TaxTMI 
TaxTMI 
2021 (5) TMI 163
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....gupta, Sr. Adv., Mr. Soumya Raychowdhury, Adv., Mr. Debanjan Mandal, Adv., Mr. Sanjiv Kumar Trivedi, Adv., Mr. Kunal Vajani, Adv., Mr. Sarvapria Mukherjee, Adv., Mr. Deepan Sarkar, Adv., Ms. Iram Sassan, Adv., Mr. Sanket Sarawgi, Adv., Ms. Mahima Cholera, Adv. ...for HVL Mr. Ranjan Bachawat, Sr. Adv., Mr. Sayan Roychowdhury, Adv., Mr. Satyaki Mukherjee, Adv., Mr. Paritosh Sinha, Adv., Mr. Saubhik Chowdhruy, Adv., Mr. Dripto Majumdar, Adv., Ms. Ayusmita Sinha, Adv. ...for the Companies Mr. Kihosre Datta, Sr. Adv. ... for APL Minority Member Mr. Joy Saha, Sr. Adv., Mr. Yash Vardhan Deora, Adv., Ms. Asmita Raychaudhuri, Adv. ...for APL Majority Committee ORDER SHAMPA SARKAR, J.:- 1. These contempt applications have been filed by the defendants in Title Suit No. 6 of 2004 (a testamentary suit) alleging wilful, deliberate and contumacious violation of a common order dated October 1, 2020 passed by this Bench in APO No.89 of 2020, APO No.90 of 2020, APO No.91 of 2020, APO No.92 of 2020 and APO No.95 of 2020. The alleged contemnors are the plaintiff No.1, Harsh Vardhan Lodha (HVL) and each of the directors of the four public listed companies, namely, Universal Cables Ltd. (UCL), Birla ....
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....re also restrained from interfering with the decisions of the APL and any decision which might be taken by it in future by majority if the same directly or indirectly relates to the estate of the deceased and further the plaintiff no.1, Harsh Vardhan Lodha is restrained from holding any office in any of the entities of M.P. Birla Group during pendency of the Suit. (c) Defendants are also restrained by an order of temporary injunction from interfering with the APL's decision by majority during pendency of the suit." 5. No orders were passed by the learned Single Judge with regard to the subsequent decisions of the APL Committee dated July 23 and 30, 2020. Aggrieved by the aforementioned order, the above-mentioned appeals were preferred by the companies as also by HVL. HVL challenged the order, inter alia, on the ground that by the order of the learned Single Judge, the APL Committee's interference with his office as a director of these companies, having been duly appointed in accordance with the provisions of the Companies Act, 1956 and 2013 as applicable had been upheld. HVL's further contention was that his role as a director was not in conflict with his capacity as a legatee ....
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....ration of paragraph (b) among, the directions would be a restriction on the plaintiff no.1 Harsh Vardhan Lodha to the extent of it being a restriction from holding any office in any of the entities of the M P Birla Group during the pendency of the suit, on the strength of the shares referable to the estate of PDB. 7. The defendants/petitioners have alleged violation of the above-mentioned order of this court, alleging failure on the part of HVL to abide by the directions of the APL Committee by participating in the Board meetings as director/chairman. The allegations of aiding and abetting HVL have been levelled against the directors of each of these companies. Further violation of the subsequent decisions taken by the APL Committee dated July 23, 2020 and July 30, 2020 not to support re-appointment of HVL as director have also been alleged. As the allegation of contumacious violation of the order of this court is primarily against HVL, CC 38 of 2020 is taken up first for our consideration. CC 38 of 2020 Contempt against HVL 8. The summary of the allegations are, inter alia, as follows: (i) HVL continued to hold office as director/chairman in UCL, BCL, BCab and VTL; (ii) HVL....
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....companies had vested upon the APL Committee being the estate of PDB. HVL by not stepping down from his office of director violated the order of this court. It was submitted that this Bench also was of the view that APL's power included the power to regulate and permit such shares to be utilised to generate appropriate income and to better utilise the same, in the best interest of the affairs of the estate of PDB which would, ultimately, reflect on the end beneficiaries. Thus, HVL's directorship against the APL Committee's decision, were detrimental to the business of these companies. Attention was drawn to the decisions of the APL Committee dated July 19, 2019 and July 30, 2019, in support of the contention that the committee upon taking into consideration that the major part of the estate of PDB consisted of direct and indirect share holdings through cross and chain holdings in various companies, being the controlling interest in the M.P. Group of Companies (as quantified in Annexure-X to the decision dated July 19, 2019), had taken the decision not to support the resolution for re-appointment of HVL as a director of VTL and BCL in the decision dated July 30, 2019. The APL Committ....
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....state of PDB. 11. HVL filed his affidavit-in-opposition responding to the show-cause issued by this court. HVL stated that he did not commit any deliberate, wilful or contumacious act of violation of the order dated October 1, 2020 and tendered unconditional apology in the event this Bench found any act of contempt on his part. 12. HVL's explanation was that the estate of PDB comprised of only those assets which were mentioned in the affidavit of assets by both the parties and in the interim report filed by the APL Committee. Reference had been made to a decision of the Division Bench of this court dated October 11, 2007 reported in ILR 2007 (2) CAL 377, Rajendra Singh Lodha vs. Ajoy Kumar Neewar & Ors. passed in the testamentary proceedings. Special emphasis has been laid on paragraph 301 of the said judgment, wherein it had been observed that the controlling block of shares of PDB were those disclosed in the affidavit of assets and no dispute on such disclosure as to the number of shares made by the executor (RSL) had been raised by the defendants. According to HVL, at present those shares had been recorded in the names of Justice Mohit Shantilal Shah (Retd.), Sri Mohendra Kuma....
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.... the shares referable to the estate of PDB and if the voting pattern in the resolutions of re-appointment were taken into account, the figures would reveal that even on the strength of votes of public shares holders he would have been re-appointed. 13. Mr. Khambata, learned senior counsel appearing on behalf of the HVL submitted that from the answer to the show-cause filed by HVL, two interpretations of the order of this Bench were possible. Thus, the benefit of doubt would be in favour of holding HVL not guilty of the alleged contempt. His next argument was that the alleged act of contempt should be strictly construed in the context of the order made and the violations alleged. Learned counsel urged that the allegations were essentially contumacious violation of the order of the learned Single Judge and there being no merger of the order, the contempt proceedings were not maintainable before this Bench. He relied on the decision of Kunhayammed and ors. v. State of Kerala and anr., reported in (2000) 6 SCC 359. His next contention was that the decisions of the APL Committee dated 4th and 5th November were not before this court and those could not be looked into in this special jur....
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....July 19, 2020, to show that the APL Committee chose to proceed on the basis of a possibility that the estate of PDB had a majority share in the M.P. Birla Group of Companies including, Tire-3 and Tire-4 companies. 15. Learned senior counsel categorically stated that HVL did not ever act as a representative of the estate of PDB. The role of HVL as a legatee under the Will and as a director of the companies were distinct and separate. The functions of HVL as a director was guided by the provisions of company law and only his functions as a legatee of the estate of the deceased would be subject to the directions of the probate court. Reliance was placed on the decision of the Apex Court in the matter of Chandrabhai K. Bhoir and ors. v. Krishna Arjun Bhoir and ors. reported in (2009) 2 SCC 315. Mr. Khambata emphasised that the action of HVL in attending the Board meeting and chairing the same were not subject to directions of the probate court as he did not hold office only on the basis of the shares referable to the estate of the deceased. The main thrust of the argument of Mr. Khambata was that once the APL Committee had recorded that it had not made any attempt to take over the ma....
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....ld be exercised by courts cautiously and sparingly and in the larger interest, after examining the true effect of the alleged contemptuous conduct. Reliance was placed in the decision of Mrityunjoy Das and anr. v. Sayed Hasibur Rahaman and ors. reported in (2001) 3 SCC 739 and Ram Kishan v. Tarun Bajaj and ors. reported in (2014) 16 SCC 204. 19. The other contempt applications in this group are against the directors of Universal Cables Limited (UCL), Birla Cables Limited (BCab), Vindhya Telelinks Limited (VTL) and Birla Corporation Limited (BCL), in their personal names. The Companies have not been impleaded. 20. The allegations against the directors are of aiding and abetting HVL in violating the order of this court. The acts of contempt, inter alia, are summarised below:- "a) Permitting HVL to continue to hold office as director/chairman of UCL, BCab, VTL and BCL. b) Permitting HVL to participate in the meeting of the Board of Directors of UCL and VTL on November 9, 2020, BCab on November 10, 2020 and BCL on November 5, 2020. c) Aiding HVL to not abide by the decisions of the APL Committee dated 19th July, 2019 and participate in the Board Meetings although the APL Commi....
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....rections of the APL Committee, allowed HVL to cast his vote in the Board meeting. Such action amounted to wilful and deliberate violation of the order of this court committed by the directors who aided and abetted HVL in violating our order. 23. Mr. Shyam Divan, learned senior counsel appearing on behalf of the alleged contemnors submitted that UCL, being a public limited company and a separate legal entity not having been impleaded as a contemnor in these proceedings, the directors could not be individually hauled up in contempt, holding them vicariously liable for the alleged acts of the company. In the absence of any allegation against the company of wilful disobedience and violation of the order of this Bench, the directors could not be made personally liable. He submitted that in the affidavit-in-opposition used by the directors, they had tendered unqualified apology and had categorically submitted before the court that none of them had any intention to deliberately violate the order of this Bench and their actions were in consonance with the provisions of the Companies Act, 2013 and for the preservation of corporate democracy. Reference was made to the provisions of Section....
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....ce taken by these directors in their affidavit-in-opposition that, in the absence of any positive directions or restrictions upon the directors from doing any act in relation to the activities of the company in question, contempt would not lie against such third parties, was preposterous and a further contempt on the face of the court. 27. Learned Senior counsel drew the attention of the court to the notes of arguments filed on behalf of RSL, in a proceeding before this court claiming that the controlling block of shares in the M.P. Birla Group of Companies was by far the main asset of PDB. Further reference was made to a decision of another learned Single Judge of this court passed on March 23, 2005, wherein the probate court passed an order of status quo holding that, if the majority shareholding or the controlling block of shares of PDB, were transferred or otherwise dealt with, the same would be having a far reaching effect in the affairs of the company. He referred to the submissions of the learned Advocates for RSL in the said proceeding, that the shares would not be transferred or disposed of. Not only an order of status quo with regard to the transfer of shares was passed ....
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....ng the control, ownership and management should be intimated to the Committee. A reference was further drawn to the order of the Company Law Board (CBL) passed in Gouri Shankar Kayan & Ors. vs. East India Investment Company P. Ltd & Ors. reported in (2005) 128 Comp Cas 145 (CLB) where it was observed that immediately on the death of PDB, her interests (the controlling block of shares) in the companies who were parties before the CLB stood devolved on her legal heirs. Reference was made to the decision of World Wide Agencies (P) Limited v. Mrs. Margaret T Desor reported in (1990) 67 Comp Cas 607 (SC). 28. Mr. Ranjan Bachawat, learned senior counsel appearing on behalf of the alleged contemnors primarily adopted the submissions of Mr. Divan. It was his specific case that the company being a public listed company had certain statutory duties and compliances, one of which was to hold the Annual General Meeting. That PDB was not the owner of the company and as such the APL Committee could not interfere in the management and affairs of the company as owner thereof, but only enjoy the rights flowing from the shares of PDB. He submitted that the learned Single Judge also was of the opinio....
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....rther submitted that the justification given by the directors in their affidavit-in-opposition of acting on the basis of the legal advice received by them could not be a ground for exoneration, as legal advice would at best fall within the realm of opinions of experts and unless these opinions were on a point of foreign law or science or art, they would not be relevant for the purpose of disposal of the instant proceedings. Moreover, opinions or treatises of living authors were not accepted by courts of law as relevant authorities. 31. Mr. Amit Sibal, learned senior counsel appearing on behalf of the directors of VTL submitted that neither the company nor the directors were parties to the probate proceedings. Aggrieved by the refusal on the part of the learned Single Judge to injunct the companies from doing certain acts contrary to the decisions of APL Committee and refusal to set aside HVL's reappointment as director, cross-objections have been filed by the defendants before this court. He submitted that the learned Single Judge did not set aside the re-appointment. That contempt by the directors would have to be proved beyond reasonable doubt and in this case, ingredients of ci....
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....njoy Das and anr. v. Sayed Hasibur Rahaman & ors. reported in (2001) 3 SCC 739. CC 39 of 2020 Contempt against directors of BCL 32. Mr. Giri, learned senior counsel appeared on behalf of the petitioners. While referring to the decisions of the APL Committee and the decisions of the learned Single Judge, he submitted that major part of the estate of PDB consisted of controlling power over all the M.P. Birla Group of Companies and such control was exercised through cross and chain shareholdings in various companies' trusts and institutions. Reliance was placed on the flow chart with the title "Tier wise Broad Structure of Control of M.P. Birla Group of Companies through Key Companies". Decisions of various judgments of this court, the Company Law Board and the Supreme Court rendered in earlier proceedings on the vastness of the control of the estate of PDB through shareholdings, in various companies, were relied upon. He submitted that as far as Tier 1 and Tier 2 companies were concerned, there was no doubt about the fact that the estate of PDB had majority shareholdings in the appellant companies. He further submitted that the quantum of shares indicated in the affidavit-of-asset....
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....re the company and the rights of such member voting on poll, would be proportionate to his share in the paid up equity share capital of the company. Thus, HVL was allowed to participate on the principle of corporate democracy. According to him, no declaration was received from either the APL Committee or the beneficiaries of the alleged estate of PDB with regard to transfer of the beneficial interest in favour of the APL Committee representing the estate of PDB. He submitted that the resolution in the AGM was passed in terms of provisions of Section 114 of the Companies Act, 2013. 34. Mr. Poovaiya referred to a judgment of the Delhi High Court in the matter of Dr. Bimal Chandra Sen v. Mrs. Kamla Mathur and anr. reported in ILR (1982) II Delhi 407, in support of his contention that a person who was not a party to the proceedings could not be proceeded against for committing civil contempt, on the allegation of aiding and abetting the breach. That aiding and abetting the breach was an essence of criminal contempt. 35. We have heard the rival contentions of the parties. We are of the view that the allegations do not fall within the definition of criminal contempt under Section 2(c) ....
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.... conduct on the basis of such incorrect interpretation. Learned counsels further submitted that the directors of these companies who aided and abetted HVL in committing the breach of the order of this court were equally liable for having committed contempt, on the principle laid down in Seaward (supra). Even if no order was passed against the companies, the actions of the directors amounted to frustrating the order of this court and rendering the order ineffective. The directors were all along in the knowledge of the order, they were repeatedly requested by the APL Committee as also by the learned advocates-on-record of the petitioners to obey the order but these directors who were managing the affairs of the company, overreached the order of this court by allowing HVL to participate in the Board meetings as a director/chairman. The essential ingredient of wilful culpability could clearly be ascribed to the actions of HVL and the directors as well. They submitted that it was trite law that even a non-party to an action in which an order had been passed, could be committed for contempt if he with knowledge of the order aided and abetted the respondent in the action against whom the ....
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....e Broad Structure Of Control of M.P. Birla Group of Companies through Key Companies, and the Statement of Shareholding of the Promoter Group in the Four Listed Operating Companies of M.P. Birla Group, marked as Annexure-X to its decision and came to the conclusion that the APL Committee was not in a position to take a final decision regarding what formed part of the estate of PDB, but so long the controversy between the parties were alive and pending before the Calcutta High Court, the APL Committee would have to proceed on the basis of a possibility that the estate of PDB had a majority share in the M.P. Birla Group of Companies. The said flow chart and the Statement of Shareholding referred to above were documents prepared and relied upon by the defendants which were annexed as annexure-I to the minutes of the meetings dated 15th and 16th June, 2019. Paragraph 26 of the decision dated July 19, 2019 being relevant, is quoted below:- "26. At the cost of repetition, the Committee is not to take any final decision regarding what forms part of the Estate of late Mrs. P.D. Birla, but so long as the controversy between the parties is live and pending before the Calcutta High Court, in....
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....d.; (d) Mr. Justice J.P. Devadhar (Retd.), Former Judge, Bombay High Court and former Chairman, Securities Appellate Tribunal, Mumbai, will be a Director on the Board of Directors of Hindustan Gums & Chemicals Ltd., upon vacancy arising in the said Board of Directors; (e) Mr. Justice J.P. Devadhar (Retd.), will be a Director on the Board of Directors of Birla Cables Ltd." 45. The allegations of contumacious acts enumerated in the applications do not disclose that HVL had violated any of the above-mentioned directions. The APL Committee had also not decided conclusively on the quantification of the shareholdings (controlling interest) in all the M.P. Birla Group of Companies but on the possibility that the majority of the shareholdings belonged to the estate of PDB, took the above decisions to continue as directors in some of the other companies of the M.P. Birla Group and to nominate their chosen persons as directors of the four listed appellant companies. 46. With regard to the decision of the APL Committee dated July 30, 2019 it is on record that the decision was arrived at on the submissions made by the parties at the meetings held on July 20 and July 21, 2019. The points ....
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.... in the Companies of the MP Birla Group for a long time as forming part of Promoters Group, for doing the needful: 1) MP Birla Foundation Educational Society. 2) MP Birla Foundation Medical Society; 3) Belle Vue Clinic; 4) MP Birla Institute of Fundamental Research; 5) Hindustan Medical Institution; 6) Eastern India Educational Institution; 7) Shreyas Medical Society; 8) South Point Fundation. 30.07.2019 AC Chakrabortti Justice Mohit S. Shah (Retd.) 48. Although there are allegations against HVL for violation of the first paragraph marked 'A' of the above-noted decision but there are no allegations of violation of the decisions marked 'B' and 'C' above. It is also pertinent to mention here that while disposing of a Special Leave Petition, the Apex Court had made the re-appointment of HVL subject to the decision of the learned single Judge. The learned Single Judge refused to set aside the re-appointment of HVL as a director of the companies and aggrieved by such refusal cross-objections have been filed after our order dated October 1, 2020 which are pending hearing along with the main appeals. 49. The allegation of not abiding by the decision contained in paragr....
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....L was re-appointed as the director. We find that the APL Committee implemented its decision (A) and voted against HVL's re-appointment. 52. The subsequent decisions of the APL Committee dated July 23, 2020 and July 30, 2020 were also not to support the resolution for re-appointment of HVL as a director in the other two companies. The plaintiffs have challenged the said decisions by filing G.A.1236 of 2020 which is pending adjudication before the learned Single Judge. 53. With regard to allegation of violation of the prohibitory part/second part of the order restricting HVL from holding any office in the M.P. Birla Group of Companies, on the strength of the shares referable to the estate of PDB, we find that going by the voting pattern, it is a possible view that HVL could have been re-appointed even on the strength of the shares not referable to the estate of PDB (personal shares of PDB and the shares referable to the promoters, promoter group and persons acting in concert). In all the AGMs, the shares which were in the name of PDB voted against the re-appointment of HVL as the director of these companies. The voting figures and statistics have been elaborately stated in the affi....
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.... in the affidavit-in-opposition filed by the alleged contemnors. When HVL could have been re-appointed on the shares of the public shareholders, invitation to HVL to attend the Board meetings and participate in the same was as per procedure prescribed by the Companies Act, 2013. If HVL could be re-appointed as a director on the strength of votes of public shareholdings alone, as per the voting figures, any deeper probe into the merits would not be proper at this stage. The contempt has to appear on the face of the order. The averments in the affidavits-in-opposition filed by the alleged contemnors including HVL has raised a valid question with regard to HVL's continuation in office. The possibility of his re-appointment only on the strength of the shares of the public shareholders cannot be ruled out. No contrary figures are forthcoming in denial of such possibility. If this court has to decide the contempt on an appreciation of the Will, Codicil other orders of CLB, judgments of this court, notes of arguments etc, in such a situation, contempt on the face of the order is not proved. The order of the CLB in Gauri Shankar Kayan (supra) was challenged before this court in an appeal u....
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....tate and the controlling interest of PDB can be to the extent admitted by the alleged contemnors. On the other hand, the extent of the estate can also be as contended by the petitioners. Controlling interest however is yet to be conclusively defined and quantified. The APL Committee has not quantified the same. In this case, the extent of control can also be the influence PDB had over the shareholders/Promoter Groups or Person Acting in concert. There is a possibility that the Promoters/Promoter Groups and PACs did not vote in concurrence with the APL Committee's decision in the AGMs where HVL was re-appointed as director. Moreover, there is also no allegation of dissipation or depletion of the estate or transfer of shares in violation of the order of status quo and thus the emphasis laid by Mr. S.N. Mookherjee on the orders of status quo over the shares as also on the orders of the CLB are not relevant in the contempt proceedings. There is also a decision of a Division Bench of this court, where the controlling interest of the estate of PDB was held to be primarily in the nature of shares which had been mentioned in the affidavit of assets filed by the respective parties as also i....
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....n shows that HVL could have been re-appointed as a director excluding those shares referable to the estate of PDB and we cannot hold under such circumstances, without any doubt that HVL was holding his office as a director/chairman solely on the shares referable to the estate of PDB. 63. Only such directions which are explicit in the judgment or order or are plainly self-evident ought to be taken into account for the purpose of consideration as to whether there had been any disobedience or wilful violation of the same. 64. In order to punish a contemnor, it has to be established that the disobedience is wilful. This requires an assessment of the mind of the alleged contemnors that is, whether the contemnors knowingly intentionally, consciously, calculatedly and deliberately with full knowledge of consequences committed a breach of the order of this Bench. There has to be a calculated action with evil motive. 65. In V.G. Nigam v. Kedar Nath Gupta reported in (1992) 4 SCC 697, the Apex Court held that it would be rather hazardous to impose a sentence for contempt in exercise of contempt jurisdiction on mere probabilities. If the doubt persisted, the alleged contemnors were entitle....