December 9, 2022

antrix: CAs’ clean chit can’t stall co’s folding: Supreme Court | India News – Times of India

NEW DELHI: In the recent Antrix-Devas judgment, the SC ruled that proceeding for winding up of a company on ground of perpetrations of a fraud cannot be stalled by shareholders by citing reports from CAs or auditors giving clean chit or reporting non-discovery of any fraud during the period in question.
The SC junked arguments of Devas and its shareholders that since the auditors’ reports of 2012, 2016, 2017 and 2020 certified that “no fraud on or by the company has been noticed or reported during the course of the audit”, the Antrix-Devas deal was terminated not on grounds of fraud.
“The auditor’s report can neither be taken as gospel truth nor act as estoppel against the company,” the court said.
Writing the judgment, Justice V Ramasubramanian, part of a bench comprising Justice Hemant Gupta, said, “The chartered accountants/auditors are not experts either in criminal law or in the technology that formed the subject matter of the agreement between Antrix and Devas. The statements of the CAs are always qualified with certain riders such as ‘according to the information and explanations given to us in the course of our audit’ or ‘to the best of our knowledge and belief and according to the information and explanations given to us’.” The bench added, “The statement in the auditor’s report is as per the information given to them or as per the information culled out to the best of their ability.”
The SC said the CBI registered an FIR for the offences under Section 420 read with Section 120B of the IPC on March 16, 2015, nearly four years after the termination of the deal. “The officers of Antrix as well as government officials were also implicated in the FIR for offences under the Prevention of Corruption Act, 1988. Therefore, the appellants cannot set up a plea of estoppel on the ground that the termination of the agreement in 2011 was not on the ground of fraud, when the discovery of fraud itself was years later,” it said.
It also rejected the plea against winding up on the ground that even during the ICC arbitration proceedings, Antrix had not taken the plea of fraud. The bench said, “The arbitral proceedings commenced in 2013 and the award itself was passed on September 14, 2015. Antrix cannot be expected to plead fraud in the arbitral proceedings, even before the discovery of fraud.” It took note of ASG N Venkataraman’s argument that all shareholders of Devas have been arrayed as accused by the CBI in the criminal cases. But the CBI has not even been able to serve summons on them, he said.
The bench said, “Persons who are avoiding summons in criminal prosecution, cannot be heard to contend they must have been heard in the petition for winding up. Taking advantage of their citizenship/residence abroad, the shareholders are prosecuting proceedings for the enforcement of (i) ICC Arbitral Tribunal Award in India; and (ii) BIT Awards overseas, even while making it impossible for CBI to serve summons for five years.”

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