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TMI Blog2021 (1) TMI 939X X X X Extracts X X X X X X X X Extracts X X X X ..... do so by virtue of Section 399. Under sub-section (2) of Section 397, if the CLB was of the opinion, that the Company s affairs are being conducted in a manner prejudicial to the public interest or in a manner oppressive to any member or members and that to wind up the Company would unfairly prejudice such member or members, but that otherwise the facts would justify the making of a winding up order on the ground, that it was just and equitable that the Company should be wound up; it was entitled to make such order as it thinks fit, with a view to bringing to an end such matter complained of - It could thus be seen, that any member of a Company is entitled to make an application to the CLB complaining that the affairs of the Company are being conducted in a manner prejudicial to public interest or in a manner prejudicial to the interest of the Company and the CLB is empowered to make such order as it thinks fit, with a view to bring to an end the matter complained of. A similar provision contained in Section 398, enables the members of a Company to complain, that the affairs of the Company are being conducted in a manner prejudicial to public interest or in a manner prejudicial to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s be seen, that this Court has held, that the contempt proceeding is not like an execution proceeding under the Code of Civil Procedure. It has been held, that though the parties in whose favour, an order has been passed, is entitled to the benefits of such order, but the Court while considering the issue as to whether the alleged contemnor should be punished for not having complied with and carried out the directions of the Court, has to take into consideration all facts and circumstances of a particular case. It has been held, that is why the framers of the Act while defining civil contempt, have said that it must be wilful disobedience of any judgment, decree, direction, order, writ or other process of the Court. It has been held, that before punishing the contemnor for non-compliance of the decision of the Court, the Court must not only be satisfied about the disobedience of any judgment, decree, direction, writ or other process but should also be satisfied that such disobedience was wilful and intentional. In the present case, the petitioner has failed to make out a case of wilful, deliberate and intentional disobedience of any of the directions given by this Court or acting i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spondent Nos.1 and 2 i.e. Ramesh Narang and Rajesh Narang so also Rakesh Narang are sons of the petitioner and Smt. Motia. The petitioner and Smt. Motia divorced in 1963. The petitioner thereafter married Smt. Mona. Out of the said wedlock, two sons Rohit and Rahul as well as a daughter Ramona were born. 3. In a previous round of litigation between these parties, the respondent No.1- Ramesh Narang had approached this Court by filing a Contempt Petition (C) Nos.265-67 of 1999 in Contempt Petition (C) No. 209 of 1998 in Civil Appeal Nos.366 of 1998, 603 of 1998 and 605 of 1998. The present petitioner Rama Narang was respondent No.1 in the said proceedings. This Court passed the following order in the said proceedings on 2nd November 2001:- "In Conmt. Pet. (C) Nos.265-267/1999 in Conmt. Pet. (C) No.209/1998 in Civil Appeal No.366/1998, 603/1998 & 605/1998. After hearing Mr. Kapil Sibal, learned senior counsel for the petitioner and Mr. Gopal Subramaniam, learned senior counsel for the alleged contemnor, at length, we are satisfied that the contemnor has flouted the order of this Court dated 4th May, 1999 by not transferring 50% of the share (and contending that he could make out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 139-A of the Constitution of India. Prothonotory and Senior Master of the Bombay High Court are directed to transmit the records in the above mentioned suits by special messenger to this court so as to reach the Registry here within ten days from today. The Bench Officer of the Principal Bench of the Company Law Board, New Delhi is directed to forward the records relating to Company Petition No. 28 of 1992 to the Registry of this Court so as to reach the Registry within ten days from today. All the parties have undertaken before us that they will implement the terms of the "MINUTES OF CONSENT ORDER" on or before 1.1.2002 and that no further time will be sought for in the matter. Clause (f) of the compromise relates to the operation of the bank accounts. That clause will come into force from today onwards. All the afore-mentioned suits and the company petition will be posted for final formal orders on 8.1.2002 at 10.30 a.m. along with these contempt proceedings." 5. The matter came up again before this Court on 8th January 2002. This Court passed the order thus:- "Pursuant to the order dated 12th December, 2001 the following suits and company petition have bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to the name of Ramesh. The purported transfer of shares by Rama on 14th May 1999 in compliance with order dated 4th May 1999 is void. It is further clarified that the transfer by Rama of 3998 shares to Ramesh pursuant to order dated 4th May 1999 is void and the said 3998 shares stand restored to the joint names of Mohini, Rama and Mona. It is also clarified that Ramesh, Rajesh and Rakesh shall have no objection to the transfer of 403 shares held by FWPL in NIHL to Rama. 3. The following directions issued by this Hon'ble Supreme Court in the above matter are re-affirmed and agreed to by the parties as follows:- (a) With effect from 4th May, 1999 Rama, Ramesh and Rajesh are the only Directors of NIHL (and its subsidiaries). Any increase in the Board of Directors shall be with the mutual consent of Rama and Ramesh/Rajesh. (b) None of the Directors (Rama, Ramesh and Rajesh) can be removed from directorship. (c) Rama and Ramesh shall continue to be in joint management and control of NIHL and Rajesh shall continue to be the Permanent Whole Time Director thereof in charge of day to day operations/management. (d) No decision shall be adopted concerning or affecting the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "a. Transfer 1000 equity shares held by Rakesh in Narang Overseas Private Limited to Rajesh. b. Confirm his retirement as partner in the firm of United Corporation and withdraw his claims referred to arbitration in Arbitration Suit No. 5110 of 1994. c. Consent to the transfer of entire undertaking of Bull Worker Private Limited from FWPL to the Manu Group. d. Consent to hive off land at Marol, Sahar, Bombay owned by NIHL admeasuring about 45105.70 square meters to the Manu Group. e. Consent to hive off ownership and possession of the property at 64, Sunder Nagar, New Delhi to Rajesh." 7. All the above is to be performed by the Rama Group before 01.01.2002. 8. Matter to be listed before this Hon'ble Court on 08.01.2002." 6. Perusal of the family settlement would reveal, that insofar as Narang International Hotel Limited (hereinafter referred to as 'NIHL') and its subsidiaries are concerned, Rama Narang, Ramesh Narang and Rajesh Narang were to be the only Directors. Any decision by the Board of Directors was to be taken only by the mutual consent of Rama Narang on one hand and Ramesh and Rajesh, on the other hand. The settlement also provided, that none of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the terms of the Consent Order. The respondents had contended, that the order dated 12th December 2001, had merged in the order dated 8th January 2002 and that they had implemented the said order. A three-Judge Bench of this Court in Rama Narang v. Ramesh Narang and Another (2006) 11 SCC 114 rejected these objections raised by the respondents with regard to maintainability of the contempt petition. It will be relevant to refer to the following observations of this Court:- "33. In the present case, the consent terms arrived at between the parties were incorporated in the orders passed by the Court on 12-12-2001 [Ramesh Narang (1) v. Rama Narang, (2009) 16 SCC 631] and 8-1-2002 [Ramesh Narang (2) v. Rama Narang, (2009) 16 SCC 600] . The decree as drawn up shows that order dated 8- 1-2002 [Ramesh Narang (2) v. Rama Narang, (2009) 16 SCC 600] was to be 'punctually observed and carried into execution by all concerned'. A violation of the terms of the consent order would amount to a violation of the Court's orders dated 12-12-2001 [Ramesh Narang (1) v. Rama Narang, (2009) 16 SCC 631] and 8-1-2002 [Ramesh Narang (2) v. Rama Narang, (2009) 16 SCC 600] and, therefore, be punishable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the parties, that the petitioner should enjoy the veto power over the company transactions having value of more than ₹ 10 lakhs and create a deadlock. 11. However, the Court did not find favour with the submissions made by the respondents and while rejecting the respondent's contention, this Court in its judgment and order dated 15th March 2007 reported as Rama Narang (V) v. Ramesh Narang and Another (2009) 16 SCC 126, observed thus:- "32. The object of entering into consent terms and jointly filing the undertaking was to run the family business harmoniously with the active participation of all as a family business but the respondents had taken absolute control of the Company NIHL to the total exclusion of the petitioner. All the management decisions and other decisions affecting the Company were taken by the respondent Rajesh Narang, the whole-time Director under the guise of the day-to-day operation/management in clear violation of Clause 3(c) of the consent terms which clearly states that Rama Narang and Ramesh Narang shall continue to be in joint management and control. The parties gave undertaking to the Court regarding the consent terms. 33. The respondents have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court is brought to the notice of the Court, in that event, the respondents shall be sent to jail forthwith to serve out the sentence imposed in this case." 14. It could thus be seen, that though this Court held the respondents guilty of contempt, taking into consideration the fact that immediately sending the respondents to jail would create total chaos in the Company and it would also vitally affect the interest of large number of people including the employees of the Company, the sentence of imprisonment imposed on the respondents was kept in abeyance. This Court further directed the parties to meticulously comply with the undertaking given by them to the Court. It was further observed by the Court, that in case, similar violations of the undertaking given to this Court, was brought to the notice of this Court, the respondents shall be sent to jail forthwith to serve out the sentence imposed in the said case. 15. It appears, that the dispute between the parties not only continued but got aggravated. Contending that on account of noncooperation by Rama, the functioning of the Company had come to a standstill, Ramesh filed Company Petition No.47 of 2008 before the Company Law B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his consent, as the Facilitator (Mobile No. ……..). As the Facilitator, he would try to bring about a consensus among the directors on matters which are urgent and essential to ensure that the business of the Company is carried on smoothly and in case a consensus is not possible, taking into consideration the views of the three Directors, he will take a final decision which will be binding on the Directors and the Company. I make it abundantly clear that his role will be limited only to operational matters, like, issues relating to workers/employees of all categories, issues relating to suppliers/supply contracts, urgent repairs to equipments etc. These are only illustrative. It will be within his competence to decide considering the spirit of this order that the business of the company should be carried on smoothly till the petition is disposed of, which are urgent/essential operational issues." 17. Alleging, that the order passed by CLB dated 10th April 2008, was violative of the order of this Court dated 15th March 2007 and nothing but an attempt to legalize their conduct of contempt, the petitioner approached this Court by the present contempt petition. 18. It a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... well as the workmen, as the first step, directed M/s K.P.M.G. Chartered Accountants to prepare financial accounts after verifying the Books. The Court directed both the parties to sign the accounts, without prejudice to their rights and contentions. The Chartered Accountant was also directed to consult both the sides. The matter was directed to be kept on 13th July 2009. 20. On 13th July 2009, again this Court passed a detailed order. The perusal thereof shows, that the Court directed the Registrar of Companies and Chief Commissioner of Income Tax to be impleaded in the proceedings. The Court also observed, that it would also like to know from the Chief Commissioner of Income Tax, as to what action has been taken against the Company with regard to dues under the Income Tax Act. The Court also wanted to know as to why assessment has not been done for all the years, particularly, when the Return/Accounts have not been filed by the Company. The matter was directed to be listed by this Court thereafter on 21st July 2009. On 21st July 2009, the Court considered the Status Report submitted before it, by the Chief Commissioner of Income Tax. Apology was tendered to the Court by the Regis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s:- (i) Shri Ranina will convene an informal meeting of all the concerned parties including M/s BSR & Company and at the said meeting, Shri Ranina was to act only as an advisor and not as an independent Director of the Company; (ii) After going through the relevant papers, Shri Ranina was to convene one more meeting in which he was to suggest mode of his induction into the Company as an independent Director. It was further clarified that, Shri Ranina was not to be subjected to prosecution which the Court had directed in its earlier order dated 21stJuly 2009 with regard to the action to be taken by the Registrar of Companies against the Directors for violation of the provisions of Companies Act; (iii) The BSR & Company was to update and audit the Accounts of the Company. If the BSR & Company found any impediment, they were to report to Shri Ranina, who in turn, was to try to resolve the problem himself in the first instance and if not, to submit a report to this Court; (iv) The BSR & Company would also submit the reports on the status of the accounts from time to time to Shri Ranina. In case, Shri Ranina found any impediment or difficulty in carrying out the orders passed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved, that although number of steps were taken; even as on that day, the signing of the Accounts remained pending because of the family disputes between the father and the sons. The Court noticed, that at the end of the day, the position remained that some of the provisions of the Companies Act were not complied with and the Accounts remained unsigned. The Court therefore directed the Additional Chief Metropolitan Magistrate, 37th Court, Mumbai, to expedite the hearing and finally dispose of the cases pending before him. The Court by the said order dispensed with the services of Shri H.P. Ranina and Shri Syed Habibur Rehman. 26. In the parallel proceedings before the CLB, Rama Narang had filed Company Application No.57 of 2011 in Company Petition No. 47 of 2008, praying for the discharge of the Facilitator Retired Justice Arvind V. Savant, on the ground of collusion with the petitioner and the respondent before the CLB. The Court found no substance in the allegation made by Shri Rama Narang and therefore, dismissed the said CA by imposing exemplary cost of ₹ 1,00,000/. It will be relevant to refer to paragraph (7) of the order dated 22nd February 2011, as under:- "7. I ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot agreeing with the dissenting Director/s or agreeing with the assenting Director/s." 28. It appears from the record, that in the emergent situation i.e. not making payment of electricity bills and the resultant possibility of electricity supply of the Hotel being disconnected, Company Application No.610 of 2011 was mentioned before the CLB. It was brought to the notice of the CLB, that the Facilitator was not able to function and operate smoothly and therefore, vide order dated 29th November 2011, the CLB, as a temporary measure, appointed Shri H.S. Acharya as a Special Officer-cum-Advisor, in addition to the Facilitator already appointed. The CLB further directed, that since the present Facilitator has stayed his hands from exercising additional powers given vide order dated 28th April 2011, the said powers could be exercised by Shri Acharya until further orders. 29. Thereafter, by an order dated 30th April 2015, the CLB passed the following order:- "16. Therefore, for the reasons stated above, I hereby appoint Mr. H.P. Ranina as Facilitator cum Advisor by removing Mr. H.S. Acharya as Administrator cum Advisor. Mr. Ranina has to act as Facilitator cum Advisor with the power ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Minutes of the Meeting, it would appear, that one of the subjects that came up for discussion before the Board of Directors, was with regard to sale of the Companies' property at 40 Pali Hill, Bandra West, Mumbai (hereinafter referred to as the 'Bandra property') so as to tide over the financial crisis. From the perusal of the Minutes of the Meeting, it could be seen, that it is stated therein, that the Bandra property was only nonbusiness asset of the Company. It is further stated in the Minutes of the Meeting, that if funds were not available, it would result in closure of the Company's Flight Catering Business, which would result in over 3000 persons losing their livelihood as well as create serious financial and legal challenges. It was suggested in the said Meeting, that on the sale of the Bandra property, an amount of ₹ 351 crore could be received from Maverick Realty & Developers LLP. In the said Meeting, the petitioner was also asked by the respondent No.1 as well as the Facilitator, as to whether the petitioner had any other suggestions to offer so as to tide over the financial crisis. However, the petitioner refused to offer any suggestion, as such under the dire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioner. The learned Senior Counsel submitted, that the perusal of the orders passed by this Court dated 12th December 2001 and 8th January 2002, would reveal, that the respondents were required to run the affairs of NIHL jointly along with the petitioner. However, they were running the affairs of the Company totally to the exclusion of the present petitioner. It was further submitted, that this Court in the judgment reported in Rama Narang (2006) 11 SCC 114 (supra) had clearly held, that the contempt petition at the behest of present petitioner against the present respondents was very much tenable. He further submitted, that not only this, but the judgment of this Court reported in Rama Narang (V) (2009) 16 SCC 126 (supra) would clearly show, that this Court in unequivocal terms has held, that the present respondents had acted in breach of the undertaking given to this Court. It is submitted, that though the respondents were required to run the affairs of NIHL jointly with the present petitioner, it was clearly found, that they had acted in breach of the orders of the Court and were running the business totally to the exclusion of the petitioner. The learned Senior Counsel subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equent settlement between the parties, the order holding the present petitioner guilty was recalled. 36. Shri Sibal submitted, that the family settlement between the parties is in two parts. He submitted, that the first part is with regard to various suits filed by Ramesh Narang which were withdrawn and transferred to this Court and decreed by this Court. He submitted, that the second part of the settlement was with regard to the management of the Company. The learned Senior Counsel submitted, that the conduct of the present petitioner was throughout of non-cooperation in the functioning of the Company. The petitioner, at every stage, was attempting to put a hindrance so that the functioning of the Company comes to a standstill. He submitted, that after the orders were passed by this Court on 12th December 2001 and 8th January 2002, though the petitioner was required to co-operate, the petitioner refused to do so and in order to run the affairs of the Company, the respondents were required to do certain things in the interest of the Company. He submitted, that had the respondents not done what they had done, the entire business of the Company would have come to a standstill thereb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th December 2001, so also the explanatory statement to the notice for Extraordinary General Meeting convened on 1st January 2002, would clearly show, that the residential accommodation provided to Rama Narang and Ramesh Narang at Company's Bandra property, was in their capacity as a Director of the Company. The learned Senior Counsel reiterated, that no Director can claim ownership over the Company's property. 39. Shri Sibal further submitted, that since after 2008, the respondents have been acting as per the orders passed by the CLB, which were passed by a competent statutory authority in exercise of the statutory provisions, by no stretch of imagination, they could be held guilty for having committed contempt of this Court. The learned Senior Counsel submitted, that even interim orders passed by the jurisdictional authorities are binding on the parties as long as they hold the field. The learned Senior Counsel relies on the judgment of this Court in the case of Tayabbhai M. Bagasarwalla and Another v. Hind Rubber Industries (P) Ltd. And Others (1997) 3 SCC 443, in support of the said proposition. 40. Shri Sibal submitted, that insofar as application of the respondents is concer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of socalled Facilitator is not only without jurisdiction but is in breach of the orders passed by this Court dated 12th December 2001 and 8th January 2002. He therefore submitted, that the application for directions needs to be dismissed summarily. 43. Shri Rohatgi reiterated, that since the activities which were found to be contemptuous by the judgment of this Court in Rama Narang (V) (2009) 16 SCC 126 (supra), have been continued even after the judgment was delivered by this Court, the respondents are required to be held guilty of having committed contempt of this Court and punished in accordance with law. He relied on the judgment of this Court in Re: Vinay Chandra Mishra (The Alleged Contemnor) (1995) 2 SCC 584. 44. Shri Rohatgi further submitted, that the family settlements even in company matters are required to be dealt with differently. He relied on the judgment of this Court in the cases of Sangramsinh P. Gaekwad and Others v. Shantadevi P. Gaekwad (Dead) Through LRs and Others (2005) 11 SCC 314 and Kale and Others v. Deputy Director of Consolidation and Others (1976) 3 SCC 119. 45. As indicated in the opening paragraphs itself, though initially only an interlocuto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt in Rama Narang (V) (2009) 16 SCC 126 (supra) i.e. 15th March 2007. 50. It is the case of the respondents, that the petitioner was attempting to use the consent terms as a veto to stall the functioning of the Company. It is their case, that the petitioner was making every attempt possible to thwart the functioning of the Company. It is also the case of the respondents, that the said acts were done with the mala fide intention. It is their case, that the son of the petitioner from his second wife namely Rohit Narang is working as the Managing Director of Sky Gourmet Catering Pvt. Ltd., which Company is a direct competitor with the Flight Catering business of NIHL. It is their case, that since the petitioner refused to offer any cooperation for proper functioning of the Company, the respondent No.1 was compelled to approach the CLB by Company Petition No. 47 of 2008. The said petition was filed on 10th March 2008. The petitioner in the said petition had averred, that after the order was passed by this Court on 15th March 2007, all genuine efforts were made by the respondents herein, to ensure that the present petitioner should not have any further grievance regarding exclusion fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CLB was contemptuous in nature. It also appears from the record, that the petitioner had also filed an application for stay of the order passed by the CLB being IA No. 1 of 2008 in the present proceedings. 52. When the matter was listed before this Court on 21stJuly 2009, this Court, keeping in mind the interest of 3000 workmen as well as the exchequer, was of the view, that under Article 142 of the Constitution, this Court should appoint an independent Director, who will look into the financial management of the Company and submit his report to this Court from time to time, on the state of the Company's accounts and due compliance of the statutory provisions of the Companies Act and Income Tax Act. He was also requested to suggest steps for good corporate governance including financial management in future. The Court therefore appointed Shri Homi Ranina, who is a Tax Expert, as an independent Director of the Company. However, by the said order, this Court noted, that Shri Arvind Savant, Former Chief Justice of the Kerala High Court had been appointed as Facilitator by the CLB. The Court therefore clarified, that the said order will not come in the way of the functioning of the F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f dispute/disagreement between the Directors, the decision taken by Shri Ranina, Advisor in consultation with Shri Habib Rehman shall be final and binding on the Board of Directors. The Court noted the statements made on behalf of the counsel for the petitioner Rama, that he will sign notes of accounts, director's reports and other statutory documents as may be required by Shri Ranina for compliance with the statutory provisions. It further clarified, that if Rama failed to do so, Shri Ranina was authorised to do so. Vide subsequent order dated 16th April 2010, the Court clarified, that Rama will comply with the directions given by the Court vide order dated 14th December 2009. It also clarified, that the said order dated 14th December 2009, was to be implemented by Rama without prejudice to his rights and contentions in the pending litigation. 55. It further appears from the record, that Company Application No. 223 of 2011 was filed by respondent No.2-Rajesh before the CLB in Company Petition No. 47 of 2008. Vide order dated 28th April 2011, the CLB rejected the objection raised by the counsel for Rama as to the locus of the applicant Rajesh (respondent No.2 herein). The CLB afte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stop the Facilitator from functioning. It was observed, that petitioner Rama had made wild, scurrilous and baseless allegations against the Facilitator. Therefore, vide order dated 22nd February 2011, the application was rejected with exemplary cost of ₹ 1 lakh. 58. When the contempt petition was listed before this Court on 16th August 2016, this Court directed the contempt petition to be kept for final disposal on a Tuesday in the month of November 2016. This Court further clarified, that without prejudice to the rights of the respective parties, the present arrangement for running the affairs of the Company will continue until further orders. It appears, that thereafter the matter was listed before this Court on 29th November 2016, when this Court directed the matter to be adjourned sine die. Thereafter, the matter has come up before this Bench to which reference has already been made in the earlier paragraphs. 59. For considering the rival submissions, it will be relevant to refer to Sections 397, 398 and 403 of the Companies Act, 1956:- "397. APPLICATION TO TRIBUNAL FOR RELIEF IN CASES OF OPPRESSION (1) Any members of a company who complain that the affairs of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such order as it thinks fit. 403. INTERIM ORDER BY TRIBUNAL Pending the making by it of a final order under section 397 or 398, as the case may be, the Tribunal may, on the application of any party to the proceeding, make any interim order which it thinks fit for regulating the conduct of the company's affairs, upon such terms and conditions as appear to it to be just and equitable." 60. Perusal of Section 397 would reveal, that a member of a Company is entitled to apply to the CLB complaining that the affairs of the Company were being conducted in a manner prejudicial to the public interest or in a manner oppressive to any member or members including anyone or more of themselves, for an order under the said section. The only rider is that such a Member should have a right to do so by virtue of Section 399. Under sub-section (2) of Section 397, if the CLB was of the opinion, that the Company's affairs are being conducted in a manner prejudicial to the public interest or in a manner oppressive to any member or members and that to wind up the Company would unfairly prejudice such member or members, but that otherwise the facts would justify the making of a winding up order o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Facilitator in the interest of the Company. Immediately after the said order was passed, the petitioner has filed the present contempt petition. Along with the said contempt petition, the petitioner has also filed IA No. 1 of 2008 seeking stay of the said order. A subsequent application, being IA No. 2 of 2008 was also filed by petitioner Rama seeking stay of the proceedings before CLB and the communications/directions passed by the Facilitator. However, perusal of the record would reveal, that no orders were passed on the said IAs. On the contrary, perusal of the record would reveal, that this Court vide order dated 21st July 2009, though had appointed Shri Homi Ranina, a Tax Expert, as an independent Director, for ensuring due compliance of the statutory provisions, it noted, that Shri Arvind Savant, Former Chief Justice of the Kerala High Court, had been appointed as a Facilitator by the CLB. The Court clarified, that the said order will not come in the way of the functioning of the Facilitator. Vide another order dated 29th July 2009, this Court while issuing various directions, before concluding the order again noted, that the CLB had appointed Shri Arvind Savant, Former Chi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the other to make amends for his acts will not amount to interfering with the course of justice, even though that may require some action on the part of the other party in connection with his own judicial proceeding, as a party is free to take action to enforce his legal rights." It could thus be seen, that this Court has held, that such action of a person which he takes in pursuance of his right to take legal action in a court of law, will not amount to interfering with the course of justice, even though that may require some action on the part of the other party in connection with his own judicial proceedings. The principle is, that a party is free to take action to enforce his legal right. This Court has approved the view taken by Allahabad High Court in Hrishikesh Sanyal v. A.P. Bagchi ILR 1940 All 710 and Radhey Lal v. Niranjan Nath AIR 1941 All 95, that a person does not commit contempt of court if during the pendency of certain proceedings, he takes recourse to other judicial proceedings open to him, even though the latter proceedings put the other party at a loss. 69. In the present case, undisputedly, the respondents were entitled to invoke the jurisdiction of the CL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parties who incidentally are Directors of the same Company. 72. Perusal of the company petition filed by the respondents before the CLB and the order dated 10th April 2008, passed by CLB would reveal, that a specific reference has been made to the order passed by this Court holding the respondents guilty for committing contempt (vide Rama Narang (V) (2009) 16 SCC 126). We are therefore of the view, that the said judgment would be of no assistance to the case of the present petitioner. 73. Apart from that, for bringing an action for civil contempt, the petitioner has to satisfy the court that there has been a wilful disobedience of any judgment, decree, direction, order, writ or other process of the Court. It will be relevant to refer to paragraph (9) of the judgment of this Court in Niaz Mohammad and Others v. State of Haryana and Others (1994) 6 SCC 332:- "9. Section 2(b) of the Contempt of Courts Act, 1971 (hereinafter referred to as 'the Act') defines "civil contempt" to mean "wilful disobedience to any judgment, decree, direction, order, writ or other process of a court …". Where the contempt consists in failure to comply with or carry out an order of a court made in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considering the issue as to whether the alleged contemnor should be punished for not having complied with and carried out the directions of the Court, has to take into consideration all facts and circumstances of a particular case. It has been held, that is why the framers of the Act while defining civil contempt, have said that it must be wilful disobedience of any judgment, decree, direction, order, writ or other process of the Court. It has been held, that before punishing the contemnor for non-compliance of the decision of the Court, the Court must not only be satisfied about the disobedience of any judgment, decree, direction, writ or other process but should also be satisfied that such disobedience was wilful and intentional. Though, the civil court while executing a decree against the judgment-debtor is not concerned and bothered as to whether the disobedience to any judgment or decree was wilful and once the decree had been passed, it was the duty of the court to execute the decree, whatever may be the consequences thereof. In a contempt proceeding before a contemnor is held guilty and punished, the Court has to record a finding, that such disobedience was wilful and intent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt observed as under: (AIR p. 193, para 9) "9. A question whether there is contempt of court or not is a serious one. The court is both the accuser as well as the judge of the accusation. It behoves the court to act with as great circumspection as possible making all allowances for errors of judgment and difficulties arising from inveterate practices in courts and tribunals. It is only when a clear case of contumacious conduct not explainable otherwise, arises that the contemnor must be punished. … Punishment under the law of contempt is called for when the lapse is deliberate and in disregard of one's duty and in defiance of authority. To take action in an unclear case is to make the law of contempt do duty for other measures and is not to be encouraged."(emphasis added)" This Court has observed, that the contempt proceedings are quasi-criminal in nature and the standard of proof required is in the same manner as in the other criminal cases. The alleged contemnor is entitled to the protection of all safeguards/rights which are provided in the criminal jurisprudence, including the benefit of doubt. There must be a clear-cut case of obstruction of administration of j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ossessed from the suit property by appointing a receiver or otherwise; in such a case, the Court should, while holding that it has no jurisdiction to entertain the suit, put back the party in the position he was on the date of suit. But this power or obligation has nothing to do with the proposition that while in force, these orders have to be obeyed and their violation can be punished even after the question of jurisdiction is decided against the plaintiff provided the violation is committed before the decision of the Court on the question of jurisdiction." 78. This Court has held, that the correct principle therefore is that, where an objection is taken to the jurisdiction to entertain a suit and to pass any interim orders therein, the Court should decide the question of jurisdiction in the first instance. However, that does not mean that pending the decision on the question of jurisdiction, the Court has no jurisdiction to pass interim orders as may be called for in the facts and circumstances of the case. It has been held, that a mere objection to jurisdiction does not instantly disable the court from passing any interim orders. It has been held, that it can yet pass appropri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 80. It could thus be seen, that though the counsel for the present petitioner had raised an issue that without deciding on the maintainability of the petition, the interim order could not be passed, the CLB observed, that under Sections 397 and 398 of the Companies Act, it is well settled, that only if the maintainability is challenged either in terms of Section 399 or jurisdiction of the CLB, challenges on other grounds have to be considered along with the merits of the case. It further observed, that in the present case, it was admitted fact, that the petitioner qualified under Section 399 of the said Act and that the CLB has jurisdiction to deal with the petition under Sections 397 and 398 of the Act. It further observed, that in the proceedings under Sections 397/398, it is the interest of the Company which is paramount. It observed, that it was quite evident from the various annexures enclosed with the petition, that due to differences among the Directors, many operational issues concerning the management of the Company like payment of salary/wages, payment to suppliers etc. were pending, resulting in agitation by the employees and irregularity in supplies. The CLB therefore c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to raise all issues available to them including the issue of jurisdiction. 82. In the result, we are of the considered view, that the present contempt petition is without any merit and deserves to be dismissed, and is accordingly dismissed. 83. That leaves us with Interlocutory Application No. 87565 of 2019 filed by the respondent No.1. The respondent No.1, by the said application is seeking direction to the petitioner to abide by the decision of the Facilitator dated 30.04.2019. 84. Having held, that the present contempt petition deserves no merit and is liable to be dismissed, we find that such an application need not be entertained. Indeed, the respondents may be welladvised to take recourse to the remedies available to them in law. We do not wish to express any opinion one way or the other in that regard. Though, Shri Kapil Sibal has strenuously argued, that this Court should invoke powers under Article 142 of the Constitution and issue directions to the contempt petitioner, we find, that this is not a case wherein directions as sought, should be issued under Article 142 of the Constitution. On Insolvency and Bankruptcy Code 2016, coming in force, the proceedings which are ..... X X X X Extracts X X X X X X X X Extracts X X X X
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