2012 (10) TMI 1151 - HC - Indian Laws

Lease granted for a period of 99 years - change of use of the said land from non-IT set up to IT set up - without any intimation to the lessor - Whether transfer of shares by the shareholders of a company to the stranger purchaser of such share amounts to transfer of assets of the company whether acquired by way of lease or otherwise? - HELD THAT - Following the decision of the Hon ble Supreme Court in Bacha F. Guzdar Bombay Vs. CIT 1954 (10) TMI 2 - SUPREME COURT as well as of this Hon ble Court in Kopila Hingorani vs. State of Bihar 2003 (5) TMI 359 - SUPREME COURT this Court has no hesitation to hold that with the transfer of the share by the promoter shareholder to the present shareholder namely the transferees of such share the lease hold interest of the company was not transferred from the promoter shareholder to the present shareholder of the said company. The petitioner-company which obtained the said lease from the Government still remains the lessee of the said plot of land and its leasehold interest in the said plot of land remains unaffected by transfer of share by the promoter shareholders to the present holders. As such this Court holds that the restrictive clause regarding transfer of the lease hold interest of the lessee in favour of a stranger sub-lessee or assignee does not attract in the present case and as a result the demand for transfer fees for recognizing the alleged transfer of leasehold interest from the erstwhile shareholders of the said company to the present shareholder is absolutely illegal and unlawful and as such that part of such demand which was made by the concerned authority in the impugned order and/or letter as aforesaid stands quashed. Whether the petitioner s representation for change of use of the said plot of land submitted on December 20 2006 can be decided on the basis of the subsequent Notification dated 17th April 2007 when this Hon ble Court while disposing of the earlier writ petition directed the concerned authority to consider the petitioner s said representation in the light of the notification dated 6th May 2005? - HELD THAT - This Court holds that the demand of the permission fees for change of user of the land from a Non-IT set up to IT set up purpose at the rate as prescribed in the subsequent Notification of 2007 which came in to operation on 17th April 2007 is illegal and unlawful. As such that part of the impugned order and/or demand made in this regard by the concerned authority stands quashed. The concerned authority is thus directed to raise a fresh demand towards the permission fees for change of use of the said land from non-IT set up to IT set up at the rate as prescribed in the Notification dated 6th May 2005. The writ petition is thus allowed.

Summary

Issues Involved:
1. Whether transfer of shares by the shareholders of a company to a stranger purchaser amounts to transfer of assets of the company, whether acquired by way of lease or otherwise.
2. Whether the petitioner's representation for change of use of the said plot of land submitted on December 20, 2006, can be decided based on the subsequent Notification dated April 17, 2007, when the court directed the concerned authority to consider the representation in light of the Notification dated May 6, 2005.

Issue-Wise Detailed Analysis:

1. Transfer of Shares and Transfer of Assets:
The court examined whether the transfer of shares by the shareholders to a stranger purchaser amounts to a transfer of the company's assets, including leasehold interests. The court referenced the precedent set in the case of Green Hut Pvt. Ltd. & Anr. Vs. State of West Bengal and Ors., which relied on Supreme Court decisions in Bacha F. Guzdar, Bombay Vs. Commissioner of Income Tax, Bombay, and Kopila Hingorani vs. State of Bihar. It was established that a shareholder has no interest in the property of the company, and the company, being a distinct juristic person, owns the property, not the shareholders. Thus, the transfer of shares does not equate to the transfer of the company's assets. The court concluded that the lease agreement was with the company, not the individual shareholders, and merely changing shareholders does not constitute a transfer of the leasehold interest. The court held that the demand for transfer fees for recognizing the alleged transfer of leasehold interest due to the change in shareholding was illegal and quashed it.

2. Applicability of Subsequent Notification:
The court considered whether the petitioner's representation for change of use of the land, submitted on December 20, 2006, should be decided based on the Notification dated May 6, 2005, or the subsequent Notification dated April 17, 2007. The court noted that the earlier writ petition directed the concerned authority to consider the petitioner's representation in light of the Notification dated May 6, 2005, which was the only notification in operation at that time. The subsequent Notification of 2007 was not in existence when the petitioner submitted its representation or when the court's directive was issued. The court held that the concerned authority acted illegally by demanding fees based on the modified Notification of 2007, contrary to the court's direction. The court referenced an unreported decision in M/s. Seven Hill Bytes Pvt. Ltd. & Anr. Vs. Kolkata Municipal Corporation & Ors., which held that pending applications should be considered based on the notification in effect at the time of submission. Consequently, the court quashed the demand for permission fees based on the 2007 notification and directed the authority to raise a fresh demand based on the 2005 notification.

Conclusion:
The court allowed the writ petition, quashing the demands based on the subsequent notification and directing the concerned authority to issue a fresh demand based on the 2005 notification. The judgment emphasized the distinction between share transfer and asset transfer and upheld the principle that pending applications should be decided based on the regulations in effect at the time of submission.