NCLAT Quashes Contempt Conviction of Government Officials After Full Compliance and Unqualified Apology for Non-Wilful Breach of Liquidation Order
- REEDLAW
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The NCLAT quashed the contempt conviction of government officials after they fully complied with the liquidation order and tendered an unqualified apology, holding that the breach was not wilful but arose from a misunderstanding of the directions.
The National Company Law Appellate Tribunal (NCLAT), Chennai Bench comprising Justice Rakesh Kumar Jain (Judicial Member) and Mr. Jatindranath Swain (Technical Member), reviewed an appeal along with connected interlocutory applications and held that contempt proceedings for non-compliance with a judicial order may be set aside if the contemnors tender a genuine, unconditional apology and demonstrate full compliance with the previous directions. The Tribunal further clarified that purging of contempt is permissible, especially where the breach stems from a bona fide misunderstanding, is not wilful, and the contemnors have no prior history of disobedience.
The National Company Law Appellate Tribunal (NCLAT), in a recent judgment, allowed the appeal filed by two government officials who had been held guilty of contempt and sentenced to one month of simple imprisonment along with a fine of ₹1,000 each by the Adjudicating Authority (NCLT) for non-compliance with its directions. The contempt originated from an order dated 29.03.2023, directing the release of imported goods of Lanco Babandh Power Ltd. lying with Paradip Port and Customs authorities, without insistence on additional compliance such as installation or reconciliation certificates, given that the company was under liquidation.
The corporate debtor had imported machinery for a thermal power project but failed to furnish the required documentation, resulting in non-clearance of goods. While 42 out of 45 bills of entry were cleared, three remained pending. Post commencement of liquidation in 2019, both the Deputy Commissioner of Customs and the Deputy Traffic Manager of Paradip Port Authority had filed claims with the liquidator. When goods continued to remain unreleased, the liquidator moved an application before the NCLT, which directed their release. However, the appellants did not comply, leading to contempt proceedings wherein they were found guilty and sentenced.
On appeal, the appellants argued that the non-compliance was unintentional and stemmed from a misreading of the liquidator’s communication. They submitted affidavits tendering an unconditional apology and demonstrating compliance with the Tribunal’s directions. The Liquidator confirmed receipt of the no-objection certificate and acknowledged full payment by the successful bidder, Jindal Steel & Power Ltd., who had acquired the assets in an e-auction but had withheld payment pending release of the goods.
The Appellate Tribunal, after reviewing the affidavits and the liquidator’s satisfaction regarding
compliance, held that the contempt had been effectively purged. It found the disobedience to
be neither willful nor deliberate and accepted the appellants' apologies, noting their status as
public officials with no prior history of defiance. Accordingly, the NCLAT set aside the contempt order dated 09.05.2024 and allowed the appeal, observing that no further action was warranted in light of complete compliance and expression of regret.
Mr. P.H. Arvindh Pandian, Senior Advocate for Mr. P. Ulaganathan, Advocate, represented the Appellant.
Ms. Shalya Agarwal, Advocate, appeared for the Respondents.
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