2009 (11) TMI 1016 - HC - Companies Law

Summary

Issues Involved: Contempt of court for violating injunction order, authority to act as Directors, sale of company property in violation of court order, apology submission, settlement with purchasers, punishment for contempt.

Contempt of Court for Violating Injunction Order:
The appeal challenged the conviction and sentence of the appellants for violating the injunction order granted by the learned single Judge. The appellants were sentenced to two weeks of simple imprisonment for dealing with the properties of the company in contravention of the injunction order. The court found that the appellants, despite being restrained from representing the company as shareholders or representatives, continued to act as Directors and sold a significant number of plots belonging to the company, which was deemed as willful disobedience of the court order.

Authority to Act as Directors:
The appellants claimed that the injunction obtained by the original plaintiffs was based on misrepresentation of facts and that certain individuals had been removed as Directors of the company during the pendency of legal proceedings. However, the court held that the restrained order did not authorize the appellants to act as Directors or represent the company in any capacity. The appellants' actions were seen as an attempt to circumvent the court proceedings and were found to be in clear violation of the court order.

Sale of Company Property in Violation of Court Order:
The real damage was caused by the sale of plots in violation of the injunction order, as noted in the impugned order. The court emphasized that the appellants had no legal right to sell the plots or create any third-party interests in the company's property. The transaction was deemed null and void, following the principles established by the Supreme Court in a relevant case.

Apology Submission:
The appellants initially appealed against the conviction but later withdrew the appeal to make submissions on the issue of sentencing. Despite submitting an apology, the court found the manner in which the apology was tendered to be unacceptable. The apology was considered insincere, especially given the appellants' continued defiance of the court order.

Settlement with Purchasers:
The appellants claimed to have settled with the purchasers of the land and agreed to refund the sale consideration. They offered to deposit the refunded amount in court for the benefit of the purchasers. However, the court noted discrepancies regarding the physical possession of the plots and the unauthorized occupation of the land by third parties.

Punishment for Contempt:
The court found no mitigating factors in favor of the appellants and upheld the punishment of fifteen days of imprisonment imposed by the learned single Judge. However, the court provided an opportunity for the appellants to avoid imprisonment by canceling the illegal sale deeds, refunding the amounts to purchasers, settling all claims, and paying a fine of Rs. 2,000 each. Failure to comply within three months would result in the enforcement of the original sentence of imprisonment.

In conclusion, the appeals were dismissed with the modification allowing the appellants a chance to rectify their actions and avoid imprisonment by settling the claims and paying the specified fine within the given timeframe.