NCLAT allows the Appeal against Corporate Affairs Ministry
The Appellate Tribunal observed that the NCLT while passing the impugned order had overreached its scope of Judicial Intervention in the determination of the Scheme of Amalgamation
The National Company Law Appellate Tribunal (NCLAT) has directed the National Company Law Tribunal (NCLT) Mumbai Bench to approve the proposed scheme of amalgamation in the Appeal preferred by the Appellants (RHI India Private Limited &Ors.) under Section 421 of the Companies Act, 2013.
The Tribunal had earlier rejected the scheme proposed by the Appellants. The Regional Director, Western Region, Ministry of Corporate Affairs, Mumbai, has been directed to monitor that the scheme is implemented according to the appointed date.
In this matter, Appellant No. 1 & 2 were the transferor companies and 3rd Appellant was the transferee company. The Appellants have been a part of RHI Magnesita group of companies. The Appellants presented a scheme of amalgamation for approval of the Tribunal for merging 1st and 2nd appellant in 3rd appellant. The proposed scheme got approved from the Board of Directors of each of the company vide their respective Board Resolution.
The Notice was issued to the Regional Director, Western Region, Ministry of Corporate Affairs, Mumbai, who appeared and filed its report stating that appellants had not served notices to the concerned authorities which were likely to be affected by the amalgamation; appellants did not submit the Chairman's report, admitted copy of the petition and Minutes of Order for admission of the petition; and other essential documents and accounting entries.
It was also contended that the appellants had to pass such entries which were necessary in connection with the scheme and as per definition of the scheme, appointed date meant the 1st day of January 2019.
The appellants mainly argued that the NCLT had rejected the scheme filed by the appellants on the ground that the appointed date of the Scheme was 01.01.2019 whereas the Valuation Date was 31.07.2018. The appellants stated that the appointed date under the Scheme was specified as 01.01.2019 but Clause 1.1.3 of the Scheme provided that the Appointed Date can be such other date as may be fixed by the NCLT.
The Appellate Tribunal on 19 January 2021 observed that the NCLT while passing the impugned order had overreached its scope of Judicial Intervention in the determination of the Scheme of Amalgamation u/s 230-232. NCLT had failed to point out any material illegality under the scheme and also accepted the clarifications submitted by the Appellant against the objections raised by the Regional Director, Western Region.
According to the NCLAT, since no minority shareholders raised any objections against the scheme thus, the commercial wisdom of the shareholders should not be overlooked by the NCLT.
The Appellate Tribunal was of the view that the scheme could not be said to be violative of public policy just on the ground that NCLT considered that the scheme appeared to benefit only a few shareholders of Transferor Company without giving any reasonable findings for the same.
The Ministry of Corporate Affairs in its General Circular bearing No. 09/2019 dated 21.08.2019 made the clarification under section 232(6) of Companies Act, 2013 that the companies in question could choose an 'appointed date' and state it in the scheme.
This date may be a specific calendar date or may be tied to the occurrence of an event such as the grant of license by a competent authority or fulfilment of any preconditions agreed upon by the parties, or meeting any other requirement as agreed upon between the parties, etc., which are relevant to the scheme.
Since the appointed date under the Scheme was specified as 01.01.2019 but Clause 1.1.3 of the Scheme provided that the appointed date can be such other date as may be fixed by the NCLT. Therefore, NCLT should not have rejected the scheme solely on the ground that the appointed date and valuation date were different. The Appellants, to put the entire issue at rest, were agreeable and filed an affidavit to this effect that the appointed date should be same as the valuation date i.e. 31.07.2018.
The Appellate Tribunal was also of the opinion that since a considerable amount of time was lost and as the Appellants were agreeable under the scheme that the appointed date may be such date as the NCLT may decide i.e. the valuation date (31.07.2018).
The Tribunal concluded that the appointed date shall be be the valuation date, i.e. 31.07.2018 and this was decided purely on the basis of the facts of the case.
The Appellate Tribunal held that it should in no way be used as a precedent as the General Circular issued by the Ministry of Corporate Affairs have made the reasonable clarification in regards to the appointed date under section 232(6) of the Companies Act, 2013.