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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
S.J. KATHAWALLA, J.
In Re : Casby CFS Pvt. Ltd. and Others - Appellant
Company Scheme Petition No. 137, 138 of 2014, Company Summons for Direction No. 609, 610 of 2013
Decided On : 19-03-2015
The Court rejected the petition for sanction of a scheme of amalgamation between two companies, Casby CFS Private Limited (Transferor) and Casby Logistics Private Limited (Transferee), due to several objections raised by the Regional Director and supported by the Income Tax Department.
Fact of the Case:
The Petitioners, Transferor and Transferee, filed Company Scheme Petitions seeking sanction of the scheme of amalgamation. The Regional Director raised objections, including the retrospective appointed date of 1st April 2008, which the Petitioners claimed was necessary to identify assets and liabilities and fix the share valuation/share exchange ratio. The Income Tax Department also objected, stating that the Petitioners were not entitled to file revised Income Tax returns and that the scheme violated Section 139(5) of the Income Tax Act.
Finding of the Court:
The Court found that the Petitioners had suppressed material facts, made false and misleading statements, and taken contradictory and inconsistent stands. It also found that the retrospective appointed date was violative of Section 139(5) of the Income Tax Act, which prohibits the filing of revised Income Tax returns without satisfying certain conditions.
Issues: 1. Whether the Petitioners had suppressed material facts and made false and misleading statements. 2. Whether the retrospective appointed date violated Section 139(5) of the Income Tax Act. 3. Whether the scheme should be sanctioned.
Ratio Decidendi: 1. The Court held that the Petitioners had suppressed material facts, made false and misleading statements, and taken contradictory and inconsistent stands. It found that the Petitioners had not disclosed income tax demands on the Transferor and Transferee Companies, had made false statements about the beneficial ownership of shares, and had suppressed the fact that Form 22Bs were filed belatedly. 2. The Court held that the retrospective appointed date was violative of Section 139(5) of the Income Tax Act, which prohibits the filing of revised Income Tax returns without satisfying certain conditions. It found that the Petitioners intended to file revised Income Tax returns retrospectively from 1st April 2008 without satisfying these conditions. 3. The Court held that the scheme should not be sanctioned due to the Petitioners' suppression of material facts, false and misleading statements, and the violation of Section 139(5) of the Income Tax Act.
Final Decision: The Court rejected the petition for sanction of the scheme of amalgamation and imposed costs on the Petitioners.
S.J. Kathawalla, J.
Sanction of this Court is sought under Section 394 of the Companies Act, 1956 ("the Act") in respect of a scheme of amalgamation between Casby CFS Private Limited ("Transferor") and Casby Logistics Private Limited ("Transferee") and their respective shareholders, whereunder the entire business and the whole of the undertaking of the Transferor shall stand transferred to and vest in the Transferee with effect from the appointed date in terms of the scheme proposed by the Petitioners.
2. The Transferor was incorporated on 7th March 2006, and has been carrying on the business of setting up a container freight station. The Transferee was originally incorporated on 9th December 1998, under the name Cassinath Shipping Private Limited. The Registrar of Companies issued a fresh certificate of incorporation on 17th April 2001, changing the name of the Transferee to its present name. The Transferee has been carrying on the business of logistics and port services across India.
3. According to the Petitioners, the rationale behind the proposed amalgamation is restructuring of the Casby group. The proposed amalgamation will reduce the shareholding tiers and rationalize investments in the Casby group. Further, the proposed amalgamation would result in improved organizational capability and leadership, strong financial structure to all creditors of the Transferor and the Transferee, lower cost of borrowing, increase operational efficiency, economies of scale, standardization and simplification of business processes, productivity improvement, elimination of duplication and streamlining administrative expenses. The interest of the various stakeholders will be secured and unaffected by the proposed amalgamation.
4. The Board of Directors of the Transferor vide their resolution dated 7th October, 2011, approved the scheme of amalgamation. The Board of Directors of the Transferee also vide their resolution dated 7th October, 2011, approved the scheme of amalgamation. The Transferor and the Transferee filed Company Summons for Directions in this Court. The same were dismissed for default by an order dated 3rd February, 2012, for non-removal of office objections/want of prosecution. Thereafter the Transferor and the Transferee filed Company Applications bearing Nos. 247 and 248 of 2013 seeking setting aside of the order dated 3rd February, 2012, and for restoration of Company Summons for Directions. By an order dated 20th June 2013, passed in Company Application Nos. 247 and 248 of 2013, the order of dismissal was set aside and the Company Summons for Directions were restored.
5. The Company Summons for Direction bearing No. 609 of 2013 was filed by the Transferor. The Transferee too filed Company Summons for Direction bearing No. 610 of 2013. By orders dated 16th August, 2013, the Company Summons for Direction were disposed of. The Transferor filed Company Scheme Petition No. 137 of 2014 seeking sanction of this Court to the scheme of amalgamation. The Transferee too filed Company Scheme Petition No. 138 of 2014 seeking sanction of this Court to the scheme of amalgamation. Both the Petitions were admitted by this Court by its order dated 21st March, 2014.
6. The concerned Income Tax Officer for the Transferor and the Transferee Companies called upon the Companies to furnish certain information and documents by a letter dated 2nd April, 2014. The Regional Director also issued a letter dated 9th May, 2014, requesting the Petitioners' Advocates to provide the information to the concerned Income Tax Officer as sought by him. The Advocate for the Petitioners informed the Regional Director on 9th June, 2014 that the Petitioners had provided to the aforesaid Officer all information sought by him. The Office of the Official Liquidator filed its Report on 16th July 2014, inter alia stating that the scheme was not prejudicial to the interest of the creditors. The Office of the Regional Director filed its affidavit dated 26th August 2
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