9911796707
TMI Blog2021 (5) TMI 139X X X X Extracts X X X X X X X X Extracts X X X X ..... s hereby clarified that reference to Respondents mentioned hereafter only means Respondent Nos. 1 to 6, since Respondent No. 7 is a Proforma party. 2. Brief facts of the case, which are relevant to the issue in question, are mentioned below: (1) The Petitioner herein is a Company registered under the Companies Act and is a 50% (+ 2 shares) shareholder of a Company namely GE Triveni Limited ("GETL"). GETL is a joint venture company, constituted pursuant to the Joint Venture Agreement dated 15.04.2010, between the Petitioner and Contemnor No. 5/General Electrical Company ("GE"), through its affiliate DI Netherlands i.e., Contemnor No. 2. Prior to the formation of GETL, TTL was competing in the 0-30 MW range for steam turbines and GE and its affiliates claimed to be competing in the 0-135 MW range. GETL was formed to effectuate the Joint Venture between TTL and GE to enter the market with the combined range of steam turbines (i.e. 30-100 MW). (2) For achieving the above purpose, the following major agreements were executed by GE [through its affiliate Contemnor No. 3/Nuovo Pignone SPA ("GENP")] with GETL: (a) Marketing and Sales Services Agreement dated November 01, 2010 betwee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tioner before the Hon'ble NCLAT vide CA 236 of 2019. It was stated in the Appeal that there was an apprehension that, "47. During the pendency of the Company Petition, Respondent No. 4 and 5 have indulged in further acts of oppression and mismanagement including by purporting to sever the relationship between GE and GETL by GE purporting to transfer its shareholding in Respondent No. 4. [....] 49. Unless Orders, as prayed for, are granted, the effect of Respondent No. 5 transferring its shareholding in the said Respondent No. 4 would be directly on the affairs of Respondent No. 1 Company as Respondent No. 1 company would neither have access to technology that it was promised, the marketing assistance that it was promised and the brand. This is apart from the fact that Respondent No. 5 would, unless orders, as prayed for, are granted, be in a position to directly compete with the business of Respondent No. 1 and would effectively leave Respondent No. 1 in a situation which may lead to eventually, winding up." (7) Thus, the Petitioner in its Appeal before the NCLAT, had sought a restrain on GE selling and transferring its shares in BHGE. During arguments before this Hon' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Respondent Nos. 4 & 5 and taking into consideration the aforesaid fact, we allow 4th and 5th Respondents to transfer the title of all the shares to any party without affecting the business of Appellant-'Triveni Turbine Limited' and the 1st Respondent Company- 'GE Triveni Limited' and should not affect all the five agreements entered into between parties as referred to in their undertaking before the Tribunal and recorded above. [.....] 8. The obligation of 4th ('Baker Hughes LLC, A GE Company') and 5th Respondent ('General Electric Company') as existing on 12th June, 2019, shall also continue till the next date." (9) The said Order therefore permitted GE to transfer the title of the shares on three explicit conditions. Firstly, the said action should not affect the business of Petitioner and GETL. Secondly, the transfer of shares should not affect all the five agreements, including the GE-TLA, GE-MSA and GE-ASA as referred to in the Undertaking before this Hon'ble Tribunal. Lastly, the Respondent No. 4 (i.e., BHGE) and Respondent No. 5 (i.e., GE), shall continue to perform their obligations, qua the Petitioner and GETL, as existing on 12.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enterprises (MSMEs) on which the very continued existence of these enterprises depends. (11) There was a major and substantial detriment and in fact brazen violation of the terms of the said Undertaking in as much as: (a) Though the said undertaking clearly and unequivocally stated the shares of GETL would be transferred to a fully owned affiliate of Respondent No. 5, thereby committing that beneficial ownership of the shares GETL would continue to remain under the beneficial ownership and control of Respondent No. 5 (GE), GE in-effect divested itself of the beneficial ownership of these shares, by transferring the shareholding held by it in Respondent No. 4 (BHGE) without, at the at the same time, transferring the shares of GETL to a " fully owned subsidiary of Respondent No. 5" as categorically stated, and committed in the said Undertaking. The complete cessation of the beneficial ownership and control of the shares of GETL, so far as Respondent No. 5 is concerned, constitutes the clear and unanswerable breach of the same Undertaking; (b) The said undertaking also clearly stated that the GE-TLA, GE-MSA, and GE-ASA dated 01.11.2010 would "remain fully enforceable on their te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said letter dated 11.11.2020, the Respondent No. 4 has also stated in para 8 that "General Electric Co. is not the joint venture partner in GETL. It is public knowledge that General Electric Co., has not been an affiliate of DI Netherlands since September 16, 2019", thereby stating unequivocally that DI Netherlands it is not "a fully owned affiliate of Respondent No. 5", which also constitutes a clear admission of the patent breach of the said undertaking. Further, the said letter also constitutes clear and unequivocal admission of Respondent No. 4 and the said breach committed by Respondent No. 4 has a profound and devastating effect on the status-quo prevailing as on the date on which the said Undertaking was given and to the knowledge of Respondent No. 4 would operate to the immeasurable detriment of GETL and the Petitioner, thereby clearly indicating that the motivation behind these acts of contempt was clearly mala fide, vicious and dishonest and intended to cause irreparable damage and injury to the interest of the Petitioner and GETL. (13) Further, in total disregard and in the teeth of the Hon'ble NCLAT's Order dated 27.08.2019, Contemnors No. 3/GENP, on the instr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reign entity openly flouted the directions of the Hon'ble NCLAT, to take advantage of the Petitioner's domestic sales network, but due to severe mismanagement and non-fulfilment of obligations by the Contemnor No. 5/GE and its associates, have left the Petitioner in a situation where the Petitioner's business interests have suffered. The said issue was also raised by the nominee Directors of Petitioner during the Board Meeting of GETL on 30.06.2020. The Board, after discussing various aspects and impact of termination on GETL, resolved to appoint a law firm and independent auditors to consider the legal and financial impact of the purported termination on GETL. (15) The Contemnor/Respondent No. 1 is the CEO of Respondent No. 5 and Respondent No. 6 is the Vice President of Respondent No. 4 and President of Respondent No. 3. That Respondent No. 1 was responsible for the transfer of shares of Respondent No. 5 Company in Respondent No. 4 and Respondent No. 6 was responsible for the issuance of the contemptuous letters. 3. The Respondent No. 1 has filed its statement of objections, dated 7th April, 2021, by inter alia stating as follows: (1) This Hon'ble Tribunal, b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lief, including of the nature sought in the present Application, does not arise - including as against the Answering Respondent. The Petitioner is merely resorting to filing multiple Applications with a view to coerce the Respondents to terms. (5) The Answering Respondent has been arrayed as a Respondent in these contempt proceedings with the oblique motive of arm-twisting the other Respondents to terms, on the basis of the threat of contempt proceedings against a high-ranking individual within the Fifth Respondent Company. There can be no other reason for the Answering Respondent being named as a respondent in the present contempt proceedings. (6) The Answering Respondent could not have violated any order(s)/direction(s) to which he was not bound by or a part of. In any event, none of the orders passed by this Hon'ble Tribunal or the Hon'ble NCLAT, in any manner, contain any direction whatsoever to the Answering Respondent to do any act, or restrain the Answering Respondent to do any act. Therefore, no contempt proceedings can possibly lie against the Answering Respondent. It is settled law that unless there exists a specific direction in an order against a person that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... denied that there is any requirement under the Undertaking or the 2019 NCLAT Order for Respondent No. 2 to transfer its shares to an affiliate of Respondent No. 5. It is now convenient for the Applicant to ignore these facts and take a contrary and false stand to prop up the present Contempt Application. Having prevented Respondent No. 2 from complying with the Undertaking, the Applicant cannot now allege contempt of the same. (2) The Undertaking and consequently orders of NCLAT in question contemplated that the Ancillary Agreements would remain enforceable on their own terms; (ii) on their own terms, the Ancillary Agreements were due to expire on October 31, 2020;(iii) Respondent No. 3 with respect to the TLA, the MSSA and the ASA called upon GETL to come forward to negotiate the terms of a renewal; (iv) GETL and the Applicant refused to engage with Respondent Nos. 2 and 3 in this regard; (v) Faced with such non-cooperation, Respondent Nos. 2 and 3 had no choice but to inform GETL (as early as April 2020) and the Applicant that the Ancillary Agreements would expire on their own terms; (vi) Respondent No. 3 specifically offered to put in place an interim arrangement for access to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for dematerialization to facilitate transfer to an affiliate of Respondent No. 5 in terms of the Undertaking. On the same day, Respondent No. 2 also wrote to the external consultants authorizing Mr. Manish to collect the physical shares and deliver to corporate office of GETL along with a copy of request to proceed with dematerialization of shares. (d) Mr. Arun Mote wrote a letter on October 31, 2019 inter alia stating as under: (i) that 2019 NCLAT Order does not require an affiliate of Respondent No. 5 to acquire GETL Shares of Respondent No. 2; (ii) that the 2019 NCLAT Order does not record any undertaking from Respondent No. 2 whatsoever; (iii) Respondent No. 2 should withdraw its statement made in its letter dated September 18, 2019 that Respondent No. 5 or its affiliate is required to acquire the GETL Shares. (e) GETL issued instructions to RCMC for rejection of dematerialization of GETL Shares on October 30, 2019, which contained an absurd requirement for Respondent No. 2 to provide a "Non-Disposal Undertaking". This was neither contemplated by the Undertaking nor any order of this Tribunal or NCLAT. In fact, it is contrary to the articles of association of GETL. Mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contempt. His inclusion is made for purely vexatious and harassment purposes only, an abuse of the legal process. (6) It is well settled that contempt jurisdiction is a special jurisdiction which the Courts exercise sparingly, with great caution and never on the basis of frivolous allegations. The present Contempt Application has been filed by the Applicant without any basis or without assigning or providing any evidence whatsoever of any contumacious act by the Answering Respondents. Therefore, they have urged to dismiss the Application with exemplary costs. 5. The Respondent No. 6 has filed its statement of objections dated 7th April, 2021, by inter alia contending as follows: (1) At the outset, the Respondent No. 6 denies all allegations made in the present Contempt Application, as the allegations are false, baseless and vexatious. The Respondent No. 6 is the President of Respondent No. 3 herein and is a resident of Italy (herein after referred to as the "Answering Respondent"). (2) On a perusal of the Contempt Application, it seems to have been filed by the Applicant for alleged violation of an 'undertaking' dated August 19, 2019 as submitted by Respondent Nos. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to engage in a discussion for renewal of the Ancillary Agreements by Respondent No. 2 and Respondent No. 3 (as applicable) had not received any response and further, GETL had also not initiated any engagement on the renewal of the Ancillary Agreements. Respondent No. 2 once again requested GETL to engage in a discussion regarding the renewal of the Ancillary Agreements; (c) On April 22, 2020, the Applicant issued a long-winded letter purporting to reply to the letter of March 9, 2020. However, this letter of April 22, 2020 was vague and nothing more than a restatement of the Applicant's alleged grievances in the main Company Petition, Respondent No. 2 responded to on April 24, 2020, inter alia countering the statements made by the Applicant in its letter of April 22, 2020 and also asking the Applicant to engage in good faith settlement discussions aimed at an orderly disentanglement from the joint venture; (d) On the same day, i.e., April 24, 2020, Respondent No. 3 also informed GETL of its intention not to renew the TLA, in accordance with the terms of the TLA. And the communication was signed by the Answering Respondent acting in the capacity of a Representative of Respon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... support of his contention that Undertaking not only on the Parties and Court/Tribunal, can pass appropriate interim orders, rendered in David Jude Vs. Hannaha Grace Jude and others (2003) 10 SCC, 767, wherein it is inter alia held that they are compelled to take coercive action due to continuous defiant attitude adopted by the Contemnors therein. The breach of undertaking given by the Contemnors is an act of gross contempt deserving deterrent punishment and pending disposal of main Contempt case, interim directions are also passed." The Respondents have no respect to the Tribunal and violated their own undertakings as recorded by orders of passed by NCLT and NCLAT in question. Therefore, the Learned Senior Counsel has urged the Tribunal not only take cognisance of the Contempt as alleged and also pass interim orders as prayed for in the interest of justice. 8. Shri Arun Kumar, learned Senior Counsel for the Respondent Nos. 2 to 4, while elaborating various averments made in the pleadings already placed on record, as briefly stated supra, has further inter alia submitted that they have not violated their undertakings as recorded by Tribunals and the Agreements in question deemed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1(4)(a) of the Act restricts the application of the Act to only those companies incorporated under the Act. Similarly, section 2(18) of the Act defines 'company' to mean a company incorporated under the Act or under any previous company law. And, in this context, 'Chief Executive Officer' under the Act means an officer of a company. In other words, the Act applies only to a CEO who is designated as such by a company that has been incorporated under the Act or any previous company law. (2) It is not the Petitioner's case that Respondent No. 5 is a Company incorporated under the Act or any previous company law. Thus, to extend the territorial application of the Act to exercise contempt jurisdiction on Respondent No. 1 is contrary to the language of the Act. Second, the Act itself restricts the scenarios in which it can apply to a foreign company. Under section 2(42), a "foreign company" means "any Company or body corporate incorporated outside India, which (a) has a place of business in India whether by itself or through an agent, physically or through electronic mode; and (b) conducts any business activity in India in any other manner". The Petitioner has not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce with the provisions of the Contempt of Court Act, much less hold Respondent No. 1 guilty of contempt merely based on the Petitioner's vague and baseless averments. (5) It is settled law that the burden to prove contempt beyond reasonable doubt lies on the Petitioner. In Chhotu Ram v. Urvashi Gulati, (2001) 7 SCC 530 (paragraph 2), the Hon'ble Supreme Court held that a contempt of court proceeding being, quasi-criminal in nature, the burden to prove would be upon the person who made an allegation of contempt. Pertinently, the Hon'ble Supreme Court also held that a person cannot be sentenced on mere probability. Wilful disobedience and contumacious conduct is the basis on which a contemnor can be punished. Such a finding cannot be arrived at on ipse dixit of the Court. It must be arrived at on the materials brought on record by the Petitioner. (6) So far as the transfer of shares held by Respondent No. 2 in GETL, it is contended that it could not do so due to Petitioner obstacle. Having prevented Respondent No. 2 from complying with the Undertaking, the Petitioner cannot now allege contempt of the same. In any case, none of this relates to Respondent No. 5. Respon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g contempt of the said orders. Since the Respondent No. 6 was not even part of the main dispute, he was not bound by and could not have violated any order/undertaking. There is no specific direction against the Respondent No. 6 and hence there can be no violation by the Respondent No. 6. (b) This Respondent has himself not signed any undertaking or submitted any undertaking before this Hon'ble Tribunal or before the Hon'ble NCLAT. The Applicant has simply made the Respondent No. 6 a party to the Contempt Application to harass the Respondent No. 6. (c) There is no specific allegation of violation or contumacious conduct against the Respondent 6. The Applicant only cursorily mentions that the Respondent No. 6 has issued some communication. No allegation is made, or evidence produced or even role ascribed which suggests that the Respondent No. 6 has wilfully disobeyed any order. No case is pleaded let alone made out against the Respondent No. 6. The Respondent No. 6 was only acting in his capacity as an official representative of the Respondent No. 3. The Respondent No. 6 is not an employee of the Respondent No. 4 and consequently, is not responsible for the sale of shares ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r cognisance of Contempt only lies against Parties to litigation or it extend to related parties like Respondent Nos. 1, 3, 6, who are alleged to have committed contempt at the instance of Respondent No. 4 & 5 who have given undertaking before the Tribunal; (6) Whether the Respondents have violated their own undertakings as recorded by NCLT and NCLAT in their orders in question so as to take cognizance of contempt against them: (7) If so, what is the interim relief and main relief, the Petitioner is entitled for and can be granted by the Tribunal; 13. Brief history of case, is as follows: (1) Initially, Triveni Engineering and Industries Limited (TEIL), a Company incorporated and existing under the Laws of India having its Registered Office at Deoband, Uttar Pradesh and GE Pacific Mauritius Limited, a Company incorporated and existing under the Laws of Mauritius and having its Registered office at Les Cascades, Edith Cavell Street, Port Louis, Republic of Mauritius, entered into Equity Joint Venture Contract (EJVC for brief) dated 15th April, 2010. Wherein, it has declared that GE Pacific Mauritius Limited is an Affiliate of General Electric Company, a Corporation organised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal and recorded above. Ultimately, the said Appeals were disposed by common order dated 17th February, 2020. In so far as providing data is concerned, the necessary data for running the business of 1st Respondent Company- 'GE Triveni Limited', if required to be provided pursuant to the aforesaid five agreements, be provided by concerned Respondents to the 1st Respondent Company-'GE Triveni Limited', if available. All transactions of shares if made shall be subject to the decision of these appeals. The obligation of 4th ('Baker Hughes LLC, A GE Company') and 5th Respondent ('General Electric Company') as existing on 12th June, 2019, shall also continue till the next date. Ultimately, the said Appeals stands finally disposed of by common order 17th February, 2020 by inter alia saying that the said interim order shall continue till pendency of Petition filed Under Sections 241-242 of Companies Act, 2013. 15. Aggrieved by violation of said interim orders dated 27th August, 2019, the Petitioner has filed Contempt Case (AT) No. 34-36 of 2020 in Company Appeal (AT) No. 236, 237 & 298 of 2019. After hearing the petition, the Hon'ble NCLAT dispose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and competed against it; (b) ensured that its nominee directors on 'GE Triveni Limited's board breached their fiduciary duties; (c) ensured that, in the process, key management personnel of 'GE Triveni Limited', i.e., the CTO and CFO colluded with 'General Electric Company', 'Baker Hughes LLC, A GE Company' and their nominees/appointees in 'GE Triveni Limited'. Ultimately 'General Electric Company' proposed to transfer its shareholding in 4th Respondent- 'Baker Hughes LLC, A GE Company' which would result in 'General Electric Company's complete de-linking/exit from the 'GE Triveni Limited' partnership. As a result of the transfer, business carried out by 4th Respondent- 'Baker Hughes LLC, A GE Company' and its subsidiary, 3rd Respondent- 'Nuovo Pignone S.p.A' has gone out of 'General Electric Company' altogether. All these transactions shows that it is GE, which is mainly responsible to protect the business interest of Petitioner through GETL. When the Petitioner has filed the Company Petition by alleging acts of oppression and mismanagement on the part of Respondents, the Tribunals hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t lacks jurisdiction over the affairs of Company, cannot entertain the instant Contempt Petition is un-tenable and baseless, especially considering the nature of terms and conditions as mentioned in Equity Joint Venture Contract dated 15th April, 2010. And the Respondents are estopped from raising question of jurisdiction in terms of said contract, and their Undertakings given before the Tribunal, as mentioned supra. Therefore, lack of jurisdiction of this Tribunal, as interpreted by the Tribunal, while vacating the interim orders passed in the case should be interpreted that the Tribunal cannot interfere in internal/external affairs of Respondents being Foreign Company, as long as those actions do not affect the business interest of Petitioner. However, the Respondents time and again reiterate question of jurisdiction to oust jurisdiction of this Tribunal, which is liable to be rejected out rightly. The question here is whether the Respondents have violated their own Contract in question, Undertaking given, and various interim orders passed by NCLAT. The Respondent cannot escape from the allegation of Contempt of orders of Tribunal by raising un-tenable ground of lack of jurisdict ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uestion. In this Application, it is admitted that DI Netherlands is party by succession to the Equity Joint Venture Contract dated 15th April, 2010 and Nuovo Pignone is a party to some of Agreements. It is not in dispute that the Tribunal ceased of the matter and passed interim as early as on 12th June, 2019, subsequently various orders are passed by NCLT/NCLAT, as stated supra. Moreover, it is not the case of Respondents that Agreements in question stand terminated before filing of the Main Company Petition, which was filed on the file of Tribunal as early as on 10th June, 2019 and NCLT also passed interim orders as early as on 12th June, 2019. Therefore, though matter is subjudice before NCLT/NCLAT, and the Respondents suffered various interim orders, still the Respondents not only violating the interim orders and its own undertaking, but they are attempting to interpret the interim orders in a contemptuous way. 21. The contention of the Respondents that I.A. Nos. 494 & 495 of 2019, filed by them, seeking to refer the matter to Arbitration, are to be taken first before Contempt Petition is taken is concerned, it is to be mentioned here that it is fair on the part of Respondents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt-'Triveni Turbine Limited' and the 1st Respondent Company- 'GE Triveni Limited' and should not affect all the five agreements entered into between parties as referred to in their undertaking before the Tribunal and recorded above. [.....] And the final order of NCLAT dated 17th February, 2020, has affirmed the same interim order as final order till the disposal of Company Petition. 23. For the aforesaid reasons and circumstances of the case, and by keeping in mind various citations cited and relied upon by the Parties, as stated supra, we are of the considered opinion that Respondent Nos. 4 & 5 are committed Contempt of the orders dated 27.08.2019 and 17.02.2020 passed by Hon'ble NCLAT and also earlier Affidavit undertaking dated 17.08.2019 filed before NCLT. Therefore, before going ahead with punishment as contemplated under the Contempt of Courts Act, 1971, we hereby direct the Respondents to comply with following directions: (1) All the Respondents [excluding Respondent No. 7 (GETL) who is Proforma Respondent], in particular Respondent Nos. 4 & 5, shall fulfil their obligations as on 12th June, 2019 as directed by the Hon'ble NCLAT vide its orders da ..... X X X X Extracts X X X X X X X X Extracts X X X X
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