NCLAT clears merger of Indiabulls Real Estate and Embassy Group, overturns NCLT order

The NCLAT ruling clears the way for IBREL and Embassy Group to finalize the merger and pursue their goal of creating a consolidated, nationwide real estate platform.

In a significant relief for Indiabulls Real Estate (IBREL) and Embassy Group, the National Company Law Appellate Tribunal (NCLAT) has approved their long-pending merger, overturning a previous order by the National Company Law Tribunal (NCLT) Chandigarh that stalled the process, according to a report by PTI.

A two-member NCLAT bench set aside the May 2023 NCLT order, which had withheld the amalgamation despite obtaining all regulatory clearances from the Competition Commission of India (CCI), stock exchanges, the Registrar of Companies (RoC), and the approval of shareholders and creditors, the PTI report added.

"We set aside the impugned order of NCLT, Chandigarh, and allow the prayer to sanction the scheme of amalgamation between the appellants—Indiabulls Real Estate, Embassy One, and NAM Estates," the bench stated.

The merger had been delayed for over 18 months due to objections raised by the Income Tax Department regarding valuation and the share swap ratio under the scheme. However, the appellate tribunal ruled that the NCLT erred in interfering with the valuation conducted by experts using the universally recognized Discounted Cash Flow Method.

According to the PTI report, The NCLAT said that the commercial wisdom of the shareholders, creditors, and boards of directors involved should take precedence in such matters. The tribunal observed that the Income Tax Department, during the proceedings, had deferred the final decision to the tribunal's discretion.

Indiabulls Real Estate, now known as Equinox India Developments, assured the appellate tribunal that it would bear all tax liabilities arising from the merger. The NCLAT also instructed the companies involved to ensure full compliance with statutory requirements post-amalgamation.

The merger aims to create a Pan-India real estate company by combining IBREL's operations in North India with NAM Estates and Embassy One Commercial Property Developments' (EOCPDPL) presence in South India.

The scheme received overwhelming support, with nearly 100% of shareholders and creditors approving it. Regulatory bodies, including the CCI, SEBI, BSE, NSE, and the Ministry of Corporate Affairs, raised no objections. Statutory auditors confirmed compliance with Indian Accounting Standards.

The Chandigarh bench of the NCLT had previously rejected the merger over concerns about valuation discrepancies, particularly related to the Cornerstone Project. However, the NCLAT noted that the profit-sharing ratio for the project had been revised to address these discrepancies, ensuring no variation in cash flow.

(With inputs from PTI)