2024 (10) TMI 985 - AT - Companies Law

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

Marathon Nextgen Townships Pvt Ltd, Marathon Nextgen Realty Ltd Versus Regional Director

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 ... Unilateral change of appointed date from 1.4.2019 to 1.4.2020, by Ld. NCLT, while admitting the scheme of arrangement between the parties - HELD THAT:- A bare perusal of the impugned order would show the said order is passed by the Ld. NCLT relying upon the General Circular No.9 of 2019 dated 21st August, 2019 as above, more particularly its Clause (c) of para 6. However, the Learned NCLT failed to notice the application for the scheme of merger was filed on 1st December, 2019 and in terms of the said para 6(c) of the Circular (Supra), the appointed date was fixed at 01.04.2019, which was within a year of filing of the Scheme. Hence, even as per sub-para (c) of para 6 there was no need to change the Appointed Date. Even otherwise, as per the said sub-para, if the Appointed Date was ante dated beyond a year from the date of filing, which in the present case it is not, then also only justification would have to be obtained from the applicants that it is not against public interest. Admittedly the petition was filed in December 2019 but owing to the outbreak of Covid pandemic there has been a delay beyond anybody’s control in the sanction of the scheme, but despite that the Appointed Date should have been kept as 01.04.2019. A bare perusal of judgements in Accelyst Solutions Pvt Ltd Vs Freecharge Payment Technologies Pvt Ltd [2021 (3) TMI 1009 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL PRINCIPAL BENCH NEW DELHI] and Shree Balaji Cinevision (India) Pvt Ltd [2009 (9) TMI 920 - GUJARAT HIGH COURT] would show while sanctioning the scheme of arrangement if the Court comes to a conclusion that the provisions of statute have been complied with; and that there is no violation of any provision of law, or the proposed scheme of compromise or arrangement is not unquestionable, unconscionable or contrary to public policy, then the NCLT has no further jurisdiction to sit in appeal over the commercial wisdom of the class of person who with their eyes open have given their approval, even if, the Court is of the view that better scheme could have been framed. It is also agreed that the alterations in the Appointed Date would affect the calculation and would have a serious financial implication. Hence if the parameters for sanctioning the scheme are complete, then the Tribunal would only be left with supervisory jurisdiction. The Appointed Date should remain as 01.04.2019 instead of 01.04.2020 - Appeal allowed. 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.