𝐂𝐚𝐧 A 𝐑𝐞𝐠𝐢𝐨𝐧𝐚𝐥 𝐃𝐢𝐫𝐞𝐜𝐭𝐨𝐫 OF MCA 𝐫𝐞𝐣𝐞𝐜𝐭 A #𝐦𝐞𝐫𝐠𝐞𝐫#𝐚𝐩𝐩𝐥𝐢𝐜𝐚𝐭𝐢𝐨𝐧..?

 𝐂𝐚𝐧 A 𝐑𝐞𝐠𝐢𝐨𝐧𝐚𝐥 𝐃𝐢𝐫𝐞𝐜𝐭𝐨𝐫 OF MCA 𝐫𝐞𝐣𝐞𝐜𝐭 A #𝐦𝐞𝐫𝐠𝐞𝐫#𝐚𝐩𝐩𝐥𝐢𝐜𝐚𝐭𝐢𝐨𝐧..?

The question came up for consideration before Hon'ble Bombay HC in Writ Petition No. 556/2019 in the matter of Asset Auto India Private Limited, Asset Motors Private Limited, Asset Education Centre Private Limited & Others V/s. Union of India, RD , ROC.

𝐎𝐛𝐬𝐞𝐫𝐯𝐚𝐭𝐢𝐨𝐧𝐬 𝐨𝐟 𝐇𝐨𝐧'𝐛𝐥𝐞 #𝐁𝐨𝐦𝐛𝐚𝐲#𝐇𝐂: (Judgement dt. 01.08.2024)

1. 𝐁𝐨𝐦𝐛𝐚𝐲 𝐇𝐂 𝐚𝐥𝐥𝐨𝐰𝐬 #𝐰𝐫𝐢𝐭 #𝐩𝐞𝐭𝐢𝐭𝐢𝐨𝐧 𝐟𝐢𝐥𝐞𝐝 𝐛𝐲 𝐀𝐬𝐬𝐞𝐭 𝐀𝐮𝐭𝐨 𝐈𝐧𝐝𝐢𝐚 𝐏𝐯𝐭. 𝐋𝐭𝐝. 𝐚𝐧𝐝 𝐢𝐭𝐬 4 𝐰𝐡𝐨𝐥𝐥𝐲-𝐨𝐰𝐧𝐞𝐝 𝐬𝐮𝐛𝐬𝐢𝐝𝐢𝐚𝐫𝐢𝐞𝐬 (𝐏𝐞𝐭𝐢𝐭𝐢𝐨𝐧𝐞𝐫 𝐜𝐨𝐬.) 𝐢𝐧𝐭𝐞𝐫 𝐚𝐥𝐢𝐚 𝐜𝐡𝐚𝐥𝐥𝐞𝐧𝐠𝐢𝐧𝐠 𝐭𝐡𝐞 𝐨𝐫𝐝𝐞𝐫 𝐩𝐚𝐬𝐬𝐞𝐝 𝐛𝐲 𝐭𝐡𝐞 𝐑𝐞𝐠𝐢𝐨𝐧𝐚𝐥 𝐃𝐢𝐫𝐞𝐜𝐭𝐨𝐫, 𝐌𝐢𝐧𝐢𝐬𝐭𝐫𝐲 𝐨𝐟 𝐂𝐨𝐫𝐩𝐨𝐫𝐚𝐭𝐞 𝐀𝐟𝐟𝐚𝐢𝐫𝐬 (𝐑𝐃/𝐑𝐞𝐬𝐩𝐨𝐧𝐝𝐞𝐧𝐭) 𝐫𝐞𝐣𝐞𝐜𝐭𝐢𝐧𝐠 𝐭𝐡𝐞 𝐚𝐩𝐩𝐥𝐢𝐜𝐚𝐭𝐢𝐨𝐧 𝐟𝐨𝐫 𝐩𝐫𝐨𝐜𝐞𝐬𝐬𝐢𝐧𝐠 𝐭𝐡𝐞𝐢𝐫 𝐬𝐜𝐡𝐞𝐦𝐞 𝐨𝐟 𝐚𝐦𝐚𝐥𝐠𝐚𝐦𝐚𝐭𝐢𝐨𝐧.

2. Petitioner cos. submitted that the impugned order is without jurisdiction and bad in law because the Respondent has illegally rejected their application without any authority of law, since u/s 233 of the Companies Act, 2013, the Regional Director cannot pass an order of rejection, but can only file an application before the #NCLT stating its objections and requesting the Tribunal to consider the scheme, if it is of the opinion that such a scheme is not in the public interest or against the interest of company creditors.

3. 𝐑𝐃 𝐫𝐞𝐣𝐞𝐜t𝐞𝐝 𝐭𝐡𝐞 𝐚𝐦𝐚𝐥𝐠𝐚𝐦𝐚𝐭𝐢𝐨𝐧 𝐚𝐩𝐩𝐥𝐢𝐜𝐚𝐭𝐢𝐨𝐧 𝐨𝐧 𝐭𝐡𝐞 𝐬𝐨𝐥𝐞 𝐠𝐫𝐨𝐮𝐧𝐝 𝐭𝐡𝐚𝐭 𝐭𝐡𝐞 𝐏𝐞𝐭𝐢𝐭𝐢𝐨𝐧𝐞𝐫 𝐜𝐨𝐬. 𝐚𝐫𝐞 𝐧𝐨𝐭 𝐬𝐨𝐥𝐯𝐞𝐧𝐭 𝐚𝐬 𝐩𝐞𝐫 𝐭𝐡𝐞𝐢𝐫 𝐛𝐚𝐥𝐚𝐧𝐜𝐞 𝐬𝐡𝐞𝐞𝐭𝐬.

4. 𝐏𝐞𝐫𝐮𝐬𝐢𝐧𝐠 𝐒𝐞𝐜. 233 𝐨𝐟 𝐭𝐡𝐞 𝐂𝐨𝐦𝐩𝐚𝐧𝐢𝐞𝐬 𝐀𝐜𝐭 𝐰𝐡𝐢𝐜𝐡 𝐩𝐫𝐨𝐯𝐢𝐝𝐞𝐬 𝐭𝐡𝐞 𝐩𝐫𝐞-𝐜𝐨𝐧𝐝𝐢𝐭𝐢𝐨𝐧𝐬 𝐟𝐨𝐫 𝐩𝐚𝐫𝐭𝐢𝐞𝐬 𝐭𝐨 𝐜𝐨𝐦𝐩𝐥𝐲 𝐛𝐞𝐟𝐨𝐫𝐞 𝐞𝐧𝐭𝐞𝐫𝐢𝐧𝐠 𝐢𝐧𝐭𝐨 𝐚 𝐬𝐜𝐡𝐞𝐦𝐞 𝐨𝐟 𝐦𝐞𝐫𝐠𝐞𝐫 𝐨𝐫 𝐚𝐦𝐚𝐥𝐠𝐚𝐦𝐚𝐭𝐢𝐨𝐧, 𝐇𝐂 𝐫𝐞𝐣𝐞𝐜𝐭𝐞𝐝 𝐭𝐡𝐞 𝐑𝐃'𝐬 𝐜𝐨𝐧𝐭𝐞𝐧𝐭𝐢𝐨𝐧 𝐭𝐡𝐚𝐭 𝐭𝐡𝐞 𝐏𝐞𝐭𝐢𝐭𝐢𝐨𝐧𝐞𝐫 𝐜𝐨𝐬. 𝐰𝐞𝐫𝐞 𝐧𝐨𝐭 𝐬𝐨𝐥𝐯𝐞𝐧𝐭 𝐜𝐨𝐦𝐩𝐚𝐧𝐢𝐞𝐬 𝐚𝐧𝐝, 𝐭𝐡𝐞𝐫𝐞𝐟𝐨𝐫𝐞, 𝐭𝐡𝐞 𝐂𝐞𝐧𝐭𝐫𝐚𝐥 𝐆𝐨𝐯𝐞𝐫𝐧𝐦𝐞𝐧𝐭 𝐡𝐚𝐝 𝐩𝐨𝐰𝐞𝐫 𝐭𝐨 𝐫𝐞𝐣𝐞𝐜𝐭 𝐭𝐡𝐞 𝐬𝐜𝐡𝐞𝐦𝐞.

CONCLUSION

The Respondent could not have rejected the application but instead should have filed an application before the NCLT stating its objections and requesting that the Tribunal may consider the scheme under Sec. 232. This is a mandatory provision because the Respondent had to form an opinion that the scheme is not in public interest or in the interest of the creditors.

Thus, a Regional Director of MCA can reject a merger application only if

1.    If the merger is against the public interest

2.    If it is against the interest of Creditors

Otherwise , he can file an application before the NCLT stating hts objections and requesting that the Tribunal may consider the scheme under Sec. 232.