ATLAS CYCLE INDUSTRIES LIMITED Vs. UNION OF INDIA

JUDGEMENT

(1.) THE petitioner in this writ petition is challenging the decision of the specified authority constituted under S. 72A(1) of the INCOME TAX ACT, 1961 (hereinafter referred to as "the Act"), who by its order dt. 16th Nov., 1978, expressed its inability to recommend to the Central Government the acceptance of the scheme of amalgamation as proposed by the petitioner.

(2.) THE petitioner is one of the leading manufacturers of bicycles in India. According to the averments made in the writ petition, the petitioner promoted a subsidiary company known as Atlas Auto - Cycles Ltd. The subsidiary company was incorporated in the year 1970, but it started manufacturing operations only in February, 1976. The said subsidiary company, however, did not make any profit. On the contrary, it has been suffering huge losses ever since it started manufacturing. Sometime in the year 1977, the company sought expert advice of M/s M. M. Suri & Associates (P) Ltd. The said advisers prepared a comprehensive report on the potentialities of the project of the subsidiary company and made it recommendations. The said recommendations postulated huge investment being made in order to market the said unit viable. It was then decided that the two companies should be amalgamated. It was thought that this was the only way in which the subsidiary company could be saved from imminent and total collapse. Both the companies filed petitions in the High Court of Punjab & Haryana under ss. 391 and 394 of the Companies Act for the approval of the scheme of amalgamation of the companies. The requisite formalities under the Companies Act having been complied with, the said High Court, vide its order dt. 27th Feb., 1978, accorded approval to the scheme of amalgamation.

(3.) THE Government of India in pursuance of the provisions of S. 72A have also laid down certain guidelines. These guidelines were issued on 7th Feb., 1978. These guidelines were laid down so that if the conditions mentioned therein were fulfilled the Government would grant approval of the amalgamation of the units. The said guidelines, inter alia, provided that the declaration under s. 72A would be given if the following conditions were fulfilled :