Rock And Storm Bottlers Private Limited ... vs For Appellant: Mr. Nipum Gautam

For Appellant: Mr. Nipum Gautam, Mr. APS Madaan, Ms. Taniya Hasija, Advocates.

For Respondent: None

ORDER

HYBRID MODE

03.09.2025:

1. The Appellants have assailed the decision dated 11.06.2025 passed in C.P. (CAA) NO. 47/CHD/2022 by the Ld. NCLT Chandigarh Bench, wherein the Second Motion Petition filed by the Appellants has been rejected.

2. The Appellant Companies are in the business of manufacturing, marketing, selling, purchasing and export and import of all kinds of alcoholic, drinks, viz: spirits, wines, liquors and non-alcoholic drinks, beverages, mineral water/aerated water and juices of all kinds.

3. M/s Rock and Storm Bottlers Private Limited ('Demerged Company') and Crystalblend Bottlers Private Limited ('Resultant Company') filed a joint motion application under Section 230-232 of the Companies Act, 2013 ('the Act') and other applicable provisions of the Act read with Companies (Compromises, Arrangements and Amalgamations) Rules, 2 2016 (the Rules) in relation to the Scheme of Amalgamation between the Appellant/Applicant Companies.

4. The First Motion Petition before the Ld. Adjudicating Authority came to be numbered as CA (CAA) No. 4/Chd/CHD/2021 (First Motion). The registered offices of Appellant Companies are situated in Chandigarh, therefore, the territorial jurisdiction of both the Appellant companies was/is with the Ld. NCLT Chandigarh Bench.

5. The First Motion approval Order dated 25.05.2022 briefly records the rationale behind the Scheme proposed and placed for the approval of the Ld. NCLT Bench:

"a) the Demerged Company and as well as the Resultant Company are the Companies under same management/ same promoter group.

b) the Demerged Company is into the business of manufacturing of liquor at two Divisions i.e. Chandigarh Undertaking and Ambala Undertaking (hereinafter referred to as "DEMERGED UNDERTAKING"). While the Resultant Company is a new company and has not commenced its operations, yet, by way of the Scheme it is proposed to transfer the demerged undertaking of the Demerged Company into the Resultant Company;

c) the proposed Scheme of Arrangement will result in consolidation and simplification of the group structure resulting in operational synergies and growth, thereby realigning the business operations as part of overall business reorganization plan;

d) the proposed Scheme of Arrangement will result in usual economies of a centralized and more productive utilization of human and other resource and enhancement of overall business efficiency in resource management, cost savings resulting from rationalization, standardization and simplification of business processes;

3 e) the proposed Scheme of Arrangement will enable these Companies to combine their managerial and operating strength, to build a wider capital and financial base and to promote and secure overall growth of their businesses."

6. The Ld. Adjudicating Authority passed the First Motion Order on 25.05.2022, wherein the following direction/order was passed-

"16. Accordingly, the directions of this Bench in the present case are as under: - I. In relation to the Demerged Company/Applicant Company No.1:

a. The meetings of the Equity Shareholders are dispensed with keeping in view the shareholding pattern, financial structure of the company and the fact that the consent of all the Equity Shareholders has been received by way of affidavits. b. The meeting of the Secured Creditors of the Demerged Company/Applicant Company No. 1 is dispensed with as it has 4 (Four) Secured Creditors and the consent of both Secured Creditors have been received by way of affidavits.

c. The meeting of the Unsecured Creditors of the Demerged Company/Applicant Company No. 1 is dispensed with as it has 36 (Thirty-Six) Unsecured Creditors and the consents of all Unsecured Creditors have been received by way of affidavits."

"II. In relation to the Resultant Company/Applicant Company No. 2:

a. The meetings of the Equity Shareholders are dispensed with keeping in view the shareholding pattern, financial structure of the company and the fact that the consent of all the Equity Shareholders has been received by way of affidavits.

b. Since, there are Nil Secured Creditors in the Resultant Company/Applicant Company No. 2, therefore, there is no scope for any meeting.

4 c. The meeting of the Unsecured Creditors of the Resultant Company/Applicant Company No. 2 is dispensed with as it has 5 (Five) Unsecured Creditors and the consent of all Unsecured Creditors have been received by way of affidavits."

"17. In view of the above, the First Motion Application stands allowed by giving liberty to the Applicant Companies to file Second Motion Petition with a direction that the Applicant Companies shall make specific prayer for sending notices to the

(a) Central Government through Regional Director, Northern Region, Ministry of Corporate Affairs, New Delhi,

(b) concerned Registrar of Companies and

(c) Income Tax Authorities by disclosing the PAN numbers of all the Applicant Companies in the title of the Second Motion Petition.

The applicant companies shall also file separate affidavits stating the Sectoral regulators governing the respective companies while filing second motion petition."

7. After the first Motion approval, the Appellant Companies moved a Second Motion Petition bearing No. CP (CAA) No. 47/Chd/2022. The Affidavits from all the concerned government authorities were placed on record for the consideration of the Ld. Adjudicating Authority. Further, the Order dated 21.05.2025 records in the Affidavit placed by the RD/ROC, the department has no objection for the scheme. Further, a NoC by the Excise department, FSSAI department and IT department were also placed before the Ld. Adjudicating Authority.

8. In the Impugned Order passed, the Ld. Adjudicating Authority rightly recorded the appointed date is 01.04.2022 as modified vide CA No. 37/2023 which was allowed on 03.01.2025 by the Ld. NCLT, however, the Second Motion Petition was rejected.

5 9. A challenge is preferred against the Impugned Order dated 11.06.2025 wherein the Ld. NCLT rejected the Second Motion while observing the following: -

"22.5. Further, the Petitioner-Companies, vide diary No. 01167/02 dated 18.10.2022 have filed an affidavit stating that neither the deponent nor the counsel for the petitioner companies has received any notice from any person supporting or opposing the petition u/s 230 & 232 of the Companies Act, 2013 for obtaining the sanction of the Scheme of Arrangement. Again, this affidavit only specifies the approval of the scheme for demerger and not for the Reduction of share capital.

22.6.1. It is also seen that the certificate of Statutory Auditor does not specify that the accounting treatment, proposed by the company for such reduction is in conformity with the accounting standards specified in section 133. Even this certificate covers only the Demerger part of the scheme.

22.6.2. The additional affidavit has been filed by the petitioner companies vide Diary No. 01167/15 dated 22.08.2024 wherein the list of secured and unsecured creditors as on 31.03.2024 in the Petitioner Companies and NOC's have been obtained from them after supplying a copy of the Scheme of Arrangement are attached with this affidavit. The consents are only with respect to the Demerger and there is no mention/consent for the Reduction of the Capital of the demerged company.

23. Thus, it is apparent from the above stated facts and circumstances that the documents placed on record and the compliances only pertain to the Scheme of Arrangement for Demerger of Demerged Undertaking of Petitioner Company 6 No.1 into Petitioner Company No.2 under Section 230 and 232 of the Companies Act, 2013 and do not cover even the basic compliances for the Reduction of capital of Rock and Storm Bottlers Private Limited (Petitioner Company No.1). Consequently, it is held that the petition for the composite Scheme of Arrangement for Demerger of Demerged Undertaking of Petitioner Company No.1 into Petitioner Company No.2 and for reduction of share capital of Rock and Storm Bottlers Private Limited (Petitioner Company No.1/Demerged Company) is not maintainable."

10. We are of the considered view the Ld. Adjudicating Authority grossly erred while rejecting the Second Motion Petition as the mandate of Section 230 (Explanation) clearly exempts the Appellants/Applicant Companies from complying with the requirements of Section 66 of the Companies Act, 2013. Briefly put, a reading of Section 230 of the Companies Act, 2013 is as following:

"230. Power to compromise or make arrangements with creditors and members. --

(1) - (11) ...xxxxxxx (12) An aggrieved party may make an application to the Tribunal in the event of any grievances with respect to the takeover offer of companies other than listed companies in such manner as may be prescribed and the Tribunal may, on application, pass such order as it may deem fit."

Explanation --For the removal of doubts, it is hereby declared that the provisions of section 66 shall not apply to the reduction of share capital effected in pursuance of the order of the Tribunal under this section.

7 11. It is clear from a bare reading of the Section 230 that the compliances of Section 66 of the Companies Act are not required while seeking approval of the Scheme under Section 230 of the Companies Act. Though, the Impugned Order appreciates the correct legal position in Para 22.1.3, however, erroneously rejected the Second Motion Petition.

"22.1.3. Although, Section 230 of the Companies Act, 2013 provides for a composite application of Arrangement/compromise which for example, includes both a demerger and a reduction of share capital, and the explanation to Section 230 of the Companies Act, 2013 provides that for the reduction of share capital included in such a scheme approved under Section 230 of the Companies Act, 2013, provisions of Section 66 of the Companies Act, 2013 will not apply, yet, it does not totally take away the obligation/compliance requirements with respect to the reduction of share capital. The reduction of share capital must be approved by a special resolution of shareholders, rather than an ordinary resolution and adequate and effective notice of such a reduction being part of the composite scheme must be given to the creditors, statutory authorities and other stakeholders and their objections/observations are to be taken on this aspect. Besides the above, the Petitioner must demonstrate a clear and justifiable rationale for the reduction and must disclose all material facts relating to such reduction."

12. Thus it is completely unclear after appreciating and noting in Paragraph 22.1.3 of the impugned order that compliances of S.66 of Companies Act are not required as stipulated in the Explanation to Section 230 of the Companies Act, the Ld. Adjudicating Authority however, checked the compliances u/s 66 of the Companies Act, 2013 8 in a Demerger Scheme Petition and rejected the Second Motion Petition filed by the Appellants.

13. Sections 230-232 of the 2013 Act form a complete code for composite schemes, allowing all incidental acts including capital reduction to be approved in one petition, without separate compliance under other provisions like Section 66. This principle, was affirmed in Re: Elitecore Technologies (P.) Ltd. [(2013) 176 Comp Cas 297] and R. Systems International Ltd. Company Appeal (AT) No. 416 of 2017. The Scheme enunciates the rationale for the arrangement of the Appellants which was not taken into consideration by the Ld. NCLT.

14. The Ld. Tribunal wrongly inferred from notices, statutory authorities' NOCs, newspaper publications, shareholder/creditor no- objection affidavits, and statutory auditor certificates that the Scheme pertain only to demerger. In fact, all stakeholders, statutory authorities, public, shareholders, creditors, and auditors, had full knowledge of and consented to the complete Scheme, including Clause 17 on capital reduction. The reduction element was disclosed transparently and approved without objection; any technical lapses cannot justify dismissal of the Petition. The certificate from the Statutory Auditor clearly spelt out that the 'accounting treatment' proposed in the Scheme of Amalgamation is in conformity with the applicable provisions of the Companies Act.

15. It is a matter of record the Scheme copy was circulated to all the departments and the creditors and the Ld. Adjudicating Authority grossly erred while rejecting the Second Motion Petition. It is clear from the records while consenting for the Scheme, all the creditors and departments were provided a copy of the Scheme being consented to. Importantly at the cost of repetition, the record suggest a copy of the Scheme was also circulated amongst the creditors and the Scheme clearly records the following:

9 "(n) The Scheme or the Scheme" means the present Scheme of Arrangement framed under the provisions of section 230 and 232 of the Companies Act, 2013 read with Companies (Compromises, Arrangements, and Amalgamations) Rules, 2016 and other applicable provisions, if any, and provides for:

i) where under Demerged Undertaking of the Demerged Company is proposed to be Demerged into the Resultant Company;

ii) where the paid up share capital of the Demerged Company and shall be reduced; "

16. Further, this Hon'ble Appellate Tribunal in the matter of "Ratnagiri Gas and Power Private Limited & Anr. v. Purshottam Mareshwar Vartak & Anr.", Company Appeal (AT) No. 294/ 2017 held the following:

"8. It was submitted that the order refusing to sanction the Scheme by the Tribunal is not only legally but also factually unsustainable on different grounds, as discussed below.

9. The Tribunal held that modified Scheme cannot be sanctioned without complying with the Section 66 of the Companies Act, 2013, or at least without obtaining fresh consents from the shareholders and creditors of the Appellant Companies.

10. Learned Senior Counsel for the Appellant has rightly pointed out that the Tribunal failed to consider that Section 230 of the Companies Act, 2013 is a complete code in itself and the explanation to Section 230 of the Companies Act, 2013 expressly and categorically states that the provision of Section 66 shall not apply to the reduction of share capital 10 effected in pursuance of the order of the Tribunal under Section 230 of the Companies Act, 2013, which reads as follows...

25. For the reasons aforesaid, while we set aside the impugned order dated 16th August, 2017 passed by the Tribunal, Principal Bench, New Delhi in Company Petition No. 07 (ND)/2017, approve the Scheme with modification as noticed and quoted above and the Long Stop Date stands extended up to 31st March, 2018. It will come into effect from the date as mentioned in the Scheme and shall be given effect from the date of its notification as required to be issued under the law. The Scheme of Demerger stands approved with modification as quoted above. Both the appeals are allowed with aforesaid observations. However, in the facts and circumstances of the case, there shall be no order as to costs."

17. This Hon'ble Appellate Tribunal in the matter of R. Systems International Limited, Company Appeal (AT) No. 416 of 2017 held as under:

"7. From explanation below Section 230, it will be evident that for passing an order under Section 230 to compromise or make arrangements with the creditors and the members, the provision of Section 66 shall not apply for reduction of share capital. Such order can be passed by the Tribunal under Section 230 of the Act.

8. In view of the aforesaid provisions, we hold that the Tribunal failed to notice the 'Explanation' below Section 230, which makes it clear that even for reduction of share capital effected in pursuance of the order of the Tribunal under Section 230, the provision of Section 66 shall not apply."

11 18. Thus we are of the considered view the Appellants have complied with all the requirements required u/s 230 of the Companies Act, 2013, and the Ld. NCLT had erroneously rejected the Second Motion Petition. Notably, there is no objection to the Scheme of the Appellants. Therefore, in light of the law stated hereinabove and the facts reproduced, the Appeal stands allowed and the Second Motion Petition is approved with from the date as mentioned before the Ld. NCLT.

19. Pending applications, if any, are also closed.

(Justice Yogesh Khanna) Member (Judicial)

(Mr. Indevar Pandey) Member (Technical) Bm/md