Case Note & Summary
The case involved E. Bapanaiah, a depositor who filed a contempt petition against K.S. Raju, the Promoter Director of Nagarjuna Finance Limited (NFL), for failing to comply with repayment orders from the Company Law Board (CLB). Bapanaiah had deposited ₹40,00,000 in NFL, which was due for repayment but remained unpaid. The CLB had issued orders requiring NFL to repay depositors, which Raju allegedly disobeyed. Initially, Raju and other directors were convicted of contempt by a Single Judge of the High Court, but the Division Bench later set aside this conviction. The Supreme Court examined whether the Division Bench's ruling was justified. It noted that Raju had given an undertaking to the CLB, which he failed to honor, and that he could not evade responsibility by claiming he had resigned from his position. The Court emphasized that directors are accountable for the company's actions and that Raju's defenses were insufficient. Ultimately, the Supreme Court restored the conviction and sentence against Raju, allowing him sixty days to repay the amount owed to the depositor, failing which he would serve his sentence. The appeals concerning other directors were dismissed as they had not been given a chance to defend themselves in the original contempt case.
Headnote
A) Contempt of Court - Wilful Disobedience - Accountability of Directors - Contempt of Courts Act, 1971, Section 12 - The Supreme Court found K.S. Raju guilty of contempt for failing to comply with the Company Law Board's order regarding repayment to depositors, emphasizing that directors are personally liable for the company's obligations. The Division Bench's decision to set aside the conviction was deemed erroneous, and the original sentence was restored with a directive for repayment within sixty days. (Paras 28-30).
Issue of Consideration
Whether K.S. Raju, Promoter Director of Nagarjuna Finance Limited, was guilty of contempt for wilful disobedience of the Company Law Board's order.
Final Decision
The Supreme Court restored the conviction and sentence against K.S. Raju for contempt of court, allowing him sixty days to repay the amount owed to the depositor, failing which he would serve his sentence. The appeals concerning other directors were dismissed.
Law Points
- Contempt of Court
- breach of undertaking
- personal liability of directors
- enforcement of Company Law Board orders
