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TMI Blog2013 (5) TMI 95X X X X Extracts X X X X X X X X Extracts X X X X ..... he shares in the Transferee company being issued to the Transferor companies in the same ratio as their contribution of the PIA. Further the PIA proposed to be contributed has been verified by an independent technical agency appointed by it. The explanation offered by the Petitioner companies that no valuation report is required is accepted and this objection of the RD is negatived. Objection concerning the transfer of licences from the Transferor companies to the Transferee company, i.e., Indus - Held that:- Indus itself has registration as IP-I. Therefore, the question of transfer of registration of certificates from the Transferor companies to Indus does not arise. Further a perusal of the registration certificates shows that this is a complete compliance under the requirements of the Indian Telegraph Act, 1885. The change of name of the companies has also been duly recorded by the authority issuing the certificates. Thus there was no third party interest involved in the scheme of merger. The shareholders, secured and unsecured creditors had also given their written consents to the scheme and the share exchange ratio proposed therein, thus this objection of the RD also does n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecourse for recovery of the previous liabilities of any of the Transferor companies or Transferee company. The proceedings arising out of the AOs passed against the Transferor companies or Transferee company will not be affected by the present judgment. In view of the above conclusions, this Court does not consider it necessary to deal with the objection of the Petitioner companies regarding the locus standi of the ITD to oppose the Scheme. Thus there appears to be no impediment to the grant of sanction to the Scheme as whole of the undertaking, the property, rights and powers with all the liabilities and duties of the Transferor companies shall be transferred to and vest in the Transferee company without any further act or deed. Upon the Scheme coming into effect, the Transferor companies shall stand dissolved without winding up & will not be construed as granting exemption from payment of stamp duty or taxes or any other charges, if payable in accordance with any law. The Petitioner companies will comply with the statutory requirements in accordance with law. - CO. PET. No. 14 of 2012 - - - Dated:- 18-4-2013 - S. Muralidhar,J. Mr. Rajiv Nayar, Senior Advocate,Mr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Category-I ( IP-I ). On 17th January 2008 Vodafone Essar was converted into a public limited company and the word Private was deleted from its name. The name of IIL was changed to Indus on 28th March 2008. On 23rd April 2008 ICTIL came to be registered as IP-I with DoT. On 17th June 2008 VIL was likewise registered as IP-I with the DoT. 5. The Scheme was entered into by VIL, BIVL, ICTIL with Indus in terms of which the effective date of the Scheme was 1st April 2009. The Scheme was to promote infrastructure sharing among telecommunications service providers as envisaged in the report of the Working Group on the Telecom Sector referred to above. The Scheme noted that the transfer and vesting of the undertakings of the Transferor companies to the Transferee company reflects the global trend of segregating telecommunications services and the telecommunications infrastructure business, with a view to adopt good management practices, establish high operational standards, provide a good value proposition to other wireless service providers and enable stakeholders to differentiate between the passive infrastructure assets business and the telecommunications services business. As a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have consolidated, or are in the process of consolidating, the agreed Passive Infrastructure Assets in the Transferor companies by way of Court approved schemes of arrangement under Section 391 to 394 of the Act or in any other appropriate manner (such consolidation, the Pre-Merger Reorganization ). In Clause 2.2.5 it was discussed in some detail that in the event that the pre-merger reorganization in respect of one or more of the Transferor companies could not be completed as a result of which any of the three Transferor companies was unable to contribute the agreed PIA to Indus (Transferee company), then the Scheme may be modified such that it may be effectively implemented in respect of the Transferor company(ies) which is/are able to contribute some or all of its/their Passive Infrastructure Assets to the Transferee Company pursuant to this Scheme. The share ratio may be suitably modified by the Board of Directors of the Transferor companies and the Transferee company. The accounting treatment to be given in the books of the Transferee company was set out in Clause 3.2 of the Scheme. 7. ICTIL is a wholly owned subsidiary of Aditya Birla Telecom Limited ( ABTL ) which, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... odafone Essar Gujarat Limited. 10. By judgment dated 29th March 2011 in Co. Petition No. 334 of 2009 [In re: Vodafone Essar Limited and Vodafone Essar Infrastructure Ltd. (2011) 2 Comp LJ 317 (Del)], the learned Company Judge of this Court approved the Vodafone Demerger Scheme in respect of Vodafone Mobile Services Limited, Vodafone South Limited, Vodafone Digilink Limited and VIL. While passing the above judgment, this Court heard and negatived the objections of the ITD. By a separate judgment on the same day, i.e., 29th March 2011 in Co. Petition No. 324 of 2009 [In re: Bharti Infratel Ltd. and Bharti Inratel Ventures Ltd. (2011) 2 Comp LJ 400 (Del)], this Court also approved the Bharti Demerger Scheme. 11. On 10th May 2011 Vodafone South Limited, Vodafone Digilink Limited, Vodafone Mobile Services Limited and VIL filed certified copies of the judgment dated 29th March 2011 of this Court approving the Vodafone Demerger Scheme. The said Scheme became effective vis- -vis six Transferor companies as well as the Transferee company upon such filing. 12. On 23rd May 2011 and 30th May 2011 the Scheme, forming the subject matter of the present petition, was approved by the Board of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ointeractive Services (India) Pvt. Ltd. ( PSIPL ) is an unsecured creditor of Indus and has opposed the Scheme and registered its objections. (v) ROC has received a complaint dated 14th December 2011 from Karnataka Engineering Pvt. Ltd., Mumbai ( KEPL ). 15. Pursuant to the notice issued, the Official Liquidator ( OL ) filed a report in the Court stating inter alia that: (i) Valuation of all the shares of all the Petitioner companies should have been done to ascertain the exact exchange ratio. (ii) By issuing just 1200 equity shares against the net assets of Rs. 2,174.43 crores of the Transferor companies, huge general reserves will be created in the books of the Transferee company. The purpose of issuing shares of Rs. 1200 against assets of Rs. 2,174.43 crores is not clear. (iii) If this Court deems fit, the comments of the DoT may be called for. (iv) The affairs of the Transferor companies appear not to have been conducted in a manner prejudicial to the interests of its members or to public interest. 16. On 2nd July 2012 an additional affidavit was filed on behalf of the RD bringing on record the letter dated 29th June 2012 issued by the Commissioner of Income Tax, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ued by ICAI. It is next pointed out in para 5 that despite a letter being written to Indus by the RD on 16th January 2012, Indus has not submitted any valuation report. 20. The third objection of the RD in para 6 of the affidavit is that Indus should be asked to obtain approvals of the DoT for transfer of licences from the Transferor companies to it after sanction of the Scheme by this Court. A reference is made to a letter dated 9th June 2003 issued by the DoT which clarifies that the licensee may transfer the licence with prior written approval of the licensor, even in the cases of a scheme under Section 391 or 394 of the Act. The fourth objection is that one of the unsecured creditors of Indus, PSIPL had, in the meeting of unsecured creditors held on 24th December 2011, opposed the Scheme. Lastly, it is pointed out in para 8 of the affidavit of the RD that the ROC, Delhi had informed that a complaint dated 14th December 2011 against Indus had been made by KEPL seeking certain outstanding payment and interest thereon and objecting to the Scheme. In response to the above affidavit of the RD, the Petitioners filed an affidavit dated 11th April 2012. 21. As regards AS-14, in par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which the relevant Passive Infrastructure Asset is located and (ii) the type of the relevant Passive Infrastructure Asset, that is, whether the Passive Infrastructure Asset is classified as a Ground Based Tower, a Roof Top Tower, a Roof Top Pole or a micro site. The Passive Infrastructure Assets proposed to be contributed by each of the Transferor companies to the Transferee company have been verified by an independent technical agency appointed by the Transferee company. The points attributable to such Passive Infrastructure Assets have been calculated in the manner set out above by the Transferor companies and the Transferee company. 23. It seems that there is no change in the overall position of the assets in any of the shares in the Transferee company being issued to the Transferor companies in the same ratio as their contribution of the PIA. Further the PIA proposed to be contributed has been verified by an independent technical agency appointed by it. The explanation offered by the Petitioner companies that no valuation report is required is accepted and this objection of the RD is negatived. 24. As regards the third objection concerning the transfer of licences from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In view of the above, the objection of the RD does not survive. 28. As regards the last objection of the RD concerning the stand of PSIPL, it requires to be noted that majority of the unsecured creditors approved the Scheme at a meeting convened for that purpose on 24th December 2011. The report of the Chairperson of the said meeting was perused by this Court and has been enclosed with the affidavit filed by the Petitioners. Indeed, when the requisite majority had approved the Scheme, the fact that one unsecured creditor had objected to it will not make a difference. It has been clarified by the Petitioners in the affidavit dated 11th April 2012 that Indus has no creditor by the name of KEPL however, it has a creditor by the name of Karamtara Engineering Private Limited ( Karamtara Engineering ) which served notice under the Act. The reply sent by Indus to Karamtara Engineering denying its claim has been enclosed with the affidavit and no further correspondence resulted from the said exchange. It is further submitted that Indus has a sound financial position and the Scheme has been approved by 99.892% in value of the unsecured creditors. In the circumstances, the above objectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, if any, made to it by that Government before passing any order under any of these Sections. 35. At the first hearing of the present petition, notice was directed to issue to the RD, Northern Region, Ministry of Corporate Affairs ( MCA ) as well as the OL. The authority of the RD, Northern Region having his office in Noida in Uttar Pradesh, to accept notice not just on behalf of the MCA but also on behalf of the Central Government is traceable to a notification dated 17th March 2011 issued by the MCA under Section 637 (1) of the Act delegating to the RDs at Mumbai, Kolkata, Chennai, Noida and Ahmedabad the powers and functions of the Central Government under several provisions of the Act including Section 394A. The precursor to the said notification was another one dated 31st May 1991 whereby again the Central Government had in exercise of its power under Section 637 (1) of the Act delegated to the RDs at Mumbai, Kolkata, Chennai, Kanpur the power and functions of the Central Government under several provisions of the Act including Section 394A. Therefore, for many years now the practice of the RD accepting notices in petitions under Sections 394A of the Act on behalf of both ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... single transaction . 38. The above submissions have been considered. As already noted hereinabove, even if it were to be assumed that the Schemes are interconnected and inter-dependent, if for some reason any part of the Demerger Schemes do not go through then such eventuality has been accounted for under Clause 2.2.5 of the Scheme. To the extent that some parts of the Demerger Schemes are not ultimately approved the present Scheme would correspondingly stand modified. Depending on the ultimate orders that may be passed concerning any part of the Demerger Schemes, applications can be filed in this Court for modification in terms of Section 392(1)(b) or Section 392(2) of the Act. 39. It is then submitted that the ITD should be permitted to proceed with recovery in respect of any existing or future tax liability of the Transferor companies or the Transferee company in respect of the assets sought to be transferred under the Scheme. It is submitted that there should be no limitation on the powers of the ITD to effect recovery of tax and penalties etc. 40. A similar contention was addressed by this Court in its judgment dated 29th March 2011 while approving the Vodafone Demerger ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f revenue. It is not open to this Court, in the exercise of company jurisdiction, to sit over the views of the shareholders and board of directors of the Petitioner companies, unless their views were against the framework of law and public policy, which, as discussed above, is not the conclusion reached here. It is purely a business decision based on commercial considerations. 42. In the operative portion of the judgment dated 29th March 2011, sanction was granted to the Scheme of Arrangement reserving the right of the income tax authorities to the extent stated above. Therefore, throughout it has been made clear that the right, if any, that the income tax authorities may have under the Income-Tax Act, 1961 ( ITA ) to proceed against the Petitioner companies was not in any manner curtailed. 43. Mr. Rajiv Nayar, learned Senior counsel for Petitioner Nos.1, 3 and 4 has reiterated the undertaking made by them as noted in para 29 of the aforementioned judgment dated 29th March 2011. Towards the end of the hearing, Mr. Abhishek Maratha, learned Senior Standing counsel for the ITD produced before the Court copies of four assessment orders ( AOs ) passed by the ITD Circles at Mumba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in view of the sanction of the Scheme. 45. Taking a cue from the above observations, this Court further clarifies that the grant of sanction of the Scheme by way of the present judgment will not defeat the right of the ITD to take appropriate recourse for recovery of the previous liabilities of any of the Transferor companies or Transferee company. The proceedings arising out of the AOs passed against the Transferor companies or Transferee company will not be affected by the present judgment. 46. In view of the above conclusions, this Court does not consider it necessary to deal with the objection of the Petitioner companies regarding the locus standi of the ITD to oppose the Scheme. 47. With no other objections remaining to be dealt with, there appears to be no impediment to the grant of sanction to the Scheme. Accordingly, this Court grants sanction to the Scheme under Sections 391 to 394 of the Act. It is made clear that the grant of sanction to the Scheme is subject to the final order in Company Appeal No. 63 of 2012 pending before the DB of this Court and any other orders in any further proceedings thereafter. 48. In terms of Sections 391 to 394 of the Act and in term ..... X X X X Extracts X X X X X X X X Extracts X X X X
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