2025 (6) TMI 201 - AT - Companies Law

NCLAT overturns unauthorized modification of appointed date in amalgamation scheme, upholds original scheme date

NCLAT allowed the appeal challenging NCLT's modification of the appointed date in an amalgamation scheme. The appellant contested NCLT's unauthorized ... Challenge to modification of the 'Appointed Date' in the Impugned Order by the Ld. NCLT without providing any reasons or opportunity to the Appellant and without any objections raised by any authority - violation of principles of natural justice - HELD THAT:- Admittedly the Scheme shall come into operation only upon completion of the conditions given under Clause 35.1, of which conditions under (d) and (f) are yet to be completed. The impugned order though allowed the Scheme but changed the appointed date as to the date of passing of the impugned order - The appellant is aggrieved of the fact while the Ld. NCLT granted permission to the scheme of amalgamation as proposed by the petitioner company and held the scheme of amalgamation shall be binding by the petitioner company its shareholders and creditors yet changed the appointed date in para 14(i) of the impugned order whereas it had no authority to do so. On perusal of Clauses of the Scheme, more specifically, its Clauses 1.1.2 viz Appointed date; 1.1.3 viz the Effective Date it means the last of the dates on which all the conditions and matters referred to in Clause 35.1 of the Scheme have occurred or have been fulfilled or waived in accordance with this Scheme and that as submitted Clause 35.1 (d) and (f) shall soon be fulfilled and thus any change of the appointed date of amalgamation at this stage would certainly affect calculations made by the companies and would have serious financial implications. Thus the appeal is allowed holding the appointed date shall be date as fixed by the Scheme per Clause 1.1.2 and 1.1.3 read with Clause 35.1 above and it shall not be “from the date of the impugned order” as is mentioned in para 14 of the impugned order by the Ld. NCLT. The impugned order to such an extent is modified. Conclusion - i) The appointed date shall be the date as fixed by the Scheme per Clause 1.1.2 and 1.1.3 read with Clause 35.1 above and it shall not be 'from the date of the impugned order' as is mentioned in para 14 of the impugned order by the Ld. NCLT. ii) Modification of the 'Appointed Date' without justification or opportunity to the parties, especially when it affects financial and legal outcomes, is impermissible. The appeal is disposed off. 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered by the Tribunal were:- Whether the National Company Law Tribunal (NCLT) was justified in modifying the definition of the 'Appointed Date' from that provided in the Scheme of Amalgamation to the date of the impugned order sanctioning the Scheme;- Whether such modification by the NCLT was made without any rationale, justification, or opportunity to the appellant, and whether it was consistent with the statutory framework under the Companies Act, 2013, and applicable Singapore laws;- Whether the alteration of the 'Appointed Date' would have financial and legal implications that necessitate adherence to the Scheme's original definition;- Whether the NCLT's jurisdiction extends to modifying the terms of the Scheme, particularly the 'Appointed Date', absent cogent reasons;- Whether the impugned order's modification of the 'Appointed Date' without objections from statutory authorities or parties was legally sustainable.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Legality and Authority of NCLT to Modify the 'Appointed Date'The legal framework governing the Scheme of Amalgamation is primarily Sections 230-232 read with Section 234 of the Companies Act, 2013, which empower the Tribunal to sanction schemes of compromise or arrangement. The Scheme itself defined the 'Appointed Date' as the 'Effective Date', which is the last date on which all conditions precedent listed in Clause 35.1 are fulfilled or waived. Clause 35.1 enumerates conditions including approvals from shareholders, creditors, Singapore Court sanction, filing with regulatory authorities, and receipt of all necessary governmental approvals.The Court referred to precedents including the Tribunal's decision in Oriental Carbon & Chemicals Ltd and the judgment in Shree Balaji Cinevision (India) Pvt Ltd, which emphasized that while the Tribunal has discretion to modify a scheme, such discretion must be exercised for cogent reasons. Modifying the 'Appointed Date' without justification or opportunity to the parties is impermissible, especially when the alteration impacts financial calculations and implementation.The impugned order modified the 'Appointed Date' to the date of the order (09.04.2025) instead of the Scheme's defined 'Effective Date'. The Tribunal noted that no reasons were assigned by the NCLT for this change, nor was any objection raised by the Regional Director or other statutory authorities, who had expressed no objection to the Scheme.The Tribunal held that the NCLT exceeded its jurisdiction by altering the 'Appointed Date' without cogent reasons or procedural fairness, thereby contravening the Scheme's terms and the Companies Act.Issue 2: Impact of Altering the 'Appointed Date' on Financial and Legal AspectsThe 'Appointed Date' is pivotal as it determines the date from which the amalgamation's effects, including accounting and tax implications, are to be recognized. The Scheme's definition aligns with the General Circular No. 09/2019 issued by the Ministry of Corporate Affairs, which provides guidance on the effective date for schemes.The Tribunal emphasized that altering the 'Appointed Date' to the date of the impugned order, before the completion of all conditions precedent (specifically clauses 35.1(d) and (f) relating to lodgement and filing), would disrupt the financial calculations and have serious implications for the companies involved. The appellant demonstrated that all conditions except these filings were completed, and the Scheme contemplated the 'Appointed Date' as the last fulfillment date, not the date of the order.The Tribunal agreed with the appellant that such modification would prejudice the appellant and impede the Scheme's implementation, thus underscoring the necessity to adhere strictly to the Scheme's original definition.Issue 3: Consistency with Indian and Singapore LawsThe Scheme involved cross-border elements, with the transferor company incorporated in Singapore and the transferee company in India. The Scheme was approved by the Singapore Court and required compliance with both Indian and Singapore laws.The Tribunal observed that the impugned order's modification of the 'Appointed Date' was inconsistent with the Scheme's terms and the Singapore Companies Act, as the Scheme's effectiveness was contingent upon the fulfillment of conditions in both jurisdictions. The Singapore Court had sanctioned the Scheme on 09.05.2024, and the conditions for effectiveness included filing and approvals in both jurisdictions.The Tribunal held that the NCLT's order must respect the Scheme's terms and the foreign jurisdiction's requirements, and unilateral modification without coordination or justification was impermissible.Issue 4: Procedural Fairness and Opportunity to the AppellantThe appellant contended that the NCLT modified the 'Appointed Date' without providing any reasons or opportunity to present objections or submissions on this point. The Tribunal noted the absence of any such procedural safeguards or recorded rationale in the impugned order.The Tribunal underscored that the principles of natural justice require that parties be given an opportunity to be heard on material modifications affecting their rights and obligations. The lack of such opportunity and absence of reasons rendered the modification arbitrary and unsustainable.3. SIGNIFICANT HOLDINGSThe Tribunal held:'The appointed date shall be the date as fixed by the Scheme per Clause 1.1.2 and 1.1.3 read with Clause 35.1 above and it shall not be 'from the date of the impugned order' as is mentioned in para 14 of the impugned order by the Ld. NCLT.'The Tribunal reaffirmed the principle that the NCLT's discretion to modify a scheme is limited and must be exercised only for cogent reasons, with due procedural fairness. Modification of the 'Appointed Date' without justification or opportunity to the parties, especially when it affects financial and legal outcomes, is impermissible.The Tribunal also emphasized the binding nature of the Scheme's terms once approved by the requisite authorities and courts in India and Singapore, and that the Tribunal cannot alter such terms arbitrarily.Accordingly, the impugned order was modified to restore the 'Appointed Date' as defined in the Scheme, and the appeal was allowed on these terms.