2021 (6) TMI 198 - Tri - Companies Law

Tribunal Orders Winding Up of Devas Multimedia Pvt. Ltd. for Fraudulent Activities

The Tribunal ordered the winding up of Devas Multimedia Pvt. Ltd. due to fraudulent intentions from its incorporation and ongoing fraudulent activities. ... Winding up of liquidation process - sanction by Central Government to file the instant Petition - fraudulent and unlawful purpose - HELD THAT:- It is a settled position of law that misdeeds and illegal acts committed by such Officials of Antrix would not bind the State and those actions have become-initio void and would not result in any legal/civil consequences. It is an absurd contention rose on behalf of Devas, that after obtaining the contract in question in the above manner, it started to obtain necessary licenses to fulfil its obligations under the terms of Contract. Devas did not stop its fraudulent activities even after termination of the Contract in question. By taking advantage, rather misusing the terms of Article 20 (Arbitration Clause) as contained in the Agreement, to pre-empt Antrix to settle the dispute first by referring to senior Management of both the parties, failing which to invoke arbitration clause, has hurriedly rushed to ICC Court on 01st July, 2011 by-passing due procedure as contemplated under the Agreement. Even the idea to incorporate Devas was with fraudulent intentions coupled with malafide objects to enter into Agreement with Antrix with no responsibility at all. It is unknown to law that such a prestigious agreement with Govt. Owned Company was got signed by a clerk, paying remuneration for the same. Therefore, the Agreement in question would become void ab initio and it would not create any legal rights, much civil rights to Devas. Thus the incorporation of Devas made with fraudulent intentions is ab initio void and its name should be struck from the Register of Registrar of Companies by virtue of this winding up proceedings. Though the validity of Agreement in question is not the subject matter in the instant case, the fraudulent and unlawful purpose behind incorporation of Devas, would be relevant factors to be taken into consideration by the Tribunal, while deciding the case - thus, the circumstances as mentioned under provisions of Section 271 of Companies Act, 2013 stand fulfilled so as to order Winding Up of R-1 Devas Company. The Petitioner has established its case beyond doubt that the incorporation of DEVAS/R-1 Company was made in a fraudulent manner and for unlawful purposes. Its management is continuing to resort to fraudulent activities - Petition allowed. Issues Involved:1. Sanction by the Central Government for filing the petition.2. Fraudulent conduct of Devas Multimedia Pvt. Ltd. and its management.3. Jurisdiction of the Tribunal to determine the fraudulent nature of the agreement.4. Limitation period for filing the petition.5. Requirement of advertisement before passing the final winding-up order.6. The impact of the ongoing criminal investigations and other proceedings on the winding-up petition.Issue-wise Analysis:1. Sanction by the Central Government for Filing the Petition:The Tribunal noted that the sanction for filing the winding-up petition was accorded by the Central Government through a notification dated 18.01.2021. This sanction was challenged by Devas on the grounds that no prior opportunity was given to them before granting the sanction. However, the Tribunal observed that as per Section 272 of the Companies Act, 2013, there is no requirement to give prior notice to the company to be wound up, unlike in the case of the Registrar who files a winding-up petition. The Karnataka High Court had also dismissed a related writ petition filed by Devas Employees Mauritius Pvt. Ltd., thereby upholding the validity of the sanction.2. Fraudulent Conduct of Devas Multimedia Pvt. Ltd. and Its Management:The Tribunal found that the incorporation of Devas itself was with fraudulent intentions to secure a prestigious contract from Antrix Corporation Ltd. in collusion with the then officials of Antrix. Devas was incorporated on 17.12.2004 and secured the contract on 28.01.2005, within 45 days of its incorporation. The Tribunal highlighted that Devas did not possess the requisite experience or infrastructure to qualify for such a contract. The fraudulent activities continued even after the termination of the contract, as Devas hurriedly invoked arbitration, bypassing due procedure. The Tribunal concluded that the incorporation of Devas was ab initio void, and its name should be struck from the Register of Companies.3. Jurisdiction of the Tribunal to Determine the Fraudulent Nature of the Agreement:Devas contended that the Tribunal lacked jurisdiction to determine the fraudulent nature of the agreement, as these issues were being examined by the CBI, Enforcement Directorate, and the Delhi High Court. The Tribunal rejected this contention, stating that it alone is competent to decide the issue of winding up under Section 271 of the Companies Act, 2013. The Tribunal emphasized that fraud proven in criminal cases may lead to sentencing but would not result in the winding up of a company, which falls under its exclusive jurisdiction.4. Limitation Period for Filing the Petition:Devas argued that the petition was barred by limitation, as the cause of action arose in 2016 when the CBI and ED unearthed the alleged fraud. The Tribunal dismissed this argument, stating that the cause of action in cases of fraud is continuous. It noted that the fraudulent activities of Devas were ongoing and that the question of limitation does not arise in the instant case.5. Requirement of Advertisement Before Passing the Final Winding-up Order:Devas contended that the petition should be advertised before passing the final winding-up order. The Tribunal observed that advertisement of the petition depends on the facts and circumstances of each case. In this case, the Tribunal had already provided adequate opportunity to Devas by making the petition and its annexures available and listing the case on the NCLT website. The Tribunal concluded that the principles of natural justice had been duly followed and that the advertisement was not mandatory.6. The Impact of the Ongoing Criminal Investigations and Other Proceedings on the Winding-up Petition:Devas argued that the Tribunal should wait for the outcome of the ongoing criminal investigations and other proceedings before deciding the winding-up petition. The Tribunal rejected this argument, stating that it has exclusive jurisdiction over winding-up petitions under the Companies Act, 2013. It emphasized that the criminal proceedings would not lead to the winding up of Devas and that the Tribunal must decide the issue independently.Conclusion:The Tribunal concluded that Devas Multimedia Pvt. Ltd. was incorporated with fraudulent intentions and continued to engage in fraudulent activities. It ordered the winding up of Devas and appointed the Official Liquidator attached to the High Court of Karnataka as the Liquidator. The Tribunal directed the Liquidator to take expeditious steps to liquidate the company and prevent it from perpetuating its fraudulent activities. The Tribunal also dismissed the connected applications as infructuous.