2007 (9) TMI 403 - HC - Companies Law

Contempt of Courts - willful disobedience and gross violation of the orders of the Company Law Board, Additional Principal Bench, Chennai dated 18-7-2005 - Held that - Open defiance of the order of the Company Law Board, in continuing demolition of the superstructures even till 29-7-2005 more than ten days after the restraint order of status quo dated 18-7-2005, is a contempt of such a nature as to have substantially interfered with the due course of justice for which imposition of the sentence of fine alone would not meet the ends of justice. Such flagrant violation of the orders of the Company Law Board must be dealt with sternly. The fifth respondent is sentenced, under section 12(1) of the Contempt of Courts Act, to undergo simple imprisonment for a term of two months and with fine of ₹ 2,000. In accordance with section 12(3), read with rule 32(1) and (3) of the Contempt of Courts Rules, 1980, the fifth respondent shall be detained in civil prison for a period of two months. His subsistence allowance is fixed at ₹ 2,500 per month. The petitioner herein shall deposit a sum of ₹ 5,000 in the High Court Registry, within one month from the date of receipt of a copy of this order, towards subsistence allowance for the two month period the fifth respondent is required to be kept in civil prison. The amount so deposited shall be defrayed towards the subsistence allowance payable to the fifth respondent. The contempt case is allowed with costs quantified at ₹ 3,500 to be paid by the fifth respondent to the petitioner herein.

Issues Involved:
1. Wilful disobedience and gross violation of the Company Law Board's orders.
2. Whether the Company Law Board is a "Court" under the Contempt of Courts Act.
3. Whether the Company Law Board is a subordinate court under section 10 of the Contempt of Courts Act.
4. Jurisdiction of the High Court to punish for contempt in the absence of a reference from the Company Law Board.
5. Limitation for taking action for contempt.
6. Principles governing the exercise of jurisdiction to punish for contempt.
7. Determination of guilt and appropriate punishment for the contemnor.

Detailed Analysis:

1. Wilful Disobedience and Gross Violation of the Company Law Board's Orders:
The petitioner filed a contempt case against respondents for wilful disobedience and gross violation of the Company Law Board's (CLB) orders dated 18-7-2005. The CLB had granted status quo regarding the existing structure of a disputed property. Despite this, the respondents continued demolishing the building, leading to the appointment of an Advocate Commissioner to verify the status. The report confirmed ongoing demolition, contradicting the respondents' claims that the demolition was necessary due to the dilapidated condition of the structures.

2. Whether the Company Law Board is a "Court" under the Contempt of Courts Act:
The CLB, under section 10E of the Companies Act, 1956, possesses powers akin to a civil court, including discovery of documents, enforcing attendance, and examining witnesses. The Supreme Court in "Nuclear Power Corpn. of India Ltd." affirmed that the CLB acts judicially and is a permanent statutory body, thus qualifying as a "Court" for the purposes of the Contempt of Courts Act.

3. Whether the Company Law Board is a Subordinate Court under section 10 of the Contempt of Courts Act:
The CLB is judicially subordinate to the High Court, as appeals against its decisions can be filed in the High Court under section 10(F) of the Companies Act. This subordination qualifies the CLB as a subordinate court under section 10 of the Contempt of Courts Act, enabling the High Court to exercise its contempt jurisdiction.

4. Jurisdiction of the High Court to Punish for Contempt in the Absence of a Reference from the Company Law Board:
The High Court can take cognizance of contempt suo motu or on a petition by any person. The CLB's order dated 4-10-2005, which found the respondents guilty of contempt and left it open for the petitioner to approach the High Court, suffices for the High Court to exercise its jurisdiction under section 10 of the Contempt of Courts Act.

5. Limitation for Taking Action for Contempt:
Under section 20 of the Contempt of Courts Act, contempt proceedings must be initiated within one year from the date of the contempt. The present contempt case was filed on 21-11-2005, within one year of the CLB's status quo order dated 18-7-2005. The Supreme Court in "Pallav Sheth" clarified that filing an application within one year constitutes initiation of proceedings within the limitation period.

6. Principles Governing the Exercise of Jurisdiction to Punish for Contempt:
The power to punish for contempt is to ensure justice and uphold the authority of the law. The act or omission must be wilful, meaning done with specific intent to disobey or disregard the law. The standard of proof required is beyond a reasonable doubt, akin to criminal proceedings. The court must consider whether the contempt is technical or substantial and whether it substantially interferes with the due course of justice.

7. Determination of Guilt and Appropriate Punishment for the Contemnor:
The Advocate Commissioner's report and the respondents' admissions established that demolition continued despite the CLB's status quo order. The fifth respondent, present at the site during demolition, was found guilty of wilful disobedience. The court sentenced him to two months of simple imprisonment and a fine of Rs. 2,000, emphasizing the need to uphold the rule of law and deter similar violations. The petitioner was directed to deposit Rs. 5,000 towards the subsistence allowance for the fifth respondent's detention in civil prison.

Conclusion:
The High Court found the fifth respondent guilty of wilful disobedience of the CLB's orders, sentencing him to imprisonment and a fine. The CLB was affirmed as a "Court" under the Contempt of Courts Act, and the High Court's jurisdiction to punish for contempt was upheld, even in the absence of a direct reference from the CLB. The case was decided within the limitation period, and the principles governing contempt jurisdiction were duly applied.

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