2007 (5) TMI 330 - HC - Companies Law

Summary

Issues Involved:
1. Maintainability of the application under Section 392 of the Companies Act, 1956.
2. Whether the Gas Sale Master Agreement (GSMA) dated 12-01-2006 is an integral part of the scheme sanctioned by the Court.
3. Whether the agreements dated 12-01-2006 and amended on 27-01-2006 are consistent with the scheme sanctioned by the Court.
4. Need for ad interim relief to protect the applicant's interests in the specified quantity of gas.

Issue-wise Detailed Analysis:

1. Maintainability of the application under Section 392 of the Companies Act, 1956:
The Court examined whether the Company Application No. 1122 of 2006 filed by the Applicant is maintainable under Section 392 of the Companies Act, 1956. The Court noted that Section 392 empowers the Court to supervise the carrying out of any compromise or arrangement ordered by it and to issue necessary directions for the proper working of such compromise or arrangement. The Court concluded that it has the power to mould the reliefs claimed to fit within the parameters of Section 392.

2. Whether the Gas Sale Master Agreement (GSMA) dated 12-01-2006 is an integral part of the scheme sanctioned by the Court:
The Court deliberated on whether the GSMA dated 12-01-2006 was an integral part of the scheme sanctioned by the Court. The Court observed that while the agreement was executed purportedly in furtherance of clause 19 of the scheme, it could not be treated as an integral part of the scheme. The Court emphasized that the new management under Anil D. Ambani, which took over on 07-02-2006, had not entered into any suitable arrangement with the Respondent company as required by the scheme.

3. Whether the agreements dated 12-01-2006 and amended on 27-01-2006 are consistent with the scheme sanctioned by the Court:
The Court scrutinized the agreements dated 12-01-2006 and amended on 27-01-2006 and found that they were not consistent with the spirit of the scheme sanctioned by the Court. The Court noted that the agreements were executed by the erstwhile management of the Applicant company before the new management under Anil D. Ambani took over. The Court highlighted that the scheme required the new management to provide focused management attention and leadership to the segregated and demerged business, which had not been fulfilled by the agreements in question.

4. Need for ad interim relief to protect the applicant's interests in the specified quantity of gas:
The Court considered the Applicant's request for ad interim relief to secure its interests in the specified quantity of gas. The Court noted that the Respondent company had initiated the process of selling gas through auction, which could potentially affect the Applicant's rights. The Court directed the Respondent company to set apart the specified quantity of gas committed to the Applicant and ensure no third-party interests are created in respect of this quantity. The Court allowed the Respondent to proceed with the auction process for the remaining quantity of gas.

Conclusion:
The Court granted ad interim relief in terms of prayer clause (a) of the application, directing the Respondent to ensure that no third-party interests are created in respect of the specified quantity of gas to be supplied to the Applicant. The Court clarified that the views expressed were tentative and that the pending proceedings would be decided uninfluenced by these observations. The main application was scheduled for hearing immediately after the Summer Vacation.