2005 (10) TMI 575 - Board - Companies Law

Summary

Issues Involved:
1. Whether the respondents violated the orders dated July 18, 2005, and July 20, 2005, of the Bench.
2. Whether the Company Law Board is empowered to take any action against the respondents for such disobedience of the orders of the Bench.

Detailed Analysis:

Issue 1: Violation of Orders Dated July 18, 2005, and July 20, 2005
The petitioner alleged acts of oppression and mismanagement in the affairs of the company and sought certain reliefs. On July 18, 2005, the Bench ordered the respondents to maintain the status quo regarding the existence of structures at the disputed property. Despite this, the respondents continued the demolition, leading the petitioner to file another application on July 20, 2005, to punish the respondents for wilful disobedience. The Advocate Commissioner's report dated July 31, 2005, confirmed that the demolition was in progress, with one structure completely demolished and another partially demolished. The respondents argued that 90% of the demolition was completed before the order and that the remaining structures were demolished to save lives due to their dilapidated condition. However, the Bench found no evidence supporting the respondents' claims and concluded that the respondents acted in gross violation of the orders by demolishing the entire structures in dispute.

Issue 2: Empowerment of the Company Law Board to Take Action
The respondents contended that there is no provision in the Companies Act, 1956, to take action for contempt. They argued that the Company Law Board is not a court under the Contempt of Courts Act, 1971, and thus cannot take any action for contempt. However, the Bench referred to Section 10E of the Act and Regulation 47 of the Company Law Board Regulations, 1991, which deem the Bench to be a court for the purpose of prosecution or punishment of a person who wilfully disobeys its orders. The Bench cited the Gujarat High Court's decision in Shaikh Mohammedbhikhan Hussainbhai v. Manager, Chandrabhanu Cinema, which laid down the essential tests of a court, and the Supreme Court's decision in Canara Bank v. Nuclear Power Corporation of India Ltd., which held that the Company Law Board is a court for the purposes of Section 111 of the Act. The Bench concluded that it has the inherent power under Regulation 44 to make orders necessary for the ends of justice and to prevent abuse of its process. Therefore, the Bench is empowered to invoke Section 10 of the Contempt of Courts Act to punish the respondents for wilful disobedience, even in the absence of a specific enabling provision in the Act.

Conclusion:
The Bench found the respondents guilty of gross violation of its orders and concluded that it has the authority to take action against them under the Contempt of Courts Act. The apologies offered by the respondents were deemed unsatisfactory and an afterthought. The petitioner was permitted to move the High Court to prosecute the respondents for wilful disobedience of the orders dated July 18, 2005, and July 20, 2005. The applications were disposed of with these directions. Additionally, the respondents were directed to file their counter-statement to the main petition by October 21, 2005, with the rejoinder to be filed by November 7, 2005, and the company petition was scheduled to be heard on November 8, 2005.