Section 232(6) of the Companies Act, 2013 requires the scheme to clearly indicate an appointed date from which it shall be effective, and the scheme shall be deemed to be effective from such date and not a date subsequent to the appointed date. The appointed date is typically a retrospective date, often the first day of the financial year in which the scheme is proposed. The question that arises is whether the NCLT can change the appointed date, and if so, on what basis.
The Marathon Nextgen Ruling
The NCLAT, in Marathon Nextgen Townships Pvt. Ltd. v. Regional Director, held that the NCLT had erred in unilaterally changing the appointed date from 1 April 2019 to 1 April 2020 without providing cogent reasons. The NCLAT observed that the alterations in the appointed date would affect the calculation and would have serious financial implications, and that where the parameters for sanctioning the scheme are complete, the Tribunal would only be left with supervisory jurisdiction. The NCLAT restored the appointed date of 1 April 2019.
The MCA Clarification
The MCA has clarified that the appointed date can be a date preceding the filing of the scheme application with the NCLT. Where the appointed date precedes the date of filing by more than one year, specific justification must be brought out in the scheme. The clarification recognises the retrospective character of the appointed date, but it requires the company to justify a longer retrospectivity.
The Limits of the Power
The NCLT’s power to change the appointed date is a part of its supervisory jurisdiction, not its commercial jurisdiction. The Tribunal can change the date where the proposed date is not permissible under the law, where the date is inconsistent with the scheme, or where the date is not supported by the requisite justification. The Tribunal cannot change the date merely because it believes that a different date would be more appropriate, and it cannot use the power to alter the commercial terms of the scheme.
The Practical Consequences
The appointed date determines the accounting treatment, the tax position, and the financial statements of the companies. A change in the appointed date can affect the profits, the reserves, and the tax liability. The company should therefore select the appointed date with care, and it should provide the justification required by the MCA’s clarification.
A technically sound scheme specifies the appointed date with precision, explains the rationale for the retrospectivity, and ensures that the date is consistent with the accounting and tax treatment. A scheme that leaves the appointed date ambiguous invites the Tribunal’s intervention.
Call to Action
Anuj Desai & Associates advises companies on the appointed date in an NCLT scheme—from the selection of the date and the MCA justification to the NCLAT’s Marathon Nextgen principle and the accounting and tax consequences. If your scheme involves a retrospective appointed date, we can help you justify it.
📧 office@anujdesaiassociates.com
📞 9619456656
🌐 https://anujdesaiassociates.com
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