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TMI Blog2015 (8) TMI 238X X X X Extracts X X X X X X X X Extracts X X X X ..... than transferee companies approved – Petition allowed – Decision of Miheer Mafatlal vs. Mafatlal Industries Ltd. [1996 (9) TMI 488 - SUPREME COURT OF INDIA], Pantaloon Retail (India) Limited Company [2010 (8) TMI 921 - BOMBAY HIGH COURT]followed – Decided in favour of petitioner. Composite scheme of arrangement and amalgamation – Regional Director, Ministry of Corporate Affairs opposed scheme having regard to definitions of 'demerger' and 'resulting company' contained in Section 2(19AA) and 2(41A) read with Section 2(19AAA) of Income-tax Act, 1961 – Held that:- scheme of arrangement permissible both under Companies Act and Income-tax Act, does not amount to 'demerger' within meaning of Income-tax Act –Provision of scheme relating to demerger makes it clear that in case scheme was inconsistent with Section 2(19AA), provisions of Section 2(19AA) shall prevail and scheme shall stand modified – Also sanction of scheme, does not bind Income-tax Department to take any particular view of scheme of arrangement insofar as tax implications of transaction were concerned. - Company Scheme Petition No. 99 of 2015, Company Summons For Direction No. 892 of 2014, Company Scheme Petition No. 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ditors, the transferee companies have presented this scheme petition for sanction of this Court under Sections 391 to 394 of the Companies Act, 1956. 3. The only opposition to the scheme is from the Regional Director, Western Region, Ministry of Corporate Affairs, Mumbai. The opposition is on the ground that having regard to the provisions of Section 394 of the Companies Act, only a transferee company can allot shares towards consideration of transfer, and not any other person, whereas for demerger and transfer of the undertaking of the resort business of SHRIL in the present case, the shares, namely, 116 equity shares of Re.1/- for every 100 shares of ₹ 10/- of SHRIL, have been allotted by TCIL, which is a parent company of the transferee company, namely, TCISIL. It is submitted that TCISIL, which is the resulting company insofar as the demerger part is concerned, is not issuing any shares and therefore, the scheme is not in consonance with the provisions of the Companies Act, 1956. Secondly, the scheme is also against the provisions of Income-tax Act, 1961 having regard to the definitions of 'demerger' and 'resulting company' contained in Section 2(19AA) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ermissible both under the Companies Act and the Income-tax Act, does not amount to 'demerger' within the meaning of the Income-tax Act, it may have certain tax implications for the companies in question. There is a provision in the present scheme that the part of the scheme, namely, the demerger, has been drawn up to comply with the conditions relating to demerger as specified under Section 2(19AA) of the Income-tax Act 1961. The scheme at the same time makes it clear that if any terms or provisions of the scheme are inconsistent with the provisions of Section 2(19AA) of the Income-tax Act 1961, the provisions of Section 2(19AA) of the Income-tax Act shall prevail and the scheme shall stand modified to the extent, if necessary, to comply with Section 2(19AA). It is thus very clear that the framing of the scheme and the corresponding sanction by this Court do not in any way prejudice the application of Section 2(19AA) of the Income-tax Act 1961. In any event, by sanctioning the present scheme, this Court is not in any way accepting the company's case that the scheme, as framed, complies with the provisions of 'demerger' within the meaning of 2(19AA). In fact, thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... public interest or in any other manner illegal or inappropriate, it is not for the company court to accept or reject such consideration. That is the principle of the decision of the Supreme Court in the case of Miheer Mafatlal vs. Mafatlal Industries Ltd. 1997 (1) SCC 579. 7. It is not the case of the Regional Director that there is any harm to public interest insofar as the transfer proposed in the scheme, or the consideration provided therefor, is concerned. In fact, the Regional Director makes it clear that there is no harm to public interest insofar as the present scheme is concerned. If that is so, it is not for this Court to reject the consideration, which is accepted by the shareholders of the transferor company, who are parties to the present arrangement. 8. This Court as well as other High Courts have accepted several schemes where consideration for transfer of an undertaking is issued in the form of shares of a company other than the transferee company. This Court, in the case of Pantaloon Retail (India) Limited Company Scheme Petition No.338/2010 decided on 24.8.2010, approved a scheme of arrangement between Pantaloon Retail (India) Limited and two resulting compan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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