Alpha Stitch-Art Private Limited ... vs The West Bengal Small Industries
2023 Latest Caselaw 2686 Cal/2

                      In the High Court at Calcutta

                    Constitutional Writ Jurisdiction

                               Original Side

The Hon'ble Justice Sabyasachi Bhattacharyya

                           W.P.O. No. 764 of 2022

             Alpha Stitch-Art Private Limited and Another
                                  Vs.
                  The West Bengal Small Industries
              Development Corporation Ltd. and Others

     For the petitioners            :    Mr. Krishnaraj Thaker, Adv.,
                                         Mr. Raghunath Ghose, Adv.,
                                         Ms. S. Santra, Adv.,
                                         Ms. Pritha Ghose, Adv.

     For the respondent nos.1 to 7 :     Mr. Joydip Kar, Sr. Adv.,

Mr. Debdeep Sinha, Adv.

For the respondent no.9 : Mr. Alok Kr. Ghosh, Adv., Ms. Manisha Nath, Adv.

Hearing concluded on : 28.08.2023

Judgment on : 25.09.2023

Sabyasachi Bhattacharyya, J:-

1. The petitioner no.1 is a registered Company.

2. The predecessor-in-interest of the petitioners, one Sona Promoters

Private Limited, obtained a lease from the respondent no.1, the West

Bengal Small Industries Development Corporation Ltd. (WBSIDCL) by

way of two lease deeds dated December 14, 2007 and March 04, 2009.

3. The WBSIDCL subsequently terminated the lease by a notice dated

December 9, 2019, which was challenged by Sona Promoters Pvt. Ltd.

in WP No. 36 (W) of 2014. An ad interim order was granted on

January 29, 2014 by the learned Single Judge, restraining the

respondent no.2 from giving effect to the impugned notice of

termination.

4. The respondent no.2 preferred an appeal numbered as APOT No. 175

of 2014, against the said order. On September 19, 2014, the Division

Bench taking up the appeal dismissed the appeal and allowed the writ

petition itself.

5. The respondent no.2 preferred a special leave petition numbered as

SLP No. 036170 of 2014, which was admitted and numbered as Civil

Appeal No. 2201 of 2020. The Supreme Court ultimately dismissed

the appeal on March 18, 2020.

6. During the pendency of the appeal before the Supreme Court, the

petitioner no.1 entered into a scheme of amalgamation with five group

companies including Sona Promoters Pvt. Ltd. in terms of all assets

and liabilities of the said group companies, which were to vest in the

petitioner no.1. By an order dated March 5, 2020 passed by the

National Company Law Tribunal (NCLT), Kolkata Bench, the scheme

of amalgamation was sanctioned and the leasehold rights of Sona

Promoters stood transferred and vested in the petitioner no.1-

company.

7. By its letter dated July 15, 2020, the petitioner no.1 called upon the

respondent no.1 to mutate the lease in the name of the petitioner no.1

pursuant to the amalgamation order dated March 5, 2020.

8. Vide letter dated September 29, 2020, the respondent no.1 called

upon the petitioner no.1 to furnish several documents which were

submitted by the petitioners on October 5, 2020. Thereafter,

respondent no.2, the Chairman of the WBSIDCL, called the petitioners

for a meeting at his office on December 8, 2020, which was attended

by the petitioners. According to the petitioners, the respondent no.2

made further enquiries about the Constitution of the Companies

which were parties to the amalgamation Scheme in the said meeting.

Further documents were also submitted by the petitioners as per the

discussion in the said meeting.

9. However, vide letter dated February 2, 2021, the respondent no.2

asked the petitioners to pay Rs.18,76,000/- with 18% on account of

GST, treating the petitioners‟ application as one for transfer of lease to

a third party.

10. On the query of the petitioners as to the reason of such claim, the

respondent no.2 cited the opinion of "senior counsel", which was never

furnished to the petitioners.

11. Learned counsel for the petitioners argues that as per the relevant

clause of the lease deeds, if the leasehold interest is transferred to

group companies, where the identity of the transferor and transferee is

same, it would not be treated as transfer and only a service charge of

Rs.10,000/- is payable. However, if the lease is transferred to a new

entity, full transfer fees are chargeable in terms of the schedule

prescribed by respondent no.2.

12. Such provisions find place in the minutes of the 353rd Meeting of the

Board of Directors of respondent no.2, dated June 3, 2019 annexed to

the opposition of the said respondent.

13. In terms of the present case, the petitioners argue that the leasehold

interest of Sona Promoter stood vested in the petitioners. As per the

annual returns of the petitioner no.1, the shareholders of Directors of

Sona Promoters and the petitioner no.1 are the same, which is not

disputed by respondent nos. 1 and 2.

14. As per the General Policy for transfer of lease recorded in the 353rd

meeting of the Board of Directors of respondent no.1, the respondents

have set up a plea that prior approval of respondent no.1 was

necessary before entering into the scheme of amalgamation. The

respondent no.1 has also held out a threat of eviction if the petitioners

does not pay the transfer fees of Rs.18,76,000/-. The respondent no.1

has relied on Section 108 of the Transfer of Property Act, and Clauses

3(j) and 3(l) of the Deed of Lease.

15. Apropos such argument, learned counsel for the petitioners submits

that the stipulation of taking prior approval before entering into a

scheme of amalgamation is neither a pre-condition nor is mandatory,

inasmuch as no penal consequence is specified for non-compliance of

the same.

16. Clause 3(l) indicates that only if there was a change in identity or

character of the lessee would the lessee be liable to pay transfer fees.

It is submitted that the respondents have cited Maan Concast Pvt. Ltd.

and Another Vs. West Bengal Industrial Development Corporation Ltd.

and Others, reported at 2017 SCC OnLine Cal 19426 and Allenby

Garments Pvt. Ltd. & Anr. Vs. West Bengal Industrial Development

Corporation Ltd. and Others, reported at 2018 SCC OnLine Cal 3508

both of which are not applicable to the present case. It is argued that

the amalgamation between the two companies having the same

directors and shareholders, as in the present case, should not be

treated as transfer and only service charges would be payable.

17. The judgments cited by the respondents were rendered prior to change

in the General Policy of the respondent no.2 in 2019 and, as such, the

ratio of the said judgments is not applicable in the present case, it is

contended.

18. In the decision Uttar Pradesh State Industrial Development Corporation

Limited Vs. Monsanto Manufacturers Private Limited and another,

reported at (2015) 12 SCC 501, relied on by the respondents, the

Supreme Court has recorded a finding on fact that the transferor and

transferee companies had no common shareholders or directors. It is

argued by the petitioners that the said circumstances are not

applicable to the present case, as the petitioner no.1 and the

amalgamated companies are group companies and the shareholding

structure and Board of Directors of the companies are identical.

19. In fact, it is argued that the provision for obtaining prior approval has

been expressly waived by the positive and overt acts and conduct of

the respondents in seeking particulars of shareholding structure and

Board of Directors of the petitioner no. 1 and Sona Promoters by its

letter dated October 5, 2020 and in the meeting dated December 8,

2020, both of which were after receipt of the petitioners‟ application

for mutation.

20. Learned counsel for the petitioners argues that the amalgamation

scheme was entered during the pendency of the appeal before the

Supreme Court. Seeking approval from the respondent no.2 prior to

entering into the scheme of amalgamation at that juncture would be

idle and empty formality as the respondent no.1, which was hotly

contesting the lease and had preferred the appeal, would not, in any

event, have considered the request of prior approval by any stretch of

imagination, since it would be contrary to the termination of the lease,

which act was sought to be validated by the respondents before the

Supreme Court.

21. Learned counsel for the petitioners relies on Chairman, All India

Railway Recruitment Board and another Vs. K. Shyam Kumar and

others, reported at (2010) 6 SCC 614 for the proposition that the

doctrine of Wednesbury unreasonableness and proportionality have

universal application in matters involving executive action, as in the

present case.

22. In reply, learned senior counsel for the respondent no.1-WBSIDCL

argues that as per the lease deeds dated December 14, 2007 and

March 04, 2009, Sona Promoters Pvt. Limited was precluded from

transferring the land and/or subletting, assigning and/or parting with

possession without prior permission of the lessor.

23. The scheme of amalgamation was filed before the NCLT, Kolkata

Bench by five companies including the petitioner no.1 in terms of

Section 230 read with Section 232 of the Companies Act, 2013.

Hence, it was a voluntary transfer between the four transferee

companies and the transferor company. By virtue of such

amalgamation, the leasehold property of Sona Promoters, which was

shown as an asset of the said entity, got transferred to and vested in

the petitioner no.1-company.

24. By reason of such transfer, it is argued, a sub-tenancy was created, in

support of which proposition learned counsel for the respondent no.1

cites M/s. General Radio and appliances Co. Ltd. and others Vs. M.A.

Khader (Dead) By LRS., reported at (1986) 2 SCC 656. It is argued that

admittedly no permission of the lessor was taken before parting with

possession. Even in case of an involuntary transfer or transfer of

tenancy by virtue of a scheme of amalgamation sanctioned by the

court, it would be deemed to be a transfer of tenancy right in violation

of the agreement between the parties as well as the statute governing

tenancy.

25. Learned senior counsel for the respondent no.1 argues that the

amalgamation scheme was sanctioned behind the back of the

WBSIDCL, which had no opportunity to object to the same, not being

a party or having been put on notice.

26. The lease agreements, it is argued, clearly stipulate that the lessee

must not change its identity or character without prior consent of the

Corporation. By reason of the amalgamation, the lessee has merged

into the petitioner no.1, losing its identity and existence.

27. Such transfer by way of amalgamation was without the consent of the

lessor. Therefore, it is argued, the respondent no.1 never had any

relationship of lessor and lessee with the transferee

company/petitioner no.1, which is, thus, an unauthorized occupant of

the premises.

28. The demand of the respondents from the petitioners for transfer

charges was an offer to regularize the tenancy/lease, which was

turned down by the petitioner no.1 on the ground that it is under the

same management and beneficiary as the lessee.

29. It is argued that the general policy for transfer of lease is based on a

public policy as contained in Section 108(j) of the Transfer of Property

Act, 1882. Where there is a contract to the contrary as in this case,

the lessee does not have the authority to deal with the leasehold

interest. At the point of time when the lessee dealt with the lessor‟s

property, it did not have the authority to do so. Thus, the transfer of

lease was wholly unauthorized in law.

30. Learned senior counsel for the respondent no.1 argues that a transfer

contrary to the contractual provision and in the absence of prior

consent of the landlord would entail transfer fee. On such

proposition, the respondent no.1cites the following judgments:

i) Uttar Pradesh State Industrial Development Corporation Limited

(supra) ;

ii) Maan Concast Pvt. Ltd. (supra); and

iii) Allenby Garments Pvt. Ltd. (supra).

31. While distinguishing the judgment of All India Railway Recruitment

Board (supra), cited by the petitioners, learned senior counsel

appearing for the respondent no.1 argues that the same pertains to

service jurisprudence and has no manner of application in the present

case. The demand of respondent no.1 for transfer fee is not arbitrary

but based on a commercial contract entered into between the parties.

32. It is next argued by respondent no.1 that the litigation between the

parties before the Supreme Court was confined to construction of

structures on a vacant land within the stipulated time provided under

the lease as contained in Clause 2(g) of the lease deeds. Seeking prior

permission for a scheme of amalgamation had nothing to do with the

said litigation.

33. In any event, the order of eviction had been set aside by the Division

Bench of this Court on September 19, 2014 and the order of NCLT

dated March 5, 2020 was passed six years thereafter. The writ

petitioner, in the meantime, treated the leasehold property as a

subsisting property of Sona Promoters and as one of the assets for the

transfer for the purpose of amalgamation. Therefore, „pendency of

litigation‟ is merely an afterthought. It is reiterated that prior consent

was mandatorily to precede transfer.

34. Thus, it is argued, the petitioners are trespassers and the writ petition

ought to be dismissed.

35. To adjudicate the issues involved herein, the Agenda Notes of the

353rd meeting of the Board of Directors of the WBSIDCL held on June

03, 2019 acquire importance. The said Notes, annexed to the affidavit-

in-opposition of the respondent no.1, under Agenda Item No. 19-353,

records that BCC & I and Aquilaw have given their recommendation

regarding transfer and surrender of lease, the suggestion being that

certain transactions would not be considered to be „Transfer‟ by the

lessor, only upon examination of the applications for prior intimation

made to the lessor by the lessee.

36. Clause (iv) under the same contemplates merger, arrangement and

amalgamation of the lessee with its group company.

37. In the present case, the petitioner amalgamated with its group

companies, thus otherwise falling within the exceptions which would

not be considered transfer. However, it is noteworthy that even as per

the recording in the said agenda, for the non-consideration as

transfer, the lessee would have to make a prior intimation to the

lessor and the lessor would decide the same upon examination of such

application of prior intimation.

38. Under the General Policy for transfer of lease, adopted by the

WBSIDCL, the WBSIDCL allows transfer of lease subject to obtaining

prior approval in writing. Thus, the transfer of lease contemplated

therein has to be preceded by prior approval in writing.

39. It is reiterated thereafter that the transferor and transferee shall make

an application in the prescribed form of WBSIDCL for seeking such

prior approval for the transfer upon payment of Rs.10,000/- as

application/processing fees. Prior to giving approval, the lessor is to

ascertain that there are no outstanding dues to the lessor by the

lessee. In the present case, the provision of prior approval which is

repeated in several places of the General Policy of Transfer and the

Agenda Notes as indicated above, is, however, considerably diluted

due to the conduct of the WBSIDCL/lessor.

40. The question of prior approval is not an absolute bar to grant

permission for transfer, but is one of the initial rungs of such

approval. The WBSIDCL, being the lessor, can at any point of time

waive such prior approval, if it takes up for consideration an

application for approval after the transfer.

41. In the present case, the communication dated February 02, 2021,

which contains the impugned claim of transfer charges, itself indicates

that, on the basis of the prayer made by the petitioners dated October

5, 2020 and December 9, 2020 for proposal of amalgamation, the

same "may be considered as treated as Transfer case as per norms of

this Corporation" as per the WBSIDCL itself, subject to fulfillment of

certain terms. Hence, the WBSIDCL waived the precondition of prior

approval by taking up for consideration the request of the petitioners

for approval of transfer, after the actual transfer was effected.

42. Being a public authority, the respondent no.1/WBSIDCL has to be

placed on a higher pedestal in terms of transparency and

reasonableness of action. The actions of the respondent no.1, unlike a

private lessor, cannot be arbitrary or contrary to its own guidelines.

43. In the present case, the WBSIDCL insisted upon payment of

Rs.18,76,000/- as transfer charges plus GST Rs.3,37,680/-.

44. However, as indicated earlier, the General Policy for transfer excludes

cases of amalgamation of the lessee within its group companies from

the purview of „transfer‟.

45. The only rider is that there has to be a prior intimation, which has

been waived in the present case by the WBSIDCL itself by taking up

for consideration the petitioners‟ request for such transfer.

46. In the present case, nothing has been produced by the respondents to

rebut the contention of the petitioners that the companies among

which there was an amalgamation of the petitioners are "group

companies" of the petitioner no.1. The annexures to the writ petition

indicate that the shareholding and Board of Directors were common

between the said companies. Hence, the amalgamation of the

petitioner no.1 squarely comes within the exception clause carved out

of „transfer‟ as per the General Policy of the respondent no.1 itself.

47. Thus, the respondent no.1 is not entitled to claim transfer charges, as

applicable to other entities, in case of the petitioners. Only the

processing fee of Rs.10,000/- can be claimed by the respondent no.1.

48. Considering the judgments cited by the respondents, in Maan Concast

Pvt. Ltd. (supra) the coordinate Bench of this Court was considering

schemes of amalgamation generally. The stress therein was on

change in identity of the lessee. The court observed that the transfer

and vesting of the rights of the lessee in respect of the deed of lease is

not binding on the first respondent as the lessor. It was further

observed that it is open to the first respondent to demand a

consideration for recognizing an entity as its lessee, in the given facts

of the said case. In the said case, there was no mitigating

circumstance of the entities which were amalgamated; hence, the said

general proposition is distinguishable from the present case.

49. In the Division Bench judgment of Allenby Garments (supra), the court

stressed the fact that the two entities which were amalgamated were

two different legal entities, which was the plinth of consideration in

respect of claim of transfer fee.

50. In Uttar Pradesh State Industrial Development Corporation Limited

(supra) the Supreme Court, similarly, was considering a case of

amalgamation between different and separate entities. It was

observed that as per the amalgamation scheme, the property rights

and power of one of such entities was transferred without further act

or deed by which it was clear that there was a transfer of premise in

favour of the other company.

51. There is no dispute that there is a transfer on amalgamation between

the petitioner no.1 and its group companies. The question, however,

is whether such transfer is between entities identical on point of

shareholding and directorship, thus coming within the exclusion

contemplated in the General Policy and minutes of meeting of the

WBSIDCL itself, as annexed to the opposition of the WBSIDCL. As

pointed out above, an amalgamation of the lessee within its group

companies is not considered as transfer for the purpose of charging

transfer fees under the said policy of the WBSIDCL. Thus, even if

there was a transfer as contemplated in the cited judgments, the same

did not fall within the purview of „transfer‟ for the purpose of charging

transfer fees by the WBSIDCL in the present case.

52. The petitioners have cited K. Shyam Kumar‟s case, where the Supreme

Court, while adjudicating in judicial review on a recruitment process

in service law, observed that the Wednesbury principle and principle

of proportionality applied to a decision which is so reprehensible in its

defiance of logic or of accepted moral or ethical standards that no

sensible person who had applied his mind to the issue could have

arrived at it. It was observed that proportionality requires the court to

judge whether action taken was really needed as well as whether it

was within the range of courses of action which could reasonably be

followed.

53. There cannot be any quarrel with the same as a general proposition of

law. However, the said proposition is not applicable in terms to the

present case, since we are not exactly dealing with patent

unreasonableness. The context here is that the respondents have

flouted their own General Policy and guidelines in charging transfer

fees by treating the amalgamation-in-question between group

companies of the petitioners as a regular transfer, in contravention of

the exception curved out in the General Policy of the respondent no.1.

54. There has been a mix-up regarding the other aspect of the matter.

The petitioners claim that the transfer by amalgamation in the

petitioners‟ favour is to be formalized by the respondents by accepting

such transfer and mutating the same.

55. However, the respondents have sought to place reliance on the

relevant clauses in the lease-deeds between the respondent no.1 and

the predecessor-in-interest of the petitioner, that is, Sona Promoters

Pvt. Ltd. for arguing that in the event of subletting without prior

approval of the lessor, the lessor is entitled to eviction.

56. The respondents have a strong case there, insofar as the lease-deeds

contemplate prior approval before subletting.

57. However, the said proposition is also arguable, since amalgamation

between group companies having same shareholding and directorship

may not tantamount to transfer in favour of a third party. However,

the same depends on the facts and circumstances of the case, which

can only be gone into in a proper proceeding, if instituted by the

respondents for eviction.

58. The present writ petition only pertains to the claim of transfer fees by

the respondent no.1. Hence, there is no use widening the scope of the

present writ petition.

59. In any event, as the respondent no.1 is already considering the

transfer in favour of the petitioner, if the same is otherwise eligible for

acceptance, there is no question of initiating any eviction proceeding

as such.

60. Thus, the judgments of M/s. General Radio (supra), cited by the

respondents, is not germane in the present context, since the same

pertains clearly to rent control and eviction. In the said judgment, it

was observed that voluntary amalgamation of the tenant company

tantamounts to subletting.

61. The question there was whether such an amalgamation, if voluntary,

tantamounts to subletting.

62. In the present case, although voluntary, the amalgamation was

between group companies having the same shareholding and

directorship, which was not a bone of contention or matter for

consideration in the said judgment. Hence, the said judgment is not

germane for the present consideration.

63. Thus, upon a comprehensive assessment of the materials on record,

this Court is of the opinion that the respondent no.1 acted de hors its

own General Policy and meeting resolutions in claiming full transfer

fees from the petitioners by treating the amalgamation between the

petitioners no.1 and its companies as a „transfer‟ within the

contemplation of the General Policy of the respondent no.1, although

it falls within the exception clause thereof.

64. Hence, WPO No. 764 of 2022 is allowed, thereby setting aside the

claim of the respondent no.1 to the tune of Rs.18,76,000/- as transfer

charges and Rs.3,37,680/- as GST thereon and directing the

respondent no.1 to accept and ratify the transfer of lease in favour of

the petitioner no.1-company upon acceptance of Rs.10,000/- as

processing fees.

65. There will be no order as to costs.

66. Urgent certified server copies, if applied for, be issued to the parties

upon compliance of due formalities.

( Sabyasachi Bhattacharyya, J. )