Karnataka High Court Dismisses Plea Challenging Antrix's Winding Up Proceedings Against Devas With Rs Rs 5 Lakh Cost

The Karnataka High Court has dismissed a petition which sought to quash proceedings initiated by ISRO-arm Antrix Corporation before NCLT Bengaluru to the wind up Devas Multimedia Private Ltd.The High Court dismissed the petition filed by Devas Employees Mauritius Private Ltd, a share holder in Devas Multimedia Private Ltd, with a cost of Rs 5 lakhs, after terming it an abuse of process of law.The petitioner had also sought declare Section 272(1)(e) of Companies Act, 2013, as ultra vires to the Constitution of India. Further, the petition sought to declare that the second proviso to Section 272(3) of the Act, must be read to be applicable to the petitions presented by persons falling under Section 272(1)(e) of the Act.On January 18, the Central Government had authorized Shri.Rakesh Shashibhushan, Chairman-cum-Managing Director of Antrix to present a petition to wind up Devas multimedia on the grounds specified under Section 271(1)(c) of the Companies Act.Antrix Corporation sought the winding up of Devas Multimedia on the grounds that the Bengaluru-based company's affairs were being conducted in a "fraudulent manner", "the company was formed for fraudulent and unlawful purpose", "the persons concerned in the formation or management of its affairs have been guilty of fraud, misfeasance or misconduct".The High Court bench of Justice P S Dinesh Kumar, while dismissing the petition, agreed with the submission made by the Additional Solicitor General N Venkataraman that 'Registrar' falls in a category as a 'Regulator'. This can also be gathered from the powers and duties of the Registrar of Companies enumerated in Sections 77, 77(2), 78, 81, 83, 93, 137, 157, 206, 208, 209 and 248 of the Companies Act. The bench also said that "This writ has been filed a day prior to the date fixed for final hearing (Before NCLT), namely March 22, 2021. This amounts to abuse of the process of law and a proxy war on behalf of Devas. Accordingly, it imposed a cost of Rs 5 lakhs on the company which is to be paid to the Registrar General of the court within four weeks. Contention of the Company: Senior Advocate Rajiv Nayar appearing for the petitioner submitted that a winding up petition can be presented by persons specified in Section 272(1) of the Act, which includes both Registrar and 'any person authorized by the Central Government'. Section 272(3) provides that the Registrar shall obtain previous sanction from the National Company Law Appellate Tribunal. The second proviso to Section 272(3) mandates that the Central Government shall not accord sanction unless the Company has been given an opportunity of making representation. In this case, no opportunity was given to Devas prior to the accord of sanction by the Central Government. The order passed by the Central Government authorizing the Chairman and Managing Director of Antrix Corporation to file winding up petition is a malafide exercise of power. Moreover, the agreement between Antrix and Devas has been terminated on the ground of force majeure after taking opinion from the learned Additional Solicitor General and not on the ground of fraud; the arbitral award passed by ICC is unanimous. Petition opposed by the Central Government and Antrix Corporation. Additional Solicitor General M B Nargund for Central Government and ASG N Venkataraman for Antrix Corporation, opposed the petition. It was submitted that that presumption of constitutionality is always in favour of legislation, unless, the contrary is shown. Relying on the judgment of the apex court in the case of Government of Andhra Pradesh and others Vs. P. Laxmi Devi, it was said that "It is settled that when a provision of law is challenged, Courts are required to exercise restraint and be cautious in striking down a provision." It was also contended that Devas did not have the ownership of any intellectual property as the technical know-how mentioned in the agreement was unknown in the world at that point of time. Thus, all that Devas has done is bringing money into India under different channels, and siphoning off a major portion of it. Court findings: The bench in its order noted that the petitioner had challenged the order passed by NCLT before NCLAT. The NCLAT had repelled the petitioner's challenge and gave it liberty to join the proceedings in NCLT to raise its objections. Pursuant to the order passed by NCLAT, the petitioner has filed an impleading application in the Company winding up Petition pending before NCLT. Thus, petitioner is privy to all averments contained in the Company Petition. Further it said "NCLAT has granted liberty to raise all factual and legal pleas before the NCLT. Petitioner has accepted the said order and proceeded further and filed an application under Rules 11 and 34 of the NCLT Rules, 2016 for impleadment in the main petition." It added "Thus, having elected the appropriate forum to oppose the ...

Karnataka High Court Dismisses Plea Challenging Antrix's Winding Up Proceedings Against Devas With Rs Rs 5 Lakh Cost

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