Sun Distribution Services Private Limited vs E-infrastructure And Entertainment India Pvt. Ltd. & Anr

 S.K. Singh, Chairperson

This order is being passed in the light of order of the Hon’ble High Court of Karnataka dated 07.01.2021 passed in Writ Petition

No.l4080/2020(GM-RES) at the instance of the writ petitioner, Mr.Sachin Narayan. The records disclose that the said writ petition was filed by

Mr.Sachin Narayan against the order dated 20.11.2020 of this tribunal passed in course of hearing of B.P. No.221/2020 along with various MAs ar.d

the Execution Application No.9/2020 filed therein. Some other connected matters such as P.Ps Nos.621/2020 and 287/2020 were also being heard

together with the aforesaid matter although these two petitions were of M/s Wei worth Software Pvt. Ltd. in no way directed against Mr.Sachin

Narayan.

The order of the Hon’ble Karnataka High Court dated 07.01.2021 notices the relevant facts in brief that it was in B.P. No.221/2020 filed by

SUN Distribution that an order was passed on 20.07.2020 directing E-Infrastructure &. Entertainment Pvt. Ltd. and Welworth Software Pvt. Lid.

(Respondents Nos.l md 2, respectively) to pay a sum of Rs.22.20 crores to the petitioner SUN Distribution Sendees within a fixed time. Since the

direction was no: complied, in an application under Section 20 of the Telecom Regulatory Authority of India Act, 1997 (TRAJ Act) this Tribunal issued

directions upon some respondents and granted further time to pay the amount tound due to SUN Distribution Services. In the same order dated

20.11.2020 the following observations were made against which Sachin Narayan petitioned the Hon’ble Karnataka High Court:

“At this stage, it appears proper to record a prima facie finding that Mr. Sachin Narayan as a majority share holder, has purposely removed from scene Mr. P

Kailasam who was negotiating for settlement and the act of fraudulently stripping Welworth of its assets if permitted will surely benefit the majority shareholder.

Hence, notwithstanding the corporate veil, in this execution proceeding it appears necessary to pass interim order not only in respect of respondent no. 1 and

respondent no. 2 but also in respect of Mr. Sachin Narayan whose full address and details shall be submitted by Sun Distribution at the earliest, preferably by

Monday.

Till the next date the respondents are given one last opportunity to comply with the prayers (b) and (c) in £A No. 9 of 2020, as elaborated m the last order.

Those directions and orders shall now also govern Mr. Sachin Narayan the majority’ share- holder upon whom a copy of this order be sent at the address to

be furnished by the decree holder, as indicated above.

Till the next date, respondent nos. I and 2 and Mr.Sachin Narayan are restrained from alienating transferring o.encumbering in any way their assets ana'

properties without seeking leave from this Tribunal They• are also restrained from withdrawing any money from their bank accounts whose details they must

furnish by the next date, without seeking leave of this Tribunal.

 On behalf of SUN Distribution Services, MA No.278/2020 was filed on 02.12.2020 seeking impleadment of Sachin Narayan as respondent No.3

and M/s Malnad Infotech Pvt. Ltd. as respondent No.4 anc was taken up on the next date By order dated 03.12.2020 this Tribunal accepted the

Vakalatncma filed by learned counsel for Mr.Sachin Narayan and in absence of any objections raised, impleaded him as respondent No.3 ar.d also

granted liberty to reply *o the facts alleged against him in MA No.278/2020.

 It transpires mom the order of the High Court that on behalf of SUN Distribution Services a plea was taken that on account of subsequent

developments and impleadment of Mr.Sachin Narayan on 03.12.2020, this Tribunal would be fully empowered to hear Mr.Sachin Narayan ar.d pass

orders as per law. ft was also contended that the order dated 03.12.2020 was not under challenge in *he writ petition. The Hon’bls High Court

looked at *he order dated 03. 2.2020 to fird that MA No.278/2020 seeking impleadment of two persons was still alive and hence it chose not to

express any opinion on the submissions advanced on behalf of Mr.Sachin Narayan and observed that since the issue is at large before the Tribunal it

would be at liberty to examine all the issues including the issue of maintainability as well as impleadment and pass order on MA No.278/2029 by

considering the rival contentions, While observing that the issue of impleadment and of the jurisdiction cf this Tribunal to proceed against Mr.Sachin

Narayan would be open for adjudication by 'his Tribunal, the Hon’ble High Court stayed the order dated 20.11.2020 of this Tribunal, in so far as it

concerns Sachin Narsyar. and clarified that the stay would continue til! the disposal cf MA No.278 2020 Time for reply by Mr.Sachin Narayan was

indicated and this Tribunal was requested to dispose of MA No.278/2020 expeditiously without bring influenced by its own subsequent observations

and orders passed after 20.11 2020.

In the aforesaid background this Tribunal has heard the parties for deciding the issues raised against impleadment of Mr.Sachin Narayan and also

his objection to jurisdiction on the ground that the respondent companies are service providers but not he himself.

Before adverting to the rival submissions on the issue oi impleadment anu jurisdiction, it is deemed necessary and useful to notice that the telecom

sector which later came to include broadcasting also, was deemed significant and of sufficient public importance to require regulation by a statutory

authority for proper growth and development. The TRAI Act aims tc achieve the same through establishment of the regulator Telecom Regulatory

Authority of India (""RAf) and this Appellate Tribunal. So far as hi: Tribunal :s concerned : is empm .-""ad in its original jurisdict- adjudie; iispute

between the licensor and a licensee; two or more service providers; and between a service provider and ■ group of consumers. It also has jurlsdictler.

to hear and dispose of appeals agr.' as directions or orders of the regulator. The Tribunal is not bound by the procedure prescribed by the Code of

Civil P&cedurei 1908. It has the power to regulate its. own procedure and is to be guided by fie principles c?natural justice it has many powers which

are vested in a civil court. Disputes lying within its jurisdiction cannot be decided by civil courts because of statutory prohibition. Its orders, are

executable as a decree of civil court. Section 19 of the TRAI Act gives no 'rer : the Tribunal to execute its own decrees for which ' v e 1 he powers

of a civil court.

The purpose of adjudication whether under a special law such as tine TRAI Act or by the ordinary civil courts is to achieve just ice by find: g mu. .

e tr ;h r.c providing relief tc the party found entitled thereto. The powers cf an executing court are much more complex and have developed from time

to time by various judicial pronouncements of the Apex Court and other high courts. The significance of delivering justice by the executing court

through proper use of the powers available under the CPC has been very well enunciated by Hon’ble Delhi High Court in a judgment by Justice

J.R. Midha dated 05.08.2020 in the case of M/s Bhandari Engineers Si Builders Vs. v*/s Mfbarfc Sa; Join: Ventures & Ors. Learned counsel for the

petitioner, SUN Dist ifcutions Services has placed reliance, particularly on Paras 65 and 66. T! is Tribunal has ft>;i that '• Npit--' quite illuminating

on the moral as well as legal aspects of why end how to aim for justice so as to provide .fruits of adjudication expeditiously to the decree holder.

Adverting to the plea that the Tribunal dees net have Jurisdiction to proceed against Sachin Narayan. the objection is found tc be without substance

as it is based upon ?. n that 'he proceedings qua Sack::: Narayaa are Sections 14 and 14A and not Section 19(1) rf the TRA1 Act. The petition by

SUN Distribution Services under Sections 1 ' and 14A is admittedly between service providers. In this petition an order was passed on 20.07.2020 to

provide mts -ur relief to the petitioner After is*-* *e concerned parties Eluding respondent No.l, EIEPL and respondent No.2, WeVcrth Software Pvt.

Ltd.. r. war. found that respondents Nos.l and 2 were being managed by the same interests represented by one MrJCaiiasam and ""they have devised

means to defraud the crcdiiors of respondent No.I, EEIPL which has/had a large business claimed to be nearing a lakh of STBs by using and

equipping Welworth to become its c'.ir ego and take over all its business and assets without paying anything so that unsec: tree creditors like SON

Distribution may ha.e no means :c realize their money e*.*en the admitted dues. Such arrangement ?•••' transactions cannot be protected

only because respondent Nos.I and 2 are y.uisti: persons having corporate vei.' This cannot help to sanctify c-r legalise a fraudulent vrA shem

transcclio: cf tram fer cf assets apparently fcr no ccr.side-rif†Suddenly respondent No.2 Vdlwrti which earlier had a business of 100C STBs 'res

acquired huge business arc assets of respondent No,l in a name: be- EEIPL an empty shell Such machinations and ber.y e clearly products of fraud

and cannot have any legal sanctity.†Respondents Nos.I ar.d 2 : he’d jointly Mid severe!!', liable to pay the entire lawful dues of SUN Distributi

on and -vere directed to pay the admitted amount of Rs.22.20 crores within one month, the order against Sachin Narayan was passed later while

proceeding wit! an application for exec. tier, under Sector 19(1) of the TRAT Act, whereunder all 'he powers of end! court for the purpose of

execution are available to TDSAT.

The concerned party/parties tried but have so far failed to secure any relief against the said order ironi Hon’ble Delhi High Court or any other

court. Review Application filed on behalf of respondent No.! was also dismissed on 30.09.2020 The respondents sought time for paying the amount of

Rs.22.20 crores and hi s:oite of accommodation granted on mere than on? date, they failed to pay arpThing :o the petitioner regardless of pendency :f

application for imposing oer.alry for disobedience.

 Ultimately, Execution Application bearing No.9/2020 was filed or. beha;' of the petitioner or. 10.11.2020. Respondent No.l continued a: make

offers of settlement of the dues ever, on I'll 2020 when the EA was mnsidered rcr the first time and certain orders were passed facilitate a settlement.

 On 20.11.2020 this Tribunal passed the order under reconsideration to record aprima facie finding against Mr.Sachin Narayan as a majority

snarenc.cic::- in the light cf submissions made by learned counsel for petitioner cr. the basis of facts recorded by Hon’ble Delhi Hign Court in its

order dated17.08.2020 and the law laid down in Delhi Development Authority Vs. Skipper Constractfon Co.(P) Ltd., (1996) 4 SCO 622 which -

’'as also noted by the High Cour: -e facts supported the sv.b rssior that as s. mHc.'r- f-areholder? : "" Sachin ""raym had purposely removed from

the scene Mr.?. Kailas am who was negotiating for settlement and that if Wei worth is also stripped of its assets, the loss ro the petitioner will be a

bene?.: for him as a majority shareholder. Hence, in view :f findings in the earlier order of 20.07.2C20 that take over cf assets of respondent No.l was

fraudulent and the likelihood cf fraudulent stripping of Wei worth also, this Tribunal on account of evident as • hr ninent further fraud held '

“Notwithstanding the corporate veil in this exec :?mn proceeding it appears necessary ro pass Interim order also in respect of Mr.Sachin Narayan

Til! the next date he was restrained ftfrom this Tribunal. This was in crritior to Interim direction of similar nature against respondent Nos.l and 2.

The aforesaid order was deemed necessary and actually proved useful because on 20.11.2020 it became evident, as recorded in that order, that

respondents Nos.l and 2 were disobeying the orders of this Tribunal by not disclosing their assets in spite of repeated opportunity and the CEO of

Welworth Software, Mr. P. Ksilesem who was also associated with respondent No.1 had stopped responding and had become incommedia although

on the  earliens date the was that talks for settlement shall be pursued seriously.

 Those reasons are apparent from the order passed on 20.11.2020 and are reiterated. It is clear that the order to proceed against Mr.Sachin

Narayan was passed not in the proceeding under Section 14 or 14A which involves adjudication of disputes between service providers etc. but in the

execution proceedings when it became imperative to ignore the corporate veil because of past fraud and likelihood of its being repeated further in

respect of assets of Welworth Software also. In the jurisdiction under Section 19(1) as an executing court this Tribunal has all the powers of a civil

court and therefore, it cannot be accepted that in exercise of this jurisdiction and when fraud is apparent, this Tribunal cannot proceed against the real

person controlling the corporate entities, Mr.Sachin Narayan. The corporate veil cannot be permitted to continue in aid of fraud evident from

circumstances and the attending facts. On removal of veil, Sachin Narayan emerges as the service provider in the cover of corporate veils.

 The other objection advanced on behalf of Mr.Sachin Narayan is on the basis that there is no necessity in facts to ignore the corporate veil. The

following four judgments have been cited tc support the submission that corporate veil can be lifted only in extra-ordinary situation:

(i) Anirban Roy & Anr. Vs. Ram Kishan Gupta & Anr; SM(M) 559/2017

(ii) Â V.K. Uppal Vs. M/s Akshay International Pvt. Ltd.; (2010) SCC Online Del 538.

(iii) Â Space Enterprises Vs. Srinivasa Enterprises Ltd.; (1998) SCC Online Del 243; and

(iv) Â Mukesh Hans Vs. Uma Bhasin; (2010) SCC Online Del 2776.

It has also been submitted on the basis several judgments including that of the Hon’ble Supreme Court in the case of Sneh Lata Goci Vs.

Pushpiata; (2019) 3 SCC 594, that executing court cannot go behind the decree so as to realize money from any person other than the judgment

debtcr.

There is no quarrel with the aforesaid legal principles settled by a catena of judgments. However, there is a long line of cases in which the law has

clearly evolved that fraud vitiates even the most solemn transactions, in the present case the extra-ordinary situation of practice of fraud cr. the

creditors of respondent No. 1 is writ large on the face of the record. The finding given by this Tribunal about fraudulent practice adopted to deprive

the creditors of respondent No.l, E1EPL by pretending its take-over by respondent No.2 was challenged before the Delhi High Court but the challenge

was found to be without any merits. The subsequent facts show that Welworth Software also stopped showing compliance to the orders of this

Tribunal and it was not known to the concerned parties including the petitioner as to whom to approach for seeking obedience or even for talks for

settlements. It was only after his shareholding was noticed by Delhi High Court and notice to Mr.Sachin Narayan by this Tribunal after a prima facie

finding against him, that another set of counsels were engaged and were given instructions leading to disclosure of assets and liabilities etc. by

respondent No.l and respondent No.2. There are sufficient materials now on record which clearly indicate that Welworth Software has also passed on

the assets of respondent No. 1, at least large number of STBs to other entities including M/s Malnad Infotech Pvt. Ltd.(!00% shares with Sachin

Narayan and his wife). This has happened in spite of interim restraint order passed by this Tribunal against the respondents and also Sachin Narayan.

But orders against the latter are under stay till the present order is passed.

In his short reply to the MA, Mr.Sachin Narayan has made a bald submission that there is no justification to proceed against him personally for

implementation/compliance with the interim decree dated 20.07.2020 which is under challenge with the Division Bench of the Delhi High Court. His

other submission is that the apprehension of fraudulent transfer of assets by Welworth Software cannot subsist anymore because respondents Nos.l

and 2 have by now disclosed their financial position ar.d this also shows comphance with the directions of this Tribunal issued from time to time.

Lastly, he has made a submission in the capacity of majority shareholder of Welworth Software Pvt. Ltd. that pursuant to the Asset Transfer

Agreement dated 19.12.2019 between the respondents Nos.I and 2. no assets of respondent No.l were actually transferred to respondent No.2 ana

the latter has not divested or transferred his assets to any person or entity. This is contrary to the stand of respondents Nos. 1 and 2 who strongly

canvassed the Asset Transfer Agreement of ! 9.12.2019 as genuine.

 In the rejoinder to the aforesaid reply, the petitioner has pointed out that Mr.Sachin Narayan has not even denied the basic facts on which this

Tribunal found the Asset Transfer Agreement dated 19.12.2019 to be fraudulent In the rejoinder it has been disclosed that Mr.Sachin Narayan along

with his wife holds 100% share in Welworth but respondent No.2 has pleaded otherwise. It has been submitted that even in respondent No.2, EIHP-.

he holds together with his wife 93.06% share. In respect of Malnad Infotech Pvt Ltd. also he is said to hold 100% share.

 The facts pleaded by the petitioner/applicant in MA No.278/2020 for seeking impleadment of Mr.Sachin Narayan including financial

transactions, shareholdings have not been subjected to any specific denial or reply. Some material facts were highlighted from Paras 3.9 and 3.10 of

the application. The financial transactions showing withdrawal and deposits of Mr.Sachin Narayan clearly indicate his total control over respondents

Nos.l and 2. Both the entities may have some officials to represent the management but they are all creatures of Mr.Sachin Narayan. He is the real

face of respondents Nos.l and 2. His presence is essential to understand the financial transactions and various aspects related to management of

respondents Nos.l and 2 including their assets and liabilities. Without his impleadment the decree holder may not get relief and justice. Hence, the

prayer for impleadment of Mr.Sachin Narayan as respondent No.3 is allowed. The memo of parties be corrected accordingly. The earlier order

passed against him so as to restrain him front alienating, transferring or encumbering in any way his assets and properties and also from withdrawing

money from his bank accounts, without seeking leave from this Tribunal is reiterated and confirmed after having perused his reply and noted the

submissions on his behalf. He must submit details of his bank account and all other assets and properties including z list of all business entities wherein

lie with his wife heid/holds majority shares, including corporate or partnership businesses, and show the quantum and value of their shares with

percentage vis-a-vis total shares in such entities/businesses.

Although some details relating to V:r.Sachin Narayan are available on record by way of papers relating to IT Return, he should disclose his

relationship with all his business ventures and their worth, as directed above, within two weeks from today by filing appropriate affidavit on the lines of

respondents Nos.l and 2.

At this stage it is not deemed necessary' to implead M/s Mainad Infotech Pvt. Ltd. even if it is fully owned by Mr.Sachin Narayan. This prayer

may be renewed in future if there are materials found to shew that business of Mainad is also being run in a fraudulent manner sc as to deprive the

benefits of decree under execution passed in favour of the petitioner. Tire MA Nc.278/2020 is allowed to the aforesaid extent and disposed cf

accordingly.

 For taking steps in the Execution Application and for considering tiny other relevant issue, post the matter under the head “for directionsâ€

on 09.03.2021.