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TMI Blog1963 (1) TMI 47X X X X Extracts X X X X X X X X Extracts X X X X ..... ss company called Winterthur Swiss Life Insurance Company was carrying on life business in India through its agents, Messrs. Volkart Brothers. The assessee entered into an agreement with the Swiss company on October 1, 1952, and this agreement was superseded and substituted by another agreement between them dated December 29, 1952. We shall refer to the terms of the agreement in detail a little later. The substance of the agreement was that the Swiss company should transfer all its assets and liabilities in regard to its life insurance business in India to the assessee company in consideration of the assessee paying the Swiss company the sum of ₹ 1,60,451.07, which was the excess value of assets over liabilities as per the balance-sheet of the Swiss company for the calendar year 1951. Under the provisions of the Indian Companies Act this arrangement had to be approved by the court. In O.P. No. 144 of 1954 on the file of the Original Side of this court Ramaswami Gounder J. accorded sanction to the agreement by order dated July 10, 1954. It appears that by order of court in Application No. 164 of 1954 dated January 18, 1954, a meeting of the creditors of the company (Swiss comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... completed during the period mentioned in that provision. The Income-tax Officer disallowed the claim for exemption on the ground that section 10(7) of the Act excludes the operation of other provisions of the Act in regard to computation of income of insurance business which had to be done under rule 2(a) or (b) of the Schedule to the Act. The assessee preferred an appeal to the Appellate Assistant Commissioner and a further appeal to the Income-tax Appellate Tribunal urging amongst others the contentions referred to above, but failed. It is not necessary to refer to other heads of claim made by the assessee before the department or the Tribunal. On an application by the assessee to the Tribunal under section 66(1) of the Act the questions cited above stand referred to us. Question No. 2 need not be discussed. It is plain that the language of the statute, section 10(7), prevents the assessee from obtaining the relief prayed for by way of exemption. The question is also covered by authorities which are against the assessee. Following our decision in Vanguard Fire & General Insurance Co. v. Commissioner of Income-tax [1962] 45 I.T.R. 328 and Commissioner of Income-tax v. Asian Assu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ided, however, that the transferee shall be entitled to receive from the transferor such sums in respect of each of the above policies as it may pay to the policyholders or other persons claiming the policies, if any claim in respect thereof should be established in a court of law or otherwise. 5. The balance arising out of the receipts and payments referred to under 5, 6, 7 (2, 3 and 4 above) shall be paid to the transferee by the transferor or by the transferee to transferor as the case may be in the shape of cash and (or) investments made subsequent to 31st December, 1951. All investments made by the transferor subsequent to 31st December, 1951, shall be considered for the purposes of this agreement at their actual purchase price. 6. When and so soon as the agreement is approved and sanctioned by the Bombay High Court, the transferee shall either by issuing fresh contracts or by endorsements on the existing contracts, directly take over the liabilities of the transferor to its policyholders on the terms and conditions hereinbefore provided and the assets shall be made over by the transferor to the transferee. 7. It is understood that notwithstanding the consent of the Bombay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Swiss company as and from January 1, 1952, despite the fact that the actual sanction by court followed subsequently long afterwards. The provisions of the Indian Companies Act have also to be borne in mind, and it is only in the light of those provisions that the validity and effectiveness of the agreement between the parties have to be adjudged. The relevant provisions of the Act in force on the date of sanction were sections 153 and 153A. They are as follows: "153. (1) Where a compromise or arrangement is proposed between a company and its creditors or any class of them, or between the company and its members or any class of them, the court may, on the application in a summary way of the company or of any creditor or member of the company or, in the case of a company being wound up, of the liquidator, order a meeting of the creditors or class of creditors, or of the members of the company or class of members, as the case may be, to be called, held and conducted in such manner as the court directs. (2) If a majority in number representing three-fourths in value of the creditors or class of creditors, or members or class of members, as the case may be, present either ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... econstruction of any company or companies or the amalgamation of any two or more companies, and that under the scheme the whole or any part of the undertaking or the property of any company concerned in the scheme (in this section referred to as a 'transferor company') is to be transferred to another company (in this section, referred to as 'the transferee company') the court may, either by the order sanctioning the compromise or arrangement or by any subsequent order, make provision for all or any of the following matters: (a) the transfer to the transferee company of the whole or any part of the undertaking and of the property or liabilities of any transferor company; (b) the allotting or appropriation by the transferee company of any shares, debentures, policies, or other like interests in that company which under the compromise or arrangement are to be allotted or appropriated by that company to or for any person; (c) the continuation by or against the transferee company of any legal proceedings pending by or against any transferor company; (d) the dissolution, without winding up, of any transferor company; (e) the provision to be made for any persons who, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n old company. It includes that, but is not confined to that." When one company is absorbed into and blended with another company the result is amalgamation. As section 153A deals with amalgamation, and as the present case is really one in which the taking over, by the assessee company, of the Swiss company's business in India and absorption of that business into its business brought about an amalgamation, we must have regard only to this special provision. The point of time when the Swiss company became merged into the assessee company losing all rights of ownership in its assets is the only question to be determined in this case. The language of the section, section 153A, indicates, quite plainly, that the arrangement becomes effective or valid only on the sanction of the court. The words used are "Where an order under this section provides for the transfer of property or liabilities, that property shall, by virtue of the order, be transferred to and vest in, and those liabilities shall, by virtue of the order, be transferred to, and become the liabilities of, the transferee company...." Now the words "by virtue of the order the property shall be transfe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on and the date of sanction, if ultimately sanction is granted. It may even be conceded that the binding character of the scheme must be attributed to it from the date of the meeting resolving the scheme. This is the view expressed by the Judicial Committee in dealing with a case under section 153 of the Companies Act. That case is reported in Raghubar Dayal v. Bank of Upper India Ltd. [1919] L.R. 46 I.A. 135; 50 I.C. 429. Learned counsel for the assessee has based his entire argument only on this decision of the Judicial Committee and contended that the agreement must be given effect to on and from January 1, 1952, and that it must be held that from that date the Swiss company lost its existence in regard to its Indian business. In the Privy Council case, a bank called the Bank of Upper India, closed its doors. The appellant before the Privy Council was a customer of the bank, who had a fixed deposit with it. The deposit was payable on November 4, 1914, but the bank had suspended payment even on October 8, 1914. The appellant filed a suit on December 19, 1914, against the bank and obtained a money decree on April 19, 1915, for recovery of a sum of about ₹ 25,000. In the mea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conclusion on the specific language of the statute rather than upon general principles of convenience and certainty. Learned counsel for the department referred to the decision in Sailendra Kumar Ray v. Bank of Calcutta Ltd. [1948] 18 Comp. Cas. 1. There the question was whether transfer of assets of one company to another under a scheme of amalgamation sanctioned by the court under section 153A of the Indian Companies Act of 1913 was not a transfer by assignment within the meaning of Order XXI, rule 16, of the Civil Procedure Code. The Jessore Loan Company obtained two final decrees in mortgage actions against the appellant in the case before the Calcutta High Court. On February 4, 1946, the High Court, on its original side, made an order under section 153A sanctioning a scheme of amalgamation of the Jessore Loan Company with the Bank of Calcutta Ltd. and by the same order provided for the transfer to the latter company of all the assets and liabilities of the former in accordance with the scheme of amalgamation. On July 16, 1946, the Bank of Calcutta Ltd. applied for execution of the two decrees in place of the Jessore Loan Co., Ltd. Judgment debtors in both the cases took the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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