NCLAT Judicial Member Facing Supreme Court's Contempt Notice Resigns; SC Slams Tribunal For Defying Its Direction

A judicial member of the National Company Law Appellate Tribunal (NCLAT), Mr.Rakesh Kumar, tendered his resignation in the wake of the Supreme Court issuing a contempt notice against him over passing a judgment defying an interim order of the Apex Court.

Senior Advocate PS Patwalia, representing Rakesh Kumar, informed of this development to the bench led by Chief Justice of India DY Chandrachud during the hearing of the contempt case.

As the bench was about to dictate the order in the case after expressing severe disappointment with the conduct of the NCLAT member, Patwalia said that he just got information about Kumar's resignation.

"After this episode, the judicial member says that he cannot continue in this post," Patwalia said. "At best, it was an error of judgement at that time. He has absolutely no intention to affront your lordships' order. He has no desire to cling on to any assignment. Please take a considerate, liberal view. He has had a very very long career," Patwalia requested the bench while highlighting that Kumar had a long unblemished career both as an Advocate and as a High Court judge.

On October 18, the Court had issued notices to Mr Rakesh Kumar (Judicial Member) and Dr Alok Srivastava (Technical Member) of the NCLAT to show cause for not initiating contempt action against them for delivering a judgment on October 13 defying an interim order passed by the Supreme Court.

Today, Senior Advocate PS Patwalia, appearing for Rakesh Kumar, said that the judgment was pronounced on October 13 since the order of the Supreme Court (which was passed on the same day earlier) was neither officially communicated nor brought on record.  

Solicitor General of India Tushar Mehta, appearing for Technical Member Alok Srivastava (a former Law Secretary to the Union Government) offered unconditional apology and admitted that the pronouncement of the judgment should have been deferred when the lawyers orally informed the bench about the Supreme Court's order. SG added that the technical members generally go along with the judicial members, who are former judges.

After examining the CCTV footage of the NCLAT proceedings, the bench comprising CJI DY Chandrachud, Justice JB Pardiwala and Justice Manoj Misra noted that the lawyers had orally apprised the NCLAT members about the Supreme Court's order and were carrying the print-outs of the order in their hands.

"It's very obvious that the fact of the order being passed was mentioned to them. What was in order was mentioned to them. They say order wasn't communicated to them officially. What is officially? How do we officially communicate? Should the CJI call the President of the NCLAT and say "hey, one of my colleagues passed this order today?"", CJI Chandrachud asked.

"The officers of courts, the lawyers are telling them. The order is right there. The lawyers want to submit. If I were the judge and I am informed that SC order is there, I will say produce it and I will defer the pronouncement...", CJI Chandrachud expressed anguish.

The issue relates to the events which took place on October 13 in a matter pertaining to the Annual General Meeting (AGM) of Finolex cables. On that day, the Supreme Court in the forenoon session passed an interim order directing that the NCLAT should deliver the judgment only after being apprised that the results of the AGM have been declared. However, in the afternoon session, the lawyers mentioned the matter again before the Supreme Court to state that the NCLAT proceeded to deliver the judgment at 2 PM despite being told about the Supreme Court's order. Following that, the Supreme Court directed the NCLAT Chairperson Justice Ashok Bhushan to conduct an inquiry.

According to the inquiry report, the two NCLAT members reportedly told the NCLAT Chairperson that they were not aware of the Supreme Court's order. However, this version was disputed by the lawyers from both the sides, who categorically stated that the order was mentioned before the NCLAT bench before it proceeded to deliver the judgment at 2 PM on October 13.

Supreme Court's order passed today

In the order passed after today's hearing, the Supreme Court observed, "It is evident beyond a shadow of doubt that though the NCLAT was duly apprised of this Court's order of the morning session that judgment shall be delivered only after the AGM results, the NCLAT declined to pay heed to the order of this Court."

"Once the order of this court was made available before the NCLAT bench, the correct course of action would be to at least defer the proceedings for correct compliance. Once the gist of order was made available, it was expected of the judicial body that the order should've been allowed to be produced," the Court observed.

"We have no doubt that the bench of NCLAT has acted in wilful defiance of an order of this court...This court would expect a certain degree of deference to the orders of this court which bind every court and tribunal," the bench observed.

The bench further said that explanation offered by the NCLAT Judicial Member "compounded the contempt" and said that there was an attempt to defy the order of the Supreme Court. The bench also observed in the order that the Judicial Member also appeared to have told the lawyers that "if you think we are passing order in violation of the Supreme Court, you go and complaint."

Censuring the conduct of the NCLAT judicial member, the Court said that it was allowing the matter to rest at that.

As regards NCLAT Technical Member, the Court took note of the unconditional apology offered by him and did not pass any order against him.

Further, the Court held the scrutinizer liable for not declaring the results of the AGM and observed that Deepak Chhabria, the former Finolex Chairman, was the beneficiary of the withholding of the results. Therefore, the Court penalised Deepak Chhabria and the scrutinizer by directing them to pay Rs. One Crore and Rs 10 lakh respectively to the PM Relief Fund. The bench also transferred the case to the bench led by NCLAT Chairperson for fresh consideration.

"This order will serve as a reminder to not only the members of NCLAT, NCLT but all tribunals. We will end this here," the bench stated in conclusion.

After the order was dictated, another lawyer mentioned an intervention application, which raised allegations of irregularities in the functioning of the NCLAT. However, the bench refused to entertain the application saying that it was not related to the facts of the specific case before it.

Case Title: Orbit Electricals Private Limited v. Deepak Kishan Chhabaria | Conmt. Pet (C) No.1195/2023 In C.A. No.6108/2023

Citation : 2023 LiveLaw (SC) 957

Click here to read the order