SC Issues Contempt Notice against 2 NCLAT Members in Finolex Cables Case
Moneylife Digital Team 20 October 2023
Setting aside the 13th October order passed by the national company law appellate tribunal (NCLAT) in the Finolex Cables Ltd matter, the Supreme Court expressed serious doubts about how the case proceeded and the honesty of the members of the tribunal. "We direct that the 13th October NCLAT judgment is set aside without getting into merits—the appeal to be heard again by the bench headed by Justice Ashok Bhushan. We are prima facie of the view that (justice) Rakesh Kumar (judicial member) and Dr Alok Srivastava (technical member) (of NCLAT) are liable to be proceeded against for contempt of court act. Thus, we issue showcase notices to show why contempt should not be carried against them. Let them be present in court on 30th October."
Coming down heavily on NCLAT, the bench of chief justice DY Chandrachud, justice JB Pardiwala and justice Manoj Misra says, "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 is appearing in this case...he should have recused and then he appeared in Supreme Court also..."
The apex court had directed NCLAT to proceed to its judgement and declare the results of Finolex Cables's annual general meeting (AGM) only after getting the scrutiniser's report. However, NCLAT did not adhere to it and issued an order. On 13th October, the apex court ordered justice Ashok Bhushan, chairperson of NCLAT, to conduct an inquiry into the working of a bench of the appellate tribunal which, allegedly, defied an order of the SC.
The bench says it is passing the order under 'extraordinary circumstances' where the two-member bench of the NCLAT proceeded to pronounce the judgment despite the clear mandate of the order passed by the Supreme Court asking the appellate tribunal to declare 'its judgement in the pending appeal after it is duly apprised of the fact that the result of the annual general meeting (AGM) has been declared'.
"The manner in which NCLAT has proceeded in defiance of SC order is unbecoming of a judicial tribunal. NCLAT was duty-bound to comply with orders of this court. The statement made by the judicial member before the chairperson indicates that he did not allow mentions as it is only after the pronouncement and the technical member has indicated the same. Both statements are belied by the fact that both contesting parties have stated that the bench was informed about the SC Order. The 13th October order compounds the situation. If indeed the order was passed after AGM results, then there was no need to suspend the order. The members have not stated so. In this view, in so far as lis (a suit) is concerned, this bench has to pass orders which will ensure the dignity of this court; parties cannot be allowed by any means to take recourse to devious means to defy solemn orders of this court."
"(The) parties cannot take recourse to 'devious' means to obviate compliance with the orders passed by the apex court. We consequently direct that the appeal shall be heard afresh by a bench presided over by the chairperson of NCLAT," the SC says, clarifying that it did not enter into merits of the rival contentions of the parties.
"Corporate India should know that if our orders are being subverted, then they should know that there is a Supreme Court who is watching. That is all we wish to say now," chief justice Chandrachud warned.
Earlier this week, NCLAT suspended its own order issued on 13 October 2023, permitting Deepak Chhabria to continue as the chairman of Finolex Cables. NCLAT action came after the apex court reprimanded the tribunal for failing to comply with its directive.
Finolex Cables conducted its AGM on 29 September 2023, and one of the items on the agenda for voting by the shareholders was for the reappointment of Deepak Chhabria as a whole-time director designated as an 'executive chairman' of the company for five years with effect from 1 July 2023 to 30 June 2028.
Last week, the SC directed to disclose the voting results of the resolutions during the Finolex Cables AGM held on 29 September 2023. It had also asked to make available the report of the scrutiniser. However, NCLAT issued an order last Friday without waiting for the scrutiniser's report. The NCLAT order was uploaded at 1.55pm, while the scrutiniser's report on AGM voting was uploaded at 2.40pm.
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