General Circular
No 1/2014, F.No. 2/1/2014, dated 15.01.2014
Report
u/s 394A of the Companies Act, 1956- Taking accounts of comments/inputs from
Income Tax Department and other sectoral Regulators while filing reports by RDs
To
All
Regional Directors,
All
Registrar of Companies,
All
Stakeholders
Section 394A of
the Companies Act, 1956 requires service of a notice on the Central Government
wherever cases involving arrangement/compromise (under Section 391) or
reconstruction / amalgamation (under Section 394) come up before the Court of
competent jurisdiction. As the powers of the Central Government have been
delegated to the Regional Directors (RDs) who also file representations on
behalf of the Government wherever necessary.
2. It is to be noted that the said
provisions is in addition to the requirement of the report to be received
respectively from the Registrar of Companies and the Official Liquidator under
the first and second provisos to Section 394(1). A joint reading of Sections
394 and 394A makes it clear that the duties to be performed by the Registrar
and Official Liquidator under Section 394 and of the Regional Director concerned
acting on behalf of the Central Government under Section 394A are quite
different.
3. An instance has recently come to
light wherein a Regional Director did not project the objections of the
Income Tax Department in a case under Section 394. The matter has been
examined and it is decided that while responding to notices on behalf of
the Central Government under Section 394A, the Regional Director concerned
shall invite specific comments from Income Tax Department within 15 days of
receipt of notice before filing his response to the Court. If no response from
the Income Tax Department is forthcoming, it may be presumed that the Income
Tax Department has no objection to the action proposed under Section 391 or 394
as the case may be. The Regional Directors must also see if in a particular
case feedback from any other sectoral Regulator is to be obtained and if it
appears necessary for him to obtain such feedback, it will also be dealt with
in a like manner.
4. It is also emphasized that it is not
for the Regional Director to decide correctness or otherwise of the
objections/views of the Income tax Department or other Regulators. While
ordinarily such views should be projected by the Regional Director in his
representation, if there are compelling reasons for doubting the correctness of
such views, the Regional Director must make a reference to this Ministry for
taking up the matter with the Ministry concerned before filing the
representation under Section 394A.
5. This Circular is effective from the
date of issue.
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