New Delhi: Recently Antrix-Devas Judgment, SC ruled that proceedings for winding up of a company on the ground of offenses of fraud cannot be stayed by the shareholders by referring to the CA or the auditors’ report clean chit or reporting of non-detection of any fraud during the period under consideration.
The SC rejected the arguments of Dewas and its shareholders that the auditors’ reports of 2012, 2016, 2017 and 2020 have since certified that “no fraud has been noticed or reported during the audit or by the company”. The Antrix-Devas deal was not terminated on the ground of fraud.
“The auditor’s report can neither be taken as gospel truth nor can there be an injunction against the company,” the court said.
Writing the judgment, Justice V RamasubramanianA part of the bench of Justice Hemant Gupta observed, “The Chartered Accountant/Auditor is neither an expert in criminal law nor an expert in the technique which formed the subject matter of the agreement between the two. Antrix and Devas. CA’s statements are always qualified with certain conditions such as ‘according to the information and explanations given to us during our audit’ or ‘to the best of our knowledge and belief and according to the information and explanations given to us’.” the bench said. , “The statements in the auditor’s report are according to the information given to him or derived to the best of his ability.”
SC said CBI registered FIR For offenses under section 420 read with section 120B Indian Penal Code On March 16, 2015, nearly four years after the deal expired. “The officers of Antrix as well as Government officials were implicated in the FIR for offenses under the Prevention of Corruption Act, 1988. Therefore, the appellants cannot argue for stay on the ground that the termination of the settlement in 2011 was due to fraud. Not on Aadhaar, when the fraud was discovered years later,” it said.
It also dismissed the petition against the termination on the ground that even during the ICC’s arbitration proceedings, Antrix had not taken up the fraud petition. “The arbitral proceedings commenced in 2013 and the award was passed only on September 14, 2015. Antrix cannot be expected to plead fraud in the arbitral proceedings even before the fraud was discovered,” the bench said. It took note of the contention of ASG N Venkataraman that all the shareholders of Dewas have been produced by the CBI as accused in criminal cases. But the CBI has not been able to even summon him.
The bench said, “Those who are evading summons in criminal prosecution cannot be heard to argue that they should have been heard in the petition for winding up. Taking advantage of their citizenship/residency abroad, Shareholders are taking action to enforce (i) the ICC Arbitral Tribunal award in India; and (ii) the BIT award abroad, making it impossible for even the CBI to serve subpoenas for five years.
The SC rejected the arguments of Dewas and its shareholders that the auditors’ reports of 2012, 2016, 2017 and 2020 have since certified that “no fraud has been noticed or reported during the audit or by the company”. The Antrix-Devas deal was not terminated on the ground of fraud.
“The auditor’s report can neither be taken as gospel truth nor can there be an injunction against the company,” the court said.
Writing the judgment, Justice V RamasubramanianA part of the bench of Justice Hemant Gupta observed, “The Chartered Accountant/Auditor is neither an expert in criminal law nor an expert in the technique which formed the subject matter of the agreement between the two. Antrix and Devas. CA’s statements are always qualified with certain conditions such as ‘according to the information and explanations given to us during our audit’ or ‘to the best of our knowledge and belief and according to the information and explanations given to us’.” the bench said. , “The statements in the auditor’s report are according to the information given to him or derived to the best of his ability.”
SC said CBI registered FIR For offenses under section 420 read with section 120B Indian Penal Code On March 16, 2015, nearly four years after the deal expired. “The officers of Antrix as well as Government officials were implicated in the FIR for offenses under the Prevention of Corruption Act, 1988. Therefore, the appellants cannot argue for stay on the ground that the termination of the settlement in 2011 was due to fraud. Not on Aadhaar, when the fraud was discovered years later,” it said.
It also dismissed the petition against the termination on the ground that even during the ICC’s arbitration proceedings, Antrix had not taken up the fraud petition. “The arbitral proceedings commenced in 2013 and the award was passed only on September 14, 2015. Antrix cannot be expected to plead fraud in the arbitral proceedings even before the fraud was discovered,” the bench said. It took note of the contention of ASG N Venkataraman that all the shareholders of Dewas have been produced by the CBI as accused in criminal cases. But the CBI has not been able to even summon him.
The bench said, “Those who are evading summons in criminal prosecution cannot be heard to argue that they should have been heard in the petition for winding up. Taking advantage of their citizenship/residency abroad, Shareholders are taking action to enforce (i) the ICC Arbitral Tribunal award in India; and (ii) the BIT award abroad, making it impossible for even the CBI to serve subpoenas for five years.
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