Alpha Stitch-Art Private Limited And Anr. vs. The West Bengal Small Industries Development Corporation LTD. And Ors.

Facts

The petitioner, Alpha Stitch-Art Private Limited, sought mutation of leasehold rights transferred to it through an amalgamation scheme with Sona Promoters Private Limited, its predecessor-in-interest. The West Bengal Small Industries Development Corporation Ltd. (WBSIDCL), the lessor, initially demanded Rs. 18,76,000/- plus 18% GST, treating the amalgamation as a transfer to a third party. The petitioners argued that as per WBSIDCL's own General Policy and minutes of meetings, amalgamation between group companies with identical shareholders and directors should only attract a service charge of Rs. 10,000/-, not full transfer fees. The lease deeds and WBSIDCL's General Policy were central to the dispute. The petitioners had obtained the lease through Sona Promoters, which had its lease terminated, a decision that went up to the Supreme Court and was ultimately dismissed. During the pendency of the Supreme Court appeal, the amalgamation took place.

Held

The Court held that the respondent no.1 (WBSIDCL) acted contrary to its own General Policy and meeting resolutions by treating the amalgamation between petitioner no.1 and its group companies as a 'transfer' liable for full transfer fees. The Court found that the General Policy of WBSIDCL itself carved out an exception for amalgamations within group companies having identical shareholding and directorship, which was the case here. Therefore, the claim for full transfer fees amounting to Rs. 18,76,000/- and GST of Rs. 3,37,680/- was set aside. The Court directed WBSIDCL to accept and ratify the transfer of lease in favour of petitioner no.1 upon payment of Rs. 10,000/- as processing fees. The Court noted that while lease deeds contemplate prior approval for subletting, the present case concerns amalgamation between group companies, which is arguable and depends on facts that would require a separate proceeding for eviction, which was not the scope of the present writ petition. The Court found the respondents' reliance on judgments concerning rent control and eviction, or amalgamations between different entities, to be not germane to the present context. The issue of eviction was expressly left undecided as it was outside the scope of the writ petition.

Key Issues

1. Whether the amalgamation of the petitioner no.1 with its group company, Sona Promoters Private Limited, constitutes a 'transfer' for which full transfer fees are exigible under the lease deeds and the General Policy of the West Bengal Small Industries Development Corporation Ltd. (WBSIDCL)? (Question of law) Petitioner's arguments: The petitioners contended that the amalgamation involved group companies with identical shareholders and directors, which, according to WBSIDCL's own General Policy and minutes of meetings (specifically the 353rd meeting), should not be treated as a transfer attracting full transfer fees, but only a service charge of Rs. 10,000/-. They argued that the respondents had waived the requirement of prior approval by their subsequent actions. They relied on the principle of Wednesbury unreasonableness and proportionality, citing K. Shyam Kumar. They also argued that judgments cited by the respondents, such as Maan Concast Pvt. Ltd. and Allenby Garments, were distinguishable as they dealt with different entities or predated the 2019 policy change. Respondent's arguments: The respondents argued that the lease deeds (dated December 14, 2007, and March 04, 2009) precluded Sona Promoters from transferring the land or subletting without prior permission. They relied on Section 108 of the Transfer of Property Act and Clauses 3(j) and 3(l) of the Deed of Lease. They cited judgments like Maan Concast Pvt. Ltd., Allenby Garments, and Uttar Pradesh State Industrial Development Corporation Limited to support their claim that amalgamation constitutes a transfer. They also argued that prior approval was necessary before entering the amalgamation scheme.