The State Of West Bengal & Ors vs Fresenius Kabi Oncology Ltd. & Anr
2023 Latest Caselaw 5337 Cal

                  IN THE HIGH COURT AT CALCUTTA
                      Civil Appellate Jurisdiction
                             Appellate side

PRESENT:

HON'BLE JUSTICE CHITTA RANJAN DASH
              AND
HON'BLE JUSTICE PARTHA SARATHI SEN


                              MAT 108 OF 2017
                                    with
                             MAT 1714 of 2015
                                    with
                            IA No: CAN 1 of 2022

              The State of West Bengal & Ors.    ......Appellants.
                                     vs.
           Fresenius Kabi Oncology Ltd. & Anr.   .........Respondents.

For the State/Appellants : Mr. Susovan Sengupta, Adv.

Mr. Naba Kumar Das, Adv.

Mr. Subir Pal, Adv.

Mr. Pathik Bandhu Banerjee, Adv.

For the Respondent No. 1 : Mr. Saptansu Basu, Sr. Adv.

Mr. Suman Dutt, Adv.

Mr. Atish Ghosh, Adv.

Mr. Arindam Chandra, Adv.

Ms. Antara De, Adv.

Heard on                          :     31.08.2022, 07.09.2022, 16.09.2022,
                                        14.12.2022, 22.12.2022, 05.01.2023,
                                        17.01.2023, 08.02.2023, 28.02.2023,
                                        & 18.08.2023.


Judgment on                       :     21.08.2023.




CHITTA RANJAN DASH, J.:-

1. As both these appeals arise out of a common Judgement passed in two writ

petitions, both the appeals are disposed of by this common Judgement.

2. Before adverting to the facts of the case it is beneficial to mention here that

no affidavit had been filed on behalf of the State (present appellant in both the

appeals) in either of the two writ petitions. Learned Counsel appearing for the

State before the Hon'ble Single Judge had agreed for disposal of the two writ

petitions without affidavits being filed on the ground that arguments have to be

advanced on question of law only.

3. A compendium of facts relevant for disposal of these appeals is as follows:

Approximately 16.95 acres of land was leased out in favour of Pfizer India

Limited in the year 1989 and the lease deed was executed on 04.01.1989. The

tenure of the said lease was 999 years as specified in Clause 1 of the lease deed

(Annexure P1) in writ petition no. 24788 (W) of 2010. The unit owned by original

lessee Pfizer India Limited with the land and structure standing thereon was

transferred to Dabur India Limited on 07.05.1996. Subsequently, through a

process of demerger the Pharmaceutical business of Dabur India Limited was

segregated and that part of the operation of Dabur India Limited came under

another company in the name and style of Dabur Pharma Limited. This scheme of

arrangement in this regard was approved by the Hon'ble High Court of Delhi on

17.10.2003. Dabur Pharma Limited thereafter applied for recording its name as a

lessee of the aforesaid plot originally leased out to Pfizer India Limited and

subsequently transferred to Dabur India Limited. Such application for recording of

the name of Dabur Pharma Limited was allowed by the competent authority of the

State Government on 15.03.2005.

3.1. The original promoters of Dabur Pharma Limited who were holding 64.34%

of the total equity shares in that company thereafter transferred their stake in the

company to Fresenius Kabi (Singapore) PTE Ltd., a company organised under the

laws of Singapore. This transfer of equity shares was effected on 11.08.2008.

Thereafter, the corporate name of Dabur Pharma Limited was changed to

Fresenius Kabi Oncology Ltd. (respondent no.1 in both the appeals).

3.2. A fresh certificate of incorporation was issued by the Registrar of

Companies, national capital territory of Delhi and Haryana on 09.01.2009 vide

Annexure P5 in WP No. 24788 (W) of 2010. The respondent company in both the

appeals is subsidiary of the Singapore based company.

4. The dispute between the respondent company and the appellant State arose

when the respondent company applied for recordal of change of name of the lessee

in respect of the subject plot. Such application was made on 06.01.2010 and the

Estate Manager, Kalyani Urban Development Department, Government of West

Bengal asked for deposit of Rs. 15,37,66,667/- as transfer permission fee on the

basis of notification dated 18.12.2007 for effecting such change. A copy of the said

notification is at page 68 of WP No. 24788 (W) of 2010. The aforesaid notification of

2007 contemplates deposit of fees for transfer of "lease hold rights" for different

categories of land in Kalyani Township. The transfer fee from the respondent

company has been demanded in terms of the circular of December 2007.

5. Further the jurisdictional District Magistrate did not give permission to the

respondent company for storage and use of Hexene etc. (which is the raw material

for production of medicine by the respondent company) under the provision of the

West Bengal Solvent, Raffinate, Slop and other Equivalent Petroleum Products

(Acquisition, Sale, Storage and Prevention of Use in Automobiles) Order, 2000 ('the

2000 order' for short).

6. Two writ petitions were, therefore, filed. The first one was filed by

respondent no.1 company challenging the demand of transfer fee under the

circular dated 18.12.2007. The second writ petition was filed by respondent no.1

company along with one of the employees challenging the order of jurisdictional

District Magistrate refusing storage and use of Hexene etc.

6.1. It is beneficial to mention here that the jurisdictional District Magistrate

passed the order dated 12.08.2014 impugned in WPA No. 28732 of 2015 on the

ground that the transfer fees by the respondent company has not been paid and

the "change of name" has not been effected.

7. The main case of the respondent before Hon'ble Single Judge was that

"change of name" of a company does not constitute transfer of lease hold right or

any asset of the company in that regard.

8. Mr. Basu, learned Senior Counsel who appeared for the writ petitioner

company, is also appearing for the respondent here, relied on the Judgement of

Hon'ble The Supreme Court in Bacha F. Guzdar Vs. Commissioner of Income

Tax, Bombay (AIR 1955 SC 74) and this court in Kalipada Sinha Vs.

Mahalaxmi Bank Ltd. (AIR 1966 Cal 585); W.H. Targett (India) Limited Vs. S.

Ashraf [2008 (3) Cal LT 362] and an unreported Judgement passed in M/s Din

Chemicals and Coatings Pvt. Ltd. & Anr. Vs. The State of West Bengal &

Ors. [WP. No. 18668 (W) of 2012 disposed of on 05.10.2012].

8.1. Mr. Susovan Sengupta, who appeared before the Hon'ble Single Judge on

behalf of the State and appears for the appellant in these appeals, submitted

before Hon'ble Single Judge that on change of equity share holding pattern,

bringing a new set of share holders in the controlling position of the company in

substance has resulted in transfer of ownership and control of the company and

such change should be treated to have resulted in transfer of assets of the

company. According to him the leasehold right was shifting from one entity to

another, and for this reason transfer fee was payable under the circular dated

18.12.2007. He further submitted that this is a case where there is simultaneous

transfer of assets including leasehold right from one entity to another along with

"change of name". He relied on Judgement of this Court in Emami Biotech

Limited & Anr. Vs. State of West Bengal [2012 (3) CHN 108]. Mr. Sengupta

further relying on New Horizons Ltd. Vs. Union of India [1995 (1) SCC 478]

urged before Hon'ble Single Judge to lift the corporate veil in the case to examine

the actual intention of the share holders of the transferee company in transferring

the bulk of equity shares in favour of the present respondent company.

9. Hon'ble Single Judge after hearing the parties at length returned the

findings as follows:

(i) "........... Whatever transfer had taken place

was at that point of time between the two

entities. The consequential act of change of

corporate name of the company is sought to be

treated as transfer of leasehold right of the

company and transfer fee is sought to be

charged on that incident or event. This, in my

opinion is not permissible. To borrow the

terminology from the fiscal jurisprudence, what

is being subjected to transfer fee is the

incidence of "change of name" of the company.

Such a situation cannot come within the ambit

of the expression "transfer of leasehold right"

as stipulated in the notification of 18.12.2007.

The ratio of the Judgement of this Court in the

case Emami Biotech Limited, is not applicable

in the fact of this case, as transfer fee is not

being charged on any instrument of transfer,

but on the basis of request for recordal of

change of corporate name. It has not been

argued by the State that the very act of transfer

of equity holding of the promoter group gives

rise to the obligation of the company to pay

transfer fee.

(ii) This stand of the State I am unable to

accept. I am not entering into the question in

this writ petition as to whether the transfer of

majority equity holding of a company would

result in transfer of assets of the company or

not because that is not the lis which has arisen

in these two proceedings, though the State has

referred to that dispute tangentially. On

permitting recordal of Dabur Pharma Limited as

the lessee on 15th March, 2005 the State had

recognized independent juridical entity of

Dabur Pharma Limited as a lessee.

Subsequently, change of the promoter group,

which eventually led to the change of corporate

name, in my opinion, cannot saddle the

petitioner company with an independent

obligation to pay transfer fee. That would result

in combining distinct identity of the

shareholders with that of the company, which

can be done on certain exceptional

circumstances. This dispute does not require

lifting of corporate veil, for the reasons I have

already discussed. I accordingly hold that no

demand for transfer fee can be raised on the

petitioner company as a condition precedent

for recordal of its name as a lessee, on the

ground that there has been transfer of leasehold

right. The licence of the petitioner company

cannot be withheld under "the 2000 Order" also

for this reason."

On the basis of the aforesaid findings Hon'ble Single Judge quashed the

impugned orders in both the writ petitions and allowed the same.

10. Against such order these appeals have been filed. In the appeal the sole

contention raised by Mr. Susovan Sengupta, learned Counsel for the State is that

this is a fit case where corporate veil should be lifted as behind the "change of

name" there must be some arrangement which ultimately affects the revenue, the

State is entitled to receive from the respondent company.

11. Mr. Basu, learned senior Counsel appearing for the respondents in both the

appeals stick to his argument advanced before Hon'ble Single Judge and submits

that this is a clear case of "change of name" there being clear distinction between

the company and its share holders. It is further submitted by him that the "change

of name" has been recognised by the competent authority under the Companies

Act, 1956 under Section 21 thereof and it is the corporate practice also that in

case of transfer of more than 50% of equity shares the transferee share holders of

more than 50% of equity shares has the privilege to "change the name" though the

liability etc. of the company remains the same under Section 23 of the Companies

Act, 1956.

12. Incorporation of an organisation by registration was presented in 1844 and

the precept of limited liability of an organisation followed in 1855. In this manner

in 1897 in Salomon Vs. Salomon & Company (1897 A.C.22), the House of Lords

influenced these establishments and solidified into English law the twin ideas of

limited liability and corporate entity. All things considered, the House of Lords set

out the rule that an organisation is a distinct legitimate person altogether not the

same as the members of that organisation. This guideline is alluded to as the "veil

of incorporation".

The same principle has come to be recognised by Constitution Bench of

Hon'ble Supreme Court in Bacha F. Guzdar Vs. Commissioner of Income Tax,

Bombay (AIR 1955 SC 74) and Sholapur Mills case (1950 SCR 869). In

paragraph 7 of the Judgement Hon'ble The Supreme Court has referred to

Sholapur Mills case supra and has held thus in the context of that case (Bacha

F. Guzdar) which was related to nature of agriculture income and whether the

dividend received by the assessee was agriculture income and as such exempt

under relevant provision of Income Tax Act.

"...... 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."

In the case of Electronics Corporation of India Limited & Ors. Vs.

Secretary Revenue Department, Government of Andhra Pradesh & Ors. [1999

(4) SCC 458] another constitution Bench of Hon'ble Supreme Court in paragraph

15 of the Judgment held thus:

"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."

In the case of Prasad Technology Park (P) Ltd. Vs. Sub-Registrar & Ors.

[2006 (1) SCC 473] the question before Hon'ble Supreme Court was as to whether

stamp duty is payable on lease to registered company changing its own name so

as to be indicative of its new business. After thorough discussion in paragraph 11

of the said Judgement, Hon'ble The Supreme Court came to hold that "change of

name" of company does not involve any transfer and accordingly the claim of

the State was negatived. On the same issue, there are some Judgements of our

own High Court, which we would like to make a reference to i.e. Din Chemicals

and Coatings Pvt. Ltd. & Anr. Vs. The State of West Bengal & Ors. [WP No.

18668 (W) of 2012] disposed of on 05.10.2012. Gopi Vallabh Solutions Private

Limited & Anr. Vs. State of West Bengal & Ors. [2018 SCC Online CAL 9035]

where in paragraph 11 of the Judgement this Court has held thus :

"..... I will content myself with only one

observation - I would have thought that the

law is well settled that by a change of name

of a company under the provisions of the

Companies Act, 1956, which is

contemporaneously considered to be a

change and not a transfer of one company to

another, there is no change of legal

personality and therefore there is no

requirement to rectify any deed to effect

mutation of the changed name in the records

of rights or land records."

(Gopi Vallabh Solutions Private Ltd. supra)

13. From the aforesaid discussion it is clear and no more res integra that the

organisation/corporation is a juristic person and is distinct from the share

holders. It is the company which holds the property and not the share holders. On

this analogy, in our considered view, Hon'ble Single Judge has come to a right

finding so far as claim of revenue by the State on the basis of circular dated

18.12.2007 for "change of name" of the company is concerned.

14. Now it is to be seen whether the submission of Mr. Sengupta, learned

Counsel for the State regarding lifting of corporate veil can be acceded.

In the case of Rustom Cavasjee Cooper Vs. Union of India (AIR 1970 SC

564) it was held by Hon'ble The Supreme Court that 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 share holders. This

feature of "veil of incorporation" was first found as discussed supra in the case of

Salomon Vs. Saloman & Company Ltd.

15. From the discussion supra it is now clear that company enjoys a separate

position from that of position of its owners. It is artificial but yet a juristic person

in eyes of law. Problems arise when this position of the company is misused. It is

not incorrect to say that though the company is an unreal person, but still it

cannot act on its own. There has to be some human agency involved so that

company is able to perform its functions. When this human agency is working, in

the name of the company, for achieving goals and targets approved by law, the

social order should not be disturbed. But when this medium of operation begins to

be tainted, conflict arise. When directors or whosoever be in charge of company

start committing fraud or illegal activity or even activities outside purview of the

objective (articles of the association forming the company), principle of lifting the

corporate veil or piercing the corporate veil becomes necessary. In common

parlance, it means, disregarding the corporate personality of a company, in order

to look behind the scene, to determine who the real culprit of the offence

committed is. Thus wherever this personality of the company is employed for the

purpose of committing illegality or for defrauding others, Courts have authority to

ignore the corporate character and look at the reality behind the corporate veil in

order to ensure justice or for that matter complete justice. However this approach

of judiciary in breaking upon the corporate shell is somewhat to be with care and

circumspection.

Piercing the corporate veil is one of the most widely used concepts to

determine when can the shareholders of the company be liable for the obligation of

the corporation. Piercing the corporate veil means disregarding the corporate

personality and looking for the real person who is in the control of the company. A

corporation/company is considered to have a separate entity as a general rule, but

when the notion of legal entity is used to defeat public convenience, justify wrong,

protect fraud, defend crime or avoid revenue/tax and so on, the law will regard the

corporation/company as an association of persons ignoring "veil of

incorporation" as propounded in Salomon Vs. Saloman & Co. Supra.

16. In LIC of India Vs. Escorts Ltd. & Ors. [AIR 1986 SC 1370] Hon'ble The

Supreme Court laid down two major instances when the corporate veil is to be

lifted. These are (i) statutory provisions and (ii) judicial grounds.

Statutory provisions as quoted supra refers to different provisions in the

Companies Act like officer in default, reduction of membership, improper use of

name, fraudulent conduct, failure to refund application money etc.

So far as judicial grounds are concerned in the case of VTB Capital PLC Vs.

Nutritek International Corp. (2012 EWCA CIV 808) corporate veil was lifted by

the Court for fraud, improper conduct on the part of the directors in obtaining

loan fraudulently. In the famous case of Vodafone International Holdings BV Vs.

Union of India & Anr. [SLP (C) No. 26529 of 2010] disposed of on 20.01.2012,

Hon'ble The Supreme Court pierced through the veil of the corporate structure

formed to evade the taxes. The Apex Court in this case observed thus:

"Once the transaction is shown to be fraudulent,

sham, circuitous or a device designed to defeat

the interest of the shareholders, investors,

parties to the contract and also for tax evasion,

the Court can always lift the corporate veil and

examine the substance of the transaction".

17. In the State of U.P. & Anr. Vs. Renusagar Power Co. & Ors. (AIR 1988 SC

1737). The question before the Hon'ble Supreme Court was whether Hindalco is

the parent company and the respondent Renusagar Power Co. is a subsidiary of

the parent company Hindalco? Whether power generated by Hindalco from its

subsidiary Renusagar Power Co. can be held to be from its own source of

generation especially when Eclectic energy generated by the subsidiary was wholly

consumed by its parent company? In this case the Constitution Bench of Hon'ble

The Supreme Court lifted the corporate veil and in paragraph 63, 64, 65 and 66

has held thus:

"63. It is hightime to reiterate that in the

expanding of horizon of modern jurisprudence,

lifting of corporate veil is permissible. Its

frontiers are unlimited. It must, however,

depend primarily on the realities of the

situation. The aim of the legislation is to do

justice to all the parties. The horizon of the

doctrine of lifting of corporate veil is expanding.

Here, indubitably, we are of the opinion that it is

correct that Renusagar was brought into

existence by Hindalco in order to fulfil the

condition of industrial licence of Hindalco

through production of aluminium. It is also

manifest from the facts that the model of the

setting up of power station through the agency

of Renusagar was adopted by Hindalco to avoid

complications in case of take over of the power

station by the State or the Electricity Board. As

the facts make it abundantly clear that all the

steps for establishing and expanding the power

station were taken by Hindalco, Renusagar is

wholly-owned subsidiary of Hindalco and is

completely controlled by Hindalco. Even the day-

to-day affairs of Renusagar are controlled by

Hindalco. Renusagar has at no point of time

indicated any independent volition. Whenever

felt necessary, the State or the Board have

themselves lifted the corporate veil and have

treated Renusagar and Hindalco as one concern

and the generation in Renusagar as the own

source of generation of Hindalco. In the

impugned order of the profits of Renusagar have

been treated as the profits of Hindalco.

64. In the aforesaid view of the matter we are of

the opinion that the corporate veil should be

lifted and Hindalco and Renusagar be treated as

one concern and Renusagar's power plant must

be treated as the own source of generation of

Hindalco and should be liable to duty on that

basis. In the premises the consumption of such

energy by Hindalco will fall under section

3(1)(c) of the Act. The learned Additional

Advocate-General for the State relied on several

decisions, some of which have been noted.

65. The veil on corporate personality even

though not lifted sometimes, is becoming more

and more transparent in modern company

jurisprudence. The ghost of Salomon's case still

visits frequently the hounds of Company Law but

the veil has been pierced in many cases. Some of

these have been noted by Justice P.B. Mukharji

in the New Jurisprudence. (Tagore Law Lecture

183).

66. It appears to us, however, that as mentioned

the concept of lifting the corporate veil is a

changing concept and is of expanding horizons.

We think that the appellant was in error in not

treating Renusagar's power plant as the power

plant of Hindalco and not treating it as the own

source of energy. The respondent is liable to

duty on the same and on that footing alone; this

is evident in view of the principles enunciated

and the doctrine now established by way of

decision of this Court in Life Insurance Corpn of

India, (supra) that in the facts of this

case sections 3(1)(c) and 4(1)(c) of the Act are to

be interpreted accordingly. The person

generating and consuming energy were the same

and the corporate veil should be lifted. In the

facts of this case Hindalco and Renusagar were

inextricably linked up together. Renusagar had

in reality no separate and independent existence

apart from and independent of Hindalco."

18. Having regard to the discussion as aforesaid and the authoritative

pronouncement of Hon'ble The Supreme Court, we are of the view that the

appropriate authority of the State Government or the Court have the necessary

jurisdiction to lift the corporate veil or pierce the corporate veil but a case should

be made out before the Court for the same.

19. "Change of name" of company is not new to company/corporate

jurisprudence. We have referred to two earlier cases of this Court one in 2012 and

another in 2018 where change of name of company has been allowed and in the

case of 2018 the prayer of the State to lift the corporate veil has been negatived as

in the instant impugned order. "Change of name" of the company is also

recognised in Section 21 and 23 of the Companies Act, 1956 while Section 21

refers to the ministerial act of the competent authority, Section 23 refers to

liability etc. of the company.

20. In the instant case on two occasions "change of name" has been allowed i.e.

first when Pfizer India Limited transferred the leasehold property with land and

standing structure thereon to Dabur India Limited; secondly when Dabur India

Limited through a process of demerger created a new company in the name of

Dabur Pharma which came to possession of the aforesaid leasehold property with

standing structure thereon. According to the respondent company Dabur Pharma

Limited had a holding of 64.34% of total equity share in that company. Said

quantum of share was transferred to respondent company. On such transfer

respondent company being the majority shareholder applied for "change of name"

and competent authority under the Companies Act, 1956 allowed such "change of

name" under Section 21 of the Companies Act, 1956. On "change of name" in the

register, the respondent company applied to competent authority of the State

Government for "change of name" in the revenue records. The problem started as

the circular dated 18.12.2007 had already come into force which sought to levy

transfer fees on "transfer of leasehold right" of different categories of land in

Kalyani Township. The question that falls for consideration is whether incidence

of "change of name" of a company falls within the expression of "transfer of

leasehold right". Hon'ble Single Judge on careful consideration of the matter has

categorically come to finding that incidence of "change of name" of a company

does not fall within incidence of "transfer of leasehold right".

21. In the present case the State has not filed any counter-affidavit. Orally a

case is tried to be made out to the effect that State is going to lose huge revenue

towards transfer fees as clandestinely the respondent company in the guise of

"change of name" is capturing the leasehold right over the land. Such a

submission without facts being asserted in an affidavit of opposition sounds to be

too spacious. By "change of name" of company on the ground of change of pattern

in share holding does not change the nature and character of the company and

there is no transfer of any property as stipulated in Section 105 or Section 54 of

the Transfer of Property Act by "change of name" of the company which is a

juristic person in itself. In such a case the well-established protection of "veil of

incorporation" as enunciated by House of Lords in the case of Salomon Vs.

Salomon & Company and followed in India by Hon'ble The Supreme Court and

other High Courts as discussed supra should not be pierced or lifted. In the

present case we do not find any material of any kind of fraud or any other grounds

as discussed supra to go behind the corporate identity of the Dabur Pharma or

that of respondent company when it is specifically asserted that Dabur Pharma

having sold all its shares to the respondent company, the respondent company

just wants "change of name" in the revenue records.

22. In common parlance, if a person changes his name through an affidavit,

though his name gets changed, his character, persona etc. remain the same.

Likewise, with the change of pattern of shareholding, the company as a juristic

person does not get affected. In place of "A", "B" may come to be the major share

holder but the company remains the same. If "B" by virtue of quantum of share

holding wants change of name of the company, the juristic persona of the

company does not change by such "change of name".

23. In view of the discussion supra we do not find any merit in both the appeals

and both the appeals are accordingly dismissed. The impugned common

Judgement passed by Hon'ble Single Judge in both the writ petitions are hereby

affirmed. The appellants are directed to implement the impugned common

Judgement passed by Hon'ble Single Judge in WP No. 24788 (W) of 2010 and WPA

No. 28732 of 2015 within 15 days from the date of receipt of copy of this order.

24. There shall be, however, no order as to costs.

25. Pronounced in open Court on this 21st day of August, 2023.

26. In view of disposal of the appeals the interim application being CAN 1 of

2022 is also disposed of.

27. Urgent Photostat certified copy of this Judgement, if applied for, be given to

the parties on completion of usual formalities.

I agree.

(Partha Sarathi Sen, J.) (Chitta Ranjan Dash, J.)