2018 (8) TMI 1030 - AT - Companies Law

Appellate tribunal affirms NCLT's approval of Scheme of Arrangement, dismisses Appellant's objections.

The Statesman Ltd. Versus Emaar MGF Land Ltd. And MGF Developments Limited

The Statesman Ltd. Versus Emaar MGF Land Ltd. And MGF Developments Limited - [2018] 211 Comp Cas 155 (NCLAT - Del) Issues Involved:1. Approval of the Scheme of Arrangement between the Respondent Companies.2. Objections raised by the Appellant regarding the Scheme of Arrangement.3. Alleged suppression of material facts by the Respondent Companies.4. Non-inclusion of the Appellant in the list of secured and unsecured creditors.5. Satisfaction of the Arbitral Award dated 12.05.2016.6. Impact of the Scheme on the Appellant's ability to recover dues.Detailed Analysis:1. Approval of the Scheme of Arrangement between the Respondent Companies:The National Company Law Tribunal (NCLT) approved the proposed Scheme of Arrangement between the Respondent Companies, Emaar MGF Land Limited (Demerged Company) and MGF Developments Limited (Resulting Company). The NCLT directed that all property, rights, liabilities, and duties of the Demerged Undertaking be transferred to the Resulting Company as per Section 232 of the Companies Act, 2013.2. Objections raised by the Appellant regarding the Scheme of Arrangement:The Appellant objected to the demerger, claiming that the Respondent Companies had not fulfilled their commitments under an Arbitral Award dated 12.05.2016. The Appellant argued that the Scheme did not account for their dues and that they were not notified of the creditors' meetings. The NCLT rejected these objections, noting that the Appellant had no locus standi as the awarded amount had been paid.3. Alleged suppression of material facts by the Respondent Companies:The Appellant contended that the Respondents suppressed the fact of the Arbitral Award dated 12.05.2016 in their Company Application. The NCLT found no merit in this argument, stating that the Board of Directors approved the Scheme on 11.05.2016, before the Award was announced in the evening of 12.05.2016. Thus, there was no suppression of material facts.4. Non-inclusion of the Appellant in the list of secured and unsecured creditors:The Appellant argued that they should have been included in the list of creditors as they became a Judgment Creditor on 12.05.2016. The Respondents countered that the lists were prepared based on the financial position as of 29.02.2016, and updating the list in real-time was not feasible. The NCLT and the appellate tribunal found this explanation reasonable and rejected the Appellant's claim.5. Satisfaction of the Arbitral Award dated 12.05.2016:The Appellant claimed that the Arbitral Award had not been fully satisfied, citing issues with TDS deductions and the marketability of the allotted property. The NCLT observed that the awarded amount had been paid in tranches by 02.09.2016 and rejected the Appellant's objections. The appellate tribunal also noted that any disputes regarding the Award were pending before the Arbitral Tribunal and were not within their purview to settle.6. Impact of the Scheme on the Appellant's ability to recover dues:The Appellant expressed concern that the demerger would leave them without an entity from which to recover their dues. The Respondents assured that both companies would continue to exist post-demerger, and the project related to the Appellant's grievance remained with Emaar. The appellate tribunal found no substance in the Appellant's argument and noted that public notices for the creditors' meetings were published, which the Appellant ignored.Conclusion:The appellate tribunal upheld the NCLT's decision to approve the Scheme of Arrangement, finding no merit in the Appellant's objections. The Appellant's appeal was dismissed, and they were ordered to pay costs to each Respondent.