Paramount Rice Pvt. Ltd. and Others vs State of Rajasthan and Others

M.N. Bhandari, J.

This writ petition has been filed to challenge the order dated 19.3.2008 and 25.4.2008 whereby direction has been issued for registration of lease deed after due payment of stamp duty apart from the registration of the sale deed.

The petitioner No. 2, present in person, submits that a partnership firm in the name of Rameshwar Industries, Bundi was carrying business of stone cutting and of rice mill. The firm was owning a land. An application was moved to the District Collector, Bundi to convert 1 bigha of land out of the total 7 bigha 10 biswa from agriculture to industrial. The Collector, Bundi, vide its order dated 16.4.1988/2.5.1988 allowed conversion of the land from agriculture to industrial. On conversion, a lease deed was executed in the name of partnership firm. The partnership firm thereupon made another application for conversion of remaining land so as to establish an industry. The conversion was permitted by the Collector vide order dated 23.1.1991 and, accordingly, lease deed was executed between the partnership firm and the Collector. The firm thereupon decide to convert partnership firm into a private limited company thus agreed to transfer business of the firm with all assets and liabilities to the company. The partnership firm was dissolved with execution of a deed and transferred the business to M/s. Paramount Rice Pvt. Ltd.

The State Government, vide its letter dated 19.3.2008, directed the District Collector for execution of sale deed between partnership firm and the company with registration after payment of required stamp duty. It further directed that the revised lease deed be executed accordingly. In pursuance to the direction of the State Government, the District Collector issued an order on 25.4.2008 for execution of sale deed with payment of stamp duty and registration therewith apart from execution of the revised lease deed in place of original lease deed executed on conversion of the land.

It is submitted that the orders passed by the State Government so as the Collector, Bundi are illegal, rather, it is in ignorance of the dissolution deed of the partnership firm where assets and liabilities of the partnership firm were given to a private limited company. In view of the dissolution deed, question of execution of sale deed apart from payment of stamp duty and registration thereafter is illegal, thus impugned order may be quashed.

I have considered the submissions made by the petitioners and perused the record.

The facts already mentioned above are not required to be repeated, however, it would be relevant to refer to the fact regarding dissolution deed of partnership firm and subsequent events. It is, no doubt, true that the dissolution deed was executed wherein partners decided not only to dissolve the partnership firm but to take assets and liabilities of the firm to be capital of the company. Thereby, private limited company took over the assets and liabilities of the firm. The District Collector thereupon passed an order dated 7.11.2001. It was on a request of the petitioners for amendment in the lease deed so as to register the land in the name of the private limited company. Therein, referring to the provisions of the Rajasthan Land Revenue (Allotment of Land for Industrial Area) Rules, 1959 respondents increased lease amount by 50% for new lease. The original lease deed was not submitted by the petitioner for change of name thus letters were sent by the respondents to submit original lease deed so as to issue fresh lease. The petitioners thereupon made an application on 28.3.2007 for execution of lease agreement within three months. The time was extended by the respondents on its expiry. The petitioners again submitted letter on 18.5.2007 for execution of revised lease deed in favour of the petitioner company. The correspondence was further exchanged between the parties thereupon also. In the meanwhile, matter was referred to the government regarding execution of the lease deed. Referring to the circular of the department dated 21.11.1996, it was clarified that a revised lease deed is required to be executed. Accordingly, a direction was given for execution of the sale deed for transfer of the property from the firm to the company with registration so that revised lease deed may be executed thereupon. The learned Collector reiterated direction of the government in its letter dated 25.4.2008.

The question for my consideration is as to whether transfer of the property from the firm to a private limited company can be made by a dissolution deed without registration and by paying stamp duty?

To answer the question aforesaid, item No. 55 of Schedule appended to the Rajasthan Stamp Act, 1998 (for short ''the Act of 1998'') is relevant and is quoted hereunder -

"THE SCHEDULE

(See Section 3)

Exemption:

Transfer of any lease exempt from duty."

The provision requires stamp duty on transfer of lease deed. The transfer of property from partnership firm to the private limited company cannot by dissolution of partnership firm but by the transfer of property as per the provisions of law. The aforesaid was ignored by the Collector initially while passing the order but then an order contrary to the provisions of law cannot hold field to the benefit of the petitioners. The word ''assignment'' used in the provision quoted above means transfer of right, interest or title of the property as per the dictionary meaning. It includes transfer of document also. By virtue of dissolution deed, right and interest have been transferred to the company without payment of stamp duty.

The order passed on 7.11.2001 only permits transfer of lease deed in favour of the company but there is no lease deed in favour of the company thereupon.

The representation of the petitioners dated 8.3.2007 shows contest about requirement of registration, as according to them, transfer of property from partnership deed to private limited company does not amount to transfer. It is, however, not supported by any provision of law, rather, as per the Act of 1998, it needs payment of stamp duty. Though the letter sent by the petitioners makes a reference of the judgment of the Revenue Board for similar transaction but cannot hold field in ignorance of the provisions of the Act of 1998.

In view of above, I do not find any illegality in the directions given by the State Government so as the Collector, Bundi for execution of the documents and registration thereon. The immovable property of a partnership firm cannot vest in a private limited company based on a dissolution deed and in ignorance of the provisions of the Transfer of Property Act so as the Rajasthan Stamp Act, 1998.

The petitioners have given reference of section 575 of the Indian Companies Act, 1956, which provides vesting of movable or immovable property of the partnership firm in a private limited company on the date of incorporation of the company. The argument is without any material and pleading about conversion of partnership firm into a company. It is not a case of the petitioners that the partnership firm was converted into a company rather contents of the writ petition show dissolution of the firm to transfer assets and liabilities of the firm and creation of the company thereupon. There is no document available on record regarding conversion of the partnership firm into company. Reference of the judgment of the Andhra Pardesh High Court in the case of Vali Pattabhirama Rao and Another Vs. Sri Ramanuja Ginning and Rice Factory P. Ltd. and Others, and Madras High Court in the case of "LKS Gold House (Pvt.) Limited versus LKS Gold Palace" [2005] 57 SCL 363 (Mad.) has been given in ignorance of the fact that the case therein was of change of the constitution of partnership firm into company and not for dissolution of the firm and constitution of a company as is in the present case. The written arguments submitted by the petitioners are otherwise not conforming to the pleadings of the writ petition yet it has been taken into consideration.

In view of the discussion made above, writ petition so as the stay application are dismissed.