TaxTMI 
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2024 (5) TMI 941
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....rs.', because all have been filed under Section 421 of the Companies Act, 2013 (in short 'Act') against the order dated 12.05.2022 passed by the National Company Law Tribunal, Guwahati Bench, Guwahati (in short 'the Tribunal') on a contempt petition no. 3 of 2018 filed in CP No. 89 of 2021. 2. The Contempt Application No. 3 of 2018 was filed by 3A Capital against Prag Bosimi Synthetics Limited (Company) and Respondent No. 1 to 9 (arrayed as such in that contempt application). Hemant Bhanushankar Vyas was impleaded as Respondent No. 2 in the contempt application as the managing director but since he has expired, therefore, his name was dropped from the array of parties. The Respondent No. 3 to 9 in the said contempt application are the directors of the Company. 3. The contempt application has been disposed of on 12.05.2022 by the Tribunal with the following directions:- "23. Directions to the Respondent Company to pay to the Petitioner: 23.1Rs 2,99,55,000.00 as payable to the Petitioner in the same proportion for those 30 lacs shares as paid to all the other 15Lenders/Shareholders under CDR approved restructuring package envisaging One Time Settlement (OTS), 23.2Rs 2,60,42....
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....Petitioner. 28. On the other hand, if the Petitioner Company does not accept the above amount for any reason, the Respondent Company is at liberty to file a petition before this bench so that the Respondent Company shall be advised to deposit the said amount in an account to be decided by the Tribunal for the discharge of all the Respondents from the case. 29. The Respondent Company shall file an affidavit with the Registry within 15 days from the date of payments of the above amount and thereafter all the Respondents (R1, R3, R4, R 6 to R9) shall be discharged automatically from the matter. 30. Hence, the Contempt Application No. 03 of 2018 in C.P. No. 89 of2011 stands disposed of with above Observations and Directions. In view of this order, all other related IAs- IA No. 52 of 2019, IA No. 53 of2019, IA No. 54 of 2019 and the Company Application No. 05 of 2021have become infructuous. 4. CA (AT) No. 115 of 2022 is filed by Devang Hemant Vyas, Girindra Mohan Das, Rohit Parmananddas Doshi, Hemanga Kishore Sharma, Deepali Rajneesh Pathak, Mukund Pradyumanrai Trivedi (all directors of the company) against 3A Capital arrayed as Contesting Respondent No. 1 and Prag Bosimi Syn....
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....,00,000 preference shares, of Respondent No.1, from the date of default of paying unpaid dividend, till date; d. Pending the hearing and final disposal of the present Appeal, be pleased to direct the Respondents to disclose on oath their respective personal properties（movable/immovable) and upon such disclosure, attach the same and thereafter sell the same in satisfaction of the claim of the Appellant, valued at 30,00,00,000/-（Rs. Thirty Crores Only) towards face value of preference shares plus unpaid dividend on the said 30,00,000 preference shares from the date of default of paying unpaid dividend, till date. e. Pending the hearing and final disposal of the above Appeal, the Respondents and their servants, agents and assignees be restrained by an order of injunction of this Hon'ble Appeal Tribunal, from disturbing/changing the capital structure of the Respondent No. 1 and/or to change the constitution / composition of RespondentNo.1; f. Pending the hearing and final disposal of the above Appeal, the Respondents and their servants, agents and assignees be restrained by an order of injunction of this Hon'ble Appeal Tribunal, from declaring/disturbing/....
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....f Rs. 867 Lac. and 19.5% Redeemable Cumulative value of Rs. 867 Lac., 19.5% RCCPS of the aggregate face value of Rs. 2058 Lac. and 19.5% Secured Redeemable Non-Convertiable Debentures of Rs. 100 each of the aggregate value of Rs. 2973 Lac. by private placement. 13. The company, by its letter dated 08.04.1996, accepted the offer of the ICICI and allotted 10,00,000 numbers of 19.5% RCCPS of Rs. 100 each aggregate face of Rs. 1000 Lac. to the ICICI and the company in its board meeting held on 07.12.1996 decided that as per the subscription agreement signed by the Company, ICICI, IDBI signed on 08.04.1997 and 17.04.1996 for the reliefs, assistance granted by the Company it was necessary to allot 19.5% RCCPS for which share certificate was issued by the Appellant on 07.12.1996 and allotted 867000 number of 19.5% RCCPS of Rs. 100 each of the aggregate face value of Rs. 867 Lac. to the ICICI and thus, the ICICI was allotted 75,000 CCP shares against project finance as according to the subscription agreement. 14. In order to avail further project finance, an agreement dated 17.04.1996 for subscription of 19.5% Cumulative Convertible Preference Shares (CCPS) was executed between the Appel....
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.... for the cancellation of total 81,46,250 RCCPS and CCPS including 30 Lac. shares issued to the ICICI and to file Company Petition No. 7 of 2011 before the Guwahati High Court for approval of cancellation/reduction of capital in relation to all the aforesaid 81,46,250 RCCPS. The Petition was allowed by Guwahati High Court on 18.12.2012. In these proceedings, 3A Capital filed an application to intervene by filing an impleadment application but it was dismissed on 17.08.2012 because its name was not appearing in the list of the shareholders of the Company and as such it had no right to intervene. 20. The order dated 17.08.2012 was challenged by 3A Capital before the Hon'ble Supreme Court by way of SLP No. 28115 of 2012 in which no stay was granted against the further proceedings in the petition filed by the Company bearing CP No. 7 of 2011. The order which was ultimately passed in the CP No. 7 of 2011 on 18.12.2012 was also challenged by 3A Capital before the Hon'ble Supreme Court by way of SLP No. 7459 of 2013 in which no stay was granted and only a notice was issued. 21. Apropos the order dated 18.12.2012, the Company filed Form 21 before the Registrar of Companies (ROC) for givin....
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....dents to disclose on oath the properties（Immovable/Movables) and upon such disclosure attach the same and thereafter sell the same in satisfaction of the claim of the Applicant, which the Applicant valued to Rs. 30,00,00,000/-（Rupees Thirty Crores only) towards face value of preference shares plus unpaid dividend on 30,00,000 preference shares from the date of default of paying unpaid, till date.; c) Pending the hearing and final disposal of the present Application, pass an Order of injunction of this Hon'ble tribunal inter-alia restraining them, their servants, agents and assigns from creating any third party rights of the said preferential shares; d) Pending the hearing and final disposal of the present application, the Respondents, their servants, agents and relatives be restrained from creating third party rights with respect of their immovable properties. e) Pending the hearing and final disposal of this Application, this Hon'ble Bench may be pleased to restrain the Respondents from dealing with the equity share capital of the Respondent No.1,including but bot limited, by way of reduction of share capital, issuance of any securities in the form o....
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....tal assets of the company as may be noticed from paragraph 20 of the company petition being Rs. 2,50,39,75,112/-, it is sufficient to take care the interest of such unsecured creditors. 14. Having heard the petitioner and also having considered the materials placed on records, this court is satisfied that the petitioner company has been able to make out a case for invoking Section 100 of the Act to confirm the proposed reduction of the share capital of the petitioner company. It is ordered accordingly." 29. The order dated 18.12.2012 was challenged by 3A Capital by way of SLP No. 7459 of 2013 in which notice was issued. 30. After the order dated 18.12.2012 of reduction of share capital, a petition no. 89 of 2011, filed under Section 111A of the Act, 1956 by 3A Capital before the CLB was allowed vide its order dated 27.05.2016. This order dated 27.05.2016 was challenged in appeal CA No. 2 of 2016 under Section 10F of the Act, 1956 which was upheld by the Hon'ble Guwahati High Court vide its order dated 12.07.2017and the order dated 12.07.2017 was challenged before the Hon'ble Supreme Court by way of SLP No. 32880 of 2017 which was dismissed on 02.02.2018 and the contempt appli....
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....rcise, for this purpose, the powers under the provisions of the Contempt of Courts Act, 1971, which shall have the effect subject to modifications that- (a) the reference therein to a High Court shall be construed as including a reference to the Tribunal and the Appellate Tribunal; and (b) the reference to Advocate-General in section 15 of the said Act shall be construed as a reference to such Law Officers as the Central Government may, specify in this behalf. " 33. It is contended that the Tribunal and the Appellate Tribunal has been given the jurisdiction, power and authority in respect of a contempt of themselves which means that it pertains to the order passed by the Tribunal or Appellate Tribunal and not the order passed by the CLB. In this regard, he has also referred to a decision of the Andhra Pradesh High Court given in the case of Venkata Swamy Naidu Vs. M/s Sri Surya Teja Construction Pvt. Ltd. (2007) 140 Comp. Cas. 412. 34. It is next argued that since no contempt proceedings was filed before the CLB, therefore, it is not a case of transfer of the pending application in terms of Section 434 of the Act. Section 434 of the Act is reproduced as under:- " Section....
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.... also that proceedings relating to cases of voluntary winding up of a company where notice of the resolution by advertisement has been given under subsection (1) of section 485 of the Companies Act, 1956 but the company has not been dissolved before the 1st April, 2017 shall continue to be dealt with in accordance with provisions of the Companies Act, 1956 and the Companies (Court) Rules, 1959.] (2) The Central Government may make rules consistent with the provisions of this Act to ensure timely transfer of all matters, proceedings or cases pending before the Company Law Board or the courts, to the Tribunal under this section. ] " 35. It is further submitted that even the order dated 27.05.2016 passed by the CLB which has been upheld by the Hon'ble High Court of Guwahati vide its order dated 12.07.2017, had merged in the order of the High Court, therefore, it was the order of the High Court dated 12.07.2017 which could have been, at the most, for the sake of argument, enforced and in this regard, reliance has been placed upon two judgements of the Hon'ble Supreme court in the case of Shanti Vs. T.D. Vishwanathan & Ors. 2018 SCC OnLine 2196 and Chandi Pd. And Ors. Vs. Jagdish P....
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.... / issue those shares which have already been cancelled nine years back and the said contention has been found to be genuine, appropriate, justified and tenable but still in para 16 of the impugned order it held that the company is liable to pay the money in lieu of those shares and then issued the impugned direction out of which some of the directions have been issued which were not even prayed for, like the award of Rs. 20 Lac. towards legal expenses and award of Rs. 5 Lac. which has been ordered to be paid to the MCA. 40. Counsel arguing CA No. 115 of 2016, filed at the instance of the directors, has submitted that the Appellant No. 1 was nonexecutive director and was not involved in the day to day activities of the Company. The Appellant No. 2 and Appellant No. 6 were independent director non-executive directors and were not involved in the day-to-day activities of the Company. The Appellant No. 3 was independent non-executive director. The Appellant No. 4 was an independent non-executive director. He was the nominee director nominated by AIDC in the board of directors of the Company. The Appellant No. 5 was an independent non-executive director. It is alleged that all the dir....
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....challenged before the Hon'ble Supreme Court which has been upheld because the appeal has been dismissed on 02.02.2018 and hence, the order dated 27.05.2016 has attained finality. He has submitted that in petition no. 7 of 2011, filed by the Company under Section 100 of the Act of 1956 for reduction of share capital, an application was filed by 3A Capital for the purpose of impleadment but the said application was dismissed on the ground that his right over the shares in question has not been crystallised at this stage. The rights was ultimately crystallised in the order passed on 27.05.2016, therefore, instead of compensation, the share should have been transferred. 42. In reply to the other appeals no. 115 and 116 of 2022, it is submitted that if the appeal no. 133 of 2022 is dismissed, there is no error in the direction issued in the impugned order for compensating 3A Capital in regard to the shares which have already been transferred. 43. While replying to this appeal, Counsel for the Company and the directors have submitted that once the share capital has been reduced in CP No. 7 of 2011 and the order has become final, the shares ceased to exist and the company cannot registe....
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.... passed by the Guwahati High Court of reducing paid-up share capital of Respondent No. 1 Company acquired finality, it would lead to anomalous position if Applicant is to claim title to or property in the said 30,00,000 RCCP and CCP share. e) By reason of the transfer, it would be alleged that the share capital of the Company stands increased which is contrary to the provisions of the Company Law and the Order passed by the High Court. Moreover, such an increase would also be without any infusion or subscription to the share capital. It is humbly submitted that in contempt jurisdiction no court or tribunal will seek to implement an order which is legally impermissible /impossible or pertains to nonexistent subject matter or which will violate or circumvent existing provisions of laws. On this ground alone the present proceedings are liable to be dismissed. " 47. Rejoinder to the reply was filed by 3A Capital on 20.05.2019. 48. However, the preliminary objections raised by the Appellant, regarding the maintainability of the contempt petition, which goes to the root of the case, have been noticed by the Tribunal in its impugned order and rejected in Para 15.1 holding that these....
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....pt of Courts Act has the power to punish for contempt of a subordinate court, coextensive and congruent with its power to punish for contempt of itself. Thus, it is clear that the CLB had no jurisdiction of issuing order of contempt because the power to punish for contempt has to be specifically provided for and conferred under the Act. 52. The second argument raised by the Appellant is that even if the application under Section 425 of the Act has been filed, it does not have the power to punish for the contempt of the order passed by the CLB. 53. In this regard, he has referred to the provisions of Section 425 of the Act in which the legislature has categorically used the words 'Contempt of themselves' which means that it can issue the rule for contempt of its own order like that of the High Court but it does not have the power to issue rule for the alleged contempt of the order of CLB. 54. The next arguments of the Appellant is that Section 434 of the Act was made operative from 01.06.2016 by notification no. S.O. 1936(E) which provides that in exercise of the powers conferred by clause (a) of sub-section (1) of Section 434 of the Act, 2013 (18 of 2013), 'the Central Governmen....
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.... passes an order of merit, the doctrine of merger would apply. The doctrine of merger is based on the principles of the propriety in the hierarchy of the justice delivery system. The doctrine of merger does not make a distinction between an order of reversal, modification or an order of confirmation passed by the Appellate Authority. The said doctrine postulates that there cannot be more than one operative decree governing the same subject matter at a given point of time." 60. In the matter of contempt, the Hon'ble Supreme Court has also held in the case of Dineshan K.K. Vs. R.K. Singh & Another, (2014) 16 SCC 88 that if the order of the High Court had merged in the order of the Apex Court then the contempt petition has to be filed on the order passed by the Appellate Court. However, in this case, the Hon'ble Supreme Court while exercising its power under Article 129, 136 and 142 of the Constitution of India, directed to the complainant to approach the High Court for the purpose of seeking direction against the contemnor, if any. 61. In view of this judgment, once the order of the CLB passed on 27.05.2016 merged with the order dated 12.07.2017 passed by the High Court and further....