HIGH COURT OF BOMBAY
Commissioner of Income-tax
Sesa Goa Ltd.
Co. Appeal Nos. 3 & 4 of 2013
Co. Application Nos. 15 & 16 of 2013
FEBRUARY 14, 2013
1. Heard learned counsel for the appellant/applicant and the learned counsel for the respondent.
2. The appellant is aggrieved by the judgment and order dated 6/11/2012 passed by the learned Single Judge of this Court. By the said judgment, the learned Single Judge was pleased to accept the preliminary objection raised by the respondent regarding the maintainability of the appeal filed by the revenue to intervene in the Company Petition no.11/2012 and Company Petition no.12/2012 on the ground that the Income Tax authorities had a right to be heard since the scheme if sanctioned by this Court, would entail huge losses to the revenue and also to the State and the Central Government. The learned Single Judge, after relying on the judgment of this Court in the case of Jindal Iron & Steel Ltd. v. Asstt. CIT [Co. Application No. 123 of 2004, dated 2-9-2004] and another judgment of the learned Single Judge of this Court, who had followed the judgment in the case of AVM Capital Services (P.) Ltd., In re  115 SCL 81 was pleased to reject the said application for intervention. The contention raised by the learned counsel for the revenue that the judgment in the case of “Garware Plastic” was directly applicable to the facts of the present case, was not accepted.
3. Learned counsel on behalf of the appellant submitted that Sesa Goa Ltd. had paid advance tax of Rs. 600 crores, sometime in October, 2012 and it was contended that by virtue of amalgamation Sesa Goa would merge with “Ekaterina”, which was a paper company was registered in 2011. It was submitted that in the scheme, 25 shares of Sesa Goa were to be transferred for one share of Ekaterina. It was submitted that the said “Ekaterina” company was a Mauritius based company. It was further submitted that if the merger and amalgamation would have taken place prior to 31/3/2013, then in that event the revenue would have adjusted the advance amount of Rs.600 crores paid by Sea Goa. It is further submitted that as a result of the said scheme, the revenue will have to make refund of Rs. 900 crores. It was submitted that no permission was taken of the Finance Ministry before getting the scheme sanctioned and the Registrar who had represented the Central Government, had stated that there was no tax liability, since there was a communication gap between the IT authority and the Registrar. It was then submitted that the demand notices had been issued under section 166 of the IT Act in December 2012 and January 2013. Learned counsel appearing on behalf of the appellant then tried to distinguish the judgment in the case of “Jindal Iron & Steel Ltd.” (supra) and it was submitted that in the said case the tax liability had not been crystallized. In the case of “AVM Capital Services (P.) Ltd.” (supra), the question was whether tax planning was permissible and whether it amounted to tax evasion. It was submitted that the said issue which was involved in the case of “AVM Capital” is not involved in the present case. The facts of the present case are clearly distinguishable and no reliance was placed on the said two judgments. It was then contended that MALCO was registered in Chennai and that the State would tend to lose a lot of revenue if Sesa Goa was merged with MALCO.
4. On the other hand, Shri A.N.S. Nadkarni, learned Senior Advocate appearing on behalf of the respondent company submitted that the ratio in the above referred two cases i.e. “Jindal” and “AVM Capital” are not applicable to the present case. Learned Senior Counsel also relied on the judgment of the Apex Court in the case of “S.R.F. Ltd. v. Garware Plastics & Polyesters Ltd.  80 Taxman 102″ and also on the recent judgment given by the Division Bench both in Company appeals no. 14 and 15/2012 and Company applications no. 82 and 83/2012. Shri Nadkarni submitted that the ratio of these two judgments was squarely applicable to the present case. He submitted that the ratio of the judgment in the case of “Garware Plastics & Polyesters Ltd.” (supra), was not applicable. He submitted that the Government of India had issued a notification dated 17/3/2012, in which the Central Government had delegated its powers to the Regional Directors at Mumbai, Kolkata, Chennai, Nodia, Ahemdabad in respect of powers and functions of the Central Government u/s 394- A of the Companies Act, 1956.
5. After having heard both the learned counsel at length and arguments, it is not possible to accept the submissions made by the learned counsel appearing on behalf of the revenue. It is an admitted position that under the provisions of Section 391 the Central Government and the IT Authority do not have any powers to intervene or to be heard on any scheme which is filed seeking sanction of this Court u/s 391 of the Companies Act. This question was considered and decided by the learned Single Judge in case of “Jindal Iron & Steel Ltd.” (supra) and in the case of “AVM Capital Services (P.) Ltd.” (supra).
6. Hence, the contention of the learned counsel for the appellant cannot be accepted. The ratio in the case of “S.R.F Ltd.” (supra) cannot be applied in the present case. Perusal of the facts of the said case reveals that question which fell for consideration before the Apex Court was whether the board had a right to be heard. The Apex Court in paragraph 8 has observed as under:
“It is true that no notice was issued by the Board either to the Central Government or to the CBDT. The Central Government shall be required to pass an order under s. 72A of the tax benefits and that, therefore, it is entitled to be heard. Since the merger scheme, which was given effect from 1st April, 1992, involves tax concessions and sacrifices enumerated in ss. 70, 71 and 72 as set-off. So, there would be great revenue losses. Therefore, the Central Government and the CBDT are necessary and proper parties before the Board. The Board before finalizing the merger scheme and approving its draft scheme for merger of the sick industrial company with a healthy company, notice should be given to the Central Government as well to the CBDT. Admittedly, by two letters SRF had given up the benefits under s. 72A. Counsel for the SRF had given an undertaking in the High Court and reiterated before this Court that the merger scheme would be effective from 1st April, 1994. Consequently, the benefits of set-off under ss. 70, 71 and 72 have been marginalized and, therefore, no considerable revenue loss would occur to the public exchequer. Any minor benefits would be consequential to the offer of merger with the healthy company. In these appeals and before the High Court , they are impleaded as respondents and were heard through Sri Ahuja, learned senior counsel, who has stated that there would be no loss of revenue to the State and benefit under s. 43B of the IT Act is bound to be given to a company revived on either basis. In that view, the orders passed by the Board and approved by the Appellate Authority are not vitiated by any error of law warranting interference.”
7. In the above case, therefore, a proposal for revival had been made and before finalizing the merger scheme and approving its draft for sick company, the question was whether notice should be given by the board to the Central Government as well as to the CBDT. In the present case, VAL has incurred losses, but it has not been registered with the CBDT nor has it been declared sick and as such, the question of issuing notice to the CBDT or to the board or the CBDT to be heard does not arise. The issue before the Apex Court in the said case was that the Central Government was required to pass an order u/s 72A of the Tax Benefits Act and, therefore, it was held that it was entitled to be heard. The observations which are made in para 8 of the aforesaid judgment are in that context. As such, in our view, the said ratio does not apply to the facts of the present case.
8. In our view, the learned Single Judge has rightly come to the conclusion that the application for intervention is not maintainable and, therefore, the order passed by the learned Single Judge is confirmed.
9. Both these appeals are dismissed. Both the company applications also are dismissed.