In Brief
A partnership firm holding a limestone mining lease sought to transfer it to a newly formed private company (with the same partners as directors), claiming no consideration was involved—just a change of business form. This was approved. However, shortly after, the entire shareholding of the private company was transferred to another company (UTCL) for Rs. 160 crores. The State later cancelled the lease, alleging this was an unauthorized sale. The High Court quashed the cancellation. The Supreme Court reversed, holding that when examined as a single integrated transaction (rather than two separate ones), this was effectively a sale of mining rights for Rs. 160 crores, concealed through the corporate structure. Since mining rights belong to the State and require statutory consent for transfer with consideration, the transaction was void. The Court applied the doctrine of lifting the corporate veil and remitted the matter to the State to frame a transparent policy for future transfer decisions.
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