In commercial parlance, merger essentially means merging or amalgamation, whereby, one or more existing companies merge their identity into the other existing company, or, alternatively, forms a new entity altogether. Merger is a form of amalgamation where all the properties and liabilities of transferor company merges with the transferee company, leading to the dissolution of the transferor company without the process of winding up as contained under the Companies Act, 2013 (“Act”).

While the Act provides for schemes of amalgamation, the same are yet to be notified and Sections 391-394 of the earlier law i.e. Companies Act, 1956 (“Old Act”), provide for the process of mergers and amalgamations. The sections provide that schemes of arrangement or compromise be regulated and sanctioned by the “Court”, which was cumbersome and long drawn. Keeping such exigency in view, and to meet the need of expediting the process of mergers, the legislators had provided the Central Government with power to constitute the National Company Law Tribunal (“NCLT”) under section 10FB of the Old Act.

The Old Act was amended in 2002 and the word ‘court’ was replaced with the word ‘tribunal’,[1] but the constitution of NCLT was mired by litigation, challenging the validity of its establishment. After a long drawn legal battle, finally, with the judgements in Union of India v. R. Gandhi[2] , and, Madras Bar Association v. Union of India[3], the Hon’ble Supreme Court, upheld the constitutional validity of NCLT. Thus, the NCLT, that was provided for in 2002, became a legal reality only in 2015. However, the actual establishment  was to be notified by the Central Government and on June 1, 2016, the establishment of the NCLT was finally notified with the intention of making the process of company law matters and litigation less cumbersome.

Thus, the Ministry of Corporate Affairs via notification[4] dated, 1^st June 2016 (“Notification”), has established National Company Law Tribunal, and consequently, the erstwhile  Company Law Board stands dissolved. The power of the Tribunal, under the new Act, relates to several matters, inter-alia:

1. orders against fraudulent actions of company at time of its registration;
2. power of approving the conversion of a public company into private;
3. any violations in issuance of debentures;
4. power to direct meetings under Section 97 and 98 of the Act;
5. direct inspection of minute-nooks at general meeting and production before concerned person;
6. order for opening of previous years books of account;
7. revision of financial statements and books of account;
8. investigation into affairs of the company and other cases, and subsequent, freezing of assets of the company;
9. power to make orders with regard to disgorgement of such asset, property, or cash;
10. power to make necessary orders when affairs of the company being conducted in oppressive manner;
11. power to make orders in class actions under Section 245;
12. sections relating to power of the Central Government, regarding transfer of cases pending before the Company Law Board and other courts to the tribunal; power of compounding certain cases; and
13. section 466, pertaining to the dissolution of the Company Law Board.

However, the jurisdiction and powers pertaining to regulation of mergers and amalgamations of companies under Section 230-240, of the Act, still lie with the High Courts as in practice, and the supervisory powers of the Tribunal under Chapter 15, that is, ‘Compromises, Arrangements and Amalgamations’ from Section 230-240 are still in the pipeline, awaiting notification.

Thus, presently, reviewing powers like those of statutory compliance of the scheme reached by the companies, whether the scheme is fair and reasonable and whether the minority shareholders were fairly represented or not, or the possibility of the scheme being detrimental to public interest, stands within the jurisdiction of the High Courts. Only on subsequent notification, the NCLT will assume jurisdiction of the High Court, regarding mergers and amalgamations.

It is pertinent to note that as per the Notification, 11 benches with two benches at New Delhi, and one each at Chandigarh, Allahabad, Ahmedabad, Mumbai, Kolkata, Guwahati, Bengaluru, Hyderabad, and Chennai have been notified with the mention of their respective territorial jurisdictions.

Therefore, with respect to the powers mentioned above, the jurisdiction for disputes/claims/application or petitions for companies in the State of Uttar Pradesh and Uttarakhand, will be at Allahabad.

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[1] Companies (Second Amendment) Act, 2002 (11 of 2003).

[2] [2010] 11 SCC 1.

[3] AIR 2015, SC 1571.

[4] Notification Nos. S.O.1935(E) & 1932(E)

[The article is authored by the founding editor and first appeared on Uttarakhand Laws Blogspot in the year 2016.]