Matrix Pharmacorp Private Limited & Anr.

Heard Ld. Counsels for the Appellants, in the cause title of the company appeal, Appellant No. 1 is a transferee company and Appellant No. 2 is a transferor company which stand amalgamated as a consequence of the order of 10.03.2025, as it was passed by the NCLT Hyderabad bench in CP (CAA) No. 34/230/HDB/2024. The amalgamation has been given effect to, by virtue of the order dated 10.03.2025. The only grievance, which has been raised by the Appellants as against the impugned order in the instant company appeal is qua the observations which has been contained in the order, as contained in para 16 sub-para xix & xx, the same are extracted hereunder: -

The contentions of the Ld. Counsels for the Appellants are that the aforesaid restrictions imposed by Para 16 and Sub-Para xix & xx of the order of 10.03.2025 was un-called for, the reason being that the observations, made therein qua the implications flowing from the orders passed by the Hon’ble High Court of Telangana, may not be applicable under the circumstances of the instant case, for the purposes to be attracted in a proceeding under Section 230 of the Companies Act, 2013, where the amalgamation has been ordered of the transferee company and the transferor company who are here before this Appellate Tribunal in this appeal, as against part of the observations.

The issue in brief, which will be necessarily requiring references in the instant appeal and as submitted by the Ld. Counsel for the Appellants, is whether the order dated 01.05.2024 of the Principal Special Court In The Cadre of District Judge For Trial And Disposal of Commercial Disputes At Hyderabad, as it was rendered in CEA No. 44 of 24, in CEA 156 of 23, in CEP No. 19 of 23, could be imported for the purposes of incorporating the embargoes as delineated in Para 16 (xix) & (xx), in the impugned order, when, as it has been argued by the Ld. Counsel for the Appellant, in the proceedings of the Commercial Court Hyderabad, in which the aforesaid order has been passed as well as the contempt proceedings for compliance of the said order, the Appellants herein are not a party to the said proceedings. In the proceedings which was taken before the Commercial Court, the array of parties has been described as hereunder: -

Alleging non-compliance of the order 01.05.2024, the contempt proceedings was drawn by way of a Contempt Case No. 1378/2024 before the Hon’ble High Court of Telangana and in the said proceedings there was an interim order granted by the High Court on 19.07.2024. What has been argued by the Ld. Counsel for the Appellant is that, this contempt proceedings was emanating from the orders dated 01.05.2024 passed by the commercial court where the Appellants were not a party and even as per the array of parties, which was described there in the contempt proceedings, the Appellants, were not parties to the proceedings and that, the aforesaid fact could be very well be established from the description of array of parties as given in the contempt proceedings, which has been extracted hereunder:

It is in the context of the aforesaid, that is, the Appellant companies are not party to the Contempt Case, the Counsels for Appellants argue, that the observations made in Para 16 (xix) & (xx) are uncalled for because any outcome or consequences to the order passed by proceedings of the commercial courts or by the status quo order passed by the Hon’ble High Court on 19.07.2024 will not be applicable to the present Appellants. They have argued further, that in the contempt proceedings there is a pending interlocutory impleadment application, where the Appellants have been sought to be impleaded as a party to the proceedings, that as on today, or as on the date of the passing of the order of amalgamation dated 10.03.2025 under Section 230 of the Companies Act, 2013, no orders on the said impleadment application has been passed, and as such, there cannot be a deeming presumption that, the Appellants happen to be a party to the contempt proceedings, which would bind them, to the terms and conditions of the status quo order as it has been granted on 19.07.2024. The relevant extract of status quo order is given hereunder: -

The nature of the interim order, as it was granted in the contempt proceedings also becomes relevant to be considered by this Appellate Tribunal, for the reason being that the status quo order cannot be expanded to be to read to stall the transactions which may take place as a consequence of the rights and liabilities accruing out of amalgamation because the status quo order itself, granted in the contempt proceedings, does not contemplate to create any restrictions qua the observations, which has been made in Para 16 (xix) & (xx) of the order of the Ld. NCLT dated 10.03.2025. Besides that, it has also been argued that, the contempt proceedings, which has been carried before the Hon’ble High Court of Telangana were emanating from an award dated 02.02.2022, which was thus decided by way of Case No. 60 of 20 by the Civil Major Circuit, Government of Ras Al Khaimah, Courts Department, the details of which are given hereunder: -

The Ld. Counsel for the Appellant has contended that even in the said proceedings, before the competent court of Ras Al Khaima which has resulted in the Execution Petition in the District Court and contempt case in the Hon’ble High Court, the array of parties given therein doesn't include the Appellants as to be a party to the proceedings. Therefore the array of parties in the subsequent proceedings such as the Execution Proceedings preferred to get the award as it was passed by the aforesaid court, will have to be the same as the array of parties, as it was chosen to be impleaded in the proceedings, before the Ras Al Khaimah, Court of first instance (Civil Major Circuit), based on the principles of Dominus Litus.

Ld. Counsel for the Appellant further submits that there cannot be any second thought that each of the proceedings, which were thus emerging from the award of 02.02.2022, including the one which led to institution of an execution proceedings, where the award of 02.02.2022 was put to execution, before the Judge Principal Court, Hyderabad, by way of CEP No. 19 of 2023, by virtue of the provisions of Section 44 A of the Code of Civil Procedure to be read with Order XXI, Rule 11 (2), to be read with Section 151 of Civil Procedure Code, will have to be confined to inter-se between the parties to the proceedings who are bound by the award of 02.02.2022, and that cannot be expanded to be made applicable to the Appellants who are not a party to the proceedings of the award or even in the contempt proceedings. Besides that, and more importantly, when at the stage when the order of Amalgamation dated 10.03.2025, was rendered by NCLT, Hyderabad, the Appellants did not figure in any of the proceedings, which could have at all attracted the restrictions as observed in para16 (xix) & (xx) of the order dated 10.03.2025.

Even under the literal connotation, the word ‘Amalgamation’ is nothing but having a consequence of merging of two commercial enterprises, which are having or intend to have a common object. And that is why the term ‘Amalgamation’ in relation to the companies, means a merger of a company enterprise with another company in a manner that, all the properties of the amalgamating company or the companies which were existing immediately before the amalgamation become the property of the consequential amalgamated company by virtue of amalgamation. Besides that, all the assets and liabilities of the amalgamating company or the companies which were there immediately before amalgamation, becomes the liability of the amalgamated company, as a consequence of amalgamation. Further, shareholders holding not less than 3/4^th in value of shares in the amalgamating company, (other than shares already held therein immediately before the amalgamation by, or by a nominee of the amalgamated company or its subsidiary), become the shareholders of the amalgamated company by virtue of the amalgamation.

Under the Finance Act of 1927, amalgamation has been defined to mean that it has to be a welding or a blending of two or more concerns into one and that where the companies concerned retain separate entities, there will be no amalgamation. Thus amalgamation is a blending of the two or more existing undertakings into one undertaking. This is what has been intended by the provisions contained under Section 230 of the Companies Act, 2013. The provisions contained under Section 230 of the Companies Act, 2013, denote that it is a compromise or an arrangement between the two enterprises. If that be so, when the consequential germination of a new entity is as a result of the compromise or an arrangement, no third party, who is not a part of either of the amalgamating company, can have any interest or, objection of any nature whatsoever to object to the scheme of amalgamation when it is being considered for approval before the Ld. Adjudicating Authority.

In the circumstances of the instant case, a restriction is being sought to be created on the Transferor and Transferee companies because of the grant of the interim order in the nature status quo order that too in a contempt proceeding. First of all, any interim order granted in a judicial proceeding, will be binding between the parties to the said proceedings only and unless intention is otherwise expressed in the order, it will not bind a party who is not a party to the proceedings. Contempt is an act of conduct in persona. Since there is no allegation of contempt against the Appellants, in the contempt petition, in which the interim order was granted, the interim order of status quo will not have any effect on the two amalgamating enterprises, that is, the transferor and the transferee company and hence the interim order in a contempt petition cannot obstruct the process of amalgamation, more particularly, when the nature of the interim order passed in the contempt petition was limited to be made applicable to the status pertaining to the transactions, which cannot be read beyond what, was circumscribed by the interim order itself.

The Ld. Counsels for the Appellants has further drawn the attention of the Tribunal to the order of 10.03.2025, which was rendered in the Intervention Petition 04/2024 in CP (CAA) No. 34/230/HDB/2024 in CA (CAA) No. 25/230/HDB/2024 and particularly he has referred to the observations made in para 11 of the order, which is extracted hereunder: -

Ld. Counsel for the Appellant has argued that the aforesaid observation provides for that when under the scheme of amalgamation, two entities/enterprises are seeking their amalgamation under the provisions contained under Section 230 of the Companies Act, 2013, it doesn't provide for any third party intervention who is not at all having a direct nexus to the object of the scheme of amalgamation.

Owing to the aforesaid tenacity of arguments extended by the Ld. Counsel for the Appellants, and the observations made by us in the context of the array of parties in the various pending proceedings where the Appellants, that is the transferor and the transferee company, do not figure at any stage, the observations made in Para 16 (xix) & (xx) of the order dated 10.03.2025, will be deemed to be expunged to be read, qua the transferee and the transferor company. Subject to the aforesaid, the ‘Company Appeal’ stands ‘disposed of’.