NCLAT Clears Ambiguity Over NCLT's Power To Dispense With The Meetings Of Shareholders & Creditors In A Scheme Of Arrangement/ Amalgamations [Read Judgment]
Case Title: DLF Phase-IV Commercial Developers Limited & Others, Company Appeal (AT) No. 180 of 2019, Judgement Dated: 19th August 2019.
In a landmark Judgement, the National Company Law Appellate Tribunal (NCLAT) set aside the order of National Company Law Tribunal (NCLT), Chandigarh Bench, as being per incuriam. This was because it declined the dispensation of certain meetings of shareholders and creditors of Applicant Companies while holding that such dispensations are not permissible under the provisions of the Section 230-232 of the Companies Act, 2013.
Various benches of the NCLT gave contradictory judgments on the subject and created ambiguity. Few benches of the NCLT denied themselves the jurisdiction to dispense with such meetings, even when 100% written consents of members/ creditors were obtained in writing. Whereas few benches, while exercising their discretion, dispensed with such meetings in cases where no such written consents were obtained.
Dr. U. K. Chaudhary, Senior Advocate while arguing before the NCLT, Chandigarh Bench submitted that the meetings of shareholders and creditors are not required in the present case as the Transferor Companies are wholly owned subsidiaries of Transferee Company, and no shares would be issued or allotted as consideration pursuant to the Scheme. Accordingly, the rights of the members of Transferee Company are not affected, and the Scheme will not result in any dilution of the shareholding of public shareholders. It was further submitted that creditors are also not affected since the Scheme does not envisage any reduction in their claims and the Transferee Company shall have a highly positive net worth post sanction of the Scheme. Reliance was placed on various judgments of co-ordinate benches of NCLT including a full member bench judgment of NCLT and various judgments of High Court(s).
However, the NCLT refused to give such dispensations while holding that such dispensation either in case of shareholders or creditors is not permissible under the provisions of the Companies Act, 2013 specifically, if read with Section 230(9) of the Act.
The NCLAT while quashing the order of NCLT and remanding the matter for fresh consideration, held that the Tribunal is required to exercise its discretion in accordance with the legal precedents and views adopted by the co-ordinate Benches and larger Benches as that is a matter of judicial discipline. The NCLAT also said that the only course open to a co-ordinate Bench of equal strength taking a different view is to refer a matter to a larger Bench.
The Appellants were advised and represented by Mr. Naveen Dahiya, Ms. Manisha Chaudhary and Mr. Himanshu Handa of UKCA and Partners, Advocates & Solicitors.