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2008 DIGILAW 247 (GUJ)

Ir Re : Arvind Mills Ltd. v. .

2008-05-16

K.A.PUJ

body2008
JUDGMENT : K.A. Puj, J. The petitioner has filed this petition for sanctioning the scheme of arrangement in the nature of demerger and transfer of Public Mobile Radio Trunking Services Business Division (PMRTS Business Division) of Arvind Mills Limited to Arya Omnitalk Radio Trunking Services Private Limited (AORTSPL). 2. The petitioner demerged company was registered on June 1, 1931 under the Indian Companies Act, 1913 as a limited company in the office of the Registrar of Companies, Mumbai. The petitioner demerged company started its business in the year 1931 and has been carrying on since then. The petitioner-company is a flagship company of the Arvind group, having business spanning across the entire value chain of textiles. The main business of the petitioner-company was manufacturing and marketing of textile products and the petitioner-company got listed in the year 1956 with the Ahmedabad Stock Exchange. It is one of the largest exporters in India, also one of the largest manufacturers of denim in the world. It also produces a range of premium cotton shirting and knits. The petitioner demerged company has been rapidly expanding its operations in garments. The turnover of the petitioner demerged company during the last financial year, i.e., 2006-07 has been Rs.1,844.91 crores including the export turnover and the profit is Rs.119.56 crores. 3. The petitioner demerged company had started its PMRTS Division in the year 1995-96 when it decided to venture into telecom business. The company was granted the operating licences to provide public mobile radio trunking service (PMRTS) in several cities in India, viz., Delhi, Mumbai (including Vashi), Faridabad, Chennai, Bangalore. Ahmedabad, Vadodara and Surat. The company as on today holds valid licences in all the cities and is rendering the services of PMRTS to its many subscribers. It collects airtime charge from its customers. However, considering from the viewpoint of the company as a whole, at present, the PMRTS division forms a very small part of the business of Arvind. As per the certificate issued by the chartered accountant of the company, during the financial year 2006-07, the turnover of PMRTS division was only 0.27 per cent. of the total turnover of the company and the profit contribution was only Rs.0.36 crores of the total profit of the company of Rs.122 crores. As per the certificate issued by the chartered accountant of the company, during the financial year 2006-07, the turnover of PMRTS division was only 0.27 per cent. of the total turnover of the company and the profit contribution was only Rs.0.36 crores of the total profit of the company of Rs.122 crores. The company, therefore, realised that in order to achieve a sustained growth and development of these two distinct business activities, it is necessary that the future growth strategies for them are devised separately. Accordingly, it has been proposed to spin off the PMRTS division to a different company. The petitioner demerged company has also identified expansion possibilities for this business and has decided to enter into a joint venture with the Arya group who also has similar interests in this sector. 4. Arya Omnitalk Radio Trunking Services Private Limited, AORTSPL, ("the resulting company") was incorporated on July 22, 2003, in the office of the Registrar of Companies, Maharashtra, under the provisions of the Companies Act, 1956. Since the PMRTS division of Arvind and the resulting company are engaged in the similar line of business, the board of directors of both the companies thought it appropriate to have an independent set up with specific objective of undertaking the telecom business. The management of the petitioner demerged company considers that the demeger of the PMRTS business of the company into AORTSPL shall help to achieve the following objectives : Consolidation of various licences pertaining to the PMRTS business for all cities/regions into one entity to enable ease of operation and intro duce considerable synergies ; To achieve economies of scale by curtailing unnecessary costs associated in carrying on of the PMRTS business separately ; To ensure a focused approach towards expansion/diversification of the PMRTS business, so as to become leading players of this business ; To achieve administrative and operative efficiency and achieve cost effective operations ; To achieve higher profitability due to optimum utilization of the combined resources of both the entities. 5. Considering the aforesaid objectives, it is anticipated that the proposed arrangement shall be advantageous to both the business groups. 6. 5. Considering the aforesaid objectives, it is anticipated that the proposed arrangement shall be advantageous to both the business groups. 6. In view of the above circumstances, the board of directors of the petitioner demerged company vide resolution passed in the board meeting dated May 12, 2007, resolved that subject to such approvals of both equity and preference shareholders and subject to such directions and sanctions of the appropriate court, as may be required in law, and subject to such consents and permissions of the Central Government and other authorities as may be necessary, the scheme of arrangement be made between ARVIND and AORTSPL on the broad basis referred to in the scheme of arrangement. 7. This court vide its order dated September 19, 2007, directed the petitioner demerged company to convene separate meetings of the equity shareholders and preference shareholders of the company for the purpose of considering and if thought fit, approving with or without modifications, the said scheme of arrangement and the said order directed that Shri Sanjay S. Lalbhai, the director of the petitioner demerged company and failing him Shri Jayesh K.Shah, the director of the petitioner demerged company and failing him Shri Anang Lalbhai, the authorised officer of the petitioner demerged company be appointed as chairman of the meetings and to report the result thereof to this court. The notice of the meetings was sent individually to all the equity shareholders and preference shareholders of the company as required by the order together with a copy of the scheme of arrangement, the explanatory statement required under section 393(1)(a) of the Act, and a form of proxy. The notice of the meetings was also advertised as directed by the said order in the Indian Express - English daily and the Gujarat Samachar - Gujarati daily - both Ahmedabad editions dated October 6, 2007. It is directed in the order dated September 19, 2007, that separate meetings of the equity shareholders and preference shareholders were duly convened and held on November 1, 2007. Shri Anang Lalbhai, the authorised officer of the petitioner demerged company acted as the chairman of the same. Shri Anang Lalbhai has reported the result of the meetings to this court along with the affidavit dated November 6, 2007. Shri Anang Lalbhai, the authorised officer of the petitioner demerged company acted as the chairman of the same. Shri Anang Lalbhai has reported the result of the meetings to this court along with the affidavit dated November 6, 2007. The said meeting of the preference shareholders of the company convened on November 1, 2007, was attended by four preference shareholders of the said company either personally or by proxy entitled together to Rs.33,30,00,000 being 55,50,000 preference shares of Rs.100 each. The said scheme of arrangement was taken as read with the permission of all the preference shareholders present at the meeting. The detailed discussions and deliberations were made on the proposed scheme. The poll was taken to ascertain the wishes of the preference shareholders, which showed that all the four preference shareholders present in person or through proxy representing the value of Rs.33,30,00,000 participated in the voting and all of them voted in favour of the proposed resolution. Thus, the resolution approving the scheme of arrangement was carried unanimously, i.e., 100 per cent. in number and 100 per cent. in value of the preference shareholders present and voting at the said meeting. 8. The meeting of the equity shareholders of the company convened on November 1, 2007 was attended to by 123 equity shareholders of the said company either personally or by proxy entitled together to Rs.73,43,52,260 being 7,34,35,226 equity shares of Rs.10 each. The said scheme of arrangement was taken as read with the permission of all the equity shareholders present at the meeting. The detailed discussions and deliberations were made on the proposed scheme. The poll was taken to ascertain the wishes of the equity shareholders which showed that out of the equity shareholders present at the meeting, nine shareholders abstained from voting. The vote of one equity shareholder holding shares of Rs.1,000 having voted in favour of the resolution was found to be invalid as the poll paper was not signed. Votes of ten equity shareholders are having no balance in the register of the company. All the remaining 103 shareholders present and casting valid votes having the value of their shares of Rs.73,43,39,620 being 7,34,33,962 equity shares of Rs.10 each voted in favour of the proposed scheme. Thus, the resolution approving the scheme of arrangement was carried unanimously, i.e., 100 per cent. in number and 100 per cent. All the remaining 103 shareholders present and casting valid votes having the value of their shares of Rs.73,43,39,620 being 7,34,33,962 equity shares of Rs.10 each voted in favour of the proposed scheme. Thus, the resolution approving the scheme of arrangement was carried unanimously, i.e., 100 per cent. in number and 100 per cent. in value of the equity shareholders present and voting at the meeting. 9. Since the proposed scheme of arrangement has been duly approved unanimously by the equity shareholders and preference shareholders, the petitioner demerged company is required to move this court for seeking sanction to the scheme of arrangement as and by way of this petition. 10. This court after hearing Mr. S. N. Soparkar, learned senior counsel appearing with Mrs. Swati Soparkar for the petitioner demerged company, on December 7, 2007, admitted the petition and the petition was ordered to be heard on December 28, 2007. An order of advertisement was passed and the petitioner was directed to publish advertisement in the Indian Express - English daily and the Gujarat Samachar - Gujarati daily - both Ahmedabad editions. Publication in Government Gazette was dispensed with. Notice was issued to the Central Government through the Regional Director, Department of Company Affairs. 11. Pursuant to the order dated December 7, 2007, the notice of the petition has been got advertised in the two newspapers on December 18, 2007 as directed by this court. Copies of the said publications are produced on the record along with the affidavit dated December 27, 2007. Notice of the petition was also served upon the Regional Director and acknowledgment for the same was annexed along with the said affidavit. 12. Pursuant to the notice issued to the Regional Director, an affidavit is filed by Mr. R. K. Dalmia, Deputy Registrar of Companies on March 12, 2008, along with which communication dated March 10, 2008, issued by the Joint Director (Technical) for Regional Director was annexed. It is stated therein that in view of clause 6 of the scheme, the petitioner-company could have opted for the provisions of section 293(1)(a) of the Companies Act, 1956, instead of the scheme of arrangement under section 391/394 of the Act. The petitioner-company was also directed to furnish the latest financial position before this court at the time of hearing. 13. The petitioner-company was also directed to furnish the latest financial position before this court at the time of hearing. 13. In response to the affidavit of the Deputy Registrar, an additional affidavit was filed on behalf of the petitioner-company by Mr. R.V. Bhimani, company secretary and authorised signatory of the petitioner demerged company. With regard to the first observation made by the Regional Director, it was stated in the said affidavit that the said section deals with the powers of the board to sell or dispose of whole or part of its undertaking with the consent of its shareholders at the general meeting. Though this is only an alternative, the company is not statutorily required to follow only this option. Further, it was pertinent to note that particularly, in the present case, the undertaking proposed to be transferred, viz., PMRTS Division is engaged in the telecom business under a specific licence issued by the Government of India through the Ministry of Communication and IT Department of Telecommunications. The said licence being not transferable, the undertaking could not have been sold or transferred as envisaged under section 293(1)(a) of the Companies Act. Under the circular issued by the Ministry of Communication and IT Department of Telecommunications on June 2, 2003, some relaxation was given for the transfer of an undertaking with such a licence. It is specifically provided that such a licence can be transferred when the undertaking is being transferred under a scheme under section 391/394 of the Companies Act, when the same is sanctioned by this court. Considering the precondition attached to the said licence under which the company carries on the said activity, the company could not have followed the provisions of section 293(1)(a) of the Companies Act, for the proposed transfer of the undertaking, viz., PMRTS Division. The petitioner demerged company has also annexed the latest financial statement of the company in the form of the provisional balance-sheet as at December 31, 2007, along with the affidavit of the company secretary. 14. After the objections raised by the Deputy Registrar of Companies and after the reply affidavit filed by the company secretary on behalf of the petitioner demerged company, further affidavit was filed by Mr. R. K. Dalmia, Deputy Registrar of Companies. Mr. Harin P. Raval, learned Assistant Solicitor General appearing with Mr. 14. After the objections raised by the Deputy Registrar of Companies and after the reply affidavit filed by the company secretary on behalf of the petitioner demerged company, further affidavit was filed by Mr. R. K. Dalmia, Deputy Registrar of Companies. Mr. Harin P. Raval, learned Assistant Solicitor General appearing with Mr. Rashmin M. Chhaya, for Central Government have made their submissions on one or two occasions. At the time of final hearing of this petition, Mr. Chhaya has submitted that further affidavit was filed by the Depury Registrar to elaborate the observations and to point out even the correct facts placed before this court for consideration of the objection of the Central Government to the effect that the present scheme in fact, is a camouflage, more particularly with a view to sell/transfer the licence "public mobile radio trunk service". He has further submitted that pursuant to announcement of the New Telecom Policy, 1999 (NTP-99), Government of India, Department of Telecom decided to migrate the existing public mobile radio trunk service (PMRTS) licences to NTP-99 regime and issue additional licenses. Thereunder, existing operators are allowed to migrate to digital technology at their option. The existing operators are also given preference for migration to digital technology. Therefore, fresh licences are to be considered after verifying the requirement of frequency spectrum in a particular service area. That the following options under the migration for existing operators are open for PMRTS : (i) That the existing operators shall be required to give preference for migration to digital technology and, therefore, fresh licences shall be considered after verifying the requirement of frequency spectrum in a particular service area. (ii) All the existing licensees were to intimate their willingness for migration to digital technology within a period of one month and may be required to sign a fresh licence agreement in terms of the NTP-99. (iii) The licence of the existing operators, who are not willing to migrate, to the new licensing regime, would be extended, if requested, up to another ten years so as to make the total licence period up to 15 years for continuing with analogue systems during which period the operators may change over to digital technology. However, no spectrum will be kept reserved for them. However, no spectrum will be kept reserved for them. (iv) In case of operators willing to migrate to the digital technology, they shall be allocated up to 1 Mhz additional frequency spectrum digital technology and shall be directed to transfer their network positively within a period of two years from the date of letter of confirmation in this regard and in such cases, licence agreement of these operators would be extended so as to make the total license period of 20 years. While this is done, these guidelines are contained in the letter No. 311-80/2000-VAS dated November 1, 2001 of the Licensing Cell (Value Added Service Group), Department of Telecommunications, Government of India. 15. M. Chhaya has further submitted that the said letter also simultaneously lays down detailed guidelines. It is laid down that fresh PMRTS licenses shall be granted after assessment of migration of existing operators to digital technology and availability of spare frequency spectrum in a particular service area since implementation of the above policy is solely dependent on the availability of frequency spectrum. It lays down that new licences for operation of PMRTS shall be granted on non-exclusive "first-cum-first serve" basis. It also lays down that one Mhz. frequency spectrum shall be allotted at the time of grant of licence, the period whereof shall be 20 years and it would bind the licensee to use only digital technology. It also envisages entry free and licence fee. It provides that there would be no entry fee, but licence fee for PMRTS system shall be 5 per cent. of the "adjusted gross revenue" (AGR) from the service and for captive PMRTS system, the licence fee shall be Rs.300 per annum per terminal with a minimum of Rs.25,000 per annum per licensed area. It also provides that there shall be separate charges for use of radio spectrum. 16. M. Chhaya has referred to paragraph 10 of the guidelines which lays down the transfer of licence. The same reads as under : "10. Transfer of licence. - Without the prior written permission of licensor, the licensee will not assign or transfer its rights in any manner whatsoever under the licence to a third party or enter into any agreement for sub-licence and/or partnership relating to any subject-matter of the licence to any third party either in whole or in any part, i.e., no sub-leasing/partnership/third party interest shall be created. However, transfer of PMRTS licence may be permitted by the licensor in case the proposed transferee company meets the conditions of eligibility for grant of a fresh PMRTS license." 17. Mr. Chhaya has, therefore, submitted that without prior permission of the licensor, the licensee is obliged under the said policy not to assign or transfer its rights in any manner whatsoever under the licence to a third party or enter into any agreement for sub-licence and/or partnership relating to any subject-matter of the licence to any third party either in whole or in part, that is, there shall be no sub-leasing/partnership or third party interest created. It specifically provides that transfer of PMRTS licence may be permitted by the licensor only in case where the proposed transferee company meets with the conditions of eligibility for grant of a fresh PMRTS license. Thus, in the absence of fulfilment of eligibility conditions by the transferee, transfer is impermissible under the policy. Furthermore, bare perusal of paragraph 10 thereof indicates that prior written permission of licensor would be required for transfer of rights in any manner. Eligibility of criteria as discernible from the said policy are as under : (A) Clearance of all dues of DoT in respect of all payments arising out of any licence granted under section 4 of the Indian Telegraph Act, 1885 (including Indian Wireless Telegraphy Act, 1933) to the company or any promoter/partner or associate/sister concern thereof. 18. That vide letter No. 311-80/2001-VAS (Vol. II) dated July 14, 2006 of the Department of Telecommunications, Ministry of Communications and IT, Government of India, there has been amendment in the licence agreements of PMRTS consequent to migration to new licensing regime under NTP-99. Paragraph 13 of the policy contains the manner of transfer of license. The same reads as under : "13. Transfer of licence. II) dated July 14, 2006 of the Department of Telecommunications, Ministry of Communications and IT, Government of India, there has been amendment in the licence agreements of PMRTS consequent to migration to new licensing regime under NTP-99. Paragraph 13 of the policy contains the manner of transfer of license. The same reads as under : "13. Transfer of licence. - The licensee may transfer or assign the license agreement with prior written approval of the licensor to be granted on fulfilment of the following conditions : When Transfer or assignment is requested in accordance with the terms and conditions on fulfilment of procedures of Tripartite Agreement if already executed amongst the licensor, licensee and lenders ; or 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 of sections 391 to 394 of Companies Act, 1956 ; and The transferee/assignee is fully eligible in accordance with eligibility criteria contained in tender conditions or in any other document for grant of fresh licence in that area and shows its willingness in writing to comply with the terms and conditions of the license agreement including past and future roll out obligations ; and All the past dues are fully paid till the date of transfer/assignment by the transferor company and thereafter the transferee company undertakes to pay all future dues inclusive of anything remained unpaid of the past period by the outgoing company." 19. Mr. Chhaya has further submitted that on perusal of the above clearly shows that the licensee may transfer or assign the licence agreement with prior written approval of the licensor to be granted on fulfilment of the conditions. Essence of the prior written approval under the policy for PMRTS transfer would be rendered meaningless if simply on the basis of the approval sought for to the present scheme of demerger that the application is to be necessarily granted by the concerned authorities. That the eligibility criteria contained in the tender conditions or in any other documents for grant of fresh licence in that area concerned is a must. That the eligibility criteria contained in the tender conditions or in any other documents for grant of fresh licence in that area concerned is a must. Prior approval would also be rendered meaningless if the parties have to solely act on representation being made like the present petitioner which would contain that simply because sanction has been accorded by this court to the scheme of demerger. As a matter of course, such permission for transfer is to be granted. Such course can and would defeat the very object and purpose of having restriction in the matter of transfer of license. 20. Mr. Chhaya has further submitted that from the above submission, the facts of the present case show that the present scheme of arrangement/demerger is a sham so as to ostensibly cover up in the name of transfer of licence simplicitor in the names of sanction order of arrangement/demerger. This is apparent from paragraph 7.2 of the scheme of arrangement. He has, therefore, submitted that the petitioner itself has stated that PMRTS division was 0.27 per cent. of the total turnover of the company and the profit contribution was only Rs.0.36 crores of the total profit of Rs.122 crores. This does not show any reasonable basis wherefrom these figures are gathered. 21. Mr. Chhaya has further submitted that the resultant company Arya Group Services Pvt. Limited, a company incorporated under the Companies Act, 1956, is incorporated in the State of Maharashtra in Pune and its paid up share capital is only Rs.1 lakh. Coupled with the fact that its paid up share capital is Rs.1 lakh, it is apparent from the figures available that it had sustained loss of Rs.28,615 as on March 31, 2007. The figures as discernible from the balance-sheet show that it is not business of its own. He has, therefore, submitted that the present scheme is a camouflage to sell/transfer licence to defeat the policy of transfer. The figures placed before this court show that the resulting company AORTSPL has authorised paid up share capital of Rs.1 lakh with loss of Rs.28,615 as on March 31, 2007. There are no details as to how the amount of Rs.600 lakhs would be procured for the purpose of paying up of the consideration. The figures placed before this court show that the resulting company AORTSPL has authorised paid up share capital of Rs.1 lakh with loss of Rs.28,615 as on March 31, 2007. There are no details as to how the amount of Rs.600 lakhs would be procured for the purpose of paying up of the consideration. Furthermore, bare perusal of page 14 of the petition clearly shows that any question that may arise as to whether a specified asset or liability pertains to or does not pertain to the PMRTS business division or whether it arises out of the activities or operations of the PMRTS business division shall be decided by the board of directors of ARVIND and AORTSPL by mutual agreement will have no absolute grey area of unfettered discretion. Bare perusal of paragraph 13, page 21, Part V of the Scheme shows that there are no secured or unsecured creditors so far as the PMRTS division is concerned. Thus, no secured or unsecured creditors are to be transferred and only assets, which in essence is the licence held by the petitioner is to be transferred. 22. Mr. Chhaya has further submitted that the balance-sheet of the petitioner does not mention anything nor does it give any details of PMRTS division. Even either layman or expert cannot find out anything about this division from the bare perusal of the balance-sheet. He has, therefore, submitted that the certificate of the chartered accountant sought to be relied upon is as vague as vagueness could be since except certifying, it does not state as to on what basis or material, the certificate is issued. There are no details as to how consideration shall be paid. Furthermore, figures stated in the certificate issued by the chartered accountant and showing purported turnover in crores of rupees of the PMRTS business division is without any basis. Bare perusal of the certificate at page 52 of the petition shows that the net worth of the petitioner Arvind Mills Limited at Rs.1,362.51 crores and the net worth of Rs.1,362.46 crores clearly shows that there is no significant change in the net worth before and after the scheme of demerger. He has, therefore, submitted that the scheme does not at all reflect as to what will the shareholders get when net worth is not undergoing any substantial change. Change is negligible to the extent of Rs.5 lakhs only. 23. Mr. He has, therefore, submitted that the scheme does not at all reflect as to what will the shareholders get when net worth is not undergoing any substantial change. Change is negligible to the extent of Rs.5 lakhs only. 23. Mr. Chhaya has, therefore, submitted that the scheme is only with a view to circumvent the NTP 99 as amended and to overcome the transferability clause in the name of demerger scheme. The scheme does not deserve to be sanctioned in public interest since it is nothing else but an attempt to overcome the transferability clause/restriction contained in the policy in the matter of sanction of the scheme. The sanction to the scheme does not deserve to be granted. 24. An additional affidavit is filed by Mr. R.V. Bhimani, company secretary on behalf of the petitioner demerged company on April 24, 2008. Mrs. Swati Soparkar, learned advocate appearing for the petitioner has submitted that the issues raised by the deputy registrar in the further affidavit are an afterthought. None of these issues were raised by the Regional Director vide letter dated March 10, 2008, who has gone into all the relevant details of the petition before issuing the aforesaid letter. The issues raised by Mr. Dalmia on the basis of the further affidavit pertain to the "New Telecom Policy, 1999 (NTP-99)". Close perusal of the causes of the said policy reproduced in the affidavit of Mr. Dalmia shall make it clear that it gives an option to the existing operators to migrate to digital technology from the present analogue system. It very categorically reiterates at number of places that it is only an option and not a direction to migrate to digital technology. After the intimation about the aforesaid policy, the present petitioner has chosen to continue with the present analogue system and chose not to migrate to digital technology at this stage. The exercise of the said option was communicated on August 14, 2006 and the concerned authority has issued license agreements dated December 5, 2007 for the State-wise circles consolidating the old licences which were issued for individual cities. Since the petitioner had previously nine licences for different cities, spread over five States, it now has five agreements for each State. The exercise of the said option was communicated on August 14, 2006 and the concerned authority has issued license agreements dated December 5, 2007 for the State-wise circles consolidating the old licences which were issued for individual cities. Since the petitioner had previously nine licences for different cities, spread over five States, it now has five agreements for each State. On perusal of the said agreement, it can be noted that the period for the licence has been extended up to a period of 20 years (i.e., May 10, 2016) from the effective date (i.e., May 10, 1996) vide the said agreement. The present petitioner has made payment of licence fee and has complied with the requirement of due performance of all the terms and conditions. Mrs. Soparkar has further submitted that with regard to the guidelines for transfer of licence, the same supports the contentions of the petitioner. Close perusal of paragraph 13 of the guidelines makes it clear that the prior written permission of the licensor, can be granted only on fulfilment of the conditions. Clause (ii) of the said preconditions requires the licensee to obtain the order from this court specifically under sections 391 to 394. This makes it abundantly clear that the petitioner was first required to move a petition under sections 391 to 394 of the Act and obtain the sanction of the court to the proposed demerger before approaching the licensor for the written prior permission. The petitioner shall now approach the licensor authority on obtaining the sanction of this court for obtaining the written permission to transfer the impugned licenses. This further makes it clear that the petitioner has not tried to circumvent any process of law and has rightly approached this court for sanction of the scheme of demerger. 25. Mrs. Swati Soparkar has further submitted that paragraph 7.2 of the petition gives the commercial details of the petitioner-company. The financial details included therein like the turnover and profits and the percentage share of the same in the total turnover of the company is based on the books of account of the company. The said contention was specifically substantiated by a certificate of a chartered accountant as the same cannot be apparently observed from the balance-sheet of the company. The balance-sheet gives the consolidated data about the total turnover and profits of the company. The said contention was specifically substantiated by a certificate of a chartered accountant as the same cannot be apparently observed from the balance-sheet of the company. The balance-sheet gives the consolidated data about the total turnover and profits of the company. The petitioner though maintains its accounts separately for each division, is not required under any legal provision, to produce the balance-sheet separately for each division. Mrs. Soparkar has further submitted that the issue raised with regard to the resulting company is not relevant for the sanction of the scheme by this court. However, in order to explain the factual position, the petitioner submits that the resulting company, viz., Arya Omnitalk Radio Trunking Services Private Limited is a company incorporated recently specifically for the purpose to carry on the business of telecommunications (including among others, terrestrial, wire-line, wireless, micro-waves, satellite and submarine telecommunications), data processing, information technology, data and voice transmission, electronic engineering and communications. Another group of companies which is well known as J.M. Baxi group of companies or Arya group has various companies which are mainly engaged in the business of shipping and cargo transportation. The approximate turnover of these group companies is around Rs.500 crores. Some of these companies have diversified into the PMRTS business activities on a small scale and has obtained licenses for the same. The list of the companies along with the licences obtained by them for various cities is produced on the record of this petition. Considering the total turnover of the said group, the PMRTS activities form a very small part of their commercial operations. The Arya group companies also propose to demerge their respective PMRTS activities to this newly formed company and have also initiated the necessary proceedings for the same in the State of Maharashtra. Upon the conclusion of all these proceedings, and the approval for the transfer of licences being granted by the concerned authorities, both Arya group and Arvind group shall contribute equally to the capital of this new entity and carry on the PMRTS business as a joint venture. This intent is already pointed out in paragraph 9 of the petition. The board of directors of both the companies thought it appropriate to have an independent set up with specific objective of undertaking the telecom business. This intent is already pointed out in paragraph 9 of the petition. The board of directors of both the companies thought it appropriate to have an independent set up with specific objective of undertaking the telecom business. The management of the petitioner demerged company considers that the demerger of the PMRTS business of the company into AORTSPL shall help to achieve various objectives as enumerated in the scheme of arrangement. 26. Mrs. Swati Soparkar has further submitted that on sanction of several schemes of demerger, the new entity shall take necessary steps to raise its capital and fulfil the commitments made for the payment of Rs.600 lakhs. This issue is not a relevant consideration for the sanction of the scheme by this court. Further, various clauses of the scheme has been referred by Mr. Chhaya on the basis of the affidavit indicating that the endeavour of the company is to by pass the approval of the Department of Telecommunications and the transfer of the assets is proposed to be made only on the order of this court. The clauses of the scheme are applicable to the two contracting parties only meaning thereby that no further action or deed is necessary between the parties to effect the said transfer. It nowhere implies that the necessary statutory sanctions shall not be obtained. In fact, the petitioner-company has already informed the Department of Telecommunications, vide letter dated March 26, 2007, that is much before moving the application before this court about its intention as well as the proposed legal proceedings. She has further submitted that pursuant to the said communication, the concerned department has not raised any objection to the said proposal. 27. Mrs. Soparkar has further submitted that the provisions of law do not require the petitioner-company to give financial details of each and every internal division of the company and the chartered accountant's certificate is separately produced specifically for this purpose to ensure that the relevant figures are derived on the basis of the books of account of the company which are reflected in balance-sheet in consolidated form. So far as interest of the shareholders is concerned, she has submitted that the scheme as well as the explanatory statement has been served upon each and every shareholder of the company. So far as interest of the shareholders is concerned, she has submitted that the scheme as well as the explanatory statement has been served upon each and every shareholder of the company. At the meeting of the equity shareholders of the company convened pursuant to the directions of this court, the shareholders present has consciously considered the proposed scheme and after due deliberations have granted their unanimous approval to the same. Pursuant to the newspaper publication no shareholder has raised any objection to the scheme or questioned the consideration for the transfer of the said division. She has, therefore, submitted that considering the entire facts and circumstances of the case, the petitioner could not have opted for provisions of section 293(1)(a) of the Companies Act, 1956, instead of the scheme of arrangement under section 391/394 of the Act. Considering the precondition attached to the said licence, guidelines and the transfer policy currently applicable to the company, is required to obtain the sanction of this court before approaching the concerned Government Department for its written prior permission for the actual transfer of the said licence as well as the commercial activities of the petitioner-company. She has, therefore, submitted that since all other requisite compliances are made, this court should sanction the scheme of arrangement. 28. After having heard learned advocates appearing for the respective parties and after having perused the entire scheme, the objections contained in the two affidavits and the reply affidavits filed on behalf of the petitioner-company, more particularly, at various stages it is clearly stated that the petitioner has made payment of licence fee and has complied with the requirement of due performance of all the terms and conditions and that the petitioner has not tried to circumvent any process of law and has rightly approached this court for sanction of the scheme of demerger and that there is no intention on the part of the petitioner demerged company to give a go bye to the necessary statutory sanctions and that no objections were raised either from the shareholders or any one else pursuant to the public advertisement, the court is satisfied that the observations made by the Registrar of Companies do not survive and the scheme of arrangement would be in the interest of the companies and their members. Prayer in terms of paragraph 25(a) of the petition is required to be granted and it is accordingly granted. 29. The petition is disposed of accordingly. So far as the costs to be paid to the Central Government Standing Counsel is concerned, the same is quantified at Rs.3,500 for the petition. The same may be paid directly to Mr.Rashmin M. Chhaya, learned Central Government Standing Counsel, by the petitioner-company.