Pradeep Kanodia & Ors. vs Ashok Kanodia & Ors.
2014 Latest Caselaw 2576 Del

$~47
*    IN THE HIGH COURT OF DELHI AT NEW DELHI
+   CCP(CO.) 9/2014
    PRADEEP KANODIA & ORS.                              ..... Petitioners
                        Through      Mr. Tanmaya Mehta, Mr. Shivam
                                     Singh and Mr. Anunaya Mehta, Advs.

                        versus

    ASHOK KANODIA & ORS.                                ..... Respondents
                Through              Mr. Akhil Sibal and Mr. Anirudh
                                     Wadhwa, Adv. for R-1.

    CORAM:
    HON'BLE MR. JUSTICE SANJEEV SACHDEVA

                        ORDER

% 20.05.2014

SANJEEV SACHDEVA, J. (ORAL)

CM No. 1186/2014 (exemption) Allowed, subject to all just exceptions.

Application stands disposed of.

CCP (CO.) No.9/2014 & CM No. 1187/2014 (for interim reliefs under Section 10)

1. The petitioners have filed the present contempt petition contending two things.

2. Firstly, that the respondent No.2 had undertaken on 6th April, 2014 before the Company Law Board to pay money as per the agreement dated 23rd January, 2013 to the petitioner but has failed to pay the said amount.

3. Secondly, that there was various directions by the Company Law Board directing the respondent to place the statement of copies of bank account of the Company before the Bench by supplying a copy to the petitioners. The petitioner has contended that the respondent has failed to comply with the said directions of filing the bank account statement in compliance of order dated 19th February, 2013, 14 th February, 2014 and 1st April, 2014.

4. Learned counsel for the petitioners contends that there is a wilful breach of the undertaking and violation of the orders of the Company Law Board. The petitioner has, thus, prayed for initiation of contempt actions against the respondents.

5. Respondent No.1 has entered appearance through counsel and contends that advance notice was served on the respondent and as such the respondent has entered appearance.

6. The contention of the counsel for the petitioners is that there was an agreement between the parties whereby the petitioner was to exit the company after being paid certain amount of money by the respondents. As per the petitioners one of the options given to the respondent to pay the amount to the petitioners was by sale of one of the assets of the company though he contends that this was not the only option. The petitioner has filed the petition before the Company Law Board contending that certain actions were taken by the respondent against the petitioner which were affecting the rights of the petitioner as a shareholder and the rights of the petitioner No.1 as a Director.

7. As per the petitioner, the petitioner No.1 was removed from the

Board of Directors on 14th January, 2014 and, accordingly, an application was filed before the Company Law Board seeking reinstatement of the petitioner No.1 to the Board of Directors. The application came up for hearing on 6th February, 2014 wherein it is the contention of the counsel for the petitioner that an undertaking was given by the respondent No.1 to pay the money as per the agreement along with interest.

8. Learned counsel appearing for respondent No.1 who was the respondent No.2 before the Company Law Board contends that the undertaking recorded in order dated 6th February, 2014 was offered on behalf of the said respondent. However, the said offer of undertaking was not accepted and the order of removal of petitioner No.1 from the Board was stayed. Learned counsel for the respondent No.1 has further contended that the petitioner No.1 has conducted himself in a manner prejudicial to the interest of the company and as such complete information of the company account cannot be shared with the petitioner No.1. He contends that the company account contain certain confidential information in respect of the clients of the company M/s. Precision Electronics Limited and further that there are certain sensitive information which cannot be shared with the petitioner No.1. Learned counsel for respondent No.1 has contended that an application has been filed before the Company Law Board seeking modification of orders dated 9th February, 2014 and 1st April, 2013 on the above ground and the said application is likely to be listed on 9th June, 2014 when the main matter is listed. He further contends that the

respondent No.1 is ready to file the complete bank statements in a sealed cover before the Company Law Board pending adjudication on the said application and further contends that up to date priodical fortnightly statements would be filed before the Company Law Board in a sealed cover pending the disposal of the above application moved by the respondent No.1.

9. The petitioner has invoked the contempt jurisdiction of this Court. To ascertain whether there is any wilful breach of an undertaking given to the Court or violation of an order, it would be necessary to extract the relevant portion of the order. Order dated 6th February, 2014 records as under:-

"......

In view of the submissions heard from both sides, it is clear that both parties are warring at each other and they could not go together any more. It appears that it is clear that R-2 herein has not paid out the money to the petitioner till date. To which, the respondent no. 2 says that he could not pay because these petitioners are not cooperating to sell the fixed asset i.e proposed to be sold by the company as per the agreement entered in between them.

R-2 undertakes that he would pay that money as per the agreement alongwith interest, if any delay takes place in making payment to the petitioners herein.

But on seeing the facts and documents in this case, R-2 should have come before this Bench before initiating any action for removal of the P-l from the Board, instead of doing the same, R-2, got a resolution passed removing the petitioner no.1 showing that he violated section 299 of the Companies Act.

This section is to be invoked only when it is evident that a Director has some interest in the transaction that comes up before the Board. Since there being no such situation

before the Board, there was no occasion for R-2 to invoke section 299 of the Companies Act for removal of P-l as Director.

For this bench being prima facie satisfied with the submissions of the petitioner side, the board resolution dated 14.01.2014 is hereby stayed until further orders in this application.

For the petitioner side having given an undertaking, not to interfere with or participate in the project likely to come to R-l company from Tata Power, the petitioners are hereby directed not to participate in the Board meeting relating to the work of MAFI or to make any correspondence in relation to this project with anybody until further orders.

List the matter as fixed earlier."

10. Perusal of the order dated 6th February, 2014 makes it clear that an offer of undertaking was made by the respondent No.2, however, the said offer was not accepted by the Company Law Board as it has recorded "But on seeing the facts and documents in this case R-2 should have come before this Bench before initiating any action for removal of P-1 from the Board.."

11. The above lines clearly indicate that the Company Law Board has not proceeded on the undertaking offered by the respondent No.1. Further, the Company Law Board has stayed the removal of the petitioner No.1 from the Board, however, subject to certain limitations. The limitation has been imposed in view of the undertaking given by the petitioner, in respect of a project that is likely to come from Tata Power. The undertaking on behalf of the petitioner has been noted in view of the allegation of the respondent that petitioner No.1 has leaked information of the

company to third parties and even confidential information in relation to defence projects. This allegation of the respondents has been denied by the petitioner.

12. The order dated 6th February, 2014 has stayed the resolution dated 14th January, 2014 whereby the petitioner No.1 was removed from the Board of Directors. The action of the Company Law Board staying the resolution dated 14th January, 2014 clearly shows that the Company Law Board has not accepted the undertaking given by the respondent No.1. The Company Law Board has not passed an order in furtherance to the undertaking offered by the respondent No.1 on the other hand has rejected the same.

13. Learned counsel for the petitioner has relied on the extract of the judgment of Bombay High Court by the Supreme Court in Rama Narang vs. Ramesh Narang and Another, (2006) 11 SCC 114 to contend that the expression "undertake" used in an order or decree of the Court amounts to an undertaking to the Court. Learned counsel for the petitioner has contended that the fact that that word undertakes has been used in the order dated 6th February, 2014 implies that the respondent No.1 has undertaken to the Court and as such any breach of the said undertaking would entail consequences.

14. In my view the said judgment is not applicable in the facts of the present case as in the said judgment of the Supreme Court has extracted paragraphs of the judgment of the Bombay High Court in Bajranglal Gangadhar Khemka & Anr. Vs. Kapurchand Ltd. AIR 1950 Bom 336, wherein the Bombay High Court has noted that the

Court had passed a decree after an undertaking was embodied in the consent terms and has held that the Court did sanction a particular course and that course was the putting of its imprimatur upon the consent terms. However, in the facts of the present case, the Company Law Board has not accepted the undertaking or passed an order based on the undertaking rather has impliedly rejected the offer of undertaking given by the respondent No.1 and has stayed the Board resolution whereby petitioner No.1 was removed from the Board of Directors. In my view, no contempt is made out as against the respondents.

15. Insofar as the direction of the Company Law Board directing the respondents to file the statement of bank accounts is concerned, it is noted that an application has been filed by the respondents seeking modification of the order. The application is pending before the Company Law Board and it has still to form an opinion on the same. The offer made by the counsel for the respondent No.1 that the statement of accounts would be filed in a sealed cover pending the adjudication of the application in my view is a reasonable offer. In view of the offer of the respondent No.1 in filing the documents in a sealed cover pending adjudication of the said application by the Company Law Board no contempt is made out at this stage.

16. The petition is, accordingly, dismissed.

17. The Company Law Board would decide the application of the respondent No.1 seeking modification of the orders in accordance with law without being influenced by any observation contained in

this order.

Order be given dasti to learned counsel for both the parties.

SANJEEV SACHDEVA, J

MAY 20, 2014 rb