Company amalgamation scheme modification allowed under sections 230-232 read with section 234 without additional RBI approval

The NCLAT New Delhi allowed an appeal concerning amendment of an amalgamation scheme under sections 230-232 read with section 234 of the Companies Act, 2013. The tribunal held that NCLT has jurisdiction to modify schemes at any stage. The proposed modification required no additional RBI approval under FEMA regulations for cross-border mergers. The tribunal set aside the impugned order, finding that sustaining it would necessitate remodification and lengthy third-round compliances, which would be counterproductive to the scheme's implementation.

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Issues Involved:

1. Amendment of the Scheme of Amalgamation.
2. Jurisdiction of NCLT to modify the scheme.
3. Impact of the amendment on shareholders and creditors.
4. Compliance with statutory regulations and approvals.
5. Procedural delays and judicial precedents.

Issue-wise Detailed Analysis:

1. Amendment of the Scheme of Amalgamation:

The primary issue revolves around the amendment of the Scheme of Amalgamation between the Appellant Company and the Respondent Companies. The Appellant Company sought to amend the scheme due to a minor change in the share capital of the Transferor Companies, which resulted in a minuscule alteration in the swap ratio. The swap ratio changed from 2.0242 to 2.0225 for Transferor Company No. 1 and from 2.7998 to 2.7915 for Transferor Company No. 2. The Appellant Company argued that this change was insignificant and did not alter the fundamental terms of the scheme.

2. Jurisdiction of NCLT to Modify the Scheme:

The Appellant Company contended that the NCLT has the power under Section 231 of the Companies Act, 2013, to sanction modifications in the scheme for its proper implementation. The Tribunal can supervise and direct modifications as necessary. The Appellant Company argued that the NCLT erroneously dismissed the application for modification, despite having the jurisdiction to approve such changes, especially when all necessary approvals from shareholders were obtained.

3. Impact of the Amendment on Shareholders and Creditors:

The Appellant Company asserted that the modification had no adverse impact on creditors, as the change was limited to the swap ratio affecting shareholders only. The creditors had already approved the original scheme, and their consent was not required for the minor amendment. The NCLT's decision to reject the modification was challenged on the grounds that it would lead to unnecessary procedural delays and costs, impacting shareholders negatively.

4. Compliance with Statutory Regulations and Approvals:

The Appellant Company ensured compliance with all statutory requirements, including obtaining fair share exchange ratio reports, certificates from statutory auditors, and consent affidavits from shareholders and creditors. The modification did not require additional approval from the Reserve Bank of India, as it complied with the Foreign Exchange Management (Cross Border Merger) Regulations, 2018. The Appellant Company argued that the NCLT should have considered these compliances and the deemed approval of shareholders.

5. Procedural Delays and Judicial Precedents:

The Appellant Company highlighted that the NCLT's decision to reset the process and file a fresh first motion application was against judicial precedents where modifications of greater significance were allowed. The Appellant Company cited several cases where similar amendments were sanctioned by the NCLT, emphasizing that the proposed change was minor and justified. The delay in proceedings was also criticized, with the Appellant Company arguing that the NCLT should have expedited the process in the interest of justice.

Conclusion:

The judgment concludes that the NCLT's impugned order is set aside, and the appeal is allowed. The Appellant Company's request for amendment is justified, given the minor nature of the change and the compliance with statutory requirements. The NCLT is directed to allow the modification without requiring a fresh first motion application, thus preventing unnecessary procedural delays and ensuring fairness to all stakeholders involved. Pending applications are disposed of accordingly.

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