NCLT Mumbai Holds Former Euro Ceramics Liquidator Guilty Of Contempt For Failing To Refund Excess Fees

On 29 October, the National Company Law Tribunal (NCLT), Mumbai, held Nirav Anupam Tarkas, former liquidator of Euro Ceramics Limited, guilty of contempt for failing to refund excess fees withdrawn from the company's liquidation account despite a direction to do so.

A Bench of Judicial Member Sushil Mahadeorao Kochey and Technical Member Prabhat Kumar observed that contempt jurisdiction protects the majesty of law and ensures compliance with judicial orders, and cannot be avoided by disputing the mode of enforcement of an earlier direction. It said:

“Section 425 of the Companies Act, 2013 provides that this Tribunal and the Appellate Tribunal shall have the same jurisdiction, powers and authority in respect of contempt of themselves as the High Court has and may exercise, for this purpose, the powers under the provisions of the Contempt of Courts Act, 1971 (70 of 1971).”

The direction to refund the excess amount followed a finding that Tarkas had withdrawn excess fees from the corporate debtor's liquidation account. The order was subsequently upheld by the Supreme Court, although a review petition remained pending. The present liquidator of Euro Ceramics filed the contempt petition, alleging that Tarkas had failed to comply with the refund direction.

Tarkas contended that the alleged non-compliance should be pursued through execution proceedings rather than contempt proceedings. He also submitted that the excess fees included GST of Rs. 23,51,710, which he had paid to the GST Department and which the corporate debtor had adjusted against its GST liability.

The Tribunal observed that even if the corporate debtor had availed input tax credit for the GST paid by Tarkas, only the GST attributable to the excess fees could be deducted. The entire GST component could not be excluded because it had already been considered while determining the excess amount withdrawn.

Relying on the Supreme Court's decision in Celir LLP v. Mr. Sumati Prasad Bafna & Ors., the Bench reiterated that contempt jurisdiction serves to protect the majesty of law and ensure that judicial orders are obeyed.

Accordingly, the NCLT held Tarkas guilty of contempt, imposed a fine of Rs. 2,000 and granted him 30 days from the communication of the order to purge the contempt by refunding the amount to the corporate debtor, taking into account his age and health condition.