Delhi High Court
Mcdonald’S India Private ... vs Union Of India And Ors. on 9 January, 2018
$~15 & 16
IN THE HIGH COURT OF DELHI AT NEW DELHI
Decided on : 9th January, 2018
+ W.P.(C) 9036/2017 & CM APPL.36957/2017
MCDONALD'S INDIA PRIVATE LIMITED
AND ANR. ..... PETITIONERS
Through: Mr. Rajiv Nayar, Sr. Adv. with
Mr. Rahul P. Dave, Ms. Niti
Dixit, Mr. Sumit Chopra, Mr.
Amit Dhingra, Mr. Rohan
Jaitley, Ms. Raunaq B. Mathur,
Mr. Shivam Kumar Raheja,
Mr. Suryaveer Berry, Ms.
Zahra Aziz, Ms. Manjira
Dasgupta & Mr. Mohit Negi,
Advs.
versus
UNION OF INDIA AND ORS. ..... RESPONDENTS
Through: Mr. Manik Dogra, Sr.
Government Counsel with Mr.
Amit Mahajan, CGSC & Mr.
Gaurang Kanth, CGSC with
Ms. Eshita Baruah & Ms. Biji
Rajesh, Advs. along with Mr.
Sanjay Shorey. Jt. Dir. (Legal),
for R-1.
Mr. Parag Tripathi, Sr. Adv.
with Mr. Tejas Karia, Mr.
Manu Krishnan, Mr. Gauhar
Mirza, Mr. Shubhaang Sinha,
W.P.(C) Nos. 9036/2017 & 9433/2017 page 1 of 39
Mr. Shikhar Khare & Mr.
Aditya Virkam & Mr. Ashvary
Vikram, Advs. for R-2 & R-3.
+ W.P.(C) 9433/2017 & CM APPL. 38403-05/2017
AYSEL MELBYE AND ANR. ..... PETITIONERS
Through: Mr. Darpan Wadhwa, Sr. Adv.
with Mr. Rahul P. Dave, Ms.
Niti Dixit, Mr. Amit Dhingra,
Mr. Rohan Jaitley, Ms. Raunaq
B. Mathur, Mr. Shivam Kumar
Raheja, Mr. Suryaveer Berry
Ms. Manjira Dasgupta & Ms.
Zahra Aziz, Advs.
versus
UNION OF INDIA AND ORS. .... RESPONDENTS
Through: Mr. Manik Dogra, Sr.
Government Counsel with Mr.
Amit Mahajan, CGSC & Mr.
Gaurang Kanth, CGSC with
Ms. Eshita Baruah & Ms. Biji
Rajesh, Advs. along with Mr.
Sanjay Shorey. Jt. Dir. (Legal),
for R-1.
Mr. Parag Tripathi, Sr. Adv.
with Mr. Tejas Karia, Mr.
Manu Krishnan, Mr. Gauhar
Mirza, Mr. Shubhaang Sinha,
Mr. Shikhar Khare & Mr.
W.P.(C) Nos. 9036/2017 & 9433/2017 page 2 of 39
Aditya Virkam & Mr. Ashvary
Vikram, Advs. for R-2 & R-3.
CORAM:
HON'BLE MR. JUSTICE R.K.GAUBA
JUDGMENT (ORAL)
1. The first of the above captioned writ petitions was filed 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
proceedings in Contempt Application No. 300 (PB) of
2017 in Company Petition No. 110 (ND) of 2013 until
W.P.(C) Nos. 9036/2017 & 9433/2017 page 3 of 39
rules are framed by Respondent No.1 in relation to
proceedings under Section 425 of the Companies Act,
2013 read with the Contempt of Courts Act, 1971, as
amended;
(e) Issue a writ, order or direction as may be
appropriate to call for the record of Contempt
Application No. 300(PB) of 2017 in Company Petition
No. 110 (ND) of 2013 pending in the National
Company Law Tribunal, Principal Bench;
(f) Issue an appropriate writ, order or direction of or
in the nature of mandamus or certiorari or such other
appropriate writ, order or direction as this Hon‟ble
Court may deem fit in the facts and circumstances of
the present case;
(g) Pass such other and further orders or directions
as this Hon‟ble Court may deem fit and proper in the
facts and circumstances of the present case;
(h) For costs of the present petition."
2. The writ petition came up before a division bench of this court
led by Hon'ble the Acting Chief Justice on 13.10.2017 when the
following order was passed :-
"1. Right at the outset, Mr. Harish Salve, ld. Senior
Counsel appearing on behalf of the petitioners, submits
that he does not press prayers (a) and (b) of the writ
petition.
2. Prayers (a) and (b) of the writ petition are
dismissed as withdrawn.
W.P.(C) Nos. 9036/2017 & 9433/2017 page 4 of 39
3. So far as the remaining prayers are concerned,
the same would be the subject of consideration by a ld.
Single Judge of this court.
4. On request of the petitioners, let this petition be
placed today itself before a ld. Single Judge of this
court as per Roster."
3. The roster judge having recused, the petition came up before
this court against the above backdrop on 13.10.2017 and was taken
up for hearing w.e.f. 16.10.2017.
4. On 26.10.2017, the second above-captioned writ petition came
to be filed, it being almost a verbatim copy of the first said writ
petition, the prayers made therein also being identically worded.
Upon reference being made to the fact that the first writ petition had
been pending before this court after withdrawal of the prayer clauses
(a) and (b), the second petition was also listed before this court
alongside the first petition on 26.10.2017. Thereafter, both the
petitions have been heard together, it being also conceded by the
petitioners in the second matter 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".
W.P.(C) Nos. 9036/2017 & 9433/2017 page 5 of 39
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 Ltd. (CPRL) was incorporated
under Companies Act, 1956 as joint venture on 29.06.1995 in which
each side held equal equity share capital. On 18.07.1995, Mr.
Vikram Bakshi, the second respondent in these writ petitions came to
be appointed as the Managing Director of CPRL, initially for a period
of two years. The second respondent continued to be the Managing
Director of CPRL, the term having been extended from time to time
till it came to an end on 17.07.2013. On 09.09.2013, the second
respondent and his company, Bakshi Holdings Pvt. Ltd., the third
respondent in these writ petitions, instituted proceedings [Company
Petition no.110(ND)/2013] before the erstwhile Company Law Board
under Section 397 and other provisions of Companies Act, 1956,
against MIPL, the principal relief sought being reinstatement of the
W.P.(C) Nos. 9036/2017 & 9433/2017 page 6 of 39
second respondent as the Managing Director of CPRL. It appears
that by a notice issued on 28.11.2013, MIPL proceeded to terminate
the joint venture agreement. On 29.11.2013, MIPL initiated
arbitration proceedings in London, U.K., in respect of the claims
arising consequent to termination of the joint venture agreement. On
21.06.2017, MIPL issued notice to CPRL alleging material breaches
in terms of para 18(d) of the franchise agreement and demanding
payment of royalty for the period October 2015 to May 2017. The
company petition [no.110(ND)/2013] which had been instituted on
09.09.2013, before the erstwhile Company Law Board by the second
and third respondents herein came up before the National Company
Law Tribunal (NCLT) which had taken it over, it being the
appropriate authority under the Companies Act, 2013. The said
company petition [no.110(ND)/2013] was allowed by NCLT on
13.07.2017, the operative part whereof (as appearing at internal page
133 of the said judgment) reads as under :-
"41. As a sequel to the above discussion this petition
succeeds. We consider it just and equitable to provide as
under:-
(i) The proceedings of the meeting of the Board of
Directions held on 06.08.2013 relating to re-election of
Mr. Vikram Bakshi as Managing Director of the Company
are set aside and declared illegal, unjust and malafide.
Consequently, the uploading of Form-32 with the
Registrar of Companies is also nullified and is declared
illegal. The status of Mr. Vikram Bakshi as Managing
Director of Connaught Plaza is restored. He shall
continue to act as Managing Director of Connaught Plaza
W.P.(C) Nos. 9036/2017 & 9433/2017 page 7 of 39
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 the possibility of
even altering the Articles of Association so as to avoid
any ugly situation to oust Mr. Vikram Bakshi as
Managing Director unjustly and unfairly.
(vi) Respondent No.5 is restrained from interfering with
the smooth functioning of Connaught Plaza and all its 154
restaurants open in the assigned territory of North/East
India.
(vii) The petitioners are held entitled to costs which we
quantified at Rs. 10 lacs. The cost shall be paid my
McDonald India-Respondent No.2 to the petitioners."
W.P.(C) Nos. 9036/2017 & 9433/2017 page 8 of 39
9. It may be mentioned here that Mc. Donald's Corporation US
(McDUS) was the fifth respondent in the afore-said proceedings and,
thus, the restraint order included in the above quoted order of NCLT
was directed against it. Further, the reference to respondent no.2 in
the above quoted order was to Mc. Donald's India Pvt. Ltd. (MIPL).
10. It has been stated that on 06.08.2017, the Administrator
appointed by the NCLT by the above extracted order dated
13.07.2017 issued a communication on 06.08.2017 proposing to hold
a meeting on 21.08.2017, inter alia, requesting information to be
given as to the issues to be discussed in addition to the subject of re-
election of the second respondent to the board of CPRL.
11. At this stage, it may be mentioned that Ms. Aysel Melbye and
Mr. Robert Dale Larson (first and second petitioners respectively in
the second above-mentioned writ petition) were party to the
proceedings arising out of company petition no.110(ND)/2013, they
having been impleaded as fourth and third respondents respectively in
the said matter. They, it appears from the material on record, were
nominees of MIPL on the board of the directors of CPRL since
August and April 2008 respectively. The pleadings indicate that on
09.08.2017, both of them informed the Administrator appointed by
NCLT that they would send their response to the communication
proposing the meeting after consulting each other on 10.08.2017.
The Administrator, in turn, asked them on 09.08.2017 to respond by
5.00 p.m. on 10.08.2017 failing which he intended to issue notice
convening the meeting on 21.08.2017. On 10.08.2017, the first
W.P.(C) Nos. 9036/2017 & 9433/2017 page 9 of 39
petitioner in the second above-captioned petition on her own behalf
and on behalf of the other co-petitioner informed the Administrator
their inability to attend the meeting on 21.08.2017 requesting it to be
rescheduled for 04.09.2017 or on 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
representatives of the two petitioners in the second above-captioned
petition, this against the objection taken on behalf of the second
respondent.
W.P.(C) Nos. 9036/2017 & 9433/2017 page 10 of 39
13. On 22.08.2017, MIPL filed Company Appeal (AT)
no.275/2017 before National Company Law Appellate Tribunal
(NCLAT) challenging the judgment dated 13.07.2017 of the NCLT.
Later, on 28.08.2017, the second and third respondents herein also
filed their appeal (Company Appeal (AT) no.280/2017 assailing the
said very judgment on some aspects.
14. On 31.08.2017, the second and the third respondents herein
moved two applications before NCLT, one being registered as
Company Appl. No.301(PB)/2017 and the other, registered as,
Contempt Application no.300(PB)/2017. The cause of action
pleaded for filing both the applications was primarily the issuance of
notice of termination of the franchise agreement on 21.08.2017 by
MIPL. The first application was filed under Section 242 of the
Companies Act, 2013 read with Rule 11 of the National Company
Law Tribunal's Rules, 2016 and Sections 397, 402 and 403 of the
Companies Act, 1956, the prayer made therein being as under :-
(a). Declare the subsequent acts of the Respondents as
illegal, void and non-est including that of the Notice of
Termination dated 21.08.2017 annexed herein as
Annexure A-2 to this application;
(b). Set aside the Notice of Termination dated
21.08.2017 and declare each of the Operational Licence
Agreements/franchisee Agreements in respect of the 145
restaurants as per Annexure-1 of the Notice of
Termination dated 21.08.2017 to be valid and
subsisting;
(c). Direct the Respondents 2 to 5 to execute
Operational License Agreement/Franchisee Agreements
W.P.(C) Nos. 9036/2017 & 9433/2017 page 11 of 39
in respect to the 20 restaurants as per Annexure-2 of the
Notice of Termination dated 21.08.2017 immediately;
(d). Restrain the Respondents and its officers, agents,
employees or any representatives of respondents from
taking any steps in pursuance of Notice of Termination
dated 21.08.2017 of the Franchise Agreements;
(e). Restrain the Respondents 2 to 5 and its officers,
agents, employees or any representatives of Respondents
from parting with the franchise rights to any third party;
(f). Direct the Respondents No.1 to 11 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 and
(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
W.P.(C) Nos. 9036/2017 & 9433/2017 page 12 of 39
(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 applications presented on
31.08.2017 by the second and third respondents came up before
NCLT on 05.09.2017 and were taken up by the said forum in the
context of Company Petition no.110(ND)/2013 separately, in the
presence of such of the respondents as were already present before it.
17. On the first above-said application - Company Appl. No.301
(PB)/2017 filed under Section 242 of the Companies Act, 2013 - the
following order was passed by NCLT :-
"...This is an application filed by the petitioner in
a disposed of matter with a prayer that subsequent
to the disposal of the company petition no.
13.07.2017, non-applicant/respondent has issued
notice dated 21.08.2017 (Annexure-Z) for
terminating the contract with J.V. Company. A
prayer has been made to set aside the notice of
termination and declare each of the Operating
Licence Agreements/Franchise Agreements in
respect of 145 restaurants to be valid and
subsisting. A further direction has been sought to
non applicant-respondent Nos. 2 to 5 to execute
Operating Licence Agreements/Franchise
Agreements in respect of 20 restaurants as per the
notice of termination dated 21.0.2017. Some
other prayers have also been made.
W.P.(C) Nos. 9036/2017 & 9433/2017 page 13 of 39
On advance notice of the application Mr.
Chagla, learned Senior Counsel has appeared
and opposed the prayers made.
We have heard learned counsel for the
parties at a considerable length and are of the
view that this application at this stage would not
be maintainable because both the applications as
well as non applicant-Respondent No.1 have filed
their respective appeals which are pending before
the Learned National Company Law Appellate
Tribunal.
A copy of the appeal filed by the applicant
has been placed before us and the factum of
notice for termination dated 21.08.2017 has been
mentioned in support of the prayer that
Connaught Plaza Restaurants Pvt. Ltd. should be
put to buy out or sell out mode. There is thus no
dispute that the present issue in question
pertaining to notice of termination dated
21.08.2017 has already been placed before
Hon‟ble NCLAT in the pending appeal. We
further feel that at this stage it would be
unnecessary because Hon‟ble Justice G.S.
Singhvi, the administrator appointed by us by
order dated 13.07.2017 granted applicant leave to
file application for interim relief before the
National Company Law Appellate Tribunal.
Both the appeals 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
W.P.(C) Nos. 9036/2017 & 9433/2017 page 14 of 39
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 earlier on 13.07.2017 was included in the aforesaid array
as contemnor no.9.
20. The prime contentions raised in the aforesaid contempt
application are that by various acts of commission and omission as
set out therein, the parties impleaded as contemnors had acted in
willful defiance of the aforesaid judgment dated 13.07.2017 of NCLT
in a manner so as to defeat and overreach the same. It was alleged
that contemnor nos.1 to 8 had acted in collusion with contemnor no.9
and its concerned officers, they being contemnors no.10 and 11, by
terminating the licence agreement for all the 165 restaurants and 4
extension counters of CPRL under the Mc Donald's franchise by the
notice of termination dated 21.08.2017. It is noted from the copy of
W.P.(C) Nos. 9036/2017 & 9433/2017 page 15 of 39
the proceedings recorded on 05.09.2017 on the contempt application
by NCLT (pages 106-107 of the paper book of the first writ petition)
that besides the counsel for the applicant (i.e. the second and third
respondents herein), MIPL (wrongly referred to as HIPL) and the two
petitioners of the second above captioned writ were duly represented
through their respective counsel.
21. The NCLT recorded the proceedings on 05.09.2017 on the
contempt application in the following manner :-
"We have heard learned counsel for the parties.
It has been urged that on account on filing an
appeal before the Hon‟ble NCLAT, notice in the
present application for contempt may not be
issued. However, we are unable to accept the
submission.
Notice to show cause to the respondent
returnable on 20.09.2017 be issued as to why
proceeding under Section 425 of the Companies
Act, 2013 read with Contempt of Courts Act, 1971
be not initiated.
List for further consideration on
20.09.2017."
22. It has been stated that the matter was not taken up for hearing
by NCLT on 20.09.2017 as had been fixed. It eventually came up for
effective proceedings on 26.09.2017. The copy of the proceedings
dated 26.09.2017 (page 108 of the paper book of the first writ
petition) would show that MIPL, the first petitioner in the first
above-captioned writ petition and both the petitioners of the second
above-captioned writ petition were duly represented besides some
other parties shown in the array as respondent-contemnors. It may be
W.P.(C) Nos. 9036/2017 & 9433/2017 page 16 of 39
added that the second petitioner in the first captioned writ petition
was reflected in the array as contemnor no.4. He alongwith 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 reasonable opportunity of being heard". Section 424
(2) confers upon NCLT and NCLAT certain powers of the civil court
W.P.(C) Nos. 9036/2017 & 9433/2017 page 17 of 39
prescribed under the Code of Civil Procedure, 1908 (CPC) while
clarifying, by sub-section (1), that the said forums while disposing of
the proceedings brought before them be not "bound by the procedure
laid down in the Code of Civil Procedure, 1908" but "shall be guided
by the principles of natural justice, and, subject to the other
provisions of this Act and of any rules framed thereunder", also
adding that both the said forums i.e. NCLT and NCLAT "shall have
powers to regulate their own procedure".
24. The Contempt of Courts Act, 1971 defines and limits the
powers of certain courts in punishing contempt of courts and
regulates the procedure in relation thereto. The expression "contempt
of court", as used in the said enactment, includes civil contempt or
criminal contempt which are distinct expressions and separately
defined. While the "civil contempt" means willful disobedience to
any judgment, decree, direction, order, writ or other process of a
court or willful breach of an undertaking given to a court, the
expression "criminal contempt" means and includes the doing of any
act which, inter alia, "tends to lower the authority of any court", or
"prejudices... any judicial proceedings" or one that "obstructs or
tends to obstruct the administration of justice." It confers jurisdiction,
inter alia, on the High Courts to take cognizance of the contempt of
court and to deal with the contemnors in accordance with its
provisions. Section 12 generally deals with the subject of punishment
for contempt of court that includes civil or criminal contempt.
Section 14 relates to the procedure to be followed where the contempt
is committed in the face of the Supreme Court or the High Court.
W.P.(C) Nos. 9036/2017 & 9433/2017 page 18 of 39
Section 15 lays down the procedure for taking of cognizance of
criminal contempt in other cases. It clarifies that action may be
initiated by the High Court "on its own motion" or "on a motion
made by the Advocate-General" or "any other person with the
consent in writing to the Advocate- General". Section 10, it may be
added, confers on the High Court the power to punish for contempt of
the courts subordinate to it. Section 17 provides broadly for the
procedure to be followed "after cognizance".
25. For the benefit of the discussion that is to follow, the provision
contained 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,
W.P.(C) Nos. 9036/2017 & 9433/2017 page 19 of 39
and if, after such attachment, the person charged
appears and shows to the satisfaction of the court that
he did not abscond or keep out of the way to avoid
service of the notice, the Court shall order the release
of his property from attachment upon such terms as to
costs or otherwise as it may think fit.
(5) Any person charged with contempt under section 15
may file an affidavit in support of his defence, and the
court may determine the matter of the charge either on
the affidavits filed or after taking such further evidence
as may be necessary, and pass such order as the justice
of the case requires."
26. Section 18 requires that every case of criminal contempt under
Section 15 shall be heard and determined by a bench of not less than
two judges. Thus, the cases of civil contempt are generally heard and
determined by single benches. In terms of Section 19, where the
order or decision of the High Court in exercise of its jurisdiction to
"punish for contempt" is rendered by a single judge, an appeal lies
before a bench of not less than two judges of the court and in cases
where such order or decision is that of a bench (of two judges), the
appeal lies to the Supreme Court. Section 23 confers, inter alia, on
the High Courts the enabling power to "make rules" for providing for
any matter relating to its procedure though clarifying that the same be
"not inconsistent with the provisions of the Contempt of Courts Act,
1971".
27. Some enactments creating adjudicatory bodies or tribunals
have extended the provisions of Contempt of Courts Act, 1971 to
such forums, illustration thereof including the administrative tribunals
W.P.(C) Nos. 9036/2017 & 9433/2017 page 20 of 39
established under the Administrative Tribunals Act, 1985 (see
Section 17). The Companies Act, 2013, by Section 425, confers the
power on NCLT and NCLAT to "punish for contempt" in accordance
with the provisions of the Contempt of Courts Act, 1971 thus :-
"425. Power to punish for contempt - The Tribunal and
the Appellate Tribunal shall have 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--
(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."
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
W.P.(C) Nos. 9036/2017 & 9433/2017 page 21 of 39
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),
general procedure (part-IV), issuance of orders and disposal of cases
(part-V), etc. The following specific rules have been referred in the
course of hearing and, thus, may be quoted to the extent relevant as
under :-
11. Inherent Powers.- Nothing in these rules shall be
deemed to limit or otherwise affect the inherent powers of
the Tribunal to make such orders as may be necessary for
meeting the ends of justice or to prevent abuse of the
process of the Tribunal.
34. General Procedure. - (1) 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.
38. Service of Notices and processes.- (1) Any notice or
process to be issued by the Tribunal may be served by
post or at the e-mail address as provided in the petition or
application or in the reply;
(2) The notice or process if to be served physically may be
served in any one of the following modes as may be
directed by the Tribunal; -
(a) by hand delivery through a process server or
respective authorised representative;
(b) by registered post or speed post with acknowledgment
due; or
(c) service by the party himself.
W.P.(C) Nos. 9036/2017 & 9433/2017 page 22 of 39
(3) Where a notice issued by the Tribunal is served by the
party himself by hand delivery, he shall file with the
Registrar or such other person duly authorised by the
Registrar in this behalf, the acknowledgment together
with an affidavit of service and in case of service by
registered post or by speed post, file with the Registrar, or
such other person duly authorised by the Registrar in this
behalf, an affidavit of service of notice alongwith the
proof of delivery.
(4) Notwithstanding anything contained in sub-rules (1)
and (2), the Tribunal may after taking into account the
number of respondents and their place of residence or
work or service could not be effected in any manner and
other circumstances, direct that notice of the petition or
application shall be served upon the respondents in any
other manner, including any manner of substituted
service, as it appears to the Tribunal just and convenient.
(5) A notice or process may also be served on an
authorised representative of the applicant or the
respondent, as the case may be, in any proceeding or on
any person 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.
W.P.(C) Nos. 9036/2017 & 9433/2017 page 23 of 39
(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 (when
the petition or the application was called) for hearing, the
Tribunal may make an order setting aside the ex-parte hearing
as against him or them upon such terms as it thinks fit.
Provided that where the ex-parte hearing of the petition
or application is of such nature that it cannot be set aside as
against one respondent only, it may be set aside as against all or
any of the other respondents also.
51. Power to regulate the procedure.- The Tribunal may
regulate its own procedure in accordance with the rules
of natural justice and equity, for the purpose of
discharging its functions under the Act.
59. Procedure for imposition of penalty under the Act.- (1)
Notwithstanding anything to the contrary contained in any rules
or regulations framed under the Act, no order or direction
imposing a penalty under the Act shall be made unless the
person or the company or a party to the proceeding, during
proceedings of the Bench, has been given a show cause notice
and reasonable opportunity to represent his or her or its case
before the Bench or any officer authorised in this behalf.
(2) In case the Bench decides to issue show cause notice
to any person or company or a party to the proceedings, as the
case may be, under sub-rule (1), the Registrar shall issue a show
cause notice giving not less than fifteen days asking for
submission of the explanation in writing within the period
stipulated in the notice.
(3) The Bench shall, on receipt of the explanation, and
after oral hearing if granted, proceed to decide the matter of
imposition of penalty on the facts and circumstances of the
case."
(emphasis supplied)
W.P.(C) Nos. 9036/2017 & 9433/2017 page 24 of 39
30. It is an admitted case on both sides that no separate rules have
been framed either by the Central Government in exercise of powers
conferred upon it under Section 469 of the Companies Act, 2013 or
by NCLT or NCLAT in terms of the provision contained in Section
23 of the Contempt of Courts Act, 1971 on the specific subject of the
procedure relating to the exercise of powers to punish for contempt as
conferred upon such forum by Section 425 of the Companies Act,
2013.
31. As noted at the outset, the prime contention with which these
writ petitions were presented, as reflected by prayer clauses (a) and
(b) quoted above was that the power to punish for contempt conferred
upon NCLT by Section 425 of Companies Act, 2013 cannot 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
W.P.(C) Nos. 9036/2017 & 9433/2017 page 25 of 39
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
any act committed reflecting deliberate disregard of the final
judgment of the NCLT, there being no case of any collusion between
the parties impleaded as contemnors.
32. The petitioners argue that on facts, no case of contempt was
made out, particularly as the restraint order issued on 13.07.2017, the
effort to overreach which is alleged, was directed only against
McDUS, the fifth respondent in the Company Petition
no.110(ND)/2013, some of the parties shown in the array as
contemnors being not even a party to the said proceedings, reference
in this context being made particularly to the case of second
petitioner in the first captioned writ petition besides contemnor nos.4,
6, 8, 10 and 11.
33. Aside from offering some explanation as to the bona fide of
their conduct so as to deny the attribute of "collusion" by the
petitioners of the second captioned petition and to plead that no case
of contempt is made out against them and submitting that the order
passed on 05.09.2017 on the contempt application is inherently
contradictory to the approach taken on the same date by the other
order passed on the application under Section 242 of the Companies
Act, 2013 [Company application no.301(PB)/2017], the petitioners in
these two matters seek to question the procedure followed by NCLT,
submitting that the same is not only improper but also invalid and in
W.P.(C) Nos. 9036/2017 & 9433/2017 page 26 of 39
breach of not only the NCLT rules but also of the principles of
natural justice. It was submitted that NCLT did not issue any formal
notices through its Registry on the contempt application and instead
proceeded to act on the affidavit of service of the notices submitted
by the counsel for the applicants (i.e. the second and third
respondents) who, per the submissions, most improperly had issued
an unauthorized communication on the subject to the petitioners and
others referring to the proceedings taken out on 05.09.2017 by
NCLT.
34. The core argument of the petitioners in these proceedings is
that the procedure followed by NCLT is flawed in as much as it has
not recorded till date its satisfaction that a prima facie case of
contempt is made out, nor communicated the "charge", nor indicated
in any other manner the gravamen of the case of contempt which the
petitioners are called upon to answer. It was submitted that a
summary procedure has been adopted wherein show cause notice has
been arbitrarily issued and 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
W.P.(C) Nos. 9036/2017 & 9433/2017 page 27 of 39
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 the
procedure that is fair and objective. Before issuing notice calling
upon the alleged contemnor to answer the charge of contempt, the
court or the forum must record satisfaction that there is a clear,
unambiguous and unequivocal case made out showing willful and
contumacious conduct by the respondent. The procedure to be
followed, after formal cognizance is taken, must include framing of a
precise and specific charge or notice so as to inform the party in
question as to the charge he is to meet. It may be added that it is not
always necessary to frame a formal charge as in a criminal trial. It is
sufficient if the gist of the specific allegations is made clear to the
alleged contemnor affording him the opportunity of being heard in his
defence. Further, the charge must be substantiated by clear and
reliable evidence to be adduced at the trial. [see Sukhdev Singh vs.
Hon‟ble C.J.S. Teja Singh & the Hon‟ble Judges of the Pepsu High
Court at Patiala, AIR 1954 SC 186; State of Bihar Vs. Rani Sonabati
Kumari, AIR 1961 SC 221; B.K. Kar vs. Hon‟ble the Chief Justice
and his companion Justices of the Orissa High Court & Anr., AIR
W.P.(C) Nos. 9036/2017 & 9433/2017 page 28 of 39
1961 SC 1367; S. Abdul Karim vs. M.K. Prakash & Ors., AIR 1976
SC 859; in re: Vinay Chandra Mishra (the alleged contemnor),
(1995) 2 SCC 584; T.R. Dhananjaya Vs. J. Vasudevan, AIR 1996 SC
302; Daroga Singh & Ors., Vs. B.K. Pandey, (2004) 5 SCC 26; R.K.
Anand Vs. Registrar, Delhi High Court, (2009) 8 SCC 106; and
Sahdeo Alias Sahdeo Singh Vs. State of Uttar Pradesh & Ors.,
2010(3) SCC 705].
36. The first objection of the second and third respondents herein is
to the maintainability of the writ petitions before this court against the
impugned orders of NCLT on the ground that the appropriate remedy
for the aggrieved party is to approach the appropriate appellate court
in terms of the provisions contained in the Contempt of Courts Act,
1971 and the Companies Act, 2013. This objection, however, cannot
be accepted in view of the law that is well settled. Reference may be
made to just three decisions of the Supreme Court reported as T.
Sudhakar Prasad Vs. Govt. of A.P. and Ors., (2001) 1 SCC 516;
Midnapore Peoples‟ Coop. Bank Ltd. and Ors. Vs. Chunilal Nanda
and Ors. (2006) 5 SCC 399 and Sujitendra Nath Singh Roy Vs. State
of West Bengal and Ors., (2015) 12 SCC 514. In Midnapore
Peoples‟ Coop. Bank Ltd. (supra), the question was examined at
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 :
W.P.(C) Nos. 9036/2017 & 9433/2017 page 29 of 39
"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. „Any order‟ is not independent of
the expression „decision‟. They have been put in an
alternative form saying „order‟ or „decision‟. In either
case, it must be in the nature of punishment for contempt.
If the expression „any order‟ is read independently of the
„decision‟ then an appeal shall lie under sub-section (1) of
Section 19 even against any interlocutory order passed in
a proceeding for contempt by the High Court which shall
lead to a ridiculous result."
(emphasis supplied)
37. In Sujitendra Nath Singh Roy (supra), the maintainability of a
writ petition under Articles 226 and 227 of the Constitution of India
against an order of the Administrative Tribunal, albeit declining to
initiate contempt proceedings, was examined reiterating the ruling in
L. Chandra Kumar Vs. Union of India, 1997 (3) SCC 261 to the effect
that the power of judicial review of the High Court under Articles 226
W.P.(C) Nos. 9036/2017 & 9433/2017 page 30 of 39
and 227 of the Constitution of India cannot be taken away by law or
even by Constitutional amendment vis-à-vis the order of any inferior
court or of the tribunal which is a creature of statute. The Supreme
court held that it would be a rare case where the High Court can hold
that such writ petition is "not maintainable" though adding that "it is
always open for the High Court, in appropriate cases, to hold that a
writ petition is not entertainable on account of propriety, the
constitutional scheme, some settled rules of self-restraint or its
peculiar facts."
38. Since the impugned orders have been passed only at the
threshold scrutiny by NCLT and there is no order issued holding any
of the petitioners or other parties arrayed as contemnors as being
guilty, not the least punishing any person for contempt of court, the
remedy of appeal may not be even available. Be that as it may, the
judicial review, if called for in the facts and circumstances of the
case, can neither be grudged nor denied.
39. The petitioners have relied on the decisions in State of J. & K.
Vs. Mohd. Yaqoob Khan and Ors., 1992 (4) SCC 167 and Modern
Food Industries (India) Ltd. and Anr. vs. Sachidanand Dass and Anr.,
1995 Supp (4) SCC 465 to argue that NCLT has committed
impropriety by not awaiting the decision of the NCLAT in the two
appeals, which had been taken out by both sides against the judgment
dated 13.07.2017 of the NCLT and which are still pending before the
said superior appellate 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
W.P.(C) Nos. 9036/2017 & 9433/2017 page 31 of 39
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, which were to be considered. There is no inhibition
before the NCLT in proceeding with the matter of contempt so long
as there is no stay issued by the appellate forum (NCLAT).
41. The initiation of contempt proceedings for non-compliance
with the order of a learned single Judge of the High Court directing
reinstatement and payment of back salary while the matter was
pending in appeal for admission before a division bench was
disapproved by the Supreme Court in Modern Food Industries (India)
Ltd. and Anr. (supra) in the peculiar facts and circumstances of the
case, because the threat of proceedings of contempt compelling
compliance with the order virtually amounted to rendering the stay
W.P.(C) Nos. 9036/2017 & 9433/2017 page 32 of 39
application before the appellate court infructuous. In the case at
hand, one of the parties bound by the restraint order has allegedly
committed certain acts, in collusion with others, the objective statedly
being to overreach and defeat the judicial process. The scrutiny of
the impugned act by NCLT cannot be construed as impropriety so
long as the order dated 13.07.2017 operates.
42. A careful reading of the two orders passed by the NCLT on
05.09.2017, one on the company application under Section 242 of the
Companies Act, 2013 and, the other, on the contempt application
which is impugned before this court, would show that there is no
inherent contradiction. As noted earlier, the prayer made in the
company application under Section 242 of the Companies Act, 2013
moved on 31.08.2017 was essentially to have the notice of
termination dated 21.08.2017 declared illegal, void and rendered non-
est with additional prayer for further restraint order to be issued to the
opposite party (i.e. the petitioners herein and others who were
impleaded in the company petition in the first place). The NCLT,
while declining to entertain the said application made it clear that the
parties were already before NCLAT in appeals and, therefore, it was
appropriate that they make all the prayers in view of the subsequent
developments for "interim relief" before NCLAT only, particular
reference being made to the fact that the Administrator appointed by
NCLT by order dated 13.07.2017 had already granted leave for such
application for interim relief to be presented before NCLAT. The
applicants having already secured leave of the Administrator to
approach the NCLAT for interim relief, could not have conceivably
W.P.(C) Nos. 9036/2017 & 9433/2017 page 33 of 39
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 guilty intent. In this
view, this court rejects the argument that a party who was not a party
to the company petition cannot at all be proceeded against in the
contempt proceedings.
44. It does appear that aside from the directions in the two orders
which are impugned before this court in these proceedings i.e. the
orders dated 05.09.2017 and 26.09.2017, which have been quoted in
extenso earlier, no formal order, or notice, or communication has
emanated from the Registry of NCLT till date. It also does appear
W.P.(C) Nos. 9036/2017 & 9433/2017 page 34 of 39
from the submissions of the parties on both sides that aside from the
information gathered by such parties, as were present before NCLT at
the hearing on the two said dates (or some of the dates thereafter),
when the impugned orders were passed, the only communication
served (or attempted to be served) on the contemnors has been in the
form of communication sent by the counsel representing the second
and third respondents in the writ petitions i.e. the applicants in the
contempt application. From this, argument is raised that it was
impermissible to allow the counsel for the opposite party to
unauthorisedly communicate its decision and further that it was
improper to act upon the service effected by the counsel for the
opposite party on its own.
45. The proceedings recorded on 05.09.2017 and 26.09.2017
conjointly show that the NCLT is yet to take a call as to whether a
case of contempt has actually been made out or not for the necessary
process to follow. The language employed in the order dated
05.09.2017 clearly shows that the proceedings under the Contempt of
Courts Act, 1971 in exercise of powers conferred on NCLT by
Section 425 of Companies Act, 1923 are yet not initiated. This is
why the forum has only issued a notice to the respondent in the
application for contempt to "show cause... as to why (such)
proceedings...be not initiated". This limited purport and objective of
the proceedings of NCLT is reinforced by the subsequent order dated
26.09.2017 whereby it has insisted on "reply to the contempt petitions
(to) be filed" by the parties who are shown as the contemnors.
Clearly, the NCLT is at the stage of threshold scrutiny of the matter.
W.P.(C) Nos. 9036/2017 & 9433/2017 page 35 of 39
It is still gathering facts. Such proceedings are nothing but in the
nature of a preliminary inquiry wherein response has been sought in
the wake of which it hopes and expects to collect not only the
necessary 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. 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 question does not wish
to say anything in the matter at such stage.
W.P.(C) Nos. 9036/2017 & 9433/2017 page 36 of 39
47. In absence of separate rules to govern the procedure to be
followed by NCLT for exercise of power to punish for contempt, the
NCLT is to follow the general rules. The statute and the rules, as
extracted earlier, permit and authorize NCLT to "regulate" its own
procedure [S. 424] and "be guided by the principles of natural
justice" [see S. 424 read with Rules 11, 34 and 51].
48. There is no merit whatsoever in the grievance raised by the
petitioners that the NCLT has flouted the law and the principles of
natural justice by not framing the formal charge or not
communicating in any manner the gravamen of the allegations on
which the petitioners are to answer the charge of contempt. At the
cost of repetition, one may say that the stage where formal charge (or
notice of accusations) would require to be framed so as to inform the
party in question of the allegations he is required to meet or the
conduct he is required to explain, is yet to arrive. The procedure
envisaged in Section 17 of Contempt of Courts Act, quoted earlier,
would kick-in after and in the event of NCLT recording a finding that
prima facie case of contempt is made out and thereby taking formal
cognizance and summoning the parties in question to stand trial.
49. The NCLT, rather than acting in hurry or undue haste, as is
alleged, has taken the neutral course of treating the application
seeking initiation of contempt proceedings or for the parties in
question to be asked to purge, merely as an application filed in the
wake of its order dated 13.07.2017. The decision as to whether or not
a prima facie case of willful disobedience, defiance or commission of
any act constituting contempt is made out, would undoubtedly be
W.P.(C) Nos. 9036/2017 & 9433/2017 page 37 of 39
taken by the NCLT after it has secured the replies and considered the
contentions having heard the parties in question. The argument that
NCLT has acted arbitrarily, or with bias, is without basis. By giving
opportunity to show cause, it has instead acted in most fair manner,
following the spirit of the rules. [Rule 59].
50. As regards the grievance that some of the parties shown in the
list of contemnors were not even properly served and yet proceeded
ex parte, all that needs to be said is that, if such were the facts, it is a
matter of irregularity of the proceedings. This court is confident that
if any such lapse has occurred, and brought to the notice of NCLT, it
would take suitable corrective action and pass the necessary orders in
terms of rules. [Rule 49(2)]. This, by itself, cannot be allowed to be
used by the petitioners to impel this court to interdict in exercise of
the writ jurisdiction.
51. The petitioners have not been able to show violation of the
principles of natural justice in the proceedings thus far conducted by
NCLT on the contempt application. As noted above, the said
proceedings cannot be said to be without jurisdiction. There is no
element of arbitrariness as necessitates the writ court's intervention.
Thus, this court declines exercise of writ jurisdiction. [see L.
Chandra Kumar (supra) and Whirlpool Corporation Vs. Registrar of
Trade Marks, Mumbai and Ors., (1998) 8 SCC 1].
52. On the above facts and in the circumstances, the NCLT being
seized of the matter, it would not be proper for this court in
proceedings at hand to make any observations either way on the
W.P.(C) Nos. 9036/2017 & 9433/2017 page 38 of 39
merits of the allegations made in the contempt application, lest the
same prejudices either side.
53. To sum up, this court is of the view that grievances raised by
the petitioners are a result of unfounded apprehensions about NCLT
having prejudged the issue and reflect paranoia rather than substance.
54. The writ petitions are, thus, dismissed. The interim orders
stand vacated.
55. The pending applications are rendered infructuous and also
stand disposed of.
R.K.GAUBA, J.
JANUARY 09, 2018
yg
W.P.(C) Nos. 9036/2017 & 9433/2017 page 39 of 39
