SC summons 2 NCLAT members for defying order, slams 'rot' in tribunal

A bench, which also had justices J B Pardiwala and Manoj Misra, asked the two NCLAT members to appear before the Supreme Court on October 30

The Supreme Court on Wednesday issued show-cause notices to two members of the National Company Law Appellate Tribunal (NCLAT), asking why contempt proceedings be not initiated against them for defying its orders in a company dispute, and lambasted the tribunal for the “rot”.

The matter pertains to an annual general meeting (AGM) of Finolex Cables and the feud between cousins Prakash Chhabria and Deepak Chhabria over the company’s control. Despite a status-quo order by the Supreme Court, NCLAT members Rakesh Kumar and Alok Srivastava delivered a judgment on October 13.

“NCLT and NCLAT have got down to a rot now. The case is an illustration of that rot,” Chief Justice of India D Y Chandrachud said while issuing the notices against Kumar and Srivastava.

The SC Bench, which also comprised Justice J B Pardiwala and Justice Manoj Misra, asked the two NCLAT members to appear before the court on October 30. The court also summoned the scrutiniser of the AGM for not following its order.

“The manner in which the NCLAT has passed the directions is unbecoming of a tribunal,” said CJI Chandrachud, setting aside the tribunal’s order. It referred the matter to be heard afresh by the NCLAT chairperson’s court.

The Chabbria cousins are fighting for the control of Finolex Cables, a listed entity with a market valuation of Rs 14,000 crore. This case pertains to the voting results of Finolex Cables' AGM held on September 29, in which a special resolution for the re-appointment of Deepak Chhabria as executive chairman was put to vote. Entities controlled by Prakash Chhabria, which own a major chunk of shares, had voted against Deepak’s re-appointment. Finolex Cables disclosed the voting results on October 13. 

While the Supreme Court had on October 13 ordered the status quo on the Finolex Cables AGM results, the NCLAT ruled that Deepak Chhabria would remain the chairman of Finolex Cables, halting any planned changes to the company's Articles of Association.

Prakash Chhabria had then filed a contempt petition, which the Supreme Court took into consideration. The court had asked NCLAT Chairperson Justice Ashok Bhushan to conduct an inquiry. Bhushan’s report was submitted before the court on Wednesday. The two NCLAT members had told Justice Bhushan they were unaware of the court order.

“This order creates an impression that the Bench of the NCLAT was apprised of the order for the first time. This prima facie is a falsehood since it has clearly emerged before this court that the NCLAT Bench was apprised of the order of this court,” said the SC Bench. “I am not talking about Justice Ashok Bhushan (NCLAT Chairperson). He is one of the most dignified and disciplined judges I know...but NCLT and NCLAT have got down to a rot now,” said CJI Chandrachud.

The SC Bench further observed: “We are prima facie of the view that the members of the NCLAT have failed to disclose correct facts and incorrectly created a record in the order dated 16 October that this court's order was drawn to their notice on 5.35 pm on October 13.” After an inquiry was ordered by the court, the NCLAT had suspended its order.

- With inputs from Dev Chatterjee