No Wilful Disobedience: NCLT Kochi Dismisses Bhagyodayam Company's Contempt Plea Against Ex-MD

The National Company Law Tribunal at Kochi has recently reiterated that simply failing to hand over company records to the tribunal appointed administrator, even after a specific direction from the tribunal, is not enough to initiate contempt unless there is clear proof that the person intended to defy the order.

A coram of Judicial Member Vinay Goel and Technical Member Madhu Sinha dismissed a contempt plea filed by Kerala based-Bhagyodayam Company against its former Managing Director Paul Joseph after finding that wilful and deliberate disobedience had not been established.

The tribunal noted that contempt powers cannot be invoked for every instance of non-compliance. It observed that “every disobedience, non-compliance, or violation of a court order would not invite contempt proceedings unless there exists an intention to undermine the authority of the court or to obstruct the stream of administration of justice. In this case, the non-obedience may invite other civil consequences, and it would not be proper to initiate contempt proceedings.”

The company had accused Paul Joseph of ignoring an order dated March 19, 2024 that required him to hand over statutory records, including books of accounts, registers of directors and related party contracts, to the court-appointed Administrator. It said repeated reminders from the board and the Administrator went unanswered, which in turn blocked an audit earlier directed by the Tribunal.

Bhagyodayam Company has been under scrutiny since 2018 after the NCLT Chennai appointed an Administrator following allegations of mismanagement. Following further directions from the Supreme Court and NCLAT, elections were held in April 2024 and a new board took charge on 8 April 2024. The Administrator was discharged on 28 May 2024 after submitting a final report.

Paul Joseph argued that the contempt plea was not maintainable because the board that authorized it had allegedly disqualified itself under Section 164(2) of the Companies Act. He also claimed that he had already handed over the documents to the former Administrator and relied on receipts issued by the company clerk. The tribunal rejected the maintainability objection after noting that he had not produced any proof from the Registrar of Companies of such disqualification. It also accepted the company's board resolution dated August 23, 2024 authorizing the filing of the petition.

On examining the merits, the tribunal found no clear evidence that Joseph had intentionally withheld the documents. Earlier proceedings contained contradictory statements on who had custody of the records and the tribunal noted that Joseph had not given any undertaking regarding the documents that could show a deliberate breach.

It said that “If there exist two possibilities, it would not be appropriate to punish a person for contempt, particularly when other avenues to the aggrieved person are also available.” It further added that those aggrieved have a efficacious remedy under the companies Act.

Accordingly, the tribunal dismissed the contempt petition while noting that the company remains free to pursue remedies available under company law.