Scheme of Amalgamation Under Sec 230-232 Companies Act 2013 for Six Entities Approved as Fair and Lawful: National Company Law Tribunal, Hyderabad Bench - 2025-05-23

NCLT Hyderabad Sanctions Major Amalgamation of Five Companies with National Energy Trading and Services Ltd.

Hyderabad, Telangana – The National Company Law Tribunal (NCLT), Hyderabad Bench, comprising Hon’ble Shri. Rajeev Bhardwaj (Member Judicial) and Hon’ble Shri. Sanjay Puri (Member Technical), has sanctioned a Scheme of Amalgamation involving five transferor companies with M/s. National Energy Trading and Services Limited. The order, dated January 16, 2025, allows the merger with an appointed date of April 1, 2022, paving the way for significant corporate consolidation.

The petition, C.P.(CAA) - 72/230/HDB/2023, was jointly filed by the petitioner companies under Sections 230-232 of the Companies Act, 2013, read with the Companies (Compromises Arrangements and Amalgamations) Rules, 2016.

The Amalgamating Entities

The Scheme involves the amalgamation of:

* Transferor Company 1: M/s. Mahatamil Mining and Thermal Energy Limited

* Transferor Company 2: M/s. Dikon Infratech Private Limited

* Transferor Company 3: M/s. Tethys Properties Private Limited

* Transferor Company 4: M/s. Belinda Properties Private Limited

* Transferor Company 5: M/s. Mirach Power Limited into the

Transferee Company: M/s. National Energy Trading and Services Limited.

All petitioner companies, including the transferee company, are represented by their Director, Mr. Vinod Kumar Godavarthi, and have their registered offices in Telangana.

Rationale for the Amalgamation

The Board of Directors of the involved companies proposed the amalgamation, citing several strategic benefits:

* Consolidation of Group Entities: As the transferor companies are group companies, the merger aims to consolidate operations without assets moving outside the group.

* Cost Savings & Efficiency: The scheme is expected to achieve cost savings through focused operations, standardization of business processes, productivity improvements, and rationalization of administrative expenses.

* Operational Synergies: Consolidation is anticipated to lead to greater productivity and economical operations for the future growth of the Transferee Company.

* Pooling of Resources: The merger will allow for the pooling of managerial, technical, and financial resources, enhancing competitiveness.

* Economies of Scale: Benefits include reduction in overheads and optimal utilization of resources.

* Reduced Regulatory Compliance: The merger will significantly reduce the multiplicity of legal and regulatory compliances.

* No Adverse Impact on Creditors: The companies asserted that banks, creditors, and financial institutions would not be adversely affected as their security and asset cover will be maintained.

Regulatory Scrutiny and Compliance

The proposed scheme underwent scrutiny by regulatory authorities:

Regional Director (RD), Ministry of Corporate Affairs: The RD filed reports on October 17, 2024, and December 5, 2024, raising certain observations. The petitioner companies responded with an affidavit on December 19, 2024, providing undertakings and clarifications. These included addressing pending charges with secured creditors by submitting satisfaction forms/NoCs, and agreeing to modify or insert certain clauses in the Scheme related to accounting treatment and bank account operations.

Official Liquidator (OL): The OL's report dated May 21, 2024, also contained observations. The petitioners replied on June 12, 2024, undertaking to comply with Section 232(3)(i) of the Companies Act, 2013 regarding fees for authorized capital, confirming the adoption of the "Pooling of Interests Method" for accounting, and assuring no retrenchment of employees in service as of the Appointed Date (April 1, 2022). They also addressed qualifications from their Company Secretary regarding statutory appointments and filings.

The Tribunal noted that the companies had submitted a Valuation Report from a Registered Valuer and a Certificate from the Statutory Auditor confirming compliance with Accounting Standards.

Key Terms of the Sanctioned Scheme

Appointed Date: April 1, 2022.

Dissolution of Transferor Companies: Upon the scheme becoming effective, the five transferor companies shall stand dissolved without undergoing the process of winding up.

Share Exchange Ratio: The Transferee Company will issue equity shares to the shareholders of the Transferor Companies based on specified ratios. For instance, 3.16 equity shares of the Transferee Company for every 100 equity shares of Transferor Company 1. Fractional shares will be rounded off.

Treatment of Preference Shares: The scheme details the issuance of Compulsorily Convertible Preference Shares (CCPS) or equity shares of the Transferee Company to the preference shareholders of Transferor Company 1 and Transferor Company 5 based on their existing terms.

Accounting Treatment: The Transferee Company will account for the amalgamation in accordance with Indian Accounting Standard 103 (Ind-AS 103) and other applicable standards, following the "Pooling of Interests Method." Inter-corporate deposits/loans between the companies will be cancelled.

Clubbing of Authorised Capital: The scheme provides for the clubbing of the authorized capital of the Transferor Companies with that of the Transferee Company.

Tribunal’s Findings and Decision

After hearing the counsel for the petitioner companies, Mr. Vinay Babu Gade (PCS), and perusing the records, including the reports from the RD and OL and the replies thereto, the NCLT concluded: > "the Scheme of Amalgamation appears to be fair and reasonable and is not contrary to public policy and not violative of any provisions of law. All the statutory compliances have been made under Section 230 to 232 of the Companies Act, 2013."

The Tribunal, therefore, sanctioned the Scheme of Amalgamation (Annexure-21 to the petition).

Key Directives from the NCLT

The NCLT's order included several directives:

1. The Scheme is binding on all members, employees, creditors, and other stakeholders.

2. The order does not grant exemption from stamp duty, taxes, or other charges payable under law.

3. All assets, properties, rights, and liabilities of the Transferor Companies shall transfer to the Transferee Company.

4. Petitioner companies must comply with all observations made by the Regional Director.

5. Books of accounts and records must be preserved as per Section 239 of the Companies Act, 2013.

6. The sanction does not absolve the companies from any statutory liabilities.

7. A certified copy of the order (Form INC-28) must be filed with the Registrar of Companies within 30 days.

8. All pending legal proceedings involving the Transferor Companies shall be pursued by the Transferee Company.

9. Tax implications arising from the scheme are subject to the final decision of the tax authorities, which will be binding on the Transferee Company.

10. The Transferee Company must strictly comply with prescribed Accounting Standards.

11. The companies must file an annual statement with the Registrar, certified by a professional, confirming compliance with the scheme, as per Section 232(7) of the Companies Act, 2013.

Implications of the Order

The NCLT’s approval marks a significant step towards the consolidation of the six entities, aiming to streamline operations and enhance overall business efficiency. The Transferee Company, M/s. National Energy Trading and Services Limited, will now absorb the operations, assets, and liabilities of the five transferor companies.