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0:23-1:11
Manisha
Hello and Welcome to a New Episode of Legal Wrangle on Corporate Laws. Today, we focus on six important cases, relating to status of secured creditors in liquidation process of Company, Scope of Scheme of arrangement, need for public announcement under Takeovers Regulations, search & seizure under the Competition Act and finally, copyright infringement.
Our first case deals with the requirement of proving the debt by creditor in the liquidation process which it was statutorily entitled to receive. The prime issue was whether the Official Liquidator can claim any power or jurisdiction to adjudicate and quantify the claim of statutory corporations who have the status of secured creditors.
Let's go to Shweta for facts of the case:
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1:12-1:48
Shweta
The appellant, Laxmi Fibres Ltd was going through liquidation process. The assets of the appellant were sold by the creditor which was a statutory corporation as per the State Financial Corporations Act. But the sale took place subject to certain conditions imposed by the High Court that the Creditor would deposit amount to ensure workmen's dues with the Official Liquidator. The creditor agreed but objected to the condition that it had to prove its claim before the Official Liquidator. The Creditor appealed before the High Court which was allowed and therefore, the liquidating company went to the SC.
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1:49-2:09
Manisha
The Supreme Court held that the Official Liquidator had clearly exceeded its jurisdiction and Secured creditors need not prove their debt before Official Liquidator which they were legally entitled to realize under the provisions of the State Financial Corporations Act.
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2:10-2:40
Manisha
The second case relates to two key issues - First, whether sections 391 to 394 are a kind of complete code which allows a company to undertake any kind of scheme involving distribution of shares, which actually resulted in distribution of dividend, to its shareholders without complying with dividend provision of the New Companies Act, 2013. The other issue was whether a scheme of arrangement can override the provisions of the Income Tax Act.
Here are the case details.
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2:41-3:15
Shweta
The Petitioner by the Scheme of arrangement, wanted to make a gift of the shares of another company called - Taneja Aerospace and Aviation Limited to its Shareholders. The Regional Director objected to the Scheme on the grounds that such gifting of shares was equivalent to giving dividend to Shareholders in kind, which was prohibited under the law. Moreover there was pendency of certain demands and proceedings under the Income Tax Act against the Petitioner. The Income Tax Department also objected to the Scheme as no application was made to the Income Tax Department for permission to make this gift.
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3:16-4:22
Manisha
The High Court held that the Scheme was illegal and contrary to the law. The reasoning given by the Court was that merely because the Scheme is framed under 391 to 394 of the Companies Act 1956, the Scheme cannot ignore the other provisions of the Companies Act, 2013 like dividend provisions in this case. As far as tax liability was concerned, the High Court was clear that the Petitioner cannot avoid the applicability of the Income Tax Act on the ground that it might have sufficient assets to discharge the tax liability.
The market regulator SEBI is again back in action. Yes, Our third case deals with very crucial issue of making public announcement under SEBI (Substantial Acquisition of Shares & Takeovers) Regulations. The Dispute was whether making public announcement would not be required when acquisition of shares was followed by sale in the same financial year.
Here are the facts.
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4:23-5:03
Shweta
The appellant acquired substantial shares of Snowcem India Ltd and became one of the promoters with shareholding over 20% of total paid up capital. SEBI carried out investigation and concluded that the appellant was already holding between 15% to 75% shares of the target company and acquired more than 5% shares without public announcement and had violated the Takeover Regulations. SEBI ordered the company to make public announcement, pay interest @ 15% per annum to the shareholders and restrained the appellant from the capital market for a period of two years. Matter was appealed before the Supreme Court.
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5:04-6:57
Manisha
The Apex Court held that if the aggregate percentage of acquisitions at any point of time during the financial year exceeds 5 per cent, takeover regulation would get triggered although the purchase was followed by sale in the same year. Therefore, the appellant was guilty of violating the Takeover Regulations and was liable to make public announcement. This decision would certainly keep the capital market players on their toes with respect to compliance under Takeover Regulations.
Cartelisation in Govt procurements is becoming a rule, than an exception. This is a prima-facie case of cartelisation where complaint was filed by a third party, who happened to be a consumer. The issue was whether such person has a locus standi to file the complaint before the competition Commission when he did not have personal interest in the matter and was acting on behest of someone else.
Let's see the details:
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6:58-8:12
Shweta
Maharashtra State Power Generation Co. Limited, invited bids for supply of coal and proper supervision of transportation for its thermal power stations. B.S.N. Joshi & Sons Ltd (Bidder), was among the bidders, who though quoted lowest rate but was not awarded the contract. The Bidder filed Writ Petition in the High Court, which was dismissed. On appeal, the Supreme Court observed that there was prima-facie existence of cartel and directed that the appellant Bidder may be granted the contract for one year. However the contract was terminated after few months on some flimsy grounds. Strangely, the State power company granted the contract to another entity which was earlier found by the Supreme Court to be involved in cartelization. This time, a complaint u/s 19 of the Competition Act was filed by an advocate who was a consumer of electricity generated by the State power company. It was alleged that Maharashtra State Power Generation Co. Limited was using its dominant position to facilitate cartelization. However, the competition Commission declined to order an investigation. The matter was appealed before the Competition Appellate Tribunal.
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8:13-9:00
Manisha
Tribunal held that the appellant had locus standi to file a complaint before the Commission as long as he was covered within the definition of Consumer under the Competition Act. Since there was a strong prima facie case of cartelization, investigation should have been ordered and therefore, the Commission's order suffered from patent illegality.
Our next case also deals with an interesting aspect under the competition act. We all have seen some or other time, the gigantic bull dozers of JCB. Yes, this case involves JCB India limited with respect to an interesting issue whether the Commission can be allowed to clone and make copies of the hard disks and the laptop etc. seized during search operation.
Here are the facts:
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9:01-9:48
Shweta
A raid was conducted by the DG at the business premises of petitioner JCB India Ltd and collected hard disks, one laptop and other materials critical for the investigation. The petitioners moved an application before the High Court for quashing the search and seizure and to return all the materials seized as they contained crucial evidence, which might get corrupted. The Court observed that all hardware seized, would be kept in a sealed cover in safe custody of the Commission. The petitioner was still not satisfied and then moved an application that all copies made by the Commission should be destroyed and an affidavit must be filed by but this application was rejected. Finally, the Petitioner filed a writ petition in the High Court.
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9:49-10-41
Manisha
The High Court held that mere making copies of the hard disks and the laptop does not cause any prejudice to the petitioner but only imposed a condition on the DG to make the copies and re-seal them in the presence of Registrar General of the Court. This decision would certainly strengthen the evidence collection powers of the DG for the future search & seizure operations.
Our last case is about " Zindagi Abhi Baki Hai Mere Ghost". Yes, we are talking about the recent horror comedy show being telecast on one of the channels of Star India which had to face allegations of Copyright infringement for copying someone else's concepts.
The key issue was whether copyright in Initial concept developed by a firm through Commission work by a person not employee of such firm can file a suit for infringement.
Let's look at the facts:
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10:42-11-23
Shweta
The Plaintiff, INCEPTION MEDIA LLP claimed that it had developed a concept note for one proposed television serial and disclosed it to Star India Private Limited, which did not show interest in developing the concept any further. But, Zee Entertainment Enterprises Limited, showed interest and they started working on it. In the meantime, Star India introduced a television show entitled " Zindagi Abhi Baki Hai Mere Ghost" which was quite similar to the Plaintiff's concept note. Due to this reason Zee refused to work on the concept note under its contract with the Plaintiff. The Plaintiff filed a suit for infringement by Star India before the high court.
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11-24
Manisha
The High court did not grant an interim injunction because in its opinion copyright cannot be said to subsist in a person when the work was commissioned and created by another person under contract for services. Moreover since the plaintiff had assigned its rights in favor of ZEE, it did not have a locus standi to file any suit. The High Court also made an important observation that the plaintiff failed to establish any similarity because the script shown by Star India was different in its approach and tone.
With this we wrap up the third episode of Legal Wrangle on Corp laws. Thank you for watching.