HIGH COURT OF ANDHRA PRADESH

N. Venkata Swamy Naidu

v.

Sri Sri Surya Teja Constructions (P.) Ltd.

Section 10 of the Contempt of Courts Act, 1971 - Contempts of subordinate Courts - Power of High Court to punish - Whether Company Law Board (CLB) is judicially subordinate to High Court and, even if its administrative control is held not to vest in High Court under article 235 of Constitution, it would nonetheless be a Court subordinate to High Court under section 10 - Held, yes - Whether while subordinate Court may make a reference in case of a contempt of such Court or Advocate General may make a motion in that behalf, rule 5 of Contempt of Court Rules, 1980 does not bar High Court from taking cognizance of contempt, or in taking action for contempt of subordinate Courts under section 10 either suo motu or on a petition made by any person - Held, yes - Whether even if regulations 44 and 47 of Company Law Board Regulations, 1991 and Order xxxix, rule 2A, of Code of Civil Procedure, 1908 are held to be a law relating to Contempt of Courts, these provisions would not preclude High Court, in an appropriate case, from taking action for contempt of orders of CLB - Held, yes

Section 20 of the Contempt of Courts Act, 1971 - Actions for contempt - Limitation for - Whether limitation under section 20 has to be computed with reference to date of filing of application for initiation of contempt and, therefore, if an application to initiate contempt proceedings is filed within one year from date on which contempt is committed, it would amount to initiation of contempt proceedings within limitation under section 20 - Held, yes

Facts

The petitioner filed the instant contempt case alleging that respondent Nos. 1, 2 and 4 to 9 wilfully disobeyed and grossly violated the CLB’s orders. It was the petitioner’s case that he filed a company petition under section 397/398, wherein he sought for various interim reliefs including an order to prevent the sale or dispossession of the company’s land and to prevent injury being caused to persons who were allotted flats in the project; that when the said petition was pending under consideration, the respondents demolished the superstructure of the building necessitating his filing an application requesting the CLB to interfere and grant necessary order with regard the existing structure; that the CLB granted status quo vide its order dated 18-7-2005 but despite that, the respondents continued to demolish the building and when those violations were brought to CLB’s notice on 20-7-2005, it appointed an Advocate Commissioner, who after visiting/inspecting the dispute site, submitted his report dated 31-7-2005 confirming that one structure was completely and the other was partially demolished; that, consequently, the CLB, vide its order dated 4-10-2005 held, inter alia, that the respondents had demolished the entire disputed structures in utter violation of its order. The CLB further held that the High Court, being the CLB’s appellate authority, CLB must be deemed to be a subordinate court within the ambit of the Act and, therefore, the High Court could exercise powers of dealing with contempt of the CLB. The CLB, therefore, granted liberty to the petitioner to move the High Court by invoking its jurisdiction under section 10 of the Contempt of Courts Act so as to prosecute the respondents for having wilfully disobeyed CLB’s order dated 18-7-2005. The respondent’s case was that the contempt case was liable to be dismissed inter alia, on the grounds that since the CLB had merely left it open to the petitioner to approach the High Court and had not made a reference itself, the High Court would not take cognizance of contempt, and that the contempt case as filed was even otherwise barred by limitation.

Held

IS THE COMPANY LAW BOARD A ‘COURT’ UNDER THE CONTEMPT OF COURTS ACT?

The Contempt of Courts Act does not define what a ‘Court’ under the Act is. [Para 18]

To fall within the ambit of the word ‘Court’ for the purposes of section 10, (i) the authority must be enjoined to adjudicate upon the disputes between the parties; (ii) the authority’s source of power must emanate from the Statute and must not be based merely on agreement between the parties; (iii) the authority should have the power to ascertain disputed question of fact and law on consideration of the legal arguments both oral and written and the evidence adduced by the contesting parties; (iv) the authority should have the power to enforce attendance of witnesses, production of documents to decide disputes in a judicial manner and the end-result or product of the exercise of such power by the authority must result in a binding decision between the contesting parties concluding the lis between them; and (v) the decision of such authority disposing the whole matter, both on questions of fact and law, must be definitive and must have finality and authoritativeness. [Para 24]

Since all the said tests were satisfied, the Company Law Board rightly held, in its order dated 4-10-2005, that it was a ‘Court’ within the meaning of section 10. [Para 25]

IS THE COMPANY LAW BOARD A SUBORDINATE COURT UNDER SECTION 10 OF THE CONTEMPT OF COURTS ACT?

High Courts, being superior courts of records, enjoy inherent powers of contempt to protect subordinate courts even in the absence of any express provision in any Act. Article 227 confers supervisory jurisdiction upon the High Court and in exercise of that power, the High Court may correct judicial orders of subordinate courts. In addition, the High Court has administrative control over subordinate courts. The jurisdiction and power of a superior court of record to punish contempt of subordinate courts is not founded on the Court’s administrative power of superintendence, instead the inherent jurisdiction is conceded to superior courts of record on the premise of its judicial power to correct errors of subordinate courts. [Para 27]

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 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, it would nonetheless be a Court subordinate to the High Court under section 10. [Para 29]

CAN THE HIGH COURT EXERCISE ITS JURISDICTION UNDER SECTION 10 OF THE CONTEMPT OF COURTS ACT EVEN IN THE ABSENCE OF A REFERENCE TO IT BY THE COMPANY LAW BOARD?

It was true that the Company Law Board, while holding that the respondents were guilty of gross violation of its restraint order dated 18-7-2005 in demolishing the entire structure in dispute and that the apologies offered were with the hope and object of avoiding punishment for wilful disobedience of the orders of the Bench and were not acceptable, held that the petitioner was at liberty to move the High Court invoking its jurisdiction under section 10. Short of making a reference, the Company Law Board had in, no unmistaken terms, held that the respondents had wilfully and deliberately violated its orders and had committed contempt. [Para 30]

Section 2(a) defines ‘contempt of court’ to mean civil contempt or criminal contempt. Section 2(b) defines ‘civil contempt’ to mean wilful disobedience to, among others, decrees, orders, or other process of a Court. Section 10 relates to the power of the High Court to punish for contempt of subordinate courts and, thereunder, every High Court shall have to exercise the same jurisdiction, power and authority, in accordance with the same procedure and practice, in respect of contempt of courts subordinate to it as it has and exercises in respect of contempt of itself. Under the proviso to section 10, 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. [Para 31]

The ‘Contempt of Court Rules, 1980’ regulate proceedings for contempt of subordinate courts of the High Court under the Act. Under rule 5, in case of contempt, other than the contempt referred to in rule 4, the High Court may take cognizance of contempt and take action (a) suo motu or (b) on a petition made by the Advocate General of the State of Andhra Pradesh or (c) on a petition made by any person and, in case of criminal contempt, with the consent in writing of the Advocate General of the State of Andhra Pradesh or (d) on a reference made to it by a court subordinate to it in the case of contempt of such subordinate court or on a motion made by the Advocate General of the State of Andhra Pradesh in that behalf. The modes prescribed in rule 5, for the High Court to take cognizance of contempt and take action, are in the alternative. While the subordinate court may make a reference in the case of a contempt of such court or the Advocate General may make a motion in that behalf, rule 5 does not bar the High Court from taking cognizance of contempt, or in taking action, either suo motu or on a petition made by any person. [Para 32]

The power of the High Court under section 10, to punish for contempt of subordinate courts, is in accordance with the same procedure and practice as it has and exercises in respect of contempt of itself. It is not and cannot be in dispute that the High Court can either suo motu or on a petition made by any person exercise jurisdiction in respect of contempt of itself. In view of section 10, the very same procedure and practice would apply even in respect of contempt of subordinate courts. Accepting the submission of the respondent Nos. 5 and 6, that the High Court can take cognizance of contempt of subordinate courts only on a reference made to it by the subordinate court itself or on a motion made by the Advocate General would render rule 5 of the Contempt of Courts Rules, 1980 ultra vires section 10. It would also fall foul of the inherent power of the High Court under article 215 of the Constitution. The mode of exercise of jurisdiction, as prescribed under rule 5, can only be in the alternative and, as a result, the High Court can take action for contempt of subordinate courts under section 10 either suo motu or on a petition made by a party. [Para 35]

WOULD EXISTENCE OF AN ALTERNATIVE REMEDY BAR EXERCISE OF JURISDICTION BY THE HIGH COURT UNDER THE CONTEMPT OF COURTS ACT, 1971?

Existence of an alternative remedy does not bar exercise of jurisdiction by the High Court, under article 215 of the Constitution, to punish for contempt of itself, and that of courts subordinate to it. Further, the provisions of the Act, are in addition to and not in derogation of any other law on contempt of courts. Even if regulations 44 and 47 of the Company Law Board Regulations and Order 39 Rule 2A C.P.C are held to be a law relating to contempt of courts, these provisions would not preclude the High Court, in an appropriate case, from taking action for contempt of the orders of the Company Law Board. [Para 39]

The Company Law Board cannot be equated to an Administrative Tribunal under the Administrative Tribunals Act, 1955 and since the Company Law Board is a court subordinate to it, the High Court, in exercise of its jurisdiction under section 10, can punish for any contempt such as wilful disobedience of the orders of the Company Law Board. [Para 41]

LIMITATION FOR TAKING ACTION FOR CONTEMPT

Under section 20, no Court shall initiate any proceedings for contempt, either on its own motion or otherwise, after the expiry of a period of one year from the date on which the contempt is alleged to have been committed. The order, violation of which was said to be in contempt, was that of the Company Law Board dated 18- 7-2005. While the contempt application was filed before the Company Law Board on 20-7-2005, the Advocate Commissioner, in compliance with the directions of the Company Law Board, visited the site and submitted his report on 31-7-2005. Thereafter, by order dated 4-10-2005, the Company Law Board, while holding that the respondents had wilfully disobeyed its orders, gave liberty to the petitioner to approach the High Court and invoke its jurisdiction under section 10. The instant contempt case was filed on 21-11-2005 within two months of the orders of the Company Law Board dated 4-10-2005. Thus, the application, in the instant contempt case, was filed within a period of one year even from 18-7-2005, when the order of status quo was passed by the Company Law Board, was not in dispute. The contention, however, was that since the High Court had not taken cognizance of contempt till date, and more than two years had elapsed from the date on which the order of status quo was passed, no proceedings for contempt could then be initiated as the contempt case was barred by limitation. [Para 42]

In view of the authoritative pronouncement of the Supreme Court, in Pallav Sheth v. Custodian [2001] 33 SCL 185, it must be held that if an application to initiate contempt proceedings is filed within one year, from the date on which contempt is committed, it would amount to initiation of contempt proceedings within limitation under section 20. The limitation under section 20 has to be computed with reference to the date of filing of the application for initiation of contempt and, since in the instant case, such an application was filed on 21-11-2005, well within the period of one year from the order of status quo dated 18-7-2005, violation of which was said to be in contempt, the contempt case as filed could not be said to be barred by limitation. [Para 43]

PRINCIPLES GOVERNING EXERCISE OF JURISDICTION TO PUNISH FOR CONTEMPT

There are certain well-recognized principles which govern the exercise of power and jurisdiction to punish for contempt. [Para 45]

In its order dated 4-10-2005, the Company Law Board observed that its earlier order dated 18-7-2005, directing maintenance of status quo, had been deliberately violated and it was evident from the Advocate Commissioner’s report that the subject structure was demolished even after the order of status quo was passed by it, and that respondent Nos. 1 to 9, in the contempt case before the High Court, were respondents in the company application, wherein the order of status quo was passed on 18-7-2005, and in contempt application filed by the petitioner to punish the respondents for wilfully disobeying the orders dated 18-7-2005, was not in dispute. The High Court, in contempt proceedings, was not concerned with the merits of the order of the Company Law Board dated 18-7-2005 directing maintenance of status quo. The only question, which arose for consideration, was as to whether the order had been flouted and, if so, whether such violation was wilful and deliberate. The conclusion of the Company Law Board, that there had been wilful and deliberate violation of its orders dated 18-7-2005, had rightly, not been disputed by the respondents. Some of them would contend that they were neither the directors, nor were they associated with the first respondent-company when the order of status quo was passed. Some others would contend that while they were directors, they did not participate in the day-to-day affairs of the company and that, in law, it was only the managing director who could be held responsible for the day-to-day affairs of the company and it was he alone who could be said to have violated the orders of the Company Law Board. [Para 51]

A person, who has wilfully and deliberately disobeyed or violated the orders of Court, cannot be heard to say that, while he may well be guilty thereof, he would, nonetheless, not be liable to be punished for contempt as he is merely a director of the company; and that it is only the managing director against whom action can be taken for contempt. [Para 53]

Under section 303(2) of the Companies Act, 1956, the company shall, within the period mentioned, send to the Registrar, a return in duplicate, in the prescribed form, containing the particulars specified in the Register and a notification in duplicate in the prescribed form of any change among its directors, managing director, manager secretaries, etc., specifying the date of change. Form-32 of the Companies (Central Government) General Rules and Forms, 1956 is the notice giving particulars of appointment of directors, managing directors, managers, secretaries, etc., and changes among them. Thereunder, the name of the person, the date of change and the particulars of change are specifically provided for. [Para 55]

A certified Form-32, as recorded by Registrar of Companies on 23-4-2004, would show that the respondent No. 3, respondent No. 7, respondent No. 8 and respondent No. 9 had ceased to be the directors of the first respondent- company as early as on 29-9-2003 much prior to the status quo order passed by the Company Law Board on 18-7-2005. Since the respondent Nos. 3,7, 8 and 9 were not even the directors of and were not associated with the first respondent-company when the order of status quo was passed, they could not be said to have violated the orders of the Company Law Board, much less wilfully and deliberately. [Para 56]

The very same Form No. 32, would show that the respondent No. 6 was reappointed in the general meeting as a director on 29-9-2003. While the respondent No. 6, in her counter affidavit, would contend that she had resigned from the company on 10-2-2004, and that her resignation was approved by the board of directors, no evidence was placed in support of such a plea. The application made to the Company Law Board in March, 2006, several months after the status quo order dated 18-7-2005 was passed, was of no assistance to respondent No. 6. Her self-serving plea, in the absence of any evidence in support thereof, did not merit acceptance. What was, however, of relevance was that the Advocate Commissioner’s report made no mention of her presence at the site of the demolished structure, when he made his visit. Since the degree of proof required, to establish contempt of court, is proof beyond reasonable doubt, giving her the benefit of doubt, respondent No. 6 was also to be held not guilty of contempt. [Para 57]

The Advocate Commissioner’s report dated 31-7-2005 specifically referred to the fact that when he visited the site, demolition was in progress and that respondent No. 5 was present at the site. The respondent No. 5 had neither rebutted the contention of the Advocate Commissioner that he was present at the site, nor had he denied his presence at the site, when the Advocate Commissioner visited and found demolition to be in progress. It was established beyond reasonable doubt that the respondent No. 5 had wilfully disobeyed and deliberately violated the order of status quo passed by the Company Law Board dated 18-7-2005, and had committed contempt of court. [Para 58]

He had not even tendered an apology for his contumacious conduct in having wilfully disobeyed the orders of the Company Law Board. Such open defiance of the order of the Company Law Board, in continuing demolition of the superstructures even till 29-7-2005 more than ten days after the restraint order of status quo dated 18-7-2005, was a contempt of such a nature as to have substantially interfered with the due course of justice for which imposition of the sentence of fine alone would not meet the ends of justice. Such flagrant violation of the orders of the Company Law Board must be dealt with sternly. The respondent No. 5 was to be sentenced, under section 12(1), to undergo simple imprisonment for a term of two months and with fine of Rs. 200. [Para 61]

The contempt case was to be allowed with costs. [Para 62]