The Tripura High Court in the case of Fortuna Agro Plantations Limited vs The State Of Tripura (RFA 07 of 2019) upheld that when the prohibition of transfer has been made by the statute, in violation thereof, any transfer even under guise will make the entire transaction untenable.
Facts of the case: The plaintiff is a Company incorporated under the Companies Act, 1956. The plaintiff is engaged in the business of tea and other allied industries. One Chunilal Banik, used to carry on the business under the name and style of Industrial Saw Mill as its sole proprietor. Following the directions of the apex court, Chunilal Banik was required to relocate his sawmills in the notified industrial estate for wood based industries. In order to run the saw mills, after locating them in any wood based industrial estate, Chunilal Banik required the license from the High Power Committee as per the directions of the apex court. During that time, Chunilal Banik approached the plaintiff and proposed to enter into an agreement. The plaintiffs sister concern M/S Fortuna Greenfields Private Limited, agreed to provide a portion of their land for setting up of an industrial estate.
According to the agreement the plaintiff would run the business of the saw mills by taking all steps at their costs and conveniences, and shall earn all profits and suffer loss, if any. Chunilal Banik shall receive a sum of Rs.12,000/- per month irrespective of the profit or loss. A power of attorney was executed in favor of the plaintiff authorizing them or their directors to do all acts necessary for the setting up and running the Saw Mills in the notified Industrial Estate on the land belonging to M/S Fortuna Greenfields Pvt. Ltd. The Industrial Saw Mill of Chunilal Banik was relocated. But the plaintiff was not allowed by the Forest Department, Government of Tripura to export the purchased timber from the Forest. The license was not renewed.
According to counsel for respondents, the principal defendants did not intend to cancel or withdraw the license or to rescind the same. Such permission was never granted to the plaintiff or any other person, not legally entitled to operate the Saw mill inasmuch as, the license is granted exclusively in favor of one Chunilal Banik, since deceased. According to them, the agreement based on which the plaintiff has raised the claim is entirely unlawful being prohibited by law inasmuch as the plaintiff had nothing to do with the licence and the licence could not be transferred in any form without prior approval of the licensing authority.
Judgment: The court held that, according to the Tripura Forest (Establishment and Regulation of Saw Mills and Other Wood Based Industries) Rules, 1985, the licence granted under those rules is not transferable. The arrangement was a transfer which has been prohibited by Rule 6(3) of the said rules. Hence, the agreement itself was unlawful under Section 23 of the Indian Contract Act.
It is a clear transfer in disguise and such transfer is completely prohibited by Section 6 of the Transfer of Property Act. No permission had been taken from the licensing authority before such transfer had taken place. When the prohibition of transfer has been made by the statute, in violation thereof, any transfer even under guise will make the entire transaction untenable
The court was of the view that since the said agreement read with the power of attorney was invalid in the eye of law within the precincts of Section 23 of the Indian Contract Act, the plaintiff had no locus standi to proceed with the suit.
JUDGMENT REVIEWED BY : SHUBHANGI CHAUDHARY