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N. Venkataswamy Naidu v/s Sri Suryateja Constructions (P.) Ltd.

    CA NOS. 84 & 87 OF 2005 IN CP NO. 24 OF 2004

    Decided On, 04 October 2005

    At, Company Law Board Southern Region Bench Chennai

    By, K.K. BALU
    By, VICE-CHAIRMAN

    R. Murari and B. Dhanaraj for the Applicant. K. Ramasamy for the Respondent.



Judgment Text

K.K. Balu, Vice-Chairman


1. In the company petition filed by the petitioner under sections 397, 398 and 402 read with section 111 of the Companies Act, 1956 (?the Act?), alleging acts of oppression and mismanagement in the affairs of M/s. Sri Suryateja Constructions Private Limited (?the company?) and claiming certain reliefs with a view to bringing to an end the acts complained of therein, Shri R. Murari, learned counsel mentioned the company application in C.A. No. 84 of 2005 on 18-7-2005, seeking directions against the respondents not to dismantle the existing structures already constructed at Survey No. 151, Qutubullapur Village, Gandhinagar Locality, Qutubullapur Municipality, Ranga Reddy District, Hyderabad, being subject-matter of the company petition. This Bench by an order dated 18-7-2005, while granting time for filing counter by the respondents, ordered that they shall maintain status quo in regard to the existence of the structures in the subject property. Shri R. Murari, learned counsel pointed out that the respondents in disregard of the order of this Bench continued the demolition of the structures, compelling the applicant to file yet another application (C.A. No. 87 of 2005) to punish the respondents for wilfully disobeying the order dated 18-7-2005, made in C.A. No. 84 of 2005. Furthermore, the respondents were directed by an order dated 20-7-2005, to ensure compliance with the order dated 18-7-2005, and further prohibited them from demolishing the existing structures. The Advocate Commissioner appointed by this Bench, after taking inspection of the disputed structures on 24-7-2005, categorically observed in his report dated 31-7-2005, that ?. . . the demolition is in progress and one structure is completely demolished and the other is partially demolished and the debris is being removed?. According to Shri R. Murari, learned counsel, the various photographs taken in the course of the present proceedings including those taken by the Advocate Commissioner would clearly indicate that the respondents proceeded with completion of the demolition of the structures in the subject property, in gross violation of the orders of this Bench. The memo dated 31-8-2005, filed by counsel representing the company confirms that the respondents have demolished the entire structures. Therefore, the respondents must be punished for wilfully committing contempt of the orders of the Bench. By virtue of section 10E of the Act, the Company Law Board being vested with the powers of (a) discovery and inspection of documents or other material objects producible as evidence; (b) enforcing the attendance of witnesses and requiring the deposit of their expenses; (c) compelling the production of documents or other material objects producible as evidence and impounding the same; (d) examining witnesses on oath; (e) granting adjournments; (f) reception of evidence on affidavits, is deemed to be a court within the meaning of section 10 of the Contempt of Courts Act, 1971, in the light of the decision of the Gujarat High Court in Shaikh Mohammedbhikhan Hussainbhai v. Manager, Chandrabhanu Cinema AIR 1986 Guj. 209 [FB], wherein, the essential tests of a court, akin to section 10E of the Act are laid down. The Supreme Court in Canara Bank v. Nuclear Power Corpn. of India Ltd. [1995] 84 Comp. Cas. 701 categorically held that the Company Law Board is a court for the purposes of section 111 of the Act. By virtue of regulation 47 of the Company Law Board Regulations, 1991, this Bench shall be deemed to be a court for the purpose of prosecution or punishment of a person who wilfully disobeys any of its orders. Section 10 of the Contempt of Courts Act, 1971, provides that every High Court shall have and exercise the same jurisdiction, powers and authority in respect of contempt of courts subordinate to it as it has and exercises in respect of contempt of itself. In view of this, the applicant may be permitted to move the High Court for punishing the respondents for their act of wilful disobedience of the orders of the Bench. The respondents interfered with administration of justice by violating the orders of this Bench and, therefore, a reference can be made by the Bench under section 15(2) of the Contempt of Courts Act, 1971, to the High Court for taking appropriate action against the respondents.


2. According to Shri K. Ramasamy, learned counsel appearing for the respondents, there is no provision in the Act for taking any action for contempt, in case of violation of any order of the Company Law Board. The powers enjoined upon the Company Law Board under section 10E of the Act, do not empower it to initiate any contempt proceedings, as sought by the applicants. Regulations 44 and 47 do not empower the Company Law Board to take any action for contempt under the Contempt of Courts Act, 1971. These regulations, being ultra vires the provisions of the Act are beyond the scope of the Act and, therefore, are illegal, null and void. No action could lie under regulations 44 and 47. The Company Law Board is not a court under the Contempt of Courts Act. Therefore, the Company Law Board cannot take any action under the Contempt of Courts Act for disobeying its orders.


3. The disputed structures being unauthorised and nine years old are forced to be demolished by the respondents. While, the application (C.A. No. 87 of 2005) was filed on 20-7-2005, about 90 per cent of the demolished work was over prior to 18-7-2005, and thereafter, immediately stopped the demolition of the remaining 10 per cent of the structures, which were photographed by the Advocate Commissioner. The photographs filed along with the contempt application are fabricated documents. The petitioner unauthorisedly constructed the structures as borne out by a sketch on record and the structures were demolished to save lives of the children and residents of the locality on account of the complaints received from them. Thus, non-compliance with the orders of the Bench is neither wilful nor wanton. At the same time, the respondents have tendered unconditional apologies for the demolition of the remaining unauthorized structures on 29-7-2005, without leave of this Bench. Therefore, no action is warranted under the provisions of the Contempt of Courts Act. Moreover, section 10 of the Contempt of Courts Act does not envisage any reference by the subordinate court to the High Court to take contempt proceedings and in the absence of any criminal contempt, no action lies under section 15 of the Contempt of Courts Act. In these circumstances, Shri Ramasamy, learned counsel sought to dismiss both the applications.


4. Shri Murari, learned counsel in his rejoinder submitted that the plea of the respondents that 90 per cent of the demolition of the structures was completed before the orders of the Bench is not supported by any material. The apprehension of the residents of the locality in terms of their communications is only an afterthought to escape from the prosecution for the contempt committed by them. The sketch indicating the unauthorised structures forming part of the disputed property is only a piece of paper without any sanctity. The memo dated 31-8-2005, filed by the respondents categorically shows that the structures which existed prior to the orders of this Bench do not now exist, thereby committing the contempt of the orders of the Bench. The apologies offered by the respondents with the object of avoiding punishment must be rejected as held by the Full Bench of the Delhi High Court in Brig. E.T. Sen v. Edatata Narayanan AIR 1969 Delhi 201.


5. I have heard the elaborate arguments of learned counsel for the parties. The issues which arise for my consideration are (i) whether the respondents violated the orders dated 18-7-2005 and 20-7-2005 of the Bench ? and (ii) If so, whether the Company Law Board is empowered to take any action against the respondents for such disobedience of the orders of the Bench ?


6. The issue Nos. (i) and (ii) are interrelated and, therefore, they are together considered. This Bench, while the company application (C.A. No. 84 of 2005) was mentioned by the petitioner on 18-7-2005, directed that the respondents will maintain status quo in regard to the existence of the structures in question, which are according to the respondents, nine years old structures [para. 1(f) of counter statement in C.A. No. 87 of 2005]. By a subsequent order made on 20-7-2005, the respondents were to ensure compliance with the order dated 18-7-2005 and, accordingly, directed the respondents not to demolish the structures. While, according to the applicant, the respondents continued the demolition of the structures in gross violation of the orders of the Bench, as borne out by the photographs on record, it is vehemently contended by the respondents that 90 per cent of the structures were demolished prior to the filing of the application in C. A. No. 84 of 2005, viz., 18-7-2005, and that the remaining structures with slabs, which became weak on account of continuous rains were demo-lished on 29-7-2005, in order to save the lives of the children and other residents living within the vicinity, on their written complaints. It shall be borne in mind that the respondents have not chosen to mention before the Bench these serious developments, having a bearing on the contempt application, in the course of the hearings held on 1-8-2005, 9-8-2005 and 17-8-2005. Shri K. Ramasamy, learned counsel never made any categorical statement in regard to the demolition of 90 per cent of the structures before 18-7-2005, as borne out by the order sheets dated 1-8-2005, 9-8-2005 and 17-8-2005, and the entire remaining structures on 29-7-2005, on the complaints of the residents of the locality. Nothing prevented the respondents from seeking leave of the Bench to dismantle the structures, in existence for the past nine years, for whatsoever may be the reasons, but instead went ahead with the completion of the demolition process, in violation of the orders of the Bench. However, learned counsel filed a memo on 31-8-2005, on behalf of the company reporting that ?they have demolished the entire structures?, without, however, furnishing any of the requisite information on the demolition of the structures. No statement was either made on the dilapidated condition of the structures on account of continuous rains. The complaints dated 21-1-2005, 20-7-2005 and 26-7-2005, reportedly made by the Secretary of Rayala Avenue Flat Owners Welfare Society, to the board of directors of the company for removal of the structures ought to have been under the custody of the company, yet, nothing was whispered at the time of the hearings held on 1-8-2005, 9-8-2005 and 17-8-2005, but were produced only on 2-9-2005. These complaints are addressed to the board of directors, but there is nothing to suggest as to who has acknowledged receipt of the same and the decision taken by the board of directors before demolishing the structures pursuant to the complaints, especially when one of such complaints is said to be addressed to the board of directors as early as on 21-1-2005. These complaints do not either indicate that the structures became weak on account of continuous rains. The report of the Advocate Commissioner appointed by the Bench does not speak about the dilapidated condition of the structures as now claimed by the respondents. I do not find any reference in the report as to whether the respondents brought to the notice of the Advocate Commissioner, at the time of inspection of the structures about the dilapidated condition of the structures on account of continuous rains. It is on record that the Advocate Commissioner visited the disputed site on 24-7-2005, and took photographs of the structures in the presence of authorised representatives of both the petitioner and the respondents. The relevant portion of the Advocate Commissioner?s report (page 2) assuming greater significance reads thus:


?(i) The site consists of two structures one is a finished structure (photograph No. 8) and another one a partially demolished structure (photograph Nos. 2, 3, 4, 5 and 6). At the entrance of the site there are remains of a completely damaged structure (photograph Nos. 9, 10 and 11). The very sight of the same confirms that the demolition work is in progress.


(ii) Photograph No. 1 is the distant view of the demolished structure. Photograph Nos. 2, 3, 4, 5 and 6 are the different views of the same structure taken at different angles. It appears that almost 70 per cent of the demolition is just completed. Even the debris is not removed from the demolished structure (photograph Nos. 5 and 6). The steel rods taken out from debris are lying there (photograph No. 7).


(iii) I shot photograph Nos. 2 and 3 from the top of the building appearing in photograph No. 8. I found several families inhabiting in the building that is appearing in photograph No. 8.


(iv) Photograph Nos. 9, 10 and 11 relate to already demolished structure. The said structure is located at the entrance to the disputed site adjoining the main road. It appeared to me that the structure is completely demolished and only some pillars are visible. The entire debris appeared to have been just shifted and I found the tyre/wheel marks of some heavy vehicles on the ground. The photograph No. 11 clearly shows the tyre/wheel marks.


(v) Photograph No. 12 shows some of the persons present at the site. The person standing at fourth place from left wearing light pink colour shirt introduced himself as Mr. Reddy, a builder. The person standing next to him in white dress is Mr. Uma Maheswara Rao, the respondent.


(vi) My overall observation is that the demolition is in progress and one structure is completely demolished and the other is partially demolished and the debris is being removed.?


7. It is beyond doubt from the Advocate Commissioner?s report that the demolition of the disputed structures was in progress on 24-7-2005, at the time of inspection undertaken by the Advocate Commissioner, a fact which remains uncontroverted by the respondents. The respondents have not chosen to file any objections on the report of the Advocate Commissioner. The forceful contentions of the respondents that ?on receipt of the order we (the respondents) have stopped the demolition of the remaining 10 per cent? are running parallel to the conclusions of the Advocate Commissioner. Against this background, the assertion of the respondents that ?The Commissioner appointed by the Bench took the photographs of the said remaining structures? i.e., 10 per cent must fail. The plea of the respondents that the photographs produced by the Commissioner represent 10 per cent of the disputed structures remains, without being supported by any concrete evidence. In the words of the respondents themselves, it is unequivocally clear that they have demolished a part of the disputed structures, in spite of the restraint orders of the Bench and after the inspection undertaken by the Commissioner, on the complaints of the local residents. The respondents had adequate time at their disposal between 18-7-2005 and 29-7-2005, to seek leave of the Bench, but they failed to take any initiative in this behalf. I do not, therefore, hesitate to hold that the respondents acted in gross violation of the orders dated 18-7-2005 and 20-7-2005, of the Bench, by demolishing the entire structures in dispute.


8. Having found that the respondents are guilty of gross violation of the restraint orders of the Bench, it shall be considered whether the Bench is empowered to punish such wilful defaulters invoking regulations 44 and 47 of the Company Law Board Regulations, in the absence of any specific enabling provision in the Act. By virtue of regulation 44, every Bench of the Company Law Board has the inherent power to make such orders as may be necessary for the ends of justice or to prevent abuse of process of the Bench. In the case before me, it is found that the respondents by demo-lishing the structures in violation of the orders of the Bench abused the process of the Bench, in which case, there cannot be any embargo to exercise the inherent power to meet the ends of justice. Regulation 47 provides that a Bench shall be deemed to be a court or the lawful authority for the purpose of prosecution or punishment of a person who wilfully disobeys any of its directions or orders. It is true that there is no provision in the Act to punish any person who wilfully disobeys any order of the Bench. That does not mean that a contemner could escape from punishment for contempt. The Bench can neither be a silent spectator, in the event of any wilful disobedience to any of its directions. An order of a judicial or quasi-judicial authority, being sacrosanct, must be obeyed unless and until set-aside in a manner known to law. The purpose of punishment for contempt is to uphold the effective administration of justice, in the larger public interest. Any Bench of the Company Law Board, being deemed to be a court under regulation 47 for the purpose of prosecution of a person disobeying its order, section 10 of the Contempt of Courts Act assumes importance, which reads as under:


?Power of High Court to punish contempts of subordinate Courts.?Every High Court shall have and exercise the same jurisdiction, powers and authority, in accordance with the same procedure and practice in respect of contempts of courts subordinate to it as it has and exercises in respect of contempts of itself:


Provided that no High Court shall take cognizance of a contempt alleged to have been committed in respect of a court subordinate to it where such contempt is an offence punishable under the Indian Penal Code, 1860 (45 of I860).?


9. The import of the above provision is that the High Court can exercise powers of dealing with contempt of subordinate courts in the same manner as it can deal with contempt of the High Court itself. However, the High Court cannot take cognisance of a contempt of the subordinate court, where such contempt is an offence punishable by the Indian Penal Code. It shall now be seen whether the Company Law Board can be said to be a ?court? within the meaning of section 10 of the Contempt of Courts Act. The Gujarat High Court in Shaikh Mohammedbhikhan Hussainbhai v. Manager, Chandrabhanu Cinema AIR 1986 Guj. 209 [FB], while considering the essential tests, which must be satisfied by an authority to be covered within the scope and the ambit of the word ?court? for the purpose of section 10 of the Contempt of Courts Act held thus :


The authority must be enjoined to adjudicate upon the disputes between the parties;


The authority?s source of power must emanate from the statute and must not be based merely on agreement between the parties;


The authority shall have the power to ascertain the disputed question of fact and law on consideration of the legal arguments both oral and written and evidence, advanced and adduced respectively by the contesting parties;


The authority shall have the power to enforce attendance of witness, production of documents etc. to decide the disputes in a judicial manner;


The end result or product of the exercise of such power by the authority must result in a binding decision between the contesting parties concluding the lis between them;


The decision of such authority disposing the whole matter, both on the question of fact and law, must be definitive and must have finality and authoritativeness.


10. Section 10E of the Act lays down the various powers of the Company Law Board, which satisfy the essential attributes of the court, as laid down by the Gujarat High Court and I, therefore, do not see any merit in the arguments of Shri Ramasamy, learned counsel that Company Law Board cannot be said to be a ?court? within the meaning of section 10 of the Contempt of Courts Act, 1971. The Supreme Court in Canara Bank v. Nuclear Power Corpn. of India Ltd. [1995] 84 Comp. Cas. 701 after considering the functions of the Company Law Board under section 111 came to the conclusion that ?in exercising its function under section 111 the Company Law Board must, and does, act judicially. Its orders are appealable. The Company Law Board, further, is a permanent body constituted under a statute. It is difficult to see how it can be said to be anything other than a court, particularly for the purposes of section 9A of the Special Courts Act?. Furthermore, the High Court, being the appellate authority of the Company Law Board, the latter must be deemed subordinate court within the ambit of the Contempt of Courts Act. Therefore, the High Court can exercise powers of dealing with contempts of the Company Law Board provided such contempts are not offences, punishable under the Indian Penal Code. In view of this legal position, the Company Law Board, deemed to be a court as envisaged in regulation 47 and in exercise of the inherent p

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ower under regulation 44, is empowered to invoke section 10 of the Contempt of Courts Act, for the purpose of punishing the respondents, who have wilfully disobeyed the orders of the Bench by demolishing the disputed structures, even in the absence of any enabling provision in the Act for initiating any action for violation of the orders of the Company Law Board, more so, when such contempt is not an offence punishable under the Indian Penal Code. The unconditional apologies are made in the counter statement filed by the first respondent-company. The other respondents neither adopted the counter statement filed by the first respondent-company nor tendered any apology. The affidavit verifying the counter statement is sworn by the managing director. Thus, the unconditional apologies on record are found to be made on behalf of the company and not on behalf of the other respondents. Moreover, the apologies tendered by the company in the context of demolition of the structures, in my view, are not only an afterthought but also not satisfactory. The apologies are found to be offered in the hope and with object of avoiding punishment for such wilful disobedience of the orders of the Bench. Hence, the unconditional apologies made on behalf of the company following the principles laid down by the Delhi High Court in Brig. E. T. Sen v. Edatata Narayanan AIR 1969 Delhi 201 [FB], are not accepted by the Bench. The petitioner has not established any criminal contempt on the part of the respondents, while disobeying the orders of the Bench and, therefore, there is no scope for invoking section 15(2) of the Contempt of Courts Act. In view of these conclusions, the petitioner is at liberty to move the High Court for invoking its jurisdiction under section 10 of the Contempt of Courts Act so as to prosecute the respondents for having wilfully disobeyed the orders dated 18-7-2005 and 20-7-2005, of the Bench. Ordered accordingly. With these directions, both the applications stand disposed of. 11. This Bench by an order dated 16-8-2004, and the subsequent orders directed the respondents to file their counter-statement to the main petition, but the respondents have not so far filed any counter-statement, which must be filed by 21-10-2005, and rejoinder to be filed by 7-11-2005. The company petition will be heard on 8-11-2005, at 2.30 p.m.
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