NAME- SHUBHAM NARAYAN

ROLL NO. 95 , SAP ID- 500061879

BBA LLB, Corp. Law ., B2, 4th year
INTERNAL NO. 2 , CORPORATE RESTRUCTURING

Q.1 NCLT has sanctioned an amalgamation scheme under Section 232 of the Companies
Act, 2013 between Company A (Transferor Co,) and Company B (Transferee
Co.). Company A had taken a land on lease from one, Mr. C 3 years prior to such
amalgamation. The Lease Deed through one of its covenants clearlyy stated that
any transfer or assignment of the lease will be void. Do you think the transfer of assets and
liabilities of Co. A to Co. B as a result of such amalgamation is a breach of such covenant
under the lease deed? What are the rights of Mr. C in the said amalgamation, with regard
to pursuing an action under oppression and mismanagement?

Yes , I think transfer of asset and liabilities of company A to company B as a result of such
amalgamation is a breach of such covenant under the lease deed.

Above contention can be understood by relying on the Judgment of Calcutta High Court in
case of Kiran Arya v. Ambalal Sarabhai Enterprises ltd. and others AIR 2013-

In this case, the plaintiff filed the suit for eviction of defendant (Ambalal Sarabhai Enterprise
ltd.) on the ground of illegal transfer/ assignment of suit premise by original tenant to defendant
as a consequence of amalgamation of original tenant (Standard pharmaceutical ltd.) with
defendant.

The Court was to ascertain whether the transfer of tenancy rights by virtue amalgamation
order is void as per the condition laid down in lease deed.
  The court observed that in such circumstance it has to check whether the landlord has
given any assent to the tenant that it will continue its possession over the suit premise
even after the change of character and identity of original tenant.
 Agreement between plaintiff and the original tenant comes to an end with the dissolution
of the original tenant.
 Fresh relationship of landlord and tenant must be established by newly formed
amalgamated company.
 Person entering premise on the basis of permissive clause could not elevate its status to
contractual or statutory tenant.
 Further Court observed that “ Tenancy is not an asset of tenant and is not transferable”.

The Supreme Court in General Radio & Appliances Co. Ltd. Ors. V. M.A Khader
AIR 1986 observed that If without written permission or consent of the landlord ,
transfer of tenancy takes place consequent on amalgamation of a company with another,
then transferee in possession in possession of tenanted premises cannot be deemed or
considered to be a tenant in respect of the same.

From above relevant cases, we can construe that transfer of assignment of the lease
between company A to B will be void.

Under oppression and mismanagement , Mr. C has following rights-

a. He has right to file the suit of eviction against Company B.
b. He can demand mesne profit from the Company B.

Q.2 Does the power of NCLT under section 231 to supervise and modify the scheme of
arrangement interferes with the commercial wisdom if the company undergoing the same?
Find out any such case law that limits or underlines the scope of NCLT’S power under
section 231.
Ans.

The power of NCLT under section 231 to supervise and modify the scheme of arrangement does
not interfere with the commercial wisdom if the company undergoing the same. The scope of
NCLT powers have been underlined in the case of Miheer H. Mafatlal Vs. Mafatlal Industries
Ltd.

It was observed by the Apex Court in this case that-

 If the scheme has been passed by the members or creditors or class of members or
creditors by requisite majority, then NLCT does not have right to reject such scheme
unless it appears to the Tribunal that the scheme is grossly unfair, made to defraud the
creditors, class of members or against public interest.
 NCLT cannot question the commercial wisdom of the parties to the scheme and also
cannot question the valuation of shares if proper valuation of share has been attached.
 Supervisory jurisdiction of NCLT cannot allow it to be the author of a scheme or policy
maker.
 The Court has evolved the principle ‘Prudent Business Management Test’ according to
which a scheme of amalgamation shall not become a device to evade law.
 But when a court is concerned only with merger of the foreign subsidiary company , the
Court must get satisfied that such merger will not result in creating hindrance in
promotion of the industry and obstruct the growth of the national economy.
 On conjoint reading of section 391 and 393 of Companies Act of 1956, which deals with
“powers to make arrangement with creditors and members” and “information as to
compromise or arrangement with the creditors or members entitled to attend the
meeting”, the court must construe whether such amalgamation scheme is just, fair and
reasonable.

Before sanctioning the amalgamation scheme, the Court must look into following issues -

1. The Court which sanctions the amalgamation must see whether all the statutory procedure has
been followed prior to the sanctioning of the scheme.

2. That the scheme put up for sanction of the Court is backed up by the requisite
majority vote.

3. Whether Class of creditors or members have sufficient and relevant material that enabled
them to vote and arrive at an informed decision for approving the scheme in question

4. That all the requisite material contemplated by the proviso of Sub-section (2) of

Section 391 of Companies Act , 1956 placed before the Court by the concerned applicant
seeking

sanction for such a scheme and the Court gets satisfied about the same.

Conclusion

The Court in this case clarified the supervisory control of NCLT over the amalgamation scheme.
It casts duty upon the court to scrutinize whether the amalgamation scheme is just and fair with
lawful object that could bind the dissenting members of a class.

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