2021 (11) TMI 735 - Tri - Companies Law

Winding up of company - Seeking to implead the applicant as a respondent - seeking permission to applicant to file necessary pleadings and further documents - rule 11 and 34 of the National Company Law Tribunal Rules, 2016 - whether all shareholders/stakeholders of a company facing wound up proceedings filed under section 271(e) of the Companies Act, 2013 must invariable to be impleaded and heard prior to ordering wound up of a company? HELD THAT - The applicant is bound by the decisions taken by its main company, wherein it is holding shares. As long as it has no grievances against the affairs of Devas company, the applicant has no locus standi to intervene in the main company petition. The contention of applicant that amount awarded is an asset and Antrix is debtor is not tenable and it is baseless, as long as the award has not attained its finality, through judicial process. Admittedly, the validity of Award is in question and the same is sub judice. The contention that rights of shareholders to carry on business through the instrumentality of a company is a right guaranteed under article 19(1)(g) of Constitution of India, and it cannot be taken away by this hon'ble Tribunal acting under the Companies Act, 2013 on mere conjectures and allegations without finding of a competent court of law, is mere misconception of law - rights of shareholders can be exercised through board of directors elected by them. Every shareholder cannot claim and defend the cases filed against their company, whether it is winding up petition or other cases and, it is the responsibility of company represented by its board of directors, to defend those cases, as a legal entity. It is misconception of law that every shareholders/stakeholders are to be heard in every case filed against a company. There are cases where creditors can file petition seeking to wind up of a company on the ground that company is unable to pay its debts and if debt in question is paid, petition itself can be closed. But here in, the case is different that the incorporation itself and subsequent affairs are being run in fraudulent manner and unlawful object. The instant application is nothing but to delay proceedings and to support Devas in the main company petition and it is proxy war. Since the Tribunal finds that Devas is a fit company to wind up by way of separate order dated May 25, 2021 the instant application is not maintainable and it is liable to be dismissed - Application dismissed.

Issues Involved:
1. Impleadment of Shareholders in Winding Up Proceedings.
2. Allegations of Fraud and Mismanagement.
3. Rights of Minority Shareholders.
4. Validity and Enforcement of Arbitration Award.
5. Jurisdiction and Powers of the Tribunal.

Issue-Wise Detailed Analysis:

1. Impleadment of Shareholders in Winding Up Proceedings:
The main issue was whether all shareholders/stakeholders of a company facing winding-up proceedings must be impleaded and heard prior to ordering the winding up of the company. The Tribunal concluded that the applicant, holding only 3.48% of the equity share capital, had no locus standi to file an application to be impleaded in the winding-up petition. It was emphasized that the affairs of a company are conducted through its board of directors, and shareholders can remove directors if their interests are compromised. The Tribunal found that the application was misconceived in both facts and law and thus liable to be dismissed.

2. Allegations of Fraud and Mismanagement:
The applicant argued that the allegations of fraud made by respondent No. 1 (Antrix Corporation) were unsubstantiated and that mere investigations or charge sheets do not constitute proof of fraud. The Tribunal noted that the allegations of fraud and mismanagement were serious and involved various criminal proceedings, but these had not yet been adjudicated by a competent court. The Tribunal emphasized that the mere filing of cases by the government does not establish fraud and that a finding of fraud requires a full-fledged trial.

3. Rights of Minority Shareholders:
The applicant claimed that its rights as a shareholder were being infringed upon and that the winding-up petition would result in a severe abridgment of its civil and substantive rights. The Tribunal held that the rights of shareholders are exercised through the board of directors and that individual shareholders do not have the right to defend cases filed against the company. The Tribunal found that the applicant's contentions were similar to those raised by Devas in the main company petition, which had already been addressed.

4. Validity and Enforcement of Arbitration Award:
The applicant argued that the arbitration award in favor of Devas was a valuable asset and that the winding-up petition was an attempt by Antrix to circumvent the enforcement of the award. The Tribunal noted that the validity of the award was still sub judice and had not attained finality. Therefore, the Tribunal found the applicant's contention that the award was an asset and that Antrix was a debtor to be baseless.

5. Jurisdiction and Powers of the Tribunal:
The applicant contended that the Tribunal did not have the jurisdiction to make findings of fraud and that such findings could only be made after a full-fledged trial. The Tribunal clarified that its powers are summary and that it cannot adjudicate on allegations of fraud, which require a full trial. The Tribunal also noted that the applicant's reliance on various judgments was misplaced, as the facts and circumstances of those cases were not applicable to the present case.

Conclusion:
The Tribunal dismissed the application filed by the minority shareholder as devoid of any merit. It held that the application was an abuse of process and a proxy war to support Devas in the main company petition. The Tribunal reiterated that the applicant could approach the liquidator to make its claim in the liquidation estate of Devas, as per law. No order as to costs was made.

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