LEGAL ISSUE: Whether the respondents’ actions constituted contempt of court for violating a prior consent order, despite subsequent orders from the Company Law Board (CLB).
CASE TYPE: Contempt of Court, Family Business Dispute
Case Name: Rama Narang vs. Ramesh Narang and Others
[Judgment Date]: 19 January 2021
Introduction
Date of the Judgment: 19 January 2021
Citation: (2021) INSC 20
Judges: A.M. Khanwilkar, J. and B.R. Gavai, J.
Can a party be held in contempt of court for actions taken under orders from a statutory body, even if those actions might appear to contradict a prior court order? The Supreme Court of India addressed this complex question in a long-standing family business dispute. The core issue was whether the respondents, Ramesh Narang and others, had committed contempt of court by allegedly violating the terms of a consent order previously approved by the Supreme Court. The court had to consider whether actions taken under orders from the Company Law Board (CLB) could be considered a violation of its own prior orders.
Case Background
The case stems from a long-standing family dispute between Rama Narang and his two sons, Ramesh and Rajesh Narang, from his first marriage. After Rama Narang divorced his first wife, Motia, in 1963, he married Mona, with whom he had two sons, Rohit and Rahul, and a daughter, Ramona. This complex family dynamic led to multiple legal battles, some of which reached the Supreme Court.
In an earlier round of litigation, Ramesh Narang had filed a contempt petition against Rama Narang for not transferring shares as per a court order. The Supreme Court, on November 2, 2001, found Rama Narang in contempt for not transferring 50% of the shares. However, the matter was later settled, and a consent order was placed on record.
On December 12, 2001, the Supreme Court recorded a “MINUTES OF CONSENT ORDER,” signed by all parties, settling various disputes. This order included the withdrawal of several suits pending in the Bombay High Court and a company petition before the Company Law Board (CLB). The parties agreed to implement the terms of the consent order by January 1, 2002. The Court withdrew all the suits to itself under Article 139-A of the Constitution of India.
On January 8, 2002, the Supreme Court disposed of the transferred cases in terms of the consent order. Rama Narang undertook to transfer a property in Sunder Nagar, New Delhi, to Rajesh Narang by March 31, 2002. The Court dropped the contempt proceedings against Rama Narang.
Timeline
| Date | Event |
|---|---|
| 1963 | Rama Narang divorces his first wife, Motia. |
| 2 November 2001 | Supreme Court finds Rama Narang in contempt for not transferring shares. |
| 12 December 2001 | Supreme Court records “MINUTES OF CONSENT ORDER” settling disputes. |
| 8 January 2002 | Supreme Court disposes of transferred cases in terms of the consent order. Rama Narang undertakes to transfer a property to Rajesh Narang. Contempt proceedings against Rama Narang dropped. |
| 15 March 2007 | Supreme Court convicts Ramesh and Rajesh Narang for contempt of court for violating the consent order, but keeps the sentence in abeyance. |
| 10 March 2008 | Ramesh Narang files Company Petition No. 47 of 2008 before the Company Law Board (CLB), alleging non-cooperation by Rama Narang. |
| 14 March 2008 | CLB directs a board meeting of NIHL to be held on 24th March 2008. |
| 20 March 2008 | Ramesh files CA No.194 of 2008, pointing out that due to non-payment of salaries about two hundred workers had stopped the work. |
| 10 April 2008 | CLB appoints Justice Arvind V. Savant as Facilitator to resolve disputes. |
| 15 December 2008 | Supreme Court reserves order after hearing the counsel for the parties. |
| 10 February 2009 | Supreme Court recalls the order dated 15 December 2008. |
| 9 April 2009 | Supreme Court notes that the Company has not filed its returns under the Income Tax Act for the last one decade. |
| 13 July 2009 | Supreme Court directs the Registrar of Companies and Chief Commissioner of Income Tax to be impleaded in the proceedings. |
| 21 July 2009 | Supreme Court appoints Shri Homi Ranina as an independent Director to look into the financial management of the Company. |
| 29 July 2009 | Supreme Court directs M/s BSR & Company to prepare and audit the accounts of the Company. |
| 14 December 2009 | Supreme Court appoints Shri Habib Rehman to advise Shri Ranina. |
| 16 April 2010 | Supreme Court notes that the Register of Directors maintained by the Company was not in conformity with the Court orders/Resolutions. |
| 3 May 2010 | Supreme Court appoints Shri Syed Habibur Rehman as an independent Director to manage the affairs of the Hotel. |
| 6 August 2010 | Supreme Court dispenses with the services of Shri H.P. Ranina and Shri Syed Habibur Rehman. |
| 22 February 2011 | CLB dismisses Rama Narang’s application to discharge the Facilitator. |
| 28 April 2011 | CLB empowers the Facilitator to make decisions in case of disputes between Directors. |
| 29 November 2011 | CLB appoints Shri H.S. Acharya as a Special Officer-cum-Advisor. |
| 30 April 2015 | CLB appoints Shri H.P. Ranina as Facilitator-cum-Advisor. |
| 15 March 2016 | Supreme Court directs the Department of Corporate Affairs to investigate the affairs of the Company. |
| 16 August 2016 | Supreme Court orders that the present arrangement for running the affairs of the Company will continue until further orders. |
| 30 April 2019 | Board of Directors of NIHL resolves to sell the Bandra property to address financial crisis. |
| 19 January 2021 | Supreme Court dismisses the contempt petition. |
Course of Proceedings
Rama Narang filed a contempt petition (Contempt Petition(C) No. 148 of 2003) alleging that Ramesh and Rajesh Narang had violated Clause 3 (c), (d), (e) and (f) of the Minutes of the Consent Order. He argued that their actions amounted to disobedience of the Supreme Court’s orders dated December 12, 2001, and January 8, 2002. The Supreme Court initiated contempt proceedings against the respondents on September 15, 2003.
A three-judge bench of the Supreme Court rejected the preliminary objections raised by Ramesh and Rajesh regarding the maintainability of the contempt petition. The Court held that violating the terms of the consent order would amount to a violation of the Court’s orders and be punishable under the Contempt of Courts Act, 1971.
After the preliminary objections were rejected, the Supreme Court heard the contempt petition on merits. The main allegations against the respondents were that they executed high-value contracts by issuing multiple cheques under Rs. 10 lakhs to bypass the requirement of joint signatures, withheld vital information from Rama Narang, unilaterally settled with trade unions, and made unilateral decisions regarding appointments and promotions.
The Supreme Court, on March 15, 2007, found Ramesh and Rajesh guilty of contempt for deliberately disobeying the undertaking given to the Court. However, the sentence of imprisonment was kept in abeyance to avoid chaos in the company, with a warning that similar violations would result in immediate imprisonment.
Subsequently, Ramesh Narang filed Company Petition No.47 of 2008 before the CLB, alleging that Rama Narang’s non-cooperation was causing a standstill in the company’s functioning. The CLB appointed Justice Arvind V. Savant as a Facilitator to resolve disputes. Rama Narang then filed the present contempt petition, arguing that the CLB order was an attempt to legalize the respondents’ contemptuous conduct.
The Supreme Court, after several hearings, also appointed an independent director and chartered accountants to oversee the company’s financial management. Despite these efforts, the disputes continued, leading to the current proceedings.
Legal Framework
The primary legal provisions relevant to this case include:
- Section 2(b) of the Contempt of Courts Act, 1971: Defines civil contempt as “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.”
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Sections 397, 398, and 403 of the Companies Act, 1956:
- Section 397: Allows members of a company to apply to the CLB for relief in cases of oppression.
- Section 398: Allows members to apply for relief in cases of mismanagement.
- Section 403: Empowers the CLB to make interim orders to regulate the conduct of a company’s affairs.
These provisions provide the legal basis for the contempt proceedings and the CLB’s intervention in the company’s affairs. The Supreme Court had to interpret how these provisions interact, especially when a statutory body like the CLB issues orders that might appear to conflict with earlier court orders.
Arguments
Arguments by the Petitioner (Rama Narang):
- The respondents were required to run the affairs of NIHL jointly with the petitioner, but they excluded him entirely, violating the consent order.
- The acts alleged to be contemptuous were identical to those found contemptuous in the 2007 judgment.
- The CLB had no jurisdiction to pass orders that contradicted the Supreme Court’s consent order.
- The Facilitator was not appointed by the Supreme Court and thus had no authority.
- The application for directions filed by the respondent was not tenable in the contempt proceedings.
Arguments by the Respondents (Ramesh and Rajesh Narang):
- The petitioner was using the consent terms as a veto to stall the company’s functioning.
- The petitioner’s non-cooperation forced the respondents to approach the CLB for directions to ensure the company’s smooth operation.
- The orders passed by the CLB were legitimate exercises of statutory powers and were necessary to prevent the company’s collapse.
- The respondents have been acting as per the orders passed by the CLB, which were passed by a competent statutory authority in exercise of the statutory provisions.
- Every Director has a fiduciary responsibility to act for the welfare of the Company.
- The petitioner was attempting to put a hindrance so that the functioning of the Company comes to a standstill.
- The residential accommodation provided to Rama Narang and Ramesh Narang was in their capacity as a Director of the Company.
The respondents argued that their actions were not a wilful disobedience of the Supreme Court’s orders but were necessary to keep the company running, given the petitioner’s non-cooperation. They also emphasized that they had acted under the orders of the CLB, a competent statutory authority.
| Main Submission | Sub-Submissions by Petitioner (Rama Narang) | Sub-Submissions by Respondents (Ramesh and Rajesh Narang) |
|---|---|---|
| Violation of Consent Order |
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| Jurisdiction of CLB |
|
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| Facilitator’s Authority |
|
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| Tenability of IA |
|
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Issues Framed by the Supreme Court
The Supreme Court framed the following key issue:
- Whether the respondents had committed contempt of court by violating the terms of the consent order, despite subsequent orders from the Company Law Board (CLB).
Treatment of the Issue by the Court
The following table demonstrates as to how the Court decided the issues:
| Issue | Court’s Decision and Reasoning |
|---|---|
| Whether the respondents had committed contempt of court by violating the terms of the consent order, despite subsequent orders from the Company Law Board (CLB). | The Court held that the respondents had not committed contempt. The Court reasoned that the respondents had taken recourse to the legal remedy available to them under the statutory provisions by approaching the CLB, and their actions were not a wilful disobedience of the Supreme Court’s orders. The Court also noted that the CLB had the power to pass interim orders to regulate the conduct of the company’s affairs and that the respondents were bound by those orders. |
Authorities
The Supreme Court considered several cases and legal provisions in reaching its decision. These authorities were categorized by the legal points they addressed:
| Authority | Legal Point | How it was used by the Court |
|---|---|---|
| Rama Narang v. Ramesh Narang [ (2006) 11 SCC 114], Supreme Court of India | Maintainability of contempt petition for violation of consent terms. | The Court noted that in this case, it was held that a violation of the terms of the consent order would amount to a violation of the Court’s orders and be punishable under the Contempt of Courts Act, 1971. |
| Rama Narang v. Ramesh Narang [(2009) 16 SCC 126], Supreme Court of India | Contempt for violation of undertaking given to the Court. | The Court noted that in this case, the respondents were held guilty of contempt for deliberately disobeying the undertaking given to the Court. |
| Pratap Singh and Another v. Gurbaksh Singh [1962 SCR Supp. (2) 838], Supreme Court of India | Right to take legal action. | The Court cited this case to support the principle that taking legal action in a court of law does not amount to interfering with the course of justice, even if it requires action from the other party. |
| Hrishikesh Sanyal v. A.P. Bagchi [ILR 1940 All 710], Allahabad High Court | Taking recourse to other judicial proceedings. | The Court cited this case to support the principle that a person does not commit contempt if they take recourse to other judicial proceedings, even if it puts the other party at a loss. |
| Radhey Lal v. Niranjan Nath [AIR 1941 All 95], Allahabad High Court | Taking recourse to other judicial proceedings. | The Court cited this case to support the principle that a person does not commit contempt if they take recourse to other judicial proceedings, even if it puts the other party at a loss. |
| Mehar Rusi Dalal (Mrs.) v. T.K. Banerjee and Others [(2004) 5 SCC 119], Supreme Court of India | Right to move a court of law. | The Court cited this case to emphasize that every party has a right to move a court of law for adjudication of their rights, and merely filing proceedings does not amount to a breach of undertaking. |
| Niaz Mohammad and Others v. State of Haryana and Others [(1994) 6 SCC 332], Supreme Court of India | Wilful disobedience in contempt cases. | The Court cited this case to highlight that for civil contempt, there must be wilful disobedience of a court order, and the court must be satisfied that such disobedience was intentional. |
| Kanwar Singh Saini v. High Court of Delhi [(2012) 4 SCC 307], Supreme Court of India | Standard of proof in contempt proceedings. | The Court cited this case to reiterate that contempt proceedings are quasi-criminal, requiring the same standard of proof as criminal cases, and that the alleged contemnor is entitled to the benefit of doubt. |
| Debabrata Bandopadhyaya v. State of W.B. [AIR 1969 SC 189], Supreme Court of India | Nature of contempt. | The Court cited this case to emphasize that punishment under contempt law is called for only when the lapse is deliberate and in defiance of authority. |
| Tayabbhai M. Bagasarwalla and Another v. Hind Rubber Industries (P) Ltd. And Others [(1997) 3 SCC 443], Supreme Court of India | Effect of interim orders and jurisdiction. | The Court cited this case to support the principle that even if there is a challenge to jurisdiction, interim orders passed by a court are valid until the court decides it has no jurisdiction, and their violation can be punished. |
| Vijay Laxmi and Others v. Prabhu Devi and Others [(2017) 11 SCC 169], Supreme Court of India | Powers under Article 142. | The Court referred to this case while discussing the powers of the Supreme Court under Article 142 of the Constitution. |
| State Bank of India v. Ajit Jain and Others [1995 Supp (1) SCC 683], Supreme Court of India | Powers under Article 142. | The Court referred to this case while discussing the powers of the Supreme Court under Article 142 of the Constitution. |
| Re: Vinay Chandra Mishra (The Alleged Contemnor) [(1995) 2 SCC 584], Supreme Court of India | Contempt of Court. | The Court referred to this case while discussing the contempt of court. |
| Sangramsinh P. Gaekwad and Others v. Shantadevi P. Gaekwad (Dead) Through LRs and Others [(2005) 11 SCC 314], Supreme Court of India | Family settlements. | The Court referred to this case while discussing the family settlements. |
| Kale and Others v. Deputy Director of Consolidation and Others [(1976) 3 SCC 119], Supreme Court of India | Family settlements. | The Court referred to this case while discussing the family settlements. |
Judgment
The Supreme Court dismissed the contempt petition, holding that the respondents had not wilfully disobeyed the Court’s orders. The Court reasoned that the respondents’ actions were taken under the orders of the CLB, a statutory body with the power to regulate the company’s affairs.
The Court emphasized that for a civil contempt action, there must be a wilful disobedience of a court order. It found that the respondents had taken recourse to the legal remedy available to them under the statutory provisions by approaching the CLB. The Court noted that the CLB had the power to pass interim orders to regulate the conduct of the company’s affairs, and the respondents were bound by those orders.
The Court also pointed out that the petitioner had not challenged the CLB’s orders before any higher forum. Therefore, the respondents could not be held in contempt for complying with those orders.
The Court also observed that the contempt proceedings are quasi-criminal in nature and the standard of proof required is in the same manner as in the other criminal cases. The alleged contemnor is entitled to the protection of all safeguards/rights which are provided in the criminal jurisprudence, including the benefit of doubt.
| Submission by the Parties | Treatment by the Court |
|---|---|
| Petitioner’s submission that the respondents violated the consent order by excluding him from the company’s management | The Court acknowledged the previous findings of contempt but noted that subsequent events and CLB orders had changed the context. The Court held that the respondents’ actions were not a wilful disobedience of the Supreme Court’s orders. |
| Petitioner’s submission that the CLB had no jurisdiction to pass orders that contradicted the Supreme Court’s consent order | The Court held that the respondents had legitimately approached the CLB invoking its jurisdiction under Sections 397, 398 and 403 of the Companies Act and that the CLB had the power to pass interim orders. |
| Petitioner’s submission that the Facilitator was not appointed by the Supreme Court and thus had no authority. | The Court clarified that the Facilitator was appointed by the CLB, a competent statutory authority and the Supreme Court had clarified that the orders passed by it would not come in the way of functioning of the Facilitator. |
| Petitioner’s submission that the application for directions filed by the respondent was not tenable in the contempt proceedings. | The Court dismissed the contempt petition and also disposed of the application for directions relegating the parties to the statutory remedy available to them in law. |
| Respondents’ submission that the petitioner was using the consent terms as a veto to stall the company’s functioning | The Court noted that the respondents had taken recourse to the legal remedy available to them under the statutory provisions by approaching the CLB. |
| Respondents’ submission that the orders passed by the CLB were legitimate exercises of statutory powers and were necessary to prevent the company’s collapse. | The Court accepted the respondents’ submission that the orders passed by the CLB were legitimate exercises of statutory powers. |
How each authority was viewed by the Court:
- Rama Narang v. Ramesh Narang [(2006) 11 SCC 114]: The Court acknowledged this case but distinguished it from the present scenario, as the circumstances had changed with the CLB orders.
- Rama Narang v. Ramesh Narang [(2009) 16 SCC 126]: The Court acknowledged this case but distinguished it from the present scenario, as the circumstances had changed with the CLB orders.
- Pratap Singh and Another v. Gurbaksh Singh [1962 SCR Supp. (2) 838]: The Court relied on this case to support the principle that taking legal action does not amount to interfering with the course of justice.
- Hrishikesh Sanyal v. A.P. Bagchi [ILR 1940 All 710]: The Court relied on this case to support the principle that a person does not commit contempt if they take recourse to other judicial proceedings.
- Radhey Lal v. Niranjan Nath [AIR 1941 All 95]: The Court relied on this case to support the principle that a person does not commit contempt if they take recourse to other judicial proceedings.
- Mehar Rusi Dalal (Mrs.) v. T.K. Banerjee and Others [(2004) 5 SCC 119]: The Court relied on this case to emphasize that every party has a right to move a court of law for adjudication of their rights.
- Niaz Mohammad and Others v. State of Haryana and Others [(1994) 6 SCC 332]: The Court relied on this case to highlight that for civil contempt, there must be wilful disobedience of a court order.
- Kanwar Singh Saini v. High Court of Delhi [(2012) 4 SCC 307]: The Court relied on this case to reiterate that contempt proceedings are quasi-criminal, requiring the same standard of proof as criminal cases.
- Debabrata Bandopadhyaya v. State of W.B. [AIR 1969 SC 189]: The Court relied on this case to emphasize that punishment under contempt law is called for only when the lapse is deliberate and in defiance of authority.
- Tayabbhai M. Bagasarwalla and Another v. Hind Rubber Industries (P) Ltd. And Others [(1997) 3 SCC 443]: The Court relied on this case to support the principle that even if there is a challenge to jurisdiction, interim orders passed by a court are valid until the court decides it has no jurisdiction.
- Vijay Laxmi and Others v. Prabhu Devi and Others [(2017) 11 SCC 169]: The Court referred to this case while discussing the powers of the SupremeCourt under Article 142 of the Constitution.
- State Bank of India v. Ajit Jain and Others [1995 Supp (1) SCC 683]: The Court referred to this case while discussing the powers of the Supreme Court under Article 142 of the Constitution.
- Re: Vinay Chandra Mishra (The Alleged Contemnor) [(1995) 2 SCC 584]: The Court referred to this case while discussing the contempt of court.
- Sangramsinh P. Gaekwad and Others v. Shantadevi P. Gaekwad (Dead) Through LRs and Others [(2005) 11 SCC 314]: The Court referred to this case while discussing the family settlements.
- Kale and Others v. Deputy Director of Consolidation and Others [(1976) 3 SCC 119]: The Court referred to this case while discussing the family settlements.
Final Decision
The Supreme Court dismissed the contempt petition filed by Rama Narang. The Court held that the respondents, Ramesh and Rajesh Narang, had not committed contempt of court by violating the terms of the consent order, given the subsequent orders of the Company Law Board (CLB).
The Court also disposed of the application for directions filed by the respondents, relegating the parties to the statutory remedy available to them in law.
The Court emphasized that the respondents had taken recourse to the legal remedy available to them under the statutory provisions by approaching the CLB. The Court noted that the CLB had the power to pass interim orders to regulate the conduct of the company’s affairs, and the respondents were bound by those orders.
Implications
This judgment clarifies the interplay between court orders and orders from statutory bodies like the Company Law Board (CLB). It establishes that:
- A party cannot be held in contempt of court for actions taken in compliance with orders from a statutory body, even if those actions might appear to contradict a prior court order.
- For civil contempt, there must be a wilful disobedience of a court order, and the Court must be satisfied that such disobedience was intentional.
- A party has a right to approach a court or statutory body for adjudication of their rights, and merely filing proceedings does not amount to a breach of undertaking.
- Contempt proceedings are quasi-criminal in nature and the standard of proof required is in the same manner as in the other criminal cases. The alleged contemnor is entitled to the protection of all safeguards/rights which are provided in the criminal jurisprudence, including the benefit of doubt.
The decision highlights the importance of considering the full context of a situation, including any subsequent legal developments, when assessing whether contempt of court has occurred. It also underscores the principle that parties should not be penalized for seeking legal remedies through appropriate channels.
Conclusion
The Supreme Court’s dismissal of the contempt petition in the Rama Narang vs. Ramesh Narang case provides important insights into the application of contempt law in complex, multi-layered disputes. The Court’s decision underscores the need for a nuanced approach, considering not only the initial court orders but also the subsequent legal developments and the actions taken under the authority of statutory bodies.
The case serves as a reminder that contempt of court is not to be lightly inferred and that the standard of proof required for contempt is the same as that in criminal cases. It also highlights the importance of allowing parties to seek legal remedies through appropriate channels without fear of being held in contempt for doing so.
Flowchart
Source: Rama Narang vs. Ramesh Narang