Quantum Mutual Fund & Ors. vs ICICI Securities Limited & Ors.

JUSTICE YOGESH KHANNA, MEMBER (JUDICIAL)

These appeals have been filed against an impugned order dated 21.08.2024 passed by the Ld.National Company Law Tribunal, Mumbai as also against rejection of objections filed by the appellants to the Scheme of Arrangement proposed between ICICI Bank Ltd and ICICI Securities Ltd.

The learned senior counsel for the appellant argued though the threshold limit for minimum number of shares for filing objection was not met with, but in view of Ankit Mittal Vs Ankit Pratisthan Ltd and Others 2019 SCC Online NCLAT 847 and in view of Miheer H Mafatlal Vs Mafatlal Industries Ltd (1997) 1 SCC 579, it has been held that irrespective of the fact the objector or the appellant may not be holding the requisite number of shares to raise the objection per sub-section (4) of Section 230 of Companies Act, 2013 yet the Tribunal is required to look into, before approving the scheme, whether the scheme in question is prejudicial to the public interest; whether the scheme has been passed after following due procedure as prescribed and contemplated under the applicable law; and whether is fair, conscionable and not opposed to public policy.

It was argued here the Ld. NCLT while approving the scheme has toed in favour of Regulation 37 of SEBI (Delisting of Equity Shares) Regulations, 2021, which it ought not to have done. It is submitted the Scheme treats the shareholders viz. promoters and public shareholders separately as against the law. It is submitted Section 230(6) of the Companies Act, 2013 notes where at a meeting held in pursuance of sub-section (1), majority of person representing three-fourths in value of the creditors, or class of creditors or members or class of members, as the case may be, voting in person of such compromise or arrangement, is sanctioned by the Tribunal by an order, the same shall be binding on the company, all the creditors, or class of creditors or members or class of members, as the case may be, or, in case of a company being wound up, on the liquidator appointed under this Act or under the Insolvency and Bankruptcy Code, 2016 as the case may be, and the contributories of company.

It was submitted consent of 3/4^th majority of the shareholders ought to be obtained while approving a Scheme but if one looks at scrutiniser report at Page 373 of the Paper book one would find on the voting of public shareholders, the percentage of votes casted in favour of the Resolution were 71.89% and whereas against it were 28.11%. Thus the argument was such a procedure ought not to have been adopted as the holding company and subsidiary company were not in the same line of business as admittedly the holding company is a Bank and whereas the subsidiary company deals in securities.

It was thus argued though the scheme purports to be under Regulation 37 of the SEBI (Delisting of Equity Shares) Regulations, 2021, but it failed to conform with the essential requirement contained therein viz. the companies should be in the same line of business. It was argued as per RBI circular dated 6^th July, 2021, which lays down the Standard Operating Procedure for listed subsidiary company desirous of getting delisted through a Scheme of Arrangement explicitly states, a bank and a broking firm are not in the same line of business, therefore, the present scheme was not under Regulation 37 (supra) and no proof was provided of any exemption or otherwise. It was argued the Scheme required a separate class meeting of the public shareholders of ICICI Securities Ltd under Section 230(6) of the Companies Act, 2013 and public shareholders were required to vote in favour of the Scheme within 3/4^th majority but this requirement was never met with and as a result of voting of promoter shareholders would show voting in favour was only 71.89% and thus did not meet the criteria as laid down under Section 230(6) of the Companies Act, 2013 and accordingly to give an exemption to a Subsidiary company, not in same line of business under Regulations 37, was wholly illegal.

It was argued the entire voting process in the Shareholders Meeting has been vitiated on account of illegal methods adopted by ICICI Bank and ICICI Securities to influence and mislead voters wherein employees of ICICI Bank, who were not registered as Investment Advisors by SEBI were influencing and coercing investors on how to vote. The learned senior counsel pointed out to letters dated 6.6.2024 of SEBI wherein it had explicitly stated in point 5 that the outreach programme undertaken by the Bank was inappropriate. Lastly it was argued the valuation methodology and the basis adopted by the Valuers to arrive at a fair value of the shares of ICICI Securities Ltd was baseless and manipulated. The very basis of the valuation and underlying figures were never provided to the shareholders and the public shareholders holding the shares were acquired at a throw away prices.

It was also argued any regulation, much less Regulation 37 (supra) cannot override an Act as has been held in Council of Architecture Vs Mukesh Goyal and others (2020) 16 Supreme Court Cases 446.

The learned senior counsel then referred to M/s Miheer H Mafatlal Vs Mafatlal Industries Ltd (1997) 1 Supreme Court Cases 579 to press his argument that even if the threshold is not met yet the Court/Tribunal cannot ignore the contentions raised by the objector qua the scheme being not fair, reasonable and opposed to public policy etc. It was argued the separate meeting of public shareholders was never held. He pointed out to the following paras of M/s Miheer H Mafatlal (supra) as follows:-

It was argued it was the duty of the Ld. NCLT to protect the investors of the company and admittedly in the present case there were two kind of shareholders viz the promoter shareholders and non-promoter shareholders and the treatment given to both of them in the scheme of arrangement was wholly different. Whereas the promoters would get the shares in the transferee company but shares of the non-promoter shareholders were getting extinguished. He further referred to various observations made in the letters of SEBI to show even voting was not done in accordance with law and the shareholders were bullied to vote in favour of the scheme by exercising inducement and coercion. Reference was made to the two letters written by SEBI of dated 06.06.2024 to ICICI Bank as well as ICICI Securities Ltd wherein the SEBI had cautioned both of them saying some of the officials of the Bank had gone beyond the outreach programme by making repeated calls, asking for screenshots of voting etc and also by informing that opting for the scheme would be beneficial. It was clearly beyond an outreach programme and asking for screenshot from the shareholders was clearly inappropriate and hence the ICICI Bank Ltd was warned to be careful in future and to improve their compliance standards to avoid recurrence of such instances failing which action could be initiated in accordance with SEBI Act, 1992 and the Rules and Regulations framed thereunder. Further ICICI Securities Ltd was warned for sharing the data of its shareholders with ICICI Bank to facilitate outreach programme undertaken by the Bank with the proposed objection of maximising participation of shareholders in the voting process which efforts was also deprecated by the SEBI stating interalia that ICICI Securities Ltd had failed to maintain personal data of its shareholders.

Qua the above letters dated 06.06.2024 of SEBI the impugned order noted as follows:-

It was thus argued as per sub-section (6) of Section 230 of Companies Act, 2013, the promoters and public shareholders ought to have been treated as a separate class and they ought not to have been mixed in the common meeting. It was argued the ‘non-promoter public shareholders’ was a separate class because its shares were going to be extinguished and hence per sub-section (6) of Section 230 of Companies Act, 2013 above, they also ought to have passed the Resolution with 3/4^th majority but such resolution got only 71% vote of public shareholders which per se was illegal and against the spirit of sub-section (6) of Section 230 of the Companies Act, 2013. It was argued per Section 230(6) each class ought to have voted by more than 75% but whereas in the present case non-promoter shareholders voted only 71% in favour of the scheme, hence the scheme was not fair, reasonable and was against the interest of non-promotor shareholders. It was argued the contention viz. the promoters and non-promoters were separate class was rather agreed to by the Ld. NCLT in its impugned order at para 5.2.5 as under:-

Learned senior counsel for the appellant further argued if one peruse the report of M/s Dolakia, Company Secretary viz. the Scrutiniser, it referred to only one consolidated meeting of shareholders who had voted in favour of the arrangement to an extent of 93.82% and non-promoters to an extent of 71.89%. It was the submission of the learned senior counsel for the appellant there was no separate meeting of non-promoter shareholders and the report relied upon break up of only one consolidated meeting of the shareholders, hence does not pass the test of sub-section (6) of Section 230 of the Companies Act, 2013. It was argued there was a falacy in the impugned order where despite observing the promoters and non-promoters make separate classes yet were treated as an homogeneous class.

Heard.

To understand the issues raised, we must first understand the rationale of the Scheme, which admittedly is as under:-

The next thing we need to find is if there are separate classes of shareholders as alleged in the present appeal. The Appellants sought to contend that, notwithstanding the specific stipulation contained in Regulation 37(2)(d) regarding manner of voting on the Scheme, a separate class meeting of public shareholders ought to have been convened. The Appellants have sought to contend a separate meeting of public shareholders would have been required under provisions of the Act and hence there is a conflict between provisions of the Act and Regulation 37 of the Delisting Regulations.

Now Rule 5(a) of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 prescribes as under:

In terms of Rule 5, the jurisdiction for determining the class of members in respect of whom a meeting is to be called with regard to a Scheme is in the exclusive domain of the Ld. NCLT. If anybody was aggrieved by any such determination of classes by the Ld. NCLT, the same was to be challenged by such aggrieved person in accordance with law. In the present case, the Ld. NCLT, after due application of mind, had determined the classes in respect of which meeting was to be called, in its order dated 14 February 2024. The Ld. NCLT, while making that determination applied its mind to the aspect of both Section 230 of the Act as also Regulation 37 of the Delisting Regulations and thereafter passed a detailed order in terms of both Section 230 and Regulation

The said Order made it clear a meeting was to conducted of all the equity shareholders, under and in terms of Section 230, and Regulation 37 and that a separate account were to be maintained in terms of Regulation 37; the Scheme in question being one of delisting

Further the first motion order which determined the classes for which the meeting was to be held was accepted by all and challenged by none, not even by the Appellants before this Court. The order thus attained finality and it was not open to being assailed at this stage and in this manner. The Companies Act prescribe strict timelines and, if any party had any grievance against the First Motion Order dated 14.02.2024, by which the classes were determined and meetings were called, the same ought to have been challenged within 45 days, extendable on the outside for further 45 days on cause being shown for the same. Admittedly, no such challenge was ever mounted. It is settled law what the law prohibits to be done directly that cannot be done indirectly. Therefore, by this circuitous route, it was not open for the Appellants to, under the garb of a challenge to the order approving the Scheme, assail the First Motion Order whereafter, they fully participated in the meetings without any caveats or reservation.

The Appellants’ reliance upon the judgment to contend the company decided at its peril the classes in respect of whom a meeting is to be called is also equally misplaced and misconceived. Notably, in State Bank of India v Alstom Power Boilers Ltd. [(2003) 5 Bom CR 421), the Appellants are relying upon for its argument, the question whether the objecting shareholders constituted a separate class was expressly kept open when the order regarding convening meeting of class of shareholders was passed whereas in the present case, no such issue was even raised at the time of passing of the first Motion Order dated 14.02.2024 , let alone any such contention being kept open. Therefore, in view of- (i) Rule 5(a) which make the determination of classes the exclusive domain of the NCLT; (ii) the strict timelines prescribed for challenging the order whereunder meetings were called; (iii) the full participation of the Appellants in the meetings; and (iv) SEBI itself in Regulation 37 prescribing the manner of reckoning the voting for the purposes of a delisting scheme, the Appellants are not entitled to challenge the convening of meeting of equity shareholders at this stage.

Further Sh Arun Kathpalia, learned senior counsel for the respondent argues : a. the subject matter of listing and delisting of securities falls exclusively within the domain of SEBI, being the securities market regulator. The SEBI Act is a standalone legislation on the subject matter of protection of the interests of investors and SEBI’s powers thereunder are not fettered by any other law including the Act (Sahara India Real Estate Corporation Limited and Others v. Securities and Exchange Board of India (2013) 1 SCC 1; Para 309). Regulation 37 was specifically introduced by SEBI to facilitate delisting through a scheme of arrangement keeping in mind, inter alia, the following two key considerations (Paras 2 and 3 of SEBI Consultation Paper dated 16 March 2020 and Para 2.3 of the SEBI Board Memorandum dated 29 September 2020): i. To enable listed holding companies that have listed subsidiaries with similar/same lines of business to achieve intended synergies by making such subsidiary a wholly owned subsidiary of the said holding company; ii. Keeping in mind that a full merger may not be favourable for certain listed holding and listed subsidiary companies owing to industry specific constraints such as license conditions; and b. Regulation 37 introduces a facilitative mechanism for a company’s right to delist its equity shares. Regulation 37(1) recognises and facilitates this right by making available the option of delisting through a scheme of arrangement for those companies. Regulation 37(2) provides for safeguards to protect public shareholders in the course of this exercise. The present Scheme is a scheme of delisting exactly as contemplated under and in terms of Regulation 37.

Admittedly one of the procedural requirements under Regulation 37(1) is the listed subsidiary company and its listed holding company should be in the “same line of business”. The expression “same line of business” has not been defined in the Delisting Regulations. In exercise of its delegated power, the SEBI has issued a SEBI Circular SEBI/ HO/ CFD/ DIL1/ CIR/ P/ 2021/ 0585 dated 6 July 2021 which provides a standard operating procedure for identifying the “same line of business” and provides inter alia that for companies to be in the same line of business the principal economic activities should fall under the same 3-digit Code prescribed by the National Industrial Classification Code, 2008 (NIC). Under the NIC; ICICI Bank and ICICI Securities have the same alphabetical code i.e. ‘K’ which relates to financial and insurance activities and hence are in similar lines of business. However, the Companies have different three-digit NIC Codes i.e., 661 (Monetary intermediation) for ICICI Bank and 641 (Activities auxiliary to financial service activities, except insurance and pension funding) for ICICI Securities. Given the extant regulatory restrictions applicable to ICICI Bank, it is not possible for ICICI Bank to have the same 3-digit NIC Code as ICICI Securities. In view of this, on 18 May 2023, ICICI Bank applied to SEBI seeking a limited relaxation from strict enforcement of the requirement in the procedural SEBI (SOP) regarding the 3-digit NIC Code on the ground the requirement is procedural and non- compliance with the same is beyond their control. The Relaxation was sought in terms of Regulations 42(1)(a) and 42(1)(c) of the Delisting Regulations. Regulation 42 of the Delisting Regulations set out SEBI’s power to relax strict enforcement of any provisions of the Delisting Regulations in the interest of investors and for development of the securities market, if SEBI is satisfied a) the requirement is procedural in nature; and b) the non-compliance was caused due to factors beyond the control of the acquirer.

Vide letter dated 20 June 2023, SEBI had granted the relaxation in exercise of its powers under Regulation 42(1)(a) and (c) subject to compliance with provisions of Regulation 37(2) of the Delisting Regulations. SEBI’s decision to grant such Relaxation is within the exclusive regulatory domain of SEBI as an expert regulator. The correctness of such decision is not justiciable in these proceedings and also not relevant for the purposes of the considering the Scheme and deciding the present appeals. It is not in dispute such relaxation has been granted by SEBI in exercise of its powers under Regulation 42(1) of the Delisting Regulations. Pertinently, it may be noted all the necessary safeguards such as that of issuance of shares of the holding company to the public shareholders of the subsidiary upon the delisting; minimum price protection for calculation of swap ratio to arrive at the number of shares of holding company to be issued to public shareholders and achieving 2/3^rd majority amongst public shareholders which are meant to protect public shareholders are all contained in Regulation 37(2). Each of these safeguards prescribed in Regulation 37(2) has been fully complied with in the present case. The limited relaxation granted by SEBI of a procedural requirement does not impact these safeguards in any manner, and in fact, the relaxation is subject to compliance of these safeguards. A table setting out such compliance was also provided to all the shareholders in the explanatory statement; as annexed at Pg. No. 199 of Appeal No. 334 of 2024.

We find there is no conflict between Section 230 of the Act and Regulation 37. There is no provision in Section 230 of the Act specifically requiring a separate meeting of public shareholders of a company. Section 230(1) refers to a scheme between a company and its members or class of members. Correspondingly, Section 230(3) refers to power of the Ld. NCLT to convene a meeting of members or a class thereof, as the case may be. At any rate, there is no specific provision in the Act specifically requiring a meeting of public shareholders in listed companies. Indeed, Section 230 only requires a meeting to be held between the members and the company or such classes of members and the company, where the scheme of arrangement is between the company and a specific class of members. In the present case, the scheme is a uniform scheme for all equity shareholders, namely a uniform scheme of delisting; the delisting in the present case being feasible only through the vehicle of a wholly owned subsidiary and not through an amalgamation in view of the extant regulatory regime applicable to ICICI Bank. In this regard, it may be relevant to note Para 21 (iv) of the judgment of Division Bench of Bombay High Court in Alstom DB where it has been held:

The Companies Act, prescribes only two classes of shareholders, i.e., preference and equity shareholders. Ordinarily, the courts does not favor a further sub-classification in the case of shareholders per Alstom(Supra). Thus the contention viz. the SEBI Regulation 37 itself recognizes the public shareholders constitute a separate class is wholly misconceived. As stated above, for the purposes of Section 230, class is a uniform class, being one of equity shareholders. SEBI in exercise of its exclusive jurisdiction over matters of listing and delisting imposes an additional safeguard in such schemes. In doing so, SEBI inherently recognizes while the class for which the meeting has to be called in such schemes of delisting under Regulation 37 is a single homogeneous class; separate accounts need to be maintained as an additional safeguard for the purpose of protecting interests of public shareholders. In view of this, there is absolutely no conflict between the provisions of the Act and Regulation 37 of the Delisting Regulations. The Act requires a meeting of equity shareholders in which approval by 3/4^th majority is to be obtained and Regulation 37 introduces an additional safeguard which requires in such meeting the public shareholders vote approving the Scheme ought to be at least by 2/3^rd majority i.e., 66% of the votes cast by public shareholders. Thus we find the Scheme is a delisting scheme, as contemplated under the provisions of Regulation 37 of the Delisting Regulations. The provisions of Regulation 37 thus ought to be given full effect along with the provisions of the Act especially when there is nothing inconsistent between the two statutes.

Now let us consider the rationale for threshold of 66% amongst public shareholders in Regulation 37 of Delisting Regulations. Admittedly the voting threshold under the Act for a scheme of arrangement is 3/4^th majority in value of the equity shareholders. In addition to this, the voting threshold for schemes proposed by listed companies has been prescribed by SEBI in its Master Circular on Scheme of Arrangement by Listed Entities. The Scheme Circular inter alia prescribes listed companies for certain schemes involving the promoter group should obtain consent by simple majority i.e., 51% of public shareholders, in addition to the regular requirement of 3/4^th majority i.e., 75% of all shareholders under Section 230 of the Act. Further in case of a delisting scheme under Regulation 37, SEBI has prescribed an additional safeguard in the form of requirement of 2/3^rd majority i.e., 66% which is greater than the requirement of simple majority in the Scheme Circular to ensure protection of public shareholders. The same is to ensure the voting threshold is consistent with the threshold stipulated under Regulation 11 of the Delisting Regulations for delisting through exit mechanism. This further ensures the threshold for delisting is the same whether in case of a delisting under Regulation 11 or Regulation 37. Regulation 11 of the Delisting Regulations stipulates a delisting can be carried out if all shareholders approve the delisting proposal by 75% and within such approval, the number of public shareholders who vote in favor of the delisting proposal should be at least twice the number of public shareholders who have voted against i.e. 2/3^rd majority viz. 66% in favor of delisting.

This rationale is clearly borne out from the board memorandum dated 29 September 2020 issued by SEBI whereby it proposed the alternate mode of delisting as currently provided under Regulation 37 of the Delisting Regulations. In the memorandum, the board also took note of the fact, as regards a listed subsidiary, there may be situations where the promoter / promoter group may be having a major holding in the listed subsidiary and if the voting were to be capped at majority or minority, it may defeat the purpose of voting. It was also noted the requirement of two times voting was also in line with the Delisting Regulations which required any entity desirous of delisting could delist only if votes cast by public shareholders in favor of the proposal amount to at least twice the number of votes cast by public shareholders against it. Thus SEBI after careful consideration of all the aforesaid factors stipulated the requirement of a vote of 66% of public shareholders in Regulation 37(2)(d). There are also other safeguards in Regulation 37(2) which protect public shareholders, in particular – the public shareholders receive listed equity shares of the listed holding company thereby ensuring continued marketability of their security and price for the purposes of swap ratio calculation being at least equal to 60-day (Volume Weighted Average Price (VWAP) of the shares concerned.

Notably, while introducing Regulation 37, SEBI was well aware that regulation 37 is to be implemented by way of a scheme of arrangement under Section 230 of the Act and was mindful of the provisions under Section 230. Accordingly, it cannot be suggested the market regulator lost sight of the fact the process would be undertaken within the statutory framework of Section

The public shareholders thus do not constitute a separate class as no separate scheme is being offered to the public shareholders.

The cancellation of shares is not a treatment accorded to the public shareholders voluntarily by ICICI Securities Ltd. It is only a consequence that follows a delisting and is a specific stipulation under Regulation 37(2)(a). In any delisting (whether through a scheme or otherwise), unlisted shares are either cancelled or acquired by an acquirer as the public shareholders cannot be compelled to hold unlisted shares which have no marketability.

To conclude, we are of the view the Ld. NCLT had correctly appreciated the provisions of Section 230 and Regulation 37 of the Delisting Regulations and has applied the said provisions harmoniously to the facts and circumstances at hand. The Ld. NCLT’s finding viz no separate meeting of public shareholders is required in the circumstances, is in consonance with the object and purpose of Regulation 37 and in no way conflicting to the provisions of Section 230 of the Act. If the Appellants’ submission regarding a separate meeting is accepted, then every scheme under Regulation 37 will need to be approved by meeting of separate class of shareholders (promoters and public) thereby rendering the provisions of Regulation 37(2)(d) completely otiose, as has also been observed by the Ld. NCLT in its impugned order.

Arguments were raised by the appellants upon Letters of SEBI. However, in such letters SEBI has nowhere stated the voting would stand invalidated on account of an Outreach Initiative nor has SEBI referred to any circumstance which had invalidated the votes cast by the shareholders of ICICI Securities. As alleged the Outreach was allegedly initiated in view of the systematic campaign started by some of the minority shareholders including, one of the Appellants. However, we find the SEBI Letter, when it refers to the Outreach Initiative being inappropriate, can only be said to have taken exception to the mode of carrying out the outreach and not the outreach per se, nor even the objective of such outreach. Most notably, as regards impact of the outreach on the voting, SEBI in its written submissions dated 26 November 2024 filed before this Tribunal has categorically noted-

The aforesaid clarification by SEBI makes it abundantly clear SEBI found no illegality whatsoever in the voting process and the Appellant’s contention in this regard is totally unsubstantiated and baseless.

Now in regard to differential treatment we find the promoter shareholder in case of scheme under the Regulation 37 is the holding company itself. Regulation 37 contemplates such holding company becomes a 100% shareholder of the subsidiary company upon the delisting becoming effective i.e., the subsidiary should become a wholly owned subsidiary of the holding company, hence, there is no occasion or necessity of providing any exit option. As regards the public shareholders, they receive listed shares of the holding company upon implementation of the Scheme. There is no requirement of providing any separate exit option to such shareholders under the Scheme. This is because holding company itself would always be a listed company whose shares are frequently traded. In other words, the public shareholders, at all times, have the ability and right to exit by selling their shares i.e., at the present stage when they currently own listed shares of the subsidiary company i.e. ICICI Securities and also after the Scheme is implemented when they will be issued listed shares of the holding company i.e. ICICI Bank. In this regard, SEBI board memorandum dated 20 September 2020 is referred to, the relevant extract of which is as below:

Now coming to challenge qua valuation and swap ratio, we find the joint valuation report has been prepared by 2 (two) independent registered valuers who adopted a comprehensive methodology by applying a combination of internationally recognized and commonly used methods. The valuation was supported by fairness opinions issued by two SEBI registered merchant bankers. We find the valuation of ICICI Securities is in accordance with the minimum requirement prescribed under Regulation 37(2)(j) of the Delisting Regulations i.e., per share valuation of the listed subsidiary shall be at least equal to 60-day Volume Weighted Average Price (VWAP)

It is settled law the courts should not enquire into the issue of valuation of shares as the same is a question of fact based on technical and complex considerations and should be left to the experts in the field of accountancy, as has been held in G.L. Sultania & Anr. v. Securities and Exchange Board of India (2007) 5 SCC 133 and Miheer H. Mafatlal v. Mafatlal Industries Ltd. (1997) 1 SCC 579).. Hence objections to this regard are all rejected.

Lastly after examining the Scheme we also need to find the entitlement of appellants to object the Scheme. The Appellants i.e., Quantum Mutual Fund (Quantum) does not meet the minimum threshold of 10% shareholding required to be entitled to object to a scheme, prescribed under the proviso to Section 230(4) of the Act. As on 20 March 2024 (being the cut-off date under the Scheme), and Quantum held 2,86,992 shares of ICICI Securities shares i.e., 0.08% shareholding. Now, section 230(4) of the Act is a mandatory provision, and the usage of the word ‘shall’ followed by the word ‘only’ in the proviso to Section 230(4) reflects the legislative intent to mandatorily exclude all such person who do not meet the threshold prescribed. Notably, the erstwhile Companies Act, 1956 did not provide for a threshold for objecting to a scheme. Subsequently, the Report of the Expert Committee on Company Law dated 31 May 2005 observed that shareholders holding miniscule shareholding raised frivolous objections with the objective of stalling the implementation of a scheme which was otherwise approved by the requisite majority of shareholders. Accordingly, the threshold in proviso to Section 230(4) was introduced to prohibit objectors like the appellants from stalling the Scheme.

Hence, as has been correctly held by Ld. NCLT, the Appellants are not entitled to object to the Scheme and not entitled to maintain an appeal as an ‘aggrieved person’. Consequently, in view of proviso to Section 230(4) too, the present appeal is also not maintainable at the instance of the appellants. Notably, the Scheme has been approved by 93.82% of equity shareholders and 71.89% of public shareholders. The Appellants who hold merely 0.08% shareholding are depriving the majority shareholders of the benefits of the Scheme by filing frivolous objections and derailing its implementation. This militates the very principle of shareholder democracy.

In conclusion, we are of the view that, firstly, the application is not maintainable under proviso of Section 230(4) of the Companies Act, 2013 as the Appellants do not have the requisite shareholding, and secondly, even on merits, as discussed above, both the appeals fail. We do not find any reason to interfere in the order of Ld. NCLT and hence both the appeals viz. Company Appeal (AT) No.333 of 2024 and Company Appeal (AT) No.334 of 2024 are dismissed herewith. All pending application(s) if any, are closed. No order as to costs.