TaxTMI 
TaxTMI 
TaxTMI 
2021 (11) TMI 793
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.... Law Tribunal, Principal Bench, New Delhi) while passing the 'Impugned Order' dated 23.09.2020 in Contempt Application No.A-01 of 2020 in CA-1081/2019 in (IB)-560(PB)/2017 (filed by the Appellant/Applicant under Section 425 of the Companies Act, 2013 r/w Section 12 of the Contempt of Courts Act, 1971 and Rule 11 of the NCLT Rules, 2016) had, inter alia, observed the following:- "On perusal of Section 425 of the Companies Act, 2013, it is nowhere provided in the said section, extending contempt jurisdiction to IBC, nor has contempt jurisdiction been provided in IBC, amendments have come from time to time, stating that operation of a particular section is applicable to IBC, but with regard to section 425 of the Companies Act, 2013, so far no amendment has come stating about Section 425 that contempt jurisdiction is applicable to IBC as well. Applicability has been provided section wise. For example, Section 424 of the Companies Act 2013, wherein Companies Act Amendment allowed IBC to apply the said provision to the matters pending under IBC. As we all know, contempt jurisdiction is an extraordinary jurisdiction, not exercisable by ordinary courts/Tribunals, unless it is specifica....
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....ance of taking necessary steps to pay the arrears of fess to him and the Tribunal had directed the Respondent to pay the arrears of fee within two days. 7. On behalf of the Appellant, it is brought to the notice of this Tribunal that even after lapse of 3 ½ months of passing of the order on 07.11.2019 by the Tribunal, the Respondent did nothing, although a direction was issued to do the needful within two days. 8. Hence, the Appellant was constrained to file Contempt Application No.A-01(PB) of 2020 under Section 425 of the Companies Act, 2013 r/w Section 12 of the Contempt of Courts Act, 1971 and Rule 11 of NCLT Rules, before the Tribunal for initiating contempt proceedings against the Respondent for wilful disobedience of the Order dated 7.11.2019 and for issuance of appropriate directions to the Respondent for clearing the Bills of Rs. 2,42,000/= together with interest and to pay litigation costs, compensation and damages. APPELLANT'S CONTENTIONS: 9. The Learned Counsel for the Appellant submits that the Appellant's fees was fixed and cannot be denied in the light of the appointment letter of erstwhile IRP dated 14.5.2018 and the orders of the Adjudicating Authority (N....
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.... for Contempt, irrespective of contempt being extra ordinary jurisdiction, to be exercised only by Constitutional Courts. Appellant's Citations: 14. The Learned Counsel for the Appellant relies on the Judgement of the Hon'ble High Court of Delhi in McDonald's India Pvt Ltd and Or Vs Union of India and Ors wherein at paras 40, 41, 45 to 48 has held as under: 40. The factual matrix in Mohd. Yaqoob Khan (supra) was slightly different and would not come to the aid of the petitioners. The stay matter in the writ petition was still pending before the High Court when the contempt case was proceeded with. It is in that context that the Supreme Court ruled that the High Court should have first taken up the stay matter without any threat to the respondents in the writ case of being punished for contempt or, to put it slightly differently, the matter relating to contempt should have been taken up only after decision had been rendered on the stay application. Unlike the facts of the said case, the NCLT has already rendered its final decision on 13.07.2017. It was the enforcement of the directions passed in the said order, if required by suitable action under the powers to punish for contem....
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....l undoubtedly have to be taken after replies have been secured. Such stage having not even been reached, the procedure followed in having the service of the copy of the contempt application effected through counsel for the opposite party (who are the applicants) is not in breach of but in accord with the rules of the National Company Law Tribunal's Rules, 2016 which have been extracted above. [see Rule 38]. 46. At the present stage of the proceedings before NCLT, where it is yet to take formal cognizance, if the party which has been shown in the array of the contemnors chooses not to cooperate by either not appearing, or not responding, the NCLT is within its jurisdiction and power to proceed ex parte against it. [see Rule 49]. Undoubtedly, after the facts have been gathered and process initiated and particularly in the event of cognizance eventually being taken of contempt under the Contempt of Courts Act, the NCLT will be within its jurisdiction and power to enforce appearance and attendance. But, till such stage arises, the preliminary scrutiny, or inquiry, can be continued with by recording the absence despite notice, the only inference to be drawn being that the party in que....
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....." 13. From the aforesaid provision, it will be evident that the Tribunal as also the Appellate Tribunal have been empowered with the same jurisdiction, powers and authority in respect of contempt of themselves as the High Court has and may exercise, for this purpose, the powers under the provisions of the 'Contempt of Courts Act, 1971', which shall have the effect subject to modifications that in place of High Court, it should be read as Tribunal or the Appellate Tribunal; and in place of Advocate-General, it is to be read as Law Officers as may be specified by the Central Government. 14. Article 215 of the Constitution of India makes it clear that the High Courts are courts of record and shall have powers of such a court including the person to punish for contempt of itself, as quoted below: "215. High Courts to be courts of record.─ Every High Court shall be a court of record and shall have all the powers of such a court including the power to punish for contempt of itself." 15. However, Section 425 of the Companies Act, 2013, the Tribunal or the Appellate Tribunal has not been delegated with all the power of a Courts of record. Under Section 425, the Tribunal and ....
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....ot been honoured, we are of the view that, prima facie, case is made out for proceeding against both the Directors in contempt. We are of the opinion that the Appellant and Deepak Daga since beginning were aware of nature of the acts they were committing in the illegal withdrawals. They disobeyed Orders of Adjudicating Authority and this Tribunal wilfully and there is wilful non-compliance of undertakings given. I.A. No.1075 of 2020 to seek time to comply undertaking is not honest and appears to have been filed to create grounds of defence to further abuse process to kill time. The I.A. is rejected. The acts of the two Directors have obstructed the proceedings of CIRP, the proceedings before Adjudicating Authority and this Tribunal. The acts prima facie disclose serious Contempt, violating mandate of law of IBC applied by Orders of Adjudicating Authority and this Tribunal and breach of undertaking given on oath, actionable as NCLT established under the Companies Act, 2013 acts as Adjudicating Authority and this Tribunal is empowered under Section 425 of Companies Act, 2013 read with enabling provisions to take action. 25. Copy of this Judgement and record of Appeal will be treate....
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.... 1st Respondent had informed the Appellant about the non-availability of the funds in the Corporate Debtor Bank Account maintained by their Resolution Professional and that, on verification of the documents it was observed by the Resolution Professional that out of the total bills raised for Rs. 556,600/-, bills amounting to Rs. 314,600/- were already paid by the Interim Resolution Professional. 20. The other version of the 1st Respondent is that he was unable to make the payment of the 'Bills' and the bills were not approved by the Members of the Committee of Creditors and the payment of the bills was subject to the approval of the Members of the Committee of Creditors and added further, the 1st Respondent had acted in good faith as per Section 233 of the I&B Code and as such, no contempt can lie. The Learned Counsel for the 1st Respondent brings to the notice of this Tribunal that the invoices furnished by the Appellant in Serial No.4 and 5 towards appearance in the matter of Corporate Debtor on 04.09.2018 and drafting of application under Section 22(4) of the Code, it is observed from the perusal of the application (filed under Section 22(4) that the same was drafted by the for....
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....an Appellate Tribunal for hearing appeals against the Orders of the Tribunal. The matters that fall within the jurisdiction of the NCLT, under the Companies Act, 2013, lie scattered all over the Companies Act, 2013 indicate in broad terms, merely the procedure to be followed by the NCLT and NCLAT before passing orders. However, there are no separate provisions in the Companies Act, exclusively dealing with the jurisdiction and powers of NCLT." 25. The Learned Counsel for the 2nd Respondent cites the decision of the Hon'ble Supreme Court in the matter of B.K. Educational Services Pvt Ltd Vs Parag Gupta and Associates (Civil Appeal No.23988 of 2017) wherein it is observed that 'Adjudicating Authority' under Section 5(1) of the Code means the National Company Law Tribunal constituted under Section 408 of the Companies Act, 2013. 26. The Learned Counsel for the 2nd Respondent contends that after the advent of I&B Code, 2016 the 'National Company Law Tribunal' is defined as Adjudicating Authority as per Section 5(1) of the Code for the purpose of Insolvency resolution and liquidation and bankruptcy and that the Code has not restricted their power in any manner. EVALUATION: 27. At th....
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....' that the Appellant had carried out any work. Besides this the CIRP of the Corporate Debtor was completed and Resolution Plan of the Corporate Debtor was approved by the Adjudicating Authority on 26.11.2020. 31. The definition of Section 5(1) of the I&B Code under Part II 'Insolvency Resolution and Liquidation for Corporate Persons' Chapter I 'Preliminary' means the 'Adjudicating Authority' for the purpose of this Part as 'National Company Law Tribunal' constituted under Section 408 of the Companies Act, 2013. Section 408 of the Companies Act, 2013 provides for the constitution of 'National Company Law Tribunal'. Section 410 of the Companies Act, 2013 pertains to 'constitution' of the 'Appellate Tribunal'. 32. Section 420 of the Companies Act, 2013 deals with 'orders of Tribunal'. Section 421 speaks of 'Appeals from orders of Tribunal'. Section 424 of the Companies Act, 2013 provides for procedure before Tribunal and Appellate Tribunal. In fact, the 'Tribunal' and the 'Appellate Tribunal' shall be guided by the principles of natural justice (although not bound by the procedure laid down under Civil of Procedure Code) while disposing of any proceedings before it and also it can r....
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....inary effort nor should be dependent, either wholly or in part, upon any act or omission of a third party for its compliance....." 35. Also, this Tribunal aptly points out the decision of the Hon'ble Supreme Court in Noorali Babul Thanewala V K.M.M. Shetty, MANU/SC/0077/1990 : (1990) 1 SCC 259 wherein it is held and observed as under: "11.When a court accepts an undertaking given by one of the parties and passes an order based on such undertaking, the order amounts in substance to an injunction restraining that party from acting in breach thereof. The breach of an undertaking given to the Court by or on behalf of a party to a civil proceeding is, therefore, regarded as tantamount to a breach of injunction although the remedies were not always identical. For the purpose of enforcing an undertaking that undertaking is treated as an order so that an undertaking, if broken, would involve the same consequences on the persons breaking that undertaking as would their disobedience to an order for an injunction. In the light of this Court's finding in the instant case, that there was a breach of the undertaking mere imposition of imprisonment or fine will not meet the ends of justic....
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....been established. "17. Subordination of Tribunals and courts functioning within the territorial jurisdiction of a High Court can be either judicial or administrative or both. The power of superintendence exercised by the High Court under Article 227 of the Constitution is judicial superintendence and not administrative superintendence, such as one which vests in the High Court under Article 235 of the Constitution over subordinate courts. Vide para 96 of L. Chandra Kumars case, the Constitution Bench did not agree with the suggestion that the tribunals be made subject to the supervisory jurisdiction of the High Courts within whose territorial jurisdiction they fall, as our constitutional scheme does not require that all adjudicatory bodies which fall within the territorial jurisdiction of any High Court should be subject to its supervisory jurisdiction. Obviously, the supervisory jurisdiction referred to by the Constitution Bench in para 96 of the judgment is the supervision of the administrative functioning of the tribunals as is spelt out by discussion made in paras 96 and 97 of the judgment." 18. Jurisdiction should not be confused with status and subordination. The Parliame....
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....hose Courts are transferred to them not realising the distinction between constitutional and statutory functionaries." We are therefore clearly of the opinion that there is no anathema in the tribunal exercising jurisdiction of High Court and in that sense being supplemental or additional to the High Court but at the same time not enjoying status equivalent to High Court and also being subject to judicial review and judicial superintendence of the High Court." 20. Section 20 of the Act was also referred to by the High Court to support its conclusions. Section 30 is merely declaratory of the proceedings before a tribunal being judicial proceedings within the meaning of Sections 193, 219, and 228 of the Penal Code. By no stretch of reasoning, Section 30 could have been held as impinging upon the power conferred on the tribunal by Section 17 of the Act and to hold further that in case of contempt of its lawful authority the only remedy available to tribunal was to have recourse to Section 30 to the exclusion of power to punish for contempt conferred by Sectopm 17.. 21.Contempt jurisdiction is exercised for the purpose of upholding the majesty of law and dignity of judicial system ....
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....on of its IA by this Court on 18 June 2020. 31 Dr Abhishek Manu Singhvi, learned Senior Counsel is correct in the formulation of legal principle but it is in the application of those principles where the fine-print of this case lies. There can be no manner of doubt that (i) the contempt jurisdiction is to be exercised with circumspection; (ii) the acceptance or rejection of a plea on merits is distinct from whether a party is in breach of the order of court; (iii) the disobedience of an order must be willful before it constitutes contempt; (iv) a willful breach must appear clear by the conduct of a party not by implication; and (v) the exercise of legal rights and remedies would not constitute contempt. 32 We must at the outset note that on 8 June 2020, this Court relegated the matter to the NCLT to decide upon the approval application within a fortnight. NCLT passed an order approving the resolution plan submitted by DVI on 9 July 2020. DVI having taken recourse to its appellate remedy before the NCLAT under the provisions of Section 61 of the IBC does not constitute contempt. The plea of contempt however proceeds on the conduct of DVI. Bearing on this issue, the f....
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....not plead force majeure based on the outbreak of the Covid-19 pandemic. 38 The issue which needs to be addressed is whether recourse to the contempt jurisdiction is valid and whether it should be exercised in the facts of this case. Undoubtedly, as we have noted earlier, the conduct of DVI has not been bona fide. The extension of time in the course of the judicial process before this Court enures to the benefit of DVI as a resolution applicant whose proposal was considered under the auspices of the directions of the Court. DVI attempted to resile from its obligations and a reading of its application which led to the passing of the order of this Court dated 18 June 2020 will leave no doubt about the fact that DVI was not just seeking an extension of time but a re-negotiation of its resolution plan after its approval by the CoC. Then again, despite the order of this Court dated 18 June 2020 rejecting the attempt of DVI, it continued to persist in raising the same pleas within and outside the proceedings before the NCLAT. The conduct of DVI is lacking in bona fides. The issue however is whether this conduct in raising the untenable plea and in failing to adhere to its obligations un....
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....d voluntarily resides or carries on business, in case the order is against any such person. 39. Section 425 of the Companies Act, 2013 confers powers on the 'Tribunal' (National Company Law Tribunal) to punish for 'Contempt'. The language employ in Section 425 of the Companies Act, 2013 are that the power of the Contempt of Courts Act, 1971 are vested with the National Company Law Tribunal while adjudicating all the proceedings that come before it. In this connection, this Tribunal significantly points out that the ingredients of Section 425 of the Companies Act, 2013 donot mention that the provisions of power under the Contempt of Courts Act, 1971 are applicable only in respect of proceedings before 'Tribunal' confining in respect of the provisions of Companies Act, 2013. 40. Under the I&B Code, 2016 the Adjudicating Authority (National Company Law Tribunal) adjudicates all proceedings before it and renders its decision. Just because the I&B Code does not specifically mention about the contempt provisions, it cannot be said that the 'Adjudicating Authority' (National Company Law Tribunal) has no powers of contempt. If one is to give such a restricted interpretation that the Adju....
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....remembered that Article 323A and Article 323 B of the Constitution of India merely authorise the certified Legislature to make laws to set up such 'Tribunals' and to include therein ancillary provisions. Also that word 'adjudication' in Article 323A(1) and 323B(1) indicates that the 'jurisdiction of the Tribunal' set up under both the Articles shall be confined to adjudication of quasi judicial issues relating to administrative matters as the case may be. NATIONAL COMPANY LAW TRIBUNAL RULES 46. It is significantly pointed out that National Company Law Tribunal Rules, 2016, Part IV, General Procedure, Rule 34(1) under the caption 'General Procedure' enjoins that in a situation not provided for in these Rules, the 'Tribunal', may, for reasons to be recorded in writing, determine the procedure in a particular case in accordance with the principles of natural justice. No wonder, the 'Tribunal' as per Rule 51 of the National Company Law Tribunal Rules, 2016 has the power to regulate its own procedure in accordance with the Rules of natural justice and equity, for the purpose of discharging its functions under the Act. Furthermore, Rule 59 of the National Company Law Tribunal Rules, 20....
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....s dismissed by the 'Tribunal' holding that IBC is devoid of contempt jurisdiction. Disposition 50. Although Section 5(1) of the I&B Code, 2016 defines 'Adjudicating Authority' for the purpose of Part II (Insolvency Resolution and Liquidation for Corporate Persons Chapter I Preliminary meaning National Company Law Tribunal constituted under Section 408 of the Companies Act, 2013 and further that the BLRC Report coupled with Statement and Objects and Reasons of the IBC Bill 2016 visualise the 'National Company Law Tribunal' to act as 'Adjudicating Authority' for the purpose of matters pertaining to I&B code, as per Section 425 of the Companies Act, 2013. The 'Tribunal' (i.e. NCLT) and the 'Appellate Tribunal' (i.e NCLAT) have the same 'jurisdiction', 'powers' and 'Authority' in respect of contempt of it as the 'High Court' viewed in that perspective, the conclusions arrived at by the Adjudicating Authority (National Company Law Tribunal) in the impugned order by making it clear that the IBC is devoid of contempt of jurisdiction and thereby dismissing the application, leaving it open to the Appellant/Applicant to seek remedy through recourses available, are clearly unsustainable in ....