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2013 (1) TMI 125 - HC - Companies LawTransfer of Telecommunication license - Overlapping licenses - Unified Access Service License for Punjab - Scheme of Amalgamation - Spice Communication Limited with Idea Cellular Limited - DoT was informing about the proposed merger on 25.6.2008 through letter - Amalgamation was not permissible without specifically taking its prior approval - Without the knowledge of or taking consent of or notice of the proceedings to the respondent Held that - the amalgamation of the companies would be different from the amalgamation of the licenses. Therefore, these material facts would have bearing on the sanctioning of the Scheme with certain conditions and would not have resulted into the dismissal of the competition petition seeking sanction. For this reason, we hold that non-disclosure of the aforesaid facts would not amount to fraud resulting into vitiating the very action namely order sanctioning the scheme. It is not possible to scramble the unscrambled eggs at this juncture, additionally on the aforesaid reason, we feel that there was no case made out by the DoT for recall of the orders dated 05.2.2010 sanctioning the scheme. Even as per the contention of the appellant itself, sanctioning of merger scheme amounts only the merging company and not the licenses and therefore, the appellant itself maintains that for transfer of these licenses, prior permission of DoT is required. It is also recognized that there is a dispute on this issue inasmuch as, as per the appellant, it is entitled to get the license transferred in its name and the refusal of the Government on this account is not appropriate. This is a dispute which has to be resolved by the TDSAT and parties are already before the TDSAT. Therefore, it is for the TDSAT to give directions, including interim orders in this behalf. Dispute about transfer of licenses of Spice to Idea is concerned; the same shall be decided and determined by the TDSAT and the parties. It will also be open to the TDSAT to determine the arrangement in the interregnum. Appeal partly allowed
Issues Involved:
1. Scheme of Amalgamation and Transfer of Licenses. 2. Allegations of Non-Disclosure and Fraud. 3. Jurisdiction and Scope of Company Court under Sections 391 and 394 of the Companies Act. 4. Validity of DoT's Refusal to Transfer Licenses. 5. Modifications to the Sanctioning Order. Detailed Analysis: 1. Scheme of Amalgamation and Transfer of Licenses: The Scheme of Amalgamation between Spice Communication Limited (Spice) and Idea Cellular Limited (appellant) was sanctioned by the Company Judge on 5.2.2010. This included the transfer of all business, assets, and liabilities of Spice to the appellant. Spice held certain licenses, notably the Unified Access Service License (UAS) for Punjab, which were also to be transferred as per the Scheme. However, the Department of Telecommunication (DoT) contended that such a transfer required prior approval, which was not sought. 2. Allegations of Non-Disclosure and Fraud: The DoT filed an application to recall the sanctioning order, alleging non-disclosure and suppression of material facts, amounting to fraud. The Company Judge found that non-disclosure of the Merger Guidelines, licenses, and correspondence with DoT constituted fraud. The Judge noted that the appellant did not inform the Court about the necessity of DoT's prior approval for the transfer of licenses, which was a material fact. The Judge modified the sanctioning order to align it with the License and Merger Guidelines, 2008. 3. Jurisdiction and Scope of Company Court under Sections 391 and 394 of the Companies Act: The Court emphasized the importance of full disclosure under Section 391(2) of the Companies Act, which mandates the disclosure of all material facts. The scope of the Company Court includes ensuring compliance with statutory procedures, fairness, and that the scheme is not contrary to law or public policy. The Court found that the appellant's non-disclosure of relevant material facts misled the Court, which could have otherwise imposed conditions or sought clarifications from DoT. 4. Validity of DoT's Refusal to Transfer Licenses: The appellant argued that the refusal by DoT to transfer the licenses was inappropriate and that such matters should be resolved by the Telecom Disputes Settlement and Appellate Tribunal (TDSAT). The Court acknowledged that the dispute over the transfer of licenses falls under the jurisdiction of TDSAT. The appellant maintained that the merger of companies is distinct from the merger of licenses and that DoT's refusal should be contested in TDSAT. 5. Modifications to the Sanctioning Order: The Company Judge modified the sanctioning order to ensure compliance with the License and Merger Guidelines, 2008. The modifications included: - The six overlapping licenses of Spice would not be transferred to the appellant until DoT's prior permission was obtained, and until then, these licenses would vest with DoT. - The spectrum allocated for these overlapping licenses would revert to DoT. - DoT was permitted to take action for the appellant's use of overlapping licenses without permission. The High Court agreed with most modifications but altered the direction that overlapping licenses would vest with DoT. Instead, it directed that the dispute over the transfer of licenses should be resolved by TDSAT. Conclusion: The appeal by the appellant was partly allowed, modifying the direction regarding the vesting of overlapping licenses with DoT. The matter of license transfer was directed to be resolved by TDSAT. The appeal by DoT was dismissed, and the parties were directed to bear their own costs.
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