The scope of the powers of the Company Court under Section 392 of the Act, as explained by the majority opinion of the Supreme Court in Reliance Natural Resources Ltd. (supra), does not permit rewriting of the scheme or introducing into it clauses that plainly do not exist. Consequently, this Court fails to appreciate how on the strength of either J.K. case or Reliance Natural Resources Ltd. (supra), RLB can persuade the Court, in exercise of its powers under Section 392 of the Act, to read into the Scheme of binding obligation on Turner to ensure the transfer of the distribution network to RLB by providing the decryption code of the STBs. The pleas of RLB in the present application go far beyond mere modification of the Scheme. The Court is satisfied that accepting the prayer of RLB to restore it the distribution network would be nothing short of ordering specific performance of an agreement that has already worked itself out and would be reading into the Scheme, clauses and obligations which did not exist when the Scheme was accorded sanction.
Alternative prayer for winding up declined
The alternative prayer that RLB should be directed to be wound up, since its entire substratum has disappeared, will require a detailed examination of several relevant factors, all of which are not before the Court. Nothing precludes RLB from seeking winding up in accordance with law in appropriate proceedings by placing the full facts before the Court which can then be responded to by the OL, the RD and other interested parties including creditors. Given the pleadings in the present application, it is not possible to undertake that exercise at this stage.
HIGH COURT OF DELHI
Real Lifestyle Broadcasting (P.) Ltd.
v.
Turner Asia Pacific Ventures Inc.
S. Muralidhar, J.
Co. Appl. No. 2076 of 2012
Co. Pet. No. 20 of 2011
FEBRUARY 22, 2013
JUDGMENT
1. Real Lifestyle Broadcasting Pvt. Ltd. (‘RLB’) has filed this application under sections 391 to 394 of the Companies Act, 1956 (‘Act’) and Rule 9 of the Companies (Court) Rules, 1959 (‘Rules’) praying that the Court may pass necessary orders and directions to ensure that the Scheme of Arrangement (‘Scheme’) is workable and, in the alternative, to declare the Scheme sanctioned by the Company Court by order dated 29th March 2011, as unworkable and cancelled. Consequently, ordering the winding up of Real Global Broadcasting Pvt. Ltd. (‘RGB’).
Background Facts
2. The background to this application is that Co. Pet. 20 of 2011 was filed jointly by RGB [describing itself as Transferor company] and RLB [describing itself as Transferee company] under sections 391 to 394 of the Act in the Company Court on 10th January, 2011 praying that the Court should sanction the Scheme involving RGB and RLB and their respective shareholders and creditors so as to be binding on RLB and RGB and their shareholders and creditors.
3. RGB was a company incorporated under the Act on 11th October, 2006 with its registered office at New Delhi. RGB was engaged in the business of broadcasting 24 hour entertainment television programmes. 50% of the shareholding of RGB was held by Turner Asia Pacific Ventures Inc. (‘Turner’) and 50% was held by Alva Brothers Entertainment Pvt. Ltd. (‘ABE’). ABE owned Miditech Pvt. Ltd. (‘Miditech’), promoted by Mr. Niret Alva and Mr. Nikhil Alva (‘Alva brothers’) engaged in the business of television content creation. Initially, the Alva brothers formed a partnership firm, which was later converted into Miditech in 1997. It is stated that ICICI Ventures picked up a 25% stake in Miditech in 2000. In 2003, Turner engaged the services of Miditech to produce television content for various Turner channels.
4. It is stated that Turner is owned entirely by Turner Asia Pacific Investments Inc., which, in turn, is owned by Historic TBS Asia LLC. which, in turn, is owned by Turner Broadcasting System Asia Pacific Inc. (‘TBSAP’). 100% of TBSAP is owned by Turner Entertainment Networks, Inc. (‘TENT). Turner Broadcasting System Inc. (‘TBSI’) owns 100% of TENI. Time Warner Inc. owns 100% of TBSI. The Turner Group is one of the multinational media corporations in the world having major operations in film, television and publishing. The Turner Group includes Time Inc., HBO, The CW television network, CNN, Warner Brothers, Cartoon Network, etc.
5. According to RLB, following the growth of the domestic television broadcast industry, ABE, in 2006, decided to enter the broadcast arena on its own and incorporated RGB as a wholly owned subsidiary of Miditech with an intention of launching a television channel under the brand name REAL.
6. On 12th December, 2007, ABE, Miditech and Turner entered into inter-related agreements whereby Turner acquired approximately 29.4% stake in Miditech and 50% stake in RGB. According to RLB, the basic arrangement between the parties was that ABE would continue to control Miditech which would generate television content to be supplied to RGB and Turner would control RGB in the administrative, financial and legal spheres. Turner would establish through its contacts and specialization “an asset in the form of a distribution network for Real Global.”
7. RLB states that a sound distribution network is the backbone for the success of a television channel. The content made for the channel is first sent to an uplinker or transmitter service which then beams the channel to a satellite from a base station. The satellite, in turn, relays the signal across the country/region. The signal is then received by cable operators/MSOs by way of Digital Satellite Receivers or Set Top Boxes (‘STBs’). The cable operators/MSOs by way of their wired/unwired networks distribute the signal to individual homes. It is stated that when a channel is established and receives high TRP ratings, it is in a position to raise additional revenue through a subscription fee from the viewers. An essential feature for this is the conditional access facility that allows the owner of the channel to control the STBs and decide which STBs to deactivate for non-payment and which STBs to activate/re-activate. Therefore, an integral part of a STB is its software encryption keys (‘SEK’) which enables the owner of the channel to remotely control the STB even when it is installed in a far-flung area. In other words, the owner can activate/deactivate the frequency of the STB without having physical access to the STB.
8. On 14th July, 2008, Turner Entertainment Networks Asia Inc. (‘TENA’) [now known as TBSAP], a parent company of Turner and RGB entered into a shared services agreement (‘SSA’) [later known as ‘transmission agreement’] (‘TA’) for uplinking of the REAL channel from Turner’s pay out facility at Hong Kong. The SSA contained a separate arbitration clause and was for a period of five years with the consideration for each year being set out in Clause 3 thereof. The SSA was governed by the laws of Hong Kong.
9. It is stated that, on 2nd September 2008, the Foreign Investment Promotion Board (‘FIPB’), Government of India, gave its approval to the investment by Turner in RGB. It is stated that RGB purchased about 3000 STBs from Turner through a nominated manufacturer named Conax situated in Hong Kong. Conax manufactures conditional access boxes for Turner. The 3000 Conax boxes were delivered to Turner’s own India distribution arm, Zee Turner Ltd. According to RLB, Turner was required to ensure that the 3,000 STBs were distributed across the country through various cable operators/MSOs. It is stated that in May 2010, one year after the launch of the REAL channel, it was being distributed to 13 to 14 million households.
10. In 2009, ABE, Miditech and Turner commenced discussions regarding Turner’s exit from RGB and Miditech. A valuation report was commissioned by RGB for the purposes of the Scheme. On 2nd June, 2010, Turner, Alva Brothers, ABE, RGB and Miditech entered into a Binding Term Sheet (‘BTS’) that replaced an earlier BTS dated 18th December, 2009. Since much of the arguments in the present application has turned around on these two BTSs, certain relevant clauses of the said documents require to be reproduced as under:
BTS dated 18th December, 2009
Sale Transaction
