IND TELESOFT PRIVATE LIMITED Vs. JAWAD AYAZ

JUDGEMENT

(1.) THE applicant?company filed Company Petition No. 72/2001 before this Court under Section 391 and 394 of the Companies act, 1956, seeking for sanction of a scheme of arrangement of the company with its share holders. This Court, by an order dated 12. 4. 2001 in C. A. No. 199/2001, dispensed with the requirement of the advertisement in holding of meeting of shareholders. Thereafter, by an order dated 13. 7. 2001, the scheme of arrangement was sanctioned and a decree was drawn up in accordance with the said order as per Annexure-A. The relevant portion of that scheme of arrangement which was sanctioned by this Court was 38,73, 342 shares of face value of US $ 0. 001 each held by the applicant company in M/s Zhone Technologies Inc. , as on February 20, 2001, was permitted to be transferred in the name of principal shareholders of the applicant-Company. This arrangement was based upon the premise that shares would be freely transferable consequent upon the public offering, which was then proposed by M/s Zhone technologies Inc. the said scheme was sanctioned subject to the necessary approval to be obtained from various statutory authorities. In the course of implementation of the scheme, it was brought to the notice of the applicant?company that Regulation 5 of Part I of the Foreign Exchange Management Transfer or Issue of any Foreign security Regulations, 2000 prohibits any direct investment outside india without prior approval of the Reserve Bank of India. The reserve Bank of India had objections for transfer of the aforesaid shares in the name of individuals. Under these circumstances, all the parties who had consented for approval of the scheme explored other avenues to make the scheme workable. Thereafter, they resolved that the shares of Zhone can be held in the name of bangalore Telesoft Private Limited tenth respondent herein, a company incorporated under the Companies Act, 1956, having its registered office at No. 104, Koramangala Industrial Estate, V Block, bangalore-560 008. All the shareholders of the applicant?company who were intended recipients of the shares in terms of the Scheme as approved are the shareholders of the tenth respondent? company. Thereafter, the Reserve Bank of India was approached for giving effect to this arrangement and the Reserve Bank has given its approval for transferring the shares from the applicant? company to the tenth respondent- Company as per Annexure-E. It is in this background the present application is filed for modification of the Scheme so as to make the Scheme workable.

(2.) THE tenth respondent, who would be beneficiary of such transfer, has expressed its willingness on the scheme.

(3.) RESPONDENT Nos. 1 to 9 are the shareholders of both the applicant?company as well as the tenth respondent?company. Along with the petition, the consent letters have been filed giving their consent for modification of the Scheme as proposed. Thereafter, notice was ordered to the respondents. All of them have appeared through their Counsel. On 4. 12. 2002, notice was ordered to the Central Government as required under Section 394a. In pursuance of the said notice, the Registrar of Companies Karnataka, on behalf of the Regional Director, Department of Company Affairs, southern Region, Chennai, has filed an affidavit bringing to the notice of this Court the fact that transfer of shares is without any consideration and the Scheme is silent in this regard. Secondly, it is stated one of the condition imposed by the Reserve Bank of india for approving the said Scheme is that both the transferor and transferee Company should have the same shareholders and the zhone shares would continue to be held by the same set of resident indian shareholders and venture captalists and the benefits from holding the Zhone should continue to accrue to them. It is stated that 5 shareholders of the applicant?company, the particulars of which are set out in the said affidavit, are not the shareholders in the transferee Company i. e. tenth respondent, and therefore, requested this Court to take into consideration the aforesaid lacuna and pass appropriate orders.