Delhi State Industrial ... vs Vikas Pharma (India) Pvt. Ltd. And ...
2005 Latest Caselaw 247 Del

JUDGMENT

S. Ravindra Bhat, J.

1. This Letters Patent Appeal is directed against the judgment and order of a learned Single Judge dated 9.12.2002 in CWP No.5696/02. The impugned judgment had allowed the respondents' writ petition and directed recording of the change in the Constitution in respect of allotment of an Industrial plot subject to payment of unearned increase, as applicable. Further direction to handover possession upon payment of such unearned increase was also issued.

2. The respondent was incorporated as a Pvt. Ltd. Company on1.10.1993. Originally it was a partnership concern comprising of two persons, namely Shri Vijay Bajaj and Ms. Madhu Rani.

3. The respondent had applied for allotment of an industrial plot for the purpose of re-location of its activities and shifting from non-conforming areas, pursuant to certain directions issued by the Supreme Court.

4.The appellant allotted a plot to the respondent on 15.12.2000; the latter deposited Rs.10,50,000/- by its letter dated 5.1.2001. Subsequently, by its letter dated 19.1.2001, the respondent notified the appellant about change in its composition inasmuch as certain new Directors had been inducted. It was also intimated that this change was pursuant to resignation of certain Directors and induction of new Directors.

5. On 14.9.2001 the Government of NCT of Delhi published a Policy which had the effect of imposing a prohibition, as well as restricting the change of names in a lease deed, through induction of new partners (in a firm) or Directors in Companies etc.

6. The appellant, sought shelter under that policy and communicated its decision of not permitting the transfer, to the respondent. This resulted in the allotment not accruing to the respondent. The appellants' action was accordingly questioned in writ proceedings.

7. The learned Single Judge by the impugned judgment, after analysing the relevant clauses in the policy published on 14.9.2001 found that changes in the Constitution of a company by way of induction of new Directors, were permissible (without any payment or charges) if such changes were limited to family members. He held that such a limitation could not be construed as an absolute bar in such cases. In other cases where the new directors were outsiders, it was held that transfer was permitted upon payment of unearned increase/charges. The learned Single Judge also found no rational basis for permitting substitution/deletion in the case of partnership concern upon payment of unearned increase and prohibiting the change in the Constitution of Directors ven if the company was willing to pay unearned increase.

8. Ms. Anusuya Salwan appearing for the appellant submits that the rational which weighed with the authorities for formulating the guidelines for transfers were based upon public policy considerations. It is submitted that those restrictions were necessitated on account of many allottees resorting to disguised sale of allotments through change in the composition of the firm/Constitution of the Management of allottee companies.

9. Learned counsel also submits that the relevant stipulation namely, Clause 2 imposes an absolute embargo upon the right of a firm or a company to change the composition of its Management. She submits that there is no question of payment of unearned increase in such cases.

10. Learned counsel for the appellant has also relied upon conditions embodied in the Guidelines in Management of Industrial Land, formulated by the erstwhile Delhi Administration some time in1968, which places restriction or embargo upon change in the composition/management of allottee firms or allottee private companies.

11. For a fuller consideration of the issues, it would be necessary to extract the material portions of the policy published on 14.9.2001 :-

''1. Substitution/addition/deletion of names of family members in the lease deed shall be allowed without any charge.

2. Deletion of one or more partner(s) from partnership firm shall be allowed on payment of 50% of unearned increase in the market value of the plot calculated on the basis of proportionate share in profit of outgoing partner(s), however, the levy of chares shall not be applicable in case of leaving/retiring partner is a family member of the remaining partner(s). However, addition/inclusion of outsiders shall not be allowed in the partnership firm(s).

3. Conversion of proprietorship/partnership firm into Pvt. Ltd. Or Public Ltd. Co. is not permitted as well as Pvt. Ltd. co. to Public Ltd. Co. or vice versa is also not permitted.

The substitution/addition or deletion in the names of Directors of a Ltd. or Pvt. Ltd. Co. may be allowed only from among the family members without the levy of any charge.

NOTE: As per Land Management Guidelines the family includes Husband or Wife, Father, Brother, Adult Son, Unmarried Daughter/Sister and minor Children.''

12. The learned Single Judge, as discussed earlier, had analysed the guidelines imposing restrictions on the transfer and returned a finding on two issues. The first was that there was no absolute embargo on the transfer either in the case of change in the management of a company. It enables transfers within the family without payment of unearned increase. However, in the case of re-organisation involving an outsider, payment of unearned increase was necessary. The second reasoning of the learned Single Judge was that there was no rational basis for permitting changes in the composition of a partnership concern, upon payment of unearned increase on the one hand and prohibiting such change in the case of companies.

13. After careful consideration of the various issues we are of the view that the decision here can and should be confined to the fact that the policy or guidelines sought to be applied in this case was published on 14.9.2001, much after the allotment in the present case, payment of the consideration and even after the intimation of the change in composition of the respondent company took place. Nothing has been brought to our notice indicating that these guidelines have any statutory force or were framed under any enactment, or Rules that enable them to have retrospective effect. In the absence of any legal sanction or authority, these guidelines can at best be enforced from the date of their issue namely, 14.9.2001 and not earlier. Since in the present case admittedly the transactions were concluded prior to that date, the appellant could have insisted only upon the conditions existing when the transaction was completed namely, December, 2000/January, 2001.

14. We do not wish to dwell upon the merits of the reasoning of the learned Single Judge in view of above findings, since according to us the petition of the respondent had to be allowed for the limited reason indicated above. The reason for this is that there appears to be some merit in the statement made by the appellant vis-a-vis the considerations that weighed while formulating the policy namely, curbing or prevention of transfers of allotments. These allotments were made for a specific purpose namely, re-location of existing industries. But for such plan or programmed, the allotment of such land would perhaps have been on other terms; on normal considerations. We say no more.

15. In view of the reasoning indicated by us and without going into the correctness of the findings of the learned Single Judge as regards the interpretation of the policy, we agree with the conclusions contained in the judgment under appeal, and dismiss this appeal and all applications for interim relief with no order as to costs.

LPA NO 500/2003 and CMS 1119/03 and 10298/04

16. In this case the factual matrix is that the respondent was initially a partnership firm comprised of three family members , all related to each other. One of the partners died on 11.8.1997 and her husband, expired on 18.12.1998. The original partnership continued with the surviving two partners and that firms as converted on 2.4.1998 into a private limited company.

17. In view of these fact a request was made by the respondent for change in the composition on 09.07.2001 namely, conversion from partnership to a private limited company. This was rejected on 23.5.2002 by the appellant relying on its policy decision dated 14.9.2001.

18. The action of the appellant was questioned in proceedings under Articles 226. Following the decision in Vikas Pharma's case (which are subject matter of the judgment in LPA No.492/2003 (supra),] the said petition namely, CWP No.3785/2002 was allowed on 4.2.2003. The learned Single Judge recorded the stand of the respondent- petitioner that they were willing to pay necessary charges. In view of that statement, and following Vikas Pharma's decision, the writ petition was allowed.

19. Following our reasoning in Vikas Pharma's case (LPA No.422/2003) affirming the decision of the learned Single Judge, this appeal and all applications for interim relief are dismissed with no order as to costs.