The Calcutta High Court recently comprising of a bench of Justices Thottathil B. Radhakrishnan, C.J. and Shampa Sarkar, J. while hearing a contempt proceedings remarked that Willful disobedience and evil motive should be reckoned before holding in contempt. (Arvind Kumar Newar v S.S. Kothari)
The bench noted that Contempt being in the nature of quasi-criminal proceedings, the allegations should be strictly construed. The standard of proof to establish contempt, is akin to a criminal proceeding and in the attempt to find an individual in contempt, the court should also take into account the circumstantial evidence and reckon if any mental element was present. The bench put-forth that they must be satisfied about the guilt beyond reasonable doubt.
Facts of the Case
Harsh Vardhan Lodha (hereafter ‘HVL’) continued to hold office as director/chairman in Universal Cables Ltd, Birla Corporation Ltd., Birla Cable Ltd. and Vindhya Telelinks Ltd; HVL participated in the meetings of the Board of Directors of the above companies as director and/or chairman thereof; HVL failed to abide by the directions of the APL Committee by which the APL Committee decided not to support the re-appointment of HVL as director in the four companies. HVL failed to abide by the directions of the APL Committee contained in the letters issued to the Board of Directors of the said companies.
It was prayed by the petitioners that Rule be issued, directing HVL to show-cause why he should not be sent to prison or suitably dealt with, for wilfully and deliberately violating, disregarding and disobeying the order dated October 1, 2020. Further prayer was made for a declaration that the alleged contumacious acts be declared as unlawful in the eye of law.
Contention of the Parties
Mr. Vishwanathan and Mr. Rohatgi, learned senior counsels appearing on behalf of the petitioners submitted that this Bench by order dated October 1, 2020 refused to stay the operation of the order of the learned Single Judge dated September 18, 2020 but clarified the order to the extent that the plaintiffs should ‘abide by’ the decisions dated July 19, 2019, July 30, 2019 and all further decisions of the APL Committee and HVL shall be restrained from holding any office in any of the entities of M.P. Birla Group of Companies during the pendency of the suit, ‘on the strength of the shares referable to the estate of PDB’. In the course of the argument, the learned counsels referred to paragraphs 17, 18 and 19 of our order, wherein this Bench had observed that it was a settled position that the APL Committee represented the estate of the deceased in terms of Section 247 of the Indian Succession Act, 1925 for all purposes, except distribution of the estate. The learned counsels pointed out that as this Bench had observed that the control of a company vested in the voting powers of the shareholders and that the shareholders holding a controlling interest could determine the nature of the business, its management and various other matters touching the affairs of the company, the APL Committee’s decision not to support re-appointment of HVL as director of the companies, was binding, as the control over the companies had vested upon the APL Committee being the estate of PDB. HVL by not stepping down from his office of director violated the order of this court. It was submitted that this Bench also was of the view that APL’s power included the power to regulate and permit such shares to be utilised to generate appropriate income and to better utilise the same, in the best interest of the affairs of the estate of PDB which would, ultimately, reflect on the end beneficiaries. Thus, HVL’s directorship against the APL Committee’s decision, were detrimental to the business of these companies.
Mr. Khambata, learned senior counsel appearing on behalf of the HVL submitted that from the answer to the show-cause filed by HVL, two interpretations of the order of this Bench were possible. Thus, the benefit of doubt would be in favour of holding HVL not guilty of the alleged contempt. His next argument was that the alleged act of contempt should be strictly construed in the context of the order made and the violations alleged. Learned counsel urged that the allegations were essentially contumacious violation of the order of the learned Single Judge and there being no merger of the order, the contempt proceedings were not maintainable before this Bench. He relied on the decision of Kunhayammed and ors. v. State of Kerala and anr., reported in (2000) 6 SCC 359. His next contention was that the decisions of the APL Committee dated 4th and 5th November were not before this court and those could not be looked into in this special jurisdiction. Subsequent decisions of the APL Committee after the order of this Bench would also not be a part of this proceeding.
Courts Observation & Judgment
The bench noted, “The sum and substance of the arguments made by the learned senior counsels appearing on behalf of the petitioners is that the deliberate and wilful violation of the directions of this court contained in paragraph 20 of the order dated October 1, 2020, struck at the very root of rule of law which was the foundation of a democratic society. Judiciary being the institution through which the rule of law was achieved, the disobedience of HVL and the directors of the companies shook this very foundation which would ultimately erode the faith and confidence reposed by the people in the judiciary. They submitted that the order dated October 1, 2020 should have been complied with in its letter and spirit. HVL should have stepped down from directorship. HVL, by attending the Board meetings on the relevant dates in the different companies as director/chairman and, the other directors by allowing HVL to attend the meetings and put his signature on the resolutions, deliberately overreached the order of this court. This court by invoking the extraordinary jurisdiction should proceed against each of them and punish them appropriately for the contempt and also undo the wrong committed, by setting aside the resolutions adopted in the respective Board Meetings. According to them, the alleged contemnors should not be allowed to reap the fruits of their own contumacious acts. They also submitted that it was not open to the contemnors to provide a wrong interpretation of our order and justify their conduct on the basis of such incorrect interpretation. Learned counsels further submitted that the directors of these companies who aided and abetted HVL in committing the breach of the order of this court were equally liable for having committed contempt, on the principle laid down in Seaward (supra). Even if no order was passed against the companies, the actions of the directors amounted to frustrating the order of this court and rendering the order ineffective. The directors were all along in the knowledge of the order, they were repeatedly requested by the APL Committee as also by the learned advocates-on-record of the petitioners to obey the order but these directors who were managing the affairs of the company, overreached the order of this court by allowing HVL to participate in the Board meetings as a director/chairman. The essential ingredient of wilful culpability could clearly be ascribed to the actions of HVL and the directors as well. They submitted that it was trite law that even a non-party to an action in which an order had been passed, could be committed for contempt if he with knowledge of the order aided and abetted the respondent in the action against whom the order had been passed, to break the order. If a person, who knew that an injunction had been granted, aided and abetted in committing a breach of it, the court had jurisdiction to commit him for contempt, although he was not a party in the action and was not a person against whom the injunction had been passed.
What has fallen for decision is whether the contumacious acts as elaborately stated in the applications filed by the defendants/petitioners herein satisfied the test of civil contempt.”
The bench thus remarked, “To constitute civil contempt, the court must be satisfied about the guilt of the alleged contemnors beyond reasonable doubt. It is fundamental that none would be proceeded against for disobedience of an order unless the disobedience was wilful.”
The court arrived at the reasoning that in order to punish a contemnor, it has to be established that the disobedience is willful. This requires an assessment of the mind of the alleged contemnors that is, whether the contemnors knowingly intentionally, consciously, calculatedly and deliberately with full knowledge of consequences committed a breach of the order of this Bench. There has to be a calculated action with evil motive. In V.G. Nigam v. Kedar Nath Gupta reported in (1992) 4 SCC 697, the Apex Court held that it would be rather hazardous to impose a sentence for contempt in exercise of contempt jurisdiction on mere probabilities. If the doubt persisted, the alleged contemnors were entitled to have the benefit or advantage of such a doubt having regard to the nature of the proceeding.
The court ruled that “For the purpose of this proceeding, it is sufficient to say that HVL’s participation in the Board meetings cannot be termed as contumacious violation of the order of this court as the willful disobedience has not been proved beyond reasonable doubt and there is a possibility that HVL could continue to hold office on the strength of the votes of public shareholders in exclusion to the votes of the APL Committee and the Promoter and Promoter Groups and PACs. The contempt application against HVL is dismissed.”
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