NCLT Hyderabad Sentences Port Authority Officers To One Month Imprisonment And Fine For Contempt Of Court

NCLT Hyderabad Sentences Port Authority Officers To One Month Imprisonment And Fine For Contempt Of Court

In a ruling by the National Company Law Tribunal (NCLT) Hyderabad, Justice Rajeev Bhardwaj (Judicial Member) and Mr. Sanjay Puri (Technical Member) found Mr. Ravi Kiran Saladi Konda, Deputy Traffic Manager at New Mangalore Port Authority, and Mr. Sriman Nayan Mishra, Senior Assistant Traffic Manager at Paradip Port Authority (Respondents), guilty of contempt for disregarding the directives of the Adjudicating Authority. As a consequence, they were each sentenced to one month of simple imprisonment and fined Rs 1,000.

Between July 2011 and April 2016, Lanco Babandh Power Ltd. (the corporate debtor) imported goods, items, and machinery to establish a thermal power plant in Odisha, filing 45 Bills of Entry for the import and clearance. However, the goods remained unreleased due to the corporate debtor's failure to provide the necessary documents. Out of 45 Bills of Entry, three didn't receive Out of Charge (OOC) because no Bill of Entry was filed even after more than a year had passed since the import.

On August 29, 2018, the corporate debtor was admitted into the CIRP. In the absence of any resolution plan, a liquidation order was issued on November 27, 2019. Jindal Steels and Power Limited acquired the assets, including the imported goods of the corporate debtor, through an e-auction. However, the successful bidder has not paid the remaining sale consideration because the cargo and goods are still in the custody of the respondents.

The liquidator initiated contempt proceedings against the respondents when they failed to release the goods despite requests. By an order dated March 29, 2023, NCLT Hyderabad granted the application and instructed the respondents to release the corporate debtor's goods within 30 days. The order specified that no installation certificate, reconciliation statement, final payment certificate, or payment of customs duty by the corporate debtor under liquidation was required. Furthermore, the Deputy Commissioner of Paradeep Customs Division was directed to issue a No Objection Certificate for the sale of these goods within three months by the Liquidator under the IBC. The liquidator was mandated to deposit the sale proceeds into the corporate debtor's liquidation account.

The liquidator issued notices to the respondents requesting the release of goods. Despite this, no action was taken, prompting the filing of the application before NCLT Hyderabad.

NCLT Hyderabad granted the application and found the respondents guilty of contempt for disregarding the directions of the adjudicating authority. They were sentenced to one month of simple imprisonment each, along with a fine of Rs 1000. Failure to pay the fine would result in an additional 15 days of simple imprisonment for each of them.

The Tribunal noted that commencing contempt proceedings serves a dual function: it maintains the authority of the law by penalizing the contemnor and compels the contemnor to adhere to legal obligations.

The Tribunal noted that the imported goods detained by the Paradeep Port Authority constitute part of the liquidation estate, encompassing assets as defined under Section 36(3) of the IBC. With the issuance of the liquidation order, the liquidator assumed responsibility for acquiring custody and control over all assets, property, effects, and actionable claims of the corporate debtor. Sections 35(a) to 35(f) of the IBC empower the liquidator to confiscate and auction the cargo or goods detained by the respondents, subject to the provisions of Section 52.

The Tribunal also observed that both the Deputy Commissioner of Paradeep Customs Division and the Traffic Manager of Paradeep Port Authority had submitted their claims to the Liquidator. Despite this, the goods were not released. Although the Deputy Commissioner of Paradeep Customs Division complied after the order was issued, the respondents refused to adhere to the authority's directives and even failed to appear before the authority, seemingly influenced by their sense of authority.

Should the respondents have harbored any concerns regarding the disbursement of the corporate debtor's property under Section 53 of the IBC, they were obligated to contest the liquidator's order within 14 days of receiving it, as mandated by Section 42 of the IBC. However, their actions imply an intent to disrupt the time-sensitive liquidation process.

The NCLT reiterated that the provisions of the IBC supersede those of the Customs Act and cited the Supreme Court's ruling in Sudarshan Bhatt, Liquidator of ABG Shipyard vs. Central Board of Indirect Taxes and Customs. The Supreme Court held that issuing demand notices to enforce customs dues during the moratorium period would contravene the IBC. Therefore, any conflicting provisions in the Customs Act or the aforementioned circulars by the Deputy Traffic Manager of the New Mangalore Port Authority do not hold legal precedence. Consequently, no action can be taken to retain the corporate debtor's goods after the liquidation order.

Additionally, it was highlighted that there is evidence indicating that the respondents were apprised of the legal stance and the orders. Even the successful bidder, Jindal Steel & Power Limited, informed both respondents about the order.

The Tribunal emphasized that it is unacceptable for a government authority to disregard the lawful directives issued by the adjudicating authority. The respondents have failed to adhere to these directives or file any appeals. Despite being fully cognizant of the lawful orders from a competent authority, they have remained inactive. The Paradeep Port Authority's blatant disobedience has needlessly prolonged the matter, resulting in a loss to the exchequer as the goods in their possession remain idle and are not being utilized productively.

NCLT Hyderabad noted that the respondents have deliberately undermined the administration of justice, and their intentional actions cannot be disregarded. It further emphasized that disregarding an order from any authority undermines the administration of justice. The Tribunal relied on the Supreme Court's ruling in Commissioner, Karnataka Housing Board v. C. Muddaiah, highlighting that once a directive is issued by a competent court, it must be obeyed and executed without hesitation.

In conclusion, the Tribunal asserted that no entity possesses the authority to engage in actions that would tarnish the dignity and honor of justice dispensed by a court of law. It emphasized that non-compliance with the court's order undermines the rule of law. If the party against whom the order is issued has any grievances, their sole recourse is to contest the order through proper legal channels.