Invoking statutory provisions on issue which is decided by court of law is not contempt of court

Rama Narang v. Ramesh Narang and Others.

Contempt Petition no.92 of 2008 in Contempt petition (Civil) no.148 of 2003 in Civil Appeal no.366 of 1998.

Counsel for the petitioner- Learned Senior Counsel Shri Jaideep Gupta, Shri Mukul Rohtagi and Shri Kapil Sibal.

Counsel for the respondent- Learned Senior Counsel Shri Gopal Subramaniam, Shri Akhil Sibal.

The honourable Supreme Court consisting of judges, Justice A.M Khanwilkar, Justice B.R Gavai. held that the when the jurisdiction of any statute or company is questionable and that matter is sub-judice and in the meanwhile the company passes an interim order, then that would not be invalid only on the basis that the its jurisdiction is questionable i.e. mere objection to jurisdiction does not instantly disable the court from passing any interim orders.

A family dispute was borne out which took legal recourse in 1998 because the shares of the companies of which they were holders were disputed. The court meddled and finally, the SC passed the order on 29th November 2001 and signified the duties of each of the family members who were involved in the business, but still the issue pertained and one of them took recourse to statutory provisions despite court order pointing towards contrary and thereby creating a contention of contempt.

All the issues pertaining to this case including that of contempt were decided by the common judgement of the Supreme Court dated 19th January, 2021, by considering the following submissions of the counsels.

Learned Counsel for the petitioner submitted that (i). The respondent acted in contravention with the judgment that was passed by the SC on 15th march, 2007 by invoking the jurisdiction of company law board (CLB), hence liable for contempt under section 2(b) of contempt of courts act, 1971 (ii). The respondent is liable for contempt as the order passed by the SC on march 15, 2007 held that all three of company shares holders, which included respondents and petitioner have to carry business together i.e. any of them cannot take a decision without one another’s consent, as far as any decision of company is concerned and respondent by invoking company law board jurisdiction has acted in contravention to that order and the order dated April 15th, 2008 of CLB signifies the respondent’s contempt. (iii). The company law board did not have the requisite jurisdiction to pass the order as which it has passed because the order dated 15th march, 2007 passed by the SC had the settlement between the parties, which was enunciated by the above order of the Scand therefore, the respondents could not have initiated the proceedings before the CLB.

Learned counsel of respondents submitted that (i). The respondents under section 397 amd 398 of companies act, 1956 could approach CLB as according to it the interests of the company are of paramount significance, so in order to maintain that they could approach CLB. (ii). The respondents had to approach CLB under the companies act, 1956 and income tax act, 1961 as if they had not done it, then the company would have been put to a standstill and 3000 persons who were beneficiaries from the company’s proceedings would be deprived of their livelihood. (iii). The respondents as directors of the company had duty to maintain the business of the company , so in pursuance of that they had to approach the CLB as the petitioner showed non-cooperation in the company and by that pursuance only they could achieve the smooth functioning of the company. (iv) The respondents were not liable for contempt as they ad genuine reason to approach CLB, which was to maintain the smooth functioning of the company. The counsel cited the judgments, Re: Vinay Chandra Mishra (The Alleged Contemnor), Vijay Laxmi 6(1997) 3 SCC 443 40 and Others v. Prabhu Devi and Others and State Bank of India v. Ajit Jain and Other to bolster his submission.

In the above regard, the court held that,

In the facts of the present case, the alleged contemnor should be punished for not having complied and carried out the direction of the court has to take into consideration all facts and circumstances of a particular case. (Para 73)

By doing so, the court are of the view that the petitioner has failed to make out a case of wilful, deliberate and intentional disobedience of any of the directions given by this court or acting in breach of an undertaking given to this court.

Then the court also held that “Without prejudice to the rights of the respective parties, the present arrangement for running the affairs of the Company will continue until further orders. (Para 30)” , So as to maintain the company affairs irrespective of the judgement of this present case.

Then, the court also referred to the judgement on Pratap Singh and Another v. Gurbaksh Singh and observed the following

“Such action of the person which he takes in pursuance of his right to take legal action in a Court of law or in just making a demand on the other to make amends for his acts will not amount to interfering with the course of justice, even though that may require some action on the part of the other party in connection with his own judicial proceeding, as a party is free to take action to enforce his legal rights.” (Para 68)

In the above regard, the court held that to enforce the legal right of a person, he can take recourse to statutory provisions or any court and he is free to do so and do not get encumbered by any judgement of the court.

The court further held that to attract contempt under section 2(b) of contempt courts act, the party acting in contempt must in all probability shall have an intent to obstruct the administration of justice by that contempt, if else then that contravention would not be deemed as contempt.

Concluding, the court held that when the jurisdiction of any statute or company is questionable and a court is deciding that and in the meanwhile the company passes an interim order, then that would not be invalid only on the basis that the its jurisdiction is questionable i.e. mere objection to jurisdiction does not instantly disable the court from passing any interim orders (Para 77).

After hearing both contentions of the parties, the Supreme Court held,

In the result, this court are of the considered view, that the present contempt petition is without any merit and deserves to be dismissed, and is accordingly dismissed.(Para 82)

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Yajush Tripathi