Approval of Scheme of Arrangement challenged as evading MPID Act; overwhelming creditor approval upheld and minority appeal dismissed

Approval of a scheme of arrangement was contested on grounds that it sought to circumvent attachments under the MPID Act and that the approving tribunal exceeded jurisdiction. The tribunal noted the scheme had overwhelming creditor approval and held that a minority objector lacking the statutory voting threshold has no locus to challenge the scheme, citing the threshold for class approval under the Companies Act; consequence: the objection was held incompetent and the appeal dismissed. The tribunal also observed that a sanctioned compromise binds all stakeholders but does not itself usurp criminal or other statutory authorities; public interest, fairness and transparency remain required.

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Issues: (i) Whether the appellants have locus standi to challenge the NCLT order sanctioning the Scheme of Arrangement. (ii) Whether a Scheme sanctioned under Section 230 of the Companies Act, 2013 can override or supplant attachment orders or criminal proceedings under the MPID Act, 1999, or compel creditors to withdraw such proceedings.

Issue (i): Whether the appellants have locus to challenge the sanction of the Scheme.

Analysis: The Tribunal examined the voting support for the Scheme and the statutory threshold under Section 230(4) of the Companies Act, 2013. The Scheme was approved by requisite majorities in value and number; the appellants hold 0.26% voting rights, which is below the statutory threshold necessary to object as an aggrieved person. The Tribunal applied authority that a person not meeting the Section 230(4) threshold cannot maintain an appeal under Section 421 as an aggrieved person.

Conclusion: The appellants lack locus standi to challenge the Scheme. Conclusion is against the appellants.

Issue (ii): Whether the sanctioned Scheme can override attachments or compel withdrawal/quashing of criminal proceedings under the MPID Act.

Analysis: The Tribunal considered the terms of the Scheme, the NCLT's operative directions and Clauses in the Scheme regarding obligations of specified creditors, and the positions of the competent MPID authority and EOW. The Tribunal held that Section 230(6) makes a duly sanctioned compromise binding on stakeholders but the sanction itself does not automatically vacate attachments or quash criminal proceedings; any release or quashing of such proceedings or attachments depends on orders of the competent courts or authorities on applications made under the Scheme. The NCLT expressly clarified the sanction shall not override or affect subsisting attachment orders or be construed as quashing criminal proceedings. Competent authorities and a Supreme Court constituted Committee recorded support for implementing the Scheme subject to appropriate court orders for any relief from attachments or criminal liability.

Conclusion: The Scheme, as sanctioned, does not override attachment orders under the MPID Act nor automatically quash criminal proceedings; the Scheme is not contrary to public policy on this ground. Conclusion is in favour of the respondent (scheme sanctioned).

Final Conclusion: The appeal is without merit on the grounds considered; the appellants have no locus to object and the sanctions granted by the NCLT are affirmed, therefore the appeal is dismissed.

Ratio Decidendi: A scheme sanctioned by the NCLT under Section 230, supported by the requisite majority, is binding on stakeholders in accordance with Section 230(6) and does not, by itself, override attachment orders or quash criminal proceedings under a special statute; relief from such orders requires separate appropriate orders by the competent courts or authorities.

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