Karnataka High Court
M/S Kirloskar Aaf Limited vs Karnataka Inudstrial Area Development ... on 3 March, 2023
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 03RD DAY OF MARCH, 2023
BEFORE
THE HON'BLE MRS. JUSTICE K.S. HEMALEKHA
WRIT PETITION No.50431/2019 (GM-KIADB)
BETWEEN:
M/S. KIRLOSKAR AAF LIMITED,
(FORMERLY KNOWN AS
M/S. KIRLOSKAR SNYDER GENERAL LIMITED)
A COMPANY INCORPORATED UNDER
THE COMPANIES ACT, 1956,
HAVING ITS REGISTERED OFFICE AT NO.143-C4,
BOMMASANDRA INDUSTRIAL AREA,
HOSUR ROAD, BANGALORE - 560 099
REPRESENTED BY ITS VICE PRESIDENT
MR. V.T. JAIRAJ. ... PETITIONER
(BY SRI DHANANJAY JOSHI, SENIOR ADVOCATE FOR
SRI VACHAN H.V., ADVOCATE)
AND:
KARNATAKA INDUSTRIAL AREA DEVELOPMENT BOARD,
A GOVERNMENT OF KARNATAKA UNDERTAKING
HAVING ITS OFFICE AT NO.49,
4TH AND 5TH FLOORS, KHANIJA BHAVAN,
RACE COURSE ROAD,
BANGALORE - 560 001
REPRESENTED BY ITS
CHIEF EXECUTIVE OFFICER
AND EXECUTIVE MEMBER. ... RESPONDENT
(BY SRI BASAVARAJ V. SABARAD, SENIOR ADVOCATE FOR
SRI PRADEEP KUMAR & DEEPAK C., ADVOCATES)
THIS WRIT PETITION IS FILED UNDER ARTICLE 226 OF
THE CONSTITUTION OF INDIA, PRAYING TO QUASH AND/OR SET
ASIDE THE RESPONDENTS DEMAND SET OUT IN ITS LETTER,
DATED 08.08.2019 (ANNEXURE-A HEREIN) AND DIRECT THE
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RESPONDENT TO EXECUTE A SALE DEED IN RESPECT OF THE
SCHEDULE PROPERTY IN FAVOUR OF THE PETITIONER AT THE
SAME RATE AS CHARGED BY THE RESPONDENT IN RESPECT OF
OTHER SIMILAR SITES WITHIN THE BOMMASANDRA INDUSTRIAL
AREA AND GRANT SUCH OTHER RELIEF AS THIS HON'BLE COURT
MAY DEEM FIT I THE FACTS AND CIRCUMSTANCES OF THE CASE.
THIS WRIT PETITION HAVING BEEN HEARD AND
RESERVED ON 20/02/2023 FOR ORDERS AND COMING FOR
PRONOUNCEMENT OF ORDER THIS DAY, THE COURT
PRONOUNCED THE FOLLOWING:
ORDER
Petitioner-company is assailing the demand letter dated 08.08.2019 at Annexure-A and a mandamus to the respondent to execute the sale deed in favour of the petitioner-company.
2. The brief facts leading to filing of the present writ petition are that:
The petitioner-company was formerly known as M/s. Kirloskar Snyder General Limited, a company incorporated under the provisions of the Companies Act, 1956, while the petitioner-company was in that manner, the respondent allotted a plot bearing No.143-C4(Part) in Boomasandra Industrial Layout, Attibele Taluk, Anekal District (hereinafter referred to as the 'plot' for short) and -3- the possession of the plot was handed over to the petitioner by virtue of the possession certificate dated 18.11.1992 and pursuant to which, a lease-cum-sale agreement was executed in favour of the petitioner by the respondent.
3. It is stated that when the facts stood thus, the petitioner-company changed its name from M/s. Kirloskar Snyder General Limited to M/s. Kirloskar AAF Limited as contemplated under the Companies Act as at Annexure-D. It is stated that in view of the change made in accordance with law, all the rights of the M/s. Kirloskar Snyder General Limited was to be enjoyed thereafter by the M/s. Kirolskar AAF Limited.
4. It is stated that though the allotment of the plot was made by the respondent in favour of the M/s. Kirloskar Snyder General Limited after completion of the lease-cum-sale agreement which was for a period of 11 years, the petitioner sought for execution of the sale deed in favour of M/s. Kirloskar AAF Limited. -4-
5. It appears that respondent-Board by its communication dated 28.02.2015 called upon the petitioner to pay a sum of Rs.7,05,83,861/- towards the difference caused to complete the sale transaction, considering the request of the petitioner to be the transfer of lease hold rights. The petitioner realized that the respondent-Board has failed to understand that the change of name of the petitioner's-company did not result in the creation of new entity and that the petitioner- company earlier was known as M/s. Kirloskar Snyder General Limited and now is known as M/s. Kirloskar AAF Limited, which is one and the same entity and forwarded a copy of the fresh certificate of incorporation consequent on the change of name dated 06.06.1995 issued by the Registrar of Companies, Karnataka at (Annexure-D) to the respondent-Board on 16.03.2015 and called upon the respondent to execute the sale deed in respect of the schedule property in favour of the petitioner. -5-
6. In response to the letter addressed by the petitioner, the respondent-Board reiterated that the petitioner was a new and a different entity from M/s. Kirloskar Snyder General Limited. Again an attempt was made by the petitioner by addressing a letter to the respondent-Board explaining that the change in the name of the petitioner's-company did not result in creation of a new and a different entity. However, it appears that the respondent refused to change its decision and treated that the petitioner's request for the sale deed as a transfer of lease hold rights to a new and different entity and demanded a sum of Rs.7,45,15,312/-.
7. Aggrieved by the issuance of the letter, the petitioner approached this Court in W.P. No.2264/2016 seeking to set-aside the respondent's-Board demand and a direction to the respondent-Board to execute the sale deed in favour of the petitioner.
8. It is stated that pursuant to the notice issued in W.P. No.2264/2016, the respondent-Board appeared -6- and filed its statement of objections inter alia made a detailed reference that the share holding pattern which existed during the allotment in favour of the company known as M/s. Kirloskar Snyder General Limited and with regard to the change in the share holding pattern subsequent to the company being known as M/s. Kirloskar AAF Limited and it is contended in the statement of objections that there is substantial change in the constitution and the petitioner-company cannot take a stand that the change is only with regard to the name of the company.
9. The W.P. No.2264/2016 was disposed of granting liberty to the petitioner to file a representation along with the supporting documents to substantiate their claim with regard to there being no change in composition of the share holding of the company and on such representation along with the supporting documents being filed, the respondent-Board to examine with the -7- assistance of the experts in the field and to take decision as expeditiously as possible.
10. The petitioner pursuant to the order in the writ petition submitted its representation to the respondent and the respondent-Board issued a letter seeking some documents and on submission of the information by the petitioner to the respondent-Board there being no consideration of the representation, the petitioner filed another W.P. No.48275/2018 seeking directions to the respondent to execute the sale deed. The said writ petition also came to be disposed of on 19.06.2019 directing the respondent-Board to decide the petitioner's representation and pass a speaking order within a period of four weeks.
11. Pursuant to the order in the writ petition the impugned letter dated 08.09.2019 has been passed by the respondent-Board reiterating that the petitioner is a new and a different entity from M/s. Kirloskar Snyder General Limited and refused to change its decision and -8- treated the petitioner's request for sale deed as a transfer of lease hold rights to a new and a different entity, has demanded the petitioner to pay a sum of Rs.9,82,73,865/-. Aggrieved by which, the present writ petition is filed.
12. The respondent-Board has filed its statement of objections and additional statement of objections inter- alia contending that the allotment of the land was made in favour of M/s. Kirloskar Snyder General Limited for implementation of the project and the promoters were required to maintain not less than 51% share holding at all times. It is stated that the share holding pattern and the name of the company was changed by the petitioner- company without intimating the respondent-Board or taking permission for selling away the company and its shares. It is stated that the request made by the petitioner-M/s. Kirloskar AAF Limited for transfer of lease hold rights in their favour from M/s. Kirloskar Snyder General Limited and would state that a new company -9- namely M/s. Kirloskar AAF Limited has took over the original company and the original promoters share is less than 51%. It is stated that the request for transfer needs to be considered in terms of the Board's policy and the petitioner-company are liable to pay difference in cost of the land between the allotted price and the price in vogue at the time of considering the such request along with other charges as intimated.
13. It is stated that the demand letter issued at Annexure-A is in accordance with the order passed in W.P. No.2264/2016 and after examination of the documents with regard to share holding pattern notwithstanding change of the name has arrived at the conclusion that the share holding pattern of the allottee company was altered in contrary to the conditions and it amounts to transfer of lease hold rights in favour of new entity M/s. Kirloskar AAF Limited and as such, state that the demand letter to pay the amount is justified. It is stated that the writ petition is not maintainable when the
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allegation is solely with regard to the violation of contractual right or duty.
14. Heard Sri. Dhananjay Joshi, learned senior counsel for the petitioner-company and Sri. Basavaraj V. Sabarad, learned senior counsel for the respondent- Board.
15. Learned senior counsel appearing for the petitioner would foremost contend that the respondent- Board has issued the allotment letter allotting the plot to Mysore Kirlsokar Limited and the Mysore Kirlsokar Limited entered into a joint venture with Snydergeneral Corporation (an American company) pursuant to which, the petitioner's-company came to be incorporated as M/s. Kirloskar Snyder General Limited. According to the learned Senior counsel, Mysore Kirloskar Limited and the Snydergenreral Corporation held equal share holding in the petitioner-company and as per the joint venture, transfer of shares to the 3rd parties were subject to restriction. According to learned senior counsel since its
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corporation till date, neither of the original share holders have transferred their share holding to any 3rd party and the Kirloskar group and the Snydergeneral group continue to own equal share holding in the petitioner-company and Mysore Kirloskar informed the respondent-Board that the Reserve Bank of India granted approval on 09.07.1992 for incorporation of a joint venture company in which Mysore Kirloskar Limited and Snydergeneral Corporation would subscribe to hold 50% shares and requested the respondent-Board to transfer the allotment of the scheduled property to the petitioner-company.
16. Learned Senior counsel further contended that as per Clause 2(r) of the lease agreement stipulates that no change in the proprietorship or partnership or private limited company or unlimited company or of a registered or unregistered partnership firm to whom the plot is handed over shall be recognized without the previous consent of the Executive Member and would contend that there is no change in the constitution a composition of
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share holders of the allottee entity is been referred in Clause 2 (r) of the lease agreement.
17. Learned senior counsel would further submit that only requirement was that Mysore Kirloskar Limited to subscribe 50% of the share capital of the petitioner- company and the said requirement has been complied. It is stated that all the terms and the conditions of the lease-cum-sale agreement has been complied and the petitioner-company is entitled to the sale deed in respect of plot without payment of exorbitant demand made by the respondent.
18. To buttress his submission learned Senior Counsel has relied on the judgments of this Court in the case of Molex India Private Limited Vs. Karnataka Industrial Areas Development Board reported in 2016 SCC Online Kar 9044 [Molex India Private Limited] and Karnataka Industrial Areas Development Board Vs. Molex (India) Private Limited in W.P. No.419/2017.
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19. Per contra, Sri. Basavaraj V. Sabarad, learned Senior Counsel appearing for the respondent-Board would contend that there is no contract between the petitioner- company and the respondent-Board and the petitioner- company is not the lessee under the respondent-Board. According to the learned Senior Counsel, the State SLSWCC had approved the project for establishment of pollution control board equipments in an extent of 05 acres in Hoskote Industrial Area field by the Mysore Kirloskar Limited and on a request made by M/s. Mysore Kirloskar Limited to change the location from Hoskote Industrial Area to Boomasandra Industrial Area. The request was considered and the part of the plot measuring 2.5 acres was allotted at a tentative cost of Rs.12,570/- per square feet to M/s. Mysore Kirloskar. Learned senior counsel would submit that the request was made to transfer M/.s. Kirloskar Snyder General Limited as the project was to be undertaken and the promoters are one and the same and the transfer of allotment of the
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land to M/s. Kirloskar Snyder General was subject to the condition that the Mysore Kirloskar Limited should subscribe 50% of the share capital approved by the RBI.
20. Learned senior counsel would contend that the lease-cum-sale agreement was executed and possession certificate was issued to M/s. Kirloskar Snyder General Limited and the request now made is by the petitioner- company-M/s. Kirloskar AAF Limited, which is a separate entity seeking for transfer of lease hold rights of plot from M/s. Kirloskar Snyder General Limited. Learned counsel would submit that since M/s. Kirloskar Snyder General Limited diluted the share holdings, the Board had directed the allottee to pay certain sum as penalty and in the light of the order in W.P. No.2264/2016 reserving liberty to the petitioner to file representation along with the documents to substantiate their claim that there is no change in the composition of the share holding and the Board holding that there is change in share holding has decided to transfer the subject plot to M/s. Kirloskar AAF Limited
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subject to payment of cost of Rs.9,82,73,865/-. Learned senior counsel would contend that there is a dispute regarding the change of share holding and hence, the disputed question of fact in contractual matter, writ petition is not a remedy. Therefore, he sought to dismiss the writ petition.
21. Learned senior counsel relied upon the following judgments to support his contentions:
1) In the case of Bihar State Industrial Area Development Authority and Others Vs. Amit Kumar and others reported in (2019) 10 SCC 733 - paragraph Nos.11 and 12 to the aspect that the policy of lessor authority to charge prevailing market value on transfer by lessee is valid.
2) In the case of Phatu Rochiram Mulchandani Vs. KIADB [Phatu Rochiram Mulchandani] reported in (2015) 5 SCC 244 - paragraph Nos.23, 25, 30 to contend that the allottee bound to comply allotment/lease conditions and continues to be a lessee till execution of sale deed on fulfillment of conditions of lease/contract.
3) In the case of Bharat Coking Coal Ltd. and Others Vs. Amr Dev Prabha and Others [Bharat Coking Coal Ltd] reported in (2020) 16 SCC 759 - paragraph Nos.31 & 34.
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22. This Court has considered the rival contentions urged by the learned counsel for the parties and perused the material on record.
23. In light of the contentions put forth by the learned counsel and keeping in mind the fact that the respondent is demanding a sum of Rs.9,82,73,865/- holding that there was share dilution taken place and the change in the name has resulted in the incorporation of a new entity. The Clause 2 (iii) (r) of the lease-cum-sale agreement stipulates, which reads as under:
"[2] Xxxxx
(r) No change in the proprietorship of partnership or a private limited or unlimited company or of a registered or unregistered partnership firm to whom the plot is handed over shall be recognised without the previous written consent of the Executive Member."
24. The undisputed facts of the case are that pursuant to the allotment of plot bearing No.143-C4 (Part) Boomasandra Industrial Area of Attibele Taluk in
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favour of then M/s. Kirloskar Snyder General Limited possession of the said plot was handed over on 18.11.1992. The respondent-Board executed the lease- cum-sale agreement in favour of then M/s. Kirloskar Snyder General Limited undertaking to sell the schedule property after the lease period of 11 years. The joint venture agreement was entered into between Mysore Kirloskar Limited and Snydergeneral Corporation on 07.03.1992, wherein the said company was referred to as M/s. Kirloskar Snyder General Limited. It appears that in the year 1995 which is also not in dispute that the fresh certificate of incorporation consequent on change of name was issued by the Registrar of Companies Karnataka, Bangalore certifying that M/s. Kirloskar Snyder General Limited which was originally incorporated on 07.07.1992 under the name of M/s. Kirloskar Snyder General Limited, the name of the said company is changed to M/s. Kirloskar AAF Limited. The fresh certificate of incorporation at Annexure-D reads as under:
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नाम म त द ली के प रणाम व प िनगमन के िलए नया माण-प FRESH CERTIFICATE OF INCORPORATION CONSEQUENT ON CHANGE OF NAME क पिनय के र ज ार के कायालय म .................................................................................
[क पनी अिधिनयम 1956 (1956 का 1) के अधीन] In the Office of the Registrar of Companies, Karnataka, Bangalore.
(Under the Companies Act, 1956 (1 of 1956) .......................................................................................................................................
........................................................... के $वषय मे IN THE MATTER OF MESSRS. KIRLOSKAR SNYDERGENERAL LIMITED XX XX XX XX .......................................................................................... म& एत'ारा मा णत करता हंू +क............ प रसीिमत जसका िनगमन मूलत 19.........के ...................+दन इस...............अिधिनयम के अधीन और............................. प रसीमीत नाम 'ारा +कया गया क पनी अिधिनयम 1956 क/ धारा 21/22 (1) (क)/22 (1) (ख) के िनब2धन के अनुसार आव5यक संक6प पा रत कर 'ारा +कया गया कह है और इसक/ बाबत के28 य सरकार क/ िल खत अनुमित क पनी काय $वभाग 'ारा दान कर द गई है ।
I hereby certify that M/s. Kirloskar Snydergeneral Limited, which was originally incorporated on 7th day of July 1992 under the Companies Act, and under the name M/s. Kirloskar Snydergeneral Limited) having duly Passed the necessary resolution in terms of section 21/22(1)(a)/22(1)(b) of Companies Act, 1956, and the approval of the Central Government signified in writing having been accorded thereto in the Department of Company Affairs.
<े ीय िनदे शक के तार ख ..................19............ के प सं ........................'ारा ा> ह जाने पर उ@ क पनी का नाम इस +दन .................................प रसीिमत म त द ल कर +दया गया है और यह माण-प उ@ अिधिनयम क/ धारा 23(1) के अनुसार म जार +कया जाता है ।
Registrar of Companies, Karnataka, Bangalore letter No.TA.I/sk/13320/CN.21/94 dated 20.01.1995 the name of the said company is this day changed to M/S. KIRLOSKAR AAF LIMITED and this certificate is issued pursuant to section 23(1) of the said Act.
मेरे ह ता<र से यह तार ख....................................................... +दया गया।
Given under my hand at Bangalore this Sixth day of June 1995 (One thousand nine hundred Ninety Five) Sd/-
(V. Sreenivasa Rao)
क पिनय का र ज ार
Registrar of Companies, Karnataka, Bangalore.
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25. The procedure for change of the name of the company is noticed to be in accordance with the provisions contained with the Companies Act, in as much as a fresh certificate of incorporation consequent upon the change in the name without there being any alteration of shares.
26. The Co-Ordinate Bench of this Court in the case of Molex India Private Limited at paragraph Nos.5, 6 and 8 held as under:
"5. On a perusal of the clause, it is seen that one of the terms of the allotment was that no change in the proprietorship or partnership of a private limited or unlimited company or of a registered or unregistered partnership to whom the plot is handed over shall be recognized without previous written consent of the Executive Member. The purpose of such condition in the agreement is to see that an allottee shall not part with the plot allotted in their favour by using dubious method. If the said intention contained in the clause is kept in view, the sequence of events that have taken place is required to be taken note of, so as to
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come to a conclusion, firstly as to whether the said clause had provided the present change that had been effected by the petitioner and even if any written consent had not been obtained whether the alteration is of such nature that the allotee has parted with the plot to any other third party or such other persons, who have taken over in the guise of re-constitution of the company. In order to appreciate the said aspect of the matter, a perusal of the petition papers would disclose that as on the date when the allotment was made and the agreements at Annexures A and B were entered into, the petitioner was a public limited company. Hence the restraint as indicated in the clause as on that day did not apply to the said company.
6. Be that as it may, the procedure as adopted by the petitioner for the change in the constitution of the company is noticed to be in accordance with the provisions contained in the Companies Act, inasmuch as a fresh certificate of incorporation consequent upon the change in the name on conversion to a private limited company has been issued by the competent authority on 11.09.2008 as at Annexure F to the petition. The said procedure as adopted would indicate that the very same company, which was
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a public limited company was converted as a private limited company and the change is only with regard to the share holding pattern. The details of the share holding pattern as a private limited company as articulated at Annexures A and B to the petition would disclose that though there was alteration in the share holding pattern from the year 2005 onwards, the petitioner had held 100% shares in the company as in the year 2009. If that be the position, the change of constitution of the company has not been made with a mala fide intention to either part with the property that I had been allotted by the respondent or alter the same in any other manner.
8. Therefore, if in the background of the legal position as noticed, in the clause contained in the agreement to which the respondent has also made a reference is taken into consideration, the only change that has occurred in the constitution of the petitioner - company is that the very same company which was a public limited company has converted itself into a private limited company by complying with the provisions of the Companies Act and a certificate to the said effect has been issued. Therefore, the question of transferring
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the lease hold right to another company does not arise, as the plot as allotted by the respondent through the agreements at Annexures A and B is retained by the very same company. Hence while executing the sale deed, in indicating therein the name of the company to which allotment is made and in whose favour the sale deed is executed the only change is by describing it as a private limited company, as against the description contained in Annexures- A and B. If that be the position, considering the petitioner-company as a different entity and indicating that there would be transfer of lease hold right as stated in the impugned letters at Annexures Y and Z both dated 3.9.2009; thus the amount demanded therein would also not be justified in law."
27. It is also relevant to note that by incorporation of the name of the petitioner as M/s. Kirloskar AAF Limited, the proprietorship of partnership has not been changed.
28. On perusal of the Clause, it is seen that one of the terms of the allotment was that there should be no change in the proprietorship or the partnership or a
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private limited or unlimited company or of a registered or unregistered partnership to whom the plot is handed over shall be recognized without the previous written consent of the executive member and thus, the only change that has occurred in the constitution of the petitioner-company is that the very same company by obtaining the certificate from the Registrar of Company has changed the name to M/s. Kirloskar AAF Limited.
29. The allotment letter in the year 1991 in respect of the plot was to Mysore Kirloskar Limited and the Mysore Kirloskar entered into the joint venture with snydergeneral Corporation and held equal share holding in the petitioner-company. The share holding of the Kirloskar Group and the Snydergeneral group continued to own equal share holding in the petitioner-company and the transfer of allotment sought by the petitioner- company the only criteria was the Mysore Kirloskar Limited to subscribe to 50% share holding in the petitioner-company as stipulated by RBI in its approval
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dated 09.07.1992 and the said requirement has been complied and the Mysore Kirloskar Limited continued to hold 50% of the shares in its name in the petitioner- company. The petitioner's company name was changed M/s. Kirloskar Snyder General Limited to M/s. Kirloskar AAF Limited in the year 1995 itself.
30. The judgments relied by the learned counsel for the respondent that the lessor is entitled to charge prevailing market value on the transfer by the lessee is valid is not in dispute. But in the present circumstances, the petitioner has not sought for transfer in favour of any third party but has sought transfer of leasehold rights from M/s. Kirloskar Snyder General Limited to M/s. Kirloskar AAF Limited wherein it is only a change of name.
31. The judgments relied by the learned counsel for the respondent insofar as Phatu Rochiram Mulchandani and Bharat Coking Coal Ltd. stated supra is not applicable to the facts and circumstances of the present case, as the allottee has not violated any of the
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terms and conditions of the lease-cum-sale agreement and the terms and conditions of the lease-cum-sale agreement has been fulfilled.
32. Insofar as the maintainability of the writ petition is concerned, this Court is of the considered view that this is not a matter, wherein there is contractual dispute between the parties. In the present case, it is the respondent, who has sought to communicate to the petitioner by its letter stating that the petitioner's request to transfer the lease hold rights in favour of M/s. Kirloskar AAF Limited is a new and different entity and demanded the petitioner to pay a sum as per the prevailing market value, which is on the face of it, is not sustainable.
33. In light of the judgment of this Court in the case of Molex India Private Limited confirmed in W.A. No.419/2017 and for the reasons stated supra, this Court is of the considered view that the communication dated 08.08.2019 at Annexure-A needs to be quashed.
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34. Accordingly, this Court pass the following:
ORDER i. The writ petition is allowed.
ii. The impugned communication dated 08.08.2019 issued by the respondent at Annexure-A directing the petitioner to pay a sum of Rs.9,82,73,865/- is hereby quashed.
iii. The respondent is directed to execute the sale deed in favour of the petitioner in respect of allotted plot bearing No.143-C4(Part) in Boomasandra Industrial Layout, Attibele Taluk, Anekal District, subject to the petitioner complying with the conditions with regard to the payment of necessary stamp duty and registration charges in that regard.
Accordingly, the writ petition stands disposed of.
SD/-
JUDGE S*