NCLT Allahabad Allows First Motion For KFPL–FPL Demerger Of Fleather Business

The Allahabad Bench of the National Company Law Tribunal (NCLT) on 10 June, allowed the first motion application filed by Kanpur Flowercycling Pvt. Ltd. (KFPL) and Fleather Pvt. Ltd. (FPL), approving the proposed demerger of KFPL's Fleather Business into FPL.

Judicial Member Praveen Gupta and Technical Member Ashish Verma passed the order and directed convening of requisite meetings for consideration of the scheme. The Tribunal observed:

“Since, the Applicant Resulting Company does not have any Secured Creditor, the requirement to convene meeting of Secured Creditors does not arise”

KFPL operates two distinct business verticals: its Flower Business, which manufactures products from collected flower waste, and its Fleather Business, which produces leather-like biomaterials from mycelium. FPL is engaged in the Fleather Business.

The boards of both companies approved the scheme on 25 February 2026, citing distinct risks, rewards, and investor interest in the Fleather segment. The appointed date under the scheme is 1 January 2026.

The companies submitted that the demerger would enable efficient control and independent management of the segregated businesses and would promote growth in both verticals. They further stated that separation would allow greater business focus and operational efficiency.

They also submitted that independent management would enable specialised strategies and skill deployment for each business, enhancing efficiency. The Fleather Business had also attracted strategic investor interest, which supported the need for separation. Both verticals, they added, carried significant independent growth potential, making the demerger commercially viable.

The companies stated that the scheme did not require approval from the Competition Commission of India. They further submitted that employee interests would remain protected under Clause 12 of the scheme. Regulatory approvals were stated to be required from the Regional Director (Northern Region), the Registrar of Companies, GST authorities, and the Income Tax Department.

The Tribunal directed convening of meetings of KFPL's 14 equity shareholders, 18 preference shareholders, 1 secured creditor, and 51 unsecured creditors on 8 August 2026 through video conferencing with e-voting facilities. It also dispensed with meetings of FPL's 2 equity shareholders and 1 unsecured creditor after noting 100% consent.

The Bench appointed Gaurav Mahajan as Chairperson, Prashank Kumar Verma as Alternate Chairperson, and Monica Nanda as Scrutinizer to oversee the meetings. It also granted seven days for filing the second motion petition.

Accordingly, the NCLT allowed the first motion application.

For Applicants: Hrash C Ruparelia