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TMI Blog2023 (8) TMI 553X X X X Extracts X X X X X X X X Extracts X X X X ..... mplainants, namely, Dr. C. Vinod Hayagriv, Mr .C. V. Hayagriv, Mrs. C. Triveni Vinod, Mrs. C. Visala Hayagriv, Mr. Chaitanya V. Cotha & Mr. Shreyas V. Cotha against two Contemnors, namely, Sri. C. Ganesh Narayan & Smt. C. Valli Narayan for alleged wilful breach of orders of this Appellate Tribunal passed in CA (AT) No. 65 of 2019 dated 08.07.2021, 25.11.2021 and 24.02.2022. 2. Learned Counsel for the Complainants gave the background of the main appeal CA (AT) No. 65 of 2019, which is under 'hearing' by this Appellate Tribunal, and background of three orders dated 08.07.2021, 25.11.2021 and 24.02.2022, which have allegedly been breached wilfully by the Contemnors. 3. Learned Counsel for the Complainants stated that the Complainants are 50% shareholders in C. Krishniah Chetty & Sons Pvt. Ltd. (in short "CKC & Sons") and similarly the Contemnors are also 50% shareholders of the said company. Learned Counsel for the Complainants stated that CKC & Sons was incorporated in 1979 and since then CKC & Sons has been using the name "C. Krishniah Chetty". Learned Counsel for the Complainants further stated that the Contemnors are also 100% shareholders of one similar named company i.e. "C. K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... undertaking given by them on 23.07.2019 not to hold Board Meeting which is still continuing, whereas the Contemnors are misusing the same undertaking prejudicing the interest of the Complainants. Learned Counsel for the Complainants alleged that the Contemnors have opened the competing business adjacent to the main company in B Block, the Touchstone, Bangalore. 8. Learned Counsel for the Complainants elaborated that the various other actions allegedly taken by the Contemnors to jeopardise business of CKC & Sons which also tantamount to contempt, inter-alia, includes:- (i) Email sent on 02.01.2023 by Contemnor No. 1 to all Employees threatening the showroom manager. (ii) Poaching the clients of CKC & Sons by the Contemnor. (iii) Threatening security personal of CKC & Sons. (iv) Getting tax invoices/ purchase invoices from suppliers for supply of jewellery using address of CKC & Sons. (v) Sending social media communication to public using name of C. Krishniah Chetty & Co. (vi) Getting jewellery boxes in mini truck in the same premises for CKC & Co. of the Contemnor. (vii) Completing competing showroom. (viii) Advertising vacancies for purpose of employment in Contemn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Reply, wherein it was referred that no change in status of construction of Touch Stone, B Block since 2019. Learned Counsel for the Complainants emphasised that in the same para the Contemnor recorded "11. No cause of action warranting the prayers sought for. No change in the status of "construction" of Touch Stone 'B' Block, Main Guard Cross Road, Bangalore 560001 ('B Block'), since June 2019 (i).... Without prejudice to the lawful exercise of the rights of the Appellant under the FSA to start a competing business, the Appellant denies that any "hectic preparation" is presently being undertaken as alleged by Respondent Nos. 2-7. (ii)....A perusal of the exterior of the B Block as on 18.06.2021 will reveal that no change has occurred in respect of it since June 2019. Copies of the photographs taken on 18.06.2021 is produced herewith as Annexure H." 11. Learned Counsel for the Complainants cited few judgments as submitted in judgment compilation to buttress their points regarding Contempt and subsequent action to be taken against the Contemnor. 12. Learned Counsel for the Complainants refuted that so called Family Settlement Agreement (in short 'FSA') is valid and binding a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at property on Main Guard Cross Road is now redeveloped building between Year 2000 to 2005 and is known as "the Touchstone". Learned Counsel for the Contemnors further stated that Complainant No. 1 & 4 sold their entire shareholding in CKC & Co. to Contemnor No. 1 way back in 1999. 19. Learned Counsel for the Contemnors emphasised that CKC & Sons as well as CKC & Co. carry out the business from the same premises i.e. "the Touchstone Building". Learned Counsel for the Contemnors stated that CKC & Sons carries business from the Touchstone A Block, owned by CV Hayagirv Major (HUF) since 2008 and CKC & Co. carries all his business from the Touchstone B Block owned by C. Ganesh Narayan (HUF) since 2004-05. Learned Counsel for the Contemnors also stated that the Registered office of both the company was at No. 35 Commercial Street, Bangalore for 42 years and now Registered Office of CKC & Co. is at the Touchstone B-Block. Learned Counsel for the Contemnors further stated that the CKC & Co. has been operating its business at the Touchstone B Block over a decade and half and not suddenly and as new competing business as being falsely made by the Complainants. 20. Learned Counsel for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0040/2020-21 with date of invoice 04.03.2021, filed by the Contemnors at Page No. 413 of Volume-II in their statement of objections filed in present Contempt Petition. Learned Counsel for the Contemnors further stated that this does not leave any scope for any doubt about any kind of violation or breach by the Contemnors of this Appellate Tribunal orders including first order dated 08.07.2021. 24. Learned Counsel for the Contemnors assailed the conduct of the Complainants who themselves have been carrying out several advertisements in various media disparaging CKC & Co. trying to harm the business and reputation of CKC & Co. which incidentally admit the fact by the Complainants that the business being carried out by the Contemnors since 2010, whereas the Complainants are now trying to make a case that the Contemnors were not allowed to do any business in competition. Learned Counsel for the Contemnors stated that the intentions of the Complainants are dubious and only for pecuniary benefits for Complainants at the cost of the Contemnors. 25. Learned Counsel for the Contemnors stated that nowhere in any of the orders by this Appellate Tribunal dated 08.07.2021, 25.11.2021 & 24.02. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pt Petition which is required to be determined by us is to whether there have been specific and clear orders for doing or not doing any stipulated action by the Contemnors and if so, whether there could be one and only one interpretation without any ambiguity, whatsoever, to any party to the said order. 33. This Appellate Tribunal is also required to look into whether there has been any wilful disobedience on the part of Contemnors knowing well the mind and the intentions of this Appellate Tribunal in their orders as alleged by the Complainants. 34. This Appellate Tribunal observes that the Contempt Petition has been filed invoking the jurisdiction of Section 425 of the Companies Act, 2013 r/w Section 10 and 12 of the Contempt of Courts Act, 1971. We also need to refer to Section 2(a) & 2(b) of the Contempt of Courts Act, 1971 which defines the contempt as under :- "Section 2(a) & 2(b) of the Contempt of Courts Act, 1971 2. Definitions.-In this Act, unless the context otherwise requires,- (a) "contempt of court" means civil contempt or criminal contempt; (b) "civil contempt" means wilful disobedience to any judgment, decree, direction, order, writ or other process of a co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for Contempt of Tribunal. 38. The first order which has been relied upon by the Complainants is dated 08.07.2021. This order was passed in main appeal CA (AT) No. 65 of 2019 and not in any I.A. This order mentioned that Learned Counsel (presumably for Contemnors herein) sought permission to file an Interlocutory Application for modification of order regarding Board Meetings which was accorded by this Appellate Tribunal. Incidentally, this order also refers to I.A. No. 1075 and 1076 of 2021 filed by the Respondent therein in CA (AT) No. 65 of 2019/ Complainants herein in the present Contempt Case, which was taken on record. In the last line of the order, it has been recorded "further Learned Counsel for the parties are directed not to show the precipitate for the matter ". In the main appeal No. 65 of 2019 filed by the Contemnors, following reliefs were prayed :- "RELIEFS SOUGHT : In the light of all of the foregoing and more, the Appellant is most respectfully praying that this Hon'ble Appellate Tribunal be pleased to pass suitable orders in respect of inter-alia the following: a. Set aside the Impugned Order dated 24.01.2019 passed by the Hon'ble NCLT, Benguluru; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndent Nos. 2 to 7 from diverting the business of the Respondent 1 Company, directly or indirectly to the Respondent No. 10 company or any other Company. i. To restrain the Respondent Nos. 2 to 7 from appointing any new Director in the Respondent No. 1 Company. j. To conduct Board and General Meetings with the leave of the Hon'ble Bench with an Independent Chairman and observer for all the Board Meetings and General Meetings of the Respondent No. 1 Company. k. To appoint the Appellant or her nominee as a joint signatory for issuance of all cheques/ payments made on behalf of Respondent No. 1 Company from all bank accounts and for any statutory compliances. l. To direct Respondent No 1 company to share all information of all transactions, daily detailed sales reports, all vendor purchases, vendor and other agreements entered by the Respondent No. 1 Company, processes, payments, receipts, salaries paid to employees and directors, and any other information sought by the appellant or her nominee representing her in the management of Respondent No 1 company. m. To restrain Respondent Nos. 2 to 7 from giving effect to the purported resolution passed in the 36th Annual Genera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and hold the Board Meetings of the Respondent Nos. 1 and 10 Companies in accordance with the statutory mandate of Section 173 of the Companies Act, 2013 read with Rule 8 of Companies (Meetings of Board and its Powers) Rules, 2014 without any further delay; and (b) To pass such other and further Orders as this Hon'ble Tribunal may deem fit and proper in the facts and circumstances of the case." (Emphasis Supplied) The I.A. No. 1076 of 2021 was for "Application seeking exemption from filing notarise affidavits in the joint application filed on behalf of Respondent No. 2 to 7 and Respondent No. 1 & 10". Thus, the order dated 25.11.2021 was specifically in relation to I.A. No. 1075-1076 of 2021 which was filed for seeking permission to hold Board Meetings in accordance with Section 173 of the Companies Act, 2013. This Appellate Tribunal has recorded that at that stage it was not inclined to pass any orders in I.A. No. 1075-1076 of 2021 and it was further ordered to list the I.A's along with the Appeal for hearing on 05.01.2022. This Appellate Tribunal gave direction to Respondent No. 9 therein- Mr. C. Ganesh Narayan therein/ Contemnor No. 1 herein not to take any coercive ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atters which require examination but the same cannot be by way of contempt. In the present appeal, the alleged violation of FSA becomes significant which will legislate the legal rights and remedies of both the parties. The FSA was subject matter in main petition before the Tribunal who passed the impugned order on 24.01.2019 in CP 54/2014 (TP No. 65 of 2016) under Section 397,398,402,403,406,237 of the Companies Act, 1956. It will be pertinent to refer to two relevant paras of the Impugned Order dated 24.01.2019, namely, Para 1 which brings out all the disputes alleged by the Contemnors against the Complainants and final order for the same contained in para 27. These two paras reads as under :- 1. C.P.No.54 of 2014 (T.P.No.65 of 2016) is filed by Smt: C Valli Narayan (Petitioner), U/s. 397, 398, 402, 403, 406, 237 of Companies Act, 1956, against M/s. C. Krishriah Chetty & Sons Private Limited (Respondent), by inter alia seeking to regulate the conduct of the affairs of the first Respondent Company in future; Direct the Respondents to alter the Articles of Association of the Company so as to insert a new clause relating to the Principle of Proportional Representation and accordi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntempt. The Contempt of Courts Act, 1971 explains a civil contempt to mean a wilful disobedience of a decision of the Court. Therefore, what is relevant is the "wilful" disobedience. Knowledge acquires substantial importance qua a contempt order. Merely because a subordinate official acted in disregard of an order passed by the Court, a liability cannot be fastened on a higher official in the absence of knowledge. When two views are possible, the element of wilfulness vanishes as it involves a mental element. It is a deliberate, conscious and intentional act. What is required is a proof beyond reasonable doubt since the proceedings are quasi-criminal in nature. Similarly, when a distinct mechanism is provided and that too, in the same judgment alleged to have been violated, a party has to exhaust the same before approaching the court in exercise of its jurisdiction under the Contempt of Courts Act, 1971. It is well open to the said party to contend that the benefit of the order passed has not been actually given, through separate proceedings while seeking appropriate relief but certainly not by way of a contempt proceeding. While dealing with a contempt petition, the Court is not e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The word "wilful" introduces a mental element and hence, requires looking into the mind of a person/contemnor by gauging his actions, which is an indication of one's state of mind. "Wilful" means knowingly intentional, conscious, calculated and deliberate with full knowledge of consequences flowing therefrom. It excludes casual, accidental, bona fide or unintentional acts or genuine inability. Wilful acts does not encompass involuntarily or negligent actions. The act has to be done with a "bad purpose or without justifiable excuse or stubbornly, obstinately or perversely". Wilful act is to be distinguished from an act done carelessly, thoughtlessly, heedlessly or inadvertently. It does not include any act done negligently or involuntarily. The deliberate conduct of a person means that he knows what he is doing and intends to do the same. Therefore, there has to be a calculated action with evil motive on his part. Even if there is a disobedience of an order, but such disobedience is the result of some compelling circumstances under which it was not possible for the contemnor to comply with the order, the contemnor cannot be punished. "Committal or sequestration will not be ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dent but explicitly left the parties to pursue the same before the executing court. The plaintiff-petitioner having acquiesced of that observation of the High Court, cannot be allowed to contend to the contrary. This Court in Jhareswar Prasad Paul v. Tarak Nath Ganguly [Jhareswar Prasad Paul v. Tarak Nath Ganguly, (2002) 5 SCC 352 : 2002 SCC (L&S) 703] , in para 11, opined thus : (SCC p. 360) '11. ... The court exercising contempt jurisdiction is not entitled to enter into questions which have not been dealt with and decided in the judgment or order, violation of which is alleged by the applicant. The court has to consider the direction issued in the judgment or order and not to consider the question as to what the judgment or order should have contained. At the cost of repetition, be it stated here that the court exercising contempt jurisdiction is primarily concerned with the question of contumacious conduct of the party, which is alleged to have committed deliberate default in complying with the directions in the judgment or order. If the judgment or order does not contain any specific direction regarding a matter or if there is any ambiguity in the directions issued therein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perty. The debris cannot cause damage and it is certainly not a case of defacement of the suit property. That position is reinforced from the fact that the water park in the suit premises was started and became fully functional within 2-3 months. Viewed thus, it is rightly urged that it can be safely assumed that no damage was caused by the respondent to the structure in question. Minor repairs required to be carried out by the petitioner for making the water park functional cannot be painted as intentional disobedience of the order of this Court. In any case, that being a complex question of fact, need not be adjudicated in the contempt proceedings. We leave it open to the petitioner to pursue even that claim in execution proceedings or such other proceedings as may be permissible in law. We may not be understood to have expressed any final opinion in respect of condition of the suit premises, whilst handing over possession to the petitioner. We hold that even this issue under consideration does not warrant initiation of contempt action against the respondent." 12. In light of the aforesaid discussion, we accordingly set aside the order passed by the High Court on 23-10-2009 in ..... 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