Process Of Court Can’t Be Misused For Partisan Purposes In Commercial Disputes Involving Warring Factions: SC Closes Contempt Case Against NCLAT Members

The Supreme Court, while closing contempt case against NCLAT members, observed that the process of the court cannot be allowed to be misused for partisan purposes in commercial disputes involving warring factions.

The three-Judge Bench comprising CJI D.Y. Chandrachud, Justice J.B. Pardiwala, and Justice Manoj Misra observed thus while disposing a contempt petition filed by Orbit Electricals Private Limited.

“We accordingly order and direct that Mr Deepak Kishan Chhabria shall pay a sum quantified at Rs One crore to the Prime Minister’s Relief Fund within a period of four weeks from the date of the order. Mr VM Birajdar shall pay a sum quantified at Rs Ten lakhs to the Prime Minister’s Relief Fund within a period of four weeks.”, the court ordered.

Senior Advocates Mukul Rohatgi, A.M. Singhvi, Neeraj Kishan Kaul, and Ranjit Kumar appeared for the appellant while Solicitor General Tushar Mehta, Senior Advocates P.S. Patwalia, Shyam Divan, Maninder Singh, and Darius Khambata appeared for the respondents.

In this case, the National Company Law Tribunal (NCLT) dismissed the application filed by the first respondent for the grant of interim relief by an order. The first respondent was in appeal before the National Company Law Appellate Tribunal (NCLAT) and no interim relief operated in favour of the first respondent during the pendency of the appeal. The appeal was heard and orders were reserved by the NCLAT, however, while reserving orders, the NCLAT directed the parties “to maintain status quo as was available prior to EOGM dated 03.05.2019” till the judgement is delivered. No reasons were indicated by the NCLAT even prima facie for issuing the interim order, particularly in the context of the fact that there was no interim relief operating since the dismissal of the application for interim relief.

The interim direction was passed by the NCLAT in September this year at the stage of reserving orders. Subsequently on October 13, 2023, the proceedings were mentioned before the Apex Court in the morning session, when the Court was apprised of the fact that the declaration of the result of the AGM was being deferred till the declaration of the judgment by the NCLAT. In the afternoon session, a grievance was made before the Court on behalf of the petitioners that though the NCLAT was apprised of the order of the Court with a request that the judgment should not be delivered until the report of the Scrutiniser is made available, the Bench of the NCLAT had proceeded to deliver the order. Consequently, the Court took note of the submission and required the Chairperson of the NCLAT to duly verify the position and report back to the Court.

The Supreme Court after considering the submissions made by the counsel observed, “We have, therefore, no manner of doubt that the Bench of the NCLAT has acted in willful defiance of the order despite the fact that its attention was drawn to the order of this Court. … The Member (Technical) has tendered an unconditional apology stating that control over the procedure of the Court, particularly on matters which are mentioned rests with the Member (Judicial) who has training and experience in judicial matters.”

The Court while bearing in mind the unconditional apology which was rendered before it, said that it does not wish to take this matter to a further stage having held that there was a breach of the order of the court. It added that the matter should be allowed to rest there by accepting the apology of the Member (Technical).

“As regards the Member (Judicial) we have already noted in the previous order of this Court that what has been stated is contrary to the record. … What the affidavit does not state is that a conscious effort was made by the Bench to prevent the order of this Court being placed on the record despite the fact that the court was apprised of the passing of the order by this Court in the morning session. We censure the conduct of the Member (Judicial). We would rest the matter at that level”, further noted the Court.

The Court also said that the Scrutiniser was duty bound to implement its order. Furthermore, it noted that the Member (Judicial) tendered his resignation from the office by a letter addressed to the Chairperson of the NCLAT and to the Secretary, Ministry of Corporate Affairs.

“The Scrutiniser has tendered an unconditional apology through Mr Khambata. Mr Deepak Kishan Chhabria has also tendered an unconditional apology through Mr Shyam Divan, senior counsel”, concluded the Court.

Accordingly, the Apex Court disposed of the contempt proceedings.

Cause Title- Orbit Electricals Private Limited v. Deepak Kishan Chhabria & Ors. (Neutral Citation: 2023 INSC 967)

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