SC | Wilful disobedience or Wilful breach: Are these necessary requisites for bringing in action for ‘Civil Contempt’? Read on

Supreme Court: B.R. Gavai, J., while addressing a contempt petition expressed that:

“…contempt proceeding is not like an execution proceeding under the Code of Civil Procedure.”

“…contempt proceedings are quasi-criminal in nature and the standard of proof required is in the same manner as in the other criminal cases.”

“A mere objection to jurisdiction does not instantly disable the Court from passing any interim orders.”

Contempt Petition | Father v. Sons

The instant contempt petition arose out of an unfortunate family dispute between a father and his two sons from his first wife.

Petitioner in the contempt petition Rama Narang was married to Smt. Motia. The respondent’s 1 and 2 i.e. Ramesh Narang and Rajesh Narang so also Rakesh Narang are sons of the petitioner and Smt. Motia. The petitioner and Smt. Motia divorced in 1963. The petitioner thereafter married Smt. Mona. Out of the said wedlock, two sons Rohit and Rahul, as well as a daughter Ramona, were born.

Family Settlement

In accordance with the family settlement, that insofar as ‘Narang International Hotel Limited’ and its subsidiaries were concerned, Rama Narang, Ramesh Narang and Rajesh Narang were to be the only Directors.

Further, it was added that any decision by the Board of Directors was to be taken by the mutual consent of Rama Narang on one hand and Ramesh and Rajesh, on the other hand. Though if the amount of any transaction was exceeding Rs 10 lakhs, then the same could be undertaken only through a cheque signed jointly by Rama Narang on one hand and Ramesh or Rajesh on the other hand.

Though the matter was settled in terms of minutes of Consent Order, there was no quietus to the dispute between the parties.

Allegations

Rama Narang alleged that Ramesh and Rajesh had violated the terms of Consent Order stipulated in clause 3 (c), (d), (e) and (f) of the Minutes of the Consent Order. Violation of the said order amounted to clear disobedience and thus punishable under the Contempt of Courts Act, 1971.

Contempt Proceedings against the Respondents

Court initiated contempt proceedings and requested Justice V.A. Mohta, retired Chief Justice of Orissa High Court to act as a Mediator for settlement of disputes between the parties. However, despite serious efforts made by the Mediator, the settlement could not be arrived at.

A three-Judge Bench of this Court in Rama Narang v. Ramesh Narang, (2006) 11 SCC 114, observed the following:

“32. The object of entering into consent terms and jointly filing the undertaking was to run the family business harmoniously with the active participation of all as a family business but the respondents had taken absolute control of the Company NIHL to the total exclusion of the petitioner.

 33.The respondents have erroneously submitted that joint management and control of the Company means giving veto power to the petitioner. According to the terms of undertaking the petitioner and the respondents were under an obligation to run the Company harmoniously with the active participation of all as a family business but unfortunately the respondents have taken absolute control to the total exclusion of the petitioner. This is contrary to the terms of the undertaking given to this Court.”

The Court in the earlier Order held the respondents guilty of contempt, taking into consideration the fact that immediately sending respondents to jail would create total chaos in the Company and it would also vitally affect the interest of large number of people including the employees of the Company the sentence of imprisonment imposed on the respondents was kept in abeyance.

Consequences

On account of non-cooperation by Rama, the functioning of the Company had come to a standstill. It was contended in the said company petition, that due to non-cooperation by Rama in signing cheques, the employees could not be paid their salaries from November 2007 onwards. It was also contended, that bills for payment to supplier could also not be paid, due to which, the entire functioning of the various units of the Company had been seriously affected.

Company Law Board

CLB noticed, that due to differences among the Directors, many operational issues like payment of salaries/wages, payment to supplier etc. were pending, leading to agitation by employees and irregularities in supply.

The CLB found it appropriate, that till the petition was disposed of, as an interim measure, in the interests of the Company and more than 3000 employees/workers, there should be a mechanism by which the day-to-day operations of the Company were carried on without any hitch.

Petitioner alleged that the CLB Order was violative of the order of the Supreme Court and nothing but an attempt to legalize their conduct of contempt but the petitioner approached the Court by the instant contempt petition.

Analysis

Section 2(b) of the Contempt of Courts Act, 1971:

2. Definitions. – …..
(b) “civil contempt” means wilful disobedience to any judgment, decree, direction, order, writ or other process of a court or wilful breach of an undertaking given to a court.”

Civil Contempt

It is clear that for bringing an action under the ambit of civil contempt, there has to be a wilful disobedience to any judgment, decree, direction, order, writ or other process of a court or wilful breach of an undertaking given to the Court.

Respondents submitted that the petitioner was attempting to use the consent terms as a veto to stall the functioning of the Company.

Bench referred to Sections 397, 398 and 403 of the Companies Act, 1956.

Respondents legitimately invoked the jurisdiction of Company Law Board invoking the powers under Sections 397, 398 and 403 of the Companies Act, to which they were entitled to in law and were not restrained to do so by any competent Court/forum.

 CLB had passed interim orders in exercise of its powers under Section 403 of the Companies Act. Petitioner had approached the Court immediately after the order dated 10-04-2008, was passed by the CLB by way of present contempt petition.

Main Contention

Petitioner’s primary contention was that invoking the jurisdiction of the CLB and entertaining the said proceedings by the CLB, itself amounts to contempt.

 Observation

Court referred to the observations of in Pratap Singh v. Gurbaksh Singh, 1962 Supp (2) SCR 838:

“The principle behind all these cases is that 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.”

 Supreme Court stated that in the present case, the respondents were entitled to invoke the jurisdiction of the CLB under Sections 397, 398 and 403 of the Companies Act. Respondents had to take recourse to that remedy in compelling circumstances to safeguard the interest of the Company and its stakeholders.

Further, the Court added that merely taking recourse to the statutory remedy available to the respondents would not amount to contempt.

“…for bringing an action for civil contempt, the petitioner has to satisfy the court that there has been a willful disobedience of any judgment, decree, direction, order, writ or other processes of the Court.”

Requisite in a contempt proceeding

In a contempt proceeding, before a contemnor is held guilty and punished, the Court has to record a finding, that such disobedience was wilful and intentional.

Adding to the above, it has also been stated that if from the circumstances of a particular case, though the Court is satisfied that there has been disobedience, but such disobedience is the result of some compelling circumstances, under which it is not possible for the contemnor to comply with the same, the Court may not punish the alleged contemnor.

Bench also referred to the decision of Supreme Court in Kanwar Singh Saini v. High Court of Delhi, (2012) 4 SCC 307.

Situation in the present case

Court held that the petitioner failed to make out a case of wilful, deliberate and intentional disobedience of any of the directions given by the Court or acting in breach of an undertaking given to the Court.

“…where an objection is taken to the jurisdiction to entertain a suit and to pass any interim orders therein, the Court should decide the question of jurisdiction in the first instance. However, that does not mean that pending the decision on the question of jurisdiction, the Court has no jurisdiction to pass interim orders as may be called for in the facts and circumstances of the case.”

Further, the Bench expressed in light of jurisdiction that,

“…question of jurisdiction should be decided at the earliest possible time, the interim orders so passed are orders within jurisdiction, when passed and effective till the court decides that it has no jurisdiction, to entertain the suit. It has been held, that those interim orders would undoubtedly come to an end with the decision that the Court had no jurisdiction.”

 Violation of Interim Orders

 While in force, the interim orders passed by such Court have to be obeyed and their violation can be punished even after the question of jurisdiction is decided against the plaintiff, provided violation is committed before the decision of the Court on the question of jurisdiction.

 Another Observation made by the Court was that in the present case, the petitioner qualified under Section 399 of Companies Act and that the Company Law Board had jurisdiction to deal with the petition under Sections 397 and 398 of the Companies Act.

“…in the proceedings under Sections 397/398, it is the interest of the Company which is paramount.”

Bench expressing no more opinion in the present matter held that the contempt petition deserves to be dismissed and added that parties may invoke the jurisdiction of NCLT for seeking orders as deemed fit in the facts and circumstances. [Rama Narang v. Ramesh Narang, 2021 SCC OnLine SC 29, decided on 19-01-2021]

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