Court upholds NCLT jurisdiction in contempt case, dismisses writ petitions challenging orders

The court dismissed the writ petitions challenging the orders of the National Company Law Tribunal (NCLT), finding no merit in the petitioners' arguments of bias and procedural impropriety. The court held that NCLT was within its jurisdiction to proceed with contempt proceedings and had not acted with bias or undue haste. It emphasized that judicial review could not be denied at the show cause notice stage. The court concluded that the grievances raised were unfounded, vacated interim orders, and disposed of pending applications as infructuous.

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Issues Involved:
1. Legality and constitutionality of the notification of Section 425 of the Companies Act, 2013.
2. Framing of rules to regulate proceedings under Section 425 of the Companies Act, 2013.
3. Validity of orders dated September 5, 2017, and September 26, 2017, issued by the National Company Law Tribunal (NCLT).
4. Propriety of the writ jurisdiction of the High Court at the stage of show cause notice.
5. Alleged bias and procedural impropriety by NCLT in the contempt proceedings.

Detailed Analysis:

1. Legality and Constitutionality of the Notification of Section 425 of the Companies Act, 2013:
The petitioners initially sought to declare the notification of Section 425 of the Companies Act, 2013, as ultra vires and unconstitutional. However, during the proceedings, prayers (a) and (b) of the writ petition, which included this issue, were withdrawn. Therefore, this issue was not pressed further and dismissed as withdrawn.

2. Framing of Rules to Regulate Proceedings under Section 425 of the Companies Act, 2013:
The petitioners also initially requested the framing of rules to regulate proceedings under Section 425 of the Companies Act, 2013. This request was similarly withdrawn along with prayer (a), and thus, it was not considered further by the court.

3. Validity of Orders Dated September 5, 2017, and September 26, 2017, Issued by NCLT:
The petitioners challenged the orders issued by NCLT on the grounds of procedural impropriety and bias. The court noted that the NCLT had only issued a show cause notice to the respondents to explain why contempt proceedings should not be initiated. The NCLT was still at the stage of preliminary inquiry and had not yet taken formal cognizance of contempt. The court held that the NCLT was within its jurisdiction to proceed ex parte against parties who chose not to cooperate by either not appearing or not responding. The court found no merit in the argument that the NCLT had acted with bias or in undue haste. The NCLT followed the rules of the National Company Law Tribunal’s Rules, 2016, which permitted service of notice through counsel for the opposite party. The court also noted that any irregularity in service could be rectified by NCLT if brought to its notice.

4. Propriety of the Writ Jurisdiction of the High Court at the Stage of Show Cause Notice:
The court examined whether the writ petitions were maintainable against the impugned orders of NCLT. It referred to the settled law that judicial review under Articles 226 and 227 of the Constitution of India cannot be taken away. The court held that since the impugned orders were only at the threshold scrutiny and no party had been punished for contempt, the remedy of appeal was not available. Therefore, the judicial review could not be denied.

5. Alleged Bias and Procedural Impropriety by NCLT in the Contempt Proceedings:
The petitioners argued that the NCLT had shown bias and procedural impropriety by not awaiting the decision of NCLAT on the appeals and by not issuing formal notices through its Registry. The court rejected these arguments, noting that the NCLT was still gathering facts and had not yet taken formal cognizance of contempt. The court emphasized that the NCLT had acted fairly by giving the respondents an opportunity to show cause. The court also rejected the argument that parties who were not part of the original lis could not be proceeded against in contempt proceedings, stating that strangers to the proceedings could be proceeded against if they had knowledge of the judicial orders and shared the guilty intent.

Conclusion:
The court dismissed the writ petitions, finding that the grievances raised by the petitioners were unfounded and reflected paranoia rather than substance. The court vacated the interim orders and disposed of the pending applications as infructuous.

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