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2019 Supreme(Del) 657
IN THE HIGH COURT OF DELHI AT NEW DELHI
VIBHU BAKHRU, J.
Gillette India Limited - Appellant
Versus
Delhi Development Authority - Respondent
Writ Petition (Civil) No. 7456 of 2013
Decided On : 09-05-2019
Abhinav Vashisht, Adv., Amitabh Chaturvedi, Adv., Satvik Verma, Adv., Tanveer Oberoi, Adv., Priya Singh, Adv., Hamneet Kaur, Adv., Ajay Verma, Adv., Sumit Mishra, Adv., Ishaan Verma, Adv.
The main legal point established is that the transfer of shares of a company does not necessarily constitute a transfer of the company's assets, and the corporate veil should not be lifted without sufficient grounds.
Headnote:
unearned increase - property transfer - Sick Industrial Companies (Special Provisions) Act, 1985, Companies Act - [Sick Industrial Companies (Special Provisions) Act, 1985 - Section 3(o), Companies Act - Corporate Veil Lifting]
Fact of the Case:
The petitioner challenges the demand of unearned increase and seeks a refund for amounts paid to DDA in connection with a property transfer. The petitioner's challenge is based on the contention that change in shareholding cannot be construed as a transfer of the subject property.
Finding of the Court:
The court found that the transfer of the subject property occurred due to the merger of Sharpedge with the petitioner, and unearned increase was payable on such transfer. However, the court held that the dilution of share capital and transfer of shares did not constitute a transfer of the subject property, and the demand for unearned increase on these grounds was erroneous. The court also directed the DDA to execute the conveyance deed of the subject property in favor of the petitioner.
Issues: The main issue was whether the dilution of share capital and transfer of shares constituted a transfer of the subject property, leading to the levy of unearned increase.
Ratio Decidendi: The court applied the principle that a company is a separate legal entity from its shareholders and held that the transfer of shares did not amount to a transfer of the assets of the petitioner company. The court also emphasized that there were no grounds for lifting the corporate veil in this case.
Final Decision: The court set aside the demand letters and directed the DDA to execute the conveyance deed of the subject property in favor of the petitioner.
Vibhu Bakhru, J.
The petitioner has filed the present petition, inter alia, impugning the demand of unearned increase for a sum of Rs.34,24,27,979/-, made by the respondent (hereafter "DDA") in terms of its letter dated 15.04.2013 read with letters dated 14.05.2013 and 13.01.2015. The petitioner also seeks a refund for an amount of Rs.3,94,57,027/-, which was paid by the petitioner to DDA in terms of the order dated 19.01.2011 passed in W.P.(C) 344/2011. In addition, the petitioner has also sought refund for certain other sums paid to DDA, in connection with the property bearing the address Plot No. E-31, admeasuring 9715.75 square yards, Okhla Industrial Area, Phase II, New Delhi (hereafter "the subject property").
2. The principal controversy in the present case relates to the levy of unearned increase in respect of the subject property. DDA claims that the subject property was transferred in the year 2005-06, as there was a material change in the shareholding of the petitioner. According to DDA, the said change in shareholding brought about the change in the effective control in the subject property, which is construed as a transfer, thereby entitling DDA to levy unearned increase. The petitioner disputes the above and contends that change in the shareholding cannot be construed as a transfer of the subject property. Factual Background
3. M/S Sharpedge Limited (hereafter "Sharpedge"), a Company incorporated in India, acquired the subject property on 11.06.1974 in an auction conducted by DDA.
4. Sharpedge constructed an industrial building on the subject property after obtaining the necessary approvals of the building plans. Subsequently on 05.07.1978, a perpetual lease deed in respect of the subject property was registered in favour of Sharpedge.
5. On 09.02.1984, the petitioner - then known as Indian Shaving Products Limited (ISPL) - acquired the entire shareholding of Sharpedge. Consequently, Sharpedge became a wholly owned subsidiary of ISPL.
6. On 09.08.1989, the Board of Industrial and Financial Reconstruction (BIFR) declared Sharpedge as a sick company within the meaning of Section 3(o) of the Sick Industrial Companies (Special Provisions) Act, 1985.
7. During the course of the proceedings before the BIFR, the operating agency prepared a scheme for rehabilitation of Sharpedge, which entailed its amalgamation with ISPL (the petitioner company). The aforesaid scheme (entailing amalgamation of Sharpedge with the petitioner) was sanctioned by the BIFR on 23.04.1992. As a consequence of the said Scheme, the assets of Sharpedge, including the subject property and the building constructed thereon, vested with the petitioner. Accordingly on 15.05.1992, the petitioner requested DDA to effect the change in its records.
8. In view of the transfer of the subject property from Sharpedge to the petitioner, DDA issued a demand notice dated 29.08.1995, calling upon the petitioner to pay a sum of Rs.5,37,95,788/- as unearned increase alongwith interest thereon.
9. The petitioner contested the aforesaid demand as according to it, unearned increase was not payable on account of transfer of any property pursuant to the rehabilitation scheme approved by BIFR under the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985. Consequently, Indian Shaving Products Limited, as the petitioner was then known, filed a writ petition being C.W.P. 3489/1995, impugning the said demand notice.
10. In terms of the order dated 06.02.1996 passed in the said petition, the petitioner deposited an amount of Rs.3,50,00,000/- with DDA on 13.02.1996.
11. The petitioner did not prevail in its challenge to the demand of the unearned increase as raised by DDA and the aforementioned writ petition was dismissed by this Court by an order dated 05.10.2001. The petitioner sought to challenge the order dated 05.10.2001 passed by this Court, before the Supreme Court. However, the Special Leave Petition (SLP(C) No.19185/2001) was also dismissed by the
