1 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 16.12.2011 CORAM THE HON'BLE MR.JUSTICE D.MURUGESAN AND THE HON'BLE MR.JUSTICE K.K.SASIDHARAN Contempt Petition No.1140 of 2011 New Bridge Holdings B.V. a company incorporated under the provisions of laws of The Netherlands and having its Registered Office at Siriusdreef 14 N.L-2132 WT Hoofddorp The Netherlands P.O.Box 721 NL-2130 AS Hoofddorp, The Netherlands through its Authorised Signatory Mr.Rajesh Kumar Jha .. Petitioner -vs- 1. TTK-LIG Limited through its Managing Director Mr.T.R.Venkatesh 6, Cathedral Road Chennai 600 006 2. Mr.T.T.Jagannathan 3. Mr.T.T.Raghunathan 4. Dr.(Mrs.) Latha Jagannathan 5. Ms.Bhanu Raghunathan 6. Mr.J.Srinivasan 7. Mr.H.T.Rajan 8. Mr.Girish Rao 9. Mr.T.R.Venkatesh .. Respondents Petition under Sections 10 & 12 of the Contempt of Courts Act, 1971 to punish the respondents for disobeying and defying the order dated 01.06.2011 passed in Company Application No.113 of 2011 in Company Petition No.41 of 2011 on the file of the Company Law Board, Chennai Bench, Chennai in accordance with law. For Petitioner :: Dr.Abhishek Manu Singhvi Senior Advocate for Mr.R.Jawaharlal & Mr.R.Saravanakumar https://hcservices.ecourts.gov.in/hcservices/ 2 For Respondents :: Mr.A.L.Somayaji Senior Advocate for Mr.R.Sankaranarayanan for R1 & R9 Mr.S.Rajesh for R6 Mr.H.Karthick Seshadri for M/s Iyer & Thomas for R2 to R5, R7 & R8 ORDER D.MURUGESAN, J. The petitioner, New Bridge Holdings B.V., through its Authorised Signatory seeks for a direction to punish the respondents for their act of disobeying and defying the order dated 1.6.2011 made in C.A.No.113 of 2011 in C.P.No.41 of 2011 on the file of Company Law Board, Chennai Bench, Chennai. 2. In support of the petition, the petitioner has averred as follows. The first respondent, M/s TTK-LIG Limited is a joint venture company incorporated in 1963 with the petitioner/its parent company. The petitioner and TTK group hold 49.87 per cent shares each and the balance percentage is held by 40 individuals. The first respondent, inter alia, manufactures contraceptives including condoms under the trademarks "Durex" and "Kohinoor". The group/parent company of the petitioner had provided the technology, machinery, processes, etc., in 1963 and continue to provide the same to the first respondent. The group company had also permitted the use https://hcservices.ecourts.gov.in/hcservices/ 3 of its world renowned trademarks "Durex" and "Kohinoor" to the first respondent and in addition 80 per cent of the turnover and profit of the first respondent comes from exports to the petitioner and its group companies. 3. Both the petitioner and the first respondent are under the joint and equal management right from the year 1963 and their inter-se rights are governed by the Articles of Association and the agreements executed between them. The ninth respondent by name T.R.Venkatesh is the Managing Director of the first respondent company. Though he is supposed to be independent, he started acting in collusion with TTK group. In the meeting of the Board of Directors of the first respondent company held on 2.5.2011, resolutions were passed reducing the petitioner to minority from the position of equal and joint management of joint venture company. A further resolution was passed to suspend the export, unless the group companies of the petitioner agree for the sale price of total costs plus profit of 50 per cent instead of the profit of 15 per cent and agree to purchase 80 crore pieces per year for five years. It was also resolved to appoint a distributor in India from amongst the TTK group companies for five years. According to the petitioner, all the resolutions were contrary to the Articles of Association of joint venture company and therefore ultra vires and illegal. Though the condition in https://hcservices.ecourts.gov.in/hcservices/ 4 regard to the sale price and increase of profit from 15 per cent to 50 per cent was onerous, the foreign buyer agreed under duress and coercion only in order to get the supplies. The foreign buyer agreed to the terms only on condition that the first respondent company should resume the exports by 10.5.2011. As the first respondent did not resume the export and forced the petitioner to give its consent to the resolutions as a pre-condition for resumption of export, the petitioner had to withdrew its offer. 4. On the above factual background, the petitioner filed a company petition before the Company Law Board for oppression of its rights and mismangement of the first respondent company. The petitioner also prayed for stay of the resolutions passed by the Board of Directors of the company in its meeting held on 2.5.2011 and to restrain the respondents from implementing the same. The Company Law Board took up the petition for hearing on 20.5.2011 and, after hearing both sides and perusing the records, passed the following interim order: "Till the matter is heard I think it is just and proper to direct the respondents to restore the supply of goods as per the terms detailed in the letter dated 06.05.2011 i.e., at 50%, as against 15%. The above order is made without prejudice to the contentions on https://hcservices.ecourts.gov.in/hcservices/ 5 both sides. The supply made by the respondents on the basis of this order shall be subject to the final outcome of the CP." 5. According to the petitioner, in spite of the above directions of the Company Law Board, the respondents deliberately and wilfully disobeyed the order. The Managing Director of the first respondent company wrote to the foreign buyer that unless an agreement for a term of five years with an assured order for 80 crore pieces per year with 50 per cent profit to the company is executed, exports would not be resumed. Under the circumstances, the petitioner filed C.A.No.113 of 2011 before the Company Law Board seeking initiation of proceedings for disobedience. By order dated 27.5.2011, the Company Law Board adjourned the matter to 1.6.2011 for hearing on the implementation of the order dated 20.5.2011. The said adjournment was granted on the request of the respondents. 6. The Company Law Board took up the matter in C.A.No.113 of 2011 on 1.6.2011 and passed the following order: "The copy of the affidavit has been served on the respondents. The affidavit is taken on record. The draft agreement has been made available by the respondents for my perusal, as per which https://hcservices.ecourts.gov.in/hcservices/ 6 800 million units per annum or 50% global sales of Durex whichever is lower will be supplied for a term of five years. In my view, till a formal agreement is drawn up, it will be in the interest of the company and the joint venture partners to limit the supply for a period of three months from June 2011 to August 2011 at the price stipulated in my order dated 20.05.2011 and on the undertaking given in the affidavit by the petitioner, LIG, SSL and its affiliates. In partial modification of my order dated 25.05.2011, the respondents are hereby directed to resume the supply as per the terms undertaken in the affidavit filed by the petitioner and its affiliates. The respondent company has made clear that the mutual trust and confidence that was prevalent in the past decades between the parties have been completely destroyed and expressed their willingness to exit from the company on a fair price. The petitioner had undertaken to respond to the offer made on behalf of respondents (TTK Group) on June 22, 2011. I therefore direct both sides to come with proposals in this regard. CP adjourned to 22.06.2011 at 10.30 AM." The said order came to be passed on the following undertaking given by the petitioner: https://hcservices.ecourts.gov.in/hcservices/ 7 "2.1. The petitioner, LIG, SSL and its affiliates had earlier placed Purchase Orders on the JV Company. They would replace those Purchase Orders on the JV Company within 24 hours; at a price stipulated by this Hon'ble Board in its order dated 20.05.2011. The JV Company would commence supply within 48 hours and complete the same, in terms of previously existing arrangement. 2.2. Payments for the supplies so made, would be mad to the JV Company, within 15 days, from the date of receipt of delivery of individual consignments of the ordered goods. 2.3. The petitioner, LIG, SSL and its affiliates would place Purchase Orders for a total of 200 million pieces (condoms) or 50% of their collective global requirement, whichever is lower (which includes the Purchase Orders referred to in paragraph 2.1 above), over the next three months i.e.June, 2011 to August, 2011, at prices stipulated by this Hon'ble Board's Order dated 20.05.2011. The petitioner, LIG, SSL and its affiliates, would remain bound by the terms of the aforesaid undertaking." 7. After the above order, the respondents sent an e- mail of excuse for not complying with the order of Company Law Board and also forwarded a letter dated 13.6.2011 to https://hcservices.ecourts.gov.in/hcservices/ 8 the advocates of the foreign buyer stating that unless an agreement was executed with the first respondent company for a period of five years with an assured order of 80 crore pieces per year or 50 per cent of the foreign buyer's total requirement whichever is lower with the price at total cost plus 50 per cent profit, they would not resume supplies. On the above facts, the petitioner had approached this Court with the allegation of wilful disobedience and disregard to the order of Company Law Board by the respondents. 8. The respondents 1 to 9 have filed a common counter affidavit denying each and every averment of the petitioner. The contempt petition is opposed on the ground that the petitioner having obtained the order dated 1.6.2011, should have filed a petition to execute the said order and there was not even an attempt to do so. In fact, the petitioner had questioned the said order in Company Appeal No.11 of 2011 before this Court and having failed to obtain any interim order, has resorted to file the contempt petition. Secondly, the petitioner is not the beneficiary of any order of the Company Law Board and it has no locus standi on the ground that the beneficiary of the order would be only SSL, PLC and LRC products limited, the parent companies. It is the case of the respondents that the petitioner had suppressed an important fact that SSL and https://hcservices.ecourts.gov.in/hcservices/ 9 LRC had filed a claim before the High Court of Justice, Chancery Division, London and sought for the grant of mandatory injunction against the first respondent to effect supply of contraceptives based on the alleged contract and the said application was dismissed on 1.7.2011 and by a subsequent order dated 21.7.2011, the claim for grant of default judgment was also dismissed. The petitioner had allowed the said orders to stand and did not question the said orders any further. According to the respondents, the petitioner is only a proxy exposing the cause of SSL and LRC simultaneously in Company Law Board and before this Court. According to the respondents, in any event, the question of wilful disobedience of the order of the Company Law Board does not arise. When the company petition was heard on 20.5.2011, the Company Law Board did not grant interim order of stay of the resolutions passed by the first respondent company on 2.5.2011. In fact, the Company Law Board in its order found that it cannot go into any commercial compromise between the parties. It is also averred that alleging disobedience, the petitioner filed C.A.No.113 of 2011 before the Company Law Board under Regulations 44 and 47 of the Company Law Board Regulations read with Section 406 of the Companies Act. By order dated 7.7.2011, after referring to earlier orders, the Company Law Board had only permitted the first respondent to exit from the company on a fair value to be arrived at on the https://hcservices.ecourts.gov.in/hcservices/ 10 valuation of shares. Accordingly, the Company Law Board had appointed a valuer to value the shares of the company with a further direction that the first respondent can also opt to purchase the petitioner's share. Having obtained such an order, it is not open for the petitioner to approach this Court again alleging disobedience. In any case, as the contempt petition has been filed against interim order, it is not maintainable. 9. We heard Dr.Abhishek Manu Singhvi, learned Senior Advocate for the petitioner, Mr.A.L.Somayaji, learned Senior Advocate for the respondents 1 & 9, Mr.S.Rajesh, learned Advocate for the respondent 6 and Mr.H.Karthick Seshadri, learned Advocate for the respondents 2 to 5, 7 & 8 elaborately. 10. We have carefully considered the rival contentions. Before we go into the contentious issues raised on merits, we are called upon to consider as to whether the contempt petition would lie before this Court alleging wilful disobedience of the order of the Company Law Board. The relevant provisions of the Contempt of Courts Act, Company Law Board Regulations and the Companies Act for consideration of the issue read thus: "S.10. Power of High Court to punish contempts of subordinate Courts.--Every High Court shall have and exercise the https://hcservices.ecourts.gov.in/hcservices/ 11 same jurisdiction, powers and authority, in accordance with the same procedure and practice, in respect of contempts of Courts subordinate to it as it has and exercises in respect of contempts of itself: Provided that no High Court shall take cognizance of a contempt alleged to have been committed in respect of a Court subordinate to it where such contempt is an offence punishable under the Indian Penal Code (45 of 1860). R.47. Bench to be deemed to be a Court for certain purposes.--A Bench shall be deemed to be a Court or lawful authority for the purpose of prosecution or punishment of a person who wilfully disobeys any direction or order of such Bench. S.634A. Enforcement of orders of Company Law Board.--Any order made by the Company Law Board may be enforced by that Board in the same manner as if it were a decree made by a Court in a suit pending therein, and it shall be lawful for that Board to send, in the case of its inability to execute such order, to the Court within the local limits of whose jurisdiction,-- (a) in the case of an order against a company, the registered office of the company is situated, or (b) in the case of an order against any other person, the person concerned https://hcservices.ecourts.gov.in/hcservices/ 12 voluntarily resides, or carries on business or personally works for gain. [Provided that the provisions of this section shall not apply on and after the commencement of the Companies (Second Amendment) Act, 2002.]" 11. Section 10 of the Contempt of Courts Act, 1971 confers a power on the High Court to punish contempts of subordinate Courts. By that provision, every High Court shall have and exercise the same jurisdiction, powers and authority, in accordance with the same procedure and practice, in respect of contempts of Courts subordinate to it as it has and exercises in respect of contempts of itself. The phrase "Courts subordinate to it" used in Section 10 is wide enough to include all Courts which are judicially subordinate to the High Court, even though they are not under its administrative control under Article 235 of the Constitution of India. The High Court has the power of superintendence under Article 227 over all Courts and Tribunals throughout the territories in relation to which it exercises jurisdiction. In order to keep the subordinate Courts and the Tribunals over which the High Court exercises its jurisdiction, the power of superintendence is conferred on the High Court under Article 227 of the Constitution of India. The inherent power of the High Court to supervise the subordinate Courts https://hcservices.ecourts.gov.in/hcservices/ 13 and the Tribunals would also include its power to punish for contempt of the Tribunals, which is based on a correlative duty of the High Court, co-related to the power of superintendence which the High Court has over the Tribunals. The power of superintendence under Article 227 is not being administrative, but being judicial. It extends to punish for the contempt of the Tribunals. The question as to whether the High Court has jurisdiction to initiate proceedings under the Contempt of Courts Act with respect to the proceedings of the Assistant Collector pending before it for the correction of papers under Section 40 of the Land Revenue Act, came up for consideration before the Allahabad High Court. In the judgment in Satdeo Pandey v. Baba Raghav Das, AIR 1953 All. 419, the question was considered by a Division Bench and as there was a difference of opinion on the question, it was referred to a third Judge. Justice Wali Ullah, while considering the question, ultimately held that the Court of an Assistant Collector is a revenue Court and is subordinate to the High Court; consequently, it comes within the power possessed by the High Court to protect its subordinate Courts. While holding that the Revenue Court of an Assistant Collector is a Court subordinate to the High Court, one of the two Hon'ble Judges, namely, Justice Mushtaq Ahmed, placed reliance on the following two judgments. The first judgment was by Justice Cornelius https://hcservices.ecourts.gov.in/hcservices/ 14 made in Sultan Ali v. Nur Hussain, AIR 1949 Lahore 131, holding the law thus: "The High Court is also the superior Court within the province, charged with the duty of setting limits to the jurisdiction of all other judicial tribunals or Courts within the province, and this imports subordination to the latter tribunals qua the High Court. Further, if it can be shown that over 'any part of its' jurisdiction, a tribunal is directly subordinate to the appellate or revisional authority of the High Court then it must be held to be subordinate to the High Court in the respects relevant for the application of S.115, Civil P.C." A Full Bench judgment of the Allahabad High Court Lucknow Bench reported in AIR 1950 All. 80 was also quoted, where the Full Bench observed thus: "A very great difference exists between the Workmen's Compensation Act and the Payment of Wages Act, inasmuch as the former Act provides for an appeal 'from certain orders' of the Commissioner appointed under the Act to the High Court, while the latter does not provide for any such appeal. Thus under the Workmen's Compensation Act, the Commissioner is a Court subordinate to the appellate jurisdiction of the High Court and can well be held to be a https://hcservices.ecourts.gov.in/hcservices/ 15 Court subordinate to the High Court for the purposes of S.115, Civil P.C." The approach of the Court seems to be that in case a Tribunal or even a Revenue Court, while discharging its quasi-judicial function, would be considered to be a Court subordinate to the High Court. In that event the orders of the Tribunal/Revenue Court are amenable to the appellate jurisdiction of the High Court. 11A. In Jaitendra Kumar Agrawal v. Lakshmi Kant, 1974 Crl. L.J. 1140, a Full Bench of the Delhi High Court, after examining the provisions of the statute, held that the Tribunal is a Court within the meaning of Section 195(1)(b) of the Criminal Procedure Code and a civil Court within the meaning of Section 476 (old) of the said Code. The issue was again considered by yet another Full Bench of Delhi High Court in Sardari Lal v. Ram Rakha, 1984 Crl.L.J. 1098 and the Full Bench has taken the same view. While considering the question as to whether a Revenue Board could be brought under the provisions of Section 10 and for that reason could it be considered to be a Court subordinate to the High Court, the Apex Court in the judgment in Board of Revenue, U.P. v. Vinay Chandra, AIR 1981 SC 723 has observed that the Revenue Board is subject to the power of superintendence of the High Court under https://hcservices.ecourts.gov.in/hcservices/ 16 Article 227 and therefore it constitutes a Court. A careful study of the law would lead to the only conclusion that in order to constitute a Court in stricto sensu, the essential condition is that the Court should have, apart from having some of the trappings of judicial tribunal, power to give a decision or a definite judgment which has finality and authoritativeness which are essential test of judicial pronouncement. The High Court must apply the above test for determining what is a Court strictly so called within the connotation of the term used in the Contempt of Courts Act. 12. The question as to whether the Company Law Board could be considered to be a Board coming under the superintendence of the High Court, the following provisions are referable. The Company Law Board has been constituted by the Central Government by issuance of a notification in the Official Gazette in terms of Section 10E of the Companies Act. By virtue of the provisions of sub-section (1A) of Section 10E, the Company Law Board shall exercise and discharge such powers and functions as may be conferred on it under the Act or other law. Sub-section (4C) of Section 10E vests on the Company Law Board the powers vested in a Court under the Code of Civil Procedure while trying a suit for discovery and inspection of documents or other material objects producible as evidence; enforcing https://hcservices.ecourts.gov.in/hcservices/ 17 the attendance of witnesses and requiring the deposit of their expenses; compelling the production of documents or other material objects producible as evidence and impounding the same; examining witnesses on oath; granting adjournments and reception of evidence on affidavits. Sub- section (4D) of Section 10E contemplates that every Bench shall be deemed to be a civil Court for the purposes of section 195 and every proceeding before the Bench shall be deemed to be a judicial proceeding within the meaning of sections 193 and 228 of the Indian Penal Code and for the purpose of section 196 of that Code. By that provision, the Company Law Board shall be considered to be a Court and by virtue of the provisions of Section 10F, the decision or order of the Company Law Board is appealable to the High Court by a person aggrieved over such decision or order. The Company Law Board exercises the judicial power while dealing with the Company Application and its orders have the trappings of judicial pronouncement. The Company Law Board is thus a Court judicially subordinate to the High Court and the High Court has jurisdiction to enquire into the alleged contempt and if found to be true, has jurisdiction to punish the violators. (See the judgment of Andhra Pradesh High Court in N.Venkata Swamy Naidu v. M/s Sri Sri Surya Teja Constructions Pvt.Ltd. & Ors., 2008 Crl.L.J.227) https://hcservices.ecourts.gov.in/hcservices/ 18 13. It is alternatively argued on behalf of the respondents that in terms of Regulation 47 of the Company Law Board Regulations, 1991, the Bench of the Company Law Board shall be deemed to be a Court or lawful authority for the purpose of prosecution or punishment of a person who wilfully disobeys any direction or order of such Bench. It is further argued that in terms of Section 634A of the Companies Act, any order made by the Company Law Board may be enforced by that Board in the same manner as if it were a decree made by a Court in a suit pending therein and therefore when such power is conferred on the Company Law Board to prosecute and punish a person who wilfully disobeys any direction or order of such Bench, invocation of the provisions of Section 10 of the Contempt of Courts Act is unsustainable. Let us consider first the submission on Section 634A of the Companies Act. A close reading of the provisions of Section 634A of the Companies Act would show that the Company Law Board is vested with the power to enforce its order in the same manner as a decree made by a Court in a suit. The said provision was inserted by Act 46 of 1997, which came into force with effect from 24.12.97. By virtue of the proviso inserted by the Companies (Second Amendment) Act, 2002, the said provision shall not apply on and after the commencement of the said amendment Act.