The NCLAT New Delhi Bench held that an approved scheme of amalgamation/ merger has the statutory force and is binding on all stakeholders including the creditors.
The National Company Law Appellate Tribunal (NCLAT), New Delhi Bench of Justice Anant Bijay Singh was hearing an Appeal filed by the Financial Creditor, where the section 7 Application had been rejected by the NCLT and held that an approved scheme of amalgamation/ merger has the statutory force and is binding on all stakeholders including the creditors.
The present Appeal has been filed by the Appellant-Financial Creditor being aggrieved and dissatisfied by the order passed by the Adjudicating Authority, NCLT, Kolkata, whereby the Application under Section 7 of the IBC filed by the Appellant for initiation of Corporate Insolvency Resolution Process against the Respondent-Corporate Debtor alleging that Corporate Debtor has failed to repay the Principal Amount along with the interest to the Financial Creditor, the default being alleged to the tune of Rs.726,69, 23,749.79/- as Principal Amount with interest was rejected by the Adjudicating Authority on the ground that the Corporate Debtor discharged the obligation as per the terms of the guarantee and therefore there was no debt due from the Corporate Debtor.
In the present case, the Appellate Authority noted that there was a force in the contention put forward on behalf of Respondent that the ‘Deed of Guarantee’ in question has to be interpreted independently and that the expression ‘additional equity’ not having been defined under the ‘Deed of Guarantee’ has to be understood in the context of the legislative intent manifested in Schedule III of the Companies Act, 2013 where, in the balance sheet format under the heading ‘Equity and Liabilities’, shareholders funds include share capital, reserves and surplus and money received against share warrants. Reserves and surplus include capital reserves.
"The provision in the approved scheme of amalgamation is loud and clear that the business value of VBL as reflected in the books of account of the Transferee Company shall be treated as an infusion by way of additional equity on account of the merger as per CDR Package. Thus, there is no escape from the conclusion that the merger will have the effect of fulfilling the obligation of additional equity of Rs. 125 Crores, the Bench observed.
The NCLAT bench further noted that "It is well settled that an approved scheme of amalgamation/ merger has the statutory force and is binding on all stakeholders including the creditors, the order of the Tribunal sanctioning such scheme operating as a judgment in rem."
The Bench observed that It was not in dispute that the Respondent had brought to the notice of the Appellant that the merger of VBL would result in the discharge of the obligation of bringing in additional equity of Rs.125 Crores.
The Respondent – Corporate Guarantor, in the face of the provision in the approved scheme of amalgamation and consequent merger, justifiably pleaded that there was no debt payable in law or in fact as the condition of additional equity of Rs. 125 Crores had been fulfilled and the obligation stood discharged. There is no debt payable in law, so the question of default does not at all arise. The conclusions drawn by the Adjudicating Authority leading to the rejection of the application under Section 7 of the I&B Code cannot be termed erroneous.
The Appellate Authority found no sufficient reasons to adopt a view different than the one taken by the Adjudicating Authority as such view and finding based on the appreciation of the relevant material placed before it was the only probable view warranted in the circumstances of the case. The Appellate Authority were accordingly of the opinion that the impugned order did not warrant interference in the appeal.
The appeal was dismissed.