NCLAT upholds original merger date, holds transferee liable for transferor tax liabilities

The National Company Law Appellate Tribunal (NCLAT) allowed the Appellant to substitute the Respondent by changing the Registrar of NCLT to the Registrar of Companies. The NCLT accepted the merger scheme but disagreed on changing the appointed date. NCLAT overruled NCLT's decision, maintaining the original date to ensure Income Tax Authorities could pursue liabilities. The judgment emphasized the transferee company's responsibility for Transferor Companies' liabilities, allowing tax authorities to hold them accountable. The appeal was disposed of without costs.

---

---

Issues:
1. Substitution of the Respondent by the Appellant.
2. Scheme of merger by absorption accepted by NCLT, Mumbai Bench.
3. Changing the appointed date of the scheme.
4. Conduct of business during the interim period.
5. Liabilities of Transferor Companies and the transferee company.
6. Decision on changing the appointed date of the scheme.

Analysis:
1. The judgment involves the issue of the Appellant substituting the Respondent by deleting the Registrar of NCLT and substituting the Registrar of Companies. The Appellants were permitted to do so, and proof of service of the appeal on the Registrar of Company was filed. The appeal was heard finally with the consent of the counsel for the Appellant.

2. The National Company Law Tribunal, Mumbai Bench, accepted the scheme of merger by absorption proposed by the Appellant, except for changing the appointed date of the scheme. The NCLT found the scheme fair and reasonable, not violating any laws, and not contrary to public policy. Certain directions were given regarding the appointed date of the scheme, which led to discussions on the transfer of rights over leasehold lands and the implications for Income Tax Authorities.

3. The NCLAT reviewed the observations and directions of the NCLT regarding the appointed date of the scheme. After considering the arguments presented by the counsel for the Appellants, the NCLAT decided to overrule the NCLT's change of the appointed date from 1st April 2017 to 1st April 2018. The NCLAT held that the appointed date of the scheme would remain as proposed by the Appellant to ensure that Income Tax Authorities could proceed against the transferee company for any liabilities of the Transferor Companies.

4. The judgment also addressed the conduct of business during the interim period as outlined in the scheme. It was emphasized that the liabilities of the Transferor Companies, including any pending transactions, would be the responsibilities of the transferee company. The Appellant No.1 was bound by the actions of the Transferor Companies done in trust of the transferee company.

5. The NCLAT clarified that the Income Tax Authorities could pursue the transferee company for any tax liabilities of the Transferor Companies, irrespective of the appointed date of the scheme. If necessary, the authorities could also hold the erstwhile persons, members, or directors of the Transferor Companies liable as per the law. The appeal was disposed of accordingly, with no order as to costs.

---