2024 (2) TMI 442 - HC - Companies Law

Company escapes contempt charges as non-compliance deemed unintentional due to compelling circumstances beyond control

Delhi HC dismissed contempt petition against respondent company for alleged disobedience of court orders under Companies Act, 1956. Court held that ... Seeking winding up of the respondent company - disobedience of the orders of the Court - Sections 433(e) & (f), 434 and 439 of the Companies Act, 1956, read with Rules 6 and 9 of the Companies (Court) Rules, 1959 - HELD THAT:- The proposition of law is established that disobedience of the orders of the Court have to be shown to be ‘wilful’, such that there lies a certain mental element, and that such inaction or disobedience is done knowingly, intentionally, consciously and in a calculated and deliberate manner, with full knowledge of the consequences that may be flowing therefrom. Hence, it flows that even when there is disobedience of an order, in such cases where the disobedience is a result of compelling circumstances, outside the control of the contemnor, the contemnor cannot be punished. The plea canvassed on behalf of the respondent is sound in so far that it has been urged that the disobedience was not wilful or intentional and this court finds the same to be sustainable in law. There has never been any wilful disobedience to violate the directions of this Court. It is but evident that efforts have been made to repay the outstanding amount as also towards revival of the company through infusion of funds. The fact that winding up proceedings were underway and thereafter proceedings under the IBC have been initiated in the interim, affords a valid and sustainable defence to the contemnor in these proceedings. The present contempt petition is dismissed. Issues Involved:1. Winding up of the respondent company due to non-payment of dues.2. Transfer of winding up proceedings to NCLT.3. Contempt proceedings against the respondent for non-compliance with court orders.Summary:Issue 1: Winding up of the respondent company due to non-payment of duesThe petitioner sought the winding up of the respondent company under Sections 433(e) & (f), 434, and 439 of the Companies Act, 1956, due to non-payment of dues amounting to USD 171,903/- in CO. PET. 981/2015 and Rs. 30,25,397/- in CO. PET. 120/2016. The respondent failed to supply goods and repay the advance payment, leading the petitioner to terminate the Purchase Order and seek a refund. Despite repeated reminders and a statutory notice, the respondent neglected to repay the amount. Similarly, in CO. PET. 120/2016, the respondent was irregular in making payments for security services, leading to a statutory notice and subsequent winding up petition.Issue 2: Transfer of winding up proceedings to NCLTThe court noted that the winding up proceedings were a 'complete non-starter' with no Provisional Liquidator appointed and no substantive orders passed. The NCLT had already admitted an application for initiating CIRP against the respondent company, and the appeal was pending before the NCLAT. The court emphasized the need to prevent duplicity of proceedings and ensure judicial propriety, hence transferring the winding up petitions to the NCLT. The court cited Section 434 of the Companies Act, 2013, and the Supreme Court decision in Action Ispat and Power Pvt. Ltd. v. Shyam Metalics and Energy Ltd. (2021) 2 SCC 641, which supports transferring winding up proceedings to the NCLT if they are at a nascent stage.Issue 3: Contempt proceedings against the respondent for non-compliance with court ordersThe petitioner filed a contempt petition under Sections 11 and 12 of the Contempt of Courts Act, 1971, against the respondent for non-compliance with a court order dated 12.02.2016. The respondent failed to make payments as per a settlement agreement, leading to contempt proceedings. The court found that the respondent made efforts to repay the outstanding amount and revive the company, but the failure was due to reasons beyond their control. The court held that contempt proceedings must demonstrate 'wilful and intentional disobedience' and found no such wilful disobedience by the respondent. Consequently, the contempt petition was dismissed.Conclusion:The winding up petitions were transferred to the NCLT, and the contempt petition was dismissed. The parties were directed to appear before the NCLT, and the electronic records were to be transmitted to the Registrar NCLT. All pending applications were disposed of accordingly.