2019 (7) TMI 1304 - AT - Companies Law

Dismissal of Contempt Petitions under Companies Act - Consent Terms Not Enforceable

The Appellate Tribunal dismissed the contempt petitions under Section 425 of the Companies Act, 2013, as the consent terms did not amount to an ... Contempt petition - contempt of disobedience of this Appellate Tribunal’s order - wilful breach of the undertaking given by the Contemnors - Terms of Settlement - HELD THAT:- ‘Company Appeal (AT) No. 99 of 2018’ was not decided by this Appellate Tribunal on merit and was allowed to be withdrawn on 29th May, 2018 as the parties reached the ‘Terms of Settlement’. Subsequently on 29th June, 2019, though Interlocutory Application was not filed for any decision, the appeal having withdrawn, it was taken on record and the ‘Consent Terms’, which parties treated as final decree and in absence of any date shown therein, this Appellate Tribunal merely stated that “we treat it as an agreement reached between the parties on 15th June, 2018.” From bare perusal of the orders passed on 29th May, 2018 and 29th June, 2018, it is clear that no undertaking was given by any of the parties before this Appellate Tribunal. In fact the appeal was allowed to be withdrawn in view of the ‘Consent Terms’ reached between the parties. Similar issue fell for consideration before the Hon’ble Supreme Court in ‘Babu Ram Gupta vs. Sudhir Bhasin and another” [1979 (4) TMI 164 - SUPREME COURT], wherein the Hon’ble Supreme Court observed that in absence of a written undertaking given by the contemnor to the court or incorporation of the same by the court in its order, mere non-compliance of a consent order or compromise decree, would not amount to civil contempt. The consent terms agreed upon by the parties if not carried upon, can be a ground for execution of a compromise decree or the ‘Consent Terms’ but it cannot be a ground for initiation of a contempt proceeding. This Appellate Tribunal had not gone in to merit and allowed the appeal to be withdrawn on 29th May, 2018 in view of the’ consent terms’ reached between the parties. In the disposed of appeal, Interlocutory Application was filed to show that the parties have reached the final consent terms, but there was no undertaking given by any party before this Appellate Tribunal nor any direction was issued - Petitioners filed the Contempt Petitions for execution of their ‘consent terms’, which will be apparent from the fact that companies namely ‘Reliance Communications Infrastructure Limited’; ‘Reliance Infratel Limited’ and Reliance Communications Limited, have also been impleaded as contemnors, though it is not maintainable against the companies. No case is made out for initiation of contempt proceedings against any of the alleged ‘Contemnors’ – ‘Respondents’ - application dismissed. Issues Involved:1. Contempt petitions under Section 425 of the Companies Act, 2013.2. Alleged willful breach of undertaking given by the Contemnors.3. Validity and enforceability of consent terms.4. Execution of compromise decree.5. Jurisdiction and authority of the Appellate Tribunal.Issue-Wise Detailed Analysis:1. Contempt Petitions under Section 425 of the Companies Act, 2013:The Petitioners preferred contempt petitions under Section 425 of the Companies Act, 2013, seeking initiation of proceedings for contempt due to the alleged disobedience of the Appellate Tribunal’s order dated 29th June, 2018. The contempt petitions were filed on the grounds that the Respondents had willfully breached the undertaking given to the Tribunal.2. Alleged Willful Breach of Undertaking Given by the Contemnors:The Petitioners alleged that the Respondents had flouted the undertaking given before the Tribunal on 29th May, 2018, which amounted to a violation of the Tribunal’s order. The Petitioners contended that the Respondents failed to pay the agreed amount and provide the Bank Guarantee as per the consent terms, leading to the contempt petitions.3. Validity and Enforceability of Consent Terms:The Tribunal noted that the appeal was allowed to be withdrawn on 29th May, 2018, as the parties reached a ‘Terms of Settlement’. The consent terms were recorded and treated as final on 29th June, 2018. However, the Tribunal did not issue any specific directions or record any undertakings from the parties. The Tribunal emphasized that the consent terms, if not honored, could be a ground for execution of a compromise decree but not for initiating contempt proceedings.4. Execution of Compromise Decree:The Tribunal referred to the Supreme Court’s decision in 'Babu Ram Gupta vs. Sudhir Bhasin and another' (1980) 3 SCC 47, which held that non-compliance with a compromise decree does not amount to contempt of court unless there is an express undertaking given to the court. The Tribunal observed that the Petitioners should seek execution of the consent terms through appropriate legal channels rather than filing contempt petitions.5. Jurisdiction and Authority of the Appellate Tribunal:The Tribunal clarified that it had not gone into the merits of the case and allowed the appeal to be withdrawn based on the consent terms agreed upon by the parties. The Tribunal did not record any undertaking or issue any directions that could be enforced through contempt proceedings. The Tribunal dismissed the contempt petitions, stating that no case was made out for initiating contempt proceedings against the Respondents.Conclusion:The Tribunal concluded that the contempt petitions were not maintainable as the consent terms did not constitute an undertaking given to the court, nor were there any directions issued by the Tribunal that could be enforced through contempt proceedings. The Tribunal dismissed both contempt petitions, emphasizing that the Petitioners should seek execution of the consent terms through appropriate legal channels.