Patna High Court
Vikramshila Transporters Pvt. Ltd vs . The State Of Bihar & Ors.: on 16 September, 2016
Author: Ramesh Kumar Datta
Bench: Ramesh Kumar Datta
IN THE HIGH COURT OF JUDICATURE AT PATNA
Company Petition No.8 of 1998
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In the matter of M/s Gopal Jute Industries Private Limited.
(In Liquidation)
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Appearance :
For the O.L. : Mr. Gautam Kejariwal
For the BIADA : Mr. Piyush Lal, Advocate
For BICICO : Mr. Amit Shrivastava, Advpcate
Mr. Girish Pandey, Advocate
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CORAM: HONOURABLE MR. JUSTICE RAMESH KUMAR DATTA
CAV JUDGMENT
Date: 16-09-2016
O.L.R No. 1/2011:
Heard learned counsel for the Official Liquidator and
learned counsels for BIADA and BICICO.
The present matter has arisen out of OLR No.
01/2011 filed by the Official Liquidator with a prayer to this Court to
exercise its power under Section 446 of the Companies Act, 1956 to
decide the issue whether BIADA can charge transfer levy on the
basis of decision made on 25.05.2007 by its Board of Directors on
the sale affected pursuant to this Court‟s orders for realization of
assets during the course of winding up.
The facts stated in the said OLR is that the Company
(in liquidation) was allotted 3.00 acres of land on lease for 99 years
by BIADA in the year 1983-84 ( in fact as per the agreement, for a
period of 33 years, subject to renewal at the option of the either party
by lease deed dated 11.6.1985) situated at Mauza Rampur Kasim,
Patna High Court COM PET No.8 of 1998 dt.16-09-2016
2/34
Donar Industrial Area, District- Darbhanga. Pursuant to the orders of
this Court dated 15.07.2010 tenders were invited for sale of the land
alongwith the building constructed thereon and several tenders were
received; one of the tenderers M/s. Pandaul Flour Mills Pvt. Ltd
represented by Mr. Manik Vedsen, Advocate submitted that he has
learnt from BIADA that they would be levying charges to the extent
of Rs. 28,71,000/- for effecting transfer. It is further stated in the
OLR that BIADA, which has allotted the land on lease to the
company (in liquidation), had passed a resolution in its Board‟s
meeting held on 25.5.2007 approving the following policy:-
(a) Transfer of ownership and all kinds of firms on
account of succession or inheritance - BIADA shall charge Rs.
1000/- alongwith payment of old dues;
(b) For transfer of shares in all other cases and to a
maximum of 50% - BIADA shall charge a fixed amount of Rs.
5000/- alongwith payment of old dues;
(c) For the transfer of shares of 51% and above-15%
of land value alongwith payment of old dues shall be charged;
(d) All changes of name of firms should be
communicated in advance to BIADA;
(e) The above policy will be applicable to partnership
firms as well;
(f) Any change in Directors has to be informed in
writing to the Authority by all allottees.
Patna High Court COM PET No.8 of 1998 dt.16-09-2016
3/34
On the basis of the above policy decision BIADA had
issued office order dated 30.05.2007. It is stated in the OLR that
from the office order it was evident that BIADA was not entitled to
ask for charges on account of sale made pursuant to this Court‟s
order for realization of assets for payment to the creditors. It is
asserted that the proposal for levy of charges to the extent of Rs.
28,71,000/- on the transfer transaction was arbitrary, illegal and
beyond the powers of BIADA and such action of BIADA scared the
auction participants from giving reasonable offer for purchase of land
which is against the interest of creditors and contributories at large.
Accordingly, it is prayed that the question whether BIADA could
levy transfer charge in terms of its policy decision dated 25.5.2007
on the sale of land during the course of winding up, in the interest of
justice be decided by this Court in exercise of powers under Section
446 of the Companies Act, 1956.
A reply has been filed by the BIADA to the aforesaid
OLR in which it is stated that a decision was taken in the meeting
held on 6.8.2002 under the Chairmanship of the Principal Secretary,
Industries Department, Government of Bihar, Patna as per which a
Core Committee was constituted under the Chairmanship of the
President of Bihar Industries Association to submit recommendation
on maintenance of infrastructure facility and other related issues in
the Industrial Areas of the State.
The said Committee after detailed discussions held on
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4/34
3.9.2002, 22.1.2003 and 17.3.2003 with Government officials, entrepreneurs and various bodies representing the cause of entrepreneurs such as Bihar Chamber of Commerce, Confederation of Indian Industry (Bihar State Council), Hajipur Industrial Area Association, Patna Industrial Area Association, Patna Industrial Estate Area Association, Bihar Udyami Sangh and Uttar Bihar Udyami Sangh submitted its recommendations to the State Government that infrastructure facilities developed a long time back by the Government in the industrial areas stating were in a very bad shape and there was urgent need for reconstruction and improvement of basic infrastructure and capital maintenance for which the industrial units should start paying a part of expenses incurred in maintenance as „User Charges‟. It was further recommended that the entrepreneurs may face hardships due to sickness of the unit or inability to continue working, therefore the owners (Lease Holders) of industrial plots/units should have the right to transfer/sell the land by paying fee @ 15% on the amount of the present value of land if situation so warrants and the land use was not changed.
Thereafter, the Board of Directors of BIADA in its meeting dated 25.5.2007 took a policy decision as stated above pursuant to which the office order dated 30.5.2007 was issued. It was further directed by letter dated 16.7.2007 of the Authority to all the Executive Directors of different Industrial Areas that for transfer of land the value of the land would be on the basis of the rate as fixed Patna High Court COM PET No.8 of 1998 dt.16-09-2016 5/34 by the Collector of the district of nearby land of the Industrial Area as available in the Sub-Registry Office and the rate fixed by the Authority for the land of the concerned Industrial Area, whichever was higher.
It is further stated that the Board of Directors of BIADA at its meeting held on 4.2.2004 and 11.2.2004 had clarified that the transfer policy shall be applicable in all the cases where ownership is being transferred due to transfer, sale, purchase from BSFC through auction, merger and de-merger of units and accordingly order dated 12.3.2004 was issued.
It is further stated in the reply filed by BIADA that the policy of charging „transfer levy‟ on transfer due to change of allottee/ownership/shareholding of the allottee company is widely accepted practice and is prevalent in most of the States through agencies of the State Government in development of Industrial Areas. The details regarding the practice being followed in the State of Madhya Pradesh, Rajasthan, Uttar Pradesh, Uttar Pradesh- Greater Noida, Andhra Pradesh and Punjab have been given. It may however, be noted here that in all of those cases in other States transfer levy is charged either on the current premium or percentage of the prevailing charges.
It is further stated that this widely accepted practice helps in revival of sick units, attract new industrial investment, generate employment, generate revenue to the concerned agencies for Patna High Court COM PET No.8 of 1998 dt.16-09-2016 6/34 sharing part of capital appreciation in the value of land, maintenance of industrial areas, upgradation of infrastructure and development of new industrial areas.
It is also stated that the President of the Bihar Industries Association had written on 8.9.2008 that the policy of transfer of land as laid down in the aforesaid decision of the Board of Directors was not being followed in practice for which necessary directions be issued by the Industries Department and the Managing Director.
A reply has been filed on behalf of BICICO to the reply of BIADA to the OLR. The stand of BICICO is that it is a secured creditor which had given loan to the Company with respect to which the Company became a chronic defaulter and the loan has accordingly ballooned into a huge amount which along with interest outstanding as on 30.9.1997 was Rs. 363.64 lacs. It is stated that BIADA is not a secured creditor so far as the claims on the sale proceeds of the unit is concerned. It is also stated that the land and shed in question was given on lease by Darbhanga Industrial Development Authority (a regional unit of Bihar Industrial Area Development Authority) to the Company by lease deed dated 10.6.1985. The said lease was for a period of 33 years with renewal clauses and the terms of the lease was exhaustive and detailed. It is asserted that there is no covenant in the said lease deed for payment of transfer charges to BIADA in such an eventuality and the terms Patna High Court COM PET No.8 of 1998 dt.16-09-2016 7/34 and conditions of the lease deed have to be construed strictly for which statutory provisions of Transfer of Property Act under Chapter-V are also applicable to the said lease deed.
In a supplementary reply to the reply of the BICICO filed by BIADA, it is asserted that the title of the land in question vests in the Authority which it had granted to the Company in liquidation to set up an industrial unit for manufacture of jute twine and for which a registered lease deed was executed and under Clause 7 of the said lease deed, in case the lessee mortgaged the land with a financial institution for raising loan for the purpose of the industry then in that case the dues of the Authority was necessarily to be a first charge on the properties of the mortgage alongwith the condition that the property offered as security against the loan from the financial institution should be adequate to also cover the dues of the Authority and in such a case also the dues of the Authority were to retain a pari passu interest with the financial institution. Thus, the first charge was created in favour of the Authority at the very instance when the company in liquidation created a mortgage in favour of the financial institution against the land leased out to it by the Authority through a registered document. Thus, it is submitted that the claim of BICICO that the Authority is not a secured creditor is not sustainable and hence denied. With regard to the second contention of BICICO regarding levy of transfer charge ,it is urged that once the land allotted to any entrepreneur is transfer to another Patna High Court COM PET No.8 of 1998 dt.16-09-2016 8/34 entrepreneur the permission for such transfer is allowed as per the policy decisions of the Authority as detailed in the earlier reply and a new lease deed with respect to the land so allowed to be transferred is executed between the authority and the new entrepreneur inasmuch as transfer of immovable property beyond the specified period has necessarily to be through a registered instrument and also because there cannot be two lessees of the Authority for the same land and for which the new entrepreneur has to pay stamp duty and any other charges as applicable under the relatable laws, even though the condition that the new entrepreneur is to pay stamp duty and any other charges is not a covenant of the lease deed with the old entrepreneur. It is submitted that once the transfer is allowed, the new entrepreneur has to follow all applicable general laws, rules, guidelines, etc., and thus it is bound to follow the rules, regulations and policy decisions of the Authority governing such transfer, one of which is payment of transfer charges.
It is also asserted that once transfer of unit is allowed by the Authority as per the applicable procedure then old lease deed has to be cancelled and a new lease deed has to be executed and thus BICICO cannot rely upon the lease deed which is cancelled on such transfer to claim that the Authority cannot levy transfer charge.
It is also urged that incidence of levy of transfer charge is on the new entrepreneur/transferee unit and not on the old entrepreneur/transferred unit and on this count also BICICO cannot Patna High Court COM PET No.8 of 1998 dt.16-09-2016 9/34 rely on the lease deed with the old entrepreneur/transferred unit to challenge levy of transfer charge on the new entrepreneur/transferee unit and not on the old entrepreneur/transferred unit. Further, it is submitted that since the transfer is allowed subject to the rules, regulations, policy decisions applicable and thus would also be applicable even if not so provided in the lease deed with the old entrepreneur/ transferred unit.
Learned counsels for the parties have reiterated their respective stand taken in their pleadings and have sought to rely upon various decisions of this Court and the Supreme Court in support of their stands. Broadly, the argument of learned counsels for the Official Liquidator and for the BICICO converge as the OL also represents the case of the secured creditors and other creditors in the winding up process. Thus, it is asserted by both that in the present matter the sale is not in the ordinary course of business but to convert the asset into cash to repay the secured creditors. Various other contentions are also raised but ultimately both the learned counsels for the OL and the secured creditor- BICICO take as their sheet anchor, the lease deed dated 11.6.1985 between the Darbhanga Industrial Area Development Authority on the one hand as the lessor and M/s. Gopal Jute Industries Private Limited, the company in liquidation as the lessee. It is submitted that the Industrial Area Development Authority being the owner of the land leased out/given on transfer by way of lease to the company in liquidation, the Patna High Court COM PET No.8 of 1998 dt.16-09-2016 10/34 respective rights of the parties would be determined by the terms and conditions of the lease only at best and it is not open to BIADA on the basis of any other executive action to claim any right apart from what is laid down in the lease deed. It is submitted that ultimately the relationship between the parties was that of lessor and lessee which would be governed by the Transfer of Property Act and any other law on the point and the terms of the lease. It is also asserted that once the parties enter into an agreement, the agreement under the law is sacrosanct and under Section 62 of the Contract Act, it is not open to any party to the agreement to unilaterally make any change except with the agreement of the other party or parties to the agreement. The levy of transfer charge, according to learned counsels, in so far as it concerns the present matter, is wholly beyond the powers of the lessor laid down in the lease deed and thus it cannot levy any such transfer charge.
In this regard, reliance is specially placed upon Clause-7 (i), (ii) and (iii) along with Clause 7(x ) of the lease deed relied upon additionally by BIADA which are quoted below.
"7(i). That the lessee will not assign mortgage under let or part with the possession over the land or right or interest therein or in respect thereto without the previous consent of the lessor or his nominee provided that in case of registered small scale industries no separate permission will be required to be obtained by the lessee for mortgaging it with any financial institution for raising loan for the purpose of Patna High Court COM PET No.8 of 1998 dt.16-09-2016 11/34 the Industries for which the land was allotted and in that case the dues of the D.I.A.D.A. shall also be first charge on the properties of mortgage the properties offered as security against the loan of the Financing Institution should be adequate to cover the full due of the D.I.A.D.A. as well the loans given by the financing institution. In that case, also the D.I.A.D.A. will retain pari passu interest with the Institution.
(ii) No charge in the lease, proprietorship or partnership if it is private limited or unlimited company or a registered or under registered firm shall be recognized without the previous written consent of the lessor or his nominee.
(iii) If the lessee assign lease hold interest with the written consent of the lessor in the land/shed described in para-1 of the schedule hereunder written the assignees shall duly get his/its or their name or names registered with the lessor or his nominee within four calendar months after obtaining possession or the holding and will possess and use the land/shed and be bound by all terms, covenant and conditions herein contained.
(x) Authority authorized by the Department of Industries to frame such rules or having authority in this behalf, and any other statutory rules or regulation as may be on force the time being relating in any way to the demised premises and any building thereon.
It is urged that in terms of the provisions of Clause 7(i), the Company in liquidation being a registered Small Scale Industry, had mortgaged the land in question with BICICO for which Patna High Court COM PET No.8 of 1998 dt.16-09-2016 12/34 no separate permission was required in terms of the lease agreement itself. BICICO is the financial institution wholly owned by the Government of Bihar for the purposes of raising loan and thus at best BIADA can claim a first charge on the property for its dues along with BICICO and the dues of BIADA can only have pari passu interest to that of BICICO. It is submitted that once the right to enter into mortgage was granted to the lessee then it was open to the mortgagee to enforce the mortgage by bringing to sale the mortgaged assets and upon such sale the purchaser of the mortgaged assets merely steps into the shoes of the original mortgager, i.e., the lessee and would be subject to the same terms and conditions to which the original lessee/mortgager was subject and since the latter was not required by the terms and conditions of the lease deed to pay any further charges for the said purposes, hence, such an obligation could not be enforced against the purchaser who would step into the shoes of the original lessee. In support of the same learned counsel relies upon a decision of a Division Bench of this Court in the case of M/s. Vikramshila Transporters Pvt. Ltd Vs. The State of Bihar & Ors.:
1994 (1) PLJR 601, in paras 6,8 and 9 of which it has been held as follows:
"6. It is well-settled that a lease of land creates an interest in the leased land, and the lessee acquires a transferable interest, which he can transfer in favour of a third party, subject however to the other terms and conditions of the lease. In case there are restrictive covenants in the lease deed which have a Patna High Court COM PET No.8 of 1998 dt.16-09-2016 13/34 bearing on the right to transfer the lease hold interest, such restrictive covenants must be given effect. In the absence of any term and condition to the contrary, normally a lessee is entitled to transfer his interest in land, in favour of a third party. We have, therefore to examine whether in the instant case the lease hold interest created in favour of M/s. Graduate Engineers by the respondent-Authority was a transferable interest, and that upon such transfer the purchaser stepped into the shoes of the original lessee, and was bound by the same terms and conditions without any obligation to pay afresh the price of the land.
8. From these clauses in the lease deed it cannot be doubted that the interest created in favour of the lessee was a transferable interest. Where the lessee intended to sell or assign his interest in the lease hold land, he was required to seek the prior permission of the respondent-Authority. This condition, however, did not apply to a case where the lessee was a registered Small Scale Industry, and a mortgage was sought to be created by the lessee in favour of a financial institution from which it had taken loan to set up its industry. In the instant case, it is not disputed that M/s. Graduate Engineers was a registered Small Scale Industry, and it had mortgaged its lease hold interest to the Bihar State Financial Corporation in consideration of the loan advanced by the said Corporation to M/s. Graduate Engineers. Since it was a mortgage in favour of the financial institution, no separate permission was required in terms of the lease deed itself. Counsel for the Bihar Patna High Court COM PET No.8 of 1998 dt.16-09-2016 14/34 State Financial Corporation is, therefore, right in submitting that no prior permission was required in this case. From the other clauses, referred to above, it will also appear that the lease deed envisages cases of transfer, sale or assignment of the lease hold interest. There is no provision in the said lease deed requiring the purchaser of the interest to pay afresh the price of the land in question. It may be that where prior permission is required, the same may not be granted unless the purchaser agrees to pay an additional amount to the lessor. In the instant case, however, no prior permission was required, and the mortgage in favour of the Bihar State Financial Corporation was created by the erstwhile lessee in favour of the Bihar State Financial Corporation in terms of the lease deed itself. It, therefore, logically followed that the mortgagee could enforce the mortgage by bringing to sale the mortgaged assets. If the lease agreement permitted the creation and enforcement of the mortgage, it also logically followed that upon enforcement of the mortgage and sale of the mortgaged assets, the purchaser stepped into the shoes of the original mortgagor and was subject to the same terms and conditions of the lease to which the original lessee/mortgagor was subject. Since the original lessee/mortgagor was not obliged in terms of the lease deed to pay the price of the land over again, such an obligation could not be enforced against the petitioner-Company which stepped into the shoes of the original lessee.
9. We have, therefore, no doubt that the lease deed in Patna High Court COM PET No.8 of 1998 dt.16-09-2016 15/34 favour of M/s. Graduate Engineers created a transferable interest in land. It permitted the lessee to mortgage its lease hold interest in favour of financial institutions without seeking separate permission to do so. It was, therefore, open to the financial institution to enforce the mortgage and to bring the lease hold interest to sale. Upon such sale being effected, the purchaser stepped into the shoes of the original lessee, and the respondent-Authority was bound by the terms of the lease to substitute his name in place of the original lessee. There is no provision in the lease deed for payment of any amount by way of current market price by the purchaser of the lease hold interest. The imposition of a condition under Annexure-4 requiring the purchaser to pay again the market price of the land in question is, therefore, clearly illegal and must be quashed."
It may here be pointed out that the lease deed in the case of M/s Vikramsheela Transporter Pvt. Ltd case (supra) contained precisely the same terms and conditions as the lease deed in the present matter.
Learned counsel for the OL and BICICO further relies upon the provisions of Section 62 of the Contract Act for the proposition that no change in the agreement is permissible except with the consent of all the parties, in support of which they rely upon a decision of the Privy Council in the case of Debendra Nath Ghosh & Ors. Vs. New Thethurya Coal Company Limited: AIR 1920 Privy Council (PC) 136 at page 138 of which it has been held as follows:
Patna High Court COM PET No.8 of 1998 dt.16-09-2016 16/34 "There is no evidence that the then lessees of the various plots in the mouza were informed that the alleged partition made by Tara Pada was an arbitrary parceling out of the land of the mouza according to the acreages leased without regard to the boundaries prescribed in the leases already granted and this alone would suffice to render the evidence immaterial as to the rights of the parties. In order to affect those rights, it would have to be shown that all the then lessees entered into an agreement that the plots so marked out should be substituted for those granted under the respective leases, and it is admitted by the respondents that there is no evidence of any such agreement or indeed of any agreement at all. Their whole case consists of attempts to trace copies of the map made by Tara Pada into the possession of the plaintiffs or their lessor and to providing that the boundaries laid down by Tara Pada were marked by Pillars. Such evidence is wholly insufficient to affect the title of the plaintiffs which is a registered title to a plot the relevant boundary of which was fixed, in 1895 and could not therefore be affected by any events happening in 1900.
Learned counsel for BIADA has, however, sought to rely upon a series of decisions both of the Company Court and in writ petitions to assert that despite the provisions contained in the deed of lease, BIADA would be entitled to levy transfer charge in view of the policy decisions taken in the year 2003 and given final shape in the year 2007 which power to levy transfer charges has been Patna High Court COM PET No.8 of 1998 dt.16-09-2016 17/34 upheld by this Court by the learned Single Judges of this Court as also by a Division Bench on appeal from Badri Mehrotra‟s case.
He relies upon a decision of this Court in C.P. No. 1/1991 (Hathwa Metals & Tubes Limited (In liquidation) wherein by order dated 9.7.2009 it has been held as follows:-
"Learned counsel for the SPIADA on the other hand submits that so far as the dues of the Company in liquidation are concerned, the SPIADA may not insist upon the applicant depositing the same but seeks liberty to file its claim before the Official Liquidator since the date for filing claims by the creditors has already expired. With respect to the dues under the notification dated 17.5.2007 learned counsel submits that the same relates to policy decision of the SPIADA for the purpose of effecting the transfer of lease on its registers and the same is in no way concerned with the dues of the Company in liquidation, rather the condition is applicable to all concerned who seek such a transfer in the register of SPIADA and it is not open to the applicant-Company to challenge the said provisions in the present proceedings.
On a consideration of the rival submissions this Court is inclined to agree with the submissions of learned counsel for the SPIADA.
So far as the past dues owed by the Company in liquidation is concerned the same cannot be claimed by the SPIADA, once the order of Patna High Court COM PET No.8 of 1998 dt.16-09-2016 18/34 winding up of the Company has been passed, from any auction purchaser and such claims being against the company in liquidation, they can only be made under the present proceedings by filing the claim like any other creditor of the Company in liquidation before the Official Liquidator. In the facts and circumstances of the case, the SPIADA is permitted to file its claim before the Official Liquidator within a period of six weeks from today with respect to its past dues pertaining to the company in liquidation.
So far as the challenge to the letter dated 15.7.2007 is concerned, it is true that a similar letter issued by the Bihar Industrial Area Development Authority has been set aside by this Court in Badri Mehrotra‟s case (supra) but the same issue does not pertain to company proceedings. The applicant-company having purchased the assets of the company in liquidation is required to obey all local and national laws for the purpose of running its industry in the State of Jharkhand. Hence, the said plea of the applicant- Company is rejected. However, it is made clear that it is open to the applicant-company to contest the said demands of SPIADA before the appropriate forum.
I.A. No. 1145/2009 is accordingly disposed of with a direction to the authorities of SPIADA to transfer the name of the applicant-company in its registers in place of the company in liquidation without insisting on payment of the past dues of Patna High Court COM PET No.8 of 1998 dt.16-09-2016 19/34 the company in liquidation but subject to other terms and conditions applicable for the said purpose."
It is further submitted that the aforesaid decision was followed and quoted with approval by order dated 12.3.2010 passed in C.P. No. 11/1996 (M/s. Mishrilall Jain (P) Ltd. Vs. M/s. Nacro Chemicals Ltd.).
Learned counsel further submits that with respect to the aforesaid order dated 12.3.2010 in M/s. Mishrilall Jains Pvt. Ltd case (supra), an appeal was filed which was dismissed by order dated 21.9.2010 with the observations that it goes without saying that it would be open to the appellant to challenge the validity of the policy decision in a duly constituted proceeding.
Learned counsel also relies upon the decision of a Division Bench of this Court in LPA No. 68 of 2008 (Bihar Industrial Area Development Authority & Ors. Vs. Amit Kumar, successor in interest as permitted assignee of M/s. Ganesh Engineering Company through its proprietor, late Badri Mehrotra and Ors. and analogous cases in which the Division Bench has set aside the order of the learned Single Judge setting aside the decision for levy of 15% in which it was held as follows:-
"To the extent the appellant has decided to levy certain amount, as a condition for according permission for transfer of the leasehold rights upon the allottees, there cannot be any dispute. Patna High Court COM PET No.8 of 1998 dt.16-09-2016 20/34 Being the owner of the land and an agency created under a Statute, the appellant has every right to stipulate the condition. The only controversy is as to what should constitute the basis for determining such amount.
It is only after verifying the credibility and efficiency of the proposed transferee that permission is accorded by the appellant for transfer. The pre-dominant purpose is to ensure that the land continues to be used for running of industries. Once that purpose is ensured, the element of commerce or profit cannot be brought into existence. The same basis that was taken into account, for determining the levy of 30% amount at the time of initial appointment needs to be adopted. In other words, what can be levied from the transferee of the leasehold rights from the writ petitioners is 15% of the cost of the land and development charges which we call, for the sake of convenience, as BIADA rate. The controversy be reduced to certain extent, by permitting the appellant to work out the rate, as on the date of permission, according to the same parameters and not with reference to the date of original allotment. However, there cannot be any justification to levy 15% of the circle rate. While in some writ petitions the Learned Single Judge took the view that no levy, whatever, can be made for permission of transfer, in other cases it was directed that the levy shall be on BIADA rates. We approve the second category."
Patna High Court COM PET No.8 of 1998 dt.16-09-2016 21/34 It is urged by learned counsel for BIADA that the aforesaid decision of the Division Bench in a batch of Latters Patent Appeals as also writ petitions has finally settled the matter regarding the right of BIADA to charge 15% as transfer fee under its policy decision of 2007 and thus not open to any one to assail the same. It is submitted that the said decision of the larger Bench is binding upon this Court and the stand of the OL and the BICICO ought to be dismissed for the said reason.
In addition, however, learned counsel has further sought to assail the reliance upon the decision of the Division Bench in Vikramshila Transformer case (supra). It is stated that a learned Single Judge of this Court in CWJC No. 13485/2013 (Ramjee Sah Vs. The State of Bihar & Ors.) by judgment dated 18.05.2016, after considering the said decision in similar circumstances of a sale by BSFC in the case of auction purchaser of mortgaged assets from BSFC has held that BIADA would be entitled to charge transfer fee as per its policy decision in such conditions.
Learned counsel also relies upon another decision of a learned Single Judge in CWJC No. 1755/2011 (M/s.CTS Industries Limited Vs. The State of Bihar & Ors.) wherein by judgment dated 28.9.2015 relying upon the decision of this Court dated 12.3.2011 in C.P. No. 11/1996 (supra) as also in Company Appeal (DB) No. 8/2010 by order dated 21.9.2010 held that respondent-authority is Patna High Court COM PET No.8 of 1998 dt.16-09-2016 22/34 competent to levy transfer fee and the petitioner of the said case shall be liable to pay the same for the purpose of obtaining permission for transfer of land in his favour and the transfer fee shall be as held by this Court in LPA No. 68 of 2008.
Learned counsel also sought to place reliance on a decision of a learned Single Judge of the Calcutta High Court in C.A. No. 117/2009 in the case of Jamshedpur Cement Ltd. (in liquidation) dated 20th April, 2011 in which relying upon the terms and conditions of the lease deed, it was held that no sale or assignment of the lease could have been made without permission of BIADA even by the OL.
Apart from the above, learned counsel for BIADA has cited a large number of decisions on the doctrine of precedent as also the doctrine of merger to bolster his submission on the two decisions of the Company Court in the case of Hathwa Metals & Tubes Limited (supra) as also that of M/s. Nacro Chemicals Ltd. (supra) and the confirmation of the same in appeal by a Division Bench in Meena Devi‟s case (supra) in addition to the decision of the LPA Bench in Amit Kumar case (supra) by which charging transfer fee at the rate of 15% has been upheld and are binding on this Court and no further challenge is permissible as to the said transfer fee as has been made by OL in OLR 1/2011 and the BICICO. The cases relied upon by learned counsel in this regard are the following:-
Patna High Court COM PET No.8 of 1998 dt.16-09-2016 23/34 Kunhayammed & ors. Vs. State of Kerala & anr.:
(2000) 6 SCC 359, Miss. P. Sarada Vs. Commissioner of Income Tax (Central) Madrs, AIR 1998 SC 762, A. Manjula Bhashini & Ors. Vs. Managing Director, Andhra Pradesh Women‟s Cooperative Finance Corporation Limited & anr: (2009) 8 SCC 431, Gulzari Lal Nanda & Ors. Vs. Sate of Bihar & Ors.: 1999(2) PLJR 315 and Official Liquidator Vs. Dayanand & Ors.: (2008) 10 SCC 1.
Learned counsels for the OL and BICICO in reply also sought to rely upon a decision of a Full Bench of this Court in the case of Sunil Singh & Ors. Vs. The State of Bihar & Ors: 1999 PLJR 903 on the doctrine of per incurium, as also the decision of a learned Single judge of this Court in the case of M/s. Shree Goshala & Ors. Vs. The State of Bihar & Ors: 1996(1) PLJR 815 on the doctrine of sub silentio, for the proposition that the Division Bench decision of this Court in the case of Vikramshila Transformers (supra) being earlier in point of time is a binding precedent for the future Benches and it was not open to the subsequent Division Bench or learned Single Judges to have taken a different view in the matter and upheld the transfer fee.
I have considered the submissions of learned counsels for the parties. Before considering the matter on its merits, it would be proper to first look into the contention of learned counsel for BIADA that the matter is covered by the decision in Hathwa Metals and Tubes Limited (supra) and M/s. Misrilall Jain (P) Ltd. Vs. M/s. Patna High Court COM PET No.8 of 1998 dt.16-09-2016 24/34 Nacro Chemicals Ltd. (supra), wherein this Court had held that the applicant-company having purchased the assets of the Company in liquidation is required to obey all local and national laws for the purpose of running its industry in the State of Jharkhand, and it had to pay the demands of SPIADA for getting its name transferred in its records, which has been upheld by the Division Bench in the case of Meena Devi (supra). It is evident from the decision in the aforesaid two cases of the Company Court that this Court had merely refused to interfere in the matter of transfer fee at the stage it was brought before it, i.e., after the sale had already taken place, at the instance of the purchaser but it was made clear by this Court that it was open to the applicant-company to contest the demands of BIADA before the appropriate forum. The Company appeal Bench also in Meena Devi‟s case (supra) while dismissing the appeal had clearly held that it goes without saying that it would be open to the appellant to challenge the policy decision in a duly constituted proceeding. Thus, the submission of learned counsel for BIADA that the matter has been closed by the said decisions and the Company Court cannot in an application under Section 446 look into it, does not appear to be correct. It is a case where the issue was not decided at the instance of purchaser subsequent to the sale having taken place. In the said circumstances, this Court had held that the challenge to the policy decision could be made before the appropriate forum, which can possibly but not necessarily be interpreted to mean not before the Patna High Court COM PET No.8 of 1998 dt.16-09-2016 25/34 Company Court, but on appeal the same has been modified to hold that the purchaser- applicant could challenge the validity of policy decision in a duly constituted proceeding, which would include not only writ proceeding but also before the Company Court.
The next question would be as to what extent the present case would be covered by the decision of the Division Bench in the LPA judgment dated 11.5.2015 in Amit Kumar‟s case (supra) wherein policy of charging transfer fee has been upheld subject to the same being limited to 15% of BIADA rate and not circle rate. It is urged that so far as that part of the order is concerned, regarding charging it on BIADA rate or circle rate it has been assailed in an SLP filed by BIADA.
It is evident that unfortunately before the LPA Bench the earlier decision of the Division Bench in Vikramshila Transformers case (supra) had not been cited but, in my opinion, the same would not materially affect the decision in the present matter. From perusal of the decision in Amit Kumar‟s case (supra), it is evident that the same was not rendered in the context of a sale being made on a mortgage by a mortgagee rather the challenge was straightforward to the policy decision to levy a transfer fee in case of a transfer. If we look at the said aspect of the matter, it would be found that there is no real conflict between the decision of the LPA Bench in Amit Kumar‟s case (supra) and the decision of the earlier Division Bench in Vikramshila Transformers case (supra). Even in Patna High Court COM PET No.8 of 1998 dt.16-09-2016 26/34 Vikramshila Transformers case (supra) the Division Bench has noticed the fact that had it been a case of assignment or sale under the later part of the deed of lease of any right or interest therein for which the consent of the Development Authority was required as per the lease deed, then it would have been open to the Authority to withhold consent to such transfer of right or interest unless charges which were sought, were paid. Thus there being no real conflict between the two Division Benches and the earlier Division Bench in Vikramshila Transformers case (supra) clearly applying to the case of a valid mortgage in favour of the finance company in terms of the lease deed for a small scale industry, the present case would be clearly covered by the earlier decision and the question of levy of transfer charges or the royalty thereof in a general context as decided in the case of sale or transfer in Amit Kumar‟s case (supra) would not be attracted at all.
So far as the decision of the learned Single Judge in Ramji Sah‟s case (supra) is concerned, it is true that the learned Single Judge has referred to the case of Vikramshila Transformers (supra) in the said matter but the applicability of the said case was sought to be distinguished by the learned Single Judge by holding that in the first place the policy decision by the Board of Directors of the respondent for charging such fee was not in question and moreover several clauses of the sale order by the BSFC were relied upon to arrive at the conclusion that the demand of transfer fee was Patna High Court COM PET No.8 of 1998 dt.16-09-2016 27/34 payable. Thus, the said case cannot be held to be a binding precedent in the present matter. Moreover, there is nothing in the said order which interprets the case of Vikramshila Transformers (supra) which can be held to be binding on subsequent Single Judges. As a matter of fact, if there is conflict between the Division Bench and the Single Judge‟s decisions, it is the decision of the Division Bench which would bind under the doctrine of precedent and the cases relied upon by learned counsel for BIADA would clearly not be applicable in the present matter.
As stated earlier, the facts of the present matter would be covered by the decision of the Division Bench in Vikramshila Transformers case (supra) as it was clearly held in the said case that a lease of land creates an interest in the leased land, and the lessee acquires a transferable interest, which he can transfer in favour of a third party, subject however to the other terms and conditions of the lease. In case there are restrictive covenants in the lease deed which have a bearing on the right to transfer the lease hold interest, such restrictive covenants must be given effect to. Hence, in the matter of assignment of lease deed of the Industrial Area Development Authority and its lessee, the mutual rights of the parties is covered by the terms and conditions of such lease deed and not upon any other action sought to be taken by the lessor by exercising any alleged overriding power in this regard.
Learned counsel for BIADA was unable to point out Patna High Court COM PET No.8 of 1998 dt.16-09-2016 28/34 from the provisions of the Bihar Industrial Area Development Authority Act, 1974 regarding existence of any such statutory power in BIADA to levy a transfer fee. It is evident from Section 6 of the said Act which provides the general duties and powers of the Authority that power conferred upon the Industrial Area Development Authority is with regard to responsibility for planning, development and maintenance of the Industrial Area and amenities thereto and allotment of land, execution of lease and cancellation of such allotment or lease, realization of fees, rent, etc., and matters connected thereto and, apart from realization of betterment charges on any development having been executed by the Authority as a result of which valuation of any property falling in that area has been increased from the owners of the property having interest therein in respect of increase of value resulting from the execution of the development. Such betterment charges can only be levied in respect of any property situated in a development area covered by such execution and not otherwise. Apart from the said betterment charge no special statutory power has been conferred upon the Authority to levy any such transfer fee, etc., by exercise of statutory powers.
Thus the power of the authority to levy transfer fee which has been upheld by the Division Bench in Amit Kumar‟s case (supra) is derived not from any statutory power conferred upon it and BIADA being a creature of Statute, cannot claim any power apart from what the statute has conferred upon it. Hence, such power can Patna High Court COM PET No.8 of 1998 dt.16-09-2016 29/34 only flow to it as the owner of the land in terms of the lease agreement entered into with the allottees of the industrial plots allotted by it. There can hardly be any doubt that under the terms of their lease deed itself with respect to certain categories of lessees, it is permissible for BIADA to levy any transfer fee or any such fee as it may deem proper as Clause 7(i) on which both the parties rely itself provides that lessee will not assign, mortgage, under let or part with the possession over the land or right or interest therein or in respect thereto without the previous consent of the lessor or his nominee. The said right is overriding right of BIADA and from the said right vis-à-vis the lessee it can charge a transfer fee, which aspect of the matter has also been emphasized by the Division Bench in Amit Kumar‟s case (supra) holding that the said transactions are bilateral and contractual in nature. It further held that the pre- dominant purpose is to ensure that the land continues for which it has been recorded to be used for running of industries and the element of commerce or profit cannot be brought into existence.
Coming to the decision in Vikramshila Transformers case (supra), the said decision does not at all exclude the right of BIADA to levy transfer fee in such cases where prior permission is required for making any transfer. What has been held in that case is that if there is mortgage by a small scale industry then under the terms of the lease deed, it does not require any prior permission of the respondent-authority and in such case it logically follows that the Patna High Court COM PET No.8 of 1998 dt.16-09-2016 30/34 mortgagee can enforce the mortgage by bringing to sale the mortgaged assets. It was accordingly held that if the lease agreement permitted the creation and enforcement of the mortgage, it also logically followed that upon enforcement of the mortgage and sale of the mortgaged assets, the purchaser stepped into the shoes of the original mortgagor and was subject to the same terms and conditions of the lease to which the original lessee/mortgagor was subject and since the original lessee/mortgagor was not obliged in terms of the lease deed to pay the price of the land over again, such an obligation could not be enforced against the petitioner-Company which stepped into the shoes of the original lessee. The said proposition laid down by the Division Bench in Vikramshila Transformers case (supra) would squarely apply in the present matter which also relates to a mortgage duly approved by the terms of the lease deed and thus a sale that may be effected of the mortgaged assets for enforcing the mortgage would be excluded from the liability of any condition of transfer fee, etc. in terms of the provisions of the Lease Deed itself. The purchaser would simply step into the shoes of the original lessee/mortgagor which was not obliged in terms of the lease deed to pay either the price or any part of the price, in this case 15% of the circle rate or BIADA rate and such an obligation to pay 15% cannot be enforced against the purchaser in terms of the mortgage.
In this regard, it must be mentioned that BICICO is before this Court as a secured creditor outside the winding up Patna High Court COM PET No.8 of 1998 dt.16-09-2016 31/34 proceeding and the sale by the Official Liquidator as per the practice of this Court is only to ensure that the pari passu charge holders‟ interest, which includes workmen and in the present matter even BIADA, is protected.
At this stage it should also be remembered that the decision of the Company Court in the case of Hathwa Metals & Tubes (supra), that past dues of the Company may not be claimed by the Industrial Area Development Authority once the order of winding up of the Company has been passed from any auction purchaser and any such claim can only be made by filing the claim before Official Liquidator, would not apply in such matters like the present one where there is sale in terms of a valid mortgage by bringing to sale of the mortgaged assets, in which under the terms of the deed of lease itself BIADA would also have pari passu charge with the financing institution with respect to its past dues.
Reference may be made to the reliance by learned counsel for BIADA on Clauses 7 (ii), (iii) and (x) of the Lease Deed. Sub-Clause (ii) of Clause 7 merely provides that no change in the lease, proprietorship or partnership or a private limited or unlimited company or a registered or unregistered firm would be recognized without the previous written consent of the lessor or his nominee. It is evident that the present matter is not a case of change in the lease, proprietorship etc., rather it is a case of enforcement simplicitor of mortgage by bringing the mortgaged asset to sale and thus the Patna High Court COM PET No.8 of 1998 dt.16-09-2016 32/34 said clause has no application in the matter.
Similarly, sub-clause (iii) of Clause 7 provides that any assignment of lease hold interest with the written consent of the lessor authority would require the assignees to get their names duly registered with it or its nominee within the time prescribed which shall further be bound by terms and conditions of the lease. The said clause can have no application in case of enforcement of the mortgage by sale of the mortgaged property as any such condition is not assignment of lease property to any other simplicitor rather the purchaser merely steps into the shoes of the mortgagee and is automatically bound under the law by all terms, covenant and conditions of the lease deed and BIADA in such circumstances would be bound to recognize it as such in its records.
So far as the reliance on Sub-Clause (x) is concerned, the authority authorized by the Department of Industries to frame such rules or having authority in this behalf or any other statutory rules or regulation as may be in force for the time being relating to the demised premises (sic), the same also cannot have any application in the present matter as the policy decision of the Board of Directors cannot be called a statutory rule or regulation, rather it is an exercise of powers by the lessor to charge a fee in terms of lease deed itself and there is no statutory force behind it so far as the applicability of any statutory rules or regulation is concerned .
The further reliance by learned counsel for BIADA on Patna High Court COM PET No.8 of 1998 dt.16-09-2016 33/34 Clause (13) which provides that the lessee shall pay water rent, Municipal taxes and any other taxes that may be levied from time to time from the date of allotment order of the land, also does not have any relevance on the rights of the purchaser in the matter but only provides that payment of all local taxes shall be liability of the lessee, as under the general law the same is the liability of the lessor unless provided by agreement to the contrary. It is only such liability which has been fixed upon the lessee rather upon the lessor by the said clause. The emphasis of learned counsel for BIADA on the term „levy‟ with respect to transfer fee appears to be completely uncalled for. It must be remembered that the transfer fee is not levy as it is understood in law nor it can be called fee stricto sensu as legally understood which is merely compensation for the service provided and the transfer fee of 15% is not a fee in the legal sense since it would be impossible for BIADA to justify such a huge amount as a fee. It can only be defended as an overriding right of the lessor to charge such transfer fee in case the lease deed so permits, which is not so in the instant case.
Thus on a consideration of the entire facts and circumstances and the various decisions of this Court and the Supreme Court and the law applicable on the point, it is evident that matters like the present one are covered by the decision of the Division Bench of this Court in the case of Vikramshila Tansformers (supra) and where there is a valid mortgage in favour of the financial Patna High Court COM PET No.8 of 1998 dt.16-09-2016 34/34 institution which does not require prior permission of BIADA as per the lease agreement, then upon such mortgage being enforced by sale by the Mortgagee along with the OL. in a winding up proceeding then the purchaser simply is placed into the shoes of the original lessee and no transfer fee shall be leviable in such circumstances.
OLR No. 1/2011 is, accordingly, disposed of.
(Ramesh Kumar Datta, J) S.Pandey/-
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