The Supreme Court warns companies that try to undermine court orders
New Delhi:
Observing that the National Company Law Appellate Tribunal had gone nowhere, the Supreme Court’s bench member Rakesh Kumar and technical member Alok Srivastava on Wednesday issued notices asking why contempt proceedings are not initiated against them for defying the top court orders in the Finolex. Cables case.
A bench headed by Chief Justice DY Chandrachud strongly objected to the NCLAT bench’s verdict.
The NCLAT bench had passed judgment on October 13, ignoring a status quo order of the apex court.
The top court quashed the NCLAT bench’s October 13 judgment regarding the annual general meeting (AGM) of Finolex Cables without going into its merits.
The bench, also comprising Justices JB Pardiwala and Manoj Misra, said the matter would be heard by NCLAT Chief Justice Ashok Bhushan.
“NCLT and NCLAT have now run into trouble. This case is an illustration of that rot. We are prima facie of the opinion that the members of the NCLAT have failed to disclose the correct facts and have wrongly created a record in the order dated 16 October that the order of this court was passed on 13 October at 5.35 p.m. was brought to their attention.
“We believe that it is necessary to issue orders to ensure that the dignity of this court is restored. Parties cannot be allowed to circumvent the orders of this court by resorting to devious means,” the court said.
The Apex Court also warned companies trying to undermine court orders, saying, “If our orders are undermined, corporate India should know that there is a Supreme Court watching. That is all we want to say for now.” The order is in connection with the annual general meeting (AGM) of Finolex Cables and Prakash Chhabria and Deepak Chhabria’s legal battle over management control of the company.
It is rare for the Supreme Court to issue contempt orders against NCLAT members.
The Supreme Court had last Friday directed the NCLAT chairman to conduct an inquiry and submit a report on Monday on the allegation that one of its courts had proceeded and passed an order without following the directions of the Supreme Court.
A three-member apex bench headed by Chief Justice Chandrachud had directed the NCLAT that day to pass its judgment and declare the results of the meeting only after receiving the comptroller’s report.
The top court’s order was uploaded at 1.55 pm and the counsel also informed the development to the NCLAT bench, which was scheduled to pronounce the verdict at 2 pm.
However, a two-member bench of the NCLAT comprising Justice Kumar, Member Judicial, and Srivastava, Member Technical, went ahead and passed the order while uploading the Comptroller’s report at 2.40 pm.
The apex court was apprised of the development through an urgent notice by lawyers, and the bench headed by the Chief Justice said, “If what is stated is correct, it will clearly stand in opposition to the order of this court by the NCLAT.” However, it also said that it does not comment on the merits of the submissions at this stage.
“We direct that an inquiry be conducted into the above allegations by the Chairman of the NCLAT. A report will be submitted to this court on October 16, 2023 at 5:00 PM after specific verification of the facts of the Judges constituting the bench of the NCLAT. the Supreme Court had said.
It also expressed dissatisfaction over the explanation given by the NCLAT members that as per the procedure at NCLAT, oral mentions are allowed only after the pronouncement of the judgment and therefore the lawyers were not allowed to mention the order of the top court before the pronouncement of the verdict.
The apex court said the NCLAT chairman will specifically verify “that the order of this court dated October 13, 2023, passed during the morning session, has been brought to the notice of the two judges”.
“If so, those are the circumstances in which the judges proceeded to pronounce the judgment despite the clear mandate of the order of this court passed during the morning hearing,” the report said.
The court’s order came on a petition filed by Prakash Chhabria-led Orbit Electricals, a promoter of Finolex Cables.
He had sought disclosure of the outcome of the vote in the company’s Annual General Meeting on the agenda item relating to the reappointment of Deepak Chhabria as executive chairman.
He challenged the non-disclosure of the outcome of the shareholder vote regarding the resolution regarding the reappointment of Deepak Chhabria as a “Whole-Time Director” designated as “Executive Chairman” at the Annual General Meeting of Shareholders on 29 September.
Earlier in the case, the NCLAT had passed an order on September 21 that settled the status quo for the conduct of the Assembly until they adjudicated the dispute between cousins Prakash Chhabria and Deepak Chhabria.
In this regard, an appeal was referred to the Supreme Court, which on September 26 had quashed this status quo order and said that whatever action would be taken would be in accordance with the end result of the proceedings before NCLAT.
“The NCLAT shall proceed to declare its judgment in the pending appeal after being duly informed of the declaration of the outcome of the annual general meeting,” the apex court had said.
(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)
