NCLAT bench ‘wilfully’ defied order, says SC, Real Estate News, ET RealEstate

October 31, 2023

NEW DELHI: The Supreme Court on Monday held that a National Company Law Appellate Tribunal (NCLAT) bench, comprising judicial member Rakesh Kumar and technical member Alok Srivastava, acted in “wilful defiance” of its October 13 order by going ahead with the pronouncement of their verdict in the Finolex Cables case.

The top court, however, closed the contempt proceedings against them after taking note of the subsequent resignation by the judicial member and unconditional apology tendered by technical member Srivastava.

“It is evident beyond a shadow of doubt that though the NCLAT was duly apprised of this court’s order (of October 13) of the morning session that the judgment shall be delivered only after the AGM results, the NCLAT declined to pay heed to the order of this court,” a bench headed by Chief Justice D Y Chandarchud and Justices JB Pardiwala and Manoj Misra said.

“We have no doubt that the bench of NCLAT has acted in wilful defiance of an order of this court,” the bench said, adding the top court would expect “a certain degree of deference to the orders” of this court which bind every court and tribunal in the country.

The top court, which also saw the relevant CCTV footage of the NCLAT proceedings and perused the transcripts, was irked over the content of the affidavit by judicial member Rakesh Kumar and said the explanation offered “compounded” the offence.

“There was an attempt to defy the order of the Supreme Court,” the CJI said.

The bench imposed a cost of Rs 1 crore on Deepak Chhabria, one of the parties in the corporate dispute, and Rs 10 lakh on a scrutiniser for their role in the case and ordered the amount to be paid in four weeks.

The amount will be deposited with the Prime Minister’s relief fund, it said.

The bench said, “Such actions by commercial interests must be dealt with firmly to show that the process of this court cannot be used by partisan interests.”

It directed that the matter be dealt with afresh by another NCLAT bench presided over by Chairperson Justice Ashok Bhushan.

The bench, in its elaborate order, noted in detail the facts of the case and said on October 13, the plea was mentioned in which a direction was issued to the NCLAT bench that it can proceed with the judgment only after it has been duly apprised of the results of the annual general meeting of the firm.

In the afternoon, the top court was again approached by some lawyers alleging that the NCLAT, despite being apprised of the SC directive for deferment of the judgement, proceeded to pronounce it, the order said.

“We sought a reply from the chairperson of NCLAT,” the bench noted, adding “the technical member has tendered unconditional apology and stated that work related to the control of procedure before the bench and procedure of mentions is conducted by the judicial member…”.

“It is stated that none of the parties made any effort to bring to the court’s notice the Supreme Court order and it was much after pronouncement of judgment that NCLAT registry received a copy of the order,” the bench said.

Taking note of the CCTV footage and the transcript of the proceedings, the order said, they “leave no manner of doubt” that the NCLAT bench was duly apprised of the fact that the Supreme Court had passed an order in the morning session.

“The judicial member has stated that if the parties think they are breaching the Supreme Court order then they can go and complain to the Supreme Court and it is evident beyond a shadow of doubt that though NCLAT was duly apprised of the SC order of morning session that judgment shall be after AGM results the NCLAT declined to pay heed to the order of this court,” the Supreme Court said.

It said once the gist of the order was made available to the NCLAT, it was expected of a judicial body to adhere to it.

“Thus we hold that NCLAT has acted in wilful disobedience to the orders of this court. We are of the view that there was an attempt to defy the orders of this court…However we would be resting the matter here,” the bench said.

The court said it has “no doubt that Deepak Chhabria and Scrutiniser acted in concert with each other to delay the results of the AGM effectively in breach of the Supreme Court orders of September 26.”.

“Since the proceedings (before the SC) are closed, we reiterate the order of this court which set aside the NCLAT order. Now the case shall be listed before the NCLAT bench presided by the chairperson (Justice Ashok Bhushan),” it said.

Earlier, the top court had issued notices to the tribunal’s judicial member and technical member asking why contempt proceedings should not be initiated against them for defying the apex court’s order in the Finolex Cables case.

The NCLAT bench had delivered a judgement on October 13 ignoring the order passed by the apex court. The top court had set aside the NCLAT bench’s October judgement relating to the annual general meeting (AGM) of Finolex Cables without going into its merit.

The court was dealing with a petition filed by Prakash Chhabria-led Orbit Electricals, which is a promoter entity in Finolex Cables.

The petition sought disclosure of the outcome of the voting in the AGM on the agenda item pertaining to the reappointment of Deepak Chhabria as executive chairman.

It challenged the non-disclosure of the outcome of voting by shareholders on the resolution for reappointing Deepak Chhabria as a ‘Whole-Time Director’ designated as the ‘Executive Chairman’ in the AGM held on September 29.

Prior to this, the NCLAT had on September 21 passed an order for maintaining status quo on the conduct of the AGM till the time it had adjudicated the dispute between cousins Prakash Chhabria and Deepak Chhabria.

An appeal against this was referred to the Supreme Court, which had on September 26 vacated the status quo order and said all action that may be taken will have to be in consonance with the final result of the proceedings before NCLAT.

“The NCLAT shall proceed to declare its judgment in the pending appeal after it is duly apprised of the fact that the result of the annual general meeting has been declared,” the apex court had said.

  • Published On Oct 31, 2023 at 03:00 PM IST

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