2017 (1) TMI 1115 - Tri - Companies Law

Contempt Application - removal of Cyrus Mistry as chairmen from the office - right to make representation to the shareholders - Held that - This Bench hereby dismisses the Contempt Application filed by the Petitioners. Both the Counsels on either side vehemently argued transgressing to the merits of the case, however, this Bench need not go into the merits of the case at this juncture, henceforth we have not dealt with arguments gone on the substantial aspects of the Company Petition. The Petitioners happened to raise a point in the Contempt petition that the Board of Directors convening to hold EGM on 6.2.2017 for removal of R11 from the Directorship he has been holding. Over this aspect, the Petitioners and R11 has liberty to raise that point before NCLT, thereby notwithstanding whether the procedure followed in proposing for his removal as a Director in Shareholders meeting leaving it open to exercise the democratic rights of the Shareholders, this Bench does not and will not want to curtail the liberty conferred upon them by the statute. Though it is not a point to be taken up in a Contempt Application, having the Petitioners already mentioned and brought it to this bench notice, this Bench, invoking the inherent powers endowed upon this Bench under Rule 11 analogous to powers under section 151 of CPC, the petitioners and R11 are given liberty to file an affidavit limiting it to the proposal for removal of R11 from the Board within three days from the day this order made available to the parties and then the answering Respondents to file reply within three days from thereof and rejoinder if any three days from the date of filing reply affidavit, so that this Bench could hear this issue along with other issues of main company petition.

Summary

Issues Involved:
1. Alleged willful disobedience of NCLT's order dated 22.12.2016 by issuing a requisition notice for an EGM to remove R11.
2. Whether the issuance of the requisition notice and holding of the EGM constitutes contempt of court.
3. The validity and interpretation of the consent order dated 22.12.2016.
4. The procedural aspects and the rights of the parties involved in the main company petition.

Issue-wise Detailed Analysis:

1. Alleged Willful Disobedience of NCLT's Order Dated 22.12.2016:
The petitioners alleged that the respondents willfully disobeyed the NCLT's order dated 22.12.2016 by issuing a requisition notice on 03.01.2017 for an EGM to remove R11 from the board of directors. The petitioners argued that this action was in direct violation of the consent order which they interpreted as restraining any actions related to the subject matter of the company petition until its disposal.

2. Whether the Issuance of the Requisition Notice and Holding of the EGM Constitutes Contempt of Court:
The petitioners contended that holding the EGM would constitute a deliberate and contumacious breach of the NCLT's order, and those participating in and voting in such a meeting would be guilty of contempt. They sought to punish the respondents under the Contempt of Courts Act for this alleged breach.

3. The Validity and Interpretation of the Consent Order Dated 22.12.2016:
The NCLT examined whether the consent order dated 22.12.2016 contained any explicit restraint on the respondents from taking actions related to the company's affairs, including the removal of R11. The order stated that the parties agreed not to file any interim applications or initiate any action or proceeding over the subject matter pending disposal of the company petition. The tribunal clarified that this clause was meant to prevent any interim filings that could delay the main petition's hearing and was not intended to restrain the company from conducting its regular affairs.

4. Procedural Aspects and the Rights of the Parties Involved in the Main Company Petition:
The NCLT emphasized the importance of proceeding with the main company petition without unnecessary delays caused by interim applications. The tribunal noted that the consent order aimed to expedite the resolution of the main petition by avoiding interim filings. The tribunal also highlighted that the petitioners had the liberty to raise the issue of R11's removal in the main petition, ensuring that the democratic rights of the shareholders were not curtailed.

Conclusion:
The NCLT concluded that the petitioners failed to establish that the consent order restrained the respondents from taking actions related to the company's affairs, including the removal of R11. The tribunal dismissed the contempt application, stating that there was no valid court order explicitly restraining the respondents from issuing the requisition notice or holding the EGM. The tribunal also provided the petitioners and R11 the liberty to file affidavits addressing the proposal for R11's removal, to be heard along with the main company petition. The matter was listed for further hearing as scheduled.