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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 ..... inoo R. Shroof, Contempt Appeal No. 5 of 2007 filed by Nimesh N. Kampani, Contempt Appeal No. 6 of 2007 filed by C.D. Menon, Contempt Appeal No. 7 of 2007 filed by A.P. Kurian, Contempt Appeal No. 8 of 2007 filed by Sridhar Chary, Contempt Appeal No. 9 of 2007 filed by G.S. Raju, Contempt Appeal No. 10 of 2007 filed by P.K. Madhav, and Contempt Appeal No. 11 of 2007 filed by L.V.V. Iyyer, which were allowed for the reason that in the Contempt Case No. 915 of 2002 they were not the respondents against whom contempt case was filed. There were only three respondents, namely, K.S. Raju, N. Selvaraj and M/s. Nagarjuna Finance Limited through its Managing Director, against whom contempt petition was filed under Section 12 read with Section 10 of Contempt of Courts Act, 1971 by E. Bapanaiah (present appellant) before the High Court. Other eight directors had no opportunity to defend themselves before the conviction was recorded by the learned Single Judge in its concluding paragraph 134 of the judgment in the aforementioned Contempt Case No. 915 of 2002. 4. It is only in respect of conviction of K.S. Raju, Promoter Director of Nagarjuna Finance Limited (for short "NFL") which requires in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2.2000 passed in CP No. 35 of 2000. In said appeals, on behalf of the Company an undertaking was given to pay half of first year's entitlement of the present appellant by 20.4.2002. However, no amount was paid. As such, the contempt petition was filed by the present appellant before the High Court for violation of the orders of the Company Law Board. 6. According to the appellant, after the scheme was approved, K.S. Raju, Promoter Director of NFL, started pleading that there was change in the management of NFL, and sought to be relieved from his liability as the Promoter Director of NFL, its group companies and from the undertaking given by him to the CLB. The CLB declined to relieve the Promoter Director K.S. Raju from the undertaking given by him and it was directed that he should make the repayment as per the repayment scheme. The Company Appeals were dismissed by the High Court on 3.1.2002. NFL and its Promoter Director failed to comply with the order of the Company Law Board even after dismissal of the Company Appeals. K.S. Raju, the then Promoter Director, was responsible for issuance of the advertisement inviting deposits from the public and failed to repay the deposit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... approximately 61%. It was also stated by NFL in its counter affidavit before the High Court that under Articles 104 and 140 of the Articles of Association K.S. Raju had power to appoint the Managing Director and other three Directors as his nominees. N. Selvaraj (respondent No. 2 in the Contempt petition) denied that he was nominee of MFSL. He further pleaded that there was no change in the management of NFL during his tenure as Managing Director, and he further told that entire control remained with K.S. Raju and his nominees. The Executive Director, G. Venkatapathi of NFL, filed additional counter affidavit in which it is clearly stated that the CLB passed the order on the basis of the undertakings and affidavits filed by the Promoter Director and the group companies. The counter affidavits further revealed that on special audit made in April, 2002, several irregularities were found to have been committed by the Management resulting in failure of recoveries in respect of loans advanced to various companies who were not traceable on the addresses given. 9. An additional counter affidavit was filed by K.S. Raju, Promoter Director, who was contesting the contempt petition with othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of the undertaking/affidavit dated 14.2.2000 before the Company Law Board, Southern Region Bench is not denied by the respondent K.S. Raju. The said undertaking/affidavit reads as under: - "BEFORE THE COMPANY LAW BOARD SOUTHERN BENCH AT CHENNAI Company Petition No.NAG6-33/45QA/SRB/99 In the matter of the Companies Act, 1956 Section 58A(9) In the matter of the Reserve Bank of India Act, 1934, Section 45QA AND In the matter of Nagarjuna Finance Limited, Punjagutta, Hyderabad ... Petitioner AFFIDAVIT I, k.s. Raju, s/o Late Shri K V K Raju, aged 50 years, residing at, 'Digvijayam', Plot No. 933A, Road No. 47, Jubilee Hills, Hyderabad-500033, do hereby solemnly affirm and state as follows: I am the promoter director of Nagarjuna Finance Limited, the petitioner in the Company Petition No. NAG6-33/45 QA/SRB/99. I as such hereby give assurance that Nagarjuna Finance Limited (NFL) shall make repayment of deposits as per the approved scheme by the Hon'ble Company Law Board in the above petition for deferment of repayment of deposits. It is further reiterated that all steps shall be taken to cause NFL to comply with aforesaid repayment schedule. The statements made a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 17. Sub-section (4) of Section 12 of the Contempt of Courts Act, 1971 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 the detention in civil prison of each of such person'. It further provides that 'nothing contained in this sub-section shall render any such person liable to such punishment if he proves that the contempt was committed without his knowledge or that he exercised all due diligence to prevent its commission'. 18. 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. 19. Though it is contend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e by the company in such cases; iii. attend to the complaints of nine depositors received at the bench office and report compliance; 2. The affidavits filed by : (a) Shri K.S. Raju, Promoter Director of the Company; (b) M/s. New India Finance Ltd. (c) M/s. Chinnar Securities Pvt. Ltd. (d) M/s. Nagarjuna Housing Development Finance Ltd. (e) M/s. Nagarjuna Engineering & Construction Co. Pvt. Ltd. (f) M/s. Nagarjuna Holdings Private Limited (g) M/s. Paschim Holdings Pvt. Ltd. (h) M/s. K.S. Raju Associates & Holdings Pvt. Ltd. (i) M/s. Corporate Securities & Holdings Pvt. Ltd. (j) M/s. K.S. Raju Associates and Estates Pvt. Ltd. (k) M/s. K.R.R. Holdings Pvt. Ltd; and (l) Shri Sridhar Chari, Managing Director of the company assuring repayment of deposits by the company as per the scheme approved by the CLB shall remain in force till discharging the obligations in terms of the order dated 29.2.2000 of the CLB. 3. The arrangements made between the company and MFSL shall not be of any consequence in relation to the repayment schedule approved by the CLB. The company, its promoter Director and Group Holding Companies shall continue to be responsible for due compliance of the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paragraphs of the common order passed by the High Court in the Company Appeals, are quoted below: - "In the circumstances, the submission of the learned counsel for the respondent company that it is entitled to wait till the month of April 2002 cannot be accepted and the respondent company is therefore bound to make the payments every month as per the clause 11(f) read with clause 12 (iv) of the scheme. Coming to the second submission made by the learned counsel for the respondent company, though I do not propose to go into the larger question whether the nature of the power exercised under Section 634A of the Companies Act is in the nature of the power exercised as an executing court, but I must say the impugned order is not in conformity with the original order of the Company Law Board dated 29th February, 2000. But, a combined reading of clause 1(i) and 12(iv) of the scheme, the respondent company is bound to pay 30% of the amount due to the petitioner within 1 year from the date of the maturity (28.4.2001) spread over 12 equal monthly instalments. Coming to the submission made by the learned counsel for the depositor, I do not see any reason why he should have any grievance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion is said to have been pending in said matter. We are of the view that the depositors cannot be left without remedy merely for the reason that prosecution could have been launched against the company. 25. Powers of the High Courts to punish for contempt including the powers to punish for contempt of itself flow from Article 215 of the Constitution of India. Section 10 of the Contempt of Courts Act, 1971 empowers the High Courts to punish contempts of its subordinate courts which reads as under: - "10. Power of High Court to punish contempts of subordinate courts. - Every High Court shall have and exercise the same jurisdiction, powers and authority, in accordance with the same procedure and practice, in respect of contempts of courts subordinate to it as it has and exercises in respect of contempts of itself: Provided that no High Court shall take cognizance of a contempt alleged to have been committed in respect of a court subordinate to it where such contempt is an offence punishable under the Indian Penal Code (45 of 1860)." 26. As to the question whether CLB is a court subordinate to High Court or not, in Canara Bank v. Nuclear Power Corporation of India Ltd. and others 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the reason that the decree passed by the subordinate court is not obeyed. However, there is no such procedure prescribed to execute order of CLB particularly after proviso is added to Section 634A of the Companies Act, 1956, vide Companies (Second Amendment) Act, 2002. 28. Therefore, having considered submissions of learned counsel for the parties, and material on record, and further considering the relevant provisions of law and the cases referred above, and exercising powers under Article 136 read with Article 142 of the Constitution, we think it just and proper to interfere with the order passed by the Division Bench of the High Court whereby the Division Bench erroneously set aside the finding and sentence awarded by the learned single Judge against K.S. Raju. In our opinion, respondent K.S. Raju wilfully disobeyed the order of CLB and breached the undertaking given to CLB, and thereby committed Contempt of Court subordinate to High Court as such the Division Bench of the High Court has erred in law in allowing the Contempt Appeal No. 3 of 2007 filed by K.S. Raju and setting aside his conviction and sentence, recorded against him by the learned Single Judge in Contempt Ca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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