Case Law Details

Case Name : M/S. Spice Communications Limited & Anr. (Delhi High Court)
Appeal Number : CO. APPLS. 578 - 579/2011
Date of Judgement/Order : 04/07/2011
Related Assessment Year :

IN THE HIGH COURT OF DELHI AT NEW DELHI

CO. APPLS. 578-579/2011 & 611/2011 IN CO.PET. 403/2009

IN THE MATTER OF M/S. SPICE COMMUNICATIONS LIMITED & ANR. ….. Petitioners

Reserved on : 2nd June, 2011

Date of Decision : 4th July, 2011

CORAM:

HONORABLE MR. JUSTICE MANMOHAN

1. Whether the Reporters of local papers may be allowed to see the judgment? Yes.

2. To be referred to the Reporter or not? Yes.

3. Whether the judgment should be reported in the Digest? Yes.

J U D G M E N T

MANMOHAN, J

1. Company Applications No. 578-579/2011 have been filed by the Department of Telecommunication (in short ‘DOT’) under Rules 6 and 9 of the Companies (Court) Rules, 1959 for recall and stay of this Court’s order dated 5th February, 2010 by virtue of which amalgamation of Spice Communication Limited (for short ‘Spice’) with Idea Cellular Limited (for short ‘Idea’) was allowed.

2. Upon the present applications being mentioned before the Division Bench, the matter was directed to be listed before this Court on 30th March, 2011. On the said date, this Court passed the following order:-

“Co. Appl. 578/2011 in Co. Pet. 403/2009

Mr. A.S. Chandhiok, learned ASG has drawn my attention to the fact that the Ministry of Telecommunication vide its letters dated 07th January, 2010 (page 60) and 18th January, 2010 (page 63) of the present application, had rejected the application of Amalgamation of M/s. Spice Communication Limited with M/s. Idea Cellular Limited.

Mr. Chandhiok further submits that these facts were not brought to the notice of the Court on 28th January, 2010 when this Court had reserved the judgment in the present case.

Issue notice to non-applicants by all modes including dasti, returnable for 25th April, 2011.

Co. Appl. 579/2011 in Co. Pet. 403/2009

Issue notice to non-applicants by all modes including dasti, returnable for 25th April, 2011.

Keeping in view the aforesaid, the operation of order dated 05th February, 2010 is stayed till the disposal of the present application.”

3. Thereafter Company Application No. 611/2011 was filed by the petitioner-companies namely, Spice and Idea seeking vacation of the aforesaid order dated 30th March, 2011. Keeping in view the urgency in the matter, this Court, with consent of parties, decided to finally hear all the aforesaid applications.

4. Briefly stated the relevant facts of the present case are that both the petitioner-companies are telecommunication companies which have been granted various Unified Access Services Licence Agreements (for short ‘licenses’) for different areas on terms and conditions mentioned therein. The said licenses have been issued under Section 4 of the Telegraph Act, 1885. The relevant clauses of a sample License are reproduced here in below:-

“1. Ownership of the LICENSEE Company…….

1.3 The merger of Indian companies may be permitted as long as competition is not compromised as defined in condition 1.4(ii).

1.4 The LICENSEE shall also ensure that:

(i) Any change in share holding shall be subject to all applicable statutory permissions.

(ii) No single company/legal person, either directly or through its associates, shall have substantial equity holding in more than one Licensee Company in the same service area for the Access Services namely; Basic, Cellular and Unified Access Service. ‘Substantial equity‘ herein will mean equity of 10% or more‘. A promoter company/Legal person cannot have stakes in more than one Licensee Company for the same service area……………………

6. Restrictions on ‗Transfer of License‘

6.1 The LICENSEE shall not, without the prior written consent as described below of the LICENSOR, either directly or indirectly, assign or transfer this LICENSE in any manner whatsoever to a third party or enter into any agreement for sub- License and/or partnership relating to any subject matter of the LICENSE to any third party either in whole or in part i.e. no sub-leasing/partnership/third party interest shall be created. Provided that the LICENSEE can always employ or appoint agents and employees for provision of the service.

6.2 Intra service area mergers and acquisitions as well as transfer of licenses may be allowed subject to there being not less than three operators providing Access Services in a Service Area to ensure healthy competition as per the guidelines issued on the subject from time to time.

6.3 Further, the Licensee may transfer or assign the License Agreement with prior written approval of the Li censor to be granted on fulfillment of the following conditions and if otherwise, no compromise in competition occurs in the provisions of Telecom Services:-

(i) When transfer or assignment is requested in accordance with the terms and conditions on fulfillment of procedures of Tripartite Agreement if already executed among st the Li censor, Licensee and Lenders; or

(ii) Whenever amalgamation or restructuring i.e. merger or demerger is sanctioned and approved by the High Court or Tribunal as per the law in force; in accordance with the provisions; more particularly Section 391 to 394 of the Companies Act, 1956; and

(iii) The transferee/assignee is fully eligible in accordance with eligibility criteria contained in tender conditions or in any other document for grant of fresh license in that area and show its willingness in writing to comply with the terms and conditions of the license agreement including past and future roll out obligations; and

(iv) All the past dues are fully paid till the date of transfer/assignment by the transferor company and its associate(s)/ sister concern(s)/ promoter(s) and thereafter the transferee company undertakes to pay all future dues inclusive of anything remained unpaid of the past period by the outgoing company.

16. General

16.1 The LICENSEE shall be bound by the terms and conditions of this License Agreement as well as by such orders/directions/ regulations of TRAI as per provisions of the TRAI Act, 1997as amended from time to time and instructions as are issued by the Li censor/TRAI.……………..”

(emphasis supplied)

5. Admittedly, the merger of aforesaid licenses is subject to guidelines issued from time to time by the Government of India. For the present case, the Guidelines dated 22nd April, 2008 for intra service area Merger are relevant. The relevant extract of Merger Guidelines, 2008 is reproduced here in below:-

No. 20-100/2007-AS-I

Government of India

Ministry of Communications and Information Technology

Department of Telecommunications

Sanchar Bhawan, 20, Ashok Road, New Delhi

22nd April, 2008

Subject : Guidelines for intra service area Merger of Cellular Mobile Telephone Service (CMTS)/Unified Access Services (UAS) Licenses

The intra service area Merger of CMTS/UAS Licenses shall be permitted as per the guidelines mentioned below for proper conduct of Telegraphs and Telecommunication services, thereby serving the public interest in general and consumer interest in particular:

1. Prior approval of the Department of Telecommunications shall be necessary for merger of the license………….

17. ―Any permission for merger shall be accorded only after completion of 3 years from the effective date of the licenses…………”

(emphasis supplied)

6. It is pertinent to mention that Spice had licenses for six different areas which were overlapping with Idea. While four out of the six overlapping licenses were non-operative, two licences namely for Punjab and Karnataka areas were operative.

7. On 25th June, 2008 Idea through its letter informs DOT that there is a proposal to merge Spice with Idea in accordance with Sections 391 to 394 of the Companies Act, 1956 (hereinafter referred to as ‘Act’) on receipt of all necessary approvals. In this letter, Idea admits that merger of companies will result in vesting of Spice licenses with Idea.

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MS. SPICE COMMUNICATIONS LIMITED & ANR

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