NCLT Rejects Talwandi Sabo’s Demerger, Setback For Vedanta
States that generally meetings of creditors/shareholders are ordered at the motion state;
NCLT Rejects Talwandi Sabo’s Demerger, Setback For Vedanta
States that generally meetings of creditors/shareholders are ordered at the motion state
The Mumbai bench of the National Company Law Appellate Tribunal (NCLAT) has dismissed the demerger scheme of Talwandi Sabo Power Ltd due to insufficient disclosure of material facts at the first motion stage.
Generally, meetings of creditors/shareholders are ordered at the motion state.
The objection raised by SEPCO Electric Power Construction Corporation highlighted that the exclusion of Rs.1250 crore in dues, played a crucial role. The ruling underscore the importance of transparency in merger processes.
Representing SEPCO, senior counsel Kapil Arora highlighted the non-disclosure of material facts necessary at the stage of the first motion petition- under Section 230 of the Companies Act, 2013 read with the Companies (Compromise, Arrangement and Amalgamation) Rules, 2016.
He submitted that an incorrect list of creditors was filed, excluding SEPCOs dues, which were consistently shown since the Financial Year 2019-20. This included the time of approval of the scheme by Talwandi’s directors.
In the first motion, unsecured dues were shown by Talwandi by excluding SEPCO, and not showing it was disputed.
Representing Talwandi, senior advocates Gaurav Joshi and Hemant Sethi objected to SEPCOs locus to object at the first motion stage.
Joshi relied on the judgment of the Supreme Court in the Rainbow Denim and NCLAT case and the MEL Windmills ruling,
SEPCOs intervention was also opposed on the ground that disputed creditors could not raise objections and those could not be used for recovery.
However, the SEPCO counsel rebutted the claims. He argued that (a) Rule of 5 the CAA Rules specifically confers jurisdiction to reject a scheme, even at the first motion (b) merits of the scheme are not being agitated (c) SEPCO not seeking adjudication or recovery of its dues by NCLT (d) only absence of requisite disclosures being highlighted (e) applicant at first motion duty bound to transparently disclose all facts (f) admitted debt cannot be extinguished based on a unilateral termination of contract.
The tribunal allowed SEPCO’s objection and rejected Talwandi’s scheme.
The ruling is significant in the jurisprudence of mergers and demergers, especially on material disclosures to be made even at the first motion.
SEPCO was represented by Cyril Amarchand Mangaldas. The team comprised Kapil Arora, Partner, Shikha Tandon, Partner, Pravar Veer Misra, Senior Associate.
The team of Sanjay Udeshi and Co included partners Mahesh Londhe and Darshan Ashar.
