NCLT blocks Talwandi Power’s scheme, stalling Vedanta demerger

MUMBAI: The National Company Law Tribunal (NCLT) on Tuesday rejected the scheme of arrangement proposed by Talwandi Sabo Power Limited (TSPL) concerning the demerger of Vedanta.

A Bench comprising Judicial Member Reeta Kohli and Technical Member Madhu Sinha clarified that it had not examined the merits of the scheme but had ruled on the company’s failure to make necessary disclosures under the law. The scheme, filed under Sections 230 to 232 of the Companies Act, 2013, aimed to restructure Vedanta Limited into five independent entities focused on aluminium, merchant power, oil and gas, base metals, and iron ore.

The objection to the scheme was raised by SEPCO, a creditor of TSPL, which alleged that the company had failed to disclose a ₹1,251 crore liability owed to it. SEPCO argued that this debt had been acknowledged in TSPL’s financial statements since 2019 but was excluded from the scheme’s creditor list, potentially distorting TSPL’s valuation post-demerger.

The Tribunal upheld SEPCO’s concerns, noting that the omission violated Section 230(2)(a) of the Companies Act and could mislead creditors and shareholders. It highlighted that the valuation of TSPL had been conducted without factoring in SEPCO’s claim, raising concerns over its accuracy and public interest implications.

Following this ruling, TSPL’s demerger plans face a significant setback.