Objections to amalgamation scheme and objector's locus standi; appeal dropped after transfer of proceedings, costs cut to Rs 2.5 lakh

An objector challenged dismissal of its objections to a scheme of amalgamation on the ground of maintainability/locus standi. NCLAT held that the scheme expressly transferred pending legal and other proceedings, eliminating any cause to continue the appeal; the objector could instead seek impleadment in proceedings under s. 9 IBC or pursue other remedies in law. Consequently, NCLAT declined to interfere with the order rejecting the objections and disposed of the appeal. On costs, since the objections were filed bona fide and the respondent did not oppose reduction, NCLAT modified the cost from Rs. 10 lakh to Rs. 2.5 lakh, payable to the Prime Minister's National Relief Fund within the stipulated time.

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1. ISSUES PRESENTED AND CONSIDERED

(i) Whether any interference was warranted with the dismissal of objections to a scheme of amalgamation, where the scheme expressly provided for continuation/transfer of pending legal proceedings against the transferee company and the objector's primary concern related to continuation of its separate insolvency application.

(ii) Whether the cost imposed for filing such objections warranted modification, and if so, the appropriate quantum and mode/time for payment.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i): Interference with dismissal of objections to the scheme of amalgamation

Legal framework (as discussed): The Tribunal considered the operative clauses of the scheme providing that the "undertaking" included liabilities and legal proceedings, and that pending suits/appeals and other proceedings "shall not abate" and would continue by or against the transferee company, with the transferee to be substituted/impleaded and to prosecute/defend such proceedings.

Interpretation and reasoning: The Tribunal noted that the objector's submissions showed predominant concern about continuation of its pending insolvency application and substitution of the correct corporate entity. Given the scheme's express stipulation that legal proceedings would continue against the transferee company without abatement, the Tribunal held there was no cause to continue the appeals challenging dismissal of objections to the scheme. The Tribunal further reasoned that the objector could seek impleadment/substitution of the transferee company in the insolvency proceeding or otherwise pursue remedies available in law; therefore, interference with dismissal of objections was not warranted.

Conclusion: The Tribunal declined to interfere with the dismissal of the objections to the amalgamation scheme and disposed of the appeals on the basis that the scheme itself preserved continuation of proceedings against the transferee company.

Issue (ii): Modification of costs imposed for filing objections

Legal framework (as discussed): The Tribunal addressed the discretionary imposition of costs by the adjudicating forum and its own power to modify the quantum, including directions regarding payment to a designated public fund and timelines for compliance.

Interpretation and reasoning: While the objector sought reduction of costs on the basis of having acted bona fide, the Tribunal recorded that the opposing side did not raise a serious objection to reduction and, in fact, expressed no objection to reducing the cost to a specified lower amount. In these circumstances, the Tribunal exercised discretion to reduce the costs and set a revised timeline for deposit and proof of payment.

Conclusion: The Tribunal reduced the cost from Rs. 10 lakhs to Rs. 2.5 lakhs, directed deposit in the Prime Minister National Relief Fund within six weeks, and required submission of proof of deposit to the Tribunal's Registrar within one week thereafter. The connected applications were also disposed of.

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