Mere Non-Payment Of Money Under Tribunal's Order Not Contempt Without Wilful Disobedience: NCLT Ahmedabad

The Ahmedabad bench of the National Company Law Tribunal (NCLT) has recently held that mere non-payment of an amount directed to be paid under an order does not, by itself, constitute civil contempt unless there is material showing conscious, deliberate and wilful disobedience.

The bench of Judicial Member Shammi Khan and Technical Member Sanjeev Sharma observed, “However, the remaining unpaid amount, by itself, cannot constitute contempt in the absence of material establishing the requisite wilful and deliberate disobedience. Questions concerning the recovery or enforcement of the monetary amount are distinct from the penal jurisdiction presently invoked.”

The case arose from a ₹10 lakh share application deposit made by Ilaben Ashokbhai Modi with Chiccem Healthcare Pvt. Ltd. on September 25, 2017. The amount was neither allotted towards shares nor refunded despite repeated requests.

Modi subsequently filed a plea seeking repayment with interest. Section 73(4) provides a mechanism for seeking repayment of money deposited with a company in circumstances covered by the provision.

On April 2, 2024, the NCLT directed the company to pay ₹17,63,068, comprising ₹10 lakh towards principal and ₹7,63,068 as interest at 12% per annum from November 24, 2017 until actual payment. The company was given one month to comply. It later sought an extension and made part-payments of ₹2 lakh on May 18, 2024 and ₹4 lakh on June 24, 2024.

Modi subsequently filed the contempt petition alleging wilful and deliberate disobedience. Section 2(b) of the Contempt of Courts Act deals with civil contempt, which requires wilful disobedience of a court's judgment, direction or order. Section 12(5) also provides for liability of company officers where contempt committed by the company is proved to have occurred with their consent or connivance, or is attributable to their neglect.

CEO and Director Hong Shik Yoo and Director Nawed Anwar argued that the April 2024 order was directed against the company alone and imposed no personal payment obligation on them. They also referred to disputes over the company's management and a failed attempt to initiate CIRP under Section 10 of the IBC.

Directors Parwez Eqbal, Yogesh Mishra and Jiten Amrutlal Desai similarly contended that they had not been parties to the original proceedings in their personal capacities. They claimed management and financial control rested with Yoo and Anwar. The order also records that Desai was a creditor of the company for ₹34 lakh.

The NCLT noted that the payment direction was against the company and there was no separate direction against the individual directors. However, it held that this alone did not determine their liability under Section 12(5).

The bench found no sufficient prima facie material showing that the company's non-payment resulted from conscious and deliberate wilful disobedience. It also found no sufficient material connecting the alleged disobedience to the directors' consent, connivance or neglect.

“The material on record, therefore, does not establish a sufficient prima facie foundation that the non-payment by Respondent No.1 was the result of a conscious and deliberate act of wilful disobedience. Equally, there is no sufficient prima facie material demonstrating that such alleged disobedience was attributable to the consent, connivance or neglect of any of Respondent Nos.2 to 7 so as to attract Section 12(5) of the Contempt of Courts Act, 1971.”,it noted.

The bench held that recovery or enforcement of the monetary direction was distinct from contempt jurisdiction. It also declined to adjudicate disputed allegations concerning management, financial control and transactions in the contempt proceedings.

The NCLT consequently rejected the prayers for contempt proceedings, attachment or freezing of bank accounts, detention or custody of the respondents and deposit of passports. It also rejected the request for an investigation under Section 213 of the Companies Act, without prejudice to the parties' rights and remedies in accordance with law.

The contempt petition was dismissed, with no order as to costs.