The National Company Law Appellate Tribunal (hereinafter referred to as “NCLAT”) recently reviewed a dispute concerning the demerger of the ATM and Cash Management Division between the Appellant (Transferee Company) and Respondent No. 2 (Transferor Company). The Appellant challenged a December 2023 NCLT order, which directed the Appellant to take over the employees of the division. The Union (Respondent No. 1) claimed it was unaware of the scheme and disputed the transfer of employees. After considering both sides, the NCLAT set aside the National Company Law Tribunal (“NCLT”) order, and allowed the appeal.
Brief Facts:
The appellant challenged the order dated 5th December 2023, passed by the National Company Law Tribunal (hereinafter referred to as NCLT), Mumbai Bench. The dispute concerns a Scheme of Arrangement between the Appellant (Transferee Company) and Respondent No. 2 (Transferor Company), which involved the demerger of the ATM and Cash Management Division from Respondent No. 2 to the Appellant. The NCLT directed the Board of Directors of the Appellant to take over the employees of the said division as part of the arrangement.
Contentions of the Applicant:
The Appellant argued that the Scheme of Arrangement was validly approved by both the Bombay High Court and the Delhi High Court. The Appellant further contended that the employees of the ATM and Cash Management Division were transferred as part of the demerger process, as outlined in the Scheme. The appellant disputed the claim of Respondent No. 1 (the Union) that it was unaware of the scheme, highlighting that the transfer of employees was legitimate and in line with the approved scheme.
Contentions of the Respondent:
The Respondent no. 1 (Union) claimed that it was not informed of the demerger scheme, asserting that it became aware of the details only in 2016 through external sources. The Union argued that the scheme, particularly the transfer of employees, was not properly communicated, and the transfer of employees to the Appellant was illegal. The Union referred to several clauses in the Scheme, suggesting that it applied to the entire business, including employees, which was allegedly not executed as per the original understanding.
Observations of the Tribunal:
The Appellate Tribunal noted that the appellant had complied with legal requirements by publishing the Scheme on 07.07.2009 in local newspapers, making it public knowledge. It stated that “Public notices and advertisements were issued in terms of the mandate of Chapter XV of Companies Act, 2013.” Furthermore, Respondent No.1, despite raising concerns about the demerger in 2011, did not object thereafter, signalling their awareness of the Scheme. The Tribunal emphasized that “Respondent No.1 had expressly accepted and acquiesced to the implementation of the Scheme and transfer of 45 employees.”
Clause 7.1 of the Scheme, which outlined the transfer of employees who were in service on the Effective Date, was found to be unambiguous. The Tribunal affirmed that “the intention of the Transferor and the Appellant was clear from the unambiguous wording of the Scheme under Clause 7.1.” It also noted that no grievances were raised after the Scheme's approval, highlighting the continuous negotiations between the parties. The Tribunal concluded that the Miscellaneous Application filed by Respondent No.1, after more than five years, was “barred by limitation,” as it was filed long after the Scheme’s implementation in 2011.
The Decision of the Tribunal:
The Tribunal set aside the impugned order and dismissed the Miscellaneous Application No. 5/2010. The appeal was allowed, and pending applications were disposed of.
Case Title: CMS Info Systems Ltd v. Bharatiya Kamgar Karamchari Mahasangh & Ors
Case No: Company Appeal (AT) 27 of 2024
Coram: Justice Yogesh Khanna Member (Judicial), Mr. Ajai Das Mehrotra Member (Technical)
Advocate for Petitioner: Mr. Arun Kathpalia, Sr. Advocate with Mr. Hemant Sethi, Mr. Gaurav H Sethi, Mr. Deetanshu Chandra and Mr. Rahul Pawar, Advocates.
Advocate for Respondent: Mr. Gaurav Mehta, Ms Riddhi Sancheti, Mr Anurag Anand and Mr. Mukul Kulhari, Advocates for Respondent 1. Mr. Prateek Kumar, Advocate for Respondent 4 to Respondent 6.
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