Aniruddha JainAppeal has been filed before Hon’ble National Company Appellate Law Tribunal (“NCLAT”) by Oriental Carbon & Chemicals Limited (“Appellant” or “Demerged Company”) against an order dated 10 April 2024 (“Impugned Order”) by the National Company Law Tribunal, Ahmedabad Bench (“NCLT”) for altering the Appointed Date.
Facts of the Case:
- The Scheme of Arrangement was filed before the NCLT to seek demerger of the Demerged Undertaking from the Appellant to OCCL Limited (referred to as the “Respondent” or “Resulting Company”) on a going concern basis.
- The Appointed Date, defined in the Scheme as an Effective Date or as decided by the Parties, was agreed upon by the Board of Directors of both companies to be the Effective Date.
- Entire Scheme was vetted by the regulatory statutory authorities before giving their no-objection letters and was also approved by the shareholders and creditors. There was no objection from any of the Authorities and members on the Appointed Date.
- NCLT, while approving a Scheme modified the terms of the Scheme by altering the Appointed Date to the date of pronouncement of the Impugned Order.
Aggrieved by the NCLT order, the Appellant filed an appeal before NCLAT to challenge the Impugned Order to the extent of this modification of the Appointed Date for being erroneous and without legal basis.
NCLT Stand for change in Appointed Date:
While approving the scheme, NCLT has found the scheme prima facie is beneficial to the company and not in any way detrimental to the interest of the company’s shareholders. However, citing Sterlite Ports Ltd Vs. Regional Director Southern Regional (Company Appeal (AT) (CH) No.99/2024, the NCLT went ahead to say under rule 11 of NCLT Rules, 2016, it has the power to fix the appointed date to the scheme on amalgamation and as such it changed the appointed date as per the Scheme of Amalgamation viz. to be considered from the date of pronouncement of the impugned order.
NCLAT Decision:
While deciding, NCLAT referred following decisions:
- Accelyst Solutions Pvt Ltd Vs Freecharge Payment Technologies Pvt Ltd, Company Appeal (AT) No.15 of 2021
- Shree Balaji Cinevision (India) Pvt Ltd V 2009 SCC Online Guj 12183
Aforesaid judgements would show while sanctioning the scheme of arrangement if the Court comes to a conclusion that the provisions of the 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
The agreed alterations in the appointed date would affect the calculation and would have serious financial implications. Hence if the parameters for sanctioning the scheme are complete, then the Tribunal would only have a supervisory jurisdiction.
NCLAT further distinguished Sterlite Port (Supra) on the basis that since in the said case, the definition of the term “Appointed Date” itself gave authority to the NCLT to fix a date other than the date fixed by the Scheme but though the NCLT had fixed another date than the Appointed Date yet in the cited case this Tribunal retained the Appointed Date to be the one as fixed under the Scheme.
On the above grounds, the appeal is allowed to hold the Appointed Date to be the date as fixed by the scheme per para 5 above and it shall not be the date of pronouncement as is held by the NCLT.
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