ZEE NEWS LIMITED v. ZEE ENTERTAINMENT ENTERPRISES LIMITED

Mr. Virag Tulzapurkar, Senior Counsel and Mr. Rajesh Shah i/b Rajesh Shah & Co., for the Petitioners. Ms. Purnima Avasthi i/b Mr. S.K. Mohapatra for Regional Director in both the petitions. 2 Mr. Niranjan Waghela i/b Pandya & Co. for Kavithalayaa Productions Private Limited, One of the Unsecured Creditors of the Transferor Company PC: CORAM: S. J. Kathawalla J. DATE: 19th March, 2010

1. Heard learned counsel for the parties.

2. The sanction of the Court is sought under Sections 391 to 394 of the Companies Act, 1956, to the Scheme of Arrangement between Zee News Limited and Zee Entertainment Enterprises Limited and their respective Shareholders and Creditors.

3. Counsel appearing on behalf of the Petitioners has stated that they have complied with all requirements as per directions of this Court and they have filed necessary affidavits of compliance in the Court. Moreover, Petitioner Companies undertake to comply with all statutory requirements, if any, as required under the Companies Act, 1956 and the Rules made there under.

4. The Regional Director has filed an affidavit in the above petitions stating that save and except as stated in paragraph 6 thereof, the scheme does not appear to be prejudicial to the 3 interest of the shareholders and the public. The paragraph 6 of the said affidavit reads thus:- “That the deponent further submits that the Transferee Company i.e. Zee Entertainment Enterprises limited was inspected under section 209A of the companies Act, 1956 during the year 2007 and various violations were notice by the inspecting officer and the said violations are under sections 77, 147, 193, 211, 217, 224, 301, 303, 307, 308, 372A and 198 read with section 349 of the Companies Act,

1956. Further the affidavit filed by the Mr. M. Lakshminarayanan, Company Secretary of the Transferee Company has disclosed that the company has made necessary applications for compounding of aforesaid violations except violation under section 77 of the Act and the same are pending for disposal with appropriate authorities. The copy of the said affidavits is annexed and marked as Exhibit ‘C-2’. As regards violation of section 77 of the Companies Act, 1956 the Instruction of the Ministry are awaited. The above fact being ‘material fact’s in respect of the Transferee company, are brought to the notice of this Hon’ble High Court for information” 4

5. The Counsel for the petitioners submits that the alleged violations referred to by the Regional Director has no bearing whatsoever on the Scheme and hence, do not come in the way of the Scheme being sanctioned by the Court. The Counsel further states that the transferee company has already made necessary applications for compounding of aforesaid violations except violation under section 77 of the Companies Act, 1956 and that the same are pending for disposal with the appropriate authorities. So far as the aforesaid violation under section 77 is concerned the Counsel submits that the Transferee Company has already made a request to the concerned Registrar of Companies to drop the show cause notice and that the concerned Registrar of Companies has forwarded the same to the Regional Director who has forwarded the same to the Ministry of Corporate Affairs and the instructions of the Ministry in this regard are awaited. The Counsel also states that the above violations are technical in nature and does not affect the Scheme of Arrangement. The Counsel also submits that it is always open to the Regional Director to adopt such proceedings in accordance with law with regard to the alleged violations against the Transferee Company and its Directors, as the case may be, even after the 5 Scheme is sanctioned by the Court and if any such proceedings are adopted against the Transferee Company, the same can be continued against the Transferee Company pursuant to relevant provisions of the Act. The Counsel states that the Company is otherwise compliant of the statutory provisions of the Companies Act, 1956 and will comply with relevant provisions of the Act. The said statement is accepted.

6. Mr. G. R. Raju, an Unsecured Creditor of the Transferor Company has filed an affidavit with the Court stating that his opposition to the Scheme of Arrangement be taken on record and that no order be passed without hearing him and securing his claims against the Transferor Company. The Transferor Company has filed an affidavit in reply to the affidavit filed by Mr. G. R. Raju stating that the Transferor Company has already secured the amounts payable to Mr. G. R. Raju by way of depositing the same with the Madras High Court as per the directions of the Madras High Court. Further, the Transferor Company has deposited the interest payable for the delayed payment with the Madras High Court as directed by the Apex Court. The said Unsecured Creditor has not appeared before this Court anytime during the course of hearing. However, after considering the above submission of the Counsel of the 6 Transferor Company, no action is considered necessary from this Court. Further, the Counsel for Kavithalayaa Productions Private Limited, another Unsecured Creditor of the Transferor Company appeared and stated that he has no objection to sanction the Scheme of Arrangement. None of the other parties concerned has come forward to oppose the Scheme.

7. From the material on record, the Scheme appears to be fair and reasonable and is not violative of any provisions of law and is not contrary to public policy.

8. As there is no objection to the Scheme and since all the requisite statutory compliances have been fulfilled, Company Petition No. 12 of 2010 filed by the Transferor Company is made absolute in terms of prayer clauses (a) to (c) and Company Petition No. 13 of 2010 filed by the Transferee Company is made absolute in terms of prayer clauses (a) to (c), subject to the right of the Regional Director/ Registrar of Companies to take appropriate action in accordance with law for aforesaid violations in respect of the Transferee Company.

9. The Petitioner Companies to lodge a copy of this order and the Scheme, duly authenticated by the Company Registrar, High Court, Bombay, with the concerned Superintendent of Stamps 7 for the purpose of adjudication of stamp duty payable, if any, on the same within 60 days from the date of the order.

10. The Petitioners in both the Company Petitions to pay costs of Rs.7,500/- each to the Regional Director, Western Region, Mumbai. Costs to be paid within four weeks from today.

11. Filing and issuance of the drawn up order is dispensed with.

12. All concerned authorities to act on a copy of this order along with Scheme duly authenticated by the Company Registrar, High Court, Bombay. (S. J. Kathawalla J.)