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2015 (3) TMI 371 - HC - Companies LawWinding up application - Loss of substratum of the company- Cancellation of 2G licenses - Held that:- On the issue of loss of substratum, the order of the Appeal Court inter alia observes that the Unified Access Services Licenses (“UASLs”) were the most valuable assets of the Company and that the commercial existence of the Company depended on UASLs. It is also observed that the UASLs were undoubtedly the basis on which the Petitioner was persuaded to invest a sum of ₹ 3,500 crores in the Company (paragraph 34). The Appeal Court also observed that the indebtedness of the Company as on 8th April, 2014, is over ₹ 4,500/crores (Paragraph 40) and that the Respondent No.2 has not denied the averment in the Petition that a minimum amount of US $ 18 million was required to continue the operation of the Company (Paragraph 42). In paragraph 44, the Appeal Court observed that the UASLs having been cancelled, the object for which the Company was incorporated and in any event the object on the basis of which the Petitioner had invested over ₹ 3,500 crores has not merely substantially, but had entirely failed. Further, that there was lack of any prospect of revival of the Company and that it was established beyond doubt that the existing and probable assets are insufficient to meet the existing liability. The Appeal Court also observed that the “purported scheme” proposed by the Respondent No. 2 for revival of the Company inspired no confidence. Accordingly, the Appeal Court concluded that, “ it has been established that the substratum of the company has gone. There is no prospect of money being brought in by anyone to make it a commercially viable enterprise.” In paragraph 51, the Appeal Court further observed that the Company “would be unable to do any business even unrelated to the 2G licenses for it does not have the financial capacity to do so. Any attempt to do any other business, including related to the three subsisting licenses would only result in disastrous consequences plunging the company to a situation far worse than it is today.” The Appeal Court dismissed the Respondent No.2's “purported scheme” by stating that, “the Scheme inspires little, if any, confidence. It is vague and without material particulars.” and in paragraph 61 concluded that they were in entire agreement with the Single Judge that the Company had lost its substratum and that any revival was unrealistic. As regards the submission of the Respondent No. 2 that the PMLA proceedings are a subsequent event and that subsequent events cannot be a ground for winding up, as set out here in above and in paragraph 100 of the order of the Appeal Court, the subsequent facts can be relied upon by the Company Court while considering a Petition under Section 433 (f) of the Act on just and equitable ground. The subsequent events may be pleaded either by amending the Petition or by filing further affidavits. In any case, the events mentioned in the said charge-sheet are events which in fact took place prior to the filing of the present Petition. The charge-sheet was however filed after the Petition was filed as stated above. In my view, invocation of the Put Option is a contractual right available to Respondent No.2. The exercise of the right under the Put Option Deed would not disentitle Respondent No. 2 from resisting the Petition unless the Petitioner accepts the option exercised by the Respondent No.2. I have independent of the issue qua the Respondent No. 2 unconditionally withdrawing the CLB proceedings and once again reiterating the same in defence to the above Petition, held hereinabove that the said allegations are not acceptable. In any event, from a perusal of the contents of the said letter I am of the view that the Petitioner is correct in its submission that the allegations made in the Petition which were unconditionally withdrawn, were without any substance, since Mr. Balwa has in the said letter attributed the fate meted by Etisalat to other authorities who allegedly had a sinister design to drive away Etisalat from this country. In view of the above facts and circumstances, I am satisfied that the Company has lost its substratum; there exits a deadlock between the main shareholders of the Company; there is complete lack of faith and probity resulting in irretrievable breakdown between the major shareholders of the Company; the liabilities of the Company have far exceeded its assets; the scheme propounded by Respondent No. 2 is unrealistic, speculative and unworkable and therefore a case is made out by the Petitioner to wind up the Company under Section 433 (f) of the Act. The Company Petition is allowed. - Winding up application accepted.
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