REPORTABLE
IN THE SUPREME COURT OF INDIA
INHERENT JURISDICTION
CONTEMPT PETITION (CIVIL) NO. 92 OF 2008
IN
CONTEMPT PETITION (CIVIL) NO. 148 OF 2003
IN
CIVIL APPEAL NO. 366 OF 1998
RAMA NARANG …Petitioner(s)
VERSUS
RAMESH NARANG AND OTHERS
…Respondent(s)
J U D G M E N T
B.R. GAVAI, J.
The present contempt petition arises out of an unfortunate
family dispute between a father on one hand and his two sons from
his first wife on the other hand. This family dispute has given rise to
number of proceedings, some of which have even reached up to
this Court.
1
2. Factual matrix necessary for the adjudication of the present
case is thus:-
The petitioner in the contempt petition Rama Narang was
married to Smt. Motia. The respondent Nos.1 and 2 i.e. Ramesh
Narang and Rajesh Narang so also Rakesh Narang are sons of the
petitioner and Smt. Motia. The petitioner and Smt. Motia divorced in
1963. The petitioner thereafter married Smt. Mona. Out of the said
wedlock, two sons Rohit and Rahul as well as a daughter Ramona
were born.
3. In a previous round of litigation between these parties, the
respondent No.1- Ramesh Narang had approached this Court by
filing a Contempt Petition (C) Nos.265-67 of 1999 in Contempt
Petition (C) No. 209 of 1998 in Civil Appeal Nos.366 of 1998, 603 of
1998 and 605 of 1998. The present petitioner Rama Narang was
respondent No.1 in the said proceedings. This Court passed the
following order in the said proceedings on 2nd November 2001:-
“In Conmt. Pet. (C) Nos.265-267/1999 in Conmt. Pet. (C)
No.209/1998 in Civil Appeal No.366/1998, 603/1998 &
605/1998.
After hearing Mr. Kapil Sibal, learned senior counsel for
the petitioner and Mr. Gopal Subramaniam, learned
senior counsel for the alleged contemnor, at length, we
are satisfied that the contemnor has flouted the order of
this Court dated 4th May, 1999 by not transferring 50% of
the share (and contending that he could make out the
2
50% share only by calculating the shares of NIHPL held
by M/s. Fashion Wears Private Ltd., which have been
forbidden by the order dated 22.01.1998). We call upon
the contemnor to show cause regarding the punishment
to be imposed on him for which he shall be present in this
Court on 29th November, 2001.
I.A. No.6 in C.P. (C) No.209/1998 in C.A. No.366/1998.
Dismissed as withdrawn.
List all matters on 29th November, 2001.”
4. It appears, that subsequently the matter was settled between
the parties and the parties had placed on record the Minutes of the
Consent Order. It will be apposite to reproduce the entire order
passed by this Court on 12th December 2001:-
“The following cases are pending between the parties
who are parties in the present proceedings before us one
way or the other. We are told that all the parties have
settled their disputes in respect of all the litigations
specified below.
1. O.S. No. 3535 of 1994 before the Bombay High Court.
2. O.S. No. 3578 of 1994 before the Bombay High Court.
3. O.S. No. 1105 of 1998 before the Bombay High Court.
4. O.S. No. 3469 of 1996 before the Bombay High Court.
5. O.S. No. 1792 of 1998 before the Bombay High Court.
6. O.S. No. 320 of 1991 before the Bombay High Court.
7. Company Petition No. 28 of 1992 Before the Principal
Bench, Company Law Board, New Delhi.
8. Arbitration Suit No. 5110 of 1994 before the Bombay
High Court.
Today they filed a document styled it as "MINUTES OF
CONSENT ORDER" signed by all the parties. Learned
counsel appearing on both sides submitted that all the
parties have signed this document. Today except Mona
Narang and Ramona Narang (two ladies), all the rest of
the parties are present before us when these proceedings
are dictated. As for Mona Narang and Ramona Narang
3
learned counsel submitted that Mona Narang had affixed
the signatures and the power of attorney holder of
Ramona Narang has signed the above document in his
presence. This is recorded.
Both sides agreed that all the suits can be disposed of in
terms of the settlement evidenced by "MINUTES OF
CONSENT ORDER" produced before us. For disposal of
those cases and/or for passing decrees in them we have
to pronounce the final formal order in terms of the
settlement now produced before us.
We, therefore, withdraw all the aforesaid suits to this
Court under Article 139-A of the Constitution of India.
Prothonotory and Senior Master of the Bombay High
Court are directed to transmit the records in the above
mentioned suits by special messenger to this court so as
to reach the Registry here within ten days from today. The
Bench Officer of the Principal Bench of the Company Law
Board, New Delhi is directed to forward the records
relating to Company Petition No. 28 of 1992 to the
Registry of this Court so as to reach the Registry within
ten days from today.
All the parties have undertaken before us that they will
implement the terms of the "MINUTES OF CONSENT
ORDER" on or before 1.1.2002 and that no further time
will be sought for in the matter.
Clause (f) of the compromise relates to the operation of
the bank accounts. That clause will come into force from
today onwards.
All the afore-mentioned suits and the company petition
will be posted for final formal orders on 8.1.2002 at 10.30
a.m. along with these contempt proceedings.”
5. The matter came up again before this Court on 8th January
2002. This Court passed the order thus:-
4
“Pursuant to the order dated 12th December, 2001 the
following suits and company petition have been
transmitted to this court and they are on the file of this
court now and registered as Transferred Cases Nos. 1 to
8 of 2002:
1. O.S. No. 3535 of 1994 before the
Bombay High Court.
2. O.S. No. 3578 of 1994 before the
Bombay High Court.
3. O.S. No. 1105 of 1998 before the
Bombay High Court.
4. O.S. No. 3469 of 1996 before the
Bombay High Court.
5. O.S. No. 1792 of 1998 before the
Bombay High Court.
6. O.S. No. 320 of 1991 before the
Bombay High Court.
7. Company Petition No. 28 of 1992
Before the Principal Bench, Company
Law Board, New Delhi.
8. Arbitration Suit No. 5110 of 1994 before
the Bombay High Court.
All the above are now being disposed of in terms of the
Minutes of Consent Order incorporated in the
proceedings passed by us on 12.12.2001.
The decree will be drawn up in terms of the Minutes of
the Consent Order.
In regard to the property (64, Sunder Nagar, New Delhi)
which is the subject matter for O.S. No. 3578/1994 of the
High Court of Bombay Rama Narang, who is present in
court, gives an undertaking that the same would be
transferred with clear and marketable title to Rajesh
Narang or his nominee on or before 31.03.2002. This
undertaking is recorded.
In the light of the above developments we deem it
necessary to drop the steps against Rama Narang for
contempt pursuant to the order of this court dated
2.11.2001. We order so.
5
Similarly all other contempt petitions are dropped and IAs
and Transferred Cases are disposed of.”
It will also be relevant to refer to the Minutes of the Consent
Order, which is a family settlement between all the members of the
family including the parties herein:-
“1. Ramesh’s Suit No.3535 of 1994 [for specific
performance of family settlement] both pending in the
Bombay High Court to be decreed and implemented
forthwith.
2. Ramesh’s Suit No. 1105 of 1998 [Fashion Wears]
opening in the Bombay High Court to be decreed and
implemented forthwith; 19184 shared held by FWPL in
NIHL are validly transferred to Ramesh on 27th June 1992
and Ramesh having already transferred 5194 (12%)
shares in the joint names of Rama and Ramesh on 21st
May 1990 directed by order of this Hon’ble Supreme
Court dated 4th May 1999. It is clarified and agreed that
the transfer of 142 additional shares by Ramesh on 24th
May 1999 to the joint names of Rama and Ramesh is
void and the said 142 shares stand restored to the name
of Ramesh. The purported transfer of shares by Rama
on 14th May 1999 in compliance with order dated 4th May
1999 is void. It is further clarified that the transfer by
Rama of 3998 shares to Ramesh pursuant to order dated
4
th May 1999 is void and the said 3998 shares stand
restored to the joint names of Mohini, Rama and Mona. It
is also clarified that Ramesh, Rajesh and Rakesh shall
have no objection to the transfer of 403 shares held by
FWPL in NIHL to Rama.
3. The following directions issued by this Hon’ble
Supreme Court in the above matter are re-affirmed and
agreed to by the parties as follows:-
(a) With effect from 4th May, 1999 Rama,
Ramesh and Rajesh are the only Directors of
NIHL (and its subsidiaries). Any increase in
6
the Board of Directors shall be with the mutual
consent of Rama and Ramesh/Rajesh.
(b) None of the Directors (Rama, Ramesh and
Rajesh) can be removed from directorship.
(c) Rama and Ramesh shall continue to be in
joint management and control of NIHL and
Rajesh shall continue to be the Permanent
Whole Time Director thereof in charge of day
to day operations/management.
(d) No decision shall be adopted concerning
or affecting the said Company (and its
subsidiaries) without the consent of Rama
and Ramesh (or Rajesh) in writing. It is further
clarified and agreed that save and except as
provided herein no prevailing decisions
including appointment of Directors/Executives
or any other persons shall continue unless
Rama and Ramesh (or Rajesh) consent to the
same in writing.
(e) All the collections coming in cash shall
continue to be remitted in the bank accounts
of the Company and all transactions will only
be made in the form of cheques and/or as
may hereafter be agreed to between Rama
and Ramesh (or Rajesh).
(f) All bank accounts of the Company shall
continue to be operated jointly by any two out
of the three Directors namely Rama, Ramesh
and Rajesh and/or as may hereafter be
agreed to between Rama and Ramesh (or
Rajesh). If the amount of any transaction
exceeds Rs. 10 (ten) lacs the same shall be
undertaken through a cheque signed jointly by
Rama and Ramesh/Rajesh.
(g) All statutory record of the Company [and
its subsidiaries] including minutes of Directors
Meetings and/or Shareholders Meetings shall
7
be valid only if signed jointly by Rama and
Ramesh or Rajesh.
(h). The remuneration and perquisites to
which Rama, Ramesh and Rajesh shall be
entitled as Directors with effect from 4th May
1999 shall be the maximum permissible under
the provisions of the Companies Act, 1956
and which shall be divided/allocated between
them in equal shares as provided and/or as
may hereafter be agreed to between Rama
and Ramesh [or Rajesh]."
4. Rahul’s Suit No. 3469 of 1996 and Rama’s Suit No.
1792 of 1998 both pending in the Bombay High Court to
be withdrawn.
5. Ramesh’s Company Petition No. 28 of 1992 pending
before the Company Law Board, New Delhi to be
withdrawn.
6. Rakesh’s Suit No. 320 of 1991 [who is part of the
Rama Group] to be compromised and implemented as
follows:
“a. Rama shall transfer 5410 shares in NIHL
to the sole name of Rakesh.
b. Rama Group agree and undertake to
restore to Rakesh his residential
accommodation on the third floor of the
bungalow at 40, Pali Hill, Bandra, Bombay
and consent to carry out all additions and
alterations required by him therein.”
In consideration of the above Rakesh hereby agrees and
undertakes to ratify and confirm and implement the family
settlement and do all the acts, deeds and things required
in that purpose including;
“a. Transfer 1000 equity shares held by
Rakesh in Narang Overseas Private Limited
to Rajesh.
8
b. Confirm his retirement as partner in the firm
of United Corporation and withdraw his claims
referred to arbitration in Arbitration Suit No.
5110 of 1994.
c. Consent to the transfer of entire
undertaking of Bull Worker Private Limited
from FWPL to the Manu Group.
d. Consent to hive off land at Marol, Sahar,
Bombay owned by NIHL admeasuring about
45105.70 square meters to the Manu Group.
e. Consent to hive off ownership and
possession of the property at 64, Sunder
Nagar, New Delhi to Rajesh.”
7. All the above is to be performed by the Rama Group
before 01.01.2002.
8. Matter to be listed before this Hon’ble Court on
08.01.2002.”
6. Perusal of the family settlement would reveal, that insofar as
Narang International Hotel Limited (hereinafter referred to as ‘NIHL’)
and its subsidiaries are concerned, Rama Narang, Ramesh Narang
and Rajesh Narang were to be the only Directors. Any decision by
the Board of Directors was to be taken only by the mutual consent
of Rama Narang on one hand and Ramesh and Rajesh, on the
other hand. The settlement also provided, that none of the
Directors i.e. Rama Narang, Ramesh Narang and Rajesh Narang
could be removed from the Directorship. Rama Narang and
9
Ramesh Narang were continued to be in joint management and
control of NIHL and Rajesh Narang was continued to be whole time
Director In-Charge of day-to-day operations and management of
NIHL. It also provided, that no decision shall be taken concerning
the said NIHL and its subsidiaries, without the consent of Rama
Narang on one hand and Ramesh/Rajesh on the other hand. It is
further provided, that all bank accounts of the Company have to be
operated jointly by any two of the three Directors as agreed
between Rama Narang and Ramesh/Rajesh. It further provided,
that if amount of any transaction was exceeding Rs. 10 lakhs, then
the same could be undertaken only through a cheque singed jointly
by Rama Narang on one hand and Ramesh or Rajesh on the other
hand.
7. It appears, that though the matter was settled between the
parties in terms of Minutes of Consent Order as recorded in the
orders dated 12th December 2001 and 8th January 2002, passed by
this Court, there was no quietus to the dispute between the parties.
Rama Narang alleging, that Ramesh and Rajesh had violated the
terms of the Consent Order stipulated in Clause 3 (c), (d), (e) and (f)
of the Minutes of the Consent Order, filed a contempt petition being
Contempt Petition(C) No. 148 of 2003 in Contempt Petition (C) Nos.
10
265-67 of 1999 in Contempt Petition (C) No.209 of 1998 in CA No.
366 of 1998. It was the case of the petitioner Rama Narang, that
the violations of the Consent Order by Ramesh and Rajesh
amounted to clear disobedience of the orders dated 12th December
2001 and 8th January 2002 and thus punishable under the Contempt
of Courts Act, 1971. This Court had initiated contempt proceedings
against the respondents vide order dated 15th September 2003.
This Court had also requested Justice V.A. Mohta, retired Chief
Justice of Orissa High Court to act as a Mediator for settlement of
disputes between the parties. However, despite serious efforts
made by the Learned Mediator, the settlement could not be arrived
at.
8. A preliminary objection was taken regarding the
maintainability of the abovesaid contempt petition. According to the
respondents Ramesh and Rajesh, in the absence of any
undertaking given to the Court, this Court could not exercise its
jurisdiction on mere violation of the terms of the Consent Order.
The respondents had contended, that the order dated 12th
December 2001, had merged in the order dated 8th January 2002
and that they had implemented the said order. A three-Judge
Bench of this Court in Rama Narang v. Ramesh Narang and
11
Another1
rejected these objections raised by the respondents with
regard to maintainability of the contempt petition. It will be relevant
to refer to the following observations of this Court:-
“33. In the present case, the consent terms arrived at
between the parties were incorporated in the orders
passed by the Court on 12-12-2001 [Ramesh Narang
(1) v. Rama Narang, (2009) 16 SCC 631] and 8-1-2002
[Ramesh Narang (2) v. Rama Narang, (2009) 16 SCC
600] . The decree as drawn up shows that order dated 8-
1-2002 [Ramesh Narang (2) v. Rama Narang, (2009) 16
SCC 600] was to be ‘punctually observed and carried into
execution by all concerned’. A violation of the terms of the
consent order would amount to a violation of the Court's
orders dated 12-12-2001 [Ramesh Narang (1) v. Rama
Narang, (2009) 16 SCC 631] and 8-1-2002 [Ramesh
Narang (2) v. Rama Narang, (2009) 16 SCC 600] and,
therefore, be punishable under the first limb of Section
2(b) of the Contempt of Courts Act, 1971. The question
whether the respondents should not be held guilty of
contempt because of any earlier confusion in the law
reflected in Babu Ram Gupta case [(1980) 3 SCC 47 :
1980 SCC (Cri) 527] is a question which must be left for
decision while disposing of the contempt petition on
merits. It may be argued as an extenuating or mitigating
factor once the respondents are held guilty of contempt.
The submission does not pertain to the maintainability of
the petition for contempt. The preliminary objection raised
by the respondents regarding the non-maintainability of
the petition for contempt is, for the reasons stated,
dismissed.”
9. After the preliminary objections raised by the respondents
were rejected, the aforesaid contempt petition was heard by this
Court on merits. The main allegations against the respondents with
regard to violation of Clause 3 (c), are thus:-
1(2006) 11 SCC 114
12
(a) that the high value contracts were executed by
issuing multiple cheques under the value of Rs. 10
lakhs, though, the contract amount was much more.
It was done so as to overcome the requirement, that
for a transaction worth more than rupees ten lakhs,
the cheques had to bear joint signatures of Rama
Narang on one hand and Ramesh or Rajesh on the
other hand;
(b) the vital information with regard to management of
the Company was withheld and as such the
Company was managed to the complete exclusion
of Rama;
(c) settlement with trade union was unilaterally
undertaken by the respondents and the petitioner
was only asked to sign the enhanced salary
cheques, which the petitioner refused as he was not
consulted; and
(d) it was also alleged, that the respondents had taken
unilateral decisions with regard to appointment and
promotion of senior executives and as such, had
acted in clear violation of Clause 3 (d).
13
10. The respondents had filed response to the said contempt
petition. It was contended on behalf of the respondents, that the
petitioner was deriving undue advantage from the alleged technical
breach of the consent terms; which too was based on interpretation
of the consent terms contrary to the mutual understanding of the
parties. It was submitted, that the petitioner was attempting to stall
the functioning of the company by trying to use the veto power. It
was submitted, that it was never the intention of the parties, that the
petitioner should enjoy the veto power over the company
transactions having value of more than Rs. 10 lakhs and create a
deadlock.
11. However, the Court did not find favour with the submissions
made by the respondents and while rejecting the respondent’s
contention, this Court in its judgment and order dated 15th March
2007 reported as Rama Narang (V) v. Ramesh Narang and
Another2
, observed thus:-
“32. The object of entering into consent terms and jointly
filing the undertaking was to run the family business
harmoniously with the active participation of all as a
family business but the respondents had taken absolute
control of the Company NIHL to the total exclusion of the
petitioner. All the management decisions and other
decisions affecting the Company were taken by the
respondent Rajesh Narang, the whole-time Director under
the guise of the day-to-day operation/management in
clear violation of Clause 3(c) of the consent terms which
2 (2009) 16 SCC 126
14
clearly states that Rama Narang and Ramesh Narang
shall continue to be in joint management and control. The
parties gave undertaking to the Court regarding the
consent terms.
33. The respondents have erroneously submitted that
joint management and control of the Company means
giving veto power to the petitioner. According to the terms
of undertaking the petitioner and the respondents were
under an obligation to run the Company harmoniously
with the active participation of all as a family business but
unfortunately the respondents have taken absolute
control to the total exclusion of the petitioner. This is
contrary to the terms of the undertaking given to this
Court.”
12. This Court while convicting the present respondents under
Section 2(b) of the Contempt of Courts Act observed thus:-
“52. We have carefully perused the undertaking given by
the parties to the Court and orders of this Court dated 12-
12-2001 [Ramesh Narang (1) v. Rama Narang, (2009) 16
SCC 631] and 8-1-2002 [Ramesh Narang (2) v. Rama
Narang, (2009) 16 SCC 600] based on the undertaking of
the parties given to this Court and other relevant facts
and circumstances. According to our considered view the
respondents are clearly guilty of committing contempt of
court by deliberate and wilful disobedience of the
undertaking given by them to this Court. In this view of
the matter, in order to maintain sanctity of the orders of
this Court, the respondents must receive appropriate
punishment for deliberately flouting the orders of this
Court.
53. Consequently, we convict the respondents under
Section 2(b) of the Contempt of Courts Act and sentence
them to a simple imprisonment for a period of two
months. We further impose a fine of Rs 2000 to be
deposited by each of them within one week failing which
they shall further undergo imprisonment for one month.”
15
13. It will also be relevant to refer to para (54) of the said
judgment and order passed by this Court in Rama Narang (V)3
(supra) dated 15th March 2007:-
“54. We are also not oblivious of the fact that immediately
sending the respondents to jail would create total chaos
in the Company which would also vitally affect the
interests of large number of people including the
employees of the Company. Therefore, while keeping in
view the peculiar facts and circumstances of this case,
the sentence of imprisonment imposed on the
respondents is kept in abeyance. We further direct the
parties to meticulously comply with the undertakings
given by them to this Court. In case similar violation of the
undertakings given to this Court is brought to the notice of
the Court, in that event, the respondents shall be sent to
jail forthwith to serve out the sentence imposed in this
case.”
14. It could thus be seen, that though this Court held the
respondents guilty of contempt, taking into consideration the fact
that immediately sending the respondents to jail would create total
chaos in the Company and it would also vitally affect the interest of
large number of people including the employees of the Company,
the sentence of imprisonment imposed on the respondents was
kept in abeyance. This Court further directed the parties to
meticulously comply with the undertaking given by them to the
Court. It was further observed by the Court, that in case, similar
violations of the undertaking given to this Court, was brought to the
3 (2009) 16 SCC 126
16
notice of this Court, the respondents shall be sent to jail forthwith to
serve out the sentence imposed in the said case.
15. It appears, that the dispute between the parties not only
continued but got aggravated. Contending that on account of noncooperation by Rama, the functioning of the Company had come to
a standstill, Ramesh filed Company Petition No.47 of 2008 before
the Company Law Board, New Delhi (hereinafter referred to as
‘CLB’). It was contended in the said company petition, that due to
non-cooperation by Rama in signing cheques, the employees could
not be paid their salaries from November 2007 onwards. It was
also contended, that bills for payment to supplier could also not be
paid, due to which, the entire functioning of the various units of the
Company had been seriously affected. On 14th March 2008, the
CLB directed the board meeting of NIHL to be held on 24th March
2008 at 11.00 AM in the registered office of the Company. Each of
the three Directors were also directed to circulate a list of items, that
they desired to discuss in the meeting, to the Directors by 18th
March 2008. The CLB also appointed Shri C.R. Das, Former
Member of CLB as Observer, to observe the proceedings of the said
meeting. In the said proceedings, Ramesh also filed CA No.194 of
2008 on 20th March 2008, pointing out therein, that due to non17
payment of salaries/wages for the months of December 2007 and
January 2008, about two hundred workers at Delhi Flight Catering
Unit of the Company had stopped the work and started protest and
agitation.
16. When the matter was listed before CLB on 7th April 2008, the
CLB found, that though the Board met on two consecutive dates
totally for fifteen hours, not a single decision had been taken, in
view of each one holding of his own views/opinion. From the Report
of the Observer, the CLB found, that all the three Directors had
adopted a rigid stand resulting in complete deadlock. The CLB
found, that in the proceedings under Section 397/398 of the
Companies Act, 1956, it was the interest of the Company, which
was paramount. The CLB noticed, that due to differences among
the Directors, many operational issues like payment of
salaries/wages, payment to supplier etc. were pending, leading to
agitation by employees and irregularities in supply. The CLB found
it appropriate, that till the petition was disposed of, as an interim
measure, in the interests of the Company and more than 3000
employees/workers, there should be a mechanism by which the
day-to-day operations of the Company were carried on without any
hitch. The CLB thus passed the following order on 10th April 2008:-
18
“8. Accordingly, as I indicated during the hearing, I
appoint Shri Justice Arvind V. Savant, Former Chief
Justice of Kerala High Court, who has given his consent,
as the Facilitator (Mobile No. ……..). As the Facilitator,
he would try to bring about a consensus among the
directors on matters which are urgent and essential to
ensure that the business of the Company is carried on
smoothly and in case a consensus is not possible, taking
into consideration the views of the three Directors, he will
take a final decision which will be binding on the Directors
and the Company. I make it abundantly clear that his role
will be limited only to operational matters, like, issues
relating to workers/employees of all categories, issues
relating to suppliers/supply contracts, urgent repairs to
equipments etc. These are only illustrative. It will be
within his competence to decide considering the spirit of
this order that the business of the company should be
carried on smoothly till the petition is disposed of, which
are urgent/essential operational issues.”
17. Alleging, that the order passed by CLB dated 10th April 2008,
was violative of the order of this Court dated 15th March 2007 and
nothing but an attempt to legalize their conduct of contempt, the
petitioner approached this Court by the present contempt petition.
18. It appears, from the Record of Proceedings, that on 15th
December 2008, this Court had heard the counsel for the parties
and reserved the order. The contempt petition was listed before this
Court on 10th February 2009 and on the said date, this Court passed
the following order:-
“We have perused the order dated 27.01.2009.
On 15th December, 2008, this Court heard learned
counsel for the parties at length and reserved the order.
19
Before this Court could pronounce the order, IA No.1 of
2008 was filed by respondent No.1 in which a prayer was
made to recall the order dated 15th December, 2008. In
the said IA what has been incorporated in para No.2 is
reproduced hereunder:
"Instructions had duly been taken that the
Hon’ble Court be requested to kindly hear the
Contempt Petition on merits.
On 15.12.2008, Mr. Nariman, learned Senior
Counsel, who has been appearing in the
matter could not be present for personal
reasons. In order not to inconvenience the
other side and this Hon’ble Court, another
learned Senior Counsel had been briefed to
argue the case. On that day, your Lordships
were pleased to observe that in case Mr.
Nariman was available on another day, your
Lordships might consider adjourning the
matter for a day or two and the availability of
Mr. Nariman was sought. However,
regrettably, on an erroneous impression, a
statement was made without consulting Mr.
Nariman that he would not be available till
January, 2009."
In the interest of justice, we deem it appropriate to recall
the order dated 15th December, 2008. We order
accordingly.
List this matter on Friday, the 20th February, 2009 before
another Bench.”
19. The matter thereafter came up before this Court on 9th April
2009. Perusal of the order dated 9th April 2009, would reveal, that
this Court, on a query found, that for the last one decade, the
Company has not filed its returns under the Income Tax Act. It also
20
found, that the Books of Accounts had not been prepared and/or
audited. It was also found, that the requisite financial statements
had not been filed before the Registrar of Companies. The Court
noticed, that none of the authorities had taken any action under the
Companies Act or under the Income Tax Act, 1961. The Court
therefore, called for the status of the matter pending before the
Income Tax Authorities. The Court, in order to protect the interest of
the Revenue as well as the workmen, as the first step, directed M/s
K.P.M.G. Chartered Accountants to prepare financial accounts after
verifying the Books. The Court directed both the parties to sign the
accounts, without prejudice to their rights and contentions. The
Chartered Accountant was also directed to consult both the sides.
The matter was directed to be kept on 13th July 2009.
20. On 13th July 2009, again this Court passed a detailed order.
The perusal thereof shows, that the Court directed the Registrar of
Companies and Chief Commissioner of Income Tax to be impleaded
in the proceedings. The Court also observed, that it would also like
to know from the Chief Commissioner of Income Tax, as to what
action has been taken against the Company with regard to dues
under the Income Tax Act. The Court also wanted to know as to
why assessment has not been done for all the years, particularly,
21
when the Return/Accounts have not been filed by the Company.
The matter was directed to be listed by this Court thereafter on 21st
July 2009. On 21st July 2009, the Court considered the Status
Report submitted before it, by the Chief Commissioner of Income
Tax. Apology was tendered to the Court by the Registrar of
Companies for not taking action under the Companies Act. The
Court recorded, that both these officers have assured to take action
in accordance with law. The Court also noticed, that apart from
non-compliance of the statutory provisions, the Books of Accounts
had not been audited by the Auditors of Company. The Court
therefore, in order to set the house in order and particularly, keeping
in mind the interest of 3000 workmen as well as exchequer, while
invoking powers under Article 142 of the Constitution, appointed an
independent Director, who was to look into the financial
management of the Company and submit his report to this Court
from time to time, on the state of the Company’s Accounts and due
compliance of the statutory provisions of the Companies Act and
Income Tax Act. He was also requested to suggest steps for good
corporate governance, including financial management in future.
The Court therefore, requested Shri Homi Ranina, a Tax Expert to
accept the assignment and submit the Status Report to this Court,
so that appropriate directions could be issued. From the perusal of
22
the order, it appears, that this Court was more concerned with
putting the house in order before taking the contempt petition for
hearing.
21. This Court, however, clarified in its order dated 21st July 2009,
that the same will not come in the way of functioning of Shri Arvind
Savant, Former Chief Justice of Kerala High Court as Facilitator
appointed by the CLB.
22. The contempt petition thereafter came up before this Court on
29th July 2009. By an order passed on the said date, this Court
requested Shri Ranina to take charge as independent Director and
further clarified that the same would be confined only in the context
of compliance of the provisions of the Companies Act as well as the
Income Tax Act. By the said order, this Court directed M/s BSR &
Company, Chartered Accountants to prepare and audit the accounts
of the Company and observed, that its function will not overlap with
the functioning of the Facilitator, who was free to proceed in
accordance with law. The Court further found, that the regular
meetings in accordance with the provisions of the Companies Act
have not been held and therefore, charted out the functions to be
undertaken by Shri Ranina who was appointed as an independent
23
Director vide order dated 21stJuly 2009. The directions in nutshell
are thus:-
(i) Shri Ranina will convene an informal meeting of all
the concerned parties including M/s BSR &
Company and at the said meeting, Shri Ranina was
to act only as an advisor and not as an independent
Director of the Company;
(ii) After going through the relevant papers, Shri Ranina
was to convene one more meeting in which he was
to suggest mode of his induction into the Company
as an independent Director. It was further clarified
that, Shri Ranina was not to be subjected to
prosecution which the Court had directed in its
earlier order dated 21stJuly 2009 with regard to the
action to be taken by the Registrar of Companies
against the Directors for violation of the provisions
of Companies Act;
(iii) The BSR & Company was to update and audit the
Accounts of the Company. If the BSR & Company
found any impediment, they were to report to Shri
Ranina, who in turn, was to try to resolve the
24
problem himself in the first instance and if not, to
submit a report to this Court;
(iv) The BSR & Company would also submit the reports
on the status of the accounts from time to time to
Shri Ranina. In case, Shri Ranina found any
impediment or difficulty in carrying out the orders
passed by the Court, he would submit Status Report
to this Court through Shri Parag Tripathi.
23. The matter thereafter came up before this Court on 14th
December 2009. This Court noted, that the Accounts of the
Company stood duly audited upto 31st March 2006, whereas
accounts of the subsidiary Companies stood audited upto 31st
March 2009. The Court further noted, that as on that date, there
was no compliance of the provisions of Section 212 of the
Companies Act. The Court extended the time for filing of accounts
before Registrar of Companies upto 31st January 2010. The Court
therefore directed, that the proceedings shall remain pending till
further orders.
24. By the same order, the Court appointed Shri Habib Rehman,
Expert in Hotel Management, to advise Shri Ranina from time to
time. It further directed, that in the event of any dispute between
25
the Directors, the decision taken by Shri H.P. Ranina in consultation
with Shri Habib Rehman, shall be final and binding on Board of
Directors. The matter was thereafter listed before this Court on 16th
April 2010. In the said order, the Court noted, that pursuant to its
order dated 8th February 2010, the Registrar of Companies had
submitted a report on 26th March 2010. It was found, that the
Register of Directors maintained by the Company was not in
conformity with the Court orders/Resolutions, passed by the Board
or Company during the period right from 1990. The court therefore
authorised Shri H.P. Ranina to update the said Register of Directors
and bring it in conformity with the Court Orders and Resolutions
passed by the Board. The said order was passed by the Court
without prejudice to the rights and contentions of the parties
appearing before the Court.
25. Thereafter, the matter came up for hearing before the Court
on 3rd May 2010. By order on said date, the Court appointed Shri
Syed Habibur Rehman as an independent Director to manage the
affairs of the Hotel and the flight kitchens on day-to-day basis. M/s
J.G. Verma & Co. was directed to be appointed as Tax Auditors of
the Company in place of M/s BSR & Company. It was clarified that
Shri Habibur Rehman was appointed as an independent Director
26
and shall not be prosecuted for any violation of the statutory
provision. Thereafter, the matter was listed before this Court on 6th
August 2010. By order on said date, the Court noticed the earlier
proceedings and observed, that although number of steps were
taken; even as on that day, the signing of the Accounts remained
pending because of the family disputes between the father and the
sons. The Court noticed, that at the end of the day, the position
remained that some of the provisions of the Companies Act were
not complied with and the Accounts remained unsigned. The Court
therefore directed the Additional Chief Metropolitan Magistrate, 37th
Court, Mumbai, to expedite the hearing and finally dispose of the
cases pending before him. The Court by the said order dispensed
with the services of Shri H.P. Ranina and Shri Syed Habibur
Rehman.
26. In the parallel proceedings before the CLB, Rama Narang had
filed Company Application No.57 of 2011 in Company Petition No.
47 of 2008, praying for the discharge of the Facilitator Retired
Justice Arvind V. Savant, on the ground of collusion with the
petitioner and the respondent before the CLB. The Court found no
substance in the allegation made by Shri Rama Narang and
therefore, dismissed the said CA by imposing exemplary cost of Rs.
27
1,00,000/. It will be relevant to refer to paragraph (7) of the order
dated 22nd February 2011, as under:-
“7. I therefore dismiss CA 57/2011 while awarding an
exemplary cost of Rs. one lakh against R-2. The cost so
awarded shall be deposited by R-2 in the High Court
Legal Aid Committee, New Delhi within a week from
today. The Facilitator shall now proceed to fix a date for
holding meeting of the Board of Directors for ensuring
statutory compliances and also for acting in furtherance of
directions contained in the Order dated
10.04.2008,12.10.2010 and 22.11.2010 and send a
status report as directed by me in the Order dated
6.1.2011.”
27. It further appears from the record, that Rajesh-respondent
No.2 herein, who was a whole-time Director, filed Company
Application No.223 of 2011 before the CLB in pending Company
Petition No. 47 of 2008. It was contended on behalf of the applicant
in the application, that due to non-cooperative attitude of the
respondent i.e. the petitioner herein, the entire functioning of the
Company had come to a standstill. It was further averred, that
Rama was making every attempt to put hindrance in the day to day
functioning of the company. As such certain necessary directions
were sought in the interest of the Company so also its workers. On
28th April 2011, the CLB after considering the rival contentions,
passed the following order:-
“On an overall consideration of the factual scenario while
rejecting the objection raised by learned senior counsel
28
for R-2 as to the locus of the applicant and considering
the complete, repeated, persistent and deliberate noncooperation by R-2 in the smooth functioning of R-1
company and also to regulate the conduct of the
company's affairs I deem it fit to grant the relief as prayed
for in CA No. 223/2011 and order that pending the
hearing and final disposal of C.P. No.47/08 and in
addition to the directions already made in C.P. No.47/08,
in the event of dispute/ disagreement inter se between
the Directors in the Board Meeting on any items on the
agenda, a decision shall be taken by the Facilitator which
shall be final and binding on the Board of Directors and
the company. With the paramount object of smooth
running of R-1 the Facilitator is further empowered to sign
cheques/minutes and statutory records in case of
disagreement between or refusal by any of the Directors
or inability of the Board to take a decision. Before signing
any cheque/ minutes/statutory records the Facilitator shall
record reasons for not agreeing with the dissenting
Director/s or agreeing with the assenting Director/s.”
28. It appears from the record, that in the emergent situation i.e.
not making payment of electricity bills and the resultant possibility of
electricity supply of the Hotel being disconnected, Company
Application No.610 of 2011 was mentioned before the CLB. It was
brought to the notice of the CLB, that the Facilitator was not able to
function and operate smoothly and therefore, vide order dated 29th
November 2011, the CLB, as a temporary measure, appointed Shri
H.S. Acharya as a Special Officer-cum-Advisor, in addition to the
Facilitator already appointed. The CLB further directed, that since
the present Facilitator has stayed his hands from exercising
29
additional powers given vide order dated 28th April 2011, the said
powers could be exercised by Shri Acharya until further orders.
29. Thereafter, by an order dated 30th April 2015, the CLB passed
the following order:-
“16. Therefore, for the reasons stated above, I hereby
appoint Mr. H.P. Ranina as Facilitator cum Advisor by
removing Mr. H.S. Acharya as Administrator cum Advisor.
Mr. Ranina has to act as Facilitator cum Advisor with the
powers that were conferred upon on Mr. Acharya by CLB
when he was made as Facilitator cum Advisor. It is made
clear that Mr. Ranina will not go beyond the powers
conferred upon when Mr. Acharya was appointed by CLB
through orders dated 29.11.2011, R1 Company shall not
close down flight catering units without prior permission
from Company Law Board.”
It could thus be seen, that by the said order, CLB appointed
Shri H.P. Ranina as Facilitator-cum-Advisor in place of Shri H.S.
Acharya with all the powers that Shri Acharya had as a Facilitatorcum-Advisor.
30. It appears from the record of this Court, that the contempt
petition was listed before various Benches of this Court on various
dates. On 15th March 2016, this court found, that the business of
the Company had come to a standstill and therefore, it was of the
tentative view, that it was a fit case where the Company may be
wound up. The Department of Corporate Affairs therefore was
directed to make an enquiry/investigation into the affairs of the
30
Company and submit its report to the Court within a period of four
weeks. On 19thApril 2016, this Court granted further eight weeks’
time to enable the Department of Corporate Affairs to make
necessary enquiry and submit a report in terms of the order dated
15th March 2016. This Court also observed, that it would be open to
the parties to settle the matter and make a mention of the Terms of
Settlement before this Court. On 19th July 2016, this Court directed
the report of the Registrar of Companies, Maharashtra, Ministry of
Corporate Affairs, to be made available to the counsel for both the
sides. It further observed, that if so required, on the next date, the
Court will proceed to appoint an independent Board/Committee to
run the affairs of the Company until appropriate solution to the
present impasse between the Directors is arrived at. On 16th August
2016, the Court directed the contempt petition to be listed for final
disposal in the month of November 2016. It further ordered, that
without prejudice to the rights of the respective parties, the present
arrangement for running the affairs of the Company will continue
until further orders. On 29th November 2016, the matter was
directed to be adjourned sine die.
31. From the documents placed on record, it appears, that in the
meantime, the meeting of the Board of Directors of NIHL was held
31
on 30th April 2019. From the Minutes of the Meeting, it would
appear, that one of the subjects that came up for discussion before
the Board of Directors, was with regard to sale of the Companies’
property at 40 Pali Hill, Bandra West, Mumbai (hereinafter referred
to as the ‘Bandra property’) so as to tide over the financial crisis.
From the perusal of the Minutes of the Meeting, it could be seen,
that it is stated therein, that the Bandra property was only nonbusiness asset of the Company. It is further stated in the Minutes of
the Meeting, that if funds were not available, it would result in
closure of the Company’s Flight Catering Business, which would
result in over 3000 persons losing their livelihood as well as create
serious financial and legal challenges. It was suggested in the said
Meeting, that on the sale of the Bandra property, an amount of Rs.
351 crore could be received from Maverick Realty & Developers
LLP. In the said Meeting, the petitioner was also asked by the
respondent No.1 as well as the Facilitator, as to whether the
petitioner had any other suggestions to offer so as to tide over the
financial crisis. However, the petitioner refused to offer any
suggestion, as such under the directions of the Facilitator, the
following resolutions came to be passed:-
“RESOLVED THAT pursuant to applicable provisions of
the Companies Act, 2013 as amended from time to time
(including any statutory modification or re-enactment
32
thereof) and any other applicable rules, regulations, laws,
circulars, the Company do sell its right, title and interest in
the property/non business asset comprising of land
admeasuring 2,530 (Two Thousand Five Hundred and
Thirty) square meters or thereabouts along with
Bungalow situated at 40 Pali Hill, Bandra West, Mumbai
CTS No. 1345/46/47/48, to Maverick Realty & Developers
LLP for a consideration of Rs.351,00,00,000/- (Rupees
Three Hundred and Fifty One Crores Only) exclusive of
stamp duty, registration charges and applicable taxes
based on vacant and peaceful possession of the said
property being made available to the said buyer, and on
such other terms and conditions as may be agreed to
between Maverick Realty & Developers LLP and Mr.
Ramesh Narang, Joint Managing Director of the
Company.
RESOLVED FURTHER THAT Mr. Ramesh Narang, Joint
Managing Director of the Company, be and is hereby
authorized to execute, sign, register, modify, required
definitive agreements, documents, papers, deeds, letters,
writing, forms etc. and to do all such acts, deeds, matters
and things as may be required to give effect to the above
Resolution.”
32. As per the said Resolutions, the petitioner as well as the
respondent No.1 were required to vacate the said property.
However, since the petitioner along with his other family members
did not vacate the premises, IA No.87565 of 2019 came to be filed
seeking directions to the petitioner along with his family members to
vacate the said property. The said IA also came to be listed before
various Benches of this Court. However, the matter came to be
adjourned from time to time. IA as well as the contempt petition was
listed before us on 4th December 2020. On the said date, we
33
informed the learned counsel for the parties, that we would hear the
main contempt petition as well as the IA for directions
simultaneously. Accordingly, we have heard the learned counsel for
the parties on the main contempt petition as well as the IA for
directions at length on 10th December 2020 and 11th December
2020.
33. Shri Jaideep Gupta, the learned Senior Counsel opened the
arguments on behalf of the contempt petitioner. The learned Senior
Counsel submitted, that the perusal of the orders passed by this
Court dated 12th December 2001 and 8th January 2002, would
reveal, that the respondents were required to run the affairs of NIHL
jointly along with the petitioner. However, they were running the
affairs of the Company totally to the exclusion of the present
petitioner. It was further submitted, that this Court in the judgment
reported in Rama Narang4
(supra) had clearly held, that the
contempt petition at the behest of present petitioner against the
present respondents was very much tenable. He further submitted,
that not only this, but the judgment of this Court reported in Rama
Narang (V)5
(supra) would clearly show, that this Court in
unequivocal terms has held, that the present respondents had acted
in breach of the undertaking given to this Court. It is submitted, that
4 (2006) 11 SCC 114
5 (2009) 16 SCC 126
34
though the respondents were required to run the affairs of NIHL
jointly with the present petitioner, it was clearly found, that they had
acted in breach of the orders of the Court and were running the
business totally to the exclusion of the petitioner. The learned
Senior Counsel submitted, that the acts which are alleged to be
contemptuous in nature, in the present proceedings, are identical
with the acts which are found to be contemptuous in the judgment
of this Court dated 15th March 2007. He submitted, that in spite of
having been held guilty, similar acts have been continued by the
respondents even after 15th March 2007. He submitted, that in view
of the findings of this Court in its judgment dated 15th March 2007,
for the reasons recorded therein, the present respondents are
required to be held guilty for committing contempt of this Court and
be punished in accordance with law.
34. With regard to the application for directions filed by the
respondent No.1 herein, Shri Jaideep Gupta submitted, that such
an application was not tenable in the contempt proceedings initiated
by the petitioner. He submitted, that as a matter of fact, the CLB
has no jurisdiction to pass an order of a nature as passed by it. It is
submitted, that when there was settlement between the parties
which has a seal of approval by this Court, the respondents could
35
not have initiated the proceedings before the CLB. He submitted,
that in any case, the petitioner had taken objection with regard to
maintainability of the proceedings before the CLB and the CLB,
without deciding the issue regarding tenability, had passed the
interim orders. It is therefore submitted, that the reliance placed by
the respondents on the orders passed by CLB is of no assistance to
their case.
35. Shri Kapil Sibal, the learned Senior Counsel made his
submissions in reply to the contempt petition and in support of the
application for directions. He submitted, that originally Narang’s
family consisted of three brothers, namely Manu, Rama and Rohit.
He submitted, that the Terms of Settlement between various
members of the family was recorded by an order passed by the
Bombay High Court on 3rd July 1997. He submitted, that the
proceedings arising out of the settlement had reached up to this
Court. This Court vide order dated 4th May 1999, had called for a
report from Justice Lodha, Judge of the Bombay High Court (as His
Lordship then was) with regard to, Rama-petitioner herein
committing contempt of Justice Dhanuka’s order. He submitted,
that after perusal of the report, this Court vide order dated 2nd
November 2001, held the present petitioner guilty for contempt.
36
However, in view of the subsequent settlement between the parties,
the order holding the present petitioner guilty was recalled.
36. Shri Sibal submitted, that the family settlement between the
parties is in two parts. He submitted, that the first part is with regard
to various suits filed by Ramesh Narang which were withdrawn and
transferred to this Court and decreed by this Court. He submitted,
that the second part of the settlement was with regard to the
management of the Company. The learned Senior Counsel
submitted, that the conduct of the present petitioner was throughout
of non-cooperation in the functioning of the Company. The
petitioner, at every stage, was attempting to put a hindrance so that
the functioning of the Company comes to a standstill. He submitted,
that after the orders were passed by this Court on 12th December
2001 and 8th January 2002, though the petitioner was required to
co-operate, the petitioner refused to do so and in order to run the
affairs of the Company, the respondents were required to do certain
things in the interest of the Company. He submitted, that had the
respondents not done what they had done, the entire business of
the Company would have come to a standstill thereby, depriving the
livelihood of 3000 persons and further resulting into closure of the
37
Company, apart from incurring various financial and statutory
liabilities.
37. Shri Sibal submitted, that though there was a settlement with
regard to the affairs of the Company, the affairs were required to be
regulated by the statutory provisions and in spite of the settlement,
statutory powers cannot be abridged. He further submitted, that
every Director has a fiduciary responsibility to act for welfare of the
Company. The learned Senior Counsel therefore submitted, that
since the present petitioner failed to act for welfare of the Company,
the respondents had no other option but to approach the CLB,
seeking certain directions for smooth functioning of the Company.
He submitted, that having already been found guilty for contempt by
the judgment of this Court in Rama Narang (V)(supra), the
respondents bona fide approached the competent statutory body to
seek directions for the smooth functioning of the Company, so as to
ensure the welfare of the Company and its 3000 employees. He
submitted, that the order appointing the Facilitator not only
continued from 10th April 2008, but this Court on several occasions
has made it clear, that it was not interfering with the order of CLB
appointing Facilitator. On the contrary, by order dated 16th August
2016, this Court has clarified, that the present arrangement for
38
running the affairs of the Company would continue until further
orders without prejudice to the rights of the respective parties. He
submitted, that if the petitioner was aggrieved by the order passed
by the CLB, the remedy available to him was to challenge the same
before the competent authority. Having failed to avail of that
opportunity, it is not open to the petitioner to now contend that the
said orders cannot be given effect to. The learned Senior Counsel
submitted, that the respondents have not taken a single decision
from 2008 onwards without the consent of the Facilitator.
38. Shri Sibal further submitted, that no Director of the Company
has propriety rights over the property owned by the Company. The
learned Senior Counsel further submitted, that the perusal of the
Minutes of the Meeting of the Board of Directors held on 31st
December 2001, which was held in order to give effect to the
Consent terms filed before this Court and the order of this Court
dated 12th December 2001, so also the explanatory statement to the
notice for Extraordinary General Meeting convened on 1st January
2002, would clearly show, that the residential accommodation
provided to Rama Narang and Ramesh Narang at Company’s
Bandra property, was in their capacity as a Director of the Company.
39
The learned Senior Counsel reiterated, that no Director can claim
ownership over the Company’s property.
39. Shri Sibal further submitted, that since after 2008, the
respondents have been acting as per the orders passed by the
CLB, which were passed by a competent statutory authority in
exercise of the statutory provisions, by no stretch of imagination,
they could be held guilty for having committed contempt of this
Court. The learned Senior Counsel submitted, that even interim
orders passed by the jurisdictional authorities are binding on the
parties as long as they hold the field. The learned Senior Counsel
relies on the judgment of this Court in the case of Tayabbhai M.
Bagasarwalla and Another v. Hind Rubber Industries (P) Ltd.
And Others6
, in support of the said proposition.
40. Shri Sibal submitted, that insofar as application of the
respondents is concerned, in order to save the Company from
imminent danger of closure, thereby affecting the livelihood of 3000
workers and also from statutory and financial repercussions, it was
necessary that this Court exercises powers under Article 142 and
directs the contempt petitioner to comply with the decision of the
Facilitator. He relied on the judgments of this Court in Vijay Laxmi
6(1997) 3 SCC 443
40
and Others v. Prabhu Devi and Others7
and State Bank of India
v. Ajit Jain and Others8
in support of this proposition.
41. Shri Akhil Sibal, the learned Senior Counsel supplemented the
arguments on behalf of the respondents in the contempt
petition/applicants in the application for directions. He submitted,
that insofar as the allegations made by the petitioner with regard to
the respondents unilaterally entering into labour contracts, grant of
increments to the executives, contract of purchase of equipments
etc. are concerned, the respondents, in order to keep the Company
running, were required to take several decisions between
September 2007 and March 2008, in accordance with the Company
Manual. He submitted, that at one point of time, the labourers went
on strike and the contempt petitioner was not willing to cooperate in
running the affairs of the Company, as such certain emergent
decisions were taken during the said period. However, all those
decisions have been ratified by the Facilitator and therefore, no
case is made out to hold the respondents guilty of contempt.
42. Shri Mukul Rohatgi, the learned Senior Counsel made his
submissions in rejoinder. He submitted, that the matter pending
before this Court was only a contempt petition and the IA for
7 (2017) 11 SCC 169
8 1995 Supp (1) SCC 683
41
directions filed by the respondents was nothing but an abuse of
process of law. He submitted, that there was no order passed by
any competent court directing the contempt petitioner to vacate the
premises. Neither had any authority approved the Resolutions of
the Board of Directors with regard to vacating the premises at Pali
Hill. He submitted, that the Facilitator has not been appointed by
this Court. Though, this Court had earlier appointed Shri H.P.
Ranina and Shri Syed Habibur Rehman, this Court itself vide order
dated 6th August 2010, dispensed with their services. He therefore
submitted, that after 6th August 2010, no Facilitator could have
exercised the powers. He submitted, that the appointment of socalled Facilitator is not only without jurisdiction but is in breach of
the orders passed by this Court dated 12th December 2001 and 8th
January 2002. He therefore submitted, that the application for
directions needs to be dismissed summarily.
43. Shri Rohatgi reiterated, that since the activities which were
found to be contemptuous by the judgment of this Court in Rama
Narang (V)9
(supra), have been continued even after the judgment
was delivered by this Court, the respondents are required to be held
guilty of having committed contempt of this Court and punished in
9(2009) 16 SCC 126
42
accordance with law. He relied on the judgment of this Court in Re:
Vinay Chandra Mishra (The Alleged Contemnor)10
.
44. Shri Rohatgi further submitted, that the family settlements
even in company matters are required to be dealt with differently.
He relied on the judgment of this Court in the cases of
Sangramsinh P. Gaekwad and Others v. Shantadevi P. Gaekwad
(Dead) Through LRs and Others11 and Kale and Others v.
Deputy Director of Consolidation and Others12
.
45. As indicated in the opening paragraphs itself, though initially
only an interlocutory application filed by the respondent No.1 herein
for direction to the petitioner to comply with the Facilitator’s decision
was listed, we intimated the parties that we would hear the
contempt petition as well as the interlocutory application together.
As such, we have heard the learned Senior counsel for the parties
at length on both the Contempt Petition as well as the interlocutory
application (IA No. 87565 of 2019) filed by the respondent No.1.
46. We are of the considered view, that it is appropriate to first
decide the contempt petition itself, inasmuch as the outcome of the
contempt petition will have a bearing on the interlocutory application
filed by the respondent No.1.
10 (1995) 2 SCC 584
11(2005) 11 SCC 314
12(1976) 3 SCC 119
43
47. It would be apposite to refer to Section 2(b) of the Contempt
of Courts Act, 1971 which reads thus:-
“2. Definitions. - …..
(b) “civil contempt” means wilful disobedience to any
judgment, decree, direction, order, writ or other process of
a court or wilful breach of an undertaking given to a
court.”
48. It is thus clear that for bringing an action under the ambit of
civil contempt, there has to be a wilful disobedience to any
judgment, decree, direction, order, writ or other process of a court or
wilful breach of an undertaking given to the court. No doubt, that
Shri Rohatgi is justified in relying on the judgment of this Court in
the case of Rama Narang (V) (supra) decided on 15th March 2007.
In the said judgment, this Court held, that according to the terms of
undertaking, the petitioner and the respondents were under an
obligation to run the company harmoniously with the active
participation of all as a family business but unfortunately, the
respondents had taken over absolute control to the total exclusion
of the petitioner. This Court held, that this was contrary to the terms
of the undertaking given to this Court. Shri Rohatgi asserts, that the
acts with regard to which the present contempt petition has been
filed, are identical to the acts of the respondents, for which, they
were held guilty of contempt. According to him, a fortiori, the
44
present respondents should also be held guilty for the acts with
regard to which, the present contempt petition has been filed.
49. We will have to consider the correctness of the said
submission. For that, it will be necessary to refer to the events that
have taken place subsequent to the date of the judgment of this
Court in Rama Narang (V)13 (supra) i.e. 15th March 2007.
50. It is the case of the respondents, that the petitioner was
attempting to use the consent terms as a veto to stall the
functioning of the Company. It is their case, that the petitioner was
making every attempt possible to thwart the functioning of the
Company. It is also the case of the respondents, that the said acts
were done with the mala fide intention. It is their case, that the son
of the petitioner from his second wife namely Rohit Narang is
working as the Managing Director of Sky Gourmet Catering Pvt.
Ltd., which Company is a direct competitor with the Flight Catering
business of NIHL. It is their case, that since the petitioner refused
to offer any cooperation for proper functioning of the Company, the
respondent No.1 was compelled to approach the CLB by Company
Petition No. 47 of 2008. The said petition was filed on 10th March
2008. The petitioner in the said petition had averred, that after the
order was passed by this Court on 15th March 2007, all genuine
13 (2009) 16 SCC 126
45
efforts were made by the respondents herein, to ensure that the
present petitioner should not have any further grievance regarding
exclusion from the management and control of the Company. It was
averred, that however the attitude of non-cooperation and putting
hindrances in the functioning of the Company by the petitioner
continued even thereafter. It was averred, that petitioner Rama was
unreasonably withholding his consent even in routine decisions
crucial to the operations of the Company. It was averred, that the
situation had led to complete management deadlock. It was further
averred, that the Company was in a precarious state with unpaid
salaries, employee unrest both at the level of senior executives and
skilled workers. It was averred, that petitioner Rama was misusing
the consent decree dated 12.12.2001, as a tool of oppression,
which had resulted in mismanagement and which in turn, was
detrimental to the interest of the Company and its shareholders.
51. The said petition filed by the respondent No.1 Ramesh herein
was heard by the Chairman of the CLB on 7th April 2008. The order
was passed in the said proceedings by the Learned Chairman on
10th April 2008. It is pertinent to note, that petitioner Rama had
raised an objection with regard to maintainability of the said
proceedings. Paragraph (8) of the order which has already been
46
reproduced herein reveals, that the Chairman, CLB had appointed
Shri Justice Arvind V. Savant, Former Chief Justice of Kerala High
Court as a Facilitator. The Facilitator was to try to bring about a
consensus among the Directors on matters, which were urgent and
essential to ensure that the business of the Company is carried on
smoothly. The said order also provided, that in case there was no
consensus after taking into consideration the views of the three
Directors, the Facilitator will take a final decision, which would be
binding on the Directors and the Company. The order made it clear,
that the role of the Facilitator was limited only to operational matters
like issues relating to workers/employees of all categories, issues
relating to suppliers/supply contracts, urgent repairs of equipments
etc. The order also made it clear, that the spirit of the order was,
that the business of the Company should be carried out smoothly till
the petition was disposed of. After the order was passed by the
CLB, the petitioner approached this Court by way of present
contempt petition alleging, that the very filing of the proceedings
before the CLB and entertaining the same by CLB was
contemptuous in nature. It also appears from the record, that the
petitioner had also filed an application for stay of the order passed
by the CLB being IA No. 1 of 2008 in the present proceedings.
47
52. When the matter was listed before this Court on 21stJuly 2009,
this Court, keeping in mind the interest of 3000 workmen as well as
the exchequer, was of the view, that under Article 142 of the
Constitution, this Court should appoint an independent Director,
who will look into the financial management of the Company and
submit his report to this Court from time to time, on the state of the
Company’s accounts and due compliance of the statutory provisions
of the Companies Act and Income Tax Act. He was also requested
to suggest steps for good corporate governance including financial
management in future. The Court therefore appointed Shri Homi
Ranina, who is a Tax Expert, as an independent Director of the
Company. However, by the said order, this Court noted, that Shri
Arvind Savant, Former Chief Justice of the Kerala High Court had
been appointed as Facilitator by the CLB. The Court therefore
clarified, that the said order will not come in the way of the
functioning of the Facilitator. The Court clarified, that it had
requested Shri Ranina to take charge as an independent Director
only in the context of compliance of the provisions of the Companies
Act as well as Income Tax Act and that function will not overlap with
the functioning of the Facilitator, who was free to proceed in
accordance with law. There are two takeaways from the order of
this Court. First, the Court recognised the continual contrarious
48
attitude of the parties impacting the efficient management of the
Company and the interests of large number of stakeholders and the
need to defuse the stalemate situation by appointing a Facilitator.
Thus, this Court not only did not disapprove the order of the CLB in
appointing a Facilitator but on more than one occasions observed,
that the orders passed by it would not come in the way of
functioning of the Facilitator. As a matter of fact, the petitioner
cannot be heard to challenge the order of the competent judicial
forum regarding appointment of a Facilitator by way of an I.A. in a
contempt petition.
53. The matter again came up before this Court on 29th July 2009.
In the said order, the Court directed M/s BSR & Company,
Chartered Accountants to take necessary measures to update and
audit the accounts of the Company. The Court noted, that it had
appointed Shri Homi Ranina as an independent Director vide order
dated 21st July 2009. Since various statutory provisions had not
been complied with for the last several years, the Court vide the
said order also charted out the functions to be undertaken by Shri
Ranina. Again, in the said order, the Court noted, that the CLB has
appointed Shri Arvind Savant, Former Chief Justice of Kerala High
Court as Facilitator. The Court observed, that the order passed by it
49
on that date, was only confined to compliance of the statutory
provisions of the Companies Act and the provisions of the Income
Tax Act. The Court also clarified, that the work assigned to Shri
Ranina as well as M/s BSR & Company would not overlap with the
work of the Facilitator. It further observed, that in fact the directions
issued by this Court would help the Facilitator.
54. Vide another order dated 14th December 2009, the Court
appointed Shri Habib Rehman, as a Consultant to guide and advise
Shri Ranina from time to time, on such terms and conditions as Shri
Ranina deemed fit. It also provided, that in the event of
dispute/disagreement between the Directors, the decision taken by
Shri Ranina, Advisor in consultation with Shri Habib Rehman shall
be final and binding on the Board of Directors. The Court noted the
statements made on behalf of the counsel for the petitioner Rama,
that he will sign notes of accounts, director’s reports and other
statutory documents as may be required by Shri Ranina for
compliance with the statutory provisions. It further clarified, that if
Rama failed to do so, Shri Ranina was authorised to do so. Vide
subsequent order dated 16th April 2010, the Court clarified, that
Rama will comply with the directions given by the Court vide order
dated 14th December 2009. It also clarified, that the said order
50
dated 14th December 2009, was to be implemented by Rama
without prejudice to his rights and contentions in the pending
litigation.
55. It further appears from the record, that Company Application
No. 223 of 2011 was filed by respondent No.2-Rajesh before the
CLB in Company Petition No. 47 of 2008. Vide order dated 28th
April 2011, the CLB rejected the objection raised by the counsel for
Rama as to the locus of the applicant Rajesh (respondent No.2
herein). The CLB after considering the complete, repeated,
persistent and deliberate non-cooperation by Rama in the smooth
functioning of the Company, in order to regulate the conduct of the
Company’s affairs, deemed it fit to grant the relief as prayed for in
Company Application No. 223 of 2011 and directed, that in addition
to the directions already made in Company Petition No. 47 of 2008,
in the event of dispute/disagreement inter-se between the Directors
in the Board meeting on any items on the agenda, a decision shall
be taken by the Facilitator, which shall be final and binding on the
Board of Directors and the Company. With paramount object of
smooth running of the Company, the Facilitator was further
empowered to sign cheques/minutes and statutory records in case
of disagreement between or refusal by any of the Directors or
51
inability of the Board to take a decision. It further directed, that
before signing any cheque/minutes/statutory records, the Facilitator
shall record reasons for not agreeing with the dissenting Directors
or agreeing with the assenting Directors.
56. Vide order dated 6th August 2010, this Court found, that
despite its various efforts, the position remained unchanged. It will
be relevant to refer to the following observations made by the
Court:-
“Although number of steps were taken, even today the
signing of Accounts remains pending because of the
family disputes between the father and the sons. At the
end of the day, the position remains that some of the
provisions of the Companies Act remains non-complied
and the Accounts remained unsigned and, therefore, we
have no option but to direct the Additional Chief
Metropolitan Magistrate, 37th Court, Mumbai, to expedite
the hearing and finally dispose of the cases pending
before him.”
Vide the said order, the Court dispensed with the services of
Shri Ranina and Shri Syed Habibur Rehman. The CLB, vide order
dated 29th November 2011, appointed Shri Acharya as Special
Officer-cum-Advisor. Vide another order dated 30th April 2015, Shri
Acharya was replaced with Shri Ranina as the Facilitator-cumAdvisor.
57. It will be pertinent to note, that in the meantime, Company
Application No. 57 of 2011 was filed by petitioner Rama in Company
52
Petition No. 47 of 2008, praying for discharge of the Facilitator Shri
Justice Arvind Savant. The CLB found, that petitioner Rama was
making attempt after attempt to somehow stop the Facilitator from
functioning. It was observed, that petitioner Rama had made wild,
scurrilous and baseless allegations against the Facilitator.
Therefore, vide order dated 22nd February 2011, the application was
rejected with exemplary cost of Rs. 1 lakh.
58. When the contempt petition was listed before this Court on
16th August 2016, this Court directed the contempt petition to be
kept for final disposal on a Tuesday in the month of November
2016. This Court further clarified, that without prejudice to the rights
of the respective parties, the present arrangement for running the
affairs of the Company will continue until further orders. It appears,
that thereafter the matter was listed before this Court on 29th
November 2016, when this Court directed the matter to be
adjourned sine die. Thereafter, the matter has come up before this
Bench to which reference has already been made in the earlier
paragraphs.
59. For considering the rival submissions, it will be relevant to
refer to Sections 397, 398 and 403 of the Companies Act, 1956:-
“397. APPLICATION TO TRIBUNAL FOR RELIEF IN
CASES OF OPPRESSION
53
(1) Any members of a company who complain that the
affairs of the company are being conducted in a manner
prejudicial to public interest or in a manner oppressive to
any member or members (including any one or more of
themselves) may apply to the Tribunal for an order under
this section, provided such members have a right so to
apply in virtue of section 399.
(2) If, on any application under sub-section (1), the
Tribunal is of opinion-
(a) that the company's affairs are being
conducted in a manner prejudicial to public
interest or in a manner oppressive to any
member or members ; and
(b) 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 ; the Tribunal may, with a view to
bringing to an end the matters complained of,
make such order as it thinks fit.
398. APPLICATION TO TRIBUNAL FOR RELIEF IN
CASES OF MISMANAGEMENT
(1) Any members of a company who complain –
(a) that the affairs of the company are being
conducted in a manner prejudicial to public
interest or in a manner prejudicial to the interests
of the company ; or
(b) that a material change (not being a change
brought about by, or in the interests of, any
creditors including debenture holders, or any
class of shareholders, of the company) has
taken place in the management or control of the
company, whether by an alteration in its Board of
directors 2 [***] or manager 3 [***] or in the
ownership of the company's shares, or if it has
no share capital, in its membership, or in any
other manner whatsoever, and that by reason of
such change, it is likely that the affairs of the
company will be conducted in a manner
prejudicial to public interest or in a manner
prejudicial to the interests of the company; may
apply to the Tribunal for an order under this
54
section, provided such members have a right so
to apply in virtue of section 399.
(2) If, on any application under sub-section (1), the
Tribunal is of opinion that the affairs of the company are
being conducted as aforesaid or that by reason of any
material change as aforesaid in the management or
control of the company, it is likely that the affairs of the
company will be conducted as aforesaid, the Tribunal
may, with a view to bringing to an end or preventing the
matters complained of or apprehended, make such order
as it thinks fit.
403. INTERIM ORDER BY TRIBUNAL Pending the
making by it of a final order under section 397 or 398, as
the case may be, the Tribunal may, on the application of
any party to the proceeding, make any interim order
which it thinks fit for regulating the conduct of the
company's affairs, upon such terms and conditions as
appear to it to be just and equitable.”
60. 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
55
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.
61. 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
56
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.
62. Perusal of Section 403 would reveal, that the CLB is also
entitled to make any interim order pending making by it of a final
order under Section 397 or 398, on an application of any party to
the proceedings, which order it thinks fit for regulating the conduct
of the Company’s affairs. Such an order has to be made on such
terms and conditions as appears to CLB to be just and equitable.
63. The respondents had legitimately invoked the jurisdiction of
CLB invoking the aforesaid powers under Sections 397, 398 and
403 of the Companies Act, to which they were entitled to in law and
were not restrained to do so by any competent Court/forum.
64. The CLB vide order dated 10th April 2008, in Company Petition
No. 47 of 2008 found, that it was necessary to appoint a Facilitator
in the interest of the Company. Immediately after the said order
was passed, the petitioner has filed the present contempt petition.
57
Along with the said contempt petition, the petitioner has also filed IA
No. 1 of 2008 seeking stay of the said order. A subsequent
application, being IA No. 2 of 2008 was also filed by petitioner
Rama seeking stay of the proceedings before CLB and the
communications/directions passed by the Facilitator. However,
perusal of the record would reveal, that no orders were passed on
the said IAs. On the contrary, perusal of the record would reveal,
that this Court vide order dated 21st July 2009, though had
appointed Shri Homi Ranina, a Tax Expert, as an independent
Director, for ensuring due compliance of the statutory provisions, it
noted, that Shri Arvind Savant, Former Chief Justice of the Kerala
High Court, had been appointed as a Facilitator by the CLB. The
Court clarified, that the said order will not come in the way of the
functioning of the Facilitator. Vide another order dated 29th July
2009, this Court while issuing various directions, before concluding
the order again noted, that the CLB had appointed Shri Arvind
Savant, Former Chief Justice of the Kerala High Court as a
Facilitator and clarified, that the order passed by it appointing Shri
Ranina as an independent Director and directing M/s BSR &
Company, Chartered Accountants, to take necessary measures and
to update and audit the accounts, was confined to compliance of the
statutory provisions of the Companies Act as well as the Income Tax
58
Act. The Court clearly observed, that the work assigned to Shri
Ranina and M/s BSR & Company will not overlap with the work of
the Facilitator. It further observed, that in fact the above directions
will help the Facilitator.
65. Vide another order dated 28th April 2011, the CLB issued
certain directions thereby giving additional powers to the Facilitator
including signing of cheques/minutes and statutory records, in case
of disagreement between the parties. This Court vide order dated
16th August 2016, observed thus:-
“Without prejudice to the rights of the respective parties,
the present arrangement for running the affairs of the
Company will continue until further orders.”
66. 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
59
communications/directions passed by the Facilitator. However, no
orders have been passed by this Court on the said IAs.
67. It is the main contention of the petitioner, that invoking the
jurisdiction of the CLB and entertaining the said proceedings by the
CLB, itself amounts to contempt.
68. It will be relevant to refer to the observations of this Court in
the case of Pratap Singh and Another v. Gurbaksh Singh14
. This
Court after referring to various judgments of the High Courts,
observed thus:-
“The principle behind all these cases is that such action of
the person which he takes in pursuance of his right to
take legal action in a Court of law or in just making a
demand on the other to make amends for his acts will not
amount to interfering with the course of justice, even
though that may require some action on the part of the
other party in connection with his own judicial proceeding,
as a party is free to take action to enforce his legal rights.”
It could thus be seen, that this Court has held, that such
action of a person which he takes in pursuance of his right to take
legal action in a court of law, will not amount to interfering with the
course of justice, even though that may require some action on the
part of the other party in connection with his own judicial
proceedings. The principle is, that a party is free to take action to
enforce his legal right. This Court has approved the view taken by
141962 SCR Supp. (2) 838
60
Allahabad High Court in Hrishikesh Sanyal v. A.P. Bagchi15 and
Radhey Lal v. Niranjan Nath16
, that a person does not commit
contempt of court if during the pendency of certain proceedings, he
takes recourse to other judicial proceedings open to him, even
though the latter proceedings put the other party at a loss.
69. 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.
70. It will also be relevant to refer to a dictum of this Court in
Mehar Rusi Dalal (Mrs.) v. T.K. Banerjee and Others17:-
15ILR 1940 All 710
16AIR 1941 All 95
17 (2004) 5 SCC 119
61
“2. In our view, every party has a right to move a court of
law for adjudication of his rights. Mere filing of
proceedings in a court of law and applying to a court of
law that the payment may not be made would not amount
to breach of undertaking. We, therefore, see no reason to
punish for contempt. The contempt notice will stand
discharged. There will be no order as to costs.”
71. As such, merely taking recourse to the statutory remedy
available to the respondents, in our view, would not amount to
contempt. With regard to the reliance placed by the learned Senior
counsel for the petitioner on the judgment of this Court in Rama
Naranag (V)18 (supra), we are of the view, that it would not be of
assistance to the case of the petitioner, inasmuch as, at that stage,
there were no orders passed by the CLB. It appears, that after the
order was passed by this Court holding the respondents guilty and
thereafter finding, that the present petitioner is not co-operating with
the respondents in running the affairs of the Company, but on the
contrary making every attempt to stall the functioning of the
Company; the respondents thought it prudent to approach the CLB
by invoking its powers under Sections 397, 398 and 403 of the
Companies Act. The respondents had to take recourse to that
remedy in compelling circumstances to safeguard the interest of the
Company and its stakeholders. It was not in strict sense remedy for
seeking personal relief, much less to defeat the terms of settlement
18 (2009) 16 SCC 126
62
recorded in a dispute between private parties who incidentally are
Directors of the same Company.
72. Perusal of the company petition filed by the respondents
before the CLB and the order dated 10th April 2008, passed by CLB
would reveal, that a specific reference has been made to the order
passed by this Court holding the respondents guilty for committing
contempt (vide Rama Narang (V)19). We are therefore of the view,
that the said judgment would be of no assistance to the case of the
present petitioner.
73. Apart from that, for bringing an action for civil contempt, the
petitioner has to satisfy the court that there has been a wilful
disobedience of any judgment, decree, direction, order, writ or other
process of the Court. It will be relevant to refer to paragraph (9) of
the judgment of this Court in Niaz Mohammad and Others v. State
of Haryana and Others20:-
“9. Section 2(b) of the Contempt of Courts Act, 1971
(hereinafter referred to as ‘the Act’) defines “civil
contempt” to mean “wilful disobedience to any judgment,
decree, direction, order, writ or other process of a court
…”. Where the contempt consists in failure to comply with
or carry out an order of a court made in favour of a party,
it is a civil contempt. The person or persons in whose
favour such order or direction has been made can move
the court for initiating proceeding for contempt against the
alleged contemner, with a view to enforce the right flowing
from the order or direction in question. But such a
19 (2009) 16 SCC 126
20(1994) 6 SCC 332
63
proceeding is not like an execution proceeding under
Code of Civil Procedure. The party in whose favour an
order has been passed, is entitled to the benefit of such
order. The court while considering the issue as to whether
the alleged contemner should be punished for not having
complied with and carried out the direction of the court,
has to take into consideration all facts and circumstances
of a particular case. That is why the framers of the Act
while defining civil contempt, have said that it must be
wilful disobedience to any judgment, decree, direction,
order, writ or other process of a court. Before a
contemner is punished for non-compliance of the
direction of a court, the court must not only be satisfied
about the disobedience of any judgment, decree,
direction or writ but should also be satisfied that such
disobedience was wilful and intentional. The civil court
while executing a decree against the judgment-debtor is
not concerned and bothered whether the disobedience to
any judgment, or decree, was wilful. Once a decree has
been passed it is the duty of the court to execute the
decree whatever may be consequence thereof. But while
examining the grievance of the person who has invoked
the jurisdiction of the court to initiate the proceeding for
contempt for disobedience of its order, before any such
contemner is held guilty and punished, the court has to
record a finding that such disobedience was wilful and
intentional. If from the circumstances of a particular case,
brought to the notice of the court, the court is satisfied
that although there has been a disobedience but such
disobedience is the result of some compelling
circumstances under which it was not possible for the
contemner to comply with the order, the court may not
punish the alleged contemner.”
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
64
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. Though, the civil court
while executing a decree against the judgment-debtor is not
concerned and bothered as to whether the disobedience to any
judgment or decree was wilful and once the decree had been
passed, it was the duty of the court to execute the decree, whatever
may be the consequences thereof. In a contempt proceeding before
a contemnor is held guilty and punished, the Court has to record a
finding, that such disobedience was wilful and intentional. It has
been held, that if from the circumstances of a particular case,
though the Court is satisfied that there has been a disobedience but
such disobedience is the result of some compelling circumstances,
65
under which it is not possible for the contemnor to comply with the
same, the Court may not punish the alleged contemnor.
74. It will also be apposite to refer to the following observations of
this Court in Kanwar Singh Saini v. High Court of Delhi21, taking a
similar view:-
“30. In an appropriate case where exceptional
circumstances exist, the court may also resort to the
provisions applicable in case of civil contempt, in case of
violation/breach of undertaking/judgment/order or decree.
However, before passing any final order on such
application, the court must satisfy itself that there is
violation of such judgment, decree, direction or order and
such disobedience is wilful and intentional. Though in a
case of execution of a decree, the executing court may
not be bothered whether the disobedience of the decree
is wilful or not and the court is bound to execute a decree
whatever may be the consequence thereof. In a contempt
proceeding, the alleged contemnor may satisfy the court
that disobedience has been under some compelling
circumstances, and in that situation, no punishment can
be awarded to him. [See Niaz Mohammad v. State of
Haryana [(1994) 6 SCC 332], Bank of
Baroda v. Sadruddin Hasan Daya [(2004) 1 SCC 360:
AIR 2004 SC 942] and Rama Narang v. Ramesh
Narang [(2006) 11 SCC 114 : AIR 2006 SC 1883].] Thus,
for violation of a judgment or decree provisions of the
criminal contempt are not attracted.”
75. It will also be appropriate to refer to the further observations
made by this Court in para (38) of the said judgment:-
“38. The contempt proceedings being quasi-criminal in
nature, the standard of proof required is in the same
manner as in other criminal cases. The alleged
21(2012) 4 SCC 307
66
contemnor is entitled to the protection of all
safeguards/rights which are provided in the criminal
jurisprudence, including the benefit of doubt. There must
be a clear-cut case of obstruction of administration of
justice by a party intentionally to bring the matter within
the ambit of the said provision. The case should not rest
only on surmises and conjectures. In Debabrata
Bandhopadhyaya v. State of W.B. [AIR 1969 SC 189 :
1969 Cri LJ 401] , this Court observed as under: (AIR p.
193, para 9)
“9. A question whether there is contempt of court
or not is a serious one. The court is both the
accuser as well as the judge of the accusation. It
behoves the court to act with as great
circumspection as possible making all
allowances for errors of judgment and difficulties
arising from inveterate practices in courts and
tribunals. It is only when 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 lapse is
deliberate and in disregard of one's duty and in
defiance of authority. To take action in an unclear
case is to make the law of contempt do duty for
other measures and is not to be
encouraged.”(emphasis added)”
This Court has observed, that the contempt proceedings are
quasi-criminal in nature and the standard of proof required is in the
same manner as in the other criminal cases. The alleged
contemnor is entitled to the protection of all safeguards/rights which
are provided in the criminal jurisprudence, including the benefit of
doubt. There must be a clear-cut case of obstruction of
administration of justice by a party intentionally, to bring the matter
within the ambit of the said provision. The Court has also referred
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to the observations made by this Court in the case of Debabrata
Bandopadbyay and Others v. State of West Bengal and
Another22, wherein it was observed, that punishment under the law
of contempt is called for when the lapse is deliberate and in
disregard of one’s duty and in defiance of authority.
76. In the present case, we are of the considered view, that 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.
77. In this regard, it will be appropriate to refer to following
observations of this Court in the case of Tayabbhai M.
Bagasarwalla (supra). After scanning the entire law, the Court
observed thus:-
“28. The correct principle, therefore, is the one
recognised and reiterated in Section 9-A — to wit, where
an objection to jurisdiction of a civil court is raised to
entertain a suit and to pass any interim orders therein, the
Court should decide the question of jurisdiction in the first
instance but that does not mean that pending the
decision on the question of jurisdiction, the Court has no
22AIR 1969 SC 189
68
jurisdiction to pass interim orders as may be called for in
the facts and circumstances of the case. A mere objection
to jurisdiction does not instantly disable the court from
passing any interim orders. It can yet pass appropriate
orders. At the same time, it should also decide the
question of jurisdiction at the earliest possible time. The
interim orders so passed are orders within jurisdiction
when passed and effective till the court decides that it has
no jurisdiction to entertain the suit. These interim orders
undoubtedly come to an end with the decision that this
Court had no jurisdiction. It is open to the court to modify
these orders while holding that it has no jurisdiction to try
the suit. Indeed, in certain situations, it would be its duty
to modify such orders or make appropriate directions. For
example, take a case, where a party has been
dispossessed from the suit property by appointing a
receiver or otherwise; in such a case, the Court should,
while holding that it has no jurisdiction to entertain the
suit, put back the party in the position he was on the date
of suit. But this power or obligation has nothing to do with
the proposition that while in force, these orders have to
be obeyed and their violation can be punished even after
the question of jurisdiction is decided against the
plaintiff provided the violation is committed before the
decision of the Court on the question of jurisdiction.”
78. This Court has held, that the correct principle therefore is that,
where an objection is taken to the jurisdiction to entertain a suit and
to pass any interim orders therein, the Court should decide the
question of jurisdiction in the first instance. However, that does not
mean that pending the decision on the question of jurisdiction, the
Court has no jurisdiction to pass interim orders as may be called for
in the facts and circumstances of the case. It has been held, that a
mere objection to jurisdiction does not instantly disable the court
69
from passing any interim orders. It has been held, that it can yet
pass appropriate orders. Though, this Court has observed, that the
question of jurisdiction should be decided at the earliest possible
time, the interim orders so passed are orders within jurisdiction,
when passed and effective till the court decides that it has no
jurisdiction, to entertain the suit. It has been held, that those interim
orders would undoubtedly come to an end with the decision that the
Court had no jurisdiction. This Court has held, that if the Court holds
that it has no jurisdiction, it is open to it to modify the orders.
However, it has been held, that while in force, the interim orders
passed by such Court have to be obeyed and their violation can be
punished even after the question of jurisdiction is decided against
the plaintiff, provided violation is committed before the decision of
the Court on the question of jurisdiction.
79. Apart from that, it is to be noted that in the present case, the
petitioner has raised an objection with regard to tenability of the
proceedings before the CLB. It will be relevant to refer to the
observations made by CLB in its order dated 10th April 2008:-
“Shri Gopal Jain once again raised the issue that
without deciding on the maintainability of the
petition, no interim order should be passed. In a
proceeding under Sections 397/398 of the Act, it is
now well settled that only if the maintainability is
challenged either in terms of Section 399 or the
70
jurisdiction of this Board, challenges on other
grounds have to be considered along with the merits
of the case. In the present case, it is an admitted fact
that the petitioner qualifies under Section 399 of the
Act and this Board has the jurisdiction to deal with
the petition under Sections 397/398 of the Act.
Further, in a proceeding under Sections 397/398, it is
the interest of the company which is paramount. It is
quite evident from the various annexure enclosed with the
petition that due to differences among the directors, many
operational issues, like, payment of salary/wages,
payment to suppliers etc. are pending resulting in
agitation by the employees and irregularities in supplies
etc. Therefore, I consider it appropriate that till the
petition is disposed of, as an interim measure, in the
interests of the company, over 3000 employees/workers,
there should be a mechanism by which the day to day
operations are carried on without any hitch.” [emphasis
supplied]
80. It could thus be seen, that 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,
71
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. The CLB
therefore considered it appropriate, that till the petition is disposed
of, as an interim measure, in the interest of the Company as well as
more than 3000 employees/workers, there should be a mechanism
by which day to day operations are carried out without any hitch.
81. It is not in dispute, that the aforesaid order has not been
challenged by the petitioner before any forum. The observations
referred hereinabove are indisputably adverse to the case of the
petitioner. Any order passed by the CLB was appellable before the
higher forums. Undisputedly, the petitioner has not challenged the
said order. Having not challenged the same, in our view, it is not
open for the petitioner to argue, that since the petitioner has taken
objection as to maintainability of the proceedings before CLB, the
said orders are without jurisdiction and the initiation of the
proceedings and the orders passed thereon, would amount to
72
respondent’s committing contempt of this Court. In our view, the
argument needs to be rejected, in view of the judgment of this Court
in the case of Tayabbhai M. Bagasarwalla (supra). This Court in
unequivocal terms has held, that even if the objection is raised to
the jurisdiction of a forum, it has jurisdiction to pass interim orders
till it finally decides the issue of jurisdiction and such orders are
binding on the parties till the issue of jurisdiction is decided. As
could be seen from the order of the CLB dated 10th April 2008,
though the CLB by referring to Sections 397, 398 and 399 of the
Companies Act, prima facie, has observed, that only if
maintainability is challenged either in terms of Section 399 of the
Companies Act or on the ground of jurisdiction of the Board, the
same will have to be considered first and challenges on other
grounds, had to be considered along with the merits of the case.
The CLB has further observed, that it was an admitted fact, that the
petitioner qualifies under Section 399 of the Act and the Court has
the jurisdiction to deal with the petition under Section 397 or/and
398 of the Act. Having chosen not to challenge the aforesaid
observations of the CLB, in our view, the argument advanced
deserves no merit and needs to be rejected. However, it should not
be construed, that we have held that the proceedings under the
CLB were maintainable in law. Since the proceedings are pending
73
final adjudication, the parties would be at liberty to raise all issues
available to them including the issue of jurisdiction.
82. In the result, we are of the considered view, that the present
contempt petition is without any merit and deserves to be
dismissed, and is accordingly dismissed.
83. That leaves us with Interlocutory Application No. 87565 of
2019 filed by the respondent No.1. The respondent No.1, by the
said application is seeking direction to the petitioner to abide by the
decision of the Facilitator dated 30.04.2019.
84. Having held, that the present contempt petition deserves no
merit and is liable to be dismissed, we find that such an application
need not be entertained. Indeed, the respondents may be welladvised to take recourse to the remedies available to them in law.
We do not wish to express any opinion one way or the other in that
regard. Though, Shri Kapil Sibal has strenuously argued, that this
Court should invoke powers under Article 142 of the Constitution
and issue directions to the contempt petitioner, we find, that this is
not a case wherein directions as sought, should be issued under
Article 142 of the Constitution. On Insolvency and Bankruptcy Code
2016, coming in force, the proceedings which are pending before
the CLB, now stand transferred to the National Company Law
74
Tribunal (NCLT). It would be appropriate for the parties to invoke
the jurisdiction of NCLT for seeking such orders as deemed fit in the
facts and circumstances in accordance with law.
85. Without going into the merits and demerits of the said
application, we dispose of the same relegating the parties to the
statutory remedy available to them in law.
86. All pending IAs, if any, stand disposed of in aforesaid terms.
…………………………...J.
[A.M. KHANWILKAR]
………………………….J.
[B. R. GAVAI]
NEW DELHI;
JANUARY 19, 2021.
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