2012 (11) TMI 152 - HC - Companies Law

Petitioner seeking initiation of proceedings under Sections 11 & 12 of the Contempt of Courts Act, 1971 - Oppression and Mismanagement - Considering the fact that the company remains closed for over two years and that the machinery stand relocated and that the respondents have offered to hand over the company along with the machinery to the petitioners without any consideration, the petitioner may chose the option of either taking the ownership/control of the company or file a petition for winding up of the company. No other relief can be granted in the facts of the case like asking the 2nd respondent to pay back the investments made by the petitioner as in a business venture, one has to take a risk and in the present case, both the sides appear to have lost their investment. There is no indication in these letters that they would take over the company as a whole including the liabilities. Since the respondents have given personal guarantees, the petitioners should have also agreed to replace the personal guarantees of the respondents. These letters do not talk of personal guarantees or taking over of liabilities. Order of the CLB in granting an option to the petitioner to exercise his option to take over the management and control of the company but obviously after the payment of Rs. 16 lacs which has been made by the respondents out of their personal funds.This also appears to be a case where the petitioner has not come to the Court with clean hands; submission of the respondent that the petitioner has learnt about the one time settlement arrived at by the respondent with the Bank; and it was only then that he approached the CLB this is clear from the fact that he had filed the contempt application before the CLB on 01.03.2007 but he did not choose to mention it before the Board till more than two months later; i.e. on 03.05.2007; it appears that only when the petitioner learnt about the aforenoted settlement that he chose to approach the Court. His approach does not appear to be honest; he appears to be nursing some personal vendetta/grievance which cannot be addressed under the provisions of Sections 11 & 12 of the Contempt of Courts Act - In this background, it can in no manner be said that the impugned order suffers from any infirmity - Appeal is without any merit, Hence is Dismissed.

Summary

Issues:
1. Contempt proceedings under Sections 11 & 12 of the Contempt of Courts Act, 1971 for non-compliance of directions in the order dated 21.12.2006.
2. Allegations of oppression and mismanagement under Sections 397 & 398 of the Companies Act, 1956 before the Company Law Board (CLB).
3. Dispute regarding the ownership and control of the company, including reimbursement of amounts brought in for discharging liabilities after 21.12.2006.

Analysis:
1. The appeal was filed against an order dismissing the application seeking contempt proceedings for non-compliance of directions in the order dated 21.12.2006. The order noted the offer to hand over the company and machinery without consideration and the petitioner's choice to take over or wind up the company.

2. The petitioner filed a petition under Sections 397 & 398 of the Companies Act, 1956 alleging oppression and mismanagement. The order highlighted the company's non-functioning, payments to creditors, and removal of machinery. Allegations of siphoning funds were not proven.

3. The dispute centered on the petitioner's claim of willful disobedience of the 21.12.2006 order. The petitioner alleged deliberate non-response from the respondents regarding handover of machinery and documents. The respondents argued for reimbursement of amounts paid to clear company debts.

4. The respondents offered to hand over the company and machinery without consideration, giving the petitioner the choice to take over or wind up the company. The petitioner alleged flouting of these directions, emphasizing willful disobedience.

5. The petitioner contended that despite communications requesting handover, the respondents did not respond, indicating deliberate non-compliance. The lack of proof of dispatch of these communications was acknowledged by the petitioner's counsel.

6. An application under the Contempt of Courts Act was filed before the CLB, noting delays in mentioning the application and lack of response from the respondents regarding handover. The respondents argued for reimbursement of amounts used to clear company debts.

7. The lack of proof of dispatch of letters requesting handover was acknowledged, with vehement denials from the respondents. The petitioner's counsel conceded to this point.

8. The respondents detailed payments made to clear company debts, seeking reimbursement of amounts funded from personal accounts. The dispute focused on payments made before and after the 21.12.2006 order.

9. The dispute centered on payments made by the respondents to clear company debts, with the petitioner claiming the funds were collected from the market, not personal funds of the respondents.

10. It was undisputed that the respondents made payments to clear company debts, with the petitioner claiming these were not from personal funds but company funds.

11. The petitioner contended that funds deposited were not from personal funds but company funds collected from the market, disputing the nature of the payments made by the respondents.

12. The petitioner highlighted the late disclosure of a lease agreement showing funds received by the company, questioning the respondent's silence on this agreement in previous replies.

13. The court emphasized the limited scope of the dispute, cautioning against using contempt proceedings for revenge and requiring careful exercise of discretion based on evidence, not mere allegations.

14. The court noted the need to appreciate the respective parties' averments in the context of the limited dispute before the court.

15. The court highlighted the two-fold directions in the 21.12.2006 order, giving the petitioner the option to take over or wind up the company. Lack of communication from the petitioner regarding choice was noted.

16. The CLB order granted the petitioner the option to take over the company after payment of a specified amount by the respondents. The court emphasized the need for reimbursement before taking over control.

17. The respondents claimed reimbursement for payments made on behalf of the company, with the petitioner acknowledging these payments but disputing their nature.

18. The court noted the petitioner's delayed approach following a settlement between the respondents and the bank, suggesting personal vendetta rather than honest intentions, dismissing the appeal.

19. The court found no infirmity in the impugned order, dismissing the appeal as without merit.