The Court perused the four perpetual lease agreements and noted that all the agreements had identical clauses putting an embargo on the lessee selling, transferring, assigning or otherwise parting with the possession of the whole or any part of the commercial plots without the previous written consent of the lessor.
The court also observed that the respondent-DDA, is entitled to recover a portion of the unearned increase in the value.
The issue before the court was : Whether the amalgamation will amount to transfer of the said plots?
The Court perused the order of the High Court sanctioning the scheme of amalgamation between the companies and answered this question in positive.
The Court observed that in the order sanctioning the amalgamation, M/s. Jaiprakash Associates Private Ltd (the erstwhile company) was shown as the ‘transferor company’ and M/s. Jaypee Rewa Cement Ltd was shown as the ‘transferee company’ and the plots leased from the respondents herein, were specifically mentioned in the schedule to the amalgamation as being transferred to the transferee company.
The Court was of the view that the embargo in the lease deeds covers the said transfer also as it covers all the categories of transfers including by way of sale, transfer, assignment or otherwise part with the possession in any manner, of the whole or any part of the commercial plots without the written consent of the lessor, including involuntary transfers.
The Court rejected the submission of the appellants that the transfer in this case is not covered by the transfer defined under Section 5 of the TPA.
Section 5 of the Transfer of Property Act clarified that nothing contained therein shall affect any law for the time being in force in relation to the transfer of property to or by companies and therefore, Section 5 of the TPA was not applicable to the present case.
The Court opined that the relevant clause in the perpetual leases, which were the subject matter of the appeal, was very wide. It not only covers transfers but also parting with possession.
The Court found nothing illegal about the impugned judgment and dismissed the appeal.
This judgment is particularly relevant given how many companies lease plots from the government for commercial use. The clarification that the amalgamation of companies and the resultant transfer of assets will attract unearned increase in value for the government lessor is an aspect that will have to be factored into the commercials, while deciding on any merger.
Source: Barandbench
