TaxTMI 
TaxTMI 
2007 (9) TMI 403
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.... project. Petitioner would submit that, when the Company Petition was pending consideration before the Company Law Board, respondents 1, 2, 4 to 9 had demolished the superstructure of the building necessitating his filing an application, in C.A. No. 84 of 2005, requesting the Company Law Board to interfere and grant status quo with regards the existing structure. The Company Law Board, by order dated 18-7-2005, granted status quo. According to the petitioner, the respondents continued to demolish the building, in violation of the order of "status quo", and when he brought these violations to its notice, the Company Law Board, by order in C.A. No. 87 of 2005 dated 22-7-2005, appointed an Advocate Commissioner to verify and submit a report on the status of the superstructure and the physical features of the disputed property. 3. The Advocate Commissioner, in his report dated 31-7-2005, informed that he had visited/inspected the disputed site on 24-7-2005 and was assisted by the Counsel for the petitioner Mr. Dhanaraj and Mr. Rajnish Garje, the Company Secretary representing the respondents, that at the disputed site a group of twenty persons had met him and had represented that, t....
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....ining structures were demolished on 29-7-2005 on receipt of complaints from residents of the locality, that nothing prevented the respondents from seeking leave of the Bench to dismantle the structures in existence for the past nine years for whatever reason but they had, in violation of the orders of the Bench, gone ahead and completed the demolition process. The Company Law Board noted that, without furnishing details of demolition of the structures, a memo was filed on behalf of the respondent company on 31-8-2005 that "they had demolished the entire structures", that no reference was made therein to the dilapidated condition of the structures on account of continuous rains, that the complaints dated 21-1-2005, 20-7-2005 and 26-7-2005 reportedly made by the Secretary of the Rayala Avenue Flat Owners Welfare Society to the Board of Directors of the respondent company, for removal of the structures, ought to have been under the custody of the Company, yet these complaints were not referred to by the respondents during the course of hearing held on 1-8-2005, 9-8-2005 and 17-8-2005, but were produced only on 2-9-2005, that the complaints did not indicate that the structures had beco....
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....rections, that an order of a Judicial or Quasi-judicial Authority, being sacrosanct, must be obeyed unless and until set aside in a manner known to law, that the purpose of punishment for Contempt was to uphold effective administration of justice in larger public interest and that the Bench of the Company Law Board must be deemed to be a "Court" under Regulation 47 for the purpose of prosecution of a person disobeying its orders. 6. The Company Law Board relied on Sk. Mohammedbhikhan Hussain-bhai v. Manager, Chandrabhanu Chinema AIR 1987 Guj. 209 and Canara Bank v. Nuclear Power Corpn. of India Ltd. [1995] 84 Comp. Cas. 70 to hold that, in exercising its functions, the Company Law Board must, and does, act judicially, that its orders are appealable, that it is a permanent body constituted under a Statute, and that it was a "Court" within the meaning of section 10 of the Contempt of Courts Act. The Bench observed that the High Court, being the appellate authority of the Company Law Board, the latter must be deemed to be a Subordinate Court within the ambit of the Contempt of Courts Act and, therefore, the High Court could exercise powers of dealing with Contempt of the Company La....
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....ent would submit that she is not a necessary party either to the petition before the Company Law Board or to the Contempt Case, that she had been unnecessarily added as a party to the proceedings, that she had filed C.A. No. 99 of 2006 in C.P. No. 24 of 2004 to delete her name from the array of respondents, that she had resigned as a Director on 10-2-2004, that her resignation was accepted by the Board of Directors, that all the allegations made in the company petition relate to the affairs of the company prior to her appointment as a Director, that the company petition was filed subsequently without verifying who were the existing Directors and, since she ceased to be a Director even before the company petition was filed, she was not in a position to offer her reply to the allegations made therein. She also states that she did not receive any pecuniary benefits from the company in any form, that she had invested her money for revival of the company, that she had attended only a few board meetings and that, even when she was a Director, she never took active part in the day-to-day administration of the Company nor in its decision making. She would contend that, since Order 39, Rule....
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....that he cannot be said to have disobeyed the orders of the Company Law Board dated 18-7-2005. He expresses his unconditional apology for any inadvertent acts which may have been made on his behalf and would submit that he has great respect for orders of judicial and quasi-judicial forums. He further states that he would not be a party to any acts of contempt and, if the Court was of the view that he was in any way responsible for contempt, he may kindly be pardoned keeping in view his health and that all further proceedings against him be dropped. 13. Sri K. Vasudeva Reddy, learned Counsel for the petitioner, would submit that, in view of the categorical finding that the respondents had wilfully and deliberately violated its orders, the Company Law Board being a Court subordinate to it, the High Court could punish the respondents for Contempt of Court. Learned Counsel would submit that the report of the Advocate-Commissioner, and the tacit admission of the respondent company, in its counter-affidavit before the Company Law Board, would itself establish that the orders of status quo had been deliberately violated and, since all the respondents herein were arrayed as respondents i....
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....mpt, this Court would refrain from exercising its jurisdiction under section 10 of the Contempt of Courts Act. He would rely on rule 5 of the "Rules to regulate proceedings of subordinate Courts and High Court under the contempt of Courts Act", more particularly to clause (d) thereof, to submit that it is only on a reference made to it, by the Subordinate Court, would the High Court take cognizance of Contempt and since, in the present case, the Company Law Board had merely left it open to the petitioner to approach the High Court, and had not made a reference, this Court would not take cognizance of Contempt. Learned counsel would submit that the fifth and sixth respondents were innocent by-standers and cannot be said to have violated the orders of the Company Law Board. Learned counsel would place reliance on Advocate-General of A.P. v. A.V. Koteswara Rao 1984 (1) ALT 69, S.J.G.M. High School v. Director of School Education 1996 (1) ALD 299 (DB), Rudraiah v. State of Karnataka AIR 1982 Kar. 182, Bimal Chandra Sen v. Kamla Mathur 1983, Crl. L.J. 495, S.V. Surendra Rao v. Bharat Chandra 2001 (1) ALD (Crl.) 522 (AP), K. Menakenathana Reddy, Deputy Director of Mines & Geology, Cuddap....
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....r the Companies Act or any other law. Under sub-section (4C), every Bench of the Company Law Board shall have the powers vested in a "Court" under the Code of Civil Procedure, 1908, while trying a suit, in respect of discovery and inspection of documents, enforcing attendance of witnesses, compelling production of documents, examining witnesses on oath, granting adjournments and reception of evidence on affidavits. Under sub-section (4D), every Bench of the Company Law Board shall be deemed to be a "Civil Court" for the purposes of section 195 and Chapter XXVI of the Code of Criminal Procedure and every proceeding before the Bench shall be deemed to be a judicial proceeding within the meaning of sections 193 and 228 of the Indian Penal Code, and for the purpose of section 196 of that Code. Under sub-section (5), the Company Law Board shall, in exercise of its powers and the discharge of its functions, be guided by principles of natural justice and shall act in its discretion. Under sub-section (6) the Company Law Board shall have the power to regulate its own procedure. 19. In exercise of the powers conferred under sub-section (6) of section 10E, the Company Law Board Regulation....
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....examining the question whether the Company Law Board was a "Court" the Supreme Court, in Nuclear Power Corpn. of India Ltd.'s case (supra) observed:- "...In exercising its function under section 111 the Company Law Board must, and does, act judicially. Its orders are appealable. The Company Law Board, further, is a permanent body constituted under a statute. It is difficult to see how it can be said to be anything other than a court, particularly for the purposes of section 9A of the Special Court Act...." [Emphasis supplied] (p. 95) ['Any conduct that tends to bring the authority and administration of the law into disrespect or disregard or to interfere with or prejudice party litigants or their witnesses during their litigation' amounts to contempt of court".] (Oswald on Contempts). 23. In order that courts should be able to dispense justice without fear or favour, affection or ill-will, it is essential that litigants who resort to courts should so conduct themselves as not to bring the authority and the administration of law into disrespect or disregard. It is in the interest of justice, and administration of law, that litigants should show the same respect to a court n....
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....Court shall exercise the same jurisdiction, power and authority "in accordance with the same procedure and practice". The High Court has the power and jurisdiction to punish summarily contempt of courts subordinate to it in the same manner as it is entitled to punish contempt of itself. [V. Ramana Rao's case (supra)]. 27. High Courts, being Superior Courts of Record, enjoy inherent powers of contempt to protect Subordinate Courts even in the absence of any express provision in any Act. Article 227 confers supervisory jurisdiction on the High Court and, in exercise of that power, the High Court may correct judicial orders of subordinate courts. In addition, the High Court has administrative control over subordinate courts. The jurisdiction and power of a Superior Court of Record to punish contempt of subordinate courts is not founded on the Court's administrative power of superintendence, instead the inherent jurisdiction is conceded to Superior Courts of Record on the premise of its judicial power to correct errors of subordinate courts. 28. The inherent powers of a Superior Court of Record have remained unaffected even after codification of the Contempt Law. The Contempt of ....
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....rs and had committed contempt. 31. Section 2(a ) of the Contempt of Courts Act, 1971 defines "contempt of court" to mean civil contempt or criminal contempt. Section 2(b) defines "Civil Contempt" to mean wilful disobedience to, among others, decrees, orders, or other process of a Court. Section 10 relates to the power of the High Court to punish for contempt of subordinate courts and, thereunder, every High Court shall have and exercise the same jurisdiction, power and authority, in accordance with the same procedure and practice, in respect of contempt of courts subordinate to it as it has and exercises in respect of contempt of itself. Under the proviso to section 10, no High Court shall take cognizance of a contempt alleged to have been committed in respect of a court subordinate to it where such contempt is an offence punishable under the Indian Penal Code. 32. The "Contempt of Court Rules, 1980" regulate proceedings for contempt of Subordinate Courts and of the High Court under the Contempt of Courts Act, 1971. Under rule 5, in case of contempt, other than the contempt referred to in rule 4, the High Court may take cognizance of Contempt and take action (a) Suo motu or (....
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....e same procedure and practice as it has and exercises in respect of contempt of itself. It is not, and cannot be, in dispute that the High Court can either suo motu or on a petition made by any person exercise jurisdiction in respect of contempt of itself. In view of section 10 of the Contempt of Courts Act, the very same procedure and practice would apply even in respect of contempt of subordinate courts. Accepting the submission of Sri D. Srinivas, learned Counsel appearing on behalf of respondents 5 and 6, that the High Court can take cognizance of contempt of subordinate Courts only on a reference made to it by the subordinate Court itself or on a motion made by the Advocate General would render rule 5 of the Contempt of Courts Rules, 1980 ultra vires section 10 of the Contempt of Courts Act. It would also fall foul of the inherent power of the High Court under article 215 of the Constitution of India. The mode of exercise of jurisdiction, as prescribed under rule 5, can only be in the alternative and, as a result, the High Court can take action for contempt of subordinate Courts under section 10 of the Contempt of Courts Act either suo motu or on a petition made by a party. ....
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....that the decree passed by a subordinate court is not obeyed. That is not the purpose of Contempt of Courts Act." [Emphasis supplied] (p. 182) 38. In Bimal Chandra Sen's case (supra) on which also reliance is placed by the respondents, the Delhi High Court held:- "...A disobedience of an order of injunction is a contempt of court. Sub-rule (1) confers on courts the power to punish such contempt and, further, prescribes the punishment to be awarded therefore. [See Amritlal v. P. Srinivas Rao AIR 1967 AP 48 (49) and Ram Saran v. Chatar Singh (1901) ILR 23 All. 465 (466).] The sub-rule provides for the punishment not only of disobedience of the temporary injunction but also of breach of any of the terms subject to which the injunction may have been granted. (Narasappa v. Chinnarappa AIR 1947 Madras 98). While the High Courts as courts of record have inherent jurisdiction to commit for contempt. Other courts have no such power apart from the provisions of R. 2-A Janak Nandini v. Kedar Narain Singh AIR 1941 All. 140 (141) and Kochappa v. Sachi Devi (1902) ILR 26 Madras 494 (495) (DB). So in the case of wife it is plain that for the disobedience of the injunction order or breach of ....
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.... the Constitution of India, to punish for Contempt of itself, and that of Courts subordinate to it. Further, as emphasized under section 22, the provisions of the Contempt of Courts Act, 1971 are in addition to and not in derogation of any other law on Contempt of Courts. Even if Regulations 44 and 47 of the Company Law Board Regulations and Order 39, Rule 2A, C.P.C, are held to be a law relating to Contempt of Courts, these provisions would not preclude the High Court, in an appropriate case, from taking action for contempt of the orders of the Company Law Board. 40. The respondents would however place reliance on S.V. Surendra Rao's case (supra), wherein this Court observed:- "......In a service matter, when the order of A.P. Administrative Tribunal was not complied with the successful party and initiated contempt proceedings against the Governmental authorities for punishing them for the wilful non-compliance of the said orders of the Tribunal. Against the said initiation of proceedings and contending that the Administrative Tribunal had no jurisdiction to initiate the contempt proceedings in view of the recognition of the power of judicial review of this Court by the Supr....
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....ve Tribunal no longer had the power to punish for contempt. The Division Bench of this Court, in S.V. Surendra Rao's case (supra), held that the power to punish for contempt still vested with, and was not divested from, the Administrative Tribunals under the Administrative Tribunals Act, 1985. The Company Law Board cannot be equated to an Administrative Tribunal under the Administrative Tribunals Act and, since the Company Law Board is a Court subordinate to it, the High Court, in exercise of its jurisdiction under section 10 of the Contempt of Courts Act, can punish for contempt any wilful disobedience of the orders of the Company Law Board. Limitation for taking action for contempt 42. Under section 20 of the Contempt of Courts Act, no Court shall initiate any proceedings for contempt, either on its own motion or otherwise, after the expiry of a period of one year from the date on which the contempt is alleged to have been committed. The order, violation of which is said to be in contempt, is that of the Company Law Board dated 18-7-2005. While the contempt application, in C.A. No. 87 of 2005, was filed before the Company Law Board on 20-7-2005, the Advocate Commissioner, i....
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....ntempt has been committed the High Court would become powerless to take any action. On the other hand, if the filing of an application before the subordinate court or the High Court, making of a reference by a subordinate court on its own motion or the filing of an application before an Advocate-General for permission to initiate contempt proceedings is regarded as initiation by the court for the purposes of section 10, then such an interpretation would not impinge on or stultify the power of the High Court to punish for contempt which power, de hors the Contempt of Courts Act, 1971 is enshrined in Article 215 of the Constitution. Such an interpretation of section 20 would harmonise that section with the powers of the courts to punish for contempt which is recognised by the Constitution." [Emphasis supplied]. (p. 2776) 43. In view of the authoritative pronouncement of the Supreme Court in Pallav Sheth's case (supra) it must be held that if an application to initiate contempt proceedings is filed within one year, from the date on which contempt is committed, it would amount to initiation of contempt proceedings within limitation under section 20 of the Contempt of Courts Act. The....
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....ent to bring home the charge within the meaning of the Act. In the event two interpretations are possible and the action of the alleged contemnor pertains to one such interpretation - the act or acts cannot be ascribed to be otherwise contumacious in nature. A doubt in the matter as regards the wilful nature of the conduct, if raised, the question of success in a contempt petition would not arise. [Anil Ratan Sarkar v. Hirak Ghosh [2002] 4 SCC 21]. 47. In K. Menakenathana Reddy's case (supra), a Division Bench of this Court observed:- "......In that view of the matter, we do not think that it is a fit case where the appellants herein should be punished. It is not that the Court should punish each and every one who has violated the Court's order. In order to punish in contempt proceedings, the persons against whom complaint is made should not only disobey the Courts order but such disobedience is shown to be deliberate and wanton. Looking from that angle, we are satisfied that the disobedience of the appellants herein of the Court order could not be regarded as deliberate and intentional. ...." [Emphasis supplied] 48. Where there has been wilful disobedience of an order ....
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....before this Court, were respondents in C.A. No. 84 of 2005 wherein the order of status quo was passed on 18-7-2005, and in C.A. No. 87 of 2005 filed by the petitioner herein to punish the respondents for wilfully disobeying the orders passed in C.A. No. 84 of 2005 dated 18-7-2005, is not in dispute. This Court, in contempt proceedings, is not concerned with the merits of the order of the Company Law Board dated 18-7-2005 directing maintenance of status quo. The only question which would arise for consideration is whether the order has been flouted and, if so, whether such violation is wilful and deliberate. The conclusion of the Company Law Board, that there has been wilful and deliberate violation of its orders dated 18-7-2005, has, rightly, not been disputed by the respondents. Some of them would contend that they were neither the Directors nor were they associated with the first respondent company when the order of status quo was passed. Some others that, while they were Directors, they did not participate in the day-to-day affairs of the company, that, in law it is only the Managing Director who can be held responsible for the day-to-day affairs of the company and it is he alon....
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.... The petitioner has himself stated that the third respondent is not a necessary party in the contempt case. Neither is the whereabouts of respondent No. 4 known nor has notice in this contempt case been served on him. 55. Under section 303(2) of the Companies Act, 1956, the Company shall, within the period mentioned, send to the Registrar, a return in duplicate, in the prescribed Form, containing the particulars specified in the Register and a notification in duplicate in the prescribed form of any change among its Directors, Managing Director, Manager, Secretaries etc., specifying the date of change. Form-32 of the Companies (Central Government) General Rules and Forms, 1956 is the notice giving particulars of appointment of Directors, Managing Directors, Managers, Secretaries etc., and changes among them. Thereunder, the name of the person, the date of change and the particulars of change are specifically provided for. 56. A certified copy of Form-32, as recorded by the Registrar of Companies on 23-4-2004, which is placed before this Court, would show that Sri R. Nageswara Rao (respondent No. 3), Sri T. Nageswara Rao (respondent No. 7), Sri G. Suryachandra Rao (respondent N....
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....ite nor has he denied his presence at the site, when the Advocate Commissioner visited and found demolition to be in progress. It is established, beyond reasonable doubt, that Sri K. Umamaheswara Rao, the fifth respondent, has wilfully disobeyed and deliberately violated the order of status quo passed by the Company Law Board dated 18-7-2005, and has committed contempt of court. 59. Now the sentence to be imposed on the fifth respondent. While awarding sentence on a contemnor the Court does so to uphold the majesty of law and to ensure that the unflinching faith of the people in Courts remains intact. If the guilty are let off, and their sentence remitted on grounds of mercy, people would lose faith in the administration of justice. The Court is duty-bound to award proper punishment to uphold the rule of law, how so high the person may be. [J. Vasudevan v. T.R. Dhananjaya 1995 (6) SCL 249]. There cannot be any laxity, as otherwise law courts would render their orders to utter mockery. Tolerance of law courts there is, but not without limits and only up to a point and not beyond. [Anil Ratan Sarkar's case (supra)]. "The law should not be seen to sit by limply, while those who def....