NCLT Chennai Approves TVS Holdings Scheme For 46 Bonus Preference Shares Per Equity Share

The National Company Law Tribunal (NCLT) at Chennai on 18 August sanctioned a Scheme of Arrangement proposed by TVS Holdings Limited to issue 46 bonus preference shares to its equity shareholders for every one equity share held by them.

A Bench comprising Judicial Member Sanjiv Jain and Technical Member Venkataraman Subramaniam approved the Scheme, observing that it appeared to be beneficial to the shareholders and would not be detrimental to their interests. It held:

“...this Tribunal is of the view that the scheme as contemplated by the Petitioner Company seems to be prima facie beneficial to the shareholders and will not be in any way detrimental to the interest of the shareholders of the Company.”

Under the Scheme, TVS Holdings will issue 46 fully paid-up 6% cumulative non-convertible redeemable preference shares of Rs. 10 each for every one fully paid-up equity share of Rs. 5 each. The company will issue the preference shares by utilising its general reserves and retained earnings.

Earlier, the company had filed a first motion application, following which the Tribunal on 18 March 2026 dispensed with the meeting of secured creditors and directed meetings of the equity shareholders and unsecured creditors. The Scheme received overwhelming shareholder approval, with 272 of the 273 shareholders who attended the meeting voting in favour, representing 99% approval.

The Regional Director and Income Tax Department had raised certain observations regarding the Scheme. The Income Tax Department did not object to the Scheme but noted that the payouts to shareholders could be taxable as deemed dividend and may require deduction of tax at source.

The Tribunal therefore directed the company to comply with the applicable tax provisions. It held that "the Petitioner Company is directed to deduct tax at sources in the manner applicable as per law.” It also noted that the Bombay Stock Exchange and the National Stock Exchange had issued their no-objection letters and that TVS Holdings had complied with their observations. It directed the company to comply with the applicable Securities and Exchange Board of India regulations.

Further, the Bench noted that there were no other objections to the Scheme and that the requisite statutory compliances had been fulfilled, subject to certain formalities for which the company had furnished undertakings. It clarified:

“…if there is any deficiency found or, violation committed qua any enactment, statutory rule or regulation, the sanction granted by this Tribunal will not come in the way of action being taken, albeit, in accordance with law, against the concerned persons, directors and officials of the Petitioners.”

Accordingly, the CESTAT allowed the application and sanctioned the Scheme.

For Petitioner: Senior Advocate P.H Aravind Pandian and Advocate Pawan Jhabakh

For Income Tax Department: Advocate Raj Jhabakh

For Regional Director: Advocate Avinash Krishnan Ravi