2021 (8) TMI 867 - AT - Insolvency and Bankruptcy

Tribunal sets aside order for contempt, emphasizes importance of upholding judicial process

The Tribunal allowed the appeal, setting aside the Adjudicating Authority's order for failing to initiate contempt proceedings against the Corporate ... Contempt Jurisdiction - ‘Aggrieved’ person - Respondent is financially solvent or not - main grievance of the Appellant is that the Adjudicating Authority while passing the impugned order had failed to exercise his powers, in terms of section 425 of the Companies Act, 2013 thereby punishing the Respondent for Contempt - HELD THAT:- There is no two opinion of a pivotal fact that the contempt of court’ is of course a ‘Special Jurisdiction’ to be exercised with great care, caution, and utmost circumspection, when an adverse act affects the administration of justice’ or which tends to shake public confidence in the judicial institutions or to impede its course - It will be a travesty of justice if the ‘Tribunal’/ ‘Court of Law’ were to permit gross contempt of Tribunal/Court of Law to go unpunished, if there be no mitigating factors/circumstances, in the considered opinion of this Tribunal a wilful breach of an undertaking given to a Tribunal/Court may amount to Contemptuous Act, coming within the meaning of Section 2(b) of the Contempt of Courts Act, 1971. It is for the Tribunal to find out whether its order has been disobeyed in a ‘wilful’ manner and the mental element is to be adjudged by the ‘Tribunal’ indicating the state of mind of the ‘contemnor’ - It may not be out of place for this ‘Tribunal’ to make a pertinent mention that Section 425 of the Companies Act, 2013 provides for ‘power to punish for contempt’ and the same enjoins that the ‘Tribunal’ and the ‘Appellant Tribunal’ shall have the same jurisdiction, powers and authority in respect of contempt of themselves as the High Court has and may exercise for his purpose the powers under the provisions of the Contempt of Court Act, 1971. When the ‘Tribunal’ has the requisite power under the Section 425 of the Companies Act, 2013 to punish a person/contemnor, then, the Tribunal is to exercise its power and to adjudicate the Contempt Petition on its file, of course, on merits - Application allowed. Issues Involved:1. Non-payment of fees and expenses to the Resolution Professional.2. Failure to comply with multiple orders of the Adjudicating Authority.3. Determination of whether contempt proceedings should be initiated.4. Evaluation of financial solvency in the context of contempt proceedings.5. Jurisdiction and authority of the Tribunal under Section 425 of the Companies Act, 2013.Issue-Wise Detailed Analysis:1. Non-payment of fees and expenses to the Resolution Professional:The Appellant, a Former Resolution Professional, was appointed to carry out the Corporate Insolvency Resolution Process (CIRP) for the Corporate Debtor. Despite multiple orders from the Adjudicating Authority directing the Corporate Debtor to pay the Appellant's fees and expenses, the payments were not made. The Appellant filed several applications seeking compliance with these orders, but the Corporate Debtor consistently failed to remit the amount due.2. Failure to comply with multiple orders of the Adjudicating Authority:The Adjudicating Authority issued orders on 25th July 2018, 10th December 2018, 8th July 2019, and 1st October 2019, directing the Corporate Debtor to pay the fees and expenses to the Appellant. Despite these orders, the Corporate Debtor did not comply, leading the Appellant to file a contempt petition. The Adjudicating Authority, however, did not initiate contempt proceedings, citing uncertainty about the contemnor's financial solvency.3. Determination of whether contempt proceedings should be initiated:The Appellant argued that the Adjudicating Authority failed to exercise its powers under Section 425 of the Companies Act, 2013, by not initiating contempt proceedings against the Respondent for willful disobedience. The Appellant cited various judgments to support the contention that contempt jurisdiction is meant to uphold the majesty and dignity of the courts and should be exercised to ensure compliance with court orders.4. Evaluation of financial solvency in the context of contempt proceedings:The Adjudicating Authority declined to initiate contempt proceedings, stating, 'it is not known whether the contemnor is financially solvent or not.' The Appellant contended that this reasoning was unsustainable in law, as the primary consideration in contempt proceedings is the willful disobedience of court orders, not the financial status of the contemnor.5. Jurisdiction and authority of the Tribunal under Section 425 of the Companies Act, 2013:Section 425 of the Companies Act, 2013, empowers the Tribunal and the Appellate Tribunal to punish for contempt, similar to the powers of a High Court under the Contempt of Courts Act, 1971. The Tribunal emphasized that the purpose of contempt jurisdiction is to uphold the authority of judicial institutions and ensure compliance with their orders. The Tribunal found that the Adjudicating Authority had not exercised its jurisdiction properly by failing to initiate contempt proceedings despite clear instances of non-compliance.Evaluation and Disposition:The Tribunal concluded that the Adjudicating Authority's order was legally infirm and set it aside. The matter was remitted back to the Adjudicating Authority for fresh consideration and necessary orders, with instructions to handle the case in a fair, just, and dispassionate manner, in accordance with the law. The Tribunal emphasized that the contempt jurisdiction should be exercised to uphold the dignity and authority of the judicial process.Conclusion:The appeal was allowed, and the impugned order was set aside. The Adjudicating Authority was directed to restore the contempt petition and pass necessary orders afresh, considering the well-established principles of law. The Tribunal's decision underscores the importance of enforcing compliance with judicial orders to maintain the integrity of the judicial system.