2025 (6) TMI 1824 - AT - IBC

Dismiaal of contempt petition - Prayer for grant of a decree of permanent injunction - restraint them from transferring 400 shares - seeking a decree in the nature of Mandatory Injunction as against the Respondent - non-compliance of the objections raised by the Registry of the NCLT - HELD THAT - The provisions of drawing of Contempt Proceedings under Companies Act 1956 was contained under Section 10G and under the Companies Act of 2013 it is contained under Section 425. The Section 425 of the Companies Act 2013 contemplates that the proceedings of the Contempt could be drawn and carried in accordance with the provisions contained under the Contempt of Courts Act of 1971. Almost akin provisions were contemplated under the Companies Act of 1956 which too provided that the Contempt Proceedings will be carried on by following the provisions of the Contempt of Courts Act 1971 - Since the status of the Applicant is that of the informer he may not have much material right as such to have a say in the proceedings of the Contempt which is to be carried in accordance with the provisions of the Contempt of Courts Act of 1971. The fact remains that if the Contempt Proceedings are taken up before the Tribunal since the issue of Contempt contemplates of passing of an order of punishment upon the Tribunal or the Court being satisfied of there being a case of deliberate and intentional non-compliance of order made out the issue thereafter exclusively relates between the Tribunal or the Court and the alleged Contemnor. Hence it had been a general widely accepted preposition that the proceedings of the Contempt since not being a proceedings in relation to the enforcement of a personal right but rather maintaining the prestige of the Court of Tribunal so as to ensure the compliance of its order the Contempt Proceedings ought not to be dismissed for want of prosecution and the Tribunal or the Court should have decided the same on merits even in the absence of the applicant because it is an exclusive satisfaction which is to be recorded by the Court or the Tribunal about the alleged non-compliance of an order passed by the Tribunal or the Court. The question which would engage consideration will be as to even when there was a lack of diligence as observed in the order dismissing the application for want of prosecution whether at all the same could be dismissed for want of prosecution as it has been made in the instant case by the order passed on 30.08.2019. The objection mounted by the Respondent that there had been an inordinate delay in serving the Contempt Petition cannot be taken as an exclusive reason for the purposes to reject the Restoration Application along with the Delay Condonation application as no other proceedings could be derived and taken as to be the basis to reject the Restoration Application along with the Condone Delay Application - deriving its logic from previous observations which were made in the proceedings that itself cannot be a reason to reject the Restoration Application along with the Condone Delay Application where the delay of 374 days has been sought to be condoned on account of the ailment which the Appellant No. 1 and Appellant No. 2 have claimed to have suffered as detailed in para IV of the Application. Owing to the fact that the reasons which has been given in the Condone Delay Application being CA.No. 16A/2021 appear reasonable in face of the documents which have been placed on record the delay which has chanced in preferring the Restoration Application in the Contempt proceedings deserves condonation. Conclusion - When the Contempt Petition and the proceedings thereof is still to take birth because of non-rectification of the defects the same could not have been dismissed for want of prosecution by the Learned Tribunal on merits. The order dated 30.08.2019 rejecting the Contempt Petition for default is recalled - Appeal allowed.

Summary

Issues Presented and Considered

The core legal questions considered by the Tribunal in this case include:

• Whether the dismissal of the Contempt Petition for want of prosecution was legally sustainable, particularly when the defects pointed out by the Registry were not complied with;
• The applicability and interpretation of the provisions relating to Contempt Proceedings under the Companies Act, 1956 (Section 10G), and Companies Act, 2013 (Section 425), read with the Contempt of Courts Act, 1971;
• Whether Contempt Proceedings can be dismissed for want of prosecution, especially given the unique nature of contempt as a proceeding to maintain the authority and dignity of the Court or Tribunal;
• The validity of the Restoration Application and Delay Condonation Application filed by the Appellant after dismissal of the Contempt Petition, including the consideration of delay caused by serious health issues of the petitioners;
• The effect of alleged compliance by Respondents on the maintainability and continuance of the Contempt Petition;
• The procedural and substantive rights of the Applicant in Contempt Proceedings under the Companies Act framework, including the role of the Applicant as an informer rather than a party with substantive rights in such proceedings.

Issue-wise Detailed Analysis

1. Dismissal of Contempt Petition for Want of Prosecution

Legal Framework and Precedents: The Contempt Petition was filed under Section 425 of the Companies Act, 2013, which mandates that Contempt Proceedings under the Companies Act be governed by the Contempt of Courts Act, 1971. The Companies Act, 1956 contained a similar provision under Section 10G. The Contempt of Courts Act governs the procedure and substantive law relating to contempt, emphasizing the preservation of the Court's authority and the enforcement of its orders.

Court's Interpretation and Reasoning: The Tribunal observed that dismissal of Contempt Proceedings for want of prosecution is generally inappropriate. Contempt Proceedings are unique in nature, being instituted not to enforce a private right but to uphold the dignity and authority of the Court or Tribunal. The Applicant in such proceedings is an informer, and the proceedings are essentially between the Court/Tribunal and the alleged contemnor. Therefore, even in the absence of the Applicant, the Court or Tribunal should decide the matter on merits.

Key Evidence and Findings: The Registry had pointed out defects in the Contempt Petition which were not rectified within the stipulated time. The Tribunal noted that the defects were not so fatal as to affect the merits of the Contempt Petition. The period from the judgment date (28.02.2019) to the dismissal (30.08.2019) was not excessively long and could have warranted leniency or further opportunity rather than outright dismissal.

Application of Law to Facts: Since the defects were procedural and not substantive, and the Contempt Petition had not legally matured for consideration on merits due to non-rectification, the Tribunal held that dismissal for want of prosecution was not justified. The Tribunal emphasized that dismissal for want of prosecution presupposes that the proceedings have been legally instituted and are pending on merits. Here, the petition had not reached that stage.

Treatment of Competing Arguments: The Respondents argued that the dismissal was justified due to non-compliance with Registry objections and non-appearance. The Tribunal rejected this, stressing the special nature of Contempt Proceedings and the need to decide such matters on merits to uphold judicial authority.

Conclusions: The order dismissing the Contempt Petition for want of prosecution was held to be legally unsustainable and bad in law.

2. Applicability and Interpretation of Contempt Provisions under Companies Act and Contempt of Courts Act

Legal Framework: Section 10G of the Companies Act, 1956, and Section 425 of the Companies Act, 2013, provide for Contempt Proceedings in relation to non-compliance of orders passed under the Companies Act. These sections require such proceedings to be conducted in accordance with the Contempt of Courts Act, 1971.

Court's Interpretation: The Tribunal clarified that although the Contempt Proceedings arise under the Companies Act, their procedural and substantive character is governed by the Contempt of Courts Act. The Applicant acts as an informer, and the proceedings aim to enforce compliance of orders and maintain the Tribunal's authority rather than enforce personal rights.

Key Findings: The Tribunal noted that the nature of Contempt Proceedings under the Companies Act does not confer substantive rights on the Applicant but only the status of an informer. The Tribunal's satisfaction about deliberate non-compliance is paramount.

Application of Law: The Tribunal applied this framework to hold that the Contempt Petition should have been decided on merits, irrespective of the Applicant's non-appearance or procedural defects.

Competing Arguments: The Respondents contended that the Contempt Proceedings were not maintainable or had become infructuous due to compliance. The Tribunal rejected this preliminary contention, stating that compliance and purging of contempt are separate issues to be decided on merits.

Conclusions: The Contempt Proceedings must be adjudicated on merits in accordance with the Contempt of Courts Act, and procedural technicalities should not defeat substantive justice.

3. Restoration and Delay Condonation Applications

Legal Framework: The Limitation Act applies to proceedings under the Companies Act by virtue of Section 433 of the Companies Act, 2013 and Section 10G of the Companies Act, 1956. Restoration of dismissed proceedings and condonation of delay require demonstration of sufficient cause.

Court's Reasoning: The Appellants pleaded serious health issues of Petitioner Nos. 1 and 2, including acute coronary syndrome and age-related ailments, which prevented diligent prosecution of the Contempt Petition and compliance with Registry objections. These grounds were not seriously disputed by the Respondents.

Key Evidence: Medical documents and pleadings substantiating the health conditions of the petitioners were placed on record.

Application of Law: The Tribunal held that the delay of 374 days in filing the Restoration Application was justified on the basis of the health issues. The Restoration and Delay Condonation Applications deserved to be allowed and considered on merits.

Competing Arguments: The Respondents argued that the Contempt Petition had become infructuous due to compliance and that the delay was inordinate. The Tribunal rejected these contentions, emphasizing that each application must be considered independently on its own merits and that compliance does not automatically purge contempt.

Conclusions: The Tribunal allowed both the Restoration and Delay Condonation Applications, quashed the dismissal order of 30.08.2019, recalled the dismissal of the Contempt Petition, and restored it for adjudication on merits.

Significant Holdings

"Since the Contempt Proceedings are not a proceeding in relation to the enforcement of a personal right, but rather maintaining the prestige of the Court or Tribunal so as to ensure the compliance of its order, the Contempt Proceedings ought not to be dismissed for want of prosecution and the Tribunal or the Court should have decided the same on merits, even in the absence of the applicant."

"When the defects are yet to be rectified, the presumption would be that as a matter of fact, there is no Contempt Petition which stands instituted either under Section 10G of the Companies Act of 1956 or under Section 425 of the Companies Act of 2013, which could be dismissed for want of prosecution."

"Compliance of an order itself will not amount to purging of Contempt, because various other aspects are required to be considered, such as whether the order was complied with in the stipulated time frame and who was supposed to comply the order."

"Each Miscellaneous Application in any judicial proceedings have to be independently considered and decided on its merits, without being influenced by earlier applications or orders passed in the proceedings or by the conduct of the party to the proceedings."

"Owing to the fact, that the reasons, which has been given in the Condone Delay Application appear reasonable in face of the documents which have been placed on record, the delay which has chanced in preferring the Restoration Application in the Contempt proceedings deserves condonation."

Core Principles Established:

• Contempt Proceedings under the Companies Act must be conducted in accordance with the Contempt of Courts Act, emphasizing the Tribunal's authority and dignity rather than enforcement of personal rights.
• Dismissing Contempt Proceedings for want of prosecution is generally impermissible; such proceedings should be decided on merits irrespective of the Applicant's absence.
• Procedural defects that do not affect the merits should not lead to dismissal of Contempt Petitions, especially when the defects are capable of being remedied.
• Restoration of dismissed Contempt Petitions and condonation of delay should be granted when sufficient cause, such as serious health issues, is demonstrated.
• Compliance with an order does not automatically purge contempt; the nature, timing, and party responsible for compliance must be examined on merits.
• Each application in judicial proceedings must be considered independently on its own merits without being prejudiced by prior orders or conduct.

Final Determinations:

• The order dismissing the Contempt Petition for want of prosecution was quashed.
• The Restoration Application and Delay Condonation Application were allowed, and the delay of 374 days was condoned.
• The Contempt Petition was restored to its original number and directed to be decided exclusively on merits.
• The Tribunal rejected the Respondents' contention that the Contempt Petition had become infructuous due to compliance, holding that such issues are to be decided on merits after restoration.