The NCLAT, New Delhi Bench in the case wherein a modification in the scheme which resulted  in the swap ratio of the Transferor Companies, held that the Scheme was reasonable, just and fair to all the stakeholders of the respective Companies and in accordance with all extant laws.

The Bench opined that the amendment can be done at any stage. It was held that the present modification to scheme would not require any further / revised adherence in so far as the regulations for inbound merger are concerned. Further, as per FEMA Notification No. FEMA.389/2018-RB dated March 20, 2018 ‘Foreign Exchange Management (Cross Border Merger) Regulations, 2018’, point 9(1) states any transaction on account of a cross border merger undertaken in accordance with these Regulations shall be deemed to have prior approval of the Reserve Bank of India as required under Rule 25A of the Companies (Compromises, Arrangement and Amalgamations) Rules, 2016. Hence, the proposed modification would also need no additional approval from Reserve Bank of India.

Brief Facts:

The present appeal has been filed under section 421 of the Companies Act, 2013 (‘Act’) by the Appellant Company / Transferee Company against an order of the NCLT for the scheme of amalgamation between FIM Holdco Ltd. (‘Respondent Company 1’ or ‘Transferor Company 1’) and Ariston Investments Sub A Limited (‘Respondent Company 2’ or ‘Transferor Company 2’) and the Appellant Company.

Brief Background:

The Transferor Companies / Respondent Companies had formulated the Scheme of Amalgamation with the Appellant Company / Transferee Company. Application was filed before the NCLT for approval.

Subsequent to the approval of the Scheme by the Board of Directors of the Appellant Company, there was a minor change in the share capital of the Transferor Companies as the existing shareholders were allotted a certain number of ordinary shares.

This allegedly caused a miniscule change to occur in the swap ratio. The Appellant Company then filed the said CA before the NCLT seeking modification of the said Scheme as per the schedule of amendment.

The NCLT rejected the application.

Observations of the Tribunal:

It was noted that the only change which occurred was a miniscule change in the swap ratio of the Transferor Companies. The Scheme was reasonable, just and fair to all the stakeholders of the respective Companies and in accordance with all extant laws.

The Bench opined that the amendment can be done at any stage. It was held that the present modification to scheme would not require any further / revised adherence in so far as the regulations for inbound merger are concerned. Further, as per FEMA Notification No. FEMA.389/2018-RB dated March 20, 2018 ‘Foreign Exchange Management (Cross Border Merger) Regulations, 2018’, point 9(1) states any transaction on account of a cross border merger undertaken in accordance with these Regulations shall be deemed to have prior approval of the Reserve Bank of India as required under Rule 25A of the Companies (Compromises, Arrangement and Amalgamations) Rules, 2016. Hence, the proposed modification would also need no additional approval from Reserve Bank of India.

The decision of the Tribunal:

Accordingly, the appeal was allowed.

Case Title: One World Center Private Ltd v. FIM Holdco Ltd

Case No.: COMPANY APPEAL (AT) NO.169 OF 2024

Coram: Justice Yogesh Khanna (Judicial Member), Mr. Ajai Das Mehrotra (Technical Member)

Advocates for Appellant: Advs. Mr Arun Kathpalia, Sr Advocate with Mr. Hemant Sethi, Mr Gaurav H Sethi, Mr. Deepanshu Chandra and Mr. Rahul H Pawar

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