Authority: National Company Law Tribunal, Hyderabad Bench - II

Order Date: 16 June 2026

Case Overview

The National Company Law Tribunal (NCLT) Hyderabad Bench heard two interconnected applications (IA(CA)/66/2026 and IA(CA)/67/2026) filed by four companies seeking recall of final orders dated 16 October 2025 that had sanctioned their demerger schemes under Sections 230-232 of the Companies Act, 2013.

The applicants were:

  • Hyderabad Securities Private Limited (Demerged Company)
  • Sri Ramachandra Builders Private Limited (Resulting Company-1)
  • Sri Moulika Vishwa Builders Private Limited (Resulting Company-2)
  • Uma Estates and Infrastructure Private Limited (Demerged Company)

All companies shared the same registered office at 8-2-703/A/6/B Road No.12, Banjara Hills, Hyderabad, and were represented by Director Mr. G. Sridhar Reddy.

The applicants sought recall of the sanction orders on grounds that subsequent evaluation revealed the schemes were no longer commercially feasible or desirable. They argued that: (1) the assets may not qualify as an "undertaking" under Section 2(19AA) of the Income Tax Act, 1961, potentially causing loss of tax neutrality and exposure to capital gains tax and stamp duty; (2) certain assets of Hyderabad Securities had been sold during the intervening period, materially changing the asset profile; and (3) the transfer of remaining housing projects/assets was no longer commercially warranted. The applicants contended that modification under Section 231 was not feasible as the very basis of the schemes had undergone material change.

The Tribunal examined whether it possessed jurisdiction to recall final orders sanctioning schemes merely because parties subsequently found them commercially unviable. The Tribunal extensively analyzed legal precedents, including NCLAT's decision in Union Bank of India v. Dinakar T. Venkatasubramanian & Ors. (affirmed by the Supreme Court) and Supreme Court judgments in Budhia Swain & Ors. v. Gopinath Deb & Ors. and Greater Noida Industrial Development Authority v. Prabhjit Singh Soni & Anr., which delineate the limited circumstances for exercising recall powers.

The Tribunal distinguished between review (re-examining merits) and recall (addressing procedural defects), noting that the Companies Act, 2013 does not confer review powers on NCLT. Rule 11 of the NCLT Rules, 2016 preserves inherent powers but only for limited circumstances such as: orders obtained by fraud or misrepresentation; procedural errors in delivery; orders passed without jurisdiction; violation of natural justice; or affecting non-parties without notice.

The Tribunal found that the applicants' grounds—commercial reassessment, tax implications, and changed business circumstances—did not fall within these limited parameters. The applicants did not allege fraud, misrepresentation, jurisdictional defects, or violation of natural justice in the original sanction proceedings. The Tribunal emphasized that a sanctioned scheme acquires statutory force and cannot be recalled merely due to subsequent commercial reconsideration by the parties.

Final Outcome

The Tribunal dismissed both applications (IA(CA)/66/2026 and IA(CA)/67/2026), upholding the finality of the demerger scheme sanction orders dated 16 October 2025. No costs were awarded.

Topics: Corporate Restructuring, Judicial Recall Powers, Tax Implications