A mere change in the name of a company, without a change in its legal identity or constitution, does not constitute a transfer of leasehold rights under an allotment agreement, and therefore, cannot be made a basis for demanding differential land costs by an industrial development board.

CAV JUDGMENT

(PER: HON'BLE MRS. JUSTICE ANU SIVARAMAN)

This appeal is filed challenging the Order dated 03.03.2023 passed by the learned Single Judge in Writ Petition No.50431/2019 (GM-KIADB)

2. We have heard Shri. Basavaraj V. Sabarad learned senior counsel as instructed by Shri. H.L. Pradeep Kumar, learned advocate appearing for the appellant and Shri. Dhananjay Joshi, learned senior counsel as instructed by Smt. Kavitha Damodaran, learned advocate appearing for the respondent.

3. The learned senior counsel appearing for the appellant submits that Plot No.143-C4 (Part), measuring 2.5 acres in Bommasandra Industrial Area, was initially allotted to M/s. Kirloskar Limited by a letter of intent dated 08.04.1991, in exchange for 5 acres at Hosakote Industrial Area, pursuant to the State Level Single Window Clearance Committee meeting dated 02.05.1990. An allotment letter dated 10.05.1991 was thereafter issued in favour of M/s.Mysore Kirloskar Limited at a tentative cost of Rs.12,570/- per square meter. On 23.10.1992, M/s. Mysore Kirloskar Limited sought transfer of the allotment to M/s.Kirloskar Snyder General Limited, which the Karnataka Industrial Areas Development Board (KIADB) approved subject to the condition that M/s. Kirloskar Limited retain at least 50% shareholding as approved by the Reserve Bank of India (RBI). Possession was handed over on 18.11.1992 and a lease-cum-sale agreement was executed on 05.08.1993.

4. It is further submitted that this condition was violated as M/s Kirloskar Limited failed to maintain the mandated 50% shareholding and a fresh Certificate of Incorporation dated 06.06.1995 was obtained and concealed, indicating restructuring in breach of allotment conditions. It is submitted that there was no privity of contract between the appellant and M/s. Kirloskar AAF Limited. On 05.09.2012, M/s. Kirloskar AAF Limited sought transfer of leasehold rights, while the State Bank of India (SBI), initiated action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 to auction the property and sought details of dues, upon which, the KIADB by letter dated 14.06.2013, indicated dues of Rs.6,10,04,136/-.

5. It is further submitted that the respondent challenged the claim of SBI before the Debt Recovery Tribunal (DRT), Bengaluru, in SA No.194/2011, which was dismissed on 21.10.2013 with costs of Rs.1,00,000/-. Thereafter, the respondent sought execution of the sale agreement and by letter dated 13.08.2014, informed KIADB that the dispute with SBI had been settled. Upon examining the shareholding pattern, KIADB found that the shareholding of the original promoter had fallen below the mandated 50% shareholding, violating the allotment conditions.

6. Consequently, KIADB treated the change as a transfer and demanded payment of differential land cost along with other charges. By letter dated 29.02.2015, the respondent was directed to pay Rs.7,05,83,861/-, relying on its policy dated 31.05.1996, under which the case did not fall within exempted categories. On 16.03.2015, the respondent sought execution of a Sale Deed, wherein the KIADB reiterated that it was a distinct legal entity and raised a revised demand of Rs.7,45,15,312/- on 11.12.2015. This was challenged in Writ Petition No.2245/2016, which was disposed of on 24.10.2017 granting liberty to produce documents to establish whether there was a substantive change in the constitution. Upon reconsideration, KIADB found that as on 30.09.2014, M/s. Mysore Kirloskar Limit