TaxTMI 
TaxTMI 
2011 (7) TMI 1004
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....t on 30-3-2011. On the said date, this Court passed the following order:- "Co. Appl. 578/2011 in Co. Pet. 403/2009 Mr. A.S. Chandhiok, learned ASG has drawn my attention to the fact that the Ministry of Telecommunication vide its letters dated 7th January, 2010 (page 60) and 18th January, 2010 (page 63) of the present application, had rejected the application of Amalgamation of M/s. Spice Communication Limited with M/s. Idea Cellular Limited. Mr. Chandhiok further submits that these facts were not brought to the notice of the Court on 28th January, 2010 when this Court had reserved the judgment in the present case. Issue notice to non-applicants by all modes including dasti, returnable for 25th April, 2011. Co. Appl. 579/2011 in Co. Pet. 403/2009 Issue notice to non-applicants by all modes including dasti, returnable for 25th April, 2011. Keeping in view the aforesaid, the operation of order dated 5th February, 2010 is stayed till the disposal of the present application." 3. Thereafter Company Application No. 611/2011 was filed by the petitioner-companies namely, Spice and Idea seeking vacation of the aforesaid order dated 30-3-2011. Keeping in view the urge....
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....therwise, no compromise in competition occurs in the provisions of Telecom Services:- (i)When transfer or assignment is requested in accordance with the terms and conditions on fulfilment of procedures of Tripartite Agreement if already executed amongst the Licensor, Licensee and Lenders; or (ii) Whenever amalgamation or restructuring i.e., merger or demerger is sanctioned and approved by the High Court or Tribunal as per the law in force; in accordance with the provisions; more particularly sections 391 to 394 of the Companies Act, 1956; and (iii)The transferee/assignee is fully eligible in accordance with eligibility criteria contained in tender conditions or in any other document for grant of fresh license in that area and show its willingness in writing to comply with the terms and conditions of the license agreement including past and future roll out obligations; and (iv)All the past dues are fully paid till the date of transfer/assignment by the transferor company and its associate(s)/sister concern(s)/promoter(s) and thereafter the transferee company undertakes to pay all future dues inclusive of anything remained unpaid of the past period by the outgoing company....
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....rge the overlapping licences prior to merger of companies and/or whether it would be better for Idea to surrender the non-operative overlapping licences. 9. On 1-8-2008, Idea reiterates that it would seek DOT's prior written approval as well as approval of the High Court for transferring the overlapping Spice licences. 10. On 7-8-2008 a meeting is held between officials of petitioner-companies and DOT in which DOT opines that overlapping licences should be surrendered and clarifies that in the event of surrender, the entry fee for obtaining such licences would be non-refundable and the spectrum allocated for such licences would have to be surrendered. From the Minutes of Meeting on record it is apparent that the demerger proposal is not discussed in the said meeting. 11. On 1-12-2008 Idea seeks DOT's approval for demerger of two overlapping licences for Punjab and Karnataka areas along with already granted spectrum for the said areas. 12. On 17-10-2008, without getting any prior permission, Idea acquires 41.09 per cent equity in Spice. It is pertinent to mention that this fact is intimated for the first time to DOT vide six monthly FDI compliance letter of Spice dated 2....
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.... clause 17 of the intra service area merger guidelines dated 22-4-2008. 20. Idea in its reply dated 25-1-2010 states that merger of licences was different from merger of companies and that clause 17 of the Merger Guidelines, 2008 is not attracted to the present case. 21. On 28-1-2010, this Court reserves its judgment in the second motion petition for amalgamation being CP 403/2009. It is an admitted position that DOT's letters dated 7-1-2010 and 18-1-2010 are not brought to the notice of this Court when it reserves its judgment. 22. On 5-2-2010, this Court allows the aforesaid merger petition and sanctions the scheme of amalgamation. One of the conditions precedent for the scheme of amalgamation is that overlapping licences would have to be transferred in accordance with the scheme of demerger. The relevant portion of the clause 17 of the Scheme sanctioned by this Court is reproduced hereinbelow:- "17. Scheme Conditional on approvals/sanctions The Scheme is conditional upon and subject to: ** ** ** 17.3 the sanction of the Scheme of Demerger-Spice and the sanction of the Scheme of Demerger-Idea by the Courts and the same being made effective in terms of t....
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....cheme is sanctioned by the High Court. In view thereof, the objection raised by the Regional Director is overruled." 24. On 11-5-2010, petitioner-companies withdraw the demerger scheme being CA(M) 98/2009. 25. Thereafter various petitions are filed by Idea challenging penalty and termination orders passed by DOT in Telecom Disputes Settlement and Appellate Tribunal (for short 'TDSAT'). Further, Idea has also challenged before the TDSAT the validity and legality of the letters dated 7-1-2010 and 18-1-2010 issued by DOT rejecting their merger proposal. Subsequent to this Court's order dated 5-2-2010, the petitioner-companies took the stand in correspondence and legal proceedings that upon the merger scheme being sanctioned by this Court, overlapping licences stand vested in Idea and that DOT has no other option but to grant its formal approval for transfer of licences. 26. In March, 2011 the present applications for recall and stay of this Court's order dated 5-2-2011 are filed. 27. Mr. A.S. Chandhiok, learned Additional Solicitor General of India submits that DOT's letters dated 7-1-2010 and 18-1-2010, by which amalgamation of petitioner-companies is rejected, has been s....
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....the court. The High Court, however, went haywire and made observations which are wholly perverse. We do not agree with the High Court that "there is no legal duty cast upon the plaintiff to come to court with a true case and prove it by true evidence". The principle of "finality of litigation" cannot be pressed to the extent of such an absurdity that it becomes an engine of fraud in the hands of dishonest litigants. The courts of law are meant for imparting justice between the parties. One who comes to the court, must come with clean hands. We are constrained to say that more often than not, process of the court is being abused. Property-grabbers, tax-evaders, bank-loan-dodgers and other unscrupulous persons from all walks of life find the court-process a convenient lever to retain the illegal gains indefinitely. We have no hesitation to say that a person, who's case is based on falsehood, has no right to approach the court. He can be summarily thrown out at any stage of the litigation. 6. The facts of the present case leave no manner of doubt that Jagannath obtained the preliminary decree by playing fraud on the court. A fraud is an act of deliberate deception with the design o....
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....that prior permission of DOT is required under clause 6. 31. Without prejudice to his interpretation of clauses 6.1, 6.2 and 6.3, Mr. Chandhiok submits that after the Merger Guidelines, 2008 have come into force, prior permission is required for merger of companies. 32. Mr. Chandhiok submits that this Court's order approving scheme of amalgamation has caused grave prejudice to DOT. He submits that in accordance with clause 17 of the merger guidelines, transfer of licences and/or merger of petitioner companies is not permissible prior to 25th January, 2011. He points out that this Court's order granting merger of petitioner-companies is being used by petitioner-companies to contend that once merger has been approved by the Company Court, all violations prior to that date of various clauses of licences and of guidelines have ceased to exist. 33. He also submits that delay in filing the application for recall does not disentitle DOT from claiming the reliefs sought for in the present application. He points out that the Gujarat High Court in Central Bank of India v. Ambalal Sarabhai Enterprises Ltd. [1999] 3 Comp. LJ 98 (Guj.) had not only entertained an application filed afte....
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....s made. When ASE had showed in the affidavits in support of the petition as well as in the petition that they have obtained consent of the secured creditors-the banks, it is obvious that the consent is on account of ASE accepting to be a guarantor even after the approval of the scheme. But when ASE refuses that position after the approval, it is clear case of ASE playing fraud on the court as well as the banks. 25. It was vehemently urged before us that the appellant will have to go before a regular court to establish its claim of fraud and that claim could not be considered in these appeals. At the cost of repetition, it must be stated that the appeal is continuation of the original proceeding, it is always open for a party to show that the opposite party is playing fraud on the court and is misleading the court and trying to obtain order in his favour. For that purpose, it is not necessary for him to take a separate proceeding. Therefore, we are unable to accept that contention of the respondent. In our opinion, by not producing the latest audited accounts and balance sheet of the company and by not putting on record the actual agreement which took place between ASE and the ba....
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....es and merger of companies are separate, distinct, mutually exclusive and non-overlapping. According to him, clause 6.3 of the Licence Agreement makes it clear beyond doubt that DOT has no say in the merger of companies and can only adjudicate on the merger of licences. 36. Dr. Singhvi submits that licence agreement and merger guidelines are public documents that constitute 'law' which are incapable of being suppressed. According to him, suppression can only be of facts and not of documents. 37. Dr. Singhvi refers to the correspondence exchanged between the parties to contend that on 25-6-2008 itself Idea had informed DOT about the proposed merger and thereafter Spice/Idea addressed various letters intimating DOT about different options including surrender of non-operative overlapping licences as well as simultaneous merger and demerger of companies. He also states that a meeting was held with high ranking officers of DOT and Idea on 7-8-2008 wherein all points regarding the merger guidelines and licence conditions were exhaustively discussed and considered. According to him, in the said meeting, DOT raised no objection to the merger or the proposed course of action suggested....
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....s 391 and 239(4) of the Companies Act. Reading the clause 17 with clause 18, it can be inferred that the intent is not to bar transfer of licences consequent upon merger of companies which are otherwise more than three years old, but the duration of the licences of the merged entity will be equal to the remaining duration of the licences of the two merging licences whichever is less on the date of merger. Therefore, it will not be appropriate to impose a self-restriction in the instant case. 5. Further, the same objective can be achieved by surrendering one of the licences, transferring the subscribers to the other entity. In case of surrender of licence, the spectrum returns to the Government and can be allocated to the licence to which subscribers have migrated based upon the subscriber criteria. In the event of merger also, the excess spectrum held by the merged entity has to be returned to the Government within a stipulated period of three months. Therefore, in both the cases, any excess spectrum is being returned to the Government and it does not remain an issue. 6. As regards entry fee paid for obtaining such licences, it was clarified that entry fee is non-refundable. ....
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....as the overlapping licences are non-operational, the purport of clause 1.3 of the licence is not attracted and the raison d'etre for clause 1.4 (ii) does not exist. He further submits that clause 17 of the merger guidelines is violative of section 11(a) of the TRAI Act. Without prejudice to the aforesaid, he submits that as the three years' bar in respect of new licences is today over, DOT is obliged to merge the licence. 42. According to him clause 6.3 clearly stipulates that approval of DOT for merger of licences is to be obtained only on sanction of the scheme of merger of companies by the High Court. He submits that if clause 6 of the licence condition read with clause 1 of the guidelines dated 22-4-2008 is read as sought by DOT, then clause 6.3 of the licence will become otiose. 43. Dr. Singhvi points out that DOT while approaching this Court on 30-3-2011 has failed to comply with the mandatory provisions of rule 19 of Companies (Court) Rules, 1959, inasmuch as it has not served an advance copy of the applications on the petitioner-companies. 44. Dr. Singhvi further states that DOT has not made even a single averment in its applications or disclosed any fact about the....
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....e Scheme with an additional condition of the Scheme that ASE shall execute within one month from today a guarantee as required by Central Bank. We are unable to accept submission that the Central Bank was only asking for a guarantee for its dues. A plain reading of the letter of Central Bank shows that it was asking for a guarantee to cover of the Swastik Division and for losses of the new company i.e., SSL. It is now admitted that the suit filed by these two Banks is for recovery of losses of the Swastik Division. Therefore, in our view, ASE must execute a guarantee guaranteeing the dues in Suit No. 2520/1989 filed by these two banks and which is pending before the Debts Recovery Tribunal, Mumbai. We so direct. The guarantee shall be executed within one month from today. On such guarantee being executed the impugned judgment will stand set aside and the order sanctioning Scheme with the additional condition set out hereinabove shall stand approved. In the event of a guarantee not being executed within time aforesaid, these Appeals shall stand dismissed without any further orders. With these directions, these Appeals stand disposed of. There will be no order as to costs." 45. Dr....
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....e company without the company being required to make a number of applications under the Companies Act for various alterations which may be required in its memorandum and articles of association for functioning as a reconstituted company under the scheme....." 48. But, in the opinion of this Court, this does not mean that if some permission is required under any separate statute or licence, then the same would not be obtained. This Court while sanctioning the scheme can always stipulate that the scheme will come into effect only when other statutory and contractual permissions have been obtained. Also, if there is a prohibition of a particular time period on transfer of an asset, then the Court can even adjourn the amalgamation proceedings till the 'eclipse period' is over. To hold otherwise would amount to not only conferring supremacy on the Act vis-a-vis other statutes/contracts, but would also amount to rendering nugatory other statutory and contractual provisions - which the Act does not provide. 49. The scope and ambit of clauses 6.1 and 6.2 are totally distinct and separate from clause 6.3. Prior permission in clauses 6.1 and 6.2 gets attracted as and when transfer of l....
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....reach of licence condition cannot be accepted as a 'virtue' - as is being sought to be submitted in the present case by petitioner-companies. 54. Dr. Singhvi's further submission that this Court should not interpret the provisions of the licence and merger guidelines as this jurisdiction vests with TDSAT, is both misconceived on facts and untenable in law. To arrive at a conclusion that there is no impediment to the amalgamation of companies and/or that no fraud has been played upon this Court, this Court is vested with wide powers including interpretation of other laws, interpretation of terms and conditions of licences etc. 55. As far as issue of non-service of advance copy of the application is concerned, this Court is of the view that there is no requirement for serving an advance copy in a disposed of matter. In any event, today this order is being passed after hearing both the parties at length. 56. The further contention of Dr. Singhvi that petitioner-companies proceeded with the merger process on the understanding that DOT has no objection, is contrary to record. On a careful perusal of the documents placed on record it is apparent that petitioner-companies were si....
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....the Supreme Court in its various judgments has dealt with the aforesaid concepts at length. In Hamza Haji v. State of Kerala [2006] 7 SCC 416, the Supreme Court has held as under :-- "10. It is true, as observed by De Grey, C.J., in R. v. Duchess of Kingston that : 'Fraud' is an extrinsic, collateral act, which vitiates the most solemn proceedings of courts of justice. Lord Coke says it avoids all judicial acts ecclesiastical and temporal. 11. In Kerr on Fraud and Mistake, it is stated that : In applying this rule, it matters not whether the judgment impugned has been pronounced by an inferior or by the highest court of judicature in the realm, but in all cases alike it is competent for every court, whether superior or inferior, to treat as a nullity any judgment which can be clearly shown to have been obtained by manifest fraud. ** ** ** 15. The law in India is not different. Section 44 of the Evidence Act enables a party otherwise bound by a previous adjudication to show that it was not final or binding because it is vitiated by fraud. The provision therefore gives jurisdiction and authority to a court to consider and decide the question whether a prior ad....
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....cohabitant) and it is a pristine maxim which has never lost its temper over all these centuries. 24. The ratio laid down by this Court in various cases is that dishonesty should not be permitted to bear the fruit and benefit to the persons who played fraud or made misrepresentation and in such circumstances the Court should not perpetuate the fraud...... ** ** ** 26. An act of fraud on court is always viewed seriously. A collusion or conspiracy with a view to deprive the rights of the others in relation to a property would render the transaction void ab initio. Fraud and deception are synonymous. Although in a given case a deception may not amount to fraud, fraud is anathema to all equitable principles and any affair tainted with fraud cannot be perpetuated or saved by the application of any equitable doctrine including res judicata. Fraud is proved when it is shown that a false representation has been made (i) knowingly, or (ii) without belief in its truth or (iii) recklessly, careless whether it be true or false. Suppression of a material document would also amount to a fraud on the court. 28. ..... Suppression of any material fact/document amounts to a fraud on....
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....ority vote as required by section 391 sub-section (2). 3.That the meetings concerned of the creditors or members or any class of them had the relevant material to enable the voters to arrive at an informed decision for approving the scheme in question. That the majority decision of the concerned class of voters is just and fair to the class as a whole so as to legitimately bind even the dissenting members of that class. 4.That all necessary material indicated by section 393(1)(a) is placed before the voters at the meetings concerned as contemplated by section 391 sub-section (1). 5.That all the requisite material contemplated by the proviso of sub-section (2) of section 391 of the Act is placed before the Court by the applicant concerned seeking sanction for such a scheme and the Court gets satisfied about the same. 6.That the proposed scheme of compromise and arrangement is not found to be violative of any provision of law and is not contrary to public policy. For ascertaining the real purpose underlying the scheme with a view to be satisfied on this aspect, the Court, if necessary, can pierce the veil of apparent corporate purpose underlying the scheme and can judicio....
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....ee years. Since this Court and the Regional Director were not aware of the prior permission and temporary prohibition contained in the licence conditions and merger guidelines respectively, the petitioner-companies reliance upon this Court's observation with regard to post merger sanction/approval of DOT is irrelevant. Consequently, withholding of relevant and material documents like licences, merger guidelines and DOT's letters dated 7-1-2010 and 18-1-2010 was deliberate, intentional and with a view to obtain an unfair advantage. 68. In the opinion of this Court it is also not necessary that there should be direct proof of fraud, the same can be inferred from various circumstances which are brought on record. Even if individual facts are not able to prove a fraud, it would be sufficient if all the circumstances taken together indicate a fraud. 69. The 'design' of the petitioner-companies is also apparent from their subsequent conduct, i.e., after this Court had sanctioned the merger scheme. It is pertinent to mention that before the amalgamation scheme was sanctioned by this Court, Idea in its own affidavit had confirmed that approval of DOT would be taken after approval of ....
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....ll shareholders, creditors of petitioner-companies, the Court is obliged to examine the Scheme in its proper perspective together with its various manifestations and ramifications with a view to finding out whether the scheme is fair, just and reasonable to the members concerned and is not contrary to any law or public policy. Though the expression 'public policy' is not defined in the Act, it connotes some matter which concerns the public good and public interest. Thus, the question that arises is whether the petitioners had disclosed sufficient information to this Court so as to enable it to arrive at an informed decision, that means, whether the information supplied was sufficient and whether the real issue was flagged before Court and whether all relevant documents were on record for the Court to arrive at a just decision. See Sesa Industries Ltd. v. Krishna H. Bajaj [2011] 3 SCC 218/106 SCL 239 . 71. Even if this Court examines the present case from this narrow and limited perspective, this Court finds that non-filing of licences as well as merger guidelines and correspondence exchanged between the parties amounts to non-production of requisite material as contemplated unde....
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....cation of any person interested in the affairs of the company. If such be the power conferred on the Court, it is difficult to entertain the submission that an application for directions or modification cannot be entertained except when made by a member or creditor. It would whittle down the power of the Court in that it cannot do so on its own motion." [Emphasis supplied] 76. It is settled law that in judicial proceedings, once a fraud is proved, all advantages gained by playing fraud can be taken away. In such an eventuality the questions of non-executing of statutory remedies or statutory bars like res judicata are not attracted. Suppression of any material fact/document amounts to a fraud on the Court. Every Court has an inherent power to recall its own order obtained by fraud as the order so obtained is non est. See Meghmala's case (supra), A.V. Papayya Sastry v. Government of A.P. [2007] 4 SCC 221. In fact, the Supreme Court in S.P. Chengalvaraya Naidu (supra) has held as under :-- "1."Fraud avoids all judicial acts, ecclesiastical or temporal" observed Chief Justice Edward Coke of England about three centuries ago. It is the settled proposition of law that a judgment o....
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.... DOT is obtained. In fact, till permission of DOT is granted, the overlapping licences of Spice shall forthwith stand transferred/vested with the Licensor, i.e., DOT. The spectrum allocated for such overlapping licences shall also forthwith revert back to DOT. In the event DOT refuses or grants conditional approval to transfer of licences, Idea would be entitled to challenge the same before TDSAT who would decide the same in accordance with law after hearing both the parties. Since the Transferee Company has used the overlapping licences without any prior permission of DOT from 5-2-2010 till date in contravention of the Licence and Merger Guidelines, it is directed that it shall be open to DOT to pass any order for such breach. Needless to say, any order passed by DOT can be challenged by Idea before any competent Court or Tribunal. To avoid inconvenience to public at large, DOT is directed to ensure that cell phone customers of the two overlapping licence areas namely, Punjab and Karnataka are provided regular and uninterrupted services like in the past. 82. Moreover, as simultaneous demerger scheme has been withdrawn, paragraphs 2.4, 2.13, 2.14, 2.19, 17.3 as well as the last ....