TMI Blog2019 (5) TMI 906X X X X Extracts X X X X X X X X Extracts X X X X ..... ith the merger of Sharpedge with the petitioner (then known as Indian Shaving Products Ltd.) on 23.04.1992, the subject property also vested with the petitioner along with other assets of Sharpedge. This clearly amounted to transfer of the subject property and, therefore, unearned increase was payable on such transfer, which was occasioned in terms of the scheme of amalgamation as approved by BIFR. The controversy involved in the present petition does not relate to levy of unearned increase on such transfer but on account of dilution of the share capital of TGC by issue of shares to Procter Gamble, USA and transfer of certain shares held by TGC in the petitioner company to Procter Gamble, Netherlands. It is trite law that an incorporated company is an entity separate from its shareholders - It is well settled that shares of a company are a separate asset wholly distinct from the assets held by the company. In the present case, there was dilution of the share capital of TGC as well as transfer of shares held by the TGC in the petitioner company. The transfer of shares of the petitioner company cannot be construed as transfer of the assets of the petitioner company. E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... present case relates to the levy of unearned increase in respect of the subject property. DDA claims that the subject property was transferred in the year 2005-06, as there was a material change in the shareholding of the petitioner. According to DDA, the said change in shareholding brought about the change in the effective control in the subject property, which is construed as a transfer, thereby entitling DDA to levy unearned increase. The petitioner disputes the above and contends that change in the shareholding cannot be construed as a transfer of the subject property. Factual Background 3. M/s Sharpedge Limited (hereafter Sharpedge ), a Company incorporated in India, acquired the subject property on 11.06.1974 in an auction conducted by DDA. 4. Sharpedge constructed an industrial building on the subject property after obtaining the necessary approvals of the building plans. Subsequently on 05.07.1978, a perpetual lease deed in respect of the subject property was registered in favour of Sharpedge. 5. On 09.02.1984, the petitioner then known as Indian Shaving Products Limited (ISPL) acquired the entire shareho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted. In December, 2001 the petitioner filed an application (CM No. 700 of 2001) before this Court, praying that directions be issued to DDA to provide the basis for arriving at the figure of unearned increase and the interest demanded from the petitioner, vide DDA s notice dated 29.08.1995. On 19.04.2002, the aforementioned application was disposed of by this Court by directing DDA to consider and dispose the representation made by the petitioner. 13. On 29.10.2002, DDA issued a letter (bearing No. F.5(52)73-LSB (Indl) PT) demanding a sum of ₹ 28,00,096/- from the petitioner as interest. 14. On 01.10.2005, the petitioner issued letters to various stock exchanges, informing them about the merger of Aquarium Acquisition Corp.(AAC) a wholly owned subsidiary of Procter Gamble, USA with the Gillette Company, USA (TGC). It is relevant to note that at the material time, TGC had substantial shareholding in the petitioner. 15. On 10.06.2006, TGC transferred its rights, title and interest in the petitioner company (a total of 41.02% shareholding) to Procter Gamble, Netherlands, without consideration. The petitioner submits that the same d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment of interest. 22. On 26.05.2011, the petitioner s counsel found that as per DDA s records, DDA had issued a letter dated 30.03.2011 demanding ₹ 45,99,596/- as difference in conversion charges calculated on the basis of conversion rates of 2010-2011 and not the conversion rate prevailing in 2007-2008. Further, by the said letter, the DDA had also demanded interest at ₹ 13,876/-. However, the petitioner submits that this communication was never sent to the petitioner. 23. On 23.06.2011, the petitioner paid an amount of ₹ 46,13,472/-, as demanded in terms of the letter dated 30.03.2011, under protest. 24. In August 2011, the petitioner submitted more documents, composition fee of ₹ 81,233/- under protest, additional interest (for the period between 01.04.2011 to 23.06.2011) amounting to ₹ 2,07,235/-under protest, and requested DDA to issue a No-Dues Certificate to the petitioner. On 13.04.2012, DDA called upon the petitioner to submit a board resolution authorizing Mr Amit Vyas to represent the petitioner in the conversion process. 25. On 21.05.2012, the petitioner filed a contempt peti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esent petition. The petitioner also claims refund of certain amount paid by the petitioner which includes a sum of ₹ 3,94,57,027/-, which was decided by DDA to be withdrawn in its order dated 26.07.2012. Reasons and Conclusion 34. The first and foremost question to be addressed is whether any unearned increase is payable on account of the merger of Aquarium Acquisition Corp. (AAC) with Gillette Company, USA (TGC) or the transfer of TGCs shareholding in the petitioner to Procter Gamble, Netherlands. 35. It is contended on behalf of DDA that unearned increase is payable on the said transaction in terms of the lease deed. Reliance in this regard is placed on Clause 4 of the lease deed which proscribes the lessee to sell, transfer, assign or otherwise part with the possession of the subject property except with the previous approval of the lessor. Clauses 4 and 5 of the perpetual lease deed dated 05.07.1978, read as under:- (4) (a) The Lease shall not sell, transfer, assign or otherwise part with the possession of the whole or any part of the industrial plot except with the previous in writing of the Lessor wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t unearned increase can be demanded only in cases where subject property is sold, transferred, assigned or its possession is parted with by the lessor. In this case, the lease was in favour of Sharpedge, which merged with the petitioner. The question whether the said merger involved transfer of the subject property is no longer res integra. Indisputably, with the merger of Sharpedge with the petitioner (then known as Indian Shaving Products Ltd.) on 23.04.1992, the subject property also vested with the petitioner along with other assets of Sharpedge. This clearly amounted to transfer of the subject property and, therefore, unearned increase was payable on such transfer, which was occasioned in terms of the scheme of amalgamation as approved by BIFR. 37. Concededly, the petitioner has paid the amount of unearned increase due of such transfer. The controversy involved in the present petition does not relate to levy of unearned increase on such transfer but on account of dilution of the share capital of TGC by issue of shares to Procter Gamble, USA and transfer of certain shares held by TGC in the petitioner company to Procter Gamble, Netherlands. 38. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assets of the petitioner company. 43. In Rustom Cavasjee Cooper v. Union of India:[1970] 1 SCC 248, the constitution bench of the Supreme Court reiterated the above settled principle in the following words: 11. A company registered under the Companies Act is a legal person, separate, and distinct from its individual members. Property of the Company is not the property of the shareholders. A shareholder has merely an interest in the Company arising under its Articles of Association, measured by a sum of money for the purpose of liability, and by a share in the distributed profit. Again a director of a Company is merely its agent for the purpose of management. The holder of a deposit account in a Company is its creditor: he is not the owner of any specific fund lying with the Company. A shareholder, a depositor or a director may not therefore be entitled to move a petition for infringement of the rights of the Company, unless by the action impugned by him, his rights are also infringed. 44. In a recent decision of the Supreme Court in Vodafone International Holdings B.V. v. Union of India and Anr.: [2012] 6 SCC 613, the Supreme C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the approval of the Competent Authority that as per the then existing policy and rule position, this demand is not logical and thus may be dropped. Action will be taken by DDA to refund this amount subject to adjustment/recovery of dues of DDA, if any. However, the Competent Authority has also approved that the Hon ble High Court may be requested to direct the petitioner to pay interest at reasonable rate as decided by it on the outstanding amount of ₹ 2,15,95,884/- which the petitioner ought to have paid alongwith payment of UEI on 13.02.1996 as DDA has lost opportunity cost on this amount while on the other hand the petitioner continued to hold this amount for his benefit. 48. As noticed above, the petitioner also claims further sums as noted in the order dated 26.07.2012 passed by DDA including ₹ 46,13,472/-on account of the difference in conversion charges and ₹ 2,07,235/- as interest on the said differential amount of conversion charges. In terms of the said order, DDA had directed that the Management Wing would review the petitioner s claim for the said amounts, keeping in view that the demand of ₹ 3,94,57,027/- has been dropped and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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