Supreme Court Starts Contempt Proceedings Against NCLAT Members

The Supreme Court on Wednesday launched contempt proceedings against the National Company Law Appellate Tribunal (NCLAT) members in the case regarding the annual general meeting (AGM) of Finolex Cables. The notices received include National Company Law Appellate Tribunal judicial member Rakesh Kumar and technical member Alok Srivastava. On October 16, the apex court ordered an inquiry against an NCLAT bench for bypassing its orders.

On Friday, the Supreme court held that contempt of court proceedings against the judicial and technical members are prima facie liable. Consequently, the apex court issued show cause notices to judicial member Rakesh Kumar and technical member Alok Srivastava, urging “why contempt (proceedings) should not be carried against them”. The Chief Justice has instructed them to appear before the court on October 30 at 1030 IST and explain the reasons with respect to the notice.

“We have serious doubts as to how the matter has proceeded in NCLAT, and we have serious doubt about the honesty of the members here. You should know that there is often a gut of the judge when we know that not all is good… An NCLAT member who heard the matter appeared in this case… He should have recused (himself)… And then he appeared in the Supreme Court also,” said Chief Justice Chandrachud. “Corporate India should know that if our orders are being subverted, they should know that there is a Supreme Court who is watching,” the bench led by Chief Justice of India D.Y. Chandrachud directed the chairperson of the appellate tribunal, Justice Ashok Bhushan, to hear the case afresh.

On October 13, the NCLAT had allowed Deepak Chhabria to resume as the chairman of Finolex Cables Limited, and held the changes that were to be brought in to the Articles of Association of the company.

On the same day, the Supreme Court extended stay to the NCLAT bench”s October 13 order and asked NCLAT chairperson Justice (retd) Ashok Bhushan to undertake an inquiry into if a bench of the appellate tribunal defied the apex court order.

On October 16, CJI DY Chandrachud had directed Justice Ashok Bhushan, chairperson of NCLAT to submit a report for the defiance of its order. Justice Bhushan had to submit the report by 5 pm on October 16.

The court had said: “If what is stated is correct, this will clearly constitute defiance.”

The NCLAT Principal Bench in New Delhi has suspended an earlier order that allowed Deepak Chhabria to continue as the chairman of Finolex Cables.

Earlier, the top court had directed the NCLAT to proceed with its judgment and declare the results of the meeting only after getting the scrutinizer”s report. However, NCLAT did not adhere to it.

Furthermore, the top court reprimanded the scrutinizer of the annual general meeting of Finolex Cables for not disclosing its shareholders” voting results pertaining to a resolution for the reappointment of Deepak Chhabria as whole-time director of the company, despite directions from the apex court. Chief Justice Chandrachud asked, “After they (scrutinizer) were told specifically, how can the scrutinizer take opinion from former Chief Justice of India and not declare the results?” .

The Chief Justice also added that if the scrutinizer does not comply with court orders, they will be sent to Tihar jail. “These people with big resources and money think they can take the court for a ride and this will not happen at all,” he said.

The Chief Justice of India has criticized the appellate tribunal and national company law tribunals, stating that there is a rot in the system. The court has directed both the judicial member and technical member of NCLAT to personally appear before it on October 30.

On September 21, the NCLAT had called for a status quo on the AGM due to a dispute between cousins Prakash Chhabria and Deepak Chhabria.

Prakash Chhabria moved the apex court, leading to the ruling on October 13 that NCLAT should refrain from making any decisions in the case until the scrutineer had published the results.

Orbit Electricals and Finolex Industries had voted against the re-appointment of Deepak Chhabria as the executive chairman of Finolex Cables. Orbit and Finolex Industries voted to oust Deepak Chhabria