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TMI Blog2024 (10) TMI 906X X X X Extracts X X X X X X X X Extracts X X X X ..... s they did not intend to merge due to commercial and regulatory reasons. The modified scheme thereafter was only for the merger of the remaining three petitioner companies. In said case, the equity shares of the Transferee Company No. 5 were listed on stock exchange. Sanction was granted to the modified scheme by the Ld. NCLT Mumbai Bench. The amendment can therefore be done at any stage. Admittedly the present modification to scheme will not require any further / revised adherence in so far as the regulations for inbound merger are concerned. Further, as per FEMA Notification No. FEMA.389/2018-RB dated March 20, 2018 Foreign Exchange Management (Cross Border Merger) Regulations, 2018 , point 9(1) states any transaction on account of a cross- border merger undertaken in accordance with these Regulations shall be deemed to have prior approval of the Reserve Bank of India as required under Rule 25A of the Companies (Compromises, Arrangement and Amalgamations) Rules, 2016. Hence, the proposed modification would also need no additional approval from Reserve Bank of India. If the impugned order is allowed to sustain then the scheme will have to be remodified to reflect such justificatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d its main activity is to act as an investment holding company. 3.The Transferor Companies / Respondent Companies being desirous of amalgamating with the Appellant Company / Transferee Company and in furtherance thereto had formulated the Scheme of Amalgamation. The said Scheme was duly approved by the Board of Directors of the Transferor Companies / Respondent Companies on 20.03.2023 and the Appellant Company on 17.03.2023. Thereafter, the Appellant Company filed a Company Scheme Application being C.A. (CAA) No. 24 / CHD / HRY / 2023 ( said CSA ) under Section 230-232 read with Section 234 of the said Act on 28.04.2023 before the Ld NCLT, for approval of the said Scheme on 28.04.2023. 4.For the purpose of filing the First Motion Application, the Appellant Company carried out the following applicable compliances as under: i)Fair share exchange ratio report from Mr Akshat Jain, IBBI Registered Valuer on March 15, 2023. ii)Approval of the Scheme of Amalgamation by the board of directors of the Appellant Company on March 17, 2023 after considering the fair share exchange ratio report dated March 15, 2023 issued by Mr Akshat Jain, IBBI Registered Valuer iii)Approval of the Scheme of Am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Scheme by the Board of Directors of the Appellant Company, there was a minor change in the share capital of the Transferor Companies as the existing shareholders were allotted a certain number of ordinary shares). This allegedly caused a miniscule change to occur in the swap ratio. The table depicting the change in share capital and aforesaid swap ratio is as under:- Pre- Amendment (ordinary shares of USD I each) Addition of shares (ordinary shares of USDI each) Post Amendment (ordinary shares of USD I each) Swap Ratio 2.0242:1000 0.0017 2.0225:1000 Stated Capital: 17,93,93,372 1,50,000 17,95,43,372 Transferor Company 2/Respondent Company As on date of approvalof theScheme (ordinary shares of USD I.2828 each) Addition of shares (ordinary shares of USD I.2828 each) Asondate (ordinary shares of USD I.2828 each) Swap ratio: 2.7998:1000 0.0083 2.7915:1000 Stated capital: 2,60,76,343 77,955 2,61,54,298 7.Consequently on 20.10.2023 before filing the second motion application, the Appellant Company filed C.A. No. 197/ 2023 in C.A. (CAA) No. 24 / CHD / HRY / 2023 ( said CA ) before Ld NCLT permitting amendment of the Scheme in terms of the powers available to the Ld NCLT and as prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... endments to the said Scheme iv)Approval of the Scheme of Amalgamation by the board of directors of the Respondent Company 2 on October 10, 2023 after considering the addendum to the fair share exchange ratio report dated October 9, 2023 issued by Mr Akshat Jain, IBBI Registered Valuer and requisite amendments to the said Scheme v)In compliance with the interim order dated February 21, 2024, the Appellant Company had filed the consent affidavits of the shareholders of the Respondent Companies approving the modified Scheme by way of an Affidavit vide diary no 0404115035002023/2 on March 13, 2024 9.The Ld NCLT vide order dated 21.02.2024 directed the Appellant Company to procure consent affidavits of the shareholders of Transferor Companies towards the aforementioned amendments. The same were duly obtained and placed on record. 10.Thereafter, the Ld NCLT heard the said CA and passed an Impugned Order dated 22.04.2024 rejecting the said CA. It is alleged NCLT misconstrued the provisions of the Act particularly with respect to the amendment of the Scheme under Section 230-232 of the Act. It is alleged the Ld. NCLT in the Impugned Order acted against the interest of the Appellant Company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect of Transferor Company No. 2. Further this minuscule change in swap ratio has been duly approved by the concerned shareholders whose consents were duly placed on record. The said change in swap ratio has no significant effect on the Scheme and changes no other parameter. 13.It is alleged the said amendment has no impact on the creditors whatsoever as the only modification is a miniscule change in the swap ratio with the shareholders alone. Therefore, on the modification, no approval is required from the creditors who have otherwise fully approved the Scheme. It was also submitted that notices are required to be given to statutory authorities, and they will get a chance to submit their objections, if any, during proceedings for Second Motion and final approval of the Scheme by NCLT. Heard. 14.In Bengal Tea Industries Ors. v. UOI Manu/WB/0451/1987; Sargon Geosynthetics Limited v. Maccaferri Environmental Solutions Private Limited 2008 SCC OnLine P H 906; Vodafone Digilink Limited Co. Appl. (M) No. 147/2012; ICICI Bank Limited CA No. 606 of 2001; Mahaamba Investments Ltd. Vs. IDI Limited CA (Lodg.) No. 1047 of 2000 etc.it was observed if the scheme does not provide for any arrangem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es. In said case, the equity shares of the Transferee Company No. 5 were listed on stock exchange. Sanction was granted to the modified scheme by the Ld. NCLT Mumbai Bench. 19.Further in Eaton Industries Private Limited CP No. 148 of 2016 connected with Company Summons For Direction No. 71 of 2016, modification was sought with respect to the following three aspects: i. Deletion of Part-C of the scheme relating to buyback of shares of the Transferor Company; ii. Exclusion/ deletion of one of the Transferor Companies from the scheme and iii. Modification of clause 13.2 which entailed the assets and liabilities of the Petitioner Company being recorded at fair value in the case of tangible and intangible assets whereas residuary assets and liabilities were to be recorded at book value. The aforementioned modifications to the Scheme were sanctioned by the Ld.NCLT, Mumbai Bench. 20.Thus based on the judicial precedents cited above, the amendment can therefore be done at any stage. In Hamburg Sud India Private Limited CA (CAA)/290/MB-IV/2022 , the Ld NCLT Mumbai while seized of a First Motion Petition passed directions for changing the valuation and the swap ratio. 21.Admittedly the prese ..... X X X X Extracts X X X X X X X X Extracts X X X X
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