NCLAT restores original appointed date in merger scheme after NCLT's unilateral change deemed improper

NCLAT allowed appeal against NCLT's unilateral change of appointed date from 1.4.2019 to 1.4.2020 in scheme of arrangement. NCLAT held that NCLT misapplied General Circular No.9/2019, as merger application was filed in December 2019 with appointed date within one year limit. Court noted that despite COVID-related delays beyond parties' control, appointed date should remain 1.4.2019. NCLAT emphasized that once statutory provisions are complied with and scheme is not unconscionable or against public policy, tribunal has only supervisory jurisdiction and cannot override commercial wisdom. Alteration would affect calculations with serious financial implications. Appeal allowed, appointed date restored to 1.4.2019.

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Issues Involved:

1. Change of the Appointed Date by the National Company Law Tribunal (NCLT) from April 1, 2019, to April 1, 2020.
2. Interpretation and application of Section 232(6) of the Companies Act, 2013, and General Circular No.09/2019.
3. Jurisdiction of the NCLT in modifying the Appointed Date in a scheme of arrangement.
4. Compliance with statutory requirements and commercial wisdom in sanctioning the scheme.

Issue-wise Detailed Analysis:

1. Change of the Appointed Date:

The primary grievance of the appellants was the unilateral change of the Appointed Date by the NCLT from April 1, 2019, to April 1, 2020, while approving the scheme of amalgamation. The appellants argued that the original date was determined considering accounting, financial, and taxation aspects and was within a year of filing the scheme. The NCLT changed the date citing it was "ante dated more than 2 years," but the appellate tribunal found this reasoning insufficient as the scheme was filed on December 1, 2019, which was within the permissible timeframe.

2. Interpretation and Application of Section 232(6) and General Circular No.09/2019:

Section 232(6) of the Companies Act, 2013, allows companies to choose an Appointed Date, which can be a specific calendar date or tied to an event. General Circular No.09/2019 clarifies that if the Appointed Date is significantly ante-dated beyond a year from the filing date, justification must be provided, and it should not be against public interest. The appellate tribunal noted that the NCLT relied on this circular but failed to acknowledge that the Appointed Date of April 1, 2019, was within a year of the filing date, thus not requiring a change.

3. Jurisdiction of the NCLT in Modifying the Appointed Date:

The appellate tribunal emphasized that the NCLT's role is supervisory rather than appellate in nature when sanctioning a scheme of arrangement. It should ensure statutory compliance and that the scheme is not violative of any law or public policy. The tribunal referred to previous judgments, including Miheer H. Mafatlal and Hindustan Lever, which underscored that the court should not interfere with the commercial wisdom of the parties unless there are compelling reasons. The alteration of the Appointed Date by the NCLT was deemed unwarranted, as it affected financial calculations and had no opposition from stakeholders.

4. Compliance with Statutory Requirements and Commercial Wisdom:

The appellate tribunal found that all statutory compliances were met, and the explanation provided by the appellants was satisfactory to the Regional Director, who raised no objections. The tribunal reiterated that once the statutory parameters are fulfilled, the court should not second-guess the commercial decisions made by the majority of stakeholders. The tribunal highlighted that the alteration of the Appointed Date could have significant financial implications and should not be modified without cogent reasons.

Conclusion:

The appellate tribunal concluded that the NCLT's decision to change the Appointed Date was not justified, as the original date was within the permissible timeframe and supported by stakeholders. The appeal was allowed, and the Appointed Date was restored to April 1, 2019. The tribunal reiterated the limited supervisory jurisdiction of the NCLT in such matters and emphasized adherence to statutory provisions and the commercial wisdom of the parties involved.

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