The National Company Law Appellate Tribunal (NCLAT) on Tuesday set aside the September 23, 2021 order of the National Company Law Tribunal (NCLT) that dismissed Ericsson India’s plea to dispense with the holding of a shareholders’ and creditors’ meeting, in relation to the scheme of amalgamation with a subsidiary firm.The scheme of amalgamation between Ericsson India Pvt Ltd (transferor company) and Ericsson India Global Services Pvt Ltd (transferee company) was to take place from the appointed date of April 1, 2021.
While dismissing Ericsson’s plea, the NCLT had said, “in our view approval of the unsecured creditors of both the applicant companies is needed and cannot be evaded. Hence, it would be wrong to say that no prejudice can ever be caused to any of the creditors if the scheme is approved without obtaining their explicit consent”.
During the course of the argument in the NCLAT, appellant companies said dispensation has been granted by this tribunal (NCLAT) in several cases where the case is of a merger of a wholly-owned subsidiary and parent company, as is in the present case and where net worth of both companies was highly positive, unsecured creditors are paid off in the ordinary course of business, and the scheme is not pre-judicial to their interest as their liability is not proposed to be reduced or extinguished.
The two-member NCLAT bench, in its Tuesday order, said, “We are of the considered view that as the merger is of a wholly owned subsidiary company into its holding company, no shares would be allotted as consideration pursuant to the merger; the proposed scheme will not result in any dilution in the shareholding of the shareholders of the ‘transferee company’, the net worth of the ‘transferee company’ is positive”.“Hence, this appeal is allowed and the impugned order dated September 23, 2021 is set aside,” it said.