NCLAT Reverses NCLT’s Decision On Indiabulls Real Estate, NAM Estates And One Commercial Property Merger
NCLAT Reverses NCLT’s Decision On Indiabulls Real Estate, NAM Estates And One Commercial Property Merger
The scheme had no objections from major regulatory bodies, and was approved with the Income Tax department’s interests in mind
The National Company Law Appellate Tribunal (NCLAT) has set aside the order of the Chandigarh bench of the National Company Law Tribunal (NCLT), interfering in the scheme of arrangement between Indiabulls Real Estate Ltd, NAM Estates Pvt Ltd and Embassy One Commercial Property Pvt Ltd, ignoring the commercial wisdom of shareholders, creditors, and Board of Directors of the appellant companies.
The Coram of Justice Yogesh Khanna (Judicial Member) and Ajai Das Mehrotra (Technical Member) noted that the Discounted Cash Flow (DCF) method was recognized for share valuation and the valuers, and the amalgamating companies could not be faulted for using it. The method relied on future earnings, rather than ownership of assets.
Thus, the issue before the appellate tribunal was to ascertain:
(a) Whether any material information was suppressed, which had a substantial impact on the valuation of the shares, and the consequential share swap ratio, or whether the valuation done by the valuers was appropriate.
(b) Whether the tribunal could have rejected the scheme, even when most shareholders and creditors approved it.
The NCLAT said, "On going through the facts of the case and the guidelines provided by various judicial pronouncements, we find that the valuation of shares and determination of Fair Equity Share Exchange Ratio has been done by experts. The method of valuation - Discounted Cash Flow Method, is universally accepted as a valid recognized method.”
Meanwhile, no objection was raised against the scheme by regulatory bodies including the Competition Commission of India and the Government of India through Regional Director, Ministry of Corporate Affairs, the Registrar of Companies, the Securities and Exchange Board of India, the Bombay Stock Exchange, and the National Stock Exchange.
The Income Tax Department initially objected but later left the approval of the scheme at the tribunal’s discretion. It stated that if the scheme is approved, the department's interests must me ensured.
