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TMI Blog2013 (6) TMI 325X X X X Extracts X X X X X X X X Extracts X X X X ..... nty four hours entertainment television programme. 50 % of the shareholding of the transferor company was held by Turner Asia Pacific Venture Inc (hereinafter referred to as Turner - the respondent) and 50% was held by the Alva Brothers Entertainment Pvt. Ltd. (ABE). 3 ABE owned Meditech Private Limited a company promoted by Nikhil Alva and Niret Alva (Alva Brothers) who were engaged in the business of television content creation. With the extension of the domestic television broadcasting industry, ABE, in 2006 incorporated the transferor company as a wholly owned subsidiary of Meditech Pvt. Ltd. with the intention of launching a television channel under the brand name "REAL". Inter-related agreements were accordingly entered into between ABE, Meditech Pvt. Ltd. and the respondent on 12.12.2007; arrangement being that ABE would continue to control Meditech Pvt. Ltd. which would generate the television content to be supplied to the transferor company and in turn the respondent would control the transferor company in its administrative, financial and legal spheres. 4 On 14.7.2008, the transferor company and the parent company of the respondent (Turner Entertainment Networks Asia In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed, Transferor Company merges into a wholly owned subsidiary of Alva Brothers Entertainment Private Limited. 9 The justification for the aforenoted scheme of arrangement/amalgamation entered into between the two companies was described as follows: (i) The Transferor and the Transferee Companies are engaged in the business of broadcasting of 24 hour entertainment television programming services. The Transferee Company will benefit from this synergy in the business professional expertise of the promoters and creative intelligence of the teams and the brand name of both the Transferor and Transferee company and will further enhance the marketability of the services under the name of the Transferee Company. (ii) The Transferee Company will benefit from the management expertise especially in technical areas, which are essential for critical decisions. (iii) The amalgamation of both the companies will pave the way for better and more efficient utilization of larger resources and funds. (iv) It would also lead to growth prospectus for the personnel and organization connected with both Petitioner Companies and thus, be in the interest of and for the welfare of, the employees of the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the very least that the respondents ought to have done by now, was to take recourse to an appropriate remedy, in accordance with law. Admittedly, no steps have been taken in that behalf, though the direction to deposit flows from a judgment dated 25.03.2011. As regards the submission made by the respondents, qua their purported inability to pay, no demonstrable, legally recognized steps have been taken in that regard. In these circumstances, for the moment, I propose to issue a limited direction, which is, that respondents will deposit US $ 1.5 Million, in Indian rupees, in court, at the rate of exchange which was prevalent on the date of the judgment, within six weeks from today. On the money being deposited, the same shall be invested in an interest bearing fixed deposit with a nationalized bank, by the registry. The release of the money, if deposited, would await the approval of the RBI and further orders of this court. List on 16.01.2013." 14 The present application was filed by the transferee company on 30.10.2012 which is after the orders were passed on the contempt petition. The submission of the learned counsel for the respondent that this application was in fact a retali ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellant. There is a two-fold submission which has been made before this Court. The first submission relates to Clause 1.10 and Clause 7.1 of the scheme which scheme now stands sanctioned. Clause 1.10 defines an "undertaking". This definition reads herein as under: "1.10 "Undertaking" shall mean and include the following: a) All the assets, whether movable or immovable, tangible or intangible, properties, current assets, investments, claims, authorities, allotments, approvals, consents, licenses, registration, contracts, engagements, arrangements, estates, interests, intellectual property rights, power, rights and titles, benefits and advantages of whatsoever nature and wherever situate of every description belonging to or in the ownership, goodwill, power or possession and in the control of or vested in or granted in favour of or enjoyed by the Transferor Company as on the Appointed Date (hereinafter referred to as "the said assets") and; b) All the present and future liability and debts, duties, liabilities and obligations of every description or pertaining to, the Transferor Company, whether secured or unsecured, as on the Appointed Date (hereinafter referred to as "the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... complete "undertaking" as a "going concern", it included the transfer of all moveable assets both tangible and intangible. It made no business sense for the transferor company to have merely transferred the STBs without transfer of the decryption key since the real asset was the distribution network; by failing to transfer the decryption key which was true property rights in the distribution network the respondent had destroyed the commercial viability of the transferee company; the respondent has acted in complete breach of the scheme which has been envisaged between the parties. The second and alternate submission propounded by the learned counsel for the appellant being that learned single Judge has wholly misunderstood and misinterpreted the provisions of Section 392(1)(b) of the said Act; the scheme being unviable and having failed to come into effect for noncompliance of the obligation by the respondent, the necessary alternate was to wind up the appellant company which prayer has also illegally not been granted by the impugned order. 20 Arguments have been countered. Learned counsel appearing for respondent has drawn attention of this Court to the correspondences exchange ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... both those methods; and The word "arrangement" is analogous in some sense to "a compromise". 24 A scheme of arrangement/amalgamation is sanctioned under Section 391 of the said Act. At the time when Companies seek a sanction of its scheme it is incumbent upon them to make a complete disclosure of all material facts to the court. 25 The scope of the powers available to the Court to deal with an application post the sanction of the scheme are contained in Section 392 of the said Act. 26 Section 392 Sub-Clause (1) (b) and Sub-Clause (2) are relevant to answer the controversy at hand read herein as under: "392. Power of Tribunal to enforce compromise and arrangement.- (1) Where the Tribunal makes an order under section 391 sanctioning a compromise or an arrangement in respect of a company, it- ...................... (b) may, at the time of making such order or at any time thereafter, give such directions in regard to any matter or make such modifications in the compromise or arrangement as it may consider necessary for the proper working of the compromise or arrangement. (2) If the Tribunal aforesaid is satisfied that a compromise or an arrangement sanctioned under section 391 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en adhered to. The first prayer is that the scheme accordingly be modified and respondent be directed that the 3000 STBs and their full ownership be given to the appellant with the encryption keys in the absence of which the STBs would be a useless property. Second submission is that in case the distribution network is not restored the court should wind up the appellant company. 29 The prayers made in the aforesaid application reads herein as under: (a) Pass necessary Orders and directions to ensure that the Scheme is workable under Sections 392 (1) and Section 394 as referred to in Para 11.2.9; Alternatively, (b) Declare the impugned Scheme dated 29.03.2011 as sanctioned by this Hon'ble Court in CP/20/2011 as unworkable and cancelled and consequently order the winding up of the Applicant Company under the Companies Act, 1956; (c) Pass such other and further order (s) as this Hon'ble Court may deem fit and proper in the facts and circumstances of the case. 30 Record shows that the joint company application seeking sanction of the scheme was filed by the transferor and transferee company on 10.01.2011. The scheme was sanctioned on 23.9.2011. This joint application was supported ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is omission of the distribution network in the list of properties cannot be accidental; it was intentional and this is evident from the prior correspondences exchanged between the parties. 34 The specific absence of the distribution network and the decryption code of the STBs answers the argument of the learned senior counsel for the appellant that this distribution network and the decryption code of the STBs did not form a part of the undertaking which was to be transferred by the transferor company to the transferee company. 35 The Court cannot add terms to the scheme which did not exist in the original sanctioned scheme. The powers of the Court are limited to giving directions which it considers necessary for the proper working of the compromise or arrangement and in the course of these directions it may only make such modifications in the said compromise or arrangement which are necessitated for the proper working of the said compromise or arrangement. It is not within the domain of the Court to read terms which were explicitly sought to be excluded under the sanctioned scheme. The provisions of the scheme and the facts and circumstances as detailed and discussed prior to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t case the second prayer was also rightly refused at that stage. The learned single Judge being conscious of the provisions of the Section 392 (2) of the said Act had not foreclosed the right of the appellant; liberty has been granted to him to move an appropriate application seeking winding up of the appellant company in accordance with law. On the second prayer also no fault is found. 39 The reliance by the learned counsel for the appellant on the judgment of J.K.(Bombay) (P) Ltd. Vs. New Kaiser-I-Hind SPG & WVG. Co. Ltd. & Ors. [1969] 2 SCR 866 is misplaced. In this case pursuant to a scheme of arrangement in terms of Clause 4 of the scheme Jalan were bound not only to procure but to personally bring in the finances sufficient to work the mills. On an application filed under Section 392 the Company Judge directed Jalan to provide the necessary finance. He dismissed the winding up petition filed by the Company and Others. The appeal court noted that since the director of the company in its affidavit had itself admitted that the company had become commercial insolvent and there being no binding obligation undertaken by Jalan to pay anything to the company and to compulsorily prov ..... X X X X Extracts X X X X X X X X Extracts X X X X
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