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REPORTABLE

IN THE SUPREME COURT OF INDIA

CRIMINAL APPELLATE JURISDICTION

CRIMINAL APPEAL NOS.                             OF 2014   (Arising out of S.L.P. (Crl.) Nos. 2479-2487 of 2009)

E. Bapanaiah          …Appellant

Versus

Sri K.S. Raju etc.   …Respondents

J U D G M E N T

Prafulla C. Pant, J.

Leave granted.

2. These appeals are directed against judgment and order  

dated 22.8.2008 passed by the High Court of Judicature,

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Andhra Pradesh, in Contempt Appeal Nos. 3, 4, 5, 6, 7,  

8, 9, 10 and 11 of 2007 whereby said Court has allowed  

all  the Contempt Appeals setting aside the order dated  

3.8.2007  passed  in  Contempt  Case  No.  915  of  2002  

wherein K.S. Raju, Promoter Director of M/s. Nagarjuna  

Finance Limited, Hyderabad, and its other directors were  

convicted under Section 12 of Contempt of Courts Act,  

1971,  and  each  one  of  them  was  sentenced  to  suffer  

simple imprisonment for a period of six months and were  

further directed to pay fine of Rs.2,000/- each.

3. At the outset, we have no hesitation to observe that  

the impugned order does not require interference to the  

extent the same is passed in Contempt Appeal No. 4 of  

2007 filed by Minoo R. Shroof, Contempt Appeal No. 5 of  

2007 filed by Nimesh N. Kampani, Contempt Appeal No.  

6 of 2007 filed by C.D. Menon, Contempt Appeal No. 7 of  

2007 filed by A.P. Kurian, Contempt Appeal No. 8 of 2007  

filed by Sridhar Chary, Contempt Appeal No. 9 of 2007  

filed by G.S. Raju, Contempt Appeal No. 10 of 2007 filed  

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by P.K. Madhav, and Contempt Appeal No. 11 of 2007  

filed by L.V.V. Iyyer,  which were allowed for the reason  

that in the Contempt Case No. 915 of 2002 they were not  

the respondents against whom contempt case was filed.  

There were only three respondents, namely, K.S. Raju, N.  

Selvaraj and M/s. Nagarjuna Finance Limited through its  

Managing Director, against whom contempt petition was  

filed under Section 12 read with Section 10 of Contempt  

of Courts  Act, 1971 by E. Bapanaiah (present appellant)  

before  the  High  Court.   Other  eight  directors  had  no  

opportunity  to  defend themselves  before  the  conviction  

was  recorded  by  the  learned  Single  Judge  in  its  

concluding  paragraph  134  of  the  judgment  in  the  

aforementioned Contempt Case No. 915 of 2002.

4. It  is  only  in  respect  of  conviction  of  K.S.  Raju,  

Promoter  Director  of  Nagarjuna  Finance  Limited  (for  

short “NFL”) which requires in-depth examination as to  

whether the Division Bench of the High Court has rightly  

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allowed the Contempt Appeal (No. 3 of 2007) arising out  

of Contempt Case No. 915 of 2002, or not.

5. Brief facts of the case are that the present appellant,  

E. Bapanaiah, (one of the depositors who made deposits  

with NFL) filed the contempt petition under Section 12  

read with Section 10 of the Contempt of Courts Act, 1971  

for  the  alleged  wilful  disobedience  of  order  dated  

29.2.2000 and one dated 21.8.2001 passed by  Company  

Law Board,  Southern Region Bench,  and for  breach of  

undertakings/affidavits, including one filed by K.S. Raju  

(Promoter Director of NFL) before CLB and one given in  

Company  Appeal  No.  7  of  2001.   It  is  stated  by  the  

present  appellant  that  the  respondent,  K.S.  Raju,  was  

Promoter  Director  of  M/s.  Nagarjuna  Finance  Limited,  

Hyderabad (in short “NFL”).  The said company, through  

its  Directors,  issued  advertisement  inviting  deposits  

promising good returns on the  deposits  with attractive  

interest  thereon,  and collected the huge sum from the  

public.  The present appellant deposited ₹.40,00,000/- (₹  

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forty  lakhs)  hoping  that  the  same  would  multiply  to  

double  within  45  months  as  projected  in  the  

advertisement.  The said amount was deposited in eight  

fixed deposits  of  ₹.5,00,000/-  (  ₹ five  lakhs)  each for  a  

period  of  45  months  on  20.7.1997  and  was  due  for  

repayment  on maturity  on 28.4.2001.   However,  when  

the NFL failed to re-pay the sum to the depositors, an  

application (CP No. 35 of 2000) was filed under Section  

58-A of  the Companies  Act,  1956 before  the  Company  

Law  Board,  Southern  Region  Bench,  for  framing  the  

scheme of repayment of deposits in instalments within a  

period of 48 months.  The Company Law Board (CLB),  

exercising its suo motu powers, allowed the time to NFL  

on the request of its directors to approve the scheme of  

repayment.  During the pendency of such application the  

CLB  ordered  the  Directors,  including  the  Promoter  

Director K.S. Raju, to file affidavits giving undertaking to  

the CLB that they would abide by the scheme and pay off  

the  amount  due to  depositors.    On the  assurance as  

given in the undertakings/affidavits filed by K.S.  Raju,  

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Promoter  Director,  and  other  Directors  separately,  the  

CLB passed order dated 29.2.2000.  But the Promoter  

Director and its group companies filed Company Appeal  

Nos. 9 of 2001 and 7 of 2001 against the said order dated  

29.2.2000 passed in CP No. 35 of 2000.  In said appeals,  

on behalf of the Company an undertaking was given to  

pay  half  of  first  year’s  entitlement  of  the  present  

appellant by 20.4.2002.  However, no amount was paid.  

As such, the contempt petition was filed by the present  

appellant before the High Court for violation of the orders  

of the Company Law Board.

6. According  to  the  appellant,  after  the  scheme  was  

approved,  K.S.  Raju, Promoter Director of  NFL, started  

pleading that  there was change in the  management  of  

NFL, and sought to be relieved from his liability as the  

Promoter Director of NFL, its group companies and from  

the  undertaking  given  by  him  to  the  CLB.   The  CLB  

declined to relieve the Promoter Director K.S. Raju from  

the undertaking given by him and it was directed that he  

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should  make  the  repayment  as  per  the  repayment  

scheme.  The Company Appeals were dismissed by the  

High Court on 3.1.2002.  NFL and its Promoter Director  

failed  to  comply  with  the  order  of  the  Company  Law  

Board even after dismissal of the Company Appeals.  K.S.  

Raju,  the  then  Promoter  Director,  was  responsible  for  

issuance of the advertisement inviting deposits from the  

public  and  failed  to  repay  the  deposits  as  per  the  

undertaking given by him on behalf of the Company.  It is  

further alleged by the present appellant in the Contempt  

Petition  before  the  High Court  that  K.S.  Raju  kept  on  

evading  his  liability,  and  attempted  to  shirk  the  

responsibility by taking plea that he had resigned from  

the directorship.

7. A counter affidavit  was filed on behalf  of  K.S.  Raju,  

Promoter Director of NFL, in February, 2003 before the  

High  Court  which  discloses  that  the  said  respondent  

disputed  and  denied  the  averments  made  in  the  

Contempt Petition.  He pleaded that he had all respect for  

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the Court and had no intention to commit the contempt  

of the court.  He further pleaded that long back he had  

left to function as Managing Director of NFL.  It is further  

stated by him that he is neither in a position to exercise  

any control over the Company nor responsible to make  

repayment of the deposits made in favour of NFL.  It was  

further submitted by him before the learned single Judge  

of  the  High  Court  that  in  the  order  dated  29.2.2000  

passed  by  the  CLB,  the  Board  did  not  rely  on  the  

assurance or undertaking given by the parties.  Only the  

Managing Director was directed to file the undertaking,  

as  such  the  undertaking/affidavit  given  by  the  

respondent  K.S.  Raju  was  not  the  basis  of  the  order  

dated 29.2.2000.  As such it was contended that there  

was no contempt of  CLB or the Court.   It  was further  

pleaded that an agreement was entered into between one  

M/s. Mahalakshmi Factorial  Services Limited (for short  

“MFSL”) and NFL whereby the control of NFL was handed  

over to MFSL, and N. Selvaraj (respondent No. 2 in the  

Contempt Petition) was nominated as the Chief Executive  

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Officer  to  look after  the affairs  of  NFL.   Lastly,  it  was  

pleaded by respondent K.S. Raju that assuming that he  

had  given  undertaking/affidavit  on  which  CLB  passed  

the  order  said  to  have  been  disobeyed,  there  is  no  

personal liability on said respondent to repay the amount  

in question.

8. In the counter affidavits filed on behalf of NFL (through  

G.  Venkatapathi,  Executive  Director)  and  N.  Selvaraj  

(respondent  No.  2  in  the  Contempt  Petition)  it  was  

disclosed  that  Sridhar  Chary,  Managing  Director,  

functioning for over a decade of NFL, was none else than  

the nominee of K.S. Raju, Promoter Director.  It was also  

pleaded on behalf of NFL that out of Paid-up Capital of  

₹.26.32  crores  group  companies  were  holding  ₹.16.16  

crores,  i.e.,  approximately  61%.  It  was also stated by  

NFL in its counter affidavit before the High Court that  

under Articles 104 and 140 of the Articles of Association  

K.S. Raju had power to appoint the Managing Director  

and other three Directors as his nominees.  N. Selvaraj  

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(respondent No. 2 in the Contempt petition) denied that  

he was nominee of MFSL.  He further pleaded that there  

was  no  change  in  the  management  of  NFL during  his  

tenure  as Managing  Director,  and he further  told  that  

entire control remained with K.S. Raju and his nominees.  

The  Executive  Director,  G.  Venkatapathi  of  NFL,  filed  

additional counter affidavit in which it is clearly stated  

that  the  CLB  passed  the  order  on  the  basis  of  the  

undertakings and affidavits filed by the Promoter Director  

and the group companies.  The counter affidavits further  

revealed  that  on  special  audit  made  in  April,  2002,  

several irregularities were found to have been committed  

by the Management resulting in failure of recoveries in  

respect of loans advanced to various companies who were  

not traceable on the addresses given.

9. An additional counter affidavit was filed by K.S. Raju,  

Promoter  Director,  who  was  contesting  the  contempt  

petition with other two respondents, in which he alleged  

that  the  representatives  of  MFSL have  engineered  and  

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secured the audit  report to save the Directors of   said  

company.

10. Learned Single Judge, after hearing the parties at  

length, came to the conclusion that NFL and its Promoter  

Director,  K.S.  Raju,  are  guilty  of  contempt  of  court.  

Paragraphs 134 and 135 of the judgment and order dated  

3.8.2007  passed  by  the  learned  Single  Judge  read  as  

under: -

“134. The 1st and 3rd respondents/contemnors  are  found  guilty  and  liable  to  be  convicted   under Section 12 of the Contempt of Courts Act.   Accordingly, the 1st respondent as well as the  other directors of the 3rd respondent company  are  convicted  and  sentenced  to  suffer  simple   imprisonment  for  a  period  of  six  months,   together  with  imposition  of  fine  of  Rs.2,000/-   (Rupees  two  thousand  only).   The  1st  respondent as well as other directors of the 3rd  respondent shall be detained in Civil Prison for   the period of imprisonment as ordered above.

135. Accordingly, C.C. is allowed.”

11. Aggrieved by  the  order  dated 3.8.2007 passed  by  

the learned single Judge in Contempt Case No. 915 of  

2002 respondent K.S. Raju, Promoter Director, appears  

to have filed Contempt Appeal No. 3 of 2007 before the  

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Division Bench of the High Court.  His appeal was taken  

up  along  with  the  appeals  of  the  other  Directors  and  

disposed  of  vide  impugned  order  dated  22.8.2008  

whereby the appeals of all the Directors, including that of  

K.S. Raju, were allowed.  Hence these appeals before us  

by the depositor E. Bapanaiah.

(We  have  already  observed  in  the  beginning  of  this  

judgment  that  since  the  ‘other  Directors’  were  neither  

impleaded  by  name nor  had an opportunity  to  defend  

themselves, as such setting aside of their conviction and  

sentence by the Division Bench of the High Court in their  

appeals,  requires  no  interference.   As  such  further  

discussion is  confined  to  the  issue  of  allowing  of  K.S.  

Raju by the Division Bench of the High Court.)

12. We have heard learned counsel  for  the  parties  at  

length and perused the papers on record.  

13. It is not disputed that E. Bapanaiah made deposit of  

₹.40,00,000/-  (  ₹ forty  lakhs)   in  eight  FDRs  each  of  

₹.5,00,000/- (  ₹ five lakhs) with NFL in response to the  

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advertisement made by the said Company.  It is also not  

disputed  that  respondent  K.S.  Raju  was  the  Promoter  

Director of NFL, Hyderabad.  Not only this, the filing of  

the  undertaking/affidavit  dated  14.2.2000  before  the  

Company  Law  Board,  Southern  Region  Bench  is  not  

denied  by  the  respondent  K.S.  Raju.   The  said  

undertaking/affidavit reads as under: -

“BEFORE THE COMPANY LAW BOARD  SOUTHERN BENCH AT CHENNAI

Company Petition No.NAG6-33/45QA/SRB/99

In  the  matter  of  the  Companies  Act,  1956   Section 58A(9)

In the matter of the Reserve Bank of India Act,   1934, Section 45QA

AND

In  the  matter  of  Nagarjuna  Finance  Limited,   Punjagutta, Hyderabad … Petitioner

AFFIDAVIT

I, k.s. Raju, s/o Late Shri K V K Raju, aged 50   years, residing at, ‘Digvijayam’, Plot No. 933A,   Road No. 47, Jubilee Hills, Hyderabad-500033,   do hereby solemnly affirm and state as follows:

I am the promoter director of Nagarjuna Finance   Limited, the petitioner in the Company Petition   No. NAG6-33/45 QA/SRB/99.

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I as such hereby give assurance that Nagarjuna  Finance Limited (NFL) shall make repayment of   deposits  as  per  the  approved  scheme  by  the   Hon’ble  Company  Law  Board  in  the  above  petition for deferment of repayment of deposits.   It  is  further  reiterated  that  all  steps  shall  be   taken to  cause NFL to  comply with  aforesaid   repayment schedule.

The statements made are true to my knowledge   and I  solemnly affirm that  this  declaration is   true and that no part of it is false.

Place: Hyderabad Sd/- Date: February 14, 2000 K.S. Raju

Deponent”

14.  Now we have to examine as to whether the defences  

taken by K.S. Raju, Promoter Director, that he committed  

no wilful disobedience of the order of the Company Law  

Board are acceptable or not.   It  is relevant to mention  

here  that  it  is  not  the  defence  of  K.S.  Raju  that  

repayment  has  been  made  by  him  or  by  NFL  to  the  

present appellant E. Bapanaiah (depositor).  That being  

so, we have to see whether there was justification on the  

part of K.S. Raju, Promoter Director, and his Company  

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(NFL)  in  not  making  repayment  as  per  the  scheme  

approved by the CLB, as  directed by said authority.

15. Learned  counsel  for  the  respondent  K.S.  Raju  

argued that in the undertaking given by K.S. Raju, only  

this much has been stated that the Company will make  

the payment, as such it is not the personal liability of  

said  respondent.   But  needless  to  say  that  Company  

functions  through  its  directors,  in  its  operations.  

Company is not such person which can be sent to jail.  It  

is the director controlling the affairs of Company through  

whom it has committed the disobedience, if any, and as  

such,  such director  has  to  suffer  the  consequences  of  

disobedience if  it is wilful.  We have already discussed  

above that from the affidavits filed before the High Court,  

it  is  clear  that  K.S.  Raju  was  not  only  the  Promoter  

Director  of  NFL,  but  the  Managing  Director  of  said  

Company, working for a decade, was his nominee, and  

practically all the powers to run the NFL vested with K.S.  

Raju, the Promoter Director, and his nominees, whom he  

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appointed  under  Articles  104  and  140  of  Articles  of  

Association.

16. In our opinion, having considered the submissions  

of learned counsel for K.S. Raju, Promoter Director, and  

considering his role in the operation of the Company, as  

discussed above, the Division Bench of the High Court  

erred in law in holding that he was not guilty of wilful  

disobedience of the order of the CLB.  It is pertinent to  

mention  here  that  after  giving  undertaking  dated  

14.2.2000,  respondent  K.S.  Raju  submitted  his  

resignation  in  September,  2000,  which  clearly  reflects  

that the same was done in order to save himself and his  

company,  from  making  the  repayment  directed  to  be  

made by the CLB, and thereby dishonestly made attempt  

in not making repayment to the depositor E. Bapanaiah.

17. Sub-section  (4)  of  Section  12  of  the  Contempt  of  

Courts Act, 1971 provides that ‘where the person found  

guilty of contempt of court in respect of any undertaking  

given to a court is a company, every person who, at the  

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time the contempt was committed, was in charge of, and  

was  responsible  to,  the  company  for  the  conduct  of  

business of the company, as well as the company, shall  

be  deemed  to  be  guilty  of  the  contempt  and  the  

punishment may be enforced, with the leave of the court,  

by the detention in civil prison of each of such person’.  It  

further  provides  that  ‘nothing  contained  in  this  sub-

section  shall  render  any  such  person  liable  to  such  

punishment  if  he  proves  that  the  contempt  was  

committed without his knowledge or that he exercised all  

due diligence to prevent its commission’.   

18. It is not the case of respondent K.S. Raju, Promoter  

Director,  who  gave  undertaking  that  he  had  no  

knowledge of the order of the CLB, or that he made any  

attempt to prevent the disobedience of the order.

19. Though  it  is  contended  by  Mr.  C.A.  Sundaram,  

learned senior counsel for K.S. Raju that liability to make  

repayment to the depositors stood transferred to MFSL  

with whom NFL entered into an agreement after the order  

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dated  29.2.2000  passed,  but  copy  of  the  order  dated  

19.9.2000  passed  by  the  CLB  (Annexure  P-4)  on  the  

record  discloses  that  the  liability  continued  with  K.S.  

Raju  and  group  of  his  companies,  as  mentioned  in  

direction No. 2 of the order which reads as under: -

“Heard  Shri  C.R.  Murali,  Practising  Chartered  Accountant  and  Authorized  representative of the company as well as Shri   L.V.V.  Iyer,  Director  of  the  company.   The   company has made payment of Rs.73 lakhs to   the  depositors  between  17.7.2000  and   19.9.2000.   The  company  has  considered  all   the 430 hardship cases; attended to complaints   to nine depositors received at the Bench Office   and disposed  of  1424 complaints  received  at   his  office  by taking appropriate action as per   the Scheme approved by the CLB.  According to   Shri Iyer, the company finds it difficult to make   payment to the depositors in accordance with   the  scheme  of  account  of  the  poor  rate  of   recovery  of  receivables  and  for  want  of  the   required additional expertise and infrastructure   for recovery of the monies due to the company.   Hence,  the  management  of  the  company  has   entered  into  a  strategic  alliance  with  M/s.   Mahalakshmi  Factoring  Services  Limited,   Bombay  (MFSL),  which  would  provide   necessary infrastructure and skills to accelerate   the process of realization of the receivables to   make  repayment  to  the  depositors.   Accordingly, additional professionals have been   inducted  into  the  Board  of  the  Company  to   strengthen  the  recovery  and  disbursement   

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mechanism.  MFSL has agreed to resume the   responsibility  in  realizing  the  dues  of  the   company.  MFSL is involved in the management   of the company, Shri N. Selvaraju, President of   the  Company  and  Shri  C.  Muthuswamy,   Director  of  MFSL  have  filed  affidavits   undertaking  to  discharge  the  obligations   towards the depositors in terms of the scheme  approved by the CLB.

Taking  into  consideration  the  facts  and   circumstances of  the  case,  submissions made   on  behalf  of  the  company,  it  is  ordered  as   under: -

1. The Company shall –

i. make payment to the depositors in   every  category  as  per  the  Scheme  approved by the CLB;

ii. furnish additional particulars of the   cases  where  payments  are  due  to   the  depositors  and  the  actual   payment  made  by  the  company  in   such cases;

iii. attend  to  the  complaints  of  nine   depositors  received  at  the  bench  office and report compliance;

2. The affidavits filed by :

a) Shri  K.S.  Raju,  Promoter  Director   of the Company;

b) M/s. New India Finance Ltd.

c) M/s. Chinnar Securities Pvt. Ltd.

d) M/s.  Nagarjuna  Housing  Development Finance Ltd.

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e) M/s.  Nagarjuna  Engineering  &  Construction Co. Pvt. Ltd.

f) M/s.  Nagarjuna Holdings  Private   Limited

g) M/s. Paschim Holdings Pvt. Ltd.

h) M/s.  K.S.  Raju  Associates  &  Holdings Pvt. Ltd.

i) M/s.  Corporate  Securities  &  Holdings Pvt. Ltd.

j) M/s.  K.S.  Raju  Associates  and  Estates Pvt. Ltd.

k) M/s. K.R.R. Holdings Pvt. Ltd; and

l) Shri  Sridhar  Chari,  Managing  Director  of  the  company  assuring  repayment  of  deposits  by  the   company  as  per  the  scheme  approved by the CLB shall remain in  force till  discharging the obligations  in  terms  of  the  order  dated  29.2.2000 of the CLB.

3. The  arrangements  made  between  the   company and MFSL shall  not  be  of  any  consequence in relation to the repayment   schedule  approved  by  the  CLB.   The  company, its promoter Director and Group  Holding  Companies  shall  continue  to  be   responsible  for  due  compliance  of  the   order stated supra.

4. The progress made in  implementation of   the  scheme  will  be  reviewed  on  14.11.2000 at 10.30 p.m.”

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20. When  an  application  under  Section  634A  of  the  

Companies  Act,  1956  was  moved  by  the  present  

appellant before the CLB, the Board, by speaking order  

dated  21.8.2001,  after  considering  rival  submissions,  

observed in paragraphs 6 and 7 as under: -

“6. In regard to the plea of  Shri  Murali  that   the  provisions  of  Section  634A  cannot  be   invoked by the applicant,  it  may be observed  that  this  Section  is  explicit  which  runs  as  follows:

Sec.  634A:  Any  order  made  by  the   Company Law Board may be enforced by  that  Board  in  the  same manner  as  if  it   were a decree made by a Court in a suit   pending therein, and it shall be lawful for   that  Board  to  send,  in  the  case  of  its   inability  to  execute  such  order,  to  the   Court  within  the  local  limits  of  whose   jurisdiction, -

(a) in  the  case  of  an  order  against  a   company, the registered office of the   company is situated, or

(b) in the case of an order against any  other  person,  the  person  concerned  voluntarily  resides,  or  carries  on   business  or  personally  works  for   gain.

Section 634A is clear that as in the case of a   court,  the  orders  of  the  Company Law Board   can be enforced by it in the same manner as if   

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it were a decree made by a court.  This section   further permits the CLB, in case of its liability to   execute the order, to seek the assistance of the   court  having  competent  jurisdiction  for   execution of its order.  In view of this there is no   force in the argument of Shri Murali.

7. Taking  into  consideration  the  facts  and   circumstances  of  the  case,  the  opportunity   afforded to the Company and the legal position   stated  hereinabove,  I  hereby  order  that  the   Company shall pay 30 per cent of the deposit   amount together with interest at the contracted   rate upto the date of maturity and thereafter till   the date of payment at the rate of 14.5 per cent   within 30 days of receipt of this order, failing   which  the  applicant  is  at  liberty  to  move  the   Court, within whose jurisdiction the registered  office of the Company is situated to execute the   order of the CLB.”

21. The above order appears to have been challenged in  

Company Appeal Nos. 7 & 9 of 2001 by both the parties –  

depositor  E.  Bapanaiah  and  NFL,  respectively.   Both  

these company appeals were heard and disposed of by  

order dated 3.1.2002 by the High Court.  The concluding  

paragraphs  of  the  common  order  passed  by  the  High  

Court in the Company Appeals, are quoted below: -

“In the circumstances, the submission of  the  learned  counsel  for  the  respondent  

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company  that  it  is  entitled  to  wait  till  the  month of April 2002 cannot be accepted and  the respondent company is therefore bound to  make  the  payments  every  month  as  per  the  clause  11(f)  read  with  clause  12  (iv)  of  the  scheme.

Coming to the second submission made  by  the  learned  counsel  for  the  respondent  company, though I do not propose to go into  the larger question whether the nature of the  power  exercised  under  Section  634A  of  the  Companies Act is in the nature of the power  exercised  as  an  executing  court,  but  I  must  say the impugned order is  not  in conformity  with  the  original  order  of  the  Company  Law  Board  dated  29th February,  2000.   But,  a  combined reading of  clause 1(i)  and 12(iv)  of  the scheme, the respondent company is bound  to pay 30% of the amount due to the petitioner  within  1  year  from the  date  of  the  maturity  (28.4.2001)  spread  over  12  equal  monthly  instalments.

Coming to the submission made by the  learned counsel for the depositor, I do not see  any reason why he should have any grievance  against the impugned order.  It is open for him  as indicated by the Company Law Board in the  impugned order to move the appropriate court  for the execution of the order of the Company  Law Board dated 29th February 2000.

In the circumstances, both the company  appeals are dismissed.”

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22. However, after above order was passed by the High  

Court, a proviso is added by Legislature to Section 634A  

of the Companies Act, 1956, which reads as under:-

“Provided that the provision of this section shall   not  apply  on and after  commencement  of  the   Companies (Second Amendment) Act, 2002.”

As such, on the date (3.8.2007) order passed by learned  

single  Judge,  the  depositor  had  no  option  of  getting  

executed the order of CLB as a decree passed in a suit,  

and present appellant could not have been asked to avail  

remedy under Section 634A of the Companies Act.

23. No doubt, a company which defaults in repayment  

of deposit can be dealt with as per provisions contained  

in  sub-sections  (9)  and  (10)  of  Section  58A  of  the  

Companies Act, 1956, which read as under: -

“(9) Where a company has failed to repay any   deposit or part thereof in accordance with the   terms  and  conditions  of  such  deposit  the   Tribunal may, if it is satisfied, either on its own   motion  or  on  the  application of  the  depositor,   that it  is necessary so to do to safeguard the   interests of the company, the depositors or in   the public interest direct, by order, the company  to  make  repayment  of  such  deposit  or  part   

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thereof  forthwith  or  within  such  time  and  subject to such conditions as may be specified   in the order:  

Provided  that  the  Tribunal  may  before   making any order under this sub-section give a   reasonable  opportunity  of  being  heard  to  the   company and  the  other  persons  interested  in  the matter.

(10)  Whoever  fails  to  comply  with  any  order   made  by  the  Tribunal  under  sub-section  (9)   shall  be  punishable  with  imprisonment  which   may extend to  three  years  and shall  also  be   liable  to  a  fine  of  not  less  than  rupees  five   hundred for every day during which such non- compliance continues.”

(Expression  “Tribunal”  was  substituted  in  the  above  

mentioned provisions vide Act No. 11 of 2003 in place of  

words “Company Law Board”)

24. During  arguments  it  is  stated  before  us  by  the  

learned counsel for the parties that the prosecution was  

also launched against the respondent K.S. Raju but he  

was discharged.  However, Special Leave Petition is said  

to have been pending in said matter.   We are of the view  

that the depositors cannot be left without remedy merely  

for  the  reason  that  prosecution  could  have  been  

launched against the company.   

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25. Powers of the High Courts to punish for contempt  

including the powers to punish for contempt of itself flow  

from Article 215 of the Constitution of India.  Section 10  

of the Contempt of Courts Act, 1971 empowers the High  

Courts  to  punish  contempts  of  its  subordinate  courts  

which reads as under: -

“10.  Power  of  High  Court  to  punish  contempts  of  subordinate  courts. –  Every  High Court  shall  have and exercise the same   jurisdiction,  powers  and  authority,  in   accordance  with  the  same  procedure  and  practice,  in  respect  of  contempts  of  courts   subordinate  to  it  as  it  has  and  exercises  in   respect of contempts of itself:

Provided  that  no  High  Court  shall  take   cognizance of a contempt alleged to have been   committed in respect of a court subordinate to it   where such contempt is an offence punishable   under the Indian Penal Code (45 of 1860).”

26. As  to  the  question  whether  CLB  is  a  court  

subordinate to High Court or not,  in  Canara Bank  v.  

Nuclear Power Corporation of India Ltd. and others1,  

this Court has held that CLB in the proceedings before it  

under Section 111 of the Companies Act since performs  

curial functions, hence it is a “court” within the meaning  1 1975 Supp (3) SCC 81

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of Section 9-A of Special Court (Trial of Offences Relating  

to  Transactions  in  Securities)  Act,  1992.   In  Sk.  

Mohammedbhikhan  Hussainbhai  v.  The  Manager  

Chandrabhanu Cinema2,  the  Gujarat  High Court  has  

taken  the  view  that  if  the  High  Court  is  an  appellate  

court of some authority under a statute, such authority  

can  be  deemed  to  be  a  subordinate  court  within  the  

ambit  of  Contempt of  Courts Act,  1971 and, therefore,  

the  High  Court  can  exercise  powers  of  dealing  with  

contempt of such authority provided the act of contempt  

was not punishable for offences under Indian Penal Code.  

In  N.  Venkata  Swamy  Naidu  v.  Sri  Surya  Teja  

Constructions  Pvt.  Ltd.  and  others3,  High  Court  of  

Andhra Pradesh observed as under: -

“28. Under Section  10F of  the Companies Act   1956, any person aggrieved by any decision or   order of the Company Law Board may file an   appeal  to  the  High  Court,  within  sixty  days   from the date of communication of the decision   or  order  of  the  Company Law Board,  on any   question of  law arising out  of  such an order.   The  Company  Law  Board  is  thus  judicially   

2 AIR 1986 Guj 209 3 2008 CriLJ 227

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passed by the subordinate court is not obeyed.  However,  

there is no such procedure prescribed to execute order of  

CLB particularly after proviso is added to Section 634A of  

the  Companies  Act,  1956,  vide  Companies  (Second  

Amendment) Act, 2002.   

28. Therefore,  having  considered  submissions  of  

learned counsel for the parties, and material on record,  

and  further  considering  the  relevant  provisions  of  law  

and  the  cases  referred  above,  and  exercising  powers  

under  Article  136  read  with  Article  142  of  the  

Constitution, we think it just and proper to interfere with  

the order passed by the Division Bench of the High Court  

whereby  the  Division  Bench  erroneously  set  aside  the  

finding  and  sentence  awarded  by  the  learned  single  

Judge against K.S. Raju.  In our opinion, respondent K.S.  

Raju wilfully disobeyed the order of CLB and breached  

the  undertaking  given to  CLB,  and thereby  committed  

Contempt of  Court subordinate to High Court as such  

the Division Bench of the High Court has erred in law in  

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allowing the Contempt Appeal No. 3 of 2007 filed by K.S.  

Raju  and  setting  aside  his  conviction  and  sentence,  

recorded  against  him  by  the  learned  Single  Judge  in  

Contempt Case No. 915 of 2002.

29. For the reasons, as discussed above, we allow the  

present appeal  filed against respondent K.S.  Raju,  and  

set aside the impugned order of  the Division Bench of  

High Court.  Accordingly, order dated 3.8.2007, passed  

in  Contempt  Case  No.  915  of  2002,  to  the  extent  of  

conviction  and  sentence  recorded  against  K.S.  Raju  

(respondent)  stands  restored.   However,  exercising  

powers under Article 142 of the Constitution of India, to  

do complete justice between the parties, we allow sixty  

days  time  to  respondent  K.S.  Raju,  with  effect  from  

pronouncement  of  this  judgment  to  repay  the  entire  

amount to the depositor/appellant as directed by CLB,  

and if within the said period of sixty days payment is not  

made to the depositor/appellant,  respondent K.S.  Raju  

shall  be  taken into  custody to  serve  out   sentence  as  

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recorded against him by the learned Single Judge vide  

order dated 3.8.2007 in Contempt Case No. 915 of 2002.  

If the amount is paid to the present appellant as directed  

by this  Court  within  sixty  days,  the  sentence  shall  be  

reduced to the extent of fine only.  Rest of the appeals  

filed by the depositor in respect of all other directors, who  

were not impleaded by name before the High Court in the  

contempt Case No.  915 of  2002, and acquitted by the  

impugned order passed by Division Bench of High Court,  

are dismissed.

………………………………J. [Vikramajit Sen]

………………………………J.                                       [Prafulla C. Pant]

New Delhi; November 07, 2014.

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