TMI Blog2015 (3) TMI 1344X X X X Extracts X X X X X X X X Extracts X X X X ..... ter, the stipulations regarding transfer, fees, 18 premium etc. have been indicated and exception provided regarding mortgage to State institution, Bank or State Corporation. The sub-rule (4) of Rule 15 provides for execution of a transfer lease deed in Form No. 15 within a period of three months of consent or within such period as may be allowed by the competent authority - Rule 72 of the Rules, which has been invoked by the respondents and relied on during the course of submissions provide that any lease, quarry licence, short term permit or any other permit granted otherwise then in accordance with the provisions of the Rules shall be deemed to be null and void. From perusal of the show cause notice, the response made by the petitioner, the provisions of Rule 15 & 72 and the order dated 16.12.2014 passed by the respondents, it is apparent that the Secretary while passing the order dated 16.12.2014 has not at all dealt with any of the contentions raised by the petitioner in its reply to the show cause notice and after reproducing the contents of the show cause notice and the contentions raised by the petitioner has jumped on to the conclusion that the reply filed by the Compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to a substantial extent or the Company's operations or undertakings are substantially controlled by Ultra Tech Cement Limited, regarding which there are absolutely no allegations or material whatsoever. Therefore, on account of the petitioner-Company becoming subsidiary of Ultra Tech Cement Limited, it cannot be said that ipso facto the provisions of Rule 15(1)(b) of the Rules have been violated by the lessee i.e. petitioner-Company. Thus, it is apparent that the allegations made in the show cause notice, the reason indicated in the order dated 16.12.2014 and the various plea raised by the respondents in the present writ petition seeking to substantiate the order dated 16.12.2014 have absolutely no substance. Neither the events prior to 25.4.2012 nor the events subsequent to 25.4.2012 can be said to be sufficient for taking action under provisions of Rule 72 of the Rules so as to either cancel the order dated 25.4.2012 and/or cancel the mining lease standing in favour of the petitioner-Company. Petition allowed. - S.B. Civil Writ Petition No. 9669/2014 - - - Dated:- 25-3-2015 - Arun Bhansali, J. For Appellant: Dushyant Dave, M.S. Singhvi, Senior Advocates assisted b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecuting the document for a period of 15 days under Rule 15(4) of the Rajasthan Minor Mineral Concession Rules, 1986 ('the Rules'). Whereafter, on 8.8.2013, the document was re-executed and after payment of requisite stamp duty was got registered. 5. In the meanwhile, the grant of permission to transfer the lease by the firm to the petitioner was questioned by respondent No. 5 JK Cement Limited ('JK Cement') by way of filing SBCWP No. 404/2013 on 17.12.2012. In the writ petition JK Cement challenged the order dated 25.4.2012, whereby permission was granted for transfer and order dated 5.9.2012, whereby another application seeking part transfer of ML No. 45/93 in favour of JK Cement was rejected. 6. In response to the writ petition, the State and the petitioner defended the action of the State in permitting the transfer by order dated 25.4.2012. However, by a show cause notice dated 21.4.2014 (Annex. 16) issued to the petitioner, the petitioner was called upon to show cause as to why the order permitting transfer of the lease dated 25.4.2012 be not declared null and void and the lease be not cancelled. 7. A reply to the show cause notice was filed by the peti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istered, the respondents have no authority or jurisdiction to go beyond the transfer under the Rules. The entire action of the respondents is based on extraneous considerations and is an example of malice in law and therefore, void. It is further submitted that the action is actuated on account of revived interest of JK Cement, which aspect also finds mention in the impugned order dated 16.12.2014. 11. On merits of the notice and the action taken by the respondents, it is submitted that the charge/allegation regarding violation of Rule 15 regarding prior permission for transfer, is baseless and the provision is not attracted merely because the share holding of the Company underwent a change in view of the settled legal position that Company is a juristic person and identity of the shareholders or Directors has nothing to do with the identity of the Company; merely because on account of transfer of shareholding, Ultra Tech Cement Limited became holding Company of the petitioner would not amount to violation of Rule 15. It was submitted that any grievance which the JK Cement may have against the firm, it can only enforce it against the firm and not before the State and it cannot b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : 1978(1) SCC 405. 16. Vehemently opposing the submissions made by learned counsel for the petitioner, learned Additional Advocate General submitted that the writ petition filed by the petitioner has no substance and the action taken by the respondent - State is well justified in the facts and circumstances of the case and therefore, the writ petition filed by the petitioner deserves to be dismissed. 17. With reference to the reply filed by the State, it was contended that the order dated 25.4.2012 permitting transfer from the firm to the Company itself was vitiated on account of the fact that the petitioner-Company was incorporated on 26.3.2012. However, the affidavits in support of the application seeking transfer were inscribed on stamp papers purchased on 23.3.2012. Further the application seeking transfer was made on 28.3.2012, resolution authorizing the Directors was passed on 30.3.2012 and the affidavits in support of the application dated 28.3.2012 were notarized on 31.3.2012, the inspection report by the mining authorities was prepared on 30.3.2012 and a recommendation was made by the Assistant Mining Engineer on 2.4.2012, whereafter order dated 25.4.2012 was passed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Rules, the State was well within its jurisdiction to pass the order dated 16.12.2014. 21. Reference was also made to the FIR (Annex. -24) lodged against the Partners of the firm, Directors/Officers of the petitioner-Company and certain Government officials to support the action taken by the respondents. 22. Regarding the stand taken by the respondents in WP No. 404/2013 filed by JK Cement, it was submitted that the stand taken by the respondent-State pertained to a claim of part transfer of the lease deed, which stand was reiterated even while filing the supplementary affidavit in the said writ petition and, therefore, it cannot be said that the respondents have taken any stand contrary to what was contended in the writ petition filed by JK Cement. 23. It was submitted that the action of the petitioner stands vitiated by fraud and therefore, they cannot invoke extraordinary jurisdiction of this Court under Article 226 of the Constitution of India and consequently, the writ petition deserves to be dismissed. 24. Reliance was placed on State of Tamilnadu Ors. v. K. Shyam Sunder Ors.: 2011(8) SCC 737; Ramesh Kumar Anr. v. Furu Ram Anr.: 2011(8) SCC 613 and Sm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s from the date of execution of lease agreement and the execution includes registration and therefore also there is a violation of the condition approving transfer. 28. Reliance was placed on Arasmeta Captive Power Limited Anr. V. Lafarge India Pvt. Ltd.: AIR 2014 SC 525 to contend that the judgments rendered by the Court are not a statute and the observations must be read in the context in which they appear to have been stated and it was submitted that the judgments cited by the petitioners and the observations made therein have no application to the facts of the present case. It was prayed that the writ petition filed by the petitioner be dismissed. 29. In rejoinder, it was submitted by learned counsel for the petitioner that by way of permitting transfer under Rule 15, what the State gets is a fee of ₹ 2,000/- under Rule 15(1A) and it charges transfer premium @ equal to the existing dead rent under Rule 15(1AA), which already stands paid. No procedure or manner has been prescribed for transfer under the Rules and therefore, the same is wholly informal, the Rules provide for a procedure and forms in case of a grant of new lease and in case of renewal, but not in cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... non-judicial stamps on 23.3.2012 before incorporation of the Company on 26.3.2012; (b)- application for transfer was filed on 28.3.2012 and the affidavit alongwith the application was notarized on 31.3.2012 and resolution regarding transfer by the Board of Directors of the Company was passed on 30.3.2012; (c)- the agreement was executed on ₹ 100/- stamp paper when the same should have been executed after payment of stamp duty and should have been got registered. 35. Qua the act subsequent to order dated 25.4.2012 it was alleged that on 6.8.2012 in place of existing Directors of the Company, three new Directors joined and the Company was listed as subsidiary of Ultra-Tech Cement Limited at Bombay Stock Exchange. 36. A detailed reply to the show cause notice was filed by the petitioner on 4.6.2014 (Annex. 17) raising preliminary objections, relying on the stand taken by the State in the writ petition filed by JK cement and explaining the so-called defects pointed out in the show cause notice regarding the order dated 25.4.2012 and denying the allegations regarding violation of provisions of Rule 15 of the Rules based on the case law cited in the reply. 37. The Secreta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t transfer premium [equal to existing dead rent;] Provided that the lease has remained in force for at least two years from the date of grant. Provided further that such transfer shall not be made if there are any dues outstanding against the transferor or transferee. Provided further also that where the mortgagee is a State Institution or a bank or a State corporation, it shall not be necessary for the lessee to obtain the previous consent of the competent authority or previous sanction of the State Government. However, the lessee shall inform the competent authority about any mortgage in favour of any State institution, Bank or State Corporation within a period of 3 months from the date of mortgage or assignment. (2) An application for transfer of mining lease shall be disposed of by competent authority: [xxx] Provided that transfer of mining lease, granted to the category of persons mentioned in sub-rule (3) of rule 7 shall be made only to a person belonging to any of the categories mentioned in the clause of the said sub-rule. (3) Transfer of mining lease shall not be considered as a matter of right and the Government may refuse for such transfer for the reaso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be null and void. 42. From perusal of the show cause notice, the response made by the petitioner, the provisions of Rule 15 72 and the order dated 16.12.2014 passed by the respondents, it is apparent that the Secretary while passing the order dated 16.12.2014 has not at all dealt with any of the contentions raised by the petitioner in its reply to the show cause notice and after reproducing the contents of the show cause notice and the contentions raised by the petitioner has jumped on to the conclusion that the reply filed by the Company is an afterthought and was not satisfactory. Not a word has been indicated as to why and how the authority reached to the said conclusion. 43. The Hon'ble Supreme Court in the case of Kranti Associates (supra), while emphasising the necessity of giving reason by a body or authority in support of its decision held and observed as under:- 12. The necessity of giving reason by a body or authority in support of its decision came up for consideration before this Court in several cases. Initially this Court recognized a sort of demarcation between administrative orders and quasi-judicial orders but with the passage of time the distinctio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transparency is the sine qua non of restraint on abuse of judicial powers. Transparency in decision making not only makes the judges and decision makers less prone to errors but also makes them subject to broader scrutiny. (See David Shapiro in Defence of Judicial Candor.) (n) Since the requirement to record reasons emanates from the broad doctrine of fairness in decision making, the said requirement is now virtually a component of human rights and was considered part of Strasbourg Jurisprudence. See Ruiz Torija v. Spain EHRR, at 562 para 29 and Anya v. University of Oxford, wherein the Court referred to Article 6 of European Convention of Human Rights which requires, adequate and intelligent reasons must be given for judicial decisions . (o) In all common law jurisdictions judgments play a vital role in setting up precedents for the future. Therefore, for development of law, requirement of giving reasons for the decision is of the essence and is virtually a part of due process . 44. Though the order passed by the respondent No. 2 does not qualify as a reasoned order in the light of law laid down by the Hon'ble Supreme Court, the respondent-State in its reply has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the company has clearly been done in contravention to the Rule 15 of the Rules of 1986 as stated above, hence the transfer of lease was made null and void under Rule 72 of the Rules of 1986 vide order dated 16.12.2014. That the other grounds shall be urged during the course of arguments. 45. Examining the validity of the plea raised by the State in defence of the order dated 16.12.2014 for holding the order of transfer dated 25.4.2012 as void and cancellation of the lease deed under Rule 72 of the Rules, the stand as indicated hereinbefore needs to be examined qua pre 25.4.2012 events and post 25.4.2012 events. Pre 25.4.2012 events: 46. As noticed hereinbefore, the show cause notice indicated purchase of stamps on 23.3.2012 prior to incorporation of the Company on 26.3.2012, filing of affidavits notarised on 31.3.2012, passing of resolution by the Board of Directors of the petitioner-Company on 30.3.2012 in support of application dated 28.3.2012. 47. From the material available on record, it is apparent that on 5.3.2012, vide Annex. 1, the Registrar of Companies, Rajasthan indicated availability of name Gotan Lime Stone Khanij Udyog Pvt. Ltd. to the partner of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e filed subsequently. However, as already noticed hereinbefore, there is no contradiction of the fact about filing of the resolution and affidavits subsequent to the filing of the application. 53. From the material on record it is revealed that the recommendation by the Assistant Mining Engineer was made on 2.4.2012 and by then the resolution and the affidavits had already been filed. So far as the making of inspection on 30.3.2012 is concerned, a look at the inspection report (pg. 72) reveals that the same merely indicates the status of the lease deed and leased area and nothing else, so as to vitiate the report if the same was made without affidavit having been filed in support of the application. 54. The arguments raised by learned counsel for the petitioner that Rule 15 does not prescribe any procedure or manner for making application for transfer and the same is wholly informal appears to have much substance as nothing was pointed out by the respondents to indicate the requirements for a valid application and therefore, mere filing of the resolution and affidavit, subsequent to the filing of the application cannot be said to be any kind of illegality. 55. The fact tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to this rule however, provides for the manner in which certain defects may be cured. Rule 32, sub-rule (2), introduced in 1955 before the grant of the application of Venkatagiri, shows that the individual qualifications of the applicants including their special knowledge, their capacity to engage technically efficient staff, their financial soundness and stability, had to be taken into account in determining the question of priority. Again Rule 26, imposing certain restrictions, prohibits the grant of the lease to any person who does not hold a certificate of approval from the State Government or who has not produced an Income Tax Clearance Certificate. It does not prohibit any grant on the ground that the application for it is defective or not accompanied by a map. The form of the application seems to be subordinate to the essential facts to be taken into account before granting a lease. 7. There is no provision in the Act showing that the defects in an application which is accompanied by the fee prescribed in Rule 28 cannot be subsequently removed. The information given in the application is intended for the satisfaction of the authorities granting the lease so that, after con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovisions of Rule 20 relied on by learned counsel for the respondent No. 5 merely pertains to the currency of the lease deed and right to continue to work, which may have implication while grant of fresh lease/renewal of lease and has apparently no application in the case of transfer as the lease irrespective of the order of transfer continuous to remain in force. 62. The other important aspect sought to be emphasised in the matter pertains to alleged violation of provisions of Rule 15(1)(b) of the Rules. 63. As noticed hereinbefore, in the show cause notice dated 21.4.2014, a cursory allegation was made that on 6.8.2012 instead of four existing Directors of the Company, three new Directors were inducted and alongwith that, the Company was listed as subsidiary of Ultra Tech Cement Limited at Bombay Stock Exchange and based on the said aspect, it was alleged that in the garb of transfer of lease, the mine has been transferred in violation of Rule 15. Whereafter, by order dated 16.12.2014, the Secretary came to the conclusion that violation of Rule 15 was apparent. 64. From the facts and material available on record, it is not in dispute that after order dated 25.4.2012, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... That a shareholder acquires a right to participate in the profits of the company may be readily conceded but it is not possible to accept the contention that the shareholder acquires any interest in the assets of the company. The use of the word 'assets' in the passage quoted above cannot be exploited to warrant the inference that a shareholder, on investing money in the purchase of shares, becomes entitled to the assets of the company and has any share in the property of the company. A shareholder has got no interest in the property of the company though he has undoubtedly a right to participate in the profits if and when the company decides to divide them. The interest of a shareholder 'vis-`-vis' the company was explained in the 'Sholapur Mills Case' - 'Charanjit Lal v. Union of India', AIR 1951 SC 41 at pp. 54, 55 (B). That judgment negatives the position taken up on behalf of the appellant that a shareholder has got a right in the property of the company. It is true that the shareholders of the company have the sole determining voice in administering the affairs of the company and are entitled, as provided by the Articles of Association, to d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e President and certain officers of the Central Government presumably it nominees and extensive control is vested in the Central Government would amount to the industry being carried on under the authority of the Central Government, held and observed as under:- 4. Before considering the authorities cited by counsel before us, we proceed first to examine the meaning of the words used by Parliament in the definition clause of 'appropriate Government'. It is an undisputed fact that the company was incorporated under the Companies Act and it is the company so incorporated which carried on the undertaking. The undertaking, therefore, is not one carried on directly by the Central Government or by any one of its departments as in the case of posts and telegraphs or the railways. It was, therefore, rightly conceded both in the High Court as also before us that it is not an industry carried on by the Central Government. That being the position, the question then is, is the undertaking carried on under the authority of the Central Government? There being nothing in Section 2(a) to the contrary, the word 'authority' must be construed according to its ordinary meaning and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation and that the other members have become members merely for the purpose of enabling the corporation to become incorporated and possess only a nominal interest in its property or hold it in trust for him. (Cf. Halsbury's Laws of England, 3rd Ed., Vol. 9, p. 9). Such a company even possesses the nationality of the country under the laws of which it is incorporated, irrespective of the nationality of its members and does not cease to have that nationality even if in times of war it falls under enemy control. (Cf. Janson v. Driefentain Consolidated Mines and Kuenigi v. Donnersmarck). The company so incorporated derives its powers and functions from and by virtue of its memorandum of association and its articles of association. Therefore, the mere fact that the entire share capital of the respondent-company was contributed by the Central Government and the fact that all its shares are held by the President and certain officers of the Central Government does not make any difference. The company and the shareholders being, as aforesaid, distinct entities the fact that the President of India and certain officers hold all its shares does not make the company an agent either of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... when the plea was raised that the property of the Government Company was the property of Union of India, its shares being only held by Union of India and therefore, the property was exempted from all taxes imposed by the State Government under Article 285 of the Constitution of India, the Hon'ble Supreme Court negated the contention and observed as under:- 15. A clear distinction must be drawn between a company and its shareholder, even though that shareholder may be only one and that the Central or a State Government. In the eye of the law, a company registered under the Companies Act is a distinct legal entity other than the legal entity or entities that hold its shares. 16. In Western Coalfields Ltd. v. Special Area Development Authority this Court reviewed earlier judgments on the point. It held that even though the entire share capital of the appellant before it had been subscribed by the Government of India, it could not be predicated that the appellant itself was owned by the Government of India. Companies, it was said, which are incorporated under the Companies Act, have a corporate personality of their own, distinct from that of the Government of India. The l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The present set of appeals came before a two-Judge Bench of this Court against a judgment and order dated 2.5.2011 of a Division Bench of the High Court of Delhi in Balwant Rai Saluja v. Air India Ltd. The present dispute finds origin in an industrial dispute which arose between the appellant workmen herein of the statutory canteen and Respondent 1 herein. The said industrial dispute was referred by the Central Government, by its order dated 23.10.1996 to the Central Government Industrial Tribunal-cum-Labour Court (for short the CGIT ). The question referred was whether the workmen as employed by Respondent 3 herein, to provide canteen services at the establishment of Respondent 1 herein, could be treated as deemed employees of the said Respondent 1. Vide order dated 5.5.2004, CGIT held that the workmen were employees of the Respondent 1 Air India and therefore their claim was justified. Furthermore, the termination of services of the workmen during the pendency of the dispute was held to be illegal. 66. In the present set of appeals, it is an admitted fact that HCI is a wholly-owned subsidiary of Air India. It has been urged by the learned counsel for the appellants that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry can reform its own management personnel and holding company may also provide expert, efficient and competent services for the benefit of the subsidiaries. (emphasis supplied) 69. Vodafone case further made reference to a decision of the US Supreme Court in United States v. Bestfoods. In that case, the US Supreme Court explained that as a general principle of corporate law a parent corporation is not liable for the acts of its subsidiary. The US Supreme Court went on to explain that corporate veil can be pierced and the parent company can be held liable for the conduct of its subsidiary, only if it is shown that the corporal form is misused to accomplish certain wrongful purposes, and further that the parent company is directly a participant in the wrong complained of. Mere ownership, parental control, management, etc. of a subsidiary was held not to be sufficient to pierce the status of their relationship and, to hold parent company liable. 70. The doctrine of piercing the corporate veil stands as an exception to the principle that a company is a legal entity separate and distinct from its shareholders with its own legal rights and obligations. It seeks to disregard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed principle of English law which applies when a person is under an existing legal obligation or liability or subject to an existing legal restriction which he deliberately evades or whose enforcement he deliberately frustrates by interposing a company under his control. The court may then pierce the corporate veil for the purpose, and only for the purpose, of depriving the company or its controller of the advantage that they would otherwise have obtained by the company's separate legal personality. The principle is properly described as a limited one, because in almost every case where the test is satisfied, the facts will in practice disclose a legal relationship between the company and its controller which will make it unnecessary to pierce the corporate veil. 73. The position of law regarding this principle in India has been enumerated in various decisions. A Constitution Bench of this Court in LIC v. Escorts Ltd., while discussing the doctrine of corporate veil, held that: 90. ...Generally and broadly speaking, we may say that the corporate veil may be lifted where a statute itself contemplates lifting the veil, or fraud or improper conduct is intended to be preven ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany's operations or undertakings are substantially controlled by Ultra Tech Cement Limited, regarding which there are absolutely no allegations or material whatsoever. Therefore, on account of the petitioner-Company becoming subsidiary of Ultra Tech Cement Limited, in view of the law laid down by the Hon'ble Supreme Court as noticed hereinbefore, it cannot be said that ipso facto the provisions of Rule 15(1)(b) of the Rules have been violated by the lessee i.e. petitioner-Company. 74. In view of the above discussion, it is apparent that the allegations made in the show cause notice, the reason indicated in the order dated 16.12.2014 and the various plea raised by the respondents in the present writ petition seeking to substantiate the order dated 16.12.2014 have absolutely no substance. Neither the events prior to 25.4.2012 nor the events subsequent to 25.4.2012 can be said to be sufficient for taking action under provisions of Rule 72 of the Rules so as to either cancel the order dated 25.4.2012 and/or cancel the mining lease standing in favour of the petitioner-Company. 75. So far as the plea raised by the petitioners regarding the action of the respondents being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inasmuch as, despite the petitioner having filed the said FIR as Annexure-24 to the writ petition the respondents could not gather enough courage to indicate the allegations in the FIR as the basis either for issuance of show cause notice or for passing of the order dated 16.12.2014. 79. In view of the above, the reliance placed by the petitioners on the judgment of the Hon'ble Supreme Court in the case of Mohinder Singh Gill (supra) and reliance placed by the respondents on the case of P.R.P. Export etc. (supra) has no implication. 80. So far as the plea raised by the respondent No. 5 regarding grant of permission dated 25.4.2012 during the pendency of application seeking part transfer to respondent No. 5 is concerned, the said fact has no implication so far as the order dated 16.12.2014 passed by the respondent-State is concerned, as despite repeated allegations made by the respondent No. 5 and the pending writ petition being CWP No. 404/2013, the respondents have not chosen to make it a ground for cancelling the permission dated 25.4.2012. 81. In view of the above discussion, the writ petition is allowed. The order dated 16.12.2014 (Annex. -22) passed by the respo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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