9911796707
TMI Blog2014 (4) TMI 1298X X X X Extracts X X X X X X X X Extracts X X X X ..... respondent No. 1 for having the second respondent company-Etisalat D.B. Telecom Limited (hereinafter referred to as "the company") wound up under section 433(f) of the Companies Act, 1956 on the ground that it is just and equitable to do so. 2. It is convenient to refer to the parties as they are arrayed in the petition. In the petition, Respondent No. 1 to this appeal was the petitioner. The appellant was respondent No. 2 to the petition. Respondent No. 2 to the appeal-Etisalat D.B. Telecom Limited i.e. the company sought to be wound up was Respondent No. 1 to the petition (hereinafter referred to as "the company"). Respondent Nos.3 and 4 -Delphi Investment Limited and Genex Exim Ventures Private Limited were respondent Nos.3 and 4 to the petition. 3. The petitioner contended that it is just and equitable to wind up the company, inter-alia, on the ground that the substratum of the company has almost completely been eroded, that there is a deadlock in the management of the company and on the Board of Directors of the company and that there is a complete lack of uberrima fides between the main shareholders of the company viz., the petitioner and the appellant, which is a glorified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... up petition. We agree. The appeal was, accordingly, heard at considerable length and in depth. (B) Mr. Madon, the learned senior counsel appearing on behalf of the petitioner submitted that the Appellate Court ought not to easily interfere with the discretion exercised by the company Judge while admitting the petition for winding up, including on the just and equitable ground. As we have come to the conclusion that the learned Judge rightly exercised his jurisdiction while admitting the petition. It is not necessary to express any opinion on the question as to the manner of exercise of the appellate jurisdiction against such orders. FACTS: 6(A) The petitioner, a company incorporated in Mauritius, is a 100% subsidiary of Emirates Telecommunications Corporation (Etisalat) incorporated in the United Arab Emirates. The Central Government of the United Arab Emirates owns 60% of the shares of Etisalat and the balance 40% is held by UAE nationals. Etisalat carries on business as an international telecommunications operator in about 18 countries and services over 140 million subscribers across its network. (B) The company was incorporated on 18th July, 2006, in the name of Swan Capita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uired in accordance with law and on the warranties made by the appellant as to their expertise in the field of telecommunications. 11. In the meantime, on 17th December, 2008, a Management Services Agreement was entered into between the company and Etisalat. We will refer to the relevant provisions thereof while dealing with the submissions. Suffice it to note at this stage that the appellant's contention is that the petitioner was in charge of the management of the company and is, therefore, responsible for the failure of the company. The petitioner's case on the other hand is that despite the provisions of the Management Services Agreement, the appellants, its directors and officers were, in fact, in charge of the management of the company. 12. On 21st October, 2009, before the petitioner invested the last amount of Rs. 106.95 crores to acquire one additional share, the CBI filed an FIR against unknown officers of the Department of Telecommunications (DoT) and unknown private persons and began an investigation into the process of allocation of 2G spectrum by the DoT. On 14th February, 2010 and 3rd January, 2011, public interest litigations were filed in the Supreme Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the decision to file the petition was taken by his lawyers without his consent and concurrence and that such a thing would never happen again. The learned Judge has recorded in the impugned judgment that though the letter was disputed on affidavit, it was not disputed during the hearing before him. 16(A) On 22nd October, 2011, an order was passed by the special CBI Judge framing criminal charges against Balwa, Goenka and the company. (B) The Supreme Court, by a judgment dated 2nd February, 2012, quashed all the 2G licences allotted to aliathe company. We will refer to the findings relied upon by the learned counsel appearing on behalf of the petitioner later. (C) On 18th February, 2012, the TRAI recommended that the entry fees paid by the licencees of the 2G licences ought not to be refunded. On 28th February, 2012, the DoT filed an affidavit stating that no refund of the licence fees was possible. 17(A) On 8th February, 2012, the company informed the DoT and the Telecom Regulatory Authority of India (TRAI) that it was shutting down its telecom network with effect from 31st March, 2012. (B) At a meeting of the Board of Directors held on 19th February, 2012, the manageme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... maintain status quo in respect thereof. Standard Chartered Bank (SCB), another creditor of the company also filed an application before the DRT for recovery of its dues. On 16th April, 2012, the DRT passed an ex parte order directing the attachment of all the assets of the company and appointed a Receiver thereof. 23. On 19th May, 2012, Punjab National Bank wrongly appropriated an amount of Rs. 254.16 crores out of the company's fixed deposits towards a loan granted by it to the appellant. On 12th October, 2012, the appellant's advocate issued a letter admitting that it owed Rs. 254 crores to Punjab National Bank and that the appropriation of funds of the company was illegal. 24. On 3rd July, 2012, the learned company Judge passed an interim order appointing an advocate and solicitor of this Court as an Authorized Person in respect of the company. He was to discharge several functions in connection with the company. We will refer to this order in detail later. The Authorized Person had submitted several reports before the company Judge. Several orders have been passed on these reports, including regarding the termination of the services of 212 out of the 286 employees o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ferred earlier to the public interest litigations and the judgment of the Supreme Court in respect of the allocation of the 2G spectrum. The Supreme Court, by its judgment dated 2nd February, 2012 in Writ Petition (Civil) No. 423 of 2010 Centre for Public Interest Litigation & Ors. v. Union of India & Ors., quashed all the 2G licences, including those allotted to the company. Mr. Madon relied upon several observations in the judgment of the Supreme Court. It is not necessary to refer to all of them. It is sufficient for the purpose of these proceedings to note that the Supreme Court held that the entire approach adopted in the allocation of licences was lopsided and contrary to the decision taken by the council of ministers and that this approach became a handle for the then minister of C&IT and the officers of the DoT to gift away important national assets at throw away prices by willfully ignoring the concerns raised from various quarters, including the Prime Minister, Ministry of Finance and also some of its own officers. The judgment notes that this becomes clear from the fact that soon after obtaining the licences some of the beneficiaries offloaded their shares to others in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... legalities and criminal acts on their part. Criminal conspiracy on their part along with others has also been alleged. The result of the case is not material. The charge-sheet alongwith various others factors, including the judgment of the Supreme Court, prima facie, at least, is sufficient ground for the company court coming to the conclusion that the petition for winding up the company on the just and equitable ground warrants admission. 31. The petition for winding up ought to be admitted even assuming that none of the persons connected with the company are found guilty. We do not for a moment suggest that the moment there is a complaint about the conduct of a company or its promoters, directors and officers, a court must wind up the company on the just and equitable ground. That would depend on the facts of each case. When matters have reached such a stage as in this case, a substantial partner in the company is entitled to approach the court to have the company wound up on the just and equitable ground. Considering all that has transpired it cannot be said that the petitioner's loss of confidence in it's partner is unjustified even if the petitioner has not independen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt was unable to indicate how on the basis of the three subsisting licences the company would be able to carry on business profitably even in the distant future. Although these are business decisions which the company is entitled to assess, it is incumbent especially in such cases for the party to establish even prima facie that the company is at least likely in future to be a commercially and financially viable undertaking. Our attention has not been brought to any material which even remotely indicates the same. Nothing except a purported scheme-and we use the term "purported" advisedly-which we will refer to shortly. The petitioner's investment in the company was almost entirely if not only in view of the 2G licences held by the company. It was not on the basis of the three subsisting licences. As noted by the learned Judge there has never been a proposal or plan to operate a business using these three subsisting licences. Nor is there a technical or a business plan indicating the resources required and the manner of conducting the business based on the three subsisting licences. 36. An indication of the relative values of the 2G licences and the three subsisting licences i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ember, 2011, records that Balwa pointed out that the company must confirm to Reliance an undisputed amount owed to it and "make immediate payment of it". That probably is why Reliance is opposing the winding up petition. The two major creditors-Standard Chartered Bank and Citibank, to whom an amount of over Rs. 2,000 crores is due, have not only not waived their claims, but have adopted proceedings to recover the same and have even sought for and obtained orders from the DRT appointing a Receiver in respect of the assets of the company. The order for Receiver has merely been suspended and that too only in view of the fact that the Authorized Person has been appointed by the company Judge. If, therefore, the appointment of the Authorized Person is revoked, the Receiver would take possession of the assets of the company in any event. It is difficult to see how in that event the company would at all be able to function. Moreover, even assuming that the company continues to function under the Receiver, there is nothing to indicate that the revenues would, even in the distant future, be sufficient to pay the dues of the company. 40. The appellant had sought permission from the company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the subject matter of the company is gone does not imply that it must have gone entirely. It is sufficient if the court comes to the conclusion that it has substantially or almost entirely gone. It can hardly be suggested that what was meant was that even if a minuscule part of the subject matter of the company remains it cannot be said that the substratum of the company has gone. In the case before us, the thirteen 2G licences have been cancelled leaving the company with the three subsisting licence. The monetary value of the three subsisting licences is only 0.325% of the value of thirteen 2G licences. The monetary values are at least an indication of the extent of the erosion of the substratum of the company. (ii) Condition (b) refers to the object for which the company was incorporated. This condition does not apply only to the initial object for which the company was incorporated. The applicability of this principle would indeed depend upon the facts of each case. We would extend this principle to cases where an investor joins a glorified partnership in view of the main business carried on at the time of his joining. It would be necessary to establish that the main or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relied upon the judgment of a Division Bench of the Gujarat High Court in In Re: Kermeen Foods Pvt. Ltd. 1985 58 CC 156. Mr. Madon relied upon the judgment as, according to him, the facts were similar to the facts in the present case. That, however, does not carry the matter any further on the question of law. 46. Mr. Kamdar then submitted that the financial position of the company is not relevant in a winding up petition based on the just and equitable ground. The financial position, according to him, is relevant only if the petition is filed under section 433(e) i.e. where the company is unable to pay its dues. 47. Mr. Madon relied upon the judgment of a learned single Judge of the Calcutta High Court in In Re: Darjeeling Bank Limited, AIR 1948 Cal. 335 and 1977 CC 15, in support of his submission that the absence of a statutory notice under section 434(1)(a) would not make a difference as that would only disentitle a petitioner to avail of the deeming provision under section 434(1)(a) that the company is unable to pay its debts. The judgment is irrelevant as the point before us is quite different. What Mr. Kamdar submitted was that as this is not a petition under section 433(e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le manner, it must be held that its substratum has gone. In this case, the company would be unable to do any business even unrelated to the 2G licences for it does not have the financial capacity to do so. Any attempt to do any other business, including related to the three subsisting licences would only result in disastrous consequences plunging the company to a situation far worse than it is today. 51. There may be certain exceptional cases arising on account of extraordinary circumstances which may pursuade a court not to wind up a company although its substratum has gone if it is in the public interest that the company continues. For instance, if a company is the only enterprise manufacturing critical defence equipment or components for defence equipment and there is an urgent need for such equipment a court may be pursuaded to let the company continue to function in public interest. The case before us does not fall under this category. Nothing to this effect was even suggested on behalf of the appellant. 52. This brings us to the purported scheme upon which the appellant relies to contend that the company is capable of carrying on business and ought to be afforded an opport ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... comprises of a sum of Rs. 1600 crores by way of "Equity Infusion by certain class of investors." There are no particulars even as to the identity of the investors. There is no affidavit or even a letter from any person confirming the same. Paragraph 6 further states that the appellant is presently in talks "with various potential investors" without specifying who the potential investors are. (iv) In clause 7 it is stated that the company would settle the claims of all its creditors, but there is not even a suggestion as to how the claims would be settled. It is pertinent to note that the scheme admits that an amount of Rs. 1600.27 crores is due to the Standard Chartered Bank, that a sum of Rs. 745.03 crores is due to the Citibank and an amount of Rs. 1537.97 crores is due to the other creditors, including Reliance. (v) There is a summary of cash flow over the business of ten years annexed to the scheme. It is also important to note clause 8.2 of the scheme, which reads as under :- 8. Settlement of Creditors ........... 8.2 The Scheme Debt shall be payable subject to the respective Creditor(s) taking appropriate step(s), moving appropriate application(s)/joint application ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nue to deploy his funds on a different venture. It would have been necessary to consider this question had there been a possibility of the company undertaking another business venture in a commercially viable manner. 59. Moreover, the learned judge has clarified that a genuine comprehensive scheme which is in the interest of the company, its shareholders and creditors can always be placed before the Court for its consideration even after the admission of the company petition. No such attempt has been made to date. 60. In the circumstances, we are entirely in agreement with the learned Judge that the company has lost its substratum and that the appellant's contention that the company is capable of being revised is unrealistic. 61. The petitioner further contended that there is a complete loss of faith and trust between the appellant and the petitioner. This, in turn, has resulted in a deadlock in the management of the company and on the Board of Directors. As a result thereof also it is just and equitable that the company be wound up. 62. We referred to the judgment of the Supreme Court and the criminal proceedings. The same have resulted in the petitioner loosing faith in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fidence and mutuality between the shareholders of the company and that "the company is in a situation of a total deadlock on the Board and on the functioning." [emphasis supplied] 64. The petitioner has, therefore, expressly pleaded that there is a complete lack of uberrima fides between the majority shareholders and that there is a deadlock in the management. The contention that the petitioner has not pleaded the same is rejected. 65. Mr. Kamdar then submitted that there is, in fact, no deadlock and that assuming that there is a likelihood of deadlock, the agreements between the parties provide a mechanism for resolving the same. 66. In view of the facts that have transpired, including those set out earlier, it is futile to presume or even imagine that the majority shareholders would cooperate with each other. There is nothing on record to suggest that the two minority shareholders who together hold about 10% shares are likely to co-operate with either the appellant or with the respondent. Even assuming that they agree to co-operate only with the appellant, it would make little difference for two reasons. Firstly, in view of the petitioner holding 45% of the equity shares, ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tive matters have a significant bearing on the running and the continued existence of the company as a viable commercial enterprise. The affirmative matters include any amendment to the Memorandum of Association and Articles of Association of the company; the approval of the annual financial and Operating Business Plan and any changes thereto to the extent materially inconsistent with the Initial Business Plan. The initial business plan contemplated the working of the 2G licences which now stand cancelled. The affirmative matters also include a significant change in the nature and scope of the business to the extent not contemplated by the initial business. The petitioner has made it clear that it does not intend according it's consent especially in this regard. The affirmative matters include borrowings and grant of guarantees outside the Annual Financial and Operating Business Plan to the extent not contemplated by the Initial Business Plan. The petitioner is hardly likely to give it's consent in this regard. Financial issues are obviously one of the most vital aspects for running the company. If there is no cooperation and there is not likely to be any in this regard, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upreme Court. Paragraph 33 reads as under : 33. When more than one family or several friends and relations together form a Company and there is no right as such agreed upon for active participation of members who are sought to be excluded from management, the principles of dissolution of partnership cannot be liberally invoked. Besides, it is only when shareholding is more or less equal and there is a case of complete deadlock in the Company on account of lack of probity in the management of the Company and there is no hope or possibility of smooth and efficient continuance of the Company as a commercial concern, there may arise a case for winding-up on the just and equitable ground. In a given case the principles of dissolution of partnership may apply squarely if the apparent structure of the Company is not the real structure and on piercing the veil it is found that in reality it is a partnership. On the allegations and submissions in the present case, we are not prepared to extend these principles to the present Company. From paragraph 33, it is clear that the shareholding does not have to be equal in such a case. It is sufficient if it is "more or less equal". All the tests ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany. It can also arise on account of the agreement between the shareholders. The case before us is an example. It would depend upon the facts of each case. For instance, an affirmative vote, as in the present case, may be required for major policy decisions even if the shareholding is unequal. The entire management and functioning of the company can be affected by such provisions. The test ought to be whether a business can be and is likely to be obstructed to the detriment of the company. 73. Mr. Kamdar submitted that a mere possibility of a deadlock is not sufficient to maintain a winding up petition on the just and equitable ground. He submitted that there must, in fact, be a deadlock for such a petition to be maintainable. 74. If the Court is satisfied that a deadlock is likely to arise in future, it must entertain the petition for winding up on the just and equitable ground. There is nothing in the Companies Act that suggests otherwise. Indeed, it would be neither just nor equitable to compel a party to stand by and permit a catastrophe to occur and then entertain the petition only as a remedial measure. It is well within the jurisdiction of a company court to interfere eve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Option Deed would not disentitle the appellant to resist the petition for winding up as the appellant may, at any time, revoke the same. In fact, the petitioner has by its letter dated 15th December, 2013 rejected its liability to pay amounts pursuant to the exercise of the Put Option right by the appellant. 81. That the appellant may withdraw the exercise of its right under the Put Option agreement would make no difference for, as on date, the appellant has not done so. It is unnecessary to consider at this stage the effect of the appellant withdrawing its action on the admissibility of the petition on this ground. 82. Having said that, however, we do not at this stage express an opinion whether this fact by itself would justify the admission of a petition on the just and equitable ground. We leave this for further consideration at the hearing of the petition. 83. Mr. Madon further submitted that the petitioner was not informed that the Reliance group of companies were also involved in the company. Had it been so informed, it would have never entered into the venture as Reliance are its competitors. The petitioner became aware of the involvement of Reliance in the company and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subsequent facts. Alternatively, he submitted that the facts must be pleaded in the petition and cannot be introduced in affidavits. Thirdly, he submitted that fourteen creditors have opposed the petition, whereas only two have supported it. 88. Mr. Kamdar submitted that a winding up petition based on the just and equitable clause must be decided only on the basis of the facts as on the date of the petition. According to him, the facts subsequent to the filing of the petition are irrelevant and cannot be taken into consideration while deciding whether such a petition ought to be entertained. Thus, for instance, the judgment of the Supreme Court cancelling the 2G licenses, the further proceedings in the criminal cases, the reduction in the number of employees, the increased liabilities of the company after the petition was filed, are irrelevant, as these facts arose subsequent to the filing of the petition. 89. The submission is not well founded either on authority or in principle. On principle there is no reason why the subsequent facts cannot be taken into consideration. The provisions of the Companies Act do not preclude the Court from taking into consideration the facts that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amendment is otherwise necessary for proper determination of issue between the parties. In the case of Promode Kumar Mittal v. Southern Steel Ltd., reported in (1980) 50 Comp. Cas. 555 the Calcutta High Court observed in a petition under sections 397 and 398 of the Companies Act that the Court can take notice of all subsequent events to grant reliefs finally after trial in a company matter and the interim orders passed from time to time by the Court in all applications, the meetings held under the Chairman appointed by the Court, and the resolutions passed by majority shareholders and directors present therein are all relevant. In the case of Inder Kumar Jain v. Osra Bottling Co. (P) Ltd., reported in (1977) 47 Comp. Cas. 194, the Delhi High Court has held that on an analogy of Order VI, Rule 17 of the Code of Civil Procedure, the High court has power to grant leave or amend a pleading in a petition under section 397 to 398 of the Companies Act, 1956 for relief against mismanagement or oppression in the affairs of a company. In the case of Bastar Transport and Trading Co. v. Court of Wards, reported in A.I.R. 1955 Nag 78 the Court held that the provisions of the Code of Civil Proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on or by filing further affidavits. Pleadings in a suit are different from the pleadings in petitions, including under the Companies Act. A plaintiff must amend the plaint. The parties must be afforded an opportunity of meeting the case whether taken in the petition or on affidavit. So long as the other parties are afforded an opportunity of meeting the case, we see no reason to insist upon subsequent facts being pleaded only in the petition by having it amended. The mere reliance upon evidence, oral or documentary, is not, of course, sufficient for evidence, oral or documentary, does not constitute pleadings. 98. In support of this submission, he relied upon a judgment of the Supreme Court in Sangramsingh P. Gaikwad vs. Shantidevi P. Gaikwad, (2005) 11 SCC 314. Paragraph 200 reads as under :- 200. It is now well settled that a case for grant of relief under Sections 397 and 398 of the Companies Act must be made out in the petition itself and the defects contained therein cannot be cured nor the lacuna filled up by other evidence oral or documentary. (See Bengal Luxmi Cotton Mills Ltd., In re.) The reference in the judgment to the documentary evidence is not to pleadings. This ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nes services to mean such management services as the operator i.e. the petitioner deems necessary based on its experience in its sole and absolute discretion to assist the company meet the objectives performed in accordance with clause 4. The objectives include the services referred to in Appendix A to the agreement. Under clause 21, the operator/petitioner was appointed to provide the services on an exclusive basis throughout the term. Clause 4 deals with services and service performance levels. Clause 41 provides that without prejudice to the responsibility of the Board and the management and the corporate governance of the company, the petitioner shall provide the services in accordance with the agreement and subject to such systems, policies and procedures as are agreed between the parties. He submitted that the petitioner, therefore, had an almost unfettered discretion regarding the management of the company. Mr. Kamdar also relied upon the following provisions of the shareholders agreement in this regard. "Key Employees" shall have the meaning set out in Clause 3.6.2. "Strategic Investor Directors" shall mean such persons (having the relevant security clearance) as are n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ployees, by giving notice in writing to the Founding Shareholder, the Individuals and the Company and to appoint any person as a replacement of such Existing Key Employee. The appointment of an individual as a replacement of that Existing Key Employee pursuant to the Clause 3.6.4 shall be subject to the provisions of Clause 3.12 of this Agreement, provided that the Founding Shareholder shall not unreasonably withhold its consent to the appointment of Key Employees as described above. 3.81 Quorum 3.8.1 The quorum for any meeting of the Board of Directors shall require the presence of at least one (1) Founding Shareholder Director (or his/her Alternate Director) and at least two Strategic Investor Directors (or their Alternate Directors), unless either the Founding Shareholder or the Strategic Investor, as the case may be, waive the requirement for the presence of one of their nominees. Further, the quorum for meetings of any committee established by the Board of Directors of the Company shall be the majority of members of such committee subject to the presence of at least 1 (one) member nominated by the Founding Shareholder and at least two (2) members nominated by the Strategic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the Company) unless the prior written consent of the Strategic Investor is obtained for such action or decision, such consent not to be unreasonably withheld or delayed. 3.12.2 Deadlock (a) If a proposal is made in respect of an Affirmative Matter but such proposal is not approved in accordance with Clause 3.12.1, a Shareholder may give written notice to the other Shareholders that it regards a deadlock situation as having arisen ("Deadlock"). (b) A Deadlock shall be referred to the senior management of the Founding Shareholder and the Strategic Investor within ten (10) Business Days of a notice issued under Clause 3.12.2(a). Such senior management shall endeavour to resolve the Deadlock within twenty (20) Business Days of the matter being referred to them ("Deadlock Discussion Period.") 106. Mr. Kamdar submitted that in view of the aforesaid provisions, the petitioner was entitled to do all things necessary connected with the management of the company. There is almost nothing that the petitioner could not do. He further submitted that there was not one occasion when the appellant or the other shareholders did not give their affirmative vote on any issue that the petiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar from only a few facts. 110. As recorded in the minutes at a meeting of the Board of Directors held on 10th November, 2009, the management was directed to communicate to Reliance in writing the potential loss to the company and the inability of Reliance to deliver the launch scope. The communication was directed to be drafted by the solicitors and vetted by Balwa. This was an important aspect for the company and the responsibility for the same was conferred upon Balwa who was the appellant's representative. 111. The petitioner contended that despite the provisions of the shareholder agreement and the management services agreement in reality, Balwa and Goenka together with their appointees managed and controlled the company at least to a very large extent and in very important respects. Even assuming this is not so, one thing is certain. The appellant, through Balwa and Goenka and the other appointees did participate in the management of the company in significant and crucial respects. In fact, Balwa was the Managing Director of the company till he resigned on 25th April, 2011. He was also the Vice Chairman of the Board of the company. It is pertinent to note in this regard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d for the above reasons. The allegations in this regard are, to say the least, vague and without material particulars. Mr. Kamdar himself faced difficulty in substantiating this submission which was evident from the fact that he essentially only read out paragraph 54.1 of the affidavit in reply dated 11th April, 2012 of one Adil Patel. Paragraph 54.1 of the affidavit itself contains bare allegations and is devoid of any particulars substantiating the same. The allegations, inter-alia, are that the competitors have gained a significant market share whereas the company has not because of the petitioner's failure; the petitioner took unilateral/secret/illegal decisions; the petitioner failed to contribute its share of the capital call and failed to formulate and carry out a business plan as per the shareholders agreement and other agreements; the petitioner incurred unnecessary expenses for travel. In the affidavit in rejoinder, the petitioner rightly contended that the allegations were without any particulars. In respect of the contention regarding the petitioner's alleged failure in rolling out the business, Mr. Kamdar reiterated the contention that the petitioner had the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the roll out obligation would, at the highest, indicate that the company had not achieved success or even a projected roll-out is well founded. In these circumstances, there is no justification for dismissing the petition on the ground that the company has not done well due to the petitioner's default. Indeed, it appears that the main cause was the cancellation of the 2G licences. 120. Mr. Kamdar then submitted that the company had suffered losses due to the petitioner having over-paid three vendors. 121. There is no substance in this allegation. The transactions with the three vendors took place in the year 2009. It is significant that the contracts had not been entered into between the petitioner with the vendors. The petitioner had merely obtained their offers and placed the same before the management. At a meeting of the Board of Directors held on 13th May, 2009, Balwa stated that the vendors proposals were higher than those of the other operators. In view of the assertion a sub-committee was formed by the company to negotiate with the vendors. The sub-committee comprised of the petitioner's representatives as well as Balwa. Even during the re-negotiation, the prices ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pointed out, assuming there was any failure on the part of the petitioner, as alleged in this regard, it affects the rights, if any, of the appellant and not of the company. In paragraph 25.14 of its affidavit in reply dated 11th April, 2012, the appellant contended that it had a Put Option Agreement dated 17th December, 2008 which, if exercised, would enable it to exit from the company by compelling the petitioner to purchase its shares at a valuation to be arrived at in accordance with the terms of the agreement. It is further alleged that the petitioner had failed to re-apply for and obtain the approval of the FIPB. It was alleged that on account of the petitioner's default in managing the company in an efficient and effective manner, the price payable upon exercise of the Put Option would stand substantially reduced. The appellant admits that it had not exercised the Put Option even when the application for the FIPB approval was made. In fact, the Put Option was exercised only during the pendency of this appeal. In any event, even assuming that the petitioner had failed to obtain the FIPB approval, the loss, if any, was caused not to the company, but to the appellant. Tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r more of the fully diluted Equity Capital of the Company, the Strategic Investor shall, subscribe for and be allotted 1 (one) additional Equity Share within ten (10) Business Days of the Strategic Investor acquiring such Shares. The consideration payable for such (1) one Equity Share shall be the Control Premium and shall be paid by wire transfer to a bank account of the Company in India (the details of which shall be provided by the Company to the Strategic Investor). 130. The contention is entirely unfounded even assuming that the petitioner failed to obtain the FIPB approval. There was an agreement to acquire the shares of Genex Exim Venture Pvt. Ltd. The petitioner, in any event, was not bound to acquire the same. Clause 2.10 required the petitioner to subscribe for the additional share for a value being the control premium only in the event of it acquiring 50% + 1 share of the company. The petitioner was not bound to acquire 50% + 1 share in the company. The submission, therefore, is without any substance. Even assuming that Genex Exim Ventures Pvt. Ltd. was entitled to call upon the petitioner to acquire the said share and the petitioner refused to do so, that is a matter b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, according to him, availed of the loan from SCB and Citibank only because of the global banking relationship that the petitioner has with these banks. 135. There is no allegation of fraud or collusion between the petitioner on the one hand and SCB and Citibank on the other. It is not even alleged that the terms and conditions of the facilities from SCB and Citibank were less favourable. The appellant's only case is that it had already arranged funds at a cost of Rs. 15 crores that the petitioner not having availed of the same on behalf of the company, caused the company a loss of Rs. 15 crores. The petitioner has denied that it failed to utilize the loan sanctioned by ICICI bank. Different facilities had been taken for different purposes. The ICICI loan was to be used for purchase of 3G licences which were never acquired by the company. SCB advanced the facilities for the purchase of equipment under the 2G licences and the same were, therefore, utilized. The SCB loan was of the year 2009 whereas the ICICI loan was sanctioned in the year 2010. 136. The learned Judge has also rightly held that Balwa and Goenka chaired all the Board meetings at which it was decided to avail o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... board to issue capital call notices to the appellant and the petitioner. The minutes of a meeting of the Board of Directors held on 31st August, 2010, recorded that call notices were issued to the appellant and to the petitioner for Rs. 8530 million and Rs. 9340 million respectively and pursuant thereto, the appellant had paid Rs. 4280 million as against the call for Rs. 8530 million. The petitioner, admittedly, had not paid any amount. The explanation for this is evident from the minutes of the meeting itself. The minutes record that a resolution approving the refund of the share application money to the appellant was passed by circulation on 5th July, 2010. Accordingly, it was resolved by the Board of Directors that the Rs. 4280 million received from the appellant pursuant to the capital call notice dated 25th May, 2010, issued by the company, be refunded without interest to the appellant "as the company does not require funds in the short term." There was no question, therefore, of the petitioner having failed to pay the call money. The company admittedly did not require the same. It is for that reason that the amounts paid by the appellant were refunded to it. In fact, the amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the appellant. It was not even suggested before us that the amounts claimed by these banks are not due to them by the company. Mr. Kamdar's grievance is that by admitting the amounts due on affidavit, albeit honestly, the company was prejudiced as a Receiver had been appointed in respect of the assets of the company. It is difficult to understand how such an argument can even be advanced. It really amounts to the appellant's saying that the amounts are due to the banks, but the company ought not to have been honest and admitted the same. It is an argument which requires merely to be stated to be rejected. 145. The company did file an affidavit dated 26th March, 2012, in which it admitted the dues of SCB to the extent of Rs. 1449 crores. We will assume that the affidavit filed by one Pratap Ghose was settled by the petitioner's general counsel. Mr. Madon submitted that when the matter was heard by the DRT, Pratap Ghose was before the police in respect of a complaint and that in any event, the CEO and the CRO, one Buddhiraj and one Jham could have gone to the DRT and asked for time or instructed advocates to oppose the application. It is not even necessary to consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n account of the SCB having agreed to keep the order of the DRT appointing the Receiver in abeyance and agreeing to the continuation of the Authorized Person. There is nothing unusual about the same. The Authorized Person was appointed initially as an interim measure by the company Judge. The assets were, therefore, protected. SCB having agreed to this arrangement whether out of deference to this Court or otherwise, cannot possibly be accused of collusion. Mr. Kamdar stated that collusion was clear as, if the assets were sold by the DRP, about Rs. 1800 crores would be available and the dues of SCB were secured to the extent of Rs. 800 crores. The SCB having agreed to an interim measure cannot possible be held guilty of collusion. 149. Mr. Virag Tulzapurkar, the learned senior counsel appearing on behalf of Citibank referred to the bank guarantee facility and the letters of credit facility granted to the company. Citibank is not a secured creditor. Its dues in the sum of Rs. 737 crores are also admitted. Citibank, of course, not being a secured creditor, the allegation of collusion on the ground of it having agreed to the continuation of the Authorized Person is not available. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d this application. The learned Judge, by an order dated 18th October, 2012, rejected the application. The learned Judge observed that the appellant had sought directions against the company even to request the DRT to treat the amount of Rs. 1600 crores deposited with the Government of India towards the original allotment of the licences as earnest money. The learned Judge observed that this could not be allowed in view of the fact that the Court Receiver had been appointed by the DRT of the assets of the company which would include the said sum of Rs. 1600 crores. The Division Bench, by an order and judgment dated 19th October, 2012, in Appeal (Lodg) No. 753 of 2012, confirmed this order. The Division Bench rejected the application, inter-alia, on the ground that the Directors appointed by the appellant had resigned and that a Receiver had been appointed by the DRT. The Division Bench also noted that the company did not at that stage have resources sufficient to fund a possible contractual obligation. (B) An application being Company Application (Lodg) No. 71 of 2013 was made for the second round of the auction in January, 2013. This was also opposed by the petitioner. The learn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. It would be necessary to consider this aspect in greater detail at the hearing of the petition. According to the petitioner, in the light of the judgment of the Supreme Court, the financial position of the company and the absence of any further source of funding, it was decided at a meeting of the Board of Directors held on 22nd February, 2012, to shut down the network and operate the company on a cash management basis going forward. The appellant denied that such a resolution had been passed at the said meeting. According to the appellant, the company resolved to file a review petition before the Supreme Court. According to the appellant, the nominee Directors of the company unilaterally passed a resolution to immediately shut down the operations of the company which effectively negated the filing of the review petition. It is further contended that such a resolution required an affirmative vote of the appellant which it did not give. The appellant, in fact, contends that at the said meeting, it was resolved to file a review petition before the Supreme Court. 157. Mr. Madon had relied upon the minutes of a meeting held on 22nd February, 2012, which recorded that Goenka and Bal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ipt of the video recording of the Board meeting held on 22nd February, 2012, has been denied by the appellant. The denial was communicated by the appellant on the very next day by a communication dated 23rd February, 2012. 160. Mr. Madon also relied upon the references to shut down in a meeting held on 19th February, 2012, and the fact that though the appellant had responded to the same and raised an objection regarding some items, it raised no objection regarding the issue of shut down. As we mentioned earlier, it is difficult at the stage of admission of the petition to express any conclusive view on the issue whether the appellant had agreed to shutdown the business of the company insofar as it related to the 2G licences. 161. However, even assuming that the petitioner is unable to establish that the appellant agreed to shut down, it would make no difference. It would make no difference even if we were to presume that an affirmative vote of the appellant was required in respect of the shut down and that the appellant had not given its affirmative vote. Even assuming that the appellant had not agreed to shut down, it would not prevent the petitioner from maintaining a petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he petitioner and its Directors, officers and nominees came into the picture only after the 2G licences were obtained. Indeed, they appear to have come into the picture on the basis of the assurance that the 2G licences were valid and had been validly acquired. That, however, is not a ground for preventing the petitioner from having the company wound up if it is otherwise entitled to such an order. 165. The learned company Judge passed an order dated 3rd July, 2012, in terms of the minutes of the order signed by the advocates of the parties. The learned Judge appointed an advocate and solicitor of this Court as an Authorized Person to manage the affairs of the company during the pendency of the petition and in the manner mentioned therein. The learned Judge, by the impugned order, continued the arrangement under the minutes of the order. Mr. Kamdar objected to the same on the ground that the company court has no power to appoint any person other than the Official Liquidator either as a Liquidator or as a Provisional Liquidator. The order in terms of the minutes of the order was passed with the consent of the parties prior to the petition being admitted. The appellant was not willi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nch dated 13th November, 2013, the Authorized Person has been assigned the task of receiving submissions/objections from the petitioner and respondent No. 2 and thereafter instructing a firm of advocates to cross examine the prosecution witnesses in Criminal Case No. 1 of 2011 (CBI v. A. Raja & Ors.) on behalf of the company. 168. We will assume for the purpose of this appeal that the Court has no power to pass an order for the appointment of the Authorized Person and to confer upon him the powers akin to those contained in the minutes of the order. Having come to the conclusion that the appeal deserves to be dismissed, we are entirely in agreement with Mr. Madon that a Provisional Liquidator, at least, must be appointed. Accordingly, by this order we have appointed the Provisional Liquidator. We direct the Provisional Liquidator to appoint the Authorized Person as an advocate to assist the Provisional Liquidator in the discharge of his functions in respect of the company. The Authorized Person has, as we mentioned earlier, been involved in the matter for a long time and he is aware and well informed regarding the affairs of the company. It is in the interest of the company, there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l with the assets of the company. It can hardly be suggested that it is in the interest of the company to let such assets decay and lose all value during the pendency of the petition. There may be assets such as heavy machinery which are no longer useful for the company. It would serve no purpose compelling the company to retain such assets during the pendency of the petition. The company court would be justified in ordering the sale of such assets. The company court would also be justified in taking decisions regarding the continued employment or the terms and conditions of employment of the officers and employees of the company. There may be cases where the company requires further personnel. The company court would then be justified in passing orders to engage such persons. On the other hand, there may be cases where the services of certain officers of the company are no longer required. In such cases, there is no warrant for compelling their continuance with the company. 172. The reliance upon section 443(1)(c) of the Companies Act in support of the contention that the company court has no power to pass interim orders in a winding up petition is not well founded. Section 443(1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annot also be sustained either under Order 39, rule 1, of the Civil Procedure Code or rule IX of the Companies (Court) Rules, 1959. The relevant portion of section 443(1) reads : (a) dismiss it, with or without costs; or (b) adjourn the hearing conditionally or unconditionally; or (c) make any interim order that it thinks fit; or (d) make an order for winding up the company with or without costs, or any other order that it thinks fit; The argument of learned counsel for the applicants is that on July 13, 1981, the learned judge has ordered notice for the hearing of the company petition on August 11, 1981, and only when the company petition was to be taken up for hearing on August 11, 1981, the court would get jurisdiction to make any interim order and not on the date when the company petition was admitted and notice of hearing was ordered. We are of the view that the hearing of the winding-up petition starts even on the day when the winding-up petition is admitted and entertained and the order of notice for the hearing to the respondents after deciding to entertain would amount to a hearing of the winding-up petition itself. The words "on hearing a winding-up petition" ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orders along with these applications which are the subject matter of the appeals and by an ex parte interim order made on July 13, 1981, the learned company court judge appointed a Commissioner and that was questioned in the appeal. One of the objections of the appellants was that the learned judge had no jurisdiction to pass an interim order under section 443(1)(c) at the stage of admission of the winding-up petition and that only at the time of the hearing of the winding-up petition the company court can make interim orders. While rejecting this contention, the Bench has observed (at page 233). In our judgment, the investiture of the court with the winding up jurisdiction, as of other powers, must be interpreted as adding to the gamut of the court's existing jurisdiction. It would be a mistake to interpret the statute as stripping the court of all his powers first, and then conferring on it only such powers as are permitted, say by section 443(1) and other related provisions. We are satisfied that having regard to the scheme of the Companies Act, we cannot read any provision in the statute which relates to jurisdiction of courts, as being in derogation of the full plenitud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rdered to be wound up". It would be reading more than what the Legislature intended in the said wording. I am of the view that the court can exercise jurisdiction under section 536(2) of the Act even before the winding up order is made. The fact that the order becomes otiose, if the application for winding up is ultimately rejected, does not take away the jurisdiction. Therefore, even before the winding up order is made, the jurisdiction of the court can be invoked under section 536(2) of the Act for permission for disposal of the assets of the company. The contention of Mr. Jayaram, learned counsel appearing for the second respondent, in view of the decision of the Supreme Court as well as the decision of the High Court referred to above, is unsustainable. I am also of the view that, at the stage of entertaining the winding up petition or admitting the winding up petition and on further hearing of the respondent after deciding to entertain the winding up petition, the court has inherent power to do that which is necessary to advance the cause of justice or make such orders which are necessary to meet the ends of justice. This inherent power of the court is not taken away or in a ..... 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