'One Stage Too Early': NCLAT Sets Aside NCLT Rejection Of HNPCL Merger With GOCL At First Motion Stage

The National Company Law Appellate Tribunal (NCLAT) Chennai has set aside an order of the National Company Law Tribunal (NCLT) Amravati Bench rejecting the first motion application for the proposed merger of Hinduja National Power Corporation Ltd. (HNPCL) with GOCL Corporation Ltd.

The appellate tribunal held that the NCLT considered the merger scheme too early. It should not have interfered before the shareholders and creditors took a decision on the scheme.

Judicial Member Justice N. Seshasayee and Technical Member Jatindranath Swain observed:

“Indeed, to compromise or to amalgamate or demerge is the business decision of the companies involved and therefore, it will be too premature a stage when tribunals may interfere with the process even before the shareholders and the creditors take a decision on the scheme of amalgamation.”

HNPCL is an unlisted public company incorporated in 1994. It is engaged in thermal power generation and in the construction, operation and transmission of facilities. GOCL is a listed public company incorporated in 1961 and is engaged in manufacturing electronics, explosive devices, energetics and real estate development.

The boards of both companies approved the merger scheme on December 15, 2025. The scheme fixed April 1, 2025 as the Appointed Date.

Since GOCL is a listed company, the draft scheme was submitted to the stock exchanges. The SEBI observation report was received on May 20, 2026, followed by BSE's observation letter on the same day and NSE's on May 22, 2026.

The companies then filed the first motion application before the NCLT on June 22, 2026. They sought directions for convening the shareholders' meeting and appropriate directions regarding meetings of creditors.

The NCLT rejected the application on three grounds. It found that the Appointed Date was more than a year before the filing and lacked adequate justification under MCA General Circular No. 09/2019.

It also pointed to discrepancies in the financial statements and documents filed with the scheme. The NCLT further held that the application had been filed belatedly.

The companies argued that the financial discrepancies arose because audited financial statements for the year ended March 31, 2025 were compared with provisional financials for the year ended March 31, 2026. The latter had been prepared for the scheme petition.

They also contended that MCA General Circular No. 09/2019 was directory and not legally binding to invalidate the scheme. They submitted that there were commercial justifications for fixing April 1, 2025 as the Appointed Date.

The companies further argued that there was no delay on their part. They submitted that GOCL had to obtain the mandatory observations from SEBI and the stock exchanges before approaching the NCLT.

The SEBI observation report was received on May 20, 2026. BSE issued its observation letter on May 20 and NSE on May 22. The companies filed the scheme application on June 22, 2026.

The NCLAT held that the companies could not be blamed for waiting for the regulatory observations. It noted that the first-stage application could not be made without the observations of the stock exchanges based on SEBI's observations, as required under Regulation 37 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

The bench also considered MCA General Circular 9/2019. The circular states that where the Appointed Date is significantly ante-dated beyond a year from the date of filing, the justification must be specifically brought out in the scheme and should not be against public interest.

The NCLAT noted that, for listed companies, the time SEBI would take to issue its report cannot be anticipated when the scheme is first uploaded. The bench observed that any delay arising from SEBI's scrutiny would be known only after the scheme had been uploaded.

The bench held that even if there was a delay, shareholders and creditors could consider its effect. It observed that the tribunal should not interfere with the commencement of the amalgamation process except on issues concerning public interest or the legalities of the scheme.

The bench observed that the matter could be considered at the second stage. At that point, regulators and tax authorities, including the income tax department, would also assist the tribunal.

“If delay in filing the petition has affected the valuation, it also can be weighed during the second stage,” the bench observed.

It described the NCLT's decision to dismiss the application as “one stage too early.”

The NCLAT allowed the appeal and set aside the NCLT's July 30, 2026, order. It directed the NCLT to appoint the Chairman and Scrutinizers for the meetings and fix their remuneration.

The NCLT was also directed to schedule the meetings within a week and, in any event, no later than October 5, 2026.