(2024) ibclaw.in 164 NCLAT
IN THE NATIONAL COMPANY LAW APPELLATE TRIBUNAL
Principal Bench, New Delhi
HT Mobile Solutions Ltd. and Anr.
v.
Regional Director Ministry of Corporate Affairs and Ors.
Comp. App. (AT) No. 74 of 2023
Decided on 12-Mar-24
Coram: Mr. Justice Yogesh Khanna (Judicial Member) and Mr. Arun Baroka (Technical Member)
Add. Info:
For Appellant(s): Mr. Krishnendu Datta, Mr. Kamal Shankar, Mr. Gautam Varma, Mr. Arjun Narang, Mr. Akash Ray, Advocates
For Respondent(s): Ms. Shankari Mishra, Advocate for R-1, Mr. Gaurav Gupta, Sr. Standing Counsel, Mr. Shivendra Singh, Mr. Puneet Singhal, Ms. Mahima Garg, Advocates for Incom tax department/R-2.
Brief about the decision:
Facts of the case
- The composite scheme of amalgamation between the Appellants, Digicontent Ltd., Next Mediaworks Ltd. and HT Mobile Solutions Ltd. with their respective shareholders and creditors under Section 230-232 of the Companies Act read with Companies (Compromises, Arrangements and Amalgamation) Rules, 2016 contemplated the amalgamation of:
- (i) Amalgamation of the Transferor Company with the Transferee Company [HTMS with HT Media];
- (ii) Amalgamation of Digicontent with the Transferee Company, and
- (iii) Amalgamation of NMW with the Transferee Company.
- The scheme was structured in a manner the shares of the transferor Company i.e. (HTMS) i.e. the Appellant held by the shareholders will be swapped with those of the transferee Company based on a pre-determined ratio, except for the shares of the transferor company held by the transferee company which shares are intended to be cancelled.
- The share swap ratio as determined by the registered valuer for the respective Parts B, C and D are completely distinct and independent of one another.
- All the three companies, Digicontent, HTMS and HT Media, convened meetings of their respective shareholders, secured creditors, unsecured creditors and also notified the relevant authorities. As a result, the scheme stood approved qua HTMS and HT Media viz the Appellants with requisite majority shareholders and creditors.
- However, the scheme was not approved by the requisite majority of public shareholders of Digicontent as well as the requisite majority of public shareholders of NMW.
- the appellants moved the second motion under Sections 230-232 of the Companies Act read with Rule 15 of the CAA Rules seeking sanction of the scheme with respect to HTMS and HT Media
- NCLT, New Delhi dismissed the application of second motion on the ground the other two parties viz. Digicontent Ltd. and M/s Next Mediaworks Ltd. had rejected the proposed scheme and it was difficult to comprehend how the approval can be granted to the scheme which involves all the three companies.
Decision of Appellate Tribunal
- The impugned order doesn’t discuss if the scheme of amalgamation was separable as pointed out in clauses no. 1.2.2 and 23.1 (supra). The impugned order is completely silent on these clauses.(12)
- Even otherwise, section 231(1) (b) of the Companies Act duly empowers the Ld. NCLT to exercise discretion to “give such directions in regard to any matter or make such modifications in the compromise or arrangement as it may consider necessary for the proper implementation of the compromise or arrangement”. The Ld. NCLT was thus duly vested with sufficient powers under the Companies Act, to even partly sanction the scheme.(p13)
- During the argument, the reliance was also placed on Rama Investment Company Pvt. Ltd. vs. Ankit Mittal (2022) ibclaw.in 329 SC wherein the Hon’ble Supreme Court was pleased to set aside the order of this Tribunal and confirm the scheme of amalgamation in part as approved by the Ld. NCLT.(p14)
- In the aforesaid circumstances, while setting aside the impugned order dated 23.02.2023 we direct the Ld. NCLT, New Delhi Bench to revisit the application of second motion in the light of the observations made by this Tribunal above and after considering the observations/clarifications of Regional Director, may dispose of the petition in accordance with law within six weeks from the date of communication of this order.(p16)
Judgment/Order:
O R D E R
(Hybrid Mode)
12.03.2024: This appeal is filed against an impugned order dated 23.02.2023 passed by the Ld. National Company Law Tribunal, New Delhi, Bench-V in C.P. (CAA)/60/(ND)2022 in C.A.(CAA)/112/(ND)2021.
2. The Appellants have assailed the impugned order on the ground it has been passed without considering the relevant clauses of the scheme of amalgamation. It is stated the composite scheme of amalgamation between the Appellants, Digicontent Ltd., Next Mediaworks Ltd. and HT Mobile Solutions Ltd. with their respective shareholders and creditors under Section 230-232 of the Companies Act read with Companies (Compromises, Arrangements and Amalgamation) Rules, 2016 contemplated the amalgamation of the Transferor Company with the Transferee Company as well as the amalgamation of Digicontent and NMW with the Transferee Company with, inter-alia, (i) Part D dealing with amalgamation of the Transferor Company with the Transferee Company [HTMS with HT Media]; (ii) Part B dealing with amalgamation of Digicontent with the Transferee Company, and (iii) Part C dealing with amalgamation of NMW with the Transferee Company.
3. Reliance is placed on Clause No. 1.2.2 of the scheme and further, Clause 23.1 of the scheme, as under:
“1.2.2. Notwithstanding, anything contained in this Scheme, if for any reason any Part of this Scheme being Part B or Part C or Part D of the Scheme is found to be unviable or unworkable qua the relevant Transferor Company or cannot be effected together with other Parts of the Scheme in a consolidated manner including on account of non-approval of the Scheme by the Appropriate Authority or by requisite majority of the shareholders of the relevant Transferor Companies, the same shall not, unless decided otherwise by the Boards of the Transferee Company and other Transferor Companies, affect the validity or implementation of the other Parts of this Scheme. For avoidance of doubt, it is hereby clarified that each part of this Scheme being Part B or Part C, or Part D, are severable and can be made effective independently along with the applicable clauses of this Scheme as contained in Part A, Part E and Part F of this Scheme, subject to Clause 22 of this Scheme. It is further clarified that for the purpose of Part A, Part E and Part F of this Scheme, the term Transferor Company or the Transferor Companies shall be construed accordingly.
23.1. In the event any of the sanctions and approvals as referred to in Clause 22 of the Scheme is not obtained or complied with or satisfied, or, if for any other reason, any Part of this Scheme cannot be implemented, such Part of this Scheme shall automatically stand revoked, cancelled and be of no effect, save and except in respect of any act or deed done prior thereto as is contemplated hereunder, or as to any rights and liabilities which might have arisen or accrued pursuant thereto, and which shall be governed and be preserved or worked out as is specifically provided in the Scheme or as may otherwise arise in law. It is hereby clarified that the non-receipt of approvals, as mentioned above, shall not, unless decided otherwise by the Boards of the relevant Transferor Companies and Transferee Company, affect the validity or implementation of the other Parts of this Scheme”.
4. It is submitted by the Ld. Sr. Counsel for the Appellant the scheme was structured in a manner the shares of the transferor Company i.e. (HTMS) i.e. the Appellant held by the shareholders will be swapped with those of the transferee Company based on a pre-determined ratio, except for the shares of the transferor company held by the transferee company which shares are intended to be cancelled. It is pertinent to note the share swap ratio as determined by the registered valuer for the respective Parts B, C and D are completely distinct and independent of one another.
5. Since the registered office of Digicontent, HTMS and HT Media were situated in New Delhi, the First Motion under Section 230 (1) of the Companies Act read with Rule No. 3 and 5 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 was filed by the three Companies before the Ld. NCLT, New Delhi and vide order dated 22.12.2021, the Ld. NCLT, New Delhi allowed the First Motion Application.
6. Since the registered office of NMW is in Mumbai, the first motion application was filed at Mumbai and vide order dated 03.12.2021, the Ld. NCLT, Mumbai had also allowed the first motion application.
7. In compliance with the first motion order, all the three companies, Digicontent, HTMS and HT Media, convened meetings of their respective shareholders, secured creditors, unsecured creditors and also notified the relevant authorities. As a result, the scheme stood approved qua HTMS and HT Media viz the Appellants with requisite majority shareholders and creditors. However, the scheme was not approved by the requisite majority of public shareholders of Digicontent as well as the requisite majority of public shareholders of NMW.
8. Thus in terms of clause 1.2.2 and 23.1 of the scheme, it is urged Part B and C dealing with amalgamations of Digicontent and NMW with HT Media, stood automatically revoked and cancelled, having no effect as regard to the implementation of the other parts of the scheme viz. part D.
9. In the light of the relevant provisions of the scheme, the appellants moved the second motion under Sections 230-232 of the Companies Act read with Rule 15 of the CAA Rules seeking sanction of the scheme with respect to HTMS and HT Media, i.e. the scheme excluding parts B and C thereof. The operative portion of the prayer clause in the second motion is as follows:
“The Transferor Company/Applicant No.1 and Transferee Company/Applicant No. 2 therefore pray:
A. Sanction the Scheme of Amalgamation of HT Mobile Solutions Limited i.e., the Transferor Company with HT Media Limited i.e., the Transferee Company as per Annexure-1 and declare the same to be binding with effect from the Appointed Date i.e. 1 April 2020 on the Applicant Companies, their shareholders, creditors and all concerned without any further act, deed or thing; and
B. Pass orders for the dissolution of the Transferor Company without the process of winding up; and
C. Pass such other/further order(s) as this Hon’ble Tribunal may deemed, fit and proper;”
10. However, ignoring the fact the sanction was sought only qua part D of the scheme, the Ld. NCLT, New Delhi dismissed the application of second motion on the ground the other two parties viz. Digicontent Ltd. and M/s Next Mediaworks Ltd. had rejected the proposed scheme and it was difficult to comprehend how the approval can be granted to the scheme which involves all the three companies.
11. It is the submission of the Ld. Sr. Counsel for the Appellant the schemes were separable as per provisions of the composite scheme of the amalgamation filed viz Annexure -2, annexed with the appeal.
12. We have gone through the impugned order and it doesn’t discuss if the scheme of amalgamation was separable as pointed out in clauses no. 1.2.2 and 23.1 (supra). The impugned order is completely silent on these clauses.
13. Even otherwise, section 231(1) (b) of the Companies Act duly empowers the Ld. NCLT to exercise discretion to “give such directions in regard to any matter or make such modifications in the compromise or arrangement as it may consider necessary for the proper implementation of the compromise or arrangement”. The Ld. NCLT was thus duly vested with sufficient powers under the Companies Act, to even partly sanction the scheme.
14. During the argument, the reliance was also placed on ‘Rama Investment Company Pvt. Ltd. vs. Ankit Mittal’ wherein vide order dated 07.09.2022 in Civil Appeal Nos. 2022-2023/2022 the Hon’ble Supreme Court was pleased to set aside the order of this Tribunal and confirm the scheme of amalgamation in part as approved by the Ld. NCLT.
15. Admittedly, OL as well as IT department have given no objections for the partial acceptance of the scheme.
16. In the aforesaid circumstances, while setting aside the impugned order dated 23.02.2023 we direct the Ld. NCLT, New Delhi Bench to revisit the application of second motion in the light of the observations made by this Tribunal above and after considering the observations/clarifications of Regional Director, may dispose of the petition in accordance with law within six weeks from the date of communication of this order.
17. Appeal and pending applications stand disposed of.
[Justice Yogesh Khanna]
Member (Judicial)
[Arun Baroka]
Member (Technical)
Original judgment copy is available here.
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