1 jpc/- IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION COMPANY SCHEME PETITION NO. 457 OF 2010 CONNECTED WITH COMPANY SUMMONS FOR DIRECTION NO. 411 OF 2010 9X Media Private Limited (Formerly known as INX Media Private Ltd.) .. Petitioner/Transferor Company WITH COMPANY SCHEME PETITION NO. 458 OF 2010 CONNECTED WITH COMPANY SUMMONS FOR DIRECTION NO. 349 OF 2010 Zee Entertainment Enterprises Limited .. Petitioner/Transferee Company In the matter of Scheme of Arrangement Between 9X Media Private Limited, formerly known as INX Media Private Ltd. And Zee Entertainment Enterprises Limited Mr. Hemant Sethi i/by M/s Hemant Sethi & Co. for the Petitioners Ms. Purnima Avasthi i/by S. K. Mohapatra for Regional Director in both the petitions Mr. Bergis Colobawalla i/by Madekar & Co. for the Applause Entertainment Pvt. Ltd. -unsecured creditor of the Transferor Company Mr. R.M. Vasudeo for K.D. Rentals- unsecured creditor of the Transferor Company. Mr. Shardul Singh for Asia Satellite Telecommunication Ltd. 2 CORAM : S. J. KATHAWALLA, J. DATE : 9th September, 2010 P.C.: 1. Heard learned Advocates for the parties. 2. Mr. Hemant Sethi, the learned Advocate appearing for the Petitioner in Company Petition No. 458 of 2010 (Transferor Company) has tendered a draft amendment seeking to change the name of the Transferor Company appearing in the Scheme and the above Petitions from INX Media Private Limited to 9X Media Private Limited. He submits that the said change in the name has come into effect from 30 th April, 2010. The draft amendment is taken on record and marked ‘X’ for identification. The amendment of the Scheme and the Petitions is allowed in terms of draft amendment -X. The amendment shall be carried out by the Petitioners within two weeks from the date of this order. 3. By the above Company Scheme Petitions, the sanction of this Court is sought under sections 391 to 394 of the Companies Act, 1956 to the Scheme of Arrangement between 9X Media Private Limited ( formerly known as INX Media Private Ltd.) ( ‘9X’ or ‘theTransferor Company’ and Zee Entertainment Enterprises Limited (‘Zeel’ or ‘the Transferee Company’) and the respective shareholders (the Scheme). 3 4. The Scheme of Arrangement is presented for de-merger of 9X Channel Business Undertaking from the Transferor Company into the Transferee Company and also for various matters consequential, incidental or otherwise integrally connected therewith. 5. As far as the Transferor Company is concerned, the Board of Directors approved the Scheme of Arrangement on 1 st May, 2010. On 16 th June 2010, the Transferor Company filed Company Summons for Direction seeking dispensation from convening and holding of the meetings of its shareholders and its unsecured creditors. In pursuance of an order dated 25 th June 2010 passed in the Company Summons for Direction, the meeting of the equity shareholders was dispensed with in view of consents given by all the shareholders. The meeting of the unsecured creditors was also dispensed with on an undertaking to give individual notices to all its unsecured creditors of the value of Rupees one lac and above. The shareholders of the Transferor Company in their Extraordinary General Meeting held on 7th July,2010 passed a Special Resolution approving the reduction of the Securities Premium Account of the Transferor Company in terms of Sections 78 and 100 to 104 of the Act as provided in the Scheme of Arrangement. Vide an order dated 25 th June 2010, this Court dispensed with the procedure prescribed under Section 101(2) of the Companies Act, 1956 and accepted the undertaking of the Transferor Company to file the said Special Resolution alongwith the Company Petition for sanctioning 4 the Scheme. The copy of Special Resolution is annexed as Exhibit-E to the Petition. 6. As far as the Transferee Company is concerned, the Board of Directors approved the Scheme at its meeting held on 29 th April 2010. By an order dated 11th June, 2010 in Company Summons for Direction filed by the Transferee Company, the Transferee Company was directed to convene a meeting of its equity shareholders. However, the meeting of its secured and unsecured creditors was dispensed with. The meeting of the Equity Shareholders was held on 20 th July 2010. It is stated in paragraph 21 of the Petition that 212 equity shareholders appeared in person/proxy/ Authorised representatives and participated in the polling. Out of the 212, 211 equity shareholders constituting 99.528% in number and representing 99.999% in value voted in favour of the Scheme. It is further averred that only one equity shareholder holding 4 shares opposed the Scheme. In para 23 of the Petition it is stated that both, The Bombay Stock Exchange Limited by its letter dated 20 th May 2010 and The National Stock Exchange of India Limited by their letter dated 27 th May 2010 have accorded their no objection to the Scheme. The said letters from the stock exchanges are annexed to the Petition as Exhibits J & J1 respectively. 7. The rationale of the proposed scheme of Arrangement is explained in paragraph 12 of the Petition as under: “Demerger of the 9X Channel Business Undertaking would 5 enable the Petitioner Company to focus on and enhance its other existing channel operations by streamlining the operations and cutting costs; and The demerger would be beneficial to both the Petitioner Company and ZEEL, their shareholders, creditors, employees and all stakeholders and will enable the Petitioner Company and ZEEL to achieve and fulfill their objectives more efficiently and economically.” 8. Necessary affidavits of Compliance of the directions of this Court are filed by the Petitioner Companies. Moreover, the Petitioner Companies through their counsel undertake to comply with all the statutory requirements applicable under the Companies Act, 1956 and the Rules made thereunder. The said undertaking is accepted. 9. Affidavit of service proving publication of notices in newspapers and notices to Creditors has been filed. 10. The Regional Director has filed his Affidavit stating therein that except as stated in paragraphs 6(a) to 6(c) of the said Affidavit, the Scheme does not appear to be prejudicial to the interest of the shareholders of the Petitioner Companies. 11. In paragraph 6 (a) of his affidavit, the Regional Director has stated that M/s Jagran Prakashan Limited and M/s Asia Satellite Telecommunications Company Limited, have filed winding up petitions against the Transferor Company. I see no substance in this objection. Both 6 the winding up petitions are pending admission. The notices have been served on M/s Jagran Prakashan Limited and M/s. Asia Satellite Telecommunications Company Ltd. However M/s Jagran Prakashan Limited have not appeared before this Court to make their submissions as regards the sanction of the Scheme. As regards M/s Asia Satellite Telecommunications Company Ltd., Mr. Shardul Singh, Advocate has submitted that his firm M/s Dutt Menon Dunmorrsett has instructions from M/s Asia Satellite Telecommunications Company Ltd. to appear on their behalf. He submits that winding up petition against the Transferor Company is filed by his client on 5.5.2010 to recover an amount US$ 1,553,124.46, wherein, this Court has directed the Transferor Company to deposit an amount of approximately Rs.34 lacs being the admitted amount and has subsequently allowed his client to withdraw the said amount. He submits that the said winding up Petition is pending admission and he seeks time to file the Vakalatnama and objections of his clients to the above Company Scheme Petition. Mr. Singh admits that he had appeared before this Court on behalf of M/s Asia Satellite Telecommunications Company Ltd. on 30 th July, 2010 and had sought time to file the Vakalatnama of his firm. However, till date no Vakalatnama is filed. Though the papers pertaining to the above Company Scheme Petitions were handed over to Mr.Singh on 16 th August, 2010, till date no reply has been filed in the above Petitions. Mr.Singh submits that no reply has been filed since the parties were trying to settle the winding up petition 7 filed by his clients against the Transferor Company. He states that the Vakalatnama is not filed since his clients are situated at Hong Kong. The reasons given by Mr. Singh for not filing Vakalatnama as well as his clients' objections to the Company Scheme Petitions are untenable and cannot be accepted. Even if M/s Asia Satellite Telecommunications Company Ltd. is at Hong Kong, Mr. Singh cannot be heard to say that his firm has not been able to file the Vakalatnama since the past about six weeks. Having settlement talks in the winding up Petition is also no excuse for not filing a reply to the above Company Scheme Petitions. In fact, the learned Advocate appearing for M/s Asia Satellite Telecommunications Company Ltd. has no locus to appear before this Court today, having not filed his client's Vakalatnama since past about six weeks. In any event, merely because the winding up proceedings are filed against the Transferor Company, the same does not prevent the Court from approving the above Scheme if it is in the interest of its shareholders and creditors. Even after sanction of the Scheme the Transferor Company shall continue to exist and the winding up proceedings initiated by M/s Jagaran Prakashan Ltd. and M/s Asia Satellite Telecommunications Company Ltd. will continue against the Transferor Company. This Court cannot lose sight of the fact that the net worth of the Transferor Company which was negative by Rs.8.60 crores prior to sanction of the Scheme shall become positive by Rs.4.70 crores after sanction of the said Scheme. 8 12. In paragraph 6(b) of the affidavit filed by the Regional Director, it is submitted that the Transferor Company vide its letter dated 9.8.2010 has informed the Ministry of Information and Broadcasting, New Delhi about its no objection for transfer of permission/licence relating to 9X General Entertainment Television Channel in favour of the Transferor Company pursuant to the present Scheme of Arrangement but has not received permission till date. In response to paragraph 6(b) of the affidavit filed by the Regional Director, the learned Advocate appearing for the Petitioners has submitted that the Transferee Company vide its letter dated 17th August, 2010 had made an application to the Ministry of Information and Broadcasting, New Delhi seeking transfer of uplinking permission/licenses relating to 9X General Entertainment Television Channel in favour of it pursuant to the Scheme. Further, the Transferor Company has conveyed its no objection for the transfer of permission/licences relating to 9X General Entertainment Television Channel in favour of Transferee Company through its letter dated 9th August, 2010 addressed to the Ministry of Information & Broadcasting, New Delhi. The permission for transfer of permissions/licenses of 9X General Entertainment Television Channel is awaited from the Ministry of Information and Broadcasting. It is submitted that the Ministry of Information and Broadcasting generally approves the request for transfer of permissions/ licences pursuant to a scheme of merger/de-merger, once the scheme is approved and sanctioned by the jurisdictional High Court. 9 Accordingly, the approval of Ministry of Information & Broadcasting for the transfer of uplinking permission/licenses will be forthcoming once this Court grants its sanction to the Scheme. It is submitted that as provided in Clause 16/6.1 of the Scheme, the Scheme is conditional upon and subject to the requisite consent, approval or permission of the Central Government or any other statutory authority or regulatory authority which, by law, may be necessary for the implementation of the Scheme. The aforestated explanation advanced on behalf of the Petitioner Companies, in my view is satisfactory 13. In paragraph 6(c) of the affidavit filed by the Regional Director, it is submitted that the Ministry of Corporate Affairs , vide its order in file No. 1/225/2007/CL.II dated 14th May, 2010, has directed the Regional Director to carry out inspection of books of accounts and records of the Transferor Company under Section 209A of the Companies Act, 1956 which is yet to be carried out. In response thereto, the Petitioners have submitted that the office of the Regional Director had vide its letter No.JDI/INSP/209 A/3/ 10/1803 dated 7th June, 2010 informed the Transferee Company that its inspection will be taken up in due course and for the purpose of commencing inspection, it has requested for preliminary information. The said information was provided by the Transferee Company to the office of the Regional Director on 24th June, 2010. Thereafter, the Regional Director vide its letter No. No.JDI/INSP/209A/3/10/4741 dated 3rd 10 September, 2010 informed the Transferee Company that the inspection shall commence on 15th September, 2010 by nominated representative from the Office of the Regional Director. Mr. Sethi on behalf of the Transferee Company states that the Transferee Company will fully cooperate with the inspection procedure to be carried out by the Ministry of Corporate Affairs and provide all the required information/documents/clarification as and when called for. The statement is accepted. 14. Apart from the above objections, three unsecured creditors, Cox & Kings (India) Ltd., K.D. Rentals and Applause Entertainment Private Limited had also raised their objections to the sanction of the Scheme of Arrangement. However,the learned Advocates appearing for Cox & Kings Limited and K.D. Rentals have today submitted that their claims have been settled by the Transferor Company and that they have no objection if the Company Scheme Petition is allowed. As regard the claim of Applause Entertainment Pvt. Ltd., the learned Advocates appearing for the Transferor Company, on instructions from the CFO of the Transferor Company who is present in Court has undertaken to pay Rs.2.2 crores (i.e. net amount after deduction of TDS) and handover TDS certificate to Applause Entertainment Pvt. Ltd. within six weeks from the date of this order. The said undertaking is accepted. In view of this undertaking, the learned Advocate appearing for M/s Applause Entertainment Private 11 Limited , on instructions, is not opposing the above Company Scheme Petitions. 15. The learned counsel for the Transferee Company has drawn my attention to an objection filed by one M/s. High Definition Television Private Limited claiming an amount of Rs.72,21,756/- from the Transferee Company. The learned counsel has further drawn my attention to the fact that a Suit has been filed by M/s. High Definition Television Private Limited before this Court being Suit No.815 of 2005 and pursuant to an order passed in Summons for Judgment No.606 of 2005 on 20th February 2006, the Transferee Company was directed to deposit a sum of Rs.60,00,000/- which the Transferee Company has deposited by way of Pay Order with the Office of Prothonotary & Senior Master. In any event no one has appeared today before this Court for M/s. High Definition Television Private Limited to oppose the above Company Scheme Petitions. 16. In the above circumstances, in my view, the Scheme appears to be fair, reasonable and is not violative of any provisions of law and is not contrary to public policy. 17. Since all the requisite, statutory compliances have been fulfilled the Company Scheme Petition Nos. 457 of 2010 and 458 of 2010 filed by the Transferor Company and the Transferee Company are made 12 absolute in terms of prayer clauses (a) to (d) and (a) to (c) respectively. 18. The Petitioner Companies to lodge a copy of this order and the Scheme, duly authenticated by the Company Registrar, High Court (O.S.), Bombay with the concerned Superintendent of Stamps, for the purpose of adjudication of stamp duty payable, if any, on the same within 60 days from the date of this order. 19. The Petitioner Companies in both the Company Scheme Petitions to pay cost of Rs.10,000/- each to the Regional Director, Western Region Mumbai. Costs to be paid within four weeks from the date of this order. 20. Filing and issuance of the drawn up order is dispensed with. 21. All concerned authorities to act on a copy of this order alongwith the Scheme duly authenticated by the Company Registrar, High Court (O.S.) Bombay. 22. The Company Scheme Petition Nos. 457 of 2010 and 458 of 2010 are accordingly disposed of. ( S. J. KATHAWALLA, J.) 13