2024 TaxPub(CL) 71 (NCLAT- Chny)
COMPANIES ACT, 2013
Sections 421, 230 & 232
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NCLT already sanctioned Scheme of amalgamation with Appointed Date as 1-10-2020, but impugned order by changing the Appointed Date to 1-10-2022, has made the Scheme unworkable, therefore, the order of modification of the appointed date was set aside. |
Appeal from Orders of Tribunal - Appeal against modification of appointed date - Order of changing Appointed Date made Scheme of amalgamation unworkable - Allowability
Transferor company and transferee company filed an application under sections 230-232 for sanction of scheme of amalgamation, which was allowed by NCLT. The NCLT while sanctioning the Scheme, modified appointed date to 1-10-2022 as against appointed date of 1-10-2020. Therefore, the transferor company filed an appeal against the order on the ground that the NCLT had failed to consider that First Motion Application was filed on 29-9-2021 by them and therefore, the Appointed Date, mentioned in the Scheme was not antedated, beyond a year from the date of filing of the First Motion Application. Held: In the instant case, the NCLT had by way of an order, dated 6-6-2022, already sanctioned the Scheme with the Appointed Date as 1-10-2020, the impugned order by changing the Appointed Date to 1-10-2022, has made the Scheme unworkable. Further, the NCLT did not have the power to review its own Order. Therefore, in view of the implementation of the Scheme, the appeal was allowed.
REFERRED : Accelyst Solutions (P) Ltd. v. Freecharge Payment Technologies (P) Ltd. 2021 TaxPub(CL) 1084 (NCLAT-Del); Miheer H. Mafatlal v. Mafatlal Industries Ltd., (1997) 1 SCC 579 : 1997 TaxPub(CL) 0217 (SC)
FAVOUR : In favour of appellant
A.Y. :
IN THE NCLAT, CHENNAI BENCH
RAKESH KUMAR JAIN, JUDICIAL MEMBER & SHREESHA MERLA, TECHNICAL MEMBER
Sterlite Ports Ltd. v. Regional Director
Company Appeal (AT) (CH) No. 99 of 2023 (IA No. 1262/2023)
21 December, 2023
Appellants by: Krishnendu Datta , Senior Advocate for Anirudh Das, Advocate
Respondent by: Avinash Krishnan Ravi, Advocate
ORDER
(Virtual Mode)
Shreesha Merla, Technical Member
1. This Appeal is filed by the Appellants under section 421 of the Companies Act, 2013 (hereinafter referred to as 'the Act'), aggrieved by the Order, dated 22-3-2023, passed by the National Company Law Tribunal ('NCLT'), Chennai Bench, in CP(CAA)/52/CHE/2022, filed by the Appellants herein, under section 230-232 of the Act, read with the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 for sanction of the Scheme of Amalgamation among the Appellants and M/s. SESA Mining Corporation Limited (hereinafter referred to as the 'Transferee Company'). By the impugned order, the NCLT while sanctioning the Scheme, modified the Appointed Date to 1-10-2022 as against the Appointed Date of 1-10-2020, as stated in the Scheme approved by NCLT, Mumbai.
2. The NCLT while fixing the Appointed Date as 1-10-2020, reasoned as follows :--
'7.1.9. Due to such an interpretation being given to section 232(6) of the Companies Act, 2013, the Ministry of Corporate Affairs (MCA) received several queries which it has addressed by way of the circular. It has relied on the rulings of the Hon'ble Apex Court in Marshall Sons & Co. India Ltd. (supra) and the Hon'ble Madras High Court in Equitas Housing Finance Limited and Equitas Micro Finance Limited with Equitas Finance Limited in C.P. Nos. 119 to 121 of 2016 as the basis for its clarification. On a perusal of the clarification issued by the MCA vide its General Circular No. 09/2019 on 21-8-2019, posits the following facts :--
The 'Appointed Date' can be a specific calendar date or be tied to the occurrence of an event e.g., grant or transfer of licenses, the fulfilment of conditions precedent, etc. (prospective date).
If the 'Appointed Date' is a calendar date, it may precede the date of applying for the Scheme before the NCLT.
If the Appointed Date is predated by a year or more from the date of applying with NCLT, Justification should be provided for the same in the Scheme and it should not be against the public interest.
If 'Appointed Date' is based on the occurrence of an event, the said event should be specifically identified in the Scheme upon the occurrence of which the scheme would become effective. If the event-based date is a date after the date of filling the order with the concerned RoC under section 232(5) of the Companies Act, 2013 the concerned Company shall file an intimation of the same with the RoC within 30 days of such Scheme coming into force.
The 'Appointed Date' shall also be the 'Acquisition Date' and date of transfer of control to confirm to Indian Accounting Standards 103.
7.1.10. In the present case, the Petitioner Company is relying upon the clause which states in the MCA Circular, dated 21-8-2019 that 'If the Appointed Date' is predated by a year or more from the date of applying with NCLT, justification should be provided for the same in the Scheme and it should not be against the public interest'. The Petitioner Company relies upon clause 9 of the Scheme as the justification for fixing the Appointed date as 1-10-2020. However, a perusal of clause 9 of the Scheme would manifest the fact that the same would pertain to Conduct of Business till Effective Date and the business activities to be carried out from the Appointed Date till the Effective Date and the said clause does not spell out any justification as to why the Appointed date is 'antedated' and as such the same cannot be treated as a Justification as mandated in the MCA Circular, dated 21-8-2019.
7.1.11. However, Clause 1.2 of Part I of the Scheme defines 'Appointed Date' and Clause 1.9 of Part I of the Scheme defines 'Effective Date' which is as follows :--
'Appointed Date' means, 1-10-2020, or such other date as may be fixed or approved by the National Company Law Tribunal or any other appropriate authority.
'Effective Date' means the date on which the last of the approvals of the Scheme is obtained as per Clause 20 of Part III and the Scheme is made effective with effect from the Appointed date.
7.1.12. Thus, a perusal of the definition clause in the Scheme would posit the fact that a discretion has been conferred upon NCLT to fix an Appointed Date. In the absence of a specific justification in relation to the Appointed Date as given by the Petitioner Company, this Tribunal in terms of Clause 1.2 of Part I of the Scheme hereby fix the Appointed Date as 1-10-2022.'
3. The learned Senior Counsel Mr. Krishnendu Datta submitted that NCLT has failed to consider that the Chennai First Motion Application was filed on 29-9-2021 by the Appellants and therefore the Appointed Date, mentioned in the Scheme was not antedated, beyond a year from the date of filing of the First Motion Application.
4. It is submitted that as per the MCA General Circular No. 09/2019, F.No. 7/12/2019/CL - I, dated 21-8-2019 (hereinafter referred to as the 'MCA Circular'), no reasons were required to be provided for the said Appointed Date, since it was not ante-dated, beyond a year from the date of filing of the Chennai First Motion Application. It is argued that since NCLT, Mumbai, had by way of an Order, dated 6-6-2022, already sanctioned the Scheme with the Appointed Date as 1-10-2020, the impugned order by changing the Appointed Date to 1-10-2022, has made the Scheme unworkable.
5. The learned Senior Counsel for the Appellant drew our attention to Clause 1.9 of Part I of the Scheme, whereunder the Effective Date has been defined as 'the date on which the last of the approvals of the scheme is obtained as per Clause 20 of Part III and the scheme is made effective with effect from the Appointed Date'.
6. Clause 20.3 of Part III of the Scheme, reads as hereunder :--
'Certified or authenticated copy of the Order of the NCLT sanctioning the Scheme being filed with the Registrar of Companies by the Transferor Company 1, Transferor Company 2, Transferor Company 3, Transferor Company 4 and the Transferee Company.'
7. It is submitted that the Appellants had filed the IA(CA)/57/CHE)/2023, before the NCLT, seeking rectification of the Appointed Date of the Scheme to 1-10-2020, but, by Order, dated 9-10-2023, NCLT, while acknowledging that owing to different Appointed Dates in the Orders of the NCLT-Mumbai and Chennai Benches, it is impossible for the Applicant Company to implement the Scheme, dismissed the IA on the ground that NCLT did not have the power to review its own Order.
8. The learned Counsel appearing for the Respondent/Regional Director (Southern Region) had submitted that the Regional Director (Southern Region) has filed a Report, before the NCLT on 3-11-2022 and have stated in Para 3 of the Report, that as per Clause 1.2 of Part I of the Scheme provides, the Appointed Date is 1-10-2020, which is ante-dated beyond a year and is not in accordance with section 232(6) of the Companies Act, 2013. It was prayed by the Regional Director to revise the Appointed Date or may determine an Appointed Date as it deems fit.
9. The brief point which falls for consideration in this Appeal is whether the NCLT was correct in fixing the Appointed Date to 1-10-2022, while allowing the Chennai Second Motion Petition and sanctioning the Scheme, when the NCLT-Mumbai, had sanctioned the Scheme filed by the Transferee Company with the Appointed Date of 1-10-2020.
10. For ready reference, Para 6(c) of the MCA General Circular No. 09/2019, is reproduced as hereunder :--
'6. In view of the above, it is hereby clarified that :--
(c) where the 'appointed date' is chosen as a specific calendar, it may precede the date of filing of the application for scheme of merger/amalgamation in NCLT. However, if the 'appointed date' is significantly ante-dated beyond a year from the date of filing, the justification for the same would have to be specifically brought out in the scheme and it should not be against public interest.'
11. Clause 1.2 of the Scheme provides that 'Appointed Date' means, 1-10-2020, or such other date as may be fixed or approved by the National Company Law Tribunal or any other appropriate authority.
12. It is not in dispute that the NCLT, Mumbai had already sanctioned the Scheme with the Appointed Date of 1-10-2020, vide Order, dated 6-6-2022. In the IA filed on 31-3-2023, the Appellants had sought for rectification of the Appointed Date to 1-10-2020, which was dismissed on the ground that NCLT did not have the power to review its own order. It is seen from the record that the Appointed Date as per the Scheme is 1-10-2020 'and the same is within a period of one year from the date of filing of the Application for Approval of the Scheme with NCLT i.e., 29-9-2021'.
13. At this juncture, it is relevant to rely on the Judgment of this Tribunal, reported in 2021 SCC OnLine NCLAT 548, in which matter, this Tribunal placed reliance on the Judgment of the Hon'ble Apex Court in Miheer H. Mafatlal v. Mafatlal Industries Ltd., (1997) 1 SCC 579 : 1997 TaxPub(CL) 0217 (SC), in which case, the Court had laid down the broad contours of the jurisdiction of the Company Court in granting a sanction to the Scheme as hereunder :--
'1. The sanctioning court has to see to it that all the requisite statutory procedure for supporting such a scheme has been complied with and that the requisite meetings as contemplated by section 391(1)(a) have been held.
2. That the scheme put up for sanction of the Court is backed up by the requisite majority vote as required by section 391 sub-section (2).
3. That the meetings concerned of the creditors or members or any class of them had the relevant material to enable the voters to arrive at an informed decision for approving the scheme in question. That the majority decision of the concerned class of voters is just fair to the class as a whole so as to legitimately blind even the dissenting members of that class.
4. That all necessary material indicated by section 393(1)(a) is placed before the voters at the meetings concerned as contemplated by section 391 sub-section (1).
5. That all the requisite material contemplated by the proviso of sub-section (2) of section 391 of the Act is placed before the Court by the applicant concerned seeking sanction for such a scheme and the Court gets satisfied about the same.
6. That the proposed scheme of compromise and arrangement is not found to be violative of any provision of law and is not unconscionable, nor contrary to public policy. For ascertaining the real purpose underlying the Scheme with a view to be satisfied on this aspect, the Court, if necessary, can pierce the veil of apparent corporate purpose underlying the scheme and can judiciously X-ray the same.
7. That the Company Court has also to satisfy itself that members or class of members or creditors or class of creditors as the case may be, were acting bona fide and in good faith and were not coercing the minority in order to promote any interest adverse to that of the latter comprising of the same class whom they purported to represent.
8. That the scheme as a whole is also found to be just, fair and reasonable from the point of view of prudent men of business taking a commercial decision beneficial to the class represented by them for whom the scheme is meant.
9. Once the aforesaid broad parameters about the requirements of a scheme for getting sanction of the Court are found to have been met, the Court will have no further jurisdiction to sit in appeal over the commercial wisdom of the majority of the class of persons who with their open eyes have given their approval to the scheme even if in the view of the Court there would be a better scheme for the company and its members or creditors for whom the scheme is framed. The Court cannot refuse to sanction such a scheme on that ground as it would otherwise amount to the Court exercising appellate jurisdiction over the scheme rather than its supervisory jurisdiction. It is the commercial wisdom of the parties to the scheme who have taken an informed decision about the usefulness and propriety of the scheme by supporting it by the requisite majority vote that has to be kept in view by the Court. The Court has neither the expertise nor the jurisdiction to delve deep into the commercial wisdom exercised by the creditors and members of the company who have ratified the Scheme by the requisite majority. Consequently the Company Court's jurisdiction to that extent is peripheral and supervisory and not appellate. The Court acts like an umpire in a game of cricket who has to see that both the teams play their game according to the rules and do not overstep the limits. But subject to that how best the game is to be played is left to the players and not to the umpire. The supervisory jurisdiction of the Company Court can also be called out from the provisions of section 392. Of course this Section deals with post-sanction supervision. But the said provision itself clearly earmarks the field in which the sanction of the Court operates. The supervisor cannot ever be treated as the author or a policy-maker. Consequently the propriety and the merits of the compromise or arrangement have to be judged by the compromise or arrangement have to be judged by the parties who as sui juris with their open eyes and fully informed about the pros and cons of the Scheme arrive at their own reasoned judgment and agree to be bound by such compromise or arrangement.
12. Two broad principles underlying a scheme of amalgamation which have been brought out in this judgment are :--
1. That the order passed by the Court amalgamating the company is based on a compromise or arrangement arrived at between the parties; and
2. That the jurisdiction of the Company Court while sanctioning the Scheme is supervisory only, i.e., to observe that the procedure set out in the Act is met and complied with and that the proposed scheme of compromise or arrangement is not violative of any provision of law, unconscionable or contrary to public policy. The Court is not to exercise the appellate jurisdiction and examine the commercial wisdom of the compromise or arrangement arrived at between the parties. The role of the Court is that of an umpire in a game to see that the teams play their role as per rules and do not overstep the limits.
Subject to that how best the game is to be played is left to the players and not to the umpire.
Both these principles indicate that there is no adjudication by the Court on the merits as such.' (Emphasis added)
14. It is held by this Tribunal in the aforenoted Accelyst Solutions Private Limited (supra), that the 'settled legal position, while exercising its power in sanctioning a Scheme of Amalgamation, the Courts/Tribunal has to examine as to whether, the Provision of Statute has been complied with'. The Courts/Tribunal would have no further jurisdiction to sit in Appeal over the 'Commercial Wisdom of the Shareholders of the Company'.
15. In the instant case, apart from the fact that NCLT - Mumbai, had already fixed the Appointed Date of the Scheme as 1-10-2020, the date of filing of the Application for Approval of the Scheme with NCLT - Chennai is 29-9-2021 and therefore is within a period of one year, and hence, attracts Clause 6(c) of the MCA General Circular No. 09/2019, dated 21-8-2019.
16. Additionally, NCLT has the discretion to fix the Appointed Date which could be beneficial to the interests of the Company, which in the instant case ought to have been fixed at 1-10-2020 as having two different Appointed Dates, would render the Scheme unworkable. The NCLT has powers under Rule 11 of the NCLT Rules, 2016, to fix the Appointed Date, which would be beneficial to the Scheme of Amalgamation.
17. For all the foregoing reasons, this Company Appeal (AT) (CH) No. 99 of 2023 is allowed and the Orders of the National Company Law Tribunal, Chennai, dated 22-3-2023 and 9-10-2023 are set aside. The connected pending IA No. 1262 of 2023 is closed.