TaxTMI 
TaxTMI 
2021 (5) TMI 139
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....and to pass necessary interim orders. It is hereby clarified that reference to Respondents mentioned hereafter only means Respondent Nos. 1 to 6, since Respondent No. 7 is a Proforma party. 2. Brief facts of the case, which are relevant to the issue in question, are mentioned below: (1) The Petitioner herein is a Company registered under the Companies Act and is a 50% (+ 2 shares) shareholder of a Company namely GE Triveni Limited ("GETL"). GETL is a joint venture company, constituted pursuant to the Joint Venture Agreement dated 15.04.2010, between the Petitioner and Contemnor No. 5/General Electrical Company ("GE"), through its affiliate DI Netherlands i.e., Contemnor No. 2. Prior to the formation of GETL, TTL was competing in the 0-30 MW range for steam turbines and GE and its affiliates claimed to be competing in the 0-135 MW range. GETL was formed to effectuate the Joint Venture between TTL and GE to enter the market with the combined range of steam turbines (i.e. 30-100 MW). (2) For achieving the above purpose, the following major agreements were executed by GE [through its affiliate Contemnor No. 3/Nuovo Pignone SPA ("GENP")] with GETL: (a) Mark....
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.... this Tribunal vide its order dated 23.08.2019. (6) The order dated 23.08.2019 was challenged by the Petitioner before the Hon'ble NCLAT vide CA 236 of 2019. It was stated in the Appeal that there was an apprehension that, "47. During the pendency of the Company Petition, Respondent No. 4 and 5 have indulged in further acts of oppression and mismanagement including by purporting to sever the relationship between GE and GETL by GE purporting to transfer its shareholding in Respondent No. 4. [....] 49. Unless Orders, as prayed for, are granted, the effect of Respondent No. 5 transferring its shareholding in the said Respondent No. 4 would be directly on the affairs of Respondent No. 1 Company as Respondent No. 1 company would neither have access to technology that it was promised, the marketing assistance that it was promised and the brand. This is apart from the fact that Respondent No. 5 would, unless orders, as prayed for, are granted, be in a position to directly compete with the business of Respondent No. 1 and would effectively leave Respondent No. 1 in a situation which may lead to eventually, winding up." (7) Thus, the Petitioner in its....
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....er, arguments took place before the Hon'ble NCLAT and the Hon'ble NCLAT vide its order dated 27.08.2019 directed as follows: "6. Having heard learned counsel for the Appellant and Contesting Respondent Nos. 4 & 5 and taking into consideration the aforesaid fact, we allow 4th and 5th Respondents to transfer the title of all the shares to any party without affecting the business of Appellant-'Triveni Turbine Limited' and the 1st Respondent Company- 'GE Triveni Limited' and should not affect all the five agreements entered into between parties as referred to in their undertaking before the Tribunal and recorded above. [.....] 8. The obligation of 4th ('Baker Hughes LLC, A GE Company') and 5th Respondent ('General Electric Company') as existing on 12th June, 2019, shall also continue till the next date." (9) The said Order therefore permitted GE to transfer the title of the shares on three explicit conditions. Firstly, the said action should not affect the business of Petitioner and GETL. Secondly, the transfer of shares should not affect all the five agreements, including the GE-TLA, GE-MSA and GE-ASA as referred to in....
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....pendency of the petition. (c) The Applicant/Petitioner Company itself having not less than 35,000 shareholders among the general public and also employs a large number of people and also has commercial relationships with small and medium enterprises (MSMEs) on which the very continued existence of these enterprises depends. (11) There was a major and substantial detriment and in fact brazen violation of the terms of the said Undertaking in as much as: (a) Though the said undertaking clearly and unequivocally stated the shares of GETL would be transferred to a fully owned affiliate of Respondent No. 5, thereby committing that beneficial ownership of the shares GETL would continue to remain under the beneficial ownership and control of Respondent No. 5 (GE), GE in-effect divested itself of the beneficial ownership of these shares, by transferring the shareholding held by it in Respondent No. 4 (BHGE) without, at the at the same time, transferring the shares of GETL to a " fully owned subsidiary of Respondent No. 5" as categorically stated, and committed in the said Undertaking. The complete cessation of the beneficial ownership and control of the shares of ....
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....ents, in our view, significantly impact the ability of GETL to carry on its business, and as such are material to the Company. We note that these developments have not been brought to the notice of the Stock Exchanges pursuant to the provisions of the LODR." Further, in the same said letter dated 11.11.2020, the Respondent No. 4 has also stated in para 8 that "General Electric Co. is not the joint venture partner in GETL. It is public knowledge that General Electric Co., has not been an affiliate of DI Netherlands since September 16, 2019", thereby stating unequivocally that DI Netherlands it is not "a fully owned affiliate of Respondent No. 5", which also constitutes a clear admission of the patent breach of the said undertaking. Further, the said letter also constitutes clear and unequivocal admission of Respondent No. 4 and the said breach committed by Respondent No. 4 has a profound and devastating effect on the status-quo prevailing as on the date on which the said Undertaking was given and to the knowledge of Respondent No. 4 would operate to the immeasurable detriment of GETL and the Petitioner, thereby clearly indicating that the motivation behind these acts of con....
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.... Contemnors herein are attempting to take undue advantage of local, Indian companies such as the Petitioner by flexing their muscle to enter the market, and then showing blatant disregard for the judicial process and Orders of the Courts. The Petitioner is a small concern, and it is stuck in a situation where the foreign entity openly flouted the directions of the Hon'ble NCLAT, to take advantage of the Petitioner's domestic sales network, but due to severe mismanagement and non-fulfilment of obligations by the Contemnor No. 5/GE and its associates, have left the Petitioner in a situation where the Petitioner's business interests have suffered. The said issue was also raised by the nominee Directors of Petitioner during the Board Meeting of GETL on 30.06.2020. The Board, after discussing various aspects and impact of termination on GETL, resolved to appoint a law firm and independent auditors to consider the legal and financial impact of the purported termination on GETL. (15) The Contemnor/Respondent No. 1 is the CEO of Respondent No. 5 and Respondent No. 6 is the Vice President of Respondent No. 4 and President of Respondent No. 3. That Respondent No. 1 was r....
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.... the CEO) is concerned, the entire proceedings in the present Company Petition, and, by extension, all applications (including the present application), are without jurisdiction, as has already been held by this Hon'ble Tribunal. When the main Company Petition is not maintainable against the Fifth Respondent, the question of granting any interim relief, including of the nature sought in the present Application, does not arise - including as against the Answering Respondent. The Petitioner is merely resorting to filing multiple Applications with a view to coerce the Respondents to terms. (5) The Answering Respondent has been arrayed as a Respondent in these contempt proceedings with the oblique motive of arm-twisting the other Respondents to terms, on the basis of the threat of contempt proceedings against a high-ranking individual within the Fifth Respondent Company. There can be no other reason for the Answering Respondent being named as a respondent in the present contempt proceedings. (6) The Answering Respondent could not have violated any order(s)/direction(s) to which he was not bound by or a part of. In any event, none of the orders passed by this Hon&#....
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....alise the GETL Shares, in terms of Rule 9A of Companies (Prospectus and Allotment of Securities) Rules, 2014, so as to enable the same to be transferred to an affiliate of Respondent No. 5. The Applicant, acting through its CEO Mr. Arun Mote not only prevented the dematerialization of the shares of Respondent No. 2 in GETL (which is contrary to the legal obligations of GETL), it has also denied that there is any requirement under the Undertaking or the 2019 NCLAT Order for Respondent No. 2 to transfer its shares to an affiliate of Respondent No. 5. It is now convenient for the Applicant to ignore these facts and take a contrary and false stand to prop up the present Contempt Application. Having prevented Respondent No. 2 from complying with the Undertaking, the Applicant cannot now allege contempt of the same. (2) The Undertaking and consequently orders of NCLAT in question contemplated that the Ancillary Agreements would remain enforceable on their own terms; (ii) on their own terms, the Ancillary Agreements were due to expire on October 31, 2020;(iii) Respondent No. 3 with respect to the TLA, the MSSA and the ASA called upon GETL to come forward to negotiate the terms of....
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....vant rules and would take steps to dematerialize its shares. (c) The Respondent No. 2 took steps to handover the certificates representing the GETL Shares. A dematerialization request was made through an external consultant engaged by Respondent No. 2 on October 10, 2019. On October 14, 2019, Respondent No. 2 wrote to GETL inter alia stating that certificates representing GETL Shares have been surrendered to GETL for dematerialization to facilitate transfer to an affiliate of Respondent No. 5 in terms of the Undertaking. On the same day, Respondent No. 2 also wrote to the external consultants authorizing Mr. Manish to collect the physical shares and deliver to corporate office of GETL along with a copy of request to proceed with dematerialization of shares. (d) Mr. Arun Mote wrote a letter on October 31, 2019 inter alia stating as under: (i) that 2019 NCLAT Order does not require an affiliate of Respondent No. 5 to acquire GETL Shares of Respondent No. 2; (ii) that the 2019 NCLAT Order does not record any undertaking from Respondent No. 2 whatsoever; (iii) Respondent No. 2 should withdraw its statement made in its letter dated September ....
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....nal, if admissible under law. Further in the Contempt Application, there is no specific allegation or evidence against any of the named individuals. Their inclusion is just an abuse of the legal process. Further, in the Contempt Application, only cursorily mentions Mr. Michele Stangarone to have issued certain communications to GETL. When there is no case of contempt made out against Respondent No. 3, by no stretch of imagination can Mr. Michele Stangarone be liable for contempt. His inclusion is made for purely vexatious and harassment purposes only, an abuse of the legal process. (6) It is well settled that contempt jurisdiction is a special jurisdiction which the Courts exercise sparingly, with great caution and never on the basis of frivolous allegations. The present Contempt Application has been filed by the Applicant without any basis or without assigning or providing any evidence whatsoever of any contumacious act by the Answering Respondents. Therefore, they have urged to dismiss the Application with exemplary costs. 5. The Respondent No. 6 has filed its statement of objections dated 7th April, 2021, by inter alia contending as follows: (1) At ....
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....e on October 31, 2020, on their own terms. The following facts with respect to the non-renewal of the Ancillary Agreements are noteworthy: (a) On March 9, 2020, Respondent No. 3 issued a letter to the Applicant inter alia pointing out the fact that the Ancillary Agreements were due to expire and thus, invited GETL and the Applicant for discussions on the terms of their renewal; (b) Not having received any response to the above, on April 7, 2020, Respondent No. 2 wrote to GETL inter alia stating that their invitation to engage in a discussion for renewal of the Ancillary Agreements by Respondent No. 2 and Respondent No. 3 (as applicable) had not received any response and further, GETL had also not initiated any engagement on the renewal of the Ancillary Agreements. Respondent No. 2 once again requested GETL to engage in a discussion regarding the renewal of the Ancillary Agreements; (c) On April 22, 2020, the Applicant issued a long-winded letter purporting to reply to the letter of March 9, 2020. However, this letter of April 22, 2020 was vague and nothing more than a restatement of the Applicant's alleged grievances in the main Company Petition, Resp....
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....n the instant case, has further inter alia submitted that the Agreements in question viz. Party B Technology, Marketing & Sales Service Agreement, Administrative Service Agreement etc., will be automatically deemed to be renewed for successive 10 years term unless terminated them in accordance extant terms contained in those Agreements. And the attempt made by the Respondents in this regard is in total violations of orders passed by the Tribunals in question. In addition to judgments already relied upon, he has further cited judgment of Hon'ble Supreme Court, in support of his contention that Undertaking not only on the Parties and Court/Tribunal, can pass appropriate interim orders, rendered in David Jude Vs. Hannaha Grace Jude and others (2003) 10 SCC, 767, wherein it is inter alia held that they are compelled to take coercive action due to continuous defiant attitude adopted by the Contemnors therein. The breach of undertaking given by the Contemnors is an act of gross contempt deserving deterrent punishment and pending disposal of main Contempt case, interim directions are also passed." The Respondents have no respect to the Tribunal and violated their own undertakings as r....
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.... (a) This Hon'ble Tribunal has categorically held that it has no territorial jurisdiction over the Respondent No. 5 and consequently it has no jurisdiction to hold Respondent No. 1 to be in contempt of this Hon'ble Tribunal or the Hon'ble NCLAT; (b) Without prejudice, the Petitioner has failed to make specific allegations against Respondent No. 1 in relation to his role in the alleged contemptuous conduct. The Petitioner has failed to establish through relevant and cogent material that Respondent No. 1 is guilty beyond reasonable doubt of contumacious conduct. Section 1(4)(a) of the Act restricts the application of the Act to only those companies incorporated under the Act. Similarly, section 2(18) of the Act defines 'company' to mean a company incorporated under the Act or under any previous company law. And, in this context, 'Chief Executive Officer' under the Act means an officer of a company. In other words, the Act applies only to a CEO who is designated as such by a company that has been incorporated under the Act or any previous company law. (2) It is not the Petitioner's case that Respondent No. 5 is a Company incorporat....
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....ny extraordinary effort nor should be dependent, either wholly or in part, upon any act or omission of a third party for its compliance. This has to be judged having regard to the facts and circumstances of each case." (4) The Petitioner has failed to plead - let alone show - that Respondent No. 1 has wilfully disobeyed any order or violated an undertaking and that he had deliberately acted "with evil intent or bad motive or purpose". In the absence of a specific pleading on the exact role of Respondent No. 1, this Hon'ble Court cannot even frame a charge against the Respondent No. 1, as required in accordance with the provisions of the Contempt of Court Act, much less hold Respondent No. 1 guilty of contempt merely based on the Petitioner's vague and baseless averments. (5) It is settled law that the burden to prove contempt beyond reasonable doubt lies on the Petitioner. In Chhotu Ram v. Urvashi Gulati, (2001) 7 SCC 530 (paragraph 2), the Hon'ble Supreme Court held that a contempt of court proceeding being, quasi-criminal in nature, the burden to prove would be upon the person who made an allegation of contempt. Pertinently, the Hon'ble Supreme C....
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.... Shri Arjun Rao, learned Counsel for the Respondent No. 6, after arguing the case, has also filed written gist of arguments, dated 12th April, 2021, by inter alia contending as follows: (1) All the allegations in Contempt Application No. 2 of 2021 ("Contempt Application") are denied. These written arguments are filed in addition to the objections to the Contempt Application filed by the Respondent No. 6. (2) The Contempt Application is required to be dismissed against the Respondent No. 6 for the following reasons. (a) The Respondent No. 6 is not a party to the main Company Petition in which orders have been passed and the Applicant is alleging contempt of the said orders. Since the Respondent No. 6 was not even part of the main dispute, he was not bound by and could not have violated any order/undertaking. There is no specific direction against the Respondent No. 6 and hence there can be no violation by the Respondent No. 6. (b) This Respondent has himself not signed any undertaking or submitted any undertaking before this Hon'ble Tribunal or before the Hon'ble NCLAT. The Applicant has simply made the Respondent No. 6 a party to the Cont....
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....gn Company/companies over the affairs being conducted in foreign Countries or to apply to affairs and contract(s) executed in India in respect of Petitioner, with reference to acts of Oppression and Mismanagement as alleged to have committed by the Respondents in the Company Petition; (3) Whether Foreign Companies are not bound by terms and conditions of Agreements/contracts entered with Indian Companies and they are not bound by orders/directions passed by Courts/Tribunal here over the allegation of violation of agreements/contracts; (4) Whether terms and conditions of said EJVC, implementation/compliance of undertakings given before NCLT/NCLAT, binds only binds GE or its Affiliates also; (5) Whether cognisance of Contempt only lies against Parties to litigation or it extend to related parties like Respondent Nos. 1, 3, 6, who are alleged to have committed contempt at the instance of Respondent No. 4 & 5 who have given undertaking before the Tribunal; (6) Whether the Respondents have violated their own undertakings as recorded by NCLT and NCLAT in their orders in question so as to take cognizance of contempt against them: (7) If so, wha....
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....nctioned by Hon'ble High court of Judicature at Allahabad vide its order dated 19th April, 2011. 14. Aggrieved by the order dated 23rd August, 2019 passed by this Tribunal by vacating the interim order dated 12th June, 2019, the Petitioner has preferred two Company Appeal (AT) Nos. 236 and 237 of 2019 before the Hon'ble NCLAT. After hearing the Appeals, an interim order dated 27th August, 2019 was passed, which says "We allow 4th and 5th Respondents to transfer the title of all the shares to any party without affecting the business of Appellant - Triveni Turbine Limited' and the 1st Respondent Company- 'GE Triveni Limited' and should not affect all the five agreements entered into between parties as referred to in their undertaking before the Tribunal and recorded above. Ultimately, the said Appeals were disposed by common order dated 17th February, 2020. In so far as providing data is concerned, the necessary data for running the business of 1st Respondent Company- 'GE Triveni Limited', if required to be provided pursuant to the aforesaid five agreements, be provided by concerned Respondents to the 1st Respondent Company-'GE Triveni Limited',....
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.... relationship in any way. Ultimately all entities will be (and will remain) controlled affiliates of General Electric Company. As a result of the Merger, the relevant steam turbine business of 'General Electric Company' and 'Baker Hughes Inc.' was transferred to 4th Respondent- 'Baker Hughes LLC, A GE Company' and 5th Respondent- 'General Electric Company' was now linked to 1st Respondent- 'GE Triveni Limited' through 4th Respondent - 'Baker Hughes LLC, A GE Company'. 17. However, Electric Company' failed to keep up its promise of providing business to 'GE Triveni Limited'. On the contrary, 'General Electric Company'; (a) used its internal processes to divert business from 'GE Triveni Limited' and competed against it; (b) ensured that its nominee directors on 'GE Triveni Limited's board breached their fiduciary duties; (c) ensured that, in the process, key management personnel of 'GE Triveni Limited', i.e., the CTO and CFO colluded with 'General Electric Company', 'Baker Hughes LLC, A GE Company' and their nominees/appointees in 'GE Triveni Limited'. Ultimately ....
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....nitiate necessary steps as per law. 18. The contention of the Respondents that the Tribunal do not have territorial jurisdiction to entertain even the main company petition and much less the instant Contempt petition, and they are not amenable to Indian Courts, are un-tenable under law and baseless, and the same is held to be misconceived. Having entered into business contract with Indian Company, the Respondents are bound by applicable laws of India with respect to terms and conditions of contract. It is true that the Petitioner has no locus standi to question the affairs of Respondents as long as its actions would not affect its business interest in terms of various agreements/contracts. Therefore, the Contention of the Respondents that the Tribunal having held that it lacks jurisdiction over the affairs of Company, cannot entertain the instant Contempt Petition is un-tenable and baseless, especially considering the nature of terms and conditions as mentioned in Equity Joint Venture Contract dated 15th April, 2010. And the Respondents are estopped from raising question of jurisdiction in terms of said contract, and their Undertakings given before the Tribunal, as mentioned sup....
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....rotect business interest of Petitioner, contrary to its contractual obligations. The issue of demat of shares in question etc., are not much relevant to the issue. The letter dated 11.11.2020, as referred to above, addressed to BSN, SEBI & NSE, Ministry of Corporate Affairs, clearly established the malafide intention of Respondents to flout the orders in question. 20. Though the Respondents especially Respondent Nos. 4 & 5 have furnished their categorical undertaking before NCLT and NCLAT and the Tribunals passed interim orders, as stated supra, the Respondent No. 2(DI Netherlands and Nuovo Pignone (Respondent No. 3), have filed LA. No. 360 of 2020 in C.P. No. 102 of 2019 by enclosing copies of correspondence made with the Petitioner in respect to renewal of Agreements in question. In this Application, it is admitted that DI Netherlands is party by succession to the Equity Joint Venture Contract dated 15th April, 2010 and Nuovo Pignone is a party to some of Agreements. It is not in dispute that the Tribunal ceased of the matter and passed interim as early as on 12th June, 2019, subsequently various orders are passed by NCLT/NCLAT, as stated supra. Moreover, it is not the case of....
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....ull title to all the shares of Respondent No. 01 (Currently held by Respondent No. 02) shall be transfer to a fully owned affiliate of Respondent No. 05. The agreements entered into with Respondent No. 1 Company viz. - The Marketing and Sales Service Agreement dated November 1, 2010; The Technology License Agreement dated November 1, 2010; Trade and Trade name Agreement dated November 1, 2010; Service Legal Agreement dated April 6, 2017; and Ancillary agreements to the JVA dated 15th April, 2010 will remain fully enforceable on their own terms. In consonance with the said undertaking given before NCLT, the Hon'ble NCLAT vide its order dated 27.08.2019, allowed 4th and 5th Respondents to transfer the title of all the shares to any party without affecting the business of Appellant-'Triveni Turbine Limited' and the 1st Respondent Company- 'GE Triveni Limited' and should not affect all the five agreements entered into between parties as referred to in their undertaking before the Tribunal and recorded above. [.....] And the final order of NCLAT dated 17th February, 2020, has affirmed the same interim order as final order till the disposal of Company Petition. 23.....