NCLT to exercise its discretion to dispense the matters related to meetings of shareholders & creditors in a scheme of amalgamation/arrangement: NCLAT
National Companies Law Appellate Tribunal (“NCLAT”) in the case of DLF Phase- IV Commercial Developers Limited and Others Company Appeal, held that the National Company Law Tribunal (“NCLT”) has to apply the discretion in dispensing the meetings of shareholders and creditors of the companies undergoing arrangement/amalgamation.
In the present matter, DLF Phase- IV Commercial Developers Limited and others (“Appellants”) proposed a scheme of amalgamation and filed a motion before National Company Law Tribunal, Chandigarh bench (“Tribunal”) seeking directions for dispensation of meetings of shareholders and secured and unsecured creditors of the Appellants which was rejected by the Tribunal.
Section 230(9) of the Companies Act, 2013, (“Act”) states that the Tribunal may dispense with calling of meetings of creditors or class of creditors where at least 90% of such creditors have given a written consent by way of an affidavit supporting the scheme of amalgamation. The Tribunal held that such dispensation of meetings in case of shareholders and creditors is not allowed under the provisions of the Act.
The Appellants cited several judgments of different Co-ordinate benches of the NCLT, wherein it was decided that the NCLT may use its discretion to dispense with the meetings. The NCLAT held that the it is a matter of judicial discipline that the judgments passed by Co-ordinate benches are to be followed and any different approach can only be taken by a larger bench. The NCLAT noted that since the matter was at initial stage and not the stage envisaged for consideration of scheme for amalgamation, the Tribunal should have exercised its discretion and followed the legal precedents.
The NCLAT set aside the impugned order within the purview of per incuriam and directed for a fresh consideration from the Tribunal.
Quick View
This is a landmark judgment as it settles the law related to dispensing of meetings of shareholders and creditors in matter related to scheme of amalgamation. Earlier, full bench of NCLT Kolkata in Jupiter Alloys case held that the NCLT can dispense with the meetings in abovementioned matter, if there was consent from the shareholders and the creditors. In the present case the Tribunal took the contradicting view and held that the NCLT has no discretion in this regard.
However, this is now clarified by NCLAT that if a Co-ordinate bench has decided the matter then other benches of same or lower strength will have to follow it. Therefore, it is now settled that NCLT may dispense with the meetings of shareholders and creditors in matter related to schemes of amalgamations if there is written consent from such shareholders and creditors.
Disclaimer: This post has been prepared for informational purposes only. The information/or observations contained in this post does not constitute legal advice and should not be acted upon in any specific situation without seeking proper legal advice from a practicing attorney.