Re Sustainability Limited & Ors vs Unknown

In the matter of: RE SUSTAINABILITY LIMITED, Level 11B, Aurobindo Galaxy, Hyderabad Knowledge City, Hitech City Road, Hyderabad, Telangana, 500 081, represented ... Appellant No. 1/ by its authorised signatory, Amalgamated Company/ Mr. Pankaj Maharaj Demerged Company

MUMBAI WASTE MANAGEMENT LIMITED, Level 11B, Aurobindo Galaxy, Hyderabad Knowledge City, Hitech City Road, Hyderabad, Telangana, 500 081, represented by its authorised signatory, ... Appellant No. 2/ Mr. Chaitanya Manikyala Rao Miriyala Amalgamating Company

RAMKY SUSTAINABILITY SOLUTIONS PRIVATE LIMITED 15th Floor Ramky Grandios, Opp. Aphb, Anjaiah Nagar Gachibowli Seri Lingampally, K.V. Rangareddy, Telangana - 500 032, represented by its authorised signatory, Mr. Sudhakar Rao Ravulapalli ... Appellant No. 3/ Resulting Company Present : For Appellants : Mr. Arvindh Pandian, Senior Advocate For Mr. Edward James, Mr. Lomesh Kiran N, Mr Sharan A. Kukreja & Mr Ajay TK, Advocates

JUDGMENT

(Hybrid Mode)

Comp. App. (AT) (CH) No. 66 / 2025 Page 1 of 27 Per : Justice Sharad Kumar Sharma, Member (Judicial):

The brief facts of the case are that;

1. The Appellants, in the instant Company Appeal (AT) (CH) No. 66 /

2025 happen to be Re-Sustainability Limited (Appellant No. 1 / the

Amalgamated Company / Demerged Company), Mumbai Waste

Management Limited (Appellant No. 2 / Amalgamating Company), and

Ramky Sustainability Solutions Private Limited (Appellant No. 3 / Resulting

Company).

2. On 18.01.2024, the Board of Directors of Appellant No. 1, 2 & 3 had

conducted their respective Board Meetings and approved the Composite

Scheme of Arrangement between the Appellant Companies, their

Shareholders and the Creditors.

3. Upon entering into a Composite Scheme of Arrangement, the

Appellant Companies filed a Company Application being CA (CAA) / 8 /

230 / HDB / 2024 (First Motion Petition), before the Ld. NCLT, Hyderabad

Bench - II, on 09.02.2024, under Section 230-232 of the Companies Act,

read with the Companies (Compromises, Arrangements And

Amalgamations) Rules, 2016, seeking directions to convene meetings of

Equity Shareholders, Preferential Shareholders, Secured & Unsecured

Shareholders of the Appellants Companies and to dispense with certain

meetings.

Comp. App. (AT) (CH) No. 66 / 2025 Page 2 of 27

4. In the proceedings of the CA (CAA) / 8 / 230 / HDB / 2024 (First

Motion Petition), the Ld. Tribunal considered the contents of the Scheme of

Arrangement as it stood approved by the Board on 18.01.2024, and

proceeded to pass an order on 06.05.2024 allowing the same. However,

certain errors had crept in the said order passed by the Ld. Adjudicating

Authority which was brought to its knowledge by the Appellant Companies,

by way of filing a Memorandum. The Ld. Adjudicating Authority took

cognizance of the said errors as it was pointed out by the Appellant

Companies which had crept in the order dated 06.05.2024, and passed a

Corrigendum on 09.05.2024 rectifying the said errors.

5. Consequent to passing of the order dated 06.05.2024 and the

Corrigendum of 09.05.2024, Ld. NCLT ordered the Appellant Companies to

convene certain meetings and permitted dispensing with certain meetings as

proposed by them, in order to carry forward the motion of their Scheme of

Arrangement under Section 230 - 232 of the Companies Act.

6. The Appellant Companies, conducted the meeting after giving notice

as required under law, in compliance of the directions given in the order of

09.05.2024, which was in qualification and in continuation to the order of

06.05.2024, where the Composite Scheme of Arrangement was approved by

the respective Shareholders and Creditors of the Appellant Companies and

Comp. App. (AT) (CH) No. 66 / 2025 Page 3 of 27 thus, complied with the directions of the First Motion Petition Order dated

06.05.2024 to be read with the Corrigendum Order of 09.05.2024.

7. Thereafter, the Appellant Companies filed the Second Motion Petition

being CP (CAA) / 30 / 230 / HDB / 2024, seeking sanction of the Composite

Scheme of Arrangement. The said Petition came up for consideration before

the Ld. NCLT on 13.07.2024 and as a first step, notices were issued to all

the Statutory Authorities, who are concerned with the said Composite

Scheme of Arrangement, and the notice of hearing with the date of hearing

as 25.10.2024 was directed to be published in two Newspapers, in order to

provide an opportunity to all parties who are likely to be affected consequent

to implementation of the Composite Scheme of Arrangement. The Appellant

Companies, complied with the said directions by carrying out the paper

publication on 08.10.2024 and served notice to Regional Director, Registrar

of Companies, Official Liquidator and Jurisdictional Income Tax Authority.

8. In the subsequent proceedings, which was held in CP (CAA) No. 30 /

230 / HDB / 2024 (i.e., the Second Motion Petition), the Official Liquidator,

the Regional Director and the Registrar of Companies filed their reports in

respect of the Composite Scheme of Arrangement under Section 230 - 232

of the Companies Act, 2013.

Comp. App. (AT) (CH) No. 66 / 2025 Page 4 of 27

In furtherance thereto, the Appellant Companies filed their reply

affidavits in response to the reports of the said Statutory Authorities and also

filed clarification by way of affidavits and henceforth.

The Appellant Companies were heard on the aspect of implementation

of the Composite Scheme of Arrangement and ultimately, the final order was

rendered by the Ld. Tribunal on 28.04.2025.

9. Parts of this order, which has been rendered by the Ld. Adjudicating

Authority in CP (CAA) No. 30 / 230 / HDB / 2024, has been challenged in

the instant Company Appeal, by the Appellant Companies. The reliefs

sought for in the instant Appeal are extracted below:

``78. In view of the facts mentioned in Paragraph No. VII above, points in dispute and questions of law set out in Paragraph No. VIII and grounds set out in Paragraph No. IX, the Appellant prays for the following relief(s):

a) The Hon'ble Appellate Tribunal be pleased to set aside Paragraph 4 of the Impugned Order dated April 28, 2025 (produced as Annexure B) as passed by the National Company Law Tribunal, Hyderabad Bench - II in CP(CAA) No.30/230/HDB/2024, in so far as it relates to issuance of directions to file a separate application for the Demerger as set forth in the Composite Scheme in CP(CAA) No.30/230/HDB/2024.

b) The Hon'ble Appellate Tribunal be pleased to set aside Paragraph 26(i) of the Impugned Order dated April 28, 2025 (produced as Annexure B) as passed by the National Company Law Tribunal, Hyderabad Bench - II in CP(CAA) No.30/230/HDB/2024, in so far as it states ``resulting in Petitioner Company-3 (the Resulting Company),

Comp. App. (AT) (CH) No. 66 / 2025 Page 5 of 27 agreed by all its stakeholders, which is filed as part of the Scheme (as distinct from the `Demerger' contemplated after amalgamation)''.

c) The Hon'ble Appellate Tribunal be pleased to set aside Paragraph 26(i) of the Impugned Order dated April 28, 2025 (produced as Annexure B) as passed by the National Company Law Tribunal, Hyderabad Bench - II in CP(CAA) No.30/230/HDB/2024, in so far as it states ``The amalgamation as aforesaid shall be effective from the date of this order'' and confirm and approve the ``Effective Date'' as set forth and defined in the Composite Scheme as presented in CP(CAA) No.30/230/HDB/2024 (as produced as Annexure A).

d) The Hon'ble Appellate Tribunal be pleased to set aside Paragraph 26(ii) of the Impugned Order dated April 28, 2025 (produced as Annexure B) as passed by the National Company Law Tribunal, Hyderabad Bench - II in CP(CAA) No.30/230/HDB/2024.

e) The Hon'ble Appellate Tribunal be pleased to set aside Paragraph 26(viii) of the Impugned Order dated April 28, 2025 (produced as Annexure B) as passed by the National Company Law Tribunal, Hyderabad Bench - II in CP(CAA) No.30/230/HDB/2024, in so far as it states ``resulting in Petitioner Company-3 (the Resulting Company).

f) Pass an order confirming and sanctioning the Composite Scheme as presented in CP(CAA) No.30/230/HDB/2024 (as produced as Annexure A).

10. The primary grievance of the Appellants is against the directions given

in Para 4 of the impugned order for filing of a separate application for

demerger. The said Paragraph is extracted hereunder:

``4. This order will deal with the proposed Scheme only to the extent of the amalgamation of Petitioner Company-2 (the Amalgamating Company) into and with Petitioner Company- 1 (the Amalgamated Company) to result in Petitioner Company-3 (the Resulting Company). With respect to the Demerger part of the Scheme, as it is contemplated after the amalgamation of Petitioner Company-2 (the Amalgamating

Comp. App. (AT) (CH) No. 66 / 2025 Page 6 of 27 Company) into and with Petitioner Company-1 (the Amalgamated Company) to result in Petitioner Company-3 (the Resulting Company) is completed, the same must be submitted as a separate application, so that the requisite statutory compliances pertaining to the demerged businesses may be independently examined and scrutinized.''

11. It is the case of the Appellants that, while considering the Scheme, the

Ld. Tribunal did initiate the process of sanctioning the Composite Scheme

of Arrangement as approved by the Shareholders of the Appellant

Companies by allowing the First Motion Petition, that the Composite

Scheme had two limbs - Amalgamation between Appellant No.1 and

Appellant No. 2 and simultaneous demerger of certain businesses from

Appellant No. 1 to be merged with Appellant No. 3 and that, by the impugned

order, Ld. NCLT denying sanction of demerger part of the Scheme, on the

ground that the demerger must be submitted as a separate application, runs

counter to the Composite Scheme of Arrangement as it was approved by the

Shareholders of the respective Appellants.

12. If we look into the Impugned Order, in a nutshell, while considering

the Scheme, the Ld. Tribunal did proceed to sanction the Composite Scheme

of Arrangement based upon the decision taken in Shareholders' Meeting of

the Appellant Companies, by allowing the First Motion Petition. However,

by the impugned order, the aspect of demerger, though it was a self-

contained second limb as contemplated under the Composite Scheme of

Comp. App. (AT) (CH) No. 66 / 2025 Page 7 of 27 Arrangement, was denied, observing that a separate application was to be

filed.

13. While denying to pass an order on demerger, the Ld. Tribunal

observed that, since, as a consequence of amalgamation of Petitioner No. 2

Company (the Amalgamating Company), with Petitioner No. 1 Company

(the Amalgamated Company), a Resulting Company (Petitioner No. 3

Company) will come into existence which is not specified under the Scheme

of Arrangements. It has further observed that, though, the Board Resolutions

as well as the Shareholders' Meeting proceedings recommended for approval

to be granted to the Composite Scheme of Arrangement, since the Resulting

Company which would come into existence as a consequence of

amalgamation, has not been clearly identified, the demerger of the same as

being sought for, cannot be sanctioned at this stage because it will amount to

demerging of an "unspecified Demerged Company", and that demerger

proposal must be submitted as a separate application as requisite statutory

compliances pertaining to demerged businesses may be independently

examined.

14. Accordingly, the Ld. Tribunal, in its order, observed that the order

dated 28.04.2025 would only be dealing with and be limited to the extent of

amalgamation of Petitioner No. 2 (the Amalgamating Company), into

Comp. App. (AT) (CH) No. 66 / 2025 Page 8 of 27 Petitioner No. 1 (the Amalgamated Company), resulting in the creation of

Petitioner No. 3 (the Resulting Company).

15. For the purposes of the demerger of the Resulting Company, i.e.,

Petitioner No. 3, the Ld. Tribunal observed that the same would have to be

resorted to by recourse to a separate process of law, by filing a separate

application independently to examine and scrutinize the conditions

precedent required to be satisfied for the purposes of passing of any order for

demerging the companies, particularly when the demerging entity was not

specified under the Scheme itself.

16. The case of the Ld. Counsel for the Appellant, while putting forth a

challenge to the part of the impugned order denying the demerger of the

Resulting Company, is on the ground that the impugned order dated

28.04.2025 is contrary to the fundamental structure of the Composite

Scheme of Arrangement that was approved as a whole by the Shareholders

and the Creditors of the Appellants, and that it is a manifest error that had

crept into the orders passed by the Ld. Adjudicating Authority.

17. The case of the Appellant is that, since they had approached the Ld.

Adjudicating Authority seeking sanction of the Composite Scheme of

Arrangement between the Appellants and their Shareholders and Creditors,

the Scheme sanctioned should have included the aspect of demerger, because

the amalgamation and demerger together constituted parts of the Composite

Comp. App. (AT) (CH) No. 66 / 2025 Page 9 of 27 Scheme itself, as particularly contained in the preamble of the Scheme under

Clause 1.1 & 1.2. Clause 1.1 states that the Composite Scheme of

Arrangement is being presented under Section 230-232 of the Companies

Act, 2013, read with the Companies (Compromises, Arrangements and

Amalgamations) Rules, 2016, and further read with Section 2(1)(B),

2(19)(AA), 2(19)(AAA) & 2 (41A) of the Income Tax Act, 1961, Clause 1.2

outlines how the amalgamation and the demerger are to be carried out.

The case of the Appellant is that since the approved Composite

Scheme of Arrangement had, as its basic objective, two limbs of

implementation, namely, amalgamation and demerger as contained in Clause

1.2, without there being any objection thereto from the Statutory Authorities,

the relief of demerger ought to have been granted as well and that since the

legal reckoning of the Scheme was in its entirety, it has to be implemented

together and cannot be split at the stage of implementation.

18. Clause 1.2 of the Composite Scheme of Arrangement is extracted as

under:

``1.2 The Scheme, inter alia, provides for:

(a) As a first step, the amalgamation of the Amalgamating Company into and with the Amalgamated Company, pursuant to the provisions of Section 232 of the Act, Section 2(1B) and other relevant provisions of the IT Act and the Act (as defined hereinafter under) (``Amalgamation'')

Comp. App. (AT) (CH) No. 66 / 2025 Page 10 of 27

(b) As a second step, followed immediately by the demerger of the Demerged Undertaking (as defined hereinafter) of the Demerged Company into and with the Resulting Company and in consideration, the consequent issuance of compulsorily convertible securities by the Resulting Company to all the shareholders of the Demerged Company in accordance with the Share Entitlement Ratio (as defined hereunder), pursuant to the provisions of Sections 230 to 232 of the Act, Sections 2(19AA), 2(19AAA) read with Section 2(41A) and other relevant provisions of the IT Act and the Act (as defined hereinafter) (``Demerger''); and

(c) Various other matters consequential or otherwise integrally connected therewith, each in the manner as more particularly described in this Scheme.''

19. The Appellant has further submitted that, in accordance with the order

of the first motion dated 06.05.2024 and its Corrigendum order dated

09.05.2024, the Ld. Tribunal had issued directions to conduct the meetings

of the Equity Shareholders, Preferential Shareholders, Secured Creditors,

and the Unsecured Creditors of the three Appellant Companies (that is, the

Amalgamated Company, the Amalgamating Company, and the Resulting

Company), and to get their approval of the Scheme.

20. The Appellant has submitted that once the directions were already

issued by the Ld. Tribunal by the orders dated 06.05.2024 and the

Corrigendum Order dated 09.05.2024, while reckoning the Scheme, that in

itself would entail that the Ld. Tribunal had positively considered the aspect

of demerger also, as it was sought under Clause 1.2(b) of the Scheme. Hence,

Comp. App. (AT) (CH) No. 66 / 2025 Page 11 of 27 it ought to be deemed to have been approved, more particularly when the

entire process of amalgamation and the consequential demerger had been

brought into the public domain by inviting objections through publication

and issuance of notices to the Statutory Authorities, and none of them raised

any objection to the Scheme as a whole and its two self-contained limbs of

amalgamation and demerger.

21. In that eventuality, it is argued by the Ld. Counsel for the Appellant

that there was no occasion for the Ld. Tribunal to have carved out an

exception on its own, requiring that for the purposes of demerger, a separate

recourse be followed.

22. It is apparent from the records that after the First Motion Petition had

already been allowed, a meeting was convened on 04.07.2024 in compliance

with the orders dated 06.05.2024 and 09.05.2024. Further, even at the stage

when the second motion was carried before the Ld. Adjudicating Authority,

on 16.07.2024, the Scheme continued to proceed in terms of the order of the

First Motion Petition, which was later affirmed in the second motion Petition

without any demur. Since there was no vital or circumstantial change, the

conditions imposed in form of filing of a separate application for demerger

would be irrational.

Comp. App. (AT) (CH) No. 66 / 2025 Page 12 of 27

23. It could be said that, inter alia, while sanctioning the Scheme in

Second Motion Petition on 28.04.2025, there was no practical impediment

before the Ld. Adjudicating Authority necessitating attachment of a rider on

its own, as contained in Paragraph 4 of the impugned order, deferring the

sanction of the component of demerger as sought for, and issuing directions

that the demerger proposal be submitted by filing a separate application.

24. Besides that, we observe that, the relevant documents for the instant

case are the reports filed by the Official Liquidator before the Ld. NCLT on

05.11.2024 and 19.12.2024, and the response affidavit filed by the

Appellants thereto, as well as the reports submitted by the Regional Director

and the Registrar of Companies on 13.11.2024, 21.11.2024 and 30.01.2025

respectively and the replies submitted thereto, supported by the additional

synopsis submitted by the Appellants. The aforesaid reports were considered

in the second motion proceedings held on 07.02.2025, subsequent to which,

the order was reserved on the Composite Scheme of Arrangement by an

order passed on 07.02.2025. We find that there was no other material placed

before the Ld. NCLT to take a contrary view of partial denial of demerger.

25. We further observe that upon consideration of the reports of the

Official Liquidator, RoC, and RD, Ld. NCLT could have called for

clarifications if any, from them which has not been done and that, in the

absence of the same, and with none of the reports suggesting `Demerger' to

Comp. App. (AT) (CH) No. 66 / 2025 Page 13 of 27 be taken up later, there was no rationale or reason to take a view contrary to

the Scheme of Arrangement, as proposed by the respective Companies

(Appellants) after getting the same approved by their Shareholders and

Creditors.

26. The Appellants have challenged the findings recorded by the Ld.

NCLT in the Paragraph Nos. 3, 4 & 26(i) of the impugned order, deferring

the passing of orders on the aspect of demerger on the ground that the

demerger was sought in respect of an "unspecified undertaking", and have

contended that the same was contrary to the records and was based on a

misreading of the documents on record, including the Scheme of

Arrangement itself. They have argued that the Composite Scheme of

Arrangement, particularly as contained in Paragraph 1.1, clearly refers to the

Demerged Company as the entity created upon amalgamation, namely, the

Amalgamated Company of Appellant No. 1, and that, the ``Demerged

Business'' and the ``Demerged Undertaking'' have been specifically defined

in Paragraph 5.1(l) & 5.1(p) of the Composite Scheme of Arrangement.

Hence, based on the aforesaid premise, and that in light of the stipulations

contained under Paragraph 5.1(p), the demerged company, having been

specified therein, cannot be treated as an unspecified Company, and

therefore, the demerger could not have been denied. We see no reason to

Comp. App. (AT) (CH) No. 66 / 2025 Page 14 of 27 differ from the said arguments. The definition of the demerged undertaking

itself, as contained under Clause 5.1(p) of the Scheme, reads as under:

(p) ``Demerged Undertaking" means the Demerged Businesses as a going concern comprising all its employees and the following rights, obligations, Assets, and Liabilities, in each case to the extent pertaining to the Demerged Business(es) as on the Appointed Date (including but not limited to units of the Demerged Company engaged in the Demerged Business in Shimoga, Belgaum and Delhi Jal Board):

(i) all of the Demerged Company's interests in the immovable properties which are listed in SCHEDULE II including each of the following in relation to each such property, rights thereto i.e. right of way, land together with the buildings and structures standing thereon (whether freehold, leasehold, leave and licensed, right of way, tenancies or otherwise including buildings, warehouses, offices, structures, roads, drains and culverts, civil works, foundations for civil works, benefits of any rental agreement for use of premises, share of any joint assets etc. and all documents (including panchnamas, declarations, receipts) of title, rights and easements in relation thereto and all rights, covenants, continuing rights, title and interest, benefits and interests of rental agreements for lease or license or other rights to use of premises, in connection with the said immovable properties;

(ii) all Assets, as are movable in nature and pertaining to and in relation to the Demerged Business, whether present or future or contingent, tangible or intangible, whether recorded in the books or not or in possession or not, corporeal or incorporeal, in each case, wherever situated (including plant and machinery, capital

Comp. App. (AT) (CH) No. 66 / 2025 Page 15 of 27 work in progress, furniture, fixtures, fixed assets, appliances, accessories, office equipment, communication facilities, installations, vehicles, inventories, stock in trade, tools and plants), investment of all kinds (including but not limited to equity shares, preference shares, optionally convertible debentures, compulsorily convertible debentures and other securities in subsidiaries, joint ventures in or outside India, current assets, earnest monies and sundry debtors, prepaid expenses, bills of exchange, promissory notes, outstanding loans and advances (specifically including but not limited the advance of INR 2,50,00,00,000 (Rupees Two Hundred and Fifty Crores) extended to Ramky Integrated Township Limited), recoverable in cash or in kind or for value to be received, receivables, funds (including Demerged Undertaking Employee Funds), cash and bank balances and deposits (excluding such inter-corporate deposits as may be mutually agreed among the Boards of the Demerged Company and Resulting Company), including accrued interest thereto with government, semi-government, local and other authorities and bodies, banks, customers and other persons, interest accrued thereon, reserves, provisions, funds, benefits of all agreements, bonds or pass through certificates, the benefits of any insurances, bank guarantees, performance guarantees and letters of credit;

(iii) all permits, licenses, grants (including government grants rights to receive subsidies), Permissions, approvals, authorisations, clearances, consents (including environment consents and permits), registrations, entitlements, credits, certificates, awards, sanctions, privileges, memberships, allotments, quotas, no objection certificates, exemptions;

Comp. App. (AT) (CH) No. 66 / 2025 Page 16 of 27 (iv) all concession agreements, bids, contracts, agreements, purchase orders/service orders, operation and maintenance contracts, memoranda of understanding / undertakings / agreements, tenders, tariff policies, expressions of interest, letters of intent, lease / license agreements, agreement with customers, service providers, other arrangements, undertakings, deeds, bonds, schemes, trade union agreements, collective bargaining schemes, and other instruments of whatsoever nature and description, whether vested or potential and written, oral or otherwise and all rights, title, interests, assurances, claims and benefits thereunder, and pre- qualifications, bid acceptances;

(v) all insurance policies, to the extent pertaining to the Demerged Business;

(vi) all intellectual property rights (whether owned, licensed or otherwise and whether registered or unregistered), applications (including hardware, software, licenses, parameterisation and scripts), registrations, licenses, goodwill, trademarks, trade and business names, rights in logos, trade dress, geographical indication, service marks, copyrights, moral rights and related rights, patents, project designs, marketing intangibles, special status, domain names, designs, trade secrets, research and studies, technical know-how, confidential information and other benefits (in each case including the benefit of any applications made for the same) and all such rights of whatsoever description and nature, and whether subsisting now or in the future, having equivalent or similar effect to the rights referred to above;

(vii) all rights to use and avail telephones, telexes, facsimile, email, internet, leased line connections and installations, utilities,

Comp. App. (AT) (CH) No. 66 / 2025 Page 17 of 27 electricity and other services, reserves, provisions, funds, benefits of assets or properties or other interests held in trusts, privileges and all other rights, liberties and advantages;

(viii) all Tax Assets and Credits;

(ix) all books, records, files, papers, engineering and process information, software licenses (whether proprietary or otherwise), test reports, drawings, manuals, databases including databases for procurement, commercial and management, catalogues, quotations, lists of present and former customers and suppliers including service providers, other customer information, and all other books and records, whether in physical or electronic form;

(x) all Demerged Liabilities;

(xi) all legal proceedings, including quasi-judicial, arbitral and other

proceedings, of whatsoever nature (specifically including but not limited to (a) Arbitration proceedings between Demerged Company and Ajmer Municipal Corporation, Ajmer, Rajasthan arising out of concession agreement dated September 24, 2008 where claims have been made by Demerged Company and proceedings were concluded and arbitral award dated July 07, 2018 was passed; (b) Arbitration proceedings between Demerged Company and Aurangabad Municipal Corporation, Aurangabad, Maharashtra arising out of concession agreement dated October 8, 2008 where claims have been made by Demerged Company and proceedings were concluded and arbitral award dated July 05, 2018 was pronounced; (c) Arbitration proceeding between Demerged Company and Jammu & Kashmir Economic

Comp. App. (AT) (CH) No. 66 / 2025 Page 18 of 27 Reconstruction Agency (J&K ERA) in relation to the disputes arising from and out of the agreement dated November 26, 2008 and initiated vide arbitration notice dated August 31, 2017 issued by Demerged Company, (d) Arbitration proceeding between Demerged Company and Market Management Committee, Koyambedu in relation to the disputes arising from and out of the agreement dated November 4, 2009 and initiated vide arbitration notice dated August 14, 2018 issued by Demerged Company), and

(xii) All permanent and temporary employees engaged by Demerged Company at various locations ("Demerged Undertaking Employees").

It is hereby clarified that where any question arises as to whether any specific asset whether tangible or intangible, or liability or contract or employee or item or matter or thing pertains to or does not pertain in the Demerged Undertaking, the same shall be decided mutually by the Boards of the Demerged Company and the Resulting Company''.

27. If we judiciously scrutinize the elaboration of the demerged

undertaking as contained in Paragraph 5.1(p), which the Ld. Counsel for the

Appellant has referred to in order to meet the objections raised by the Ld.

Tribunal in the impugned order regarding the demerged company being

unspecified, it is seen that the definition / description of ``Demerged

Undertaking'' lists out in detail its rights, obligations, assets and liabilities

as on the appointed date.

Comp. App. (AT) (CH) No. 66 / 2025 Page 19 of 27

28. On reading Clause 5.1(p) itself along with Clause 1.1 and Clause

1.2(b), the same contradicts the finding recorded by the Tribunal in

Paragraphs 3, 4, and 26(i), that the Scheme does not specify the demerged

company, as sought under Clause 1.1 read with Clause 1.2 of the Scheme.

Clause 1.1 specifies Re Sustainability Limited as the ``Amalgamated

Company'', and upon Amalgamation, the ``Demerged Company'' and

Clause 1.2(b) envisages demerger of the ``Demerged Undertaking'' as

defined in Clause 5.1(p) of the Demerged Company into and with the

``Resulting Company''. At this point, to hold that the ``Demerged

Undertaking'' and the `Demerged Company'', are unspecified would

amount to a perverse interpretation.

29. The Ld. Counsel for the Appellant has argued the controversy from

the perspective that since the Scheme was composite in accordance with the

implications of Clause 46 of the Scheme, amalgamation and demerger are

two inseparable parts and demerger would be an automatic consequence

upon the amalgamation and that any deviation therefrom would amount to a

patent error.

30. In view of what has been discussed by us in the aforesaid paragraphs,

the entire controversy lies in a very narrow compass, because there happens

to be a partial challenge to the impugned order, where the Ld. Tribunal, while

sanctioning the Scheme of Arrangement, had restricted the approval to the

Comp. App. (AT) (CH) No. 66 / 2025 Page 20 of 27 Scheme of Amalgamation only and directed that the demerger process, as it

has been contemplated to be taken up after completion of amalgamation

process, and must submit a separate application seeking the requisite

direction for demerger, subject to compliance with the statutory provisions.

31. The observation made therein was on the ground that the Scheme itself

did not specify the Demerged Undertaking and therefore demerger should be

applied for separately after completion of amalgamation. In fact, this finding

recorded in the impugned order happens to be contrary to the records, for the

reason that the Scheme was a Composite Scheme and not a step by step

process. Clause 1.1 and 1.2 of the Scheme are extracted hereunder:

``1.1) This composite scheme of arrangement (``Scheme'', more particularly defined hereinafter) is presented pursuant to the provisions of Sections 230 to 232 and other applicable provisions of the Act (as defined hereinafter) read with the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016, Section 2(1B), 2(19AA), 2(19AAA), 2(41A), conditions, if any, notified under sub-section (5) of Section 72A of the IT Act and other relevant provisions of the IT Act amongst Re Sustainability Limited (``Amalgamated Company'' or, upon Amalgamation, the ``Demerged Company''), Mumbai Waste Management Limited (``Amalgamating Company''), Ramky Sustainability Solutions Private Limited (``Resulting Company'') and their respective shareholders and creditors.

1.2) The Scheme, inter alia, provides for:

(a) As a first step, the amalgamation of the Amalgamating Company into and with the Amalgamated Company, pursuant to the provisions of Section 232 of the Act, Section

Comp. App. (AT) (CH) No. 66 / 2025 Page 21 of 27 2(1B) and other relevant provisions of the IT Act and the Act (as defined hereinafter under) (``Amalgamation'')

(b) As a second step, followed immediately by the demerger of the Demerged Undertaking (as defined hereinafter) of the Demerged Company into and with the Resulting Company and in consideration, the consequent issuance of compulsorily convertible securities by the Resulting Company to all the shareholders of the Demerged Company in accordance with the Share Entitlement Ratio (as defined hereunder), pursuant to the provisions of Sections 230 to 232 of the Act, Sections 2(19AA), 2(19AAA) read with Section 2(41A) and other relevant provisions of the IT Act and the Act (as defined hereinafter) (``Demerger''); and

(c) Various other matters consequential or otherwise integrally connected therewith, each in the manner as more particularly described in this Scheme.''

Thus Clause 1.1 and Clause 1.2, on their conjoint reading, provide as

to which would be the ``Amalgamated Company / Demerged Company''

and which would be the ``Resulting Company''.

32. In view of the aforesaid Clauses, there was no ambiguity in the

Scheme which was otherwise perceived by the Ld. Tribunal to conclude that

since the Demerged Company or its business was not specified in the Scheme

itself, the same was required to be processed through independent

proceedings. The said finding recorded by the Ld. Tribunal happens to be

contrary to Clauses 1.1 and 1.2, because when they themselves, in quite

specific terms, specified the emergence of a "Demerged Company" as a

consequence of the Amalgamation, which had been permitted by the

Comp. App. (AT) (CH) No. 66 / 2025 Page 22 of 27 impugned order, and in that event, filing a separate application for demerger

would amount to an abuse of process, particularly when the parties to the

proceedings were agreeable to the Demerged Company forming as a

consequence of the Amalgamation.

33. Further, a reading of Section 232 of the Companies Act together with

Section 2(19AA) of IT Act, a Scheme which includes demerger can be

sanctioned by NCLT / NCLAT, and it is well within the powers conferred

u/s. 230-232 of Companies Act. Ld. Counsel for the Appellant has cited

several cases where such composite schemes involving merger and demerger

on simultaneous basis have been sanctioned by NCLT / High Courts. Hence,

for the purpose of the aspect of demerger, as it was sought under the Scheme

itself, which was to consequentially come into existence after the

Amalgamation, no independent process is required to be resorted to by the

Appellants for seeking a demerger as proposed in the Scheme of

Arrangement as contained under Clause 1.1 read with Clause 1.2.

34. Further, it is seen that, the Ld. NCLT has, by only sanctioning the

Amalgamation and directing a separate application to be filed for the

Demerger has considerably altered the terms of the Composite Scheme,

which ought not to have been done since the Composite Scheme was

approved by the board of directors, shareholders and creditors in their

commercial wisdom. This settled position has been laid down by the Hon'ble

Comp. App. (AT) (CH) No. 66 / 2025 Page 23 of 27 Supreme Court in Miheer H. Mafatlal v. Mafatlal Industries Ltd. (1997) 1

SCC 579 at Paragraph 29 which is extracted hereunder:

``29... It is the commercial wisdom of the parties to the scheme who have taken an informed decision about the usefulness and propriety of the scheme by supporting it by the requisite majority vote that has to be kept in view by the Court. The Court certainly would not act as a court of appeal and sit in judgment over the informed view of the parties concerned to the compromise as the same would be in the realm of corporate and commercial wisdom of the parties concerned. This Court has neither the expertise nor the jurisdiction to delve deep into the commercial wisdom exercised by the creditors and members of the company who have ratified the Scheme by the requisite majority. Consequently, the Company Court's jurisdiction to that extent is peripheral and supervisory and not appellate...''

35. Accordingly, it is held that, since the Demerged Company has quite

specifically been specified in Clause 1.1 of the Scheme as "Re-Sustainability

Solutions Limited", no independent application is required under law to be

submitted as directed by the impugned order for the purpose of consideration

of the demerger, particularly when, by the judicial process, the Tribunal had

sanctioned the proposal of Amalgamation, which would automatically lead

to undertaking of the process of demerger as specified in the Composite

Scheme of Arrangement.

Comp. App. (AT) (CH) No. 66 / 2025 Page 24 of 27

36. Ld. Counsel for the Appellants have also submitted that the impugned

order suffers from certain factual errors as contained in Para 26(i), 26(ii) &

26(viii) of the said order. He has stated that, in Para 26(i), it is recorded that

the amalgamation shall be ``effective from the date of this order'', which is

erroneous as the Scheme defines ``the effective date'', for the Scheme under

Clause 5(1)(s) and NCLT ought not to have altered the same. In Para 26(i)

& 26 (viii), the impugned order records resulting in Petitioner Company No.

3 (the Resulting Company). Actually, Petitioner No. 3 Company is already

in existence and the Scheme envisages merging of the Demerged Business

into this Company. Thus, it is seen that the portions of the order occurring in

Para 26(i) & (viii) which is being challenged by the Appellant, are liable to

be set aside. In Para 26(ii), the order records that the Approval for the

amalgamation is subject to the outcome of the Petition filed against the

Amalgamated Company under Section 433(E), 434(1)(A) and 439 of

Companies Act, 1956, pending before Hon'ble High Court of Telangana &

Andhra Pradesh. The Appellant states that the Petition is not yet admitted. In

Para 24 of the impugned order, Ld. NCLT also records that the said Petition

has not been admitted. In such a situation, it is not necessary to put such a

rider especially when no objections have been received in response to the

public notice by Ld. NCLT. Hence Para 26(ii) also deserved to be deleted.

Comp. App. (AT) (CH) No. 66 / 2025 Page 25 of 27

37. The aforesaid directions, with regard to the reckoning of the demerged

undertaking, which have been observed by us on the strength of the Scheme

itself, shall not operate as any exception or exemption with regard to the

payment of stamp duty, taxes, or other statutory charges, if any, payable in

accordance with law, or in respect of any permission, compliance, or any

other requirement which may be specifically required to be complied with as

per the provisions of law. The same shall continue to be obligatory upon the

Demerged Company and the Resulting Company.

38. Subject to the aforesaid, the Company Appeal stands allowed, limited

to the extent to which it has been challenged, namely, that the demerger, as

a consequence of the approval of the Scheme of Arrangement granted by the

order dated 28.04.2025, and the existence of the Demerged Company, would

be purely consequential to the terms of the Scheme of Arrangement, for

which no independent application would be required, since there was no

ambiguity ever observed from any quarter in the Scheme with regard to the

Demerged Company not being specified in accordance with the Scheme.

Accordingly, no separate application is necessary to be filed by the parties

with regard to the demerger.

39. Thus, the Company Appeal (AT) (CH) No. 66 / 2025 stands allowed,

limited to the extent of the relief sought in the present Company Appeal, as

extracted in Para 9 above, subject to the restrictions already observed with

Comp. App. (AT) (CH) No. 66 / 2025 Page 26 of 27 regard to the liability for payment of taxes and other dues payable by the

Demerged Company in accordance with the applicable provisions of law.

This order shall not be construed as granting any exemption or exception to

the Demerged Company and the Resulting Company from the payment of

any statutory dues, or from any statutory compliances.

The connected pending Interlocutory Applications, if any, will stand

closed.

[Justice Sharad Kumar Sharma] Member (Judicial)

[Jatindranath Swain] Member (Technical) 06/02/2026

SR/MS/AK

Comp. App. (AT) (CH) No. 66 / 2025 Page 27 of 27