AIG MAURITIUS LLC Vs. TATA TELEVENTURES HOLDINGS LIMITED

JUDGEMENT

(1.) The question which calls for determination is whether, in the factual matrix disclosed in the pleadings of the parties to this petition, Section 395 of the Companies Act, 1956 (hereinafter referred to as 'the Act') could have been invoked by the Respondents with the intent of compulsorily acquiring the entire shareholding of the Petitioner, namely, AIG (Mauritius) LLC in the erstwhile Respondent No. 2, Tata Cellular Limited, Respondent No. 1. Tata Televentures (Holdings) Limited, had in terms of its notice dated 24.7.2001, invoking Section 395 of the Act, required the Petitioner to sell its stake in Respondent No. 2 at a price of Rs. 10/- per share for cash. Counsel for the parties have unanimously contended that I should pronounce on the preliminary issue of whether the said section has been properly and correctly invoked by Respondent No. 1. It is only in the event that this Court comes to the conclusion that Respondent No. 1 was authorised, competent and entitled in law to unilaterally purchase or requisition or expropriate the Petitioner's holding in Respondent No.. 2, would the further question arise of whether the price fixed by Respondent No. 1 should be accepted by the Court to be a fair and proper valuation;

(2.) Respondent No. 2 was incorporated in March, 1995 and changed its name to the present one in March, 2000. In June, 1995 Tata Industries Limited, Bell Canada International Inc., Bell Canada International (Mauritius) Inc., and Respondent No. 2 entered into a Joint Venture Agreement 0VA) for obtaining a License in respect of cellular services in India. The Petitioner-was 'associated with the JVA from its inception and had acquired the aforementioned shares of Respondent No. 2 at the very inception stage. In November, 1995 the Respondent No. 2 was awarded a licence to establish and provide Cellular Mobile services in Andhra Pradesh. In December, 1995, the Petitioner was issued 10 per cent equity shares in Respondent No. 2. In September 1998 Respondent No. 1 was incorporated, of which 99.99 per cent shares were held by Tata Industries Limited. While these two parties are indubitably separate and distinct legal entities for most purposes, once the corporate veil is lifted it will be evident that they are one and the same. It is only to a marginally lesser extent that the Respondents are commercial alter egos of each other since 91.4% of the equity is held by the Tata group, the remainder being with the Petitioner. These facts shall be of great significance. Thereafter Bell Canada International (Mauritius) Inc., for reasons which need not be dealt with in detail, withdrew from the Joint Venture Agreement, its interests being taken over by Tata Industries Limited, which in turn held 99.99 per cent shares in Respondent No. 1. It is the Respondents' say that in December, 1999 the Petitioner made unreasonable demands on Tata Industries Limited which led to the consequence that the latter offered to buy out the Petitioner on the same terms as were applicable to the Bell Canada International Group. In March, 2000 a Memorandum of Understanding (MoU) was entered into between Respondent No. 2 and Grasim Limited and AT&T Wireless Services Inc., for their proposed merger into a company in which each Corporate Group would hold 1 /3rd of the equity. The Petitioner, which at that point of time held 10 per cent shares in Respondent No. 2, was not included in the proposed reorganisation. In August, 2000 the Joint Venture Agreement was terminated and in the following month the Board of Respondent No. 2 proposed an amalgamation with Birla AT&T Communications Limited (BACL). The Petitioner was excluded from this reorganisation in the sense that it was not allotted any separate shares of the new entity, but was still a part thereof by virtue of its holdings in Respondent No. 2. In December, 2000 Tata Industries Limited requested Respondent No. 2 for issuance of 6,65,30,000 Naked Warrants which were eventually allotted. On 25.1.2001 the Petitioner was informed that it was not entitled to any portion of the Warrants or the Preferential Issue of Equity.

(3.) On 12th February, 2001 Respondent No. 2 filed Company Petition No. 57 of 2001 as a sequel to Company Application No. 1564 of 2000 for the sanction of the Aiaalgarnation Scheme between Respondent No. 2 on one side and Birla's and AT&T- who had .combined-iheir interests in the form of BACL on the other. RespondentNo. 1 has averred that a Letter of Offer, seeking to purchase their shares under Section 395 of the Act, was dispatched under U.P.C. to all the shareholders 0f Respondent NO. 2 including the Petitioner, but receipt of this communication has been specifically denied by the Petitioner. It will be seen that the identity of Respondent No. 1 and Respondent No. 2 are almost the same, once the corporate veil is lifted. On such a important matter, it could be expected that the Respondent No. 1 would have been prudent to despatch the Letter of Offer by recorded/ registered post so as to set speculation to rest. The Petitioner contends, however, that it came to know of the letter dated 26.4.2001 for the first time on the receipt of the subsequent notice dated 24.7.2001. In this interregnum, the Scheme of the Merger of Respondent No. 2 with BACL was sanctioned by this Court on 28.5.2001. It is necessary to underscore that no reference in the Scheme to the Offer dated 26.4.2001 of Respondent No. 1 to all the shareholders of Respondent No. 2, and also that Respondent No. 1 was not a part of the Merger detailed in CP No. 57/2001. In this Offer, Respondent No. 1 had stated that the current fair value of the shares of Respondent No. 2 was between Rs. 9/- and Rs. 11 /- and that they were offering Rs. 10/- per share to every shareholder of Respondent No. 2. Some of the other salient terms of the Offer are as follows: " CLAUSE FOUR TENURE OF OFFER The offer will open on the date of issuance of this Letter of Offer to the TCL shareholders. The Offer will close on the occurrence of the earlier of the following two events: . Upon the acceptance of the Offer by all TCL Shareholders; or (b) on the expiry of one month from the date of Opening of the Offer. CLAUSESEVEN 7.3 Upon acceptance of this Offer by the TCL Shareholder, the Transferee Company will hold in trust, on behalf of the TCL Shareholder, the share certificates of TCL shares (if any), Forms of Acceptance - cum - Acknowledgement fully filled in and the duly executed Transfer Deed/s, till such time as the Cheques/drafts, more particularly described in Clause SIX of this Letter of Offer, are posted. 7.4 Notwithstanding that the Offer may not yet have closed in accordance with CLAUSE FOUR of this Letter of Offer, TTVHL hereby expressly retains and desires to exercise all rights available to it under law subsequent to the acceptance of this offer by 90% (Ninety per cent) of the TCL Shareholders, including the right to treat the TCL Shareholders who have not, by then, assented to the Offer as having rejected the Offer and all rights ancillary thereto. For the purposes of this paragraph 7.4 alone, an acceptance that is subject to the approval of RBI/ financial institutions/ lenders/ governmental agencies shall be deemed to be a valid acceptance." What is sought to be conveyed by Clause 7.4 to the shareholders of Respondent No. 2, which in substance is the Petitioner, since Respondent No. 1 and Respondent No. 2 are almost completely of common identity? I understand the clause to indicate that the shareholders must accept the offer of Respondent No. 1 to purchase their holdings at Rs.l0/-per share within thirty days, failing which while they would not be able to enforce the sale thereafter, Respondent No. 1 may still do so. I do not for a moment think this to be the intendment of Section 395 of the Act. It matters little what Respondent No. 1 intended to convey; even if I have misconstrued the clause, so could the public at large.