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TMI Blog2015 (9) TMI 1131X X X X Extracts X X X X X X X X Extracts X X X X ..... undertaking, had placed a purchase order, dated 27.1.2006 for the supply of equipment described as FWTs and IFWTs, upon the Indian Telephone Industries (Hereinafter referred to as the 'ITI', for brevity), also a Government of India undertaking. ITI, in turn, is said to have placed a purchase order on the respondent for the same goods. The respondent is said to have sought to source the same from the petitioner and is said to have placed a purchase order on the petitioner, dated 28.4.2006. It is stated that ITI had paid 75% of the total value in advance, to the respondent. The petitioner claims to have supplied the goods to the respondent in terms of the purchase order during the period June 2006 to March 2007. The petitioner is said to have raised invoices on the respondent for the said supplies made. The aggregate amount of the invoices so raised was said to be in a total sum of US $ 180,476,670.40. The petitioner has acknowledged payments made by the respondent in a sum of US $ 9,738,733.29. It is stated that in the year 2007, an Asset Purchase Agreement was said to have been entered into between M/s Xalted Networks Inc. and M/s Xalted Information Systems Private Limit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was said to have been served at the registered office of the respondent. The respondent is said to have denied the liability and is said to have raised irrelevant issues by way of a reply dated 1.12.2009. And hence the present petition. 3. The respondent having entered appearance has filed statement of objections disputing its liability. It is contended that the purchase order placed on the respondent by ITI was for 3,43,700 units of IFWT and FWT products. The respondent is said to have placed a purchase order on the petitioner on the same terms and conditions. The petitioner is said to have indicated that it was in a position to supply only 27,000 units and the remaining would be outsourced from a Hong Kong based company, M/s. Abakus Communications Company (HK) Limited. It is claimed that the petitioner had also instructed the respondent to make direct payments to the said company, on any supplies to be made. Pursuant to this arrangement, the petitioner is said to have supplied only 27,000 units and had received full payment in a sum of Rs. 4.30 crore. And that in so far as the supplies made by Abakus Communications of the major portion, a sum of Rs. 40.92 crore is said to have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nch in appeals Nos. OSA 44/2010 and OSA 43/2010. The division bench had allowed the appeals by its judgment dated 15.10.2011 and had remanded the matter for a fresh consideration, while granting leave to the respondent to either, amend the statement of objections or to file a separate application as regards a contention as to the maintainability of the petition. On such remand, the respondent has filed Company Application No.118 of 2012 to contend as follows: That the respondent had come across some shocking news which goes to the root of the filing of the company petition itself, in that, the respondent itself had ceased to exist under the laws of its incorporation in the United States of America (USA). Consequently, the company petition itself could never have been initiated and hence the company petition requires to be rejected in limine. Under California, Delaware and U.S.Federal Law, at the time of its suspension by the States of California and Delaware, the respondent ceased to be a corporation and unable, inter alia, to operate as a corporation and lost its corporate powers including without limitation, the power to file a lawsuit, to defend a lawsuit or to appeal a lawsui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contended in OSA 44/2010 that subsequent to the filing of the application in OSA No.44/2010, the respondent has taken steps to revive the corporation and that the corporation has been revived under the laws of Delaware. The respondent contends that upon such revival, the respondent's status stands revived from the day it was declared void and therefore the company petition was maintainable. Even if one were to assume this to be correct, in Indian law, the position that would require to be examined is from the point of view of the date on which the petition was filed. Indian law would govern proceedings in India and if a person did not exist on the date of filing of the petition such petition suffers from being void ab initio and hence not maintainable. It is contended that the conduct of the respondent in not disclosing these fundamental facts have to be taken into account. In that, the respondent had deliberately failed to place before this court the fact that it does not have the power under the laws of its incorporation to prosecute any proceedings. When the respondent has a status of "void", the respondent does not have any right to continue the company petition and the v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not been forfeited or void pursuant to this title, or had not expired by limitation. Such reinstatement shall validate all contracts, acts, matters and things made, done and performed within the scope of its certificate of incorporation by the corporation, its officers and agents during the time when its certificate of incorporation was forfeited or void pursuant to this title, or after its expiration by limitation, with the same force and effect and to all intents and purposes as if the certificate of incorporation had at all times remained in full force and effect...." That once the corporation is renewed, the effect is that the corporation is never extinguished. The Corporation is revived as if the certificate was never suspended. Further, in an opinion given by one Mr. Patty Cheng, licenced to practice law in State of California, has stated that according to Section 23301 of California Revenue and Taxation Code, it only forfeits powers, rights and privileges in the State of California and not in courts in other jurisdictions. That the Petitioner-Company is incorporated in the State of Delaware and not in State of California. Further, the Petitioner-Company does not carry any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tanding the admitted circumstance that the certificate of incorporation stood forfeited as on the date of presentation of the petition before this court, the subsequent revival of the same, even during the pendency of these proceedings would not affect the maintainability of the petition. In this regard, he places reliance on the following provisions of the Delaware Code : "278. Continuation of corporation after dissolution for purposes of suit and winding up affairs. All corporations, whether they expire by their own limitation or are otherwise dissolved, shall nevertheless be continued, for the term of 3 years from such expiration or dissolution or for such longer period as the Court of Chancery shall in its discretion directs, bodies corporate for the purpose of prosecuting and defending suits, whether civil, criminal or administrative, by or against them, and of enabling them gradually to settle and close their business, to dispose of and convey their property, to discharge their liabilities and to distribute to their stockholders any remaining assets, but not for the purpose of continuing the business for which the corporation was organized. With respect to any action, suit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpired, except as provided in sub-section (f) of this section, and the date of filing of its original certificate of the incorporation with the Secretary of State; (2) The address (which shall be stated in accordance with § 131(c) of this title) of the corporation's registered office in this State and the name of its registered agent at such address; (3) Whether or not the renewal, restoration or revival is to be perpetual and if not perpetual the time for which the renewal, restoration or revival is to continue and, in case of renewal before the expiration of the time limited for its existence, the date when the renewal is to commence, which shall be prior to the date of the expiration of the old certificate of incorporation which it is desired to renew; (4) That the corporation desiring to be renewed or revived and so renewing or reviving its certificate of incorporation was organized under the laws of this State; (5) The date when the certificate of incorporation would expire, if such is the case, or such other facts as may show that the certificate of incorporation has become forfeited or void pursuant to this title, or that the validity of any renewal has been bro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ived or any foreign corporation qualified in accordance with § 371 of this title shall have adopted the same name as the corporation sought to be renewed or revived or shall have adopted a name so nearly similar thereto as not to distinguish it from the corporation to be renewed or revived, then in such case the corporation to be renewed or revived shall not be renewed under the same name which it bore when its certificate of incorporation became forfeited or void pursuant to this title, or expired but shall adopt or be renewed under some other name and in such case the certificate to be filed under the provisions of this section shall set forth the name borne by the corporation at the time its certificate of incorporation became forfeited or void pursuant to this title, or expired and the new name under which the corporation is to be renewed or revived. (g) Any corporation that renews or revives its certificate of incorporation under this chapter shall pay to this State a sum equal to all franchise taxes, penalties and interest thereon due at the time its certificate of incorporation became forfeited or void pursuant to this title, or expired by limitation or otherwise; prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of any non-stick corporation, the governing body shall perform all the acts necessary for the renewal or revival of the charter of the corporation which are performed by the board of directors in the case of a corporation having capital stock, and the members of any nonstick corporation who are entitled to vote for the election of members of its governing body and any other members entitled to vote for dissolution under the certificate of incorporation or the bylaws of such corporation, shall perform all the acts necessary for the renewal or revival of the certificate of incorporation of the corporation which are performed by the stockholders in the case of a corporation having capital stock. Except as otherwise provided in § 313 of this title, in all other respects, the procedure for the renewal or revival of the certificate of incorporation of non-stock corporation shall conform, as nearly as may be applicable, to the procedure prescribed in this section for the renewal or revival of the certificate of incorporation of a corporation having capital stock; provided, however, that sub-section (i) of this section shall not apply to non-stock corporations. 8. Del. C. 1953, § ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in pari materia with the corresponding provisions of the English Companies Act and the effect of an order of restoration is to place the company whose name was struck off by the Registrar in the same position as if the name of the company had never been struck off during the interregnum. If a court of competent jurisdiction directs restoration of the name of the company to the register, it follows that the company shall be deemed to have continued throughout. It is so provided in the statutory provisions contained in the English Companies Act, 1985 as well as Companies Act, 1956. No reference to decide cases or case-law is, therefore, necessary on this aspect of the case." 4. Maharashtra State Textile Corporation Ltd. v. Official Liquidator [1978] 1 SCC 490, the apex court has laid down as follows:- 'in the case of East End Dwellings Company Limited v. Finsbury Borough Council [1952 AC 109] Lord Asquith observed as follows: "IF you are bidden to treat an imaginary state of affairs as real, you must surely, unless prohibited from doing so, also imagine as real the consequences and incidents which, if the putative state of affairs had in fact existed, must inevitably have flo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall have given further time for payment of the tax or taxes or the completion of an annual franchise tax report, in which case a certificate thereof shall be filed in the office of the Secretary of State stating the reason therefor. On or before November 30 in each year, the Secretary of State shall notify each corporation which has neglected or refused to pay the franchise tax or taxes assessed against it or becoming due during the year or has refused or neglected to file a complete annual franchise tax report, that the charter of the corporation shall become void unless such taxes are paid and such complete annual franchise tax report is filed on or before March 1 of the following year. (emphasis supplied) 21 Del. Laws, c.166, § 10; 22 Del. Laws, c.15, § 9; 27 Del. Laws, c. 21, § 2; Code 1915, § 111; 36 Del. Laws, c.6, §10; Code 1935, § 105; 44 Del. Laws, c. 3, §2; 8 Del. C. 1953, §510; 55 Del. Laws, c. 90, § 1; 57 Del. Laws, c. 712, §§ 3-5; 58 Del. Laws, c. 450, § 6; 71 Del. Laws, c. 339, § 104; 75 Del. Laws, c. 306, §23." Having regard to the unconditional language and tenor of the above provision, Shri C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t; 510 become void and revoked and all powers heretofore conferred upon the corporation have become, "inoperative." The corporation has thereby ceased to exist and has lost any standing to appeal and be heard, even if represented by counsel. (3) The legal authorities relied upon by the respondent are inapposite and irrelevant and demonstrate the underlying purpose of the rule prohibiting the appearance of a corporation by anyone other than a member of the Bar of this Court. NOW, THEREFORE, IT IS ORDERED that the within appeal be and the same is hereby DISMISSED by the Court acting sua sponte.' (Emphasis supplied) Shri Chinnappa would further contend that in examining as to the validity of the institution of the proceedings by the petitioner at a point of time when the incorporation of the petitioner stood "voided", in the context of the legal principle as applicable in India, he would place reliance on the decision in Rameshwar v. Jot Ram [1976] 1 SCC 194, where in the appellants before the apex court, were said to be the descendants of a "large" land owner, whose lands had been purchased by his tenants on their being found eligible and by their deposit of the first instalme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vested in a party, they cannot be nullified or negated by subsequent events save where there is a change in the law and it is made applicable at any stage." Relying on the decision in Pasupuleti Venkateswarlu v. Motor and General Traders [1975] 1 SCC 770, it has been held thus: "Courts of justice may, when the compelling equities of a case oblige them, shape reliefs cannot deny rights- to make them justly relevant in the updated circumstances. Where the relief is discretionary, courts may exercise this jurisdiction to avoid injustice. Likewise, where the right to the remedy depends, under the statute itself, on the presence or absence of certain basic facts at the time the relief is to be ultimately granted, the Court, even in appeal, can take note of such supervening facts with fundamental impact." Further, relying on Chockalinga Chetty v. Seethai Achi [1921] 54 Mad.LJ 88 (PC), it has been held thus:- "Where a cause of action is deficient but later events have made up the deficiency, the Court may, in order to avoid multiplicity of litigation, permit amendment and continue the proceeding, provided no prejudice is caused to the other side. All these are done only in exceptiona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evived. 10. In the light of the above contentions it is necessary to address the maintainability of the petition in the first instance. The following facts are not in dispute. That the present petition was filed as on 3.4.2010. That the petitioner's status as a corporation stood voided, on account of non payment of taxes, under the Delaware Code applicable in the State of its incorporation, in the United States of America, as on 1.3.2010. And that it stood renewed and revived by a certificate of revival dated 2.8.2011. The point that would arise for consideration is therefore, whether the petition could have been entertained as on 3.4.2010, by this court. It would appear from the interpretation of Section 510 of Title 8 of the Delaware Code, as spelt out by the Supreme Court of Delaware in Transpolymer Industries Inc. (supra), on a corporation becoming "inactive" and "voided", for failure to pay the required franchise taxes, the charter or certificate of incorporation of the corporation would become void and revoked and all powers conferred upon the corporation become "inoperative". The corporation ceases to exist and loses its right to sue and be heard, even if represented ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orations created by it for disobeying the law. People ex rel. Kerner v. Blue Rose Oil Co., 360 I11 397, 196 NE 456, cert den 296 US 605, 80 L Ed 429, 56 S Ct 121. It is said that a corporation has forfeited its corporate rights when it has lost its charter and all rights thereunder due to the doing of something prohibited by law or the omission to do something required to be done by law, if forfeiture is the penalty assessed by law for that act of omission or commission. Central Nat. Bank v. Dallas Bank and Trust Co. (Tex Civ App) 66 SW2d 474. § 2802 Failure to pay its taxes may, in certain cases, result in the forfeiture of the charter of the corporation. The forfeiture of a corporate charter may be decreed because of its failure to pay license or franchise taxes; this is frequently expressly declared by the corporate charter or by statute. Dickey v. Southwestern Surety Ins.Com, 119 Ark 12 173 SW 398 § 2826 Assertion of forfeiture or dissolution in collateral proceeding. In accordance with the general rule that a forfeiture of a corporate charter can only take effect upon a direct adjudication in a judicial proceeding instituted for such purpose § 2822. It has be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... party is determined by the facts as they exist on the date the action is instituted would aptly apply in considering the validity of the petition instituted as on 3.4.2010. The petitioner was not in existence as on the date of institution. The petition was hence not maintainable. It is not a case where the petition had been instituted before the certificate of incorporation was forfeited, whereby it could be claimed that the petition could be revived immediately after the certificate of incorporation was revived, though by a deeming fiction the corporation ceased to exist, temporarily. It was also possible for the petitioner to have instituted fresh proceedings on a revival, after the initial forfeiture of the certificate of incorporation. The petition which was infirm on the date of filing cannot be resuscitated on the basis of a subsequent event, to the prejudice of the respondent. The petitioner would also be disentitled to claim that any such relief be moulded in its favour, to avoid multiplicity of proceedings or such other hardship, on account of the petitioner not having stated the actual state of affairs as on the date of filing of the petition, which the respondent has bro ..... 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