Resultant Co. can file appeal after demerger; abundant caution appeal by demerged Co. dismissed to avoid duplicity

Appeals filed by demerged company under the apprehension that the original appeals filed by the resulting company might not be held as maintainable, were not permissible. Such duplicate appeals might lead to a serious problems if they remained un-noticed, because mistakenly two judgments could be delivered and that might lead to a serious error.

The Tribunal held as under:

1) Demerger implies transfer of all the assets and liabilities of the undertaking or division by a 'demerged company' to a 'resulting company'. In consequence of assets being taken over by a ‘resulting co’ it would be responsible and would have the rights to be a party to the litigation to protect its interest;

2) A resulting company on one hand acquired the assets and on the other hand it was responsible for the liabilities, including tax liability;

3) As per sub-section (vi) of section 2(19AA), the transfer of the undertaking was on a going concern basis, meaning thereby, that as a result of demerger the effected undertaking would loose it’s independent legal identity which merged with the resultant company. Its entity thereafter vested in the resulting company. As a natural corollary the litigation couldn’t be pursued against a non-existing legal body;

4) As a result of demerger an undertaking or a unit of demerged company was transferred to a resulting company. Therefore, after the transfer, the demerged company was not to be held responsible for any legal action but the transferee- company was legally answerable and accountable thereafter;

5) Appeals filed by the demerged company under the apprehension that the original appeals filed by the transferee-company (resulting company) might not be held as maintainable, were nothing but the duplicate appeal, which was not permissible in the eyes of law;

6) Such duplicate appeals might lead to a serious problems if these remained un-noticed, because mistakenly two judgments could be delivered and that might lead to a serious error. Duplicity is void ab initio hence appeals were required to be dismissed - CAIRN ENERGY GUJARAT BV V. ADIT [2013] 34 taxmann.com 281
(Ahmedabad -Trib.)

This Case Law has been Shared by a Student of ICAI Vinanti Zatakiya. You can reach her at vinanti2504@gmail.com

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