Case: RAMA NARANG Vs. RAMESH NARANG AND OTHERS


Decision reasoning: 0[ds]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 Facilitators 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.1.48. 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.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 Companys 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 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 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 Companys 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.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 communications/directions passed by the Facilitator. However, no orders have been passed by this Court on the said IAs.68. It will be relevant to refer to the observations of this Court in the case of Pratap Singh and Another v. Gurbaksh Singh 1962 SCR Supp. (2) 838. 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 Allahabad High Court in Hrishikesh Sanyal v. A.P. Bagchi ILR 1940 All 710 and Radhey Lal v. Niranjan Nath AIR 1941 All 95 , 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 Directors 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.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) (2009) 16 SCC 126 (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 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) (2009) 16 SCC 126 ). 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 Others (1994) 6 SCC 332 :-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 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 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, 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 Delhi (2012) 4 SCC 307 , 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 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 ones 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 to the observations made by this Court in the case of Debabrata Bandopadbyay and Others v. State of West Bengal and Another AIR 1969 SC 189 , wherein it was observed, that punishment under the law of contempt is called for when the lapse is deliberate and in disregard of ones 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 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 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 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, 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 respondents 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 final adjudication, the parties would be at liberty to raise all issues available to them including the issue of jurisdiction.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 well- advised 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 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.