Decided on December 29,1982



Bishan Lal, Accountant Member - (1.) THE assessee is a limited company which was formerly carrying on banking business in the name of 'Punjab National Bank Ltd.'. THE name of the company was changed to 'P.N.B. Finance Limited' as per fresh certificate of Incorporation dated 4-3-1976, issued by the Registrar of Companies, Delhi and Haryana, New Delhi.
(2.) The President of India promulgated the Banking Companies (Acquisition and Transfer of Undertakings) Ordinance, on 19-7-1969 and it came into force from that very day. Under the Ordinance, the entire undertaking of the Punjab National Bank Ltd. stood transferred to the corresponding new bank, viz., Punjab National Bank. The Ordinance was replaced by the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, which was retrospectively effective from 19-7-1969. Under this Act, the amount of compensation for the entire undertaking was fixed at Rs. 10.20 crores. The difference between the compensation of Rs. 10.20 crores and the paid-up capital, viz., Rs. 8.20 crores, was credited to general reserve of the limited company. After the nationalisation of the Punjab National Bank Ltd., the company carried on business in terras of the following resolution adopted at the extraordinary general meeting of the company held on 20-1-1971: Resolved that the company do continue the business of banking as defined in Section 5(b) of the Banking Regulation Act, 1949. subject to the receipt of permission from the Reserve Bank of India and that the company do continue to engage in other forms of business under Section 6(i) of the said Act and in accordance with the provisions of the objects clause of the company's Memorandum of Association. The board of directors had assured the shareholders that they would come forward with suitable proposals to satisfy both the sections of the shareholders-one desiring the company to continue its business of financing trade and industry and also to undertake trading activities and the other not wanting to continue as members of the company on its ceasing to do banking business. Pursuant to this assurance, the board of directors decided to offer cash option to the shareholders at Rs. 38 per share inclusive of dividend for the year 1972. A circular letter dated 28-2-1973 was issued to the shareholders giving them an option to sell all their shares to the company on or before 30-4-1973. After tabulation of the options the extent of the consequent reduction of capital was to be determined. A general meeting of the shareholders of the company was to be convened on or before 29-6-1973, inter alia, for considering the special resolution for the consequent reduction of capital. The circular letter also stated that after the special resolution approving the reduction of the capital was passed by the shareholders, the High Court at Delhi would be moved on 7-7-1973 for sanctioning and confirming the reduction, in capital. After the High Court order was received a copy of the same was to be filed with the Registrar of Companies at New Delhi. The circular letter further stated that on the Court's order having been registered with the Registrar of Companies, the shares in respect of which the reduction of capital was sanctioned by the Court shall stand cancelled and the holders of such shares shall forthwith cease to be the members of the company. Thereupon, the company was to make payment of Rs. 38 per share (less the dividend for the year 1972 that may have been declared in the meantime), on the relevant share certificates being received by the company.
(3.) BY circular letter dated 19-4-1973 the offer of the company to purchase the shares of the company at Rs. 38 per share inclusive of dividend for the year 1972 was withdrawn. Instead the shareholders were informed, that the company would purchase the shares from the shareholders who exercised their option at Rs. 40 per share exclusive of dividends that may be declared till the date of payment of the purchase price in place of Rs. 38 inclusive of dividend for 1972. The last date for lodging of letters of option with the company's office was fixed on or before 15-6-1973. The other terms and conditions of the offer of option remained the same as contained in circular letter dated 28-2-1973.;

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