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SC slaps Rs 1 crore fine on Chabria for contempt of court

A judicial member of the National Company Law Appellate Tribunal (NCLAT) resigned on October 30 following a contempt action initiated by the Supreme Court in connection with the Finolex Cables case. The apex court accused members of the bankruptcy appellate tribunal of defying its orders. While the apex court closed the contempt proceedings against NCLAT members, it criticized the conduct of the Member Judicial.

Deepak Chhabria, who was removed from the board of Finolex Cables on October 21, and the scrutiniser were both chastised for “acting in concert.” The scrutiniser was found to have withheld the results of the September 29 AGM to benefit Deepak Chabbria. Consequently, the court imposed a penalty of ₹1 crore on Chhabria and ₹10 lakh on the scrutiniser.

This matter revolves around a contempt notice sent by the Supreme Court to NCLAT members due to the tribunal’s conduct in the Finolex Cables case, which was deemed unbecoming of a judicial tribunal. The court raised questions about the tribunal’s integrity. As a result, two appellate tribunal members facing contempt were directed to appear in person before the apex court on October 30.

The case involves a battle between cousins Deepak Chhabria and Prakash Chhabria over control of the electrical and telecommunication cables manufacturing company, Finolex Cables. An annual general meeting (AGM) held on September 29 resulted in the majority opposing the reappointment of Deepak Chabbria as the Executive Chairman. However, the AGM result was kept confidential. Prakash then approached the Supreme Court to disclose the AGM result.

The cousins were also in a parallel dispute regarding a 2019 extraordinary general meeting (EGM) that allowed amendments to the Articles of Association. Deepak Chhabria challenged the EGM results and the subsequent changes to the Articles of Association.
NCLAT had reserved its judgment in the EGM matter in September, with the verdict scheduled for October 13 at 2:15 pm. However, on the morning of October 13, the Supreme Court heard Prakash Chhabria’s plea and directed the scrutinizer to declare the result of the September 29 AGM.

The top court’s order was uploaded at 1:55 pm. Lawyers on both sides rushed to NCLAT to inform them of the Supreme Court order and requested a deferral of the judgment to consider the AGM results. Despite these appeals, NCLAT proceeded to pass its judgment, which angered the top court.

At the October 30 hearing, Solicitor General (SG), appearing on behalf of NCLAT technical member Alok Srivastava, tendered an unconditional apology and claimed that it was not correct that both sides informed NCLAT on SC directions. He said he was informed only by a single counsel that orders the NCLAT passes would be subject to the top court’s orders. The Supreme Court order, however, was not presented before the NCLAT, the SG said.

Chief Justice of India (CJI) DY Chandrachud observed that the impression is that the NCLAT members have an ego that has to be dealt with as this is not fair. The top court gets no pleasure in issuing contempt notice to another judge, but this is unprecedented, he said, adding that the least NCLAT could have done is ask for the Supreme Court’s directions, consider its orders, and then pass the judgment.

“The attitude of NCLAT appears to be one of ego, that who is SC, we will pass our own order, we are concerned about this behaviour… If informed that SC has passed directions, the pronouncement of NCLAT could have been deferred, heaven would not fall if the judgment was deferred,” the CJI noted.

Counsels in this case have told the Supreme Court that its directions were raised before NCLAT, Chandrachud added.

The CJI also pointed out that the explanation by member Judicial Rakesh Kumar only compounds his contempt and that he does not deny that lawyers mentioned that SC has passed directions. He is defending his actions by citing that as per procedure judgment is pronounced first, only then can lawyers mention, CJI came down heavily on the tribunal, adding “he (Rakesh Kumar) is teaching us about procedure.”

The lawyer representing, member Judicial Rakesh Kumar asserted before the court that there is no issue of ego or affront to top court, and that he has had a blemish free career and been a prosecutor in the fodder scam.

The Supreme Court watched the CCTV footage from the NCLAT hearing on Oct 13 and the CJI said that it is obvious that top court’s orders were brought before NCLAT and that lawyers had a printout of the order. “It is obvious that there is a clear intention (of NCLAT) to breach the SC order,” he said.

The SG for NCLAT member technical Alok Srivastava, said the member technical could have deferred passing the judgment, but had to go by whatever the member judicial say because they are retired judges.

He tendered an unconditional apology before the court and said he is a former IAS officer, is unbiased and a decent man.

NCLAT member Judicial Rakesh Kumar’s lawyers, meanwhile, said he has sent his resignation to the appellate tribunal’s chairman, to the Law Secretary and the Ministry of Corporate Affairs. “It was an error of judgment at that point of time, no affront meant to SC…No desire for position, would urge SC for a considerate view,” he said. CNBCTV18

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