2024 TaxPub(CL) 71 (NCLAT-
Chny)
COMPANIES ACT, 2013
Sections
421, 230 & 232
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.
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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
(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.