2021 (2) TMI 892 - Tri - Companies Law

Initiation of Contempt Proceedings - violation of the interim orders - oppression and mismanagement - removal of director - whether the Respondents are guilty of civil contempt - Section 2(b) of the Contempt of Courts Act, 1971 - HELD THAT - In the case of NIAZ MOHAMMAD AND ORS. VERSUS STATE OF HARYANA AND ORS. 1994 (9) TMI 364 - SUPREME COURT , the Hon ble Apex Court held that while the contemnors had not obeyed the judgment and released the salary, but this disobedience was not wilful so as to amount to a civil contempt and the Court drew a distinction between a Court executing an order and punishing for contempt Thus, in order to hold a person guilty of civil contempt, it has to be established by the person alleging contempt that the alleged contemnor was guilty of a wilful breach or a wilful disobedience of an order or a direction, decree etc. of any Court. The emphasis, therefore, has to be on the word wilful . The word wilful‟ means an act or omission which is done voluntarily and with an intent to do something which is forbidden by law or failing to do something which the law requires to be done. In the present case, the petitioner could not establish that there is any wilful disobedience of the orders passed by this Tribunal on 27.09.2019. In the absence of any wilful disobedience, this Court cannot grant the relief sought for by the petitioner. Petition dismissed.

Summary

Issues:
Contempt proceedings for violation of interim orders under Companies Act, 2013.

Analysis:
The judgment pertains to a Contempt Petition filed under Section 425 of the Companies Act, 2013 against multiple respondents for breaching interim orders passed by the Tribunal. The applicant, a promoter shareholder and founder Director in two companies, alleged oppression and mismanagement by the present Managing Director and other Board members. The applicant was removed and reinstated as Director in one of the companies, leading to the Contempt Petition. The Tribunal had directed no changes in the Board composition and to maintain status quo until further orders.

The applicant contended that the respondents violated the orders by removing and inducting directors, attempting to illegally control the companies. The respondents claimed compliance with the order by filing necessary papers and informing the applicant of his reinstatement as Director in one of the companies. The Tribunal analyzed the Contempt of Courts Act, 1971, emphasizing willful disobedience for civil contempt. Referring to precedents, the Tribunal highlighted the need for intentional disobedience before holding a contemnor guilty.

The Tribunal examined whether the respondents' actions constituted willful disobedience of the orders. The defense argued that the appointment of a director during an Annual General Meeting was not a breach, as it was a change in designation and not a new addition to the Board. The Tribunal found that the petitioner failed to establish willful disobedience, leading to the dismissal of the Contempt Petition. Consequently, the respondents were not held guilty of contempt, and the notice of Contempt issued by the Tribunal was discharged.