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‘Registrar’ does not fall into the category of ‘A person authorized by Central Government’: Karnataka High Court

‘Registrar’ and ‘a person authorized by Central Government’ are two different entities and entitling the Registrar with the power to present a petition to the Tribunal for the winding up of a company is valid and well within the scope of law. A single-judge bench comprising of Justice Dinesh Kumar, while adjudicating the matter in Devas Employees Mauritius Private. Ltd. V. Union of India & Ors; [WRIT PETITION No.6191 OF 2021 (GM-RES)], dealt with a plea challenging the winding-up proceedings against a company.

The petitioner held a certain number of shares in Devas Multimedia Pvt Ltd (respondents). The petitioner and the respondent entered into an agreement for the lease of space segment capacity on ISRO/Antrix S-Band Space Craft. As per the petitioner, various shareholders including Deutshe Telekom, an enterprise of the German Government had invested in the respondent company. The petitioner terminated the agreement on the ground that they were not happy with the services of the respondent company, in response to which the respondent initiated arbitration proceedings in ICC. The Arbitral Tribunal passed an award which imposed an amount of 10,000 crores on the petitioners. A petition was filed before NCLT to wind up the respondent company on the ground that the respondent company’s affairs were being conducted in a fraudulent manner and the persons involved in the company’s management have been guilty of fraud, misfeasance and misconduct. The petitioner also sought to declare Section 272(1)(e) of Companies Act, 2013 which states that a petition to the Tribunal for the winding up of a company shall be presented by the Registrar, as ultra vires to the Constitution of India.

The learned counsel representing the respondents held that the Registrar of Companies and a ‘person authorized by the Central Government’ stand on the same footing. In the case of Registrar, before according sanction, Central Government is required to give an opportunity to the Company and the same is missing in the case of a ‘person authorized by Central Government’.

According to the Court, the petitioner failed to demonstrate as well as prove the allegations of fraud slapped upon the respondent company and abused the process of law. The Bench accordingly sounded the judgment that/ “One of the most profound tenets of Constitutionalism is presumption of Constitutionality assigned to each legislation enacted. Indubitably, Parliament has competence. The sanction accorded by the Central Government does not meet petitioner with any Civil consequence. Devas has not challenged the sanction order. Petitioner has failed to demonstrate infringement of any rights enshrined in Part-III of Constitution of India. 52. Having held that Registrar and ‘a person authorized by the Central Government’ fall into different categories, it does not warrant reading down Section 272(3) of the Companies Act. 53. Accordingly, both points for consideration are held in the negative. 54. Resultantly, this writ petition must fail and it is accordingly dismissed.”

Click here to read the judgment.

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