2023 (4) TMI 1201 - AT - Companies Law

NCLAT upholds NCLT's decision, directs appellants to appear and reply to contempt application

M/s Morepen Laboratories Ltd., Sh. Suhsil Suri, Sh. Sanjay Suri, Wholetime Director, Sh. Arun Kumar, Wholetime Director, Sh. Manoj Joshi, Director Versus Union of India And M/s Morepen Laboratories Ltd. Versus Union Of India

The NCLAT affirmed the NCLT's decision, dismissing the appeals and upholding the order dated 06.10.2021. The Tribunal held that the NCLT could not modify ... Seeking issuance of contempt proceedings against the Respondents (the Appellants herein) for continuous noncompliance and wilful disobedience of the order - Section 425 of the Companies Act, 2013 read with the provisions of the Contempt of Courts Act, 1971 - HELD THAT:- The Appellant-M/s. Morepen Laboratories Ltd. as well as Union of India are aggrieved with the order of the Company Law Board dated 01.07.2005, filed separate company appeals before the Hon’ble High Court of Himachal Pradesh at Shimla. The Hon’ble High Court vide its common order dated 17.05.2007 dismissed both the appeals. Thereafter, the Appellant-M/s Morepen Laboratories Ltd. as well as Union of India again challenged the order of the Hon’ble High Court before the Hon’ble Supreme Court of India by filing two separate Special Leave Petitions and the Hon’ble Supreme Court of India directed to maintain status quo by orders dated 16.07.2007 and 07.09.2007 respectively and the said status quo order continued till the disposal of the said SLPs. The NCLT has rightly considered the facts and circumstances of the case that the order in CP No. 4 of 2005 dated 01.07.2005 was upheld upto the Hon’ble Supreme Court of India and hence the NCLT cannot modify or cancel the same. The observation of the Hon’ble Supreme Court of India while dismissing the civil appeals to the extent that “it would be open for the appellant to agitate the subsequent events before the concerned forum” cannot empower to the Tribunal to modify the order which was upheld by the Hon’ble Supreme Court of India. On the other hand, the observation “let the proceedings be concluded as far as possible within one year” amounts to a direction for proper compliance of the order dated 01.07.2005 passed in CP No. 4 of 2005. There are no merit in both these Appeals to interfere with the common order impugned dated 06.10.2021 passed by the National Company Law Tribunal, Chandigarh Bench, Chandigarh - impugned order is hereby affirmed - appeal dismissed. Issues Involved:1. Non-compliance and wilful disobedience of the CLB order dated 01.07.2005.2. Dismissal of the application for modification of the CLB order dated 01.07.2005.Issue-wise Comprehensive Details:1. Non-compliance and wilful disobedience of the CLB order dated 01.07.2005:The Appellants were aggrieved by the order dated 06.10.2021 passed by the NCLT, Chandigarh, which issued contempt proceedings against them for non-compliance with the CLB order dated 01.07.2005. The CLB had directed the appointment of two Government Directors on the Board of Morepen Laboratories Ltd. for three years. This order was upheld by the Hon'ble Supreme Court of India, which dismissed the appeals but allowed the Appellants to agitate subsequent events before the concerned forum.The NCLT issued a contempt notice based on the Union of India's application, alleging willful disobedience of the CLB order. The Appellants argued that the contempt application was not maintainable as the CLB order had merged with the Supreme Court's final order dated 09.07.2019. They contended that any contempt would be of the Supreme Court's order, not the NCLT's. The Appellants also highlighted that the Supreme Court had granted liberty to present subsequent events, which they did through CA 785/2019 before the NCLT.2. Dismissal of the application for modification of the CLB order dated 01.07.2005:The Appellants filed CA 785/2019 seeking modification of the CLB order, arguing that the financial turnaround of the company and other subsequent events negated the need for Government Directors. They presented evidence of the company's improved financial status, repayment of debts, and increased market confidence. However, the NCLT dismissed the application, stating it could not modify an order upheld by the Supreme Court.The NCLT noted that the CLB order was based on the company's financial difficulties and the need to restore public confidence. The Appellants argued that these conditions no longer existed, and the appointment of Government Directors was unnecessary. Despite this, the NCLT concluded that the original order's purpose remained valid and could not be altered based on subsequent events.Judgment Summary:The NCLAT affirmed the NCLT's decision, dismissing the appeals and upholding the order dated 06.10.2021. The Tribunal held that the NCLT could not modify the CLB order, which had been upheld by the Supreme Court. The NCLAT directed the Appellants to appear before the NCLT and file their reply to the contempt application, considering all subsequent developments and events. The NCLT was instructed to pass appropriate orders in accordance with the law.