CHAPTER 12 – AN OVERVIEW OF CORPORATE REORGANISATION
Joint Commissioner of Income Tax (OSD), Circle (3)(3)-1 & Ors.(Appellants) vs. Reli-
ance Jio Infocomm Ltd. & Ors. (Respondents)
Mere fact that a Scheme of Arrangement may result in reduction of tax liability does
not furnish a basis for challenging the validity of the same.
The NCLAT, held that without going to the record and without placing any evidence or sub-
stantiating the allegation of avoidance of tax by appearing before the Tribunal, it was not
open to the income tax department to hold that the composite scheme of arrangement
amongst the petitioner companies and their respective shareholders and creditors is giving
undue favour to the shareholders of the company and also the overall scheme of arrangement
results into tax avoidance.
The NCLAT observed that mere fact that a scheme may result in reduction of tax liability
does not furnish a basis for challenging the validity of the same. The Income Tax Depart-
ment, which sought for liberty, while accepted by the Petitioner Companies (Respondents
herein) and the NCLT, Ahmedabad bench while approving the Composite Scheme of Ar-
rangement has granted liberty. Such liberty to the Income Tax Department to enquire into
the matter, if any part of the Composite Scheme of Arrangement amounts to tax avoidance
or is against the provisions of the Income Tax and is to let it take appropriate steps if so
Thus, NCLAT upheld the decision of NCLT, Ahmedabad bench and in view of the
liberty given to the Income Tax Department decided not to interfere with the Scheme of Ar-
rangement as approved by the Tribunal and dismissed the appeals filed.
Aruna Oswal (Appellant) vs. Pankaj Oswal & Ors.(Respondents)
The Supreme Court of India
Dispute of Inheritance of Shares is a civil dispute, it cannot be decided under section
241/242 of the Companies Act, 2013
Facts of the case
The brief facts of the case are that Late Mr. Abhey Kumar Oswal, during his lifetime, held
as many as 5,35,3,960 shares in M/s. Oswal Agro Mills Ltd., a listed company. He died on
29.3.2016. Mr. Abhey Kumar Oswal filed a nomination according to section 72 of the Compa-
nies Act, 2013 in favour of Mrs. Aruna Oswal, his wife. Two witnesses duly attested the
nomination in the prescribed manner. The name of Mrs. Aruna Oswal, the appellant, was reg-
istered as a holder on 16.4.2016 as against the shares held by her deceased husband.
Pankaj Oswal (respondent no.1), son of late Abhay Oswal filed a partition suit in High Court
claiming entitlement to 1/4th of the estate of his father including the deceased’s sharehold-
ings. The High Court passed an interim order to maintain status quo concerning shares and
other immoveable property.
While the suit was pending, respondent no.1 also moved the NCLT, Chandigarh, alleging ‘op-
pression and mismanagement’ under Section 241/242 of the Companies Act, 2013 in the af-
fairs of respondent no.2 company. The appellant challenged the maintainability of the peti-
tion. The NCLT directed filing of reply to the petition, without deciding the question of
This was challenged before NCLAT, which in turn directed the NCLT to decide the question
of maintainability of the petition. The NCLT thereafter dismissed the challenge to maintain-
ability and held that the respondent no.1, being a legal heir, was entitled to one-fourth of
the property/shares. Therefore, the matter eventually reached the Supreme Court of India.
Supreme Court observed that the basis of the petition is the claim by way of inheritance of
1/4th shareholding so as to constitute 10% of the holding. This is the right, which cannot be
decided in proceedings under Section 241/242 of the Companies Act, 2013. Thus, filing of the
petition under sections 241 and 242 seeking waiver is a misconceived exercise as the, re-
spondent no.1 has to firmly establish his right of inheritance before a civil court to the ex-
tent of the shares he is claiming; more so, in view of the nomination made as per the provi-
sions contained in Section 71 of the Companies Act, 2013.
In order to maintain the proceedings, the respondent should have waited for the decision of
the right title and interest, in the civil suit concerning shares in question.
The orders passed by the NCLT as well as NCLAT are set aside, and the appeals are allowed.