(First published on Linkedin)
Schemes of arrangement—whether mergers, demergers, or business transfers—are a key tool for facilitating India’s corporate restructuring landscape. While the legislative framework under the Companies Act, 2013 is quite comprehensive, its practical implementation through the National Company Law Tribunal (NCLT) still leaves much to be desired in terms of procedural uniformity and efficiency.
At present, the NCLT exercises jurisdiction over all such schemes (except fast-track mergers), with multiple benches across cities and sometimes within the same city. However, there exists no uniformity in the process. Matters such as admission timelines, dispensation of meetings, and treatment of valuation reports often vary significantly from bench to bench, leading to unpredictability, uncertainty, and delay—especially for schemes that are uncontroversial in nature.
This lack of institutional memory results in schemes being governed by the preferences of individual benches, rather than a codified set of practices. While discretion is necessary in complex judicial matters such as IBC cases or contested litigation, schemes of arrangement—particularly those involving private companies or mirror-image demergers—require a more predictable and streamlined approach.
A few key areas for standardization include:
– Uniform SOPs across benches for admission, convening, dispensation, and final hearings
– Doing away with the “Reserved for Order” concept where the scheme is fairly straightforward
– Automatic dispensation of meetings where 90%+ consents from shareholders/ secured creditors are obtained, and obtaining consents from unsecured creditors above a relative threshold basis the quantum for each company
– Non-interference in valuations unless demonstrably unfair or against the public interest
– Time-bound responses from statutory authorities (RD, ROC, OL), with a clear “deemed no objection” if no response is received within 30 days (as envisaged under Section 230(5))
– Digital tracking dashboards for scheme status, to ensure transparency and accountability
– Designated scheme hearing days or benches, to avoid crowding out amidst IBC and other litigation matters
Such standardization would not compromise judicial oversight—they would perhaps enhance it by making space for judgment where it truly matters.