TaxTMI 
TaxTMI 
2018 (3) TMI 1783
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....he Petitioner Company 1/ Transferor Company with the Petitioner Company 2/ Transferee Company. A perusal of the petition discloses that initially the application seeking the dispensation/ convening of the meetings of shareholders, secured and unsecured creditors were filed before this Tribunal in Company Application CA (CAA)-81 (PB) of 2017. The Tribunal vide its order dated 28.07.2017 after delineating the relevant particulars of both the companies including its capital base and objects for which these companies have been incorporated and for sake of brevity not repeated in the present order, however the order is annexed as Annexure "A" to the instant order, was pleased to dispense with the requirement of convening the meetings of the Equity shareholders and the secured creditors of the Transferor Company and also the meeting of the secured creditors of the Transferee Company in view of their consents having been obtained and produced before it or there was none therefore the necessity of convening the meeting did not arise as the case may be. In relation to the unsecured creditors of the Transferor Company and Equity shareholders as well as unsecured creditors of the Transferee C....
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....s scheme becoming effective, the Transferee Company shall, without requirement of any further act or deed, issue and allot the Transferee merger shares to Telenor Singapore and shall take all such steps as required for the purposes of listing and receiving the final trading approval for the Transferee merger shares, within a reasonable period of time. The Transferee merger share shall be issued by the Transferee Company, free from all liens, charges, equitable interest, encumbrances and other third party rights of any nature whatsoever. 4. On 17.10.2017 the Tribunal ordered Notice in the Second Motion petition in Company Petition No. (CAA )-313 (P B) 2017 moved by the petitioners under Sections 230-232 of the Companies Act, 2013 read with Rules in connection with the scheme Of amalgamation, to the Registrar of Companies, Regional Director, Income Tax Department, Official Liquidator, National Stock Exchange, Bombay Stock Exchange, Competition Commission of India, Securities and Exchange Board of India, Reserve Bank of India, Department of Telecommunication, Ministry of Electronics and Information Technology and to such other sectoral regulatory authorities. The Petitioners were a....
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....would not likely to have an appreciable adverse effect on competition in India and hence approved the same. A copy of the order passed by CCI dated 30.05.2017 is placed on record. 8. Further, the counsel of the Income Tax Department has filed a report before this Tribunal on 20.12.2017 stating its observations. In respect of Transferee Company, the Income Tax Department has no objection to the proposed scheme of amalgamation. In so far as the report pertains to the Transferor Company, the Income Tax Department have made the following observation:- "In this regard, it is to kindly intimate that the assesse company has an outstanding demand of Rs. 367.20 croresfor the A. Y. 2014-15 u/s 143(3). Out of this the department has recovered Rs. 50.93 crores. The balance demand was stayed by the Hon'ble Delhi High Court till the disposal of Appeal [CIT(A)]. Now that the Ld CIT(A) has passed an order confirming the addition made by the AO the total outstanding demand along with applicable interest now stand due to the assesse. This information is being imparted for further transmitting the information regarding the outstanding demand as mentioned above " 9. In response to the o....
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....se for recovering the existing or previous tax liabilities of the Transferor Company from the Transferee Company, in accordance with applicable law. The above undertaking is taken on record. The Learned Sr. Counsel also points out that the financial position of the Transferee Company is very sound and it has consolidated revenues of INR 1,009,373 million (100937.3 crore) for the financial year ended March 31, 2016 against which the tax demand is only Rs. 316.27 crores. 10. The Official Liquidator, upon notice, has filed an affidavit dated 16.11.2017 which includes paragraph 14 extracted supra and in paragraph 13 has made the following observation: "That as per information submitted by the petitioner companies there are disputed tax liability in case of Transferor and Transferee company. 11. In response to this observation of OL, the petitioner companies have filed a joint reply dated 07.12.2017, in which they have stated that upon the Scheme becoming effective and with effect from the Appointed date, all the liabilities shall stand transferred to the Transferee Company in terms Of Clause 3 of Part B of the Scheme i.e., Transfer of Liabilities and the Transferee Co....
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....unable to comment on the quantum of adjustment that they may be required in the carrying value of net fixed assets (network equipment and spectrum) of the company as stated in its financial statements. b) The company has continued to incur losses in the twelve months period ended 31.03.2017, has accumulated losses of Rs. 56, 753 Mn and continued erosion of net worth of this date and net current liabilities of Rs. 29,408 Mn. The company has estimated sum of R.s. 60,408 Mn to fund its capital and operating requirements over the next twelve months. Though the shareholders of the company intend to arrange the funding requirements as stated above until the Proposed Transaction is consummated, they have not provided any commitments/ guarantee to arrange such funding. These conditions indicate the existence of material uncertainty that they may cast significant doubt on the company's ability to continue as a going concern; c) On November 27, 2013, the company had acquired a business through Business Transfer Agreement (STA') on a going concern basis from United Wireless (Tamil Nadu) Private Limited ('the Acquiree). As part of business transfer, the company is....
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....t shall stand transferred pursuant to the Scheme. In that regard Ld. Sr. Counsel for the Petitioner Companies has placed reliance on the decision rendered by the Hon'ble High Court of Rajasthan in the matter of M/S. Sistema Shyam Teleservices Limited and Ws. Reliance Communication Limited which is as follows:- "In the case of Hindustan Lever Employees Union Vs. Hindustan Lever Limited (1995) 5 SCC 499], a three judge bench of the Apex court held that a company court does not exercise appellate jurisdiction over a scheme, and its jurisdiction is limited to ascertaining fairness, justness and reasonableness of the scheme and to ensuring that neither any law has been violated or public interest compromised in the process. It was held that where a majority of shareholders (in the aforesaid case 99.64% as against 99.88% in the present case) approved the valuation in respect of the transaction under the scheme as best judges of their interest fully conversant with market trends, their judgment should not be interfered with by the court for the reason that it is not a part of judicial function to examine entrepreneurial activities and ferret out flaws. It is well set....
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....sfer/merger of licences and the same is already conveyed to you vide this office letter of even no. dated 12.04.2017. Excerpts of relevant clause of UL is reproduced below:- "6.4 (i) (b) Whenever amalgamation or restructuring i.e. merger of demerger is sanctioned and approved by the High Court or Tribunal as per law in force; in accordance with the provisions; more particularly Sections 391 to 394 of Companies Act, 1956; provided that scheme of amalgamation or restructuring is formulated in such a manner that it shall be effective only after the written approval of the licensor for transfer/merger of licences, and. " Merging entities has to ensure for the compliance of the above said clause. Further, it may be noted that relevant clause 3(b) of M&A guidelines Dt. 20.02.2014 on this matter as under:- "3(b) A time period of one year will be allowed for transfer/merger of various licences in different service areas in such cases subsequent to the appropriate approval of such scheme by the Tribunal/ Company Judge. " 4. Consequent upon fulfilment of above said essential condition, transfer/merger of Licence consequent to proposed scheme of am....
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....r amalgamation by the competent authority. h. Merging entities has to clear the liabilities of quashed Licences of M/S Unitech Group Company including the OTSC demands (Rs. 770.1583 Crores). In case of judicial intervention, clause 3(i) and 3(m) of M&A guideline dt.20.02.2014 shall apply. i. Consequent to transfer of assets/ licences/authorisation held by transferor(acquired) company to the transferee (acquiring) company, the licences/ authorisation of transferor (acquired) company will be subsumed in the resultant entity 5. Resultant entity has to ensure the securitisation of deferred payment amounting to Rs. 200, 45, 84,952/-(lnstalment amount of spectrum auction). 6. It is also informed further that the issuance of this letter should not be taken as the approval of proposal for transfer/merger of licences/authorisation consequent to the merger/amalgamation of companies. Proposal for transfer/ merger of licences/authorisation may be submitted afresh after the sanction/approval of the Scheme of merger/amalgamation by the concerned NCLT as the case may be. ' 15. Further, upon notice at the 2nd motion stage, DOT has filed an affidavit dated....
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.... vide order dated 03.03.2017 has directed that no coercive action be taken on this matter. (f) One Time Spectrum Usage Charges (OTSC) towards M/S M/S Bharti Airtel Limited in respect of the spectrum holding beyond 4.4 MHz in GSM band -Rs. 1499.09 Crores. Hon'ble Bombay High Court vide order dated 28.01.2013 has stayed the demand(s) in Writ Petition (L) No. 184 of2013. (g) CAF penalty to the tune of Rs. 11,23,33,000/- for the Bihar Licensed Services Area for the CAF Audit period from April 2011 to December 2011 against M/S Bharti Airtel Limited. Hon'ble Patna High Court vide order dated 16.05.2013 has stayed the demands in CWJC 10308 of2013. (h) CAF penalty to the tune of Rs. 1,78,78,000/- for the Assam Service Area against M/s Bharti Airtel Limited for the periods - April 2013, July 2013, Oct 2013, Jan 2014, Apr 2014, July 2014, Oct 2014, Jan 2015, Apr 2015, July 2015, Oct 2015, Jan 2016, Apr 2016, Jul 2016, Oct 2016, Jan 2017 and Apr 2017. Hon'ble TDSAT vide order dated 27.09.2017 has stayed the demand in Telecom Petition No. 93 of 2017. (i) Financial Penalty of Rs. 50 crores per service area for the service areas of Haryana, Maharashtra, UP East, ....
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....nsferee Company however, craves leaves of this Hon'ble Tribunal to preserve its rights in law to pursue its legal remedies against the imposition of such a condition by the DOT in the background of its challenge to the demand itself which is pending before the Hon'ble Bombay High Court in Writ Petition (L) No. 184 of 2013, where the Transferee Company has a stay against the OTSC demand itself and no requirement of furnishing a bank guarantee has been imposed by the Hon'ble Bombay High Court. 6. In response to paragraph 17 of the DOT Affidavit, the Transferee Company being the resultant entity undertakes to replace the bank guarantees provided by the Transferor Company for the deferred payment of the Transferor Company amounting to Rs. 200, 45, 84952/- towards the instalment of auctioned spectrum following the sanction of the Scheme by this Hon'ble Tribunal, as and when called upon to do so by the DOT. " 19. The objections raised by Department of Telecommunication in the above circumstances it is represented by the Learned Sr. Counsel for the Petitioner has been removed by the petitioner company and the above undertaking given by the Petitioner Companies be taken on reco....
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....d scheme, in the present case, and in conformity with the Licence and Merger Guidelines, 2008 ". Consequently, the modification which is done is to the effect that; (i) The Six overlapping licenses of the Spice would not stand transferred or vested with the appellant till prior permission of DoT is obtained. Instead, till that time, these licenses shall stand transferred/vested with the respondent; (ii) The spectrum allocated for such overlapping licences shall also forthwith revert back to DOT; (iii) Since the appellant had used the overlapping licenses (which belonged to the Spice) without any permission of DoTfrom 5.2.2010 till date, in contravention of the License and Merger Guidelines, DOT (respondent) is permitted to pass any such order for breach. Permission however, is given by the learned Single Judge to the appellant to challenge the order of the DoT/respondent in the event the DOT refuses or grant transfer of licenses by filing appropriate proceedings before the TDSAT. The permission is also granted to challenge any order passed by the DOT/respondent qua the contravention of the License and Merger Guidelines by the appellant. ....
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....ing the very action namely order sanctioning the scheme. Once it is found that implication of the disclosure of the opinion could have led to passing an conditional order of merger, that is precisely the course of action adopted by the learned Company Judge. Thus, apart from the reasoning given by the learned Company Judge that 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. Ultimately at Paragraph 31 it has been concluded as follows:- At paragraph 31 as follows:- 31. With this, we come to the various modification ordered by the learned Company Judge vide the impugned judgment to the sanctioning order dated 05.2.2010. These have already been reproduced above. We agree with all the modifications except one, viz., six overlapping licenses of Spice would vest with the DOT. No doub even as er the contention o thea ellant itsel sanctionin of merger scheme amounts onlp the merging comnanp and not the licenses and therefore. the apnellant itself maintains that for transfer 01 these licenses. pri....
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.... paragraphs earlier had cited the judgment of the Hon'ble Supreme Court rendered in Fomento Resorts and Hotels Limited case (2009) 3 SCC 57, in which at paragraph 55 the public trust doctrine has been expounded as follows:- 55. The public trust doctrine is a tool for exerting long-established public rights over short-term public rights and private gain. Today every person exercising his or her right to use the air, water, or land and associated natural ecosystems has the obligation to secure for the rest of us the right to live or otherwise use that same resource or property for the long-term and enjoyment by future generations. To say it another way, a landowner or lessee and a water right holder has an obligation to use such resources in a manner as not to impair or diminish the people 's rights and the people's long-term interest in that property or resource, including down slope lands, waters and resources." and has finally concluded in relation to natural resources, which includes "Spectrum" within its ambit as follows:- 89. In conclusion, we hold that the State is the legal owner of the natural resources as a trustee of the people and although....
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...., issued to or executed in favour of the Transferor Company), the concerned licensor and guarantors of such approvals, clearances, permissions, approvals, arrangements, authorisations benefits, concessions, rights and benefits of all contracts, agreements, allocations, consents, quotas, right, easements, engagements, exemptions, entitlements, advantages of whatever nature and howsoever named, properties, movable, . in possession or reversion, present or contingent of whatsoever nature and where-so-ever nature situated, liberties, ownerships rights and benefits, earnest moneys payable pertaining to the assets mentioned in the aforesaid clauses, if any, all other rights and benefits, licenses, powers, privileges, and facilities of every kind, nature and description whatsoever; right to use and avail of telephones, telexes, facsimile, connections, installations and other communication facilities and equipment, titles, all other utilities, benefits of all agreements, contracts, government contracts, memoranda of understanding project service agreement, prequalification, applications, bids, tenders, letters of intent, concessions, non- possessory, contractual rights or any other contrac....
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....ach other. Thus, preserving the right of both the parties' vis-å-vis each other and also a duty is cast upon both the parties while dealing with Spectrum being a national asset/ resource in the manner as delineated by the Hon'ble Supreme Court in Centre for Public Interest Litigation case (supra) proceeds further with the consideration of the petition. 26. That the Petitioner Companies have complied with proviso to Section 230 (7) proviso/ Section 232 (3) by filing the certificate of the Company's Auditor's in relation to compliance with the Accounting Standards under section 133 of the Companies Act, 2013. 27. The Petitioner companies have stated in the petition that no investigation proceedings are pending against them under Sections 210 or any other applicable provisions of the Companies Act, 2013. Further, it states that no winding-up petition has been filed and is pending against either of the companies. 28. The counsel for Petitioners have filed an affidavit dated 29.11.2017 stating that they have not received any objections from any objector till date for the purpose of sanction to the present Scheme of Amalgamation. The above statement is take....