NCLT Ahmedabad Sanctions Essar Scheme, Approves Brand Demerger And ₹875 Crore CCPS Restructuring

The Ahmedabad Bench of the National Company Law Tribunal (NCLT) on 31 August sanctioned a composite scheme of arrangement providing for the demerger of the brand undertaking of Abhinand Ventures Pvt. Ltd. (AVPL) into Essar Power Ltd. (EPOL), along with restructuring of EPOL's 0.01% Compulsory Convertible Cumulative Preference Shares (CCPS).

A Bench comprising Judicial Member Shammi Khan and Technical Member Sanjeev Sharma sanctioned the Scheme after finding that it complied with the statutory procedure and was fair to the shareholders and creditors. It held:

“Subject thereto, the Scheme, inter alia, provides for transfer and vesting of the Brand Undertaking of Abhinand Ventures Pvt. Ltd. (the Demerged Company) in Essar Power Ltd. (the Resulting Company), restructuring of the 0.01% Compulsory Convertible Cumulative Preference Shares (“CCPS”) of the Resulting Company and reorganisation of its reserves, and merits sanction.”

AVPL, incorporated in 2016, owns, operates and manages the brand business comprising nearly 150 Essar brand variants registered with the Trade Marks Department of the Central Government. The business is collectively referred to as the “Brand Undertaking” or “Demerged Undertaking”.

EPOL, the flagship power entity of the Essar Group, holds significant stakes in Essar Power Gujarat Ltd., which has an installed thermal capacity of 1,200 MW, with expansion plans of 1,600 MW, as well as in Essar Renewables Ltd.

Under the Scheme, effective from 1 April 2025, AVPL's Brand Undertaking will be transferred to EPOL. The transfer will centralise ownership of the Essar brand with EPOL, which will own and license the brand and related intellectual property to entities within the group in accordance with applicable law.

The companies submitted that centralising brand licensing with EPOL would strengthen cash flows, reduce duplication and enhance negotiation leverage with suppliers and financiers.

The Scheme also provides for conversion of 50 crore CCPS into unsecured loans valued at Rs. 875 crore. The differential amount of Rs. 125 crore will be credited to the capital reserve and adjusted against retained earnings.

The first motion application was filed in January 2026. The Tribunal directed the companies to convene meetings of their shareholders, debenture holders and creditors. The meetings were held in April 2026.

The companies filed the second motion petition on 27 April 2026. The Tribunal thereafter directed them to issue notices to statutory authorities, including the Regional Director, Registrar of Companies (RoC), Income Tax Department, Securities and Exchange Board of India (SEBI), National Stock Exchange of India (NSE) and BSE Ltd.

The Regional Director sought clarity on the proposed conversion of the CCPS. The companies submitted that the reduction of the CCPS into an unsecured loan formed an integral part of the Scheme and was intended to rationalise and reorganise the capital structure of EPOL.

The RoC raised an outstanding tax demand of Rs. 19.23 crore against AVPL. The Income Tax Department subsequently rectified the demand. The RoC also questioned the proposed CCPS conversion, pointing out that Section 55 of the Companies Act, 2013 deals with redemption of preference share capital and that the company had not filed an application under Section 55(3) for conversion of the 0.01% CCPS into a loan.

The petitioner companies argued that Sections 230 to 232 of the Companies Act, 2013 constitute a self-contained and comprehensive code governing compromises, arrangements and reorganisation of share capital, including substitution and reclassification of securities. The Income Tax Department reserved its right to pursue tax liabilities.

The petitioner companies also submitted that the accounting treatment specified in the Scheme conformed with the Accounting Standards prescribed under Section 133 of the Companies Act, 2013.

The Tribunal noted that the Scheme had been approved by the respective classes of creditors in the requisite statutory manner. It found the Scheme compliant with the statutory procedure and fair to the shareholders and creditors.

Further, the Bench clarified that sanction of the Scheme would not absolve the companies of their statutory liabilities or exempt them from stamp duty, tax or other regulatory compliance. It reiterated that the concerned authorities would retain their powers to examine the tax consequences of the Scheme and enforce statutory obligations.

Accordingly, the NCLT allowed the petition and sanctioned the Scheme.

For Petitioners: Senior Advocate Saurabh Soparkar with Advocate Yash Dadhich