ABC Limited is an unlisted public Company, is part of ABC group of Companies with its business ranging from paper to pharmaceutical manufacturing. The Company's Pharmaceutical manufacturing division was under scanner of

The ground of rejection by NCLT is not justified. The present case is similar to the Case of Mel Windmills Pvt. Ltd. v. Mineral Enterprises Limited & Anr [NCLAT] Company Appeal (AT) No. 04 of 2019 [Decided on 27/05/2019] wherein the NCLT Bengaluru Bench declined to sanction the scheme of demerger on the ground that several issues were pending finalization and certain investigations were pending in relation to the business of the demerged company. Reference Section: Section 230 of the Companies Act, 2013 Section 230(1) states that the Tribunal may, on the application of the company, order a meeting of the creditors or class of creditors, or of the members or class of members, as the case may be, to be called, held and conducted in such manner as the Tribunal directs. As per Section 230 (2), the company or any other person, by whom an application is made under section 230(1), shall disclose to the Tribunal by affidavit all material facts relating to the company, such as the latest financial position of the company, the latest auditor's report on the accounts of the company and the pendency of any investigation or proceedings against the company. Thus, the Tribunal should have first ordered a meeting of creditors/members and if consent has been accorded in such meeting of creditors/members, then it can go into the merits of proposed scheme of demerger.