Home Case Index All Cases Companies Law Companies Law + SC Companies Law - 2021 (1) TMI SC This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2021 (1) TMI 939 - SC - Companies LawContempt petition - guilty of contempt - specific performance of family settlement - oppression and mismanagement - allegation is that the high value contracts were executed by issuing multiple cheques under the value of ₹ 10 lakhs, though, the contract amount was much more - vital information with regard to management of the Company was withheld - unilateral settlement with trade union - appointment and promotion of senior executives - Sections 397, 398 and 403 of the Companies Act, 1956 - HELD THAT:- Perusal of Section 397 would reveal, that a member of a Company is entitled to apply to the CLB complaining that the affairs of the Company were being conducted in a manner prejudicial to the public interest or in a manner oppressive to any member or members including anyone or more of themselves, for an order under the said section. The only rider is that such a Member should have a right to do so by virtue of Section 399. Under sub-section (2) of Section 397, if the CLB was of the opinion, that the Company’s affairs are being conducted in a manner prejudicial to the public interest or in a manner oppressive to any member or members and that to wind up the Company would unfairly prejudice such member or members, but that otherwise the facts would justify the making of a winding up order on the ground, that it was just and equitable that the Company should be wound up; it was entitled to make such order as it thinks fit, with a view to bringing to an end such matter complained of - It could thus be seen, that any member of a Company is entitled to make an application to the CLB complaining that the affairs of the Company are being conducted in a manner prejudicial to public interest or in a manner prejudicial to the interest of the Company and the CLB is empowered to make such order as it thinks fit, with a view to bring to an end the matter complained of. A similar provision contained in Section 398, enables the members of a Company to complain, that the affairs of the Company are being conducted in a manner prejudicial to public interest or in a manner prejudicial to interest of the Company. It also enables a member to complain with regard to material change which has taken place in the management and control of the Company and by reason of such change, it is likely that the affairs of the Company will be conducted in a manner prejudicial to the public interest or to the interest of the Company. Again, the only rider is, that such a member must have a right to apply by virtue of Section 399. Perusal of sub-section (2) of Section 398 would further reveal, that if such an application was made under sub-section (1) of Section 398 and if the CLB was of the opinion, that the affairs of the Company are being conducted as aforesaid, the Tribunal may, with a view to bringing to an end or preventing the matter complained of or apprehended, is entitled to make such orders as it thinks fit - It could thus be seen, that the respondents had legitimately approached the CLB invoking its jurisdiction under Sections 397, 398 and 403 of the Companies Act. The learned CLB had also passed interim orders in exercise of its powers under Section 403 of the Companies Act. The petitioner had approached this Court immediately after the order dated 10th April 2008, was passed by the CLB by way of present contempt petition. Along with the contempt petition, IA No. 1 of 2008 was also filed for stay of the order passed by CLB. Subsequently, another IA No. 2 of 2008 was also filed seeking stay of the proceedings before CLB and the communications/directions passed by the Facilitator. However, no orders have been passed by this Court on the said IAs. In the present case, undisputedly, the respondents were entitled to invoke the jurisdiction of the CLB under Sections 397, 398 and 403 of the Companies Act. The CLB has passed the order on 10th April 2008 appointing a Facilitator and further passed order dated 28th April 2011, enhancing the powers of the Facilitator. Perusal of the orders passed by this Court dated 21st July 2009 and 29th July 2009, would reveal, that though this Court had appointed independent Director, it is clarified, that the independent Director’s functioning would not come in the way of the functioning of the Facilitator. On the contrary, by order dated 29th July 2009, this Court observed, that the appointment of Shri Ranina as independent Director would facilitate the functioning of the Facilitator, appointed by the CLB - It can thus be seen, that this Court has held, that the contempt proceeding is not like an execution proceeding under the Code of Civil Procedure. It has been held, that though the parties in whose favour, an order has been passed, is entitled to the benefits of such order, but the Court while considering the issue as to whether the alleged contemnor should be punished for not having complied with and carried out the directions of the Court, has to take into consideration all facts and circumstances of a particular case. It has been held, that is why the framers of the Act while defining civil contempt, have said that it must be wilful disobedience of any judgment, decree, direction, order, writ or other process of the Court. It has been held, that before punishing the contemnor for non-compliance of the decision of the Court, the Court must not only be satisfied about the disobedience of any judgment, decree, direction, writ or other process but should also be satisfied that such disobedience was wilful and intentional. In the present case, the petitioner has failed to make out a case of wilful, deliberate and intentional disobedience of any of the directions given by this Court or acting in breach of an undertaking given to this Court. On the contrary, we find that the respondents had taken recourse to the legal remedy available to them under the statutory provisions. No doubt, Mr. Rohatgi has argued, that the proceedings before the CLB are itself without jurisdiction. Though the counsel for the present petitioner had raised an issue that without deciding on the maintainability of the petition, the interim order could not be passed, the CLB observed, that under Sections 397 and 398 of the Companies Act, it is well settled, that only if the maintainability is challenged either in terms of Section 399 or jurisdiction of the CLB, challenges on other grounds have to be considered along with the merits of the case. It further observed, that in the present case, it was admitted fact, that the petitioner qualified under Section 399 of the said Act and that the CLB has jurisdiction to deal with the petition under Sections 397 and 398 of the Act. It further observed, that in the proceedings under Sections 397/398, it is the interest of the Company which is paramount. It observed, that it was quite evident from the various annexures enclosed with the petition, that due to differences among the Directors, many operational issues concerning the management of the Company like payment of salary/wages, payment to suppliers etc. were pending, resulting in agitation by the employees and irregularity in supplies - it should not be construed, that we have held that the proceedings under the CLB were maintainable in law. Since the proceedings are pending final adjudication, the parties would be at liberty to raise all issues available to them including the issue of jurisdiction. The present contempt petition is without any merit and deserves to be dismissed, and is accordingly dismissed.
|