SUPREME COURT HOLDS THAT WILFUL AND DELIBERATE DISOBEDIENCE OF ANY COURT’S ORDER LEADS TO CONTEMPT PROCEEDINGS

As per the Contempt of Courts Act, 1971, a #Civil #Contempt Petition can be filed by an #aggrieved party when there is a wilful, intentional, and deliberate disobedience or #breach of any directions, judgment, order or judicial processes.

With this view, recently a Bench of the Hon’ble #SupremeCourt of India in the Contempt Petition titled as Rama Narang v. Ramesh Narang & Others [CP (Civil) No. 92 of 2008], vide its Judgment dated 19.01.2021 reiterated and held that for bringing an action for civil contempt, one has to satisfy the court that there has been a willful, intentional, and deliberate disobedience of any order, direction, judgment, and other processes of the Court.

Background

The facts leading to the present Contempt Petition involves family dispute amongst Shri Rama Narang (‘Petitioner’) and Shri Ramesh Narang and Shri Rajesh Narang (‘Respondents No 1 and 2’), who are sons of the Petitioner from his first wife. The Petitioner divorced his first wife and got married to Smt Mona. Out of the said wedlock, two sons Rohit and Rahul as well as a daughter Ramona were born (‘Parties’).

Thereafter, there were chains of litigation between the Parties. Consequently, in one of the Civil Appeals before the Supreme Court, the disputes in all the litigations came to a family settlement under a Consent Order. Based on the said Consent Order the Supreme Court, vide its Order dated 08.01.2002 held that insofar as ‘Narang International Hotel Limited (NIHL)’ and its subsidiaries were concerned, it was settled that the Petitioners and the Respondents herein were to be the only Directors.

It was also stated that any decision by the Board of Directors was to be taken by the mutual consent of the Petitioner and the Respondents herein. Further, it was agreed that if any transaction exceeding Rs 10 lakhs was made then the same could be undertaken only through a cheque signed jointly by the Petitioner and the Respondents herein.

However, the Petitioner alleged that the Respondents No 1 and 2 had violated the terms of Consent Order stipulated in clause 3 (c), (d), (e) and (f) of the Minutes of the Consent Order. Violation of the said order amounted to clear disobedience of the Supreme Court Orders dated 12.12.2001 and 08.01.2002 thereby punishable under the Contempt of Courts Act, 1971.

As a result, the Supreme Court initiated a Contempt Petition reported as Rama Narang v. Ramesh Narang, (2006) 11 SCC 114, against the Respondents, vide Order dated 15.09.2003  and a Mediator was appointed for settlement of disputes between the Parties. However, the settlement of disputes could not be arrived at. The Supreme Court, vide its Judgment dated 15.03.2007 held that the Respondents herein were guilty of contempt and convicted them for two months simple imprisonment with fine of Rs 2000. The Supreme Court also observed that the object of entering into consent terms was to run the family business harmoniously with active participation of all. However, the Respondents had taken absolute control of the Company NIHL in complete exclusion of the Petitioner.

Thereafter, the dispute between the Parties aggravated again and the Respondent No 1 filed a Company Petition before the Company Law Board (CLB) against the Petitioner for non-cooperation causing business operation of the Company NIHL to come to a standstill. The CLB, vide its Interim Order dated 10.04.2008 held that in the interests of the Company and more than 3000 employees/workers, there should be a mechanism by which the day-to-day operations of the Company are carried on. As a result, a facilitator was appointed as an interim measure.

Based on the aforesaid Order of the CLB, the Petitioner herein has filed a present Contempt Petition alleging that the CLB Order dated 10.04.2008, was violative of the Supreme Court Order dated 15.03.2007. The major contention of the Petitioner before the Supreme Court was that invoking the jurisdiction of the CLB and entertaining the said proceedings by the CLB, itself amounts to contempt.

Supreme Court Judgment

The Supreme Court referred to the Section 2 (b) of the Contempt of Courts, Act, 1971, which defined the term ‘Civil Contempt’ as a “wilful disobedience to any judgment, decree, direction, order, writ or other process of a court or wilful breach of an undertaking given to a court.”

Thereafter, the Supreme Court considered its earlier Order dated 15.03.2007, whereby it held that according to the terms of undertaking, the Petitioner and the Respondents were under an obligation to run the company harmoniously with the participation of all but unfortunately, the Respondents had taken over absolute control with complete exclusion of the Petitioner. Therefore, the Supreme Court reiterated all of its earlier Orders passed in the matter to figure out the wilful, intentional, and deliberate disobedience or breach of the judgment, order or direction of the Supreme Court by the Respondents.

The Supreme Court observed that in the present case, the Respondents were entitled to invoke the jurisdiction of the CLB under Sections 397, 398 and 403 of the Companies Act, 2013. It further observed that due to compelling circumstances, which was disrupting the Company’s functioning, the Respondents had to approach the CLB to safeguard the interest of the Company and its stakeholders.

Further, the Supreme Court observed that merely taking recourse to the statutory remedy available to the Respondents would not amount to contempt. Therefore, the Supreme Court said that where an objection is taken to the jurisdiction to entertain a suit and to pass any interim orders therein, the court should decide the question of jurisdiction in the first instance. However, this does not mean that pending decision on the question of jurisdiction, the Court has no jurisdiction to pass interim orders as may be called for in the facts and circumstances of the case.

The Supreme Court dismissed the Contempt Petition and held that the Petitioner failed to make out a case of wilful, deliberate and intentional disobedience or acted in breach of the undertaking given to the Court of any of the directions of the Supreme Court and therefore were unable to satisfy the Court regarding contempt by the Respondents.

Lakshmi Vishwakarma

Senior Legal Associate

The Indian Lawyer