Family Company Cheque Dispute: NCLAT Says Section 19 Bars Appeals Against Dismissed Contempt Petitions

In brief

The question

Whether the evidence established deliberate and wilful disobedience of the NCLT’s order dated 5 January 2024 so as to warrant contempt proceedings.

The court held

The NCLAT dismissed the appeal, holding that contempt was not made out and, independently, that an appeal under Section 19 of the Contempt of Courts Act, 1971, was not maintainable against dismissal of the contempt petition.

01Facts

The appellant, who had initiated a contempt petition during the pendency of a company petition under Sections 241–242 of the Companies Act, 2013, alleged that Respondent No. 3 had disobeyed the NCLT’s order dated 5 January 2024.

¶ 1–3, 7–8

That order directed that the company’s bank accounts continue to be operated by the appellant and Respondent No. 2, as before the EOGM of 29 November 2023.

¶ 1–3, 7–8

The appellant relied on cheques allegedly issued or signed by Respondent No. 3 after the order, including cheques dated 8 April 2024, and sought punishment under the contempt jurisdiction.

¶ 4–5, 9

The NCLT dismissed the contempt petition, finding no proof that the cheques had been issued after the order or that any amount had been encashed or withdrawn.

¶ 10, 12–14

The appellant appealed to the NCLAT.

¶ 10, 12–14

02Issues

i.Whether the evidence established deliberate and wilful disobedience of the NCLT’s order dated 5 January 2024 so as to warrant contempt proceedings.

¶ 12–14

ii.Whether an appeal under Section 19 of the Contempt of Courts Act, 1971, is maintainable against an order dismissing a contempt petition.

¶ 11–12, 15–16

03Law Applied

Section 425 of the Companies Act, 2013, confers contempt powers on the NCLT and makes the provisions of the Contempt of Courts Act, 1971, applicable to their exercise.

¶ 6, 11

Under Section 12 of the 1971 Act, punishment for contempt requires proof of deliberate or intentional disobedience; the alleged act must be established beyond doubt.

¶ 7, 14

Section 19 provides an appeal as of right from an order or decision made in the exercise of contempt jurisdiction to punish for contempt; it does not provide an appeal against dismissal of a contempt petition.

¶ 11–12, 15–16

The Tribunal also stated that a contempt applicant acts as an informer, while the decision whether to continue or drop contempt proceedings rests with the court or tribunal.

¶ 16

Provisions in the judgment · 6 · Linked ones open on LawLens

Companies Act, 2013 Section 425 Section 241 Section 242

Contempt of Courts Act, 1971 Section 12 Section 14 Section 19

04Reasoning

The NCLAT accepted the NCLT’s factual finding that the bank statements did not show encashment or withdrawal of funds after the 5 January 2024 order.

¶ 12–14

It also noted that the record did not establish that the cheques had been issued after that order; the NCLT had found that the relevant post-dated cheques were in the appellant’s possession and had been presented by him.

¶ 12–14

In the absence of proof of post-order issuance, encashment, or withdrawal, deliberate disobedience was not established.

¶ 12–14

Separately, because the NCLT had dismissed rather than punished for contempt, the appeal did not fall within Section 19’s scope.

¶ 15–16