Etisalat Mauritius Ltd. Vs. Etisalat DB Telecom Pvt. Ltd. and Others - Court Judgment

SooperKanoon Citationsooperkanoon.com/1174065
CourtMumbai High Court
Decided OnFeb-20-2015
Case NumberCompany Petition No. 114 of 2012
JudgeS.J. KATHAWALLA
AppellantEtisalat Mauritius Ltd.
RespondentEtisalat DB Telecom Pvt. Ltd. and Others
Excerpt:
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companies act - sections 397, section 398 -
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1. company petition no.114 of 2012 is filed by the petitioner– etisalat mauritius ltd. for winding up of respondent no. 1-etisalat db telecom pvt. ltd. the petitioner submitted in the petition that 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 honble 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. 2. the company petition is taken up for final hearing. 3. briefly set out here-in-below, are.....
Judgment:

1. Company Petition No.114 of 2012 is filed by the Petitioner– Etisalat Mauritius Ltd. for winding up of Respondent No. 1-Etisalat DB Telecom Pvt. Ltd. The Petitioner submitted in the Petition that 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 Honble 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.

2. The Company Petition is taken up for final hearing.

3. Briefly set out here-in-below, 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.

3.1 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 Corporation (“Etisalat”), a Public Listed Corporation, incorporated in the United Arab Emirates (UAE). Etisalat is 60 per cent owned by the Federal Government of UAE and 40 per cent owned by UAE national individuals. Etisalat is an International Telecommunications Operator and currently has operations in 18 countries and services over 140 million subscribers across its network.

3.2 The first Respondent – Etisalat DB Telecom Pvt. Ltd. (“the Company”) was incorporated on 13th July, 2006 under the Companies Act, 1956, in the name of Swan Capital Pvt. Ltd. On 15th February, 2007, the Company changed its name to Swan Telecom Pvt. Ltd. and on 12th March, 2009 again changed its name to Etisalat DB Telecom Pvt. Ltd.

3.3 The second Respondent, Majestic Infracon Pvt. Ltd. (Majestic) is a Company incorporated under the Companies Act, 1956, under the provisions of the Companies Act, 1956. Majestic is said to be 100 per cent owned and controlled either directly or indirectly by Shahid Balwa (Balwa) and Vinod Goenka (Goenka). Majestic was formerly known as Tiger Trustees Pvt. Ltd. (‘Tiger). Tiger has been the subject of investigation by the Criminal Investigation Authorities investigating the 2G scam and was closely involved in the events which form the 2G scam. The Petitioner has pointed out that it has been alleged by the CBI that Tiger is an Associated Company of Reliance.

3.4 The third Respondent Delphi Investment Limited (Delphi) is a Private Company, limited by shares incorporated in the Republic of Mauritius. Delphi holds 5.26 per cent shares in the Company.

3.5 The fourth Respondent–Genex Exim Ventures Pvt. Ltd. (‘Genex) is a Company incorporated under the provisions of the Companies Act, 1956 and holds 4.26 per cent of the shareholding of the Company.

3.6 After the incorporation of the Company on 13th July, 2006, on 1st October, 2007, Respondent No.2 Majestic acquired 90.10 per cent of the equity shares of the Company and Shahid Balwa and Vinod Goenka were appointed Directors of the Company. The remaining 9.90 per cent shares were held by Delphi.

3.7 On 10th January, 2008, Letters of Intent for the grant of Unified Access Services Licenses (‘2G Licenses) were issued to the Company by the Department of Telecommunications (‘DoT), Government of India. The Company met the funding required to pay the entry fees in respect of the 2G licenses through bank loans.

3.8 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.

3.9 Based on the above representations and warranties, on 23rd September, 2008, Share-holders Agreement and Share Subscription Agreement were entered into between the Company, Respondent No.2Majestic, 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/Majestic45.73%
(ii) Petitioner—EML44.73%
(iii) Respondent No.3 – Delphi4.27%
(iv) Respondent no.4 – Genex5.27%
Total100%
 
According to the Petitioner, their capital contribution was, inter alia, used by the Company to repay the bank loans which funded the acquisition of the 2G licenses.

3.10 On 17th December, 2008, a Management Services Agreement was entered into between the Company and Etisalat Telecommunications Corporation wherein the Etisalat Group agreed to provide management services as provided therein, to the Company. However, according to the Petitioner in reality, at an operational level, Balwa (Managing Director and Vice-Chairman), Goenka and the key management (CEO/CRO/CLO) hired by them, prior to the Petitioners investment, managed the Company on a daily basis. Contrary to Respondent No.2Majestics allegation that the Petitioners nominee Directors were also given power and 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 on 31st August, 2010, to assist in the negotiation of a contract with ZTE. Balwa interfered in all minor and major matters that were to be dealt by Mr. Pratap Ghose and other key officers and ensured that his decision prevailed over the others. In support of these contentions, the Petitioner has relied on the affidavit of Respondent No.2 Majestic dated 26th March, 2012, and the affidavits on behalf of the Petitioner dated 30th April, 2012 and 24th July, 2012 and the table marked A18 summarizing authority given to Respondent No. 2 Majestic through Board Resolutions.

3.11 On 17th March, 2009, the Petitioner invested an amount of Rs.209.70 crores in the Company and was allotted 2 additional shares of the Company. The said sum of Rs. 209.70 crores was the equivalent of spectrum fee payable by Respondent no.1 for the Rajasthan and Haryana circles under the 2G licenses.

3.12 On 21st October, 2009, the CBI filed a FIR against unknown officers of the DoT and unknown private persons and began an investigation into the process of allocation of 2G spectrum by the DoT.

3.13 On 25th May, 2010, the Petitioner invested a further amount of Rs. 106.95 crores in the Company and was allotted one additional share of the Company. The said sum of Rs. 106.95 crores was the equivalent of the spectrum fees payable 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.

3.14 On 14th February, 2010 and 3rd January, 2011, Public Interest Litigations (PILs) were filed in the Honble 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 charge-sheet 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 charge-sheet 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.2Majestic 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 charge-sheet 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 or obtain UASLs as it held licenses in RCOM. Swan was used by RADAG to mask the identity of the promoter (then RADAG) while applying for 2G licenses. On a change in the Telecom Policy permitting dual technology (GSM+CDMA), RADAG sold Swan to Balwa and Goenka. According to the Petitioner, the CBI charge-sheet describes how Balwa and Goenka, whose DB Group had no telecom experience, then entered into a criminal conspiracy with RADAG, the then Telecom Minister and the then Telecom Secretary, to cause the issuance of UASLs to Swan, which was otherwise ineligible, in a manner that ensured the issuance of licenses to Swan over several other eligible applicants on a ‘first come first served' basis, for a price that was far lesser than the inherent value of the spectrum that accompanies the licenses. On 8th July, 2011, a show cause notice was issued by the Directorate of Enforcement to the Company and its Directors alleging violation of the provisions of the Foreign Exchange Management Act, 1999.

3.15 On 8th July, 2011, Respondent No.2/Majestic filed a Petition under Sections 397 and 398 of the Companies Act before the Company Law Board, Mumbai (‘CLB) against the Company, the Petitioner and the Petitioners nominee on the Board of Directors of the Company wherein Respondent No.2 Majestic (the Petitioner therein), inter alia, raised the following allegations:

(i) That the Petitioner failed to bring its expertise and management skills to manage the business of Respondent No. 1 in terms of the 2G licenses;

(ii) That the Petitioner failed to comply with the capital call made by the Board of Directors of the Company;

(iii) That the Minutes of the Meeting of the Board of Directors held on 25th April, 2011 had been wrongly recorded; and

(iv) That the Petitioner was responsible for the financial losses suffered by the Company on account of its mismanagement and unnecessary expenditure.

However, on 1st August, 2011, Respondent No.2 Majestic unconditionally withdrew the said petition filed before the CLB. On 2nd August, 2011, Balwa admitted in his letter to the Chairman of Etisalat (the holding Company of the Petitioner) that the decision to file the petition before the CLB was taken by his lawyers without his consent or concurrence and that such occurrence will never happen again. (Though Respondent No.2 Majestic has disputed this letter in its affidavit dated 12th June, 2012, the same was not disputed during oral arguments).

3.16 On 22nd October, 2011, an order was passed by the Special CBI Judge framing criminal charges against Balwa, Goenka and the Company.

3.17 According to the Petitioner, Respondent No.2Majestic repeatedly stated that it is unable to make any capital contribution into the Company.

3.18 On 2nd February, 2012, the Honble Supreme Court quashed all the 2G licenses, inter alia, allotted to the Company. In its said judgment, the Honble 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 Honble 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 Honble Supreme Court also imposed costs of Rs. 5 crores each, only on three of the licensee companies whose licenses had been cancelled by the said judgment which included the Company. The said judgment was made operative by the Honble Supreme Court after four months from the date of pronouncement.

3.19 At the meeting of the Board of Directors of the Company held on 19th February, 2012, the management of the Company was directed to submit a complete plan for network shutdown. Again, in the meeting of the Board of Directors of the Company held on 22nd February, 2012, it was unanimously decided to shut down the telecom network of the Company. According to the Petitioner, the Directors nominated by Respondent No. 2 supported this decision as is evident from the video recording and the transcripts of this meeting.

3.20 On 23rd February, 2012, Reliance Infratel Ltd. (RITL) and Reliance Communication Ltd. (RCL) (together Reliance) filed Petitions before the Telecom Disputes Settlement and Appellate Tribunal (‘TDSAT) for claims amounting to Rs. 1679 crores against the Company. On 31st January, 2012, Reliance had already switched off the telecom network of the Company and disabled access to their passive telecom infrastructure to the Company.

3.21 On 23rd February, 2012, the Petitioner filed a Civil Suit in this Court against Respondent No.2 Majestic and its promoters Balwa and Goenka claiming damages for loss of the Petitioners investment on account of their fraudulent representations and misrepresentations.

3.22 On 23rd February, 2012, Goenka and Balwa issued a letter to the Board of Directors of the Company raising objections to the recording of Minutes of the Meeting held on 22nd February, 2012. On 28th February, 2012, the Company informed the DoT and the Telecom Regulatory Authority of India (‘TRAI) that it is shutting down its telecom network with effect from 31st March, 2012.

3.23 According to the Petitioner on 29th February, 2012, Respondent No.2Majestic threatened withdrawal of its nominee Directors in a letter addressed to the Petitioner and on 1st March, 2012, Respondent No.2 Majestic withdrew its two nominee Directors from the Board of the Company. Out of the remaining three Directors, two are foreign nationals. The meeting of the Board of Directors could not be convened thereafter as it is stipulated under the Foreign Director Investment (‘FDI) scheme that a telecom Company must have a majority of Indian citizens on its Board of Directors.

3.24 Thereafter, the Petitioner filed the present petition on 12th March, 2012, seeking winding up of the Company on the grounds set out hereinabove.

3.25 On 29th March, 2012, criminal complaints were filed by the Channel Partners of the Company against the Petitioners nominees on the Board of Directors and the Petitioners employees seconded to the Company. The Petitioner has pointed out that none of the Directors or employees associated with the Respondent No. 2Majestic were named in these complaints, clearly indicating that Respondent No. 2Majestic 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.

3.26 On 3rd April, 2012, the Honble Supreme Court rejected the Review Petition filed by Respondent No. 1 for review of the judgment dated 2nd February, 2012, quashing the 2G licenses.

3.27 On 11th April, 2012, this Court in the above Company Petition granted time to the creditors/claimants of the Company to file their respective affidavits before this Court, setting out the particulars of their claim against the Company on or before 16th April, 2012 and also directed that until further orders the Company shall not make any payments to any of the creditors/claimants of the Company without obtaining prior permission of the Court.

3.28 On 13th April, 2012, in an application filed by Citi Bank, a creditor of the Company, the Debts Recovery Tribunal, New Delhi, directed the Company to disclose details of all its movable and immovable assets and to maintain status quo. On 16th April, 2012, in an application filed by Standard Chartered Bank, a creditor of the Company, the Debts Recovery Tribunal, Mumbai, passed an ex parte order directing the attachment of all the assets of the Company and appointed a Receiver for all its assets.

3.29 On 18th February, 2012, TRAI issued its recommendations on Exit Policy for Telecom Licenses wherein it recommended that in view of the terms of the 2G licenses, the entry fees paid by earlier licensees (including the Company) ought not to be refunded to them.

3.30 According to the Petitioner on 19th May, 2012, Punjab National Bank (“PNB) misappropriated an amount of Rs. 254.16 crores out of the Companys fixed deposits with the Bank towards an outstanding loan given by PNB to Respondent No.2 Majestic. In fact, on 12th October, 2012, the Advocates for Respondent No.2 Majestic have issued a letter admitting that it owed over Rs. 254 crores to PNB and that the appropriation of the funds of the Company by PNB against unpaid amounts due from Respondent No.2 Majestic was illegal.

3.31 On the basis of the minutes consented to by the Petitioner, Respondent No.2 Majestic, employees and creditors of the Company; on 3rd July, 2012, this Court in the above Company Petition passed an order in terms of the said minutes whereby an Authorized Person (“AP) was appointed by this Court inter alia, to preserve and protect the assets of the Company and to mitigate and minimize costs and liabilities.

3.32 On 6th August, 2012, Respondent No.2 Majestic issued dispute notice invoking arbitration against the Petitioner under the Share Subscription Agreement and the Shareholders Agreement dated 23rd September, 2008. On 14th August, 2012, the Petitioner has replied to the dispute notice issued by the Respondent No.2 Majestic and denied all the allegations 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.

3.33 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 281-B 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.

3.34 In the meantime, the Authorized Person 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 payment of employees salaries and other dues; recommending payment/renewal of Bank Guarantees; recommending to vacate property/office premises in occupation of the Company; retaining M/s. Luthra and Luthra as Advocates for the 2G matter; recommending sale of furniture, seeking sanction as regards payment for various ongoing services; recommending return of licensed premises; recommending payment to Channel Partners, etc. The Authorized Person also obtained permission of this Court by Report No. 12 of 2013 to move the DRT and obtain a stay on the ex-parte order dated 16th April, 2012, appointing a Receiver in respect of the movable and immovable properties of the Company. Pursuant thereto, the Authorized Person also made an application before the DRT to that effect. On 9th January, 2013, the DRT declined to set aside its order dated 16th April, 2012, but has however, in view of the appointment of the Authorized Person by this Court to inter alia protect the assets of the Company, directed that its order dated 16th April, 2012, remain in abeyance until the Authorized Person continues to be so appointed under the order passed by this Court dated 3rd July, 2012.

3.35 This Court has disposed of most of the reports, inter alia of the Petitioner as well as Respondent No.2Majestic by passing consent orders. On 11th October, 2012, Respondent No.2Majestic also filed a Company Application (L) No. 616 of 2012 seeking orders from this Court to direct the Company to submit its application for prequalification in the 2G auction, for which the last date notified by the DoT was 19th October, 2012. The said application which was opposed by the Petitioner was rejected by this Court by its order dated 18th October, 2012 and the Appeal preferred there-from was also dismissed by the Honble Division Bench of this Court (Coram: Dr. D.Y. Chandrachud and A.A. Sayed, JJ.), on the ground that it is not possible for a shareholder of a Company to seek a direction to the effect that the Company should bid in respect of a particular contract and also that the Company evidently does not have sufficient resources to enter into contractual commitments. A similar application was made on behalf of Respondent No.2 Majestic on 21st February, 2013 to bid for new 2G licenses which was again rejected by this court.

3.36 The total amount claimed by the Companys creditors as on 12th April, 2013, as per the list submitted by the Authorized Person is Rs. 41,867,100,05.14.

3.37 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 had, through their Counsel at the stage of admission of the Petition, submitted that they do not support the present Winding Up Petition filed by the Petitioner. However now, when the Petition is being heard finally they have remained absent and therefore no submissions are made before this Court.

4. This Court after hearing arguments for admission over several days of the above Company Petition, and after considering the voluminous written submissions tendered, by its order and judgment dated 18th November 2013, admitted the above Company Petition wherein detailed reasoned findings on the relevant aspects of the matter that were before the Court at the stage of admission have been recorded (“order of Admission”). By the said order of admission, the Company Petition was made returnable on 18th December, 2013, and directed to be advertised. Pending the hearing and final disposal of the Petition, the Authorised Person appointed by the Court by an order dated 3rd July, 2012, was directed to continue to act as an Authorised Person and carry on his duties as set out in the said order, on the same monthly remuneration that he was receiving on the date of the order of admission. The application seeking stay of the order of admission was rejected.

5. The Respondent No. 2 being aggrieved by the said order of admission filed an Appeal, being Appeal (Lodging) No. 461 of 2013. The said Appeal (L) No. 461 of 2013 came to be disposed of by an order and judgment of the Appeal Court dated 8th April, 2014 (“order of the Appeal Court”). The Appeal Court in paragraph 182 of its order and judgment held as under:

“182. In the circumstances, the impugned order admitting the company petition and the consequential orders is upheld. The judgment is modified only to the limited extent of appointing the Official Liquidator as the Provisional Liquidator of the company and directing the Provisional Liquidator to appoint the Authorized Person as a legal advisor on the same terms and conditions as to his remuneration as fixed by the company court. The Provisional Liquidator shall submit reports, including on the recommendations / suggestions of the legal advisor.

The appeal, accordingly, stands disposed of. The operative part of this order shall remain stayed, upto and including 15th July, 2014. It is clarified that the petition shall not be advertised till 15th July, 2014. The time to deposit the amount of Rs.10,000/- towards costs of advertisement is extended till further orders of the learned company Judge. Liberty to apply in this regard. Till 14th July, 2014, the modification of the impugned order shall also remain stayed”.

6. Reading of the order of the Appeal Court shows that the hearings before the Appeal Court were equally lengthy and both sides advanced arguments in great detail on all matters which were before the Company Judge and on certain further aspects which had arisen after the order of admission and during the pendency of the said Appeal.

7. The Respondent No. 2 being aggrieved by the order of the Appeal Court filed a Special Leave Petition being Special Leave to Appeal (C) No.15297 of 2014 in the Hon'ble Supreme Court of India. The Hon'ble Supreme Court of India by its order dated 14th July, 2014, dismissed the Special Leave Petition in limine.

8. The Company Petition, as stated above, is now taken up for hearing and final disposal.

9. The Learned Counsel appearing for the Respondent No.2, after making detailed submissions on certain aspects which had arisen after the order of admission and during the pendency of the said Appeal and on aspects pertaining to which the Appeal Court had observed that the same would be considered in greater detail at the hearing of the Petition, once again started reading and repeating what was set out by the Respondent No.2 in the written submissions which were submitted in three volumes and already argued upon in great detail at the stage of admission, the findings pertaining to which have been set out in the order of admission and also upheld by the Hon'ble Appeal Court in its detailed order and findings. This Court therefore informed the Counsel for the Respondent No.2 that the question of him again advancing the same arguments which have been dealt with and decided in the order of admission, and in respect of which there are no change of circumstances, does not arise. The Respondent No. 2 has in its written submissions at the outset now submitted as follows:

“The Respondent No.2 submits that in deference of the oral directions of this Court, the Respondent No.2 has not submitted oral arguments in respect of matters contained in the aforesaid three separate written submissions filed by the Respondent No.2. Hence it is submitted that the three separate written submissions filed by the Respondent No. 2 should be considered as part of the oral submissions made by the Respondent No.2 and this Court should consider the same and request this Court to deal with the same afresh whilst passing the final orders in the captioned petition.”

10. This Court has by its order and judgment dated 13th December, 2013 in Company Petition No. 28 of 2012 (The Bank of New York Mellon, London Branch vs. Zenith Infotech Limited) in materially identical circumstances where a detailed order had been passed, which was confirmed by the order of the Appeal Court/Division Bench, against whose order a Special Leave was preferred and dismissed by the Hon'ble Supreme Court, has in paragraph 44 recorded the submissions of the parties on this aspect and held as follows:

“44. It is submitted on behalf of the Company that merely because the Company Petition has been admitted, it does not necessarily mandate a final order of winding up of the Company. The Petitioner has submitted that the detailed admission order passed by this Court dated 30th July, 2013 has been confirmed by the order of the Honble Division Bench dated 2nd September, 2013 and the SLP preferred there-from has been dismissed as withdrawn by the Company by an order of the Honble Supreme Court dated 30th September, 2013. It is submitted by the Petitioner that the said order/judgment though passed at the admission stage are binding even at the final hearing of the Company Petition. It is submitted that the orders do not merely record any prima facie view. Instead the findings in the orders have been made after considering all the facts and circumstances on record, the averments made, the arguments advanced and the evidence led on behalf of both the parties to the Company Petition. It is also submitted that since the SLP has been dismissed and the employees have chosen not to challenge the Division Bench order, the findings therein and in the admission order have become final and binding. Apart from the fact that I am in agreement with the submissions advanced by the Petitioner, in my view, the facts and circumstances on the basis of which I have passed the admission order dated 30th July, 2013, have remained the same till date and do not call for any different findings at this stage than those arrived at during the stage of admission. I therefore once again confirm all the findings arrived at by this Court in the admission order dated 30th July, 2013.”

In the instant case since the facts and circumstances on the basis of which the order of admission was passed have remained the same till date, no different findings from those already arrived at, at the stage of admission are called for. Accordingly I confirm all the findings arrived at in the order of admission.

11. However, for a convenient reading of the present judgment and order, I will hereinafter mention and reproduce in verbatim the arguments advanced by the parties on several issues and the findings recorded by me in the order of admission, and which, as stated hereinabove, hereby stand confirmed by me.

LOSS OF SUBSTRATUM

12. As set out herein and in the order of admission, one of the main contentions of the Petitioner is that the Company has lost its substratum. The said contention is denied/disputed by the Respondent No.2. The contentions of the parties and the finding of the Court pertaining to loss of substratum of the Company are recorded in paragraphs 3 to 3.11 of the order of admission and are reproduced hereunder:

“3. One of the main contentions of the Petitioner is that in view of the judgment of the Honble 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 Company and the very basis for the investment of equity capital by the Petitioners and debt by various secured creditors. On account of the quashing and termination of all the 15 Universal Access Service Licenses (‘UASL or ‘2G licenses), the Company has lost its substratum.

3.1 However, Respondent No.2Majestic has denied and disputed that the Company has lost its substratum and has submitted that notwithstanding the cancellation of the 2G spectrum UASL licenses by order of the Honble Supreme Court of India, the Company still has 3 valid telephone licenses for International Long Distance (ILD), National Long Distance (NLD) and Internet Service Provider (ISP) and the Company is capable of carrying on profitable business on the strength of these 3 valid licenses and the Company has reasonable prospect of carrying on 2G business by applying for fresh 2G license particularly when the Company has the assets and infrastructure to carry on 2G licenses. It is submitted on behalf of Respondent No.2 Majestic that merely because the Company is currently making losses, it does not imply that the substratum of the Company is lost. It is submitted that as held in various judgments, it is not for this Court to decide whether the Company is capable of carrying on a profitable venture. Respondent No.2 Majestic as shareholders of the Company have a business plan and are ready and willing to carry on the business of the Company as per its Memorandum. There is no basis for the Company to be wound up under the just and equitable clause on account of a baseless allegation of loss of substratum by the Petitioner. In support of the submission that the facts of the present case do not constitute a loss of substratum for the purposes of a petition under Section 433 (f), Respondent No. 2 relied on the decisions in (i) Hind Overseas Pvt. Ltd. v. Raghunath Prasad Jhunjhunwalla and another (1976)3 SCC 259, paras 34 to 36, page 271), (ii) M/s. Madhusudan Gordhandas and Co. vs. Madhu Woollen Industries Pvt. Ltd. (1971 (3) SCC 632, page 641, para 29), (iii) In re. The Cine Industries and Recording Co. Ltd. (1941 Bom. L.R. (54) 387, page no. 394), (iv) In Re Kitson and Co. Ltd.((1946) 1 All ER 435, 175 LT 25, page Nos. 4 and 5), (v) In re Taldua Rubber Co. Ltd. ((1946) 2 All ER 763, page Nos. 1, 4 to 6), (vi) In Galbraith v. Merito Shipping Co. (1947 SC 446, page Nos. 5 to 7) and (vii) In Vassant Holiday Homes Pvt. Ltd. and ors. Vs. Madan V. Prabhu (2001 (3) BomCR 493, paras 31 and 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 Honble 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 capital by the Petitioners and debt by various secured creditors. Subsequently, by an order dated 4th April, 2012, the Honble Supreme Court was pleased to dismiss the review petition filed by the Company and by various other orders, the Honble Supreme Court continued to require that the Government of India ensure that the licensees whose 2G licenses had been cancelled, cease to do business within the outer limit of time provided by the Honble Supreme Court. The Company was using the telecom infrastructure under contracts with Reliance Infratel Ltd. and Reliance Communications Ltd. who shut down the power supply to the Companys telecom equipment from 31st January, 2012. According to the Petitioner, the Company does not have any other telecom infrastructure.

3.3 In fact, on 22nd February, 2012, the Board of Directors of the Company unanimously resolved to shut down the 2G operations in India as at 31st March, 2012, and it was so shut down on 31st March, 2012. Again shortly after the unanimous decision to shut down operations was taken by the Board of Directors of the Company, on or about 1st March, 2012, both the nominees of Respondent No.2 on the Board of the Company, who constituted two out of the three Indian Directors on a five member Board of Directors, unilaterally resigned from the Companys Board. This made the Board defunct as no real decisions could be taken without the consent of the majority shareholders. This had the effect of all the decision making operations at the Company coming to a complete halt.

3.4 The Honble Supreme Court further required the Govt. of India to conduct fresh auctions of the 2G licenses and spectrum and two such rounds of auction have been completed till date. The Company, however, has not bid in the fresh auctions of the 2G licenses and presently does not hold any 2G license or spectrum. Respondent No.2Majestic did move this Court seeking directions against the Company to bid for the fresh auctions of the 2G licenses and spectrum. As set out hereinabove, this Court as well as the Honble Division Bench of this Court dismissed the applications, inter alia, on the ground that the DRT, Mumbai, on an application made by the SCB has appointed a Receiver in respect of all the movable and immovable assets of the Company and also on the grounds that the management of the Company was in disarray and that the Company evidently does not have sufficient resources to enter into contractual commitments.

3.5 The Respondent No. 2Majestic 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 Petitioners 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 Petitioners 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 Honble 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. The ILD and NLD licenses were purchased in October, 2008, before the roll out services under the 2G licenses. Despite the acquisition of these licenses, Respondent No.2 Majestic has at no stage thought it fit to operate these licenses or set up the infrastructure necessary for operating these licenses. This is despite the fact that there were no disputes between the Petitioner and Respondent No.2 Majestic when the ILD/NLD/ISP licenses were acquired. The Petitioner has further correctly submitted that the suggested revival of the Company through these three licenses is baseless, as the proposal does not account for the substantial additional investment and risks involved in entering a new market in which neither the Company nor Respondent No.2 Majestic has any prior experience or expertise. In any event, it is the considered view of the Petitioner that even if the Company were to commence this business, the costs involved would generate further liabilities and the earnings, if any, would not be sufficient to service the existing debts. It is therefore not in the interest of the Company to even attempt to commence such business. Again, the purported telecom infrastructure already deployed for operating NLD/ILD/ISP licenses has already been attached by the order of the DRT dated 16th April, 2012. Though by an order dated 9th January, 2013, the DRT has kept its order appointing Receiver in abeyance, the attachment continues to remain in effect.

3.6 As recorded hereinabove it is strongly contended on behalf of the Respondent No.2 Majestic that in the present case it is possible for the Company to carry on the business stipulated in its charter. Even during the hearing held before this Court on 30th October, 2012, the Learned Senior Advocate appearing for Respondent No.2 Majestic submitted before this Court that Respondent No.2 Majestic is in a position to place a revival scheme before the Court on the basis that the Company can be revived even without receiving the funds due to the Company which are held up with the telecom authorities and/or other Banks. In view thereof, without prejudice to the rights and contentions of the parties and without going into the issue as to whether the Company was capable of being revived, an opportunity was given to the Respondent No.2 Majestic to place its revival scheme before this Court on or before 30th November, 2012 and forward 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 5th 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 lack of business potential. Though Respondent No.2 Majestic has offered speculative and hypothetical data in the scheme, the method of arriving at the figures is not substantiated. Despite the huge outstanding debts and the proposed operational expenditure to be incurred by the Company being critical to the future of the Company, respondent No.2 Majestic has failed to disclose the most fundamental facet namely the source of funds required for the revival of the Company. This clearly demonstrates a non-serious and frivolous nature of the scheme prepared by Respondent No.2 Majestic.

3.8 While the scheme is significantly silent on what steps are suggested to be taken by the Company to repay its creditors, the best offer that Respondent No.2 Majestic has been able to make in respect of the creditors is repayment of the amounts in about 57 years and that too, not the entire debt but the reduced amount. This clearly shows that Respondent No.2 Majestic intends the Company to be exposed to further risks and liabilities over a longer period of time, thereby diminishing the likelihood of settlement of the claims of legitimate creditors. As correctly submitted by the Petitioner, as the scheme is intended to be brought into effect only after the withdrawal of the Company Petition by the Petitioner and therefore after the Companys affairs are no longer within the purview of this Court, the purported scheme is clearly an attempt by Respondent No.2 Majestic to selectively deal or not to deal with certain classes of creditors in furtherance of its own independent agenda. Again Respondent No.2 Majestics purported revival scheme admits that the Company can only be revived if Rs.1600 crores is brought in as equity infusion. In paragraph 5.1 of the purported scheme, Respondent No.2 Majestic admits that if the Company is not revived, it will undergo liquidation. Such infusion of capital will necessarily require the consent of the Petitioner and the Petitioner is correct in submitting that it is not agreeable to any such capital infusion by unknown third party investors.

3.9 Again, the decision in respect of the Company to undertake any new venture has to be jointly made by the principal shareholders of the Company viz. the Petitioner and Respondent No.2 Majestic. As correctly submitted by the Petitioner, apart from the impossibility of working with Respondent No.2 Majestic, 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 of the Chief Executive Officer, the Chief Regulatory Officer and two Nodal Officers of the Company. At present the Company has 48 employees on its rolls and is disbursing their respective monthly salaries. The Authorized Person by his report dated 13th June, 2013, has recommended the termination of 28 employees thereby leaving a skeletal staff of 16 employees to take care of the remaining assets of the Company. The Authorized Person had to make various payments in order to meet the current liabilities in the phase of preservation of assets pending the winding up of the Company. Since the filing of the present Petition, payments to employees towards salaries and benefits are in excess of INR 47 crores. Furthermore, approximately Rs. 1 crore has been spent on renewing Bank Guarantees. Over INR Rs. 1.1 crore have been paid towards warehousing and to landlords including by way of adjustment of deposits. A sum in excess of INR 93 lakhs has been incurred towards insurance premiums which again largely relates to fast depreciating, nonproductive assets which the Petitioners maintain must be disposed of immediately. As per the latest list of claims circulated by the Authorized Person on 12th April, 2013, the total amount claimed by the Companys creditors is above Rs. 4186.71 crores. By Report No. 26 of 2013, a further liability to Channel Partners to the amount of INR Rs.10 crores has been shown by the Authorized Person.

3.11 In the aforesaid circumstances I am in agreement with the Petitioner that the Company has lost its substratum. I am also of the view that the purported revival scheme of the Respondent No.2 Majestic is unrealistic and speculative. There is therefore no scope of any realistic revival of the business of the Company or a renewed ability to carry out its own functions independently. The Respondent No.2Majestic has therefore miserably failed to establish that it is possible for the Company to carry on the business stipulated in its charter, and the principal barrier to achieving this is the conduct of the Petitioner. In view of the facts and circumstances set out herein, the decisions relied on by the Respondent No.2 Majestic also do not lend any assistance to the Respondent No.2 Majestic. However it is necessary to clarify 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 i.e. even after the admission of the Company Petition.

12.1 On the issue of loss of substratum, the order of the Appeal Court inter alia observes that the Unified Access Services Licenses (“UASLs”) were the most valuable assets of the Company and that the commercial existence of the Company depended on UASLs. It is also observed that the UASLs were undoubtedly the basis on which the Petitioner was persuaded to invest a sum of Rs.3,500 crores in the Company (paragraph 34). The Appeal Court also observed that the indebtedness of the Company as on 8th April, 2014, is over Rs.4,500/crores (Paragraph 40) and that the Respondent No.2 has not denied the averment in the Petition that a minimum amount of US $ 18 million was required to continue the operation of the Company (Paragraph 42). In paragraph 44, the Appeal Court observed that the UASLs having been cancelled, the object for which the Company was incorporated and in any event the object on the basis of which the Petitioner had invested over Rs. 3,500 crores has not merely substantially, but had entirely failed. Further, that there was lack of any prospect of revival of the Company and that it was established beyond doubt that the existing and probable assets are insufficient to meet the existing liability. The Appeal Court also observed that the “purported scheme” proposed by the Respondent No. 2 for revival of the Company inspired no confidence. Accordingly, the Appeal Court concluded that, “it has been established that the substratum of the company has gone. There is no prospect of money being brought in by anyone to make it a commercially viable enterprise.” In paragraph 51, the Appeal Court further observed that the Company “would be unable to do any business even unrelated to the 2G licenses for it does not have the financial capacity to do so. Any attempt to do any other business, including related to the three subsisting licenses would only result in disastrous consequences plunging the company to a situation far worse than it is today.” The Appeal Court dismissed the Respondent No.2's “purported scheme” by stating that, “the Scheme inspires little, if any, confidence. It is vague and without material particulars.” and in paragraph 61 concluded that they were in entire agreement with the Single Judge that the Company had lost its substratum and that any revival was unrealistic.

12.2 It is also very pertinent to note that the Authorized Person by his letter dated 26th August, 2014, addressed to the Official Liquidator (annexed to Pl Report OL/Liqn.V/6100 dated 4th January, 2011), has placed on record facts pertaining to the substantial tax demands which have been levied against the Respondent No. 1 as enumerated below:

“The Company was assessed by the Income Tax Officer (TDS) –3 (3) vide order u/s 201 (1)/201 (1A) determining short deduction of Tax amounting to Rs. 24,83,020/- in respect of the 2nd quarter of the Financial Year 2008-09, resulting in a demand of Rs. 32,03,830/- including interest amounting to Rs. 7,10,810/- for short deduction of tax and determining short deduction of Rs. 14,061,480/- in respect of the 4th quarter of the Financial Year of 2008-09 resulting in a demand of Rs. 1,84,93,840/- including interest amounting to Rs. 44,28,800/- for short payment and for long deposit of tax. The Company preferred an appeal against the said order of the Assessing Officer.

The Company received a notice issued by the Income Tax Department under sections 143 (1) and a show cause notice under section 271 (1) (b) of IT Act and Income Tax Assessment proceedings relating to the Company which are in progress.

Order dated 10.01.2013 under Section 281-B of the Income Tax Act 1961 issued by the Additional CIT Mumbai attaching the telecom license fees deposited by Respondent No. 1 Company with the DOT.

Notice of Demand issued by the Income Tax Department under Section 156 of the IT Act of an amount of Rs. 467,00,39,738/- (Rupees Four Hundred Sixty Seven Crores Thirty Nine Thousand Seven Hundred and Thirty Eight only) which was demanded from the Company on account of income tax for A.Y. 2007-08.

Appeal filed by the Company under Section 246A of IT Act in respect of the Assessment Order which is pending before the Commissioner of Income Tax (Appeal19), Mumbai.

Notice of Demand issued by the Income Tax Department under which an amount of Rs.79,85,980/- (Rupees Seventy Nine Lakhs Eighty Five Thousand Nine Hundred and Eighty only) was demanded from the Company on account of income tax for A.Y. 2008-09.

Notice of demand issued by the Income Tax Department under Section 156 of IT Act of an amount of Rs. 2794,15,33,341/- (Rupees Two thousand Seven Hundred Ninety Four crores Fifteen Lakhs Thirty Three Thousand Three Hundred and Forty One only) was demanded from the Company on account of tax for A.Y. 2009-10.

Notice of Demand issued by the Income Tax Department under Section 156 of an amount of Rs. 607,98,04,547/-( Rupees Six Hundred and Seven crores Ninety Eight lakhs Four Thousand Five Hundred and Forty Seven only) demanded from the Company on account of tax for A.Y. 2010-11.

Appeal filed by the Company under section 246 (A) of IT Act in respect of the Assessment Order dated 24th April, 2014 which is pending before the Commissioner of Income Tax (Appeal) (15), Mumbai.

Notice of Demand issued by the Income Tax Department under Section 156 of an amount of Rs. 607,98,04,547/( Rupees Six Hundred and Seven Crores Ninety Eight Lakhs Four Thousand Five Hundred and Forty Seven only) demanded from the Company on account of tax for A.Y. 2010-11.

The Company paid an amount of Rs. 79,85,980/( Rupees Seventy Nine Lakhs Eighty Five Thousand Nine Hundred and Eighty only) in full payment of income tax demanded for A.Y. 2008-09.

With the sanction of the Hon'ble Bombay High Court, the Company paid Rs.40,00,00,000/( Rupees Forty Crores only) on account of Income Tax demand for A.Y. 2007-08 and A.Y. 2009-10 in compliance with the condition for grant of stay. A refund of Rs.9,41,18,399/( Rupees Nine Crore Forty One Lakhs Eighteen Thousand Three Hundred and Ninety Nine only) sanctioned to EDB for A.Y. 2012-13 has been adjusted against the Income Tax Demand for A.Y. 2007-08 and A.Y. 2009-10. The stay of demands for A.Y. 2007-08 and A.Y. 2009-10 is in operation till 31st August, 2014 or disposal of the Appeals, whichever is earlier.

The Application for stay of recovery of Income Tax demand for A.Y. 2010-11 has been refused by the Deputy Commissioner of Income Tax9 (1) under Order dated 10th July, 2014.”

I am therefore once again in complete agreement with the Petitioner that the substratum of the Company has eroded and is destroyed, and the Company is liable to be wound up on this ground.

COMPLETE LACK OF PROBITY, LOSS OF FAITH AND BREAKDOWN OF RELATIONS:

13. As set out in paragraph 4 of the order of admission, I am also convinced that the facts set out in paragraph 2 above demonstrates a complete lack of probity, loss of faith and a complete breakdown of relations between the principal shareholders of the Company. Paragraph 4 of the order of admission is therefore reproduced hereunder.

“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. 2Majestic 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 Honble Supreme Court), in which Balwa and Goenka stand accused of being party to and benefitting from the illegal actions on the part of the Ex-Minister of Communications. As submitted by the Petitioner, the Petitioner is a respectable telecom company, majority 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 acquitted or not.

4.1 Again, as submitted by the Petitioner, the purpose of the Petitioners investment was to create a major telecom service provider in India providing services on the 2G network using the licenses acquired by the Company. The Petitioner has effectively lost its entire investment of Rs. 3545.09 crores in the Company as a result of the quashing of the 2G licenses by the Honble Supreme Court, which has clearly been occasioned by the illegal acts of the promoters of Respondent No.2/Majestic (Balwa and Goenka) who were Directors and the main decision makers of the Company at the time of the acquisition of the 2G licenses on 10th January, 2008, which were declared to be illegal by the Honble Supreme Court.

4.2 The Petitioner and the Respondent No.2Majestic have separately raised civil disputes against each other under the Share Subscription Agreement and the Shareholders Agreement. The Petitioner has filed a suit for damages against Respondent No.2 Majestic and its Promoters, inter alia, for the loss of its investment in the Company. Respondent No. 2 Majestic has issued a dispute notice against the Petitioner for disputes allegedly arising out of unspecified terms of these agreements.

4.3 Both the principal shareholders have made very serious allegations against each other. Both of them attribute the present state of the Company to each other. There exists complete mistrust between the two principal shareholders and both the principal shareholders believe that the Company cannot successfully run its business in continuance with the other. Despite the proceedings of the meeting of the Company being captured on CC T.V, the principal shareholders do not and cannot agree on the issue as to what actually transpired at the meeting and choose to deny and dispute what is stated by each other.

4.4 The relationship between the Petitioner and Respondent No. 2 has further deteriorated after the filing of the present Company Petition. In fact, the employees seconded by the Petitioner to the Company and the Directors nominated by the Petitioner are subjected to criminal proceedings initiated by the Channel Partners of the Company. It appears that the Petitioner is correct in believing that these proceedings have been brought at the behest of Respondent No.2 Majestic as the complaints filed have selectively targeted only persons associated with the Petitioner 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.

13.1. The Hon'ble Appeal Court too has, in the order of Appeal, inter alia observed that considering all that has transpired, it cannot be said that the Petitioner's loss of confidence in its Partners is unjustified, even if the Petitioner has not independently verified whether the case against the Appellant and/or its Promoters is correct or not. It is not necessary in such circumstances for the Company Court to await the result of the trial in criminal proceedings or proceedings adopted by the authorities under the various enactments before winding up a Company (Paragraph 32).

DEADLOCK

14. This Court has in its order of admission, for reasons set out in paragraph 5 of the said order, arrived at a finding that a deadlock is created in the Company. Paragraph 5 of the order of admission is reproduced hereunder:

“5. The Learned Senior Advocate appearing for the Petitioner has also submitted that in view of the afore-stated 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 notice as required under Clause 3.12.2 of the Shareholders Agreement dated 23rd September, 2008. It is further submitted that there are four shareholders of the Company. There is no 50–50 share-holding between the Petitioner and Respondent No.2Majestic which could give rise to a deadlock situation. The voting in terms of the shareholding can tilt on either side in case of a difference of opinion between the Petitioner and Respondent No.2 Majestic depending upon the votes cast by the other shareholders i.e. Respondent Nos. 3 and 4. Further, even on the Board of Directors three Directors are required to be nominated by the Petitioner and two by the Respondent No.2Majestic. Therefore, there is no question of a deadlock in the decision making of the Company as falsely alleged by the Petitioner. Respondent No.2Majestic in support of its contention that a situation of deadlock has not been created in the Company has relied on the decisions in Hind Overseas Pvt. Ltd. vs. R.P. Jhunjhunwalla and another. (supra), M.S.D.C. Radharaman v. M.S.D. Chandrashekhar and another ((2008) 6 SCC 750), and Abnash Kaur v. Lord Krishna Sugar Mills and others ((1972) 2 Del 413 pages 452 and 454.). It is further submitted on behalf of Respondent No.2 Majestic that from the above judgments and in particular, the Judgment of the Hon'ble Supreme Court in Hind Overseas Pvt. Ltd., it is clear that deadlock alone is not sufficient for winding up of a Company on a just and equitable ground. The deadlock must arise from actions which constitute a lack of probity. The deadlock must be of such a nature that there is no hope or possibility of smooth and effective continuance of the Company as a commercial concern.

5.1 As set out in the earlier paragraphs of this order, Respondent No.2 Majestic has withdrawn its two Nominee Directors from the Board of Directors of the Company without nominating replacements. Out of the remaining Directors, two are foreign nationals. A meeting of the Board of Directors could not be convened thereafter as it is stipulated under the FDI Scheme that Telecom Companies must have a majority of Indian citizens on its Board of Directors. The Petitioner has correctly submitted that the provision in the Share-holders Agreement pertaining to the deadlock mechanism apply in a situation where there are commercial or managerial differences between the parties and not when the substratum 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 and 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”.

14.1. The Hon'ble Appeal Court too has after recording its observations qua deadlock and loss of confidence in paragraphs 32 (page 23), 33 (page 24), 67 (page 48-51), 68 (page 51), 72 (page 55), 76 (page 58) and 77 (page 58) observed that indeed a deadlock in the management has arisen in the present matter and that the Petition must be admitted on the ground that there is more than just a prima facie case that the substratum of the Company has gone with almost no hope of it being revived, there is a complete breakdown in the faith and trust between the main Partners i.e. the Appellants and the Petitioners and that there is a total deadlock in the management of the Company and on its Board of Directors.

15. ALLEGATIONS AS REGARDS CONDUCT OF THE PETITIONER:

(i) Collusion with Standard Chartered Bank and the Citi Bank: It was submitted on behalf of Respondent No.2 at the stage of admission and now again reiterated that the jurisdiction invoked by the Petitioner is a discretionary and equitable jurisdiction and therefore the conduct of the Petitioner is an extremely relevant fact to decide the question as to whether this Petition under Section 433 (f) of the Act ought to be entertained or allowed. Relying on the decision of the Hon'ble Supreme Court in M/s. Madhusudan Gordhandas and Co. (Supra) wherein the Honble Supreme Court has held that a petition presented with an improper motive or without a legitimate motive ought not to be entertained by a Court, the Respondent No.2 has submitted that the conduct of the Petitioner is unfair and dubious. Respondent No. 2 in support of this contention first submitted that the Petitioner has acted in collusion with the Standard Chartered Bank (“SCB”) and the Citi Bank N.A. (Citi Bank). This Court has in clauses 6.1.1 to 6.1.15 of the order of admission recorded and dealt with all the allegations made by the Respondent No. 2 qua SCB – Citi Bank and has reached a finding that there is no collusion between the Petitioner with SCB and/or Citi Bank as alleged or at all and that Respondent No. 2 has failed to establish that the conduct of the Petitioner is unfair or dubious. The relevant paragraphs dealing with the said allegations against SCB and Citi Bank and the findings of the Court thereon, as recorded in the order of admission are reproduced hereunder:

“6.1.1 The Petitioner has acted in collusion with Standard Chartered Bank (SCB) and Citi Bank N.A. (Citi Bank).

It is submitted on behalf of Respondent No.2 Majestic that the present Petition is filed by the Petitioner in collusion with SCB with whom it has global relations and also with Citi Bank. The Petitioner has not only admitted the alleged debts of the Company to these Banks in affidavits filed by it but on the instructions of the Petitioner, the Company has also admitted its alleged dues to SCB in the affidavit filed by it dated 26th March, 2012. Further, using the admission in the affidavit dated 26th March, 2012, SCB has at the hearing before the DRT on 16th April, 2012, obtained an order of appointment of Receiver over the assets of the Company. The Petitioner has also ensured that no one appears for the Company before the DRT at the said hearing despite a battery of lawyers appearing for the Company before other forums at the same time. No plausible explanation for nonappearance on behalf of the Company before DRT-1 has been given by the Company or the Petitioner herein. The said collusion is also apparent from the emails annexed to the affidavit dated 12th June, 2012 filed by an employee of the Company, whereby it is evident that the Petitioners Advocates have vetted the draft reply proposed to be filed by the Company and even consulted SCB in the process. It is further submitted that though it is true that the nominee Directors of Respondent No.2 Majestichad signed a balance sheet of the Company admitting the dues of SCB, signing of the said balance-sheet cannot be construed as a judicial 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 Companys 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 Companys books. Therefore it is incorrect to say that the order dated 16th April, 2012, is based on Pratap Ghoshs 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.2Majestic and its nominees. There was never any allegation by Respondent No.2Majestic 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 Goenka who were the Managing Director and Director of the Company at the relevant time. It is submitted that in fact it is Balwa who has colluded with the PNB and Reliance and other entities in which he had financial interests like the DB Group of Companies and Techniplex. It is submitted that the affidavit filed by Shri Gyanendra Upadhyay is not admissible and cannot and does not form part of the record of this Court, as more particularly set out inter alia in the affidavits filed by the Petitioner dated 21st July, 2012, 30th April, 2012, Report Nos. 29 and 30 of the Authorized Person and this Courts order dated 22nd July, 2013 and also the CBI charge-sheet. The documents annexed to Upadhyays affidavit are not only stolen documents but are also privileged and confidential documents as envisaged under Sections 126 and 129 of the Indian Evidence Act. In this regard, the Learned Advocate appearing on behalf of the Petitioner has relied on page Nos. 211-212 of Compilation of Affidavits of the Petitioner which pages form part of the affidavit dated 24th September, 2012.

6.1.3 As regards the allegation of Respondent No.2 Majestic that the Company was not represented by any lawyer before the DRT, since the Petitioner and the SCB were acting in collusion, the Petitioner has pointed out that Abdul Salam Al Bangui has previously delegated his authority in other proceedings including the Supreme Court Review Petition and TDSAT Petition and the CLB proceedings to Atul Jhamb and Dr. Budhiraja, appointees of Respondent No.2 Majestic. Admittedly SCB notices were served/attempted to be served on 12th and 13th April, 2013 at which time Atul Jhamb and Bhudhiraja, both being Senior Officers of the Company were both present in the Company and could have taken steps to represent the Company in the DRT proceedings. It is submitted that it has never been the contention of Respondent No.2Majestic that these two senior most officials of the Company were in any way prevented from defending the DRT proceedings. It is pointed out that the Petitioners secondees had resigned with effect from 1st April, 2012 and its nominee were out of the country. Pratap Ghose had already been detained at the Airport on 4th April, 2012 and was being subjected to daily intense police questioning (mostly about the present Petition) for an entire month, at the behest of Balwa and Goenka/Majestic. The Board 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 Petitioners 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 Share-holders 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 submitted on behalf of the Petitioner that without the letter of comfort, the SCB loan would not have been made available on the terms it was made available. The Petitioner has therefore submitted that the allegation that the Petitioner had intention of favouring the said Banks is baseless, untenable and self-contradictory. It is submitted that if the Petitioner had any intention of favouring the said Banks, it would have got the Company to repay the loan in priority instead of filing the present Petition and seeking the intervention of this Court to ensure due payment of all proven creditors on a fair and equitable basis. It is submitted that it is absurd to insinuate that the Petitioner would allegedly for the benefit of certain creditors jeopardize more than Rs. 3544 crores of its own investment in the Company.

6.1.5 The SCB has also denied and disputed the allegations of collusion advanced by Respondent No.2 Majestic against the Petitioner and SCB. It is submitted by SCB that SCB being a secured creditor has acted in a bona fide manner in its normal course of business as a Bank at all times and its action cannot be treated as collusive as alleged. Further the decision of availing the loan from a particular bank is entirely a commercial decision of the Board of Directors of the Company which depends upon various factors, including purpose of the loan, viability, sanction limit, interest rate, other charges etc., all of which the borrowing party has to consider. It is submitted that the loan facility availed by the Company from SCB was for the conduct of its business which facilities were duly approved by the Board of Directors of the Company and only on execution of suitable documentation between the Company and SCB, the said loan facilities were disbursed. Thus, SCB validly and legally granted the loan to the Company much prior to the filing of the present Company Petition. The Respondent No.2 Majestic or their nominees never objected to the facilities granted by SCB at the time of disbursal. The Company failed and neglected to pay the outstanding dues and committed series of events of default under the said loan facilities. In view thereof, the allegation of Respondent No.2 Majestic regarding the alleged preference given to SCB by the Petitioner /Etisalat Group over the other Banks is misconceived and devoid of any merit. SCB has further pointed out that the 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 Schedule-C 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 year ending March, 2012 which has been prepared and submitted along with the IT Returns of the Company for the Assessment Year 2012-2013 also reflects an admission of liability by the Company to SCB in the sum of Rs. 1448.5 crores approximately as on 31st March, 2012. It is therefore submitted that it is undeniable that SCB is a secured creditor of the Company and the Company is indebted to SCB in the sum in excess of approximately Rs. 1450 crores as on 31st March, 2012.

6.1.6 The SCB has further submitted that in order to recover its amounts, it issued a recall notice on 4th April, 2012 to the Company and thereafter on 10th April, 2012, filed proceedings before the DRT at Mumbai being Original Application No. 61 of 2012 for recovery of its dues. On 16th April, 2012, the DRT passed various interim orders and directions in the said interim Application taken out by SCB. Pursuant to and in compliance with the order of the Company Court dated 11th April, 2012, SCB also filed its affidavit setting out its claim and the factum of the DRT proceedings before this Court vide its affidavit dated 17th April, 2012.

6.1.7 SCB has denied the allegation that it is apparent from the emails annexed to the affidavit dated 12th June, 2012 of Mr. Gyanendra Upadhyay that there is collusion between SCB and the Petitioner. SCB has denied that it was ever consulted either by the Petitioner or by the Advocates of the Company in the matter of the draft reply which was proposed to be filed by the Company. It is submitted that there is nothing in the said emails which indicate any consultation with regard to the reply to be filed by the Company or with regard to the Company Petition before this Court. However, on the contrary the said emails disclose the intent to inform the creditor banks of certain proceedings filed before the learned TDSAT by Reliance Telecommunications Ltd. And Reliance Infracon Ltd. In fact, pursuant to the said intimation by the Petitioner, SCB did attend the proceedings before the learned TDSAT with a view to protecting its interest particularly with regard to the security in its favour, by bringing to the notice of the learned TDSAT the relevant facts relating to the security. SCB further after filing its claim before the DRT, Mumbai, and after obtaining ad-interim orders therein also sought to bring the said facts to the notice of the learned TDSAT which is inter 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 ad-interim order passed by the DRT, Mumbai in favour of SCB, wherein the fact of ex-parte ad interim order having been passed was also brought to the notice of the DRT, Mumbai. In-spite thereof, by a reasoned order, the DRT refused to vacate the ex-parte 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, where-under 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 have acted in collusion is baseless, untenable and deserves to be forthwith rejected.

6.1.10 The allegations made by Respondent No.2 Majestic that the Petitioner and Citibank have acted in collusion with each other are also vehemently denied by the Petitioner as well as Citi-Bank. The details of the loans availed of by the Company from Citi-bank and their outstanding amounts there-under have been set out in detail in Citibanks Affidavit dated 16th April, 2012 wherein it is pointed out by Citibank that the Company for the purpose of carrying on its business had availed from Citibank (i) unsecured working capital credit facilities upto an amount of Rs. 333,60,00,000 (BG Facility); and (ii) unsecured working capital credit facilities upto an amount of Rs. 550,00,00,000/- (LC Facility). As regards the BG Facility availed by the Company from Citibank, the Board of Directors of the Company on 25th May, 2010 passed a Resolution, inter alia, for availing of the BG Facility upto US $ 100 Million (then approx.. INR 492,09,99,908.45) from Citi-bank and to do such other deeds and things as may be necessary for availing the BG Facility. In its further meeting held and resolution passed on 6th June, 2011, the limit of the BG Facility was reduced to USD 57 Million (then approx. INR 280,49,69,947.81). The copies of the Board Resolutions have been made available by the Company to Citibank. Thereafter, upon execution of certain loan/security documents, the Company availed of the BG facility from Citibank. Under the BG Facility, at the request of the Company, Citibank issued its Bank Guarantee dated 14th July, 2010, in favour of the beneficiary viz. Tech Mahindra Limited valid upto 30th June, 2011. Tech Mahindra was entitled to invoke and make a claim under the Bank Guarantee in accordance with the terms thereof. The said Bank Guarantee was therefore in force till the same was invoked by Tech Mahindra. On 1st March, 2012, Citi-bank received a letter from Tech Mahindra Ltd. invoking the Bank Guarantee of Citibank on account of default in the payment of invoices by the Company for quarter ending 31st December, 2011, on the agreed due dates of 31st December, 2011 plus 60 days from the due date for the respective quarters as stated in the Bank Guarantee and demanding payment there-under. This demand was in terms of the Bank Guarantee and within its validity period. Citi-bank was therefore bound by this demand. In view thereof, the liability of Citi-bank 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 Citibanks 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 15th 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 interest from the Company.

6.1.11 For the purpose of availing the LC Facility, the Board of Directors of the Company on 31st August, 2010, resolved to avail the LC Facility upto USD 122 Million. Under the said LC Facility, at the request of the Company, Citibank issued six Letters of Credit in favour of the beneficiaries named therein, in respect of the network equipment provided by the said beneficiaries to the Company for implementation of 2G network. Under the said Letters of Credit, Citibank N.A. China (Citi China) was nominated as the Negotiating Bank, while Citibank N.A. Bahrain (Citi Bahrain) was nominated as Reimbursing Bank. The maturity date of the said Letters of Credit was 31st May, 2012.

6.1.12 Thereupon, the beneficiaries of the LCs negotiated documents under the LCs to Citi China. Citi China advised Citibank (the LC Opening Bank) of certain discrepancies in the documents submitted under the LCs. Citibank brought these discrepancies to the notice of the Company. The Company advised acceptance of the documents (notwithstanding the discrepancies), by an acceptance letter dated 18th November, 2010. Thus the Company waived the discrepancies. The Company unconditionally and irrevocably instructed Citibank to make payment to the beneficiary notwithstanding the discrepancies. Citibank, accordingly advised and instructed Citi China to accept the documents. Citibank instructed Citi Bahrain to release the payment under the LCs to Citi China upon negotiation. Citibank acted upon the said letter, as instructed by the Company. Accordingly, Citi Bahrain discounted the documents under the LCs and became entitled to receive payment under the said documents from Citibank. Citi Bahrain thus became entitled to demand payment of the said amount from Citibank and upon such demand it was the liability of Citibank to pay the said amount to Citi Bahrain. Upon payment, Citibank was entitled to seek reimbursement of the said amount from the Company as the opener of the LCs. On 31st May, 2012, Citibank transmitted the sum of USD 103,945,631 to the account of Citi Bahrain. Upon making the aforesaid payment to Citi Bahrain viz. the Reimbursing Bank under the said LCs, the contingent liability of the Company became an absolute liability. Citibank is entitled to recover the said amounts from the Company. Citibank vide its letter dated 21st June, 2012, intimated to the Company 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 Companys liability to Citibank. In fact, in the present Petition, Respondent No.2 Majestic is completely silent about the aforesaid huge liability of the Company towards Citibank and therefore is attempting to unnecessarily divert the attention of this Court to issues which are devoid of any merit. The Citibank has vehemently denied the allegation of Respondent No.2Majestic that the Petitioner has purportedly given a preference to Citibank over other Banks and has also denied and disputed the allegation of purported collusion between the Petitioner and Citibank in filing the Petition.

6.1.14 It is further submitted on behalf of the Citibank that though Respondent No.2Majestic proposed a purported scheme of revival of the Company, the said scheme was vague, without any substance, unreasonable, unfair, lacking transparency and did not protect the rights/interests of creditors. Further it is not in dispute that there is total loss of mutual confidence and trust amongst the shareholders of the Company, viz. the Petitioner and Respondent No.2 Majestic. Thus, there is a vacuum in the management of the Company due to the internal disputes between its shareholders, and the business of the Company has come to a standstill, for which Citibank is not accountable. The Company owes huge amounts to its several creditors to the tune of Rs. 3569, 09, 52,184.27 which includes the claim of Citibank. It is submitted that ultimately the winding up proceedings ensure to the benefit of all the creditors of the Company. Therefore, as a creditor of the Company, Citibank is entitled to support the Petition for winding up.

6.1.15 The above submissions of SCB as well as Citibank clearly establish the transparent dealings between the Petitioner and the said Banks. The loans and advances applied for and obtained by the Company are supported by the Resolutions passed by the Board of Directors of the Company which includes the nominees of Respondent No.2 Majestic. The said loans are shown payable to the respective Banks by the Company in its balance-sheets which are inter alia signed by the nominee Directors of the Respondent No.2Majestic. The Respondent No.2Majestic has at no point of time disputed the claims of SCB as well as of Citibank and has not done so even in the present proceedings. I find nothing incorrect on the part of the CFO of the Company having admitted in his affidavit the amounts due and payable by the Company to the said Banks, which amounts are not denied/disputed by the Respondent No.2Majestic 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.2Majestic 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 afore-stated 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 and amongst others, the allegations that the said Banks were preferred by the Petitioner over other Banks or that the Petitioner did not get the Company represented before the DRT, Mumbai, through an Advocate on 16th April, 2012, with an intention to help the SCB to obtain orders against the Company are untenable and baseless and cannot be accepted and hence rejected. Respondent No.2 Majestic have therefore also failed to establish that the conduct of the Petitioner is unfair or dubious.”

15.1 The Hon'ble Appeal Court has also declined to accept the allegations advanced on behalf of Respondent No.2, that:

(i) the Petitioner has acted in collusion with SCB and Citi Bank, as is clear amongst others from paragraph Nos. 136 and 138 at pages 96 and 97 of the order of the Appeal Court.

(ii) the Company suffered losses and failed to effectively commence its business due to the alleged unilateral and secret conduct of the Petitioner.

15.2. The Respondent No.2, as recorded in the order of admission, has made several allegations against the Petitioner in support of its contention that due to unilateral /secret illegal decisions/conduct, the Company which was managed by the Petitioner suffered losses and was unable to effectively commence its business. This Court has, in paragraphs 6.2 to 6.2.7 of the order of admission set out in detail the allegations made by the Respondent No. 2, the response thereto by the Petitioner and the finding of this Court that the allegations made by the Respondent No.2 against the Petitioner seriously lacks merits as well as bona fides and are nothing but a creation of the Respondent No. 2 in order to raise excuses to contend that the Petitioner's alleged conduct does not entitle them to any reliefs in the Petition. The said paragraphs 6.2 to 6.2.7 are reproduced hereunder:

“6.2 Due to unilateral secret and illegal decisions/conduct, the Company which was managed by the Petitioner suffered losses and was unable to effectively commence its business.

It is submitted on behalf of Respondent No.2 Majestic that the Petitioner had represented that it had operations in the Middle East, in Africa and other countries and that it had significant experience, ability and expertise in carrying on the telecom business as an International Telecom Operator. The Respondent No.2 had entered into the aforesaid agreements with Etisalat viz. the Share Subscription Agreement, the Shareholders Agreement and the Management Services Agreement, as it was desirous of taking on Board a strategic partner with a proven track record and expertise in carrying on and guiding the day to day operations of the Company. Pursuant to the said Agreements and the deputation of the secondees by the Etisalat Group, they were put in management and were responsible for the day to day affairs of the Company. The cheque signing authority of the Company was also given to the Petitioner and its nominees pursuant to the Board Resolution dated 17th December, 2008. Thus the Petitioner/Etisalat Group was in charge of and managing the day to day affairs of the Company. However, under the management of the Petitioner, the Company suffered losses and was unable to effectively commence its business as a result of the delay in meeting with its roll out obligations. The Petitioner/Etisalat Group has taken unilateral/secret illegal decisions through the Board of the Company which is controlled by the Etisalat Group without knowledge, intimation or even consent of the Respondent No.2 Majestic and/or its representatives. The secondees deputed by the Petitioner/Etisalat Group incurred unnecessary expenses on account of the Company by frequently travelling to the U.A.E. over the weekends and also on week 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 Shareholders Agreement was executed. It is submitted that therefore allegations against Respondent No.2Majestic and its ex-Directors with regard to the alleged 2G scam are wholly irrelevant in respect of the failure to start commercial operations, inasmuch as the issue of 2G scam is still under investigation. In contrast to the failure and inability of the Petitioner to launch telecom services, other Companies such as Uninor and MTS which were granted the licenses at he same time as the Company, have been able to garner significant market share and are expanding their customer base. These Companies have despite cancellation of their licenses submitted bids and have been successful in obtaining licenses in the subsequent fresh round of auction by DoT.

6.2.1 The Learned Advocate appearing for the Petitioner has in response pointed out that despite the afore-stated agreements entered into by and between Respondent No.2Majestic with Etisalat including the Management Services Agreement, in reality Balwa and Goenka together with the CEO, the Chief Regulatory Officer, the Chief Legal Officer, who were hired by them prior to the Petitioners investment, managed the Company on a daily basis. Balwa was the Managing Director of the Company and he also served as Vice Chairman on the Board of the Company. This position, in conjunction with the fact that a permanent Chairman was never elected, further increased his influence qua taking decisions on the Board and in the management of the Company. The Petitioner despite being entitled to appoint replacements for the higher senior management positions (including CEO, CFO and COO), upon insistence of the Respondent No.2Majestic retained some of its people in the same roles such as Atul Jhamb, the CEO of the Company. Board resolutions were passed giving Balwa and Goenka control of the Company as follows:

(i) To act as regards the appointment of Directors;

(ii) To invest Company funds;

(iii) To do all things facilitating creation and allotment of Company shares;

(iv) To act in relation to loans;

(v) To sign the Companys balance-sheet;

(vi) To sign Directors report;

(vii) To execute POA in favour of signatories authorized to represent the Company before the Government; and

(viii) To execute documents relating to 3G auction.

Balwa was the sole person in charge of negotiating with the Reliance Companies which Companies 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 Majestics allegation that the Petitioners 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 behalf of the Petitioner that the allegation made by the Respondent No.2 Majestic that it is the Petitioner who is responsible for the losses incurred by the Company or failure to meet their roll out obligations as per the terms of UASLs issued by DoT, are false and incorrect. The Petitioner has submitted that Respondent No.2 Majestic has even earlier made similar allegations before the CLB in a Petition filed under Sections 397/398 of the Companies Act and has later unconditionally withdrawn the same. It is submitted that failure to meet its roll out obligations was inter alia due to Balwa exercising great degree of control over the Company and at times would ensure that his opinion prevailed over the advice of the management leading to delays. The poor services by Reliance also caused great delay, as is reflected in various Board Resolutions. It is submitted that Companys failure to implement its business plan and to meet its roll out obligations was severely hampered by the commercial environment and technical and legal problems associated with roll out operations which were then seriously exacerbated by commencement of the various legal proceedings against it (for the most part arising out of the conduct of Balwa and Goenka), including the CBI investigations and subsequent criminal trial, the Supreme Court proceedings and the various investigations/proceedings by the-Regulators, the DoT and the Enforcement Directorate, including the FEMA proceedings. Considerable time and resources have been spent since the end of 2010 defending the Company against these various investigations/proceedings. It is submitted that the Petitioner/Etisalat Group has not taken any unilateral/secret illegal decisions as alleged or at all. The decision taken on 22nd February, 2012 was with the knowledge, presence and consent of Respondent No.2Majestic which is revealed by the video recording. The decision to shut down the network was taken after obtaining legal opinion of Senior Advocates. The Resolution to shut down the network was read out and approved by Respondent No.2Majestic. These allegations have been made as an afterthought to the suit for damages filed by the Petitioner. The decision to shut down the network was unanimous. It is submitted that the secondees travelled to and from the UAE at their own expenses and not at the expense of the Company. The travel cost of 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 Genexs 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 arms 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 Balwa which never happened. The Resolution to return the call money was at the insistence of Balwa. It is submitted that therefore Respondent No.2 Majestic cannot claim that the Petitioners lack of funding contributed to the delay in roll out and/or other financial business issues. In fact, after Respondent No.2 Majestics alleged initial equity investment, it never contributed material funding to the Company. Respondent No.2Majestic purchased UAS licenses primarily from the debt taken by Respondent No.2 Majestic and/or the Company. The Petitioners total investment in the Company was allegedly used to repay this debt. On 5th and 22nd July, 2010, at the instance of Mr. Balwa, the Board of the Company resolved that the funds are not required by the Company and shall be returned to PNB. Since Balwa funded the capital call through a PNB Loan, the amount ought to have been returned to PNB. However, the Respondent No.2 Majestic used the funds to fund its other businesses including the payment of DB Group loans. As per the orders of this Court, the Authorized Person has got a suit drafted and settled against PNB, Balwa and Goenka for colluding to misappropriate the assets/monies of the Company.

6.2.3 The Petitioner has also denied the allegation that it has failed to utilize the sanctioned loan of Rs. 6,700 crores by the ICICI Bank. The Petitioner has explained that different Bank loans were taken for different purposes. SCB loan was for purchase of equipment. The loan from Citibank was for BGs. The ICICI loan was to be used for purchase of additional spectrum/3G licenses which were never acquired by the Company. Therefore these loans and their terms cannot be compared with each other. Balwa and Goenka chaired all the Board meetings where it was decided to avail of SCB loan as also where it was agreed to differ the ICICI loan. The SCB loan was considered and taken in 2009, whereas the ICICI loan was contemplated in 2010. Therefore, there could never have been any comparison. The Board Resolution No. 34 dated 15th September, 2009 and the Board Resolution dated 25th May, 2010 clearly indicate that all Banks were being contemplated for a loan facility to fund further purchase of spectrum/licenses and that the ICICI loan was on terms equally favorable/unfavorable as others.

6.2.4 As regards the allegation that the Etisalat Group procured network equipment at a very high 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 unsecured creditor.

6.2.5 As regards the allegation that the Petitioner/Etisalat Group had called for meetings contrary to the Shareholders Agreement and deliberately incorrectly recorded minutes of various Board Meetings and also failed to give to Respondent No.2 Majestic and its nominee Directors copies of the Minutes of the Board Meetings, the Petitioner has submitted that it was the responsibility of the Company to draft the minutes of the meeting. Mr. Afzal Lodhi, the Company Secretary of the Company had this responsibility and they were to be sent to the Chairman for approval. The allegation therefore that the Petitioner incorrectly recorded the minutes or failed to give copies of the same to the nominees of Respondent No.2 Majestic is in correct and denied.

6.2.6. As regards the allegation that in contrast to the failure and inability of the Petitioner to launch telecom services, other Companies such as Uninor and M.T.S. desired cancellation of their licenses, and submitted bids and have been successful in obtaining licenses in the subsequent fresh round of auction by DoT, the Petitioner has submitted that the Company cannot participate in an auction for any fresh licenses without further funding. The Company has been unsuccessful as the bankers have refused to lend to it. Respondent No.2 Majestic has indicated that it cannot bring in further capital. Even its alleged revival plan requires the Banks to wait for a period of 5 years before any repayment. Unitech (the real estate Company) has exited from Uninor. Balwa and Goenka have never indicated any such exit. The Petitioner has also denied and disputed the allegation that one of the principal reasons for filing the present Petition is the fact that clause 8 of the Shareholders Agreement provides for a non-compete clause which restrains the Petitioner from entering into the Telecom Sector in India through any entity other than the Company and it is clear that the Petitioner has no intention of exiting the Indian Telecom Sector.

6.2.7 From the afore-stated allegations advanced by the Respondent No.2 Majestic and the answers given thereto by the Petitioners and the perusal of the documents relied upon by the Parties, it is clear that it cannot be held that it was only the Petitioner who was in charge of the day to day affairs of the Company or that all business decisions have been taken by the Petitioner. There is equal participation, if not more, of the nominees of Respondent No.2Majestic 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 afore-stated 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 Petitioners alleged conduct does not entitle them to any reliefs in this Petition”.

(ii) Alleged illegal acts of the nominees of the Petitioner, like noncompliance with its roll out obligations and unilateral shut down of business resulting in issuance of show cause notices/demand notices:

The Respondent No.2, as recorded in the order of admission, has made several allegations against the Petitioner in support of its contention that the nominees of the Petitioner failed to comply with its roll out and unilaterally shut the business of the Company, or have committed illegal actions, or on account of the conduct of the Petitioner several show cause notices/demand notices are issued to the Company. This Court has, in paragraphs 6.3 to 6.3.2 set out in detail the allegations made by the Respondent No.2, the response thereto by the Petitioner and the finding of this Court that the Respondent No. 2 has not established that the nominees of the Petitioner have failed to comply with its roll out obligation and have 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. The said paragraphs 6.3 to 6.3.2 are reproduced hereunder:

“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.2Majestic inter alia alleged that (i) the Petitioner failed to ensure that the Company complies with its roll out obligations under the UASLs. Though the Honble Supreme Court passed an order cancelling 122 UASLs issued by the Govt. of India including 15 UASLs held by the Company, the Honble Supreme Court extended the validity of the licenses until fresh auctions would take place; (ii) the Petitioners nominees unilaterally passed Resolution for shut down of the business. Such a decision could only have been taken with the affirmative vote of the Respondent No.2 Majestics Nominee Director as provided for under clause 3.12.1 of the Shareholders Agreement. In fact, Respondent No.2 Majestic vide its letter dated 23rd February, 2012, strongly objected to the incorrect statement of Etisalat Group that the Board of the Company (which at that time had Respondent No.2s Nominee Directors) had unanimously agreed to shut down the business of the Company and that the said nominees had not given consent to shutting down the Company; (iii) Despite the aforesaid objection of Respondent No.2 Majestic, by its letter dated 23rd February, 2012, Etisalat immediately informed the Abu Dhabi Securities Exchange about the decision to shut down the operations of the Company and also informed the DoT and TRAI that the Company is shutting down its telecom network w.e.f. March 31, 2012; (iv) In view of the conduct of the Petitioner, TRAI addressed a show cause notice dated 16th March, 2012, calling upon the Company to comply with its obligations under the UASLs until the licenses are operative; (v) On 27th June, 2012, DoT issued a show cause notice calling upon the Company to explain why it should not be penalized for illegal closure of operations in breach of the UASL terms and conditions; (vi) On 28th December, 2012, DoT filed an affidavit stating that the Company has violated certain conditions of the UASLs and therefore the amount of Rs. 1600 crores is not refundable to the Company; (vii) DoT also issued a demand notice dated 16th January, 2013, demanding Rs. 650 crores from the Company for violation of UASL conditions for failure to meet roll out obligations and illegal closure of operations. Therefore, due to the illegal actions and conduct of the Petitioner, DoT has made a huge claim against the Company whereas it has granted an adjustment of Rs. 1661 crores and Rs. 1653 to Uninor and MTS (paid by the entities against the cancelled licenses) towards the license 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.2Majestic, 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 (Majestics appointee) signed all the letters addressed to TRAI and DoT. It is submitted that the said decision was taken by consent by the Board of the Company because of the cancellation of the Companys UAS Licenses by the Supreme Court judgment dated 2nd February, 2012; dire financial position of the Company in that its liabilities exceeded its assets, unilateral shut down of substantial parts of its network by Reliance; inability of the Petitioner to raise external funding and Respondent No.2Majestic too refused to contribute to the funding of the Company. The Petitioner has pointed out that the objection taken by Respondent No.2 Majestic on 23rd February, 2012 was belated and an afterthought and contrary to the consent given at the meeting of 22nd February, 2012. It is pointed out by the Petitioner that Etisalat informed the Abu Dhabi Securities Exchange about the decision to shut down the operations of the Company before receipt of the letter dated 23rd February, 2012, from the Respondent No.2 Majestic recording its objections. It is submitted that in any event, the intimation is factually correct and the said intimation was required as Etisalat is owned by the sovereign. As regards the allegation that the Petitioner informed the DoT and TRAI that the Company is shutting down its telecom network with effect from 31st March, 2012, the Petitioner has pointed out that the said information was forwarded to the DoT and TRAI not by the Petitioner but by the Company and Shri Buddhiraja, a nominee of the Respondent No.2Majestic had signed the letters. As regards the show cause notices/demand notices issued by the DoT and the stand of the DoT that the amount of Rs. 1600 crores is not refundable to the Company, the Petitioner has submitted that the allegations made in the show cause notice as well as demand notice are incorrect and untenable and the same are required to be pursued with the DoT by the Company/Authorized Person. As regards the allegation that the Uninor and MTS are allowed adjustments of Rs. 1661 crores and Rs. 1653 crores towards the license fees payable by the said Companies for the fresh licenses allotted to them, the Petitioner has submitted that there is nothing on record to show that Uninor and/or MTS are given any adjustment of license fee as alleged.

6.3.2 After considering the afore-stated submissions and perusing the pleadings and records 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:

16. The submission advanced by Respondent No. 2 that, since the Petitioner by filing the suit selected an alternate remedy and cannot move this Court with the Petition seeking winding up on just and equitable ground, is already rejected by this Court by holding that 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 (Paragraph 7 of the order of admission).

17. The Respondent No. 2 has contended that the Petitioner has wrongly relied on events post the filing of the Petition in support of the Petition. This Court has already dealt with and rejected the said contention as untenable and baseless in paragraphs 8.1 to 8.4 of the order of admission, which are reproduced hereunder:

“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 without the consent of parties but with the sanction of this Court) in support of the admission of this Petition. It is submitted that it is well settled that in a Petition for winding up, a case for winding up must be contained in the Petition alone and subsequent events cannot be looked at to support the Petition. In support of this contention, the Learned Senior Advocate appearing for the Respondent No.2Majestic has relied on the decision of the Hon'ble Supreme Court in Mohan Lal and another vs. Grain Chamber Ltd., Muzzaffarnagar and others (AIR 1968 SC 772, para 20), Hind Overseas Pvt. Ltd. vs. Raghunath Prasad Jhunjhunwala and another (supra) and Sangramsinh p.Gaekwad and ors. vs.Shantadevi P. Gaekwad (2005) 11 SCC 314 para 200.). It is submitted that the decisions relied upon by the Petitioner in response to the above decisions relied upon by the Respondent No.2 Majestic lends no assistance to the Petitioner. In any event, the said judgments would be impliedly overruled by the judgment of the Supreme Court in the case of Sangramsingh P. Gaekwad (supra) more particularly paragraph 22 of the same which reads as follows:

“It is now well settled that a case for grant of relief under Sections 397 and 398 of the Company 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.”

8.2 Without prejudice to the aforesaid contentions, it is submitted on behalf of the Respondent No.2Majestic that the consent order of 3rd July, 2012 by which the Authorized Person was appointed, cannot be relied upon because by that order it was clearly provided that the appointment of the Authorized Person and the power of the Authorized Person as agreed to by the parties was strictly without prejudice to the rights and contentions of the parties. The Petitioners submission and reliance on events that emanate from this without prejudice consent order is improper. It is therefore submitted that the Petitioner is not entitled to rely upon subsequent events as argued by it.

8.3 The Petitioner has in response pointed out that the fact that the Petitioner is entitled to rely upon the events post filing the Petition is clear from paragraph 20 of the decision in Mohan Lal vs. Grain Chamber Ltd. (supra) and paragraph 30 of the decision in Hind Overseas Pvt. Ltd. (supra). Furthermore, the 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.2Majestic also realizing the same had consented to various employees being laid off, etc. It is submitted that if Respondent No.2Majestic'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 facts and circumstances of the present case. It is submitted that there is no question of any breach of understanding. It is true that the appointment of the Authorized Person was without prejudice to the rights of either party. That does not mean that the court should not take into account the situation of the company at the time of hearing the matter. It is therefore submitted that the Respondent No.2Majestic has wrongly contended that the Petitioner wrongly relies on events post the filing of the Petition in support of the admission of the Petition.

8.4. Prior to 3rd July, 2012, this Court had informed Mr. Madon, Learned Senior Advocate appearing for the Petitioner and Mr. Dwarkadas, learned Senior Advocate appearing for Respondent No.2Majestic that in view of the management of the Company being in complete disarray, if this Court takes the view that pending the hearing and final disposal of the admission of the Company Petition, a Provisional Liquidator needs to be appointed in respect of the Company, the same will cause harm and prejudice to the Company because there are number of very urgent/essential steps required to be taken on behalf of the Company. This Court therefore suggested to the learned Advocates that it would be in the interest of the parties, if some independent Advocate/Solicitor is appointed to look after the day to day affairs of the Company. In fact, it was this Court which suggested the name of Mr. Solomon to be the person in charge of the affairs of the Company pending the admission of the Petition. The suggestion made by the Court was accepted by the Advocates appearing for the Parties. Mr. Solomon was accordingly appointed and after considering the various nomenclatures it was decided that Mr. Solomon be referred to as “the Authorized Person” (‘AP). Accordingly the minutes dated 3rd July, 2012 were submitted in Court and an order in terms of the said minutes was passed by this Court. The said AP thereafter has submitted various reports to this Court and most of the orders passed on the said reports are by consent of the Petitioner as well as by Respondent No.2Majestic. In my considered view, this Court being seized of the reports and having passed orders thereon from time to time can certainly look into and/or consider the same on its own or at the instance of any party before the Court whilst taking a decision in regard to the 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.2Majestic 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.2Majestic 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.”

17.1 In fact, the Appeal Court too in paragraph 100 of its order has rejected the said submissions and held as follows:

“100. In the circumstances, it is held that the subsequent facts can be relied upon by the Company Court while considering a petition under Section 433 (f) on the just and equitable ground. The subsequent events may be pleaded either by amending the petition or by filing further affidavits.”

18. The Respondent No.2 has, at the stage of admission, also submitted that the Petitioner cannot be heard to argue that the Petition is filed under Section 433 (e) of the Act, since the Petitioner has not issued any statutory notice under Section 434 (1) (a) of the Act or any other demand notice in its alleged capacity as a creditor of the Company. The said allegation is discussed in paragraphs 9.1 to 9.3 of the order of admission. This Court has concluded the said discussion in paragraph 9.3 as under:

“.......Though from the facts narrated in this order, it is very clear that the total liabilities of the Company are far greater than its total assets and the Company is unable to pay its debts in the usual course of business, once this Court comes to a conclusion that the Petitioner has made out a case for winding up of the Company under Section 433 (f) of the Act it is irrelevant whether the Petition is indeed filed also under Section 433 (e ) and am therefore not dealing with the said issue”.

19. As set out hereinabove, there are certain matters /issues which were either not argued before this Court at the stage of admission, or the Appeal Court has in its order stated that the same can be considered in detail at the stage of final hearing of the matter. I now therefore proceed to deal with such issues and give my findings thereon.

20. As set out hereinabove, this Court in clause 6.3.2 of its order of admission has held that Respondent No. 2 Majestic has not established that the nominees of the Petitioner had unilaterally shut the business of the Company. In paragraph 157 of the order in Appeal the issue pertaining to the unilateral shut down of the Company's business is discussed and the Appeal Court has observed that, “From the record, it is difficult to come to a definite conclusion at the stage of admission. It would be necessary to consider this aspect in greater detail at the hearing of the Petition.”

20.1. Further with regard to the video recording of the meeting of the Board of Directors of the Respondents dated 22nd February, 2012, the Appeal Court in paragraph 160 observed thus:

“...We are not inclined at this stage to express any conclusive opinion on the basis of the video for admittedly the entire meeting was not recorded. This aspect would require further consideration.”

The Appeal Court, however, in paragraph 162 went on to observe that:

“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 for winding up the company, including on the just and equitable ground”.

20.2 As regards the video recording of the meeting of the Board of Directors of the Respondents dated 22nd February, 2012 and the minutes of the Board Meeting dated 19th February, 2012, it is submitted on behalf of Respondent No.2 as follows:

(i) That the video recording is incomplete and does not completely record as to what transpired during the meeting;

(ii) Moreover in no part of the video recording produced, it can be seen that the nominee Directors of the Respondent No. 2 have given their consent, as falsely alleged by the Petitioner;

(iii) The video recording so produced does not show any discussion between the Board Members so present, and only shows the Chairman reading the resolutions without any reaction from the Board Members;

(iv) Under the Shareholders Agreement dated 23rd September, 2008, and the amended AOA of the Company, such a decision could only have been taken with the affirmative vote of Respondent No.2s Nominee Director.

(v) This being so, no reliance can be placed on such a video recording which is incomplete and does not show any consent or affirmative vote given by the Nominee Directors of the Respondent No.2 for the shutting down of the network.

(vi) The Minutes of the Board Meeting dated 19th February, 2012, relied upon by the Petitioner in clause 3 (a), in no uncertain terms stated that, “…in case the Board resolves to shut down the network….”. This itself is sufficient to establish that the Board had not decided to shut down the network and it had left the same for future consideration. Therefore the entire reliance of the Petitioner on Minutes of the Board Meeting dated 19th February, 2012, to show that the Board of Directors had allegedly decided to shut down the business is false and baseless.

(vii) The Respondent No. 2 immediately vide its letter dated 23rd February, 2012, recorded that the decision to shut down the operations was illegal and without the consent of the Respondent No.2.

20.3. It is further submitted on behalf of Respondent No. 2 that the illegal shut down was also contrary to the terms and conditions of the UASL licenses. Therefore, a penalty of Rs. 650 crores calculated at Rs. 50 crore per circle for 13 circles was imposed upon the Company by the Department of Telecommunications (“DOT”). The Petitioner deliberately ignored the admitted position that the decision of the Honble Supreme Court dated 2nd February, 2012, did not cancel the existing UASL licenses with immediate effect but deferred the cancellation to a future date to be announced by the Government of India. Till such time the Telecom Companies were required to maintain their licenses. Therefore, the unilateral and illegal decisions to shut down operations as mentioned above, contravened the license conditions. As a result of this, the Company was visited with a penalty of Rs. 650 crores calculated at Rs. 50 crores per circle for 13 circles.

20.4. It is submitted on behalf of the Petitioner that the order of the Appeal Court has clearly found that irrespective of whether the shut down was unilateral, the present Petition is maintainable. Without prejudice thereto, it is submitted that in any event the video recording makes it clear and free from all doubts that the Respondent No. 2 and/or its Nominee Director did in fact unanimously approve the shut down of the network at the meeting of 22nd February, 2012. It is submitted that the Respondent No. 2's letter dated 24th February, 2012, in which they purported to raise objection to the decision on network shut down taken the previous day was obviously an afterthought. Moreover, it was also motivated and in the nature of a counterblast to the suit which was filed by the Petitioner on 23rd February, 2012, inter alia praying for a decree of damage for fraud and misrepresentation against Respondent No. 2 and Mr. Shahid Balwa and Mr. Vinod Goenka. It is submitted that the decision to shut down was in fact discussed at a prior meeting of the Board of Directors held on 19th February, 2012. The said issue was to be discussed at the next meeting viz. on 22nd February, 2012. As such the parties on 19th February, 2012, were fully aware of further discussion taking place on this aspect on 22nd February, 2012. The minutes of 19th February, 2012 are not disputed. The Resolution dated 22nd February, 2012, came to be passed pursuant to the discussions already held in the meeting on 19th February, 2012.

20.5. This Court has gone through the said video recording in Chambers in the presence of the Advocates for the parties and also the representatives of the parties and have also gone through the submissions made by the parties in this regard in their respective affidavits. The decision to shut down the network was in fact first discussed at a prior meeting of the Board of Directors held on 19th February, 2012, at which the following business was discussed:

“3. CASH MANAGEMENT AND CASH REALIZATION

(a) Presentation of Cost Reduction Scenarios (as per the directive of the last Board Meeting):

The Management presented three cost reduction scenarios before the Board. After discussion on the matter, all of the Board members indicated a preference for the shutting down of the network. The Board directed the Management to obtain clarity from Regulatory i.e. TRAI/DoT and External Legal Counsels on Quality of Services (QOS) and customer service requirements or compliances by 22.02.2012, in case the Board resolved to shut down the network. The Board also directed the Management to submit a complete plan for network shutdown. Further Mr. Isa Al Haddad directed the Management to suspend all the activities related to sales and marketing acquisition of customers, in line with the cost reduction efforts.

The Board also agreed that this item would be further discussed in the next Board Meeting.”

20.6. From the aforesaid extract, it is evident that the issue of network shutdown was discussed and that the said item was to be discussed at the next meeting which was to be held on 22nd February, 2012. As such the parties on 19th February, 2012, were fully aware that further discussion on this aspect would take place on 22nd February, 2012. Significantly, on 19th February, 2012, also no objection/protest was made by the Respondent No.2 and/or its Nominee Director with regard to the network shut down. The Minutes of 19th February, 2012, are also not disputed. On 22nd February, 2012, Resolution 5 (a) came to be passed which reads as under:

“Resolution No. 5a.”

1. The board notes that the Supreme Court judgment of 2 February 2012 would have the effect of cancelling the company's UAS licenses to operate mobile telecommunication network with effect from 2 June 2012. This decision will remove the company's ability to operate its current mobile communication business from that date. The board noted that the eligibility criteria and process for rebidding for the license and spectrum has not been determined and is currently estimated to take some 400 days to complete. Having considered all the issues including the historical and likely future commercial performance of the company's business and based on feedback from EDB management from the DoT and TRAI, of all of the directors present resolved and the appropriate course of action was for the company to shut down the network pursuant to the terms of the UASL, and that the management should take all necessary and proper steps accordingly.

2. In the light of that decision and its consequences for the current business of the company, with the full consensus of the board, it is further resolved that the management of the company should take all necessary and proper steps.

(1) To limit as quickly and as effectively as possible the flows of cash out of the company, including terminating, on appropriate terms all obligations giving rise to the current or future obligations to pay cash. The cost reduction scenario 'C' presented to the last board meeting should be implemented and all payments referred to the board for approval.

To seek a refund of the licence fee paid for the UASLs from the DoT.

(2) To seek payment of all debts promptly.

(3) In light of these events which will affect the financial position of the Company in a number of respects, with the full consensus of the Board, it further resolved to instruct the FCO to consider the company's current financial position and to report to the board on two weekly basis to ensure that the board is in an appropriate position to take all necessary decisions in relation-to the company's affairs to reflect its evolving financial position.”

20.7 From the said video recording it is clear that the Chairman has read out all the Resolutions passed at the meeting of 22nd February, 2012, including the above Resolution No. 5 (a) resolving to shut down the network and directing the management to take all necessary and proper steps in regard thereto. Though the Resolution with regard to payment of legal fees was discussed, the video recording makes it clear that there was no discussion qua Resolution 5 (a) with regard to shut down of the network. In my view, the video recording thus makes it clear that the Respondent No.2 and /or its Nominee Director did in fact unanimously approve the shut down of the network at the meeting of 22nd February, 2012. Respondent No. 2 further objected to the video recording on the ground that the same is incomplete. The said objection cannot be accepted. In fact, the video recording is complete with regard to the resolutions which were passed, which is the relevant part of the business at the said meeting of 22nd February, 2012. It is correctly submitted by the Petitioner that the fact that Mr. Shahid Balwa and Mr. Vinod Goenka requested a further short discussion on some other aspects is entirely irrelevant and has no bearing on the authenticity, veracity and genuineness of the video recording. In fact, the Respondent No. 2's case on this aspect is without any material particulars as to what the further discussion was in respect of and/or whether it had any bearing whatsoever on the resolutions which were passed earlier. I am therefore of the view that the Respondent No.2's letter dated 24th February, 2012, in which they purported the objection to the decision on network shut down taken the previous day, was obviously an afterthought. I am therefore also of the view that the Board of Directors of Respondent No. 2, had unanimously approved the shut down of the network at the meeting of 22nd February, 2012. I also in respectful agreement with the view of the Hon'ble Appeal Court that even assuming that the Petitioner is unable to establish that the Appellant agreed to shut down the network, it would make no difference. The decision to shut down the network was in fact pursuant to the Hon'ble Supreme Court's order and judgment dated 2nd February, 2012, cancelling the UASLs issued to the Respondent No. 1 Company. Further, Reliance had already on 31st January, 2012 shut down power to parts of the telecom network of the Company.

21. It is next submitted on behalf of Respondent No.2 that the Petitioner has erroneously and mischievously relied upon a complaint filed under the Prevention of Money Laundering Act, 2002 (“PMLA”) against the Company, Respondent No. 2 and Mr. Shahid Balwa and Mr.Vinod Goenka and is seeking to allege that the complaint evidences that Mr. Balwa and Mr. Goenka had procured the 2G licenses through illegal means and that they had misrepresented to the Petitioner that the 2G licenses were validly obtained. It is submitted on behalf of Respondent No.2 that the complaint filed under the PMLA proceedings is totally irrelevant to the present Petition. In any event and without prejudice it is submitted that a bare reading of the said complaint shows that the Company was not involved in any kind of illegal transaction and that the Company is not involved in any kind of money laundering. It is submitted that in the PMLA complaint, it is not even stated that any money has passed from the Company to any other entity. There is no evidence of any nature whatsoever suggesting transfer of funds to or by the Company. The investigation authorities have erroneously termed a pure lending transaction as a money laundering transaction. The Kalianagar TV to whom the money has been given has repaid the entire money with interest as can be seen from the complaint itself. The charges against Mr. Balwa and Mr. Goenka have not as yet been proved. It is further submitted that the Court of the Special Judge in PMLA proceedings, vide its order dated 20th August, 2014, while granting bail held that the accused in the PMLA proceedings have an explanation which is not unbelievable and also observed that the amount of Rs. 200 crores is not tainted by itself as its source is known at both the ends. It is also submitted on behalf of Respondent No.2 that the PMLA proceedings have been initiated much later than the filing of the present Petition. It is submitted that it is settled legal position that in a Petition for winding up, a case for winding up must be contained in the petition alone and subsequent events cannot be looked at to support the Petition. It is submitted that therefore the entire relevance placed on the PMLA proceedings is totally false and baseless and the same is done only to prejudice this Court.

21.1 On behalf of the Petitioner it is submitted that the following paragraphs of the PMLA charge-sheet belies the afore-stated submissions advanced on behalf of Respondent No.2 including the submission that in the PMLA charge-sheet the Company is not involved in any illegal transaction/money laundering.

Sr. No.AccusedParagraph/page of PMLA charge-sheet (Annexed at page 1537 of affidavit dated 18th August, 2014.
1Mr. Shahid

Balwa/Mr.Vinod

Goenka

(a) Para 1.3 at page 4.

(b) Para 8 at pages 89 to 99. (c ) Para 2.1 to 2.5 at page 111 to 113.

(d) Para 12.2 at page 128 to 129.

2STP/EDB(a) Para 1.3 at page 4.

(b) Para 5.4 at page 50.

(c) Para 8 at page 89 to 99. (d) Para 11.2 to 11.5 at page 105 to 107.

(e) Para 9.1 to 9.4 at page 121 to 122.

(f) Para 12.9 to Page 131 to 132.

 
The Petitioner has submitted that the Petitioner is a 100% subsidiary of ‘Etisalat in which the Central Government of the U.A.E. owns a 60% share. In view of the allegations made in the PMLA charge-sheet, the Petitioner cannot in any manner continue its association with Mr. Shahid Balwa and Mr. Vinod Goenka and/or remain as a joint venture partner in Respondent No.1. It is submitted that the submission advanced on behalf of Respondent No. 2 that the PMLA proceedings are a subsequent event and that subsequent events cannot be a ground for winding up, is incorrect and the submission is not well founded in law.

21.2 I have considered the submissions on behalf of the Petitioner as well as the Respondent No.2. After the order of the Appeal Court, the Respondent No.1 Company has been charged as an accused (Accused No. 11) in a charge-sheet filed by the Joint Director, Directorate of Money Laundering Act, 2002 on 25th April, 2014 (PMLA charge-sheet). The said charge-sheet is annexed at page 1537 of the affidavit of the Petitioner dated 18th August, 2014. The said charge-sheet sets out the role of the original Promoters Mr. Shahid Balwa and Mr. Vinod Goenka in raising and routing the moneys which were allegedly used to corrupt public servants in what is commonly known as “2G Scam” and in engineering return of those funds once the CBI investigation commenced. The said charge-sheet also sets out how Mr. Balwa and Mr. Goenka allegedly used the Company (then known as Swan Telecom Pvt. Ltd. “STPL”) inter alia for money laundering. The relevant paragraphs of the said charge-sheet are already set out in the table hereinabove. As far as the Respondents' case that the PMLA charge sheet shows that the Company was not involved in any illegal transaction and/or that the Company is not involved in money laundering, the same is expressly belied by the fact that in paragraph 12.9 of the PMLA charge-sheet it is alleged as follows:

“12.9 STPL was illegally allotted UASL by Shri A.Raja for which a sum of Rs. 200 crores of illegal gratification was paid in KTV through a process of layering from Dynamix Realty, which has been received back by Dynamix Realty from KTV through process of layering as Rs. 223.55 crores. Dynamix Realty and STPL being DB Group companies were actually involved in layering of proceeds of crime generated out of illegal gratification and its refund. STPL has thus committed the offence of money laundering as defined under section 3 of PMLA in the period and manner as aforesaid which is punishable under section 4 of PMLA.”

Therefore, not only has STPL's role been expressly brought out, it has been charged under Section 3 of the PMLA. Respondent No.2's reliance upon the findings made by the Special Judge in the PMLA proceedings in his order dated 20th August, 2014, while granting bail inter alia to Mr. Shahid Balwa and Mr. Vinod Goenka is, as submitted by the Petitioner, misplaced. The learned Judge appears merely to have found that the accused have an explanation which is not absurd, farfetched or imaginary. The fact of the matter remains that serious charges have been levied against them and that they are currently on bail.

21.3 As regards the submission of the Respondent No. 2 that the PMLA proceedings are a subsequent event and that subsequent events cannot be a ground for winding up, as set out hereinabove and in paragraph 100 of the order of the Appeal Court, the subsequent facts can be relied upon by the Company Court while considering a Petition under Section 433 (f) of the Act on just and equitable ground. The subsequent events may be pleaded either by amending the Petition or by filing further affidavits. In any case, the events mentioned in the said charge-sheet are events which in fact took place prior to the filing of the present Petition. The charge-sheet was however filed after the Petition was filed as stated above.

21.4 The further submissions of Respondent No.2, which are in the nature of defenses to the charges levelled against them, cannot be gone into at this stage. The submission advanced on behalf of Respondent No. 2 that only charges have been framed against Mr. Balwa and Mr. Goenka and the same are yet to be proved, is irrelevant. The fact of the matter is that after investigation, these charges have been framed and as a result thereof the Petitioner is not wanting to continue in the joint venture Company viz. the Respondent No.1 and the very basis of the joint venture stands eroded and the substratum of the Company destroyed. Moreover, the Company being a joint venture quasi partnership, the PMLA charge-sheet has compounded the loss of mutual faith and confidence between the partners making the continuation of the joint venture impossible.

22. The Respondent No. 2 next submitted that, the submission of the Petitioner that by exercising the Put Option, Respondent No. 2 has opted to exit from the Company and therefore the Respondent No.2 would be entitled only to monetary reliefs to enforce the rights under the Put Option Deed is untenable. The Respondent No. 2 has submitted that the exercise of right under the Put Option Deed would not disentitle Respondent No. 2 from resisting the Petition for winding up. In fact, the Petitioner has vide its letter dated 15th December, 2013, rejected its liability to pay any amounts to Respondent No.2. This being so, it is not open for the Petitioner to rely upon the invocation of the Put Option by the Respondent No.2, pursuant to the Petitioner rejecting its liability. It is further submitted on behalf of Respondent No.2 that the Put Option right is an independent and separate right available to the Respondent No.2 against the Etisalat group and this being so, no reliance can be placed by the Petitioner on the said Put Option Deed. It is further submitted that invocation of the Put Option is its contractual right available to it under the Put Option Deed and the same would have become time barred as per the Put Option Deed.

22.1 The order of the Appeal Court dealt with the Put Option inter alia in paragraphs 79 to 83. The order of the Appeal Court at paragraph 83 left open the question for further consideration at the hearing of the Petition.

22.2 According to the Petitioner, the exercise of the Put Option is contrary to and inconsistent with the Respondent No.2's claim that the Company ought not to be wound up on the ground that it is capable of being revived. Further and in any event, it is contrary to and inconsistent with the Respondent No.2's claim that Respondent No.2 is interested in reviving the Company and that it is possible to do so. It is also significant to note that till date, the Petitioner's exercise of the Put Option stands and has not been withdrawn. The Respondent No. 2's response viz. that the Put Option right is an independent and separate right available, is irrelevant in view of the Petitioner's submissions above. Further, the fact that the Put Option would have become time barred is also irrelevant. Lastly, the Respondent No.2's submission that the Put Option right having been initiated much later on, after the filing of the present Petition, and cannot be a ground for winding up is incorrect and a submission not well founded in law. It is further submitted that it is in fact well settled that a subsequent event after the filing of the winding up petition can also be taken as a ground to support the winding up of the Company. Without prejudice to the aforesaid and in any event the Petitioner submits that its submissions on the Put Option were directed at demonstrating that the purported revival scheme, was without substance.

22.3 In my view, invocation of the Put Option is a contractual right available to Respondent No.2. The exercise of the right under the Put Option Deed would not disentitle Respondent No. 2 from resisting the Petition unless the Petitioner accepts the option exercised by the Respondent No.2.

23. The Respondent No. 2 has next submitted that the Petitioner has purposely delayed and failed to obtain the FIPB approval. Although, an application was prepared in December 2008, the application was made to the FIPB only on December 3, 2009, by the Petitioner. On 27th April, 2010, FIPB raised various queries and on September 29, 2010, FIPB rejected the application for the reasons that the Ministry of Home Affairs had not supported the proposal. Respondent No.2, vide its letter dated 1st April, 2011, informed the Petitioner that it had delayed in filing the FIPB application and requested the Petitioner to once again make the application. Despite the same, the Petitioner did not make a fresh application.

23.1 Respondent No.2, in support of the aforesaid submission, submitted that had the FIPB approval been obtained by the Petitioner, the Company in accordance with Clauses 2.1 and 2.10 of the Share Subscription Agreement (“SSA”) would have got an amount of Rs. 934.20 crores on account of control premium. It is evident beyond any doubt that the Petitioner deliberately failed to obtain the FIPB approval, as had the same been obtained, under clauses 2.1 and 2.10 of the SSA the Petitioner would have had to bring in the control premium amount of Rs. 934.20 crores to the Company. The aforesaid conduct of the Petitioner of deliberately not obtaining the FIPB approval has caused a huge financial loss to the Company and is responsible for the present financial condition of the Company. On this ground also, the captioned Petition deserves to be dismissed.

23.2 According to the Petitioner, the relevant facts in this regard can be found at pages 927 and 951 to 953 of the Affidavit of the Petitioner dated 30th April, 2012. According to the Petitioner, in fact this issue has been decided by the Appeal Court. In paragraphs 125 and 129 of the order of the Appeal Court, the Appeal Court in the context of the issue with regard to the FIPB Approval observed that:

“Firstly, it is important to note that the petitioner did make an application to the FIPB, but the FIPB refused to grant the approval. It cannot, therefore, be said that the petitioner had failed to make an application to the FIPB for approval. Further, the appellant had filed a petition before the CLB under sections 397 and 398 of the Companies Act in which it raised this issue. The appellant thereafter withdrew the company petition.”

“In conclusion, therefore, the FIPB approval not having been obtained, at the highest, affects only the Put Option rights of the appellant. That would be a private dispute between the petitioner and the appellant. Such a dispute cannot prevent the petitioner from maintaining the winding up petition. Secondly the record, as it stands, does not establish that the petitioner failed to obtain the FIPB approval. The learned Judge, therefore, rightly refused to dismiss the petition on this ground.”

“131. 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 between Genex and the petitioner. It was not even suggested that there was a tripartite agreement in this regard between the appellant and/or the company, Genex and the petitioner in this regard.”

23.3 According to the Petitioner, besides the observations as extracted above, it was the duty of the Company and not the Petitioner to apply for FIPB approval. In fact the Company did apply for FIPB approval but the same was rejected by the Government of India principally because of the serious concern relating to the reputation of Mr. Balwa and required that Mr. Balwa disassociate himself with the Company before the application could be reconsidered. This is evident from Mr. Balwa's resignation letter dated 12th January, 2011 (Annexure A-10 page 246 of the Compilation of Annexures). Furthermore, the FIPB approval was needed to acquire the shares of Genex Exim Venture Pvt. Ltd. The Petitioner in any event was not bound to acquire the same and therefore this is purely an inter-shareholder issue between the Petitioner and Genex. It is also submitted that Respondent No. 2 could always have at that time exercised its Put Option to exit the Company in case the FIPB approval was not forthcoming. This was admittedly not exercised by Respondent No. 2 (contemporaneously.

23.4 From the afore-stated allegations advanced by the Respondent No.2, Majestic, the answers given thereto by the Petitioner and the observations/findings of the Appeal Court set out hereinabove, I am of the view that the Respondent No. 2 is incorrect in contending that the Petitioner deliberately did not obtain the FIPB approval.

24. As set out in paragraph 3.15 hereinabove, on 8th July, 2011, Respondent No. 2 Majestic filed a Petition under Sections 397 and 398 of the Companies Act before the CLB, making several allegations against the Company, the Petitioner and the Petitioner's nominee on the Board of Directors of the Company. However, on 1st August, 2011, Respondent No. 2 – Majestic unconditionally withdrew the said petition filed before the CLB. The same allegations are now reiterated by the Respondent No. 2 in defence to the above Company Petition seeking winding up of the Company. On this aspect the Appeal Court has in paragraph 87 of its order observed as follows:

“We are not inclined, at this stage, to consider the effect of these averments. They are made in the context of a petition under sections 397 and 398. That petition would have to be analyzed to see whether the averments therein militate against the appellant's defence to this company petition. The grounds in support of the appellants averments in the petition before the CLB that the conduct of the petitioner herein warrants winding up on the just and equitable ground may be entirely different from the grounds upon which the petitioner herein seeks winding up of the company. This aspect must be left open for consideration, at the final hearing of the petition.”

25. It is submitted on behalf of the Petitioner that the Petitioner does not dispute the legal proposition that the Respondent No. 2 is entitled to raise the points urged by it in the Company Petition before the CLB as a defense to the present Petition as laid down in the judgment of Kandapazha Nadar and Ors. vs. Chitraganiammal and Ors. (2007) 7 SCC 65, para 19.) However the Petitioner has submitted that the unconditional withdrawal of the same by the Respondent No. 2 makes it evident that the same are without substance. This is further supported by the letter written by Mr. Shahid Balwa dated 2nd August, 2011.

26. The letter dated 2nd August, 2011, addressed by Mr. Shahid Balwa to the-Petitioner is relevant. Mr. Balwa has in the said letter inter alia stated that:

“The UAE Government/Etisalat can bring to bear its large influence on organization such as Amnesty International or Fair Trail which are international organizations working globally to ensure human rights protection and fundamental right to free and fair trial. Such organizations can appoint their own monitors who will bring a lot of pressure on the Indian establishment and judiciary to give a free and fair trial.

Hon'ble Sir, this is necessary to be done since you are aware that Etisalat being a company from UAE was selectively targeted even at the time of giving FIPB approval, whereas similar placed companies were given the approval. It is necessary and imperative that such diplomatic and multilateral pressure is exerted on the Government of India and the judiciary to ensure a free and fair trial. Sir, you are also aware that several companies such as TATA, Sistema, and STel who had divested their stakes have not been charged whereas Etisalat and Uninor have been selectively targeted. This pick and choose has to be challenged to defeat the sinister design to drive away Etisalat and for which we need your help. Whilst I am very sorry for the CLB petition, I can assure you that it was a decision taken by the lawyers without my consent and/or concurrence. I can further assure you that such occurrences will never happen again.

I look forward to your kind consideration to the above, I would like to state before I end that this war cannot be won without fighting it together and for which we need your support. I once again assure you of our fullest cooperation to fight legal batle together and look forward to your equal support.”

I have independent of the issue qua the Respondent No. 2 unconditionally withdrawing the CLB proceedings and once again reiterating the same in defence to the above Petition, held hereinabove that the said allegations are not acceptable. In any event, from a perusal of the contents of the said letter I am of the view that the Petitioner is correct in its submission that the allegations made in the Petition which were unconditionally withdrawn, were without any substance, since Mr. Balwa has in the said letter attributed the fate meted by Etisalat to other authorities who allegedly had a sinister design to drive away Etisalat from this country.

27. Respondent No. 2 has next submitted that a show cause notice dated 8th July, 2011, has been issued under the PMLA by the Directorate of Enforcement, Ministry of Finance, Government of India, asking to show cause as to why the investments made by Etisalat Group were not in violation of Indian laws. It was found in the said complaint that the Petitioner, Etisalat Group and Genex i.e. Respondent No. 4 herein were related parties and that the Etisalat Group and the Petitioner had, in order to take advantage of investing directly vide the automatic FDI route, acquired shares in the Company jointly through the Petitioner and the said Genex, despite both of them being related parties. It is submitted that it is clear that the Petitioner has deliberately violated and acted in contravention of the provisions of Foreign Exchange Management Act, 1999 (“FEMA”) and FDI policy which stipulates that any acquisition of shares in a Telecom Company by a foreign party above 49% would require FIPB approval. According to Respondent No.2, the Petitioner has not come to this Court in its equity jurisdiction with clean hands and this itself warrants that the Petition be dismissed with costs.

28. The above submission advanced on behalf of the Respondent No. 2 will not be of much assistance to the Respondent No. 2 since the Petitioner is not a notice to the show cause notice under PMLA or under FEMA, and nor has it been issued any other show cause notice in this regard. In fact, it is only the Company and its Directors (including the Nominee Directors of the Petitioner at the relevant time) who have been issued a show cause notice under FEMA.

29. For reasons set out in paragraph 11 of the order of admission, this Court chose to appoint Mr. Solomon, an Advocate and Solicitor of this Court, to act as an Authorised Person in place of the Provisional Liquidator. However, the Hon'ble Appeal Court modified the order of admission to the limited extent of appointing the Official Liquidator as the Provisional Liquidator of the Company with a direction to the Official Liquidator to appoint the Authorised Person as a Legal Advisor on the same terms and conditions as to his remuneration as fixed by the Company Court. It is submitted on behalf of the Petitioner that in the event of the Company being wound up, this Court should direct the Official Liquidator to continue with the appointment of the Authorised Person as a Legal Advisor. Respondent No. 2, without prejudice to its contention that the Petition deserves to be dismissed, has opposed the said submission advanced on behalf of the Petitioner on the ground that there is no provision for the appointment of a person in the event of a Company being wound up. However, it is pointed out that the Official Liquidator may appoint, with the sanction of the Court, an Advocate/Attorney or Pleader to assist him in the performance of his duties.

30. Section 459 of the Companies Act provides that the Liquidator may, with the sanction of the Court, appoint a legal practitioner to assist him in the performance of his duties. Rule 307 of the Companies (Court) Rules, 1959 also provides that the Official Liquidator may apply to the Court for sanction to employ an Advocate or Advocates to assist him, and the Court may, on such an application sanction such employment or pass such further or other orders as it may think fit. As set out in the order of Admission, the work involved in the present case for liquidation of the Company is complex in nature and inter alia involves:

(i) giving instructions on behalf of the Company in respect of the ongoing litigations and cases against the Company including the CBI criminal trial which the Company is facing viz. the “2G trial”, the FEMA proceedings and the PMLA proceedings, it also includes initiating and giving instructions in respect of proceedings filed by the Company, for instance in the suit filed by the Company against Punjab National Bank (PNB);

(ii) representing the Company in the DRAT and in various proceedings under the Income Tax Act;

(iii) dealing with the large number of creditor claims including the claims of statutory creditors such as the Income Tax Department;

(iv) dealing with the sale and disposal of the Company's assets. Many of the assets are of a nature having a high incidence of obsolesce and accordingly must be dealt with immediately to realise their value;

(v) making recommendations for the continuance and/or termination of the employees and matters connected therewith.

The Official Liquidator shall therefore be at liberty to move an application/s before this Court under Section 459 of the Companies Act read with Rule 307 of the Companies (Court) Rules, 1959, seeking sanction of this Court to engage the services of a legal practitioner to assist him in the performance of his duties including representing him before the courts of law.

31. In view of the above facts and circumstances, I am satisfied that the-Company has lost its substratum; there exits a deadlock between the main shareholders of the Company; there is complete 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 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. Hence the following Order:

(i) The Company Petition is allowed in terms of prayer clauses (a) and (b) which are reproduced hereunder:

a) That the Company, that is, Etisalat DB Telecom Pvt. Ltd. be ordered and directed to be wound up by and under the directions of this Hon'ble Court, and in accordance with the provisions of the Companies Act, 1956;

(b) That the Official Liquidator, High Court, Bombay be appointed Liquidator of the Company with all powers under the provisions of the Companies Act, 1956.”

(ii) The Official Liquidator to act on an ordinary copy of this Order duly authenticated by the Learned Associate of this Court without waiting for any further notification.

(iii) The Official Liquidator shall be at liberty to move an application/s to this Court under Section 459 of the Companies Act read with Rule 307 of the Companies (Court) Rules, 1959 seeking sanction of this Court to engage the services of a legal practitioner to assist him in the performance of his duties including representing him before the courts of law.

The above Company Petition is accordingly disposed off.

The Learned Advocate appearing for the Respondent No.2 applies for stay of this order. Since the Company has stopped its operations and a Provisional Liquidator has already taken charge, the question of granting any stay does not arise. The Application is therefore rejected.