"Has Got Down To A Rot": Supreme Court Notice To Company Tribunal Members

Observing that the National Company Law Appellate Tribunal has got down to a rot, the Supreme Court on Wednesday issued notices to tribunal's judicial member Rakesh Kumar and technical member Alok Srivastava asking why contempt proceedings be not initiated against them for defying apex court orders in the Finolex Cables case.

A bench headed by Chief Justice DY Chandrachud took strong exception to the passing of a judgement by the NCLAT bench.

The NCLAT bench had delivered a judgement on October 13 ignoring a status quo order passed by the apex court.

The top court set aside the NCLAT bench's October 13 judgement relating to the annual general meeting (AGM) of Finolex Cables without going into its merit.

The bench also comprising Justices JB Pardiwala and Manoj Misra said the case would be heard by NCLAT chief Justice Ashok Bhushan.

"NCLT and NCLAT have got down to a rot now. This case is an illustration of that rot. We are prima facie of the view that the members of the NCLAT have failed to disclose correct facts and incorrectly created a record in the order dated 16 October that this court's order was drawn to their notice on 5.35 pm on 13 October.

"We are of the view that it is necessary to pass orders to ensure that the dignity of this court is restored. Parties cannot be allowed by recourse to devious means to obviate this court's orders," the bench said.

The apex court also cautioned corporates attempting to subvert court orders and said, "If our orders are being subverted then Corporate India should know that there is a Supreme Court who is watching. That is all we wish to say now." The order is related to the annual general meeting (AGM) of Finolex Cables and Prakash Chhabria and Deepak Chhabria's legal tussle over the management control of the company.

It is rare for the Supreme Court to issue contempt notices against NCLAT members.

The Supreme Court on last Friday had directed the NCLAT chairperson to conduct an enquiry and submit a report by Monday over an allegation that one of its benches proceeded and delivered an order without following the top court's directions.

A three-member apex court bench headed by Chief Justice Chandrachud had on that day directed the NCLAT to proceed to its judgment and declare the results of the meeting only after getting the scrutiniser's report.

The top court order was uploaded at 1.55 pm and the counsel also informed the development to the NCLAT bench, which was scheduled to deliver the judgment at 2 pm.

However, a two-member bench of the NCLAT comprising Justice Kumar, Member Judicial, and Srivastava, Member Technical, went ahead and pronounced the order, while the scrutiniser's report was uploaded at 2:40 pm.

The apex court was apprised about the development through an urgent mentioning by lawyers and the bench led by the chief justice said, "If what is stated is correct, this will clearly constitute the defiance of the order of this court by the NCLAT." However, it also said that at this stage it is not commenting on the merits of the submissions which have been made.

"We direct that an enquiry shall be conducted on the above allegations by the Chairperson of the NCLAT. A report shall be submitted before this court by 5 pm on 16 October 2023 after specifically verifying the facts from the judges who constituted the bench of the NCLAT," the apex court had said.

It also expressed dissatisfaction with the NCLAT members' explanation that as per the procedure in NCLAT, oral mentionings are allowed only after the pronouncement of the judgment and therefore the lawyers were not allowed to mention the top court's order before the pronouncement.

The apex court said the NCLAT chairperson shall specifically verify "that the order of this court dated 13 October 2023 passed in the morning session was drawn to the attention of the two judges".

"If that is so, the circumstances in which the judges proceeded to pronounce the judgment despite the clear mandate of the order of this court which was passed in the morning session," it said.

The court's order came over a petition filed by Prakash Chhabria-led Orbit Electricals which is a promoter entity in Finolex Cables.

He had sought disclosure of the outcome of voting in the AGM of the company on the agenda item pertaining to the reappointment of Deepak Chhabria as executive chairman.

He challenged the non-disclosure of the outcome of voting by shareholders pertaining to the resolution related to the reappointment of Deepak Chhabria as a "Whole-Time Director" designated as an "Executive Chairman" in its AGM held on September 29.

Earlier in this matter, the NCLAT had on September 21 passed an order directing the status quo on the conduct of the AGM, till they adjudicate on the dispute between cousins Prakash Chhabria and Deepak Chhabria.

On this, an appeal was referred to the Supreme Court, which had on September 26 vacated this status quo order and said all action which may be taken would abide by the final result of the proceedings before NCLAT.

"The NCLAT shall proceed to declare its judgment in the pending appeal after it is duly apprised of the fact that the result of the annual general meeting has been declared," the apex court had said.

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