TaxTMI 
TaxTMI 
2018 (1) TMI 1749
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....iled on 12.10.2017 seeking the following reliefs:- (a) Issue an appropriate writ, order or direction in the nature of certiorari or mandamus or such other appropriate writ, order or direction to declare that the notification of Section 425 of the Companies Act, 2013 by Respondent No.1 pursuant to Notification No. S.O. 1934 (E) dated June 1, 2016 published in the Gazette of India is ultra vires and unconstitutional and to strike down such modification; (b) Issue an appropriate writ, order or direction in the nature of mandamus or such other appropriate writ, order or direction to Respondent No.1 to frame rules to regulate proceedings under Section 425 of the Companies Act, 2013 read with the Contempt of Courts Act, 1971, as amended; (c) Issue an appropriate writ, order or direction in the nature of certiorari or such other appropriate writ, order or direction to quash or set aside the orders dated September 5, 2017 and September 26, 2017 issued by the National Company Law Tribunal, Principal Bench in Contempt Application No. 300 (PB) of 2017 in Company Petition No. 110 (ND) of 2013; (d) Issue an appropriate order or direction to stay the proceedin....
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.... that they also do not press the prayer clauses (a) and (b). 5. On 26.10.2017, the court framed the following preliminary issue :- "The question of propriety of the writ jurisdiction of this Court being invoked at the stage of show cause notice alongside the submission of the respondents that the remedy of appeal under the special statute (Companies Act, 2013) is also available, needs to be examined first". 6. It was, however, noted in the proceedings recorded on 07.11.2017 that the petitioners have insisted on and advanced arguments also covering the challenge on merits to the impugned orders not restricting themselves to the preliminary issue mentioned in the proceedings of 26.10.2017. 7. The background facts need to be noted at this stage, albeit, briefly. 8. McDonald's India Pvt. Ltd. (MIPL) was incorporated in August, 1993 under the Companies Act, 1956, it being a wholly owned indirect subsidiary of Mc Donald's Corporation US (hereinafter referred to as McDUS), in the wake of a joint venture agreement (JV) dated 31.03.1995 entered into by MIPL on one hand and by the second respondent in these petitions. A new company styled as Connaught Plaza Restaurants L....
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....o act as Managing Director of Connaught Plaza subject to passing of any resolution under the chairmanship of learned Administrator. (ii) All steps taken in pursuance of non-election of Mr. Vikram Bakshi as Managing Director, are also declared illegal, unlawful, unjust and malicious. (iii) The Board of Director of Connaught Plaza is divided in 50-50. In order to break the impasse, we deem it just and equitable to appoint Hon'ble Mr. Justice G.S. Singhvi, Former Judge Supreme Court, 7 Padmini Enclave, Arvindoo Marg, New Delhi-110016 to act as Administrator with all the powers including the power to vote in the Meetings of Board of Directors. The Administrator shall settle his own fee. (iv) The Administrator shall ensure that all resolutions in respect of Connaught Plaza are passed to advance the interest of the Connaught Plaza and none of the two groups is oppressed. The agenda for re-election of Mr. Vikram Bakshi as the Managing Director shall be taken up with the prior approval of the Administrator. No agenda should be placed before the Board of Directors without the prior approval of the learned Administrator. (v) The Administrator may consider ....
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....n any day thereafter. This request was declined by the Administrator and notice of the meeting of the board of directors of CPRL was circulated on 11.08.2017. On 14.08.2017, the second petitioner in the first captioned petition, who had earlier not been a party to the proceedings arising out of company petition no.110(ND)/2013, came to be appointed as Director of MIPL board, assumably he being the nominee of McDUS. The two petitioners of the second captioned petition reiterated their inability to attend the meeting of the board of directors of CPRL on 21.08.2017. By another communication dated 19.08.2017 in response to a further communication from the Administrator, they indicated that their external legal counsel would observe the proceedings of the board on the date for which the meeting had been convened. 12. On 21.08.2017, MIPL issued a notice of termination of the franchise agreement in respect of the restaurants operated by CPRL. For completion of the narration of facts, it may be added that the meeting of the board of directors of CPRL convened by the Administrator took place as scheduled on 21.08.2017 and was attended, amongst others, by the second respondent, and the re....
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.... (g). Pass ex-parte, ad-interim orders in terms of Prayers (a) to (f) above. (h). Pass any other or further orders as this Hon'ble Tribunal may deem fit and proper in the circumstances of the case." 15. The second application was presented to invoke the jurisdiction of NCLT under Section 425 of the Companies Act, 2013 alleging willful disobedience by the parties shown in the array as contemnors, this with reference to the order dated 13.07.2017 of NCLT on Company Petition no.110(ND)/2013, the prayer made therein being as under :- "(a) Pass appropriate orders to summon and punish the Contemnor Nos. 1 to 11 in contempt for willful breach and willful disobedience of Final Judgment and Order dated 13.07.2017 passed by this Hon'ble Tribunal in Company Petition No. 110 (ND) of 2013; and (b) Direct the Contemnors Nos. 1 to 11 to purge the contempt and to comply with the Final Judgment and Order dated 13.07.2017 passed by this Hon'ble Tribunal in Company Petition No. 110 (ND) of 2013. (c) Pass any other or further orders as this Hon'ble Tribunal may deem fit and proper in the circumstances of this case." 16. Both the above mentioned applicati....
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....als are pending consideration before the National Company Law Appellate Tribunal and propriety demands that any such application for interim relief be preferred before the National Law Appellate Tribunal. As a sequel to above discussion this application is dismissed without any cost. We make it clear that we have not considered the issues on merit and this order shall not be construed to have expressed any opinion on the controversy". 18. In the second application - Contempt Appl. No.300(PB)/2017 - the applicants (i.e. the second and third respondents herein) had impleaded eleven parties as respondents describing them as contemnor nos.1 to 11, they including MIPL (contemnor no.1), Ms. Aysel Melbye (contemnor no.2), Robert Dale Larson (contemnor no.3) and Robert Vee Chong Hunghanfoo (contemnor no.5), the second and third whereof are the co-petitioners in the second above-captioned petition and the first and fourth whereof are the co- petitioners in the first captioned petition, the others being respondents in these matters. 19. It may be mentioned here that McDUS, the fifth respondent in Company Petition No.110(ND)/2013 against which the restraint order was passed ear....
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....ongwith certain others were, however, set exparte. The proceedings recorded would read thus :- "Reply to the contempt petition be filed within 10 days with a copy in advance to the counsel for the petitioner. Rejoinder, if any, be filed within a week thereafter with a copy in advance to the counsel opposite. Respondent Nos. 4,5,7,9, 10 & 11 are proceeded ex-parte. List the matter for arguments on 23rd October, 2017." 23. The Companies Act, 2013 has established authorities that include NCLT and NCLAT. Section 420(1) mandates that NCLT would pass such orders in the proceedings brought before it as it thinks fit after giving to the parties "a reasonable opportunity of being heard". In terms of Section 421, any person aggrieved by an order of NCLT "may prefer an appeal" to the NCLAT, the exception being, per sub-section (2), in case the order has been passed by NCLT "with the consent of parties". The mandate to NCLAT is similar in as much as Section 421(4) requires that NCLAT shall pass such orders on the appeal "as it thinks fit" by confirming, modifying or setting aside the order impugned before it "after giving the parties to the appeal a reaso....
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....tained in Section 17 of the Contempt of Courts Act, 1971 may be noted in extenso :- 17. Procedure after cognizance.- (1) Notice of every proceeding under section 15 shall be served personally on the person charged, unless the court for reasons to be recorded directs otherwise. (2) The notice shall be accompanied- (a) in the case of proceedings commenced on a motion, by a copy of the motion as also copies of the affidavits, if any, on which such motion is founded; and (b) in case of proceedings commenced on a reference by a subordinate court, by a copy of the reference. (3) The Court may, if it is satisfied that a person charged under section 15 is likely to abscond or keep out of the way to avoid service of the notice, order the attachment of his property of such value or amount as it may deem reasonable. (4) Every attachment under sub-section (3) shall be effected in the manner provided in the Code of Civil Procedure, 1908 (5 of 1908 , for the attachment of property in execution of a decree for payment of money, and if, after such attachment, the person charged appears and shows to the satisfaction of the court that he....
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....onstrued as a reference to such Law Officers as the Central Government may, specify in this behalf." 28. Section 469 of the Companies Act, 2013 vests in the Central Government the authority to "makes rules" for carrying out the provisions of this law, by notification, clarifying by sub-section (2) that such enabling power confers the jurisdiction to make rules "for all or any of the matters which by this Act are required to be, or may be, prescribed or in respect of which provision is to be or may be made by rules." 29. The Central Government issued notification no.S.O.1934 (E) on 01.06.2016 bringing into effect the provision contained in Section 425 of the Companies Act, 2013. By notification G.S.R. 716(E) issued and published in the official Gazette on 21.07.2016, the Central Government framed the rules, in exercise of the powers conferred by Section 469, such rules being called "the National Company Law Tribunal Rules, 2016". These rules, inter alia, deal with a variety of subjects and issues including definitions, forms, etc (Part-I), power and functions of the President, Registrar and Secretary (Part-II), institutions of proceedings, petitions, appeals, etc. (Part-III), ....
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....on authorised to accept a notice or a process, and such service on the authorised representative shall be deemed to be a proper service. (6) Where the Tribunal directs a service under sub-rule (4), such amount of charges, as may be determined by the Tribunal from time to time, but not exceeding the actual charges incurred in effecting the service, shall be deposited with the registry of the Tribunal by the petitioner or applicant. 49. Ex-parte Hearing and disposal.- (1) Where on the date fixed for hearing the petition or application or on any other date to which such hearing may be adjourned, the applicant appears and the respondent does not appear when the petition or the application is called for hearing, the Tribunal may adjourn the hearing or hear and decide the petition or the application ex- parte. (2) Where a petition or an application has been heard ex-parte against a respondent or respondents, such respondent or respondents may apply to the Tribunal for an order to set it aside and if such respondent or respondents satisfies the Tribunal that the notice was not duly served, or that he or they were prevented by any sufficient cause from appearing ....
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.... be exercised till rules relating to the procedure therefor are framed by NCLT or NCLAT and further that the issuance of the notification on 01.06.2016 by the Central Government bringing into force the provision contained in Section 425 was ultra vires and Unconstitutional. But, prayer clauses (a) and (b) having been given up, the legality and propriety of the orders passed by NCLT on 05.09.2017 and 26.09.2017 on the contempt application no.300 (PB)/2017 is challenged on the grounds that the action is wholly uncalled for, illegal and arbitrary, in gross breach of the principles of natural justice. The petitioners attribute bias alleging that NCLT has shown undue hurry and haste in taking cognizance on the contempt application committing impropriety, not only by not awaiting the decision of NCLAT on the appeals which have been brought before it by both sides assailing the order of the NCLT (dated 13.07.2017), the alleged breach of which constitutes the contempt, but also failing to apply its mind appropriately to the averments made in the contempt application which, if done, would have shown that there is not even a prima facie case made out for any willful disobedience, defiance or....
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....d some of the respondents have been proceeded ex parte without it even being examined as to whether they had been served or not with the notices on the contempt application thereby denying to such parties an effective opportunity to be heard in relation to the issuance of notice. 35. There can be no quarrel with the proposition that the proceedings under the Contempt of Courts Act, 1971 are quasi criminal in nature. Initiation of action under the criminal law is one of great import and therefore, a serious matter. The burden and standard of proof in contempt proceedings is the same standard of proof as required in criminal proceedings. Great circumspection is required to be exercised by the court or the forum conferred with power to punish for contempt. Such action cannot be undertaken merely based on conjectures or surmises. The proceedings of contempt of court are generally treated as sui generis. Though the procedure adopted both under the common law and the statute in this context has invariably been summary in nature and the provisions of the Code of Criminal Procedure or the Evidence Act do not strictly control the same, it is essential that the court or the forum follows ....
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.... length with reference to a series of previous rulings of the Supreme Court holding that appeal under Section 19 of the Contempt of Courts Act was maintainable only in respect of orders "punishing for contempt". The court reiterated the position of law on the subject as declared in Mahboob Vs. Allibhoy, (1996) 4 SCC 411 as under : "On a plain reading Section 19 provides that an appeal shall lie as of right from any order or decision of the High Court in exercise of its jurisdiction to punish for contempt. In other words, if the High Court passes an order in exercise of its jurisdiction to punish any person for contempt of court, then only an appeal shall be maintainable under sub-section (1) of Section 19 of the Act. As sub-section (1) of Section 19 provides that an appeal shall lie as of right from any order, an impression is created that an appeal has been provided under the said sub-section against any order passed by the High Court while exercising the jurisdiction of contempt proceedings. The words 'any order' have to be read with the expression 'decision' used in the said sub-section which the High Court passes in exercise of its jurisdiction to punish for contempt. ....
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....late forum. It is submitted that while the prayer in the Company Appl. 301(PB)/2017 under Section 242 of the Companies Act, 2013 on these very grounds was accepted on 05.09.2017, NCLT taking an inherently contradictory approach has proceeded to act on the contempt application by way of separate order passed on the same date issuing notice for show cause. 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 contempt, ....
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....onceivably been entertained by NCLT at the same time when the superior forum was expected to be in seisin of similar prayer. The NCLT made it clear in last para of its order on application under Section 242 that it was not expressing any opinion on the controversy at that stage. In these circumstances, the ruling in Modern Food Industries (India) Ltd. (supra) would not help the petitioners. 43. There is no merit in the argument that an action for contempt cannot be initiated or taken against a party who was not already a party to the lis or, that in contempt proceedings there cannot be a charge of "collusion" or, of the parties having acted "in concert". It is not difficult to conceive of cases where a party to the litigation, with aid, assistance or abetment of a stranger to the proceedings, may indulge in acts of commission or omission so as to overreach the judicial orders passed in such proceedings and to defeat or obstruct the administration of justice. The parties which are strangers to the judicial proceedings can be proceeded against if there is material to support the allegation that they had knowledge of the lis and the orders passed therein and that they shared the gu....
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....y facts but also requisite material in support of the contentions of either side. The decision as to whether the alleged acts constituting contempt have actually been committed or not will 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. ....