TMI Blog2018 (3) TMI 201X X X X Extracts X X X X X X X X Extracts X X X X ..... me Tax Authorities. It should be noted that Transferee has filed returns for 3 years before this applications were filed. Therefore, these applications are not just for a simple or minor modification of the scheme. If the Court grants the prayers as sought, the net effect would be of recalling the order sanctioning the Scheme to the extent of windmill business. Just because certain tax benefits have been lost does not mean that the Scheme is not workable. Hence no modifications are required. If the reliefs as sought are granted, would effectively amount to tampering with the essence of the scheme which is impermissible. The basic fabric of the Scheme would change and will go beyond the confines of what the Court while sanctioning the Scheme understood in the provisions of the Scheme. - Company Application No. 580 of 2016 In Company Scheme Petition No. 292 of 2013 With Company Application No. 581 of 2016 In Company Scheme Petition No.293 of 2013 - - - Dated:- 26-2-2018 - K.R. SHRIRAM, J. Shri Hemant Sethi a/w. Ms. Dhanashree G. i/b. M/s. Bilawala and Co. for applicant/petitioner. Shri N.D. Sharma for Regional Director. Shri Ankit Lohia, Amicus Curiae present. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and future liabilities including contingent liabilities arising out of the activities or operations relating to windmill business including insurance, loans, debts (secured or unsecured), current liabilities and provisions and duties and obligations relating to the windmill business. iii. Office premises admeasuring 643.630 square feet (built up area) situate at 122B, 12th Floor, Mittal Court Premises Coop. Soc. Ltd., Nariman Point, Mumbai 400 021. iv. Land building at Plot No.10, MIDC Industrial Area, Taloja, District Raigad 410 208 with structure standing thereon. Provided that any question that may arise as to whether a specified asset or liability pertains or does not pertain to the Demerged Undertaking of the Demerged Company shall be decided by mutual agreement between the Boards of the Demerged Company and the Resulting Company. f. Windmill Business Undertaking shall mean and include: i. All the assets or properties operating at Gut No. 64/4P, Village; Akhatwade, Taluka, Nandurbar, Dist; Nandurbar, Maharashtra together with all that piece or parcel of freehold/leasehold lands, hereditaments and premises situate, lying and being thereat together ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , water connections, internet connections, environmental clearances, lease rights, easements, powers and facilities), of the Demerged Company which relates to the Windmill business. iv. All licensing arrangements including but not limited to usage of softwares, patents, trademarks, copyrights and other intellectual property rights of any nature whatsoever which relates to the Windmill business as on the Appointed Date. v. Reserve, provisions and funds, all records, files, papers, process information, computer programs, manuals, data, catalogue, quotations, sales advertising materials, lists of present and former customers and suppliers, customer credit information, customer pricing information and other records whether in physical form or electronic form of the Demerged Company which relates to the Windmill business as on the Appointed Date. vi. All wind energy generators, movable and fixed plants and machinery equipments, installations, plants, pipes, tools, accessories, computers, furniture, fixtures, office equipments, power lines, water lines, relating to windmill business. vii. All current asserts including sundry debtors, receivables, cash, bank balances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisions of Section 80IA. In this regard sub section (4) of Section 80IA has classified the undertakings or enterprises eligible for availing deduction under this Section as under. (i) Enterprise carrying on the business of developing or operating and maintaining or developing, operating and maintaining infrastructure facilities. (ii) Undertakings providing basic or cellular telecommunication services. (iii) Undertaking which develops, develop and operates or maintains and operates an Industrial Park or SEZ. (iv) Undertakings set up for generation/generation and distribution of power or laying of network/renovation or modernization of network of transmission/Distribution lines or set up for reconstruction or revival of power generation plant. 5.4 In view of the above classification, and since the assesse falls in clause (iv) of sub section (4) of Section 80IA, the conditions which are necessary to be met for being eligible for deduction as per the provisions of sub section (3) of Section 80IA are also examined which in an unambiguous terms states that The undertakings at (ii) and (iv) above should not, interalia, be formed by splitting up or reconstruction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Windmill Business Undertaking would be retained by Transferor whereas the remaining undertakings as mentioned in clause 2(e) of the Scheme will continue to remain with Transferee. 7. Respondent has filed an affidavit of one A.K. Chaturvedi affirmed on 7th June, 2017 opposing the applications. Since there were tax implications involved, respondent insisted that Income Tax Authorities be also given notice to remain present in Court and address the issue. Though on one occasion counsel represented the Income Tax Department, today nobody is present. At the same time, as there were tax issues also involved, this Court appointed Shri Ankit Lohia, an advocate practicing in this Court, who is also a Chartered Accountant by qualification, as Amicus Curiae. It has to be noted that the support given by Shri Ankit Lohia was immense and the Court expresses its appreciation. 8. Shri Lohia placed on record three judgments, viz., (i) Unique Delta Force Security P. Ltd., In re vs. Sumeet Facilities P. Ltd., In re (2012) 175 Comp Cas 318 (Bom), (ii) S.K. Gupta and another vs. K.P. Jain and another AIR 1979 SC 734 and (iii) Idea Cellular Limited vs. Union of India (2012 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... modifications. Section 392 codifies the power of the Court to deal with the Scheme post sanction. Therefore, the Companies Act specifically prescribes the powers vested in the Court once the Scheme is sanctioned by the Court. Section 392 shows that the Act empowers the Court to give directions and allow modifications in the compromise or arrangement but has not given any powers to the Court to recall/rescind/cancel the order sanctioning the compromise or arrangement. If at all the Court is satisfied that the compromise or arrangement sanctioned under Section 391 of the Act cannot be worked satisfactorily with or without modifications, the Court can suo motu or on the application of any person interested in the affairs of the company, make an order winding up the company. 12. The Hon'ble Supreme Court of India in Meghal House P. Limited vs. Shree Niwas Girni K.K. Samiti (2007) 7 SCC 753 has held that if a company desires to modify a sanctioned scheme despite the same not being necessary for the proper working thereof, the company cannot do so under any other provisions except by following the required procedure prescribed under Section 391 of the Companies Act. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may or may not work. In fact in S.K. Gupta this court recognized that to be the very reason why the legislature in India has given such a power to the courts; and such power can be exercised only to order those minimal modifications that would bring the aspect that is not working into a functional zone, with the proviso that at any rate such a modification cannot lead to a change of the basic fabric of the Scheme. What does the expression basic fabric mean? Fabric can imply both the end result, and also equally importantly, the processes, procedures and steps that were taken to weave the fabric of the Scheme. During the course of weaving of the fabric , decisions could be taken to leave out certain aspects as unacceptable to the Board or the shareholders and stakeholders or the Court. Further, those processes necessarily involve certain steps in obtaining shareholders permissions. Such processes are the very essence of the fabric and not just some technicalities that are to be consigned to history and ignored in making modifications. Whatever changes are made can only be minor ones which would not tamper with the essence of the scheme. 13. Therefore, once a scheme is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pt tight as far as possible (see Kalva Singh v. Genda Lal). 26. Is there anything in the context and setting in which the word 'modification' is used in s.392 to indicate that the legislature has not used the expression assigning the meaning to the word as set out in the definition clause? At least nothing was pointed out to us. Undoubtedly, as pointed out by Lord Hershell in Cox v. Hakes, that for the purpose of construing any enactment it is right to look, not only at the provision immediately under construction, but at any others found in connection with it which may throw light upon it, and afford an indication that general words employed in it were not intended to be applied without some limitation. Even with this caution we find nothing in s.392 or reading s.392 with s.391, to cut down and restrict the meaning as has been attempted by the High Court completely ignoring the definition section. 27. According to the definition 'modify' and 'modification' would include the making of additions and omissions. In the context of s.392 'modification' would mean addition to the scheme of compromise and/or arrangement or omission therefrom solel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... telephone service licence granted to it by the Department of Telecommunications in the service areas of Haryana, Maharashtra, Andhra Pradesh and Delhi. Spice was a telecom service provider in the service areas of Punjab and Karnataka. The licence stipulated that the licensee may transfer or assign the licence agreement with prior written approval of the licensor to be granted on fulfillment of certain conditions. The unified access service licence provided that any change in shareholding shall be subject to all applicable statutory permissions, that no single company/legal person, either directly or through its associates, shall have substantial equity holding, i.e., 10 per cent or more in more than one licensee company in the same service area for the access services. The licence also provided that the licensee shall not, without the prior written consent of the licensor, either directly or indirectly, assign or transfer the licence to a third party or enter into any agreement for sub-licence or partnership, that the licensee may transfer or assign the licence agreement with prior written approval of the licensor to be granted on fulfillment of the condition, inter alia, that ama ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of Telecommunications was obtained but would stand vested with the Department of Telecommunications and that the spectrum allocated for such overlapping licences shall also forthwith revert to the Department of Telecommunications. 15. The Division Bench upheld this conclusion of the Learned Single Judge with some minor modifications. The facts in the applications being heard are totally different. At one point, Shri Sethi tried to suggest that the application dated 9th March, 2016 of Transferee to Chief Engineer, Maharashtra State Electricity Distribution Company Limited (MSEDCL) is still pending disposal and hence the windmill business has not yet been transferred to Transferee and the Scheme is conditional upon the requisite approval being received from various authorities as mentioned in Clause 20 (a) (ii) of the scheme. 16. In my view, this submission of Shri Sethi is of no assistance to applicants because if this permission was a condition precedent for carrying on windmill business by Transferee, Transferee would not have made the Scheme effective by filing Form 21 alongwith copy of the order and Scheme with the Registrar of Companies on 15th October, 2013. The fac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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