Taking notice of a perceived decline in the National Company Law Appellate Tribunal (NCLAT), the Supreme Court issued notifications to NCLAT’s judicial member, Rakesh Kumar, and technical member, Alok Srivastava, inquiring why contempt proceedings should not be instigated against them for purportedly disregarding the Supreme Court’s directives in the Finolex Cables case.
A panel led by Chief Justice DY Chandrachud expressed strong disapproval of the NCLAT bench’s decision. The NCLAT bench had issued a verdict on October 13, disregarding a status quo order issued by the Supreme Court.
The Supreme Court annulled the NCLAT bench’s judgment of October 13 concerning the annual general meeting (AGM) of Finolex Cables without delving into the merits of the case. The matter will now be handled by NCLAT Chief Justice Ashok Bhushan.
The Supreme Court criticized the state of the NCLT and NCLAT, stating, “NCLT and NCLAT have deteriorated. This case serves as an example of this deterioration. We are preliminarily of the opinion that the NCLAT members failed to accurately disclose the facts and erroneously created a record in the order dated October 16, claiming that the Supreme Court’s order had been brought to their attention at 5:35 pm on October 13.”
The Supreme Court also cautioned companies attempting to circumvent court orders and warned that it is closely monitoring such actions. This case centers on the dispute between Prakash Chhabria and Deepak Chhabria regarding the management control of Finolex Cables and the AGM associated with it.
It is worth noting that the Supreme Court seldom issues contempt notices against NCLAT members. In the past, the Supreme Court had instructed the NCLAT chairperson to conduct an inquiry after allegations that one of its benches issued an order without adhering to the Supreme Court’s instructions. The NCLAT bench had issued the order despite the Supreme Court’s directive to await the scrutinizer’s report. The Supreme Court found that the order was pronounced before the scrutinizer’s report was uploaded. Consequently, the Supreme Court ordered an inquiry to be conducted by the NCLAT chairperson to ascertain the facts and circumstances of the case.
The case originated from a petition filed by Prakash Chhabria-led Orbit Electricals, a promoter entity in Finolex Cables, which sought the disclosure of the voting results in the AGM regarding the reappointment of Deepak Chhabria as the executive chairman. The NCLAT had previously issued a status quo order regarding the conduct of the AGM, which was subsequently revoked by the Supreme Court.