Court sets aside unearned increase demand, orders refund to petitioner. Conveyance deed to be executed promptly.

M/s GILLETTE INDIA LIMITED Versus DELHI DEVELOPMENT AUTHORITY

M/s GILLETTE INDIA LIMITED Versus DELHI DEVELOPMENT AUTHORITY - [2019] 214 Comp Cas 527 (Del) Issues Involved:
1. Levy of unearned increase on the subject property due to change in shareholding.
2. Refund of Rs. 3,94,57,027/- paid towards interest on unearned increase.
3. Execution of conveyance deed by DDA.

Issue-wise Detailed Analysis:

1. Levy of Unearned Increase on the Subject Property Due to Change in Shareholding:
The primary controversy revolves around whether unearned increase is payable due to the merger of Aquarium Acquisition Corp. (AAC) with Gillette Company, USA (TGC) and the subsequent transfer of TGC's shareholding in the petitioner to Procter & Gamble, Netherlands. The DDA argued that this change in shareholding constituted a transfer of the subject property, invoking Clause 4 of the lease deed, which restricts the lessee from selling, transferring, assigning, or parting with possession of the property without prior approval and mandates payment of unearned increase upon such transfer.

However, the court noted that the merger of Sharpedge with the petitioner (then known as Indian Shaving Products Ltd.) on 23.04.1992, which resulted in the transfer of the subject property to the petitioner, had already been settled, with the petitioner having paid the unearned increase for that transfer. The court emphasized that the transfer of shares within a company does not equate to the transfer of the company's assets. The court referenced established legal principles, including the distinct legal entity of a company separate from its shareholders, as upheld in cases like Bacha F. Guzdar v. Commissioner of Income Tax and Vodafone International Holdings B.V. v. Union of India.

The court concluded that the dilution of TGC's share capital and the transfer of shares to Procter & Gamble, Netherlands, did not constitute a transfer of the subject property. Consequently, the demand for unearned increase on this basis was deemed erroneous and set aside.

2. Refund of Rs. 3,94,57,027/- Paid Towards Interest on Unearned Increase:
The petitioner sought a refund of Rs. 3,94,57,027/- paid under protest towards interest on unearned increase. The DDA had previously decided to drop this demand, as recorded in the order dated 26.07.2012. The court noted that the DDA had acknowledged the illegitimacy of this demand and had committed to refunding the amount, subject to adjustments for any dues.

The court directed the DDA to compute the refundable amount in accordance with its decision from 26.07.2012 and the court's observations. The petitioner's claim for interest on the refundable amount was rejected, considering the high interest rate already applied and the payments made by the petitioner.

3. Execution of Conveyance Deed by DDA:
The petitioner also sought the execution of the conveyance deed for converting the subject property from leasehold to freehold. The court directed the DDA to execute the conveyance deed in favor of the petitioner within six weeks, without waiting for the determination of the refundable amount.

Conclusion:
The court set aside the impugned letters dated 15.04.2013, 14.05.2013, and 13.01.2015, which demanded unearned increase based on the change in shareholding. The DDA was directed to refund the amount of Rs. 3,94,57,027/- to the petitioner, compute any additional refundable amounts, and execute the conveyance deed within six weeks. The petition was disposed of with these observations.