Devas Multimedia Private Ltd. Vs Antrix Corporation Ltd. (Supreme Court of India)
Facts- The company, Devas Multimedia Pvt. Ltd., in liquidation has challenged an order of winding up passed by the National Company Law Tribunal under section 271(c) of Companies Act, 2013. The order was confirmed by the National Company Law Appellate Tribunal.
It is contended 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 scrutinized a little deeper. The standard of proof required in a criminal case is different from the standard of proof required in the proceedings before NCLT.
It is also 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.
Conclusion-
Technically speaking, the appeal before us which is u/s 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 reappreciate evidence.
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 investors can hope to get tens of thousands of crores of rupees, even after siphoning off INR 488 crores.
FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER
1. Challenging an order of winding up passed by the National Company Law Tribunal under Section 271(c) of the Companies Act, 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
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 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 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 India1. 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 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 SBand spacecraft by DEVAS”. The preamble of the Agreement stated that Devas was developing a platform capable of delivering 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 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 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 IndiaMauritius Bilateral Investment Treaty and the German Company by name Deutsche Telecom, initiated a BIT arbitration under the IndiaGermany 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 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
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:
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:
(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 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, DEVAS2 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.
(iv) Violation of SATCOM policy, manipulation of minutes of meetings and the misleading Cabinet Note.
(v) 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 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 Companies 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 formation of the company or (ii) in the conduct of affairs of the company or (iii) on the part of persons concerned in the formation of or the management of its affairs, was not one of the circumstances 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 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 subsection (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.”
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 provisions from Sections 235 to 251 is grouped under the Heading “Investigation”. Section 235(1) empowers the Central Government to order an investigation into the affairs of the company whenever a Re-port has been made by the Registrar under Section 234. Independent 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 connection 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 –
(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 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 ªjust 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) 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 confidence3”. 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 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 apply4. 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 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 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 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
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(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 sub-clauses (i) and (ii) of clause (b) of section 237 of the 1956 Act, are to be found in sub-clauses (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 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 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 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 circumstances7. 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 section 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 order, decency or morality;
(c) if on an application made by the Registrar or any other person authorised by the Central Government by notification 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 concerned 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;
(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 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:
