Starlight Bruchem Ltd. vs State of Rajasthan and Others

Sangeet Lodha, J.—This writ petition is directed against the demand of 50% of the license fee quantified at Rs. 12,50,000/- raised by the Additional Commissioner, Excise, Rajasthan, Jaipur, for the substitution of the name of the petitioner company in place of M/s. Narang Distillery Limited, in the license issued in favour of the said company, to manufacture spirit from grain base in its Distillery situated at village Sundani, District Banswara.

The facts relevant are that M/s. Narang Distillery Limited, a company incorporated under the provisions of Companies Act, 1956 (for short "the Act of 1956"), was granted a license to manufacture spirit from grain base in its Distillery situated at village Sundani, District Banswara, under Rule 4 of Rajasthan Distillery Rules, 1977. The license was renewed from time to time and was valid upto 31.3.13. The company by a special resolution adopted and with the approval of the Central Government in writing, changed its name from M/s. Narang Distillery Limited to M/s. Starlight Bruchem Limited, in terms of the provisions of Section 21 of the Act of 1956. Consequent upon the change of the name, fresh certificate of incorporation was issued by the Registrar of Companies, Uttar Pradesh on 27.6.11, pursuant to Section 23 of the Act of 1956. Thereafter, an application accompanied by the relevant documents was submitted by the company to the Commissioner, Excise, Rajasthan, Udaipur for change of name of the company in the record of the Department of Excise, Government of Rajasthan. The Additional Commissioner, Excise vide communication dated 21.9.12 sought clarification as to whether the owner of both the units are the same or different, which was responded to by the petitioner vide communication dated 10.11.12 accompanied by requisite documents, clarifying that it is only the case of change of the name of the company and the license issued has not been transferred to a different company. However, the Additional Excise Commissioner, Rajasthan, Jaipur vide communication dated 1.1.13 addressed to the District Excise Officer, Banswara with the copy endorsed to the Manager, M/s. Narang Distillery Limited, directed that the petitioner company may be directed to deposit 50% amount of the license fee and bond license fee quantified at Rs. 12.50 lacs as per the provisions of Rule 72B of the Rajasthan Excise Rules, 1956 (for short "the Rules of 1956"), for the change of the name of the company from M/s. Narang Distillery Limited to Starlight Bruchem Limited. Hence, this petition.

Precisely, the case of the petitioner is that in terms of Rule 72B of the Rules of 1956, 50% of the license fee is required to be paid only in case where the license issued is sold or transferred and since in the instant case, the petitioner has applied for only the change of name of the company in the record and there is no transfer of the license from the petitioner company to another company and therefore, the demand raised for 50% of the license fee in terms of the provisions of Rule 72B of the Rules of 1956, is ex facie illegal and without jurisdiction.

The respondents in their reply to the writ petition has taken the stand that the petitioner has not given the details of shareholding structure of the company prior to the change of the name and thereafter. It is submitted that the change of name of the company involve amendments in the Memorandum of Association and Articles of Association, however, the petitioner has not furnished the details in this regard. It is submitted that instead of supplying the information sought by the Department of Excise, the petitioner indulged in sending irrelevant communications. It is submitted that the petitioner has not produced any document showing that the legal entity of the company remains the same and therefore, the demand raised is absolutely in conformity with the provisions of Rule 72B of the Rules of 1956.

Learned counsel for the petitioner submitted that from bare perusal of the certificate of incorporation issued by the Registrar of Companies and other documents on record, it is manifestly clear that there is no change in the legal entity of the company and it is only a case of change of the name in conformity with the provisions of Section 21 of the Act of 1956. Learned counsel submitted that all the relevant documents were placed on record by the petitioner company in response to the clarification sought by the respondents by way of various communications and therefore, the stand taken by the respondents in their reply to the writ petition that no documents showing that it is only a case of change of name of the company were placed on record, is ex facie incorrect.

On the other hand, learned counsel appearing for the respondent reiterating the stand taken in the reply to the writ petition submitted that the petitioner has not furnished details of shareholding structure of the company prior to the change of the name and thereafter as also the documents showing that the legal entity of the company has not changed and therefore, the demand raised in terms of Rule 72B of the Rules of 1956, cannot be faulted with.

I have considered the rival submissions and perused the material on record.

The controversy raised rolls around the provisions of Rule 72B(1) of the Rules of 1956, which may be beneficially quoted:

"72B. Transfer of a licence--(1) Every licencee shall be deemed to have been granted or renewed personally to the licensee and no licence shall be sold or transferred without obtaining previous permission in writing from the licensing authority and such permission shall not be accorded unless an amount equal to 50% of the licence fee has been paid.

Provided that addition(s) or deletion(s) or substitution(s) of name(s) of co-licensees constituting a particular licence in or from running licence shall be sanctioned by the Licensing Authority on such terms and conditions as he thinks fit."

Indisputably, in terms of Rule 72B of the Rules of 1956, every license issued is deemed to have been granted or renewed personally to the licensee and no license could be sold or transfer without previous permission in writing of the licensing authority and no permission for the transfer of the license could be granted without payment of 50% of the license fee. There is nothing on record to suggest that the undertaking of M/s. Narang Distillery Limited with assets and liabilities has been transferred to a different company M/s. Starlight Bruchem Limited, the petitioner herein. To the contrary, the documents placed on record manifestly shows that the company-M/s. Narang Distillery Limited had changed its name after adopting special resolution in the meeting of its members with the approval of the Central Government and accordingly, the Registrar of the Companies has entered new name on the register in place of the former name and issued a fresh certificate of incorporation with the necessary alterations embodied therein, in conformity with the provisions of Section 23 of the Act of 1956 and thus, after issuance of the certificate, the change of name of the company becomes effective. Obviously, after issuance of the certificate of incorporation as aforesaid, the necessary alterations must have been made by the Registrar of Companies in its Memorandum of Association. Further, it is pertinent to note that in view of the provisions of sub-section (3) of Section 23 of the Act of 1956, the change of name does not affect any rights or obligations of the company or render defective any legal proceedings by or against it and any legal proceedings which might have been continued or commenced by or against the company by its former name may be continued by or against the company by its new name. In the considered opinion of this court, ignoring the certificate of incorporation issued by the Registrar of Companies certifying the change of the name of the company, the conclusion arrived at by the respondents regarding transfer of the license by M/s. Narang Distillery Limited in favour of M/s. Starlight Bruchem Limited, treating it to be a different company, is avowedly arbitrary and unjustified.

In view of the discussion above, without there being anything suggesting that M/s. Narang Distillery Limited has transferred the license issued in its favour to a different company, the demand raised by the respondents in terms of Rule 72B of the Rules of 1956, presuming the transfer of the license, is ex facie illegal and without jurisdiction.

In the result, the writ petition succeeds, it is hereby allowed. The impugned demand raised by the respondents vide communication dated 1.1.13 is quashed. The respondents are directed to permit the change of name of the company from M/s. Narang Distillery Limited to M/s. Starlight Bruchem Limited in the license issued and the relevant record of the Department of Excise, Government of Rajasthan. No order as to costs.