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The National Company Law Appellate Tribunal (NCLAT) has upheld National Company Law Tribunal’s order to wind up Devas Multimedia Pvt Ltd while declaring that the company was incorporated in a fraudulent manner to carry out unlawful purposes.
The NCLAT said that Devas Multimedia did not have the technology, appropriate licences and government approvals to carry out the agreement it did with Antrix Corporation in 2005. Every benefit and every advantage that accrued to Devas under the agreement dated was through “fraud, misrepresentation or suppression”, it ruled.
“This Tribunal has elaborately discussed the defence raised by Devas in the winding-up petition. This Tribunal believes that the defence raised by Devas is not substantial, and Devas deserves to be wound up on the grounds of Section 271(c) of the Companies Act, 2013. Accordingly, the finding of the Ld National Company Law Tribunal needs no interference from this Appellate Tribunal, and both theappeals deserves to be dismissed,” said the NCLAT.
Vital agreement
This Tribunal also said it found it rather strange that such a vast and vital agreement between Antrix and Devas in 2005 was allowed to be signed by an Article Clerk who had no background in science and technology, especially with the functioning of Devas Services, and was given remuneration for signing the agreement. “It is also surprising to note that the then officials of Antrix also did not object to it when the agreement from the Devas was not being signed by the Director or employee of the company, but was being signed by an Article Clerk of the then Chartered Accountant of the company,” it said.
The NCLAT also upheld Antrix’s position that shareholders of Devas diverted funds from India. “This Tribunal finds that after bringing in an amount of ₹579 crore for ISP services and not rendering any ISP services and instead diverting vast portions of the same for non-ISP purposes amounts to illegal diversion of funds and financial fraud that attracts the ingredients of Section 271(c) Companies Act, 2013,” said the NCLAT.
On May 25, the Bengaluru Bench of the National Company Law Tribunal (NCLT) had ordered the liquidation of Devas Multimedia Pvt Ltd while declaring that the company was incorporated in a fraudulent manner to carry out unlawful purposes.
The legal counsel representing Devas Multimedia had appealed against the NCLT order it on the grounds that “the instant winding up proceedings appear to be an endeavour to prevent Devas from pursuing its remedies in India or outside India (including Washington), where enforcement proceedings are pending on behalf of Devas”.
When contacted, Jay Newman, a senior advisor to Devas shareholders said: “Even a cursory examination of the NCLAT proceedings reveals them to be a sham, with the Indian government acting as judge, jury, and executioner to terminate the very existence of its creditor, Devas. Shareholders of Devas will not be deterred, but potential investors in India should be forewarned: India is risky and unpredictable.”
An Antrix spokesperson said, "Fraud vitiates every solemn act. This ruling is an ample testimony to the time tested truth, that Fraud can neither be suppressed nor eclipsed, Justice and Truth will find its way to expose. A case of multiple frauds done so brazenly with absolute disregard to Rule of Law."
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