U.P. State Industrial Development Corpn. Ltd. v. Monsanto Manufacturers (P) Ltd.:

The learned counsel for the appellant Corporation submitted that the respondent Company has violated Clause 3(p) of the lease deed dated 5-9-1979 entered into between the said Company and the appellant Corporation inasmuch as its “memorandum of association” and “article of association” was altered without the written consent of lessor i.e. the appellant Corporation. In view of the same the appellant Corporation has the right to determine the said lease deed dated 5-9-1979.

On the other hand, according to the counsel for the respondent as the Company has got separate legal status and the Corporation has allotted the industrial plot to it by name and not in the name of its Directors, the Directors being only officials working on behalf of the Company, mere change of names of the Directors or shareholders does not in any way or manner affect the legality or status of the respondent Company. It was further contended that change of names of the Directors, shareholders duly done within the purview of the Companies Act, 1956, does not affect the legal status of the respondent Company and much less there has been any transfer of the site by the Company to any other individual person.

 Clause 4(h) of the licence agreement prohibits licensee's acts to directly or indirectly transfer, assign, sale, encumber or part with its interest under the benefit of the said agreement without previous consent in writing of the grantor, relevant portion of which reads as follows:

“4.(h) That the licensee will not directly or indirectly transfer, assign, sell, encumber or part with its interest under or the benefit of this agreement or any part thereof in any manner whatsoever without the previous consent in writing of the grantor and it shall be open to the grantor to refuse such consent or grant the same subject to such conditions as may be laid down by the grantor in that behalf.”

In the present case the entire shareholding of Goyal family headed by Mr Amar Nath Goyal in the said company was transferred to the Mehta-Lamba family. The entire list of shareholders, Managing Director and Board of Directors was provided by Monsanto to the appellant Corporation vide letter dated 7-5-1994. The record shows that the original subscribers of shares were members of the Goyal family and the entire shareholding was transferred to the Mehta-Lamba family. Therefore, the original subscribers of shares of Respondent 1 Company were totally changed.

 The “memorandum of association” of a company limited by shares mandatorily prescribes in “Table B” (Table B of the 1956 Act and Table A of the 2013 Act deal with company limited by shares) of the Companies Act mandatorily prescribed that the names, addresses, description, occupation of subscribers shall be given in memorandum of association. In this case as the original subscribers of shares were changed in 1994, there was material alteration in the “memorandum of association” of Respondent 1 Company.

It was also contended that there was an alteration in “articles of association” of Respondent 1 Company as well. The last column of “articles of association” also mandatorily provides for giving names, addresses and description of subscribers. In this case, the subscribers of shares have been completely changed from the Goyal family to the Mehta-Lamba family and hence there was material alteration of “articles of association” of Respondent 1 Company.

In this case, the ownership of a huge industrial plot measuring 14,533 sq ft in the prestigious and economically affluent area of Sahibabad (Ghaziabad) has been transferred from the Goyal family to the Mehta-Lamba family for material financial gains, by adopting clever means that too without taking written consent of the lessor i.e. the appellant Corporation. There are many instances/examples in which the lessee gets allotment of huge industrial plots and thereafter sells the same for huge monetary gains. This adversely affects the aims and objectives of Appellant Corporation i.e. the planned development of industrial areas in the State of Uttar Pradesh. The Hon'ble High Court ought not to have interfered in the matter looking into the public interest involved and Clause 3(p) of the lease deed.