2022 (9) TMI 1650 - SC - Indian Laws

Approval of scheme of amalgamation of six companies - it is alleged that valuer has made valuation disregarding the methodology methods or share entitlement ratio and has proceeded on guess work to arrive at a share exchange ratio - HELD THAT - It is considered appropriate to dispose of these appeals with a direction that the order of the NCLAT dated 29.11.2019 is set aside and the scheme of amalgamation as approved by the NCLT in respect to four private limited companies(respondent nos.4 to 7) with the appellant under order impugned dated 12.04.2018 confirmed. Appeal disposed off.

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

Whether the National Company Law Appellate Tribunal (NCLAT) was correct in setting aside the order of the National Company Law Tribunal (NCLT) approving the scheme of amalgamation of six companies with the appellant.
Whether Respondent No.1, who held less than 1% shareholding, had the standing to challenge the scheme of amalgamation under Section 230(4) of the Companies Act.
Whether the valuation methodology used in determining the share exchange ratio for the amalgamation was appropriate and fair to all stakeholders.
Whether the scheme of amalgamation could be partially approved concerning the private limited companies (Respondent Nos. 4 to 7) despite objections raised by a shareholder of the public limited companies (Respondent Nos. 2 and 3).

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: NCLAT's Decision to Set Aside NCLT Order

Relevant Legal Framework and Precedents: The Companies Act provides the framework for amalgamations, including the role of NCLT in approving schemes and the conditions under which appeals can be made to the NCLAT.
Court's Interpretation and Reasoning: The Supreme Court considered whether the NCLAT had appropriately exercised its jurisdiction in setting aside the NCLT's order. The court found that NCLAT's decision was based on an inappropriate assessment of the valuation methodology.
Key Evidence and Findings: The NCLAT had found that the valuation disregarded proper methodology, which led to its decision to reject the scheme.
Application of Law to Facts: The Supreme Court noted that the NCLT had approved the scheme with modifications, and the objections raised did not substantiate a complete rejection of the scheme.
Treatment of Competing Arguments: The appellant argued for the scheme's approval, while the respondent questioned the fairness of the valuation. The Supreme Court found merit in the appellant's position regarding the private companies.
Conclusions: The Supreme Court set aside the NCLAT order, allowing the scheme of amalgamation for the private limited companies.

Issue 2: Standing of Respondent No.1

Relevant Legal Framework and Precedents: Section 230(4) of the Companies Act requires a minimum shareholding threshold for a shareholder to challenge a scheme.
Court's Interpretation and Reasoning: The court noted that Respondent No.1 did not meet the 10% shareholding requirement, thus lacking standing to challenge the scheme.
Key Evidence and Findings: Respondent No.1 held less than 1% of shares, which was insufficient under the statutory requirement.
Application of Law to Facts: The court applied Section 230(4) and found that the respondent's challenge was not maintainable.
Treatment of Competing Arguments: The appellant highlighted the lack of standing, which the court agreed with, leading to the dismissal of the challenge.
Conclusions: The court concluded that Respondent No.1 lacked the requisite standing to contest the scheme.

Issue 3: Valuation Methodology

Relevant Legal Framework and Precedents: Proper valuation methodologies are critical in ensuring fairness in amalgamations.
Court's Interpretation and Reasoning: The Supreme Court found that the NCLAT's concerns about valuation were not sufficient to overturn the NCLT's approval.
Key Evidence and Findings: The NCLT had approved the scheme with modifications, indicating a thorough review of the valuation.
Application of Law to Facts: The court found that the valuation issues did not warrant a complete rejection of the amalgamation.
Treatment of Competing Arguments: The appellant argued for the sufficiency of the valuation, which the court found persuasive.
Conclusions: The court upheld the NCLT's decision, allowing the scheme to proceed for the private companies.

Issue 4: Partial Approval of the Scheme

Relevant Legal Framework and Precedents: The Companies Act allows for partial approval of schemes where appropriate.
Court's Interpretation and Reasoning: The court found it reasonable to approve the scheme for the private companies, given the lack of objection from Respondent No.1 regarding these entities.
Key Evidence and Findings: The board resolutions of the private companies supported the scheme.
Application of Law to Facts: The court applied the law to approve the scheme for the private companies, as no prejudice was demonstrated.
Treatment of Competing Arguments: The court noted the absence of objections for the private companies, facilitating approval.
Conclusions: The court approved the amalgamation for the private companies, setting aside the NCLAT's rejection.

3. SIGNIFICANT HOLDINGS

Verbatim Quotes of Crucial Legal Reasoning: "The order of the NCLAT dated 29.11.2019 is set aside and confirm the scheme of amalgamation as approved by the NCLT in respect to four

← Previous Next →