Case Law Details
Groupe Seb India Private Limited Vs State of Himachal Pradesh and others (Himachal Pradesh High Court)
The existence and transitions of a company are governed by law. Changing a company’s name is one such activity that has legal implications. A recent case presented before the Himachal Pradesh High Court involving Groupe Seb India Private Limited (GSIPL) and the State of Himachal Pradesh delves into the legal aspects of changing a company’s name and its impact on property ownership, stamp duty, and registration fees. This article provides insights into the legal framework and the implications of such changes.
Understanding the Statutory Framework
To comprehend the case, it’s essential to consider the statutory legal framework. In this instance, Section 13 of the Companies Act, 2013, plays a pivotal role, addressing the process of changing a company’s name. Additionally, Section 118 of the Himachal Pradesh High Court Tenancy and Land Reforms Act, 1972, comes into play as it pertains to the permissions required for land transfers.
MWIL (the company in question) decided to change its name first to MWIPL and subsequently to GSIPL. Changing a company’s name is a statutory process regulated by the Companies Act, 2013. It involves passing a resolution, as done in this case, and receiving a Certificate of Incorporation reflecting the new name upon approval by the Registrar of Companies. Importantly, such a change in the company’s name does not entail the transfer of its assets.
The Crucial Aspect: Property Ownership
A critical aspect of this case revolved around the ownership of a piece of land used for industrial purposes. Despite the changes in the company’s name, the ownership of the land remained with the same entity. The central issue was whether changing the company’s name would trigger stamp duty and registration fees. The Himachal Pradesh High Court ruled that the change of the company’s name did not lead to the transfer of the property. This distinction holds key legal implications.
The Court referred to the Indian Stamp Act and the Indian Registration Act, clarifying that these charges are applicable when there is an “instrument of transfer.” Changing the company’s name, in this case, did not qualify as such an instrument of transfer. Consequently, the Court ruled that no stamp duty or registration fee should be levied. The petition was allowed in favor of the petitioner.
Legal Precedents and Clarifications
The judgment drew upon legal precedents, including decisions from various High Courts and the Supreme Court. These decisions emphasized that when a partnership firm is converted into a company under statutory provisions, there is a statutory vesting of property in the new company, and no separate conveyance is required.
In Conclusion
This case underscores the significance of comprehending the legal intricacies surrounding a company’s name change and its consequences on property ownership and taxation. When such a change occurs through statutory procedures and does not involve asset transfers, it does not attract stamp duty or registration fees. This legal interpretation provides clarity for companies undergoing name changes and reaffirms the principle that changing a company’s name, by itself, does not alter property ownership rights.
FULL TEXT OF THE JUDGMENT/ORDER OF ANDHRA PRADESH HIGH COURT
Being aggrieved and dissatisfied with communication dated 28.3.2019 (Annexure P-2), whereby Department of Revenue, Government of Himachal Pradesh, while granting permission for the change of name of the company from Maharaja Whiteline Industries Limited to Groupe SEB India Private Limited stipulated that the stamp duty and registration fee shall be chargeable, the petitioner has approached this Court in the instant proceedings filed under Art. 226 of the Constitution of India, praying therein for following main reliefs:
“(a) Issue a writ of certiorari or any other appropriate writ, order or direction in the nature of certiorari for quashing and setting aside the Conditions 1 and 2 of Impugned Approval letter No. Rev.B.F.(10)-87/2019 dated 28.03.2019 (Annexure P-2) issued by the Respondent No.2, in relation to the Subject Property i.e. land admeasuring 58 Bigha and 2 Biswas having Khewat/Khatauni No. 317/336 situated in Mohal Malkumajra, Tehsil Baddi, District Solan, State of Himachal Pradesh, as being illegal, arbitrary, unreasonable and ultra vires the provisions of the H.P. Tenancy and Land Reforms Act, 1972, the H.P. Tenancy and Land Reforms Rules, 1975, the Companies Act, 2013 (and Companies Act, 1956), The Indian Stamp Act, 1899 and the Registration Act 1908,
(b) Issue a writ of mandamus or any other appropriate writ, order or direction in the nature of mandamus directing the Respondent No.2 to 4 to change the company name in the revenue /Land Records pertaining to the Subject Property from “Maharaja Whiteline Industries Limited” to “Maharaja Whitline Industries Private Limited” and thereafter to “Groupe SEB India Private Limited”, as required under law.
2. Precisely, the facts of the case as emerge from the record are that a public limited company namely “Maharaja Whiteline Industries Limited” (hereinafter, ‘MWIL’) was incorporated on 13.9.2005 under the provisions of Companies Act, 1956. Name of aforesaid company was changed to “Maharaja Whitline Industries Private Limited” (hereinafter, ‘MWIPL’) on 20.9.2011. On 28.10.2014, name of MWIPL came to be changed to “Groupe SEB India Private Limited” (hereinafter, ‘GSIPL’), which is petitioner No.1 herein (Annexure P-3). MWIL, with a view to set up its business, purchased land measuring 58-02 Bigha in Khewat Khatauni No. 317/386, situate in Mohal Malkumajra, Tehsil Baddi, District Solan, Himachal Pradesh, from the previous land owners, after having obtained necessary approval of the Government i.e. respondents Nos. 1 and 2, under S.118 of the Himachal Pradesh Land Reforms and Tenancy Act, vide letter No. Rev-B-F(10)-296/2007, dated 31.8.2007 (Annexure P-4). Aforesaid permission was granted on the basis of Essentiality Certificate issued by the Industries Department on 20.3.2007 (Annexure P-4).
3. After having received the aforesaid permission under S.118 of the Act ibid, MWIL executed sale deed dated 10.2.2008 and had confirmed transfer of subject property in favour of MWIL. In furtherance of execution of aforesaid sale deed, name of MWIL was duly entered in the revenue record of respondents Nos. 1 and 2 and concerned agency as owner of subject property.
4. MWIL commenced commercial production from the subject property with effect from 15.5.2009, on the basis of Entrepreneur Memo (EM) No. II No. 02/00/1/2/70599 dated 29.9.2010 issued by the Department of Industries (Annexure P-6). On 20.9.2011, Maharaja Whiteline Industries Limited got its name changed to Maharaja Whitline Industries Private Limited in the records of the Registrar of Companies in accordance with rule 31 of the Companies Act, 1956, upon conversion of erstwhile MWIL from a ‘public limited company’ to a ‘private limited company’ and a Certificate of Incorporation for change of name dated 20.9.2011 was issued in its favour (Annexure P-7).
5. In November, 2011, SEB Internationale SAS, France purchased 55% shareholding from original shareholders of petitioner No.1 (erstwhile MWIPL) and subsequently in May, 2014, SEB Internationale SAS purchased remaining 45% shareholding from original shareholders of petitioner No.1.
6. On account of aforesaid developments, name of MWIPL came to be changed in the record of Registrar of Companies New Delhi as GSIPL on 28.10.2014, as is evident from Certificate of Incorporation (Annexure P-8). Subsequent to change in the name, as detailed herein above, GSIPL applied for renewal of business licences and for change in its name to be recorded in various records. Various Government concerns such as Employees State Insurance Corporation, Employees Provident Fund Organisation, Departmental of Factories, fire Department, Contract Labour Registration etc. granted renewal of the business licences and recorded the change in the name of petitioner No.1 from MWIPL to GSIPL in their records. However, District Industry Centre, Baddi, called upon the petitioner No.1 to furnish a revised Entrepreneur Memorandum-I (EM-II).
7. Deputy Director of Industries, Department of Industries issued letter dated 31.8.2015 enabling petitioner No.1 to obtain various clearances /permissions from concerned departments. It was intimated vide said letter that name of MWIPL has been changed to GSIPL provisionally by the Department of Industries. However, it was also stated in the said letter that change of name shall be entered in EM-II only after necessary approval under S.118 of the Act is accorded in favour of petitioner NO.1 and when said unit changes its name and constitution in the record of Revenue Department.
8. On 11.10.2018, Director of Industries issued a fresh Essentiality Certificate No. 3598 bearing reference No. Ind.Dev.F(14)EC-865/2004, wherein it was stated that pending stamp duty and registration fee in lieu of changes previously in the constitution of the company shall be charged from petitioner No.1, if any, found due by the Revenue Department. Petitioner No.1, approached respondent Nos. 2 and 3 for approval of change of name of petitioner No.1 in the revenue records to Groupe SEB India Private Limited under S.118 off the Act. Respondents Nos. 1 and 2 vide letter No. Rev.B.F.(10)-87/2019 dated 28.3.2019 (Annexure P-2), granted approval for change of name of Company in revenue record subject to following conditions:
“a. Stamp duty and registration fee shall be chargeable for the change of name of Petitioner No.1 from “Maharaja Whitline Industries Private Limited” to “Groupe SEB India Private Limited”
b. Stamp duty/Registration Fee shall also be chargeable in lieu of changes in the constitution (from public limited to private limited) of the Petitioner No.1 in 2011.
c. A “No Dues Certificate” to be procured from the Excise & Taxation Department.”
9. Thereafter, petitioner No.1 procured a No Objection Certificate from Excise & Taxation Department on 10.10.2018 (Annexure P-13) and Excise & Taxation Department issued a letter on 9.8.2019 to the petitioner No.1 stating that no case of recovery under Land Revenue Act has been initiated against petitioner No.1 and nothing is due from the dealer as on 5.8.2019 and thus condition No.3 of impugned letter dated 28.3.2019 was complied with.
10. Being aggrieved and dissatisfied with imposition of two conditions qua stamp duty and registration fee, petitioner made a representations (Annexure P-14) to respondent Nos. 1, 2 and 4 but the respondents neither responded to any of said respondents, nor did they revoke such conditions, as such, petitioner was compelled to approach this Court in the instant proceedings, praying therein for the reliefs as have been reproduced herein above.
11. N.K. Sood, learned senior counsel duly assisted by Mr. Aman Sood, Advocate, representing the petitioners, vehemently argued that at no point of time, transfer of subject property occurred on account of change in the name of petitioner No.1 from MWIL to MWIPL and thereafter to GSIPL in Register of Companies maintained by Registrar of Companies, as such, neither stamp duty nor registration fee is payable on change of name in revenue record qua the subject property. He further submitted that respondents Nos.1 and 2 have failed to appreciate that change in the name of petitioner No.1 (now known as GSIPL) alongwith issue of Certificate of Incorporation is pursuant to S.13 to Companies Act, 2013 (pari-materia to Ss. 21 and 23 of the Companies Act, 1956) or under S.31 of Companies Act, 1956) or under S.31 of the Companies Act, 1956. He further stated that Certificate of Incorporation for change of name has been issued under Rule 29 of the Companies (Incorporation) Rules, 2014, which provides for “alteration of Memorandum by change of name” of a company. He further stated that Certificate of Incorporation upon change in name of a company issued by Registrar of Companies under the Companies Act, 2013 (or the Companies Act, 1956) and under Rule 29 of the Companies (Incorporation) Rules, 2014 or under S.31(1) of Companies Act, 1956 is not an “instrument” within the meaning of S.2(14) of Stamp Act or the Registration Act, attracting charging or imposition of stamp duty or registration fee.
Lastly, Mr. Sood, argued that respondents Nos. 1 and 2, while imposing condition No.1, in the impugned order, failed to take note of the fact that change in the name of MWIPL to GSIPL was an act of passing of special resolution under S.13 of the Companies Act, 2013 (pari-materia to Ss. 21 and 23 of Companies Act, 1956) and on the basis of such resolution, name of petitioner No.1 was changed by Registrar of Companies in the register of companies, as such, at no point of time, properties, if any, of the company ever came to be transferred rather there was only change of name. While making this Court peruse documents annexed with the petition, Mr. Sood further argued that despite change in the name of petitioner No.1 and change in shareholders, Corporate Identification Number of petitioner No.1 remained the same. He submitted that transfer of shares of shareholders of company to third party does not mean transfer of property of the company to a third party, as shareholders do not have any right, title or interest in the properties belonging to a company. He submitted that petitioner No.1 GSIPL, which has an independent corporate identity, remained the owner of subject property, as is evident from copy of Securities Transfer Form (Annexure P-9), executed inter se original share holders and SEB Internationale SAS in the years 2011 and 2014. In support of his aforesaid submission, Mr. Sood, learned senior counsel invited attention of this court to judgment passed by a Division Bench of this Court in JSTI Transformers Pvt. Ltd. v. The State of Himachal Pradesh and another, CWP No. 4394 of 2021 decided on 20.4.2022, in which, I was also a member.
12. Mr. Rajan Kahol, learned Additional Advocate General, while supporting the impugned conditions, vehemently argued that the respondents have rightly ordered charging of stamp duty and registration fee as present is not a mere case of change of name of company, rather, assets of the company alongwith land have been transferred to petitioner No.1. He submitted that the procedure as laid down in rule-29 for alteration in the memorandum by change of name requires submission of application/information in Form-INC-24 along with the fee for change in the name of the company and a new certificate of incorporation in Form No.INC.25 shall be issued to the company consequent upon change of name. He submitted that Certificate of Incorporation issued pursuant to change of name does not imply that no stamp duty and registration fee is chargeable. He submitted that after exit of minority shareholders, logo of erstwhile company MWIL and MWIPL have been changed to GSIPL, as such, while granting approval for change of name in revenue record, they have been rightly imposed condition of payment of stamp duty and registration fee.
13. Having heard learned counsel for the parties, this court finds that precisely, the question which needs determination in the case at hand is that ‘whether the change of name of a company with the approval of Registrar of Companies, would amount to transfer of assets of the company attracting imposition of stamp duty and registration fee?’
14. Reply filed by the respondents, if read in its entirety, clearly suggests that the facts as have been noted herein above, are not in dispute, rather, stand admitted. Precisely, the case of the petitioners, as has been highlighted in the petition and further canvassed by learned senior counsel for the petitioner is that condition of stamp duty and registration fee is ultra vires of the prescribed powers and responsibilities of respondent No.2 under the provisions of the Act and the Rules. It has been further claimed by the petitioners that upon acquiring entire shareholding of petitioner No.1, erstwhile MWIPL by GSIPL, there was no actual transfer of land, within the meaning of S.118 of the Act,
15. Having carefully perused the judgment rendered by this Court in JSTI Transformers (supra), this Court find that the Division Bench has held that mere acquiring of equity share capital of ‘Company does not amount to transfer, assignment or parting with the possession or any other rights of the allottee Company, neither with the plot in question nor structure in existence thereon. Acquiring of equity share capital of the allottee Company by the petitioner also does not contravene the conditions contained in Clause 2(xi) of the conveyance deed. It would be apt to take note of following paras of the judgment in JSTI Transformers supra:
“7. Before examining the arguments of the parties and analyzing the case law, we deem it appropriate to reproduce the instructions dated 16.2.2012 issued by the Revenue Department of the State, which read as under:
“I am directed to say that the matter with regard to registration of a transaction for mutation of land in revenue records pursuant to change in the name of Company has been under consideration of the department for quite some time.
2. Section 394 of the Companies Act, 1956 deals with the provision for facilitation and amalgamation of two or more Companies. The amalgamation scheme, which is an agreement between the two of more Companies, is presented before the Court, which passes appropriate order sanctioning the compromise or arrangement. Under the scheme of amalgamation the whole or any part of the undertaking, the property or liability of any Company concerned in the scheme is to be transferred to the other Company The amalgamation scheme, sanctioned by the Court, would be an instrument and Stamp Duty is chargeable on such instrument unless the Hon’ble Court, while sanctioning a scheme, has directed under Section 394(2) of the Companies Act, 1956 that on transfer of property on sanction of scheme of amalgamation under Section 391 to 394 no stamp duty shall be payable. Where no such direction has been given by the Court while sanctioning scheme of amalgamation then on such instrument, stamp duty shall be chargeable.
3. In cases where merely the name of the Company is changed with the approval of the Registrar of Companies in terms of Sections 21 and 23 of the Companies Act,1956, no transaction/sale of property takes place and only change in name of the Company is sought to be recorded in the revenue record, no stamp duty is chargeable.
4. For the purpose of this clarification, the change of name of a company will mean that an existing company with name “A” changes its name to “B” which is not the name of a pre-existing company and name “A” ceases to exist consequent to this change. It is also clarified that in case assets are proposed to be transferred to a company or an existing company proposes to change its name to a preexisting company, the it will constitute transfer/merger and will normally constitute a transaction and will required registration after obtaining permission under the provisions of Section 118 of the Himachal Pradesh Tenancy and Land Reforms Act, 1972
5. In cases, where the name change as per example given in para 4 above is approve by the Registrar of Companies and the change in name has also been given effect to by the Director, Industries, The District Collector concerned will order to effect change in name in revenue record as per procedure laid down in Chapter 8.52(ii) of “The Himachal Pradesh Land Records Manual” and an entry in remarks column of revenue record i.e. Jamabandi, shall be made with red ink giving therein the old name of Company and reference of order in compliance to which the name is changed.”
8. This Court in M/s Fresenius Kabi Oncology Limited (supra) was dealing with a case, where consequent upon request made by the petitioner to incorporate by way of change of its name in the record, respondent-State Authorities demanded a sum of Rs.1,04,21,508/-towards unearned increase /transfer charges on account of alleged violation of Clause 2(xi) of conveyance deed, where Pharma business of the Company, “Dabur India Limited” by way of merger, merged into the new entity, “Dabur Pharma Limited”. The respondent-Corporation changed the name of the allottee company i.e. “Dabur India Limited” to “Dabur Pharma Limited”, vide order dated 28.11.2003. Later on, petitioner-Company incorporated under the laws of Singapore, acquired 90.89% of total equity share capital of Dabur Pharma Limited on 11.8.2008. The management and control of Dabur Pharma Limited, therefore, came to be changed and its Board reconstituted with the nominee of the petitioner-company. The management of the Company i.e. Dabur Pharma Limited later on, decided to change its name from “Dabur Pharma Limited” to “Fresenius Kabi Oncology Limited” on 9.1.2009. The Registrar of Companies, NCT of Delhi allowed the change of name of the company from “Dabur Pharma Limited” to “Fresenius Kabi Oncology Limited” on 9.1.2009. It was against this backdrop that on 18.2.2009, petitioner submitted an application to the respondent-Corporation with a request to change the name of the allottee in respect of the plot in question and record its name in place of Allottee Company. The respondent-Corporation instead of making change in the name of the Company, raised a demand for Rs. 1,04,21,508/-, vide letter dated 17.6.2009 towards the unearned increase /transfer charges and called upon the petitioner to remit the said amount to the Corporation within 30 days, so that the supplementary transfer deed qua the plot is executed in favour of the petitioner. This Court held that mere acquiring of equity share capital of ‘Dabur Pharma Limited’ by the petitioner Company does not amount to transfer, assignment or parting with the possession or any other rights of the allottee Company, neither with the plot in question nor structure in existence thereon. The acquiring of equity share capital of the allottee Company by the petitioner also does not contravene the conditions contained in Clause 2(xi) of the conveyance deed. In such circumstances, how a right to claim unearned increase/transfer charges would have arisen in favour of the respondent is not understandable, held this Court.
9. The High Court of Calcutta in a similar dispute pertaining to petitioner herein itself, in Writ Petition No. 24788 (W) of 2010, titled M/s Fresenius Kabi Oncology Limited v. The State of West Bengal and others and its connected matter Writ Petition No. 26049(W) of 2014 titled M/s Fresenius Kabi Oncology Limited and another v. The State of West Bengal and another, held as under:
“8. Main case of the petitioners, however, is that change of the name of a company does not constitute transfer of leasehold right or any assets of the company. In this regard, Mr. Basu has relied on a judgment of the Supreme Court in the case of Bacha F. Guzdar Vs. Commissioner of Income Tax, Bombay (AIR 1955 SC 74), Kalipada Sinha Vs. Mahalaxmi Bank Ltd. (AIR 1966 Cal 585), W.H. Targett (India) Limited Vs. S. Ashraf reported in [2008(3) Cal LT 362] and an unreported judgment of this Court in W.P. No. 18668(W) of 2012 M/S. Din Chemicals and Coatings Pvt. Ltd & Anr. Vs. The State of West Bengal and Ors delivered on 5th October, 2012.
9. Mr. Susobhan Sengupta, learned counsel appeared on behalf of the State in this matter. His submission is that on change of equity shareholding pattern, bringing a new set of shareholders in the controlling position of the company in substance has resulted in transfer of ownership and control of the company, and such change should be treated to have resulted in transfer of assets of the company. According to him, the leasehold right was shifting from one entity to another, and for this reason transfer fee was payable. His submission is that this is a case where there is simultaneous transfer of assets including leasehold right from one entity to another along with change of name and in this regard he relied on a judgment of this Court delivered on 8th February 2012 in the case of in Re:- Emami Biotech Ltd. & Anr. [(2012)3 CHN 102] which is also a decision of an Hon’ble Single Judge of this Court.
10. In the case of Bacha F. Guzdar (supra), it has been held by the Hon’ble Supreme Court:-
“That a shareholder acquires a right to participate in the profits of the company may be readily conceded but it is not possible to accept the contention that the shareholder acquires any interest in the assets of the company. The use of the word ‘assets’ in the passage quoted above cannot be exploited to warrant the inference that a shareholder, on investing money in the purchase of shares, becomes entitled to the assets of the company and has any share in the property of the company. A shareholder has got no interest in the property of the company though he has undoubtedly a right to participate in the profits if and when the company decides to divide them. The interest of a shareholder vis-avis the company was explained in the case of Chiranjitlal Chowdhuri v. The Union of India and Others [1950] S.C.R. 869, 904.). That judgment negatives the position taken up on behalf of the appellant that a shareholder has got a right in the property of the company. It is true that the shareholders of the company have the sole determining voice in administering the affairs of the company and are entitled, as provided by the Articles of Association to declare that dividends should be distributed out of the profits of the company to the shareholders but the interest of the shareholder either individually or collectively does not amount to more than a right to participate in the profits of the company. The company is a juristic person and is distinct from the shareholders. It is the company which owns the property and not the shareholders. The dividend is a share of the profits declared by the company as liable to be distributed among the shareholders. Reliance is placed on behalf of the appellant on a passage in Buckley’s Companies Act, 12th Ed., page 894, where the etymological meaning of dividend is given as dividendum, the total divisible sum but in its ordinary sense it means the sum paid and received as the quotient forming the share of the divisible sum payable to the recipient. This statement does not justify the contention that shareholders are owners of a divisible sum or that they are owners of the property of the company”
11. The same principle was followed in the case of Din Chemicals & Coatings Pvt. Ltd. (supra), and it has been held in this decisions:-
“Let me now consider as to how far the principle laid down in the said decision of the Hon’ble Supreme Court is applicable to the facts of the instant case. I have already indicated above that the case which was before the Hon’ble Supreme Court was a case of amalgamation of the two companies which is not the case before this Court. In case of amalgamation of two companies the transferor company losses its existence and all the property, rights, powers of every description including all leases and tenancy right, industrial, import and all other licences, of the transferor company without any further act or deed are transferred and vested or deemed to be transferred or vested in favour of the transferee company. Thus, in case of amalgamation no doubt the lease-hold interest of the transferor company stands transferred in favour of transferee company but the such transfer is not contemplated in case of transfer of share by the shareholder of the company to the stranger purchasers of such shares, as it was held in Mrs. Bacha F. Guzdar, Bombay vs. Commissioner of Income Tad, Bombay (supra) by the Hon’ble Supreme Court that a shareholder who buys share does not buy any interest in the property of the company which is a juristic person entirely distinct from shareholders. It was further held therein that the true position of a shareholder in a company is that on buying shares he becomes entitled to participate in the profit of the company as and when the company declares, subject to articles of association, that the profits or any portion thereof would be distributed by way of dividends amongst the shareholders. It was further held therein that he has further a right to participate in the assets of the company which would be left over after winding up but not in the assets as a whole. In the present case, it is nobody’s case that the company was wound up and the assets of the wound up company which were left over after winding up of the said company was transferred by the promoter shareholder in favour of the stranger purchaser. As such, by following the aforesaid decision of the Hon’ble Supreme Court as well as of this Hon’ble Court, this Court has no hesitation to hold that with the transfer of the share by the promoter shareholder to the present shareholder, namely the transferees of such share, the lease hold interest of the company was not transferred from the promoter shareholder to the present shareholder of the said company. The petitioner-company which obtained the said lease from the Government, still remains the lessee of the said plot of land and its leasehold interest in the said plot of land remains unaffected by transfer of share by the promoter shareholders to the present holders. As such, this Court holds that the restrictive clause regarding transfer of the lease hold interest of the lessee in favour of a stranger, sub-lessee or assignee, does not attract in the present case and as a result, the demand for transfer fees for recognizing the alleged transfer of leasehold interest from the erstwhile shareholders of the said company to the present shareholder, is absolutely illegal and unlawful and as such, that part of such demand, which was made by the concerned authority in the impugned order and/or letter as aforesaid, stands quashed.”
15. So far as these two petitions are concerned, Dabur Pharma Limited became lessee of the land in question through arrangement approved by this Court. Leasehold right of Dabur Pharma Limited has been recognized by the State authorities. On 11th August, 2008 the majority holding of Dabur Pharma Limited was transferred to the parent company of the petitioner. Whatever transfer had taken place was at that point of time between the two entities. The consequential act of change of corporate name of the company is sought to be treated as transfer of leasehold right of the company, and transfer fee is sought to be charged on that incident or event. This, in my opinion is not permissible. To borrow the terminology from the fiscal jurisprudence, what is being subjected to transfer fee is the incidence of change of name of the company. Such a situation cannot come within the ambit of the expression “transfer of leasehold right”, as stipulated in the notification of 18th December, 2007. The ratio of the judgment of this Court in the case of Emami Biotech Ltd. is not applicable in the facts of this case, as transfer fee is not being charged on any instrument of transfer, but on the basis of request for recordal of change of corporate name. It has not been argued by the State that the very act of transfer of equity-holding of the promoter group gives rise to the obligation of the company to pay transfer fee.”
10. Similar issue again arose before this Court in Reckitt Benckiser (India) Private Limited (supra).In that case, petitioner was initially incorporated as a public limited company by the name of M/s Reckitt & Colman of India on 5.7.1951. Subsequently, it got its name changed to Reckitt Benckiser (India) Limited on 18.12.2000. Thereafter, the name of the petitioner-company was again changed to Reckitt Benckiser (India) Private Limited on 13.5.2015, vide certificate of incorporation issued by the Registrar of Companies, NCT of Delhi and NCT of Haryana. This lastly named company, which was a public limited company, had acquired a piece of land i.e. industrial plot measuring 714 bigha entered in Khewat/Khatauni Nos. 39 min/64 min, bearing Khasra No. 449/2, situated in village Nandpur, BH No. 170, Pargana Dharampur, Tehsil Nalagarh, District Solan, Himachal Pradesh together with the factory building measuring 46000 square feet vide sale deed dated 24.2.2006. The respondent-State approved the sale of the land and building, while granting permission in favour of the petitioner under Section 118 of the Himachal Pradesh Tenancy and Land Reforms Act, 1972 vide letter dated 7.12.2005. The change of the name was carried out consequent upon conversion of the petitioner from a public limited company to a private limited company in accordance with the provisions of Section 13 of the Companies Act. Accordingly, the petitioner made an application to the respondents for change of name of the petitioner from “Reckitt Benckiser (India) Limited to “Reckitt Benckiser (India) Private Limited” in the revenue record pertaining to the land in question. The respondents recommended the case of the petitioner for permission to transfer the land alongwith assets in the name of M/s Reckitt Benckiser (India) Private Limited, however, subject to payment of stamp duty and registration fee on its value merely on account of addition of words, “Private” in its name. This Court held that the change in the name of the company was made with the approval of the Registrar of the Companies though even such approval was also not required as per the proviso to Section 13(2) of the Act, where the only change in the name of the company is either deletion therefrom or addition thereto the word ‘private’, consequent upon conversion of any one class of Companies to another class in accordance with the provisions contained under the Act. Section 13(3) provides that as and when there is any change in the name of the company under sub-Section 3, the Registrar shall enter the new name in the Register of the Company and issue fresh certificate of registration with new name. Section 13(2) made it crystal clear that no new company was ever created as a result of the change of its name and it is the case of mere addition of word ‘private’ to its name. Relying upon aforesaid instructions/clarification dated 16.2.2012 issued by the respondent-State, this Court held that respondents erroneously concluded that there is transfer of assets and property by the Company.
11. Bombay High Court in Commissioner of Income-Tax vs. Texspin Engg. & Mfg., (2003) 180 CTR Bom. 497, while dealing with a case where partnership firm was being treated as a company under the statutory provisions of the Companies Act, held that when a firm is treated as a company, there is no conveyance of the property executable in favour of the Limited Company. The vesting of property of firm in the Limited Company was not incidental to a transfer, but statutory. Therefore, there was no question of capital gain. It would be profitable to reproduce para-6 of the aforesaid judgment hereinbelow.
“6. ………………………. Now, in the present case, it is argued on behalf of the department before the Tribunal, for the first time, that in this case, on vesting of the properties of the erstwhile Firm in the Limited Company, there was a transfer of capital assets and, therefore, it was chargeable to income-tax under the head “Capital gains” as, on such vesting, there was extinguishment of all right, title and interest in the capital assets qua the Firm. We do not find any merit in this argument. In the present case, we are concerned with a Partnership Firm being treated as a company under the statutory provisions of Part IX of the Companies Act. In such cases, the Company succeeds the Firm. Generally, in the case of a transfer of a capital asset, two important ingredients are : existence of a party and a counterparty and, secondly, incoming consideration qua the transferor. In our view, when a Firm is treated as a Company, the said two conditions are not attracted. There is no conveyance of the property executable in favour of the Limited Company. It is no doubt true that all properties of the Firm vests in the Limited Company on the Firm being treated as a Company under Part IX of the Companies Act, but that vesting is not consequent or incidental to a transfer. It is a statutory vesting of properties in the Company as the Firm is treated as a Limited Company. On vesting of all the properties statutorily in the Company, the cloak given to the Firm is replaced by a different cloak and the same Firm is now treated as a Company, after a given date. In the circumstances, in our view, there is no transfer of a capital asset as contemplated by Section 45(1) of the Act. Even assuming for the sake of argument that there is a transfer of a capital asset under Section 45(1) because of the definition of the word “transfer” in Section 2(47)(iii), even then we are of the view that liability to pay capital gains would not arise because Section 45(1) is required to be read with Section 48, which provides for mode of computation…………………………….. ”
12. Similar issue came up before Andhra Pradesh High Court in Vali Pattabhirama Rao and another Versus Sri Ramanuja Ginning and Rice Factory (P.) Ltd. and others, AIR 1984 AP 176, wherein the Court was considering a situation where a previous firm was converted into company under the provisions of Companies Act. The Court held that there was statutory vesting of title of all the property of the previous firm in the newly incorporated company, therefore, there was no need for any separate conveyance. It was held that a partnership which was treated as a company for the purposes of the Companies Act can be registered under Part 8 of the previous Act (Part 9 of the present Act) and the vesting is provided by Section 263 of the 1913 Act (Section 575 of the present Act). The provision is mandatory and there will be statutory vesting in the corporation so incorporated under the provisions of the Companies Act. The Registrar is bound to give a certificate of registration under Section 262 (present Section 574) which is a conclusive proof of incorporation, vide Section 35 of the present Act that corresponds to Section 24 of the previous Act. Hence, it is clear that no conveyance is necessary when a partnership is converted and registered as a company. However, it is not possible to acquire such title statutorily under this section if the previous firm purports to convey title to the company in which event a separate deed of conveyance is necessary. The Court therefore held that if the constitution of the partnership firm is changed into that of a company by registering it under Part 9 of the present Act (Part 8 of the previous Act), there shall be statutory vesting of title of all the property of the previous firm in the newly incorporated company without any need for a separate conveyance.
13. The above judgment was quoted with approval by the Supreme Court in Jai Narain Parasrampuria (Dead) and others Versus Pushpa Devi Saraf and others, (2006) 7 SCC 756, in following manner:-
“26. The said decision has been followed by a Division Bench of the Andhra Pradesh High Court in Vali Pattabhirama Rao v. Sri Ramanuja Ginning & Rice Factory (P) Ltd. wherein it was held: (AIR pp. 184-85)
“Thus we hold that if the constitution of the partnership firm is changed into that of a company by registering it under Part 9 of present Act (Part 8 of previous Act), there shall be statutory vesting of title of all the property of the previous firm in the newly incorporated company without any need for a separate conveyance.”
14. The Supreme Court while considering the effect of conversion of partnership firm into a company under Part IX of the Companies Act in Commissioner of Income Tax, Udaipur Versus M/s. Chetak Enterprises Pvt. Ltd., AIR 2020 SC 4305, held that on statutory vesting all properties of the firm, in law, vest in the company and the firm is succeeded by the company. Para 7 of the judgment reads as under:-
“7. The question is: what is the effect of conversion of partnership firm into a company under Part IX of the Companies Act? That can be discerned from Section 575 of the Companies Act, which reads thus:
“575. Vesting of property on registration. All property, movable and immovable (including actionable claims), belonging to or vested in a company at the date of its registration in pursuance of this Part, shall, on such registration, pass to and vest in the company as incorporated under this Act for all the estate and interest of the company therein.”
It is manifest that all properties, movable and immovable (including actionable claims) belonging to or vested in a company at the date of its registration would vest in the company as incorporated under the Act. In other words, the property acquired by a promoter can be claimed by the company after its incorporation without any need for conveyance on account of statutory vesting. On such statutory vesting, all the properties of the firm, in law, vest in the company and the firm is succeeded by the company. The firm ceases to exist and assumes the status of a company after its registration as a company.”
15. In M/s Sozin Flora Pharma LLP (supra), similar dispute arose in context of conversion of petitioner from ‘Partnership Firm’ to ‘Limited Liability Partnership’. Petitioner approached the respondents for effecting the change of its name in the revenue record with regard to certain land but the respondents, while granting permission to reflect such change, directed the petitioner to deposit the stamp duty and registration fee. This court relying upon the aforesaid instructions dated 16.2.2012, in para-5 held as under:
“5. Conclusion:-
From the above discussion, following conclusions are drawn:-
5(a). Upon conversion of a registered partnership firm to an LLP under the provisions of the Limited Liability Partnership Act, all movable and immovable properties of erstwhile registered partnership firm, automatically vest in the converted LLP by operation of Section 58(4)(b) of the Limited Liability Partnership Act.
5(b). The transfer of assets of firm to the LLP is by operation of law. Being statutory transfer, no separate conveyance/ instrument is required to be executed for transfer of assets.
5(c). Since there is no instrument of transfer of assets of the erstwhile partnership firm to the limited liability partnership, the question of payment of stamp duty and registration charges does not arise as these are chargeable only on the instruments indicated in Section 3 of the Indian Stamp Act and Section 17 of the Indian Registration Act.
5(d). Partnership firm’s legal entity after conversion to limited liability partnership does not change. Only the identity of the firm as a legal entity changes. Such conversion or change in the name does not amount to change in the constitution of partnership firm.
5(e). Stamp duty and registration fee cannot be levied upon conversion of a partnership firm to LLP. Therefore, permission under Section 118 of the H.P. Tenancy and Land Reforms Act for recording such change of name in the revenue documents, i.e. M/s Sozin Flora Pharma to M/s Sozin Flora Pharma LLP cannot be made dependent upon deposit of stamp duty and registration fee. For the foregoing discussion, we allow the instant writ petition. The impugned Annexures P-8, dated 28.08.2017 and P-10 dated 23.08.2019, insofar they direct the petitioner to deposit the stamp duty and registration fee consequent upon change of its name from M/s Sozin Flora Pharma to M/s Sozin Flora Pharma LLP, are quashed and set aside. The respondents are directed to enter the name of the petitioner as ‘M/s Sozin Flora Pharma LLP’ in the revenue record within a period of four weeks from today.”
16. In the case at hand, on 20.9.2011, when name of MWIL was changed to MWIPL in the record of Registrar of Companies on conversion from ‘public’ to ‘private’ limited company, total number of shares held by MWIL was 51,26,000 only and aforesaid number of shares remained the same in the year 2012, 2013 and 2014, as is evident from annual returns of company with Registrar of Companies for the years 2012, 2013 and 2014 (Annexure P-17), total number of shareholders in 2012 and 2014 were eight and there was no immediate change in shareholding pattern of petitioner No.1 in the year 2014 when balance shareholding of MWIPL was acquired by SEB Internationale SAS. Despite change in name of petitioner No.1 now known as GSIPL, change in shareholders of Corporate Identification No. U31909DL2005PTC140652 of petitioner No.1 (now known as GSIPL) remained the same.
17. Needless to say, transfer of shares of shareholders of company to third party, does not mean transfer of properties of the company to third party nor shareholders have any right, title or interest in the property belonging to the company, meaning thereby second transfer of shares of erstwhile MWIPL to GSIPL, subject property remained the same. GSIPL, which is an independent corporate identity always remained owner of subject property.
18. Careful perusal of letter No. Rev.B.F10-154-2009, dated 16.2.2012 clearly provides that where merely the name of the Company is changed with the approval of Registrar of Companies in terms of Ss. 21 and 23 of the Companies Act, 1956, no transaction/sale of property takes place and only change in name of the Company is sought to be recorded in the revenue record, no stamp duty is chargeable.
19. Similarly, vide letter dated 15.3.2012, it stands clarified that permission under S.118 of the Act will be only granted when non-agriculturist seeks permission for sale of land and change of purpose, for which it is being used and when land is used for the purpose purchased.
20. Another Revenue Notification dated 22.9.2011 provides that in case proposed purchaser is a non-agriculturist , permission must be sought as per provisions of Rules on Form LR-XIV and in case land is proposed to be utilized for same purpose for which permission was granted in Essentiality Certificate.
21. Most importantly, Letter dated 28.5.2012 clearly provides that requirement of Essentiality Certificate for further sale of land, for which approval was already granted by Revenue Department to a non-agriculturist, shall be met if the Department concerned issues a No Objection Certificate together with a recommendation that the transferee is eligible to carry out the relevant activity. (Annexure P-16, page 158)
22. Undisputedly, in the case at hand, change in the name with the approval of Registrar of Companies came to be effected by Department of Industries, as such, respondents Nos. 1 and 2 had no option but to change the name of petitioner No.1 in the revenue records. Approval for change of name by Registrar of Companies under Ss. 21 and 23 of the 1956 Act corresponding to S.13 of the 2013 Act does not mean transaction or sale as such no stamp duty is chargeable. In the instant case, respondents Nos. 1 and 2 have failed to appreciate that change in name with approval of Registrar of Companies and issuance of Certificate of Incorporation by Registrar of Companies under Companies Act, 2013 does not mean transfer of land under S.118 of the Act.
23. In the aforesaid judgment, as taken note herein above, Division Bench of this Court held that change in revenue record can be carried out without payment of stamp duty and registration fee by applicant/transferee company and as such, this Court has no hesitation to conclude that upon acquisition of entire shareholding of petitioner No.1, there was no actual transfer of land within the meaning of S.118 of the Act and change of name of a company would not amount to transfer of assets from one company to another company. Payment of stamp duty and payment of registration charges are only levied upon an instrument of transfer (within the meaning of S.29 of Stamp Act and Registration Fee Act).
24. In the case at hand, change in the name of company from MWIL to MWIPL is mere change by addition of word “private”. Moreover, number of shareholding in MWIL and MWIPL remained the same and that cannot be said to attract stamp duty and registration fee.
25. In the case at hand, respondents Nos.1 and 2, while imposing conditions Nos. 1 and 2 in the impugned letter have failed to appreciate that change in the name of MWIPL.1 as GSIPL was an act of passing of a special resolution under S.13 of Companies Act,2013. Certificate of Incorporation upon change in the name issued by Registrar of Companies under Companies Act 2013 and under Rule 29 of Companies (Incorporation) Rules, 2014, is not an ‘instrument’ within the meaning of S.2(14) of the Stamp Act or under the provisions of Registration Act, attracting imposition of stamp duty and registration fee.
26. Leaving everything aside, this Court finds that change in the name of MWIPL to GSIPL is the result of an act of passing a special resolution under S.13 of the Companies Act, 2013 (pari-materia to Ss. 21 and 23 of Companies Act, 1956) based on which came to be issued No Objection Certificate for change of name of petitioner No.1 in the Register of Companies. Subject property has been used for industrial purposes which is an admitted fact and commercial production started on 15.5.2009 and as such, the application for approval filed by the petitioner No.1, under S.118 of the Act did not seek therein change of intended purpose for use of subject property.
27. Conditions Nos. 1 and 2, imposed while granting permission under S.118 of the Act, in law, are erroneous for the reason that respondents Nos. 1 and 2 have considered the change in name of petitioner No.1 to mean subject property was earlier purchased by former company and same has been transferred to separate company i.e. GSIPL, whereas, as has been discussed herein above, there is no transfer of assets rather, only change of name of company that too by way of passing of a special resolution under S.13 off the Companies Act, 2013.
28. Change of name of petitioner No.1 in revenue record does not mean transfer of assets, consequently, there is no obligation to pay stamp duty and registration fee, as has been held by this court in JSTI Transformers supra.
29. Consequently, in view of detailed discussion made supra and law taken note, this court finds merit in the present petition and same is allowed. Conditions 1 and 2 of Impugned Approval letter No. Rev.B.F.(10)-87/2019 dated 28.03.2019 (Annexure P-2) issued by the Respondent No.2 are quashed and set aside and respondents Nos. 1 and 2 are directed to take further action accordingly.
All pending applications stand disposed of.
Notes:-
1 Whether the reporters of the local papers may be allowed to see the judgment?
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