The Supreme Court last week set aside the judgment of the Allahabad High Court and allowed the appeal of the Uttar Pradesh State Industrial Development Corporation against several companies, which were granted long- term lease of industrial plots. The corporation found that the companies had changed their shareholders and directors. Some of them were sold to foreign entities. Therefore, it demanded transfer levy according to the lease deed and guidelines pertaining to reconstitution and transfer. That demand was challenged by four companies, one of them being Monsanto Manufactures Ltd. They filed suits in different civil courts. The courts took the view that a company is alegal entity and change of shareholders did not change its character. They barred the corporation from levying the charges. The corporation moved the high court, which dismissed its appeal.
However, the Supreme Court accepted the corporation’s appeal. It went into the transfer deeds of each company and found that they had not only changed hands but also incurred liabilities. Therefore, there was “ larger public interest” involved in incorporating rules regarding alteration in capital structure. “ There are many instances where the company takes loan from third parties on the security and land and structure allotted to them in lease keeping in dark the lessor which amounts to incurring liabilities on the property without the knowledge of the lessor.” In one case, there was huge amount of debt on the company as it took loan on land . There have been instances in which the lessee gets allotment of huge industrial plots and thereafter sold them for huge gains. “ This adversely affects the aims and objectives of corporation i. e. the planned development of industrial area,” the judgment emphasised.
Source:
Business Standard 2/2/2015
However, the Supreme Court accepted the corporation’s appeal. It went into the transfer deeds of each company and found that they had not only changed hands but also incurred liabilities. Therefore, there was “ larger public interest” involved in incorporating rules regarding alteration in capital structure. “ There are many instances where the company takes loan from third parties on the security and land and structure allotted to them in lease keeping in dark the lessor which amounts to incurring liabilities on the property without the knowledge of the lessor.” In one case, there was huge amount of debt on the company as it took loan on land . There have been instances in which the lessee gets allotment of huge industrial plots and thereafter sold them for huge gains. “ This adversely affects the aims and objectives of corporation i. e. the planned development of industrial area,” the judgment emphasised.
Source:
Business Standard 2/2/2015
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