The binding nature of a sanctioned scheme of arrangement and its impact on property transfers.

DEBANGSU BASAK, J.

1. The petitioners have challenged a reasoned Order dated July 31, 2014 passed by the Managing Director of West Bengal Industrial Development Corporation Limited to the effect that, the first petitioner is liable to pay 10% of the market value of the immovable property for the purpose of registering itself as a lessee of such immovable property with the first respondent.

2. Learned Advocate appearing for the petitioners has submitted that, the lease deed executed between the parties does not provide for the first respondent being entitled to 10% of the market value of the immovable property in the event of change of name of the lessee. He has referred to the various terms and conditions of the lease deed. According to him, on the contrary the lease deed requires the first respondent not to withhold permission for transfer. He has submitted that, the description of the lessee in the lease deed would include an assignee of the original lessee, particularly the entity arising out of a scheme of arrangement sanctioned by the High Court. The resulting entity of a sanctioned scheme of arrangement with the original lessee being a part of the scheme, would come within the purview of the definition of the lessee as obtaining in the deed of lease, by virtue of the deed of lease defining the lessee to include its assigns. The first petitioner is a product of a scheme of arrangement entered into between the legal entity emanating out of the original lessee and the other entity. According to the petitioner, the entire shareholding, as well as the Board of Directors, of the original lessee and that of the first petitioner, which emerged from the scheme of arrangement sanctioned by the High Court, is the same. Consequently, the decision of the first respondent, to impose such a condition for grant of permission to change the name of the lessee is arbitrary, without basis and should be set aside. The first petitioner is a product of a scheme of arrangement. The proceeding for granting a sanction of a scheme of arrangement is a proceeding in rem. As a landlord, the first respondent could have objected to the sanction of such scheme. It did not do so. It had allowed the sanction to be granted. It is no longer in a position to contend that, it will not abide the sanctioned scheme. The order of grant of sanction of the scheme of arrangement is binding upon the first respondent. The first respondent has to accept the same and to treat the first petitioner as a lessee of the first respondent.

3. Learned Advocate for the petitioners has relied upon All India Reporter 2004 Supreme Court 2206 (Bharat Petroleum Corporation Ltd. v. P. Kesavan & Anr.), All India Reporter 1970 Supreme Court page 1041 (M/s. J.K. (Bombay) Private Ltd. v. M/s. New Kaiser-I-Hind Spinning and Weaving Co. Ltd. & Ors.), 2004 Volume 3 Calcutta High Court Notes page 607 (Madhu Intra Ltd. & Anr. v. Registrar of Companies, W.B. & Ors.), a passage from Mulla’s on the Transfer of Property Act, 1882 and Section 2(d) and Section 5 of the Transfer of Property Act, 1882 in support of the contention that, the transfer of the immovable property from the original lessee to the first petitioner is by operation of law, and therefore, the provisions of the Transfer of Property Act, 1882 and the Indian Registration Act, 1908 are not applicable. Referring to the impugned order, learned Advocate for the petitioner has submitted that, the basis for imposition of 10% of quantum has not been discussed. The order violates Article 14 of the Constitution of India.

4. Learned Advocate appearing for the respondent has submitted that, a demerged entity is treated as a separate assessee under the provisions of Section 2(19AA) of the Income Tax Act, 1961. A demerged entity is a separate legal entity according to him. It is a separate and distinct entity than that of the original lessee, notwithstanding the shareholders and directors being the same. In support of the contention that,