Summary
A court-sanctioned demerger transferring a DDA commercial plot between two public companies attracted the lease’s 50% unearned-increase liability. Common promoters, directors and substantial shareholding, and absence of monetary consideration, did not remove the transaction from the transfer clause. The relevant policy exemption concerned different specified conversions and could not be extended by analogy. The Division Bench’s contrary ruling was set aside and dismissal of the companies’ writ petition restored.
Issues
- Whether the demerger transfer attracted the lease’s unearned-increase clause despite common control and no consideration.
- Whether the policy’s specified exemption could be extended to this reorganisation.
Provisions considered
- Clause 6(a), DDA Perpetual Lease Deed dated 28 September 1993Required consent and permitted recovery of 50% of unearned increase on transfer; the premium-to-market-value measure did not depend on transaction consideration. (¶¶ 3, 11, 13–17)
- Clauses 1(b) and 2(d), DDA instructions dated 6 September 1988 on unearned increaseThe partnership-conversion exemption did not cover these companies; common directors in a separately floated company did not exempt the transfer. (¶¶ 5, 12–15)
Held
- The scheme expressly transferred and vested the plot in the second company. The company-court order did not make this an involuntary transfer or displace the lessee’s contractual obligations. (¶¶ 13, 16)
- Clause 6(a) covered sale, transfer, assignment and parting with possession. Unearned increase depended on premium and market value, and could arise notionally where no consideration passed. (¶ 11)
- The policy’s limited partnership-to-private-company exemption could not be expanded to a public-company demerger. The policy itself was unchallenged, and clause 2(d) applied despite common directors or continued existence of the original company. (¶ 12–15)
- Common control and the parent’s 98.62% shareholding did not absolve the lease obligation. The Single Judge correctly upheld the demand and notice. (¶ 16–18)
Result
Appeal allowed without costs. Division Bench judgment set aside; Single Judge’s dismissal of W.P.(C)No.1885 of 2011 restored, leaving the unearned-increase demand and show-cause notice upheld. Applications disposed of.