2021 (5) TMI 163 - HC - Companies Law

Wilful, deliberate and contumacious violation of a common order - allegations are primarily against HVL and consequently against the directors of the companies who have allegedly aided and abetted HVL in committing the contempt - HELD THAT - The allegations do not fall within the definition of criminal contempt under Section 2(c) of the Contempt of Courts Act, 1971. The proceedings have not been initiated by the court suo moto or on the consent of the Advocate General. The court must be satisfied about the guilt of the alleged contemnor (HVL) beyond reasonable doubt. Contempt being in the nature of quasi-criminal proceedings, the allegations should be strictly construed. The standard of proof to establish contempt, is akin to a criminal proceeding. In this case, mere allegation of violation based on surrounding circumstances and observations made by the CLB and the High Court are not enough. The breach of the order of this court must be proved beyond reasonable doubt - On the one hand, the affidavit of assets and the inventory/interim report of the APL committee give rise to a possible interpretation that the extent of the estate and the controlling interest of PDB can be to the extent admitted by the alleged contemnors. On the other hand, the extent of the estate can also be as contended by the petitioners. Controlling interest however is yet to be conclusively defined and quantified. The APL Committee has not quantified the same. In this case, the extent of control can also be the influence PDB had over the shareholders/Promoter Groups or Person Acting in concert. There is a possibility that the Promoters/Promoter Groups and PACs did not vote in concurrence with the APL Committee s decision in the AGMs where HVL was re-appointed as director. Moreover, there is also no allegation of dissipation or depletion of the estate or transfer of shares in violation of the order of status quo and thus the emphasis laid by Mr. S.N. Mookherjee on the orders of status quo over the shares as also on the orders of the CLB are not relevant in the contempt proceedings. In view of the preponderance of probabilities in the facts of this case, contempt has not been proved beyond reasonable doubt. It is desirable in the larger interest of the parties that the main lis should be decided on the merits first, or else, calling upon the court to decide the alleged contempt will be actually inviting the court to go beyond the order and decide the issues on merits which is beyond the scope of contempt jurisdiction. Unless the court is satisfied beyond reasonable doubt on the assimilation of the facts pleaded by the petitioners and the show-cause filed by the alleged contemnors in response to such allegations, that contempt has been committed wilfully, deliberately and intentionally, the court cannot hold that HVL and the other directors are guilty of contempt. The rival contentions involve an interpretation of the orders passed in the probate proceedings, by the CLB and other documents filed in course of the suit. We are not deciding in this contempt case whether the interpretation of the estate of PDB as given by the respondents or the one given by the petitioners is correct or not. That question has to be decided in the pending appeals. For the purpose of this proceeding, it is sufficient to say that HVL s participation in the Board meetings cannot be termed as contumacious violation of the order of this court as the willful disobedience has not been proved beyond reasonable doubt and there is a possibility that HVL could continue to hold office on the strength of the votes of public shareholders in exclusion to the votes of the APL Committee and the Promoter and Promoter Groups and PACs. The contempt application against HVL is dismissed. Contempt application dismissed.

Issues Involved:
1. Alleged contempt of court by Harsh Vardhan Lodha (HVL) and directors of four public listed companies.
2. Violation of the order dated October 1, 2020, by HVL's participation in Board Meetings.
3. Allegations against the directors for aiding and abetting HVL in contempt.
4. Interpretation of the estate of Priyamvada Devi Birla (PDB) and the role of the Administrator Pendente Lite (APL) Committee.

Issue-Wise Detailed Analysis:

1. Alleged Contempt of Court by HVL and Directors:
The contempt applications were filed alleging wilful, deliberate, and contumacious violation of a common order dated October 1, 2020, by HVL and the directors of Universal Cables Ltd. (UCL), Birla Cable Limited (BCab), Vindhya Telelinks Limited (VTL), and Birla Corporation Limited (BCL). The primary allegation was HVL's participation in Board Meetings as director/chairman, which was claimed to be in violation of the court's order.

2. Violation of the Order Dated October 1, 2020:
The court order dated October 1, 2020, had two parts: (a) plaintiffs were to abide by the APL Committee's decisions dated July 19, 2019, and July 30, 2019, and (b) HVL was restricted from holding any office in M.P. Birla Group entities on the strength of shares referable to PDB's estate. The allegations were that HVL continued to hold office and participated in Board Meetings, thereby failing to abide by the APL Committee's decisions.

3. Allegations Against Directors for Aiding and Abetting HVL:
The directors were accused of aiding and abetting HVL by allowing him to continue as director/chairman and participate in Board Meetings. The petitioners argued that the directors' actions amounted to wilful and deliberate violation of the court's order.

4. Interpretation of the Estate of PDB and Role of APL Committee:
The APL Committee was appointed to exercise rights flowing from PDB's estate, including controlling shares in the companies. The court had to consider whether HVL's actions were on the strength of shares referable to PDB's estate. The APL Committee had not conclusively quantified the controlling interest of PDB's estate.

Court's Findings:

Contempt Against HVL:
The court found that the allegations did not prove contempt beyond reasonable doubt. HVL's re-appointment as director could have been on the strength of public shareholders' votes, excluding shares referable to PDB's estate. The court noted that the APL Committee had voted against HVL's re-appointment, and HVL's participation in Board Meetings was not wilful, deliberate, or intentional violation of the court's order.

Contempt Against Directors:
The court dismissed the contempt proceedings against the directors, holding that HVL's participation in Board Meetings was not contumacious. The directors' actions in allowing HVL to participate were in accordance with the Companies Act, 2013, and did not amount to wilful disobedience.

Conclusion:
The court dismissed the contempt applications against HVL and the directors, concluding that the allegations did not meet the standard of proof required for contempt. The court emphasized the need for the main 'lis' (dispute) to be decided on merits and that the interpretation of PDB's estate should be addressed in the pending appeals. The court reiterated that contempt must be proved beyond reasonable doubt, and in this case, the evidence did not support a finding of wilful disobedience.

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