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2016 DIGILAW 1100 (KER)

Sepack India Pvt. Ltd. v. Controller of Legal Metrology

2016-12-14

SHAJI P.CHALY

body2016
JUDGMENT : Shaji P. Chaly, J. This writ petition is filed by the petitioner seeking to quash Exts. P-8 to P-11 and declare that the petitioner is entitled to use the Dealer's License (Ext. P-1), Manufacturer's License (Ext. P-2), and Repairer's License (Ext. P-3) issued by the 1st respondent to M/s Sevana Packaging Systems Pvt. Ltd., which was amalgamated into the petitioner company as per Ext. P-4 order passed by the Company Court in C.P. No. 17/2015 on 8-10-2015, and for other related reliefs. Material facts for the disposal of the writ petition are as follows: 2. Petitioner company sought for a change of the name in its favour from the license-holding company, M/s Sevana Packaging Systems Pvt. Ltd., which was amalgamated with the petitioner company by an order of amalgamation passed by this Court by its order dated 8-10-2015, in C.P. No. 17 of 2015. The licenses viz., Dealer's License, Manufacturer's License and Repairer's License were held by the transferor company amalgamated to the petitioner company, under Legal Metrology Act, 2009. According to the petitioner, as a result of merger under the Scheme of Amalgamation, all these licenses stood vested with the petitioner company from the effective date of amalgamation viz., the date on which the certified copy of order of amalgamation passed by this Court was filed before the Registrar of Companies, Kerala. 3. However, the applications made by the petitioner company for resultant change of name in the licenses mentioned above was rejected by the 1st respondent, stating that the petitioner company is not entitled to use those licenses hitherto held and used by the transferor company. According to the petitioner, the said order was passed without hearing the petitioner in gross violation of the principles of natural justice and in total disregard of the legal result of amalgamation under Section 394 of the Companies Act, 1956, and the order passed by this Court thereunder. Therefore, seeking to set aside Exts. P-8 to P-1l rejecting to transfer the licenses in favour of the petitioner, this writ petition is filed. 4. First respondent has filed a statement with the following contentions: Exts. P-1, P-2 and P-3 Dealer's License, Manufacturer's License and Repairer 's License are issued by the 1st respondent in favour of M/s Sevana Packaging Systems Pvt. Ltd. These licenses are issued under the Legal Metrology Act, 2009, as a permission to conduct the respective activities. 4. First respondent has filed a statement with the following contentions: Exts. P-1, P-2 and P-3 Dealer's License, Manufacturer's License and Repairer 's License are issued by the 1st respondent in favour of M/s Sevana Packaging Systems Pvt. Ltd. These licenses are issued under the Legal Metrology Act, 2009, as a permission to conduct the respective activities. Under the provisions of Legal Metrology Act and Rules, license issued to a person/legal entity is not transferable or saleable. Therefore, it is submitted, amalgamation of the erstwhile company with the petitioner company has no legal consequences as far as the respondents are concerned. That apart, it is stated, going by the schedule of amalgamation, all rights and liabilities of the transferor company are transferred to petitioner, transferee company, and no rights have been accrued on the transferor company by issuing license by the Department. It is only a permission subject to scrutiny by the Department. Hence the transfer of license is not covered by the scheme of the amalgamation, since the license issued by the Department has not created any right to the erstwhile company. 5. It is also contended, after amalgamation, transferor company ceased to exist and thereafter transferor company and transferee company cannot function in a blended form. When the transferor company has ceased to exist in the eye of law, transferee company cannot claim any privilege or concession enjoyed by the transferor company. Therefore, it is the contention of the 1st respondent, petitioner is not entitled to get the licenses transferred consequent to the amalgamation. However, if a fresh application for license is submitted by the transferee company, the same will be considered by the respondents. 6. Petitioner has filed a reply affidavit, reiterating the stand adopted in the writ petition and has produced Ext. P-12, a copy of the Scheme of Amalgamation. According to the petitioner, as per the scheme sanctioned by this Court in C.P. No. 17 of 2015, and specifically Clause 3.5 provides that all licenses, permits, entitlements, approvals etc. etc., before or after the appointed date including Income Tax benefit and exemptions will stand transferred to the petitioner. Therefore, it is the contention that by virtue of the provisions of the scheme of amalgamation, petitioner is entitled to get all licenses transferred by the 1st respondent, and therefore the adverse orders passed, evident from Exts. etc., before or after the appointed date including Income Tax benefit and exemptions will stand transferred to the petitioner. Therefore, it is the contention that by virtue of the provisions of the scheme of amalgamation, petitioner is entitled to get all licenses transferred by the 1st respondent, and therefore the adverse orders passed, evident from Exts. P-8 to P-11 are liable to be quashed and appropriate directions are issued for transfer of the licenses. 7. Heard learned counsel for the petitioner and the learned Senior Government Pleader. Perused the documents on record and the pleadings put forth by the respective parties. 8. Learned counsel for the petitioner has invited my attention to the judgment of the Madras High Court in Binny Ltd.(1972) 42 Comp. Case 626 (Mad)., wherein a question arose, consequent to the amalgamation of the Insurance company with the petitioner company, of which it was an agent, after the amalgamation had applied to the Controller of Insurance, for substitution of its name for that of the insurance company in the license issued to it to act as an agent. On the refusal by the Controller, proceedings were initiated before the High Court for necessary direction and therein, it is held that there is no express prohibition to recognize the transfer that is brought about by reason of the amalgamation of companies under the provisions of the Companies Act, and it was for the purpose of enabling principal agents to continue to act as ordinary agents that Section 42 of the Insurance Act was amended by the Insurance (Amendment) Act, 1957, and therefore the Controller of Insurance was directed to amend the license. Without elaborating much on the factual circumstances of the said case, it is clear, there was no prohibition created under the Act in question for transferring the name of the Insurance company as that of the petitioner. 9. Yet another decision pressed into service is the judgment of the High Court of Calcutta in India Power Corporation Limited & another v. West Bengal Electricity Regulatory Commission & others W.P. No. 22561 (W) of 2014 dated 17-8-2015, and invited my attention to paragraphs 11 and 12. 9. Yet another decision pressed into service is the judgment of the High Court of Calcutta in India Power Corporation Limited & another v. West Bengal Electricity Regulatory Commission & others W.P. No. 22561 (W) of 2014 dated 17-8-2015, and invited my attention to paragraphs 11 and 12. On a reading of the factual circumstances discernible from the said judgment, it is specific and clear, the factual circumstances in this case are entirely different and there was no consideration of any prohibition created under a statute for the transfer of a license. 10. Another judgment pointed by the learned counsel for the petitioner is that of the Apex Court in M/s Singer India Limited v. Chander Mohan Chadha & others Appeal (Civil) 387 dated 13-8-2004, wherein, it is held that the provision for facilitating reconstruction and amalgamation of companies is made under Section 394 of the Companies Act, and in an amalgamation, two or more companies are fused into one by merger or by one taking over the other, it is held that, reconstruction or amalgamation has no precise legal meaning, and in Halsbury's Laws of England (4th Edn.), para. 1539, the attributes of amalgamation of companies are described as a blending of two or more existing undertakings into one undertaking, the shareholders of each blending company becoming substantially the shareholders in the company which is to carry on the blended undertakings. There may be amalgamation either by transfer of two or more undertakings to a new company, or by the transfer of one or more undertakings to an existing company. By referring to the said judgment, learned counsel contends that consequent to the amalgamation of the transferor company with the petitioner company, which is merged into one, entire rights and privileges held by transferor company, by virtue of the provisions of Section 394 of the Companies Act, are entitled to be enjoyed by the petitioner company. 11. On the other hand, learned Senior Government Pleader contended that by virtue of Rule XI (10) of the Kerala Legal Metrology (Enforcement) Rules, 2012, a prohibition is created from sale or transfer of licenses issued under the said Act. Therefore, when a statute prohibits a particular act, merely because an amalgamation takes place, that will not in any manner interferes with the prohibition created under a statute. Therefore, when a statute prohibits a particular act, merely because an amalgamation takes place, that will not in any manner interferes with the prohibition created under a statute. In that regard, learned Government Pleader has invited my attention to the judgment of the Apex Court in M/s General Radio and Appliances Co. Ltd. and others v. M. A. Khader (Dead) by LRS. (1986) 2 S.C.C. 656 . There, the Apex Court was considering a question with respect to the voluntary amalgamation of the tenant company vis-a-vis prohibition of subletting contained under A.P. Buildings (Lease, Rent and Eviction) Control Act, 1960, and held that by virtue of the amalgamation, the prohibition created under the said Act against subletting will not be watered down. 12. So also, the judgment in Saraswati Industrial Syndicate Ltd. v. Commissioner of Income Tax 1990 (Supp.) S.C.C. 675 is pressed into service, wherein, the Apex Court was considering the question of amalgamation of two companies in the context of allowance under Section 41(1) of the Income Tax Act, 1961, and held that allowance made to the transferor company which was a different assessee, could not be held to be the income of the amalgamated company for the purpose of Section 41(1) of Act, 1961, the transferee company is a different entity, and therefore the appellant company was not liable to pay tax. The sum and substance of the argument put forth by the learned Senior Government Pleader is that, when there are statutory prohibitions in respect of doing a particular act in a particular way, consequent to the amalgamation of a company, it is to be done in accordance with the provisions of the law. It is also contended that merely because a scheme was approved by the Company Court under Section 394 of the Companies Act, 1956, those are all terms entered into by and between the parties and the scheme was acceptable to the Court, which will in no manner take away the statutory limitations created against the petitioner company. Therefore, it is the contention of the learned Senior Government Pleader, petitioner is not entitled to get transfer of the licenses as of right, and therefore Exts. P-8 to P-1l orders passed by the 1st respondent are in accordance with law. 13. Therefore, it is the contention of the learned Senior Government Pleader, petitioner is not entitled to get transfer of the licenses as of right, and therefore Exts. P-8 to P-1l orders passed by the 1st respondent are in accordance with law. 13. To counter the said contention, learned counsel for the petitioner submitted that the prohibition created under Rule XI (10) of the Rules, 2012 is against sale or transfer or while amalgamation takes place, there is no sale or transfer involved and therefore the said prohibition will not apply to the facts and circumstances of this case. 14. Taking note of the respective submissions made across the Bar, the sole question to be decided is whether the prohibition created under Rule XI (10) of the Rules, 2012 against sale or transfer of licenses issued by the 1st respondent applies to the petitioner company to which the license holder is amalgamated to. The word ‘amalgamation' is defined under the Black's Law Dictionary Ninth Edn. as "act of combining or uniting; consolidation, etc. etc.". 15. The act of amalgamation of the license holder with the petitioner company is not at all a disputed fact, which was done in accordance with law as per Section 394 of the Companies Act, 1956. it is also true that the scheme is approved by this Court and thereafter the license holder merged with the petitioner company. The fact remains, whatever agreement and understanding entered into by and between the transferor company and transferee company can only be subject to the laws in force under a statute. Consequent to the amalgamation by and between the parties, it can only be understood as an agreement to transfer those licenses in favour of the transferee company by the transferor. In the amalgamation process, the licensing authorities are not parties and the agreement entered into by and between the transferor and the transferee will not in any manner dissuade the statutory authorities from implementing the provisions of law in accordance with the powers conferred on them. Therefore, subject to the terms and conditions of the amalgamation scheme, petitioner company has applied for transfer of licenses in its favour. Therefore, subject to the terms and conditions of the amalgamation scheme, petitioner company has applied for transfer of licenses in its favour. The 1st respondent could not do the same in view of the prohibition created under the Rules and therefore it cannot be said that there is any arbitrary, illegal, or unfair exercise of power by the 1st respondent in not effecting transfer of the licenses, as sought for by the petitioner. So also, in effect, the amalgamating company in its entirety is transferred to the amalgamated company, thus in every sense, and for all practical and legal purposes, amalgamating company lost its identity completely after amalgamation. Therefore, whatever said and done, it is a transfer for the purpose of applying the provisions of Rules, 2012. 16. In my considered opinion, the judgment of the Apex Court in M/s General Radio and Appliances Co. Ltd. and others (supra) clearly applies to the facts and circumstances of this case. If the statutory provisions are given a go by, by virtue of the amalgamation entered into by and between the parties in a scheme of amalgamation, the consequences will be disastrous, and it will be very easy to flout the statutory provisions contained under various statutes in vogue. As held by the Apex Court in the afore-cited judgments, the amalgamation has no specific meaning assigned to it, and it depends upon various facts and circumstances, on the basis of the contract entered into by and between the transferor and transferee company. However, the agreement entered into by and between the parties cannot in any manner alter the statutory provisions. 17. Therefore, in my considered opinion, Exts. P-8 to P-1l orders passed by the 1st respondent are in accordance with the provisions of the Legal Metrology (Enforcement) Rules, 2012. The 1st and 2nd respondents have acted only in accordance with the provisions of the Rules, which are not under challenge in this writ petition. Therefore, I find no illegality, arbitrariness, unfairness of any other legal infirmities warranting interference of this Court under Article 226 of the Constitution of India. 18. Resultantly, writ petition fails, and accordingly it is dismissed.