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TMI Blog2024 (4) TMI 336X X X X Extracts X X X X X X X X Extracts X X X X ..... Law Tribunal', Court No. V, Mumbai Bench. 2. The National Company Law Tribunal, Court No. V, Mumbai Bench, while passing the 'Impugned Order', dated 09.02.2024 in C.A. 320 / 2023 in CP No. 200 / 2023, among other things, at Paragraph Nos. 25 to 29, had observed the following: 25. ''On perusal of the pleadings of both parties, it is evident that the Applicant does not feature as a creditor of both Respondent Nos. 1 and 2 as per its audited financial statements and the list of its unsecured creditors, duly verified and authenticated by the statutory auditor. Reliance is placed on Astorn Research Ltd. (2013 SCC OnLine Guj 1510) in which it was held that only a creditor as per the audited financial statements of the transferor/transferee companies or a shareholder of the transferor/transferee companies has the locus to intervene in a scheme to oppose the same. 26. In addition to the above stated, the Applicant's name is also not included in the list of 194 unsecured creditors of Respondent No. 1 and 1,215 unsecured creditors of Respondent No. 2 as annexed to the Company Application Scheme No. 48 of 2023. Both the Respondents Nos. 1 and 2 have no secured creditors. Therefore, we ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unsel for the Appellant contends that the 'Impugned Order', dated 09.02.2024, passed by the 'Tribunal', in dismissing the C.A. 320 / 2023 in CP No. 200 / 2023, is an 'invalid' and an 'illegal' one, because of the fact that the 'Tribunal', had passed the 'Impugned Order', beyond the 'Reliefs' and 'Pleadings' of the 'Petition / Application', filed by the 'Appellant / Petitioner', by placing reliance on documents, Viz. 'List of Creditors' and 'Affidavit', which had not formed part of the 'Pleading' in C.A. 320 / 2023 and further, that the 'Appellant', had no access, to the said 'Scheme Documents'. 4. It is represented on behalf of the Appellant, that the matter to be determined, was Appellant's entitlement as a Person / Member of the Public and also as the 'Creditor' of the 'Respondent Companies', to the 'Scheme Documents', filed under the 'Scheme', by the Respondents, while the 'Court' decided on the 'Appellant's Locus' as 'Creditor' of the 'Respondent Companies', ignoring that the 'Scheme' is Public process and affects the other rights of the Appellant. 5. It is the stand of the Appellant that the 'Tribunal', had not taken into consideration of the 'statutory force, establishing A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents / Records / Books', which were not made available to the 'Appellant'. 13. The plea of the Appellant is that, the 'Impugned Order', of the Tribunal', dated 09.02.2024 had 'abrogated', the 'valuable right of the Appellant', in challenging the 'Respondents Books', which had 'excluded the Appellant', as a 'Creditor' of the Respondents. In this connection, the contention of the 'Appellant', is that the 'Tribunal' is 'not to rely on anything which is not made available to a Person, to hold it against him, without 'providing an opportunity of being Heard'. 14. According to the Appellant, the 'Tribunal', in the 'Impugned Order', had confused the 'two distinct and separate steps in the Amalgamation Process'. As such, the decision in 'Astorn Research Limited, 2013 SCC OnLine Guj. 1510, being relied upon by the 'Tribunal', in the 'Impugned Order', is a 'misplaced' one. Also that, the decision in 'Astorn Research Limited's case', carves out an 'exception', by mentioning that, 'it is open to the 'Creditors', to demonstrate that they are the 'Creditors', to the satisfaction of the 'Court'. 15. According to the Appellant, the 'Impugned Order', had wrongly held, that 'the Letter Agreement' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... final hearing of the 'Scheme Petition'. In fact, the said advertisement in the last point includes, ''A copy of the Petition / Application / Reference, will be furnished by the undersigned to any Person requiring the same on payment of the prescribed charges for the same.'' 20. The prime submission of the Learned Counsel for the Appellant, there is no qualification in the term 'Person', and therefore it includes 'every member of the public', who is interested knowing about the 'Scheme'. 21. According to the Appellant / Petitioner, it is a 'Copyright Society', registered and authorised, under Section 33 of the Copyright Act, 1957, by this, it has the 'right' to collect 'Royalty', from all the 'Organisations' that are in the 'Business of Broadcasting, Telecasting, Streaming of any Musical and Literary work'. 22. The Learned Counsel for the Appellant, brings to the notice of this 'Tribunal', that the Respondents Nos. 1 & 2 are in the 'Business of Broadcasting and Streaming Activities', utilising numerous literary and musical works in which 'Copyright', subsists in various forms i.e., either by the 'communication to the public' or 'performance of the literary or musical works', stan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om 21.06.2012, in view of sub-section (10) of Section 19, the assignment of the copyright in the work to make sound recording which does not form part of any cinematograph film, shall not affect the right of the author of the work to claim an equal share of royalties or/and consideration payable for utilization of such work in any form by the respondent - plaintiff.'' (Emphasis Supplied) 28. The Learned Counsel for the Appellant, adverts to the decision in 'Indian Performing Right Society Limited v. Rajasthan Patrika Pvt. Ltd.' (vide Interim Appln. (L) No. 9452 / 2022 in Comm. IP Suit No. 193 / 2022), reported in 2023 SCC OnLine Bom 944, wherein at Paragraph Nos. 45 to 48, 58 & 59, it is observed as under: 45. ''The plaintiff - IPRS has been able to make out a strong prima facie case in its favour on the strength of the above-quoted provisos to Section 18 of the Copyright Act, for the reason that the rights of authors of such literary and musical work have been placed at a high pedestal in the said provisos. It is clear that such authors, by a legislative tool, have been prohibited from assigning or waiving their right to receive royalties for the utilization of their works in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... change in position of law as laid down by the Supreme Court in the context of the unamended Copyright Act in the year 1977 in the case of IPRS Vs. Eastern Indian Motion Pictures Association and others (supra). 59. This Court is of the opinion that the nature of amendments brought about in the Copyright Act in the year 2012 need to be considered in the backdrop in which such amendments became necessary. Reference is already made to the Report of the Standing Committee of Parliament, which led to introduction of amendments as also the Statement of Objects and Reasons for bringing about such amendments. All of them point towards additional protection of rights envisaged for authors of such literary and musical works, who had hitherto lost all their rights once they were assigned to the producers of cinematograph films incorporating sound recordings or sound recordings as such. Therefore, this Court is not in agreement with the opinion expressed by the learned Single Judge of the Delhi High Court (Endlaw, J.) in the order dated 04.01.2021 passed in IPRS Vs. Entertainment Network (India) Limited (supra). As noted hereinabove, in the first place, when the suits themselves concerned dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... through our Client's channels has performances as part of TV shows which uses underlying musical and / or literary works independent of the sound recordings and / or cinematograph films. Only in reference to this specific category of use, our Client has instructed us to state and clarify that our Client is agreeable to discuss, negotiate and pay royalty for communication to the public of underlying works (independent of a cinematograph film) owned and administered by IPRS which may be used by our Client in reality shows, independent and not pre-incorporated in the sound recordings and / or cinematograph films, at reasonable rates.'' 31. It is represented on behalf of the Appellant, that it filed a CP (IB) No. 1100 / 2023, against the First Respondent for a Claim of Rs.44,44,00,000/- and CP (IB) No. 1102 / 2023, against the Second Respondent for a Claim of Rs.254,19,44,137/-, as per Section 9 of the I & B Code, 2016, and further that the 'Adjudicating Authority' / 'Tribunal', was pleased to issue 'Notice', to both the Respondents and directed the 'Respondents', to file a 'Reply', on or before 20.12.2023. Moreover, the 'Appellant', is able to establish, that it is the 'Appellant' o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tstanding Debt', as per latest 'Audited Financial Statements', can make any objection to a 'Scheme of Amalgamation'. 38. According to the Respondents, the Appellant, is neither a 'Shareholder' nor a 'Creditor' of the Respondents, as per the latest 'Audited Financial Statements'. In fact, only those who fulfil the requirements of Section 230(4) of the Companies Act, 2013, are 'Interested Parties', who can object the 'Scheme', and are therefore, entitled to pray for a 'Copy of the Documents'. In reality, Section 230(4) of the Companies Act, 2013, specifically requires one to be 'Creditor' as per the 'Financial Statements', to be able to object to a 'Scheme'. 39. It is represented on behalf of the Respondents, that the Respondents Advertisement ('Scheme Hearing Advertisement'), is made under Rule 16 of the Companies ('Compromises, Arrangements and Amalgamations') Rules, 2016, which relates to Advertising, the 'Notice of Hearing'. As per Rule 35 of the NCLT Rules, 2016, being a 'general rule' for any 'Advertisement of a Petition / Application', is not the 'Rule', under which, the 'Scheme Hearing Advertisement', has been published. 40. Further, the 'Tribunal', through its 'Order', da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Copyright Society to issue and grant licences in respect of the 'works' it 'administers'. That apart, the applicability of any 'Royalty Rates', including any of the 'Appellant' / 'IPRS Published Tariff' or otherwise, is to be seen in the context of other provisions of the Copyright Act, 1957. 46. The Learned Counsel for the Respondents, adverts to Section 30 of the Copyright Act, which provides that, the 'Owner of the Copyright', may grant any Interest, in the right, by way of 'Licence', in writing by 'himself' or by his 'duly Authorised Agent'. 47. According to the Respondents, Section 30A of the Copyright Act, provides that the provisions of Section 19 of the Copyright shall, with any necessary adaptations and modifications, apply in relation to a licence under Section 30 of the Copyright Act as they apply in relation to assignment of copyright in a work, which consequently provide that licence of any copyright shall only be valid in the event the licence has been made in writing by the Licensor or his Authorised Agent. 48. The Learned Counsel for the Respondents points out that Section 30 of the Copyright Act, 1957, also applies to the Appellant, as mandated under Section 34( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Division Benches of the respective 'Courts'. Further, a specific issue was framed by the Hon'ble High Court of Delhi in this regard (By an 'Order', dated 20.12.2021 in the decision in Entertainment Network (India) Limited v. IPRS), and added further, the Hon'ble Division Bench of Bombay, had suspended the operation of the Order of the Hon'ble Single Judge in the matter of IPRS v. Rajasthan Patrika Pvt. Ltd. (2023) SCC OnLine Bom 994), till 12.04.2024. 54. The Learned Counsel for the Respondents, submits that the Appellant / IPRS is 'clutching on to a straws', by relying on the 'earlier, without prejudice one time Letter Agreement', which was not to be treated as precedent for any future Agreements. Besides this, in the event of any noncompliance, without admission, the remedy for the same, as per Section 62 of the Copyright Act, 1957, exclusively lies within a 'Civil Court', and as such, this 'Appellate Tribunal' and 'Tribunal', have no jurisdiction to entertain or decide these issues, arising from the Copyright Act, 1957, more particularly in proceedings relating to Amalgamation of Companies. 55. The Learned Counsel for the Respondents, contends that without prejudice, even if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was contended that the substratum of the transferor-company has been eroded completely and, therefore, the amalgamation should not be allowed. My attention was invited to the audited balance-sheets of the transferor-company as well as the transferee-company annexed to the petition. It was pointed out that so far as the transferor-company is concerned, its paid up capital is only Rs. 700 crores as against loans of over Rs. 127 crores. However, the asset side of the balance-sheet also shows assets of similar value and the loans appear to have been utilised for the purpose of acquisition of assets including fixed assets and current assets. In fact, the transferor-company had not even commenced the operation till the year ending March 31, 2001, and, therefore, the profit and loss account was also not drawn. Merely because the company has borrowed money for the purpose of acquisition of assets, it cannot be said that the substratum of the company is lost. Assuming without admitting that the substratum of the transferor-company is lost, the creditors of the transferor-company cannot object to the sanctioning of the scheme on the said ground because by amalgamation, they would not only b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt from proceeding further with the Scheme is question. The admitted position in this matter is also that the said meeting was dispensed with by the Court's order. It may be mentioned here that during the course of argument the basic submission of all the creditors/intervenor/objectors are that they are only interested in recovery of their dues and or amounts from the transferee company i.e. EMCO Ltd. There is no objection of any kind or of any creditors against the transferor company. The Scheme of Arrangement and its merit, if we tests, from this point of view that the creditors have no objection, if their money is paid. Then in a way they are not objecting to the basic Scheme of Arrangement in question. In fact they have no objection, if the Scheme is sanctioned subject to the respective payments of the respective creditors. Considering, the rival objection and contentions raised, by the parties, now as creditors have appeared before the Court and submitted their objections to the Scheme of Arrangement in question. I see there is no reason now to direct the parties to issue fresh individual notices or held meeting of such creditors again. I am considering the Scheme of Arra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed amount, as demanded by Jain Electronics, as referred above. The petitioners company contended that in fact the applicant is liable to pay the damages to the company for withholding the capital equipments. In view of this, the petitioner, submitted that intervenor has no locus stand to intervene the proceeding. Considering, the affidavit of the petitioner on record and controversy raised by both the parties, at this stage, this disputed amount cannot be adjudicated or finalized by the Court, while Sanctioning the Scheme in question. Subject to the settlement of their respective dispute and dues, parties are entitled to initiate or take out appropriate proceeding before appropriate forum. In my view, at this stage, this objection also cannot be considered and it is rejected. 24. Considering, the over all view of the Scheme of the arrangement in question, as well as the affidavit filed to oppose the objection as raised by the respective creditors and even after considering, the merit of the objection raised by the creditors. I am convinced that such creditors cannot object the sanctioning of the arrangement in question. In my view also if liabilities or dues are in dispute and un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transferee company, as the chairman of the aforesaid meeting, which was ordered to be scheduled on 07.09.2012 and in respect of any adjournment(s) thereof. Other directions were also issued by this Court, including directing the chairman to submit report to this Court, the result of the said meeting, within 14 days from the conclusion of the meeting. 9. It appears from the record that the aforesaid meeting came to be held on 07.09.2012 and an affidavit to that effect has filed by Shri Jainand Vyas along with report of the chairman, which indicates that a resolution resolving the proposed scheme of amalgamation as prayed for came to be approved unanimously i.e. 100%.'' 14. ...... therefore the objector has no locus standi to raise objections on the basis that he is shareholder. Similarly, the status of the Objector as a creditor is also not only doubtful but is a disputed and even if it is presumed, as observed earlier, it is less than even minimal for which the objector has other remedy under law and, therefore, on such ground the scheme cannot be halted.'' Meaning of Creditor : 64. The word 'Creditor', is not limited to one whom a 'Debt', is due on the 'date of Petition' a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'Applicant', is neither a 'Creditor' nor a 'Shareholder' of the First Respondent. In fact, as per the 'Audited Financial Statements' of the 'First Respondent', the 'Petitioner / Applicant', is not a 'Creditor' of the 'First Respondent'. 72. Moreover, the Petitioner in C.A. 320 / 2023 in CP No. 200 / 2023, had claimed to be an 'Unsecured Creditor' of the 'First Respondent'. There is no averment made in the 'Application', as to the basis of 'such Claim' or 'Quantum of Debt', i.e. allegedly owed to the Applicant, by the First Respondent. 73. It is the version of the First Respondent, that the 'Appellant's Claim', as set out in the Application, at best, can be classified as a 'Disputed Claim', which can be pursued, if at all, subject to Limitation), against the 'Amalgamated Entity', before a 'Competent Court of Law', and further, the 'Application', lacks any merit. 74. As far as the present case is concerned, the 'Respondents' do not consider the 'Appellant / IPRS', as its 'Creditor' and have consistently and seriously disputed the 'Appellant's Alleged Claims'. Indeed, the Appellant, was not recognised as 'Creditor' in the 'Financial Statements' of both the 'Respondents'. 75. Added ..... X X X X Extracts X X X X X X X X Extracts X X X X
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