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Judgment
(Hybrid Mode)
[ORAL JUDGMENT: Justice Sharad Kumar Sharma, Member (Judicial)]
In the matters of scheme of arrangement and amalgamation, between M/s. Shasun Leasing and Finance Private Limited, the Transferor Company, and M/s. Axxelent Pharma Science Private Limited, the Transferee Company, the aforesaid Petitioner companies had filed the First Motion Application CA(CAA)/60(CHE)/2024 and sought directions for dispensing with convening of the meetings of shareholders & Creditors.
After holding the said meetings as directed by Ld. NCLT, the scheme of arrangement, as proposed by the Boards of respective companies, was placed before Ld. NCLT for approval in the Second Motion application being CA(CAA)/51(CHE)/2025. Ld. Tribunal directed the Petitioner companies to issue notice to statutory / regulatory authorities as well as to issue paper publication, for filing their objections, if any.
After considering the objections that were taken by the parties, as detailed in para 8 of the impugned order, the statement regarding accounting treatment & valuation, the Ld. Tribunal came to a conclusion, that the scheme, prima facie, is not detrimental to the interests of the members of the respective companies and sanctioned the scheme and ordered that the rights, interest and all the liabilities, powers, obligations and duties of the Transferor company, in view of the implications of the provisions contained under Section 232 (3) of the Companies Act shall, without further act or a deed, be transferred to and vest in, or be deemed to have been transferred to and vested in the Resulting Company in terms as given therein under the scheme.
The Appellant is before this Appellate Tribunal, questioning the propriety of the impugned order, dated 10.03.2026, and contending thereof that the impugned order would be vitiated for the reason being that, the objections that were submitted by the Appellant, as it was filed through memo before the NCLT on 23.08.2025, in relation to the scheme of M/s. Shasun Leasing and Finance Private Limited with M/s. Axxelent Pharma Science Private Limited, were not considered by the Ld. Tribunal.
The Appellant contended that their objections to the scheme, which they have submitted on 23.08.2025, have not been addressed of by the Ld. Tribunal because Ld. Tribunal has not given any remarks either on the objection put forth by him or, on the reply extended by the Respondents thereon and therefore, the order will be vitiated.
In furtherance of his argument, the Ld. Counsel for the Appellant has drawn our attention to the observation, that has been made while dealing with the objection and the reply of the Income Tax Department, as it finds reference in the impugned order, and in context thereto the Ld. Counsel for the Appellant submits that, in fact, the reply as considered by the Ld. Tribunal may not be read as to be the reply in context of the objection dated 23.08.2025.
The Ld. Senior Counsel for the Respondent, in response to the argument extended by the Ld. Counsel for the Appellant has drawn the attention of this Appellate Tribunal to the letter issued by Assistant Commissioner, Income Tax, Corp. Circle-1, Chennai, dated 23.08.2025 wherein the objections of the Appellant were listed and particularly he has referred to para 12 and 13 of the said letter. If we scrutinize the contents of the said letter, the objections raised therein were rather anticipatory in nature, wherein the Appellant observed by way of an objection that if the scheme of arrangement is sanctioned, it should not flout any of the provisions of the Income Tax Act and the rules framed thereunder. The relevant para 12 and 13 of the said letter is extracted hereunder: -
After considering all the above facts, there appears to be no business objective for the amalgamation scheme as stated by the transferee company. The scheme is intended to transfer the reserves of the transferor company to the transferee company without distributing the same to the shareholders, to avoid dividend tax in the hands of the individual shareholders."
It is further concluded that the scheme of amalgamation should not flout any provisions of the Income Tax Act, 1961 and any rules under Income Tax Rule 1962 and subject to fulfillment of conditions specified in scheme of amalgamation. If any part of the scheme is found to be repugnant to the Income tax Act 1961 and Income Tax Rule 1962, the same is to be treated as void ab initio. The department also requests that the transferee company M/s. Axxelent Pharma Science Pvt Ltd shall discharge all its responsibilities and liabilities emanating in respect of the proceedings pending/completed/likely to arise in respect of transferor company. At present, there no arrear in the case of Transferee company M/s Axxelent Pharma Science Pvt Ltd. The transferee company may be liable for payment of these arrears."
The Appellant, in principle, admits the fact that at present there were no arrears in the case of the Transferee Company, M/s. Axxelent Pharma Science Private Limited, and that the Transferee Company would be liable to make the payment of the arrears, if any, of the Transferor Company.
The interest of the Appellant in the proceedings, which was ensured to be protected, and it was that, in an event if there was any tax liability on the Transferor Company that would be reserved to be protected if there was any adverse impact as a consequence of the scheme of arrangement after having been accepted.
We called upon the Ld. Counsel for the Appellant to answer in the light of the finding which has been recorded in the impugned order by the Ld. Tribunal, particularly as contained in para 8.2.3, as to what prejudice would be caused in relation to the objection, which has been taken by the Appellant by filing the same on 23.08.2025, even if it is presumed that the said objection has not been considered or remarked upon by the Ld. Tribunal in the impugned order. Para 8.2.3 of the impugned order is extracted hereunder: -
It is stated that in the present scheme of Amalgamation even though the Transferor Company gets dissolved, the liabilities of the same will be delved upon this Petitioner Company/ Transferee Company and therefore the Income Tax Department can proceed with their proceedings if any and approval of this Scheme does not cause any prejudice."
The Ld. Counsel for the Appellant has been fair enough to concede that, owing to the observations made in para 8.2.3, which has been extracted above, read with the recording of Ld. Tribunal in para 11.2 and 11.3 of the impugned order, all interests of the Appellant pertaining to the tax liability in respect of the Transferor Company has been safeguarded to be protected and be proceeded in accordance with the provisions of the Income Tax Act and the rules framed thereunder. Para 11.2 and 11.3 of the impugned order are extracted hereunder: -
Notwithstanding the above, if there is any deficiency found or, the violation committed qua any enactment, statutory rule or regulation, the sanction granted by this Tribunal will not come in the way of action being taken, albeit, in accordance with the law, against the concerned persons, directors and officials of the petitioners."
While approving the Scheme as above, it is clarified that this order should not be construed as an order in any way granting exemption from payment of stamp duty, taxes or any other charges, if any, payment is due or required in accordance with law or in respect to any permission/ compliance with any other requirement which may be specifically required under any law."
Owing to the fact that the objection dated 23.08.2025 itself was only an anticipatory in nature, and was not a concrete objection qua any variation in the tax liability, and because the scheme sanction order itself is not a conclusive decision with regards to the tax liability, the Appellant still has all options open to protect his interests in the light of the observation made by the Ld. Tribunal in para 11.2 and 11.3 of the impugned order.
Hence, merely on the ground that the objection of the Appellant dated 23.08.2025 was not considered, the order cannot be concluded as 'bad' in the eyes of law to be interfered with, in the exercise of our appellate jurisdiction. Further, as there is no immediate prejudice caused, and whatsoever probable prejudice is anticipated, that has been protected by a number of stipulations and conditions set down in the impugned order. Hence, we decline to interfere in the company appeal.
Owing to the aforesaid, the company appeal is dismissed.