2022 (6) TMI 545 - Tri - Companies Law

Respondents found guilty of contempt for disobeying orders, face compensation and penalties

The Tribunal found Respondents 2 to 5 guilty of contempt for willfully disobeying its orders, resulting in the auction of personal property due to ... Punishment for contempt of orders of this Tribunal - direction to jointly and severally compensate the Petitioners for the wrongful loss caused to the Petitioners as result of non-compliance of orders of this Tribunal - Section 424(3) read with Section 425 read with Section 241 of the Companies Act, 2013 read with Rule 11 of National Company Law Tribunal Rules, 2016 - HELD THAT:- It is seen that the Corporate Insolvency Resolution Process in respect of the Corporate Debtor was ordered by this Tribunal vide order dated 13.11.2018 and IRP was appointed. In relation to the non-compliance of the order passed by this Tribunal it was submitted by the Respondents that the Petitioners have failed to pay the Sales Tax dues and hence they have also violated the terms of the Joint memo of compromise. In this regard, it was submitted that the Sale Tax Department has not lodged any claim for any period prior to 31.03.2020 and has lodged a total claim of only Rs. 18 lakh, that too pertaining to the subsequent period, with the RP in respect of the 1st Respondent Company. Therefore, the claim of the sale tax dues upto 31.03.2010 having become an impediment is a bogus claim. Further, as per clause 6 of the joint memo, if there is any sales tax claim pertaining to period prior to 31.03.2010, even if it was not resolved by the Petitioner, the right of the Respondents was only to discharge the same and recover it as a charge on the property of the Petitioner. Therefore, the Respondents had no right under the compromise memo not to comply with the undertaking to discharge its dues to ARCIL, or disregard the orders passed by this Tribunal. In any case, the Respondents are bound to comply with the directions/orders of this Tribunal. The Respondent Nos. 2 to 5 have willfully and deliberately disobeyed the orders passed by this Tribunal - The Respondent Nos. 2 to 5 are directed to jointly and severally pay a sum of Rs. 5.5 Crore to the Petitioner together with interest at the rate of 18% p.a. till the date of payment, within a period of 30 days from the date of this order - the Contempt Application stands disposed of. Issues:- Contempt of orders of the Tribunal- Failure to comply with terms of compromise- Allegations of non-compliance and auction of personal property- Dispute over liabilities and compliance with orders- Applicability of Section 424(3) of the Companies Act, 2013Contempt of Orders of the Tribunal:The Contempt Application was filed seeking to punish Respondents 2 to 5 for contempt of orders of the Tribunal. The Applicant alleged non-compliance with the terms of a Joint Memo of compromise, leading to the auction of personal property. Despite multiple orders directing compliance, the Respondents failed to fulfill their obligations, resulting in the auction of the property. The Tribunal found that the Respondents willfully disobeyed its orders, leading to a directive for them to jointly and severally compensate the Petitioners with a specified sum and interest.Failure to Comply with Terms of Compromise:The dispute arose from the failure of Respondents to adhere to the terms of the compromise memo dated 05.03.2018. The Respondents, majority shareholders in the company, argued that there was no express direction to discharge the company's liability. However, the Tribunal noted that the Respondents failed to comply with the terms agreed upon, leading to significant consequences for the Petitioners. The Respondents' defense regarding the alleged liabilities and non-disclosure of facts was considered, but the Tribunal found their actions amounted to deliberate disobedience of its orders.Allegations of Non-Compliance and Auction of Personal Property:The Respondents' non-compliance with the compromise terms led to the auction of the Petitioners' personal property. Despite various orders and opportunities given by the Tribunal to rectify the situation, the Respondents failed to meet their obligations, resulting in the auction. The Respondents' actions were deemed as a violation of the Tribunal's orders, leading to the contempt proceedings.Dispute Over Liabilities and Compliance with Orders:The Respondents argued that the Petitioners failed to pay sales tax dues and breached the compromise terms, leading to additional liabilities. However, the Tribunal found that the Respondents were obligated to comply with its orders regardless of the Petitioners' actions. The Respondents' failure to discharge their duties as per the compromise memo and subsequent orders was considered as willful disobedience, warranting contempt action.Applicability of Section 424(3) of the Companies Act, 2013:The Respondents contended that Section 424(3) of the Companies Act, 2013 was not applicable to the situation as no enforcement of orders was being sought in the present application. However, the Tribunal held that the Respondents' actions amounted to contempt of its orders, justifying the application of relevant provisions. Ultimately, the Tribunal invoked its powers under Section 425 of the Companies Act, 2013 and the Contempt of Court Act, 1971 to pass directives for compensation and consequences in case of non-compliance.In conclusion, the Tribunal found the Respondents guilty of willful disobedience of its orders, leading to a directive for compensation and potential penalties for non-compliance within a specified timeframe.