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TMI Blog2013 (11) TMI 1824X X X X Extracts X X X X X X X X Extracts X X X X ..... horized Person, present. JUDGMENT 1. The above Company Petition is filed by the Petitioner - Etisalat Mauritius Ltd. for winding up of Respondent No. 1 Etisalat DB Telecom Pvt. Ltd. According to the Petitioner, it is just and equitable to wind up the Respondent No. 1 Company inter alia on the following grounds: (i) Loss of substratum of the Respondent No. 1 Company on account of the quashing of the 2G licenses by the Hon'ble Supreme Court; (ii) Dysfunctional Board of Directors owing to the withdrawal of Directors nominated by Respondent No.2 Majestic Infracon Pvt. Ltd.; (iii) The Respondent No.1 Company is insolvent as its liabilities far exceed its assets and it cannot pay its dues as and when they arise. The Company Petition is taken up for admission. 2. Briefly set out hereinbelow, are the facts which have led to the filing of the above Company Petition and the orders passed by this Court thereon after the filing of the Petition and pending admission of the same: 2.1 The Petitioner - Etisalat Mauritius Ltd. (EML) is a Company incorporated under the laws relating to Companies of Mauritius. The Petitioner is a 100 per cent subsidiary of Emirates Telecommunications Corpor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.8 According to the Petitioner, thereafter Balwa and Goenka approached Etisalat through Deutsche Bank to convince Etisalat to invest in Swan Telecom Ltd. Balwa and Goenka in the course of negotiations made false representations as to the lawful manner in which the licenses were acquired. Amongst other representations, they represented that the licenses had no basis to be revoked/suspended/cancelled/terminated as they had fulfilled all legal obligations and due procedure. Warranties were also made by Respondent No. 2 as to their expertise in the field of telecom. 2.9 Based on the above representations and warranties, on 23rd September, 2008, Shareholders Agreement and Share Subscription Agreement were entered into between the Company, Respondent No.2-Majestic, the Petitioner, Genex, Shahid Balwa and Vinod Goenka. Pursuant thereto on 17th December, 2008, the Petitioner subscribed to 11,29,94,228 shares of the Company by investing an amount of Rs. 3228.44 crores. At about the same time, Genex subscribed to 1,33,17,245 shares of Respondent No. 1. As a result of this investment, the shareholding structure of the Company was as under: (i) Respondent No.2/Majestic : 45.73% (ii) Pet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Company for the Bihar and Madhya Pradesh circles. With this remittance, the total investment made by the Petitioner in Respondent No. 1 was Rs. 3545.09 crores. 2.14 On 14th February, 2010 and 3rd January, 2011, Public Interest Litigations (PILs) were filed in the Hon'ble Supreme Court of India in respect of 2G spectrum allocation by the Centre for Public Interest Litigation and Dr. Subramanian Swamy. On 2nd April, 2011, the CBI filed a chargesheet before the Special CBI Judge, inter alia, against the then Minister of Telecommunications - A. Raja, the Company, Balwa and Goenka. On 25th April, 2011, a supplementary chargesheet was filed by CBI setting out details of the amounts in the nature of illegal gratification channeled by M/s. Dynamix Realty, a Group Company of the DB Group of Companies (of which Respondent No.2-Majestic is a part and Balwa and Goenka the principal shareholders and promoters) in return for preferential allotment of 2G licenses to the Company. According to the Petitioner the CBI chargesheet alleges that the Company (Swan) was a Reliance Anil Dhirubhai Ambani Group ('RADAG') entity. Under the extant Telecom Policy, RADAG was ineligible to apply for o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12 th June, 2012, the same was not disputed during oral arguments). 2.16 On 22nd October, 2011, an order was passed by the Special CBI Judge framing criminal charges against Balwa, Goenka and the Company. 2.17 According to the Petitioner, Respondent No.2-Majestic repeatedly stated that it is unable to make any capital contribution into the Company. 2.18 On 2nd February, 2012, the Hon'ble Supreme Court quashed all the 2G licenses, inter alia, allotted to the Company. In its said judgment, the Hon'ble Supreme Court recorded findings of conspiracy between the then Minister of Communications and certain applicants for licenses which were real estate companies having no prior experience in dealing with telecom services and who had made their applications only one day before the cutoff date fixed by the Minister on his own. The only real estate companies who were granted 2G licenses in 2008 were the Company and the Unitech Group. The Hon'ble Supreme Court in its judgment further recorded that Respondent No. 1 was one of the successful applicants which had offloaded their stakes for thousands of crores in the name of infusion of equity. The Hon'ble Supreme Court also imposed costs of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e a majority of Indian citizens on its Board of Directors. Thereafter, the Petitioner filed the present petition on 12th March, 2012, seeking winding up of the Company on the grounds set out hereinabove. 2.24 On 29th March, 2012, criminal complaints were filed by the Channel Partners of the Company against the Petitioner's nominees on the Board of Directors and the Petitioner's employees seconded to the Company. The Petitioner has pointed out that none of the Directors or employees associated with the Respondent No. 2 Majestic were named in these complaints, clearly indicating that Respondent No. 2 Majestic orchestrated/instigated such complaints. In fact, on 3rd April, 2012, Pratap Ghose, a secondee of the Petitioner to the Company was detained at the Mumbai International Airport on account of a lookout notice issued pursuant to the criminal complaints filed by the Channel Partners. 2.25 On 3rd April, 2012, the Hon'ble Supreme Court rejected the Review Petition filed by Respondent No. 1 for review of the judgment dated 2nd February, 2012, quashing the 2G licenses. 2.26 On 11th April, 2012, this Court in the above Company Petition granted time to the creditors/claimants of the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... legations raised therein. It was further stated that PNB may have a claim against Respondent No.2-Majestic in respect of the loans disbursed to it, but the Company is completely unconnected with the said loan transaction. 2.32 On 28th February, 2012, DOT filed an affidavit stating that there is no refund possible of the license fees. On 10th January, 2013, the Additional CIT, Mumbai, passed an order under Section 281B of the Income Tax Act, 1961, attaching the telecom license fees deposited by the Company with the DOT. On 16th January, 2013, DoT issued a notice to the Company imposing penalty of Rs. 650 crores. On 8th February, 2013, DoT once again wrote a letter to the Company stating that it will not refund the license fees. 2.33 In the meantime, the Authorized Person has from time to time heard the nominees of the Petitioner as well as Respondent No.2-Majestic and/or the creditors of the Petitioner and has submitted several reports before this Court and obtained orders on the same regarding termination of 212 out of 286 employees (i.e. 74 per cent of the employees) on the rolls of the Company; making payments for the premium of insurance policies taken by the Company; seeking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s per the list submitted by the Authorized Person is Rs. 41,867,100,05.14. 2.36. The SCB which has a claim of Rs. 1465.95 crores against the Company and the Citi Bank which has a claim of Rs. 738 crores against the Company, have through their respective Counsel supported the present Petition seeking winding up of the Company. Reliance Infratel Ltd. and Reliance Communications Ltd. who have filed petitions before the TDSAT for claims amounting to Rs. 1679 crores against the Company as on 23rd February, 2012 and who have on 31st January, 2012, switched off the telecom network of the Company and disabled access to their passive telecom infrastructure to the Company have, through their Counsel, submitted that they do not support the present Winding Up Petition filed by the Petitioner. 3. One of the main contentions of the Petitioner is that in view of the judgment of the Hon'ble Supreme Court dated 2nd February 2012, the Company is unable to carry on its principal business viz. the provision of Second Generation ('2G') telecommunication services in India and the Company was left without a commercial enterprise. The 2G licenses were the most valuable and only tangible assets of the Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... abhu 2001 (3) BomCR 493, paras 31 ad 32, 41 to 44. It is submitted that though in the present case, as stated hereinabove, it is possible for the Company to carry on the business stipulated in its charter, the principal barrier in achieving this is the conduct of the Petitioner. The Petitioner cannot be allowed to take advantage of its own conduct to frustrate the possibility of the Company carrying on business as prescribed by its Memorandum of Association. It is therefore submitted that there is no loss of substratum so as to justify the admission of the Petition under Section 433(f) of the Act. 3.2 It is an admitted position that under the judgment dated 2nd February, 2012 of the Hon'ble Supreme Court in the case of Centre for Public Interest Litigation vs. Union of India and others (supra) , all the 15 Universal Access Service Licenses (UASL or 2G Licenses) held by the Company have been quashed/terminated. The Company was therefore rendered unable to carry on its principal object viz. the provision of Second Generation (2G) telecommunication services in India. The 2G licenses constituted the most valuable asset of the Company and the very basis for the investment of equity cap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... does not have sufficient resources to enter into contractual commitments. 3.5 The Respondent No. 2-Majestic has sought to oppose the submission of the Petitioner that the Company has lost its substratum and deserves to be wound up, on the ground that there is viable business opportunity which can be exploited by utilizing the NLD, ILD and ISP licenses held by the Company. As correctly submitted by the Petitioner, the intent and object of the parties at the time of the Petitioner's investment in the Company to the tune of Rs. 3228.44 crores (which was by 25th May, 2010 increased to Rs. 3545.09 crores) was to run a successful 2G mobile and telecommunications business in India. The Petitioner's decision to invest in the Company was informed by projections of strong growth in mobile penetration in India and the opportunity to exploit the same through the 2G licenses. In fact, even in the early stages of its financial difficulties and immediately after the cancellation of its UAS licenses by the Hon'ble Supreme Court, while nominees of Respondent No. 2-Majestic were still on the Board of Directors of the Company, there was no proposal or plan to operate a business using these licenses. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orward copies of the same to the Advocate for the Petitioner and the Advocates appearing for some of the creditors of the Company. 3.7 The purported scheme was thereafter served on the Petitioner by the Advocate for Respondent No.2-Majestic on 5 th December, 2012. The purported scheme is necessarily founded on the Petitioner withdrawing the present Company Petition and the Petitioner selling its shares to Respondent No.2-Majestic. The scheme, as correctly pointed out by the Petitioner, is so designed so as to conceal material data and to obviate objections from the other interested parties. It is impossible to derive any positive outcome from the arrangement proposed by the Respondent No.2-Majestic, where neither the immediate source of funds available to the Company nor the future revenue streams from purportedly viable businesses have been determined in the scheme. The scheme is devoid of any specifics or details. Till date there has been no information/detail on the names of the 'potential investors' as envisaged in the scheme. As submitted by the Petitioner, it is inconceivable to reasonably expect investors to invest in the Company considering the financial situation and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Petitioner cannot be lawfully compelled to participate in a venture which is fundamentally different to that for which it invested in the Company. Under the Shareholders Agreement and the Share Subscription Agreement, the Petitioner can assert its affirmative voting rights against commencement of new businesses and therefore it is not open to Respondent No.2-Majestic to unilaterally commence a business solely on NLD/ILD/ISP licenses. The Petitioner has made it clear that it does not intend the Company to pursue this enterprise which poses additional risks and mounting liabilities for the Company, further worsening its financial position as well its ability to repay the debts due to its creditors. 3.10 This Court has also noted that the Company had 308 employees on its rolls at the time of filing of the Company Petition on 12th March, 2012. When the Authorized Person was appointed, by an order dated 3rd July, 2012, the number of employees was reduced to 286 on account of resignations. Accepting the recommendations of the Authorized Person, the number of employees as on 4th March, 2013 was reduced to 52. By an order dated 22nd March, 2013, this Court has directed the termination ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laced before the Court for its consideration i.e. even after the admission of the Company Petition. 4 The facts set out in paragraph 2 above also establish a complete breakdown of relations between the principal shareholders of the Company. The relationship between the principal shareholders of the Company being the Petitioner and Respondent No. 2-Majestic has irretrievably broken down on account of the fact that the reputation of the Company has been destroyed by the CBI proceedings (conducted under the supervision of the Hon'ble Supreme Court), in which Balwa and Goenka stand accused of being party to and benefitting from the illegal actions on the part of the ExMinister of Communications. As submitted by the Petitioner, the Petitioner is a respectable telecom company, majorly held and controlled by the Government of the United Arab Emirates and having operations in 18 countries. The Government of UAE does not desire to be associated with such persons. These developments have completely undermined the Company, destroying its brand and reputation, as it has been at the center of and is criminally accused in the 2G Spectrum Scam. It is irrelevant whether they are ultimately acquit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er and conveniently excluded everyone connected through Respondent No.2-Majestic. 4.5 The above facts demonstrate complete lack of probity and total loss of faith between the major shareholders of the Company and contribute in proving the loss of substratum and the fact that the Company is incapable of functioning. If such a failed joint venture is allowed to continue, in my view, the slim chances that prevail as on date to protect some of the assets of the Company and not to leave its creditors and skeletal staff high and dry, would also be lost. 5 The Learned Senior Advocate appearing for the Petitioner has also submitted that in view of the aforestated facts a deadlock situation is created in the Company. The Learned Senior Advocate appearing for the Respondent No.2-Majestic has submitted that the Petitioner has not set out a single instance of a deadlock situation. He submitted that under Clause 3.12.2 of the Shareholders Agreement dated 23rd September, 2008, the Petitioner was required to give a written notice if it regarded that a deadlock situation had arisen and the senior management was required to then try and resolve the same. The Petitioner has not given a single noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bstratum of the Company has completely disappeared. In circumstances where the Hon'ble Supreme Court has cancelled the Company's UAS Licenses, the Petitioner cannot be reasonably expected to invoke this clause especially since the Hon'ble Supreme Court has found the issuance of the UASL's under the then Telecom Minister unlawful and designed to benefit certain persons, specifically Balwa, Goenka & Swan. The facts set out hereinabove demonstrate total loss of faith between the major shareholders of the Company and lack of probity. The other two shareholders viz. Delphi and Genex have stayed away from taking decisions pertaining to the Company. They do not have any representation on the Board of Directors of the Company. In view thereof, the submissions advanced on behalf of the Respondent No.2-Majestic and the case law cited in support of their submission that the Petitioner has falsely alleged that a situation of deadlock is created in the Company cannot be accepted and stands rejected. 6. The Learned Senior Advocate appearing for the Respondent No.2-Majestic has submitted that the jurisdiction invoked by the Petitioner is undoubtedly a discretionary and equitable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dicial admission. 6.1.2 In response, the Petitioner has pointed out that Respondent No.2-Majestic nor the Company have never denied the SCB debt in the Company Petition or in the proceeding before the DRT. The SCB debt is admitted in the Company's balance sheet which is signed by Balwa/Goenka. The order dated 9th January, 2013 passed by DRT also recognizes/takes cognizance of the existence of the SCB debt. The DRT observed that the debt is appearing in the Company's books. Therefore it is incorrect to say that the order dated 16th April, 2012, is based on Pratap Ghosh's affidavit in the Company Petition. It is further submitted that the Company agreed to draw on the SCB loan for purchase of network equipment (2G) in 2009, with the full consent and knowledge of Respondent No.2-Majestic and its nominees. There was never any allegation by Respondent No.2-Majestic at the time of the transaction that there was any collusion between the Petitioner and SCB. This allegation is therefore a complete afterthought. It is submitted that various Board Resolutions dated 15th June, 2009, 15th September, 2009, 31st August, 2010 were passed on the drawdown of the SCB with the consent of Balwa and G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d of the Company was dysfunctional post the unilateral resignation of the Directors of Majestic. The Channel Partners and other persons acting in concert with Balwa and Goenka threatened the Petitioner's secondees and Pratap Ghose. 6.1.4 It is submitted on behalf of the Petitioner that the allegation advanced on the part of Respondent No.2-Majestic that the documents viz. the letter of comfort from Emirates Communication Corporation and the covenants to the effect that the facility is valid only till such time as Etisalat has control over the Company under the Shareholders Agreement, the evidence showing collusion between SCB and Etisalat and that the Petitioner is trying to favour SCB, are untenable and baseless. It is submitted that there is nothing suspicious, illegal or mala fide about the Letter of Comfort. It is international practice for Banks to take such letters of comfort while extending loans to a Joint Venture. In any event, Balwa also agreed to utilize the SCB funds in the purchase of telecom equipment. In fact, Respondent No.2-Majestic in the Company Petition filed before the CLB accused the Petitioner of not providing a comfort letter to Tech Mahindra. It is submitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SCB is a secured creditor of the Company which is indebted to SCB in the sum of Rs. 1465.95 crores approximately as of March 31, 2012 with interest thereon till the date of payment. It is pointed out on behalf of the SCB that the balance sheet for the year ended 31st March, 2011 expressly admits the then existing liability of the Company to SCB in the sum of Rs. 781.8 crores approximately as per ScheduleC of the said balance sheet. Schedule-C mentions that the said loan is a secured loan, secured by way of a first charge over the equipment supplied by Ericson India Pvt. Ltd., and a Comfort Letter from Emirates Telecommunication Corporation. The said balance sheet has been executed on 24th August, 2011 by representatives of both Etisalat Mauritius Ltd. i.e. the Petitioner herein as also Majestic Infracom Pvt. Ltd. being Respondent No. 2 herein. The said balance sheet is also inter alia executed by the aforementioned Mr. Pratap Ghosh, CFO of the Company. In fact, the said balance sheet significantly is found annexed to the affidavit of Respondent No.2-Majestic dated 11th April, 2012. It is further submitted on behalf of the SCB that the unaudited balance sheet of the Company for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nter alia recorded by the learned TDSAT vide its order dated May 3, 2012. 6.1.8 SCB has submitted that it is pertinent to note that the Authorized Person took out a Misc. Application No. 389 of 2012 to vacate the adinterim order passed by the DRT, Mumbai in favour of SCB, wherein the fact of exparte ad interim order having been passed was also brought to the notice of the DRT, Mumbai. Inspite thereof, by a reasoned order, the DRT refused to vacate the exparte order. 6.1.9 As regards the revival scheme of the Respondent No.2-Majestic, SCB submitted that it is clear that the same does not reflect any realistic plan proposed by the Respondent No.2-Majestic to revive the business of the Company and the said scheme is vague, without any substance, unreasonable and above all fails to protect the rights/interest of the creditors of the Company. It is submitted that the SCB has filed its affidavit responding to the purported revival scheme, whereunder the said scheme has been vehemently opposed to, to which the Respondent No.2-Majestic has no valid and substantial defense. SCB therefore submitted that the allegation advanced on behalf of the Petitioner that the SCB and the Petitioner hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore bound by this demand. In view thereof, the liability of Citibank to make payment under the Bank Guarantee became absolute. By its letter dated 2nd March, 2012, Citibank brought to the notice of the Company the letter dated 1st March, 2012, from Tech Mahindra and that Citibank was in the process of making the payment to the beneficiary and requested the Company to immediately reimburse/fund Citibank the amount under the BG Facility which the Company was/is bound to do. The Company did not dispute the demand made by Tech Mahindra nor the requisition made by Citibank's said letter dated 2nd March, 2012. Citibank in response to the invocation of the Bank Guarantee, made due payment of Rs. 154, 48, 35,531/ to Tech Mahindra Ltd. on 15 th March, 2012 under the said Bank Guarantee. Vide its two letters, both dated 16th March, 2012, Citibank communicated the same to the Company at its address in Mumbai and New Delhi and requested the Company to fund the same to Citibank immediately. However, the Company wrongly failed and neglected to arrange reimbursement/funding to Citibank. Citibank is therefore entitled to recover the said amount of Rs. 154, 48, 35,531/ together with applicable int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... about the payment made by Citibank to Citi Bahrain and called upon the Company to make the said payment of USD 103,945,631. Citibank received a letter dated 29th June, 2012, from the Advocates for the Company, inter alia, expressing its inability to pay the dues, inter alia, on the ground that Winding Up Petition against the Company is pending in this Court and an order of injunction has been passed in the said Winding Up Petition by this Court restraining the Company from making any payment to any of its creditors. Citibank for recovery of its claim under the loan facilities, has already filed Original Application No. 56 of 2012 in the DRT No. 2, New Delhi, which is pending hearing and final disposal. The said claim of Citibank has been amended in the Original Application and the revised claim is for Rs. 737, 60, 20,256.11. 6.1.13 Citibank has submitted that it is an admitted position that the Company took the benefit of the loan facilities granted by Citibank and is bound to repay the dues. Having availed of the loan facilities, Respondent No.2-Majestic (as a shareholder of the Company) cannot dispute the Company's liability to Citibank. In fact, in the present Petition, Respon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mounts are not denied/disputed by the Respondent No.2-Majestic till date, more so when the transaction with the Bank are supported by overwhelming documentary evidence. Both the parties have filed their independent proceedings before the DRT. It is incorrect to suggest that the DRT, Mumbai passed an order appointing Receiver in respect of the movable and immovable properties of the Company only because the CFO of the Company admitted the liability of the Company towards the Banks. Even otherwise, there is no defence even attempted to be advanced on behalf of Respondent No.2-Majestic qua the claims of the Banks. The DRT has, even after hearing the parties, declined to set aside its order dated 16th April, 2012 appointing a Court Receiver in respect of the movable and immovable properties of the Company, though the DRT has kept the said order in abeyance only because this Court has already appointed the Authorized Person to take care of the assets and properties of the Company. In view thereof and in view of the aforestated submissions advanced by the Petitioner and the Banks, it is clear that there is no collusion between the Petitioner with SCB and/or Citibank as alleged or at all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... days and thereby not being available to efficiently run the day to day affairs of the Company. It is submitted that the Petitioner also failed to obtain F.I.P.B. approval to increase its shareholding and the Petitioner also failed to bring in call money as agreed under the Shareholders Agreement. The Petitioner failed to utilize the sanctioned loan of Rs. 6700 crores. The Petitioner procured equipments at a very high cost. They failed to implement the business plan and launch the services despite repeated follow up. The Petitioner called for meetings contrary to the Shareholders Agreement and incorrectly recorded minutes of various Board Meetings. In view of this conduct, the Etisalat Group failed to ensure the launch of the telecom services as per the business plan and led the Company into a situation wherein it started facing a financial crunch and wrongly and illegally started blaming the Respondent No.2-Majestic and its ultimate shareholders for the same. It is submitted that it was on account of the mismanagement by the Petitioner and its group entities, that the Company was unable to commence commercial operations in accordance with the business plan contemplated when the Sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpanies were responsible for the passive telecom infrastructure. Balwa cited his strong business relation with Reliance to take on the responsibility to deal with them personally. Balwa and Goenka entered into various contracts on behalf of the Company without disclosing their interests in those Companies viz. Reliance, EON and Techniplex. Shri Ahmed Salahuddin who was appointed as Director of the Company was not an employee of Etisalat but was introduced to Etisalat by Balwa. Mr. Salahuddin was also personally known to Goenka. Contrary to the Respondent No.2-Majestic's allegation that the Petitioner's Nominee Directors were also given Board authority to negotiate/execute contracts, Mr. Al Haddad was not given any such power on any occasion and Mr. Julfar was given limited authorization by the Board on only one occasion i.e. on 31st August, 2010 to assist in the negotiation of a contract with ZTE. Balwa interfered in all major and minor matters that were to be dealt by Mr. Pratap Ghose and other key officers and ensured that his decision prevailed over the others. Balwa and Goenka were always present in all Board meetings held when decisions were taken. It is therefore submitted on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Etisalat secondees to the Company were never paid by the Company. As regards the allegation that the Petitioner failed to obtain F.I.P.B. approval to increase its shareholding, it is submitted by the Petitioner that the said allegation is false and is denied. The Company was responsible for filing the application for FIPB approval. The FIPB refused to give its approval to the purchase by Etisalat of Genex's shares largely because of the reputation and links of Balwa, as admitted by Balwa in his letter dated 23rd December, 2010. Genex was presented to Etisalat by Balwa. Etisalat had no previous involvement with Genex. As far as the Petitioner is concerned, the relationship with Genex has thus always been at arm's length and on a purely commercial basis. 6.2.2. As regards the allegation that the Petitioner failed to bring in the call money, the Petitioner has submitted that there is no failure on the part of the Petitioner to bring in the call money. The amount was to be used to capitalize the Company. As the Company did not need the money at the time of the capital call, the Petitioner did not contribute. Capital call was subject to a supported business plan to be submitted by Balw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh cost as compared to what was paid by other Indian Telecom operators, it is submitted by the Petitioner that the equipment was purchased by the Company at the best possible price. Balwa and Jhamb tried to renegotiate but to no effect. Balwa despite having no experience in this field made an unsubstantiated claim as to the high price of the equipment. The Respondent No.2-Majestic has also not produced any evidence of the equipment being overpriced. Later on negotiations with vendors by Jhamb and Balwa resulted in acceptance of the initial price with minor changes to volume and the Board unanimously accepted the same. In fact, Balwa cancelled the purchase of the Company's own micro wave equipment and purchased the same from Reliance. Balwa ensured that only he and Ms. Suvarna were involved in concluding the Passive Telecom Infrastructure Sharing Agreement signed by Reliance on behalf of the Company. The Management had no opportunity to give its input, and their suggestions which when given were excluded. The CBI and the Enforcement Directorate have similar concerns regarding the links between Balwa and Reliance. Balwa attempted to pay Reliance even though Reliance was an unsecu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here is equal participation, if not more, of the nominees of Respondent No.2-Majestic in carrying on its day to day business and in taking important decisions in the matter. The Petitioner alone therefore cannot be blamed for non-commencement or delay in commencement of the business or incurring any losses in the business or taking any unilateral decisions qua the running and/or shutting down of the business. From the submissions made by the Parties and the records produced by them it is clear that all the aforestated allegations made by the Respondent No.2-Majestic against the Petitioner seriously lacks merits as well as bona fides and are nothing but a creation of the Respondent No.2-Majestic, in order to raise excuses to contend that the Petitioner's alleged conduct does not entitle them to any reliefs in this Petition. 6.3 The nominees of the Petitioner failed to comply with its roll out obligation and unilaterally shut the business of the Company. Due to such illegal actions and conduct of the Petitioner several show cause notices/demand notices are issued to the Company. The Respondent No.2-Majestic inter alia alleged that (i) the Petitioner failed to ensure that the Compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se fees payable by the said Companies for the fresh licenses allotted to them. 6.3.1 The Petitioner has submitted that the Resolution passed by the Company for shut down on 22nd February, 2012, was consensual. The Majestic Nominee Directors raised no objection against the decisions which can be seen from the video recording taken at the time of the passing of the Resolutions. It is also correctly pointed out that the argument in regard to the affirmative vote is a red herring. The affirmative vote provision pertains to decisions which are to be taken for the purpose of running the business and any change therein. Such affirmative vote cannot be expected in the present situation where the Hon'ble Supreme Court has held that Respondent No.2-Majestic, Balwa and Goenka are guilty of such acts which make it impossible for any respectable person to carry on business in partnership with Balwa and Goenka. Furthermore, it is impossible to contemplate that such a person will give an affirmative vote thereby admitting to the charges. In support of its submission that the decision for shut down of the business was not unilateral, the Petitioner has also pointed out that Dr. Buddhiraja (Ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds relied upon by the Parties, I am of the view that the Respondent No.2 Majestic has not established that the nominees of the Petitioner have failed to comply with its roll out obligation and unilaterally shut the business of the Company or have committed any illegal actions or conduct resulting in show cause notices/demand notices being issued to the Company. 7. The Respondent No.2-Majestic also contended that since the Petitioner by filing the suit selected an alternate remedy, they cannot move this Court with the Petition seeking winding up on just and equitable ground. In my view, the suit for damages is not an alternate remedy for a winding up petition. The Petitioner does not seek to benefit financially or recover its losses in the winding up petition which is primarily for the benefit of the creditors. 8.1 The Learned Senior Advocate appearing for Respondent No.2-Majestic has next submitted that the Petitioner has wrongly relied on events post the filing of the Petition in support of the admission of the Petition. It is submitted that the Petitioner has relied upon various reports and steps taken by the Authorized Person (some with the consent of the parties and some with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Petitioner while relying on events post filing of the Petition has not based its case solely on the same. It is submitted that the events prior to the filing of the Petition are more than sufficient to wind up the company. The events post filing of the Petition were put forth to the Court only to demonstrate how the situation has further deteriorated and as to how Respondent No.2-Majestic also realizing the same had consented to various employees being laid off, etc. It is submitted that if Respondent No.2 Majestic's submission is accepted, an absurd situation could arise i.e. a Company which at the time of filing of the Petition deserves to be wound up by the Court, cannot continue its winding up petition despite the fact that during the pendency of the Petition, the situation had improved and by the time of the final hearing no case for winding up was made out. It is further submitted on behalf of the Petitioner that there is no implied overrule of the three judgments relied upon by the Petitioner by the judgment of Sangramsingh Gaikwad. It is submitted that paragraph 200 of the Judgment of Sangramsingh P. Gaikwad lends no assistance to the Respondent No.2-Majestic in the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e admission of the above Company Petition. Paragraph 200 of the decision of the Hon'ble Supreme Court in Sangramsingh P. Gaikwad (supra) does not assist the Respondent No.2-Majestic in any manner because the cognizance of the reports of the Authorized Person is not taken by the Court to cure any defect in the Company Petition or to fill up the lacuna by other evidence oral or documentary. The question of amending the Petition also does not arise. Though it is true that the Authorized Person was appointed without prejudice to the rights of either party, it is not the contention of the Petitioner that since the Authorized Person was appointed by an order dated 3rd July, 2012, the Company Petition should be admitted. At the same time it also does not imply that the Court should not take into account the situation of the Company at the time of hearing the matter. In view thereof, the submission advanced on behalf of the Respondent No.2-Majestic viz. that the Petitioner has wrongly relied on events post the filing of the Petition in support of the admission of the Petition is untenable and baseless and is rejected. 9.1 The Learned Senior Advocate appearing for the Respondent No.2-M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion does not meet the requirement under Section 433(e) of the Act and cannot be admitted on that basis. 9.2 Strictly without prejudice to the above submissions, it is further submitted on behalf of the Respondent No.2-Majestic that the alleged debt of the Petitioner is disputed. This dispute is not capable of adjudication in a summary proceeding for winding up under Section 433(e) of the Act. For this reason also the Petition under Section 433(e) ought not to be entertained or admitted. 9.3 In response, the learned Senior Advocate appearing for the Petitioner has submitted that in the matter of Indian Companies Act VII of 1913 and in the matter of Darjeeling Bank Ltd. AIR (35) 1948 Cal. 335 (See para 14 at pg. 339); Pandam Tea Co. Ltd. vs. Darjeeling Commercial Co. Ltd. (supra), N.N. Valecha vs. I.G. Petrochemicals Ltd. (supra), and Siddharth Apparels P. Ltd. (1983) 59 Comp cas 435 (Cal) (see pages 437 to 438), it is clearly stated that a notice under Section 434(1)(a) is only required if a creditor wishes to rely upon the presumption that a company is unable to pay its debt. However, it is otherwise open to a creditor or a contributory, who has not given a notice to satisfy the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 Majestic 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 therefore deserves to be admitted. 11. As set out hereinabove, since the Company has to recover several huge amounts from the statutory authorities as well as PNB, and is also required to answer the show cause notices/default notices and challenge the same before the appropriate court of law and further steps are required to be taken for protecting the properties of the Company and renewing its Bank Guarantees, by consent of the Parties an Authorized Person was appointed even prior to the admission of the Petition on 29th October, 2013. Of course, Respondent No.2-Majestic has submitted that even if the Company Petition is admitted, the Authorized Person cannot be appointed and the law requires the appointment of a Provisional Liquidator. In my view, the Office of the Official Liquidator, High C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany Petition is admitted and made returnable on 18th December, 2013; (ii) The Petitioner is directed to advertise the Petition in two local newspapers, viz. "Free Press Journal" (in English), "Nav Shakti" (in Marathi) and the Maharashtra Government Gazette; (iii) The Petitioner shall also deposit an amount of Rs. 10,000/ with the Prothonotary and Senior Master of this Court towards publication charges, within a period of two weeks from the date of this order, with intimation to the Company Registrar failing which the Petition shall stand dismissed for non prosecution. (iv) Pending the hearing and final disposal of the Petition, the Authorized Person appointed by this Court by an order dated 3rd July, 2012, shall continue to act as an Authorized Person and carry on his duties as set out in the said order and shall be entitled to receive the same monthly remuneration being received by him till date. (v) Notice under Rule 28 of the Companies (Court) Rules, 1959, is waived. 12. The Learned Advocate appearing for Respondent No.2/Majestic seeks stay of the order admitting the above Company Petition. The application is rejected. However, the Petitioner shall not advertise the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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