2014 Supreme(SC) 788

SUPREME COURT OF INDIA
VIKRAMAJIT SEN, PRAFULLA C. PANT, JJ.
E. Bapanaiah – Appellant
Versus
Sri K.S. Raju etc. – Respondents
Criminal Appeal Nos. of 2014 (Arising out of S.L.P. (Crl.) Nos. 2479-2487 of 2009)
Decided On : 07-11-2014

IMPORTANT POINT
A litigant cannot be left remedyless.
High Court can take cognizance of contempt of CLB.

Headnote:(a) Contempt of Courts Act, 1971 – Section 12 – Division Bench of High Court allowing Contempt appeals no. 4, 5, 6, 7, 8, 9, 10, 11 of 2007 on ground that appellants were no respondents in the contempt case no. 915 of 2002 – No infirmity. (Para 3)

       (b) Contempt of Courts Act, 1971 – Section 12(4) – Respondent, MD of defaulting company at relevant time, giving undertaking to CLB to repay due amount to appellant – Resigning after submission of undertaking to CLB – Company not making payment – Respondent rightly held guilty of contempt by Single Judge – Although responsibility of making repayment by NFL transferred to MFSL, CLB ordering continuance of liability on respondent and his group companies. (Para 17, 19)

       (c) Contempt of courts Act, 1971 – Section 10 r/w Article 215, Constitution of India – Power of High Court to punish contempts of subordinate courts – CLB judicially subordinate to High Court – No prescribed procedure for execution of order of CLB, particularly after addition of proviso Section 634A of the Companies Act, 1956 vide Companies (Second Amendment) Act, 2002 – An aggrieved party becomes remedyless in case of disobedience of CLB order. (Para 26, 27)

       1975 Supp (3) SCC 81 – Relied upon

       AIR 1986 Guj 209; 2008 CriLJ 227 – Cited with approval

       Constitution of India – Article 136 and 142 – Willfull disobedience of CLB order – High Court allowing contempt appeal – Appellant left remedyless – Interference by Supreme Court under Article 136 and 142 required – Impugned order of Division Bench of High Court set aside and that of Single Judge restored – 60 days time granted to respondent to make payment to the appellant. (Para 28, 29)

       Facts of the case:

       The respondent, K.S. Raju, was Promoter Director of M/s. Nagarjuna Finance Limited, Hyderabad (NFL). The company invited deposits promising good returns on the deposits with attractive interest thereon, and collected the huge sum from the public. The present appellant deposited Rs.40,00,000/- (Rs. forty lakhs) hoping that the same would multiply to double within 45 months as projected in the advertisement. The said amount was deposited in eight fixed deposits of Rs.5,00,000/- (Rs. five lakhs) each for a period of 45 months on 20.7.1997 and was due for repayment on maturity on 28.4.2001.

       However, when the NFL failed to re-pay the sum to the depositors, an application was filed before the Company Law Board for framing the scheme of repayment of deposits in instalments within a period of 48 months. The Company Law Board (CLB) allowed time to NFL to approve the scheme of repayment.

       On the assurance as given in the undertakings/affidavits filed by K.S. Raju, Promoter Director, and other Directors separately, the CLB passed order dated 29.2.2000 allowing time to NFL.

       But the Promoter Director and its group companies filed Company Appeal Nos. 9 of 2001 and 7 of 2001 against the said order dated 29.2.2000. In said appeals, on behalf of the Company an undertaking was given to pay half of first year’s entitlement of the present appellant by 20.4.2002.

       However, no amount was paid. As such, the contempt petition was filed by the present appellant before the High Court for violation of the orders of the Company Law Board.

       After the scheme was approved, K.S. Raju, Promoter Director of NFL, sought to be relieved from his liability as the Promoter Director of NFL, its group companies and from the undertaking given by him to the CLB. The CLB declined to relieve the Promoter Director K.S. Raju from the undertaking given by him and it was directed that he should make the repayment as per the repayment scheme. The Company Appeals were dismissed by the High Court.

       NFL and its Promoter Director failed to comply with the order of the Company Law Board even after dismissal of the Company Appeals.

       The Single Judge of the High Court came to the conclusion that NFL and its Promoter Director, K.S. Raju, are guilty of contempt of court.

       Respondent K.S. Raju, Promoter Director filed Contempt Appeal No. 3 of 2007 before the Division Bench of the High Court. His appeal was taken up along with the appeals of the other Directors and disposed of whereby the appeals of all the Directors, including that of K.S. Raju, were allowed.

       Finding of the Court:

       Interference by Supreme Court under Article 136 and 142 is warranted in this case.

       Result:

       Impugned order set aside.