Levy of fiscal penalty following corporate merger and sanctioned rehabilitation scheme successor liable; appeal dismissed

Scheme of amalgamation sanctioned by a rehabilitation authority had become operative and the successor company, having merged with the transferor, assumed all liabilities including a fiscal penalty imposed for failure to meet export obligations; the successor did not pursue statutory waiver remedies and cannot revive a withdrawn challenge by the transferor, so the writ was dismissed. The court treated the merger as binding on rights and liabilities, held absence of any reserved liberty to re-agitate the issue after withdrawal, and affirmed liability for the fiscal penalty without a waiver under the scheme.

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Issues:
Challenge to fiscal penalty imposed by Additional Director General of Foreign Trade (ADGFT) on a company after merger with another company under a sanctioned scheme of amalgamation.

Analysis:
The appellant, a limited company, challenged a fiscal penalty of &8377; 23,38,882 imposed by the ADGFT on another company, KMBL, which had merged with the appellant under a sanctioned scheme of amalgamation. The appellant contended that KMBL had previously challenged the penalty successfully but withdrew the challenge later. The Single Judge found that the penalty was compensatory Customs duty for KMBL's failure to meet export obligations, not waived by the Board for Industrial and Financial Reconstruction (BIFR) during KMBL's proceedings before it. The Single Judge dismissed the writ petition, stating that the appellant, having taken over KMBL's liabilities, could not revive the challenge after KMBL's withdrawal without any reservation to re-agitate the issue.

The High Court upheld the Single Judge's decision, noting that the appellant, having merged with KMBL, inherited all liabilities, including the fiscal penalty. The Court emphasized that the penalty was justified due to KMBL's failure to meet export obligations and the absence of any BIFR scheme waiving the penalty. The Court found no violation of the appellant's rights and dismissed the appeal, concluding that the appellant could not challenge the penalty post-merger when KMBL had withdrawn its challenge without reserving the right to revisit the issue.

In conclusion, the High Court affirmed the Single Judge's order, dismissing the appeal and emphasizing that the appellant, as the successor of KMBL, was bound by all liabilities, including the fiscal penalty, and had no grounds to challenge the penalty's imposition. The Court found no merit in the appeal and ruled in favor of the respondent, upholding the fiscal penalty imposed by the ADGFT on KMBL, which now fell under the appellant's responsibility post-merger.

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