Authority: National Company Law Tribunal, Allahabad Bench, Prayagraj

Order Date: 10 June 2026

Case Overview

The National Company Law Tribunal (NCLT) Allahabad Bench heard a joint first motion application (CA (CAA) No.10/ALD/2026) filed by Kanpur Flowercycling Private Limited (Applicant No. 1/Demerged Company) and Fleather Private Limited (Applicant No. 2/Resulting Company) under Sections 230 to 232 of the Companies Act, 2013. The application seeks sanction for a Scheme of Arrangement involving the demerger of the 'Fleather Business' from Kanpur Flowercycling into Fleather Private Limited.

The demerged company (KFPL) is engaged in manufacturing, marketing, and distribution of products made from collected flower waste, while the resulting company (FPL) is engaged in manufacturing leather products from biomaterials including mycelium. The rationale for the demerger includes distinct risk profiles of the two business verticals (Flower Business and Fleather Business), the attraction of different investors, and the need for independent focused management to maximize growth potential.

The appointed date for the arrangement is 01 January 2026. The share entitlement ratio, as determined by a registered valuer, is: 1 new equity share of FPL (₹10 each) for every 1 equity share of KFPL (₹10 each); 1 new preference share of FPL (₹100 each) for every 1 compulsory convertible preference share of KFPL (₹100 each); and 1 new preference share of FPL (₹100 each, partly paid) for every 1 compulsory convertible preference share of KFPL (₹5 each, partly paid).

Both companies are unlisted and not regulated by any sectoral regulator. The scheme includes provisions for employee interests and requires approvals from the Regional Director, Registrar of Companies, GST authorities, and Income Tax Department.

Final Outcome

The NCLT allowed the first motion application and issued specific directions:

  • For Kanpur Flowercycling (Demerged Company): Meetings of equity shareholders (14 members, ₹1,48,910), preference shareholders (18 members, ₹15,79,715), secured creditors (1 creditor, ₹12,00,00,000), and unsecured creditors (51 creditors, ₹28,101,119.21) to be convened via video conferencing with remote e-voting on 08 August 2026 at specified times.
  • For Fleather Private Limited (Resulting Company): Meetings of equity shareholders (2 members, ₹20, with 100% consent) and unsecured creditors (1 creditor, ₹17,700, with 100% consent) are dispensed with. There are no secured creditors.
  • Mr. Gaurav Mahajan is appointed as common Chairperson (fee ₹1,50,000), Mr. Prashant Kumar Verma as Alternate Chairperson (fee ₹1,00,000), and Ms. Monica Nanda as Scrutinizer (fee ₹75,000), with fees payable by the demerged company.
  • Notices must be sent 30 days in advance, and advertisements must be published in Financial Express (English) and Dainik Jagran (Hindi).
  • The second motion petition must be filed within 7 days of the chairperson's report submission.

The demerger is intended to create separate focused entities with independent business strategies and greater potential for growth and investment.

Topics: Corporate Restructuring, Legal Proceedings, Demerger