NCLT Mumbai Sanctions Demerger Of GE Power India With JSW Energy, Preserves Income Tax Rights
On 1 October, the Mumbai Bench of the National Company Law Tribunal sanctioned a Scheme of Arrangement providing for the demerger of GE Power India Limited's Durgapur-based business to JSW Energy Limited.
A Bench comprising Judicial Member Sushil Mahadeorao Kochey and Technical Member Prabhat Kumar sanctioned the Scheme after considering reports from the Chairperson, Regional Director and Income Tax Department. It noted that the Scheme had received the requisite approval from shareholders and creditors of both companies.
It held that the Scheme could be sanctioned subject to compliance with the undertakings given by the companies and without affecting the Income Tax Department's right to examine or recover any tax liability arising from the transaction.
Under the Scheme, GE Power India's Durgapur-based business of manufacturing and supplying power boiler components, pressure vessels, piping and coal mills for thermal power plants will be transferred to JSW Energy. The appointed date for the demerger is 1 July 2025.
JSW Energy will issue 10 fully paid-up equity shares of Rs. 10 each for every 139 fully paid-up equity shares of Rs. 10 each held in GE Power India. The share entitlement ratio was determined based on reports prepared by registered valuers RBSA Valuation Advisors and GT Valuation Advisors.
The Scheme was approved by 391 GE Power India shareholders holding 4,80,58,269 shares, representing about 99.99% of valid votes. Of its unsecured creditors, 85 of 86 creditors, representing 99.9359% by debt value, voted in favour of the Scheme.
At JSW Energy, 1,025 shareholders holding 1,65,22,84,784 shares approved the Scheme. Forty-seven unsecured creditors representing Rs. 1,938.13 crore in outstanding debt also voted in favour.
The Regional Director sought compliance with the Companies Act, accounting standards, tax laws, FEMA, RBI regulations and requirements protecting creditors and employees. The companies furnished the required undertakings.
The Income Tax Department raised concerns over the valuation of the Durgapur undertaking, the share entitlement ratio and tax implications, including certain outstanding tax demands. GE Power India undertook to discharge applicable tax dues and clarified that sanction of the Scheme would not prevent the tax authorities from examining or recovering any liability.
The Tribunal sanctioned the Scheme while preserving the Income Tax Department's right to examine any tax liability or tax avoidance arising from the transaction.
It directed the companies to file the certified order and Scheme with the Registrar of Companies through e-Form INC-28 within 30 days of receiving the certified order and to comply with all undertakings furnished to the Regional Director.
Accordingly, the NCLT approved the demerger.
For Petitioner Companies: Gaurav Joshi a/w Mehul Shah, Peshwan Jehangir, Aman Yagnik, Haabil Vahanvaty, Jamsheed Dadachanji, Ishrita Bagchi, Anmol Sharma and Jwaalaa Suresh i/b Khaitan & Co, Advocates
For Regional Director: Altap Shaikh