A compromise or arrangement under Sections 230–232 of the Companies Act, 2013 is a statutory mechanism that allows companies to reorganize their business by transferring parts of an undertaking, merging entities, or absorbing assets and liabilities. Courts approve the scheme, and once sanctioned, it becomes binding on all stakeholders.
The recent NCLT Chandigarh Bench order involving multiple Haldiram group entities, illustrates how a demerger and merger can be structured within a single composite scheme.
Entities in the Scheme-
The scheme has three categories of entities:
A. Demerged Companies i.e. Petitioner Company No. 1 and Petitioner Company No. 2 who are demerging their specific undertakings.
B. Transferor Companies (merging) i.e. Petitioner Companies 4, 5, 6 and 7
C. Resulting / Transferee Company i.e. Petitioner Company No. 3 in which four companies are merging and two entities are demerging their undertakings.
This means:
Two companies are demerging specific undertakings and Four companies are merging into the resulting company and All landing finally into Petitioner Company No. 3, which is the resulting/holding platform.
What is being transferred?
(A) Demerger
Petitioner Company No. 1 and No. 2 are called “Demerged Company No. 1” and “Demerged Company No. 2”. Each of them is carving out a separable business undertaking (a going concern) and transferring it to the Resulting Company (Petitioner No. 3).
A demerged undertaking normally includes, assets, liabilities, contracts, employees, licence, permits etc and with the NCLT approval, the transfer of undertaking occurs by operation of law and going Concern Left Behind, wherein, after demerger the remaining undertaking continues to stay with Demerged Company 1 and 2. They keep running their core or residual business.
(B) Merger / Amalgamation
Petitioner Company Nos.4, 5, 6 and 7 are labelled as Transferor Companies in the scheme and all these companies are being merged into the Resulting Company** (Petitioner 3). This is a typical amalgamation, whereunder, all assets and liabilities of Transferor Cos. pass to the Resulting Co and those companies stand dissolved without winding up.
Nature of Compromise / Arrangement
The essence of compromise or arrangement here that no money is exchanged and consideration is shares issued to the shareholders of the demerged and transferor companies. The transfer happens as a going concern and NCLT approval ensures that contracts vest, employees transfer, licenses continue, no stamp duty in many jurisdictions and Tax neutrality under Section 2(19AA) is available if conditions are met. This is a statutory restructuring rather than a sale and it may the part of larger planning to sell part stake to the private equity in the time ahead.
Conclusion
The Haldiram scheme shows how demerger and amalgamation can be combined in a single court-approved arrangement to reorganize a diversified business. The resulting platform company becomes the anchor holding consolidated operations, while the demerged companies retain residual businesses. This is an effective group restructuring strategy under Section 230–232, demonstrating that compromise or arrangement is not only for debt or insolvency but it is also a corporate engineering tool for market leadership.
-Dixit Mehta, Ductus Legal
(You can Read NCLT Order here: file:///C:/Users/DUCTUS%20QU%20LEGAL/Downloads/1764860602_haldirams-634572-repaired.pdf)
DUCTUS EDGE 