9911796707
TMI Blog2007 (8) TMI 442X X X X Extracts X X X X X X X X Extracts X X X X ..... any; and (iii) constitute transfer of ownership of the company by sale of shares or control within the meaning provided to the said term in regulation 2(i)( c) of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997. Therefore, it is clear that the 1st respondent not only violated the orders of the Court as well as the orders of the Company Law Board as well as the undertakings, but also made a deliberate attempt to deny the liability, taking contrary stands, thereby violating the orders. he Company Law Board is not vested with the powers to deal with cases under the provisions of the Contempt of Courts Act. Therefore, such powers are to be exercised only by this Court for any alleged contempt to Company Law Board similar to the Civil Courts. Further, as the orders of the Company Law Board are appealable under section 10F of the Act before this Court, the Company Law Board should be treated as subordinate to this Court, and therefore, this Court is well within its powers in entertaining the contempt proceedings, and the contentions to the contra are devoid of merit. It is difficult to accept the contention of the respo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In that process, the petitioner deposited Rs. 40 lakhs as it was informed that the same would multiply to double the amount within 45 months, and as such, the said amount was deposited in 8 fixed deposits of Rs. 5 lakhs each for a period of 45 months. The said deposit was made on 28-7-1997 and is due for repayment on maturity on 28-4-2001. But, however, even before the said date of maturity, the 3rd respondent failed to pay to various other similar depositors, and therefore, filed an application under sub-section (9) of section 58A of the Companies Act, 1956 before the Company Law Board, Southern Region Bench at Chennai for framing a scheme for repayment of the deposits in instalments within a period of 48 months and the said petition was numbered as C.P. 35 of 2000. The Company Law Board passed an order on 29-2-2000, exercising its suo motu powers, granting time as claimed by the Company and its directors by approving the scheme. 3. During course of pendency of the petition before the Company Law Board, as per the directions, the directors, especially the promoter director, the 1st respondent herein, along with group companies, filed affidavits, giving undertaking to the Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mply with aforesaid repayment schedule. The statements made are true to his knowledge and he solemnly affirms that this declaration is true and that no part of it is false. 7. In fact, before the Company Law Board, another director by name Sri LV.V. Iyyar appeared and represented on behalf of the company, while seeking exercise of suo motu powers of the Company Law Board that the company will be in a position to repay the deposits maturing up to December, 2001 over a period of 6 to 42 months. He also represented before the Company Law Board that the promoter director the 1st respondent herein and group companies would ensure duly payment of deposits by the company in accordance with the scheme, which is to be complied with by the company. In view of the assurances given by the promoter director as well as other directors and the group companies, the Company Law Board exercised its suo motu powers, and approved the scheme. But, however, the respondent did not comply the undertaking as well as the approved scheme. In fact, they were directed to file update reports as to the implementation of the scheme, which the respondents did not even comply. The non-payment and non-compli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, obtained an order where the promoter director as well as group companies filed affidavits before the Company Law Board stating that the scheme, if approved, would be implemented. Further, during pendency of the appeals filed against the said order, an affidavit was filed on behalf of the company, giving assurance that the amount would be paid within specified dates, which was due and payable by that date, but failed to pay the same, and in fact, the 1st respondent is attempting to evade his liability, on the ground that he has resigned from the directorship. Therefore, the said action is clearly in violation of the orders as well as undertaking given before the Company Law Board as well as before this Court, and therefore, the respondents are liable to be punished for contempt of a Court. 11. Originally, respondents 2 and 3 filed separate counters, which were adopted by the 1st respondent. In both the counters, filed by respondents 2 and 3, they denied the allegations in general and also contended that the petitioner filed the contempt petition to execute the order of the Company Law Board. Both the respondents 2 and 3 denied having violated the orders of the Company Law Boa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of undertaking. No such direction was given to any other director of the company including himself. Even the affidavit filed by this respondent only assures that he will ensure that the 3rd respondent will honour the scheme. Inasmuch as this respondent has no control today over the 3rd respondent company, he cannot be held responsible. 15. It is stated that not even a tangible reference to the affidavit dated 14-2-2000 was made in the order of the Company Law Board, therefore the affidavit dated 14-2-2000 filed by him was neither an affidavit on the basis of which the Company Law Board passed its order nor was the said affidavit filed in compliance with the direction issued by the Company Law Board. In the circumstances, there can be no contempt arising out of the alleged violation of the order of the Company Law Board. It is further stated that in view of the guidelines and orders of the Reserve Bank of India, it was no longer possible to carry on the business of the 3rd respondent company as a non-banking finance company. Whatever business was needed to be done was only for the purpose of recovering the receivables and repaying the creditors of the 3rd respondent company. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2000. 18. It was stated that the paid up share capital of the 3rd respondent company at the relevant point of time was approximately Rs. 26.32 crores and out of the same, the 1st respondent and his group companies were holding Rs. 16.16 crores which is approximately 61 per cent. It was also stated that the Board of Directors authorized the 2nd respondent as well as the Managing Director Mr. Sridhar Chary to take necessary steps on behalf of the 3rd respondent company and to engage counsel/consultant and to execute/file on behalf of the company, the vakalatnamas, written statements, affidavits and such other documents as may be required to be filed or submitted before the authorities. The 2nd respondent stated that he was not a Director or part of the Board of Directors of the company, when the company filed undertaking to get an order from the Company Law Board, and he was only an employee of the 3rd respondent company. 19. It is further stated that as per articles 104 and 140 of the Articles of Association of 3rd respondent company, the 1st respondent Sri K.S. Raju is having power to appoint the Managing Director/whole time Director and three other directors as his nominee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... various lapses that have been committed which were found by the auditors who conducted a special audit on receivables and to advice the management on the status of the receivables. The auditors were appointed for special audit in April, 2002, where the report clearly shows that several irregularities have been committed by the management which had resulted in failure of recoveries, and in certain cases loans were advanced even to the companies, which were before the BIFR, and in several cases loans were advanced are multiple loans, even though the earlier loans were overdue and also advanced loans to the companies, whose addresses were not traceable. In many cases, the recovery proceedings could not be initiated due to the deficiency in the documentation, and even execution proceedings could not be initiated for want of address as well as the documentation. Warrants could not be executed in section 138 of Negotiable Instruments Act proceedings for want of correct addresses of the borrowers. This Executive Director therefore, has brought on record the several of the lapses that have been committed by the erstwhile directors, which had resulted in non-recovery of the loans that were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irector, who filed affidavits, giving assurance of repayment of the deposits by the 3rd respondent as per the approved deferment scheme. It is stated that on the strength of the affidavits filed on 14-2-2000 before the Company Law Board in conformity with the representation made by one of the Directors Sri L.V.V. Iyyer on 11-2-2000, the scheme order was passed by the Company Law Board dated 29-2-2000. The appeals filed by both parties against the said order dated 29-2-2000 in C.As.7 and 9 were dismissed by this Court on 3-1-2002, confirming the scheme order. 26. It is contended that subsequent to the said order, one Sri Sridhar Chari, Managing Director of the Company, filed an application, assuring repayment of the deposits by the Company as per the scheme approved by the Company Law Board, sought permission of withdrawal of the affidavits filed by the 1st respondent and other group companies by substituting the affidavits on behalf of MFSL. But the Company Law Board rejected the said relief, observing that the agreement made between the company and MFSL shall not be of any consequences in relation to the repayment schedule approved by the Company Law Board, the Company, its p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated to comply the order to repay the deposits. 28. In addition to the affidavits filed before the Company Law Board, further an affidavit was filed by one Sri G. Ramdas, Senior Manager (legal) of the respondent company even before this Court, while the appeals were pending, stating that the respondent will pay one half of the 1st year s entitlement of the appellant within a period of 30 days from the date of the order and the remaining half of the 1st year s entitlement on or before 20-4-2002. 29. The learned counsel also contended that the Company Law Board is a Court, as held by the Supreme Court in the case of Canara Bank ( supra ). In the light of the judgments of the Supreme Court, the judgment of this Court in RDF Power Projects Ltd. v. M. Murali Krishna [2004] 55 SCL 393 and Prakash Timbers (P.) Ltd. v. Smt. Sushma Shingla AIR 1996 All. 262 are Per in icurium as the same are in complete disregard of the decisions of the Supreme Court and binding nature of the said judgments in terms of article 141 of the Constitution of India. 30. It is further stated that the agreement that was alleged to have been entered into between the management of the 3rd resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the year 2005, perhaps when the fact of his non-appearance was stated in the written arguments filed by this petitioner. Therefore, the learned counsel sought for appropriate orders, taking note of the fact of deliberate failure of the 1st respondent even to appear before this Court when Form-1 was issued, directing him to appear before this Court and to pass appropriate orders. 33. Coming to the arguments filed on behalf of the 1st respondent, the counsel for the 1st respondent, while reiterating the averments made in the counter, stated that the 1st respondent was one of the directors of the 3rd respondent company, and at the relevant point of time, one Mr. Sridhar Chary was the Managing Director. It is stated that the 1st respondent tendered his resignation for the Board of Directors of the 3rd respondent company in September, 2000, pursuant to the transfer of management of the 3rd respondent company, therefore, the respondent was not in a position to exercise any control over the repayment of deposits. It is further stated that the 2nd respondent and one Sri G. Ramdas, representing the 3rd respondent, had filed affidavits before this Court. In the affidavit of Sri G. Ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fulfilled, and therefore, that affidavit has no bearing or relevance. Even in the order of the Company Law Board there is no reference to the affidavit of this respondent, nor was there any direction to this respondent to file an affidavit undertaking to comply with the orders of the Company Law Board. The direction of the Company Law Board that all the directors are responsible can only be co-extensive during the period when they are directors and cannot extend for periods beyond. 36. It is submitted that this respondent had not contracted any personal liability. There is no statutory obligation on this respondent to pay the depositors. There is no proof nor allegation of mismanagement by this respondent, as would make him personally liable. At any rate that cannot be the subject-matter of the contempt petition in this Court. 37. It is contended by the learned counsel that the case of the petitioner that the Company Law Board is a subordinate Court to this Court is incorrect, and even assuming for a minute but not admitting that there is any such violation as alleged, the jurisdiction of this Court cannot be invoked under contempt jurisdiction. It is submitted that a learn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1971; (3) whether the contempt proceedings initiated by the petitioner are not barred by limitation; and (4) whether the contemnors are liable for punishment as provided under the provisions of the Contempt of Courts Act; Issue No. 1: 41. The admitted facts are that the 1st respondent was a promoter director of the 3rd respondent company, while he was so, on behalf of the 3rd respondent, a publication was issued, inviting deposits from the public and accordingly, public deposits were received and accepted by the 3rd respondent company. In that process, the petitioner made a deposit of Rs. 40 lakhs under 8 fixed deposits of Rs. 5 lakhs each. Some of the deposits were matured for repayment by virtue of lapse of time stipulated, but, however, the 3rd respondent company was unable to repay the depositors as stipulated, representing that it is in financial crunch and crisis. 42. On behalf of the 3rd respondent company, a company petition was filed under sub-section (9) of section 58 of the Companies Act, seeking approval of a scheme of repayment by re-scheduling the deposits payable to various depositors. When the said company petition was pending, one of its director ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r group companies and permission was, in fact, sought for from the Company Law Board by substituting the affidavits of the persons, stated to be the persons in the management, on behalf of the other company i.e., MFSL. But, the Company Law Board rejected the said relief by order dated 14-11-2000. 45. Subsequently, as the company did not pay the amounts due to the petitioner in terms of the scheme approved by the Company Law Board, C.A.344/2001 was filed in C.P.35/2000 before the Company Law Board under section 634A of the Companies Act, seeking to enforce the order dated 29-2-2000. Before the Company Law Board, an argument was advanced in the said application that the amounts are not due, as stipulated under the scheme, the first instalment of 30 per cent is payable at the end of the first year, and therefore, represented that the order was not enforceable. Rejecting the claim of the 3rd respondent company, the Company Law Board passed the order, after referring to its own order, passed on 29-2-2000, approving the scheme and directed that the first instalment was payable before 27-4-2002, and second instalment on or before 27-4-2003 and third instalment on or before 27-4-2004 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s sanctioned by the Company Law Board on the strength of among other things, the undertaking given by Shri K.S. Raju." 48. The affidavits filed by the 1st respondent shows that the 1st respondent shall take all steps to comply the order by the 3rd respondent. Accordingly, the Company Law Board passed the scheme order taking into account such affidavits that are filed on behalf of the promoter director as well as his group companies. But, contrary to the undertaking, the 1st respondent claims that he ceases to be a director of the 3rd respondent company, therefore, he is not liable to comply the order. He further claims that he had no control over the 3rd respondent company, hence, there is no liability on his part. This argument of the 1st respondent is clearly devoid of merit, hence, rejected. With his undertaking, he obtained an order from the Company Law Board, approving the scheme, a benefit to himself, as well as to his company. Later, he will not be permitted to say that he ceased to be a director, and therefore, there is no liability. 49. But, as already noticed by this Court that the claim of the respondent that the affidavit was filed in the context of some other p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot only in violation of the orders of the Company Law Board as well as the undertaking, but also a deliberate attempt to circumvent the proceedings of the Company Law Board. After suffering an order, if the 1st respondent is permitted to transfer his obligations to some third party and then claims that he has no control over the 3rd respondent, and therefore, he cannot be held responsible for non-compliance. Then there would not be any sanctity to the judicial proceedings and the orders passed by the judicial authorities, especially when an undertaking has been filed before the authority for obtaining an order, and further made an attempt to get out of the proceedings, by seeking permission to withdraw the affidavits which were rejected. 52. Under the above circumstances, the liability of the 1st respondent by virtue of the orders passed by the Company Law Board as well as the undertaking given by the 1st respondent would continue and failure to comply the order would amounts to deliberate attempt to circumvent the orders of the Company Law Board by his own action, which was not approved by the competent authority which passed the order against him. 53. In view of the above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt to civil contempt in terms of section 2( b ) of the Contempt of Courts Act, 1971. In that case, in a suit filed by the petitioner bank against the respondents for recovery of money due, during the pendency of appeal before the Supreme Court, parties arrived at a settlement, in terms of which, consent decree was passed by the Court. As per the terms of the decree, certain specified properties shall remain under attachment in execution and shall not be sold, mortgaged, alienated, encumbered or charged to anyone until decree was satisfied. No payments were made by the respondents in satisfaction of the decree. However, subsequently, in another summary suit instituted in High Court by another Bank, the respondent entered into another settlement, whereunder they again placed the same properties under attachment and also undertook not to alienate, encumber or create a third party right over the said properties till satisfaction of the decree in the said suit. The respondents further agreed that the Court Receiver of the High Court shall stand appointed as Receiver in execution in respect of the said properties with power to sell and pay over the sale proceeds to the plaintiff towards ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al of the money by the defendants in the absence of any subsisting bank guarantee, held, violated the orders of the High Court. Hence, defendants were guilty under both the counts. In such circumstances, sentence of fine alone was, held, not enough. Hence, sentence of two months simple imprisonment and a fine of Rs. 2,000 each imposed, with a further direction for one month simple imprisonment in case of default of payment of fine. 60. In Daroga Singh v. B.K. Pandey [2004] 5 SCC 26 the Apex Court while considering the case under the provisions of the Contempt of Courts Act, relating to the assault on Judge in a Courtroom in a pre-planned and calculated manner, and thereafter after chase, in chambers by police officials not in uniform, held, the incident amounts to deliberate interfere- ence with discharge of duty of a judicial officer by intimidation, apart from scandalizing and lowering dignity of the Court and interference with the administration of justice. The said incident was deprecated in the strongest terms possible. Further, highlighted the urgency of curbing possibility of such incidents stressed, to prevent collapse of judicial system of country, prison sentence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt or incorporation of the same by the Court in its order, mere non-compliance of a consent order or compromise decree, would not amounts to a civil contempt. The Apex Court further observed that : "the reason why a breach of clear undertaking given to the Court amounts to contempt of Court is that the contemnor by making a false representation to the Court obtains a benefit for himself and if he fails to honour the undertaking, he plays a serious fraud on the Court itself and thereby obstructs the course of justice and brings into disrepute the judicial institution." 64. In the case of consent order or a compromise decree, the fraud, if any, is practiced on the person concerned not on the Court but on one of the parties. In such a case, the remedy of the aggrieved party would be not to pray for drawing up proceedings for contempt of Court against the defaulting party but to approach the executing Court for necessary relief. 65. In R.N. Dey s case ( supra ) the Apex Court while considering the issue of Contempt of Court, held that the same cannot be used as a weapon for the purpose of executing the decree or implementing an order for which, law provides appropriate proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceeding under Code of Civil Procedure. The party in whose favour an order has been passed, is entitled to the benefit of such order. The Court while considering the issue as to whether the alleged contemnor should be punished for not having complied with and carried out the direction of the Court, has to take into consideration all facts and circumstances of a particular case. That is why the framers of the Act while defining civil contempt, have said that it must be wilful disobedience to any judgment, decree, direction, order, writ or other process of a Court. Before, a contemnor is punished for non-compliance of the direction of a Court, the Court must not only be satisfied about the disobedience of any judgment, decree, direction or writ but should also be satisfied that such disobedience was wilful and intentional......... But while examining the grievance of the person who has invoked the jurisdiction of the Court to initiate the proceeding for contempt for disobedience of its order, before any such contemnor is held guilty and punished, the Court has to record a finding that such disobedience was wilful and intentional. If from the circumstances of a particular case, bro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Further, on the representations made by the directors on behalf of the 3rd respondent company, a benefit of scheme order, rescheduling the payment of deposits was obtained by the company and its directors. Further, the said order was even confirmed by this Court in the appeals filed by both the company and the depositor. Even during pendency of the appeals before this Court, on behalf of the company, an affidavit was filed giving an undertaking that the amounts payable to the petitioner would be paid to the extent of 50 per cent of the first year s outstanding within 30 days from the date of the order and balance on or before 20-4-2002. Even that order was not complied with. Therefore, it is clear that the 1st respondent as well as the company have committed violation of the orders as well as the undertakings that are given by way of filing affidavits, which clearly amounts to violation of the orders. 71. In fact, the 1st respondent made a deliberate attempt to disown the liability, representing that he has resigned from the 3rd respondent company and the management was even taken over by third parties. This fact was noted by the Company Law Board in the subsequent proceedin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... years. The qualifications of the persons to be appointed as Chairman and members are also prescribed. The Board may form one or more Benches from among its members, and authorize each such Bench to exercise and discharge such of the Board s powers and functions as may be specified in the order; and every order made or act done by a Bench in exercise of such powers or discharge of such functions shall be deemed to be the order or act of the Board. 74. As per sub-section (4C) of section 10E of the Companies Act, every Bench shall have powers which are vested in a Court under the Code of Civil Procedure, 1908, while trying a suit, in respect of the following matters : ( a )discovery and inspection of documents or other material objects producible as evidence; ( b )enforcing the attendance of witnesses and requiring the deposit of their expenses; ( c )compelling the production of documents or other material objects producible as evidence and impounding the same; ( d )examining witnesses on oath; ( e )granting adjournments; ( f )reception of evidence on affidavits. 75. As per sub-section (4D) of section 10E of the Companies Act, every Bench shall be deemed to be a Ci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r provided that, however, where the case was disposed of on merit, the decision shall not be recalled. 81. Regulation 28 provides that in the case of death of any party during the pendency of the proceedings before the Bench, the legal representatives of the deceased party may apply within 30 days of the date of such death for being brought on record as necessary parties, and where no application was received within the period specified, the proceedings against the deceased party shall abate. However, further discretion was provided to the Bench on good and sufficient reasons to set aside the abatement order and substitute the legal representatives. 82. Under Regulation 43, the Board was provided with the powers to enlarge the time where any period is fixed by or under these regulations or granted by a Bench, for doing of any act, or filing of any documents or representation, the Bench may, in its discretion, from time to time, enlarge such period, even though the period fixed by or under these regulations or granted by the Bench may have expired. 83. Regulation 44 provides inherent powers to the Bench. As per the said regulation, nothing in these rules shall be deemed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 47 provides that a Bench shall be deemed to be a Court for the purpose of prosecution or punishment of a person who wilfully disobeys any direction or order of the Company Law Board. Therefore, it is contended by the learned counsel that not only as interpreted by various Courts, but also as per the regulations, the Company Law Board is deemed to be a Court even for the purpose of punishment, as contemplated under Regulation 47. Therefore, there is no dispute that the Company Law Board is a Court, at least for the purpose of the Contempt of Courts Act, which provides for punishment for violation of the orders of the Court. 90. The learned counsel also contended that the order of the Company Law Board is appealable under the provisions of the Companies Act to this Court, and this Court has got supervisory powers over the Company Law Board as an appellate authority, therefore, the Company Law Board is deemed to be subordinate to this Court, in the light of the various judgments. 91. The learned counsel for the respondents, on the other hand, sought to contend that the Company Law Board is not a Court as is claimed by the petitioner and it is only a Tribunal. Further, the Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 48 of the Act. On May 15, 1964, the Assistant Registrar decided the matter upholding the contention of the bank and making the appellant liable for the entire amount. In the meantime, however, the appellant had challenged his liability for the amount of Rs. 5,014-5-9 as determined in appeal by the State Government by a Writ Petition to the High Court of Patna which was dismissed. He then filed a title suit before the Subordinate Judge of Muzaffarpur who decreed it in his favour and at the time when the contempt matter was heard by the Patna High Court, an appeal preferred by the bank from the said decree was pending before the District Judge, Muzaffarpur. 94. The appellant preferred an appeal to the Joint Registrar of Co-operative Societies against the order of the Assistant Registrar who was made respondent No. 2 in the appeal. One of the grounds of appeal was that the order of the 2nd respondent is mala fide inasmuch as after receiving the order of transfer he singled out this case out of so many for disposal before making over charge and used double standard in judging the charges against the defendants 1 and 2. It was also prayed that it should be declared ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fallen on the ordinary civil and revenue Courts of the land. The Registrar has not merely the trappings of a Court but in many respects he is given the same powers as are given to ordinary civil Courts of the land by the Code of Civil Procedure including the power to summon and examine witnesses on oath, the power to order inspection of documents, to hear the parties after framing issues, to review his own order and even exercise the inherent jurisdiction of Courts mentioned in section 151 of the Code of Civil Procedure. In such a case there is no difficulty in holding that in adjudicating upon a dispute referred under section 48 of the Act, the Registrar is to all intents and purposes, a Court discharging the same functions and duties in the same manner as a Court of law is expected to do. 99. The Apex Court further after referring to the term Court and thereafter, referring to various decisions, approved the observations made in Cooper v. Wilson [1937] 2 KB 309: "It is clear, therefore, that in order to constitute a Court in the strict sense of the term, an essential condition is that the Court should have, apart from having some of the trappings of a judicial Tribunal, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operative Societies Act." 101. In Canara Bank s case ( supra ) the Apex Court was considering the issue whether the Company Law Board is a Court within the meaning of section 9A of the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992. In that the Canara Bank had made an application before the Company Law Board under section 111 of the Companies Act seeking relief against the Nuclear Power Corporation of India Limited, which had refused to register in its books in the name of Canara Bank in respect of the bonds of the Nuclear Power Corporation purchased by the Canara Bank. The Standard Chartered Bank had also claimed ownership of the said bonds. The Canara Bank alleged that it had acquired the said bonds from the Andhra Bank Financial Services Limited through one Hiten P. Dalal, who had acted as a broker. Hiten P. Dalal is a person notified under the provisions of section 3(2) of the Special Court Act and was, as the application of the Canara bank before the Company Law Board showed, involved as a broker in the transactions relating to the said bonds. The said application of the Canara Bank was pending disposal before the Company Law Board as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ordinary hierarchy of Courts but the broader meaning of a curial body - a body acting judicially to deal with matters and claims arising out of transactions in securities entered into between the stated dates in which a person notified is involved. An interpretation that suppresses the mischief and advances the remedy must, plainly, be given. 105. The Apex Court further observed that under section 111 of the Companies Act, as amended with effect from 31-5-1991, the Company Law Board performs the functions that were theretofore performed by Courts of civil judicature under section 155. It is empowered to make orders, directing rectification of the Company s register, as to damages, costs and incidental and consequential orders. It may decide any question relating to the title of any person who is a party before it to have his name entered upon the company s register, and any question, which it is necessary or expedient to decide, it may make interim orders. Failure to comply with any order visits the company with a fine. In regard to all these matters it has exclusive jurisdiction. Its orders are appealable. The Company Law Board, further, is a permanent body constituted under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Companies Act, alleging acts of oppression and mismanagement in the affairs of the company by the appellants herein and sought rectification of the register of members of the company. While so, in the said company petition, the appellants filed an application C.A. 37/2004 under section 10 of C.P.C. seeking stay of the proceedings before the Company Law Board, on the ground that the questions in issues before the Civil Court in the suit filed by the appellant and the issues in the company petition filed by the respondents before the Company Law Board are substantially one and the same, since the civil suit was filed before the company petition was filed, therefore, sought for stay of the company petition till the disposal of the suit. The Company Law Board rejected the said application on the ground that the issues in both before the Civil Court as well as before the Company Law Board are not substantially one and the same, therefore, dismissed the application. Against which, the appeal was filed before this Court. 111. One of the issue that fell for consideration before this Court was whether the Company Law Board could be considered as a Court for the purpose of section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard of section 10E and other related provisions held that the Board can be held only a Tribunal and not a Court. While deciding the issue, the Division Bench of the Allahabad High Court also considered the decision of the Apex Court in Canara Bank s case ( supra ) where the Apex Court held that even the Company Law Board which was discharging the functions under section 111 of the Companies Act is also a Court as such broader interpretation was given with purposive approach as the Special Courts Act was constituted for the purpose of constituting a Special Court, dealing with the matters relating to the securities dealt with by a specified person during the specified period. But, however, observed that all the Courts are Tribunals, but all the Tribunals are not Courts. The ordinary Courts of civil judicature are vested with inherent powers and are structured in a hierarchy. In the Canara Bank s case ( supra ) it was pointed out by the Supreme Court that when the Constitution spoke of "Courts" under article 136 and other articles it contemplated Courts of civil judicature, but not Tribunals other than such Courts. 114. If we examine the facts of the present case in the light ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sinha ( supra ). 116. The regulations framed as per the powers vested under the Act itself provides that the Company Law Board shall be deemed to be a Court for the purpose of punishment of a person who wilfully disobeys any direction or order of the Company Law Board. Therefore, there is absolutely no scope to take any different view than the one that the Company Law Board should be treated as a Court. In addition, the provisions of the Act as well as the regulations make it clear that the Company Law Board was vested with all the powers that are similar to that of a Civil Court, while dealing with the proceedings before it, similar to that of a suit instituted before the Civil Court. 117. The Company Law Board is not vested with the powers to deal with cases under the provisions of the Contempt of Courts Act. Therefore, such powers are to be exercised only by this Court for any alleged contempt to Company Law Board similar to the Civil Courts. Further, as the orders of the Company Law Board are appealable under section 10F of the Act before this Court, the Company Law Board should be treated as subordinate to this Court, and therefore, this Court is well within its powe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs that the cause of action for the present contempt proceedings is a continuous, since the order of the Company Law Board contemplates the respondents to pay the amount over a period of 36 months from the date of maturity or from the date of the order. In fact, in the present case, by the date of the order, the amounts deposited by the petitioner were not matured, but they were matured and payables on a subsequent date i.e., 28-4-2001. 121. The learned counsel for the petitioner relied upon a decision in Pallav Sheth s case ( supra ). The Apex Court was considering about the period of limitation with reference to contempt proceedings. The Apex Court held that contempt proceedings can be initiated either on Court s own motion which must be by issuing a notice or it can be initiated otherwise than on the Court s own motion which must be by a party filing a petition before the Court, drawing Court s attention regarding commission of contempt within a period of one year from the date on which contempt is alleged to have been committed. Proceedings otherwise than on Court s own motion can be said to have been initiated only on issuance of show-cause notice by Court, where app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of that specified in sub-section (1) for any contempt either in respect of itself or of a Court subordinate to it. 128. Sub-section (3) further provides that where a person is found guilty of a civil contempt, the Court, if it considers that a fine will not meet the ends of justice and that a sentence of imprisonment is necessary shall, instead of sentencing him to simple imprisonment, direct that he be detained in a civil prison for such period, not exceeding six months, as it may thinks fit. 129. Sub-section (4) provides that where the person found guilty of Contempt of Court in respect of any undertaking given to a Court is a Company, every person who, at the time the contempt was committed, was in charge of, and was responsible to, the Company for the conduct of business of the Company, as well as the company, shall be deemed to be guilty of the contempt and the punishment may be enforced, with the leave of the Court, by detention in civil prison of each of such person. 130. The provision of sub-section (2) as well as (3) starts with a non abstanti clause. Therefore, if the facts of the present case are examined in the light of the above provisions, it is clear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spondent-contemnor is liable for severe punishment, which could be shown as an example for such persons not to indulge in such activities by deliberate false representations before the Company Law Board as well as before this Court. In view of the deliberate attempts made by the 1st respondent-contemnor, both the 1st respondent and 3rd respondent-contemnors are liable for imposition of severe punishment. 132. Though the 2nd respondent is also shown as one of the contemnor, making allegations against him for non-implementation of the order, but, however, he was not one of the directors at the time when the scheme order dated 29-2-2000 was obtained from the Company Law Board, and further it was claimed that he was only a nominee of the 1st respondent-contemnor and appointed as President of the 3rd respondent company as paid employee and was discharging the duties as are entrusted to him as President of the 3rd respondent company. Further, he has even resigned subsequently, therefore, he may not be liable for any punishment as he has no stake either in the Company or any part in obtaining order from the Company Law Board. Therefore, he is found not guilty under the provisions of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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