TMI Blog2021 (5) TMI 163X X X X Extracts X X X X X X X X Extracts X X X X ..... s and the inventory/interim report of the APL committee give rise to a possible interpretation that the extent of the estate and the controlling interest of PDB can be to the extent admitted by the alleged contemnors. On the other hand, the extent of the estate can also be as contended by the petitioners. Controlling interest however is yet to be conclusively defined and quantified. The APL Committee has not quantified the same. In this case, the extent of control can also be the influence PDB had over the shareholders/Promoter Groups or Person Acting in concert. There is a possibility that the Promoters/Promoter Groups and PACs did not vote in concurrence with the APL Committee s decision in the AGMs where HVL was re-appointed as director. Moreover, there is also no allegation of dissipation or depletion of the estate or transfer of shares in violation of the order of status quo and thus the emphasis laid by Mr. S.N. Mookherjee on the orders of status quo over the shares as also on the orders of the CLB are not relevant in the contempt proceedings. In view of the preponderance of probabilities in the facts of this case, contempt has not been proved beyond reasonable doubt. It i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ajay Bhargav, Adv., Mrs. Vanita Bhargav, Adv., Mr. Swarnendu Ghosh, Adv. For the Petitioners : Mr. Darius Khambata, Sr. Adv., Mr. Abhrajit Mitra, Sr. Adv., Mr. Partha Sarathi Sengupta, Sr. Adv., Mr. Soumya Raychowdhury, Adv., Mr. Debanjan Mandal, Adv., Mr. Sanjiv Kumar Trivedi, Adv., Mr. Kunal Vajani, Adv., Mr. Sarvapria Mukherjee, Adv., Mr. Deepan Sarkar, Adv., Ms. Iram Sassan, Adv., Mr. Sanket Sarawgi, Adv., Ms. Mahima Cholera, Adv. ...for HVL Mr. Ranjan Bachawat, Sr. Adv., Mr. Sayan Roychowdhury, Adv., Mr. Satyaki Mukherjee, Adv., Mr. Paritosh Sinha, Adv., Mr. Saubhik Chowdhruy, Adv., Mr. Dripto Majumdar, Adv., Ms. Ayusmita Sinha, Adv. ...for the Companies Mr. Kihosre Datta, Sr. Adv. ... for APL Minority Member Mr. Joy Saha, Sr. Adv., Mr. Yash Vardhan Deora, Adv., Ms. Asmita Raychaudhuri, Adv. ...for APL Majority Committee ORDER SHAMPA SARKAR, J.:- 1. These contempt applications have been filed by the defendants in Title Suit No. 6 of 2004 (a testamentary suit) alleging wilful, deliberate and contumacious violation of a common order dated October 1, 2020 passed by this Bench in APO No.89 of 2020, APO No.90 of 2020, APO No.91 of 2020, APO No.92 of 2020 and A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... furtherance of the said decisions and shall be restrained from drawing any benefit personally from out of the assets of the estate of the deceased during pendency of the Testamentary Suit. (b) Plaintiffs are also restrained from interfering with the decisions of the APL and any decision which might be taken by it in future by majority if the same directly or indirectly relates to the estate of the deceased and further the plaintiff no.1, Harsh Vardhan Lodha is restrained from holding any office in any of the entities of M.P. Birla Group during pendency of the Suit. (c) Defendants are also restrained by an order of temporary injunction from interfering with the APL s decision by majority during pendency of the suit. 5. No orders were passed by the learned Single Judge with regard to the subsequent decisions of the APL Committee dated July 23 and 30, 2020. Aggrieved by the aforementioned order, the above-mentioned appeals were preferred by the companies as also by HVL. HVL challenged the order, inter alia, on the ground that by the order of the learned Single Judge, the APL Committee s interference with his office as a director of these companies, having been duly a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ending for final adjudication. This Bench clarified that the word implement occurring in paragraph (a) among the three directions issued by the learned Judge would mean abide by . It was further clarified that the operation of paragraph (b) among, the directions would be a restriction on the plaintiff no.1 Harsh Vardhan Lodha to the extent of it being a restriction from holding any office in any of the entities of the M P Birla Group during the pendency of the suit, on the strength of the shares referable to the estate of PDB. 7. The defendants/petitioners have alleged violation of the above-mentioned order of this court, alleging failure on the part of HVL to abide by the directions of the APL Committee by participating in the Board meetings as director/chairman. The allegations of aiding and abetting HVL have been levelled against the directors of each of these companies. Further violation of the subsequent decisions taken by the APL Committee dated July 23, 2020 and July 30, 2020 not to support re-appointment of HVL as director have also been alleged. As the allegation of contumacious violation of the order of this court is primarily against HVL, CC 38 of 2020 is taken up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he nature of the business, its management and various other matters touching the affairs of the company, the APL Committee s decision not to support re-appointment of HVL as director of the companies, was binding, as the control over the companies had vested upon the APL Committee being the estate of PDB. HVL by not stepping down from his office of director violated the order of this court. It was submitted that this Bench also was of the view that APL s power included the power to regulate and permit such shares to be utilised to generate appropriate income and to better utilise the same, in the best interest of the affairs of the estate of PDB which would, ultimately, reflect on the end beneficiaries. Thus, HVL s directorship against the APL Committee s decision, were detrimental to the business of these companies. Attention was drawn to the decisions of the APL Committee dated July 19, 2019 and July 30, 2019, in support of the contention that the committee upon taking into consideration that the major part of the estate of PDB consisted of direct and indirect share holdings through cross and chain holdings in various companies, being the controlling interest in the M.P. Group of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Board of Directors of the companies held on 5th November, 2020, 9th November, 2020 and 10th November, 2020, as he was not re-appointed as a director in his individual capacity, but only on the strength of the shares referable to the estate of PDB. 11. HVL filed his affidavit-in-opposition responding to the show-cause issued by this court. HVL stated that he did not commit any deliberate, wilful or contumacious act of violation of the order dated October 1, 2020 and tendered unconditional apology in the event this Bench found any act of contempt on his part. 12. HVL s explanation was that the estate of PDB comprised of only those assets which were mentioned in the affidavit of assets by both the parties and in the interim report filed by the APL Committee. Reference had been made to a decision of the Division Bench of this court dated October 11, 2007 reported in ILR 2007 (2) CAL 377, Rajendra Singh Lodha vs. Ajoy Kumar Neewar Ors. passed in the testamentary proceedings. Special emphasis has been laid on paragraph 301 of the said judgment, wherein it had been observed that the controlling block of shares of PDB were those disclosed in the affidavit of assets and no dispu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s director/chairman on the strength of the shares referable to the estate of PDB. HVL contended that he abided by the decisions of the APL Committee. HVL reiterated that his office as director in the listed companies was not on the strength of the shares referable to the estate of PDB and if the voting pattern in the resolutions of re-appointment were taken into account, the figures would reveal that even on the strength of votes of public shares holders he would have been re-appointed. 13. Mr. Khambata, learned senior counsel appearing on behalf of the HVL submitted that from the answer to the show-cause filed by HVL, two interpretations of the order of this Bench were possible. Thus, the benefit of doubt would be in favour of holding HVL not guilty of the alleged contempt. His next argument was that the alleged act of contempt should be strictly construed in the context of the order made and the violations alleged. Learned counsel urged that the allegations were essentially contumacious violation of the order of the learned Single Judge and there being no merger of the order, the contempt proceedings were not maintainable before this Bench. He relied on the decision of Kunh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... some of the other companies (within MP Birla Group) and also nominated Justice D.G. Karnik (Retd.) as a director of UCB, BCL and VTL and Justice Devadhar (Retd.) as director in the Board of BCab. Attention was drawn to paragraph 26 of the decision dated July 19, 2020, to show that the APL Committee chose to proceed on the basis of a possibility that the estate of PDB had a majority share in the M.P. Birla Group of Companies including, Tire-3 and Tire-4 companies. 15. Learned senior counsel categorically stated that HVL did not ever act as a representative of the estate of PDB. The role of HVL as a legatee under the Will and as a director of the companies were distinct and separate. The functions of HVL as a director was guided by the provisions of company law and only his functions as a legatee of the estate of the deceased would be subject to the directions of the probate court. Reliance was placed on the decision of the Apex Court in the matter of Chandrabhai K. Bhoir and ors. v. Krishna Arjun Bhoir and ors. reported in (2009) 2 SCC 315. Mr. Khambata emphasised that the action of HVL in attending the Board meeting and chairing the same were not subject to directions of the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imited reported in (2015) 10 SCC 602 was also referred. 18. Mr. Khambata concluded that as the standard of proving contempt was that of a criminal proceeding, the contempt must be established beyond reasonable doubt and powers under this special jurisdiction should be exercised by courts cautiously and sparingly and in the larger interest, after examining the true effect of the alleged contemptuous conduct. Reliance was placed in the decision of Mrityunjoy Das and anr. v. Sayed Hasibur Rahaman and ors. reported in (2001) 3 SCC 739 and Ram Kishan v. Tarun Bajaj and ors. reported in (2014) 16 SCC 204. 19. The other contempt applications in this group are against the directors of Universal Cables Limited (UCL), Birla Cables Limited (BCab), Vindhya Telelinks Limited (VTL) and Birla Corporation Limited (BCL), in their personal names. The Companies have not been impleaded. 20. The allegations against the directors are of aiding and abetting HVL in violating the order of this court. The acts of contempt, inter alia, are summarised below:- a) Permitting HVL to continue to hold office as director/chairman of UCL, BCab, VTL and BCL. b) Permitting HVL to participate in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cisions of the APL Committee, taken by majority and a further restriction on HVL from holding any office in any of the M.P. Birla group of companies on the strength of the shares referable to the estate of PDB, the directors of the company despite several communications, request and directions of the APL Committee, allowed HVL to cast his vote in the Board meeting. Such action amounted to wilful and deliberate violation of the order of this court committed by the directors who aided and abetted HVL in violating our order. 23. Mr. Shyam Divan, learned senior counsel appearing on behalf of the alleged contemnors submitted that UCL, being a public limited company and a separate legal entity not having been impleaded as a contemnor in these proceedings, the directors could not be individually hauled up in contempt, holding them vicariously liable for the alleged acts of the company. In the absence of any allegation against the company of wilful disobedience and violation of the order of this Bench, the directors could not be made personally liable. He submitted that in the affidavit-in-opposition used by the directors, they had tendered unqualified apology and had categorically subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Judge in the judgment and order dated September 18, 2020, permitted HVL to attend the meeting and act as the director/chairman. Reliance was placed on the flow chart and the statement of shareholdings annexed to the decision of the APL Committee dated July 19, 2019. He further submitted that the defence taken by these directors in their affidavit-in-opposition that, in the absence of any positive directions or restrictions upon the directors from doing any act in relation to the activities of the company in question, contempt would not lie against such third parties, was preposterous and a further contempt on the face of the court. 27. Learned Senior counsel drew the attention of the court to the notes of arguments filed on behalf of RSL, in a proceeding before this court claiming that the controlling block of shares in the M.P. Birla Group of Companies was by far the main asset of PDB. Further reference was made to a decision of another learned Single Judge of this court passed on March 23, 2005, wherein the probate court passed an order of status quo holding that, if the majority shareholding or the controlling block of shares of PDB, were transferred or otherwise dealt with, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... L Committee consisting of a former Judge of the Supreme Court of India written to the chairman and Board of Directors of BCL, informing the directors of BCL that as the controlling block of shares in the company vested in the estate of PDB which was represented by the committee, all important decisions touching the control, ownership and management should be intimated to the Committee. A reference was further drawn to the order of the Company Law Board (CBL) passed in Gouri Shankar Kayan Ors. vs. East India Investment Company P. Ltd Ors. reported in (2005) 128 Comp Cas 145 (CLB) where it was observed that immediately on the death of PDB, her interests (the controlling block of shares) in the companies who were parties before the CLB stood devolved on her legal heirs. Reference was made to the decision of World Wide Agencies (P) Limited v. Mrs. Margaret T Desor reported in (1990) 67 Comp Cas 607 (SC). 28. Mr. Ranjan Bachawat, learned senior counsel appearing on behalf of the alleged contemnors primarily adopted the submissions of Mr. Divan. It was his specific case that the company being a public listed company had certain statutory duties and compliances, one of which was to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers vehemently argued that the directors of the company were guilty of contempt as they had aided and abetted HVL by permitting him to attend the Board meetings and act as the chairman of the company. In support of his contention, he relied on the decision of Seaward and ors. v. Paterson reported in (1897) 1 Ch. 545. He further submitted that the justification given by the directors in their affidavit-in-opposition of acting on the basis of the legal advice received by them could not be a ground for exoneration, as legal advice would at best fall within the realm of opinions of experts and unless these opinions were on a point of foreign law or science or art, they would not be relevant for the purpose of disposal of the instant proceedings. Moreover, opinions or treatises of living authors were not accepted by courts of law as relevant authorities. 31. Mr. Amit Sibal, learned senior counsel appearing on behalf of the directors of VTL submitted that neither the company nor the directors were parties to the probate proceedings. Aggrieved by the refusal on the part of the learned Single Judge to injunct the companies from doing certain acts contrary to the decisions of APL Committ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd ors. v. Dinesh Kumar Bhagat and ors. reported in (1997) 6 SCC 141, Arun Kumar Gupta and Eleven ors. v. Jyoti Prasanna Das Thakur and ors. reported in (1996) 2 CHN 445, Aneeta Hada v. Godfather Travels Tours (P) Ltd. reported in (2012) 5 SCC 661, Ram Kishan v. Tarun Bajaj and ors. reported in (2014) 16 SCC 204 and Mrityunjoy Das and anr. v. Sayed Hasibur Rahaman ors. reported in (2001) 3 SCC 739. CC 39 of 2020 Contempt against directors of BCL 32. Mr. Giri, learned senior counsel appeared on behalf of the petitioners. While referring to the decisions of the APL Committee and the decisions of the learned Single Judge, he submitted that major part of the estate of PDB consisted of controlling power over all the M.P. Birla Group of Companies and such control was exercised through cross and chain shareholdings in various companies trusts and institutions. Reliance was placed on the flow chart with the title Tier wise Broad Structure of Control of M.P. Birla Group of Companies through Key Companies . Decisions of various judgments of this court, the Company Law Board and the Supreme Court rendered in earlier proceedings on the vastness of the control of the estate o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the affidavit-in-oppositions filed by the directors, he submitted that the direct shareholding of PDB was to the extent of 1260 shares. He referred to the provisions of Sections 47, 88, 89 and 114 of the Companies Act, 2013 and submitted that every member of a company holding shares had a right to vote on every resolution placed before the company and the rights of such member voting on poll, would be proportionate to his share in the paid up equity share capital of the company. Thus, HVL was allowed to participate on the principle of corporate democracy. According to him, no declaration was received from either the APL Committee or the beneficiaries of the alleged estate of PDB with regard to transfer of the beneficial interest in favour of the APL Committee representing the estate of PDB. He submitted that the resolution in the AGM was passed in terms of provisions of Section 114 of the Companies Act, 2013. 34. Mr. Poovaiya referred to a judgment of the Delhi High Court in the matter of Dr. Bimal Chandra Sen v. Mrs. Kamla Mathur and anr. reported in ILR (1982) II Delhi 407, in support of his contention that a person who was not a party to the proceedings could not be procee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d also undo the wrong committed, by setting aside the resolutions adopted in the respective Board Meetings. According to them, the alleged contemnors should not be allowed to reap the fruits of their own contumacious acts. They also submitted that it was not open to the contemnors to provide a wrong interpretation of our order and justify their conduct on the basis of such incorrect interpretation. Learned counsels further submitted that the directors of these companies who aided and abetted HVL in committing the breach of the order of this court were equally liable for having committed contempt, on the principle laid down in Seaward (supra). Even if no order was passed against the companies, the actions of the directors amounted to frustrating the order of this court and rendering the order ineffective. The directors were all along in the knowledge of the order, they were repeatedly requested by the APL Committee as also by the learned advocates-on-record of the petitioners to obey the order but these directors who were managing the affairs of the company, overreached the order of this court by allowing HVL to participate in the Board meetings as a director/chairman. The essential ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the meetings held on 15th and 16th June 2019, it appears that two major controversies between the parties, broadly stated, are as under: (A) The first major controversy is about the scope and ambit of the estate of late Mrs. P.D. Birla; (B) Controversy about the role of APL Committee. 42. The APL Committee considered the flow chart titled Tier Wise Broad Structure Of Control of M.P. Birla Group of Companies through Key Companies, and the Statement of Shareholding of the Promoter Group in the Four Listed Operating Companies of M.P. Birla Group, marked as Annexure-X to its decision and came to the conclusion that the APL Committee was not in a position to take a final decision regarding what formed part of the estate of PDB, but so long the controversy between the parties were alive and pending before the Calcutta High Court, the APL Committee would have to proceed on the basis of a possibility that the estate of PDB had a majority share in the M.P. Birla Group of Companies. The said flow chart and the Statement of Shareholding referred to above were documents prepared and relied upon by the defendants which were annexed as annexure-I to the minutes of the meetings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Trading Co. Pvt. Ltd. And (v) Punjab Produce Holdings Pvt. Ltd. (b) Mr. Justice D.G. Karnik (Retd.) will continue to be a Director on the Boards of Universal Cables Ltd., Vindhya Telelinks Ltd., and Birla Corporation Ltd.: (c) Mr. Justice D.G. Karnik (Retd.) will be appointed as a Director on the Boards of (i) August Agents Ltd., (ii) Insilco Agents Ltd., and (iii) Laneseda Agents Ltd.; (d) Mr. Justice J.P. Devadhar (Retd.), Former Judge, Bombay High Court and former Chairman, Securities Appellate Tribunal, Mumbai, will be a Director on the Board of Directors of Hindustan Gums Chemicals Ltd., upon vacancy arising in the said Board of Directors; (e) Mr. Justice J.P. Devadhar (Retd.), will be a Director on the Board of Directors of Birla Cables Ltd. 45. The allegations of contumacious acts enumerated in the applications do not disclose that HVL had violated any of the above-mentioned directions. The APL Committee had also not decided conclusively on the quantification of the shareholdings (controlling interest) in all the M.P. Birla Group of Companies but on the possibility that the majority of the shareholdings belonged to the estate of PDB, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision shall be sent by the Secretary to the Committee by email at the earliest and not later than morning of 31.07.2019 to all the companies and their directors for acting in conformity with the present decision. This decision will also be sent by the Secretary to the Committee by email by email at the earliest and not later than morning of 31.07.2019 to Trustees/Management Committee of the following Trusts/Societies which have been holding shares in the Companies of the MP Birla Group for a long time as forming part of Promoters Group, for doing the needful: 1) MP Birla Foundation Educational Society. 2) MP Birla Foundation Medical Society; 3) Belle Vue Clinic; 4) MP Birla Institute of Fundamental Research; 5) Hindustan Medical Institution; 6) Eastern India Educational Institution; 7) Shreyas Medical Society; 8) South Point Fundation. 30.07.2019 AC Chakrabortti Justice Mohit S. Shah (Retd.) 48. Although there are allegations against HVL for violation of the first paragraph marked A of the above-noted decision but there are no allegations of violation of the decisions marked B and C above. It is also pertinent to mentio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... promoter group/non-PAC]shareholders Total no. of votes cast against reappointment of HVL including votes cast on the basis of the shares of PDB UCL August 18, 2020 2,68,54,019 30,81,451 197,566 BCab August 6, 2019 1,71,60,083 2,66,768 800 VTL August 5, 2019 71,60,469 24,51,753 57,594 BCL August 25, 2020 5,86,33,799 1,02,00,868 12,05,732 51. The APL Committee as per its above decision (A) voted against reappointment of HVL. Such votes in respect of some of the companies were declared invalid. Excluding the votes against HVL, HVL was re-appointed as the director. We find that the APL Committee implemented its decision (A) and voted against HVL s re-appointment. 52. The subsequent decisions of the APL Committee dated July 23, 2020 and July 30, 2020 were also not to support the resolution for re-appointment of HVL as a direct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mprised the estate of PDB had already been decided through different judicial orders of this court as well as the Apex Court, and should not be reopened in order to give a different interpretation, it is possible that the extent of the estate of PDB with regard to the controlling interest over the other M.P. Birla Group of Companies would include the shareholdings of the Promoter and Promoter s group and the Person Acting in Concert (PACs) with PDB. However if HVL could have been re-appointed even without the votes of the Promoter groups and PACs and only on the votes of the public shareholders, in such event, it is also possible that HVL did not continue to hold office only on the strength of the shares of PDB. HVL could also hold office excluding the shares referable to the estate of PDB. Thus the contempt has not been proved beyond reasonable doubt. We hold so on the basis of the pleadings in the affidavit-in-opposition filed by the alleged contemnors. When HVL could have been re-appointed on the shares of the public shareholders, invitation to HVL to attend the Board meetings and participate in the same was as per procedure prescribed by the Companies Act, 2013. If HVL could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intentional. The participation of HVL in the Board Meetings as gathered from the affidavits-in-opposition filed by HVL and the directors cannot be said to be wilful, deliberate and intentional violation of the order of this court. 56. The court must be satisfied about the guilt of the alleged contemnor (HVL) beyond reasonable doubt. Contempt being in the nature of quasi-criminal proceedings, the allegations should be strictly construed. The standard of proof to establish contempt, is akin to a criminal proceeding. In this case, mere allegation of violation based on surrounding circumstances and observations made by the CLB and the High Court are not enough. The breach of the order of this court must be proved beyond reasonable doubt. 57. On the one hand, the affidavit of assets and the inventory/interim report of the APL committee give rise to a possible interpretation that the extent of the estate and the controlling interest of PDB can be to the extent admitted by the alleged contemnors. On the other hand, the extent of the estate can also be as contended by the petitioners. Controlling interest however is yet to be conclusively defined and quantified. The APL Committee ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he court cannot hold that HVL and the other directors are guilty of contempt. 61. In the decision of Debabrata Bandopadbyay and ors. (supra), it has been held that if only a clear case of contumacious conduct not explainable otherwise arises, that the contemnor must be punished. Punishment under the law of contempt is called for when the disobedience is deliberate. 62. With regard to standard of proof in deciding contempt, the Apex Court in Chhotu Ram (supra) held that contempt being a quasi-criminal proceeding, the standard of proof required to be shown was the same as in a criminal proceeding and the breach complained of would have to be established beyond reasonable doubt. In Kashinath Kher (supra) it was held that the common law phrase of he would asserts must prove had its due application in the matter of proof of allegations said to be constituting an act of contempt. In this case, the voting pattern shows that HVL could have been re-appointed as a director excluding those shares referable to the estate of PDB and we cannot hold under such circumstances, without any doubt that HVL was holding his office as a director/chairman solely on the shares referable to the esta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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