Authority: National Company Law Tribunal Chandigarh Bench (Court-I)

Order Date: 10 July 2026

Case Overview

The National Company Law Tribunal (NCLT) Chandigarh Bench heard a joint first motion application filed by Essen Forge Private Limited (Demerged Company) and Essen Autoforge Private Limited (Resulting Company) under Sections 230-232 of the Companies Act, 2013. The application sought approval for a Scheme of Arrangement involving the demerger of the autoforge business from Essen Forge into Essen Autoforge.

The Applicant Companies are both private limited companies registered in Punjab under the jurisdiction of the Registrar of Companies, Punjab and Chandigarh. Essen Forge was incorporated on 8 February 1996 with registered office at Vishwakarma Road, Industrial Area-C, V.P.O Kanganwal, Ludhiana, and has an authorized share capital of ₹1,00,00,000 divided into 10,00,000 equity shares of ₹10 each. Its paid-up capital is ₹97,24,000 divided into 9,72,400 equity shares. Essen Autoforge was incorporated on 8 November 2004 with registered office at Plot No. B/B 54, Phase-VII, Focal Point, Ludhiana, and has an authorized share capital of ₹80,00,000 divided into 8,00,000 equity shares of ₹10 each. Its paid-up capital is ₹74,09,500 divided into 7,40,950 equity shares.

The Scheme proposes to demerge the autoforge business of Essen Forge, which includes casting, forging and manufacturing of high precision machined auto parts and specialty products, into Essen Autoforge. The rationale includes leveraging growth opportunities in India's automobile parts forging market, creating focused business entities, unlocking higher value for shareholders, and attracting aligned investors. The appointed date for the demerger is 1 April 2026 or such other date as mutually agreed or directed by the Tribunal.

The consideration mechanism provides that for every 138 equity shares of face value ₹10 each held in Essen Forge, shareholders will receive 174 equity shares of face value ₹10 each in Essen Autoforge. All employees of the demerged undertaking will become employees of Essen Autoforge on terms no less favorable than their current employment.

Final Outcome

The NCLT approved the first motion application and dispensed with the requirement to convene meetings of shareholders and creditors based on submitted consent affidavits. For Essen Forge: 100% of equity shareholders (by number and value), 100% of secured creditors (3 creditors), and 93.2% of unsecured creditors (by value, 117 creditors) consented. For Essen Autoforge: 100% of equity shareholders, 100% of secured creditors (2 creditors), and 93.3% of unsecured creditors (by value, 110 creditors) consented. The Tribunal granted liberty to the companies to file a second motion petition under Rule 15 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 for final sanctioning of the Scheme.

Topics: Corporate Restructuring, Auto Components, NCLT Approval