Holding

A change in the lessee's shareholding and alteration of its Memorandum and Articles of Association constitutes a transfer of interest under the licence and lease, making the lessee liable to pay the transfer levy.

Summary

The Uttar Pradesh State Industrial Development Corporation (UPSIDC) leased industrial plots to several companies under licence agreements and lease deeds that contained clauses prohibiting any transfer, assignment or alteration of the lessee's interest without the lessor's written consent. The lessees later changed their shareholding, directors, and, in some cases, underwent amalgamation or sale of assets, prompting UPSIDC to issue demand notices for a transfer levy as per its guidelines. The lessees challenged these notices in writ petitions, and the Allahabad High Court set aside the levy demands, holding that changes in shareholders or directors did not constitute a transfer of interest. On appeal, the Supreme Court examined the specific clauses (4(h) of the licence agreement and 3(p) of the lease deed) and the corporation’s guidelines defining a transfer as disposal of controlling interest, concluding that the alterations in the companies' Memorandum and Articles of Association amounted to a material change in interest, making the lessees liable to pay the transfer fee. Consequently, the Court set aside the High Court judgments and allowed the appeals, affirming UPSIDC’s right to demand the levy.

Issues considered

Whether a change in shareholders, directors, or amalgamation of a lessee company amounts to a transfer of interest under the licence agreement and lease deed.
Whether such alleged transfer triggers liability to pay the transfer levy as per UPSIDC’s guidelines.
Whether the High Court was correct in setting aside the transfer levy notices issued by UPSIDC.

Legislation cited

Companies Act, 1956s. 126

Subjects

lease deedlicence agreementtransfer levychange of shareholdersindustrial development corporationUttar Pradeshcontrolling interestcorporate restructuringSupreme Court

Judgment

[2015] 11 S.C.R. 1044

A U.P. STATE INDUSTRIALDEV.CORPN. LTD.
v.
MONSANTO MANUFACTURES (P) LTD. &ANR.
(Civil Appeal No.2731 of 2005)
8
JANUARY 29, 2015
[SUDHANSU JYOTI MUKHOPADHAYA AND V. GOPALA
GOWDA;JJ.]

c Industrial Development- Government of Uttar Pradesh
acquired land and conveyed the same to appel/ant-U. P State
Industrial Development Corporation for setting up industrial
area -Appellant-Corporation divided the land into plots for
leasing the same to industrial units and executed lease deed
D in favour of respondents-Companies - Later appellant-
Corporation made allegation that respondents--companies'
share holders transferred their company/their shares to new
shareholders without the consent of appellant-Corporation,
which amounted to transfer of interest, for which transfer levy
E is required to be deposited- Demand notices issued by the
appellant-Corporation challenged by the respondents-
Companies in different writ petitions or suits which were
allowed by the High Court- Justification- Held: On facts, by
their alleged action, the respondents-Companies directly or
F indirectly transferred or patted with their interest/benefit under
their respective agreements in violation of the terms of the
agreement and their lease deed and were thus liable to pay
transfer fee -Appellant rightly issued notice demanding
transfer fee from each of the respondents and there was no
G reason for the High Courl to interfere with the same.

CIVIL APPELLATE JURISDICTION: Civil Appeal No.
2731 of 2005

H
1044
U.P. STATE INDUSTRIALDEV.CORPN.·LTD. v. 1045
MONSANTO MANUFACTURES (P) LTD. &ANR.

From the Judgment and Order dated 11.05.2004 of the A
High Court of Judicature of Allahabad in Writ Petition No. 5094
of2000

WITH
8
C.A. Nos. 1310 of 2006 and C. A. Nos. 1318 and 1319
of2015 •

Rakesh Uttamchandra Upadhyay, Amar Deep Sharma
for the Appellants.
c
S. K. Dubey, Pramod Kr. Sharma, K. V. Mohan, M. Datta,
Angad Mehta, Arun Cathpalia, D. Bharat Kumar, Pr_a~eep
Kumar Bakshi, Sayooj Mohandas M., Mohd. lrshadHanif, M:.
Z. Chaudhary,AftabAii Khan for the Respondents.
D
The Judgment qfthe Court was delivered by
1. Leave granted in SLP {C) No.16404 of 2006 and
· SLP(C) No.5838 of 2008.

2. The Government of Uttar Pradesh acquired land in E
various distri.cts and conveyed the same to the appellant-U .P.
State Industrial Development Corporation (hereinafter referred
to as, 'the Corporation' for short) for the purpose of setting up
industrial area. The Corporation thereafter divided the said F
land into plots for leasing the same to industrial units. The.
respondents-Companies, applied to· the appellant-Corporation
for grant of lease. On receiving part premium of the plot, the
appellant executed an agreement for licence and later executed
l~ase deed in favour of the respondents-Companies. Later G
the appellant-Corporation made an allegation that_ the
respondents-companies' share holders transferred their
company/their shares to new shareholders without the consent
of appellant-Corporation, which amounted to transfer of .
interest, for which transfer levy is required to be deposited. H
1046 SUPREME COURT REPORTS (2015] 11 S.C.R.

A Demand notices were issued by the appellant-Corporation to
the respondents-Companies. Those demand notices were
challenged by the respondents-Companies in different writ
petitions or suits which were allowed by the Division Bench of
the High Court of Judicature at Allahabad by impugned
B judgments.

3. In the aforesaid cases the High Court held that unless
the respondents-Companies transfer its right in the plot in
question in favour of another legal entity, there is no qvestion
C to apply clause 4(h) of the Agreement for licence. The High
Court further held that mere change in shareholders or Directors,
does not change legal entity of the Company and as such it
continues unchanged.

0 4. The questions that arise for our consideration in these
appeals are:
. '

(i) Whether by the alleged action the respondents-
Companies directly or indirectly had transferred or parted
E with their interest/benefit under their respective
agreements for licence.

(ii) Whether the respondents-Companies violated the
terms as contained in Clause 4(h) of agreement and
Clause 3(p )of their lease deed and
F
(iii) Whether the respondents-Companies are liable to
pay transfer fee for alleged transfer of its own interest.

5. The facts leading to the cases are as follows:-
G
Monsanto Manufactures Private Ltd.(A Company
registered under the Companies Act, 1956)

The respondent-Company applied to the appellant-
H Corporation for grant of lease of plot of land bearing no.38/1-
U.P. STATE INDUSTRIALDEV.CORPN. LTD. v. 1047
MONSANTO MANUFACTURES (P) LTD. &ANR.

A situated in Sahibabad Industrial Area, Site No.4 of Tehsil A
·and District Ghaziabad admeasuring 14,533 square yards for
the .purpose of constructing an industrial unit.. The appellant-
Corporation after receiving part premium of the plot land
executed an agreement for licence on 12th June, 1978 in favour
of the respondent-Company. The possession of the land was B
given on 12th June, 1978. After construction of the building of
the factory, the respondent-Company and the appellant-
Corporation executed a deed of lease on 51h September, 1979
for a period of 90 years. Later, the appellant-Corporation vide
letter dated 121h April, 1994 asked the respondent"'Company C
to provide the list of its Directors and shareholders duly certified
by the Chartered Accountant. The same was furnished by the
respondent-Company to the appellant-Corporation on 71h May,
1994. Accardi~ to the appellant-Corporation the respondent- .
0
Company changed the Directors and shareholders without
prior permission and con$e·nt of the appellant-Corporation and
since the respondent-Company was purchased by the present
Directors from the previous Directors. The appellant-
Corporation by letter dated 271h May, 1994 asked for details E
in order to take necessary action in accordance with the terms
of the lease deed. The respondent-Company categorically
denied the al!egations levelled by the appellant-Corporation
by their letter aa ted 271h September, 1994.
F
6. By letter dated 1st October, 1999 the appellant-
Corporation demanded Rs.25,51 ,781/- from respondent-
Company towards transfer levy charges as the original
shareholders of the respondent-Company transferred their
entire share holding and interest to the new shareholders and G
there was change in the Directors of the respondent-Company.
. According to the appellant such change makes the shifting of
the controlling interest of the respondent-Company and transfer
levy for the same was demanded from the respondent-
Company-as per the rules of the Corporation. The Company H
1048 SUPREME COURT REPORTS [2015] 11 S.C.R.

A submitted its reply vide letter dated 81h December, 1999 and
reiterated its earlier stand to the effect that there is no breach
of any terms of the lease deed as no transfer or assignment or
sale of premises in question-has been made. However, it was
not accepted by the Corporation, who sent another reminder
B dated 13th January, 2000 asking the Company to pay a sum of
Rs.25,51 ,781/- towards transfer levy charges.

The aforesaid demand notice was challenged by the
respondent-Company before the High Court ofAllahabad which
C by impugned judgment dated 11th May, 2004 allowed the writ
petition.

U.P. Twiga Fiberglass Limited (A Company registered
·under the Companies Act, 1956)
0
7. The appellant-Corporation executed an agreement
with respondent-Company followed by lease deed dated 27th
May, 1977 by which the Corporation_ leased plot nos.9 and
23-A admeasuring approxtmately 1,10,926 square meters of
E land situated at Sikandrabad ·Industrial Area, District
Bulandshahr, Uttar Pradesh to the respondent-Company. The
lease was executed for 90 years. In the year 1994, the
respondent-Company suffered heavy losses to the tune of
Rs.42 crores. Therefore, the respondent-Company sold almost
F its entire shares including shares of its promoters and shares
lying with financial institutions to a foreign company known as
.. Rotar India Ltd.". As entire shares of the respondent-Company
transferred to Rotar India ltd., the promoters of the said
Company were replaced by new promoters/Directors.
G
B. According to the appellant-Corporation, in view of the
above disposal of controlling interest in the venture of the
existing allottee, they were liable to pay transfer levy as per
Clause 6(f) of the guidelines of the Cci.rporation pertaining to
H reconstitution and transfer.
U.P. STATE INDUSTRIALDEV.CORPN. LTD·. v. 1049
MONSANTO MANUFACTURES (P) LTD. &ANR.

9. The Corporation vide its letter dated 26th April, 1995 A
requested the respondent-Company to supply list of new
· shareholders, list of new Directors and copies of Memorandum
of Association and Articles of Association. However, it is
alleged that respondent-Company neglected the same and
refused to supply the do~uments. The appellant-Corporation . B
thereafter vide letter dated 151h May, 1995 asked the
respondent-Company to pay a sum of Rs.24,95,835i- towards
transfer levy as there was disposal of controlling intere~t in the
venture by the existing allottee. The said demand of transfer
levy, according to appellant, was as per lease deed and C
· guidelines of the Corporation pertaining to re-constitution and
transfer.

10. Being aggrieved the respondent-Company filed suif
bearing No.876 of 1996 before Civil Judge, Bulandshahr D
seeking permanent injunction and praying forrestraining the
appellant-Company from claiming any amount as traQsfer levy.
The appellant filed written statement and contested the suit.

11. The Civil Judge, Bulands~ahr vide judgment and E
decree dated 23rd January, 1999 allowed the suit and directed
the appellant-Corporation not to charge transfer levy from the
respondent-Company. The Civil Judge, held that the
respondent-Company is a legal person and disposal of its
majority shares in the name of a foreign Company namely Rotar F
India Ltd. does not change the legal status of the Company
and therefore, there is no transfer.

· 12. The appellant-Corporation being dissatisfied with the· •
aforesaid order filed Civil Appeal No.45 of 1999 in the Court G
of District Judge, Bulandshahr which
. was. dismissed vide ord_er
dated 15th July, 2000. Thereafter, the appellant-Corporation
filed Second Appeal No.1'425 of 2000 before the High Court
of Judicature at Allahabad and the same dismissed by
impugned judgment dated 24th October, 2005. · H
1050 SUPREME COURT REPORTS [2015] 11 S.C. R.

A M/s Enrich Engineering Works Pvt. Ltd.(A Company
registered under the Companies Act, 1956)
13. One M/s lyres & Tubes Co. Pvt. Ltd. having its
registered office at Scooters India Ltd. Premises, Sarojini
Nagar, PO Lucknow through . its Directors Shri
8
S.Sounderarajan s/o of late Shri .S. Srinivasan applied to
appellant-Corporation for allotment of plots of land. After
agreement which was followed by lease deed dated 21 51
December, 1976 the appellant-Corporation allotted industrial
c plot no.A-4 and A-5 admeasuring approximately 40,489
square yards and 8.36 square yards respectively situated at
site no.2, Rai Bareilly, Uttar Pradesh to M/s Tyres & Tubes
Company Pvt. Ltd. The lease was for 90 years. M/s Tyres &
Tubes Co. Pvt. Ltd. suffered heavy losses and pursuant to its
o winding up, Allahabad High Court vide judgment and order
dated gth January, 1996 appointed Official Liquidator. The
Official Liquidator sold the properties of M/s Tyres & Tube Co.
Pvt. Ltd. including right and interest on the land in question to
respondent M/s Enrich Engineering Pvt. Ltd. The said sale
E was affirmed by the Allahabad High Court vide order dated 9th
February, 2000. Pursui:mttothe order of the Allahabad High
Court dated 1Qth September, 2003 the Official Liquidator
issued sale certificate dated 121h March, 2004 in favour of
respondent-Company.
F
14. The appellant-Corporation was not a party in the
winding up proceedings nor was any notice issued to the
appellant-Corporation by the Official Liquidator. On knowing
about transfer of the rights of the original allottee- M/s lyres &
G Tubes Co. Pvt. Ltd. , the appellant-Corporation demanded
transfer levy amounting to Rs.3,80,621 .25/- from respondent-
Company. According to the appellant, such demand was made
from the respondent-Company, as the said company had
purchased M/s Tyres & Tubes Co. Pvt. Ltd., with all its assets
H and liabilities.
U.P. STATE INDUSTRIALDEV.CORPN. LTD. v. 1051
MONSANTO MANUFACTURES (P) LTD .. &.ANR.

15. Against the demand, respondent-Company preferred A
a writ petition being Civil Misc. Writ Petition No.56982 of 2005
before the Allahabad High Court which was allowed by the
impugned judgment dated 271h April, 2006. The demand notice
was set aside by the High Court in view of judgment rendered
in-another similar case. B

M/s Super Tannery. (India) Ltd.(A Company registered
under the Companies Act,- 1956)

16. The appellant-Corporation entered into an agreement c
dated 1Qth October, 1990 with one M/s Super Agro Tech Ltd.·
for setting up of specialty paper unit in industrial plot nos.A-9
and A-1 0 admeasuring approximately 45,080/- square meters
in Industrial Area Unnao Site-2. No right whatsoever in regard
to transfer of said plots were given-to the licensee M/s Super o
Agro Tech Ltd. The possession of the said plots was handed
over on 251h January,·1991 and subsequently lease w_as also
executed. M/s Super Agro Tech Ltd. ·thereafter did not set up
any specialty paper unit and no investment was made.
According to the appellant-Corporation said licensee M/s E
Super Agro Tech Ltd~ with a view to enrich itself started
amalgamation proceeding with the new company namely M/s
Super Tannery (India) Ltd.-respondent herein. The said
am·algamation was a mutual understanding between M/s
Super Agro Tech Ltd. and M/s Super Tannery (India) Ltd'. The F
Allahabad High Court vide order dated gth May, 1997
sanctioned the amalgamation in Company Petition No.32 of
1997. Though the land belongs to the appellant-Corporation,
it was not made a party to the said petition. According to the
appellant-Corporation, the amalgamation does not create any . G .
right whatsoever on respondent-M/s Super Tannery (India} Ltd.
over industrial plots in question and the said two plots cannot
be legally transferred to the new Company i.e. M/s Super
Tannery (India) Ltd.
H
1052 SUPREME COURT REPORTS [2015] 11 S.C.R.

A 17. The respondent-Super Tannery (India) Ltd. made an
ppplication for the transfer of the said industrial plot. On such
request, the appellant-Corporation demanded transfer levy
from M/s Super Tannery (India) Ltd. for transfer of the said
industrial plot. However, no amount was deposited. The
B Corporation by notice dated 3rd November, 2001 demanded
a sum of Rs.34,23,954.51/- as on that date from M/s Super
Tannery (India). Ltd. towards transfer levy. The aforesaid notice
was challenged by the respondent-M/s Super Tannery (India}
Ltd. by filing a writ petition being Civil Misc. Writ Petition
C No.18535 of 2002 before Allahabad High Court and the same .
was allowed, by the impugned judgment dated 22"d August, ·
2007 following the decision' rendered in another case.

Case wise stand of the parties and finding of this Court.
D
Monsanto Manufactures Private Ltd.

· 18. Learned counsel .for the appellant-Corporation
submitted that the respondent-Company has violated Clause
E 3(p) of le~se deed dated 5th September, 1979 entered into
between the said Company and appellant-Corporation
inasmuch as its "Memorandum of Association" and "Article of
Association" were altered without the written consent of Lessor
i.e. appellant-Corporation. In view of the same the appellant-
F Corporation has the right to determine the said lease deed
dated 5th September, 1979.

19. On the other hand, according to counsel for the
respondent as the Company has got separate legal status and
G the Corporation has allotted the industrial plot to it by name
and not in the name of its Directors, the Directors being only
officials working on behalf of the Company, mere change of
names of Direct<?rs or shareholders does not in any way or
manner affect the legality or status of the respondent-Company.
H It was further contended that change of names of Directors,
~·
- ""::'."'~
--- ...
_- ·"'!<".... ~ ~.

U.P. STATE INDUSTRIALDEV.CORPN. LTD. v. 1053
MONSANTO MANUFACTURESJP) LTD. &ANR.

shareholders duly done within the purview of the Companies A
Act, 1956, does not affect the legar status of the respondent-
Company and much less there has been any transfer of the
site by the C~mpany to any other individual person.
.
20. For deCiding the issue involved in the present case it 8
is necessary to refer certain clauses of licence agreement,
lease deed and guidelines issued by the appellant-Corporation
which are common in all the cases.

21. Clause 4(h) of the licence agreement prohibits . c
licensee's acts to directly or indirectly transfer, assignment,
sale, encumber or part with its interest under the benefit of the
said Agreement without previous consent in writing of the
Grantor, relevant portion of which reads as follows:

"4(h). That the Licence will not directiy or indirectly D
transfer, assign, sell, encumber or part with its ~nterest
under or the benefit of this Agreement or any part thereof
.in any manner whatsoever without the previous consent.
in writing of the Grantor and it shall be open to the E
Grantor. to refuse such consent or grant the same .
subject to such conditions as may be laid down by the
Grantor in the behalf. "

22. Sub-Clause (p) of Clause 3 of lease deed also F
prohibits any alteration in the Memorandum and Article~ of
Association or in its capital structure without the written COr:lSent
of the Lessor, relevant portion of which reads as follows:

"3(p) That the Lessee being a registered partnership
firm declares, affirm$ and undertakes that during the G
subsistence of the terms of this agreement, the said
partnership shall not be dissolved/ reconstituted or
wound up, an.dlor dealt with in any way which may_
jeopardi?e the rights and interests of the Lessor in the H
1054 SUPREME COURT REPORTS [2015] 11 S.C.R.

A matter of this lease, nor shall its constitution be altered
in any manner otherwise written consent of the Lessor,
first and obtained, and it shall not stand dissolved on
the deAth or insolvency of any of its partners;

8 OR

The Lessee being an individual or sole proprietor of a
firm, shall not allow any person(s) as partner(s) with him
without the prior written consent of the Lessor;
c OR
The Lessee being a Company shall not make or
attempt to make any alterations, whatsoever in the
provisions of its Memorandum and Articles of
0 Association or in its capital structure without the written
consent of the Lessor, first had and obtained, and the
Lessee hereby undertakes to get registered the
prescribed particulars of the charge hereunder created
with Registrar of Joint Stock Companies un.der Section
E 126 of Companies Act, 1956, within stipulated period.

While granting its consent as aforesaid the Lessor may
require the successor in interest of the Lessee to enter
into a binding contract with the Lessor to abide by and
F faithfully carry out the terms, conditions, stipulations,
provisos and agreements herein contained or such
other terms and conditions as the Lessor may, in its
discretion, impose including the payment by the
successor-in-interest such additional premium and/or
G enhanced rent as the Lessor may in its discretion think
proper. In the even of breach of this condition the
agreement shall be determined at the discretion of the
Lessor.

H
. U.P. STATE INDUST.RIALDEV.CORPN. LTD. v. 1055
MONSANTO MANUFACTURES (P) LTD. &ANR.

Provided that the right to determine this agreement A
und~r this clause will not be exercised if the industry at
the premises has been financed by the State
Government or the Industrial Finance Corporation of
India or the Industrial Credit and Investment c;;orporation
6f India, or the U. P. Financial Corporation or Pradeshiya B
Industrial and Investment Corporation of Uttar Pradesh
or any scheduled bank(including the· State Bank of
India) and the said financing body or bodies mentioned·
· abC?ve decide to take over possession or sell, or /ease C
or assign the mortgaged assets in exercise vesting in
it or them by virtue of the deeds or deed executed in its
or their favour by the Lessee as provided herein above, ·
or under any law for the time being in force."

23. The Corporation has issued guidelines for tran·sfer/ D
re-c0nstruction in respect of the plots in the industrial area of
the Corporation. Clause 6.01 (E) of the said guideliQ.es
prescribes Transfer Levy and Clause 6.01 (F) defines transfer.
The aforesaid provisions reads as follows:
E
"6.01(E) Transfer Levy- persq.m.@ 5% to 15% of the
rate of premium in fast moving areas and 2. 5% to 7. 5%
of the current premium rn slow moving areas prevailing
on the date of issuance of transfer approval letter will
be changed as applicable. While calculat;ng the F
transfer levy the location a/ charges·of a particular plot
will not be considered and only basic premium will be.
taken into account.

6.01(F) Transfer- Means disposal of controlling G
interest in the venture by the existing allottee. In the
case of reconstitution, the existing allottee retains
controlling interest except in case, where interest is
transferred to family members as defined in 6.3(iv)(a)
below or where there is change in the constitution ofthe H
1056 SUPREME COURT REPORTS [2015] 11 S.C.R.

A allottee due to inheritance, succession or operation of
law."

. 24. In the present case the entire shareholding of Goyal
family headed by Mr. Amar Nath Goyal in the said company
8 was transferred to the Mehta-Lamba Family. The entire list of
shareholders, Managing Director and Board of Directors was
provided by Monsanto to the appellant-Corporation vide letter
dated 7 .5.1994. The record shows that the original subscribers
of shares were members of Goyal family and the entire
C shareholding was transferred to Mehta-Lamba family.
Therefore, the original subscribers of shares of respondent
No.1 Companyweretotallychanged.

25. The "Memorandum of Association" of a company
o limited by shares mandatorily prescribes in 'Table-S" (Table-
S of 1956 Act and Table-A of 2013 Act deals with Company
Limited by shares) of the Companies Act mandatorily
prescribed that the names, addresses, description, occupation
of subscribers shall be given in Memorandum of Association.
E In this case as the original subscribers of shares were changed
in 1994, there was material alteration in the "Memorandum of
Association'' of respondent no. 1 Company.

26. It was also contended that there was an alteration in
F "Articles ofAssociation'' of respondent no. 1 Company as well.
The last column of"Articles of Association" also mandatorily
provides for giving names, addresses and description of
subscribers. In this case, the subscribers of shares has been
completely changed from the Goyal Family to Mehta-Lamba
G Family and hence there was material alteration of "Articles of
Association" of the respondent no. 1 Company.

27. In this case, the ownership of a huge Industrial plot
measuring 14,533 sq. ft. in the prestigious and economically
H affluent area of Sahibabad (Ghaziabad) has been transferred
U.P. STATE INDUSTRIAL DEV.CORPN. LTD. v. 1057
MONSANTO MANUFACTURES (P) LTD. &ANR.

from Goyal family to the Mehta-Lamba fam.ily for material A
financial gains, by adopting clever means that too without taking
written consent of the Lessor i.e. appellant-Corporation. There
are many instances/examples in which the lessee gets
allotment of huge industrial plots and thereafter sells the same
for huge monetary gains. This adversely affects the aims and 8
qbjectives of appellant-Corporation i.e. the planned
development of industrial areas in the State of Uttar Pradesh.
The. Hon'ble High Court ought not to have interfered in the
matter looking into the public interest involved and Clause ~(p) C
of the lease deed.

U.P. Twiga FiberQiass Limited

28. Similar submissions as made in the above case were
made by the learned counsel for the app~llant in the present o
case also. It was contended that the respondent-U.P. _Twiga
Fiberglass Ltd. has violated Clause 3(p) of lease deed dated
27th May, 1977 entered between the said company and
appellant-Corporation inasmuch as its ~~Memorandum of
Association", "Articles of Association" and capital structure- E
were altered without the written consent of Lessor appellant-
Corporation and in view of the same, the appellant-Corporation
has the right to determine the said lease deed dated 27t11
May,1977.
F
29. Per contra, according to the respondent, the aforesaid
contention(s) are fallacious, misconceived and untenable.
Learned counsel for the respondent made the following
submissions:
G
i)The Lease-Deed dated 271h May, 1977 has been
executed by the respondent-company, in the capacity of
a "lessee". Consequently, the provisions of the .lease-·
Deed obligate the Lessee/the Company and not its
shareholder(s); H_

I
1058 SUPREME COURT REPORTS [2015) 11 S.C.R.

A ii) The Lease-Deed contains no clause whatsoever, that
authorises such levy of transfer-fee, nor does 'it prohibit
any change in the share-holding of the respondent-
company. Even otherwise, such change in share-holding
was committed with the express consent and approval
B of the petitioner;

iii) Law recognises a categorical distinction between a
Company and its share-holders, who have otherwise no
right whatsoever on the assets of a company. Reliance
C was placed on Constitution Bench decision in Bacht1 F.
Guzdar, Bombay vs. Commissioner of Income Tax,
Bombay, AIR 1955 SC 74, which observed as follows:

"A share-holder has got no interest in the
o property of the company though he has undoubtedly a
right to participate in the profits if and when the
company decides to divide them".

And
E ·"the Company is a juristic person and is distinct
from the share-holders. It is the Company which owns
the property and not the share-holders".

iv) In a relationship between the Lessor and a Lessee, it
F is the Lease-Deed which is paramount and whose
contents are binding on the parties.

v)A unilateral guideline issued by the Lessor cannot be
held applicable or binding to a lessee. On the face of the
G iease deed, such guideline has no binding force. Further,
change in share-holding was admittedly done with the
express consent/approval of the appellant; and

vi)Anyfee, penalty, compensation, damages or transfer
H charges to be claimed by the lessor from the lessee must
U.P. STATE INDUSTRIAL DEV.CORPN. LTD. v. 1059
MONSANTO MANUFACTURES (P) LTD. &ANR.

necessarily be provided in the lease-deed. Otherwise, A
such fee, penalty, compensation, damages ·or transfer
charges being beyond the terms of the Lease-Deed
cannot be. sought or claimed by the Lessor; Thus the levy
of transfer-fee as sought and claimed by the appellant is
illegal, misconceived and untenable, being beyond the B
terms of the lease deed. It is not a transfer in law, since
transfer in s_hare-holding does not amountto any transf~r
in the Company's assets, immovable or otherwise. It is
equally not a transfer in fact, since the provisions of the
Lease-Deed do not recognise/nor prohibit any such C
transfer. ·

vii) The Guidelines and in particular Clause ·6.01 (F) is.
not applicable in the present case as there has been no
~~disposal of con.trolling interest in the venture by an D
existing allottee". Undoubtedly, the respondent-company
is the "existing allottee" and the respondent-company has .
not disposed its "controlling interest in the venture". In
other words, there is no transfer even upon a literal
construction· of the Guidelines. E

30. It rs not in dispute that the appellant-Corporation on
27'h May, 1977 allotted huge plot measuring 1,10,926 sq. mtrs.
to respondent no. 1 Company in the industrial area,
Sikandarabad, Bulandshehar on nominal amount. The F
respondent no. 1 clearly admitted that it had a huge debt of
Rs.13, 14,00,000/- the different financial institutions and,
tnerefore, it sold s_hares of company, its own shares, shares of·
promoters and shares of financial institutions to the foreign
company, namely, "M/s Rotar Ltd.'.' G

31. The appellant-Corporation in written statement filed
in Suit No. 876/1996 clearly and. categorically mentioned that
the shares of original promoters we~e transferred in the name
of new promoters of foreign company and therefore, the. H

.f.'"
1060 SUPREME COURT REPORTS [2015] 11 S.C.R.

A appellant-Corporation demanded list of new shareholders and
Memorandum and "Articles of Association" of the Company.
The change of original promoters shares to the new promoters
means the subscribers of shares were changed and, therefore,
there is material change in the "Memorandum ofAssociation"
B and "Articles of Association" of the Company.

32. The appellant-Corporation clearly brought on record
that there is cl)ange in "Capital Structure" of the company and
the "Capital structure" in common parlance means "debt-equity
C ratio,. In this case admittedly there a huge amount of Rs.
13, 14,00,000/- was funded by the foreign company, i.e. "M/s
Rotar Ltd." towards settling the debt. In this background the
·appellant alleged that there is change in "debt-equity ratio"
resulting alteration in the "capital structure" of the company.
D
33. There is larger public interest involved in
incorporating alteration in "Capital Structure" in Clause 3(p) of
the lease deed. There are many instances where the company
takes loan from third parties on the security and land and
E structure allotted to them in lease, keeping in dark the lessor
which amounts to incurring liabilities on the property without
the knowledge of the lessor. In this case also there was huge
amount of debt on the company as it took loan on land and
building/factory from different financial institutions. Therefore,
F there is public interest involyed for which consent of lessor was
nece·ssary.

M/s Enrich Engineering Works Pvt. Ltd

34. In this case also similar submission has been made
G
by the parties.

35.1t is not in dispute thatthe huge plot of about40, 489
& 8.35 sq. yards in the industrial area of Rai Bareilly (U.P.)
H was allotted by appellant-Corporation to M/s lyres and Tubes
U.P.. STATE INDUSTRIALDEV.CORPN. LTD. v. 1061
MONSANTO MANUFACTURES (P) LTD. &ANR.

Company Pvt. Ltd. As the said company suffered heavy A
los~es, on 9.1.1996 the company Judge of Allahabad High
Court appointed Official Liqui9ator and perused High Court's
Order on 12.3.2004 the said company was sold to M/s Enrich
.Engineering Works Pvt. Ltd., by the Official Liquidator.
B
36. Learned counsel for the respondent submitted that it
was a case of reconstitution and therefore payment of transfer
fee does not arise. However, such submission can not be.
accepted in view of Clause 6.01 (E) & (F) of the guidelines-.
The fact that there is a change of hand of the asset including C
the land in question by transfer.· Therefore, the respondent is
liable to pay transfer fee.

M/s Super Tannery (India) Ltd.
D
37. Learned counsel for the appellant submitted that the
huge plot of 45080 sq. mtrs. in Kanpur was allotted to M/s
SupreAgo Tech Ltd. for establishing and running a"Specialty
11
Paper lnqustry".ln this case, only a LicenseAgreement" dated
10.10.1990 was executed by UPSIDC and the admitted fact E
on record is that no lease deed was executed by UPSIDC
with M/s Super Agro Tech. Ltd.

38. In view of the abov~. M/s Super Agro Tech Ltd. was
merely a licens.ee and as per the license agreement dated F
10.1 0.1990 it had no authority whatsoever to transfer the said
industrial land to~ M/s Super Tannery (I) Ltd.

39·. On the other hand, according to the learned counsel
for the respondents, due to various constraints over head costs
and financial ha.rdship company became non viable and the G
major production activities was not feasible to run the company.
. In order to avoid the future problem a scheme of amalgamation
was prepared as per the provisions of the Companies Act, _
seeking amalgamation under Chapter V of the Companies H
1062 SUPREME COURT REPORTS [2015] 11 S.C.R.

A Act. A joint application was filed before the Allahabad High
Court. The High Court vide order dated 9.5.1997 allowed the
petition for amalgamation and sanctioned the tcheme of
amalgamation and ordered that M/s Super Agro will be merged
into M/s Super Tannery (India) Ltd.
8
40. In the present case it has not been denied that
respondent company M/s Super Tannery (India) Ltd. and the
other company Super Agro Tech. Ltd. are family held
companies of the same family having common Directors/
C Promoters. Pursuant to the order of amalgamation by the High
Court the plot of land in question namelyA-9,A-10, Industrial .
Area Unnao Site-11 which was allotted to SuperAgro Tech. Ltd.
became the asset of the respondent company M/s Super
Tannery (India) Ltd. As per Amalgamation Scheme, all the
D property, rights and powerofSuperAgro Tech. Ltd., having its
office at 184/170, Jajmau Kanpur was transferred without
further act or deed.to M/s Super Tannery (India) Ltd. Thus it is
clear that by the order of the Court the premises in question
was transferred in favour of the other Company.
E
41.1n view of the aforesaid facts as noticed in each case,
we hold that the appellant rightly issued notice demanding
transfer fee from each of the respondents and there was no
reason for the High Court to interfere with the same.
F
42. For the reason aforesaid, we set aside the impugned
judgments dated 11th May, 2004 in C.W.P.No.5094 of 2000,
24th October, 2005 in Second Appeal No.1425 of 2000, 27th
April, 2006 in Civil Misc.W.P.No.56982 of 20.05 and 22"d
G August, 2007 in C.M. Writ Petition No.18535 of2002 passed
by the High Court of Judicature at Allahabad and allow the
appeals.

Bibhuti Shushan Bose Appeals allowed.