RELIANCE COMMUNICATIONS LIMITED Vs. STATE

JUDGEMENT

(1.) I have before me a Company Scheme Petition for sanction. One Systema Shyam Teleservices Limited ("SSTL") is the Transferor company. The Transferee company is the present Petitioner Reliance Communications Limited ("RCom"). One of SSTL's undertakings is proposed to be demerged from it and vested in RCom on the appointed date. SSTL's registered office is in Jaipur. SSTL therefore made a corresponding application to the Rajasthan High Court at its Jaipur bench. The Rajasthan High Court allowed SSTL's petition by an elaborate judgment dated 30th September 2016.

(2.) The rationale of the Scheme is set out in this voluminous record.Record, p. 720. The ostensible purpose, at least as far as RCom is concerned, is to facilitate its expansion in the telecom market, develop its infrastructure, create additional value for its shareholders and to achieve improved efficiencies in its operations. The expression "transferred undertaking" is separately and specifically defined. This is a comprehensive definition. Record, pp. 729­732. It covers several immovable properties, plant and machinery, debts, obligations and, most importantly for our purposes, what are known as Unified Access Service Licenses ("UAS Licenses") issued by the Department of Telecommunications ("DoT"). At the most general level, the transferred undertaking is defined to mean the telecom business undertaking of SSTL on a going-concern basis. Certain assets and liabilities are specifically identified in the schedule. A related concept is that of "remaining business". This is logically necessary, for this contains a definition of the SSTL undertaking that remains after the demerger or divesting of the transferred undertaking from SSTL.Record, p. 727. I also notice that there is a clarification on an Affidavit in Reply to an early objector, who has since withdrawn the objection, that the 'remaining business' includes the Data Centre, Tower Business and SSTL's investments in RCom.

(3.) The entire Scheme is framed under Sections 391 to 394 of the Companies Act, 1956. It is clearly conditional and it is subject to a series of events that are set out in the Scheme in Clause 8(j). The conditions include receipt of written approvals from the DoT. Following the proposed demerger and vesting in RCom, the Scheme proposes that SSTL will hold 10% of RCom's equity. This translates to 27,65,53,305 equity shares, today of an estimated market value of Rs. 1,379 crores. This is, very broadly, the outline of the Scheme. To put it in a nutshell, the Scheme contemplates that SSTL will stop doing its previous telecom business under UAS licenses that it currently holds and that this telecom business under these licenses will vest in RCom from the appointed date, and will be carried on by RCom thereafter. SSTL will hold equity (as mentioned above) in RCom. There is one objection in regard to this equity holding. That has been dealt with on affidavit, but I will consider it presently, as I I address each objection placed before me.