Investigations pending against one of the merging companies - Whether CIRP be rejected

Last updated: 14 January 2023

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Quick Summary

The National Company Law Appellate Tribunal (NCLAT) allowed appeals against a National Company Law Tribunal (NCLT) order that had declined to sanction a demerger scheme. The NCLT's refusal was based on pending investigations against one of the merging companies. However, the NCLAT found that the NCLT had erred by not following the mandatory procedures under Section 230 of the Companies Act, which requires either convening a meeting of creditors/members or dispensing with it if 90% consent is obtained. The appellate tribunal also noted that pending investigations, particularly those unrelated to the demerged business, should not impede the approval of such schemes.

Court :
NCLAT

Brief :
These appeals arise out of common order passed by the NCLT Bengaluru Bench (hereinafter referred to as ‘Tribunal') by virtue whereof the Tribunal declined to sanction the scheme of demerger on the ground that several issues were pending finalization and certain investigations were pending in relation to the business of the demerged company.

Citation :
Company Appeal (AT) No. 04 of 2019

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