Case Details

Case Name: CP(CAA) No.02/230/HDB/2026 Connected with CA (CAA) No.38/230/HDB/2025

Parties: KM Power Private Limited (Transferor/Demerged Company), KM Power Madhavaram Private Limited (Transferee Company 1), KM Power Velpanur Private Limited (Transferee Company 2)

Court/Authority: National Company Law Tribunal, Hyderabad Bench - II

Date of Order: 21st May 2026

Period of Violation/Dispute: Not applicable - This is a scheme approval petition

Parties Involved

Petitioners:

  • M/s. KM Power Private Limited (CIN: U40109TG1999PTC032766), represented by Director Mr. Govindareddygari Vikram Reddy
  • M/s. KM Power Madhavaram Private Limited (CIN: U40300TG2020PTC140848), represented by Director Mr. Haribabu Kambalapadu Ediga
  • M/s. KM Power Velpanur Private Limited (CIN: U40108TG2020PTC140884), represented by Director Mr. Prathap Kambalapadu Ediga

Regulatory Authorities Represented:

  • Regional Director (SER) represented by Ms. Kusum Yadav and Mr. Gokulnath, Deputy Directors
  • Income Tax Department represented by Ms. Rakshitha and Ms. B. Sapna Reddy

Professional Counsel: Mr. L. Dhanamjay Reddy, PCS for the Petitioners

Issues / Allegations / Violations

This is not a case of violations or allegations but a petition for sanction of a Scheme of De-Merger under Sections 230-232 of the Companies Act, 2013. The scheme involves demerger of specific power projects from KM Power Private Limited into two separate companies.

Findings & Observations

Regional Director's Observations and Company Responses:

  • Land Valuation: RD noted advance for purchase of land of ₹3.35 crores as of 31.03.2025. Company clarified lands were purchased long back at historical cost using internal accruals, not borrowed funds.
  • Geographical Jurisdiction: RD questioned valuation by CA Navin Khandelwal from Indore for Hyderabad-based companies. Company clarified no geographical restrictions exist for Registered Valuers under Section 247 of Companies Act, 2013.
  • Loan Advances: RD noted loans of ₹3,00,00,000/- for investment activities. Company recovered ₹3,25,00,000 in 2025-26 which will remain with Demerged Company.
  • Employee Protection: RD sought undertaking for employee interests. Company submitted affidavits confirming no retrenchment of employees as on Appointed Date.
  • Authorized Capital: RD noted reduction of Demerged Company's capital to ₹4,50,00,000 and increase in Resulting Companies' capital. Company undertook to pay differential registration and stamp duty.
  • Secured Creditor: HDFC Bank (secured creditor for ₹99,00,000) provided NOC dated 29.08.2025. The borrowing and charged assets remain with Demerged Company, not transferred to Resulting Companies.

Income Tax Department Observations:

  • Filed affidavits on 28.01.2026 and 20.04.2026 stating NIL demand outstanding for KM Power Private Limited and KM Power Velpanur Private Limited
  • Reserved right for any future tax implications under GAAR provisions/Income Tax Act, 1961

Penalties / Settlements / Directions

No penalties imposed as this is a scheme approval order. The Tribunal issued specific directions:

  • The Scheme is sanctioned with Appointed Date as 01.04.2025
  • This order does not grant exemption from payment of stamp duty, taxes or any other charges payable under law
  • Whole assets, property, rights and liabilities of Transferor Company be transferred to Transferee Companies without further act
  • Petitioner Companies must comply with all observations of Regional Director and Income Tax Department
  • Books of accounts and records must be preserved and not disposed without Central Government permission
  • Companies must ensure statutory compliance of all applicable laws
  • Certified copy of order to be delivered to Registrar of Companies in Form INC-28 within 30 days
  • All legal proceedings pending against Transferor Company shall continue against Transferee Companies
  • Companies must comply with Accounting Treatment Standards under Section 133 of Companies Act, 2013
  • Revenue Authority retains right to recover existing and previous tax liabilities
  • Annual compliance statement to be filed with Registrar certified by Chartered Accountant/Cost Accountant/Company Secretary

Corrective Actions & Future Obligations

Undertakings by Petitioner Companies:

  • To file Form INC-28 with Registrar of Companies
  • To pay income tax liability that may arise in future with respect to Transferor Company
  • To pay differential registration and stamp duty for increased Authorized Share Capital of Resulting Companies
  • No retrenchment of any employee who were in service as on Appointed Date
  • To transfer lands not registered in company name to Resulting Companies by suitable agreements

Ongoing Reporting Requirements:

  • Until completion of demerger, file annual statement with Registrar certified by professional accountant
  • Compliance with all statutory requirements under Companies Act, 2013

Final Ruling & Enforcement

Tribunal's Decision: The Scheme of De-Merger is sanctioned and approved. The Company Petition CP(CAA)No.02/230/HDB/2026 is allowed and stands disposed of.

Key Operational Details:

  • Demerged Undertakings: Madhavaram Project and Velpanur Project
  • Consideration:
  • KM Power Madhavaram to issue 4,338,179 equity shares of ₹10 each to KM Power shareholders
  • KM Power Velpanur to issue 3,578,998 equity shares of ₹10 each to KM Power shareholders
  • Business Focus Post-Demerger:
  • KM Power Private Limited: Unit I at Guntakandala Village, Andhra Pradesh
  • KM Power Madhavaram: Unit III at Madhavaram Village, Andhra Pradesh
  • KM Power Velpanur: Unit II at Velpanur Village, Andhra Pradesh
  • Capital Structure:
  • KM Power Private Limited: Authorized Capital ₹14,20,00,000; Paid-up Capital ₹12,25,49,220
  • KM Power Madhavaram: Authorized Capital ₹10,00,000; Paid-up Capital ₹1,00,000
  • KM Power Velpanur: Authorized Capital ₹10,00,000; Paid-up Capital ₹10,00,000

The Scheme is binding on all equity shareholders, secured creditors and unsecured creditors of the Transferor/Demerged Company & Transferee/Resulting Companies 1 and 2.