2018 (12) TMI 805 - AT - Companies Law

Judgments Uphold Validity of Amalgamation Scheme, Dismiss Appeals challenging NCLT Approval

The judgments in Company Appeal 30/2018 and Company Appeal 167/2018 upheld the validity of the amalgamation scheme approved by NCLT Chennai and Mumbai, ... Scheme of amalgamation - matter is pending before Arbitration - Held that:- The Appellants received amount aggregating to ₹ 56,95,00,000/- with balance ₹ 5 Lakhs remaining. The Respondents are disputing this. With regard to 3rd tranche, it appears that there are requirements under the SPA linking the payment to criteria relating to “EBITDA”. Admittedly, now the transferee Company has been taken by the Appellants to Arbitral Tribunal and the matter is pending before Arbitration as can be seen from Annexure R-3 in Diary No.6037 which is Reply of the Respondents in CA 167/2018. The Appellants claim that they have to receive ₹ 10.05 Crores from the transferee Company and the transferor Company No.1 in which they were 100% shareholders has already been ordered to be wound up and stands amalgamated and thus according to the Appellants, they may be rendered remediless. What appears is that after the Appellants executed the SPA, they handed over their shares and admitted that they had resigned as Directors on 01.01.2017. In fact, the Appellants even approved the balance sheet of the transferor Company No.1, as on 31st March, 2016 by signing the same on 31.08.2016 as can be seen from Page – 66 of Diary No.4167 (Volume – 1). What appears after going through such documents is that the Appellants were clearly aware of the proceedings relating to the scheme of amalgamation and had no difficulties initially but it appears that, as their transaction based on SPA landed in difficulties and so, now they want to raise grievances to the scheme of amalgamation on the plea that Notice to them also was necessary. Going through the material on record, we do not find that there is any substance in the grievance raised by the Appellants. Dispute relating to SPA is before Arbitration . Transferee Company is facing it. If Appellants had difficulty, they never went before NCLT to raise Objections although they knew about the amalgamation process going on. This being so, we are proceeding to reject both the Appeals. Issues:1. Validity of the scheme of amalgamation approved by NCLT Chennai and Mumbai.2. Allegations of lack of notice to shareholders and creditors.3. Dispute over payments under Share Purchase Agreement (SPA).4. Knowledge and consent of the appellants regarding the scheme of amalgamation.Issue 1: Validity of the scheme of amalgamation approved by NCLT Chennai and Mumbai:In Company Appeal 30/2018, the appellant challenged the Impugned Order of NCLT, Chennai, accepting the scheme of amalgamation between two transferor companies and a transferee company under Section 230 of the Companies Act, 2013. The NCLT Chennai accepted the scheme after considering various factors, including share capital, creditor affidavits, and compliance with necessary formalities. Similarly, Company Appeal 167/2018 arose from the Impugned Order of NCLT, Mumbai, approving the same scheme subject to Chennai NCLT's sanction. The appellants in both appeals alleged lack of notice and raised objections, claiming to be aggrieved parties. However, the NCLT Mumbai also approved the scheme, leading to the subsequent filing of CA 167/2018 after CA 30/2018. The judgments rejected both appeals, upholding the validity of the amalgamation scheme approved by both NCLT benches.Issue 2: Allegations of lack of notice to shareholders and creditors:The appellants, claiming to be aggrieved parties, alleged that they were not given notice regarding the amalgamation despite being shareholders and creditors. They contended that as 100% shareholders of one transferor company, they were entitled to notice, especially considering a Share Purchase Agreement (SPA) between them and the transferee company. The appellants argued that payments under the SPA were not fulfilled, leading to their objections against the amalgamation. However, the respondents argued that the appellants had knowledge of the proceedings and had even submitted affidavits consenting to the amalgamation, indicating their awareness and lack of objections at an earlier stage. The judgments noted the appellants' knowledge and rejected their claims of lack of notice as a ground for grievance.Issue 3: Dispute over payments under Share Purchase Agreement (SPA):The appellants raised concerns regarding payments under the SPA, claiming that they were yet to receive a significant amount from the transferee company. The dispute over payments, particularly related to Earnings Before Interest, Tax, Depreciation, and Amortization (EBITDA) criteria, led to arbitration proceedings. The judgments highlighted the ongoing arbitration and stated that the payment dispute was not within the scope of the current appeals, emphasizing that the issue was being addressed separately through arbitration.Issue 4: Knowledge and consent of the appellants regarding the scheme of amalgamation:The judgments extensively discussed the appellants' knowledge and consent regarding the scheme of amalgamation. Affidavits submitted by the appellants in May 2017 indicated their awareness and support for the scheme, including dispensation with the creditors' meeting. The judgments emphasized that the appellants had actively participated in the process, including approving balance sheets and resigning as directors, indicating their involvement and understanding of the proceedings. Despite the appellants' arguments regarding the necessity of notice, the judgments concluded that the appellants were well-informed about the amalgamation process and had not raised objections earlier, leading to the rejection of both appeals.In conclusion, the judgments upheld the validity of the amalgamation scheme approved by NCLT Chennai and Mumbai, dismissing the appeals raised by the aggrieved parties based on lack of notice and payment disputes, emphasizing the appellants' prior knowledge and consent regarding the proceedings.