Judgment:
ORDER
SHEET APO NO.153 OF 201.CP NO.289 OF 201.IN THE HIGH COURT AT CALCUTTA Civil Appellate Jurisdiction ORIGINAL SIDE ABHAY GANDHI Versus DIGVIJAY INVESTMENT LTD.& ORS.BEFORE: The Hon'ble JUSTICE ASHIM KUMAR BANERJEE AND The Hon'ble JUSTICE SHUKLA KABIR (SINHA) Date :
6. h August, 2012.
Mr.Ahin Chowdhury, Sr.Adv., Mr.Swatarup Banerjee, Adv., Mr.Rajesh Upadhyay, Adv., for the appellant.
Mr.S.B.Mookherjee, Sr.Adv., Mr.S.N.Mookherjee, Sr.Adv., Mr.D.N.Sharma, Adv., Ms.Manju Bhuteria, Adv., Mr.B.M.
Sharma, Adv., Mr.G.Khaitan, Adv., Ms.Atasi Sarkar, Adv., for the respondent.
Mrs.Nilanjana Banerjee (Pal).Adv., for the Union of India.
The Court : This appeal would arise out of an order sanctioning the scheme of arrangement between the respondent companies inter se.
The appellant is one of the shareholders in the transferor company being the respondent no.1, Digvijay Investment Limited.
Under the scheme there would be inflow of Rs.270 crores in addition to receipt of Rs.11 crores approximately as non-competitive fee.
The appellant contended before the learned single Judge also before us that the shares were under valued and the revenue was defrauded.
The learned Judge rejected the contention and sanctioned the scheme.
Hence, this appeal by the appellant.
Mr.Ahin Chowdhury, learned senior Counsel appearing for the appellant, contended that any profits or gains arising out of capital asset would attract appropriate tax under the Income Tax Act.
The revenue should have investigated into the matter as to whether the company, in the disguise of scheme of arrangement, is defrauding the revenue.
Opposing the application Mr.S.B.Mookherjee, learned senior Counsel, contended that the appellant being a trifle shareholder having one or two shares valued at 100 rupee could not have opposed the scheme which was passed by overwhelming majority.
The Central Government considered the scheme and put their seal of approval that was considered by His Lordship before sanctioning the scheme.
He relies on an unreported decision (Leige Traders & Investments LTD.& Ors.) dated March 3, 1993 when His Lordship rejected the objection raised by one shareholder having a face value of Rs.10.
On the question of capital gains Mr.Mookherjee contends that the issue was covered by our Division Bench decision in the case of Commissioner of Income Tax –versus A.S.Wardekar, reported in (2006) 283 ITR 43.(Cal) wherein the non-competitive fee was held to be No.“capital gains”.
within the meaning of Income Tax Act as it would not involve acquisition of right.
In this regard Mr.Mookherjee relies on Section 47 of the Income Tax Act to show that the scheme of arrangement would not attract any income tax to be paid by the transferee company under the Income Tax Act.
Such contention is disputed by Mr.Chowdhury.
Mr.Chowdhury relies on a decision in the case of Bedrock Ltd., reported in (1998) 4 Comp LJ 47.(Bom) particularly paragraphs 27 and 28 wherein the learned single Judge of the Bombay High Court observed, “It would be difficult for this Court to close its eyes to the huge amount of tax evasion that may be involved”.We have also heard Mrs.Nilanjana Banerjee (Pal) appearing for the Central Government.
Mrs.Pal contends that the revenue would require some time to investigate upon and this Court should grant such opportunity.
The lis before us would relate to a scheme of arrangement that was sanctioned by the learned single Judge.
It is well-settled principle of law that once the scheme is sanctioned by overwhelming majority, it could not be undone at the instance of a trifle shareholder unless it is shown to be absolutely perveRs.and illegal and contrary to the provisions of law that would shock the conscience of the Court.
The Central Government is supposed to assist the Court prior to the sanction by examining the scheme.
The Central Government did so in the instant case.
They did not raise any objection.
not that the appellant has highlighted the issue it is for the Central Government and/or the revenue to act upon the same, if they so like and for that no special blessing is required to be granted by this Court particularly in this lis.
With these observations, we affirm the judgment and order of the learned single Judge and dispose of the appeal without any order as to costs.
Urgent xerox certified copy of this order, if applied for, be supplied to the parties subject to compliance with all requisite formalities.
(ASHIM KUMAR BANERJEE, J.) (SHUKLA KABIR (SINHA).J.) sd/ AR[CR].