Sterlite Ports Limited vs Regional Director Southern Region

NATIONAL COMPANY LAW APPELLATE TRIBUNAL AT CHENNAI (APPELLATE JURISDICTION) Company Appeal (AT) (CH) No. 99 of 2023 (IA No. 1262 / 2023) (Filed under Section 421 of the Companies Act, 2013)

(Arising out of the 'Order' dated 22.03.2023 in CP (CAA) / 52(CHE)/2022, passed by the 'Adjudicating Authority', National Company Law Tribunal, Chennai Bench)

In the matter of:

1. Sterlite Ports Limited Having its Registered Office at SIPCOT Industrial Complex, Madurai By Pass Road, Tuticorin, Thoothukudi, Tamil Nadu - 628002, INDIA, Represented by its Authorised Representative Mr. Navin Kumar Jaju .....Appellant No.1

2. Paradip Multi Cargo Berth Private Limited Having its Registered Office at SIPCOT Industrial Complex, Madurai By Pass Road, Tuticorin, Thoothukudi, Tamil Nadu - 628002, INDIA, Represented by its Authorised Representative Mr. Challa Venkat Kameswar Rao .....Appellant No.2

3. Maritime Ventures Private Limited Having its Registered Office at SIPCOT Industrial Complex, Madurai By Pass Road, Tuticorin, Thoothukudi, Tamil Nadu - 628002, INDIA, Represented by its Authorised Representative Mr. Abhinav Gupta ..... Appellant No.3

Comp. App (AT) (CH) No. 99 / 2023

Page 1 of 14 4. Goa Seaport Private Limited Having its Registered Office at SIPCOT Industrial Complex, Madurai By Pass Road, Tuticorin, Thoothukudi, Tamil Nadu - 628002, INDIA, Represented by its Authorised Representative Mr. Benicio Menezes ..... Appellant No.4

Versus

The Regional Director (Southern Region) Ministry of Corporate Affairs Having its Office at 5th Floor, Shastri Bhawan, 26, Haddows Road, Chennai - 600006, Tamil Nadu. ..... Respondent

Present: For Appellants : Mr. Krishnendu Datta, Senior Advocate For Mr. Anirudh Das, Advocate

For Respondent : Mr. Avinash Krishnan Ravi, Advocate

ORDER

(Virtual Mode)

[Per: Shreesha Merla, Member (Technical)]:

1. This Appeal is filed by the Appellants under Section 421 of the

Companies Act, 2013 (hereinafter referred to as `the Act'), aggrieved by

the Order dated 22.03.2023, passed by the National Company Law

Comp. App (AT) (CH) No. 99 / 2023

Page 2 of 14 Tribunal (`NCLT'), Chennai Bench, in CP(CAA)/52/CHE/2022, filed by

the Appellants herein, under Section 230 - 232 of the Act, read with the

Companies (Compromises, Arrangements and Amalgamations), Rules

2016 for sanction of the Scheme of Amalgamation among the Appellants

and M/s. SESA Mining Corporation Limited (hereinafter referred to as

the `Transferee Company'). By the impugned order, the NCLT while

sanctioning the Scheme, modified the Appointed Date to 01.10.2022 as

against the Appointed Date of 01.10.2020, as stated in the Scheme

approved by NCLT, Mumbai.

2. The NCLT while fixing the Appointed Date as 01.10.2020,

reasoned as follows:

``7.1.9. Due to such an interpretation being given to Section 232(6) of the Companies Act, 2013, the Ministry of Corporate Affairs (MCA) received several queries which it has addressed by way of the circular. It has relied on the rulings of the Hon'ble Apex Court in Marshall Sons & Co. India Limited (supra) and the Hon'ble Madras High Court in Equitas Housing Finance Limited and Equitas Micro Finance Limited with Equitas Finance Limited in C.P. Nos. 119 to 121 of 2016 as the basis for its clarification. On a perusal of the clarification issued by the MCA vide its General Circular No.09/2019 on 21.08.2019, posits the following facts;

The 'Appointed Date' can be a specific calendar date or be tied to the occurrence of an event e.g., grant or transfer of licenses, the fulfilment of conditions precedent, etc. (prospective date).

Comp. App (AT) (CH) No. 99 / 2023

Page 3 of 14 If the `Appointed Date' is a calendar date, it may precede the date of applying for the Scheme before the NCLT.

If the Appointed Date is predated by a year or more from the date of applying with NCLT, Justification should be provided for the same in the Scheme and it should not be against the public interest.

If 'Appointed Date' is based on the occurrence of an event, the said event should be specifically identified in the Scheme upon the occurrence of which the scheme would become effective. If the event-based date is a date after the date of filling the order with the concerned RoC under Section 232(5) of the Companies Act, 2013 the concerned Company shall file an intimation of the same with the RoC within 30 days of such Scheme coming into force.

The 'Appointed Date' shall also be the 'Acquisition Date' and date of transfer of control to confirm to Indian Accounting Standards 103.

7.1.10. In the present case, the Petitioner Company is relying upon the clause which states in the MCA circular dated 21.08.2019 that "If the Appointed Date' is predated by a year or more from the date of applying with NCLT, justification should be provided for the same in the Scheme and it should not be against the public interest". The Petitioner Company relies upon Clause 9 of the Scheme as the justification for fixing the Appointed date as 01.10.2020. However, a perusal of Clause 9 of the Scheme would manifest the fact that the same would pertain to Conduct of Business till Effective Date and the business activities to be carried out from the Appointed Date till the Effective Date and the said clause does not spell out any justification as to why the Appointed date is 'antedated' and

Comp. App (AT) (CH) No. 99 / 2023

Page 4 of 14 as such the same cannot be treated as a Justification as mandated in the MCA circular dated 21.08.2019.

7.1.11. However, Clause 1.2 of Part I of the Scheme defines "Appointed Date" and Clause 1.9 of Part I of the Scheme defines "Effective Date" which is as follows;

"Appointed Date" means, October 1, 2020, or such other date as may be fixed or approved by the National Company Law Tribunal or any other appropriate authority.

"Effective Date" means the date on which the last of the approvals of the Scheme is obtained as per Clause 20 of Part III and the Scheme is made effective with effect from the Appointed date.

7.1.12. Thus, a perusal of the definition clause in the Scheme would posit the fact that a discretion has been conferred upon NCLT to fix an Appointed Date. In the absence of a specific justification in relation to the Appointed Date as given by the Petitioner Company, this Tribunal in terms of Clause 1.2 of Part I of the Scheme hereby fix the Appointed Date as 01.10.2022.''

3. The Learned Senior Counsel Mr. Krishnendu Datta submitted that

NCLT has failed to consider that the Chennai First Motion Application

was filed on 29.09.2021 by the Appellants and therefore the Appointed

Date, mentioned in the Scheme was not antedated, beyond a year from the

date of filing of the First Motion Application.

Comp. App (AT) (CH) No. 99 / 2023

Page 5 of 14

4. It is submitted that as per the MCA General Circular No. 09 / 2019,

F.No. 7 / 12 / 2019 / CL - I, dated 21.08.2019 (hereinafter referred to as

the `MCA Circular'), no reasons were required to be provided for the said

Appointed Date, since it was not ante-dated, beyond a year from the date

of filing of the Chennai First Motion Application. It is argued that since

NCLT, Mumbai, had by way of an Order dated 06.06.2022, already

sanctioned the Scheme with the Appointed Date as 01.10.2020, the

impugned order by changing the Appointed Date to 01.10.2022, has made

the Scheme unworkable.

5. The Learned Senior Counsel for the Appellant drew our attention to

Clause 1.9 of Part I of the Scheme, whereunder the Effective Date has

been defined as ``the date on which the last of the approvals of the

scheme is obtained as per Clause 20 of Part III and the scheme is made

effective with effect from the Appointed Date''.

6. Clause 20.3 of Part III of the Scheme, reads as hereunder:

``Certified or authenticated copy of the Order of the

NCLT sanctioning the Scheme being filed with the

Registrar of Companies by the Transferor Company 1,

Comp. App (AT) (CH) No. 99 / 2023

Page 6 of 14 Transferor Company 2, Transferor Company 3,

Transferor Company 4 and the Transferee Company.''

7. It is submitted that the Appellants had filed the

IA(CA)/57/CHE)/2023, before the NCLT, seeking rectification of the

Appointed Date of the Scheme to 01.10.2020, but, by Order dated

09.10.2023, NCLT, while acknowledging that owing to different

Appointed Dates in the Orders of the NCLT - Mumbai and Chennai

Benches, it is impossible for the Applicant Company to implement the

Scheme, dismissed the IA on the ground that NCLT did not have the

power to review its own Order.

8. The Learned Counsel appearing for the Respondent / Regional

Director (Southern Region) had submitted that the Regional Director

(Southern Region) has filed a Report, before the NCLT on 03.11.2022

and have stated in Para 3 of the Report, that as per Clause 1.2 of Part I of

the Scheme provides, the Appointed Date is 01.10.2020, which is ante-

dated beyond a year and is not in accordance with Section 232 (6) of the

Companies Act, 2013. It was prayed by the Regional Director to revise

the Appointed Date or may determine an Appointed Date as it deems fit.

Comp. App (AT) (CH) No. 99 / 2023

Page 7 of 14

9. The brief point which falls for consideration in this Appeal is

whether the NCLT was correct in fixing the Appointed Date to

01.10.2022, while allowing the Chennai Second Motion Petition

and sanctioning the Scheme, when the NCLT - Mumbai, had sanctioned

the Scheme filed by the Transferee Company with the Appointed Date of

01.10.2020.

10. For ready reference, Para 6(c) of the MCA General Circular No.

09/2019, is reproduced as hereunder:

``6. In view of the above, it is hereby clarified that;

c)where the`appointed date' is chosen as a specific calendar, it may precede the date of filing of the application for scheme of merger / amalgamation in NCLT. However, if the `appointed date' is significantly ante-dated beyond a year from the date of filing, the justification for the same would have to be specifically brought out in the scheme and it should not be against public interest.''

11. Clause 1.2 of the Scheme provides that ``Appointed Date'' means,

October 1, 2020, or such other date as may be fixed or approved by the

National Company Law Tribunal or any other appropriate authority.''

Comp. App (AT) (CH) No. 99 / 2023

Page 8 of 14

12. It is not in dispute that the NCLT, Mumbai had already sanctioned

the Scheme with the Appointed Date of 01.10.2020, vide Order dated

06.06.2022. In the IA filed on 31.03.2023, the Appellants had sought for

rectification of the Appointed Date to 01.10.2020, which was dismissed

on the ground that NCLT did not have the power to review its own order.

It is seen from the record that the Appointed Date as per the Scheme is

01.10.2020 `and the same is within a period of one year from the date of

filing of the Application for Approval of the Scheme with NCLT i.e.,

29.09.2021'.

13. At this juncture, it is relevant to rely on the Judgment of this

Tribunal, reported in 2021 SCC OnLine NCLAT 548, in which matter,

this Tribunal placed reliance on the Judgment of the Hon'ble Apex Court

in Miheer H. Mafatlal v. Mafatlal Industries Limited., (1997) 1 SCC

579, in which case, the Court had laid down the broad contours of the

jurisdiction of the Company Court in granting a sanction to the Scheme as

hereunder:

``1. The sanctioning court has to see to it that all the requisite statutory procedure for supporting such a scheme has been complied with and that the requisite meetings as contemplated by Section 391(1) (a) have been held.

Comp. App (AT) (CH) No. 99 / 2023

Page 9 of 14

2. That the scheme put up for sanction of the Court is backed up by the requisite majority vote as required by Section 391 sub-section (2).

3. That the meetings concerned of the creditors or members or any class of them had the relevant material to enable the voters to arrive at an informed decision for approving the scheme in question. That the majority decision of the concerned class of voters is just fair to the class as a whole so as to legitimately blind even the dissenting members of that class.

4. That all necessary material indicated by Section 393(1)(a) is placed before the voters at the meetings concerned as contemplated by Section 391 sub-Section (1).

5. That all the requisite material contemplated by the provisoof sub-section (2) of Section 391 of the Act is placed before the Court by the applicant concerned seeking sanction for such a scheme and the Court gets satisfied about the same.

6. That the proposed scheme of compromise and arrangement is not found to be violative of any provision of law and is not unconscionable, nor contrary to public policy. For ascertaining the real purpose underlying the Scheme with a view to be satisfied on this aspect, the Court, if necessary, can pierce the veil of apparent corporate purpose underlying the scheme and can judiciously X-ray the same.

7. That the Company Court has also to satisfy itself that members or class of members or creditors or class of creditors as the case may be, were acting bona fide and in good faith and were not coercing the minority in order to promote any interest adverse to that of the latter

Comp. App (AT) (CH) No. 99 / 2023

Page 10 of 14 comprising of the same class whom they purported to represent.

8. That the scheme as a whole is also found to be just, fair and reasonable from the point of view of prudent men of business taking a commercial decision beneficial to the class represented by them for whom the scheme is meant.

9. Once the aforesaid broad parameters about the requirements of a scheme for getting sanction of the Court are found to have been met, the Court will have no further jurisdiction to sit in appeal over the commercial wisdom of the majority of the class of persons who with their open eyes have given their approval to the scheme even if in the view of the Court there would be a better scheme for the company and its members or creditors for whom the scheme is framed. The Court cannot refuse to sanction such a scheme on that ground as it would otherwise amount to the Court exercising appellate jurisdiction over the scheme rather than its supervisory jurisdiction. 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 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. The Court acts like an umpire in a game of cricket who has to see that both the teams play their game according to the rules and do not overstep the limits. But subject to that how best the game is to be played is left to the players and not to the umpire. The supervisory jurisdiction of the Company Court can also be called out

Comp. App (AT) (CH) No. 99 / 2023

Page 11 of 14 from the provisions of Section 392. Of course this Section deals with post-sanction supervision. But the said provision itself clearly earmarks the field in which the sanction of the Court operates. The supervisor cannot ever be treated as the author or a policy-maker. Consequently the propriety and the merits of the compromise or arrangement have to be judged by the compromise or arrangement have to be judged by the parties who as sui juris with their open eyes and fully informed about the pros and cons of the Scheme arrive at their own reasoned judgment and agree to be bound by such compromise or arrangement.

12. Two broad principles underlying a scheme of amalgamation which have been brought out in this judgemnent are:

1. That the order passed by the Court amalgamating the company is based on a compromise or arrangement arrived at between the parties; and

2. That the jurisdiction of the Company Court while sanctioning the Scheme is supervisory only, i.e., to observe that the procedure set out in the Act is met and complied with and that the proposed scheme of compromise or arrangement is not violative of any provision of law, unconscionable or contrary to public policy. The Court is not to exercise the appellate jurisdiction and examine the commercial wisdom of the compromise or arrangement arrived at between the parties. The role of the Court is that of an umpire in a game to see that the teams play their role as per rules and do not overstep the limits.

Comp. App (AT) (CH) No. 99 / 2023

Page 12 of 14 Subject to that how best the game is to be played is left to the players and not to the umpire.

Both these principles indicate that there is no adjudication by the Court on the merits as such.''

(Emphasis added)

14. It is held by this Tribunal in the aforenoted Accelyst Solutions

Private Limited (supra), that the `settled legal position, while exercising

its power in sanctioning a Scheme of Amalgamation, the Courts /

Tribunal has to examine as to whether, the Provision of Statute has been

complied with'. The Courts / Tribunal would have no further jurisdiction

to sit in Appeal over the `Commercial Wisdom of the Shareholders of the

Company'.

15. In the instant case, apart from the fact that NCLT - Mumbai, had

already fixed the Appointed Date of the Scheme as 01.10.2020, the date

of filing of the Application for Approval of the Scheme with NCLT -

Chennai is 29.09.2021 and therefore is within a period of one year, and

hence, attracts Clause 6(c) of the MCA General Circular No. 09/2019

dated 21.08.2019.

16. Additionally, NCLT has the discretion to fix the Appointed Date

which could be beneficial to the interests of the Company, which in the

Comp. App (AT) (CH) No. 99 / 2023

Page 13 of 14 instant case ought to have been fixed at 01.10.2020 as having two

different Appointed Dates, would render the Scheme unworkable. The

NCLT has powers under Rule 11 of the NCLT Rules, 2016, to fix the

Appointed Date, which would be beneficial to the Scheme of

Amalgamation.

17. For all the foregoing reasons, this Company Appeal (AT) (CH)

No. 99 of 2023 is allowed and the Orders of the National Company Law

Tribunal, Chennai, dated 22.03.2023 and 09.10.2023 are set aside. The

connected pending IA No. 1262 of 2023 is Closed.

[Justice Rakesh Kumar Jain] Member (Judicial)

[Shreesha Merla] Member (Technical)

21/12/ 2023

SR / TM

Comp. App (AT) (CH) No. 99 / 2023

Page 14 of 14