JUDGMENT
A.K. Ganguly, J.
1. All these reference matters were heard together as common question is involved in respect of four assessment years and as such they are decided by the following judgment.
The common question which falls for a decision in all these cases is:
Whether, in the facts and in the circumstances, and on a true construction and interpretation of the Gazette Notification dt. 30th Aug., 1991, read with the clarification dt. 17th March, 1993 issued by the Department of Company Affairs, Tribunal was justified in coming to the conclusion that amalgamation of OMC Alliance Ltd., the erstwhile subsidiary company with Orissa Mining Corporation Ltd. became effective from 30th Aug., 1991 and not from 1st April, 1986 and consequent denying the claim of OMC for treating all the operation of the erstwhile subsidiary as that of the patent company, namely, OMC from 1st April, 1986 and resultant loss.
2. It is only the above question which has been referred to this Court by the Tribunal. The material facts of the case appear from the referring order of the Tribunal and which are as follows;
3. The Orissa Mining Corporation (hereinafter called the Corporation), a Government of Orissa undertaking, the assessee and the applicant before the Income-tax Appellate Tribunal (Tribunal), is engaged in the mining of different kinds of ores. The Corporation had a wholly owned subsidiary named OMC Alloys Ltd. By a Gazette Notification dt. 30th Aug., 1991, issued by the Government of India, Ministry of Law, Justice and Company Affairs, the subsidiary company was merged with the Corporation in public interest as contemplated under Section 396 of the Companies Act.
4. Clause 4(2) of the said Notification stipulates as follows:
4. Amalgamation of the companies.
(1) xxxxxxx
(2) For accounting purposes, the amalgamation shall be effected with reference to the audited accounts and balance sheets as on 1st April, 1986 of the two companies and the transactions thereafter shall be pooled into a common account, the dissolved company shall not be required to prepare its final accounts as on any later date and the resulting company shall take over all assets and liabilities according to the balance sheet as on 1st April, 1986 and accept full responsibility for all transaction thereafter.
5. It appears that subsequently the Government of India, Ministry of Law and Justice Affairs issued another Gazette Notification dt. 17th March, 1993 by way of clarification. The clarification is to the effect that “the effective date for all intents and purposes in regard to the amalgamation in question shall be 1st April, 1986”. The said clarification is in respect of the Gazette Notification dt. 30th Aug., 1991.
6. Therefore, the main issue is the effective date of merger/amalgamation. According to the Corporation-the assessee, the amalgamation took place w.e.f. 1st April, 1986. But the contention of the Revenue is that the merger took effect from the date of notification i.e. w.e.f. 30th Aug., 1991 and the Revenue contended that the subsidiary company, OMC Alloys existed as a separate entity from 1st April, 1986 to 29th Aug., 1991. Therefore, all the transactions including profits and losses arising from the business carried on by the subsidiary company cannot be treated as the business of the Corporation.
7. The stand of the Revenue was contested by the Corporation, but the Tribunal did not accept the contention of the Corporation and upheld the stand of the Revenue that the merger took place only from 30th Aug., 1991 and not from 1st April, 1986.
8. From out of these facts, the aforesaid question has been referred to this Hon’ble Court for its answer.
9. It may be mentioned hereinbelow that in this case the assessee, the Corporation, is the transferee-company and its subsidiary OMC Alloys Ltd. is a transferor. The learned counsel for the Corporation urged that in the order of amalgamation dt. 30th Aug., 1991 “appointed day” must be understood in the context. It was submitted that the date of Notification in the Official Gazette, which is 30th Aug., 1991 is not the actual date of amalgamation. It was further contended that the amalgamation has taken place w.e.f. 1st April, 1986 and the same is made clear under Clause 4(2) of the order which has been notified. The learned counsel submitted that the definition of the word “appointed day” as given in the order of amalgamation must be understood in the context of the facts of the case.
10. This Court finds that the order of amalgamation was made by the Central Government under Section 396(1) and (2) of the Companies Act, 1956 in public interest and for the purpose of ensuring co-ordination in policy, efficient administration and economic expansion. The applicant-company was a Government of Orissa Company and OMC Alloys Ltd. was its subsidiary. As such, the amalgamation between the two companies being in public interest was approved by the Central Government as stated above. Learned counsel for the Revenue very much relied on the expression “appointed day” in the order of amalgamation dt. 30th Aug., 1991. Clause 2(a) of the order defines “appointed day” which is as follows:
2. Definitions.-In this order, unless the context otherwise requires.
(a) ‘appointed day’ means the date on which this order is notified in the Official Gazette
11. But the effect of amalgamation of the company is dealt with separately in Clauses 4(1) and 4(2) of the amalgamation order.
12. Clause 4(2) has already been set out above. Learned counsel for the petitioner very much relied on Clause 4(2) and urged that for the accounting purpose the amalgamation shall be effected with reference to the audited accounts and balance sheet as on 1st April, 1986 of the two companies and the transactions thereafter shall be pooled into a common account and the dissolved company, namely, OMC Alloys Ltd., shall not be required to prepare its final accounts as on any later date and the resulting company which is the applicant company shall take over the assets and the liabilities according to the balance sheets as on 1st April, 1986.
13. Apart from Clause 4, Clause 8 of the said order is also relevant in this connection, which is set out below:
8. Piovision with respect to taxation-All taxes in respect of profits and gains (including accumulated losses and unabsorbed depreciation) of the business carried on by the dissolved company before the appointed day shall be payable by the resulting company subject to such concessions and reliefs as may be allowed under IT Act, 1961 (43 of 1961) as a result of this amalgamation.
14. In this case we are concerned with four assessment years which elapse between 1st April, 1986 and 30th Aug., 1991, namely, 1987-88, 1988-89, 1989-90 and 1990-91. Learned counsel for the petitioner also very much relied on the clarification dt. 17th March, 1993 issued by the Government of India and the said clarification is set out below:
Orissa Mining Corporation Ltd., Bhubaneswar.
Subject: Amalgamation of OMC Alloys Ltd. with Orissa Mining Corporation Ltd.–Department of Company Affairs Order dt. 30th Aug., 1991- clarification regarding.
Sir,
I am directed to refer to this Department order No. SO 502(E) dt. 30th Aug., 1991 published in Gazette of India Extra-ordinary Part-II Section 3 Sub-section (ii) on the subject mentioned above and to clarify that the effective date for all intents and purposes in regard to the amalgamation in question shall be 1st April, 1986.
Yours faithfully
Sd/-
(Dharam Pal)
Under Secretary
15. Relying on the clarification it was urged that the amalgamation has taken place on 1st April, 1986.
16. The learned counsel for the petitioner also relied on several judgments in support of his contention that in all the cases of amalgamation actual amalgamation takes place prior to the Notification of the amalgamation order in” the Official Gazette.
17. Reliance was first placed by Dr. Pal, the learned senior counsel for the petitioner, on the judgment of the Supreme Court in the case of Marshall Sons and Co. (India) Ltd. v. ITO . That was also a case of amalgamation. Learned counsel for the petitioner very much relied on the principles laid down in the judgment to the effect that every scheme of amalgamation of companies has necessarily to provide a date with effect from which the amalgamation/transfer shall take place. The apex Court also held that while sanctioning the scheme, it is open to the Company Court to modify the said date and prescribe such date of amalgamation/transfer as the Company Court or the Central Government may think appropriate. But where no other date is prescribed, but merely the scheme is sanctioned, the date of amalgamation/date of transfer is the date specified in the scheme as the transfer date. In the case of Marshall Sons and Co. (India) Ltd. (supra) in December, 1982 the subsidiary company passed a resolution proposing to amalgamate with the holding company w.e.f. 1st Jan., 1982. Then an application was made to the Company Court and pursuant to its order a meeting of shareholders was held on 11th Feb., 1983 wherein a resolution was passed approving amalgamation of the subsidiary company with the holding company. Similarly resolution was also passed by the shareholders of the holding company on 7th May, 1983. The Company Court sanctioned the scheme of amalgamation by its order dt. 21st Nov., 1983. Similarly an application was filed before the Calcutta High Court and the Calcutta High Court sanctioned the scheme of amalgamation by its order dt. 11th Jan., 1984. On those facts the learned Judges of the Supreme Court, at p. 823 of the report, held that every scheme of amalgamation has to necessarily provide a date with effect from which the amalgamation/transfer shall take place. The scheme in the aforesaid case provides a date viz., 1st Jan., 1982. While sanctioning the scheme, the Court may modify the said date. But where the date has not been modified but merely scheme presented to it has been sanctioned, in such a case the date of amalgamation/date of transfer is the date specified in the scheme as the transfer date and the Court held that “it cannot be otherwise”.
18. Learned counsel for the petitioner while applying the principles of Marshall Sons and Co. (India) Ltd. (supra) to the facts of the present case submitted that the scheme of amalgamation in this case has been sanctioned by the Central Government. It has not provided any separate date of amalgamation. On the other hand in Clause 4(2) of its order it is provided that 1st April, 1986 as the date of amalgamation. The same is also reiterated in Clause 8. That is also the date of transfer mentioned in the scheme which has been sanctioned without specifying any other date.
19. This Court finds that there is a lot of substance in the contention of the learned counsel. The rationale of accepting the date of amalgamation is the date which is specified in the scheme as has been explained by the learned Judges in Marshall Sons and Co. (India) Ltd. (supra) in the following words:
…During the period the proceedings are pending before the Court, both the amalgamating units i.e. the transferor-company and the transferee company may carry on business, as has happened in this case, but normally provision is made for this aspect also in the scheme of amalgamation.
20. The learned Judges in Marshall Sons and Co. (India) Ltd. (supra) has further explained the position as under:
….The order of the Court sanctioning the scheme, the filing of the certified copies of the orders of the Court before the Registrar of Companies, the allotment of shares, etc., may have all taken place subsequent to the date of amalgamation/transfer, yet the date of amalgamation in the circumstances of this case would be 1st Jan., 1982.
21. The Hon’ble Supreme Court while coming to the said conclusion also relied on the decision of the Privy Council in the case of Raghubar Dayal v. Bank of Upper India Ltd. Vol. XLVI 1918-1919 Indian Appeals 135. The learned counsel also submits in the instant case that the scheme of amalgamation clearly shows that transfer date as 1st April, 1986 and in para 3 of the scheme, which has been sanctioned, clearly provide as under:
3. ‘Transfer date’, means the 1st day of April, 1986″.
22. It is not in dispute that the said scheme has been approved by the Central Government without any change of transfer date. Therefore, the time which has elapsed between the scheme and its approval without a different date is not relevant in deciding the date of amalgamation.
23. In the decision of Privy Council in Raghubar Dayal (supra) the Court considered similar questions. In that case the Privy Council approved the decision of the Court of the Judicial Commissioner of Oudh under Section 153 of the Indian Companies Act as it stood then. The question before the Court of Judicial Commissioner was from which date the arrangement of compromise under Section 153 of the Companies Act would become effective namely whether from the date of sanction by the Court or whether it would become effective from the time when the arrangement/agreement has been arrived at. The Court held that if the arrangement/agreement is sanctioned by the Court, the said arrangement/agreement becomes binding, not from the date of the sanction of the Court but from the date such arrangement/agreement was arrived at. The decision of the Privy Council in the words of Lord Haldane was felicitously expressed as under:
If it had been the intention of the legislature that such an agreement should not be binding until the arrangement had been sanctioned by the Court, instead of the words if sanctioned by the Court the words ‘when it has been sanctioned by the Court’ would ordinarily have been used. The agreement becomes binding from the date when it is arrived at, subject to subsequent sanction by the Court. If that sanction be refused, the agreement is without effect. But it is not the case that the agreement is to take effect from the date of sanction. It takes effect from the date when it is made. Such is our interpretation of the words of the section.
24. The same principle was followed by a Division Bench of the Calcutta High Court in the case of Rajshahi Banking & Trading Corporation Ltd. v. Pulin Behary Mukherjee Vol. XLII Calcutta Weekly Notes, 610 (1937-1938). (See at p. 612).
25. Almost similar views have been taken by the Bombay High Court in the case of CIT v. Swastik Rubber Products Ltd. . It appears that the Hon’ble Supreme Court dismissed the SLP filed by the Revenue against the said judgment of Bombay High Court.
26. The learned counsel for the Revenue on the other hand contended that the order of amalgamation which was passed under Section 396 of the Companies Act does not make any provision of clarification. It was stated that the clarification order dt. 17th March, 1993 has no legal basis. It was also contended that the said clarification order was signed by the under secretary who is below the rank of the joint secretary and the said clarification has not been notified in the Official Gazette. It was also stated that the main order of amalgamation dt. 30th Aug., 1991 was passed under the provisions of Section 396 of the Companies Act and such order was placed before the Parliament under Section 396(5) but the order of clarification has not been placed before the Parliament and therefore it has to be ignored. Learned counsel for the Revenue also submitted that in all the cases of definitions the expression, “unless the context otherwise requires” finds place. Therefore, there is no substance in this case. Learned counsel further submitted that the statutory definition cannot be ignored. It was also submitted that Sub-clause 4(2) does not override Sub-clause 4(1) of the amalgamation order as the said Sub-clause 4(2) does not start with a non obstante clause. Learned counsel for the Revenue relied on a decision of the Supreme Court in the case of General Radio & Appliances Co. Ltd. and Ors. v. M.A. Khader . On the basis of the said judgment, it was contended that subsidiary companies exist as separate entities from 1st April, 1986 to 30th Aug., 1991. Learned counsel also submitted that Clause 8 of the amalgamation order is a provision with respect to all taxes in respect of profits and gains including accumulated losses and unabsorbed depreciation. Learned counsel also relied on a decision of the Supreme Court in the case of Government of Orissa v. Ashok Transport Agency and Ors. .
27. This Court is however unable to accept the contention of the learned counsel for the Revenue for the following reasons.
28. It is difficult for this Court to discard the clarification which has been given by the Government of India, Ministry of Law Justice and Company Affairs, Department of Company Affairs by order dt. 17th March, 1993 to the order dt. 30th Aug., 1991. In fact, the question which has been referred to this Court has taken into account the said clarification. This Court is called upon to construe the Gazette Notification dt. 30th Aug., 1991 read with the clarification dt. 17th March, 1993. Therefore, this Court cannot accept the contention of the learned counsel for the Revenue that the said clarification should be ignored. Such a contention is virtually against the reference as formulated and on which the Court is to give its opinion.
29. The said clarification which is issued by the Government clearly stipulates that the effective date for all intents and purposes in regard to the amalgamation in question shall be 1st April, 1986. The same has been issued by the Government of India. It is well known that one Department of the Government, namely, Revenue cannot challenge the clarification issued by another Department of the Government specially when the said clarification has been taken into account for the purpose of construction of the order dt. 30th Aug., 1991 and the reference order on that basis falls for answer by this Court. It may be true that Court may reframe the terms of reference but there is no warrant for the same in the facts of the case.
30. Apart from that, both Clause 4(2) and Clause 8 of the amalgamation order make it clear that for accounting and taxation purposes 1st April, 1986 shall be the date on which the amalgamation is to be effected.
31. The scheme of amalgamation which has been approved by the Central Government also indicates that the transfer date is 1st April, 1986. The judgment on which reliance has been placed by the learned counsel for the Revenue, namely, the judgment of the Supreme Court in the case of Ashok Transport Agency (supra) has no relevance to the facts and circumstances of the present case. In the case of Ashok Transport Agency (supra), a suit was filed against OMC Alloys Ltd. on 1st Aug., 1986. OMC Alloys Ltd. filed a written statement on 14th Oct., 1997. Thereafter the suit was dismissed for default. Then the plaintiff Ashok Transport Agency filed an application for restoration of the suit. The said prayer for restoration was not opposed and the application for restoration was heard and allowed. Thereafter the suit was proceeded ex parte against OMC Alloys Ltd. Neither OMC Alloys Ltd. nor the Government of Orissa informed the Court about amalgamation of the OMC Alloys Ltd. with the said Corporation and as such the decree was sought to be executed. The executing Court allowed the same to be executed against the Government of Orissa and TISCO. Against such order, the matter went before the Hon’ble Supreme Court.
32. In the background of these facts, the Supreme Court held that there is no dispute about the amalgamation of the two companies and the Central Government passed the order of amalgamation under Section 396 of the Companies Act and Clause 7 of the amalgamation order provides for continuation of the suit or legal proceeding against the Corporation instead of OMC Alloys Ltd. The Supreme Court was of the view that since none of the parties informed the Court about the amalgamation and TISCO has not been impleaded as a party in the suit, the order passed by the High Court was quashed by the Supreme Court and the Supreme Court remanded the matter to the trial Court for deciding the suit after impleading OMC Alloys Ltd. and the TISCO to the proceeding. The said decision has no relevance to the facts of the present case.
33. The other decision which has been cited by the learned counsel for the Revenue was rendered in the case of General Radio & Appliance Company Ltd. v. M.A. Khadei (supra). The said decision was in the case of a tenant transferring interest in the tenanted premises to another company under High Court’s order sanctioning the scheme of amalgamation. In that case, the consent of the landlord for subletting as per rent agreement was not obtained. The Supreme Court held that in such a case transfer of tenancy interest by tenant is hit by Section 10(ii)(a) of A.P. Buildings (Lease, Rent and Eviction) Control Act (15 of 1960). This Court is unable to appreciate the reference of the said ratio to the facts of the present case. This Court, on the other hand, finds that the consistent view of the Privy Council which has been discussed above and which has been affirmed by the Supreme Court and by Calcutta and Bombay High Courts clearly shows that there is always a time gap between the amalgamation scheme and the period when the same is sanctioned by the Court. But after the said sanction, the effective date of amalgamation is the date when the scheme is arrived at and when the date is fixed under the scheme, unless the Court specifies another date. No argument has been advanced by the learned counsel for the Revenue contradicting such consistent judicial opinion.
34. Apart from that, the import of expression, “unless the context otherwise requires” has been explained by Supreme Court in many judgments. In the case of K.V. Muthu v. Angamuthu Animal , this has been explained very lucidly in para 10. The learned Judges held that definitions are not conclusive when the context requires a different meaning. The exact words of the apex Court are as follows:
…This implies that a definition, like any other word in a statute, has to be read in the light of the context and scheme of the Act as also the object for which the Act was made by the legislature.
This has been further elucidated in paras 11 and 12 of the judgment in the following words :
11. While interpreting a definition, it has to be borne in the mind that the interpretation placed on it should not only be not repugnant to the context, it should also be such as would aid the achievement of the purpose which is sought to be served by the Act. A construction which would defeat or was likely to defeat the purpose of the Act has to be ignored and not accepted.
12. Where the definition or expression, as in the instant case, is preceded by the words ‘unless the context otherwise requires’, the said definition set out in the section is to be applied and given effect to but this rule, which is the normal rule may be departed from if there be something in the context to show that the definition could not be applied.
Following the aforesaid principles, this Court cannot hold that the date of the notification of the scheme in the Official Gazette is the effective date of amalgamation.
35. For the reasons discussed above, the question in these reference matters is answered in favour of the assessee and this Court holds that the date of amalgamation is 1st April, 1986. The Tribunal is to decide the matters accordingly.
The reference are answered as above and disposed of accordingly.
There is no order as to costs.