S.B. Sinha
The Petitioner No.1 herein is a Multi Service Operator. Petitioner No.2 was a promoter of Petitioner No.1. The Respondent No.1 is a partnership firm; respondents No.2 to 6 being its partners. It has been operating as a multi service operator in the area of Sharda Nagar in the town of Bangaluru.
2. Admittedly, a Business Transfer Agreement was entered into by and between the Petitioner No.1 herein and the Respondent Nos.2 to 6 on or about 20.8.2007, in terms whereof the latter agreed to transfer all their assets/infrastructure/equipments of the Respondent No.1 to the Petitioner No.1 for a total consideration of Rs.3 crores 60 lakhs; 50% whereof was to be paid in cash and the rest in fully paid up equity shares in Petitioner No.1.
3. Some of the important clauses of the said agreement are as under:-
2.1.3 – The Subscription Charges paid by presently about 130 Operators to (as prevailing at the Closing Date) and the exclusive right to collect and receive the Subscription Charges from the Subscribers in the Area from the Closing Date more particularly described in Annexure 9 thereto.
3 TRANSFER AND CONSIDERATION
3.1 Subject to the terms and conditions hereof, on the date hereof, Transferor agrees to transfer, convey, assign, sell and deliver to the Transferee free from all Encumbrances to the end and intent that the Transferee shall be the full and undisputed owner of the Business and Assets effective as at the Closing Date, and the Transferee agrees to acquire and take-over the Business, the goodwill and profits free of all Encumbrances in accordance with and in the manner provided in this Agreement with effect from the Closing Date.
3.2 Subject to Clause 4 and 6 hereof, the Transferee shall pay to the Transferor, a total consideration of 3,60,00,000 (Rupees Three Crore Sixty Lacs only) for the sale and transfer of the Business (“Consideration”). The Transferor acknowledges that the Consideration stated herein is adequate and sufficient consideration for sale and transfer of the Business to the Transferee.
3.3 The parties have agreed that on the Closing Date, 50% of the Consideration shall be payable in cash, and for the balance 50% of the Consideration, the Transferor shall be issued fully paid up equity shares in the Transferee aggregating to 50% of the then issued fully paid up equity capital in the Transferee.
3.4 Based on the Representation and Warranties of the Transferor and in consideration for the purchase and transfer of the Business from the Transferor, and the non-compete provisions herein, the Transferee shall pay to the Transferor, 50% of the total consideration in the following manner:
3.4.1 A sum of Rs.1, 60, 00,000 shall be payable on the date of Closing, when the Business is transferred to the Transferee. On the date hereof, this amount shall be placed in an escrow account with an bank of repute pursuant to an escrow agreement and shall be released by the Bank to the Transferor on the date of Closing; and
3.4.2 A sum of Rs.20,00,000 shall be kept as holdback by the Transferee and shall be released in the manner set out in Clause 3.5 (“Holdback”)
3.5 The Holdback shall be paid to the Transferor within two months after the date of issue of shares to the Transferor as set out in Clause ___above, after the execution of a shareholders agreement between DOPL, the Transferor and the Transferee (“Closing Date”), subject however to the following adjustments from such Holdback, including but not limited to:
i. Any outstanding pay channel charges, on the date hereof, due and payable by the Transferors to pay channels broadcasters that provided it the signals as the case may be,
ii. Any unpaid Entertainment tax, as of the Closing,
iii. Any advance subscription charges received from the operators from the Area by the Transferor, becoming due and payable for the period falling after Closing date, and
iv. Any unpaid service tax or any other tax, cess duty, charge levy or other dues pertaining to a period prior to the date hereof.
v. Any outstanding liabilities related to the business, salary, electricity, rent, ROW charges for the period prior to the Closing, including those which may arise after the date hereof and have not been paid by the Transferor, etc.
vi. Any advance carriage fees collected.
6 CLOSING OBLIGATIONS
6.1 The Transferor shall co-operate with the Transferee in executing the shareholders agreement and other related agreements like appropriate non compete agreements and [management contracts] by the Closing date and in any event before the expiry of 10 days after the date of execution hereof, failing which the Transferee has the right, but not the obligation to terminate this Agreement. If the Agreement is terminated by the Transferee then neither party shall have any liability to the other except to the extent as have already arisen.
6.2 The consummation of the transactions contained in this Agreement (the “Closing”) shall take place at the office of the Transferee or at any other place mutually agreed upon by the Parties as soon as possible, but in no event later than the close of banking hours on the Closing Date, after satisfaction of the conditions precedent set forth in Clause 4, or at such other time or place as the Parties may agree.
6.3 On the date hereof and to the extent relevant, on the Closing Date the Transferor shall ensure that:
a. The Representations and Warranties of the Transferor are true and correct.
b. The Transferor delivers a list of not less than 130 Operators, assigned to the Transferee as per the list, with total monthly revenue of 11, 00,000 as contained in Annexure 5.
c. The Transferor establishes that the average collection actually received for the previous two quarters preceding the Closing Date, is not less than 90% per month from the 130 Operators and the same shall continue to be received by the Transferee from the Closing Date.
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7.1.7 – The Transferor represents, agrees and undertakes that he, directly or indirectly, has no other interest in cable operations in the Area, including by way of any investment in any head end, operators. The Transferor confirms and undertakes that upon Closing, the Transferor will be engaged in the Business only through the Transferee and through no other, direct or indirect arrangement, except his primary points that already exist on the closing date.
7.1.8 – The primary points of the Transferor shall always take fee from the head end of the transferee company.
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4. Some of terms of the agreement defined therein are as under:-
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(xii) “Employees” shall mean the persons whose names, designations and compensation details are set out in Annexure (4) being the employees/ consultants/ professionals of Transferor, proposed to be transferred to Transferee, provided they are in the employment of Transferor on the Closing date.
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(xiv) “Existing Client Accounts” shall mean all the client accounts existing and serviced by Transferor as on Closing Date, as well as any accounts in the process of being negotiated for service by Transferor, pursuant to and in connection with the Business carried on by Transferor as more particularly listed in Annexure ___.
(xix) “Liabilities” shall mean liabilities of Transferor whether present or contingent as on the Closing Date, which are expressly agreed to be assumed by the Transferee and more particularly set out in Annexure (7) hereto
(xx) “Operator” shall mean all the existing cable operators i.e. local cable operator and/or multi system operator in the Area, to whom the transferor provides cable TV signals and all details including accounts relating to such subscribers described under Annexure (5)
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(xxiv) “Subscriber: or “Client” shall mean all the existing cable operators in the Area, to whom the transferor provides Cable TV signals and all details including accounts relating to such subscribers described under Annexure (5)
(xxiv) “Subscriber Points” shall mean the point of connection where the subscriber receives input feed/ signal for viewer ship of the cable delivered content, from the Transferor at a place indicated by the Subscribers to the Transferor.
(xxv) “Third Party” shall mean any person or association of persons, whether incorporated or not, who has not signed this Agreement.
5. The parties also entered into a Shareholders Agreement in terms whereof, the Respondents no.2 to 6 became shareholders in the Petitioner No.1 to the extent of 50%, some of the relevant clauses whereof are as under :-
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7.13 Related Party Transactions: Anush Group hereby agrees and undertakes that all agreements and arrangements with any of its respective related parties shall be entered into with the prior written consent of DOPL and on arms length basis and subject to the other provisions of this Agreement. Anush Group may enter into commercial arrangements with the Company, with prior consent of DOPL, for providing their respective assets and infrastructure, including dark fibers, as may be required in the Business, to the Company under separate agreements conveying such right of use. It is agreed by the Parties that both DOPL and Anush Group shall, during the Term, under respective agreements, receive the Signals for transmission through their own cable networks from the Head Ends’ owned and operated by the Company, or nominated by the Company and shall not source the same from any Third Party.
7.14 Role of the Anush Group in conducting the Business: Anush Group shall be responsible for maintaining the relations of the Company with existing cable operators, ensuring timely collection, and also in furthering the growth of the cable operator related business.
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9.2 Anush group, currently runs direct cable operations in area described in Schedules 5. It will be entitled to pay feed charges as described below for the current direct connections.
9.2.1 9 month waiver on payment of feed charges
9.2.2 Rs.15000 pm for the period after the 9th month
9.2.3 This concession will hold only till CAS comes. After that the normal charges shall hold.
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12 NON COMPETE AND NON SOLICITATION
12.1 During the subsistence of this Agreement and a period of Ten (10) years thereafter, Anush Group shall not carry on or engage in directly or indirectly whether through partnership or as a shareholder, joint venture partner, collaborator, consult or agent or through the relatives as defined in Section 2 (41) of the Companies Act, 1956 of the Anush Group or in any other manner whatsoever, whether for profit or otherwise any business, which competes with the whole or any part of the Business and the business of providing internet services either through broadband, leased line, wireless, Digital Cable, conditional access, or any other medium and/or the future business of the Company and/or DOPL including but not limited to :
12.1.1. Investing in, supporting and/or being associated with any endeavour same or similar to the business or the cable Network business or internet and broadband business.
12.1.2 Setting up or operating any head end control room for cable business either by itself, its relatives or through any newly formed association with another company, firm or association or jointly or severally or in concert with any person whether an affiliate or not, or
12.1.3 Taking input feed from any control room other than the control rooms owned by the Company and/or DOPL.
12.2 The Anush Group covenants and agrees that during the subsistence of this Agreement and for a period of Ten (10) years thereafter it will not, directly or indirectly:
12.2.1. Attempt in any manner to solicit from any client/customer, business of the type carried on by the Company and/or DOPL or persuade any person, firm or entity which is a client/customer of the Company and/or DOPL to cease doing business or to reduce the amount of business which any such client/customer has customarily done or might propose doing with the Company and/or DOPL whether or not the relationship between the Company and/or DOPL and such client/ customer was originally established in whole or in part through its efforts ; or
12.2.2 Employ or attempt to employ or assist anyone else to employ any Person who is in the employment of the Company and/or DOPL at the time of the alleged prohibited conduct, or was in the employment of the Company and/or DOPL at any time during the preceding twelve months.
12.3 The Parties acknowledge and agree that the above restrictions are considered reasonable for the legitimate protection of the business and goodwill of the Company and/or DOPL, but in the event that such restriction shall be found to be void, but would be valid if some part thereof was deleted or the scope, period or area of application were reduced, the above restriction shall apply with the deletion of such words or such reduction of scope period or area of application as may required to make the restrictions contained in this clause valid and effective. Notwithstanding the limitation of this provision by any law for the time being in force, Anush Group undertake, at all times to observe and be bound by the spirit of this Clause.
12.4 It is hereby clarified that the Anush group may carry on the business of fixed line telephony so long as DOPL or any of its Affiliates does not commence or acquire a similar business. In the event DOPL and/or any of its Affiliates commence or acquire such a similar business, the Anush Group shall cease to carry out such business and shall migrate or transfer their customers of such business to DOPL
6. In terms of the said Share Holders Agreement, the Respondent No.1 as a multi service operator was to continue to operate in the areas specified in the Vth schedule appended thereto as a cable operator upon obtaining feed from the network of the Petitioner No.1. It was furthermore agreed that for initial 9 months the Respondent No.1 would not be required to pay the subscription fee and thereafter only @ Rs.15, 000/- p.m. till implementation of the Conditional Access System.
7. A Non-Compete Agreement as also Confidentiality and Non-Disclosure Agreement were also executed by and between the Petitioners by Respondents No.1 to 6 on or about 9.9.2007.
8. Indisputably, the Respondent No.1 was to pay the aforementioned sum of Rs.15,000/- p.m. for receiving signals from the network of the Petitioner No.1 for its direct points in the areas mentioned in the Shareholders Agreement on and from 1.7.2008, but no payment has so far been made to the Petitioner.
9. The Petitioner, therefore, on or about 01.04.2009 raised an invoice on the Respondents No.1 to 6 for a sum of Rs.1,48,905/-.
10. The Petitioner No.2 is said to have advanced a sum of Rs.7.5 crores to Petitioner No.1 for expanding its business for which no interest was to be levied. The said amount of loan was to be converted into equity share as per Shareholders Agreement as also the terms of the Articles of Association of the Petitioner No.1. For the said purpose, a meeting of the Board of Directors of Petitioner No.1 was requisitioned on 18.6.2009. It was unanimously resolved that additional 26% share would be allotted to Petitioner No.2.
11. The Petitioners contend that they deployed assets worth Rs.3 crores 62 lakhs with the Respondent No.1 which was being managed by Respondents no.2 to 6. A map showing the exact deployment of assets/ infrastructure/ equipments of the network of the Petitioner was also prepared.
12. The Petitioners furthermore allege that the Respondents no.1 to 6 disconnected the signal of the TV channels supplied by Petitioner No.1 to direct points of theirs in the areas mentioned in the Share Holders Agreement and started transmission of signals of Respondents no.7 and 8; a competing MSO. The Petitioner No.1 communicated its displeasure in regard thereto to the Respondents no.1 to 6. It reminded that its bill for a sum of Rs.1,93,905/- had not been cleared. It also communicated that a sum of Rs.13,18,248/- was due and payable by the Respondents to the Petitioners towards the digital set up boxes supplied to it. The Petitioner No.1 also wrote letters to the Respondents no.7 and 8 herein requesting them not to indulge in illegal acts of supplying signals to the cable operators who had joined them to evade outstanding amounts payable to it.
13. The Petitioners later on came to learn that the Respondent No.2 also issued letters to various broadcasters for the purpose of holding fresh negotiations with them in respect whereof it had no authority whatsoever. According to the Petitioner the said action was taken by the said Respondent with an intent to obstruct/disrupt arrangements with the broadcasters.
14. Having come to learn of the same, the Petitioner No.1 communicated to the Broadcasters that it was in the process of recovering the outstanding dues in the area of Sharda Nagar and apprehended that few of its cable operators with a view to evade outstanding bills may migrate to the rival MSOs operating in that area.
15. The Petitioners, however, received a reply from the Respondent No.7, wherein it was admitted that they had connected a few cable operators in Sharda Nagar but denied that it had been using the network/infrastructure of the Petitioner No.1. In the said letter, the Respondent No.7 further stated that all the operators had given out to it clear declarations that they had settled their all dues with their erstwhile MSO.
16. The Respondents no.1 to 6 reconnected the signals of the Petitioner No.1 to their network on 26.6.2009.
17. This petition was filed praying inter alia for the following reliefs:-
“a) Order directing the Respondent No.1 to 6 to adhere to the terms for transmission of signals under Agreement dated 9.9.2007 and 20.8.2007 and to maintain the supply of signals of the Petitioner No.1 on its network;
b) Order in favour of Petitioner No.1 declaring the action of the Respondent Nos.1 – 6 of disturbing the signals supplied by Petitioner No.1 illegal and contrary to TRAI Regulations;
c) Order directing the Respondent No.1 to 8 from not to indulge in any activity impermissible or detrimental to the network/assets/ equipment/infrastructure of the Petitioner No.1;
c) Order/ decree in favour of the Petitioner and against the Respondents No.1 to 6 for an amount of Rs.1,93,905/- (Rupees One Lac Ninety Three Thousand Nine Hundred and Five only) being the outstanding amount due from the Respondents towards subscription fee as on 31.5.2009 for the cable services received by the Respondents from the Petitioners;
d) Order/ decree in favour of the Petitioner and against the Respondents No.1 to 6 for a sum of Rs.13,18,248/- towards outstanding payment of digital set top boxes provided by Petitioner No.1 to the Respondents;
e) an order awarding pendentelite interest @ 18% on the above mentioned about till the date of payment by the Respondents.
18. In this petition the Petitioners have also prayed for the following interim reliefs:-
a) Directing the Respondent Nos.1 to 6 to not to disrupt or disturb signals supplied by Petitioner No.1 in compliance with the terms of transmission of signals as per the Agreement 09.9.2007 and 20.8.2007.
b) Directing Respondents to comply with the interconnect regulations of TRAI.
c) Pass order restraining Respondent No.7 and 8 to supply signals of its TV channels to Respondent No.1 to 6 and defaulting cable operators of the Petitioner No.1.
19. When the matter relating to grant of interim relief came up for consideration before this Tribunal, by an order dated 30.06.2009 the Respondents no.1 to 6 were restrained from disconnecting the signals of the Petitioner No.1 and other cable operators affiliated to it. It was furthermore directed that it would not join any other multi service operator without clearing the dues of the Petitioner No.1 and without issuing any notice to it as per the regulations.
20. We may notice that by another order dated 21.10.2009, this Tribunal directed the Respondents no.1 to 6 to pay the admitted amount of Rs.1,93,905/-, compliance whereof was intimated to this Tribunal on 8.12.2009.
21. By reason of an order of the said date this Tribunal framed the following issues:-
i) Whether the transmission of signals under agreements dated 9.9.2007 and 20.8.2007 have been discontinued by the Respondent?
ii) Whether Respondents 1-6 had been disturbing the signals supplied by Petitioner No.1?
iii) Whether the Respondent No.1 has been indulging in tempering with equipment and network of the Petitioners?
iv) Whether the Petitioners are entitled to the relief from Respondents 1-6 for payment of a sum of Rs.13,18,248/- towards outstanding dues towards digital Set Top Boxes supplied by the Petitioner No.1?
v) What relief, if any, the Petitioners are entitled to?
22. The Respondents had filed their respective replies.
23. We may, however, place on record some events which took place subsequent to the filing of the petition.
24. According to the Petitioners, a meeting was held between the representatives of the Petitioner No.1 and the Respondent No.2, wherein it was agreed that the Respondents no.1 to 6 would help Petitioner No.1 to recover the outstanding subscription amount from the LCOs and Respondent No.2 would also settle Rs.13 lakhs as outstanding towards the STBs rentals. It was also agreed that Respondent No.2 would help Petitioner No.1 to operate in Sharda Nagar area which was under its control. However, according to the Petitioners the Respondent No.2 refused to sign the said Minutes.
25. A communication was sent to the Respondent No.2 by the Petitioners alleging that it has violated the agreement arrived at by and between the parties and had been acting in connivance with another MSO. It also demanded payments of the outstanding amount due towards STBs.
26. The Respondents No.1 to 6 had collected a sum of Rs.6,20,000/- from various cable operators.
The respondent No. 1 by a letter dated 17.7.2009 stated as under:-
“Sir,
Re: Furnishing of Documents and Information
Ref: Your letter dated 06.7.2009
I refer to the above letter with regard to the outstanding issues between M/s Digital Outsourcing Pvt. Ltd. and the other shareholders of M/s Digital Infotainment Pvt. Ltd. In this regard, I have noted with surprises the contents of your letter and completely deny all the allegations made therein.
I along with the other partners of M/s Anush Satellite Network are quite surprised and shocked to be told that you intend to convert the existing unsecured loan from M/s Digital Outsourcing Pvt. Ltd. (DOPL) given to M/s Digital Infotainment Pvt. Ltd. (DIPL) amounting to Rs.7,51,35,479/- (Rupees Seven Crores Fifty One Lakh Thirty Five Thousand Four Hundred and Seventy Nine only) into equity thus substantially reducing our percentage of shareholding in M/s Digital Outsourcing Pvt. Ltd.
In this regard I would like to note that the management of DIPL has not conducted the business in a transparent manner. Further, it is to be noted that I along with the other shareholders constituting M/s Anush Satellite Network were never aware of the loan obtained from DOPL, the terms and conditions of such loan, the circumstances under which such a loan was obtained and the current status of the loan. Further, you also have failed to provide us the accounts of DIPL thus making it extremely difficult for us to understand the affairs of DIPL. This being so, your hurried attempt to call for an Extra Ordinary General Meeting on July 8, 2009 contrary to the provisions of the Shareholders Agreement, Articles of Association and the Companies Act, 1956 is totally illegal and unacceptable. Your conduct and attitude in running the affairs of DIPL is very alarming and seems to be only motivated with intent to forcible wrest control of DIPL and reduce our shareholding (Anush Satellite Network) to a minority thus contravening the essence and spirit of the Business Transfer Agreement and the Shareholders Agreement. This had led to serious loss of trust and faith in you for which only you are responsible.
I write this letter with intend to understand and seek clarity about the affairs of DIPL in light of the attempts being made to convert the debt of DOPL into equity. I herewith call upon you to furnish the following documents/ information forthwith:
1. Certified copies of documents relating to the debt of DOPL given to DIPL amounting to Rs.7,51,35,479/-.
2. Certified copies of minutes of all the meetings held till date (including Board Meetings and General Meetings).
3. Certified copies of the entire Accounts of DIPL till date.
4. Current financial status of DIPL with an explanatory statement to the same.
5. Certified copies of all the statutory forms filed with the Registrar of Companies, Mumbai with regard to DIPL.
It is to be further noted that pending disclosure of the above information, I along with the other shareholders of M/s Anush Satellite Network strongly object to any attempt on the part of any of the shareholders of DIPL or the Board of Directors of DIPL seeking to convert the debt into equity. Any conversion made in spite of the above objection would not be legally binding on us or DIPL and the same would be void in the eye of law.
I do hope that you will provide us the above documents/ clarification at the earliest so that the issue relating to the conversion of debt into equity could be resolved.
I have collected a sum of Rs.6,20,000 till date from various cable operators. The said money is being held by me as a shareholder in trust for DIPL as I have lost faith in your ability to run and manage the affairs of DIPL. Further, I also hold it unsafe for either of you to continue managing the financial affairs of DIPL. I shall deposit the same with DIPL as and when there is more clarity in the financial affairs of DIPL and the same are vested in safe hands.
I shall await your early response in this letter. “
27. During the pendency of this petition, the Respondents no.1 to 6 again disconnected the signals which were being provided to the network of Petitioner No.1. They were communicated that the interim order passed by this Tribunal, has been violated by a letter dated 28.7.2009. Yet again, it called upon the said Respondents to make payments of the admittedly collected amount of Rs.6,20,000/-. Meetings were held on 18.8.2009 and 19.8.2009, the Minutes whereof were forwarded by the Petitioners to the Respondent No.1 by a letter dated 25.08.2009, stating:-
“….. On 11th August 2009, we have received the communication dated 4th August 2009 from the Registrar of Companies seeking our comments on the communication dated 7th July 2009 sent by you to the Company. The said communication was duly replied by us on 13.08.2009 in which we have brought to the notice of the Registrar of the Companies material facts and issues which were apparently suppressed by you to cause harassment to the Company. We have enclosed the list of communications that are exchanged so as to elucidate true facts and circumstances of the issues existing between the parties.
Soon after the communication was sent to the ROC it came to our knowledge that you turned up at the regional office of the Company at Infantry Road where the headend is situated and from where the company is transmitting/ retransmitting of signals is to the cable operators/ subscribers. You threatened the officials of the Company for dire consequences and damaged the property of the Company by breaking the glass door of the headend and switching off the signals being transmitted/ retransmitted by the Company through head end for 2-3 hours. Your unauthorized free exercise of causing damage to the property of the Company like a bull in a china shop despite being the director of the Company brought disgrace and embarrassment to the Company.
Your act of causing intimidation and annoyance to the officials of the Company, damaging the property of the Company, forcefully entering into the headend by breaking the glass door of the headend and switching off the signals being transmitted by the Company, constitutes the offence of criminal trespass, mischief and criminal intimidation against the Company and its official. Though the Company has initiated appropriate action against your unwarranted and uncalled for action, however as you have regretted for your act and expressed to resolve the issues by mutual consultation and dialogue we have agreed to have at another round of meeting with you.
On 17.08.2009 and 18.08.2009 Mr.Neeraj Bhatia and Mr.Vinit Sharma along with Mr.Arvind Kumar, Mr.Shivashankar and Mr.Shankar Bhatt met you and your mother Mrs. Shakuntala S. at our regional office at Banaglore. Once again we have discussed the issues existing between the parties and agreed on the terms stipulated in Memorandum of agreement. Copy of the Memorandum of Agreement is enclosed herewith. However, despite being agreed on terms of the agreement once again you turned volte-face and avoided executing the same for the reasons best known to you. You have assured Mr.Arvind that you will execute the same for the reasons best known to you. You have assured Mr.Arvind that you will execute the said Memorandum of Agreement on 19.8.2009 however once again you have deceived the Compnay by not keeping your promises and avoided executing the said MOA even on 19.08.2009. We have followed up with you on each of the day till today for the execution of MOA and also for remitting the payment collected from the operators to the Company.
It is noteworthy that admittedly you have collected more than a sum of Rs.16 lacs from the Local Cable Operators and has not deposited the same with the Company. Your act constitute an offence of cheating, misappropriation of fund and criminal breach of trust for which Compnay reserves its right to initiate appropriate action against you. Further, it is also admitted position that you owe an outstanding of Rs.1,93,905/- towards the subscription charges to your direct/ primary points/ subscribers. You are called upon to make the payment of the aforesaid amount immediately upon the receipt of this communication.………."
28. The procedure in regard to digital set top boxes was streamlined as below:
“a The accounts for STB rentals will be settled which currently shows an outstanding of about Rs.13 lacs from Mr.Suresh Indee.
b. LCO identification accounts to be created with proper details for Shardanagar operators.
c. Details of existing STB will be obtained operator by operator. The same will be updated in the SMS and billing system.
d. Future STBs shall be issued only upon receipt of payments from LCOs.”
29. The relevant portions of The Memorandum of Agreement dated 19.8.2009 which was forwarded with the said letter read as under:-
“1 The Company has agreed to the proposal of Anush of making the payment of Rs.7.5 lacs per month for the first 3 months towards the subscription charges for the area of Sharda Nagar from where it is retransmitting the signals of Company (DIPL) to the existing operators of Sharda Nagar. After 3 months this will stand revised to Rs. 8 lacs per month by mutual consent.
2 Mr.Suresh (Anush) shall provide the details of operators and their negotiated subscriber base against which the Company shall raise the invoices of the aforesaid amount. This will be a manner that the total subscription billing from the existing operators will stand adjusted as per the billing in point 1 above (Rs.7.5 lacs for 3 months and Rs.8 lacs thereafter by mutual consent).
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6 The Company has agreed to provide minimum 500 STBs to Anus per month. This is subject to payment of STB charges/ rentals being received. Further the details of old issued STB (operator wise) and submission of duly filled CRF with the Company).
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9 Mr.Suresh and the Company shall ensure that the STB’s outstanding of the operators of Shardangar Area shall be cleared and deposited with the Compnay with the stipulated period of 30 days. Mr.Suresh has represented that he has given 650 STBs free to operators. The company acknowledges the same and will provide credit for the same as part of the overall settlement. Mr.Suresh has agreed to provide details of the boxes and the operators to whom these are issued. This is also a part of the overall settlement and the terms of this agreement.
10 Mr.Suresh has agreed to reconcile the list of operators and their negotiated subscriber base with the Company and shall provide the details to the Company. This reconciliation shall be done jointly. This shall result in changes in Billing and outstanding. The final outstanding will also be cleared after that. It is agreed that the reconciliation will happen in 30 days and the collection from the operators shall be paid in 90 days. This will happen in no more than 2 months.
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30. The Petitioner No.1 also lodged a police complaint against the said Respondents for misappropriation of sum of Rs.6,20,000/-. It again called upon them to pay the outstanding amount by letters dated 18.8.2009, 22.9.2009, 23.11.2009 and 5.1.2010.
31. According to the Petitioners, the Respondents no.1 to 6 have been colluding with the Respondents no.7 and 8 whereby and whereunder their assets/ infrastructures were being utilized by them.
32. In the aforementioned factual matrix, we may notice our order dated 28.1.2010. Upon noticing the prayers made by the Petitioner and keeping in view the subsequent events, it was directed as under:-
……..In the prayer as the word (c) has been typed twice, we will treat second ( c) as C1.
So far as prayer (a) is concerned, learned counsel appearing on behalf of the Respondent No. 1 to 6 gives an undertaking before us that his client will adhere to by the terms of the agreements dated 09.09.2007 and 20.08.2007 and maintain the supply of signals of the Petitioner No. 1 on its network. However, the said undertaking shall be subject to any other or further cause of action which may arise in future. In view of the said undertaking of the Respondent to adhere to the terms of agreement in accordance with law.
So far as prayer (b) is concerned, this Tribunal has passed an interim order in favour of the Petitioner on 30.06.2009 which has been accepted by the learned counsel for the Respondent No. 1 to 6, and thus, it is made absolute.
Prayer (c) still survives for our consideration.
So far as prayer C1 is concerned, it is accepted at the Bar that Respondent No. 1 to 6 has paid the amount referred to therein to the Petitioner.
Coming to prayer (d), the learned counsel appearing for Respondent No. 1 to 6 submits that this Tribunal has no jurisdiction to pass any order in relation to supply of digital set top boxes by Petitioner No. 1 to the Respondents. As digital set top boxes are supplied by MSO to a cable operator for the purpose of transmission of signals, in our opinion, the said contention has no legal basis. In that view of the matter, such a dispute is amenable to the jurisdiction of this Tribunal in terms of Section 14 of the Telecom Regulatory Authority of India Act, 1997.
33. This Tribunal furthermore took into consideration the letter dated 17.7.2009 issued by the Petitioner to opine:-
…….Learned counsel appearing on behalf of Respondent No. 7 and 8 submits that no relief has been claimed against his clients.
Mr. Bhatia states that in the petition allegations of collusion by and between the Respondent No. 1 to 6 on the one hand, and the Respondent No. 7 and 8, on the other, have been made and therefore, the Respondent No. 7-8 are also necessary parties. This aspect of the matter is also required to be gone into by this Tribunal at the time of hearing.
We, therefore, confine ourselves to the aforementioned questions and would pass the judgment and decree in respect of the prayers as noticed by us, hereinbefore.
Mr. Vineet Chandra Sharma has affirmed an affidavit in support of the Petitioner’s case as a part of his evidence. The said witness is not present for cross-examination. Put up the matter for cross-examination of the said witness on 25.02.2010.
Within the said period Respondent must also file evidence of its witnesses by way of affidavits. The indulgence on part of this Tribunal to the Petitioner is being given subject to payment of Rs. 5000/- as costs.
The parties adduced their respective oral evidences before this Tribunal on later dates.
34. Whereas the Petitioners examined Mr.Vineet Chandra Sharma, the Respondents no.1 to 6 examined Mr.Suresh I.
35. The Respondents, we may notice, in its reply referred to various clauses of the Business Transfer Agreement as also the Share Holders Agreement, and thus, relied upon the same.
36. It also did not raise any contention either in its reply or the affidavit of its witnesses that the said Business Transfer Agreement was inadmissible in evidence in the terms of the provision of Karnataka Stamp Act or otherwise.
37. We have mentioned this fact specifically because we may notice that on 23.3.2010, Mr.Vineet Chandra Sharma was examined and discharged. However, cross-examination of Mr.Suresh I. was postponed. The witness examined on behalf of the Respondents no.7 and 8 was cross examined and discharged on 20.4.2010.
38. An official translator was appointed for examination of Mr.Suresh I. For one reason or the other the said witness was not cross-examined for a long time. We may, however, notice that Mr.Vineet Chandra Sharma was cross-examined on material points. The cross examination of Mr.Sharma on material points although took place on 25.2.2010, having regard to the fact the copies of the CDs and maps which were filed for the purpose of alleged violation of the order of this Tribunal by the Respondents had not been supplied, further cross-examination of the said witness was postponed.
39. Learned counsel for the Respondents no.7 and 8, however, raised a question on the said date that adequate stamp duty had not been paid on the Business Transfer Agreement. In our order of the said date, it was observed:-
…..Learned counsel for the Respondent states that having regard to the provisions of Karnataka Stamp Act, 1957, adequate stamp duty has not been affixed on the Business Transaction Agreement.
It is stated by the learned counsel for the Respondent that in terms of Article 10 Schedule II of Karnataka Stamp Act, the Business Transaction Agreement was required to be stamped @ 7.5% of the amount of consideration mentioned therein and as the document (marked `X’ for identification”, is not adequately stamped, the same would be impounded. Mr.Bhatia states that he will make his submissions on the next date…….
40. On the aforementioned factual backdrop, we may notice the submissions of the learned counsel for the parties.
Mr.Kathpalia, learned counsel appearing on behalf of the Petitioner urged:-
(i) Having regard to the contradictory stand taken by the Respondents no.1 to 6 so far as the supply of set top boxes is concerned, there cannot be any doubt or dispute that the Petitioners have proved their case against Respondents herein.
(ii) In view of the conduct of the Respondents in trying to hijack the entire business of the Petitioners, at all stages the endeavour on the part of Respondents no.1 to 6 had been to deprive the lawful dues of the Petitioners as would be evident from the fact that even a huge amount collected by them towards the subscription charges from the Link Operators deliberately and intentionally have not been deposited in the accounts of the company.
(iii) The minutes of the meeting and/or memorandum of settlement filed by the Petitioner would categorically show that the Respondents no.1 to 6 at every stage had gone back from their promises.
(iv) The minutes of the meeting as also the memorandum of settlement must be construed in their entirety and not in piecemeal.
(v) The Respondents even disregarded the order of this Tribunal, insofar as it continued to take supply of signals from Respondents no.7 and 8 on the analogue mode while supplying signals to its customers on a digital mode from the network of the Petitioner.
(vi) There was absolutely no reason for the Respondent No.2 as to why it sent a letter to various broadcasters on or about 26.3.2009 stating that it was the only person who had authority to enter into an agreement with them, although, even at that point of time no dispute had arisen.
41. Mr.Sangwan, learned counsel appearing on behalf of Respondents no.1 to 6, on the other hand, submitted:-
(i) The only plea which survives for consideration of this Tribunal is the prayer `c’ of the petition. Sofar as prayer `d’ is concerned, this Tribunal has no jurisdiction in relation thereto as the Respondent could withhold any amount as a shareholder of Petitioner No.1 company.
(ii) The Petitioners are not entitled to any payment towards set top boxes far less the sum of Rs.13,18,248/- as the same were distributed to the link operator by way of promotional offers.
(iii) The charges towards STBs was by way of rentals and not by way of the price thereof, were not payable and in any event the quantum of the amount being seriously disputed.
(iv) In the memorandum of agreement dated 19.8.2009. The Petitioners having accepted that 650 set top boxes had been distributed free of cost to Respondents no.2 to 6; nothing survives in the petition.
42. Before adverting to the issues which arise for our consideration, we may notice the relevant pleadings of the parties and in particular the statements made in paragraph 11 of the petition and paragraph 17 of the reply filed by Respondents no.1 to 6.
Para 11 of the petition reads as under:-
It is respectfully submitted that thereafter on 26.06.2009 Respondent No.1-6 have once again reconnected the signals of the Petitioner No.1 to their network. It is respectfully submitted that as on date Respondent No.2-6 is liable to pay a sum of Rs.1,93,905/- towards subscription fee for the supply of signals by the Petitioner No.1 to Respondent No.2 – 6 under the share holders’ agreement and further sum of Rs.13,18,248/- towards digital set top boxes provided by the Petitioner no.1 to Respondent No.2 – 6. Copies of invoices raised by the Petitioner No.1 towards subscription fee and copy of statement of account towards payments to be received by the Petitioner No.1 towards digital set top boxes are annexed herewith as ANNEXURE P-11 (COLLY). It is submitted that Respondent No.2 – 6 were also to help the Petitioner No.1 to collect the subscription fee from the cable operators as per the terms of Shareholder Agreement and have defaulted in making such payment to the Petitioner No.1 collected from Cable Operators. However, since such dispute would not be a dispute pertaining to transmission and retransmission of signals, the Petitioners crave leave of this Hon’ble Tribunal to agitate the same before the appropriate forum.
43. The said statements have been traversed by the Respondents no.1 to 6 in paragraph 17 of their reply.
“… 17 – It is admitted by the Petitioners that the answering Respondents have reconnected the signals of Petitioner No.1 to the network of the answering Respondents. So far as payment of Rs.1,93,905/- towards subscription fee is concerned, the answering Respondents are willing to pay the same. However, so far as Rs.13,18,248/- towards digital set top boxes are concerned, it is submitted that the said digital set top boxes were supplied by the Petitioners only as an promotional offer to promote the business of Petitioner No.1 The said set top boxes have been further distributed to the LCOs of Petitioner No.1 who were liable to pay for the same. The answering Respondents cannot be burdened for having merely assisting Petitioner No.1 in distributing the set top boxes…..”
44. A bare perusal of the aforementioned statements made in the reply of the Respondents no.1 to 6 would clearly go to show that the allegations contained in paragraph 11 of the petition, sofar as the same relate to the statement of accounts maintained by the Petitioner are concerned, has not been specifically denied or disputed.
45. The relationship of parties is not in dispute. Although, admissibility of the Business Transfer Agreement dated 20.8.2007, is in question but we intend to deal with the said question independently. The contents of the Business terms for Agreement and the Shareholder Agreement dated 9.9.2007 are not in dispute. In fact, in their reply the Respondents no.1 to 6 themselves have relied upon clause 7.1.7 of the Business Transfer Agreement as also clause 9.2 of the Shareholders Agreement.
46. Even in his affidavit the witness of Respondents no.1 to 6 Sh.Suresh I. referred thereto. The relationship between the parties being not in dispute, the question which would arise for consideration is as to whether the action of the Respondents no1. to 6 vis-Ã -vis the Petitioners can be considered by us for the purpose of answering the issues arising between the parties.
47. The fact remains that in terms of the aforementioned agreements dated 20.8.2007 and 9.9.2007, the Respondent No.1 continued to act as a Local Cable Operator of Petitioner No.1; it having taken over the network of the Respondents no.2 to 6. It is also not in doubt or dispute that Respondents no.2 to 6 were to manage the affairs of the said network for all intent and purpose keeping in view the shareholder agreement, being 50% shareholders of the company. They, in the said capacity were to act as Trustees. If they were Trustees, it would be for them to show that they acted bona fide and for the benefit of the company and not for their individual gains.
48. The area of operation of Petitioner No.1 was Sharda Nagar in the town in Bangaluru. The Respondent No.1 was to retransmit the signals received by it from the network of the Petitioner No.1 to a large number of its Link Operators. It had also direct connectivities. The Respondent No.1 has not disclosed the number of the LCOs to whom signals were being supplied and how many direct connectivities it had.
49. It is also not in dispute that it was obligated to collect the subscription fees from the LCOs and pay the due subscription fees so realized to the Petitioner No.1 as also in respect of supply of signals to its own subscribers subject to the relevant clauses of the Share Holders Agreement, as noticed hereto before. It is also not in dispute that the Respondent No.1 did not pay the subscription fee in terms of the Shareholders Agreement. It even failed and/or neglected to pay the admitted dues of the Petitioners. As noticed hereinbefore, this Tribunal had to pass a decree on admission which has been complied with.
50. It is also not disputed that for the purpose of transmission of signals through digital mode, a large number of set top boxes have been distributed either through the LCOs or to the direct subscribers of the Respondent No.1.
51. It also stands admitted which has been noticed hereinbefore by us that the Respondent No.1 was to pay a nominal sum for the initial period as it was expected that addressable system would be introduced in the meanwhile. However as it now transpires that for one reason or the other the digital mode of supply of signals could not achieved by the parties hereto. The fact that the Respondent No.2 had made communications to various broadcasters by letter dated 23.6.2009 is not disputed.
52. He failed to explain his position as to how he raised a contention with the broadcasters that he had the sole authority to enter into negotiations with them on behalf of the Petitioner No.1, said to be on legal advice.
53. It even stands proved that the Respondent No.7 in or about the month of June, 2009 had contacted few local cable operators who had earlier been receiving supply of signals from the Petitioner No.1. It has also not been denied or disputed that on or about 22.6.2009, supply of signals of the TV channels by Petitioner No.1 was disconnected and the same was reconnected again only on 26.6.2009.
54. With a view to iron out the disputes and differences between the parties and to see that the business remains an on going one, meetings took place on several occasions. The Respondents no.2 to 6 and/or their authorized representative also participated in the meeting of the Board of Directors of the Petitioner No.1. Several issues were raised. They were deliberated upon and ultimately a settlement was arrived at. In the minutes of meeting dated 2.7.2009, it was agreed that the resolution of the Board meeting dated 18.6.2009 shall be implemented.
55. The resolutions adopted in the said Board Meeting have been quoted in the said minutes of meeting also. Respondent No.2 made themselves liable to reconcile the accounts between the Petitioner No.1 and the Link Operators not only towards the feed charges but also towards the price/ rental of the Set Top Boxes. In sub-para `C’ of paragraph 2 of the minutes of the meeting, it was accepted that a sum of about Rs.90 lakhs was due towards the subscription amount and a sum of Rs.13 lakhs towards the STBs.
56. The procedure as regards accounting and/or future dealings sofar the digital set top boxes are concerned was also streamlined.
57. Several other issues were discussed with which we are not concerned for the time being.
58. Strong reliance has been placed by Mr.Sangwan on the Memorandum of Agreement dated 19.8.2009. Therein a large number of persons participated. The meeting was held on both 18.8.2009 and 19.8.2009. It has not been disputed that Mr.Suresh I. represented the Respondent No.1.
59. We have referred to the aforementioned paragraphs of Memorandum of Agreement as the same is binding on the parties.
60. Mr.Sangwan placed strong reliance on paragraph 9 of the said memorandum to contend that the representation of Mr.Suresh I. that he had given 650 STBs free to the Broadcasters having been acknowledged, the Petitioners cannot deny to give due credit therefor and in that view of the matter the price of the Set Top Boxes being about Rs.3000/- per piece, no amount can be held to be owing and due to the Petitioners.
61. The Respondents did not raise such a plea in the reply. Mr.Suresh I. in his affidavit also did not raise the said plea. It was urged only at the time of hearing.
62. What would be the effect of the statements made in paragraph 9 of the said minutes of said memorandum of agreement, therefore, is in question.
63. Before, however, we resort to the interpretation of several clauses of the Minutes of Meeting, we may notice that prior thereto, the Respondents No.1 to 6 had not raised any such plea. In fact, by reason of the said Minutes of Meeting, which is binding on the parties, it would be evident that the Respondent No.2 made himself bound to reconcile the accounts not only in respect of the subscription fee but also the STBs.
64. Apart from the fact that the statement of accounts filed by the Petitioners are not denied and disputed, even in the said minutes of meeting was acknowledged that a sum of Rs.13 lakhs had been owing and due to the Petitioners from the Respondents no.1 to 6 towards STBs. Apart from the fact and as it appears from the admissions made by the said Mr.Suresh I. himself, evidently the Respondents no.1 to 6 were to reconcile the accounts in regard to the supply of STBs made to the Local Cable Operators as also to its own subscribers. It was to be placed before the company with suitable explanation and supporting documents for the purpose of reconciliation. The Respondents admitted that it did not comply with the same. Even before us, the supporting documents, namely as to how many STBs, the Respondents had received and how many of them were distributed to the LCOs and how many of them were supplied to their own subscribers have not been disclosed.
The Respondent No.1 is a partnership firm. There cannot be any doubt or dispute that it must be maintaining its books of accounts. There cannot furthermore be any doubt or dispute that for the purpose of distribution of the STBs to the LCOs, be it by way of promotional offer or otherwise, it must have obtained due receipts from the recipients . It must have also accounts as to how many STBs were distributed to their own subscribers. The Respondents for reasons best known to them did not produce any of these documents whatsoever. No books of accounts have been filed. No explanation has been offered in regard thereto. No document in support of their own case has been produced before us. An adverse inference, therefore, must be drawn against them.
65. In the aforementioned backdrop of the events, we may also observe that as the parties have met for two days, serious discussions must have been taken place and an overall agreement was arrived at. The Respondents made themselves liable to pay a sum of Rs.7.5 lakhs p.m. for the first 3 months and then Rs.8 lakhs, of course, by mutual consent. It has not been denied or disputed that no payment has been made pursuant thereto or in furtherance thereof. For the purpose of keeping the business an on going concern, the Petitioners further agreed to supply minimum 500 STBs to the Respondent No.1 per month. Such supply was subject to STBs charges/ rental being received. Indisputably, the details of old issued STBs (operator wise and submission of duly filled CRF with the company were to be provided) have not been provided.
66. In the aforementioned backdrop of events, paragraph 9 of the said Memorandum of Understanding must be construed. A bare perusal thereof would clearly go to show that a representation was made by Mr.Suresh I. that 650 STBs were given to the operators. It will bear repetition to state that such a contention has been raised by it for the first time. Acknowledgement on the part of the company was not of any fact in relation whereto the representation had been made; what was acknowledged was the representation itself which would be evident from the words “the same”. While acknowledging the said representation, the Petitioner No.1 had agreed to provide credit in respect of 650 STBs but giving of such credit was by way of a part of an overall settlement. It was also subject to furnishing of the details of the boxes and the operators to whom the same had been issued. Again the same was as a part of overall settlement as also subject to compliance of the other terms of the agreement.
67. It is, therefore, not correct to contend that for all intent and purpose, the Petitioner No.1 had agreed to take into account the price of 650 STBs duly credited from its account. Either the minutes of meeting and the memorandum of settlement had been acted upon or they were not. If they have not been acted upon, no party can rely on a part of it which is favourable to it and deny and dispute the rest.
68. A settlement being a contract between the parties must be given its full effect. The terms of the contract, when the settlement is an overall one, must be given effect to in their entirety. If giving benefit to one part of the settlement is subject to the compliance of the other parts, unless the conditions precedent therefor are satisfied, no case can be said to have been made out for implementing a part thereof. The words “subject to”, in our opinion, assume significance. It provides for a condition precedent. The intention of the parties would also become apparent from paragraph 10 of the said memorandum of settlement. The list of operators as also of the Respondent No.1, subscribers was to be given to the company, was undertaken by Mr.Suresh I., so as to enable the ‘Company’ to effect changes in billing consequent recovery of the outstanding amounts. Reconciliation was to take place in 30 days and collections made from the operators were to be paid in 90 days.
69. We have also noticed heretobefore that although collections have been made by the Respondents, they withheld the payment on the ground that they are shareholders of the company.
70. We cannot subscribe to the said view. No shareholder far less a Director subject to his right of lien, which may be a part of contract, cannot retain the amount of the company which is a separate juristic person.
71. It has not been shown by the Respondents no.2 to 6 that they had any lien over the amount in question which they had collected for and on behalf of the Petitioner No.1. In fact the act of withholding of the said amount was contrary to their own representation.
72. The contention of Mr.Sangwan that the Petitioners had been claiming rentals for the STBs and not the price, therefore, in our opinion, become wholly immaterial. It may be noticed that in Clause 6 of the Memorandum of Understanding, the STBs charges/rentals have been used interchangeably. Be it for the price of the STBs or towards rentals, the parties agreed that a sum of Rs.13 lakhs was owing and due from the Respondents no.2 to 6 to the Petitioners.
73. We may also notice that Mr.Vineet Chandra Sharma, PW-1 in his cross-examination stated as under:-
Q: What is the basis of your claim for an amount of 1318248/- towards dues of set top digital boxes ?
A: The details of the set top boxes has been furnished.
Vol – It has also been communicated through various letters.
It is correct that the set top boxes have been supplied to the Respondent for enhancing the business of the Petitioner.
74. It is also relevant to notice that the statements made in his cross-examination by Mr.Suresh I. in this regard, which is to the following effect:-
“xxxx
Ques: After June, 2009 have you made any subscription fee payment from your primary points?
Ans: Except for the payment directed by the court, no other payments have been made by me.
Ques; How may primary points do you have?
Ans; 5,000 to 6,000.
Ques: How many STBs are installed in primary points?
Ans: 1000 to 1500.
Ques: Did you install digital boxes after June, 2009?
Ans: No.
Ques: Have you supplied any STBs to link operators?
Ans; No
Ques: Have you supplied any STBs to link operators before June, 2009?
Ans: The Company would supply STBs which I would install with link operators.
I have not installed any STB with any link operators from the last one-and-a-half year.
The STBs were installed at link operators who were not receiving signals from my control room.
Ques; Have you paid the Petitioner for the STBs installed by you?
Ans: I have only paid for the STBs installed at my primary points. The link operators were to pay directly to the Petitioner.
Ques: Was it not your responsibility under the agreement to collect from link operators?
Ans: Yes, it was under the agreement but those persons who have been taking direct connections from the Petitioner used to pay directly to Petitioner.
Ques: The STBs which were installed by you were not supplied to the link operators through you?
Ans: No.
Ques: If the STBs were supplied directly to the link operators by the Petitioner ,where was the need for you to install?
Ans: My technical team used to go for installation of STBs alongwith the Petitioner’s employees and the link operators.
Volunteers: I established a Hub at Sharda Nagar.
Ques; If the STBs were installed by your technical team you would have the addresses of the customers where the STBs were installed?
Ans: I do not have the addresses. As the company would have the addresses.
Attention of the witness is drawn towards para15 of your affidavit at page 416.
Ques: What is the promotional scheme referred in your affidavit?
Ans: Initially 100 STBs to each operators were distributed free by the Petitioner. These were distributed directly.
Ques: If they were distributed directly, how do you know that the distribution took place?
Ans: I know because the operators were mine and the same were distributed 5 to 6 months after the BTA.
I have not filed any Statement of Accounts.
Attention of the witness is drawn towards para 8 of your affidavit at page 417.
Ques: Have you seen the statement of accounts filed by the Petitioner?
Ans: No.
It is incorrect to state that I was liable to make payment for the STBs supplied to link operators.
It is incorrect that STBs were supplied to link operators through me.
It is incorrect that I have collected money for STBs from link operators.
It is incorrect to state that I do not have 50 per cent shares in the Petitioners company.
xxxx”
75. Analysis of the aforementioned statements of Mr.Suresh I. points out that he has taken the following stands :-
(i) The STBs were supplied by way of promotional measure;
(ii) The LCOs were liable to pay therefor directly to the Petitioner;
(iii) No STB was supplied to the operators through the Respondent No.1;
(iv) He only provided technical assistance for installation of STBs;
(v) He even does not have the addresses of the Local Cable Operators or the subscribers where the STBs have been installed;
(vi) The promotional scheme was to distribute 100 STBs to each operator.
(vii) He has not collected money for STBs from the Link Operators.
76. Each of the aforementioned contentions, in our opinion, are inconsistent and/or self contradictory.
77. We may, in this connection, observe :-
(i) If the STBs were distributed by way of promotional offer, the question of receiving any payment therefor did not arise and, thus, there was no occasion for the Respondent to admit any dues on that account in the meetings.
(ii) The statement of accounts would show that payments have been made by the Respondent No.1 to the Petitioners.
(iii) If 100 STBs only were to be given to the LCOs by way of a promotional offer, even the Respondent No.1 would be entitled only to 100 STBs.
(iv) It is accepted that out of 5000 to 6000 primary points, the Respondent No.1 had supplied at least 1000-1500 STBs.
(v) It even had not made any payment, on its own showing in relation thereto. Indisputably the management of business of Petitioner No.1 was in the hands of Respondents no.2 to 6.
78. Contrary to the assurances given in the Minutes of Meeting, no reconciliation of accounts including STBs had been done. A new case has been made out that the company, namely, the was to supply STBs to the subscribers directly to the LCOs, which the Respondent No.2 were only to install, only for the last 1-1/2 years since the dispute arose, no such STBs have been installed by him.
79. If the STBs had been installed at the premises of the link operators who had not been receiving signals from his Control Room as contended by the Respondent No.2, who else had been receiving the signals from the Control Room of the Petitioner No.1 which was being managed by Respondents no.2 to 6, has not been disclosed.
80. The responsibility to collect the dues from the link operators was not seriously denied or disputed by the Respondents. But it was alleged that those who had been taking direct connections from the Petitioner used to pay directly to it. How the same was possible in view of the agreement between the parties, has not been explained.
81. Even the addresses of the subscribers, according to the said witness are not known although he had agreed to supply the same.
82. He despite acknowledging the fact that some amount was due to the Petitioner No.1 from the Respondents no.1 to 6; according to the said witness he even has not seen the accounts, which can not be believed. At least the statement of accounts had been annexed with the petition and, thus, there is absolutely no reason as to why he did not check the same and question the authenticity thereof in its reply.
83. In any event, having regard to the fact that the Respondent No.1 had made payments to the Petitioner No.1, it is but natural that when the statement of accounts has been produced in a legal proceeding, any prudent person would verify as to whether all payments made by it have been accounted for therein or not.
84. We, therefore, have no doubt in our mind that the aforementioned Mr.Suresh I. had deposed falsely and no part of his statement can be relied upon having regard to the materials brought on record. We, therefore, are of the opinion that this petition must be allowed.
The Stamp Act issue
85. The Petitioners filed the affidavit of Mr.Vineet Chandra Sharma on 19.1.2010. Mr.Suresh I. filed his affidavit on 3.3.2010. Affidavit of one Mr.Kalish, the witness examined on behalf of Respondents no.7 to 8 was filed on 3.3.2010.
86. Mr.Vineet Chandra Sharma was cross-examined on 25.2.2010. No question was put to him in regard to in-admissibility of the Business Transfer Agreement. However, only at the end of the day a contention was raised that the adequate stamp duty on the Business Transaction Agreement being 7.5% of the amount of consideration mentioned therein in terms of Article 10 of the Schedule of Part II of the First Schedule of the Karnataka Stamp Act (wrongly recorded as Schedule II), having not been paid the same was not admissible in evidence.
87. No case has been found to have been proved by Respondents no.7 and 8 as would appear from our order dated 4.10.2010.
88. Even prior thereto on the statement made by Mr.Vineet Chandra Sharma in his cross-examination that he has no grievance against the Respondent No.8, the petition was dismissed as against it but again on an application filed by the Petitioners, the case against it was restored. The matter was heard on 4.10.2010. Learned counsel appearing on behalf of the Petitioners concluded his arguments. When certain questions were put to Mr.Sangwan, learned counsel made an offer that the accounts should be reconciled the liability of the said respondent, to the said effect, them, was not denied. On that ground the matter was adjourned. However, it was stated that no reconciliation of the accounts had taken place.
89. Mr.Sangwan only in his arguments made on 27.10.2010, raised the contention of admissibility of the Business Transfer Agreement. Mr.Sangwan, however, did not even produce a copy of the Karnataka Stamp Act or the Schedule appended thereto. He, very fairly stated that such a contention had been raised by the counsel appearing for Respondents no.7 to 8.
90. What would be the effect is the question. Despite the fact that the Business Transfer Agreement was proved by way of an affidavit, having regard to the fact that no contention was raised by the learned counsel for Respondents no.7 to 8, subject to the final outcome of our decision we marked the same as `X’ for identification, although, in the affidavit it was already marked as an exhibit.
91. Having regard to the provisions contained in Sections 35 and 36 of the Indian Stamp Act, there cannot be any doubt or dispute that impounding of a document and consequent finding that a document is inadmissible has a serious consequence. Thus, if no objection is taken with regard to the admissibility of a document and if it is marked an exhibit, admissibility thereof cannot be objected to at a later stage. Respondents no.1 to 6 even did not raise any question with regard thereto. It accepted its admissibility. It relied on its contents. In fact, it itself, as indicated heretobefore relied on certain clauses of the Business Transfer Agreement as also the Shareholders Agreement. Furthermore, a distinction must be needed between a transfer and agreement to transfer. The business transfer agreement by itself does not clothe anybody from receiving any benefit from the same unless some other conditions are fulfilled only on compliance of the closing obligations as contained in clause 6.1. The transaction was to be completed await with retrospective effect.
Transfer of property movable or immovable is sine quo non to attract the provision of the said Act, therefore, in that view of the matter, the transfer of property should be a complete transfer and not conditional transfer.
We, therefore, are of the opinion that it may not be possible for this Tribunal to ignore the Business Transfer Agreement as inadmissible in evidence.
Even otherwise, the petitioner has been allowed in past on admission of the Respondent Nos.1 to 6 based on the transactions which took place between the parties. The said respondents having accepted their liabilities, in our opinion, cannot be permitted to deny their other liabilities arising out of the same transaction.
92. We may, however, also proceed on the assumption that the Business Transfer Agreement is inadmissible in evidence.
93. The parties agreed that the transactions had been taken place pursuant to the Shareholders Agreement. The allegations contained in the petition that the Respondents no.2 to 6 were managing the affairs of the business of Petitioner No.1 and Respondent No.1 was acting as a Local Cable Operator or had been taking supply of signals of the channels from its network of Petitioner No.1 are not in dispute. Transactions between the parties admittedly took place. The nature of the transactions is also not in dispute. At this, the Respondent cannot be heard to say that it had no liability. Furthermore, as indicated heretobefore, the parties had entered into two agreements.
94. These agreements between the parties and the settlement of their disputes which related to the transactions of business which had been carried out by and between the parties is admissible in evidence. The liability of the parties can be culled out from the said agreements. As the parties are bound thereby as also in view of the stand taken before this Tribunal, we are of the opinion that a decree can be passed in favour of the Petitioners and against the Respondents on the basis thereof and irrespective of the terms and conditions of the said Business Transfer Agreement. We, therefore, are of the opinion that only because adequate stamp duties have not have been paid, the same would not come in our way to pass an order in favour of the Petitioners.
95. We also find force in the submissions of Mr.Kathpalia that the conduct of the Respondents to approach the broadcasters directly inter alia on a wrong premise that the Respondent No.3 had the sole authority to represent the Petitioner No.1 was not only wholly incorrect but also had been so done with a view to hijack the business of Petitioner No.1.
96. We, therefore, direct :-
(i) the interim order passed in favour of the Petitioners and against the Respondents no.1 to 6 dated 30.6.2009 should be made absolute.
(ii) The Petitioners are entitled to a decree for a sum of Rs.13,18,248/- towards the price of set top boxes;
(iii) The Respondents no.1 to 6 having realized a sum of Rs.6,23,000/, is bound to pay the same to the Petitioners;
(iv) The Respondents No. 1 to 6 would pay interest on the aforementioned sum @ 12% per annum from the day same fell due till the filing of the petition and pendete lite and future interest @ 9% per annum.
(v) The Petitioners may enforce their other rights before an appropriate forum.
The Petitioners have filed an application under Section 20 of the TRAI Act for violation of the order of this Tribunal dated 30.6.2009. We find that a prima facie case has been made out. We, therefore, direct that notice be issued on the said Miscellaneous Applications. Reply thereto be filed by the Respondents within two weeks. Rejoinder thereto be filed within two weeks thereafter;
We furthermore are of the opinion that keeping in view the fact that we have found the deposition of Mr.Suresh I. to be false, proceedings under Section 340 Cr.P.C. be directed to be initiated against him.
We direct the Registrar of this Tribunal to initiate such a proceedings and serve a notice upon Mr.Suresh I. as to why he should not be prosecuted for deposing falsely before this Tribunal for commission of an offence under Section 195 of the Indian Penal Code.
97. The Registrar is directed to take appropriate steps including filing of a complaint before the concerned Court, in the event, it is ultimately found that a prima facie case, therefor, has been made out.
98. This petition is allowed with the aforementioned directions. Keeping in view the conduct of the Respondents, the Petitioners are entitled to exemplary costs. Apart from the expenses which have been incurred by the Petitioners, the Respondents are directed to pay a sum of Rs.2 lakhs to the Petitioners by way of the Advocate’s fee.