Contempt jurisdiction under Section 425 of the Companies Act, 2013, is a remedy of last resort and cannot be invoked as a substitute for execution proceedings; mere non-payment or non-compliance with monetary orders does not constitute civil contempt without proof of willful and deliberate intent to undermine the court's authority.

O R D E R

1. This Contempt Petition has been filed under Section 425 of the Companies Act, 2013, read with Section 11 & 12 of the Contempt of Courts Act, 1971 and Rule 11 of the NCLT Rules, 2016 , by a major shareholder in the Corporate Debtor, M/s Savute Textiles Private Limited (hereinafter ‘the Corporate Debtor’) against its Suspended Directors of the Corporate Debtor, and the related parties of the said Suspended Directors for their alleged wilful and deliberate violation of the order dated 25.04.2024 passed by this Adjudicating Authority in IA(IBC)/97/KOB/2023.

Brief facts of the case: -

2. The Corporate Insolvency Resolution Process was initiated against M/s Savute Textiles Private Limited on 11.03.2022, and during the process, the Resolution Professional identified fraudulent transactions by the suspended directors, including unauthorized transfer of assets and siphoning of funds. Consequently, an application under Section 66 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred as the Code) was filed, and by order dated 25.04.2024, this Adjudicating Authority declared the Business Transfer Agreement null and void and directed restoration of assets and payment of specified amounts to the Corporate Debtor.

3. The said order was challenged before the Hon’ble High Court of Kerala, which dismissed the writ petitions, holding that Regulation 35A is directory and rejecting the objections regarding third parties. The petitioner stated that despite the dismissal of the writ petitions and full knowledge of the orders, the Respondents have failed to comply, compelling the Petitioner to seek contempt proceedings under Section 425 of the Companies Act, 2013.

4. The Respondents contended that the Contempt Petition is not maintainable as there is no material to show any wilful disobedience of the order dated 25.04.2024, and mere non-compliance does not amount to civil contempt. They submitted that the Petitioner has no locus standi, the proper remedy for recovery of money is execution and not contempt, and that compliance with the directions was either practically impossible (as the disputed goods were not available) or beyond their financial capacity. The allegation regarding the removal of machinery is denied by the respondents, and it is stated that only a single machine was temporarily moved for repair with the approval of the SEZ authorities and was returned, and no other assets were removed after the order. It is further contended that the petition is based solely on the RP’s quarterly report, that no finding of siphoning of funds was recorded in the order, and that the proceedings are an abuse of process liable to be dismissed with costs.

5. During the pendency of the Contempt Petition, the Applicant has filed IA(IBC)/390/KOB/2025 seeking permission to take on record certain documents, including the 8th Quarterly Progress Report of the Liquidator, photographs, and other supporting material evidencing the unauthorized removal of plant, machinery, and closing stock by the Respondents on 19.11.2024 and 20.11.2024, which were not available at the time of filing the Contempt Petition. According to the Petitioner, these documents demonstrate the wilful and deliberate non-compliance of the order dated 25.04.2024 by the Respondents and are crucial for the proper adjudication of the Contempt Petition. Vide order dated 12.03.2026, this Adjudicating Authority has already taken the said documents on record, and IA(IBC)/390/KOB/2025 was accordingly disposed of.

Findings:

6. This Adjudicating Authority has heard the learned Counsel appearing for the parties and has perused the documents placed on record, the written submissions filed, and the judgments relied upon