Company Directors Absolved as CLB Lacked Jurisdiction to Issue Contempt Notices Under Companies Act 1956

The NCLAT Principal Bench dismissed a contempt petition filed against a company and its directors for alleged disobedience of a CLB order dated 27.05.2016. The Tribunal held that CLB lacked jurisdiction to issue contempt notices as it had no specific power to punish for contempt under the Companies Act, 1956. The petition was deemed fresh rather than transferred proceedings since no contempt matters were pending before CLB on the transfer date of 01.06.2016. Additionally, the CLB order had merged with the Guwahati HC order following dismissal of appeals, applying the doctrine of merger. The appeal was allowed, absolving the directors.

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Issues Involved:
1. Maintainability of the contempt application.
2. Merger of the CLB order with the High Court order.
3. Jurisdiction of the Tribunal to entertain contempt for orders passed by the CLB.
4. Validity of the Tribunal's directions for monetary compensation.

Summary:

1. Maintainability of the Contempt Application:
The Tribunal held that the contempt application filed by 3A Capital against Prag Bosimi Synthetics Ltd. and its directors for non-compliance with the CLB order dated 27.05.2016 was not maintainable. The Tribunal noted that the CLB, constituted under Section 10E of the Companies Act, 1956, had no power to punish for contempt of its orders. Consequently, the Tribunal, under Section 425 of the Companies Act, 2013, could not exercise contempt jurisdiction over orders passed by the CLB. The Tribunal emphasized that Section 425 grants the Tribunal and the Appellate Tribunal jurisdiction only over contempt of their own orders, not those of the CLB.

2. Merger of the CLB Order with the High Court Order:
The Tribunal recognized that the order of the CLB dated 27.05.2016 had merged with the order of the Guwahati High Court dated 12.07.2017, which was further upheld by the Supreme Court on 02.02.2018. The Tribunal referred to the doctrine of merger, which postulates that there cannot be more than one operative decree governing the same subject matter at a given point of time. Therefore, any contempt proceedings should have been based on the High Court's order, not the CLB's.

3. Jurisdiction of the Tribunal:
The Tribunal found that the application for contempt under Section 425 of the Companies Act, 2013, was not maintainable as the Tribunal could not entertain contempt for orders passed by the CLB. The Tribunal cited the Andhra Pradesh High Court decision in Venkata Swamy Naidu Vs. M/s Sri Surya Teja Construction Pvt. Ltd., which held that the CLB is a court within the meaning of Section 10 of the Contempt of Courts Act but lacks jurisdiction to issue contempt orders.

4. Validity of the Tribunal's Directions:
The Tribunal criticized the directions issued by the Tribunal for monetary compensation to 3A Capital, stating that a court cannot travel beyond the original judgment or direction. The Tribunal emphasized that the contempt jurisdiction is limited to ensuring compliance with the original order and should not grant new directions, such as compensation. The Tribunal also noted that the RCCPS shares in question had already been canceled nine years prior, making the execution of the CLB's order legally impossible.

Conclusion:
The appeals filed by Prag Bosimi Synthetics Ltd. and its directors (CA (AT) No. 115 and 116 of 2022) were allowed, and the impugned order was set aside. The appeal filed by 3A Capital (CA (AT) No. 133 of 2022) was dismissed. The Tribunal held that the contempt application was not maintainable, and the directions for monetary compensation were invalid.

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