IN THE HIGH COURT OF DELHI AT NEW DELHI COMPANY JURISDICTION. CCP (Co.) No. 8 of 2008 COMPANY PETITION NO. 215 OF 2005

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1 IN THE HIGH COURT OF DELHI AT NEW DELHI COMPANY JURISDICTION CCP (Co.) No. 8 of 2008 IN COMPANY PETITION NO. 215 OF 2005 Reserved on: Date of pronouncement : M/s Sanjay Cold Storage..Petitioner Through : Mr. Rajesh Gogna, Advocate Versus M/s Gateway Coated Papers Pvt. Ltd....Respondent Through : Mr. Deepak Kumar, Advocate CORAM : HON BLE MR. JUSTICE SUDERSHAN KUMAR MISRA 1. Whether Reporters of local papers may be allowed to see the judgment? Yes 2. To be referred to the Reporter or not? Yes 3. Whether the judgment should be reported in the Digest? Yes SUDERSHAN KUMAR MISRA, J. 1. This petition under Sections 10 and 12 of the Contempt of Courts Act, 1971 has been filed by M/s Sanjay Cold Storage on the grounds that Mr. K.K. Goel, Director of the company M/s Gateway Coated Papers Pvt. Ltd. intentionally and deliberately filed a false reply and affidavit in the winding up petition bearing CP. No. 215/2005. CCP(Co.) No. 8 in CP No. 215/2005 Page 1 of 12

2 2. The developments which led to the filing of this petition are as follows: The petitioner moved CP No. 215/2005, seeking the winding up of M/s Gateway Coated Papers Pvt. Ltd. on the ground of non-payment of Rs.30 lakhs, allegedly loaned by the petitioner to the company some time in According to the petitioner, one Mr. Narendra Kumar Goyal, stated to be a Director of the company, signed post-dated cheques in repayment of that loan, which were dishonoured on presentment. 3. The company s reply to the winding up petition was supported by an affidavit of the respondent Mr. K.K. Goel, as its Director. There, certain statements regarding the abovementioned Mr. Narendra Kumar Goyal s status in the company were made, as also regarding the company s liability to pay any amount to the petitioner. In essence, the company s defence was that the alleged loan was taken by Mr. Narendra Kumar Goyal from the petitioner on forged and manufactured documents. It was also averred that on 19 th June, 2004, by a Memorandum of Understanding, the aforesaid Mr. Narendra Kumar Goyal, who was at that time a Director and majority shareholder, sold his entire shareholding in the company to one Mr. Naresh Kumar Gupta, and, since the aforesaid Memorandum did not specifically list this liability due to the petitioner as payable by Mr. Naresh Kumar Gupta in the Annexure where details of other liabilities payable by him subsequent to his coming into the company s management were given, therefore, the outstanding amount remained the personal liability of Mr. Narendra Kumar Goyal alone. According to the company, pursuant to the aforesaid Memorandum of Understanding, Mr. Narendra Kumar Goyal had ceased to be a Director CCP(Co.) No. 8 in CP No. 215/2005 Page 2 of 12

3 of the company; and since the post-dated cheques issued to the petitioner were signed by him, therefore, no legally enforceable debt is due or payable by the company to the petitioner because Mr. Narendra Kumar Goyal had no authority to sign the aforesaid cheques on behalf of the company. 4. In support of these contentions, it was stated in paragraph 7 of the preliminary objections in the reply, that..shri Narendra Kumar Goyal is no more the director of the Company and he is not authorized to sign the cheque on behalf of the Company and therefore, on this ground the winding up petition deserves to be dismissed. 5. In paragraph 7 of the reply on merits, it was stated that, It is denied that the Respondent Company has been confirming the loan amount taken on different occasions by different confirmation letters. As stated heretobefore, Mr. Narendra Goyal took alleged loan and executed documents in favour of Petitioner, the proprietor whereof is related to Mr. Narendra Goyal. It is submitted that all the letters/confirmation have been executed in collusion with Shri Narendra Kumar Goyal, Ex-Director of the Respondent Company and the said documents do not bind the Respondent Company. 6. In paragraph 8 of the reply on merits, it was further stated that, As stated heretobefore, the alleged loan was taken personally by Mr. Narendra Kumar Goyal and the manufactured documents, which were never disclosed in MoU whereby present management purchased the entire shareholding. All documents were being manufactured by said Mr. Narendra Kumar Goyal in collusion with Petitioner, who are related to each other. All the earlier payments were made by Shri Narendra Kumar Goyal, Ex-Director of the Respondent Company and CCP(Co.) No. 8 in CP No. 215/2005 Page 3 of 12

4 the last payment for the year has been made on , 5 days before the signing of the memorandum of understanding, which was never disclosed to the present management at the time of take over. 7. In paragraph 9 of the reply on merits, it was, denied that as on the Respondent Company was indebted in the amount of Rs.34 lacs, to the Petitioner. In paragraph 15 of the reply on merits, it was also denied that the Respondent Company is liable to pay any amount much less sum of Rs.34,62,165 (Rs.30,00,000/- as principal amount along with Rs.4,62,165 as an interest accrued thereon upto ) to the Petitioner as falsely claimed. 8. The aforesaid reply has been admittedly signed and verified by Mr. K.K. Goel, as required under Order 6, Rule 15 of the Civil Procedure Code, It states that, para 1-2 of the preliminary submissions and para 1-19 of reply on merits are true to my knowledge based on the records maintained by the respondent during the normal course of business and para of reply on merits and para 1-9 of preliminary objections are true and correct to my belief and legal information received. An affidavit of Mr. K.K. Goel has further verified the contents of the reply, and specifically stated therein that he had read and understood the contents of the reply and that the facts stated therein were true and correct to his knowledge, which had been gathered from the records of the respondent company during the normal course of business. Further, in the verification of the aforesaid affidavit, Mr. K.K. Goel stated that, nothing material has been concealed therefrom. CCP(Co.) No. 8 in CP No. 215/2005 Page 4 of 12

5 9. However, after the respondent filed the reply to the winding up petition on 23 rd January, 2006 on behalf of the company, the petitioner applied for and obtained copies of the annual returns and balance sheets filed by the respondent with the Registrar of Companies. These documents are public documents with the Registrar of Companies, whose filing is statutorily mandated by S. 210 and 159 of the Companies Act, 1956, and may be inspected by any member of the public. 10. In the audited balance sheet of the respondent, as at 31 st August, 2007, that had been filed with the Registrar of Companies in Form 23AC on 26 th June, 2008, the name of the petitioner appears in the list of, schedule unsecured loan as on , for an amount of Rs.30,00,000/-. A copy of this Form 23AC that the petitioner received from the Registrar of Companies has been placed on record. The aforesaid Form has been digitally signed by Mr. Samir Garg, who is stated to be a Director of the respondent company. The audited balance sheet for the year ending has the signatures of Mr. K.K. Goel, Director of the company, on each page thereof, including the page in respect of the schedule unsecured loan, as on It was also admitted at the Bar that, even in the current balance sheet, this amount is being shown as outstanding and payable to the petitioner. 11. Further, in the annual return filed by the respondent with the Registrar of Companies, for the year ending , in Form 20B on 26 th June, 2008, Mr. Narendra Kumar Goyal is shown as one of the Directors of the company in the List of Directors, as on 29 th September, The same List of Directors also gives his date of CCP(Co.) No. 8 in CP No. 215/2005 Page 5 of 12

6 appointment as 30 th March, The aforesaid Form has been signed by Mr. Samir Garg, and the List of Directors, as on 29 th September, 2007, has been signed by Mr. K.K. Goel. A copy of this Form 20B has been placed on record as well. 12. The aforesaid Mr. K.K. Goel signed the reply to the winding up petition; the reply to this contempt petition; as well as the returns, and balance sheets before the Registrar of Companies. Yet, in the pleadings, he categorically takes the stand that Mr. Narendra Kumar Goyal is merely an ex-director of the company, and that no amount is owed to the petitioner. No rules, regulations or precedent have been cited by the respondent which might permit a person to state a fact to the Registrar which is knowingly incorrect, nor has any accounting treatment been explained by the respondent to support his stand that the amount due to the petitioner was still to be shown as due from the company even if it had been settled as payable by Mr. Narendra Kumar Goyal personally, after the Memorandum of Understanding was signed in This petition for initiation of contempt proceedings was filed by the petitioner in this Court, where the winding up petition is also pending. Reliance was placed by counsel for the petitioner on Sadhna Sharma v Municipal Corporation of Delhi, 157 (2009) DLT 462 (DB); and Murray & Co. v Ashok Kumar Newatia & Anr, (2000) 2 SCC 367, in support of the petitioner s contention that by making such contradictory and palpably false statements before this Court and a statutory authority, the respondent has committed contempt of this Court. The issue essentially is whether, in stating inconsistent and contrary facts before this Court on one hand, and CCP(Co.) No. 8 in CP No. 215/2005 Page 6 of 12

7 before the Registrar of Companies on the other, Mr. K.K. Goel has deliberately attempted to gain some advantage in these proceedings and to impede the administration of justice, thus committing contempt of this Court. It may be noted that counsel for the respondent admitted at the Bar that the statements in the documents filed before the Registrar are, in fact, correct. 14. The power to punish for contempt is, inter alia, in the larger public interest of preventing any undue interference with the administration of justice and to uphold the dignity and majesty of the law. 15. Section 2(b) of the Contempt of Courts Act, 1971 defines civil contempt as willful disobedience to any judgment, decree, direction, order, writ or other process of a court or willful breach of an undertaking given to a court. 16. Section 2(c) of the Act defines criminal contempt as the publication (whether by words, spoken or written, or by signs, or by visible representation, or otherwise) of any matter or the doing of any other act whatsoever which- (i) Scandalizes or tends to scandalize, or lowers or tends to lower the authority of, any court, or (ii) Prejudices, or interferes or tends to interfere with the due course of any judicial proceeding, or (iii) Interferes or tends to interfere with, or obstructs or tends to obstruct, the administration of justice in any other manner. 17. It is well established that making any false statement in pleadings supported by an affidavit amounts to contempt of court. In CCP(Co.) No. 8 in CP No. 215/2005 Page 7 of 12

8 Dhananjay Sharma v State of Haryana & Ors., (1995) 3 SCC 757, the Supreme Court has held as under; The swearing of false affidavits in judicial proceedings not only has the tendency of causing obstruction in the due course of judicial proceedings but has also the tendency to impede, obstruct and interfere with the administration of justice. The filing of false affidavits in judicial proceedings in any court of law exposes the intention of the concerned party in perverting the course of justice. The due process of law cannot be permitted to be slighted nor the majesty of law be made a mockery by such acts or conduct on the part of the parties to the litigation or even while appearing as witnesses. Anyone who makes an attempt to impede or undermine or obstruct the free flow of the unsoiled stream of justice by resorting to the filing of false evidence, commits criminal contempt of the court and renders himself liable to be dealt with in accordance with the Act. Filing of false affidavits or making false statement on oath in Courts aims at striking a blow at the Rule of Law and no court can ignore such conduct which has the tendency to shake public confidence in the judicial institutions because the very structure of an ordered life is put at stake. [See also, Rita Markandey v Surjit Singh Arora, (1996) 6 SCC 14] 18. In reply to the contempt petition, the respondent s stand was that the present petition is an abuse of the process of law as there was, no willful and deliberate violation of the orders of this Court, and that Mr. K.K. Goel s actions did not amount to, civil contempt, as defined in S.2(b) of the Contempt of Courts Act, At the same time, an unconditional apology for the actions of the respondents was also tendered, in case this Court felt that there was any omission or commission on their part which amounted to any disobedience of the orders of this Court. On merits it was categorically denied that Mr. K.K. Goel had made any false statement in the reply to CP No. 215/2005. It was also denied that there was any contradiction in the reply and CCP(Co.) No. 8 in CP No. 215/2005 Page 8 of 12

9 affidavit filed by Mr. K.K. Goel in this Court and in the documents filed by him at a later date before the Registrar of Companies. At the same time, counsel for the respondent stated at the Bar that the statements in the documents filed before the Registrar of Companies, were correct. Further, it was also alleged that Mr. Narendra Kumar Goyal was shown as a Director in the records of the company after 19 th July, 2004, in name only, with a view to meeting certain statutory liabilities which existed on 19 th July, In this context, a letter of resignation dated 19 th July, 2004, allegedly written by Mr. Narendra Kumar Goyal to the Board of Directors of the respondent company pursuant to the aforesaid Memorandum of Understanding, was relied on. However, the relevant Form 32 informing the Registrar of Companies of Mr. Narendra Kumar Goyal s resignation, admittedly, has not been filed with the Registrar of Companies till date. According to counsel for the respondent, the filing of the relevant Form 32 with the Registrar of Companies was a mere procedural formality. I do not agree with this submission, for the reason that, while there is no procedure prescribed by the Companies Act, 1956 as such for the resignation of Directors, S.303(2) of the Companies Act, 1956 requires a company to intimate the Registrar in the prescribed form of any change among its directors or managing director while specifying the date of the change. No rule, regulation or precedent has also been cited by the respondent to show that the filing of Form 32 with the Registrar of Companies is merely a procedural requirement, and that a letter of resignation from the Director concerned is sufficient. 19. It is evident that inconsistent and contrary facts were placed before this Court during the course of the winding up CCP(Co.) No. 8 in CP No. 215/2005 Page 9 of 12

10 proceedings, and before the Registrar of Companies. In view of counsel s admitted position that the statements made before the Registrar are correct, the conduct of the respondent, prima facie, appears to be an effort to prejudice the due course of judicial proceedings and falls within the definition of criminal contempt. 20. However, once a conclusion has been reached that the contempt alleged to have been committed by the respondent is, prima facie, criminal contempt, and not civil contempt, the effect of S.15, 17 and 18 of the Contempt of Courts Act, 1971 cannot be ignored. S.14 and S.15 of the Act deal with cognizance of contempt in two situations. S.14 deals with contempt committed in the hearing or in the presence of the Supreme Court or a High Court, i.e. contempt in facie curiae, whether civil or criminal. On the other hand, S.15 deals with cognizance of criminal contempt of the High Court or courts subordinate thereto, other than criminal contempt in facie curiae, in as many as five different ways, since the entire objective of prescribing the procedure to take cognizance of criminal contempt is to safeguard the Court s time from being wasted by a frivolous contempt petition. S.17 further prescribes the procedure to be followed after cognizance of criminal contempt is taken under S.15. However, S.18 of the Act provides that every case of criminal contempt under S.15, other than contempt referred to in S.14, must be heard and determined by a Bench of not less than two Judges. Therefore, the conclusion that naturally follows is that where a criminal contempt appears to have occurred, other than in the hearing or presence of the Court itself, the manner of cognizance of the same is prescribed in S.15, which is, in turn, to be read with S.18. CCP(Co.) No. 8 in CP No. 215/2005 Page 10 of 12

11 21. This aspect of the matter was not pleaded by either party before this Court. The respondent also did not raise any objection to the maintainability of the petition on that ground. What is to be seen is whether this Court, i.e. the Company Court, can proceed with the petition in its present form. To my mind, this Court does not have the jurisdiction to deal with criminal contempt that has not been committed in the hearing or in the presence of this Court. The petitioner filed this contempt petition in this Court since it is the Court in which the winding up petition is also pending, and prayed that this Court initiate appropriate contempt proceedings. Yet, the petitioner made no prayer to initiate suo motu proceedings against the respondent, nor is there anything on record to indicate that the contents of the petition are to be treated as information placed before the Court for initiation of suo motu proceedings by this Court. The matter has also been fully argued in the Company Court as a petition filed by a private party, in respect of which the written consent of the Advocate-General was not obtained. This Court is not unaware that the power to proceed suo motu on the basis of information or facts stated in a contempt petition otherwise incompetent under S.15 is to be exercised sparingly. There is also nothing in the Delhi High Court Rules which would permit this Court to hear and decide this type of criminal contempt, in view of a specific statutory provision that provides for hearing and final determination of the same by a Bench of not less than two Judges. In order to further elucidate the position, the matter was listed for directions on Only the petitioner s counsel appeared on that day and submitted that he too agreed with the view CCP(Co.) No. 8 in CP No. 215/2005 Page 11 of 12

12 that the matter needs to be heard by a Division Bench in terms of Section 18 of the Contempt of Courts Act. 22. It is, therefore, directed that the present petition be placed before Hon ble the Chief Justice for reference to an appropriate Bench, on 28 th January, 2011 in view of Section 18 of the Contempt of Courts Act, January 18, SUDERSHAN KUMAR MISRA, J. CCP(Co.) No. 8 in CP No. 215/2005 Page 12 of 12

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