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Scheme of Arrangement between East West Pipeline Infrastructure Pvt. Ltd.

Scheme of Arrangement between East West Pipeline Infrastructure Pvt. Ltd.

Scheme of Arrangement between East West Pipeline Limited and Pipeline Infrastructure Private Limited.

Section 232(6) of the Companies Act, 2013 (“Companies Act”) included a statutory requirement for identifying an appointed date in a scheme for the first time. Following the enactment of this requirement, therefore, schemes formulated under the Companies Act must specifically indicate an appointed date.

Facts: This appeal was filed under Section 230 of the Companies Act, by the Appellant, a transferee Company. It is stated that the business of East West Pipeline Limited – transferor Company or demerged Company with regard to pipeline business would be hived off and merged with the Appellant. For this purpose, the First Motion Application was filed before the National Company Law Tribunal, Mumbai Bench.

Issue: Whether an appointed date may be prospective or alternatively, whether the appointed date may be linked to the occurrence of events with uncertain dates?

Judgement: The Supreme Court, in the case of Marshall Sons & Co. [India] Ltd. Vs. Income Tax Officer, had held that every scheme is required to state the date on which the amalgamation is to take effect and such date may precede the date of sanction of the scheme by the court. The Supreme Court also held that the court should give effect to the amalgamation or transfer from the appointed date listed in the scheme. 

However, the NCLT in this order held that the appointed date must mandatorily be the same date as the date of valuation of the companies. This order decried the practice of linking the appointed date to uncertain events (e.g. the date of approval or effectiveness of the scheme) and included a requirement for parties to identify a definite calendar date as the appointed date. More specifically, the NCLT held in the Pipeline Order that since the Companies Act does not require the effective date of a scheme to be the date on which the scheme is filed with the Registrar of Companies, the effectiveness of a scheme will always relate back to the appointed date and cannot be the same as a future effective date.