/2022 INSC 0044/
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.5766 of 2021
DEVAS MULTIMEDIA PRIVATE LTD. ... APPELLANT(S)
Versus
ANTRIX CORPORATION LTD. & ANR.        ... RESPONDENT(S)
WITH
CIVIL APPEAL NO.5906 of 2021
J U D G M E N T
V. Ramasubramanian, J.
1. Challenging   an   order   of   winding   up   passed   by   the   National
Company Law Tribunal under Section 271(c) of the Companies Act,
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2013 (for short   the 2013 Act ), which was confirmed by the National
Company   Law   Appellate   Tribunal   on   appeals,   the   company   in
liquidation,   namely,   Devas   Multimedia   Private   Limited,   through   its
ex­Director   has  come  up with  an  appeal  in  Civil  Appeal  No.5766  of
2021   and   one   of   the   shareholders   of   the   company   in   liquidation,
namely,   Devas   Employees   Mauritius   Private   Limited   (hereinafter
referred   to   as   DEMPL )   has   come   up   with   another   appeal   in   CA
No.5906 of 2021.
2. We   have   heard   Shri   Mukul   Rohtagi,   learned   senior   counsel
appearing   for   the   company   in   liquidation,   Shri   Arvind   P.   Datar,
learned   senior   counsel   appearing   for   the   shareholder­appellant,
Shri   N.   Venkataraman,   learned   Additional   Solicitor   General
appearing for Respondent No. 1 herein, which is the company which
moved  the  Tribunal   for  winding   up the  company  in   liquidation   and
Shri Balbir Singh, learned Additional Solicitor General appearing for
the Union of India.
3. Brief  Background 
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3.1 The   first   respondent   in   these   appeals,   namely,   Antrix
Corporation   Limited   (hereinafter  referred   to   as   Antrix ),   incorporated
on   28.09.1992   under   the   Companies   Act,   1956,   is   the   commercial
arm   of   the   Indian   Space   Research   Organisation   ( ISRO   for   short)
which   is   wholly   owned   by   the   Government   of   India   and   coming
under the administrative control of the Department of Space.
3.2 On   28.07.2003,   Antrix   entered   into   a   Memorandum   of
Understanding   with   Forge   Advisors,   LLC,   a   Virginia   Corporation.
The   intent,   as   spelt   out   in   the   MOU,   was   to   make   both   parties
become   “ strong   and   vital   partners   in   evaluating   and   implementing
major   new   satellite   applications   across   diverse   sectors   including
agriculture,   education,   media   and   telecommunications”.   Apart   from
other   things,   the   MOU   contemplated   Forge   Advisors   to   provide   a
broad   array   of   advisory   services   that   included   near­term   tactical
projects   in   the   areas   of   sales,   marketing,   business   development,
strategic   partnership   negotiations   and   other   related   business   areas
and   long   term   projects   in   the   areas   of   corporate   strategy,   market
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opportunity   assessment,   business   case   development   for   new
services, launch of new application services etc.
3.3 On   22.03.2004,   Forge   Advisors   made   a   presentation
proposing an Indian joint venture, to launch what came to be known
as   “ DEVAS ”   (Digitally   Enhanced   Video   and   Audio   Services).   It   was
projected in  the said  proposal  that  DEVAS  platform  will be capable
of   delivering   multimedia   and   information   services   via   satellite   to
mobile   devices   tailored   to   the   needs   of   various   market   segments
such   as   (i)   consumer   segment ,   comprising   of   entertainment   and
information   services   to   digital   multimedia   consoles   in   cars   and
vehicles;     (ii)   commercial   segment ,   comprising   of   high   value
information   services   to   Commercial   Information   Devices   in
commercial transport vehicles; and   (iii)   social segment , comprising
of   Developmental   Information   Services   to   Rural   Information   kiosks
in underserved areas.
3.4 The   presentation   dated   22.03.2004   was   followed   by   a
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proposal   dated   15.04.2004.   The   proposal   was   to   form   “ a   strategic
partnership   to   launch   DEVAS,   a   new   service   that   delivers   video,
multimedia and information services via satellite to mobile receivers in
vehicles   and   mobile   phones   across   India ”.   The   proposal   dated
15.04.2004 indicated that DEVAS was conceived as a new National
Service,   expected   to   be   launched   by   the   end   of   2006,   that   would
deliver   video,   multimedia   and   information   services   via   satellite   to
mobile   receivers   in   vehicles   and   mobile   phones   across   India 1
.   The
proposal   contemplated   the   formation   of   a   joint   venture   and   an
obligation   on   the   part   of   ISRO   and   Antrix   to   invest   in   one
operational   S­Band   satellite   with   a   ground   space   segment   to   be
leased   to   the   joint   venture.   In   return,   ISRO   and   Antrix   were   to
receive lease payments of USD 11 million annually for a period of 15
years.
3.5 The   concept   of   DEVAS,   as   indicated   in   the   penultimate
paragraph   of   the   Executive   Summary   of   the   proposal   dated
15.04.2004,   was   based   upon   the   evolution   and   performance   of
1    Paragraph 1 of the Executive Summary of the Proposal dated 15.04.2004
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similar services in other markets such as XM Radio and Sirius Radio
in   the   United   States   and   Mobile   Broadcasting   Corporation’s
multimedia services  via  satellite in Korea and Japan.
3.6 It appears that pursuant to the aforesaid proposal, several
meetings   were   held   between   the   representatives   of   Forge   and
ISRO/Antrix   and   a   Committee   headed   by   one   Dr.   K.N.   Shankara,
Director   of   SAC   (Space   Application   Centre)   was   constituted   to
examine the proposal.
3.7 On   17.12.2004   Devas   Multimedia   Private   Limited,
(hereinafter   referred   to   as   ‘Devas’   or   the   ‘company   in   liquidation’)
was   incorporated   as   a   private   company   under   the   Companies   Act,
1956. Immediately thereafter, Antrix entered into an Agreement with
the   said   company   on   28.01.2005.   The   Agreement   was   titled   as
“ Agreement for the lease of space segment capacity on ISRO/Antrix S­
Band   spacecraft   by   DEVAS ”.   The   preamble  of  the   Agreement   stated
that   Devas   was   developing   a   platform   capable   of   delivering
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multimedia   and   information   services   via   satellite   and   terrestrial
system   to   mobile   receivers,   tailored   to   the   needs   of   various   market
segments   and   that   Devas   had,   therefore,   requested   Antrix,   space
segment   capacity   for   the   purpose   of   offering   S­DMB   service,   a   new
digital multimedia and information service, including but not limited
to   audio   and   video   content   and   information   interactive   services,
across India that will be delivered  via  satellite and terrestrial system
via   fixed, portable mobile receivers including mobile phones, mobile
video/audio receivers for vehicles etc.. What was to be leased out by
Antrix   to   Devas   was   5   numbers   of   C   X   S   transponders   each   of   8.1
MHz capacity and 5 numbers of S X C transponders each of 2.7 MHz
capacity   on   the   Primary   Satellite   1   (PS1).   The   leased   capacity   was
agreed   to   be   delivered   by   Antrix   to   Devas   from   a   fully   operational
and   ready   PS­1  within   30   months   of   the   agreement,   with   a   further
grace period of six months.
3.8 Article   7   of   the   Agreement   contained   provisions   for   the
termination   of   the   Agreement   by   either   of   the   parties,   with   certain
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consequences   to   one   or   the   other,   depending   upon   the
circumstances under which termination was made.
3.9 It   appears   that   Devas   obtained   approvals   from   Foreign
Investment   Promotion   Board   (FIPB)   during   the   period   May   2006   to
September   2009.   Pursuant   to   those   approvals,   Devas   actually
brought into India, an investment of about INR 579 crores.
3.10 Devas   also   obtained   an   Internet   Service   Provider   (ISP)
License from the Department of Telecommunications on 02.05.2008.
Devas   then   obtained   permission   from   the   Department   of
Telecommunications   on   31.03.2009   for   providing   Internet   Protocol
Television   (IPTV)   Services   within   the   scope   of   the   terms   and
conditions   of   ISP   license.   Devas   claims   to   have   conducted
experiments on the emerging technologies for satellite and terrestrial
system in September 2009.
3.11 However the Agreement dated 28.01.2005 was terminated
by   Antrix   by   a   Communication   dated   25.02.2011,   in   accordance
with Article 7(c) of the Agreement, which provides for termination on
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the ground of   force majeure . It was stated in the said letter that the
Government   of   India   had   taken   a   policy   decision   not   to   provide
orbital slots in S­Band for commercial activities.
3.12 This   termination   led   to   Devas   initiating   a   commercial
arbitration in India before the ICC Arbitral Tribunal. Independently,
the   Mauritius   investors   initiated   a   BIT   arbitration   under   the   India­
Mauritius Bilateral Investment Treaty and the German Company by
name Deutsche Telecom, initiated a BIT arbitration under the India­
Germany BIT. ICC Arbitral Tribunal passed an Award on 14.09.2015
directing   Antrix   to   pay   Devas,   a   sum   of   USD   562.5   million   with
simple interest @ 18% p.a. The Government of India suffered similar
awards in the other 2 BIT Arbitral proceedings also. 
3.13 In the meantime, the Central Bureau of Investigation (CBI)
filed a First Information Report on 16.03.2015, against the company
in   liquidation   namely   Devas,   as   well   as   the   officers   of   Devas   and
Antrix, for offences under Section 420 read with Section 120B of IPC
and   Section   13(1)(d)   read   with   Section   13(2)   of   the   Prevention   of
Corruption   Act,   1988.   It   was   followed   by   a   charge­sheet   filed   on
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11.08.2016   and   a   supplementary   charge­sheet   on   08.01.2019.
Similarly   the   Enforcement   Directorate   filed   a   report   in   ECIR
No.12/BGZO/2015.  
3.14 Therefore,   Antrix   made   a   request   to   the   Ministry   of
Corporate   Affairs,   Government   of   India,   on   14.01.2021   seeking
authorization   to   initiate   proceedings   under   Section   271(c)   of   the
2013   Act   for   winding   up   Devas.   Authorisation   was   given   on
18.01.2021,   on   the   basis   of   which  Antrix   filed  a  petition   before   the
National   Company   Law   Tribunal,   Bengaluru   Bench   on   18.01.2021
for the winding up of Devas.
3.15 On   19.01.2021,   NCLT   passed   a   reasoned   order,   after
hearing   the  counsel  for  Devas,  admitting  the  company  petition   and
appointing   the   Official   Liquidator   attached   to   the   High   Court   of
Karnataka at Bangalore, as the provisional liquidator.
3.16 Against   the   said   order   of   NCLT   admitting   the   company
petition,   DEMPL   filed   an   appeal,   but   the   same   was   disposed   of   by
the   NCLAT   with   a   direction   to   DEMPL   to   seek   impleadment   before
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NCLT and raise all objections.
3.17 DEMPL   simultaneously   filed   a   writ   petition   in   W.P.   No.
6191   of   2021   before   the   Karnataka   High   Court   challenging   the
constitutional   validity   of   Section   272(1)(e)   of   the   Companies   Act,
2013  and   praying   for  quashing  the  authorization   dated  18.01.2021
granted   by   the   Ministry   of   Corporate   Affairs   to   Antrix   to   initiate
proceedings   for   winding   up   Devas.   The   High   Court   dismissed   the
Writ Petition on 28.04.2021 and also imposed costs of Rs.5,00,000/­
on DEMPL on the ground that they were guilty of abuse of process of
law.
3.18 By   a   final   order   dated   25.05.2021,   NCLT   directed   the
winding   up   of   Devas.   Aggrieved   by   the   order   of   winding   up,   Devas
filed   one   appeal   and   the   shareholder­DEMPL   filed   another   appeal
before   NCLAT.   These   appeals   having   been   dismissed   by   NCLAT   by
an Order  dated 08.09.2021, the ex­Director  of the company as well
as the shareholder are on appeal before us.
4. Grounds of Attack:
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4.1 The Company in liquidation, which is the appellant in one
appeal, assails the impugned orders of NCLT and NCLAT broadly on
the following grounds:­
(i) breach   of   the   mandatory   requirement   of   advertisement
before ordering winding up;
(ii) winding up petition barred by limitation;
(iii) Antrix estopped from pleading fraud;
(iv) violation of the principles of natural justice due to the 
denial of permission for cross examination.
(v) erroneous findings of fact;
(vi) application of incorrect standard of proof on the question
of fraud;
(vii) erroneous   conclusions   regarding   the   consequences   of
fraud, assuming that fraud was established;
 
4.2  DEMPL, which is the appellant in the second appeal before us
and   which   holds   3.48%   of   the   issued   equity   share   capital   of   the
Company in liquidation, assails the impugned orders broadly on the
following grounds:­
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(i) The   question   of   locus   of   a   small   shareholder   to   oppose
winding   up has   been  decided  by  both  Tribunals  contrary
to law;
(ii) Findings recorded against shareholders on the question of
fraud,   have   been   so   recorded   without   making   them   a
party and without giving them an opportunity of hearing;
(iii) Inapplicability   of   the   theory   of   useless   formality   to
mandatory   requirements   such   as   advertisements   before
ordering winding up.
5 Defence
5.1   The impugned orders are sought to be defended by Shri N.
Venkataraman,   learned   Additional   Solicitor   General   appearing   for
Antrix, broadly on the following grounds:­
(i) Detailed   findings   recorded   by   the   Tribunal   on   8   different
types of fraud committed by Devas, both in the formation
of the Company and in the manner in which the affairs of
the   Company  were  carried  out,  which  cannot  be  assailed
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in   an   appeal   under   Section   423   of   the   Companies   Act,
2013.
(ii)   The   Agreement   dated   28.01.2005   entered   into   between
Antrix and Devas spoke about three components, namely,
DEVAS 2
  Technology,   DEVAS   services   and   DEVAS   device,
none   of   which   existed   either   on   the   date   of   formation   of
Devas or on the date of execution of the Agreement or on
the date of termination of the Agreement and not even on
the date of winding up of the company.
(iii) Violation   of   SATCOM   policy,   manipulation   of   minutes   of
meetings and the misleading Cabinet Note.
(iv) Shocking nature of the financial fraud.
5.2 Shri   Balbir   Singh,   learned   Additional   Solicitor   General
appearing   for   the   Union   of   India   defended   the   impugned   orders
broadly on the following grounds: 
(i)   The requirement of an advertisement before winding up is
2   Wherever there is a reference to the company in liquidation, we have used the lowercase of the
letters   in   the   word   ‘Devas’   and   wherever   there   is   a   reference   to   the   technology   and   services
offered by Devas, we have used the capital letters in the word ‘DEVAS’ 
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redundant in a petition under Section 271(c).  
(ii) The question of fraud has to be addressed from the broad
parameters laid down, not only in Section 17 of the Indian
Contract   Act,   1872,   but   also   in   Section   447   read   with
Section   7   of   the   Companies   Act,   2013   and   keeping   in
mind   the   distinction   between   fraud,   fraudulent   manner,
fraudulent purpose and unlawful purpose. 
(iii) The   attempt   of   Devas   to   challenge   the   constitutional
validity of Section 271(c) and its failure.
(iv) The case on  hand not falling  under  the  category  of cases
where cross­examination was necessary.
6. Fraud   as   a   ground   for   winding   up   and   the   difference  
between 1956 Act and 2013 Act
Before we proceed to consider the specific grounds of challenge
to the impugned order, it is necessary to see the contours of Section
271   (c)   of   the   Companies   Act,   2013,   as   it   is   stated   by   the   learned
counsel  on  both  sides   (i)   that  this   is  a  new   addition  to   the  Compa ­
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nies   Act;   and   (ii)   that   this   is   the   first   case   of   winding   up   on   the
ground   of   fraud.   Therefore,   a   comparison   of   the   provisions   of   2013
Act with those of the 1956 Act may serve us better.
6.1 The   Companies   Act,   1956   spoke   about   two   categories   of
winding   up,   namely,   (i)   winding   up   by   the   Tribunal;   and
(ii)   voluntary   winding   up.   The   circumstances   in   which   a   company
could be wound up by the Court, were enlisted in Section 433 of the
1956   Act.   This   Section   contained   a   list   of   nine   circumstances   in
which a company may be wound up.  Fraud (i) either in the forma ­
tion of the company or (ii) in the conduct of affairs of the com ­
pany or (iii) on the part of persons concerned in the formation
of or the management of its affairs, was not one of the circum ­
stances stipulated in Section 433 of 1956 Act . 
6.2 Though Section 433 of the 1956 Act did not include fraud
as one of the circumstances in which a company may be wound up,
there   was   still   an   indirect   reference   to   fraud.   Section   439(1)   of   the
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1956 Act provided a list of seven persons who were entitled to file an
application for the winding up of a company. Under clause (f) of sub­
section   (1)   of   Section   439,   an   application   for   winding   up   shall   be
presented   by   “ any   person   authorized   by   the   Central   Government   in
their behalf ” in a case falling under Section 243.  
6.3 Section   243   of   the   1956   Act   empowered   the   Central
Government   to   cause   a   petition   for   winding   up   to   be   presented,   in
cases   covered   by   sub­clause   (i)   or   sub   clause   (ii)   of   Clause   (b)   of
Section 237. Section 243 of the 1956 Act read as follows:­   
“ 243. Application for winding up of company or an order
under section  397  or 398 . ­ If any  such company  or other
body corporate is liable to be wound up under this Act and it
appears to the Central Government from any such report as
aforesaid that it is expedient so to do by reason of any such
circumstances   as   are   referred   to   in   sub­clause   (i)   or   (ii)   of
clause   (b)   of   section   237,   the   Central   Government   may,
unless   the   company,   or   body   corporate   is   already   being
wound   up   by   the   Tribunal,   cause   to   be   presented   to   the
Tribunal   by   any   person   authorised   by   the   Central
Government in this behalf – 
(a)  a   petition   for   the   winding   up   of   the   company,   or   body
corporate   on   the   ground   that   it   is   just   and   equitable
that it should be wound up ; 
(b)  an application for an order under section 397 or 398, 
(c)  both a petition and an application as aforesaid.” 
17

6.4 Section 243 forms part of a set of provisions from Sections
235 to  251 in  Chapter   I of  Part VI  of  the Act.  This cluster  of provi ­
sions   from   Sections   235   to   251   is   grouped   under   the   Heading   “ In ­
vestigation ”. Section 235(1) empowers the Central Government to or ­
der an investigation into the affairs of the company whenever a Re ­
port   has   been   made   by   the   Registrar   under   Section   234.   Indepen ­
dent   of   Section   235(1),   Central   Government   is   empowered   also
under   Section   237   to   order   an   investigation,   if,   in   its   opinion
or in the opinion of the Company Law Board (i) the business of
the   company   is   being   conducted   for   a   fraudulent   or   unlawful
purpose   or   (ii)   the   company   was   formed   for   any   fraudulent   or
unlawful purpose or (iii) persons concerned in the formation of
the company or the management of its affairs have in connec ­
tion   therewith,   are   guilty   of   fraud .   Section   237   of   the   1956   Act
reads as follows:­
“ 237. Investigation of company’s affairs in other cases .   ­
Without   prejudice   to   its   powers   under   section   235,   the
Central Government – 
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(a)  shall   appoint   one   or   more   competent   persons   as
inspectors   to   investigate   the   affairs   of   a   company   and
to   report   thereon   in   such   manner   as   the   Central
Government may direct, if – 
(i)   the company, by special resolution ; or 
(ii)  the Court, by order, 
declares   that   the   affairs   of   the   company   ought   to   be
investigated   by   an   inspector   appointed   by   the   Central
Government ; and 
(b)  may   do   so   in   its   opinion   or   in   the   opinion   of   the
Tribunal, there are circumstances suggesting –
(i) that   the   business   of   the   company   is   being
conducted   with   intent   to   defraud   its   creditors,
members or any other persons, or otherwise for a
fraudulent   or   unlawful   purpose   or   in   a   manner
oppressive   of   any   of   its   members,   or   that   the
company   was   formed   for   any   fraudulent   or
unlawful purpose; 
(ii) that   persons   concerned   in   the   formation   of   the
company or the management of its affairs have in
connection   therewith   been   guilty   of   fraud,
misfeasance   or   other   misconduct   towards   the
company or towards any of its members ; or 
(iii) that the members of the company have not been
given   all   the   information   with   respect   to   its
affairs   which   they   might   reasonably   expect,
including   information   relating   to   the   calculation
of   the   commission   payable   to   a   managing   or
other director, or the manager, of the company.”
6.5 Thus   a   combined   reading   of   Sections   439(1)(f),   243   and
237(b) of  the 1956 Act shows that,   (i)   fraud in  the  formation  of the
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company;   (ii)   fraud   in   the   conduct   of   affairs   of   the   company;   and
(iii)   fraud   on   the   part   of   the   persons   engaged   in   the   formation   or
conduct of the affairs of the company, though not listed as some of
the   circumstances   under   Section   433   of   the   1956   Act,   were   still
available   for   the   winding   up   of   the   company,   even   under   the   1956
Act. But there were 3 requirements to be satisfied. They are:   (i)   the
perpetration of one or the other types of fraud mentioned above are
reflected   in   a   report   of   investigation;   (ii)   the   petition   under   these
provisions is to  be filed only  by  a person  authorised by  the Central
Government; and  (iii)  the petition should be premised on the ground
that it is just and equitable to wind up the company. 
6.6 What is interesting to observe from section 243 (a) is that
a   petition   for   winding   up   in   terms   of   Section   439(1)(f)   of   the
1956 Act, read with Section 237(b)(i) and (ii), has to be on “just
and equitable” ground.   Clause (a) of Section 243 of the 1956 Act,
enabled   the   Central   Government   (if   upon   receipt   of   a   report   about
the   existence   of   the   circumstances   referred   to   in   Section   237(b)(i)
20

and (ii), it appears to the Central Government that it is expedient to
do so), to authorize any person to present a petition for the winding
up of a company, not directly on the ground of fraud but actually on
the ground that it is just and equitable that the company should be
wound up. 
6.7 It   must   be   noted   that   just   and   equitable   clause   has
several   facets.   The   origin   of   just   and   equitable   clause   in   Company
law,   is   traceable   to   the   law   of   partnership,   which   developed   “the
conceptions   of   probity,   good   faith   and   mutual   confidence 3
” .   The
principle   behind   just   and   equitable   clause,   in   the   words   of   the
House   of   Lords   is   that   “equity   always   does   enable   the   Court   to
subject   the   exercise   of   legal   rights   to   equitable   considerations”.   In
other   words,   equitable   considerations   get   superimposed   on
statutorily governed legal rights under this clause.
6.8 It is well settled that the words   “just and equitable ” in the
legislation   specifying   the   grounds   for   winding   up   by   the   Court,   are
not to be read as being   ejusdem generis  with the preceding words of
3      Ebrahimi vs. Westbourne Galleries Ltd.;  (1972) 2 WLR 1289
21

the   enactment.   They   are   not   to   be   cut   down   by   the   formation   of
categories   or   headings   under   which   cases   must   be   brought   if   the
enactment   is   to   apply 4
.   But   apart   from   cases,   (i)   where   there   is
something   in   the   history   of   the   company   or   in   the   relationship
between the shareholders; or   (ii)   where there is functional deadlock
of   a   paralysing   kind;   or   (iii)   where   there   is   justifiable   lack   of
confidence, which may give rise to a petition for winding up on just
and   equitable   clause,   there   have   also   been   other   cases   at   least
before the Courts in England, some of which are listed in paragraph
360 of Volume 16 of the Fifth Edition (2017) of the Halsbury’s Laws
of   England.   Two   of   them   are   (i)   where   the   company   is   a   bubble
company;  and   (ii)   where  the   company  is  fraudulent  in  its  inception
and carries on at a loss without a capital of its own. 
6.9 But   traditionally,   fraud   committed   by   a   company   on
outsiders   or   the   fact   that   the   company   acted   dishonestly   to
outsiders, was not a ground for winding up in English Law. A useful
4       Para 359, Vol. XVI, Fifth Edition (2017) of Halsbury’s Laws of England.  
22

reference   may   be  made   in   this   regard   to   Re   Medical   Battery   Co. 5
,
where   a   question   relating   to   investigation   through   public
examination came up. It was held therein that the relevant provision
was   not   intended   to   apply   to   a   case   where   the   charges   were   about
the commitment of fraud in the course of business with the outside
world and not connected in any way with the promotion or formation
of the company. 
6.10 But the law has not remained static even in England.  The
Insolvency   Act,   1986   was   amended   in   England   through   the
Companies   Act,   1989   to   incorporate   Section   124­A.   Under   Section
124­A of the Insolvency Act, 1986,   (i)   the Secretary of State may
seek   the   winding   up   of   a   company   if   he   thinks   that   it   is
expedient   in   the   public   interest   to   wind   up   the   company   and
(ii)   if   the   court   thinks   it   just   and   equitable   to   do   so .   Such
winding up may be based upon,  (i)  the reports of some investigations
under  the  Companies  Act   itself;   or   (ii)   a   report  under   the  Financial
5   (1894) 1 Ch. 444  
23

Services   and   Markets   Act;   or   (iii)   any   information   under   the
Criminal Justice Act, 1987. 
6.11 In   Re  Walter  L.  Jacob  &  Co.   Ltd. 6
,   the Court  of Appeal
(Civil   Division)   was   concerned   with   a   case,   where   the   Secretary   of
State, after examining the books of the company in question, formed
an opinion that the company should be wound up in public interest.
Therefore,   he   filed   a   petition   under   Section   447   of   the   Companies
Act,   1985   for   winding   up   on   just   and   equitable   ground   under
Section   122(1)(g)   of   the   Insolvency   Act,   1986.   The   High   Court
dismissed the petition. While reversing the decision and ordering the
winding   up,   the   Court   of   Appeal   held   that   the   Court’s   task   in   the
case of petitions  for  winding  up in  public interest, is to  carry  out  a
balancing   exercise,   having   regard   to   all   the   circumstances   as
disclosed by the totality of the evidence. One of the arguments raised
in that case was that the company sought to be wound up did well
and   that   all   clients  to   whom   the   company   owed   money   except   one,
had   settled   the   matter   with   the   company.   While   rejecting   the   said
6     (1989) 5 BCC 244
24

argument, the Court of Appeal emphasised that the Parliament had
recognised   the   need   for   the   general   public   to   be   protected   against
the activities of unscrupulous persons who deal in securities. 
6.12 Thus, there was a shift even in the English Law, from the
conservative   view   that   fraud   committed   by   the   company   upon
outsiders   was   not   available   as   a   ground   for   winding   up.   However,
winding up on the ground of public interest was also linked to just
and  equitable clause in  England.  This is perhaps why  the  law even
in   India,   for   the   winding   up   of   a   company   on   the   ground   of   fraud,
was also linked to just and equitable clause under the 1956 Act.
6.13 But the mandate of Section 243 (a) of the Companies Act,
1956   to   take   recourse,   in   cases   of   fraud,   to   just   and   equitable
ground, was little incongruous. This is due to the reason that under
Section   443(2),   the   court   may   refuse   to   make   an   order   of   winding
up,   on   just   and   equitable   ground,   if   some   other   remedy   was
available   to   the   persons   seeking   winding   up.   Section   443(2)   of   the
1956 Act reads as follows:­
“ 443. Powers of tribunal on hearing petition
25

 
xxxxxxxxxxxxxxx
(2)   Where   the   petition   is   presented   on   the   ground   that   it   is
just   and   equitable   that   the   company   should   be   wound   up,
the Tribunal may refuse to make an order of winding up, if it
is   of   the   opinion   that   some   other   remedy   is  available   to  the
petitioners and that they are acting unreasonably in seeking
to   have   the   company   wound   up   instead   of   pursuing   that
other remedy.”
Therefore,   despite   the   fact   that   fraud   was   available,   albeit
indirectly, as a circumstance for the winding up of a company,
even  under  the  1956  Act,   its   link  to  just   and  equitable  clause
was little problematic because of section 443(2). 
6.14 Coming to the 2013 Act, provisions similar to sub­clauses
(i)   and   (ii)   of   clause   (b)   of   section   237   of   the   1956   Act,   are   to   be
found   in   sub­clauses   (i)   and   (ii)   of   clause   (b)   of   section   213   of   the
2013   Act.   They   employ   the   same   language   for   the   purpose   of
ordering   an   investigation   into   the   affairs   of   a   company.   But   under
section   237   of   the   1956   Act,   the   power   to   order   investigation   was
with   the   central   Government,   while   it   is   with   the   Tribunal   under
Section   213   of   the   2013   Act.   Section   224   (2)   of   the   2013   Act   is
26

similar   to   Section   243   of   the   1956   Act   as   it   enables   the   Central
Government to authorize any person to file a petition for winding up,
on   the   basis   of   the   report   of   any   investigation.   Here   again,   the
petition   for   winding   up   on   the   basis   of   the   report   of   such
investigation,   is   to   be   on   just   and   equitable   ground   by   virtue   of
clause   (a)   of   sub­section   (2)   of   Section   224,   which   is   similar   to
clause (a) of Section 243. 
6.15 The   main   departure   of   the   2013   Act   from   the   statutory
regime of the 1956 Act, is the specific inclusion of fraud, directly as
one   of   the   circumstances   in   which   a   company   could   be   wound   up.
Section 271 of the 2013 Act lists out the circumstances in which a
company may be wound up. What were clauses (a), (g), (h) and (i) of
Section 433 of 1956 Act have now become clauses (a), (b), (d) and (e)
of   Section   271   of   the   2013   Act,   though   not   in   the   same   order.   In
addition,   (i)   conduct   of   the   affairs   of   the   company   in   a   fraudulent
manner;   (ii)   formation   of   the   company   for   fraudulent   or   unlawful
purpose;   and   (iii)   persons   concerned   in   the   formation   or
27

management   of   its   affairs   being   guilty   of   fraud,   misfeasance   or
misconduct, have now been included in clause (c) of Section 271, as
some of the circumstances in which a company could be wound up.
In   other   words,   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, under
section 224(2) read with section 213 [as it was under Section 439(1)
(f) read with sections 243 and 237(b) of the 1956 Act] .  
6.16 As   a   matter   of   fact,   Section   271(1)   of   the   2013   Act,   as   it
was originally enacted, included the inability of a company to pay its
debts as one of the grounds for winding up. Therefore, the deeming
provision   which   was   there   in   Section   434   of   the   1956   Act   found   a
place as  sub­section  (2) of  Section 271 of  the  2013 Act.  But  by   the
Insolvency and Bankruptcy Code, 2016 (Act 31 of 2016), “ inability to
pay   debts ”   has   been   deleted   from   Section   271.   As   a   consequence,
the deeming  provision in sub­section (2) of Section 271 also stands
deleted. In fact, section 271 of the 2013 Act (along with sections 270
and   272)   got   amended   even   before   they   were   notified   under
28

Section 1 (3) of the Act to come into force.
6.17 In   other   words,   Section   271   as   it   originally   stood   in   the
2013   Act,   listed   six   circumstances   in   which   a   company   may   be
wound up. Inability to pay debts was one of those six circumstances.
But   by   Act   31   of   2016,   ‘inability   to   pay   debts’   got   deleted   from   the
list of circumstances 7
. Section 271 of the 2013 Act, as it now stands
after 2016, reads as follows:
“ 271.   Circumstances   in   which   company   may   be   wound
up   by   Tribunal ­­   A   company   may,   on   a   petition   under   sec ­
tion 272, be wound up by the Tribunal,­­
(a)   if   the   company   has,   by   special   resolution,   resolved
that the company be wound up by the Tribunal;
(b)  if   the   company   has   acted   against   the   interests   of   the
sovereignty   and   integrity   of   India,   the   security   of   the
State, friendly  relations  with foreign  States,  public  or ­
der, decency or morality;
(c)  if on an application made by the Registrar or any other
person authorised by the Central Government by noti ­
fication   under   this   Act,   the   Tribunal   is   of   the   opinion
that the affairs of the company have been conducted in
a   fraudulent   manner   or   the   company   was   formed   for
fraudulent   and   unlawful   purpose   or   the   persons   con ­
cerned   in   the   formation   or   management   of   its   affairs
have   been   guilty   of   fraud,   misfeasance   or   misconduct
in   connection   therewith   and   that   it   is   proper   that   the
company be wound up;
7   Now   the   inability   of   a   company   to   pay   its   debts   is   a   ground   for   initiation   of   CIRP.     If   CIRP
fails, winding up can be resorted to. 
29

(d)   if   the   company   has   made   a   default   in   filing   with   the
Registrar its financial statements or annual returns for
immediately preceding five consecutive financial years;
or
(e)  if   the   Tribunal   is   of   the   opinion   that   it   is   just   and
equitable that the company should be wound up.”
6.18 Just   as   Section   439(1)   of   the   1956   Act   provided   a   list   of
persons   by   whom   an   application   for   winding   up   may   be   filed,
Section   272(1)   of   the   2013   Act   also   provides   a   list   of   persons   by
whom   a   petition   for   winding   up   may   be   filed.   What   is   common   to
both Section 439(1) of the 1956 Act and Section 272(1) of the 2013
Act,   is   that   a   petition   for   winding   up   may   be   filed   by:   (i)   the
company;   (ii)   any   contributory;   (iii)   the   Registrar;   and   (iv)   any
person authorized by the Central Government in that behalf. 
6.19 Both Section 439(1) of the 1956 Act and Section 272(1) of
the   2013   Act   use   two   important   expressions,   in   relation   to   the
persons   competent   to   file   a   petition   for   winding   up   and   the
procedure   to   be   followed.   They   are,   (i)   authorization;   and   (ii)
sanction.   The   circumstances   in   which   an   ‘authorization’   has   to   be
granted   and   the   circumstances   in   which   a   sanction   has   to   be
30

granted,   are   different.   Similarly,   the   grant   of   sanction   should   be
preceded   by   an   opportunity   of   hearing,   but   the   issue   of
authorization does not require any prior opportunity to the company
to make a representation.  Sub-sections (5) and (6) of section 439 of the 1956 Act and
sub-section (3) of section 272 of the 2013 Act are presented in a table for easy reference:
439.   Provisions   as   to   applica ­
tions for winding up
(1) ………….
(2) ………….
(3) ………….
(4) ………….
(5    )   Except in the case where he
is   authorised   in   pursuance   of
clause (f) of sub­ section (1) , the
Registrar shall be entitled to pre­
sent   a   petition   for   winding   up   a
company   only   on   the   grounds
specified in   clauses (b), (c), (d), (e)
and (f)] of section 433: 
Provided   that   the   Registrar   shall
not   present   a   petition   on   the
ground   specified   in   clause   (e)
aforesaid,   unless   it   appears   to
him   either   from   the   financial
condition of the company as dis ­
closed   in   its   balance   sheet   or
from the report of  
  a special audi ­
tor   appointed   under   section
233A   or   an   inspector]   appointed
under   section   235   or   237,   that
the company is unable to pay its
debts: 
Provided   further   that   the   Reg ­
istrar shall obtain the previous 272. Petition for winding up
(1) ………..
(2) ………..
(3)   The   Registrar   shall   be   enti ­
tled   to   present   a   petition   for
winding   up   under   section   271,
except   on   the   grounds   specified
in clause (a)   of that section:
Provided that the Registrar shall
obtain   the   previous   sanction   of
the   Central   Government   to   the
presentation of a petition:
Provided   further   that   the
Central   Government   shall   not
accord   its   sanction   unless   the
company   has   been   given   a
reasonable   opportunity   of
making representations.
31

sanction   of   the   Central   Gov ­
ernment to the presentation of
the   petition   on   any   of   the
grounds aforesaid .
(6)   The Central Government shall
not   accord   its   sanction   in   pur ­
suance   of   the   foregoing   proviso,
unless   the   company   has   first
been   afforded   an   opportunity
of   making   its   representations ,
if any.  
  
6.20 It   may   be   seen   from   the   above   table   that   the   second
proviso to sub­section (5) of section 439 of the 1956 Act became the
first   proviso   to   sub­section   (3)   of   Section   272   of   the   2013   Act   and
sub­section   (6)   of   Section   439   became   the   second   proviso   to   sub­
section   (3)   of   Section   272.   They   respectively   prescribe,   (i)   that   for
presenting a petition for winding up, the Registrar requires previous
sanction   of   the   Central   Government;   and   (ii)   that   before   granting
sanction,   the   Central   Government   should   give   a   reasonable
opportunity to the company to make a representation.   
6.21 Thus,   in   effect,   the   distinction   between   the   procedure   to
be   followed   by   the   Registrar   and   the   procedure   to   be   followed   by
32

“any   other   person   authorised   by   the   Central   Government”,   for
presenting   a   petition   for   winding   up,   is   maintained   as   such.   If   the
petition   is   to   be   filed   by   the   Registrar,   it   should   be   preceded   by   2
things namely,  (i)  a sanction; and  (ii)  an opportunity to the company
to object. If the petition is to be filed by “any other person”, there is
only   one   requirement   namely   that   of   authorization   by   the   Central
Government by notification.   
6.22 The   above   discussion   would   show  that   in  contrast   to   the
1956   Act,   the   2013   Act   provides   2   different   routes   for   the   winding
up of a company on the ground of fraud. They are: 
(i)   winding   up   under   clause   (c)   of   Section   271   (directly   on   the
ground   of   fraud)   by   any   person   authorised   by   the   Central
Government by notification; or 
(ii)   winding  up  under  clause (e) of  Section  271 (on  the  ground
that   it   is   just   and   equitable   to   wind   up)   in   terms   of   Section
224(2)(a) on the basis of a report of investigation under Section
213(b). 
33

6.23 If   the   second   route   is   taken,   then   the   power   of   the
Tribunal to order winding up, may perhaps stand circumscribed by
sub­section  (2) of Section 273 which states that  w here a petition  is
presented on just and equitable ground, the Tribunal may refuse to
make an order of winding up, if it is of the opinion that some other
remedy   is   available   to   the   petitioners   and   that   they   are   acting
unreasonably in seeking  to have the company  wound up instead of
pursuing   the   other   remedy.   But   the   question   whether   such   a
restriction could be applied to cases of fraud, established by reports
of investigation, may have to be tested in appropriate cases. 
6.24 Having seen the distinguishing features between the 1956
Act   and   the   2013   Act,   with   regard   to   the   question   of   availability   of
fraud as a ground for the winding up of a company, let us now take
up for  consideration, the grounds of attack to the impugned orders
one after another.  
7. Advertisement of the Company Petition
Admittedly,  the  petition  for   winding  up,  in  this  case, was
34

never advertised nor even ordered to be advertised, either  upon the
admission   of   the   petition   or   anytime   thereafter.   It   is   therefore
contended   by   the   appellants   that   the   failure   to   comply   with   this
requirement which is mandatory, vitiates the whole proceedings.   
7.1 Under the 1956 Act regime, the mode of proceedings to be
held for winding up of a company, was prescribed by the Companies
(Court)   Rules,   1959   issued   in   exercise   of   the   powers   conferred   by
sub­sections   (1)   and   (2)   of   Section   643   of   the   1956   Act.   Rule   10   of
these   1959   Rules   prescribed   that   all   applications   under   the   Act,
unless   otherwise   provided   by   the   Rules   or   permitted   by   the   Judge,
shall be made   (i)   either by a petition; or   (ii)   by a Judge’s summons.
Rule 11(a) contains a list of about 23 types of applications under the
Act,   which   shall   be   made  by   way   of   petition.   Rule  11(b)  states  that
all   applications   other   than   those   covered   by   Rule   11(a),   shall   be
made by a Judge’s summons. 
7.2 After   making   a   distinction   between   (i)   applications   to   be
made by way of a petition; and  (ii)  applications to be made by way of
35

a Judge’s summons in Rule 11, the Companies (Court) Rules, 1959
speaks about advertisement in Rules 23 and 24. Rules 23 and 24 of
the Companies (Court) Rules, 1959 read as follows:­
“ 23. Summons   for   direction   ­   (a)   Where   a   petition   is
presented under paragraphs (1), (3), (4), (22) and (23) of Rule
11, an application shall, in every case, be made by summons
to   the   Judge   in   Chambers   for   directions   as   to   the
advertisement   of   the   petition,   the   notices   to   be   served   and
the proceedings to be taken. Except where, in any particular
case,   a   different   form   is   prescribed   by   these   rules,   such
summons shall be in Form No. 4. (b) The summons shall be
posted for hearing before the Judge in Chambers at the next
Chamber   sittings,   and   the   Judge   may   make   such   orders
thereon   and   may   give   such   directions   as   may   seem   to   him
appropriate.   (c)   No   summons   for   directions   shall   be
necessary   in   the   case   of   other   petitions,   but   the   petition
shall,   upon   admission,   be   placed   before   the   Judge   in
Chambers for fixing the date of hearing and directions as to
the   advertisement   of   the   petition   and   the   notices   to   be
served, and such other directions as may be necessary. 
24.   Advertisement   of   petition   ­   (1)   Where   any   petition   is
required   to   be   advertised,   it   shall,   unless   the   Judge
otherwise   orders,   or   these   rules   otherwise   provide,   be
advertised   not   less   than   fourteen   days   before   the   date   fixed
for hearing, in one issue of the Official Gazette of the State or
the   Union   Territory   concerned,   and   in   one   issue   each   of   a
daily   newspaper   in   the   English   language   and   a   daily
newspaper   in   the   regional   language   circulating   in   the   State
or   the   Union   Territory   concerned,   as   may   be   fixed   by   the
Judge.   (2)   Except   in   the   case   of   a   petition   to   wind­up   a
company   the   Judge   may,  if   he  thinks  fit,  dispense   with  any
advertisement required by these rules.” 
7.3 As   could   be   seen   from   Rule   23,   the   summons   for
36

directions as to advertisement of the petition, dealt with by Rule 23,
correlates only to 5 out of the 23 items listed in Rule 11(a). These 5
items mentioned in Rule 23, are those found in serial Nos.1, 3, 4, 22
and   23   of   Rule   11(a).   A   petition   for   winding   up   falls   under   item
No.15   of   Rule   11(a).   Therefore,   Rule   23   has   no   application   to   a
petition for winding up.
7.4 Rule   24   deals   with   advertisement   of   a   petition.   But   Rule
24(1)   begins   with   the   words   “ where   any   petition   is   required   to   be
advertised ”. Therefore, Rule 24 will also have no application  unless
there   is   any   provision   in   the   Act   or   the   Rules   which   require   the
petition to be advertised.
7.5 Part   III   of   the   1959   Rules   contains   special   provisions
relating to proceedings for winding up. This part comprises of Rules
95 to 338. Rule 95 requires a petition for winding up to be in Form
No.45,   46   or   47.   Rule   96   speaks   about   admission   of   petition   and
directions as to advertisement. It reads as follows:­
“ 96. Admission   of   petition   and   directions   as   to
advertisement   ­   Upon   the   filing   of   the   petition,   it   shall   be
posted   before   the   Judge   in   Chambers   for   admission   of   the
37

petition   and   fixing   a   date   for   the   hearing   thereof   and   for
directions   as  to  the  advertisements   to  be  published   and  the
persons,   if   any,   upon   whom   copies   of   the   petition   are   to   be
served.   The   Judge   may,   if   he   thinks   fit,   direct   notice   to   be
given   to   the   company   before   giving   directions   as   to   the
advertisement of the petition.”  
Rule 99 deals with advertisement and it reads as follows:­
“ 99.   Advertisement   of   petition   ­   Subject   to   any   directions
of the Court, the petition shall be advertised within the time
and   in   the   manner   provided   by   rule   24   of   these   rules.   The
advertisement shall be in Form No. 48.”
7.6 It   must   be   remembered   that   Chapter   II   of   Part   VII   of   the
1956   Act,   did   not   contain   a   provision   in   itself,   requiring   the
advertisement   of   a   petition   for   winding   up.   But  Section  643(1)   read
with   Clause   (i)   of   Sub­section   (2)   of   Section   643   of   the   1956   Act
delegated to the Rule   making power of the Central Government, the
power   to   prescribe   the   mode   of   proceedings   to   be   held   for   the
winding up of a company by the Court. Therefore it is the Rules that
speak about advertisement.
7.7 Coming to the   rules framed   under the   2013 Act, Sub­sec ­
tions (1) and (2) of Section 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
38

Central Government has issued a set of Rules known as the Compa ­
nies (Winding  up) Rules, 2020. Rules 5 and 7 of these Rules speak
about advertisement. These Rules read as follows:
“ 5. Admission   of   petitioner   and   directions   as   to
advertisement .­   Upon   filing   of   the   petition,   it   shall   be
posted before the Tribunal for  admission of the petition and
fixing   a   date   for   the   hearing   thereof   and   for   appropriate
directions   as  to  the  advertisements   to  be  published   and  the
persons,   if   any,   upon   whom   copies   of   the   petition   are   to   be
served,   and   where   the   petition   has   been   filed   by   a   person
other   than   the   company,   the   Tribunal   may,   if   it   thinks   fit,
direct   notice   to   be   given   to   the   company   and   give   an
opportunity of being heard, before giving directions as to the
advertisement of the petition, if any, and the petitioner shall
bear all costs of the advertisement.
7. Advertisement of petition. ­ Subject  to any directions
of the Tribunal, notice of the petition shall be advertised not
less   than   fourteen   days   before   the   date   fixed   for   hearing   in
any   daily   newspaper   in   English   and   vernacular   language
widely circulated in the State or Union territory in which the
registered   office   of   the   company   is   situated,   and   the
advertisement shall be in Form WIN 6.”
7.8 In   view   of   the   language   employed   in   Rule   7   of   the   2020
Rules,   it   is   contended   by   Shri   Arvind   P.   Datar,   learned   senior
counsel   appearing   for   DEMPL,   that   there   is   no   option   available   to
NCLT   but   to   order   the   advertisement   of   the   petition.   Rule   7   begins
with the words “ subject to any directions of the Tribunal, notice of the
39

petition   shall   be   advertised” .   These   words,   in   the   contention   of   the
learned   senior   counsel   for   DEMPL,   indicate   the   availability   of   a
limited   elbow   space   to   the   Tribunal   to   issue   directions   about   the
newspaper   in   which   the   advertisement   is   to   be   issued   and   the
particular   edition  (State,  Regional   or  National  Edition)   in  which   the
advertisement   shall  be  published.  In   other  words,  his   contention  is
that ordering the publication of an advertisement is mandatory, but
smaller   things  such   as  the   particular   newspaper,   particular  edition
etc., are left to  the  discretion  of  the Tribunal  to  be  exercised in  the
form of directions.
7.9 Before   we   test   the   correctness   of   the   above   argument,   it
may be necessary to look at the anatomy of Rule 5 which prescribes
the   procedure   to   be   followed   by   the   Tribunal,   upon   the   filing   of   a
petition   for   winding   up.   The   step­by­step   procedure   prescribed   in
Rule 5 is as follows:­ 
(1)   The   petition   should   first   be   posted   before   the   Tribunal   for
admission. 
40

(2)   The   purpose   of   posting   the   petition   for   admission   is   three­
fold,   namely ,   (i)   fixing   a   date   for   hearing   of   the   petition;
(ii)  issuing appropriate directions as to the advertisement to be
published;   and   (iii)   indicating   the   persons   upon   whom   the
copies of the petition are to be served. 
(3)    On the date when the petition is posted for admission,  the
Tribunal   may   direct   notice   to   be   given   to   the   company
and   also   provide   an   opportunity   of   being   heard   before
giving directions as to the advertisement of the petition .
7.10 The essence of Rule 5 is to provide an opportunity of being
heard to the company sought to be wound up, even before directions
as   to   the   advertisement   of   the   petition   are   given.   The   last   limb   of
Rule   5   speaks   about  the   discretion  vested   in   the   Tribunal   to   direct
notice   to   be   given   to   the   company   and   to   give   an   opportunity   of
being   heard   before   giving   any   directions   as   to   the   advertisement   of
the   petition.   This   last   limb   of   Rule   5   provides   the   clue   about   the
purpose of advertisement.
41

7.11 One way of looking at the requirement of an advertisement
is   that   it   provides   an   opportunity   to   all   the   stakeholders   such   as
(i)   creditors;   (ii)   workers;   (iii)   suppliers;   (iv)   customers;   and   (v)   the
general   public,   either   to   support   or   oppose   the   proceedings   for
winding   up.   There   is   also   another   way   of   looking   at   the   object   of
issuing   an   advertisement   of   the   petition   for   winding   up.   The
advertisement   serves   as   a   warning/notice   or   red   alert   to   all   those
dealing with the company so that they know that there could be an
element of risk in dealing with the company.
7.12 After   all,   the   winding   up   of   a   company   is   like   the
insolvency   of   an   individual.   The   advertisement   of   the   petition   for
winding   up,   not   merely   serves   as   an   opportunity   to   support   or
oppose   winding   up,   but   also   harms   the   reputation   of   the   company
and sends shock waves in the stock market, if it is a listed company
or   among   the   stakeholders   who   have   dealings   with   the   company.
This is why an opportunity of being heard is contemplated in Rule 5,
before ordering the advertisement of the petition. This is exactly the
42

reason why  this Court held in   National Conduits (P) Ltd.   vs.   S.S.
Arora 8
 as follows:­
“ xxxxx xxxxx   xxxxx
The   view   taken   by   the   High   Court   that   the   Court   must,   as
soon   as   the   petition   is   admitted,   advertise   the   petition   is
contrary   to   the   plain   terms   of   Rule   96.   Such   a   view,   if
accepted,   would   make   the   Court   an   instrument,   in
possible  cases,  of  harassment  and  even  of  blackmail, for
once   a   petition   is   advertised,   the   business   of   the
Company is bound to suffer serious loss and injury. ”   
7.13 The   decision   is   National   Conduits   (P)   Ltd .   (supra)   was
followed   in   Cotton   Corporation   of   India   Limited   vs.   United
Industrial   Bank   Ltd.   &   Ors. 9
  In   fact,   the   argument   of   the
companies sought to be wound up in   Cotton Corporation of India
Limited   (supra)   was   that   “ the   presentation   of   winding   up   petition
coupled   with   advertisement   thereof   in   newspapers,   has   certain
serious   consequences   on   the   status,   standing,   financial
viability   and   stability   and   operational   efficiency   of   the
company .”   While   dispelling   the   apprehensions   so   expressed,   this
8     AIR 1968 SC 279
9     (1983) 4 SCC 625
43

Court   relied   upon   the   decision   in   National   Conduits   (P)   Ltd .
(supra) to say that  the apprehensions stood removed by taking a
view that advertisement is not automatic .
7.14 Therefore,   the   way   in   which   the   requirement   of
advertisement   has   been   viewed   by   Courts   is   that   advertisement
causes more harm to the company than the benefit that it brings to
the company. Hence the argument of the appellant in this case that
the failure to advertise the petition was prejudicial to their interest,
goes contrary to one of the important purposes of the advertisement
and the chilling effect that it is supposed to have on the company.   
7.15 It is no doubt true that in   National Conduits,   this Court
was   concerned   with   an   appeal   arising   out   of   an   order   of   the   Delhi
High Court, holding that once a petition is admitted to file, the Court
is   bound   forthwith   to   advertise   the   petition.   Interestingly,   such   an
order   was   challenged   by   the   Company   itself   on   the   ground   that
advertisement   was   prejudicial   to   them.   While   considering   the
challenge,   in   terms   of   Rule   24(2),   this   Court   held   in   National
44

Conduits   (in   paragraph   4)   that   a   petition   for   winding   up   cannot   be
placed for hearing before the Court, unless the petition is advertised.
7.16 In   IDBI   Bank   Ltd.   vs.   the   Official   Liquidator 10
,
authored   by   one   of   us   (VRS,   J.)   as   a   Company   Judge   in   the   High
Court of Judicature at Madras, it was held that Rule 99 of the 1959
Rules   makes   it   mandatory   for   an   advertisement   to   be   issued   and
that Rule 24(2) does not confer  any  power even upon the Company
Court   to   dispense   with   any   advertisement,   in   the   proceedings   for
winding up. It was also pointed out in   IDBI Bank Ltd.   (supra) that
Rule 100(2) which prohibits the withdrawal of a winding up petition
before   the   date   fixed   in   the   advertisement   for   the   hearing   of   the
parties,   also   provided   a   clue   about   the   mandatory   nature   of   the
requirement to  advertise. In the  aforesaid decision, Rule 101 which
provides   for   the   substitution   of   a   creditor   or   contributory   in   the
place   of   the   original   petitioner,   upon   his   failure   to   advertise,   was
also   taken   note  of.  Rule   101  of  the   Companies   (Court)   Rules,   1959
reads as follows:
10     2013(6) CTC 40
45

“ Rule   101.   Substitution   of   creditor   or   contributory   for
original petitioner . – Where a petitioner. – 
(1) is not entitled to present a petition, or
(2) fails to advertise his petition within the time prescribed
by these rules or by order of court or such extended time as
the court may allow, or
(3) consents   to   withdraw   the   petition,   or   to   allow   it   to   be
dismissed, or  the hearing  to  be adjourned  or  fails to  appear
in support of his petition when it is called on in court on the
day   originally   fixed   for   the   hearing   thereof,   or   any   day   to
which the hearing has been adjourned, or 
(4) if appearing, does not apply for an order in terms of the
prayer of his petition
or
where   in   the   opinion   of   the   court   there   is   other   sufficient
cause   for   an   order   being   made   under   this   rule,   the   court
may, upon such terms as it may think just, substitute as pe ­
titioner   any   creditor   or   contributory   who,   in   the   opinion   of
the court, would have a right to present a petition, and who
is desirous of prosecuting the petition.” 
7.17 In  the light  of the aforesaid Rule 101 also,  it was  held in
IDBI   Bank   Ltd.,   that   the   requirement   of   advertisement   was
mandatory.   While   coming   to   the   said   conclusion,   the   Madras   High
Court   also   took   note   of   the   difference   of   opinion   in   this   regard
between the High Courts of Allahabad and Gujarat on the one hand
and the High Court of Delhi on the other hand, with respect to the
power of the Court to dispense with the publication of advertisement
in   the   official   Gazette.   Paragraphs   53   to   55   of   the   decision   of   the
46

Madras   High   Court   in   IDBI   Bank   Ltd.   is   reproduced   for   easy
reference as follows:­
“ 53.   In U.P. Twiga Fiberglass Ltd vs. Parekh Marketing Pvt.
Ltd   {1986   (59)   CC   886},   a   Division   Bench   of   the   Allahabad
High Court considered on appeal, a question, among others,
as   to   whether   the   non­publication   of   the   advertisement   in
the   Gazette   would   be   violative   of   Rule   24.   In   that   case,   the
Company Judge ordered the publication of advertisements in
one   English   Daily   and   one   Vernacular   Daily,   but   not   in   the
Gazette.   The   Division   Bench   of   the   Allahabad   High   Court
held that Rule 24(1) contains a rider "unless the Judge oth ­
erwise   orders"   and   that   Rule   99   also   speaks   about   "subject
to any directions of the Court". A similar view with regard to
the power of the Company Court to dispense with the publi ­
cation   of   advertisement   in   the   Government   Gazette   was
taken by a Division Bench of the Gujarat High Court in   Plas ­
tisac   P.   Ltd   vs.   Gujarat   Lease   Finance   Ltd   {2000   (101)   CC
334   (Guj.)}.   But   a   Division   Bench   of   the   Delhi   High   Court
disagreed   with   the   views   expressed   by   the   Allahabad   and
Gujarat   High   Courts,   with   regard   to   the   power   of   the   Com ­
pany Court to dispense with the publication of advertisement
in   the   Official   Gazette.   In   Lt.   Col.   R.K.Saxena   vs.   Imperial
Forestry   Corporation   {2001   (107)   CC   401   (Del.)},   a   Division
Bench of the Delhi High Court, after a careful consideration
of Rules 96, 99 and 24 held that "the publication of the ad ­
vertisement   of   a   petition   for   winding   up   is   mandatory,   even
in respect of the Official Gazette". On the scope of the discre ­
tion conferred by Rule 99, the Delhi High Court held that the
discretion   is   limited   only   to   the   extent   of   deciding   at   what
stage the petition is to be advertised. The contention that the
Company Court has inherent powers by virtue of Rule 9 even
to   dispense   with   the   requirement   of   Rule   24,   was   also   re ­
jected   by   the   Delhi   High   Court   on   the   ground   that   "if   a
statute requires a thing to be done in a particular manner, it
shall be done in that manner or not at all".
54. Though there was a difference of opinion between the Al ­
lahabad   and   Gujarat   High   Courts   on   the   one   hand   and   the
47

Delhi   High   Court   on   the   other   hand,   with   regard   to   the
power   to   dispense   with   the   publication   of   advertisement   in
the   Official   Gazette,   all   these   Courts   were   unanimous   in
their opinion at least with regard to the mandatory nature of
the   requirement   of   publication   of   advertisements,   in   one
English   Daily   and   one   Vernacular   Daily   as   ordered   by   the
Company Judge. Therefore, it is clear that publication of ad ­
vertisements is mandatory. Irrespective of whether the Court
has   any   discretion   to   dispense   with   the   publication   in   the
Gazette  or   not,   the   publication  of  advertisements   at   least   in
newspapers   is   mandatory   and   the   failure   of   the   petitioning
creditor   to   comply   with   this   requirement   despite   a   positive
order to that effect, is fatal to his petition.
55.   In   Falcon   Gulf   Ceramics   Ltd   vs.   Industrial   Designs   Bu ­
reau   {1996   (86)   CC   207   (Raj.)},   a   Division   Bench   of   the   Ra ­
jasthan High Court set aside an order of winding up passed
by the Company Court, on the sole ground that the winding
up   order   was   not   preceded   by   an   advertisement.   The   Divi ­
sion   Bench   of   the   Rajasthan   High   Court   held   in   that   case
that advertisement of a petition was imperative in view of the
provisions of Rule 96 read with Rule 99. For holding so, the
Division   Bench   of   the   Rajasthan   High   Court   relied   upon
paragraph 1463 of Halsbury's Laws of England (4th Edition),
which stated that non­compliance with these provisions is a
ground on which the Court shall reject the petition. After cit ­
ing   the   relevant   passage   from   the   decision   of   the   Supreme
Court in National Conduits, the Division Bench held in para
16   of   its   decision   that   in   the   absence   of   advertisement   and
admission,   the   petition   for   winding   up   was   bound   to   be   re ­
jected.”
7.18 However,   when   the   decision   of   the   Company   Judge   in
IDBI  Bank Ltd.   was assailed in an intra­court appeal, the Division
bench   of   the   Madras   High   Court   held   in   Pradeep   D.   Kothari   vs.
48

IDBI Bank Ltd . 11
 as follows:
“ 31.   Therefore,   to   our   minds,   two   aspects   would   arise   for
consideration  given  the  fact  and  circumstances  obtaining   in
the   instant   case.   First,   if,   winding   up   is   not   advertised,   by
the   original   petitioner   as   directed,   can   the   Court   direct   the
PL to advertise the petition, having regard to the fact that the
proceedings are inter alia for the benefit of creditors at large
and not one single creditor ?
31.1. The answer to this poser, to our minds, has to be in af ­
firmative as there is no bar in the Rules which prohibits a PL
from   advertising   the   Company   Petition   in   such   like   circum ­
stances,   though,   ordinarily,   in   practice,   Company   Petitions
are advertised by the petitioner who institutes the action. As
alluded   to   above,   the   Rules   do   not   bar   the   Company   Court
from   directing   the   PL   to   advertise   the   petition.   The   reason,
why we hold this view is plainly this, that, while, adver ­
tisement   of   the   petition   is   compulsory   as   winding   up
proceedings are proceedings in rem and therefore should
receive   the   widest   of   publicity   enabling   all   stakeholders
to have notice of the proceedings, there is no such stipu ­
lation in the Rules that once, the winding up petition is
admitted   by   a   Court,   it   can   in   no   circumstances   move
forward,   unless   an   advertisement   is   taken   out   by   the
original   petitioner   or   a   suitable   substituent   who   fulfills
the qualifications provided in Rule 101(4) .”
7.19 But   the   Judgment   of   the   Company   Judge   of   the   Madras
High   Court   in   IDBI   Bank   Ltd.     and   the   Judgment   of   the   Division
Bench in   Pradeep D. Kothari , arose out of proceedings for winding
up,   in   which   a   specific   order   directing   the   publication   of   the
11     2018 (1) CTC 136
49

advertisement had been made by the Company Court at the time of
admission.   However,   the   said   direction   was   omitted   to   be   complied
with, by the petitioning creditor. Therefore, the crucial question that
fell   for   consideration   in   that   case   was   as   to   how   a   company   Judge
should   proceed,   in   circumstances   where   the   petitioning   creditor
loses   interest   in   prosecuting   the   petition   further   and   abandons   the
proceedings   without   carrying   out   the   advertisement.   This   question
assumed   significance   in   the   light   of   the   fact   that   the   failure   of   one
petitioning   creditor   cannot   result   in   serious   prejudice   to   a   whole
body of creditors, in a  proceedings in rem. 
7.20 The   above   decision   of   the   Division   Bench   of   the   Madras
High   Court   in   Pradeep   D.   Kothari   was   assailed   before   this   Court.
While upholding the decision of the Division Bench, in its decision in
IDBI   Bank   Ltd.   vs.   the   Official   Liquidator 12
,   this   Court   held   as
follows:
“ 14.3. Against   this   backdrop,   the   crucial   question   that
arises for our consideration is whether a winding up petition
can be dismissed solely on the ground lack of a prosecuting
creditor under Rule 101, or whether the Company Court has
12     (2020) 15 SCC 517
50

the   power   to   direct   the   publication   of   an   advertisement   by
the   Liquidator   of   the   company,   especially   in   cases   where
other   unsatisfied   creditors   still   remain.   For   answering   this
question,   it   is   important   to   bear   in   mind   that   winding
proceedings   are   proceedings   in   rem  and   have   an   impact
on the rights of people, in general. Thus, it is mandatory
to   advertise   such   proceedings   so   as   to   ensure   that   they
receive   the   widest   possible   publicity   and   all   relevant
stakeholders have adequate notice.    This implies that in a
situation where the petitioning  creditor fails to advertise the
petition and no other creditor or contributory comes forward
to   prosecute   it,   Rule   101   should   not   be   read   in   a   manner
that   absolutely   bars   the   continuation   of   a   winding   up
petition.     This   is   particularly   so   when   there   are   unsatisfied
creditors   who   should   have   been   given   an   opportunity   to
prosecute the petition, but were deprived of the same due to
the   failure   to  advertise.     Indeed,   Rule   101   is   only   limited   to
instances where the petitioning creditor fails to advertise the
petition.     However,   there   is   nothing   in   the   language   of   Rule
24,   96   or   99   to   indicate   that   only   such   petitioning   creditor
can advertise the petition.   In our considered opinion, given
the   absence   of   a   specific   provision   mandating   that   the
petition   can   only   be   advertised   by   the   petitioning   creditor,
the   Company   Court   has   the   discretion   to   direct   the
publishing of an advertisement to secure the interest of other
creditors.     In   such   situations,   the   winding   up   proceedings
cannot be dismissed, as it would frustrate the very objective
of securing the interest of all creditors.
14.4. In   the   light   of   this   discussion,   we   find   that   it
would   be   unjust   to   dismiss   the   winding   up   petition   in   the
instant   case   solely   on   the   ground   that   there   is   no   other
person   willing   to  substitute   the   original  creditor   in   terms   of
Rule   101.     Here,   due   to   the   lack   of   advertisement   of   the
winding   petitions,   it   appears   that   the   secured   creditors   of
KOFL were  constrained  to approach  the DRT  for  recovery  of
their dues by filling OAs Nos. 139 of 2001, 978 of 2000 and
14   of   2002.     Further,   upon   learning   of   the   decision   of   the
Company   Judge   dated   04.10.2013,   dismissing   the   winding
up   petition,   one   of   the   secured   creditors   (SBI)   also
approached   the   DRT   to   secure   its   interest.     Based   on   this,
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vide  order  dated  13.12.2013,  the DRT  had  directed  that   the
amount   to   be   returned   to   KOFL   be   attached   so   that   the
banks have an opportunity to recover their dues from KOFL.
This   clearly   goes   on   to   show   that   the   secured   creditors   of
KOFL   were   relevant   stakeholders   who   were   affected   by   the
non­advertising   of   the   winding­up   petition.     They   should
have   been  called   upon  to  indicate  whether   they   would  want
to step into the shoes of the petitioning creditors as per Rule
101.”
7.21 Thus   even   in   a   case   where   the   Court   took   a   view   that
advertisement   is   mandatory,   not   only   in   view   of   the   prescription
contained in the Rules, but also in view of the specific order passed
by   the   Company   Court   at   the   time   of   admission,   directing   the
publication of the advertisement in specified newspapers, this Court
did   not   see   the   failure   to   publish   an   advertisement   as   something
that   would   lead   to   the   automatic   dismissal   of   the   petition   for
winding   up.   This   is   for   the   reason   that   the   advertisement   of   a
petition for winding up is perceived to be something that worked at
cross   purposes,   sometimes   beneficial   to   several   stakeholders   as   it
provides   an   opportunity   of   hearing   to   them   and   sometimes   as   a
measure  of harassment  of the  company. There  are  cases where  the
companies   themselves   have   opposed   the   advertisement   of   the
52

petition   on   the   ground   that   the   same   would   harm   their   reputation
and   cripple   their   commercial   activities.   There   are   also   cases   where
the   failure   to   advertise   has   led   to   some   of   the   creditors   not   having
any   notice   of   the   proceedings   and   thereby   suffering   prejudice.   This
is   why   another   Bench   of   the   Madras   High   Court   held   in
T.   Narayanan   vs.   the   Official   Liquidator 13
,   after   taking   note   of
the decision in  National Conduits,  as follows:
“ 38.   Assuming   that   the   mandatory   requirement   was   not
complied   with,   the   question   falling   for   consideration   is,   can
the   non­compliance   of   procedural   mandatory   requirement
would   ipso   facto   vitiate   the   winding   up   order   and   stall   fur ­
ther proceedings?.  The next question falling for considera ­
tion   is   ‘can   the   non­compliance   of   a   procedural   manda ­
tory requirement be a ground to set aside the winding up
order   after   three   years,   especially   when   the   appellant
had   the   opportunity   of   fighting   out   the   litigation   in   the
earlier round? ’
39. The purpose of advertisement is to give an opportunity to
the   creditors/debtors/Company   to   put   forth   their   case   be ­
fore   the   Court.   Assuming   that   the   procedural   mandatory
requirement   was   not   complied   with,   in   our   considered
view,   it   cannot   be   a   ground   to   set   aside   the   winding   up
order   after   three   years.   As   rightly   contended   by   the
learned Senior Counsel for the Official Liquidator, to sus ­
tain   the   allegations   of   violation   of   principles   of   natural
justice,   one   must   establish   prejudice.   When   fairness   is
shown   and   if   the   facts   and   circumstances   indicate   that
13     2012 (1) MLJ 59
53

the   Company/contributory   were   put   on   notice   and   that
no prejudice was caused to them, the Company/contrib ­
utory cannot complain of any procedural irregularity. ”
7.22 We   may   also   have   to   take   note   of   one   more   aspect.   The
Companies   Act,   2013   mandates   the   constitution   of   a   National
Company   Law   Tribunal   and   a   National   Company   Law   Appellate
Tribunal   to   exercise   and   discharge   such   powers   and   functions   as
may be conferred upon it by or under the Act. Section 424(1) makes
it clear   (i)   that the Tribunal and the Appellate Tribunal shall not be
bound   by   the   procedure   laid   down   in   the   Code   of   Civil   Procedure,
1908,   but   shall   be   guided   by   the   principles   of   natural   justice;   and
(ii)   that   subject   to   the   other   provisions   of   the   Act   and   of   any   rules
made   thereunder,   the   Tribunal   and   the   Appellate   Tribunal   shall
have power to regulate their own procedure.
7.23 While Section 468(1)   of   the   2013   Act   empowers   the
Central Government to make Rules consistent with the Code of Civil
Procedure,   providing   for   all   matters   relating   to   winding   up,   Section
469(1)   empowers   the   Central   Government   generally   to   make   Rules
54

for carrying out the provisions of the Act.
7.24 In   exercise   of   the   powers   conferred   by   Sections   468   and
469,   the   Central   Government   issued   the   Companies   (Winding   Up)
Rules 2020. Similarly, the Central Government issued another set of
Rules   called   the   National   Company   Law   Tribunal   Rules,   2016   (for
short   “NCLT   Rules   2016 ”)   in   exercise   of   the   powers   conferred   by
Section 469.  
7.25 Rule   35   of   the   National   Company   Law   Tribunal   Rules,
2016 deals with advertisement of petitions.  It reads as follows:­
“ 35.   Advertisement   detailing   petition.­   (1)   Where   any
application, petition or reference is required to be advertised,
it shall, unless the Tribunal otherwise orders, or these rules
otherwise   provide,   be   advertised   in   Form   NCLT­3A,   not   less
than fourteen days before the date fixed for hearing, at least
once   in   a   vernacular   newspaper   in   the   principal   vernacular
language   of   the   district   in   which   the   registered   office   of   the
company is situate, and at least once in English language in
an English newspaper circulating in that district.
(2) Every such advertisement shall state;­ 
(a)  the date on which the application, petition or reference
was presented; 
(b)  the name and address of the applicant, petitioner and
his authorised representative, if any; 
(c)  the   nature   and   substance   of   application,   petition   or
reference;
(d) the date fixed for hearing; 
55

(e)  a   statement   to   the   effect   that   any   person   whose
interest is likely to be affected by the proposed petition
or who intends either to oppose or support the petition
or   reference   at   the   hearing   shall   send   a   notice   of   his
intention to the concerned Bench and the petitioner or
his   authorised   representative,   if   any,   indicating   the
nature   of   interest   and   grounds   of   opposition   so   as   to
reach him not later than two days previous to the day
fixed for hearing. 
(3)  Where  the  advertisement  is being   given by   the  company,
then   the   same   may   also   be   placed   on   the   website   of   the
company, if any. 
(4)   An   affidavit   shall   be   filed   to   the   Tribunal,   not   less   than
three days before the date fixed for hearing, stating whether
the petition has been advertised in accordance with this rule
and whether the notices, if any, have been duly served upon
the persons required to be served: 
Provided   that   the   affidavit   shall   be   accompanied   with
such   proof   of   advertisement   or   of   the   service,   as   may   be
available. 
(5) Where the requirements of this rule or the direction of the
Tribunal,   as   regards   the   advertisement   and   service   of
petition,   are   not   complied   with,   the   Tribunal   may   either
dismiss   the   petition   or   give   such   further   directions   as   it
thinks fit.
(6) The Tribunal may, if it thinks fit, and upon an application
being   made   by   the   party,   may   dispense   with   any
advertisement required to be published under this rule.”
7.26 It   may   be   seen   from   Sub­rule   (1)   of   Rule   35   that   the
procedure   laid   down   in   Rule   35   is   applicable   to   cases   “ where   any
application, petition or reference is required to be advertised .”
7.27 The   requirement   to   advertise   a   petition   for   winding   up
56

does not flow out of the statute, but flows out of the Rules. Since the
requirement   to   advertise   a   petition   for   winding   up   is   stipulated   in
Rules 5 and 7 of the Companies (Winding  up) Rules, 2020, what is
prescribed in Rule 35 would cover even petitions for winding up.
7.28 If   so   understood,   Sub­rules   (5)   and   (6)   of   Rule   35   of   the
NCLT Rules 2016 would throw light upon the controversy on hand.
Sub­rule (5) makes it clear that even in cases where the 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. Sub­rule (6) confers
power upon the Tribunal even to dispense with any advertisement.
7.29 In   other   words,   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.
7.30 In   the   case   on   hand,   the   company   in   liquidation   was
incorporated on 17.12.2004, the Memorandum of Association of the
57

Company was subscribed to by two persons by name D. Venugopal
and   M.   Umesh.   They   subscribed   to   9000   equity   shares   and   1000
equity   shares   respectively   @   Rs.10   per   share.   Subsequently   six
individuals   by   name   Ramachandran   Vishwanathan,   Paresh   Shah
Natwarlal,   James   Fox,   MG   Chandrasekar,   Abhishek   Jain   and   L
Clarence   Irving   were   issued   with   equity   shares   on   31.12.2005.
Thereafter, two corporate entities, namely, Columbus Capital Devas
(Mauritius) Ltd. and the Telecom Devas Mauritius Ltd., were issued
Optionally   Convertible   Preference   Shares   and   equity   shares.
Subsequently, two other companies by name Deutsche Telecom Asia
Plc. Ltd. and Devas Employees Mauritius Pvt. Ltd. were issued with
equity   shares.   All   these   shareholders   are   aware   of   the   winding   up
proceedings   and   the   proceedings   are   fought   tooth   and   nail   by   one
shareholder DEMPL through Mr. Ramachandran Vishwanathan who
was also a shareholder. Another individual shareholder by name MG
Chandrasekar   has   filed   one   of  the   above  appeals  as   the  ex­director
of   the   company   in   liquidation.   Admittedly,   the   company   in
liquidation   does   not   have   any   creditors   or   customers   who   have
58

dealings   with   the   company.   In   other   words,   there   are   no
stakeholders who are prejudiced by the failure of NCLT to order the
publication of  advertisement of  the  petition.  Though  technically   the
Tribunal may not be correct in invoking “ useless formality theory ” in
cases   of   this   nature,   we   can   certainly   apply   the   test   of   prejudice,
especially   in   the   light   of   the   serious   nature   of   the   allegations   of
fraud, on the basis of which the company is sought to be wound up.
This is not a case where the company is sought to be wound up on
the ground of inability to pay debts or on just and equitable ground.
This   is   a   case   of   fraud   and   all   stakeholders   are   fully   aware   of   the
proceedings and they have even shown extreme urgency in enforcing
an ICC Arbitration award and 2 BIT awards, before the conclusion of
the winding up proceedings. Therefore, we are unable to sustain the
argument that the failure of the Tribunal to order the publication of
an advertisement rendered the entire proceedings unlawful. 
7.31 The Companies (Winding Up) Rules, 2020 contain a list of
Forms   in   which   all   the   proceedings   before   the   Tribunal   are   to   be
couched. While FORM WIN  1 prescribes the format of a petition for
59

winding up by a person other than the company and Forms WIN 2,
WIN 3 etc., prescribe the formats of certain other things, FORM WIN
11   prescribes   the   format   of   a   winding   up   order.   The   National
Company   Law   Tribunal   is   obliged   under   Rule   17(1)   of   the
Companies   (Winding   Up)   Rules   2020,   to   prepare   the   order   for
winding   up   in   FORM   WIN   11   with   such   variations   as   may   be
necessary.   On   the   basis   of   the   contents   of   FORM   WIN   11,   it   was
argued   by   the   learned   counsel   for   the   appellants   that   paper
publication   of   the   advertisement   of   the   winding   up   petition   is
mandatory.
7.32 FORM WIN 11 reads as follows:­
FORM WIN 11
[See rule 17(1)]
Before The National Company Law Tribunal
Bench At……………………………
In The Matter of­­­­­Ltd (Give The Name of The Company) 
(Company incorporated under Companies Act,……………….. )
Company Petition No…../20……..
 ……………… .‘Petitioner
Before the Hon'ble Mr. ­­­­­
Dated…………
Winding up Order
Upon   the   petition   of……………..   presented   on   the   day
of……… .20 , upon hearing Shri ……………representative for
the   petitioner   Shri   representative   for   the   creditors   (or
contributors)   supporting   the   petition,
60

Shri………………………..   representative   for   the   creditors   (or
contributors)   opposing   the   petition,   and   Shri…………………
representative   for   the   company,   upon   reading   the   said
petition,   the   affidavit   of   A.B.,   filed   the   ………………….day
of……………...   20   verifying   the   said   petition,   the   affidavit   of
x.y.,   filed   the   .......   day   of……………   20   .....     the   (state   or
union territory)   paper publication of the advertisement of
the said petition  this Tribunal doth order: 
*(1)   That   the   said   company   be   wound   up   by   this   Tribunal
under the provisions of the Companies Act, 2013; and 
(2) That the provisional liquidator or Company Liquidator as
the   case   may   be   as   liquidator   of   the   company   aforesaid
forthwith   take   charge   of   all   the   property   effects   actionable
claims and books and papers of the said company; 
**(3)   That   the   provisional   liquidator   or   Company   Liquidator
shall   cause   a   sealed   copy   of   this   order   to   be   served   on   the
company by pre’paid registered post; 
(4)   That the petitioner do advertise within fourteen days
from   this   date   a   notice   in   the   prescribed   form   of   the
making of this order in one issue (each) of. .. (here enter
the newspaper or newspapers in which the order is to be
advertised); 
(5)   That   the   said   petitioner   do   serve   a   certified   copy   of   this
order   on   the   Registrar   of   Companies   not   later   than   one
month from this date; and
(6) That the cost of the said petition shall be paid out of the
assets of the said company. 
Dated this …...... day ….... 20. 
(By the Tribunal)
Registrar 
*Where   the   company   ordered   to   be   wound   up   is   a   Banking
Company or an Insurance Company add at the end of clause
(1)   "and   the   Banking   Companies   Act,   1949'   or   'and   the
Insurance Act 1938" as the case may be. 
**   To   be   inserted   only   where   the   company   is   not   the
petitioner. 
7.33 The   above   FORM   WIN   11   contains   a   reference   to
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advertisement,   in   two   places.   In   the   first   place,   it   is   found   in   the
preamble portion of the format, beginning with the words “upon the
petition…..”.   In   the   second   place,   a   reference   to   advertisement   is
found   in   paragraph   4   of   FORM   WIN   11.   While   the   advertisement
referred to in the preamble of FORM WIN 11, obviously relates to the
advertisement   of   the   petition,   the   advertisement   referred   to   in
paragraph 4 of WIN 11 relates to the advertisement of the making of
the order of winding up. It is needless to say that the advertisement
of the petition for winding  up is different from  the advertisement of
an order of winding up.
7.34 In so far as the advertisement of the order of winding up is
concerned, Rules 19 and 20 occupy the field. Rules 19 and 20 of the
Companies (Winding Up) Rules, 2020 read as follows:­
“ 19. Directions on making winding up order.   ­ At the time
of making the winding up order or at any time thereafter the
Tribunal   shall   give   directions   to   the   petitioner   as   to   the
advertisement   of   the  order  and   the   persons  if   any   on  whom
the   order   shall   be   served   and   the   persons   if   any   to   whom
notice   shall   be   given   of   the   further   proceedings   in   the
liquidation and such further directions as may be necessary.
20. Advertisement of order.   ­ Save as otherwise ordered by
the   Tribunal   the   order   for   the   winding   up   of   a   company   by
the   Tribunal   shall   within   fourteen   days   of   the   date   of   the
62

order   be   advertised   by   the   petitioner   in   a   newspaper   in   the
English   language   and   a   newspaper   in   vernacular   language
widely   circulating   in   the   State   or   the   Union   territory   where
the registered office of the company is situated and shall be
served by the petitioner upon such person if any and in such
manner   as   the   Tribunal   may   direct   and   the   advertisement
shall be in Form WIN 14”.
7.35 Rule   19   mandates   the   Tribunal,   at   the   time   of   making
of the winding up order or any time thereafter  to give directions
to   the   petitioner   as   to   the   advertisement   of   the   order.   This   is   why
paragraph 4 of FORM WIN 11 forms part of the operative portion of
the FORM.
7.36 In   so   far   as   the   reference   to   advertisement   contained   in
the preamble of FORM WIN 11 is concerned, it is merely one of the
several items that the Tribunal may take into account for passing a
winding   up   order.   The   items   mentioned   in   the   preamble   of   FORM
WIN   11   are,   (i)   the   petition   for   winding   up;   (ii)     the   hearing   of   the
representative   for   the   petitioner;   (iii)   the   hearing   of   the
representative   for   the   creditors   or   contributories   supporting   the
petition;   (iv)   the   hearing   of   the   representative   for   the   creditors   or
63

contributories   opposing   the   petition;   (v)   the   hearing   of   the
representative of the company;   (vi)  the affidavits; and  (vii)  the paper
publication of the advertisement of the petition.
7.37 Thus   the   preamble   merely   contains   a   list   of   several
matters   that   may   be   taken   into   account   by   the   Tribunal   before
passing an order of winding up. All those items need not necessarily
be present in all cases. For instance, there may be cases where the
petition   may   not   be   supported   by   all   creditors   or   contributories.
There may also be cases where the petition may not be opposed by
all   creditors   or   contributories.   However,   there   is   a   mention   in   the
preamble   about   the   hearing   of   the   representatives   of   creditors
supporting   or   opposing   the   winding   up   petition.   Therefore,   we
cannot   hold   that   merely   because   something   is   mentioned   in   the
preamble of Form WIN­11, it becomes mandatory. 
8. LIMITATION
8.1 The   second   ground   on   which   the   impugned   orders   are
assailed,   is   that   the   petition   under   Section   271(c)   was   hopelessly
64

barred by limitation. Section 433 of the Companies Act, 2013 makes
the provisions of the Limitation Act, 1963 applicable to proceedings
or appeals before the Tribunal or the Appellate Tribunal as the case
may be. Therefore, it is the contention of the learned senior counsel
for the appellants that Article 137 of the Schedule to the Limitation
Act,   which   prescribes   a   period   of   limitation   of   3   years   for   any
application for which no period is prescribed elsewhere, is applicable
to the case on hand. The period of 3 years so prescribed, according
to   the   learned  Senior   Counsel   for   the  appellants,   in   cases  of   fraud,
would   start   running   from   the   date   stipulated   in   Section   17   of   the
Limitation Act, 1963. Section 17 reads as follows:
“ 17.   Effect  of   fraud   or  mistake. — (1)   Where,  in  the  case  of
any suit or application for which a period of limitation is pre ­
scribed by this Act,—
(a)   the suit or application is based upon the fraud of
the defendant or respondent or his agent; or
(b)   the   knowledge   of   the   right   or   title   on   which   a   suit   or
application is founded is concealed by the fraud of any
such person as aforesaid; 
or
(c)   the   suit   or   application   is   for   relief   from   the   conse ­
quences of a mistake; or
(d)   where   any   document   necessary   to   establish   the   right
of the plaintiff or applicant has been fraudulently con ­
cealed from him, 
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the   period   of   limitation   shall   not   begin   to   run   until   plaintiff
or   applicant   has   discovered   the   fraud   or   the   mistake   or
could, with reasonable diligence, have discovered it; or in the
case of a concealed document, until the plaintiff or the appli ­
cant   first   had   the   means   of   producing   the   concealed   docu ­
ment or compelling its production: 
Provided   that   nothing   in   this   section   shall   enable   any
suit   to be  instituted   or   application  to  be  made   to  recover   or
enforce   any   charge   against,   or   set   aside   any   transaction   af ­
fecting, any property which—
(i)   in  the  case  of   fraud,   has  been  purchased  for   valuable
consideration  by   a  person  who  was  not  a  party   to the
fraud and did not at the time of the purchase know, or
have   reason   to  believe,   that   any   fraud   had   been   com ­
mitted, or
(ii)   in   the   case   of   mistake,   has   been   purchased   for   valu ­
able   consideration   subsequently   to   the   transaction   in
which the mistake was made, by a person who did not
know, or have reason to believe, that the mistake had
been made, or
(iii)   in   the   case   of   a   concealed   document,   has   been   pur ­
chased for valuable consideration by a person who was
not a party to the concealment and, did not at the time
of   purchase   know,   or   have   reason   to   believe,   that   the
document had been concealed.
(2)   Where   a   judgment­debtor   has,   by   fraud   or   force,   pre ­
vented the execution of a decree or order within the period of
limitation,   the   court   may,   on   the   application   of   the   judg ­
ment­creditor made after the expiry of the said period extend
the period for execution of the decree or order: Provided that
such   application   is   made   within   one   year   from   the   date   of
the   discovery   of   the   fraud   or   the   cessation   of   force,   as   the
case may be.”
8.2 The   argument   of   Shri   Mukul   Rohatgi,   learned   Senior
Counsel   for   the   appellant   is   that   even   assuming   that   the   so   called
66

fraud   was   incapable   of   being   discovered   with   due   diligence,
limitation   would   start   running   at   least   from   the   date   of   actual
discovery  of the fraud. The date of actual discovery  of fraud cannot
be   postponed   beyond   11.08.2016,   which   was   the   date   on   which   a
charge   sheet   was   filed   in   the   criminal   case,   by   the   CBI   before   the
Special   Court.   Therefore,   it   is   the   contention   of   the   learned   senior
counsel for the appellants that the petition for winding up ought to
have   been   filed   at   least   on   or   before   10.08.2019.   However,   Antrix
applied to the Government of India only on 14.01.2021 for the grant
of   authorisation.   The   authorisation   was   issued   on   18.01.2021   and
the petition for winding up was filed on 18.01.2021 (the same day).
Therefore,   placing   heavy   reliance   upon   the   decision   of   the   three
member Bench of this Court in   Jignesh Shah and Anr. vs. Union
of India and Anr. 14
, it is contended on behalf of the appellant that
the   petition   for   winding   up   should   have   been   thrown   out   on   the
ground of limitation, even if we take the date of filing of the charge­
sheet alone as the date of knowledge of the alleged fraud.  
14     (2019) 10 SCC 750
67

8.3 Before   we   consider   the   aforesaid   contentions
independently, it will be useful to take note of the manner in which
the   National   Company   Law   Appellate   Tribunal   dealt   with   the
question of limitation and decided the same against the appellants.
8.4 The   Member   (Technical)   of   NCLAT,   in   his   separate   but
concurring   opinion,   dealt   with   the   question   of   limitation,   from
paragraphs   2   to   13.   In   sum   and   substance,   the   Member   (T)   of
NCLAT   held   (i)   that   the   fraud   alleged   by   Antrix   was   not   a   singular
act  which  was transaction­specific;   (ii)   that the  petition  for  winding
up was based upon a series of acts of fraud, unearthed over a long
period of time;   (iii)   that though the CBI filed a first charge­sheet on
11.08.2016,   a   supplementary   charge­sheet   was   filed   on   8.01.2019;
(iv)   that   a   complaint   was   lodged   under   the   Prevention   of   Money
Laundering Act, 2002 alleging financial frauds, only on 24.12.2018;
and   (v)   that in cases of this nature, the date of discovery of the first
act  of  fraud  among   a  series  of  acts of   fraud,  cannot  be  taken  to  be
68

the date on which the right to apply accrued in terms of Article 137
of the Schedule to the Limitation Act, 1963.
8.5 The   above   view   taken   by   NCLAT   is   a   plausible   view   and
does  not  suffer   from  any  perversity.  The  above  view  cannot   be  said
to   be   completely   contrary   to   law.   However,   we   will   independently
deal with this issue, so that the myth of limitation is demystified.
8.6 The   various   provisions   of   the   Companies   Act,   2013,
unfortunately   came   into   force   on   various   dates,   in   view   of   the
leverage   granted   under   Section   1(3)   to   the   Central   Government   to
appoint   different   dates   for   different   provisions   to   come   into   force.
Section   270   providing   for   the   winding   up   by   the   Tribunal,   Section
271   prescribing   the   circumstances   in   which   a   company   may   be
wound   up   by   the   Tribunal   and   Section   272   stipulating   the
requirements   of   a   petition   for   winding   up,   as   they   were   originally
enacted in the Companies Act, 2013, never came into force, since no
notification   under   Section   1(3)   of   the   Act   was   issued   in   respect   of
these three provisions. 
69

8.7 However, the Insolvency and Bankruptcy Code, 2016 (Act
31   of   2016)   received   the   assent   of   the   President   on   28.05.2016.
Section   255   of   this   Code   declared   that   the   Companies   Act,   2013
shall stand amended in the manner specified in the 11 th
 Schedule to
the   Code.   The   existing   provisions   of   Sections   270   to   272   of   the
Companies Act, 2013 were replaced by  the 11 th
  Schedule read with
Section   255   of   IBC.   Section   255   of   IBC   came   into   force   on
15.11.2016   vide   S.O   3453(E)   dated   15.11.2016.   Consequently   the
11 th
  Schedule   containing   amendments   to   the   Companies   Act,   2013
also   came   into   force   on   15.11.2016.   Sections   270,   271   and   272   as
they stand today, resultantly came into force on 15.11.2016.
8.8 In contrast, the provisions of Sections 4 to 32 of IBC came
into   force   on   1.12.2016   vide   S.O   3594(E)   dated   30.11.2016.   The
provisions   relating   to   Corporate   Insolvency   Resolution   Process   are
found in Sections 6 to 32 of IBC 2016. Sections 7, 9 and 10 of IBC
2016   provide   for   the   initiation   of   Corporate   Insolvency   Resolution
Process,   respectively   by   the   financial   creditor,   the   operational
creditor and the corporate applicant.  
70

8.9 Section   434   of   the   Companies   Act,   2013,   as   it   was
originally   enacted,   provided   for   transfer   of   certain   proceedings
pending   before   various   forums   on   the   date   of   coming   into   force   of
the Act. Clause (c) of Sub­section (1) of Section 434 provided for the
transfer   of   the   winding   up   proceedings   to   the   Tribunal,   with   a
mandate   to   the   Tribunal   to   proceed   to   deal   with   those   proceedings
from   the   stage   before   their   transfer.   IBC   2016,   through   the   11 th
Schedule,   substituted   a   new   provision   in   Section   434.   Though   the
newly   incorporated   Section   434   also   provided   under   Clause   (c)   of
Sub­section  (1)  for  the   transfer  of  winding  up  proceedings  from  the
High   Court   to   the   Tribunal,   such   transfer   was   made   subject   to
certain   restrictions.   One   of   those   restrictions   was   that   only   those
proceedings   relating   to   winding   up   which   are   at   a   stage   as   may   be
prescribed by the Central Government, which may be transferred to
the Tribunal. This restriction is found in the first proviso to Section
434(1).
8.10 Therefore,   the   Central   Government   issued   a   set   of   Rules
known   as   the   Companies   (Transfer   of   Pending   Proceedings)   Rules,
71

2016. These Rules (except Rule 4 which relates to voluntary winding
up)   came   into   force   with   effect   from   15.12.2016.   Rule   5   of   these
Rules prescribes the stage at which alone, a petition for winding up
under Section 433(e) of the 1956 Act could be transferred to NCLT.
Similarly   Rule   6   prescribes   the   stage   at   which   the   petitions   for
winding up filed under Clauses (a) and (f) of Section 433 of the 1956
Act could be transferred.
8.11 What is important to note from the above discussion is 
(i)   that while Sections 270 to 272 of the Companies Act,
2013   came   into   force   on   15.11.2016,   Sections   7,   9
and 10 of IBC came into force on 1.12.2016 and the
Rules   relating   to   transfer   proceedings   came   into
force on 15.12.2016;  and 
(ii ) what  is  provided for  under   the Companies (Transfer
of   Pending   Proceedings)   Rules,   2016   read   with
72

Section 434 of the Companies Act, 2013 and Section
239   of   the   IBC   2016   is   the   transfer   of   only   three
categories of petitions for winding up, namely, those
that  fall under  clauses (a), (e)  and (f) of  Section 433
of the 1956 Act.
8.12 Keeping   in   mind   the   above   statutory   scheme,   let   us   now
see   what   happened   in   Jignesh   Shah   (supra),   on   which   heavy
reliance is placed. In   Jignesh Shah , a suit for specific performance
of an agreement with an alternative claim for damages, was filed by
IL&FS,   on   19.06.2013,   on   the   ground   that   the   cause   of   action,
namely, the refusal to honour the commitment under the agreement
arose   on   16.08.2012.   After   more   than   two   years   of   the   date   of   the
institution   of   the   suit   and   after   more   than   three   years   of   the   date
mentioned in the plaint as the date of arising of the cause of action,
the plaintiff in the suit issued a statutory notice under Sections 433
and   434   of   the   1956   Act,   on   3.11.2015.   After   receipt   of   the   reply
from   the   defendant,   a   petition   for   winding   up   was   filed   by   the
73

plaintiff in the suit, against the defendant, on 21.10.2016 before the
Bombay   High   Court   under   Section   433(e)   of   the   1956   Act.   This
petition for winding up was transferred by the High Court of Bombay
to the NCLT, by an order dated 1.02.2017, in terms of Section 434 of
the   Companies   Act,   2013   read   with   Rule   5   of   the   Companies
(Transfer   of   Pending   proceedings)   Rules,   2016.   NCLT   treated   the
petition   for   winding   up   as   a   petition   for   corporate   insolvency
resolution under Section 7 of IBC by a financial creditor and ordered
the   admission   of   the   petition.   The   order   of   admission   was
unsuccessfully challenged before the NCLAT, whereafter, the matter
landed   up   before   this   Court.   The   view   taken   by   NCLAT   was   that
since   Section   7   of   IBC   2016   came   into   force   on   1.12.2016,   the
winding   up   petition   was   within   the   period   of   limitation.   It   was   this
view   of   NCLAT   which   was   put   to   test   before   this   Court   in   Jignesh
Shah.
8.13 In   essence,   Jignesh   Shah   was   one   under   Section   433(e)
of   the   1956   Act   which   related   to   inability   of   a   company   to   pay   its
74

debts. Therefore, unless the debt was a legally recoverable debt, on
the date on which a petition for winding up was filed, no petition for
winding   up   was   maintainable.   If   a   suit   for   recovery   of   such   a   debt
was already time barred, it is incongruous to say that a petition for
winding   up   was   maintainable   in   respect   of   such   a   debt.   Therefore,
the   test   applied   in   Jignesh   Shah   was   not   new   but   what   was   so
obvious. In fact, on the date on which a petition for winding up was
filed on the file of the Bombay High Court in  Jignesh Shah , the civil
suit   for   enforcement   of   the   contract   with   an   alternative   claim   for
damages was pending. If the plaintiff had waited for a decree in the
suit  and  thereafter  moved a  petition  for  winding   up on  the  basis of
the decree, Section 434(1)(b) of the Companies Act, 1956 would have
come into play and the winding up petition could not have been held
in  Jignesh Shah  to have been time barred. Since the plaintiff in the
suit moved an application for winding up even during the pendency
of the suit, limitation had to be naturally counted on the basis of the
75

original cause of action mentioned in the civil suit, with reference to
Section 434(1)(a).
8.14 As we have seen earlier, Section 434 of the 2013 Act read
with   the   Companies   (Transfer   of   Pending   Proceedings)   Rules,   2016
apply   only   in   respect   of   three   types   of   proceedings   for   winding   up,
namely,   (i)   proceedings  on   the  ground   of   inability   to   pay   the  debts,
covered by Clause (e) of Section 433 of the 1956 Act;  (ii)  proceedings
initiated   by   the   company   itself   by   a   special   resolution   covered   by
Clause (a) of Section 433; and  (iii)  proceedings on just and equitable
ground covered by clause (f) of Section 433.
8.15 As   we   have   seen   in   Chapter   6   above,   fraud   was   not
included   in   Section   433   of   the   1956   Act   as   one   of   the   nine
circumstances   in   which   a   company   may   be   wound   up.   Under   the
1956 statutory regime, a petition for winding up, even if triggered on
the   basis   of   an   investigation   report   under   section   237(b)   read   with
section   243   and   Section   439(1)(f),   was   required   to   be   only   on   just
and equitable ground under Section 433(f). Therefore, on the date on
76

which IBC came into force, if a petition for winding up was pending
under section 433 (e) or (f), it was liable to be transferred to NCLT by
virtue   of   Section   434   of   the   2013   Act   read   with   the   Companies
(Transfer of Pending Proceedings) Rules, 2016.
8.16 But under the Companies Act, 2013, three different types
of   fraud   are   included   in   Section   271(c),   as   the   circumstances   for
winding   up   a   company.   Such   a   winding   up   is   independent   of   just
and   equitable   ground.   Therefore,   the   parameters   applicable   to
winding   up   on   the   ground   of   inability   to   pay   debts   or   on   just   and
equitable ground may not be applied blind fold to a case of fraud. 
8.17 Antrix, which initiated the  proceedings for   winding  up, is
neither   a   financial   creditor   nor   an   operational   creditor   nor   a
corporate applicant. This is why Antrix have not and could not have
gone   for   insolvency   resolution   process,   under   the   IBC,   but   taken
recourse   to   Section   271(c)   of   the   Companies   Act,   2013.   Hence   the
ratio   in   Jignesh   Shah ,   as   applicable   to   debts,   whose   recovery   in
any case should not have been time barred on the date of initiation
77

of   the   proceedings   for   winding   up/insolvency   resolution   process,
cannot have any application to the case on hand.
8.18 It   is   fundamental   to   the   law   of   limitation   that   limitation
extinguishes the  remedy  and not  the right. If the  remedy  of  filing  a
civil suit for the recovery of a debt stands extinguished by the Law of
Limitation,   the   creditor   cannot   make   use   of   Section   433(e)   of   the
Companies   Act,   1956.   This   is   the   premise   on   which   this   Court
decided  Jignesh Shah.
8.19 After   Jignesh   Shah ,   this   court   was   concerned   with   the
application   of   sections   14   and   18   of   the   Limitation   Act,   1963   in
different   cases.   In   Sesh   Nath   Singh   v.   Baidyabati   Sheoraphuli
Co­operative  Bank  Ltd 15
  ,   this  Court  held that Sections  14  and 18
will apply to cases filed under section 7 or 9 of IBC.  Again in  Laxmi
Pat Surana vs Union Bank of India 16
, this Court held :“ Section 18
of   the   Limitation   Act   would   come   into   play   every   time   when   the
principal borrower and/or the corporate guarantor (corporate debtor),
15   (2021) 7 SCC 313
16   (2021) 8 SCC 481
78

as the case may be, acknowledge their liability to pay the debt. Such
acknowledgement,   however,   must   be   before   the   expiration   of   the
prescribed  period   of   limitation including  the  fresh  period   of   limitation
due to acknowledgement of the debt, from time to time, for institution
of the proceedings under Section 7 of the Code.”    
8.20 Thereafter,   the   question   whether   the   entries   made   in   the
balance   sheets   of   a   corporate   debtor   would   amount   to
acknowledgement of a liability under section 18 of the Limitation Act
came   up   for   consideration   in   Asset   Reconstruction   company   vs
Bishal   Jaiswal 17
.   After   referring   to   the   judgment   of   the   Calcutta
High   Court   in   Bengal   Silk   Mills   Co.   v.   Ismail   Golam   Hossain   Ariff 18
,
this Court held in   Bishal Jaiswal   (i)   that   “though the filing of a
balance   sheet   is   by   compulsion   of   law,   the   acknowledgement
of a debt is not necessarily so; and (ii) that the entries made in
the   balance   sheets   would   amount   to   acknowledgement   of
liability   depending   upon   whether   such   an   entry   qua   any
17   (2021) 6 SCC 366
18   AIR 1962 Cal 115 
79

particular   creditor   is   unequivocal   or   has   been   entered   into
with   caveats   in   the   form   of   notes   that   are   annexed   to   or
forming part of such financial statements ”    
8.21 The   above   decisions   show   that   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.   These   acts   of   omission   and   commission
constitute   the   bundle   of   facts,   which   determine   the   question
whether an action is barred by limitation or not.
8.22 As   we   have   pointed   out   elsewhere,   the   contours   of   fraud
as   delineated   in   Section   271(c)   of   the   Companies   Act,   2013   cover
three aspects namely,  (i)  the affairs of the company being conducted
in a fraudulent manner;   (ii)   the company was formed for fraudulent
and   unlawful   purpose;   and   (iii)   the   persons   concerned   in   the
formation   and   management   of   its   affairs   have   been   guilty   of   fraud,
80

misfeasance   or   misconduct   in   connection   therewith.   As   rightly
pointed   out   by   the   Tribunal,   a   singular   act   of   omission   or
commission   may   constitute   fraud   and   even   a   series   of   acts   may
constitute   fraud.   A   fraudulent   act   may   be   different   from   the
fraudulent   manner   in   which   an   act   is   performed.   The   words   “ the
conduct of the affairs of a company in a fraudulent manner ” indicate
that the process was a continuing one. If the conduct of the affairs of
the   company   in   a   fraudulent   manner   is   a   continuing   process,   the
right to apply becomes recurring.
8.23 We   must   keep   in   mind   the   fact   that   apart   from   the
persons in charge of the management of the affairs of the company
in   liquidation,   the   officials   of   Antrix   as   well   as   the   officials   of   the
Department   of   Space   are   now   facing   prosecution   not   only   for
offences   under   Section   420   read   with   Section   120B   of   the   Indian
Penal Code, but also for offences under the Prevention of Corruption
Act,   1988   and   the   Prevention   of   Money   Laundering   Act.   The
termination of the Contract on 25.02.2011, was not triggered by an
allegation   of   fraud   and   corruption.   Fraud   and   corruption   were
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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
Section   271(c).   Therefore,   the   contention   that   the   petition   was
barred   by   limitation   was   rightly   rejected   by   the   Tribunal   and   we
have no reason to take a different view. 
9. ESTOPPEL
9.1 The next   ground of attack to the impugned orders is that
Antrix   is   estopped   from   pleading   fraud   and   seeking   winding   up   of
Devas,   in   view   of   the   fact,   (i)   that   the   letter   of   termination   dated
25.02.2011,   of   the   Agreement   dated   28.01.2005   was   not   on   the
ground of fraud but by invoking the  force majeure  clause;  (ii)  that in
the proceedings before the arbitral Tribunals, no allegation of fraud
was   ever   raised;   and   (iii)   that   the   Auditor’s  reports   of  Antrix   for  all
these years, contained a statement that no fraud was committed on
Antrix.
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9.2 The contention of the appellants is that under Section 19
of  the  Indian Contract Act, 1872, an agreement vitiated by  fraud is
not void but only voidable at the option of the party who is a victim
and that therefore the failure of Antrix,   (i)   to terminate the contract
on the ground of fraud and/or  (ii)  to set up fraud as a defence to the
arbitral proceedings operated as estoppel. In addition, the Auditor’s
statements in the Annual Reports, that no fraud was committed on
Antrix, would give rise to a valid plea of estoppel.
9.3 Factually, the appellants are right in pointing out that the
Agreement   dated   28.01.2005   was   terminated   by   a   letter   dated
25.02.2011 only by invoking the  force majeure  clause and that fraud
was   not   set   up   as   a   defence   in   the   arbitral   proceedings.   The
appellants   are   also   factually   correct   in   pointing   out   from   the
Auditor’s   reports   of   Antrix   dated   15.09.2012,   19.07.2016,
24.07.2017,   19.06.2020   etc.,   that   there   was   a   certification   by   the
auditors to the effect that no fraud on or by the company has been
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noticed or reported during the course of the audit. In the Annexure
to the Auditor’s report dated 15.09.2012, the Auditors have stated:­
“ According   to   the   information   and   explanations   given   to   us
in the course of our audit, we report that no fraud on or by
the Company has been noticed or reported during the course
of our audit.”
9.4 Similarly,   in   the   Annual   Report   dated   19.07.2016,   for
2015­16, it was reported by the Auditors as follows:­
“ To the best of our knowledge and belief and according to the
information and explanations given to us, we report  that no
case of fraud has been committed on or by the Company or
by its officers or employees during the year.”
9.5 A statement similar to the one extracted above, also finds
a place in the Auditor’s report dated 24.07.2017, forming part of the
Annual Report 2016­17.
9.6 Even   in   Annexure­B   Report   dated   19.06.2020,   the
Auditors have given a statement as follows:­
“ Fraud by company or its officers and employees  
According   to   the   information   and   explanation   given   to   us,
there   are   no   frauds   reported   by   the   company   or   any   fraud
has   been   noticed   or   reported   during   the   year.     Accordingly,
the   provisions   of   clause   3(x)   of   the   said   order   are   not
applicable.”
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9.7 Under   Clause   (xxi)   of   paragraph   4   of   the   Companies
(Auditor’s   Report)   Order,   2003,   issued   in   exercise   of   the   powers
conferred by Section 227 (4A) of the Companies Act, 1956, there is a
prescription that the Auditor’s Report should contain a statement as
to   whether   any   fraud   on   or   by   the   company   has   been   noticed   or
reported   during   the   year   and   if   so,   the   nature   and   the   amount
involved.
9.8 But the question is as to whether all the above would lead
to   an   inference   of   estoppel   against   Antrix.   The   fact   that   the
Agreement   dated   28.01.2005   was   not   terminated   on   the   ground   of
fraud,   through   the   letter   dated   25.02.2011,   cannot   take   the
appellants   anywhere.   The   earliest   First   Information   Report   for   the
offences   under   Section   420   read   with   Section   120B   of   the   IPC   was
filed by the CBI only on 16.03.2015. The officers of Antrix as well as
officials   of   the   Government   were   also   implicated   in   the   FIR   for
offences   under   the   Prevention   of   Corruption   act,   1988.   Therefore,
the   appellants   cannot   set   up  a  plea   of   estoppel   on  the   ground  that
the   termination   of   the   Agreement   in   the   year   2011   was   not   on   the
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ground of fraud, when  the  discovery  of fraud itself was many  years
later.
9.9 For   the   very   same   reason,   the   failure   of   Antrix   to   plead
fraud   in   the   ICC   arbitration   proceedings,   cannot   also   operate   as
estoppel.  The arbitral proceedings commenced in the year 2013 and
the   award   itself   was   passed   on   14.09.2015.   Antrix   cannot   be
expected to plead fraud in the  arbitral proceedings, even before the
discovery of fraud.
9.10 The   Chartered   Accountants/Auditors   are   not   experts
either in Criminal Law or in the technology  that formed the subject
matter   of   the   Agreement   between   Antrix   and   Devas.   The   statement
of   Chartered   Accountants   are   always   qualified   with   certain   riders
such as “ according to the information and explanations given to us in
the   course   of   our   audit”   or   “ to   the   best   of   our   knowledge   and   belief
and according to the information and explanations given to us ”.
9.11 In   fact,   the   Companies   (Auditor’s   Report)   Order,   2015
which  was superseded by  another  order  in  2016 was issued by  the
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Central   Government   in   exercise   of   the   power   conferred   by   Section
143(11)   of   the   Companies   Act,   2013.   Section   143(12)   obliges   the
Auditor   to   report   to   the   Central   Government,   if   he   has   reason   to
believe that an offence of fraud of a particular dimension was being
committed in the company by its officers or employees. Sub­section
(13)   of   Section   143   also   provides   immunity   to   the   Auditors   for
furnishing  a report to the Central Government, if it is done in good
faith. Sub­section (12) & (13) of Section 143 read as follows:­
“ 143.     Powers   and   duties   of   auditors   and   auditing
standards. ­
xxxx xxxx xxxx
(12)   Notwithstanding   anything   contained   in   this   section,   if
an auditor of a company in the course of the performance of
his duties as auditor, has reason to believe that an offence of
fraud   involving   such   amount   or   amounts   as   may   be
prescribed,   is   being   or   has   been   committed   in  the   company
by   its   officers   or   employees,   the   auditor   shall   report   the
matter   to   the   Central   Government   within   such   time   and   in
such manner as may be prescribed:
Provided   that   in  case   of   a   fraud   involving   lesser   than
the   specified   amount,   the   auditor   shall   report   the   matter   to
the   audit   committee   constituted   under   section   177   or   to
the   Board in other cases within such time and in such man ­
ner as may be prescribed:
Provided   further   that   the   companies,   whose   auditors
have   reported   frauds   under   this   sub­section   to   the   audit
committee or the Board but not reported to the Central Gov ­
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ernment,   shall disclose  the  details about  such  frauds  in the
Board’s report in such manner as may   be prescribed.
  (13)  No   duty   to   which   an   auditor   of   a   company   may   be
subject   to  shall  be   regarded   as   having   been   contravened   by
reason of his reporting the matter referred to in sub­section
(12) if it is done in good faith.”
9.12 If the auditors of a company fail to make a report in terms
of   Section   143(12),   despite   having   knowledge   about   the   fraud,   they
may   become   liable   for   penal   consequences   under   Section   448   read
with Section 447 of the Companies Act, 2013. But the failure of the
auditors   to   make   a   report   as   required   by   Section   143(12)   or   as
required by the order issued under Section 143(11), cannot  operate
as estoppel against the company. The auditor’s report can neither be
taken as gospel truth nor act as estoppel against the company. The
statement in the auditor’s report, is as per the information given to
them or as per the information culled out to the best of their ability.
9.13 The   reliance   placed   upon   Section   19   of   the   Indian
Contract   Act,   1872   to   raise   the   plea   of   estoppel   may   not   wholly   be
correct.   Section   19   of   the   Indian   Contract   Act,   deals   with   only   one
type   of   fraud   namely,   a   fraud   perpetrated   on   a   party   to   secure   his
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consent   to   an   agreement.   Section   19   begins   with   the   words   “ when
consent   to   an   agreement   is   caused   by   coercion,   fraud….. ”.     Frauds
other   than   those   used   to   induce   the   consent   of   a   party   to   an
agreement,   are   not   covered   by   Section   19.   In   fact,   the   definition   of
fraud   under   Section   17   is   also   confined   only   to   certain   acts
committed   by   a   party   to   a   contract.   There   are   cases   where   a   party
may perpetrate a fraud either upon non­contracting parties or upon
the   Government   or   even   upon   the   courts.   The   principle   that   fraud
vitiates   all   solemn   acts,   will   itself   be   rendered   nugatory,   if   the
understanding of fraud is confined only to the realm of contract.
9.14 In   the   case   on   hand,   the   fraud   alleged   by   Antrix   is   not
solely   on   the   ground   that   their   consent   to   the   Agreement   dated
28.01.2005 was vitiated by fraud. What is alleged in the petition for
winding   up   are,   (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
89

company. The fraud relatable to the agreement, is only one facet of
the whole scheme of things. Therefore, we have to go beyond section
19 of the Contract Act. 
9.15 In   fact,   the   Explanation   (i)   under   Section   447   of   the
companies   Act,   2013   also   defines   fraud,   but   for   the   purposes   of
Section   447.   What   is   covered   by   Section   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   that   Antrix   was   estopped   from
pleading   fraud,   was   rightly   rejected   by   the   Tribunal   and   we   see   no
reason to taken a different view.
10. Refusal  to permit cross­examination
10.1 Another   ground   of   attack   by   the   appellants   to   the
impugned   orders   is   that   the   foundation   for   the   allegation   of   fraud
was   the   averment   that   Devas   offered   to   provide   goods   and   services
which   were   non­existent   both   on   the   date   of   execution   of   the
agreement   and   on   the   date   of   its   termination   and   that   Devas   was
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also incapable and did not have the necessary permission/approvals
to   provide   such   device/services.   Contending   that   the   question   of
existence/availability   of   the   technology   has   become   a   contentious
issue   with   both   parties   filing   several   affidavits,   Devas   filed   an
application   before   NCLT   seeking   permission   to   cross­examine   the
officials of Antrix. This application was taken up along with the main
company petition. While ordering winding up, by a final Order dated
25.05.2021,   NCLT   justified   its   action   by   holding   that   the   case   did
not   require   any   oral   evidence.   Therefore,   in   the   memorandum   of
grounds   of   appeal   before   NCLAT,   the   appellants   raised   a   specific
ground   that   the   omission   on   the   part   of   the   Tribunal   to   afford   an
opportunity   of   cross­examination,   vitiated   the   final   outcome.   But
NCLAT upheld the view taken by NCLT.
10.2 Therefore, it is contended on behalf of the appellants that
(i)   allegations   of   fraud,   as   a   rule,   warrant   a   full­fledged   trial   and
proof;   (ii)   that   in   the   light   of   the   specific   bar   of   jurisdiction   of   Civil
Courts   under   Section   430   of   the   Companies   Act,   2013,   NCLT   was
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obliged   to   scan   the   allegations   of   fraud   very   carefully,   by   allowing
parties   to   lead   evidence   and   cross­examine   the   witnesses;   (iii)   that
the   Tribunal   is   conferred   with   the   same   powers   as   are   vested   in   a
Civil Court under the Code of Civil Procedure, 1908, in respect of the
summoning   and   enforcing   of   the   attendance   of   any   person   and
examining him on oath, under Section 424(2) of the Companies Act,
2013;   (iv)   that   Rules   52   and   135   of   the   National   Company   Law
Tribunal Rules, 2016 make it clear that the Tribunal has the power
to   summon   the   appearance   of   any   witness,   cross­examine   him   on
oath   and   even   issue   commission   for   the   examination   of   witnesses;
and   (v)   that   the   Tribunals   committed   a   gross   error   of   law   in
recording findings on serious allegation of frauds, solely on the basis
of affidavits and documents. Reliance is placed in this regard by the
learned   senior   counsel   for   the   appellants,   on   the   decisions   of   this
Court  in   Standard   Chartered   Bank  vs.   Andhra  Bank  Financial
Services   Ltd.   and   Ors. 19
;   Svenska   Handelsbanken   vs.   Indian
19     (2006) 6 SCC 94
92

Charge Chrome and Ors . 20
 and  V. Ravi Kumar vs. State, Rep. by
Inspector of Police, District Crime Branch, Salem & Ors. 21
10.3 At   the   outset   we   should   point   out   that   the   decision   in
Svenska   Handelsbanken   (supra)   arose   out   of   an   interim   order   of
injunction   granted   in   a   civil   suit.   The   principle   of   law   laid   down   in
the   said   decision   that   mere   pleadings   cannot   make   out   a   case   of
fraud,   is   an   off­shoot   of   the   time   tested   principle   that   pleadings
cannot take the place of proof. Insofar as the decision in   Standard
Chartered   Bank   (supra)   is   concerned,   the   same   arose   out   of
proceedings before the special Court. One of those proceedings was
under   Section   111   of   the   Companies   Act,   1956   which   was
“ somewhat summary in nature ”. Therefore it was in that context that
this   Court   held   that   when   a   seriously   disputed   question   of   title
arises, the Company Court should relegate the parties to a civil suit.
But having admitted that under  Section 430 of the Companies Act,
the   jurisdiction   of   the   Civil   Court   is   barred,   it   is   not   open   to   the
20    ( 1994) 1 SCC 502
21     (2019) 14 SCC 568
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appellants to rely upon this decision to say that the parties could be
relegated to a civil court.
10.4 Similarly   the   decision   in   V.   Ravi   Kumar   (supra),   arose
out   of   criminal   proceedings   under   Section   482   Cr.P.C   for   quashing
the   second   complaint,   after   the   withdrawal   of   the   first   complaint.
The   High   Court   quashed   the   criminal   complaint   and   while   setting
aside   the   order   of   the   High   Court,   this   Court   held   that   the
allegations   of   fraud   and   cheating,   which   prima   facie   constitute
offences   under   Section   420   IPC,   have   to   be   established   through
evidence at the time of trial.  
10.5 Thus  the  decisions  relied upon by the  appellants  to drive
home   the   point   that   the   Tribunal   must   have   permitted   cross­
examination,   have   no   relevance   to   the   case   on   hand.   However,
dehors   those   decisions   relied   upon   by   the   appellants,   let   us   see
whether   the   omission   of   NCLT   to   permit   cross­examination   was
fatal.
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10.6 The Tribunal classified the allegations made by Antrix into
eight categories.  In sum and substance, they revolve around,  (i)   the
offer   of   a   non­existent   technology ;   (ii)   misrepresentation   about   the
possession of intellectual property rights over a device;   (iii)   violation
of   SATCOM   policy;   (iv)   securing   of   an   experimental   licence
fraudulently;   (v)   manipulation   of   the   minutes;   and   (vi)   the   trail   of
money brought in through FIPB approvals.
10.7 All   the   averments   forming   the   foundation   of   the
allegations   of   fraud,   from   the   point   of   view   of   the   Indian   Evidence
Act,   would   fall   under   only   two   categories,   namely,   (i)   positive
assertions requiring persons making those assertions to prove them;
and  (ii)  negative assertions.
10.8 A party alleging the non­existence of something, cannot be
called   upon   to   prove   the   non­existence.   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.
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10.9 In   the   case   on   hand,   Antrix   asserted   that   Devas   offered
services   which   were   non­existent,   through   a   device   which   was   not
available and that even the so­called intellectual property rights over
the   device   were   not   available.   Therefore,   obviously   Antrix   cannot
lead evidence to show the non­existence or non­availability of those
things,   either   by   oral   evidence   or   by   subjecting   their   officials   to
cross­examination   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 cross­examination of
the   officials   of   Antrix.   Any   amount   of   cross­examination   of   the
officials   of   Antrix   could   not   have   established   the   existence   of
something that was disputed by Antrix.
10.10 It is also interesting to note that the application for cross­
examination   was   moved   by   Devas   on   5.5.2021,   after   arguments   in
the   main   petition   itself   had   commenced   on   30.04.2021   and
concluded on 3.05.2021 on the side of Antrix.  The list of dates filed
by   Shri   N.   Venkataraman,   Additional   Solicitor   General   shows   that
on 19.01.2021, NCLT ordered the admission of the company petition
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and appointed a provisional liquidator. In fact this order was passed
after   hearing   objections   of   the   company.   As   against   the   order   of
admission, DEMPL filed an appeal before NCLAT. But the same was
dismissed   by   NCLAT   on   11.02.2021,   with   liberty   to   the   DEMPL   to
file   an   application   for   impleadment.  DEMPL   filed   an   application   for
impleadment on 2.03.3021. They also filed a writ petition before the
High   Court   of   Karnataka   challenging   the   authorisation   given   by
Central  Government   to  Antrix,   as well  as  the  constitutional  validity
of   Section   272(1)(e)   read   with   Section   272(3)   of  the   Companies  Act,
2013. After hearing extensive arguments over several dates, the High
Court   of   Karnataka   dismissed   the   writ   petition   by   an   Order   dated
28.04.2021 with costs of Rs.5,00,000/­ for abuse of process of law.
It   was   only   thereafter   that   the   company   petition   was   taken   up   by
NCLT  and arguments  on  behalf  of Antrix  was  heard and  concluded
on 30.04.2021 and 3.05.2021.    
10.11   When   the   company   petition   was   adjourned   to   5.05.2021
for   arguments   on   behalf   of   Devas,   a   two­pronged   strategy   was
adopted   by   Devas.   The   first   was   to   make   DEMPL   file   a   writ   appeal
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before   the   Division   Bench   of   the   High   Court   of   Karnataka   against
the   order   of   the   learned   Single   Judge   upholding   the   constitutional
validity   of   the   aforesaid   provisions.   Simultaneously,   Devas   filed   an
application   on   5.05.2021   to   cross­examine   the   Managing   Director
and Finance Director of Antrix. However, Devas also continued their
arguments   in   the   main   company   petition   and   concluded   the   same
on 10.05.2021. On 10.05.2021, NCLT reserved the judgment.
10.12 Incidentally,   it   must   be   pointed   out   that   the   writ   appeal
filed by the DEMPL came up for hearing before the Division Bench of
the   High   Court   of   Karnataka   on   12.05.2021.   The   Division   Bench
directed the matter to be listed on 19.05.2021 with a condition that
the costs as awarded by the learned Single Judge should be paid on
or before the said date.  
10.13 On 25.05.2021, the NCLT passed final orders, after which
DEMPL withdrew the writ appeal on 27.05.2021.  
10.14 It   is   clear   from   the   above   time­line   of   events   that   the
application   for   cross­examination   was   moved   by   Devas   after
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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 cross­examination.
11. LOCUS STANDI OF THE SHAREHOLDERS
11.1 The next ground of attack to the impugned orders is that
despite the petition for winding up containing specific allegations of
fraud   as   against   the   shareholders   of   Devas,   NCLT   did   not   give   any
opportunity   to   the   shareholders.   Even   the   application   for
impleadment   filed   by   DEMPL   which   is   one   of   the   shareholders,
pursuant   to   the   leave   granted   by   NCLAT,   was   taken   up   along   with
the   main   company   petition   and   eventually   rejected   along   with   the
main   company   petition.   Therefore,   DEMPL   filed   an   independent
appeal   before   NCLAT.   Unfortunately,   the   Member   (Judicial)   of
NCLAT   dismissed   the   appeal,   as   not   maintainable,   on   the   ground
(i)   that the rights of the shareholders are confined to the election of
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Directors,   voting   in   the   meetings   of   the   company,   distribution   of
dividends   and   the   distribution   of   surplus   upon   liquidation;   and
(ii )   that   the   company   in   liquidation   itself,   through   its   ex­Director,
has independently filed an appeal as an aggrieved person.
11.2 Therefore,   relying   upon   the   decision   of   this   Court   in
National   Textile   Workers’   Union   vs.   P.R.   Ramakrishnan   &
Ors . 22
, it is contended that it would be contrary to every recognised
principle   of   fair   judicial   procedure   and   violative   of   the   rule   of   audi
alteram   partem   which   constitutes   one   of   the   basic   principles   of
natural   justice,   to   deny   to   the   shareholders,   the   right   to   be   heard
before an order prejudicially affecting their interest was passed.
11.3 It is true that the petition for winding up was filed under
Section 271(c) alleging   (i)   that the affairs of the company have been
conducted in a fraudulent manner;  (ii)  that the company was formed
for   fraudulent   and   unlawful   purpose;   and   (iii)   that   the   persons
concerned   in   the   formation   or   management   of   its   affairs   have   been
22     (1983) 1 SCC 228
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guilty of fraud. But there is no scope either in the Act or in the Rules
for   the   impleadment   of   any   shareholder   as   a   respondent   to   the
petition for winding up. Rule 3(1) of Companies (Winding Up) Rules
2020 requires a petition for winding up to be in Form WIN 1 or Form
WIN   2.   A   look   at   these   forms   would   indicate   that   there   is   no
provision   for   making   any   one,   as   the   respondent   in   the   petition.
Therefore,   the   question   of   impleading   any   shareholder   at   the   time
when the petition for winding up was filed, did not arise.
11.4 Interestingly,   Antrix   sought   the   authorisation   under
Section   272(1)(e)   on   14.01.2021   and   the   Central   Government
granted   authorisation   on   18.01.2021.   On   the   very   same   day,   the
petition for winding up was filed. When the petition was taken up by
NCLT   on   19.01.2021   for   the   first   time,   Devas   Multimedia   Private
Limited,   which   is   the   company   in   liquidation   appeared   through
counsel and opposed the petition and also sought sufficient time to
file reply. Therefore, NCLT did not have  to  go through the  formality
of ordering notice before admission, as a battery of counsel appeared
for Devas, raised preliminary objections and also sought time to file
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response.   The   Tribunal   passed   a   detailed   order   dated   19.01.2021
admitting   the   company   petition   and   appointing   a   provisional
liquidator   even  while   granting  time  to   the   company   to   file  its  reply.
In   paragraph   5   of   the   detailed   order   dated   19.01.2021,   the
preliminary   submissions   made   by   the   company   in   liquidation
against the admission of the company petition, are recorded.
11.5 The   order   dated   19.01.2021   admitting   the   company
petition became the subject matter of an appeal before NCLAT at the
instance   of   the   company   in   liquidation.   Therefore,   on   8.02.2021
when the company petition came up for hearing, it was adjourned to
16.02.2021   and,   thereafter,   to   2.03.2021.   On   2.03.2021,   DEMPL
which   is   a   shareholder   filed   a   petition   for   impleadment.   It   is   true
that this application was not independently dealt with and disposed
of   at   that   stage.   However,   the   objections   of   DEMPL   to   the   main
company   petition   were   just   the   same   as   the   objections   of   the
company in liquidation. Despite the fact that a provisional liquidator
has   been   appointed   on   19.02.2021   itself,   the   ex­Director   of   the
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company  in liquidation  was  permitted to  file objections  to the main
company petition and also argue the same fully.
11.6 After   the   conclusion   of   the   arguments   on   the   part   of
Antrix   to   the   main   company   petition,   DEMPL   even   moved   a   writ
petition   challenging   the   constitutional   validity   of   Section   272(1)(e)
and   the   authorisation   issued   to   Antrix.   The   writ   petition   was
dismissed with costs and the writ appeal was withdrawn.  
11.7 It  will   be  clear   from  the   above   sequence   of  events   that   (i)
despite   NCLT   not   disposing   of   the   impleadment   petition   before
passing   final   orders;   and   (ii)   despite   NCLT   dismissing   the
impleadment   petition   along   with   the   main   company   petition,   their
objections to the main company petition have been dealt, along with
the   objections   of   the   ex­Director   of   the   company   in   liquidation.   In
other   words,   the   objecting   shareholder   had   an   effective   hearing
before   NCLT.   Though   their   appeal   was   rejected   by   NCLAT   on   the
ground of maintainability, their arguments for opposing the winding
up,   which   were   just   the   same   as   that   of   the   company,   have   been
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considered.   Therefore,   the   objection   that   an   opportunity   was   not
given to the shareholders, is just theoretical, when in fact they were
heard.
11.8 It   is   true   that   in   National   Textile   Workers’   Union
(supra),   this   Court   took   the   law   relating   to   locus   standi   by   a   leap
forward. But as seen from the facts of the said case, the petition for
winding up was triggered by one group of shareholders, both on the
ground that company was unable to pay its debts and on the ground
that it is just and equitable to wind up the company. The company
Judge before whom the winding up petition came up, granted an ex­
parte   injunction   restraining   company   from   borrowing   any   moneys
and   from   alienating   and/or   creating   any   charge   or   encumbrance
over   any   of   the   assets   of   the   company.   As   a   consequence,   the
Employees’   Cooperative   Stores,   stopped   issuing   any   provisions   or
supplies   to   the   workmen.   The   workmen   were   also   prevented   from
enjoying  the  benefits  under  the  ESI   scheme. The  wages  payable for
the   following   month   itself   became   doubtful.   Faced   with   the   sudden
threat   to   their   livelihood,   the   workers’   Unions   sought   to   implead
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themselves   as   party   to   the   winding   up   proceeding.   Therefore,   the
decision   rendered   in   National   Textile   Workers’   Union ’s   case   has
to be understood in the context in which it was rendered.
11.9 It is true that the dismissal of the appeal filed by DEMPL,
by   NCLAT   on   the   ground   of   maintainability   may   not   be   correct.
Section   421(1)   of   the   Companies   Act,   2013   enables   “ any   person
aggrieved by an order of the Tribunal” , to file an appeal. To say that
DEMPL   cannot   be   taken   to   be   a   person   aggrieved,   may   be   far­
fetched. But on that sole ground, the impugned order cannot be set
aside. 
11.10 We have seen from the memorandum of grounds of appeal
filed   by   DEMPL   before   NCLAT   and   the   memorandum   of   grounds   of
appeal filed by DEMPL before this Court that their objections to the
petition for winding up are just the same as those of the ex­Director
of   the   company   in   liquidation.   In   fact,   before   us,   the   ex­Director   of
the company in liquidation was represented by Shri Mukul Rohtagi,
learned senior  counsel and DEMPL was represented by Shri Arvind
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P.   Datar,   learned   senior   counsel.   While   the   learned   senior   counsel
for   the   company   in   liquidation   occupied   the   crease   only   for   limited
number   of   overs,   the   learned   senior   counsel   appearing   for   DEMPL
took   the   entire   responsibility   on   his   shoulders   and   played   a   very
long innings. Therefore, it is not possible for us to set aside the order
of winding up, on the sole ground that the shareholders application
for impleadment as well as the appeal were rejected wrongly.
11.11 Before leaving the discussion on this ground of attack, we
must   also   take   note   of   one   submission   made   by   Shri   N.
Venkataraman,   learned   Additional   Solicitor   General.   According   to
him,   all   the   shareholders   of   Devas   are   arrayed   as   accused   by   the
CBI   in   the   criminal   cases.   But   the   CBI   has   not   even   been   able   to
serve   summons   on   them.   Therefore,   persons   who   are   ducking/
avoiding   summons   in   the   criminal   prosecution,   cannot   be   heard   to
contend that they must have been heard in the petition for winding
up.   Taking   advantage   of   their   citizenship/residence   abroad,   these
shareholders   are   prosecuting   proceedings   for   the   enforcement   of   (i)
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ICC  Arbitral Tribunal Award in India; and   (ii)   BIT Awards overseas,
even while making it impossible for CBI to serve summons on them
for   the   past   five   years.   It   is   not   open   to   such   persons   to   raise   the
bogey of failure to afford an opportunity.
12. FINDINGS   ERRONEOUS   AND   PERVERSE   AND
THE STANDARD OF PROOF APPLIED INCORRECT
12.1 The next ground of attack to the impugned orders is that
the   findings   recorded   by   the   NCLT   which   were   approved   by   NCLAT
were   completely   perverse   and   erroneous   and   that   the   Tribunals
applied   a   completely   incorrect   standard   of   proof.     In   any   case,   the
findings were recorded to be only  prima facie , which is not sufficient
to order the winding up of the company.
12.2 In order to test the correctness of the above contention, it
is   necessary   to   take   note   of   the   averments   on   which   Antrix   built
their   case   for   winding   up,   the   response   of   Devas   to   the   averments,
the findings recorded by NCLT and the findings recorded by NCLAT.
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12.3 Briefly   stated,   the   averments   made   by   Antrix   in   their
petition   for   winding   up   were,   (i)   that   Devas   was   incorporated   as   a
private   limited   company,   on   17.12.2004,   with   an   authorised   share
capital of Rs.1,00,000/­ divided into 10,000 equity shares of Rs.10/­
each;   (ii)   that   within   a   few   weeks   of   incorporation,   an   Agreement
dated   28.01.2005   was   entered   into   between   the   company   and
Antrix, as a result of a fraudulent and criminal conspiracy between
the   persons   in   management   of   the   affairs   of   the   company   and   the
officials   of   Antrix/Government   of   India,   to   award   a   lease   of   scarce
and   valuable   S­band   spectrum,   without   obtaining   necessary
approvals   and   without   following   applicable   norms   and   procedures;
(iii)   that   the   persons   in­charge   of   the   formation   as   well   as   the
management   of   the   affairs   of   Devas   did   not   possess   the   necessary
technical   know­how   or   the   intellectual   property   rights   for   the
provision of what was claimed as “Devas Services”, either at the time
of   signing   of   the   agreement   or   even   till   date;   (iv)   that   despite   not
being   in   possession   of   either   the   technology   or   the   device,   the
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company was pushing Antrix and the Government of India to launch
the satellite;   (v)   that as part of the conspiracy, the Agreement dated
28.01.2005   was   terminated   by   Antrix   by   a   letter   dated   25.02.2011
by invoking the  force   majeure  clause;  (vi)  that it made things easy for
Devas   to   initiate   an   arbitration   before   the   ICC   Arbitral   Tribunal,
apart   from   the   initiation   of   the   two   BIT   Arbitrations   by   the
shareholders of Devas,  (vii)  that when the criminal conspiracy, fraud
and   corrupt   practices   came   to   light,   an   FIR   was   lodged   by   the   CBI
on   16.03.2015;   (viii)   that   a   charge­sheet   was   filed   by   CBI   on
11.08.2016,   both   against   the  persons  responsible  for  the   formation
and management of the affairs of the company in liquidation, as well
as   the   officials   of   Antrix   and   Government   of   India;   (ix)   that   a
supplementary   charge­sheet   was   filed   on   08.01.2019;   (x)   that   a
complaint   was   also   registered   under   the   Prevention   of   Money
Laundering   Act,   2002   on   24.12.2018;   (xi)   that   the   company   which
was   formed   with   an   authorized   share   capital   Rs.   1,00,000/­   in
December,   2004,   managed   to   secure   a   contract   for   a   stated
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consideration of an “up­front capacity  reservation fee” in the region
of   US,   $   20   million   per   satellite,   apart   from   annual   license   fee   of
around US $ 9 million per satellite;  (xii)  that the execution of such a
contract   and   the   award   of   a   public   largesse   of   such   a   huge
magnitude   was   not   through   any   public   auction   but   by   private
negotiations   held   by   the   officials   of   Antrix   with   Forge   Advisors   of
USA,  (xiii)  that after securing the contract, the company was able to
sell   its   equity   shares   as   well   as   OCP   shares   at   a   huge   premium   to
foreign investors;   (xiv)   that equity shares of a face value of Rs. 10/­
were   sold   at   the   rate   of   Rs.   1.26   lakhs   per   share;   (xv)   that
interestingly,   DT   Germany   which   invested   Rs.   430   crores   through
DT   Asia   obtained   only   19%   share   holding,   while   four   Mauritius
investors   obtained   37%   share   holding   by   investing   Rs.   150   crores;
(xvi)   that   experimental   licences   were   obtained   by   Devas   by
manipulating the minutes of the meetings;  (xvii)  that FIPB approvals
were   secured   for   the   stated   purpose   of   providing   Internet   services,
though the  agreement  was  for  rendering  a hybrid service known  as
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Satellite   based   Digital   Multimedia   Broadcasting   Services   (SDMB
Services,   for   short);   (xviii)   that   the   fact   that   such   a   hybrid
technology   was   not   in   existence   at   that   time   was   suppressed   from
FIPB   as   well   as   other   authorities;   (xix)   that   after   showcasing   the
inflow   into   India,   of   investment   to   the   tune   of   Rs.   579   crores,   the
company siphoned out of India, a sum of Rs. 75 crores for creating a
wholly   owned   subsidiary   in   USA,   a   sum   of   Rs.   180   crores   towards
payment   for   business   support   services   and   sum   of   Rs.   233   crores
toward litigation services;  (xx)  that a sum of Rs. 92 crores alone was
kept   in   India   out   of   which   Rs.   21   crores   was   by   way   of   Fixed
Deposits and a sum of Rs. 59 crores was paid to Antrix towards up­
front capacity fee;  (xxi)    that some of the then officials of Antrix and
the Government of India were parties to the fraudulent and unlawful
purpose for which Devas was created and the fraudulent manner in
which the affairs of the company had been conducted;  (xxii)  that the
persons including investors and the share­holders concerned in the
formation   and   the   management   of   its   affairs   have   been   guilty   of
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fraud,   corrupt   practices   and   money   laundering   and   that   therefore
the company was liable to be wound up.
12.4   On   the   basis   of   the   pleadings,   the   documents   produced
and   the   submissions   made,   NCLT   recorded   the   following   findings
namely,   (i)   that   the   incorporation   of   Devas   was   with   fraudulent
intention to grab the prestigious contract in question, in connivance
and   collusion   with   the   then   officials   of   Antrix;   (ii)   that   it   is   not   in
dispute that at the time of entering into the contract, Devas did not
have   the   technology,   infrastructure   or   experience   to   perform   their
obligations under the Agreement;   (iii)   that one of the subscribers to
the   Memorandum   of   Association   of   the   company   in   liquidation  was
an   Auditor   by   name   Shri   M.   Umesh,   whose   Article   Clerk   by   name
Gururaj   was   the   one   signed   the   Agreement;   (iv)   that   the   Executive
Director   of   Antrix   who   signed   the   Agreement   of   behalf   of   Antrix   is
one   of   accused   in   the   criminal   cases;   (v)   that   the   incorporation   of
Devas   was   with   fraudulent   motive   and   unlawful   object,   to   bring
money   into   India   and   divert   it   by   dubious   methods;   (vi)   that   even
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after   the   termination   of   the   Agreement,   Devas   was   not   carrying   on
any business operations;  (vii)  that the objective of Devas was hardly
to   do   any   business   except   grabbing   Primary   Satellite­I   (PS­I)   and
Primary   Satellite­II   (PS­II),   and   that   therefore   the   requirements   of
Section 271(c) stand satisfied.
12.5        The order of the Appellate Tribunal is in two parts; the first
authored by Member (Judicial), and the second authored by Member
(Technical).   The   Member   (Judicial)   noted,   (i)   that   the   company   in
liquidation   failed   to   establish   either   the   existence   of   technology   or
the   ownership   of   intellectual   property   rights   over   the   stated
technology;   (ii)   that   even   according   to   the   affidavit   of   Shri   M.   G.
Chandrashekar, Devas had ample time to develop Devas Technology,
meaning   thereby   that   its   non­existence   at   that   time   was   admitted;
(iii)   that the company did not have a single approval, permission or
licence to render Devas services utilising Devas technology;   (iv)   that
the   approval   of   the   Space   Commission   for   building   a   satellite   for
Devas,   was   secured   only   after   finalisation   of   commercial   terms   but
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without   apprising   the  Space   Commission   of  the  same;   (v)   that   even
in   the   cabinet   note,   prepared   by   the   Department   of   Space   on
17.11.2005   a   full   picture   was   not   recorded;   (vi)   that   there   was   a
contravention   of   the   SATCOM   Policy;   (vii)   that   though   the   original
minutes of the meeting required Devas to secure a spectrum licence
from Wireless Planning Committee (WPC), after appearing before the
apex   committee   with   requisite   technical   details,   the   minutes   of   the
meetings   were   manipulated   later   as   though   the   company   was
exempted from the requirement;  (viii)  that after objections about the
manipulations,   the   original   minutes   of   the   meeting   came   to   be
restored,   on   20.11.2009,   but   this   happened   only   after   the   grant   of
experimental   licence   on   07.05.2009;   (ix)   that   in   any   case   the
experimental   licence  was  to   establish   Wireless   Telegraph   Station  in
India   under   the   India   Telegraph   Act,   1885,   without   which
experimental   trials   could   not   have   been   conducted;   (x)   that   Devas
obtained IPTV licence as part of ISP licence, which has nothing to do
with   what   was   offered   as   DEVAS   services;   (xi)   that   the   agreement
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dated   28.01.2005   made  no   reference  of   IPTV;   (xii)   that   undeniably,
Devas services cannot be provided with ISP licences;   (xiii)   that after
bringing an amount of Rs 579 crores into India, a major portion was
taken out of India;  (xiv)  that the only business activity carried on by
Devas   was   to   provide   ISP   services   in   a   particular   locality   in
Bangalore   for   a   few   residents   and   that   too   for   a   short   duration,
which   made   Devas   earn   a   revenue   of   Rs.   80,000/;   (xv)   that   the
diversion of Rs. 489 crores and Rs. 58 crores for non ISP purposes is
violative   of   ISP   licence,   which   comes   squarely   within   the   ambit   of
Section   271(c);   (xvi)   that   Devas   fraudulently   approached   FIPB
through   the   ISP   route   to   avoid   scrutiny   by   Department   of   Space;
(xvii)   that the investors of Devas actually  became shareholders and
they   also   had   their   nominees   on   the   Board   of   Devas;   (xviii)   that
therefore these persons were also guilty of the conduct of the affairs
of   Devas   in   the   manner   stated;   (xix)   that   the   Share   Subscription
Agreement   dated   06.03.2006   entered   into   with   the   investors
contains   a   recital   as   though   appropriate   licences   have   been   validly
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issued   or   assigned   to   the   company,   though   in   fact   the   only   licence
namely ISP licence was obtained much later on 02.05.2008 and  (xx)
that therefore the formation of the company and the conduct of the
affairs   of   the   company   were   fraudulent   and   the   persons   concerned
therewith were also guilty of fraud.
12.6 In   his   independent   but   concurrent   opinion   the   Member
(Technical)   of   NCLAT   classified   the   items   of   fraud   into   eight
categories.   He   first   found   that   the   company   was   formed   and   the
Agreement   was   entered   into   with   the   stated   object   of   providing   a
bouquet of services, which were non­existent. The second category of
fraud   dealt   with   by   the   Member   (Technical)   related   to   the
misrepresentation   in   the   Agreement.   The   third   category   of   fraud
concerned the violation of SATCOM Policy. The fourth category  was
actually an extension of the third category which related to SATCOM
Policy.   The   fifth   category   was   about   suppression   and
misrepresentation in obtaining the approval of the cabinet. The sixth
category of fraud revolved around the ISP licence dated 02.05.2008,
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of which IPTV licence was a part, but which had nothing to do with
Devas   Services.   The   seventh   category   related   to   the   fraudulent
manner  in  which experimental  licence was obtained and the eighth
category   related   to   FIPB   approvals   and   money   trail.   The   Member
(Technical)   found   the   formation   of   company,   the   conduct   of   the
affairs of the company and those persons concerned in the formation
and conduct of management of its affairs to be guilty of fraud. 
12.7   Technically   speaking,   the   appeal   before   us   which   is
under Section 423 of the Companies Act, 2013, is only on a question
of   law.   When   two   forums   namely   NCLT   and   NCLAT   have   recorded
concurrent   findings   on   facts,   it   is   not   open   to   this   Court   to   re­
appreciate   evidence.   Realising   this   constraint,   the   learned   Senior
Counsel   for   the   Appellant   sought   to   project   the   case   as   one   of
perversity   of   findings.   But   we   do   not   find   any   perversity   in   the
findings recorded by both the Tribunals. These findings are actually
borne out  by  documents, none of which  is challenged as fabricated
or  inadmissible. Though it is sufficient for  us to stop at this, let us
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go a little deeper to find out whether there was any perversity in the
findings recorded by the Tribunals and whether such findings could
not have been reached by any reasonable standards. 
12.8 The   following   undisputed   facts   emerge   from   the
documents   placed   before   the   Tribunal.   The   authenticity   of   these
documents were never in question or denied:
(i) An   agreement   of   a   huge   magnitude,   for   leasing   out   five
numbers of C X S transponders each of 8.1 MHz capacity
and five numbers of S X C transponders each of 2.7 MHz
capacity on the Primary Satellite­I (PS­I), was surprisingly
and shockingly entered into by Antrix with Devas, without
same   being   preceded   by   any   auction/tender   process.   It
appears from the letter dated 27.09.2004 sent by DEVAS
LLC, USA to Shri K.R. Sridhara Murty, Executive Director
of Antrix with copies to Dr. G. Madhavan Nair, Chairman,
ISRO   and   others   that   Shri   Ramachandran   Viswanathan,
met   the   then   Chairman   of   ISRO   and   other   officials   in
Bangalore   in   April­2003   and   they   met   once   again   in
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Washington D.C. during the visit of the then Chairman of
ISRO.   These   meetings,   which   were   not   preceded   by   any
invitation   to   the   public   for   any   Expression   of   Interest,
culminated   in   a   Memorandum   of   Understanding   dated
28.07.2003.   Though   it   is   not   clear   where   the   MoU   was
signed, there are indications that it was signed overseas;
(ii) It   must   be   noted   here   that   a   one   man   Committee
comprising   of   Dr.   B.N.   Suresh,   former   Member   of   the
Space   Commission   and   Director   of     Indian   Institute   of
Space   Science   and   Technology,   was   constituted   on
8.12.2009,   long   after   the   commencement   of   the
commercial   relationship,   to   look   comprehensively   into   all
aspects   of   the   contract,   both   commercial   and   technical.
According to the Report submitted by him in May­2010, it
was   Forge   Advisors,   USA   which   made   a   presentation   in
March­2003,   on   technology   aspects   of   digital   multimedia
services   to   Antrix/ISRO,   followed   by   a   presentation   in
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May­2003   purportedly   to   the   top   management   of   Antrix/
ISRO. The MoU was signed thereafter; 
(iii) But   the   documents   filed   by   the   appellants   themselves
show that a power point presentation was made by Forge
LLC   on  22.03.2004,  proposing   an   Indian   joint   venture  to
launch what came to be known as DEVAS (which perhaps
ultimately  turned  out  to  be  ASURAS 23
). It  was claimed  in
the said proposal that DEVAS platform will be capable of
delivering   multimedia   and   information   services   via
satellite to mobile devices tailored to the needs of various
market segments such as consumer segment, commercial
segment   and   social   segment.   This   presentation   dated
22.03.2004 was followed by a proposal dated 15.04.2004,
about which  we have  made a brief mention in  paragraph
3.4 above. This proposal obliged ISRO/Antrix to invest in
one   operational   S­band   Satellite   with   a   ground   space
segment to be leased to a joint venture between Forge and
23   According to Hindu Mythology, Devas are demigods and Asuras are demons
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Antrix. What was to be reserved for the joint venture was
97% of  the  space. The  consideration  receivable by  ISRO/
Antrix   upon   such   a   lease,   was   to   be   US   $   11   million
annually for a period of 15 years. At least at this stage the
proposal   to   invest   in   an   operational   S­band   satellite   and
the   lease   of   nearly   the   entire   space   of   such   satellite   to   a
joint venture, should have come to the public domain, to
see,   (a)   if   the   technology   existed;   and   (b)   if   the   proposal
was commercially viable. But it was not done;
(iv) On   14.05.2004,   a   Committee   headed   by   one   Dr.   K.N.
Shankara,   Director,   Space   Applications   Centre   was
constituted   purportedly   to   examine   the   technical
feasibility,   risk   management   including   possibilities   of
alternate   uses   of   space   segment,   financial   and   market
aspects   and   time   schedule.   According   to   the   Report
submitted by this Committee, DEVAS was conceived as a
new   national   service  expected  to   be  launched  by   the   end
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of   2006   that   would   deliver   video,   multimedia   and
information   services   via   high   powered   satellite   to   mobile
receivers in vehicles and mobile phones across India. The
catch   here   lies   in   the   fact   that   while   it   was   possible   to
deliver  some of these services   via   terrestrial mode, it was
not possible at that point of time to provide this bouquet
of   services   via   satellite.   Even   today   satellite   phones   are
beyond   the   reach   of   a   common   man.   Mobile   receivers   or
devices which can simply receive audio and video content
are   different   from   mobile   phones,   which   are   capable   of
providing   a   two   way   communication.     The   technology   for
providing   the   services   through   mobile  phones   was   not   in
existence at that time, which is why the proposal made by
Forge   Advisors   included   an   expectation   that   such   a
service may be launched by the end of 2006. It was with
this   expectation/promise   that   an   Agreement   was   entered
into on 28.01.2005 but this so­called new national service
was   never   launched   as   promised   in   2006.   The   launch   of
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the   services   was   not   linked   to   the   provision   of   a   S­band
satellite by  Antrix, at least at the time when negotiations
took place;  
(v) Admittedly,   FIPB   (Foreign   Investment   Promotion   Board)
approvals taken by Devas during the period May­2006 to
September­2009   were   on   the   basis   of   the   ISP   (Internet
Service   Provider)   license   secured   from   the   Department   of
Telecommunications   on   02.05.2008   and   IPTV   (Internet
Protocol   Television)   services   license   obtained   on
31.03.2009;
(vi) Therefore,   the   finding   of   the   Tribunal,   (a)   that   a   public
largesse   was   doled   out   in   favour   of   Devas,   in
contravention of the public policy in India;   (b)   that Devas
enticed Antrix/ISRO to enter into an MoU followed by an
Agreement   by   promising   to   provide   something   that   was
not in existence at that time and which did not come into
existence   even   later;   (c)   that   the   licenses   and   approvals
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were   for   completely   different   services;   and   (d)   that   the
services   offered   were   not   within   the   scope   of   SATCOM
Policy etc. are actually borne out by records;
(vii) There is no denial of the fact that Devas offered a bouquet
of services known as (a)  Devas Services   through a device
called (b)  Devas device  in a hybrid mode of transmission,
which   is   a   combination   of   satellite   and   terrestrial
transmissions, and which is called (c)   Devas Technology
but none of which existed at the relevant point of time or
even thereafter;
(viii) Devas   did   not   even   hold   necessary   intellectual   property
rights in this regard though they claimed to have applied; 
(ix) That   the   formation   of   the   company,   namely,   Devas
Multimedia   Private   Limited   was   for   a   fraudulent   and
unlawful   purpose   is   borne   out   by   the   fact   that   the
company was incorporated in December­2004, as a result
of preliminary meetings held at Bangalore in March­2003
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and   in   USA   in   May­2003,   followed   by   the   signing   of   the
MoU   on   28.07.2003,   the   presentation   made   on
22.03.2004   and   the   discussions   held   thereafter.   The
ground   work   was   clearly   done   during   the   period   from
March­2003   to   December­2004   before   the   company   was
formally   incorporated.   Immediately   after   incorporation,
the   Agreement   dated   28.01.2005   was   signed.   Therefore,
the first ingredient of Section 271(c) of the Companies Act,
2013,   namely,   the   formation   of   the   company   for   a
fraudulent and unlawful purpose was clearly made out;
(x) The   kind   of   licenses   obtained   such   as   ISP   and   IPTV
licenses   and   the   object   for   which   FIPB   approvals   were
taken   but   showcased   as   those   sufficient   for   fulfilling   the
obligations   under   the   Agreement   dated   28.01.2005
demonstrated   that   the   affairs   of   the   company   were
conducted in a fraudulent manner. This is fortified by the
fact that a total amount of Rs.579 crores was brought in,
but   almost   85%   of   the   said   amount   was   siphoned   out   of
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India, partly towards establishment of a subsidiary in the
US,   partly   towards   business   support   services   and   partly
towards   litigation   expenses.   We   do   not   know   if   the
amount   of   Rs.233   crores   taken   out   of   India   towards
litigation services, also became a part of the investment in
a   more   productive   venture,   namely,   arbitration.   The
manner in which a misleading note was put to the cabinet
and   the   manner   in   which   the   minutes   of   the   meeting   of
TAG sub­committee were manipulated, highlighted by the
Tribunal, also shows that the affairs of the company were
conducted in a fraudulent manner. Thus, the second limb
of Section 271(c), namely, the conduct of the affairs of the
company in a fraudulent manner, also stood established.
(xi) SATCOM   Policy   perceived   telecommunication   and
broadcasting services to be independent of each other and
also mutually exclusive. Therefore, a combination of both
was   not   permitted   by   law.   It   is   especially   so   since   no
deliberation   took   place   with   the   Ministry   of   Information
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and   Broadcasting.   Moreover,   unless   ICC   allocates   space
segment, to a private player, the same becomes unlawful.
This   is   why   the   conduct   of   the   affairs   of   the   company
became unlawful;
(xii) That   the   officials   of   the   Department   of   Space   and   Antrix
were in collusion and that it was a case of fence eating the
crop (and also allowing others to eat the crop), by joining
hands with third parties, is borne out by the fact that the
Note   of   the   104 th
  Space   Commission   did   not   contain   a
reference   to   the   Agreement.   The   Cabinet   Note   dated
17.11.2005   prepared   after   ten   months   of   signing   of   the
Agreement,   did   not   make   a   mention   about   Devas   or   the
Agreement,   but   proceeded   on   the   basis   as   though   ISRO
received   several   Expressions   of   Interest.   These   materials
show the complicity of the officials to allow Devas to have
unjust enrichment;
(xiii)  It is on record that the minutes of the meeting of the Sub
Committee   dated   06.01.2009   were   manipulated   and   the
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experimental   licence   was   granted   on   07.05.2009.   Only
thereafter,   the   original   minutes   were   restored   on
20.11.2009 and that too after protest.
(xiv)   Admittedly, every  one  of  the investors  procured shares of
the   company   in   liquidation   and   each   shareholder   had   a
representative   in   the   board   of   directors.   Since   the   board
controlled   the   company,   the   directors   were   guilty   of   the
conduct   of   the   affairs   of   the   company   in   a   fraudulent
manner.   Since   each   shareholder   had   a   representative   in
the board, the shareholders had to take the blame for the
misdeeds of the directors;
(xv) Additionally, the shareholders were fully aware of the fact
that the application for approval dated 02.02.2006 to the
FIPB   was   for  ISP   services.   But   they   entered   into   a   Share
Subscription   Agreement   on   06.03.2006   for   Devas
services. The Share Subscription Agreement discloses that
they   were   aware   of   the   false   statements   contained   in   the
Agreement dated 28.01.2005. Therefore, the shareholders,
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who   now   want   to   reap   the   fruits   of   a   tree,   fraudulently
planted   and   unlawfully   nurtured,   cannot   feign   ignorance
and escape the allegations of fraud.
12.9 An argument was advanced by the learned senior counsel
for the appellants, on the basis of a statement contained in the order
of   NCLAT   that   the   allegations   are   prima   facie   made   out,   that   a
company   cannot   be   ordered   to   be   wound   up   on   the   basis   of   prima
facie   findings.   The   standard   of   proof   required   for   winding   up   of   a
company cannot be  prima facie. 
12.10 But   we   do   not   think   that   the   appellants   can   take
advantage of the use of an inappropriate expression by NCLAT.  The
detailed   findings   recorded   by   the   Tribunal   show   that   they   are   final
and   not   prima   facie.   Merely   because   NCLAT   used   an   erroneous
expression those findings cannot become  prima facie .
13. Miscellenous Grounds
13.1 Apart   from   the   above   main   grounds   of   attack,   which   we
have dealt in extenso, the learned senior counsel for the appellants
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also made a few supplementary submissions. One of them was that
a   lis   between  two   private  parties  cannot   become  the  subject  matter
of   a   petition   under   Section   271(c).   But   this   argument   is   to   be
rejected outright, in view of the fact that the claims of Devas and its
shareholders   are   also   on   the   property   of   the   Government   of   India.
The   space   segment   in   the   satellite   proposed   to   be   launched   by   the
Government of India, is the property of the Government of India. In
fact, the shareholders have secured two awards against the Republic
of India under BIT.  Therefore, it is neither a  lis   between two private
parties   nor   a   private   lis   between   a   private   party   and   a   public
authority. It is a case of fraud of a huge magnitude which cannot be
brushed under the carpet, as a private  lis.
13.2 Another   contention   raised   on   behalf   of   the   appellants   is
that the petition under Section 271(c) should have been preceded, at
least by a report from the Serious Fraud Investigation Office, which
has   now   gained   statutory   status   under   Section   211   of   the
Companies Act, 2013. But this contention is un­acceptable, in view
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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   under
Section 271(c) and the other  is under the just and equitable clause
in   Section   271(e),   read   with   Section   224(2)   and   Section   213(b).
What was Section 439(1)(f) read with Section 243 and Section 237(b)
of the 1956 Act, have now taken a new   avatar   under Section 224(2)
read   with   Section   213(b).   It   is   only   in   the   second   category   of   cases
that   the   report   of   the   investigation   should   precede   a   petition   for
winding up.
13.3 Yet  another   contention   raised   on   behalf   of   the  appellants
is that the criminal complaint filed for the offences punishable under
Section 420 read with Section 120B  IPC, has not yet been taken to
its logical end. Therefore, it is contended that in case the officials of
Antrix and shareholders of Devas are acquitted after trial, the clock
cannot be put back, if the company is now wound up. Attractive as
it   may   seem   at   first   blush,   this   contention   cannot   hold   water,   if
scrutinised   a   little   deeper.   The   standard   of   proof   required   in   a
criminal case is different from the standard of proof required in the
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proceedings before NCLT. The outcome of one need not depend upon
the   outcome   of   the   other,   as   the   consequences   are   civil   under   the
Companies   Act,   2013   and   penal   in   the   criminal   proceedings.
Moreover, this argument can be reversed like the handle of a dagger.
What if the company is allowed to continue to exist and also enforce
the arbitration awards for amounts totalling to tens of thousands of
crores   of   Indian   Rupees   (The   ICC   award   is   stated   to   be   for   INR
10,000  crores and  the  2  BIT awards are stated to  be for  INR  5,000
crores)   and   eventually   the   Criminal   Court   finds   all   shareholders
guilty of fraud? The answer to this question would be abhorring.
13.4 Lastly,   it   was   contended   that   the   actual   motive   behind
Antrix  seeking   the   winding   up  of  Devas,  is  to  deprive  Devas,  of   the
benefits of an unanimous award passed by the ICC Arbitral tribunal
presided   over   by   a   former   Chief   Justice   of   India   and   the   two   BIT
awards   and   that   such   attempts   on   the   part   of   a   corporate   entity
wholly   owned   by   the   Government   of   India   would   send   a   wrong
message to international investors.
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13.5 We do not find any merit in the above submission. If as a
matter of fact, fraud as projected by Antrix, stands established, the
motive   behind   the   victim   of   fraud,   coming   up   with   a   petition   for
winding   up,   is   of   no   relevance.   If   the   seeds   of   the   commercial
relationship   between   Antrix   and   Devas   were   a   product   of   fraud
perpetrated by Devas, every part of the plant that grew out of those
seeds, such as the Agreement, the disputes, arbitral awards etc., are
all infected with the poison of fraud. 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   the   motive   behind   the   action   brought   by   the   victim   of   fraud
can never stand as an impediment.
13.6 We   do   not   know   if   the   action   of   Antrix   in   seeking   the
winding up of Devas may send a wrong message, to the community
of   investors.   But   allowing   Devas   and   its   shareholders   to   reap   the
benefits   of   their   fraudulent   action,   may   nevertheless   send   another
wrong   message   namely   that   by   adopting   fraudulent   means   and   by
bringing   into   India   an   investment   in   a   sum   of   INR   579   crores,   the
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investors can hope to get tens of thousands of crores of rupees, even
after siphoning off INR 488 crores.
14. Conclusion
Therefore, in fine, we find all the grounds of attack to the
concurrent   orders   of   the   NCLT   and   NCLAT   to   be   unsustainable.
Therefore,  the appeals are dismissed.   However,    without any  order
as to costs.
… ..…………....................J.
      (Hemant Gupta)
.…..………......................J.
        (V. Ramasubramanian)
NEW DELHI
JANUARY 17, 2022
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