The present case relates to a civil contempt wherein an undertaking given to Company Law Board is breached. Normally, the general provisions made under the Contempt of Courts Act are not invoked by the High Courts for forcing a party to obey orders passed by its subordinate courts for the simple reason that there are provisions contained in Code of Civil Procedure, 1908 to get executed its orders and decrees. It is settled principle of law that where there are special law and general law, the provisions of special law would prevail over general law. As such, in normal circumstances a decree holder cannot take recourse of Contempt of Courts Act else it is sure to throw open a floodgate of litigation under contempt jurisdiction. It is not the object of the Contempt of Courts Act to make decree holders rush to the High Courts simply for the reason that the decree passed by the subordinate court is not obeyed
REPORTABLE
IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPEAL NOS.
OF 2014
(Arising out of S.L.P. (Crl.) Nos. 2479-2487 of 2009)
E. Bapanaiah
...Appellant
Versus
Sri K.S. Raju etc.
Dated;November 07, 2014.
Prafulla C. Pant, J.
Leave granted.
2. These appeals are directed against judgment and order
dated 22.8.2008 passed by the High Court of Judicature,
Andhra Pradesh, in Contempt Appeal Nos. 3, 4, 5, 6, 7,
8, 9, 10 and 11 of 2007 whereby said Court has allowed
all the Contempt Appeals setting aside the order dated
3.8.2007 passed in Contempt Case No. 915 of 2002
wherein K.S. Raju, Promoter Director of M/s. Nagarjuna
Finance Limited, Hyderabad, and its other directors were
convicted under Section 12 of Contempt of Courts Act,
1971, and each one of them was sentenced to suffer
simple imprisonment for a period of six months and were
further directed to pay fine of Rs.2,000/- each.
3. At the outset, we have no hesitation to observe that
the impugned order does not require interference to the
extent the same is passed in Contempt Appeal No. 4 of
2007 filed by Minoo R. Shroof, Contempt Appeal No. 5 of
2007 filed by Nimesh N. Kampani, Contempt Appeal No.
6 of 2007 filed by C.D. Menon, Contempt Appeal No. 7 of
2007 filed by A.P. Kurian, Contempt Appeal No. 8 of 2007
filed by Sridhar Chary, Contempt Appeal No. 9 of 2007
filed by G.S. Raju, Contempt Appeal No. 10 of 2007 filed
Page 2
3
by P.K. Madhav, and Contempt Appeal No. 11 of 2007
filed by L.V.V. Iyyer, which were allowed for the reason
that in the Contempt Case No. 915 of 2002 they were not
the respondents against whom contempt case was filed.
There were only three respondents, namely, K.S. Raju, N.
Selvaraj and M/s. Nagarjuna Finance Limited through its
Managing Director, against whom contempt petition was
filed under Section 12 read with Section 10 of Contempt
of Courts Act, 1971 by E. Bapanaiah (present appellant)
before the High Court.
Other eight directors had no
opportunity to defend themselves before the conviction
was recorded by the learned Single Judge in its
concluding paragraph 134 of the judgment in the
aforementioned Contempt Case No. 915 of 2002.
4. It is only in respect of conviction of K.S. Raju,
Promoter Director of Nagarjuna Finance Limited (for
short “NFL”) which requires in-depth examination as to
whether the Division Bench of the High Court has rightly
Page 3
4
allowed the Contempt Appeal (No. 3 of 2007) arising out
of Contempt Case No. 915 of 2002, or not.
5. Brief facts of the case are that the present appellant,
E. Bapanaiah, (one of the depositors who made deposits
with NFL) filed the contempt petition under Section 12
read with Section 10 of the Contempt of Courts Act, 1971
for the alleged wilful disobedience of order dated
29.2.2000 and one dated 21.8.2001 passed by Company
Law Board, Southern Region Bench, and for breach of
undertakings/affidavits, including one filed by K.S. Raju
(Promoter Director of NFL) before CLB and one given in
Company Appeal No. 7 of 2001.
It is stated by the
present appellant that the respondent, K.S. Raju, was
Promoter Director of M/s. Nagarjuna Finance Limited,
Hyderabad (in short “NFL”). The said company, through
its Directors, issued advertisement inviting deposits
promising good returns on the deposits with attractive
interest thereon, and collected the huge sum from the
public. The present appellant deposited ₹.40,00,000/- (₹
Page 4
5
forty lakhs) hoping that the same would multiply to
double
within
45
months
as
projected
in
the
advertisement. The said amount was deposited in eight
fixed deposits of ₹.5,00,000/- (₹ five lakhs) each for a
period of 45 months on 20.7.1997 and was due for
repayment on maturity on 28.4.2001.
However, when
the NFL failed to re-pay the sum to the depositors, an
application (CP No. 35 of 2000) was filed under Section
58-A of the Companies Act, 1956 before the Company
Law Board, Southern Region Bench, for framing the
scheme of repayment of deposits in instalments within a
period of 48 months.
The Company Law Board (CLB),
exercising its suo motu powers, allowed the time to NFL
on the request of its directors to approve the scheme of
repayment. During the pendency of such application the
CLB ordered the Directors, including the Promoter
Director K.S. Raju, to file affidavits giving undertaking to
the CLB that they would abide by the scheme and pay off
the amount due to depositors.
On the assurance as
given in the undertakings/affidavits filed by K.S. Raju,
Page 5
6
Promoter Director, and other Directors separately, the
CLB passed order dated 29.2.2000.
But the Promoter
Director and its group companies filed Company Appeal
Nos. 9 of 2001 and 7 of 2001 against the said order dated
29.2.2000 passed in CP No. 35 of 2000. In said appeals,
on behalf of the Company an undertaking was given to
pay half of first year’s entitlement of the present
appellant by 20.4.2002. However, no amount was paid.
As such, the contempt petition was filed by the present
appellant before the High Court for violation of the orders
of the Company Law Board.
6. According to the appellant, after the scheme was
approved, K.S. Raju, Promoter Director of NFL, started
pleading that there was change in the management of
NFL, and sought to be relieved from his liability as the
Promoter Director of NFL, its group companies and from
the undertaking given by him to the CLB.
The CLB
declined to relieve the Promoter Director K.S. Raju from
the undertaking given by him and it was directed that he
Page 6
7
should make the repayment as per the repayment
scheme.
The Company Appeals were dismissed by the
High Court on 3.1.2002. NFL and its Promoter Director
failed to comply with the order of the Company Law
Board even after dismissal of the Company Appeals. K.S.
Raju, the then Promoter Director, was responsible for
issuance of the advertisement inviting deposits from the
public and failed to repay the deposits as per the
undertaking given by him on behalf of the Company. It is
further alleged by the present appellant in the Contempt
Petition before the High Court that K.S. Raju kept on
evading
his
liability,
and
attempted
to
shirk
the
responsibility by taking plea that he had resigned from
the directorship.
7. A counter affidavit was filed on behalf of K.S. Raju,
Promoter Director of NFL, in February, 2003 before the
High Court which discloses that the said respondent
disputed
and
denied
the
averments
made
in
the
Contempt Petition. He pleaded that he had all respect for
Page 7
8
the Court and had no intention to commit the contempt
of the court. He further pleaded that long back he had
left to function as Managing Director of NFL. It is further
stated by him that he is neither in a position to exercise
any control over the Company nor responsible to make
repayment of the deposits made in favour of NFL. It was
further submitted by him before the learned single Judge
of the High Court that in the order dated 29.2.2000
passed by the CLB, the Board did not rely on the
assurance or undertaking given by the parties. Only the
Managing Director was directed to file the undertaking,
as
such
the
undertaking/affidavit
given
by
the
respondent K.S. Raju was not the basis of the order
dated 29.2.2000. As such it was contended that there
was no contempt of CLB or the Court.
It was further
pleaded that an agreement was entered into between one
M/s. Mahalakshmi Factorial Services Limited (for short
“MFSL”) and NFL whereby the control of NFL was handed
over to MFSL, and N. Selvaraj (respondent No. 2 in the
Contempt Petition) was nominated as the Chief Executive
Page 8
9
Officer to look after the affairs of NFL.
Lastly, it was
pleaded by respondent K.S. Raju that assuming that he
had given undertaking/affidavit on which CLB passed
the order said to have been disobeyed, there is no
personal liability on said respondent to repay the amount
in question.
8. In the counter affidavits filed on behalf of NFL (through
G. Venkatapathi, Executive Director) and N. Selvaraj
(respondent No. 2 in the Contempt Petition) it was
disclosed
that
Sridhar
Chary,
Managing
Director,
functioning for over a decade of NFL, was none else than
the nominee of K.S. Raju, Promoter Director. It was also
pleaded on behalf of NFL that out of Paid-up Capital of
₹.26.32 crores group companies were holding ₹.16.16
crores, i.e., approximately 61%.
It was also stated by
NFL in its counter affidavit before the High Court that
under Articles 104 and 140 of the Articles of Association
K.S. Raju had power to appoint the Managing Director
and other three Directors as his nominees. N. Selvaraj
Page 9
10
(respondent No. 2 in the Contempt petition) denied that
he was nominee of MFSL. He further pleaded that there
was no change in the management of NFL during his
tenure as Managing Director, and he further told that
entire control remained with K.S. Raju and his nominees.
The Executive Director, G. Venkatapathi of NFL, filed
additional counter affidavit in which it is clearly stated
that the CLB passed the order on the basis of the
undertakings and affidavits filed by the Promoter Director
and the group companies. The counter affidavits further
revealed that on special audit made in April, 2002,
several irregularities were found to have been committed
by the Management resulting in failure of recoveries in
respect of loans advanced to various companies who were
not traceable on the addresses given.
9. An additional counter affidavit was filed by K.S. Raju,
Promoter Director, who was contesting the contempt
petition with other two respondents, in which he alleged
that the representatives of MFSL have engineered and
Page 10
11
secured the audit report to save the Directors of
said
company.
10.
Learned Single Judge, after hearing the parties at
length, came to the conclusion that NFL and its Promoter
Director, K.S. Raju, are guilty of contempt of court.
Paragraphs 134 and 135 of the judgment and order dated
3.8.2007 passed by the learned Single Judge read as
under: -
“134. The 1st and 3rd respondents/contemnors
are found guilty and liable to be convicted
under Section 12 of the Contempt of Courts Act.
Accordingly, the 1st respondent as well as the
other directors of the 3 rd respondent company
are convicted and sentenced to suffer simple
imprisonment for a period of six months,
together with imposition of fine of Rs.2,000/-
(Rupees two thousand only).
The 1 st
respondent as well as other directors of the 3 rd
respondent shall be detained in Civil Prison for
the period of imprisonment as ordered above.
135. Accordingly, C.C. is allowed.”
11.
Aggrieved by the order dated 3.8.2007 passed by
the learned single Judge in Contempt Case No. 915 of
2002 respondent K.S. Raju, Promoter Director, appears
to have filed Contempt Appeal No. 3 of 2007 before the
Page 11
12
Division Bench of the High Court. His appeal was taken
up along with the appeals of the other Directors and
disposed of
vide impugned order
dated 22.8.2008
whereby the appeals of all the Directors, including that of
K.S. Raju, were allowed. Hence these appeals before us
by the depositor E. Bapanaiah.
(We have already observed in the beginning of this
judgment that since the ‘other Directors’ were neither
impleaded by name nor had an opportunity to defend
themselves, as such setting aside of their conviction and
sentence by the Division Bench of the High Court in their
appeals, requires no interference.
As such further
discussion is confined to the issue of allowing of K.S.
Raju by the Division Bench of the High Court.)
12.
We have heard learned counsel for the parties at
length and perused the papers on record.
13. It is not disputed that E. Bapanaiah made deposit of
₹.40,00,000/- (₹ forty lakhs)
in eight FDRs each of
₹.5,00,000/- (₹ five lakhs) with NFL in response to the
Page 12
13
advertisement made by the said Company. It is also not
disputed that respondent K.S. Raju was the Promoter
Director of NFL, Hyderabad. Not only this, the filing of
the undertaking/affidavit dated 14.2.2000 before the
Company Law Board, Southern Region Bench is not
denied
by
the
respondent
K.S.
Raju.
The
said
undertaking/affidavit reads as under: -
“BEFORE THE COMPANY LAW BOARD
SOUTHERN BENCH AT CHENNAI
Company Petition No.NAG6-33/45QA/SRB/99
In the matter of the Companies Act, 1956
Section 58A(9)
In the matter of the Reserve Bank of India Act,
1934, Section 45QA
AND
In the matter of Nagarjuna Finance Limited,
Punjagutta, Hyderabad
... Petitioner
AFFIDAVIT
I, k.s. Raju, s/o Late Shri K V K Raju, aged 50
years, residing at, ‘Digvijayam’, Plot No. 933A,
Road No. 47, Jubilee Hills, Hyderabad-500033,
do hereby solemnly affirm and state as follows:
I am the promoter director of Nagarjuna Finance
Limited, the petitioner in the Company Petition
No. NAG6-33/45 QA/SRB/99.
Page 13
14
I as such hereby give assurance that Nagarjuna
Finance Limited (NFL) shall make repayment of
deposits as per the approved scheme by the
Hon’ble Company Law Board in the above
petition for deferment of repayment of deposits.
It is further reiterated that all steps shall be
taken to cause NFL to comply with aforesaid
repayment schedule.
The statements made are true to my knowledge
and I solemnly affirm that this declaration is
true and that no part of it is false.
Place: Hyderabad
Date: February 14, 2000
14.
Sd/-
K.S. Raju
Deponent”
Now we have to examine as to whether the defences
taken by K.S. Raju, Promoter Director, that he committed
no wilful disobedience of the order of the Company Law
Board are acceptable or not.
It is relevant to mention
here that it is not the defence of K.S. Raju that
repayment has been made by him or by NFL to the
present appellant E. Bapanaiah (depositor). That being
so, we have to see whether there was justification on the
part of K.S. Raju, Promoter Director, and his Company
Page 14
15
(NFL) in not making repayment as per the scheme
approved by the CLB, as directed by said authority.
15.
Learned counsel for the respondent K.S. Raju
argued that in the undertaking given by K.S. Raju, only
this much has been stated that the Company will make
the payment, as such it is not the personal liability of
said respondent.
functions
through
But needless to say that Company
its
directors,
in
its
operations.
Company is not such person which can be sent to jail. It
is the director controlling the affairs of Company through
whom it has committed the disobedience, if any, and as
such, such director has to suffer the consequences of
disobedience if it is wilful.
We have already discussed
above that from the affidavits filed before the High Court,
it is clear that K.S. Raju was not only the Promoter
Director of NFL, but the Managing Director of said
Company, working for a decade, was his nominee, and
practically all the powers to run the NFL vested with K.S.
Raju, the Promoter Director, and his nominees, whom he
Page 15
16
appointed under Articles 104 and 140 of Articles of
Association.
16.
In our opinion, having considered the submissions
of learned counsel for K.S. Raju, Promoter Director, and
considering his role in the operation of the Company, as
discussed above, the Division Bench of the High Court
erred in law in holding that he was not guilty of wilful
disobedience of the order of the CLB. It is pertinent to
mention
here
14.2.2000,
that
after
respondent
giving
K.S.
undertaking
Raju
submitted
dated
his
resignation in September, 2000, which clearly reflects
that the same was done in order to save himself and his
company, from making the repayment directed to be
made by the CLB, and thereby dishonestly made attempt
in not making repayment to the depositor E. Bapanaiah.
17.
Sub-section (4) of Section 12 of the Contempt of
Courts Act, 1971 provides that ‘where the person found
guilty of contempt of court in respect of any undertaking
given to a court is a company, every person who, at the
Page 16
17
time the contempt was committed, was in charge of, and
was responsible to, the company for the conduct of
business of the company, as well as the company, shall
be deemed to be guilty of the contempt and the
punishment may be enforced, with the leave of the court,
by the detention in civil prison of each of such person’. It
further provides that ‘nothing contained in this sub-
section shall render any such person liable to such
punishment
if
he
proves
that
the
contempt
was
committed without his knowledge or that he exercised all
due diligence to prevent its commission’.
18.
It is not the case of respondent K.S. Raju, Promoter
Director,
who
gave
undertaking
that
he
had
no
knowledge of the order of the CLB, or that he made any
attempt to prevent the disobedience of the order.
19.
Though it is contended by Mr. C.A. Sundaram,
learned senior counsel for K.S. Raju that liability to make
repayment to the depositors stood transferred to MFSL
with whom NFL entered into an agreement after the order
Page 17
18
dated 29.2.2000 passed, but copy of the order dated
19.9.2000 passed by the CLB (Annexure P-4) on the
record discloses that the liability continued with K.S.
Raju and group of his companies, as mentioned in
direction No. 2 of the order which reads as under: -
“Heard Shri C.R. Murali, Practising
Chartered
Accountant
and
Authorized
representative of the company as well as Shri
L.V.V. Iyer, Director of the company.
The
company has made payment of Rs.73 lakhs to
the depositors between 17.7.2000 and
19.9.2000. The company has considered all
the 430 hardship cases; attended to complaints
to nine depositors received at the Bench Office
and disposed of 1424 complaints received at
his office by taking appropriate action as per
the Scheme approved by the CLB. According to
Shri Iyer, the company finds it difficult to make
payment to the depositors in accordance with
the scheme of account of the poor rate of
recovery of receivables and for want of the
required additional expertise and infrastructure
for recovery of the monies due to the company.
Hence, the management of the company has
entered into a strategic alliance with M/s.
Mahalakshmi Factoring Services Limited,
Bombay
(MFSL),
which
would
provide
necessary infrastructure and skills to accelerate
the process of realization of the receivables to
make
repayment
to
the
depositors.
Accordingly, additional professionals have been
inducted into the Board of the Company to
strengthen the recovery and disbursement
Page 18
19
mechanism. MFSL has agreed to resume the
responsibility in realizing the dues of the
company. MFSL is involved in the management
of the company, Shri N. Selvaraju, President of
the Company and Shri C. Muthuswamy,
Director of MFSL have filed affidavits
undertaking to discharge the obligations
towards the depositors in terms of the scheme
approved by the CLB.
Taking into consideration the facts and
circumstances of the case, submissions made
on behalf of the company, it is ordered as
under: -
1.
The Company shall –
i. ii. furnish additional particulars of the
cases where payments are due to
the depositors and the actual
payment made by the company in
such cases;
iii.
2.
make payment to the depositors in
every category as per the Scheme
approved by the CLB;
attend to the complaints of nine
depositors received at the bench
office and report compliance;
The affidavits filed by :
a)
Shri K.S. Raju, Promoter Director
of the Company;
b) M/s. New India Finance Ltd.
c) M/s. Chinnar Securities Pvt. Ltd.
d)
M/s.
Nagarjuna
Development Finance Ltd.
Housing
Page 19
20
e) M/s. Nagarjuna Engineering &
Construction Co. Pvt. Ltd.
f) M/s. Nagarjuna Holdings Private
Limited
g) M/s. Paschim Holdings Pvt. Ltd.
h) M/s. K.S. Raju Associates &
Holdings Pvt. Ltd.
i) M/s. Corporate Securities &
Holdings Pvt. Ltd.
j) M/s. K.S. Raju Associates and
Estates Pvt. Ltd.
k)
l)
M/s. K.R.R. Holdings Pvt. Ltd; and
Shri Sridhar Chari, Managing
Director of the company assuring
repayment of deposits by the
company as per the scheme
approved by the CLB shall remain in
force till discharging the obligations
in terms of the order dated
29.2.2000 of the CLB.
3. The arrangements made between the
company and MFSL shall not be of any
consequence in relation to the repayment
schedule approved by the CLB.
The
company, its promoter Director and Group
Holding Companies shall continue to be
responsible for due compliance of the
order stated supra.
4. The progress made in implementation of
the scheme will be reviewed on
14.11.2000 at 10.30 p.m.”
Page 20
21
20.
When an application under Section 634A of the
Companies
Act,
1956
was
moved
by
the
present
appellant before the CLB, the Board, by speaking order
dated 21.8.2001, after considering rival submissions,
observed in paragraphs 6 and 7 as under: -
“6. In regard to the plea of Shri Murali that
the provisions of Section 634A cannot be
invoked by the applicant, it may be observed
that this Section is explicit which runs as
follows:
Sec. 634A: Any order made by the
Company Law Board may be enforced by
that Board in the same manner as if it
were a decree made by a Court in a suit
pending therein, and it shall be lawful for
that Board to send, in the case of its
inability to execute such order, to the
Court within the local limits of whose
jurisdiction, -
(a) in the case of an order against a
company, the registered office of the
company is situated, or
(b) in the case of an order against any
other person, the person concerned
voluntarily resides, or carries on
business or personally works for
gain.
Section 634A is clear that as in the case of a
court, the orders of the Company Law Board
can be enforced by it in the same manner as if
Page 21
22
it were a decree made by a court. This section
further permits the CLB, in case of its liability to
execute the order, to seek the assistance of the
court having competent jurisdiction for
execution of its order. In view of this there is no
force in the argument of Shri Murali.
7.
Taking into consideration the facts and
circumstances of the case, the opportunity
afforded to the Company and the legal position
stated hereinabove, I hereby order that the
Company shall pay 30 per cent of the deposit
amount together with interest at the contracted
rate upto the date of maturity and thereafter till
the date of payment at the rate of 14.5 per cent
within 30 days of receipt of this order, failing
which the applicant is at liberty to move the
Court, within whose jurisdiction the registered
office of the Company is situated to execute the
order of the CLB.”
21.
The above order appears to have been challenged in
Company Appeal Nos. 7 & 9 of 2001 by both the parties –
depositor E. Bapanaiah and NFL, respectively.
Both
these company appeals were heard and disposed of by
order dated 3.1.2002 by the High Court. The concluding
paragraphs of the common order passed by the High
Court in the Company Appeals, are quoted below: -
the
“In the circumstances, the submission of
learned counsel for the respondent
Page 22
23
company that it is entitled to wait till the
month of April 2002 cannot be accepted and
the respondent company is therefore bound to
make the payments every month as per the
clause 11(f) read with clause 12 (iv) of the
scheme.
Coming to the second submission made
by the learned counsel for the respondent
company, though I do not propose to go into
the larger question whether the nature of the
power exercised under Section 634A of the
Companies Act is in the nature of the power
exercised as an executing court, but I must
say the impugned order is not in conformity
with the original order of the Company Law
Board dated 29th February, 2000.
But, a
combined reading of clause 1(i) and 12(iv) of
the scheme, the respondent company is bound
to pay 30% of the amount due to the petitioner
within 1 year from the date of the maturity
(28.4.2001) spread over 12 equal monthly
instalments.
Coming to the submission made by the
learned counsel for the depositor, I do not see
any reason why he should have any grievance
against the impugned order. It is open for him
as indicated by the Company Law Board in the
impugned order to move the appropriate court
for the execution of the order of the Company
Law Board dated 29th February 2000.
In the circumstances, both the company
appeals are dismissed.”
Page 23
24
22.
However, after above order was passed by the High
Court, a proviso is added by Legislature to Section 634A
of the Companies Act, 1956, which reads as under:-
“Provided that the provision of this section shall
not apply on and after commencement of the
Companies (Second Amendment) Act, 2002.”
As such, on the date (3.8.2007) order passed by learned
single Judge, the depositor had no option of getting
executed the order of CLB as a decree passed in a suit,
and present appellant could not have been asked to avail
remedy under Section 634A of the Companies Act.
23.
No doubt, a company which defaults in repayment
of deposit can be dealt with as per provisions contained
in sub-sections (9) and (10) of Section 58A of the
Companies Act, 1956, which read as under: -
“(9) Where a company has failed to repay any
deposit or part thereof in accordance with the
terms and conditions of such deposit the
Tribunal may, if it is satisfied, either on its own
motion or on the application of the depositor,
that it is necessary so to do to safeguard the
interests of the company, the depositors or in
the public interest direct, by order, the company
to make repayment of such deposit or part
Page 24
25
thereof forthwith or within such time and
subject to such conditions as may be specified
in the order:
Provided that the Tribunal may before
making any order under this sub-section give a
reasonable opportunity of being heard to the
company and the other persons interested in
the matter.
(10) Whoever fails to comply with any order
made by the Tribunal under sub-section (9)
shall be punishable with imprisonment which
may extend to three years and shall also be
liable to a fine of not less than rupees five
hundred for every day during which such non-
compliance continues.”
(Expression “Tribunal” was substituted in the above
mentioned provisions vide Act No. 11 of 2003 in place of
words “Company Law Board”)
24.
During arguments it is stated before us by the
learned counsel for the parties that the prosecution was
also launched against the respondent K.S. Raju but he
was discharged. However, Special Leave Petition is said
to have been pending in said matter.
We are of the view
that the depositors cannot be left without remedy merely
for
the
reason
that
prosecution
could
have
been
launched against the company.
Page 25
26
25.
Powers of the High Courts to punish for contempt
including the powers to punish for contempt of itself flow
from Article 215 of the Constitution of India. Section 10
of the Contempt of Courts Act, 1971 empowers the High
Courts to punish contempts of its subordinate courts
which reads as under: -
“10. Power of High Court to punish
contempts of subordinate courts. – Every
High Court shall have and exercise the same
jurisdiction,
powers
and
authority,
in
accordance with the same procedure and
practice, in respect of contempts of courts
subordinate to it as it has and exercises in
respect of contempts of itself:
Provided that no High Court shall take
cognizance of a contempt alleged to have been
committed in respect of a court subordinate to it
where such contempt is an offence punishable
under the Indian Penal Code (45 of 1860).”
26.
As to the question whether CLB is a court
subordinate to High Court or not, in Canara Bank v.
Nuclear Power Corporation of India Ltd. and others 1,
this Court has held that CLB in the proceedings before it
under Section 111 of the Companies Act since performs
curial functions, hence it is a “court” within the meaning
1
1975 Supp (3) SCC 81
Page 26
27
of Section 9-A of Special Court (Trial of Offences Relating
to Transactions in Securities) Act, 1992.
In Sk.
Mohammedbhikhan Hussainbhai v. The Manager
Chandrabhanu Cinema2, the Gujarat High Court has
taken the view that if the High Court is an appellate
court of some authority under a statute, such authority
can be deemed to be a subordinate court within the
ambit of Contempt of Courts Act, 1971 and, therefore,
the High Court can exercise powers of dealing with
contempt of such authority provided the act of contempt
was not punishable for offences under Indian Penal Code.
In N. Venkata Swamy Naidu v. Sri Surya Teja
Constructions Pvt. Ltd. and others3, High Court of
Andhra Pradesh observed as under: -
“28. Under Section 10F of the Companies Act
1956, any person aggrieved by any decision or
order of the Company Law Board may file an
appeal to the High Court, within sixty days
from the date of communication of the decision
or order of the Company Law Board, on any
question of law arising out of such an order.
The Company Law Board is thus judicially
2
3
AIR 1986 Guj 209
2008 CriLJ 227
Page 27
28
subordinate to the High Court and, even if its
administrative control is held not to vest in the
High Court under Article 235 of the Constitution
of India, it would nonetheless be a Court
subordinate to the High Court under Section 10
of the Contempt of Courts Act.”
27.
an
The present case relates to a civil contempt wherein
undertaking
given
to
Company
Law
Board
is
breached. Normally, the general provisions made under
the Contempt of Courts Act are not invoked by the High
Courts for forcing a party to obey orders passed by its
subordinate courts for the simple reason that there are
provisions contained in Code of Civil Procedure, 1908 to
get executed its orders and decrees. It is settled principle
of law that where there are special law and general law,
the provisions of special law would prevail over general
law. As such, in normal circumstances a decree holder
cannot take recourse of Contempt of Courts Act else it is
sure to throw open a floodgate of litigation under
contempt jurisdiction.
It is not the object of the
Contempt of Courts Act to make decree holders rush to
the High Courts simply for the reason that the decree
Page 28
29
passed by the subordinate court is not obeyed. However,
there is no such procedure prescribed to execute order of
CLB particularly after proviso is added to Section 634A of
the Companies Act, 1956, vide Companies (Second
Amendment) Act, 2002.
28.
Therefore,
having
considered
submissions
of
learned counsel for the parties, and material on record,
and further considering the relevant provisions of law
and the cases referred above, and exercising powers
under
Article
136
read
with
Article
142
of
the
Constitution, we think it just and proper to interfere with
the order passed by the Division Bench of the High Court
whereby the Division Bench erroneously set aside the
finding and sentence awarded by the learned single
Judge against K.S. Raju. In our opinion, respondent K.S.
Raju wilfully disobeyed the order of CLB and breached
the undertaking given to CLB, and thereby committed
Contempt of Court subordinate to High Court as such
the Division Bench of the High Court has erred in law in
Page 29
30
allowing the Contempt Appeal No. 3 of 2007 filed by K.S.
Raju and setting aside his conviction and sentence,
recorded against him by the learned Single Judge in
Contempt Case No. 915 of 2002.
29.
For the reasons, as discussed above, we allow the
present appeal filed against respondent K.S. Raju, and
set aside the impugned order of the Division Bench of
High Court. Accordingly, order dated 3.8.2007, passed
in Contempt Case No. 915 of 2002, to the extent of
conviction and sentence recorded against K.S. Raju
(respondent)
stands
restored.
However,
exercising
powers under Article 142 of the Constitution of India, to
do complete justice between the parties, we allow sixty
days time to respondent K.S. Raju, with effect from
pronouncement of this judgment to repay the entire
amount to the depositor/appellant as directed by CLB,
and if within the said period of sixty days payment is not
made to the depositor/appellant, respondent K.S. Raju
shall be taken into custody to serve out
sentence as
recorded against him by the learned Single Judge vide
order dated 3.8.2007 in Contempt Case No. 915 of 2002.
If the amount is paid to the present appellant as directed
by this Court within sixty days, the sentence shall be
reduced to the extent of fine only. Rest of the appeals
filed by the depositor in respect of all other directors, who
were not impleaded by name before the High Court in the
contempt Case No. 915 of 2002, and acquitted by the
impugned order passed by Division Bench of High Court,
are dismissed.
....................................J.
[Vikramajit Sen]
....................................J.
[Prafulla C. Pant]
New Delhi;
November 07, 2014.
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