Scheme of Arrangement between East West Pipeline Infrastructure Pvt. Ltd.
- 2022-02-16
Facts: There was a scheme of demerger involving a company where in there were certain pending investigations in respect of its mining business and the mining business, windmills was not being demerged. The Company Application was made to the Bangalore Bench for dispensation of the meetings of the members/creditors. The NCLT went into the merits of the scheme and also considered the pending investigations and rejected the Application and appeal was made before the NCLAT against the Order.
Issue: Whether the scheme of merger is valid?
Judgement: The Appellate Tribunal observed that “It is manifestly clear that at the stage of calling of meeting of creditors/members for consideration of the scheme of compromise or arrangement the Tribunal is not required to examine the merits of the scheme qua the proposed compromise/ arrangement. Any such indulgence on the part of Tribunal would fall foul of the provision engrafted in Section 230 (1) of the Act and would be without jurisdiction”
In identical circumstances, the Hon’ble Gujarat High Court had sanctioned the modified composite scheme of arrangement in terms of its judgment dated 1st March 2007 rendered in Core Health Care Limited v. Nirma Ltd. The appellate tribunal held that the Tribunal seriously erred in dismissing the application on merit when the stage of consideration of the proposed scheme of demerger was yet to arrive. Therefore the NCLT order was set aside.
