Mergers, demergers and most other restructurings of Indian companies pass through one procedure: a scheme of arrangement sanctioned by the Hon'ble National Company Law Tribunal under Sections 230 to 232 of the Companies Act, 2013. It runs in two motions, an application to convene meetings and a petition for sanction, with regulators heard in between, and ends with an order that is filed with the Registrar of Companies and stamped in Maharashtra. This article explains when a scheme is used, what is prepared before filing, each stage before the Hon'ble NCLT Mumbai Bench, what the final order does, the stamp duty it attracts, and the fast-track alternative.
Sections 230 to 232 and the 2016 Rules
Section 230 allows a company, a creditor, a member or, in a winding up, the liquidator to apply to the Tribunal for an order convening meetings of creditors or members, or a class of them, to consider a compromise or arrangement. Section 232 applies where the scheme is for the reconstruction of a company or the amalgamation of two or more, which includes a demerger, and adds requirements: a draft scheme adopted by the directors and filed with the Registrar, a board report on the effect of the scheme on each class of stakeholder, setting out the share exchange ratio, the valuer's report, and a supplementary accounting statement where the last audited accounts are more than six months old (Section 232(2)). The Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 prescribe the forms, notice periods and sequence. The provisions came into force on 15 December 2016, when the jurisdiction moved from the Hon'ble High Courts.
When a scheme is used
A scheme is a flexible instrument. It is used for an amalgamation, where one or more transferor companies merge into a transferee and are dissolved without winding up; a demerger, where an identified undertaking is hived off to a resulting company; a reduction of share capital as part of an arrangement, which Section 230(2)(c) contemplates within a scheme rather than by a separate application under Section 66; a compromise with creditors, a takeover offer under Section 230(11), and a group reorganisation that moves businesses between subsidiaries or collapses tiers.
Its advantages are that the order transfers the undertaking, its property, liabilities, contracts, licences and pending proceedings by operation of law (Section 232(4)); that it binds every creditor and member once sanctioned; and that an amalgamation or demerger that meets the income-tax definitions of those terms (carried forward from the 1961 Act into the Income-tax Act, 2025, in force from 1 April 2026) is tax neutral, with accumulated losses carried forward subject to the conditions and time limits in that Act. The cost is time, publicity and regulatory scrutiny.
Preparing the scheme: board approval, valuation and the exchange ratio
The scheme is drafted by the companies: it defines the undertaking, the appointed date, the consideration, the treatment of employees, contracts, proceedings and taxes, the accounting treatment and the conditions to effectiveness. Before filing, the board of each company approves the draft, adopts the report required by Section 232(2)(c) and authorises the application. Where shares are to be issued, a registered valuer under Section 247 values the companies and recommends the share exchange ratio, and the board's report must specify any special valuation difficulties; a listed company also needs a merchant banker's fairness opinion and the stock exchanges' no-objection. Where no shares are issued, as on the merger of a wholly owned subsidiary into its parent, the Mumbai Bench ordinarily accepts a statement that valuation is not required. The auditor of each company certifies that the accounting treatment conforms to the standards under Section 133 (the provisos to Section 230(7) and Section 232(3)), and lender consents are obtained where the facility agreements require them.
The first motion: convening or dispensing with meetings, and notices to regulators
The first motion is an application under Section 230(1) and Rule 3, in Form NCLT-1, with a notice of admission in Form NCLT-2, an affidavit in Form NCLT-6, the scheme and the disclosures required by Section 230(2) (material facts, financial position, auditor's report, pending investigations and any capital reduction). Companies within the same Bench's jurisdiction may file jointly (Rule 3(2)).
At the hearing the Tribunal gives the directions in Rule 5: which classes are to meet, the chairperson and scrutiniser, the quorum, the notice and the manner of voting. It may also dispense with meetings. Section 230(9) allows a meeting of creditors to be dispensed with where creditors holding at least ninety per cent in value have consented by affidavit. For members the section is silent; the Tribunal exercises a discretion, and the Mumbai Bench has commonly dispensed with the meeting of a closely held company whose members have all given consent affidavits. Practice is not uniform.
The order also directs notice in Form CAA-3 to the authorities named in Section 230(5) and Rule 8: the Central Government through the Regional Director, Western Region, the Registrar of Companies, Mumbai (or Pune for companies registered there), the Official Liquidator, the income-tax authority for each company and, where relevant, the Reserve Bank of India, SEBI and the stock exchanges, the Competition Commission and any sectoral regulator. Each has thirty days from receipt to make representations, failing which it is presumed to have none. In practice the Regional Director's report, often carrying the Registrar's observations, and the Official Liquidator's report on the transferor's books each need an affidavit in reply, and that is what takes the time.
Meetings, voting and the three-fourths threshold
Notice of each meeting is sent individually to every creditor, member and debenture-holder at least one month before the meeting (Rule 6), in Form CAA-2, with the explanatory statement required by Section 230(3) (the scheme, the valuation report, the board's report and the effect on each class). It is advertised at least thirty days before the meeting in an English and a Marathi newspaper and on the company's website (Rule 7).
A class approves the scheme if a majority of the persons voting, representing three-fourths in value, vote in favour (Section 230(6)): a dual test of number and value. Objections may be raised only by a person holding at least ten per cent of the shareholding or five per cent of the outstanding debt (proviso to Section 230(4)). The chairperson reports the result in Form CAA-4 within three days of the meeting or the time the order fixes (Rule 14).
The second motion: petition, hearing and objections
Within seven days of filing the chairperson's report, the company presents a petition for sanction in Form CAA-5 (Rule 15). The Tribunal fixes a hearing and directs notice to the regulators and any objector, with an advertisement at least ten days before the hearing (Rule 16). At the hearing it considers the regulators' reports and the company's replies, any objection, and whether the procedure was followed, the majorities obtained and the scheme fair, reasonable and lawful. It does not substitute its own commercial judgment for that of the shareholders (Miheer H. Mafatlal v. Mafatlal Industries, 1996), but it can decline sanction if the exchange ratio is unsupported, creditors are prejudiced, the accounting treatment does not comply or the scheme is a device to avoid tax or a statute.
The Tribunal's jurisdiction over a scheme is supervisory, not appellate. It checks that the process was fair and the law observed; the commercial wisdom belongs to the shareholders.
The final order, Form INC-28, appointed date and effective date
The sanction order is in Form CAA-6 for an arrangement and Form CAA-7 for a merger, and provides for the matters in Section 232(3): transfer of the undertaking, allotment of shares, continuation of proceedings, dissolution of the transferor without winding up and the combination of authorised capital. A certified copy must be filed with the Registrar in Form INC-28 within thirty days of receipt (Section 230(8) and Section 232(5)); on that filing the transfer takes effect and the transferor is dissolved without winding up. A statement of compliance in Form CAA-8 is filed annually until the scheme is completed (Section 232(7)).
The scheme must state an appointed date from which it takes effect (Section 232(6)); the effective date is the date of the last filing of the order with the Registrar. The Ministry's General Circular 09/2019 of 21 August 2019 confirmed that the appointed date may be a calendar date or tied to an event, may precede the filing, and should be justified if it precedes filing by more than a year. Between the two dates the transferor carries on the business in trust for the transferee. The appointed date decides which accounts are consolidated, the year in which losses pass and the value on which stamp duty is assessed.
Stamp duty on the order in Maharashtra
An order sanctioning a scheme that transfers property is an instrument of conveyance, and the Hon'ble Supreme Court held in Hindustan Lever v. State of Maharashtra (2004) that it is chargeable with stamp duty. In Maharashtra the charge is under Article 25(da) of Schedule I to the Maharashtra Stamp Act, 1958, which covers an order of the Tribunal sanctioning an amalgamation, merger, demerger, arrangement or reconstruction, and a confirmation under Section 233. The duty is a percentage of the market value of the shares issued or allotted under the scheme together with any other consideration, subject to a ceiling fixed by reference to the market value of the transferor's immovable property in Maharashtra, with separate provision for a demerger. The certified order is lodged for adjudication with the Collector of Stamps, in Mumbai the Superintendent of Stamps, under Section 31. A scheme with property in more than one state attracts duty in each, and the sequence of adjudications should be planned. Rates and ceilings change, so no figures are given here; the duty is estimated on the draft scheme before filing, since it can be a material cost.
Fast-track mergers under Section 233
Section 233 and Rule 25 provide a route without the Tribunal for a merger between two or more small companies, between a holding company and its wholly owned subsidiary and, since 2021, between start-ups or a start-up and a small company. Amendment rules notified on 4 September 2025 widened Rule 25 further, to unlisted companies below a stated borrowing threshold with no default, holding companies and subsidiaries that are not wholly owned, fellow subsidiaries, and a foreign holding company merging into its wholly owned Indian subsidiary, each with conditions.
Each company issues a notice of the scheme in Form CAA-9 inviting objections from the Registrar and the Official Liquidator within thirty days, files a declaration of solvency in Form CAA-10, and obtains the approval of members holding at least ninety per cent of the total number of shares and of creditors representing nine-tenths in value; the transferee then files the scheme with the Regional Director, the Registrar and the Official Liquidator in Form CAA-11. If no material objection is received, the Regional Director issues a confirmation in Form CAA-12; if the Regional Director considers it contrary to the public interest or to creditors, the scheme is referred to the Tribunal within sixty days. The route is faster, commonly a few months, but the ninety per cent thresholds are of all shares and all creditors, not of those voting.
The Hon'ble NCLT Mumbai Bench in practice: timelines and documents
The Mumbai Bench hears schemes for companies with registered offices in Maharashtra and Goa, at Cuffe Parade, through several courts whose lists are shared with insolvency matters. The Bench expects the first-motion application to be complete; one filed without the consent affidavits, the auditor's certificate, the valuation report and the board reports is adjourned. Notices to the regulators are served by the company and proved by affidavit; the Regional Director's report tends to arrive close to the hearing, and the Bench usually gives time to answer it. Sanction orders record undertakings to the income-tax department and the Registrar, and commonly direct that the scheme does not affect any pending tax proceeding.
| Stage | What happens | Indicative time |
|---|---|---|
| Preparation | Scheme drafting, valuation, board approvals, auditor's certificate, lender consents, filing of the draft scheme with the Registrar. | 4 to 8 weeks |
| First motion | Application in Form NCLT-1; hearing; order convening or dispensing with meetings and directing notices. | 4 to 10 weeks from filing to order |
| Notices and meetings | Notices to members, creditors and regulators; thirty-day windows; meetings; chairperson's report. | 6 to 10 weeks |
| Second motion | Petition in Form CAA-5 within seven days of the report; advertisement; regulators' reports and replies; hearing. | 3 to 6 months |
| Final order and filings | Certified copy; Form INC-28 within thirty days; stamp adjudication; allotments; Registrar records updated. | 4 to 8 weeks |
| Overall | Unlisted, uncontested scheme from first filing to final order. | 8 to 14 months; listed schemes and schemes with objections take longer |
These ranges are indicative, drawn from recent practice at the Mumbai Bench, and vary with the court, the docket, the regulators' responses and whether any objection is raised.
Documents checklist
- The scheme, with the appointed date, consideration, accounting treatment and conditions to effectiveness.
- Board resolutions of each company approving the scheme and adopting the Section 232(2)(c) report.
- Memorandum and articles, certificates of incorporation and the latest audited financial statements of each company, with a supplementary accounting statement if more than six months old.
- Valuation report of a registered valuer and the share exchange ratio; for a listed company, the fairness opinion and the stock exchanges' no-objection.
- Auditor's certificate on the accounting treatment under Section 230(7).
- Lists of shareholders and of secured and unsecured creditors, with amounts, certified by a chartered accountant, and consent affidavits where dispensation is sought.
- Net worth certificate and a certificate that creditors are not adversely affected, where relied on.
- Proof of filing the draft scheme with the Registrar, a statement of pending investigations or proceedings, and the Section 230(2) disclosures.
- Affidavits of service on the regulators, newspaper advertisements, the chairperson's and scrutiniser's reports and the minutes of meetings.
- Certified copy of the order, Form INC-28 and the application for stamp adjudication.
The firm's company law and restructuring practice prepares and files schemes before the Mumbai Bench and fast-track mergers through the Regional Director; you can contact us to discuss a proposed structure.
Key takeaways
- A scheme under Sections 230 to 232 moves an undertaking with its contracts, liabilities and proceedings by operation of law, binds every member and creditor, and can be tax neutral.
- The first motion in Form NCLT-1 asks the Tribunal to convene or dispense with meetings; creditors' meetings may be dispensed with on ninety per cent consent (Section 230(9)), members' meetings at the Tribunal's discretion.
- Regulators under Section 230(5) have thirty days to respond; each class approves by a majority in number representing three-fourths in value of those voting (Section 230(6)).
- The second motion in Form CAA-5 leads to the sanction order, filed with the Registrar in Form INC-28 within thirty days; the scheme operates from the appointed date once the effective date arrives.
- The order attracts stamp duty in Maharashtra under Article 25(da); Section 233 offers a faster route through the Regional Director for eligible companies.
Frequently asked questions
Can we skip the shareholders' meeting if every shareholder agrees?
Often, but it is the Tribunal's decision. Section 230(9) allows a meeting of creditors to be dispensed with where creditors holding at least ninety per cent in value consent by affidavit. For members the Act is silent and the Tribunal exercises a discretion. The Mumbai Bench has commonly dispensed with the members' meeting of a closely held company where every member has filed a consent affidavit, but the practice is not uniform between courts, and the first-motion order should be read for what it actually directs.
What is the difference between the appointed date and the effective date?
The appointed date is the date from which the scheme takes effect, which Section 232(6) requires the scheme to state; it may be a calendar date or tied to an event, and may precede the filing, though a gap of more than a year should be justified (Ministry of Corporate Affairs General Circular 09/2019). The effective date is the date on which the scheme becomes operative, usually the last filing of the certified order with the Registrar in Form INC-28. Between the two, the transferor carries on the business in trust for the transferee, and the accounts, tax and stamp duty are all worked from the appointed date.
Do we have to pay stamp duty on an Hon'ble NCLT merger order in Maharashtra?
Yes. An order sanctioning a scheme that transfers property is an instrument of conveyance, as the Hon'ble Supreme Court held in Hindustan Lever v. State of Maharashtra (2004), and Article 25(da) of Schedule I to the Maharashtra Stamp Act, 1958 charges duty on it, calculated on the value of the shares issued and the consideration paid, subject to a ceiling by reference to the immovable property in Maharashtra. The certified order is lodged with the Collector of Stamps for adjudication and the duty is paid on adjudication. Rates and ceilings are read from the Schedule as it stands, so the duty is estimated on the draft scheme.
Our subsidiary is wholly owned. Do we still need to go to the Hon'ble NCLT?
Not necessarily. Section 233 and Rule 25 provide a fast track for a merger between a holding company and its wholly owned subsidiary, between small companies and, since 2021, between start-ups, through the Regional Director rather than the Tribunal; the categories were widened by the amendment rules of September 2025. The route needs a declaration of solvency, approval by members holding ninety per cent of all shares and creditors representing nine-tenths in value, and a filing with the Regional Director, who may refer the scheme to the Tribunal if objections are raised. A company eligible for the fast track may still choose the Tribunal route.
How long does a scheme take at the Hon'ble NCLT Mumbai Bench?
For an unlisted, uncontested scheme, commonly eight to fourteen months from the first filing to the final order, plus a few weeks for the Registrar filing and stamp adjudication; a listed scheme, which first needs the stock exchanges' no-objection, or one that draws objections from a regulator or a qualifying shareholder or creditor, takes longer. The first motion typically takes four to ten weeks to an order, the notices and meetings six to ten weeks, and the second motion three to six months. These are indicative ranges from recent practice and vary with the court, the docket and the regulators' responses.
This article is general information on Indian law, not legal advice. How the law applies depends on your facts; please consult an advocate before acting on it.
