2007 (11) TMI 684 - HC - Companies Law

Summary

Issues Involved:
1. Sanction of the scheme of arrangement between Bharti Airtel Ltd. and Bharti Infratel Ltd.
2. Objections raised by the Regional Director, Northern Region, Ministry of Company Affairs.
3. Approval by equity shareholders, secured and unsecured creditors.
4. Transfer and vesting of assets and liabilities.
5. Legal proceedings and contracts.
6. Employee transfer and benefits.
7. Tax credits and incentives.
8. Costs and expenses.

Detailed Analysis:

1. Sanction of the Scheme of Arrangement:
The court considered the petition for the sanction of the scheme of arrangement between Bharti Airtel Ltd. (transferor company) and Bharti Infratel Ltd. (transferee company). The scheme aimed to reorganize the telecom infrastructure operations of Bharti Airtel Ltd. by transferring them to its wholly-owned subsidiary, Bharti Infratel Ltd., for more efficient management.

2. Objections Raised by the Regional Director:
The Regional Director, Northern Region, Ministry of Company Affairs, raised two main objections:
- Lack of Detailed Assets and Liabilities: The scheme did not specify the individual assets and liabilities of the telecom infrastructure undertaking. The petitioners responded by providing provisional details as of 30.9.2007, which satisfied the court.
- Voting by Unsecured Creditors: One unsecured creditor entitled to Rs. 2,26,298 voted against the scheme. The petitioners clarified that the scheme was approved by a majority in number representing 99.73% of the value of unsecured creditors present and voting, satisfying the requirement under Section 391(2) of the Companies Act.

3. Approval by Equity Shareholders, Secured and Unsecured Creditors:
The scheme was approved unanimously without any modification by the equity shareholders, secured, and unsecured creditors of the transferor company. The meetings were convened as per the court's order, and the approval was documented through affidavits and reports submitted to the court.

4. Transfer and Vesting of Assets and Liabilities:
The court ordered that all property, rights, powers, liabilities, and duties of the telecom infrastructure undertaking of the transferor company be transferred to the transferee company without further act or deed, pursuant to Section 394(2) of the Companies Act, 1956. This includes:
- Movable and immovable assets.
- Current assets and liabilities.
- Permits, licenses, and approvals.
- Contracts and agreements.

5. Legal Proceedings and Contracts:
All legal proceedings by or against the telecom infrastructure undertaking of the transferor company will continue by or against the transferee company. The transferee company is authorized to execute necessary documents to give formal effect to the transfer of contracts and agreements.

6. Employee Transfer and Benefits:
All employees related to the telecom infrastructure undertaking will become employees of the transferee company on terms not less favorable than their current terms. The existing provident fund, gratuity fund, and other benefits will be transferred to the transferee company.

7. Tax Credits and Incentives:
The transferee company will succeed the transferor company in terms of tax credits and incentives. Unutilized credits for excise duties and service tax will be retained by the transferor company for its liabilities. Benefits under incentive schemes will be transferred to the transferee company.

8. Costs and Expenses:
The court ordered that the petitioners pay Rs. 20,000 to the official liquidator, which will be deposited in the common pool fund. All costs, charges, and expenses arising from the scheme will be borne by the transferee company.

Conclusion:
The court sanctioned the scheme of arrangement, declaring it binding on all shareholders and creditors of both companies. The scheme will be effective from the appointed date, i.e., the date on which a certified copy of the court order is filed with the Registrar of Companies, Delhi and Haryana. The court also provided directions for the transfer of assets, liabilities, and other procedural requirements to ensure the smooth implementation of the scheme.