TMI Blog2018 (1) TMI 876X X X X Extracts X X X X X X X X Extracts X X X X ..... law and the principles of natural justice by not framing the formal charge or not communicating in any manner the gravamen of the allegations on which the petitioners are to answer the charge of contempt. At the cost of repetition, one may say that the stage where formal charge (or notice of accusations) would require to be framed so as to inform the party in question of the allegations he is required to meet or the conduct he is required to explain, is yet to arrive. The procedure envisaged in Section 17 of Contempt of Courts Act, quoted earlier, would kick-in after and in the event of NCLT recording a finding that prima facie case of contempt is made out and thereby taking formal cognizance and summoning the parties in question to stand trial. NCLT, rather than acting in hurry or undue haste, as is alleged, has taken the neutral course of treating the application seeking initiation of contempt proceedings or for the parties in question to be asked to purge, merely as an application filed in the wake of its order dated 13.07.2017. The decision as to whether or not a prima facie case of willful disobedience, defiance or commission of any act constituting contempt is made out, wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to declare that the notification of Section 425 of the Companies Act, 2013 by Respondent No.1 pursuant to Notification No. S.O. 1934 (E) dated June 1, 2016 published in the Gazette of India is ultra vires and unconstitutional and to strike down such modification; (b) Issue an appropriate writ, order or direction in the nature of mandamus or such other appropriate writ, order or direction to Respondent No.1 to frame rules to regulate proceedings under Section 425 of the Companies Act, 2013 read with the Contempt of Courts Act, 1971, as amended; (c) Issue an appropriate writ, order or direction in the nature of certiorari or such other appropriate writ, order or direction to quash or set aside the orders dated September 5, 2017 and September 26, 2017 issued by the National Company Law Tribunal, Principal Bench in Contempt Application No. 300 (PB) of 2017 in Company Petition No. 110 (ND) of 2013; (d) Issue an appropriate order or direction to stay the proceedings in Contempt Application No. 300 (PB) of 2017 in Company Petition No. 110 (ND) of 2013 until rules are framed by Respondent No.1 in relation to proceedings under Section 425 of the Companies Act, 2013 read with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cause notice alongside the submission of the respondents that the remedy of appeal under the special statute (Companies Act, 2013) is also available, needs to be examined first . 6. It was, however, noted in the proceedings recorded on 07.11.2017 that the petitioners have insisted on and advanced arguments also covering the challenge on merits to the impugned orders not restricting themselves to the preliminary issue mentioned in the proceedings of 26.10.2017. 7. The background facts need to be noted at this stage, albeit, briefly. 8. McDonald s India Pvt. Ltd. (MIPL) was incorporated in August, 1993 under the Companies Act, 1956, it being a wholly owned indirect subsidiary of Mc Donald s Corporation US (hereinafter referred to as McDUS), in the wake of a joint venture agreement (JV) dated 31.03.1995 entered into by MIPL on one hand and by the second respondent in these petitions. A new company styled as Connaught Plaza Restaurants Ltd. (CPRL) was incorporated under Companies Act, 1956 as joint venture on 29.06.1995 in which each side held equal equity share capital. On 18.07.1995, Mr. Vikram Bakshi, the second respondent in these writ petitions came to be appointed as t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ared illegal, unlawful, unjust and malicious. (iii) The Board of Director of Connaught Plaza is divided in 50-50. In order to break the impasse, we deem it just and equitable to appoint Hon ble Mr. Justice G.S. Singhvi, Former Judge Supreme Court, 7 Padmini Enclave, Arvindoo Marg, New Delhi-110016 to act as Administrator with all the powers including the power to vote in the Meetings of Board of Directors. The Administrator shall settle his own fee. (iv) The Administrator shall ensure that all resolutions in respect of Connaught Plaza are passed to advance the interest of the Connaught Plaza and none of the two groups is oppressed. The agenda for re-election of Mr. Vikram Bakshi as the Managing Director shall be taken up with the prior approval of the Administrator. No agenda should be placed before the Board of Directors without the prior approval of the learned Administrator. (v) The Administrator may consider the possibility of even altering the Articles of Association so as to avoid any ugly situation to oust Mr. Vikram Bakshi as Managing Director unjustly and unfairly. (vi) Respondent No.5 is restrained from interfering with the smooth functioning of Connau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the proceedings arising out of company petition no.110(ND)/2013, came to be appointed as Director of MIPL board, assumably he being the nominee of McDUS. The two petitioners of the second captioned petition reiterated their inability to attend the meeting of the board of directors of CPRL on 21.08.2017. By another communication dated 19.08.2017 in response to a further communication from the Administrator, they indicated that their external legal counsel would observe the proceedings of the board on the date for which the meeting had been convened. 12. On 21.08.2017, MIPL issued a notice of termination of the franchise agreement in respect of the restaurants operated by CPRL. For completion of the narration of facts, it may be added that the meeting of the board of directors of CPRL convened by the Administrator took place as scheduled on 21.08.2017 and was attended, amongst others, by the second respondent, and the representatives of the two petitioners in the second above-captioned petition, this against the objection taken on behalf of the second respondent. 13. On 22.08.2017, MIPL filed Company Appeal (AT) no.275/2017 before National Company Law Appellate Tribunal (NCLAT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Section 425 of the Companies Act, 2013 alleging willful disobedience by the parties shown in the array as contemnors, this with reference to the order dated 13.07.2017 of NCLT on Company Petition no.110(ND)/2013, the prayer made therein being as under :- (a) Pass appropriate orders to summon and punish the Contemnor Nos. 1 to 11 in contempt for willful breach and willful disobedience of Final Judgment and Order dated 13.07.2017 passed by this Hon ble Tribunal in Company Petition No. 110 (ND) of 2013; and (b) Direct the Contemnors Nos. 1 to 11 to purge the contempt and to comply with the Final Judgment and Order dated 13.07.2017 passed by this Hon ble Tribunal in Company Petition No. 110 (ND) of 2013. (c) Pass any other or further orders as this Hon ble Tribunal may deem fit and proper in the circumstances of this case. 16. Both the above mentioned applications presented on 31.08.2017 by the second and third respondents came up before NCLT on 05.09.2017 and were taken up by the said forum in the context of Company Petition no.110(ND)/2013 separately, in the presence of such of the respondents as were already present before it. 17. On the first above-said applic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the issues on merit and this order shall not be construed to have expressed any opinion on the controversy . 18. In the second application Contempt Appl. No.300(PB)/2017 - the applicants (i.e. the second and third respondents herein) had impleaded eleven parties as respondents describing them as contemnor nos.1 to 11, they including MIPL (contemnor no.1), Ms. Aysel Melbye (contemnor no.2), Robert Dale Larson (contemnor no.3) and Robert Vee Chong Hunghanfoo (contemnor no.5), the second and third whereof are the co-petitioners in the second abovecaptioned petition and the first and fourth whereof are the copetitioners in the first captioned petition, the others being respondents in these matters. 19. It may be mentioned here that McDUS, the fifth respondent in Company Petition No.110(ND)/2013 against which the restraint order was passed earlier on 13.07.2017 was included in the aforesaid array as contemnor no.9. 20. The prime contentions raised in the aforesaid contempt application are that by various acts of commission and omission as set out therein, the parties impleaded as contemnors had acted in willful defiance of the aforesaid judgment dated 13.07.2017 of NCLT in a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11 are proceeded ex-parte. List the matter for arguments on 23rd October, 2017. 23. The Companies Act, 2013 has established authorities that include NCLT and NCLAT. Section 420(1) mandates that NCLT would pass such orders in the proceedings brought before it as it thinks fit after giving to the parties a reasonable opportunity of being heard . In terms of Section 421, any person aggrieved by an order of NCLT may prefer an appeal to the NCLAT, the exception being, per sub-section (2), in case the order has been passed by NCLT with the consent of parties . The mandate to NCLAT is similar in as much as Section 421(4) requires that NCLAT shall pass such orders on the appeal as it thinks fit by confirming, modifying or setting aside the order impugned before it after giving the parties to the appeal a reasonable opportunity of being heard . Section 424 (2) confers upon NCLT and NCLAT certain powers of the civil court prescribed under the Code of Civil Procedure, 1908 (CPC) while clarifying, by sub-section (1), that the said forums while disposing of the proceedings brought before them be not bound by the procedure laid down in the Code of Civil Procedure, 1908 but s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommenced on a motion, by a copy of the motion as also copies of the affidavits, if any, on which such motion is founded; and (b) in case of proceedings commenced on a reference by a subordinate court, by a copy of the reference. (3) The Court may, if it is satisfied that a person charged under section 15 is likely to abscond or keep out of the way to avoid service of the notice, order the attachment of his property of such value or amount as it may deem reasonable. (4) Every attachment under sub-section (3) shall be effected in the manner provided in the Code of Civil Procedure, 1908 (5 of 1908 , for the attachment of property in execution of a decree for payment of money, and if, after such attachment, the person charged appears and shows to the satisfaction of the court that he did not abscond or keep out of the way to avoid service of the notice, the Court shall order the release of his property from attachment upon such terms as to costs or otherwise as it may think fit. (5) Any person charged with contempt under section 15 may file an affidavit in support of his defence, and the court may determine the matter of the charge either on the affidavits filed or after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct are required to be, or may be, prescribed or in respect of which provision is to be or may be made by rules. 29. The Central Government issued notification no.S.O.1934 (E) on 01.06.2016 bringing into effect the provision contained in Section 425 of the Companies Act, 2013. By notification G.S.R. 716(E) issued and published in the official Gazette on 21.07.2016, the Central Government framed the rules, in exercise of the powers conferred by Section 469, such rules being called the National Company Law Tribunal Rules, 2016 . These rules, inter alia, deal with a variety of subjects and issues including definitions, forms, etc (Part-I), power and functions of the President, Registrar and Secretary (Part-II), institutions of proceedings, petitions, appeals, etc. (Part-III), general procedure (part-IV), issuance of orders and disposal of cases (part-V), etc. The following specific rules have been referred in the course of hearing and, thus, may be quoted to the extent relevant as under :- 11. Inherent Powers.- Nothing in these rules shall be deemed to limit or otherwise affect the inherent powers of the Tribunal to make such orders as may be necessary for meeting the end ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 49. Ex-parte Hearing and disposal.- (1) Where on the date fixed for hearing the petition or application or on any other date to which such hearing may be adjourned, the applicant appears and the respondent does not appear when the petition or the application is called for hearing, the Tribunal may adjourn the hearing or hear and decide the petition or the application exparte. (2) Where a petition or an application has been heard ex-parte against a respondent or respondents, such respondent or respondents may apply to the Tribunal for an order to set it aside and if such respondent or respondents satisfies the Tribunal that the notice was not duly served, or that he or they were prevented by any sufficient cause from appearing (when the petition or the application was called) for hearing, the Tribunal may make an order setting aside the ex-parte hearing as against him or them upon such terms as it thinks fit. Provided that where the ex-parte hearing of the petition or application is of such nature that it cannot be set aside as against one respondent only, it may be set aside as against all or any of the other respondents also. 51. Power to regulate the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n no.300 (PB)/2017 is challenged on the grounds that the action is wholly uncalled for, illegal and arbitrary, in gross breach of the principles of natural justice. The petitioners attribute bias alleging that NCLT has shown undue hurry and haste in taking cognizance on the contempt application committing impropriety, not only by not awaiting the decision of NCLAT on the appeals which have been brought before it by both sides assailing the order of the NCLT (dated 13.07.2017), the alleged breach of which constitutes the contempt, but also failing to apply its mind appropriately to the averments made in the contempt application which, if done, would have shown that there is not even a prima facie case made out for any willful disobedience, defiance or any act committed reflecting deliberate disregard of the final judgment of the NCLT, there being no case of any collusion between the parties impleaded as contemnors. 32. The petitioners argue that on facts, no case of contempt was made out, particularly as the restraint order issued on 13.07.2017, the effort to overreach which is alleged, was directed only against McDUS, the fifth respondent in the Company Petition no.110(ND)/2013, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion under the criminal law is one of great import and therefore, a serious matter. The burden and standard of proof in contempt proceedings is the same standard of proof as required in criminal proceedings. Great circumspection is required to be exercised by the court or the forum conferred with power to punish for contempt. Such action cannot be undertaken merely based on conjectures or surmises. The proceedings of contempt of court are generally treated as sui generis. Though the procedure adopted both under the common law and the statute in this context has invariably been summary in nature and the provisions of the Code of Criminal Procedure or the Evidence Act do not strictly control the same, it is essential that the court or the forum follows the procedure that is fair and objective. Before issuing notice calling upon the alleged contemnor to answer the charge of contempt, the court or the forum must record satisfaction that there is a clear, unambiguous and unequivocal case made out showing willful and contumacious conduct by the respondent. The procedure to be followed, after formal cognizance is taken, must include framing of a precise and specific charge or notice so as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or decision of the High Court in exercise of its jurisdiction to punish for contempt. In other words, if the High Court passes an order in exercise of its jurisdiction to punish any person for contempt of court, then only an appeal shall be maintainable under sub-section (1) of Section 19 of the Act. As sub-section (1) of Section 19 provides that an appeal shall lie as of right from any order, an impression is created that an appeal has been provided under the said sub-section against any order passed by the High Court while exercising the jurisdiction of contempt proceedings. The words any order have to be read with the expression decision used in the said sub-section which the High Court passes in exercise of its jurisdiction to punish for contempt. Any order is not independent of the expression decision . They have been put in an alternative form saying order or decision . In either case, it must be in the nature of punishment for contempt. If the expression any order is read independently of the decision then an appeal shall lie under sub-section (1) of Section 19 even against any interlocutory order passed in a proceeding for contempt by the High Court whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erent and would not come to the aid of the petitioners. The stay matter in the writ petition was still pending before the High Court when the contempt case was proceeded with. It is in that context that the Supreme Court ruled that the High Court should have first taken up the stay matter without any threat to the respondents in the writ case of being punished for contempt or, to put it slightly differently, the matter relating to contempt should have been taken up only after decision had been rendered on the stay application. Unlike the facts of the said case, the NCLT has already rendered its final decision on 13.07.2017. It was the enforcement of the directions passed in the said order, if required by suitable action under the powers to punish for contempt, which were to be considered. There is no inhibition before the NCLT in proceeding with the matter of contempt so long as there is no stay issued by the appellate forum (NCLAT). 41. The initiation of contempt proceedings for non-compliance with the order of a learned single Judge of the High Court directing reinstatement and payment of back salary while the matter was pending in appeal for admission before a division bench ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rgument that an action for contempt cannot be initiated or taken against a party who was not already a party to the lis or, that in contempt proceedings there cannot be a charge of collusion or, of the parties having acted in concert . It is not difficult to conceive of cases where a party to the litigation, with aid, assistance or abetment of a stranger to the proceedings, may indulge in acts of commission or omission so as to overreach the judicial orders passed in such proceedings and to defeat or obstruct the administration of justice. The parties which are strangers to the judicial proceedings can be proceeded against if there is material to support the allegation that they had knowledge of the lis and the orders passed therein and that they shared the guilty intent. In this view, this court rejects the argument that a party who was not a party to the company petition cannot at all be proceeded against in the contempt proceedings. 44. It does appear that aside from the directions in the two orders which are impugned before this court in these proceedings i.e. the orders dated 05.09.2017 and 26.09.2017, which have been quoted in extenso earlier, no formal order, or notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y (who are the applicants) is not in breach of but in accord with the rules of the National Company Law Tribunal s Rules, 2016 which have been extracted above. [see Rule 38]. 46. At the present stage of the proceedings before NCLT, where it is yet to take formal cognizance, if the party which has been shown in the array of the contemnors chooses not to cooperate by either not appearing, or not responding, the NCLT is within its jurisdiction and power to proceed ex parte against it. [see Rule 49]. Undoubtedly, after the facts have been gathered and process initiated and particularly in the event of cognizance eventually being taken of contempt under the Contempt of Courts Act, the NCLT will be within its jurisdiction and power to enforce appearance and attendance. But, till such stage arises, the preliminary scrutiny, or inquiry, can be continued with by recording the absence despite notice, the only inference to be drawn being that the party in question does not wish to say anything in the matter at such stage. 47. In absence of separate rules to govern the procedure to be followed by NCLT for exercise of power to punish for contempt, the NCLT is to follow the general rules. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... el this court to interdict in exercise of the writ jurisdiction. 51. The petitioners have not been able to show violation of the principles of natural justice in the proceedings thus far conducted by NCLT on the contempt application. As noted above, the said proceedings cannot be said to be without jurisdiction. There is no element of arbitrariness as necessitates the writ court s intervention. Thus, this court declines exercise of writ jurisdiction. [see L. Chandra Kumar (supra) and Whirlpool Corporation Vs. Registrar of Trade Marks, Mumbai and Ors., (1998) 8 SCC 1]. 52. On the above facts and in the circumstances, the NCLT being seized of the matter, it would not be proper for this court in proceedings at hand to make any observations either way on the merits of the allegations made in the contempt application, lest the same prejudices either side. 53. To sum up, this court is of the view that grievances raised by the petitioners are a result of unfounded apprehensions about NCLT having prejudged the issue and reflect paranoia rather than substance. 54. The writ petitions are, thus, dismissed. The interim orders stand vacated. 55. The pending applications are rend ..... X X X X Extracts X X X X X X X X Extracts X X X X
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