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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 ..... sorts (India) Ltd. (SHRIL), which is a transferor company, with Thomas Cook Insurance Services (India) Ltd. (TCISIL), which is a resulting company (Resulting Company No.1) and Thomas Cook (India) Ltd. (TCIL) which is another resulting company (Resulting Company No.2), and their respective shareholders and creditors. 2. The transferor company, i.e. SHRIL, is a listed public company engaged in the business of vacation ownership and leisure hospitality. The company is primarily engaged in time share, resort business and holiday activities. The two transferee or resulting companies, namely, TCISIL and TCIL, are respectively engaged in the business of corporate agency for travel insurance, and integrated travel and travel related services. Wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visions 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 Rs. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2(19AAA) and 2(41A). Mr.Mehta submits that it is stated in the scheme that the scheme complies with all provisions of the Income-tax Act and this statement is not correct, since the demeger contemplated in the scheme is not in accordance with the definition of 'demerger' contained in the Income-tax Act. It is submitted that if this Court sanctions the scheme on the footing that it complies with the requirements of Income-tax Act and thereby puts its imprimatur on the position taken by the company regarding such compliance, the Income-tax Department would be bound by the position and that the companies would be entitled to claim tax benefits despite not being entitled to do so. 5. At the outset, we may deal with the objections rais ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the scheme, as proposed by this Court, does not in any way bind the Income-tax Department to take any particular view of the scheme of arrangement sanctioned by this Court insofar as the tax implications of the transaction are concerned. In the face of this clarification, learned Counsel for Regional Director and Income-tax Department have no further objections to the scheme on the ground of non-compliance with the provisions of the Income-tax Act referred to above. 6. Coming now to the main objection of the Regional Director to the present scheme, namely, its non-compliance with Section 394 of the Companies Act, it is pertinent to note at the very outset that provisions referred to in Clauses (i) to (vi) of sub-section (1) of Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exercised by the shareholders of the transferor company. As long as such consideration is not against 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Andhra Pradesh High Court (in M/s.IVRCL Limited Company Petition Nos.58, 59, 60 and 61 of 2012 decided on 2 July 2012) have also approved similar schemes, where as part of the consideration for transfer of undertaking, the shareholders of transferor company were issued shares by the holding company of the transferee. Thus, after considering the merits of the respective schemes in those cases, this Court as well as other High Courts have thought it fit to approve of the schemes, making provisions for consideration in terms of allotment of shares of companies other than the transferee companies including, for that matter, the holding companies of the transferee companies. 9. In that view of the matter, there is no merit in the objection rais ..... X X X X Extracts X X X X X X X X Extracts X X X X
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