NCLAT Allows Appeal Against Titan Industries , Condones Delay In Filing Restoration Application In Contempt Proceedings u/s 425 of Companies Act [Read Order]

The three appellants had initiated a proceedings under Section 108 of the Companies Act of 1956 ( “Act of 1956”) against Titan Industries Ltd. The Appellant had prayed for a grant of a decree of permanent injunction, in favour of the Plaintiff/Appellants, as against the Respondent/Defendant, thereby restraining them from transferring 400 shares bearing Registration Folio.

Tax Planning For Trusts and cooperation Societies - CLICK HERE

Besides, the above, the Appellants also sought a Decree in the nature of Mandatory Injunction as against the Respondent, seeking a direction to register the name of the appellant/petitioner in the records of the Respondent No.1 Company as the owner of 400 shares, the particulars of which have been herein above. Another relief, which was sought for in the same petition, being Suit No.365 of 2012 by the Plaintiff / Appellant was that, the defendants / Respondents be directed to pay a sum of Rs.8,45,000/- along with the interest at the rate of 24% payable on it, to the appellants, in terms of the pleadings raised in para-16 of the plaint.

Since the said order was not complied with within the specified time frame, the Appellant herein filed a Contempt Petition being Contempt Petition No.154/BB/2019, by invoking the provisions contained under Section 425 of the Companies Act of 2013 (to be read with the Provisions contained under Section 10G of the Act of 1956). The said Contempt Petition was preferred by the Appellant by invoking the Provisions contained under Section 11 to be read with Section 12 of the Contempt of Courts Act of 1971.

Owing to the fact that the proceedings of the Contempt, under the Companies Act, are to be carried and governed in accordance with the provisions of the Contempt of Courts Act, the proceedings of the Contempt, as against the final judgment of 28.02.2019, rendered in Suit No.365 of 2012 was taken up before the Adjudicating Authority and the Adjudicating Authority by an order dated 30.08.2019, after observing that the contempt petition was filed on 09.05.2019 and that after its filing the Registry has pointed out certain defects and they were granted time to remove the defects, which was not complied with, got the Contempt Petition listed for hearing on 28.08.2019.

Consequently, citing non-compliance of the objections raised by the Registry of the NCLT on 10.06.2019, coupled with non-compliance of the email communication dated 14.06.2019, resulting into non-rectification of the defects as pointed out by the Registry, and citing non-appearance of the Applicant where the Contempt Petition was taken up on 30.08.2019, the NCLTdismissed the Contempt Petition, for want of prosecution. Seeking recall of this order dated 30.08.2019, the Appellant on 11.12.2020 filed an application for

Restoration of Contempt Petition, praying thereby for recall of the order dated 30.08.2019 and to restore the Contempt Petition being Contempt Petition No.154/BB/2019, to its original number.

The Contempt Petition was accompanied with a condone delay Application wherein the Appellant/Applicant had prayed for a condonation of 374 days of delay, which had chanced in preferring the Resolution Application. Both the Applications got dismissed by the order dated 28.05.2024. It is against the dismissal of the Delay Condonation Application has been preferred by the Appellant.

Apart from the aliment of the Petitioner Nos.1 & 2, they have also contended that the Petitioner No.2 since being an aged senior citizen of 75 years of age, was suffering from age related problem and at the relevant time he was bedridden and owing to the poor health conditions he was unable to put in his appearance when the Contempt Petition was called for hearing on 30.08.2019.

It was submitted that the reason which has been given in the Condonation Delay Application is justified, and therefore, the Restoration Application seeking restoration of the Contempt Petition may be heard by NCLT on merits after condoning the 374 days of delay.

Step by Step Guide of Preparing Company Balance Sheet and Profit & Loss Account Click Here

In the Restoration Application, the Appellant, on almost similar grounds as above, has pleaded to explain his inability to diligently pursue the Contempt Petition. In addition, he had submitted that it took him a long time to comply with the office objections and to collate the records within the time, and as such, the inability to pursue the Contempt Petition diligently was on genuine reasons and therefore the Restoration Application may be allowed.

The provisions of drawing of Contempt Proceedings under the Companies Act, 1956 were contained under Section 10G and under the Companies Act of 2013, it is contained under Section 425. Section 425 of the Companies Act, 2013 contemplates that the proceedings of the Contempt could be drawn and carried under the provisions contained in the Contempt of Courts Act of 1971. Almost akin provisions were contemplated under the Companies Act of 1956, which also provided that the Contempt Proceedings will be carried on, by following the provisions of the Contempt of Courts Act, 1971.

If the Contempt Proceedings are taken up before the Tribunal since the issue of Contempt, contemplates of passing of an order of punishment, upon the Tribunal or the Court being satisfied of there being a case of deliberate and intentional non-compliance of order made out, the issue thereafter exclusively relates between the Tribunal or the Court and the alleged Contemnor.

Since not being a proceedings in relation to the enforcement of a personal right, but rather maintaining the prestige of the Court of Tribunal so as to ensure the compliance of its order, the Contempt Proceedings ought not to be dismissed for want of prosecution and the Tribunal or the Court should have decided the same on merits, even in the absence of the applicant, because it is an exclusive satisfaction, which is to be recorded by the Court or the Tribunal about the alleged non-compliance of an order passed by the Tribunal or the Court.

Besides that when the defects are yet to be rectified, the presumption would be that as a matter of fact, there is no Contempt Petition which stands instituted either under Section 10G of the Companies Act of 1956 or under Section 425 of the Companies Act of 2013, which could be dismissed for want of prosecution, the reason being that dismissal for want of prosecution would be only in those cases where the proceedings have been legally instituted and it is pending consideration on merits before the Court or the Tribunal to be decided on merits.

A two member bench Justice Sharad Kumar Sharma, Member (Judicial) and Jatindranath Swain, Member (Technical) observed that, compliance of an order itself will not amount to purging of Contempt, because various other aspects are required to be considered, such as whether the order was complied with in the stipulated time frame and who was supposed to comply the order. The averment of compliance, cannot be derived to be taken as to the basis for rejecting the Restoration Application along with Delay Condonation Application filed in the Contempt Petition, because the extent and nature of compliance would be an issue, which is required to be considered on merits when the Contempt Petition itself is considered after its Restoration and not before that.

How to Audit Public Charitable Trusts under the Income Tax Act Click Here

Owing to the fact, that the reasons, which has been given in the Condone Delay Application being appear reasonable in face of the documents which have been placed on record, the delay which has chanced in preferring the Restoration Application in the Contempt proceedings deserves condonation.

Accordingly, both the Appeals are allowed and the impugned orders dated 28.05.2024 as passed rejecting the Delay Condonation Application were quashed. The order dated 30.08.2019, rejecting the Contempt Petition for default is recalled.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates