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TMI Blog2015 (2) TMI 998X X X X Extracts X X X X X X X X Extracts X X X X ..... ctor of said Company, working for a decade, was his nominee, and practically all the powers to run the NFL vested with K.S. Raju, the Promoter Director, and his nominees, whom he appointed under Articles 104 and 140 of Articles of Association. In our opinion, having considered the submissions of learned counsel for K.S. Raju, Promoter Director, and considering his role in the operation of the Company, as discussed above, the Division Bench of the High Court erred in law in holding that he was not guilty of wilful disobedience of the order of the CLB. It is pertinent to mention here that after giving undertaking dated 14.2.2000, respondent K.S. Raju submitted his resignation in September, 2000, which clearly reflects that the same was done in order to save himself and his company, from making the repayment directed to be made by the CLB, and thereby dishonestly made attempt in not making repayment to the depositor E. Bapanaiah. It is not the case of respondent K.S. Raju, Promoter Director, who gave undertaking that he had no knowledge of the order of the CLB, or that he made any attempt to prevent the disobedience of the order. The arrangements made between the company and MFS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g powers under Article 142 of the Constitution of India, to do complete justice between the parties, we allow sixty days time to respondent K.S. Raju, with effect from pronouncement of this judgment to repay the entire amount to the depositor/appellant as directed by CLB, and if within the said period of sixty days payment is not made to the depositor/appellant, respondent K.S. Raju shall be taken into custody to serve out sentence as recorded against him by the learned Single Judge vide order dated 3.8.2007 in Contempt Case No. 915 of 2002. If the amount is paid to the present appellant as directed by this Court within sixty days, the sentence shall be reduced to the extent of fine only. - CRIMINAL APPEAL NO. S.L.P. (Crl.) Nos. 2479-2487 of 2009 - - - Dated:- 7-11-2014 - VIKRAMAJIT SEN AND PRAFULLA C. PANT, JJ. JUDGMENT Prafulla C. Pant, J. - Leave granted. 2. These appeals are directed against judgment and order dated 22.8.2008 passed by the High Court of Judicature, Andhra Pradesh, in Contempt Appeal Nos. 3, 4, 5, 6, 7, 8, 9, 10 and 11 of 2007 whereby said Court has allowed all the Contempt Appeals setting aside the order dated 3.8.2007 passed in Contempt Case No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Company Appeal No. 7 of 2001. It is stated by the present appellant that the respondent, K.S. Raju, was Promoter Director of M/s. Nagarjuna Finance Limited, Hyderabad (in short NFL ). The said company, through its Directors, issued advertisement inviting deposits promising good returns on the deposits with attractive interest thereon, and collected the huge sum from the public. The present appellant deposited ₹ 40,00,000/- (Rs. forty lakhs) hoping that the same would multiply to double within 45 months as projected in the advertisement. The said amount was deposited in eight fixed deposits of ₹ 5,00,000/- (Rs. five lakhs) each for a period of 45 months on 20.7.1997 and was due for repayment on maturity on 28.4.2001. However, when the NFL failed to re-pay the sum to the depositors, an application (CP No. 35 of 2000) was filed under Section 58-A of the Companies Act, 1956 before the Company Law Board, Southern Region Bench, for framing the scheme of repayment of deposits in instalments within a period of 48 months. The Company Law Board (CLB), exercising its suo motu powers, allowed the time to NFL on the request of its directors to approve the scheme of repayment. D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that long back he had left to function as Managing Director of NFL. It is further stated by him that he is neither in a position to exercise any control over the Company nor responsible to make repayment of the deposits made in favour of NFL. It was further submitted by him before the learned single Judge of the High Court that in the order dated 29.2.2000 passed by the CLB, the Board did not rely on the assurance or undertaking given by the parties. Only the Managing Director was directed to file the undertaking, as such the undertaking/affidavit given by the respondent K.S. Raju was not the basis of the order dated 29.2.2000. As such it was contended that there was no contempt of CLB or the Court. It was further pleaded that an agreement was entered into between one M/s. Mahalakshmi Factorial Services Limited (for short MFSL ) and NFL whereby the control of NFL was handed over to MFSL, and N. Selvaraj (respondent No. 2 in the Contempt Petition) was nominated as the Chief Executive Officer to look after the affairs of NFL. Lastly, it was pleaded by respondent K.S. Raju that assuming that he had given undertaking/affidavit on which CLB passed the order said to have been disobeye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the 3rd respondent company are convicted and sentenced to suffer simple imprisonment for a period of six months, together with imposition of fine of ₹ 2,000/- (Rupees two thousand only). The 1st respondent as well as other directors of the 3rd respondent shall be detained in Civil Prison for the period of imprisonment as ordered above. 135. Accordingly, C.C. is allowed. 11. Aggrieved by the order dated 3.8.2007 passed by the learned single Judge in Contempt Case No. 915 of 2002 respondent K.S. Raju, Promoter Director, appears to have filed Contempt Appeal No. 3 of 2007 before the Division Bench of the High Court. His appeal was taken up along with the appeals of the other Directors and disposed of vide impugned order dated 22.8.2008 whereby the appeals of all the Directors, including that of K.S. Raju, were allowed. Hence these appeals before us by the depositor E. Bapanaiah. (We have already observed in the beginning of this judgment that since the 'other Directors' were neither impleaded by name nor had an opportunity to defend themselves, as such setting aside of their conviction and sentence by the Division Bench of the High Court in their appeals, requi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r there was justification on the part of K.S. Raju, Promoter Director, and his Company (NFL) in not making repayment as per the scheme approved by the CLB, as directed by said authority. 15. Learned counsel for the respondent K.S. Raju argued that in the undertaking given by K.S. Raju, only this much has been stated that the Company will make the payment, as such it is not the personal liability of said respondent. But needless to say that Company functions through its directors, in its operations. Company is not such person which can be sent to jail. It is the director controlling the affairs of Company through whom it has committed the disobedience, if any, and as such, such director has to suffer the consequences of disobedience if it is wilful. We have already discussed above that from the affidavits filed before the High Court, it is clear that K.S. Raju was not only the Promoter Director of NFL, but the Managing Director of said Company, working for a decade, was his nominee, and practically all the powers to run the NFL vested with K.S. Raju, the Promoter Director, and his nominees, whom he appointed under Articles 104 and 140 of Articles of Association. 16. In our opi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... akhs to the depositors between 17.7.2000 and 19.9.2000. The company has considered all the 430 hardship cases; attended to complaints to nine depositors received at the Bench Office and disposed of 1424 complaints received at his office by taking appropriate action as per the Scheme approved by the CLB. According to Shri Iyer, the company finds it difficult to make payment to the depositors in accordance with the scheme of account of the poor rate of recovery of receivables and for want of the required additional expertise and infrastructure for recovery of the monies due to the company. Hence, the management of the company has entered into a strategic alliance with M/s. Mahalakshmi Factoring Services Limited, Bombay (MFSL), which would provide necessary infrastructure and skills to accelerate the process of realization of the receivables to make repayment to the depositors. Accordingly, additional professionals have been inducted into the Board of the Company to strengthen the recovery and disbursement mechanism. MFSL has agreed to resume the responsibility in realizing the dues of the company. MFSL is involved in the management of the company, Shri N. Selvaraju, President of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay be enforced by that Board in the same manner as if it were a decree made by a Court in a suit pending therein, and it shall be lawful for that Board to send, in the case of its inability to execute such order, to the Court within the local limits of whose jurisdiction, - (a) in the case of an order against a company, the registered office of the company is situated, or (b) in the case of an order against any other person, the person concerned voluntarily resides, or carries on business or personally works for gain. Section 634A is clear that as in the case of a court, the orders of the Company Law Board can be enforced by it in the same manner as if it were a decree made by a court. This section further permits the CLB, in case of its liability to execute the order, to seek the assistance of the court having competent jurisdiction for execution of its order. In view of this there is no force in the argument of Shri Murali. 7. Taking into consideration the facts and circumstances of the case, the opportunity afforded to the Company and the legal position stated hereinabove, I hereby order that the Company shall pay 30 per cent of the deposit amount together with inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... As such, on the date (3.8.2007) order passed by learned single Judge, the depositor had no option of getting executed the order of CLB as a decree passed in a suit, and present appellant could not have been asked to avail remedy under Section 634A of the Companies Act. 23. No doubt, a company which defaults in repayment of deposit can be dealt with as per provisions contained in sub-sections (9) and (10) of Section 58A of the Companies Act, 1956, which read as under:- (9) Where a company has failed to repay any deposit or part thereof in accordance with the terms and conditions of such deposit the Tribunal may, if it is satisfied, either on its own motion or on the application of the depositor, that it is necessary so to do to safeguard the interests of the company, the depositors or in the public interest direct, by order, the company to make repayment of such deposit or part thereof forthwith or within such time and subject to such conditions as may be specified in the order: Provided that the Tribunal may before making any order under this sub-section give a reasonable opportunity of being heard to the company and the other persons interested in the matter. (10) W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hin the ambit of Contempt of Courts Act, 1971 and, therefore, the High Court can exercise powers of dealing with contempt of such authority provided the act of contempt was not punishable for offences under Indian Penal Code. In N. Venkata Swamy Naidu v. Sri Surya Teja Constructions Pvt. Ltd. and others 2008 CriLJ 227, High Court of Andhra Pradesh observed as under: - 28. Under Section 10F of the Companies Act 1956, any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court, within sixty days from the date of communication of the decision or order of the Company Law Board, on any question of law arising out of such an order. The Company Law Board is thus judicially subordinate to the High Court and, even if its administrative control is held not to vest in the High Court under Article 235 of the Constitution of India, it would nonetheless be a Court subordinate to the High Court under Section 10 of the Contempt of Courts Act. 27. The present case relates to a civil contempt wherein an undertaking given to Company Law Board is breached. Normally, the general provisions made under the Contempt of Courts Act are not invoked by t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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