In re Jana Holdings Limited (NCLT Chennai)
Summary : The National Company Law Tribunal (NCLT), Chennai Division Bench-II, comprising Judicial Member Shri Jyoti Kumar Tripathi and Technical Member Shri Ravichandran Ramasamy, sanctioned the Scheme of Amalgamation of Jana Holdings Limited with Jana Capital Limited under Sections 230 to 232 of the Companies Act, 2013, by its order dated 3 November 2026. The Tribunal held that the proposed amalgamation was prima facie not detrimental to the interests of the members of the companies and that the requisite statutory compliances had been fulfilled. Although the Regional Director and Official Liquidator had raised extensive concerns about the companies’ financial condition, regulatory compliance, banking arrangements and pending tax proceedings, the Tribunal found no material objection preventing sanction. It nevertheless expressly preserved the powers of statutory authorities to initiate lawful proceedings for any violations discovered subsequently.
The scheme contemplated the merger of Jana Holdings Limited, the transferor company, into Jana Capital Limited, its holding and transferee company. Jana Holdings had been established in January 2017 as a Non-Operative Financial Holding Company (NOFHC) in connection with the regulatory framework governing banking licences. Its activities principally involved raising funds through non-convertible debentures and making investments, including investments connected with Jana Small Finance Bank. Jana Capital functioned as a Core Investment Company and the holding company of Jana Holdings. According to the petitioners, maintaining the existing three-tier corporate structure was no longer commercially necessary because the group did not intend to establish additional financial-services entities. The proposed amalgamation was intended to consolidate management, eliminate duplication of administrative functions, reduce regulatory compliance costs, achieve operational efficiencies and strengthen the overall financial structure.
The boards of both companies approved the proposed amalgamation through resolutions dated 3 February 2025. In the first-motion proceedings, the Tribunal passed an order on 10 October 2025 dispensing with the meetings of equity shareholders, secured creditors and unsecured creditors. Subsequently, by order dated 7 January 2026, the Tribunal directed the petitioners to issue notices to the statutory and regulatory authorities and publish notices in newspapers. The companies published notices in The Indian Express and Dinamani on 19 January 2026 and served notices on the Regional Director, Registrar of Companies, Income Tax Department, Official Liquidator, Securities and Exchange Board of India, BSE Limited, Reserve Bank of India and Competition Commission of India. Reports and representations received from the statutory authorities were considered during the second-motion proceedings.
The Regional Director questioned the proposed appointed date of 1 April 2024 because it preceded the filing of the company application in July 2025 by more than one year. Referring to MCA General Circular No. 09/2019 and Section 232(6) of the Companies Act, 2013, the Regional Director sought justification for the retrospective date. Concerns were also raised regarding the proposed automatic consolidation of authorised share capital, compliance with provisions governing alteration of constitutional documents and the proposed dissolution of the transferor company without winding up. The Regional Director further referred to qualifications in the statutory auditors’ reports concerning negative net worth, deficiencies in Net Owned Funds, non-compliance with RBI prudential requirements, impairment of goodwill, loan waivers, refinancing arrangements, statutory TDS payments and other adverse observations. The petitioners submitted replies explaining the commercial rationale, financial circumstances and proposed compliance measures.
A significant part of the regulatory scrutiny concerned the financial position of the companies and their relationship with Jana Small Finance Bank. The Regional Director’s report referred to negative net worth of approximately ₹1,395.74 crore and a deficit in Net Owned Funds. The Official Liquidator’s report separately highlighted the transferor company’s negative Net Owned Funds, a leverage ratio of 2.82 times against the stated regulatory threshold of 1.25 times, and recurring qualifications in the financial statements. The Official Liquidator also referred to approximately ₹705.74 crore of outstanding redeemable non-convertible debentures as at 31 March 2025, including substantial funding from foreign entities. Questions were raised regarding the source and utilisation of these funds, investments in Jana Small Finance Bank, possible implications under FEMA and RBI regulations, promoter-shareholding conditions, lock-in requirements and whether relevant regulatory approvals had been obtained. These matters were raised as issues requiring clarification and verification, rather than being conclusively adjudicated as violations by the Tribunal.
The Official Liquidator additionally raised concerns about the protection of employees, compliance with observations communicated through SEBI and BSE, service of notices upon the appropriate RBI authorities, and accounting treatment of the amalgamation. Since Jana Holdings was a wholly owned subsidiary of Jana Capital, the Official Liquidator considered the transaction to be a common-control business combination governed by Appendix C to Ind AS 103 and sought an undertaking that the pooling-of-interests method would be followed. The report also referred to the absence of adequate clarification on certain banking-licence conditions, financial losses, impairment of investments and the timing of the merger in relation to the public issue of Jana Small Finance Bank. The Official Liquidator stated that, pending satisfactory information and supporting documents, it was unable to form a definitive opinion on whether the affairs of the transferor company had been conducted without prejudice to its members or the public interest.
The Income Tax Department submitted its representation on 4 May 2026 and informed the Tribunal that scrutiny assessment proceedings under Section 143(3) of the Income Tax Act, 1961, were pending against both companies for Assessment Year 2024–25. The Department reported that no outstanding tax demands were reflected in its records and that the latest income-tax returns had been filed for Assessment Year 2025–26. Nevertheless, it reserved its rights to examine the tax consequences of the amalgamation, continue pending proceedings, initiate legally permissible reassessment or other proceedings, and recover any tax liabilities arising under the applicable law. The Official Liquidator separately referred to reassessment proceedings under Section 147 concerning the source, nature and genuineness of investments made by Jana Holdings in Jana Small Finance Bank. These tax matters remained within the jurisdiction of the competent income-tax authorities.
In support of its position, the Income Tax Department specifically relied upon the Supreme Court judgment in Marshall Sons & Co. (India) Ltd. v. Income Tax Officer, (1997) 223 ITR 809 (SC). The Department referred to the Supreme Court’s clarification that sanction of an amalgamation does not prevent income-tax authorities from examining, through separate proceedings in accordance with law, whether the arrangement was designed to evade taxes legitimately payable. The Department submitted that filing its representation before the NCLT did not amount to waiver of its statutory powers. The Tribunal recorded that the transferor company’s liabilities would devolve upon the transferee company and that approval of the scheme would not prejudice the Department’s ability to proceed in accordance with law. The Income Tax Department accordingly conveyed no objection to the scheme while expressly preserving its rights.
Regarding accounting treatment and share capital, the Tribunal recorded that certificates issued by the statutory auditors confirming compliance with Section 133 of the Companies Act, 2013, had been placed on record. Since Jana Capital already held the entire issued, subscribed and paid-up share capital of Jana Holdings, directly and through its nominees, the scheme did not require any fresh allotment of shares by the transferee company. The existing equity shares of the transferor company held by Jana Capital and its nominees would stand cancelled upon the scheme becoming effective. The authorised share capital of the transferee company was proposed at ₹53 crore, comprising 3.80 crore equity shares of ₹10 each and 1.50 crore preference shares of ₹10 each. The Tribunal directed the transferee company to file its revised Memorandum and Articles of Association with the Registrar of Companies and pay any applicable differential filing fees after adjusting the fees already paid by the transferor company.
After considering the scheme, statutory reports, objections and replies, the Tribunal sanctioned the amalgamation with 1 April 2024 as the appointed date. It directed that all properties, rights, interests, liabilities, obligations and duties of Jana Holdings would vest in Jana Capital in accordance with Section 232(3) of the Companies Act, 2013. Pending legal proceedings involving the transferor company would continue through the transferee company. Employees and workmen in service immediately before the scheme became effective would become employees of Jana Capital without interruption of service and with their existing benefits. The petitioners were directed to deliver a certified copy of the order to the Registrar of Companies within 30 days of receipt. Importantly, the Tribunal clarified that sanction would not exempt the companies from stamp duty, taxes, statutory charges, regulatory permissions or other legal requirements, and would not prevent action against concerned persons, directors or officials for any statutory or regulatory violation. The company petition was accordingly allowed, subject to these directions and safeguards.
Cases Discussed
Marshall Sons & Co. (India) Ltd. v. Income Tax Officer — AIR 1997 SC 1763; MANU/SC/0407/1997 (Supreme Court).
