.
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22. Learned counsel for petitioners has also placed reliance upon judgment of this High Court in Mahle Filter Systems India Ltd. vs. Himachal Pradesh Urban Development .
Authority (HIMUDA) and another reported in 2021(2) ShimLC 611 : 2021(228) Comp Case 313, wherein de-merging of a company into another company with change of name, levy of unearned increase was held unsustainable and was quashed.
23. Present case is of de-merger wherein a business Unit of IIL has been transferred to IIPL. Transferor company as well as transferee company both were in existence prior to de- merger and are in existence thereafter. Both are separate entities and a portion of the property belonging to 'A' company has been transferred to 'B' company, through Scheme of Arrangement sanctioned by NCLT in terms of provisions of Companies Act. It is not a case where entire property or entire company has been amalgamated or merged in another company. It is not a case where a company/firm or any other entity has been re-formed or re-formulated or re- constituted into another legal entity with vestment of property of previous entity in newly emerged entity. It is also not a case of change of name of existing company. It is not a case where petitioners are being subjected for payment of stamp duty or any other charges for transfer of property as provided under Indian Stamp Act, 1899 or with reference to any provision of Transfer of Property Act, 1882.
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24. In case of Vali Pattabhirama Rao's case (pronouncement of Andhra Pradesh High Court) a partnership firm was converted into registered company by operation of .
law and for vestment of property of Erstwhile partnership firm, no conveyance deed was required as it was statutory vesting of title of all properties of the previous firm in newly incorporated company without any need for a separate conveyance and, therefore, it was held that no conveyance was necessary for the company to claim the title in the leasehold interest acquired by original lessee. In this case, a partnership firm was converted into company. It was not a case where a portion of property or business of a firm was transferred to another firm or company, but it was a conversion of partnership firm with its entire assets and liabilities into a company. Whereas, in present case, there is de-merger whereby a portion of property/business of one company has been transferred to another company and after transfer both companies are in existence and, therefore, there is transfer of same assets from 'A' to 'B' whereas in aforesaid case, there was complete transformation of a legal entity into another legal entity leaving no remains of previous entity. Thus, in my view, the facts of present case are different.
25. The Supreme Court in Jai Narain Parasurampuria's case has endorsed the view of the Andhra Pradesh High Court that if the constitution of the partnership firm is changed into ::: Downloaded on - 31/07/2023 20:41:44 :::CIS CWP No. 3331 of 2021 ...12...
that of a company registering it under the Companies Act there shall be statutory vesting of title of all the properties of previous firm into the newly incorporated company without .
any need of separate conveyance. Present case is not a conversion of a firm into another legal entity but is of a transfer of one part of the property to another company. Though, in view of provisions of Sections 230 to 232 of Companies Act, conveyance deed may not be necessary because of sanctioning of Scheme by NCLT but other formalities, as applicable, for transfer of leasehold rights are necessary to be performed for completion of record.
26. In Madhu Intra Limited's case, Calcutta High Court was dealing with question of payment of stamp duty for transfer of property and liabilities of a company to another company by operation of law. In present case also, provisions related to payment of stamp duty are not applicable because for transfer of property of a company by order of NCLT, in terms of provisions of Companies Act, shall not require execution of conveyance or any other deed for transferring of property for vestment of same in the transferee company by operation of law and, therefore, stamp duty, in absence of any instrument, is not applicable because Section 17 of Indian Stamp Act provides payment of stamp duty on an instrument chargeable with duty and executed by any person, whereas on transfer or vestment of property from 'A' company to 'B' ::: Downloaded on - 31/07/2023 20:41:44 :::CIS CWP No. 3331 of 2021 ...13...
company by operation of law does not require execution of any deed, conveyance or instrument and, thus, stamp duty is not leviable for absence of pre-condition of execution of .
instrument therefor.
27. The ratio of judgment in General Radio and Appliances Co, Ltd. pronounced by the Supreme Court is not in dispute and, therefore, no further conveyance or deed is required to be executed in present case for transfer of Spandex Business/Division/Unit of IIL to IIPL alongwith leasehold rights of first company shall be transferred to second company without execution of fresh instrument/lease deed/conveyance. However, because the land/plot has been leased to IIL but not to the business Unit specifically, rights in leased land/plot shall be governed by terms and conditions of lease deeds and, therefore, for transfer of leasehold rights in Plot/land, arising out of lease deed executed in favour of IIL, are to be vested in transferee company IIPL automatically, bust subject to Condition No.2(v) and 2(vi) of Lease Deeds.
28. In M/s Sozin Flora Pharam LLP's case, there was conversion of Partnership Firm into Limited Liability Partnership. Like Vali Pattabhirama Rao's case, it is the conversion of entire legal entity into another legal entity and, thus, there is no question of transfer of property from 'A' to 'B', but it is reconstitution or reformation or re-manifestation ::: Downloaded on - 31/07/2023 20:41:44 :::CIS CWP No. 3331 of 2021 ...14...
of previous entity into another legal entity and thus, this judgment is also not applicable in present case.
29. In Mahle Filter Systems India Ltd.'s case 'A' .
company was merged into 'B' company with proposal of change of name 'B' company as 'A' company. Amalgamation/merger of 'A' company was in 'B' but with change of name of 'B' as 'A' and therefore, it was held that leasehold rights of 'B' company were not transferred to another company, but it was a case of change of name of company after amalgamation of two companies. In the Scheme, there was proposal for transfer of assets of 'A' company into 'B' company but a Clause was there to re-name the 'B' company as 'A' company and thus, it was held that it was not a property of 'B' company into 'A' company but merger of 'A' company with 'B' company but with change of name of 'B' as 'A'. Whereas in present case, it is not a change of name of company but transfer of some assets of a company into another company and after transfer both companies are in existence with their respective assets.
30. Therefore, I am of considered opinion that judgments referred and relied upon on behalf of petitioners are not applicable to present case.
31. As per Scheme of Arrangement, 'Demerged Undertaking of IIL' or 'Demerged Undertaking' or 'Spandex Business' includes all assets, whether movable or immovable ::: Downloaded on - 31/07/2023 20:41:44 :::CIS CWP No. 3331 of 2021 ...15...
pertaining to an in relation to Demerged Undertaking, whether leasehold or freehold land at Himachal Pradesh. Therefore, all leasehold land including leasehold land at Himachal Pradesh, .
related to Spandex Business are inclusive of arrangement, which has been approved by the NCLT.
32. As per Part-C of the Scheme dealing with 'Transfer and Vesting of Demerged Undertaking from IIL to IIPL', all assets or properties comprising demerged undertaking of whatsoever nature and wherever situated shall, under the provisions of Sections 230 to 232 of Companies Act, stand transferred to and vested in IIPL, without any further act or deed, be deemed to be transferred to and vested in IIPL as a going concern so as to become the assets and properties of IIPL, and the IIL shall transfer without any further act or deed the immovable properties in the State of Himachal Pradesh, and there shall be no fresh duty payable on such transfer.
33. In Clause 2(v) of Lease Deed, there is provision that lessee shall not sell, transfer, assign or otherwise part with the possession of the whole or any part of industrial plot except with the previous consent, in writing, of the lessor, which he/she shall be entitled to refuse in his absolute discretion.
34. In present case, notice of proceedings initiated before NCLT for approval of the Scheme of Arrangement having proposal to transfer leasehold rights, under reference, ::: Downloaded on - 31/07/2023 20:41:44 :::CIS CWP No. 3331 of 2021 ...16...
was served upon the respondents, through respondent No.4 Joint Director, Department of Industries, Himachal Pradesh, on 27.11.2020. For not filing any objection or representation in .
relation to the proposed Scheme of Arrangement between the petitioners - Companies, but issuing a Communication dated 16.12.2020 with advice to apply for transfer of leasehold rights on account of change of ownership, there is implied consent of the Department/respondents for transfer of leasehold rights as proposed in the Scheme of Arrangement, but the said consent shall be subject to further condition of Lease Deed. It is further clarified that for transfer of leasehold rights no fresh deed or conveyance or instrument is required to be executed, for sanction of Scheme of Arrangement by NCLT, in terms of provisions of Companies Act.
35. In aforesaid facts and circumstances, I am of considered opinion that vestment of Spandex Business Dkvision/Unit from IIL to IIPL is by operation of law and such vestment governing the transfer of leasehold rights of IIL to IIPL shall also be without any deed or conveyance and, therefore, no stamp duty or other charges are leviable on instrument, deed or conveyance for such transfer shall be leviable on transfer of leasehold rights from IIL to IIPL, but such transfer of leasehold rights shall be governed by terms and conditions of lease deed dated 11.1.2012 and 27.2.2012 executed in favour of IIL and, therefore, for transfer of ::: Downloaded on - 31/07/2023 20:41:44 :::CIS CWP No. 3331 of 2021 ...17...
leasehold rights of Plot, in reference, IIL has to comply with relevant provisions of terms and conditions of lease deed(s). It is made clear that stamp duty for transfer of Spandex .
Business Division/Unit is not applicable in present case, including for transfer of leasehold rights of Land/Plot concerned, but transfer of leasehold right that shall be governed by terms and conditions of lease deed.
36. Accordingly, petition is disposed of, in aforesaid terms, with direction to petitioners to approach the respondents with an appropriate application for transfer of leasehold rights and in such eventuality, the respondents shall consider and take the decision thereon in the light of observations made hereinabove, within one month thereafter.
All pending miscellaneous application(s), if any, also stand disposed of.
July 31, 2023 (Vivek Singh Thakur)
(ms/sd) Judge
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