The Source of the Power
The NCLT’s power to modify a scheme derives from its jurisdiction under Sections 230–232 to sanction the scheme “with or without modification.” The power is not unlimited. The Tribunal may modify the scheme to bring it within the law, to protect the interests of a dissenting class, or to remove a provision that is prejudicial to the public interest. It cannot modify the scheme to change the commercial bargain that the parties have struck.
The Illegality Modification
The most common modification is the deletion or alteration of a provision that is illegal or contrary to public policy. For example, the NCLT may modify a scheme that seeks to extinguish statutory liabilities or that bypasses a regulatory approval. The modification is intended to make the scheme lawful, not to improve it commercially.
The Stakeholder Protection Modification
The NCLT may modify a scheme to protect a stakeholder who would otherwise be prejudiced—for example, by requiring the transferee to discharge a contingent liability or to preserve the employees’ rights. The modification must be connected to a finding of prejudice, and it must be proportionate.
The Limits
The NCLT cannot modify a scheme to impose a term that the parties did not agree to and that is not necessary to cure an illegality or to protect a stakeholder. A modification that changes the consideration, the share exchange ratio, or the allocation of assets is vulnerable on appeal. The Tribunal’s role is to sanction or reject, not to design.
Call to Action: For scheme modification application, illegality cure, or NCLT modification strategy, contact office@anujdesaiassociates.com or 9619456656. Website: https://anujdesaiassociates.com. LinkedIn: linkedin.com/in/ca-anuj-desai-122547230.