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TMI Blog2019 (7) TMI 1523X X X X Extracts X X X X X X X X Extracts X X X X ..... exercise of supervisory jurisdiction, the NCLT examines whether the scheme concerned has been approved by the requisite majority of shareholders and/or creditors, as the case may be, and whether the scheme is fair, reasonable and not opposed to public policy or law. In effect, it examines whether the scheme is a lawful contract. For the above purpose, it does not examine the scheme minutely with a tooth comb. Appellant was notified about the Appointed Date and the fact that the Transferee Company concerned has taken over the assets and affairs of the Transferor companies concerned with effect from such date. In addition, the Appellant has been notified that the Scheme of Arrangement enables the Amalgamated Company and Transferee Company to file returns and revised returns before the relevant tax authorities, including the income tax authority. However, it cannot be said that the Appellant consented to waive the procedures or statutory requirements prescribed in the Income Tax Act for the above purposes. In this regard, it is also relevant to bear in mind that the Order of the NCLT whereby the Scheme of Arrangement was sanctioned also mandated that necessary permissions should b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssly for the filing of revised returns beyond the specified time. Therefore, upon the sanction of the scheme by the National Company Law Tribunal(NCLT), it becomes obligatory for the Appellant to accept the revised returns for the respective assessment years without insisting on the filing of an application under Section 119 (2) (b) of the Income Tax Act read with the Circular. On the contrary, the case of the Appellant herein is that the order of the NCLT specifically provided that all necessary permissions would be obtained and compliances carried out by the Transferee Company pursuant to the sanction of the Schemes of Arrangement. Therefore, the Appellant states that the respective Respondent herein is required to file the necessary application to condone delay and only, thereafter, could the revised return be taken on file and considered as per the Income Tax Act. 4. At the hearing, the learned Additional Solicitor General submitted that Rule 12 (3) of the Income Tax Rules specifies as to when income tax returns should be filed electronically. He further submitted that the relevant provision in respect of filing of a revised return is Section 139 (5) of the Income Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turn contains omissions or errors. Consequently, he submitted that it is wholly inappropriate that an application to condone delay should be presented before an administrative authority when the NCLT sanctioned the Scheme of Arrangement in exercise of quasi-judicial powers. 7. The learned senior counsel, thereafter, distinguished the three judgments that had been relied upon by the Appellant herein in the Writ Petitions. In specific, he submitted that the judgement in Pala Marketing Co-operative Society Ltd. vs. Union of India (2008) 167 Taxman 238 (Ker.) is not an amalgamation case. Likewise, he submitted that the judgment in Commissioner of Income Tax-I, Chandigarh vs. Harjinder Kaur (2009) 180 Taxman 23 (P H) (DB) is also not an amalgamation case. With regard to the decision of the Bombay High Court in re Casby CFS (P) Ltd., (2015) 231 Taxman 0089, he pointed out that, in that case, the Regional Director raised specific objections with regard to the clauses in the scheme that enable the filing of a revised return by the transferee company concerned. In spite of that, the court sanctioned the scheme of arrangement and instead held that the income tax authorities may deal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e scheme of arrangement is not binding on statutory authorities. 11. We considered the pleadings, documents, oral and written submissions of both sides carefully. The facts, in brief, are that Dalmia Power Limited (the Respondent in W.A. Nos. 566 and 567 of 2019) filed its return of income for the Assessment Years 2015-16 and 2016-17 on 17.09.2015 and 30.09.2016, respectively. Likewise, Dalmia Cement (Bharat) Limited (the Respondent in W.A. 568 and 569 of 2019) filed its return of income for the Assessment Years 2015-16 and 2016-17 on 30.11.2015 and 30.11.2016, respectively. Thereafter, pursuant to the sanction of the Scheme of Arrangement the respective Respondent attempted to file revised returns without filing an application to condone delay on the basis that the sanctioned Scheme of Arrangement and, in particular, Clause 64(c) thereof, entitles such filing and is binding on the Appellant herein. This was rejected by the Appellant herein on the basis that it should be preceded by an application to condone delay. 12. The question to be answered in this case throws up the larger question as to whether the Scheme of Arrangement is binding on statutory authorities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertainly would not act as a court of appeal and sit in judgment over the informed view of the parties concerned to the compromise as the same would be in the realm of corporate and commercial wisdom of the parties concerned. The court has neither the expertise nor the jurisdiction to delve deep into the commercial wisdom exercised by the creditors and members of the company who have ratified the scheme by the requisite majority. Consequently the company court's jurisdiction to that extent is peripheral and supervisory and not appellate. The court acts like an umpire in a game of cricket who has to see that both teams play their game according to the rules and do not overstep the limits. But subject to that how best the game is to be played is left to the players and not to the umpire.... .... in view of the aforesaid settled legal principles, therefore, the scope and ambit of the jurisdiction of the company court has got clearly earmarked. The following broad contours of such jurisdiction have emerged: 1. The sanctioning court has to see to it that all the requisite statutory procedure for supporting such a scheme has been complied with and that the requisite meetings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y and its members or creditors for whom the scheme is framed. The court cannot refuse to sanction such a scheme on that ground as it would otherwise amount to the court exercising appellate jurisdiction over the scheme rather than its supervisory jurisdiction. The aforesaid parameters of the scope and ambit of the jurisdiction of the Company Court which is called upon to sanction a scheme of compromise and arrangement are not exhaustive but only broadly illustrative of the contours of the court's jurisdiction. From the above judgments of the Hon'ble Supreme Court, it is evident that the court exercises supervisory jurisdiction and not appellate jurisdiction while sanctioning schemes of arrangement or compromise so as to ensure that the scheme is broadly fair and reasonable and not in violation of public policy or law. It also emerges from the judgment in the Hindustan Lever case that the basic principle of such satisfaction is none other than the broad and general principles inherent in any compromise or settlement entered between parties that it should not be unfair or contrary to public policy or unconscionable. 14. In this regard, the judgments that we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT Act would have to be considered in light of the appointed date under the scheme and the law laid down by the Supreme Court in the Marshall case. In addition, it was held therein that the merits or otherwise on the returns filed, however, is a matter of assessment for the authorities to consider and pass order in accordance with law. In effect, this judgment could be the basis for requesting the income tax authority to condone delay in the application filed for that purpose. This judgment does not, in our view, indicate that the procedural requirements under the Income Tax Act with regard to filing an application for condoning delay need not be complied with. 16. In this connection, it is also relevant to consider another judgment in Pentamedia Graphics Ltd. versus the Bombay Stock Exchange (2008) 145 Com. Cas. 327 (the Pentamedia Graphics BSE case). In this case, the scheme of arrangement envisaged and provided for the automatic listing of the shares of an unlisted company. After the sanction of the scheme by the High Court, the Bombay Stock Exchange refused to list the shares in view of non-compliance with its bye-laws and this was challenged by the company concerne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 4 of the Securities Contracts (Regulation) Act empowers SEBI to recognise the stock exchanges. It also controls the rule-making of the said exchanges. Stock exchanges are held to be regulatory authorities. Their bye- laws bind not only buyers, sellers and brokers but also third parties who are affected by the transactions on the stock exchange. They are entitled to regulate all matters connected with the business of the stock exchange. The bylaws have the effect of the statutory force. Hence given the expertise in the above field, the exclusive province of the stock exchange to grant recognition subject to the compliance of the securities laws, regulations and the listing agreement, in the context of clause 24 (f) is not to be confused with the jurisdiction of this court granting approval of the scheme. The applicants have, no doubt, filed a copy of the scheme and the petition proposed to be filed. However considering clause 24 (g), even after the grant of approval to the scheme, it is open to the stock exchange to reject the plea for listing, when it is satisfied that such listing would be violative of the securities laws, there is no disrespect to the order of approval gra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Company and Transferor Company (pertaining to Transferred Undertaking) relating to the period on or after Appointed Date, shall be deemed to be the taxes or duties paid by Amalgamated Company and Transferee Company respectively and Amalgamated Company and Transferee Company shall be entitled to claim credit or refund for such taxes or duties. 18. The aforesaid clause opens with the words; the amalgamated company and the transferee company shall be entitled to;. Is this a clause that enables the Amalgamated Company and the Transferee Company to file returns, including revised returns, before the relevant tax authorities, including belatedly by requesting for a waiver of penalty, interest, et cetera, and make the various claims for credit, deductions, et cetera, as set out above, or is it a clause that confers an entitlement on the Amalgamated Company and the Transferee Company, which is binding on the respective statutory authorities, to the various benefits set out therein? If it is construed as a clause conferring an entitlement to all these benefits, the NCLT would be effectively taking over the jurisdiction of the relevant tax authorities under the relevant tax sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of arrangement or compromise. b. In exercise of supervisory jurisdiction, the NCLT examines whether the scheme concerned has been approved by the requisite majority of shareholders and/or creditors, as the case may be, and whether the scheme is fair, reasonable and not opposed to public policy or law. In effect, it examines whether the scheme is a lawful contract. For the above purpose, it does not examine the scheme minutely with a tooth comb. c. The scheme is binding on all shareholders and or creditors, as the case may be, including dissenters, because they approve the scheme at specially convened meetings by the requisite three fourths majority. The scheme is binding on employees if it provides that employees would be absorbed on terms that are not inferior to the existing terms. d. The statutory authorities, who are notified under section 230 (5) of the Companies Act 2013, and who do not object to the scheme, are put on notice about the scheme, including the appointed date therein, and therefore, would be bound to consider returns or revised returns, etc. that are filed pursuant to the scheme of arrangement provided they are filed in accordance ..... X X X X Extracts X X X X X X X X Extracts X X X X
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