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2024 (5) TMI 941 - AT - Companies LawMaintainability of the contempt petition - wilful disobedience by the Company and Respondent No. 2 to 9 (directors) - power to punish for the contempt of the order passed by the CLB - CLB having the jurisdiction or power to issue contempt notice on the alleged disobedience or not - Doctrine of merger - order of the CLB dated 27.05.2016 had merged with the order of the Guwahati High Court. Maintainability of the contempt petition - CLB, constituted under Section 10E of the Companies Act, 1956 had no power to punish for contempt of its order - HELD THAT - Reference made to the decision of the Hon ble Andhra Pradesh High Court rendering in the case of N Venkata Swamy Naidu 2007 (9) TMI 403 - HIGH COURT OF ANDHRA PRADESH in which it has been held that the High Court under Section 10 of the Contempt of Courts Act has the power to punish for contempt of a subordinate court, coextensive and congruent with its power to punish for contempt of itself. Thus, it is clear that the CLB had no jurisdiction of issuing order of contempt because the power to punish for contempt has to be specifically provided for and conferred under the Act. Power to punish for the contempt of the order passed by the CLB - application under Section 425 of the Act has been filed - HELD THAT - Reference made to the provisions of Section 425 of the Act in which the legislature has categorically used the words Contempt of themselves which means that it can issue the rule for contempt of its own order like that of the High Court but it does not have the power to issue rule for the alleged contempt of the order of CLB. Jurisdiction or power of CLB to issue contempt notice on the alleged disobedience of its order - HELD THAT - Section 434(1)(a) of the Act categorically provides that all matters, proceedings or cases pending before the CLB, immediately before such date shall stand transferred to the Tribunal and the Tribunal shall dispose of such matters, proceedings or cases in accordance with the provisions of this Act. It means that the proceedings, cases or matters which were pending as on 01.06.2016 before the CLB shall automatically be transferred to the Tribunal but if the proceedings are not pending on that date then it cannot be transferred automatically to the Tribunal - the CLB passed the order on 27.05.2016, much before the date of notification i.e. 01.06.2016 and no contempt proceedings or even execution filed by 3A Capital was pending which could have been transferred to the Tribunal for the purpose of taking decision on it. Thus, it is afresh petition which has been filed by 3A Capital before the Tribunal for the alleged disobedience of the order dated 27.05.2016 and is not a case of transfer of petition. Doctrine of merger - order of the CLB dated 27.05.2016 had merged with the order of the Guwahati High Court because the appeal was dismissed on 12.07.2017 and further appeal before the Hon ble Apex Court was dismissed on 02.02.2018 - HELD THAT - Reliance placed upon two decisions of the Supreme Court in the cases of Shanthi 2018 (10) TMI 2034 - SUPREME COURT and Chandi Pd. 2004 (10) TMI 550 - SUPREME COURT in which it has been held that when a higher forum entertains an appeal and passes an order of merit, the doctrine of merger would apply. The doctrine of merger is based on the principles of the propriety in the hierarchy of the justice delivery system. The doctrine of merger does not make a distinction between an order of reversal, modification or an order of confirmation passed by the Appellate Authority. The said doctrine postulates that there cannot be more than one operative decree governing the same subject matter at a given point of time. In so far as the appeal filed by the Directors are concerned, they have categorically said that they were non-executive director/nominee director and had no control over the affairs of the Company about which no contrary observations has been made by the Tribunal but they have not been absolved only on the ground that till the payment is made by the Company to 3A Capital, they will remain bound by the order. Appeal allowed.
Issues Involved:
1. Maintainability of the contempt application. 2. Merger of the CLB order with the High Court order. 3. Jurisdiction of the Tribunal to entertain contempt for orders passed by the CLB. 4. Validity of the Tribunal's directions for monetary compensation. Summary: 1. Maintainability of the Contempt Application: The Tribunal held that the contempt application filed by 3A Capital against Prag Bosimi Synthetics Ltd. and its directors for non-compliance with the CLB order dated 27.05.2016 was not maintainable. The Tribunal noted that the CLB, constituted under Section 10E of the Companies Act, 1956, had no power to punish for contempt of its orders. Consequently, the Tribunal, under Section 425 of the Companies Act, 2013, could not exercise contempt jurisdiction over orders passed by the CLB. The Tribunal emphasized that Section 425 grants the Tribunal and the Appellate Tribunal jurisdiction only over contempt of their own orders, not those of the CLB. 2. Merger of the CLB Order with the High Court Order: The Tribunal recognized that the order of the CLB dated 27.05.2016 had merged with the order of the Guwahati High Court dated 12.07.2017, which was further upheld by the Supreme Court on 02.02.2018. The Tribunal referred to the doctrine of merger, which postulates that there cannot be more than one operative decree governing the same subject matter at a given point of time. Therefore, any contempt proceedings should have been based on the High Court's order, not the CLB's. 3. Jurisdiction of the Tribunal: The Tribunal found that the application for contempt under Section 425 of the Companies Act, 2013, was not maintainable as the Tribunal could not entertain contempt for orders passed by the CLB. The Tribunal cited the Andhra Pradesh High Court decision in Venkata Swamy Naidu Vs. M/s Sri Surya Teja Construction Pvt. Ltd., which held that the CLB is a court within the meaning of Section 10 of the Contempt of Courts Act but lacks jurisdiction to issue contempt orders. 4. Validity of the Tribunal's Directions: The Tribunal criticized the directions issued by the Tribunal for monetary compensation to 3A Capital, stating that a court cannot travel beyond the original judgment or direction. The Tribunal emphasized that the contempt jurisdiction is limited to ensuring compliance with the original order and should not grant new directions, such as compensation. The Tribunal also noted that the RCCPS shares in question had already been canceled nine years prior, making the execution of the CLB's order legally impossible. Conclusion: The appeals filed by Prag Bosimi Synthetics Ltd. and its directors (CA (AT) No. 115 and 116 of 2022) were allowed, and the impugned order was set aside. The appeal filed by 3A Capital (CA (AT) No. 133 of 2022) was dismissed. The Tribunal held that the contempt application was not maintainable, and the directions for monetary compensation were invalid.
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