Company CA2 Notes - Priyanshi

Monday, April 1, 2024 5:26 PM

8th March 2024

Mergers, Acquisitions and Arrangements
Fundamental notion behind chapter 15:
- Reorganization
- Expansion
- Understanding Arrangements

Problem with Public Offering & Expansion;

When a company is established, first round of expansion comes in the form of private placement.
Post this, once a company reaches the benchmark of 200 people, in order to enlarge it further, the
company can go for initial public offering. This would mean expansion in terms of unlimited
revenue generation. Once a company becomes public, the company would not want to constantly go
for multiple public offerings because of dilution of shares. Dilution of shareholding is an important
concern since decision making will be impacted. The shareholding would be so fractured that it
would be very difficult to pass a resolution. It would cause unnecessary trouble for the company as
well. The insiders of the company will lose control and significant influence.

In such circumstances, if the company wants to raise money, section 62 read with section 232 comes
into picture for further issue of share. This is an organic manner in which the capital is raised. Right
now, by issuing shares you are rearranging the existing shares.

Expansion in the form of acquisition is an inorganic expansion plan, the company is not the only
entity involved.
For example, L&T acquired Minefree in 2017.

Arrangements means the existing resources are organized in such a way that optimal utilization is
achieved. Sometime, optimal utilization is not achieved by internal rearrangement. This is where
mergers, acquisitions, etc. come into picture.

Clarification of Terms
Acquisition
When a company acquires shares, there is a transfer in ownership of shares. Acquisition is the
process. Through acquisition , the result can be:
- Merger
- Amalgamation
- Acquisition of majority control

Acquiring 1% would still be an acquisition. It would not amount to any regulatory regime.
25% - Regulation 3 of Takeover Code, open offer.
50% - Subsidiary
100% - Wholly on Subsidiary

Entities: Merging Entity and Resulting Entity.

A + B = Merging Entity
A/B = Resulting Entity
Smaller one- merged entity; Larger one- Resulting Entity

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Amalgamation
For income tax treatment, amalgamation has been defined separately since the information for tax is
going to change. As per section 230 and 232, the preexisting liability would shift to the merging
entity. Structurally speaking, there is no distinction.
Merger is an act of combination wherein if the constituent entity survives the process. If both cease
to exist, it is an amalgamation.

Arrangement
Both of these are considered as arrangement for the purpose of section 230 read with section 232.

11th March 2024

No class

12th March 2024

Need restructuring
Kinds of Restructuring

Section 230: Power to compromise or make arrangements with creditors and members.—
(1) Where a compromise or arrangement is proposed—

(a) between a company and its creditors or any class of them; or

(b) between a company and its members or any class of them,

the Tribunal may, on the application of the company or of any creditor or member of the company,
or in the case of a company which is being wound up, of the liquidator, order a meeting of the
creditors or class 141 of creditors, or of the members or class of members, as the case may be, to be
called, held and conducted in such manner as the Tribunal directs.
Explanation.—For the purposes of this sub-section, arrangement includes a reorganization of the
company‘s share capital by the consolidation of shares of different classes or by the division of
shares into shares of different classes, or by both of those methods.

What is an arrangement?
Arrangement is restructuring of the existing assets of the company. It is a structural restructuring of
the company.

What is restructuring?
In companies act, we are primary dealing with the process. Sometimes, the restructuring might be
organic wherein no outside entity is involved and existing resources are rearranged. Either these
resources are developed through internal restructuring which might be done from:
- Equity
- Debt
- Slump Sale
In case of external restructuring which include mergers and acquisitions under section 232 read with
section 230

Why has the term compromise been used?

The term has been used because we are talking about a class of members which means when the
company is going for the arrangement, specific or general, the interest of the classes are not getting
impacted relatively. For example: going for general deduction of shares would impact the interest of the
shareholders although relative position is not changing. When the shareholder still agrees, it is because it is a
consensual process.
An arrangement will be referring to areas where restricting is merely structural and the rights of the

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An arrangement will be referring to areas where restricting is merely structural and the rights of the
shareholders are not affected. Since there is a pro rata reduction, the relative position remains the
same while the absolute position changes.

There are four types of creditors:

- Financial (Contribution in pure monetary terms governed by an instrument)
- Operational (Contribution in kind, but not contributing in monetary terms)
- Secured (Collateral present)
- Unsecured (No collateral)

There is a functional aspect in compromise. The interests of all these creditors would vary. The term
'class of creditors' has been used which means interest of all these would have to be protected. So, when we
are trying to pass an arrangement, we would need a consensus from everybody on the same whose interests
are at stake. So any arrangement without an element of conflicting interest to rearrange the resources of the
company is covered under section 230. For example, conflicting interest does not arise in general reduction.
Compromise will be triggered when there is conflicting interest which is required to be balanced by the
company.

Explaining the Process

Step 1: Approval by Tribunal
You want to restructure your company, so you take approval for the same by the Tribunal.
The approval is sought via an application.

The next question is - who is filing the application?

Here, either the Official Liquidator or the Interim Resolution Professional files the application as per
the situation, the company is in currently.

IRP is mentioned here because when a company intends to make a compromise or arrangement
especially debt restructuring, some amount of grace period is provided to the company before there
is a default or there is a possibility of default. So, depending on the stage the company is- whether it
is under the grace period or the default has already occurred, the IRP or Official Liquidator are
appointed and they file the application for restructuring. IRP is appointed during the grace period
while the OL's role comes post the default.

The major difference between the two is their appointment process and at what stage both of these
are appointed. Before the formation of COC, the tribunal appoints an interim resolution professional.
If the company requests that they can service the debt without the resolution, a grace period is given
to the company. The scheme of arrangement provided under this scheme would be presented by the
IRP

Step 2: Approval by Shareholders

The Tribunal can either agree or disagree for the same. If it agrees and as the tribunal directs, the
company would move forward to the shareholder approval.
If the particular default is remedied or rectified, a scheme of arrangement is provided. If the
liquidation process has started, the members have a right to choose to stay in the company or leave at
the moment. As a balancing act, section 230 comes into picture stating that restructuring plan is a
way out for the members, creditors, etc. in which the official liquidator will be filing the application.
If the tribunal refuses, then there is no requirement of the shareholder's approval. The order of
tribunal comes over and above the shareholder's approval.

When it has been specifically mentioned in IBC, why are we mentioning under Companies
Act?
COC is formed when the application is approved under IBC. Post this, moratorium is applied, there
is an overriding effect of IBC over any other law.

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We are looking at the possibility whether the debt can be processed without the resolution process. If
voluntary liquidation is coming into play or a substantial legal default is taking place, then we apply
companies act for asset restructuring. If grace period is given to service debt by restructuring, hence
230 allows for debt restructuring as a simultaneous process under IBC. If IBC would come into
picture, so would moratorium, and the entire waterfall mechanism would be of no use.

13th March 2024

(2) The company or any other person, by whom an application is made under subsection(1), shall
disclose to the Tribunal by affidavit—

(a) all material facts relating to the company, such as the latest financial position of the company,
the latest auditor’s report on the accounts of the company and the pendency of any investigation or
proceedings against the company;

(b) reduction of share capital of the company, if any, included in the compromise or arrangement;

(c) any scheme of corporate debt restructuring consented to by not less than seventy-five per cent. of
the secured creditors in value, including—
(i) a creditor’s responsibility statement in the prescribed form:;
(ii) safeguards for the protection of other secured and unsecured creditors;
(iii) report by the auditor that the fund requirements of the company after the corporate debt
restructuring as approved shall conform to the liquidity test based upon the estimates provided
to them by the Board;
(iv) where the company proposes to adopt the corporate debt restructuring guidelines specified
by the Reserve Bank of India, a statement to that effect; and
(v) a valuation report in respect of the shares and the property and all assets, tangible and
intangible, movable and immovable, of the company by a registered valuer.

It provides for a category of documents to be supplied for the tribunal to make an informed decision.
The rationale, information of shareholders, impact of scheme of arrangement on the shareholders is
given to the tribunal. The categories of documents include:
- Financial
: Audit Report - to clarify the financial position of the company, profits, tentative losses, etc.
: Reduction of share capital (if any) - it is covered here since
: Details of debt restructuring
: Valuation

- Legal Compliance
: Pendency of Investigation

14th March 2024

Section 66 mentions that when there is a special resolution, it would not be covered under
section 230. Why?
There is a very specific intent behind section 66. The resolution has been passed for the purpose of
reduction of share capital. It has been kept outside the scope of 230 because 230 starts with a
tribunal's order. Had it been considered under section 230, it would have meant that the application
of the share capital would have been with the tribunal. When a company goes for reduction, it is
squarely a question of commercial wisdom of the company. We consider only whether there is an
adversely impact on the insiders of the company. This is why, initially a resolution inside the
company is passed and then application is sent to the tribunal. Considering this, both of these regime
are opposite to each other with regards to the process.

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Difference between reduction mentioned under section 66 and section 230.
Under section 66, the resolution is particularly intended to t
Under section 230, the primary intent is not to cause reduction but due to some reason or the other,
reduction is happening. It is an outcome. For example, during debt restructuring, a company decides
to restructure. To integrate the correct position of the company post buy back of shares, there is
technically a change in the shareholding position. To streamline the equity capital, reduction is done.
What happens here is - reduction is done, but as an outcome. They are trying to do the same thing
but with permission.

If section 66 is brought within section 230 entirely, the autonomy of the company would get
hampered.

(3)Where a meeting is proposed to be called in pursuance of an order of the Tribunal under

subsection (1), a notice of such meeting shall be sent to all the creditors or class of creditors and to
all the members or class of members and the debenture-holders of the company, individually at the
address registered with the company which shall be accompanied by a statement disclosing the
details of the compromise or arrangement, a copy of the valuation report, if any, and explaining
their effect on creditors, key managerial personnel, promoters and non-promoter members, and the
debenture-holders and the effect of the compromise or arrangement on any material interests of the
directors of the company or the debenture trustees, and such other matters as may be prescribed:
Provided that such notice and other documents shall also be placed on the website of the company, if
any, and in case of a listed company, these documents shall be sent to the Securities and Exchange
Board and stock exchange where the securities of the companies are listed, for placing on their
website and shall also be published in newspapers in such manner as may be prescribed: Provided
further that where the notice for the meeting is also issued by way of an advertisement, it shall
indicate the time within which copies of the compromise or arrangement shall be made available to
the concerned persons free of charge from the registered office of the company.

Notice
: 21 days
: Clear Day: All these 21 days will be working days. It would exclude holidays, etc.

Agenda
: A clear agenda concerning the points of discussion has to be provided. It would be inclusive of any
document which the members, creditors or debenture holders would require to form a clear opinion
on how they want to proceed with the meeting. It should clarify the procedure, impact and why the
rearrangement is being provided. Agenda also includes any other necessary document so that they
can make an informed decisions.

Details of the Meeting

: Date, Time and place.

(4). A notice under sub-section (3) shall provide that the persons to whom the notice is sent may vote
in the meeting either themselves or through proxies or by postal ballot to the adoption of the
compromise or arrangement within one month from the date of receipt of such notice: Provided that
any objection to the compromise or arrangement shall be made only by persons holding not less
than ten per cent. of the shareholding or having outstanding debt amounting to not less than five per
cent. of the total outstanding debt as per the latest audited financial statement.

Voting specifications:
: In person
: Proxy
: Postal or electronic means

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Electronic vote and 21 day notice are problematic from point of view of legal drama.

(5)A notice under sub-section (3) along with all the documents in such form as may be prescribed
shall also be sent to the Central Government, the income-tax authorities, the Reserve Bank of India,
the Securities and Exchange Board, the Registrar, the respective stock exchanges, the Official
Liquidator, the Competition Commission of India established under sub-section (1) of section 7 of
the Competition Act, 142 2002 (12 of 2003), if necessary, and such other sectoral regulators or
authorities which are likely to be affected by the compromise or arrangement and shall require that
representations, if any, to be made by them shall be made within a period of thirty days from the date
of receipt of such notice, failing which, it shall be presumed that they have no representations to
make on the proposals.

Restructuring is a commercial act.

For example: Undertaking are those assets which have the ability to operate independently. Slump
sale normally happen with respect to an undertaking only. Every single transaction is to be notified
and taxed. When slump sale happens, the following entities would be involved:

It provides for a single window channel. There is a simultaneous process going in. The regulators
will take stack of the situation and verify their requirements post which they will send their opinion
on whether restructuring will be followed. If no, they will provide a reasoned order as to why not.
These regulators shall be involved:
- Central Govt./ ROC
- Income Tax
- RBI
- SEBI
- Stock Exchange
- Official Regulator
- CCI

18th March 2024

Relevance of all these regulators:
Section 230 is the principal provision regarding restructuring.
Initially the application is made to the NCLAT. Post which the NCLAT forwards it to other
regulators.

(6)Where, at a meeting held in pursuance of sub-section (1), majority of persons representing three-
fourths in value of the creditors, or class of creditors or members or class of members, as the case
may be, voting in person or by proxy or by postal ballot, agree to any compromise or arrangement
and if such compromise or arrangement is sanctioned by the Tribunal by an order, the same shall be
binding on the company, all the creditors, or class of creditors or members or class of members, as
the case may be, or, in case of a company being wound up, on the liquidator appointed under this
Act or under the Insolvency and Bankruptcy Code, 2016, as the case may be, and the contributories
of the company.

When an order is made by the tribunal for convening a meeting, a shareholder resolution or
member's resolution is to be passed to discuss the status quo of the application that has been
temporarily approved by the tribunal. When structural changes are made, ordinary resolution will be
passed. On the other hand, if the shareholder's rights are affected, special resolution is passed. Both
of these talk about the value utilized to vote in one manner.

(6) uses the phrase 'more than 50% in number holding more than 3/4th of the value'. It means that
special resolution will come into picture. We are looking at the shareholders present and voting.
Individual person will also be considered. For example: out of 100, the value should be 75%. These
75% of shares should be held by 51 shareholdings in the company. This notion is known as dual

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75% of shares should be held by 51 shareholdings in the company. This notion is known as dual
majority.

19th March 2024

What was the need of putting a requirement of double majority?

The changes we are trying to bring out by the scheme of arrangement are permanent and irreversible.
So, the impact of the same are long term. In such cases, public interest will come into picture.
Because of these, the understanding of public interest becomes much more stringent. Another
situation is when the holding is majorly held by a few persons, then also it becomes essential to
protect the interest of the shareholders. It ensures that if such a resolution is passed the interests of
minority do not get suppressed because passing of such resolution can result in the reconstruction of
the company which is an important issue and concerns to all.

The value will have different interpretations and meanings.

L&T Valve NCLT Decision

The NCLT said that when talking about majority in persons representing 3/4th in value, it should not
be interpreted as double majority. If the 3/4th value is achieved, there is no need to go for majority
confirmation as well. This is because earlier the shareholding positions were extremely consolidated
in nature. There were family businesses. The holdings were concentrated. This is why the
interpretation under 1956 Act will be different from the one in 2013. But now, it is a democratic
process. In 1956 context, having shareholder democracy was necessary to protect the minority
interest and avoid abuse of the minority shareholder.
Post 2013, as and when more and more countries started going public and with the increased scrutiny
of SEBI in the securities market, the corporate shareholders are keeping control to themselves but
the same is not reflected in terms of shareholding scenario. The shareholding is disintegrated and
less consolidated. It doesn’t further the notion of ease of doing business. So, now the majority of
people who exercise control are not seen. In such circumstances, representation of 3/4th value will
require more and more people and is challenging. In this case, the majority of the persons is not
acting in the intent it was introduced with. So even if you have 3/4th value, it would be sufficient.

The term class of members has been used to signify class based voting to protect the specific rights
of a particular class. It might be the classification done by the company, if not then- equity and
preferential. Otherwise it might include - creditors (secure & unsecure), shareholders and financial
shareholders. The threshold in section 230 has to be achieved with respect to all the classes involved
in the process.

In 2020, an amendment was made to the Compromise and Arrangement Rules, 2014 - majority of
the people present and voting which would also include postal and electronic votes.

Whether the approach taken by L&T can be adopted for the interpretation of 230(6) in general?

20th March 2024

No class

21st March 2024

L&T Valves Case

Facts: It concerned a demerger between L&T Valves and L&T Electricals, both wholly owned
subsidiaries of L&T.

22nd March 2024

(9) The may dispense with calling of a meeting of creditor or class of creditors where such

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(9) The Tribunal may dispense with calling of a meeting of creditor or class of creditors where such
creditors or class of creditors, having at least ninety per cent. value, agree and confirm, by way of
affidavit, to the scheme of compromise or arrangement.

If there is a creditor with an outstanding debt of more than 90%, he can either make an application or
provide a creditor’s statement issued under sub-section (2) – agree on a particular scheme of
arrangement. The meeting concerning creditors may be dispensed with.

There are two ways of looking at it:

1. Rationale – The position of creditor is essentially outsiders wherein they have a fixed interest
accruing. It is the sole criteria/interest in the company apart from this interest, they do not
enjoy any rights. If the creditors are already in consent with the scheme of arrangement, if 90%
or more has been achieved, the dispensation of meeting can be done. This is an extension of the
Duomatic principle.
The outstanding amount is the only basis upon which the interest can be established. if a
company goes into financial distress, the secured creditors are the most affected. Hence, they
agree to the scheme of arrangement being sufficient and there is no more need for meeting.
This is not a ground for oppression or mismanagement.
If the minority is less than 10%, it is covered under Proviso 2 of Section 244. It must be filed as
a simultaneous application.

2. Scope – The scope is limited to creditors. Why? There were a lot of situations, where the
process remained the same for an organic restructuring and an inorganic restructuring. Why is
the dispensation not being allowed for members? There is a list of cases forming the
jurisprudence as to when there can be dispensation of the shareholders’ meeting. The first one
is, that the law is silent and hence, we cannot go beyond it to dispense away with the meeting
of the shareholders’.
Secondly, we focused more on the ambit of commercial wisdom, there are certain specific
cases where in a merger, for all relevant purposes, from a functional perspective, is an internal
matter. There are situations, according to certain companies that the court must look into the
essentiality of meeting and dispense with the meeting of the creditors as well as members
where their interests are not being hampered. The intent of the legislation must be interpreted
to benefit the members and not hamper the same.
Thirdly, subsection (9) cannot be interpreted with subsection (6). The latter clearly states
creditors and members as two separate classes with different interests. As a normative practice,
(9) could not be interpreted in light of (6). However, there can be exceptions wherein
dispensation can be allowed in a commercial sense with commercial benefit/advantage (or ease
of doing business) from doing so. This is the balanced approach. Currently, it is the discretion
of the Tribunal used in a sparing manner.

26th March 2024

Case Laws
S. 230(3)
- Reliance Communications & Aircel Ltd. 2017 Order, NCLT Mumbai

S.230(5) –
- Gaps Investment Pvt. Ltd & Ajanta Pharma Ltd. CSP 995/2017 NCLT Mumbai
- Bharat Kumar Padamsee 2015 order – regarding jurisdiction of SEBI wwe the transferee
company in any arrangement is not a listed company

S.230(9)
- Mazda Caterers Pvt. Ltd. v. Bank of India Ltd. 1975 ILR (1) Del 1
- In re Singer Enterprises Pvt. Ltd. CP No. 384/2007, Jan 17 2011
- Ganges Podcast Industries Ltd. Company Application No. 2/2015, April 15 2015

Company CA2 Notes - Priyanshi Page 8

 - Ganges Podcast Industries Ltd. Company Application No. 2/2015, April 15 2015
- JVA Trading Pvt Ltd and C&S Electric Ltd. Company Application No. CAA 1/PB/2017 NCLT
(PB)
- Eternity Infrabuild Pvt Ltd Company application no. 156/2017 NCLT Calcutta

(10) No compromise or arrangement in respect of any buy-back of securities under this section shall
be sanctioned by the Tribunal unless such buy-back is in accordance with the provisions of section
68.
Explanation.—For the removal of doubts, it is hereby declared that the provisions of section 66 shall
not apply to the reduction of share capital effected in pursuance of the order of the Tribunal under
this section.

Dispensation of meetings is not permitted as a matter of rule for shareholders (refer cases for more
reasons why)

Why would these two provisions be considered under restructuring ?

This is because buy back of securities brings change in the prevalent shareholding structure in the
company. The element of choice is not present in s.66 – we simply pass a resolution with 3/4th
majority and the order is mandatorily applicable to all members.
Subsection 10 allows for a restructuring through buyback of securities but not s 66 – the reason is
for the simplification of the procedure. Why simplification?

Buyback, in the traditional sense under s 68, can be carried out only by a public listed company
because buyback is done from the stock exchange – because there is no coercive aspect in buybacks,
and the ancillary procedures stipulated once the buyback is complete (amendment of memorandum
and shareholders’ clause)

S 68 is brought under the scope of s 230 for simplification – restructuring of the company through
buyback of securities – since this is a consensual process, s 230 is not a problem.
But s 66 is of a different nature altogether – s 66 works on the principle of majority and it brings in
the element of company’s autonomy wherein even if the tribunal can interfere in the decisions of the
company, such interferences cannot be made on commercial grounds, it can only be on legal
grounds.

The fact that there is a 75% majority makes it coercive – there may be instances where the reduction
is not of a general nature but is of a specific nature (pro rata reduction of shares) – allowing s/230
applications here brings in concerns about the public interest aspect at the stage of application itself.
S 66 is applicable to private companies as well as listed companies – but in s 230 , public interest
itself is a ground, and it is not differentiating between public listed and private companies.
Even though we understand that s 230 is a safeguard mechanism, the tribunal can go way into the
commercial aspect– but this cannot be the norm – this is to be entertained as an exception – because
reduction by practice is a coercive practice, the psyche of the tribunal will be biassed towards
protecting the interests of the shareholders

This is why we have kept s 66 outside the purview of s 230.

Under the explanation, reduction is the cause – in subsection 2, reduction is the effect
If there is a proposal with a clear agenda of carrying out reduction, then in that case, s 230 will not
apply.
But if it is coming up as a consequence or result, then we merely provide the information regarding
that reduction to keep the tribunal informed so they can pass an informed order.
Section 230(11)
This is of a different nature – it is the latest addition to s 230

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Previously, normal mergers and amalgamations was under 391 but there when we were talking about
the takeover, it was always considered to be a hostile process – it did not care about the rights or
inclusion of the management of the company – there was no negotiation taking place and hence the
possibility of it being extremely coercive was very high – eg: Twitter case
Twitter, as a social media platform, requires people having sufficient management understanding –
Musk went forward simply with the financial prowess he possessed and took over the company
entirely – the problem arises that under s 230 regime, we have some sort of safeguard mechanisms to
stop this from happening
Takeover Code – listed companies
Private companies had no such code though – takeover regulations existed but were not applicable to
private companies because it was a SEBI regulation and hence automatically not subject to private
companies

For the first time, subsection 11 introduced the concept that private companies can also be taken
over – they included their interests in the consideration of the tribunal
Any takeover of a private company is to be treated at par with the internal restructuring and can be
covered squarely under s 230 – but this was notified MUCH later, only sometime in 2020 there was
no particular reason for this delay.
It was simply due to the delay in the comprehension of the fact that a private company could be
taken over – a third person coming over and buying all the shares was difficult in a private company
since there would have to be a negotiation deal in a private company, meaning thee would always be
the aspect of consent. But the MCA observed that negotiation did not always mean consent since it
was easy to squeeze out the minority in a private company. Thus, a 230 applications can be filed for
private companies as well.

Section 231

27th March 2024

Section 231
Scope
Once the resolution has been passed through dual majority principles and the scheme of arrangement
is accepted by shareholders, now comes the implementation part – -the tribunal has a part to play in
this as well – the scope and limits of this role are discussed in s 231.
The scope of this section comes after the approval of the scheme. It deals with the implementation
process of the scheme. The tribunal can exercise mandatory or discretionary power. The mandatory
power is with respect to the supervision of the scheme. Whatever is mentioned in the scheme of
arrangement has to be followed in letter and spirit. This is done to protect the stakeholders interest.
The people who did not agree for the scheme should not be disadvantaged because of their dissent.
This has to be read with Rule 11 of NCLT Rules (the power of the tribunal to ensure inherent
justice).

Power of Tribunal to enforce compromise or arrangement.—

(1) Where the Tribunal makes an order under section 230 sanctioning a compromise or an
arrangement in respect of a company, it— (

a) shall have power to supervise the implementation of the compromise or arrangement; and

There are two ways of supervision:

- Issuing Specific Directions.
These directions may extend with regards to the entirety of the scheme. Directions with respect
to the implementation procedure. For example: if there is a time sensitive scheme wherein the
company does not adhere to the timeline, a direction can be made with respect to the same.
Shall provision is only pertaining to the implementation. Substantive aspect cannot be touched

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 Shall provision is only pertaining to the implementation. Substantive aspect cannot be touched
upon here. The directions are merely procedural.

(b) may, at the time of making such order or at any time thereafter, give such directions in regard to
any matter or make such modifications in the compromise or arrangement as it may consider
necessary for the proper implementation of the compromise or arrangement.

- Discretionary Aspect
The tribunal may propose modifications. There must be a necessity which is arising out of
implementational challenges. This additional power has been provided because the existing
scheme of arrangement might not be conducive of implementation which is why the Tribunal
has been given the power of modification. Section 231 comes after the approval which means it
has been accepted by the tribunal once as well as the shareholders. At this stage, there will not
be any application of mind. If mandatory modification power is allowed, commercial wisdom
of the company will be affected. As per the norm, the tribunal cannot interfere in the scheme of
arrangement. Un feasibility of the scheme to be implemented at a later stage might require
modifications. The modifications should be necessary and directly related to the
implementation of the scheme. The modification will strictly be respect to the structural aspect.
The fundamental notion of scheme of arrangement is not going to be altered.

2) If the Tribunal is satisfied that the compromise or arrangement sanctioned under section 230
cannot be implemented satisfactorily with or without modifications, and the company is unable to
pay its debts as per the scheme, it may make an order for winding up the company and such an order
shall be deemed to be an order made under section 273. (3) The provisions of this section shall, so
far as may be, also apply to a company in respect of which an order has been made before the
commencement of this Act sanctioning a compromise or an arrangement

Cases:
- SK Gupta v RP Jain 1957 CC342.
- Associated Aluminum Industries v ROC Mumbai Company Application No. 580 of 2016.
- Spantex Industries v Indorama Synthetic Pvt. Ltd. 2013 178 CC 358.

230(1) Cases
- Rama Investment Company Pvt. Ltd. v Ankit Mittal IA 2440 of 2022.
If there is a denial of order, whether appeal with respect to NCLAT can be made.

28th March 2024

No class

1st April 2024

No class

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