A tribunal asked only to let shareholders and creditors vote on a merger ended up deciding the merger was flawed before anyone got to vote at all. The NCLAT's Chennai Bench has corrected that sequence, reviving the proposed merger of Hinduja National Power Corporation Limited into GOCL Corporation Limited after the NCLT's Amravati Bench had thrown out the scheme at the earliest possible stage.
The timeline mattered to how the appeal turned out. SEBI's observation report on the scheme came in on 20 May 2026, with BSE's observation letter arriving the same day and NSE's two days later. HNPCL and GOCL filed their first motion application before the NCLT on 22 June, roughly a month after clearing the exchange and regulatory observations. The NCLT nonetheless rejected the application on 30 July, on two grounds: that the scheme's appointed date was more than a year before the filing date without adequate justification under the Ministry of Corporate Affairs' General Circular 09/2019, and that the companies' financials showed unexplained discrepancies.
On appeal, the companies argued that both objections were raised too soon and rested on an incomplete picture. The delay between the appointed date and the filing, they said, was explained precisely by the time taken waiting for SEBI, BSE and NSE to clear the scheme, a wait that was neither the companies' fault nor unusual for a listed-company merger of this size. The NCLAT agreed, finding it unfair to penalise the companies for a regulatory timeline that was largely out of their hands.
The Bench went further than simply disposing of the delay point. It held that a merger, compromise or demerger scheme is fundamentally a commercial decision belonging to the companies proposing it, and that judicial scrutiny at the first motion stage, before shareholders and creditors have even had the chance to consider and vote on the proposal, is premature. Questions of public interest and legality, the tribunal said, properly belong at a later stage of the process, once the scheme has been placed before the people whose money and claims are actually affected by it.
That reasoning let the NCLAT sidestep a detailed examination of the financial discrepancies the NCLT had flagged. Rather than resolve whether those discrepancies were real or explainable, the appellate bench simply held that first motion was not the moment to adjudicate them. Objectors, including the Regional Director, remain free to raise substantive concerns about the scheme's fairness and legality once it comes up for sanction after shareholder and creditor approval.
Setting aside the NCLT's order, the NCLAT directed the Tribunal to convene the required meetings of shareholders and creditors, fixing a tight outer limit: the meetings were to be scheduled within a week of the order and held no later than 5 October 2026. The NCLT Amravati Bench followed through on 8 October, directing GOCL to convene meetings of equity shareholders and unsecured creditors on the scheme of merger by absorption.
For companies working through the first and second motion structure under Sections 230 to 232 of the Companies Act, the ruling draws a clear boundary around what a tribunal can do at the threshold stage. Delay caused by waiting on SEBI or stock exchange observations is not, on its own, a ground to kill a scheme before it is even put to a vote, and financial discrepancies flagged by the registry are a matter for the sanction hearing, not for summary rejection at first motion. Promoters structuring group restructurings with appointed dates that predate regulatory clearance by well over a year now have an appellate precedent to point to if a tribunal balks at the gap. The ruling also has something to say to registries and regional directors who raise financial-discrepancy objections at the first motion stage without first seeking a fuller explanation from the companies concerned. By leaving those objections open for the sanction hearing rather than resolving them one way or the other, the NCLAT effectively told objecting authorities that an unexplained discrepancy flagged early is not, by itself, a basis to stop a scheme from reaching shareholders and creditors at all. The objection survives to be argued properly later, with the benefit of whatever explanation the companies choose to place on record once the scheme returns for sanction. Promoters of listed companies pursuing similar group restructurings should take two things from this order. First, document the regulatory timeline carefully, since the gap between SEBI, BSE and NSE observations and the eventual first motion filing is exactly what rescued this scheme from outright rejection. Second, treat a first motion rejection on discrepancy grounds as appealable rather than final, since the NCLAT has now shown a clear preference for letting shareholders and creditors vote first and leaving detailed financial scrutiny for the stage where objectors can test the scheme on a complete record.