Demerger of BCCL’s EIBME Undertaking: Legal Analysis of NCLT Approval under the Companies Act, 2013

Introduction

The Mumbai Bench of the National Company Law Tribunal (NCLT) approved a Composite Scheme of Arrangement between Bennett, Coleman and Company Limited (BCCL), the flagship entity of the Times Group, and its wholly owned subsidiary, Times Horizon Private Limited (THPL), marking a significant step in the restructuring of its business operations in India.

The Scheme provides for the demerger of BCCL’s non-publishing business undertaking, identified as the EIBME Business (Entertainment, Internet, Brand Capital and Emerging Businesses), into THPL. The approval has been granted under Sections 230 to 232 of the Companies Act, 2013.

This order reflects the increasing use of statutory restructuring mechanisms by Indian conglomerates to streamline operations while ensuring compliance with regulatory safeguards governing schemes of arrangement.

Corporate Background and Business Segmentation

BCCL is one of India’s largest media conglomerates, with operations spanning print and digital publishing, television, radio broadcasting, digital platforms, brand capital investments, education, fintech, sports, and other emerging sectors. The Tribunal noted that BCCL’s operations can broadly be classified into:

• The Publishing Business; and
• The EIBME Business (Entertainment, Internet, Brand Capital and Emerging Businesses).

The EIBME segment comprises digital and internet ventures, entertainment businesses, brand capital investments, and other emerging verticals that are distinct from BCCL’s core publishing operations.

THPL, prior to the Scheme, was a wholly owned subsidiary of BCCL and was designated as the resulting company to house the EIBME Business.

Mechanics and Structure of the Demerger

The Scheme was approved by the respective Boards of BCCL and THPL on 22 September 2025. Importantly, the Scheme distinguishes between:

• Appointed Date: 1 April 2026; and
• Effective Date: the date on which the certified copy of the NCLT order is filed with the Registrar of Companies.

The Scheme provides for:

• Demerger and vesting of the EIBME undertaking from BCCL into THPL;
• Transfer on a going concern basis; and
• Automatic transfer of all assets, liabilities, contracts, obligations, and employees pertaining to the undertaking.

Such vesting operates by virtue of Sections 230-232 of the Companies Act, 2013, without requiring separate conveyances.

Share Entitlement / Consideration Mechanism

Under a typical demerger structure compliant with Section 2(19AA) of the Income-tax Act, 1961:

• Shareholders of the demerged company (BCCL) are issued shares in the resulting company (THPL) in proportion to their existing shareholding; and
• The consideration is discharged solely through issuance of shares, unless otherwise specifically structured.

Further, the Tribunal clarified that:

• Its sanction of the Scheme does not preclude scrutiny by tax authorities or other regulators; and
• Any preferential allotment or share issuance remains subject to applicable laws, including tax and securities regulations.

Statutory Framework: Sections 230-232 of the Companies Act, 2013

Sections 230 to 232 establish the legal framework for compromises, arrangements, amalgamations, and demergers. The role of the NCLT is supervisory and jurisdictional, not commercial. The Tribunal examines whether:

• Statutory procedures have been duly complied with;
• Requisite approvals (majority in number representing three-fourths in value) have been obtained;
• The Scheme is fair, reasonable, and not contrary to law or public policy; and
• The arrangement is not fraudulent, oppressive, or prejudicial to stakeholders.

It is a settled principle that the Tribunal does not substitute its commercial wisdom for that of the shareholders and creditors.

Procedural Compliance and Dispensation of Meetings

The Tribunal dispensed with the requirement of convening meetings of equity shareholders and unsecured creditors on the basis that:

• Written consents/affidavits had been obtained satisfying statutory thresholds;
• There were no secured creditors or preference shareholders; and
• THPL had no unsecured creditors.

Notices were duly issued to statutory authorities, including:

• The Regional Director;
• The Registrar of Companies; and
• The Income Tax Department,

in compliance with Section 230(5) of the Companies Act, 2013. No substantive objections were raised by the Regional Director, and necessary undertakings were furnished by the petitioners.

The Tribunal ultimately held the Scheme to be fair, reasonable, and not violative of any law or public policy.

Tax Neutrality and Compliance with Section 2(19AA) of the Income-tax Act, 1961

The petitioners submitted that the demerger satisfies the conditions of a tax-neutral demerger under Section 2(19AA), which include:

• Transfer of the undertaking on a going concern basis;
• Transfer of all assets and liabilities of the undertaking;
• Issue of shares by the resulting company to the shareholders of the demerged company on a proportionate basis; and
• Consideration discharged solely by way of shares (subject to limited exceptions).

The Tribunal reiterated that:

• Its approval does not bind tax authorities; and
• Tax implications may be independently examined under the Income-tax Act.

This aligns with settled jurisprudence that corporate law approval does not override fiscal statutes.

Rationale for the Restructuring

The Scheme identified structural differences between the Publishing and EIBME businesses in terms of:

• Capital intensity;
• Operational strategy;
• Regulatory landscape;
• Risk profile; and
• Investor alignment.

The demerger is intended to:

• Enable focused management and operational efficiency;
• Facilitate optimal capital allocation;
• Ring-fence risks across business verticals;
• Attract sector-specific investors and strategic partners; and
• Enhance overall shareholder value.

The Tribunal appropriately refrained from questioning the commercial rationale.

Directions and Post-Sanction Compliance

The NCLT directed the companies to:

• File the certified copy of the order with the Registrar of Companies in e-Form INC-28 within 30 days;
• Submit the order for stamp duty adjudication within the prescribed timeline; and
• Comply with all applicable statutory and regulatory requirements.

It was also clarified that all regulatory authorities retain the right to act in accordance with law.

Conclusion

The NCLT’s approval of the demerger between Bennett, Coleman and Company Limited and Times Horizon Private Limited highlights the robustness of India’s corporate restructuring framework under the Companies Act, 2013.

The ruling reinforces the principle that while the Tribunal ensures procedural compliance and safeguards stakeholder interests, it does not interfere with commercial decision-making unless warranted by illegality or unfairness.

From a broader perspective, the transaction reflects a continuing trend among diversified conglomerates to segregate high-growth digital and emerging businesses from legacy operations. For practitioners, the decision serves as a practical illustration of the application of Sections 230–232 and reaffirms the Tribunal’s supervisory rather than interventionist role in schemes of arrangement.