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Company Law – Winding up of a company – Fraud as a ground for winding up – Distinguishing features between Companies Act, 1956 and Companies Act, 2013, with regard to question of availability of fraud as a ground for winding up of a company – Discussed – Held: The main departure of the Companies Act, 2013 from the statutory regime of the Companies Act, 1956, is the specific inclusion of fraud, directly as one of the circumstances in which a company could be wound up – s. 271 of the 2013 Act lists out the circumstances in which a company may be wound up – Fraud has now directly become (under the 2013 regime), one of the circumstances in which a company could be wound up, though it also continues to be a ground indirectly, u/s 224(2) r/w section 213 [as it was under Section 439(1) (f) r/w sections 243 and 237(b) of the 1956 Act] – Companies Act, 2013 – s. 271 – Companies Act, 1956.Company Law – Winding up of a company – Fraud as a ground for winding up – Petition u/s. 271(c) of the Companies Act, 2013 – Advertisement of the company petition – Breach of – On facts, petition for winding up was never advertised nor even ordered to be advertised, either upon admission of the petition or anytime thereafter – Contention of appellants that this vitiated the whole proceedings – Held: Sub-sections (1) and (2) of s. 468 of the 2013 Act empower the Central Government to make Rules providing for all matters relating to winding up of companies – In exercise of the powers so conferred, the Companies (Winding up) Rules, 2020 were issued – Since requirement to advertise a petition for winding up is stipulated in rr. 5 and 7 of the Companies (Winding up) Rules, 2020, what is prescribed in r. 35 of the NCLT Rules 2016 would cover even petitions for winding up – Sub-rule (5) of r. 35 makes it clear that even in cases where direction of the Tribunal as regards advertisement has not been complied with, the Tribunal has an option (i) either to dismiss the petition; or (ii) to give such further directions as it may think fit – Sub-rule (6) of r. 35 confers power upon the Tribunal even to dispense with any advertisement – Thus, what was not specifically available in black and white, under the 1956 statutory regime, namely the power to dispense with any advertisement, is now made available specifically under the statutory regime of 2013 – In the case at hand, the company in liquidation did not have any creditors or customers who had dealings with the company – There were no stakeholders prejudiced by failure of NCLT to order publication of advertisement of the petition – This was not a case where the company was sought to be wound up on ground of inability to pay debts or on just and equitable ground – This was a case of fraud and all stakeholders were fully aware of the winding up proceedings – Therefore, failure of the Tribunal to order publication of an advertisement did not render the entire proceedings unlawful – Companies Act, 2013 – s. 271(c) and 468 – Companies Act, 1956 – Companies (Winding up) Rules, 2020 – rr. 5 and 7 – National Company Law Tribunal Rules, 2016 – r. 35.Company Law – Winding up of a company – Petition u/ s. 271(c) of the Companies Act, 2013 – Challenged, for being barred by limitation – Held: Limitation is not always akin to a lighted matchstick to a train of gun powder – The date of commencement of the period need not necessarily be static – The date of commencement may keep changing depending upon the acts of omission and commission on the part of the party against whom the action is initiated – If the conduct of the affairs of the company in a fraudulent manner is a continuing process, the right to apply becomes recurring – In the case at hand, fraud and corruption were discovered only later and by the time the discovery was made, the attempts to reap the fruits of fraud had reached the pinnacle – These attempts continue even till date and this falls squarely within s. 271(c) – Therefore, the contention that the petition was barred by limitation was rightly rejected by the Tribunal – Companies Act, 2013.Company Law – Winding up of a company – Fraud as a ground for winding up – Petition under s. 271(c) of the Companies Act, 2013 – Challenge to – On ground of estoppel from pleading fraud and seeking winding up – Held: In the case at hand, what was alleged in the petition for winding up were, (i) formation of the company for fraudulent or unlawful purpose; (ii) fraud in the conduct of the affairs of the company; and (iii) fraud on the part of the persons who were involved in the formation and/or in the management of affairs of the company – The fraud relatable to the agreement in question, was only one facet of the whole scheme of things – What is covered by s. 271(c) of the Companies Act, 2013 is a fraud that goes beyond what lies in the realm of contract or in the realm of the penal provisions of the Companies Act, 2013 – Hence the contention of estoppel from pleading fraud, was rightly rejected by the Tribunal – Companies Act, 2013 – s. 271(c). Company Law – Winding up of a company – Fraud as a ground for winding up – Petition under s. 271(c) of the Companies Act, 2013 – Order of winding up passed by Tribunal – Challenge to – On ground of violation of the principles of natural justice due to denial of permission for cross examination – Tribunal justified its action of omission to permit cross-examination holding that the case did not require any oral evidence – Held, on facts, the Tribunal was right in rejecting the request for cross-examination – A party alleging the non-existence of something, cannot be called upon to prove the non-existence – It is the party who asserts the existence or who challenges the assertion of non existence, who is liable to prove the existence of the same – In the case on hand, Antrix asserted that Devas offered services which were non-existent, through a device which was not available and that even the so-called intellectual property rights over the device were not available – Therefore, Antrix cannot lead evidence to show the non-existence or non-availability of those things, either by oral evidence or by subjecting their officials to cross-examination by Devas – Devas never produced before the Tribunals any device nor did they demonstrate the availability to Devas services – All that Devas wanted was, the cross-examination of the officials of Antrix – Any amount of cross-examination of the officials of Antrix could not have established the existence of something that was disputed by Antrix – Also, it is clear from the time-line of events that the application for cross-examination was moved by Devas after conclusion of the arguments on the side of Antrix in the main petition itself, and that too after the unsuccessful attempt made by one of its shareholders to assail the constitutional validity of the statutory provisions – Therefore, the Tribunal was right in rejecting the request for cross-examination. Company Law – Winding up of a company – Fraud as a ground for winding up – Petition under s. 271(c) of the Companies Act, 2013 – Locus standi of the shareholders – Held: There is no scope either in the Act or in the Rules for impleadment of any shareholder as a respondent to the winding up petition – The objecting shareholders had an effective hearing before NCLT – Though their appeal was rejected by NCLAT on ground of maintainability, their arguments for opposing the winding up, which were just the same as that of the company, had been considered – Therefore, the objection that opportunity was not given to the shareholders, is just theoretical, when in fact they were heard – Companies (Winding Up) Rules, 2020 – r. 3(1) – Companies Act, 2013.Company Law – Winding up of a company – Fraud as a ground for winding up – Petition under s. 271(c) of the Companies Act, 2013 – Order of winding up passed by Tribunal – Challenge to – On ground of erroneous and perverse findings and incorrect standard of proof – Held: On facts, there is no perversity in the findings recorded by both the Tribunals – These findings were actually borne out by documents, none of which was challenged as fabricated or inadmissible – Appellants cannot take advantage of the use of an inappropriate expression by NCLAT – Detailed findings recorded by Tribunal show that they were final and not prima facie – Merely because NCLAT used an erroneous expression those findings cannot become prima facie. Company Law – Appeal against order of NCLT confirmed by NCLAT before Supreme Court – Re-appreciation of evidence – If permissible – Held: When two forums namely NCLT and NCLAT have recorded concurrent findings on facts, it is not open to the Supreme Court to re-appreciate evidence. Company Law – Winding up of a company – Fraud as a ground for winding up – Petition u/s. 271(c) of the Companies Act, 2013 – Contention that the petition u/s. 271(c) should have been preceded, at least by a report from the Serious Fraud Investigation Office, which has now gained statutory status u/s. 211 of the Companies Act, 2013 – Held: The contention is un-acceptable, in view of the fact that under the 2013 Act there are two different routes for winding up of a company on allegations of fraud – One is u/s. 271(c) and the other is under the just and equitable clause in s. 271(e), read with s. 224(2) and s. 213(b) – It is only in the second category of cases that the report of the investigation should precede a petition for winding up – Companies Act, 2013 – Companies Act, 1956. Company Law – Winding up of a company – Fraud as a ground for winding up – Relevance of motive – Held: If as a matter of fact, fraud as projected, stands established, the motive behind the victim of fraud, coming up with a petition for winding up, is of no relevance – A product of fraud is in conflict with the public policy of any country including India – The basic notions of morality and justice are always in conflict with fraud and hence motive behind the action brought by the victim of fraud can never stand as an impediment. |
