Tribunal's Overreach: Decision Overturned for Prematurely Assessing Demerger, Sent Back for Proper Procedures.

The Tribunal's decision was overturned due to non-compliance with Section 230(1) of the Companies Act, 2013, and for exceeding its jurisdiction by assessing the merits of the demerger scheme prematurely. The case was remanded to the National Company Law Tribunal, Bengaluru Bench, for further proceedings, with instructions to adhere to legal requirements by obtaining the consent of creditors and members or convening necessary meetings.

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Issues Involved:
1. Whether the Tribunal erred in declining to sanction the scheme of demerger due to pending investigations.
2. Whether the Tribunal failed to consider the prayer for dispensation of meetings of creditors and shareholders.
3. Whether the Tribunal overstepped its jurisdiction by examining the merits of the scheme at the preliminary stage.

Issue-wise Detailed Analysis:

1. Tribunal's Refusal to Sanction the Scheme of Demerger Due to Pending Investigations:
The Tribunal declined to sanction the scheme of demerger on the ground that several issues were pending finalization and certain investigations were pending in relation to the business of the demerged company. The Appellants argued that the pending investigations, registered as Spl. CC No. 12/2016 and Spl. CC No. 471/2016, were unrelated to the proposed demerger and should not impede the approval process. The Tribunal's decision was based on these pending issues, but the Appellants contended that the demerger scheme was not related to the mining business under investigation, and thus, the pending investigations would not impact the demerger.

2. Tribunal's Failure to Consider the Prayer for Dispensation of Meetings:
The Appellants submitted that they had filed applications for the dispensation of meetings of their creditors and shareholders, supported by consent affidavits from 100% of the shareholders of each company, 100% of the creditors of the resulting companies, and 97.18% of the creditors of the demerged company. The Tribunal rejected the applications without considering these consent affidavits or directing the convening of meetings, which the Appellants argued was a breach of the mandatory provisions under Section 230(1) of the Companies Act, 2013. The Tribunal's refusal to either dispense with or direct the calling of meetings was seen as a failure to adhere to the statutory requirements.

3. Tribunal Overstepping its Jurisdiction:
The Tribunal was criticized for overstepping its jurisdiction by examining the merits of the proposed scheme of demerger at the preliminary stage. According to the Appellants, the Tribunal's role at this stage was limited to ordering the meeting of creditors or members or dispensing with such meetings if 90% of the value of creditors or members agreed to the scheme. The Tribunal's decision to reject the scheme on merits without first obtaining the consent of creditors/members or directing meetings was deemed premature and beyond its jurisdiction. The Tribunal was required to call for meetings or dispense with them based on the consent affidavits before delving into the merits of the scheme.

Conclusion:
The Tribunal's order was set aside due to its failure to comply with the mandatory provisions of Section 230(1) of the Companies Act, 2013, and for overstepping its jurisdiction by examining the merits of the scheme at the preliminary stage. The matter was remanded back to the National Company Law Tribunal, Bengaluru Bench, for further proceedings in accordance with the observations made and the provisions of law, ensuring that the consent of creditors/members is obtained or meetings are convened as required.

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