9911796707
TMI Blog1980 (7) TMI 214X X X X Extracts X X X X X X X X Extracts X X X X ..... e, which has been filed on behalf of the CLB which is opposing this application. The transferee-company has built up huge reserves and as on 31st March, 1979, its net worth is Rs. 226.61 lakhs as against a paid-up capital of Rs. 126.72 lakhs. Keshari Steels and Industries Ltd., the transferor-company, was incorporated on 12th August, 1971. Its original name was Rolta Industries Private Ltd., which has been subsequently changed to the name mentioned above. It carries on business at Dewas in Madhya Pradesh. It is admittedly a wholly owned subsidiary of the transferee-company. The transferor-company is admittedly quite sick and has a large accumulated loss. The reasons for the proposed scheme of amalgamation are stated in para. 13 of the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourage the amalgamation of sick units with prosperous and financially viable units. He submitted that such an amalgamation has certain obvious advantages particularly with regard to the income-tax dues of the amalgamated company. I must say, however, that apart from a statement in the affidavit-in-reply filed on behalf of the petitioner, there is no other material before me in support of this submission with regard to the government policy. The second answer of Mr. Mookerjee, however, is much more substantial. Mr. Mookerjee drew my attention to the scheme of amalgamation which is annex. A to the petition and clause 5 whereof is as follows: "The scheme is conditional upon and subject to necessary declaration being made by the Central Gov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich the amalgamation was effected, and the other provisions of this Act relating to set off and carry forward of loss and allowance for depreciation shall apply accordingly. (2) Notwithstanding anything contained in sub-section (1), the accumulated loss shall not be set off or carried forward and the unabsorbed depreciation shall not be allowed in the assessment of the amalgamated company unless the following conditions are fulfilled, namely : ( i )during the previous year relevant to the assessment year for which such set off or allowance is claimed, the business of the amalgamating company is carried on by the amalgamated company without any modification or reorganisation or with such modification or reorganisation as may be approve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mr. Mookerjee is sound and should be accepted. The provisions of section 72A of the I.T. Act, 1961, referred to by Mr. Mookerjee clearly contemplate the amalgamation or merger of a financially unsound company with another company. This objection of the CLB is, therefore, held to be without any foundation and is rejected. The second objection of the CLB is that section 372(4) of the Act is being contravened in the facts of the present case. This is because, according to para 6 of the affidavit of Mukherjee, the purchase by the holding company of the shares of the transferor-company is far in excess of 10% of the subscribed capital of the transferor-company. Consequently, since the purchase is not sanctioned by a resolution of the transfere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the present case. I further hold that section 372 has no manner of application to the facts of the present case. The last objection of the CLB is, as will appear from paras. 7 and 8 of the affidavit of Mookherjee, that the transferee-company is liable to registration under section 26 of the MRTP Act, 1969. As such, in view of the provisions of section 23 thereof the court is precluded from sanctioning this amalgamation. In reply to this contention Mr. Mookerjee drew my attention to a letter dated 22nd September, 1978, from the joint directors of the Ministry of Law, Justice and Company Affairs of the Govt. of India, addressed to the transferee-company alleging that the company is liable to apply under section 26 of the MRTP Act and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th January, 1980, and 6th February, 1980, respectively, annexed to the affidavit-in-reply. Thereafter, there is complete silence from the end of the joint director. On the basis of the above, Mr. Mookerjee submitted that quite apart from the fact that, in the facts and circumstances of this, case, the transferee-company does not come within the mischief of the MRTP Act, from the conduct of the Union Govt. I should come to the conclusion that they are deemed to have been satisfied that the transferee-company does not come within the operation of the MRTP Act. He drew my pointed attention to the fact that although as early as 22nd September, 1978, the Union Govt. has threatened the transferee-company with the penal consequences of non-compl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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