Delhi High Court

Delhi State Industrial & ... vs M/S K.G. Electronics Pvt. Ltd. & ... on 7 November, 2014

Author: Rajiv Sahai Endlaw

          *IN THE HIGH COURT OF DELHI AT NEW DELHI

%                                     Date of decision: 7th November, 2014

+                                LPA No.391/2014

       DELHI STATE INDUSTRIAL & INFRASTRUCTURE
       DEVELOPMENT CORPORATION LTD.           ..... Appellant
                    Through: Ms. Anusuya Salwan & Mr. Vikas
                             Sood Advs.

                                    Versus

    M/S K.G. ELECTRONICS PVT. LTD. & ANR. ..... Respondents

Through: Ms. Bandana Shukla for Ms. Ruchi Sindhwani, Adv. for R-2.

Ms. Swati Yadav, Official from DSIIDC.

CORAM:-

HON'BLE THE CHIEF JUSTICE HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW

RAJIV SAHAI ENDLAW, J

1. This intra-court appeal impugns the judgment dated 10th December, 2013

of the learned Single Judge of this Court, allowing W.P.(C) No.2324/2013

preferred by the respondent no.1 by directing the appellant to execute the

perpetual lease of plot of land bearing no.A-102 at Narela Industrial Complex

in favour of the respondent no.1 / writ petitioner within six weeks thereof

subject to the respondent no.1 / writ petitioner completing all the formalities.

2. Though this appeal was accompanied with an application for

condonation of 110 days delay in filing thereof, however being prima facie of

the opinion that the appeal does not deserve to be entertained, we, without

entertaining the controversy whether the appellant discloses sufficient cause for

condonation of delay in filing the appeal, heard the counsel for the appellant on

merits and reserved judgment on the aspect of admission. We may notice that

the counsel for the respondent no.2 Commissioner of Industries, Government of

National Capital Territory of Delhi (GNCTD), a non-contesting respondent,

appeared on advance notice.

3. The facts are not in dispute. The respondent no.1 / writ petitioner

through its two Directors Sh. Devender Kumar Gupta and Sh. Dinesh Kumar

Gupta, in or about the year 1987, applied to the appellant for allotment of an

industrial plot in Narela area and the appellant allotted plot no.A-102 at Narela

Industrial Area to the respondent no.1 / writ petitioner and in or about the year

1995 handed over the possession of the said plot of land to the respondent no.1

/ writ petitioner on perpetual lease basis. The said perpetual lease was to be

executed subsequently. The work of execution of the lease deed by the

respondent no.2 in favour of the respondent no.1 / writ petitioner was taken up

in the year 2007 when the respondent no.2 asked the respondent no.1 / writ

petitioner to furnish details of changes in the shareholding and directorship of

the respondent no.1 / writ petitioner company so as to calculate the unearned

increase charges if applicable. Finding that shares of the respondent no.1 / writ

petitioner, subsequent to allotment and being put in the possession of the plot of

land aforesaid, had been transferred to persons other than family members and

further finding that there had also been change in directorship of the respondent

no.1 / writ petitioner, the work of execution of the perpetual lease was held up.

The respondent no.2 in or about the year 2009-10 transferred the Narela

Industrial Area to the appellant. The appellant finally demanded unearned

increase charges of Rs.15,08,436/- from the respondent no.1 / writ petitioner for

executing the perpetual lease deed and impugning which demand, the writ

petition from which this appeal arises was filed.

4. The learned Single Judge has allowed the writ petition as aforesaid

finding/observing/holding:

(i) that at the time of allotment of the land to the respondent no.1 /

writ petitioner company, the brothers Sh. Devender Kumar Gupta

and Sh. Dinesh Kumar Gupta were its only shareholders and

Directors; however as on 30th September, 2004, the said Sh.

Devender Kumar Gupta and Sh. Dinesh Kumar Gupta held only

28.814% share each and Smt. Anju Gupta, wife of Sh. Devender

Kumar Gupta held 14.124% shares, Smt. Rekha Gupta, sister-in-

law of Sh. Devender Kumar Gupta and Sh. Dinesh Kumar Gupta

held 14.124% shares and one Sh. Tarun Gupta held the remaining

14.124% shares;

(ii) that Smt. Rekha Gupta and Mr. Tarun Gupta who together held

28.248% in the respondent no.1 / writ petitioner company were not

family members as defined in the Guidelines for Management of

Industrial Land managed by the Delhi Government; however as on

29th September, 2007, Sh. Devender Kumar Gupta and Sh. Dinesh

Kumar Gupta were again the only shareholders of the respondent

no.1 / writ petitioner company;

(iii) that in the aforesaid Guidelines for Management of Industrial Land

in Delhi, there is no provision for charging unearned increase

wherever the shares in a private limited company are transferred to

a person who is not a family member in terms of the definition

given in the said Guidelines;

(iv) that the appellant relied on the Minutes of the Meeting held on 11 th

June, 2009 in the Chamber of the respondent no.2 where a

decision was taken that change of Directors in a private limited

company is permissible on payment of proportionate unearned

increase wherever required as per Land Management Guidelines

and that change of Directors in relocation cases is allowed only

amongst family members;

(v) that the aforesaid decision also applied to the case where Land

Management Guidelines provide for payment of unearned

increase; however as aforesaid the said Guidelines do not provide

for payment of unearned increase in case there is a transfer of

shares in a company to a person who is not a member of the

family; thus the said policy decision also did not entitle the

appellant to claim unearned increase from the respondent no.1 /

writ petitioner;

(vi) in the light of the above, the question whether the said Guidelines

apply to the respondent no.1 / writ petitioner was not relevant;

(vii) that even the terms and conditions of the perpetual lease deed

proposed to be executed in favour of the respondent no.1 / writ

petitioner prohibit only selling, transferring, assigning or otherwise

parting with the possession of the leased land without permission

and which could be granted on payment of 50% of the unearned

increase; however the respondent no.1 / writ petitioner to whom

the land was allotted, is a company, a legal entity and

notwithstanding the interim change in shareholding and

directorship of the respondent no.1 / writ petitioner, the respondent

no.1 / writ petitioner company remained the owner / in possession

of the said land;

(viii) it was also not a case of transfer / change of majority shareholding

in a company and in which case the unearned increase could

possibly be claimed; as aforesaid the shareholders at the time of

allotment of land had continued to hold 71% share even when the

shares were transferred.

5. We have invited the attention of the counsel for the appellant to:

(a) Human Care Medical Charitable Trust Vs. Delhi Development

Authority 186(2012) DLT 395 where one of us (Rajiv Sahai

Endlaw, J.) held that when perpetual lease is executed, in that case

by the DDA, in favour of a Society, it is the Society which is

prohibited from selling, transferring, assigning the land / building

constructed thereon and a change in the proprietorship or the

Governing Body of the Society cannot fall within the meaning of

'otherwise part with the possession of the property'; that a change

in proprietorship of the Society would thus not amount to

subletting, assigning or parting with possession of the leased

property as the privity under the perpetual lease deed is with the

Society and not with the members, at the time of allotment of land

of the Society; reliance was placed on the earlier judgments of this

Court in Indudyog Co. Ltd. Vs. GNCTD MANU/DE/1422/2003

and J.C. Khosla Vs. Khosla Medical Institute & Research Society

MANU/DE/1194/1996;

(b) Delhi Development Authority Vs. Mahabir Prasad and Sons

MANU/DE/3308/2009 where a Division Bench of this Court held

that unearned increase as a jural concept requires a sale, for the

reason that without a sale, what would be the measure to determine

the increase in the price of land;

(c) Rama Association (P) Ltd. Vs. Delhi Development Authority 45

(1991) DLT 630 where another Single Judge of this Court held

that a company is a legal entity separate and distinct from its

shareholders and Directors; if the lease is executed in favour of a

company, the embargo therein on subletting, assigning or parting

with possession is on the company;

(d) Salomon Vs. Salomon and Co. Ltd. [1897] A.C. 22 (HL), State

Trading Corporation Vs. C.T.O. AIR 1963 SC 1811, Ram Chand

and Sons Sugar Mills Vs. Kanhaya Lal Bhargava AIR 1966 SC

1899, Electronics Corporation of India Ltd. Vs. Secretary,

Revenue Department (1999) 4 SCC 458 and Bacha F. Guzdar Vs.

Commissioner of Income Tax, Bombay AIR 1955 SC 74 inter

alia to the effect that if the shares of a company are transferred, it

does not mean that the legal entity of the company is changed; and

(f) Scindia Potteries and Services Ltd. Vs. Deputy Land and

Development Officer, Government of India 41 (1990) DLT 261

where also a Single Judge of this Court held that shareholders of

the company are distinct from the company of which they hold

shares and sale of shares cannot be construed as sale of land held

by the company.

and enquired from the counsel for the appellant that in view of the said

settled position of law aforesaid followed by the learned Single Judge, how can

the impugned judgment be faulted.

6. No reply has been forthcoming.

7. We have also examined the letter dated 7th July, 1990 of allotment of the

said land in favour of the respondent no.1 / writ petitioner and the same is also

not found to contain any condition to the effect that the change of shareholding

and Directorship was prohibited or any unearned increase would be payable

therefor. We may in this regard notice that such a provision exists in some of

the documents of allotment and lease / perpetual lease of land executed by

governmental agencies.

8. The counsel for the appellant has sought to argue that the allotment of