Whether NCLT is within its power to reject the scheme on the ground of tax benefits available to The Transferee Company?

Minda TG Rubber Private Limited (“Applicant Company/Transferor Company) filed scheme of amalgamation with Toyoda Gosei Minda India Private Limited (“Transferee Company”) before the Hon’ble National Company Law Tribunal (NCLT) Delhi & Jaipur Bench,  respectively.

Facts of the case: –

1. The Transferee Company is engaged in the business of manufacturing, distributing, selling, importing, and exporting automotive parts and rendering services in this respect.
2. The Transferor Company is engaged in the business of manufacturing auto components.
3. Rationale for the proposed amalgamation as envisaged under the Scheme were:
   • Achieving business and administrative synergies,
   • Consolidation and simplification of shareholding structure, cost, saving, synergies resulting from rationalization, standardization and simplification of business process,
   • Improved organizational capability arising from a pooling of financial resources,
   • Avoiding unnecessary duplication of cost of administration, distribution, selling and marketing and reduction in legal and regulatory compliances,
   • Maximize the overall shareholders value.
4. Being the registered office of the Transferee and the Transferor Company is in different states, the transferor company filed the scheme in NCLT Delhi Bench and the transferee company in Jaipur Bench.
5. Now as far as The Transferor company is concerned.
   • The Regional Director and The Official Liquidator did not raise any objection to the said scheme in their reports submitted to Delhi Bench.
   • The Income Tax Department filed their No objections with Hon’ble Jaipur Bench with proviso that the company strictly complies with the conditions of Section 72A of the Income Tax Act, 1961 and Rule 9C of the Income Tax Rules, 1962 and secure the interest of the revenues to that extent that if any demand arises then the company may pay demand as and when it arises.
6. Based on the above, the Hon’ble Jaipur Bench allowed the scheme vide order dated 23rd June 2022. The final order of the approved scheme was filed by the transferee company with the Registrar of Companies, Jaipur which was subsequently approved on 30^th December 2022.
7. Interestingly, in Hon’ble Delhi Bench, the Income Tax Authorities filed their report with NCLT citing below mentioned grounds and prayed that scheme be rejected by NCLT. Pursuant to this, Hon’ble Delhi Bench accepted the Income Tax Authorities prayer & rejected the scheme.