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SCHEME OF ARRANGEMENT

FOR AMALGAMATION OF

BALAGARH POWER COMPANY LIMITED

AND

CESCON LIMITED

WITH

CESC LIMITED

PART – I

DEFINITIONS :

For the purpose of this Scheme, the following expressions shall, unless the context otherwise requires, have the meaning as defined hereunder:

“Act” means the Companies Act, 1956.

“Appointed Date” means 31^st day of March 2004.

“BPCL” means Balagarh Power Company Limited, a Company incorporated under the provisions of the Companies Act, 1956 and having its registered office at CESC House, Chowringhee Square, Kolkata 700 001 in the State of West Bengal.

“CESCON” means CESCON Limited, a Company incorporated under the provisions of the Companies Act, 1956 and having its registered office at CESC House, Chowringhee Square, Kolkata 700 001 in the State of West Bengal.

“Effective Date” means the date on which the certified copy of the Order of the Hon’ble High Court at Calcutta sanctioning the Scheme is duly filed with the Registrar of Companies, West Bengal.

“Scheme” means this Scheme of Arrangement for Amalgamation of the Transferor Companies with the Transfere Company in its present form or with any modification(s) approved or directed by the Hon’ble High Court at Calcutta.

“Transferor Companies” means BPCL and CESCON

“Transferee Company” means CESC Limited, an existing Company within the meaning of the Companies Act, 1956 and having its registered office at CESC House, Chowringhee Square, Kolkata 700 001 in the State of West Bengal.

“Undertakings of the Transferor Companies” means and includes:

(i) All the properties, investments, assets and liabilities of the Transferor Companies immediately before the arrangement.

(ii) Without prejudice to the generality of the foregoing clause, the expression “Undertakings” shall include all rights, powers, interests, authorities, privileges, liberties, licenses and properties of all nature whether moveable or immoveable, real or personal, corporeal or incorporeal, in possession or in reversion, present, contingent or future of whatsoever nature and wherever situate including but not limited to land, buildings, plant, furniture, office equipments, inventories, investments in shares, debentures, bonds and other securities, sundry debtors, cash and bank balances, loans and advances, leases and agency rights and all other interests and rights in or arising out of such property together with all licenses, trade marks, entitlements and quotas whether held, applied for or to be obtained hereafter by the Transferor Companies or which the Transferor Companies are entitled to and all debts, liabilities, duties and obligations of the Transferor Companies of whatsoever kind. .

WHEREAS:

BPCL has an Authorised Share Capital of Rs. 1,00,00,000/- divided into 10,00,000 Equity Shares of Rs. 10/- each and an Issued, Subscribed and Paid up Share Capital of Rs.5,00,000/- divided into 50,000 Equity Shares of Rs.10/- each fully paid up.

CESCON has an Authorised Share Capital of Rs. 11,00,00,000/- divided into 1,10,00,000 Equity Shares of Rs. 10/- each and an Issued, Subscribed and Paid up Share Capital of Rs. 10,84,00,000/- divided into 108,40,000 Equity Shares of Rs.10/- each fully paid up.

The Transferee Company has an Authorised Share Capital of Rs. 1,50,00,00,000/- divided into 12,17,50,000 Equity Shares of Rs. 10/- each and 2,82,50,000 Cumulative Redeemable Preference Shares of Rs. 10/- each and an Issued and Subscribed Share Capital of Rs.71,15,83,020/- divided into 6,61,58,302 Equity Shares of Rs. 10/- each and 50,00,000 16% Cumulative Redeemable Preference Shares of Rs.10/- each. The Paid Up Share Capital of the Transferee Company as on 31 December 2003 is Rs. 7002 lakhs comprised as follows :

Rs. lacs

6,59,68,754 fully paid Equity Shares of Rs. 10/- each (net of calls unpaid Rs. 96,000/-)	6596
1,89,548 Equity Shares of Rs. 10/- each paid up to the extent of Rs.5/- per share	9
50,00,000 16% Cumulative Redeemable Preference Shares of Rs.10/- each fully paid up out of which an amount at the rate of Rs.3.33 per share has since been redeemed; and	333
Forfeited Shares.	64
TOTAL	7002

The entire shares of the Transferor Companies are held by the Transferee Company and/or its nominees. The Transferor Companies are therefore wholly owned subsidiaries of the Transferee Company.

For economic and efficient management, control and running of the businesses of the companies concerned, it is considered desirable and expedient to amalgamate the Transferor Companies with the Transferee Company and to restate the assets and liabilities thereof in the manner and on the terms and conditions stated in this Scheme of Arrangement.

PART - II

With effect from the Appointed Date but operative from the Effective Date, the Undertakings of the Transferor Companies shall, without further act or deed, be transferred to and vest in and shall be deemed to have been transferred to and vested in the Transferee Company pursuant to Section 394(2) of the Act, subject however, to all charges, liens, mortgages, if any, then affecting the same or any part thereof.

If any suit, appeal or any other proceedings of whatsoever nature (hereinafter called "the proceedings") by or against the Transferor Companies be pending, the same shall not abate, be discontinued or be in any way prejudicially affected by reason of the transfer of the Undertakings of the Transferor Companies or by reason of anything contained in this Scheme, but the proceedings may be continued, prosecuted and enforced by or against the Transferee Company in the same manner and to the same extent as it would be or might have been continued, prosecuted and enforced by or against the Transferor Companies, if this Scheme had not been made.

The transfer and vesting of properties and liabilities under Clause 1 hereof and the continuance of the proceedings by or against the Transferee Company under Clause 2 hereof shall not effect any transaction or proceeding already concluded by or on behalf of the Transferor Companies on and after the Appointed Date and to this end and intent the Transferee Company accepts and adopts all acts, deeds and things done and executed by or on behalf of the Transferor Companies as acts, deeds and things done and executed by or on behalf of the Transferee Company.

Subject to the provisions contained in this Scheme, all contracts, deeds, bonds, licences, agreements and other documents and instruments of whatsoever nature to which the Transferor Companies are parties subsisting or having effect immediately before the arrangement, shall remain in full force and effect against or in favour of the Transferee Company and may be enforced as fully and effectively, as if instead of the Transferor Companies, the Transferee Company had been a party thereto.

Upon the Scheme being sanctioned by the Hon'ble High Court at Calcutta and transfer taking place as stipulated under Clause 1 hereof :-

(a)

The Transferee Company's investments in / advances to the Transferor Companies shall stand cancelled.

(b)

All the employees of the Transferor Companies shall become the employees of the Transferee Company on the same terms and conditions on which they are engaged by the Transferor Companies without any interruption in service as a result of the transfer of the Undertakings of the Transferor Companies to the Transferee Company.

Provided further that:-

(i)

The Transferee Company agrees that the service period of all such employees with the Transferor Companies prior to the transfer, as aforesaid, shall be taken into account for the purposes of all benefits to which the said employees may be eligible in the Transferee Company, including for the purpose of payment of provident fund dues, gratuity dues, retrenchment compensation and other terminal benefits and accordingly, their Individual period of service shall be reckoned from the date of their respective appointment in the Transferor Companies.

(ii)

The existing Provident Fund, Gratuity Fund and Superannuation Fund, as the case may be, of which the employees of the Transferor Companies are members or beneficiaries shall, with the approval of the concerned authorities, be transferred to the respective retirement funds of the Transferee Company for the benefit of such employees on the same terms and conditions and/or taken over by the Transferee Company; the name of the Transferee Company shall be deemed to have been substituted in place of the name of the Transferor Companies in the existing deeds of trust relating to such funds.

(c)

An account shall be taken of the assets and liabilities of the Transferor Companies as on the date immediately preceding the Appointed Date for incorporation in the books of account of the Transferee Company. The identity of the reserves of the Transferor Companies shall be retained in the books of account of the Transferee Company. Such of the assets and liabilities including capital profit or loss, the accumulated balance in the profit and loss account and contingent liabilities of the merged Company shall, however, be restated and/or revised and/or provided for as may be determined by the Transferee Company and the net effect thereof shall be adjusted by debiting or crediting (as the case may be) to revaluation reserve of the Transferee Company.

(d)

The Transferor Companies shall be dissolved without winding up.

PART - III

The Transferor Companies and the Transferee Company shall make necessary applications before the Hon'ble High Court at Calcutta for obtaining the Court's sanction to this Scheme and for the consequent dissolution without winding up of the Transferor Companies.

2.	This Scheme is conditional upon and subject to the sanction of this Scheme by the Hon'ble High Court at Calcutta.

3.	With effect from the Appointed Date and up to the Effective Date, the Transferor Companies shall carry on their businesses in usual course and shall be deemed to be carrying on the said businesses for and on behalf of and in trust for the Transferee Company with effect from the Appointed Date.

4.	With effect from the Appointed Date and upto and including the Effective Date, the Transferor Companies shall be deemed to have held and stood possessed of the properties so to be transferred to the Transferee Company for and on account of and in trust for the Transferee Company and accordingly the Transferor Companies shall not (without the prior written consent of the Transferee Company) alienate, charge or otherwise dispose off their respective Undertakings or any part thereof except in the usual course of business.

5.	The Transferor Companies and the Transferee Company shall also take such other steps as may be necessary or expedient to give full and formal effect to the provisions of this Scheme.

6.	The Transferee Company shall pay all costs, charges and expenses of and incidental to this Scheme of Arrangement.

7.	The Board of Directors of the Transferor and Transferee Companies or any person authorised by them may assent on behalf of all concerned to any modification to this Scheme of Arrangement or to any condition which the Court or the Government or any other authority may impose or which the said Board of Directors may, in their sole discretion, think fit for the purpose of effectively carrying out this Scheme and the said Board of Directors may do all acts, things and deeds as may be necessary and/or expedient for the purpose of implementing this Scheme and/or settling any question, doubt or difficulty arising under this Scheme or in any manner connected therewith.

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Last updated on 3rd April , 2004