NCLAT rejects scheme modification, emphasizes jurisdiction, and upholds objections for private companies.

The NCLAT rejected the application for modification/clarification, affirming the rejection of the Scheme of Amalgamation and Arrangement due to valuation discrepancies and lack of credibility. Jurisdictional issues between NCLT Chennai and NCLT Mumbai were noted, emphasizing the need for approval from all relevant authorities. The validity of the scheme for Private Companies was disputed, with objections from the Regional Director considered valid. Legal precedents cited were deemed inapplicable. The NCLAT concluded that Rule 11 could not be used to selectively enforce the scheme, leading to the transfer of the Contempt Case record to the Chennai Bench for further action.

---

---

Issues Involved:

1. Application for modification/clarification of judgment under Rule 11 of NCLAT Rules, 2016.
2. Rejection of the Scheme of Amalgamation and Arrangement by NCLAT.
3. Jurisdictional issues related to NCLT Chennai and NCLT Mumbai.
4. Validity and enforceability of the Scheme for Private Companies.
5. Inherent powers of NCLAT under Rule 11 and Section 231(b) of the Companies Act, 2013.
6. Objections raised by the Regional Director.
7. Legal precedents and their applicability.

Issue-wise Detailed Analysis:

1. Application for modification/clarification of judgment under Rule 11 of NCLAT Rules, 2016:
The application was filed by Original Respondent No. 9 representing Respondents 3 to 6 against the Original Appellant, seeking modification/clarification of the judgment dated 29th November, 2019. The application argued that the judgment rejected the Scheme of Amalgamation and Arrangement, which had been approved by NCLT Chennai and NCLT Mumbai, and sought reinstatement of the scheme for the merger of Respondent Nos. 3 to 6 with Respondent No. 9.

2. Rejection of the Scheme of Amalgamation and Arrangement by NCLAT:
The NCLAT had rejected the scheme in its entirety, citing serious compromises in the valuation process and lack of credibility in the exchange ratio recommended. The Tribunal noted that the scheme was unreasoned, unfair, and based on an unprofessionally prepared Valuation Report, impacting the entitlement of shareholders of the transferor companies.

3. Jurisdictional issues related to NCLT Chennai and NCLT Mumbai:
The application highlighted that Respondent Nos. 3 and 4 fell under the jurisdiction of NCLT Chennai, while Respondent Nos. 5 and 6 had registered offices in Mumbai and were approved by NCLT Mumbai. The NCLT Mumbai's judgment dated 6th December, 2017, was not challenged before this Tribunal. However, the NCLAT noted that the scheme was composite and required approval from all concerned authorities.

4. Validity and enforceability of the Scheme for Private Companies:
The application argued that no objections were raised regarding the amalgamation of Private Transferor Companies (Respondent Nos. 3 to 6) with Respondent No. 9, and the scheme was unanimously approved by their respective shareholders and Board of Directors. The applicant claimed that the scheme could work satisfactorily and in accordance with law for the merger of these Private Companies.

5. Inherent powers of NCLAT under Rule 11 and Section 231(b) of the Companies Act, 2013:
The applicant argued that the NCLAT could exercise its inherent powers under Rule 11 to clarify/modify the judgment to exclude the merger of Private Companies from the rejection. However, the NCLAT held that Rule 11 could not be used to reopen the entire appeal and consider partial enforcement of the scheme. Section 231(b) applies only if an order has been made under Section 230 sanctioning a compromise or arrangement, which was not the case here as the scheme was rejected.

6. Objections raised by the Regional Director:
The Regional Director had raised objections regarding the lack of clarity and crucial information in the scheme. The NCLAT noted that the scheme was a composite one and could not be segregated for Public and Private Companies. The objections of the Regional Director were considered valid and contributed to the rejection of the scheme.

7. Legal precedents and their applicability:
The applicant cited judgments in 'Mahavir Weaves Pvt. Ltd.' and 'S. K. Gupta & Anr. vs. K. P. Jain & Anr.' to support their case. However, the NCLAT found that these judgments did not apply to the present matter as they involved different factual contexts and legal provisions. The NCLAT emphasized that the scheme was composite and could not be partially enforced.

Conclusion:
The NCLAT rejected the application for modification/clarification, stating that the scheme was composite and its rejection applied to the entire scheme, including both Public and Private Companies. The Tribunal held that Rule 11 could not be used to reopen the appeal and that there was no mistake apparent on the face of the record to warrant rectification. The Contempt Case record was transferred to the Chennai Bench for further proceedings.

---