Finolex Cable Case: NCLAT judicial member Rakesh Kumar resigns facing contempt proceedings by SC

NCLAT

Justice (retd) Rakesh Kumar, who is a judicial member at the National Company Law Appellate Tribunal (NCLAT) has tendered his resignation after facing contempt action by Supreme Court, his lawyer told the apex court on October 30.

The Supreme Court held that the bench had tried to overreach its order, however stopped short of punishing it for contempt.  The bench was accused of pronouncing an order in Finolex Cables case in defiance of SC's order asking them not to do so. The SC thus initiated contempt proceedings against the bench.

Senior advocate Pramjit Patwalia, who appeared for Rakesh Kumar told the Supreme Court that he had resigned on the morning on October 30 and has sent a copy of the letter to the authorities.  Kumar resigned pursuant to a contempt of court

Challenges to Zee-Sony merger are listed for hearing on October 31 before bench led by him. Rakesh Kumar's bench is also hearing a host of antitrust cases including petitions against Uber India and by Makemytrip.

Kumar, who was a practicing lawyer at Patna High Court represented Central Bureau of Investigation during the Fodder Scam investigation. He was appointed a judge of the Patna High Court in 2009, he was transferred to the Andhra Pradesh High Court in 2019. He retired as a judge of the Andhra Pradesh High Court in late 2020. He was appointed as a judicial member of NCLAT on May 17, 2022.

On September 21, while reserving the case challenging the Finolex Cables EGM for judgment, the NCLAT directed that no Annual General Meeting (AGM) should be held by the company until it had decided on the challenges to the 2019 EGM.

Prakash Chhabria opposed this ruling in the Supreme Court. On September 26, the Supreme Court vacated the NCLAT order and said the AGM could go ahead. However, it noted, important decisions, such as the appointment of an executive chairperson, would be subject to the decision of the NCLAT.

One of the issues being decided at the AGM was the continuance of Deepak Chhabria as the chairman of Finolex cables.

Following the Supreme Court ruling, the company held its AGM late in September. However, the result of a vote on the continuance of Deepak Chhabria as the Chairman of Finolex Cables was not released by the scrutiniser. This prompted the Prakash Chhabria group to file a contempt petition against the scrutiniser for not following the Supreme Court’s order.

On the morning of October 13, the apex court asked the scrutiniser of the AGM to publish the result of the vote immediately and also directed the NCLAT to not pronounce any order till the result was published.

Despite the Supreme Court diktat, the NCLAT went ahead and ruled on the matter at 2 pm on October 13. The order, which has now been set aside, allowed Chhabria to continue as Chairman.

The scrutiniser of the AGM uploaded the result of the vote at 2.40 pm, 40 minutes after the NCLAT ruling. In an exchange filing, the company stated that shareholders had rejected the continuance of Deepak Chhabria as chairman.

On being apprised of these developments, the apex court directed NCLAT chairperson Justice Bhushan to conduct an enquiry into whether a bench of the appellate tribunal had defied the apex court’s order. Justice Bhushan was asked to submit his report by 5 pm on October 16.

On October 16, the NCLAT suspended the operation of its order, stating that it was apprised of the supreme court’s directions only at 5:30 PM on October 13.

On October 21, Deepak Chhabria stepped down from being the executive chairman of Finolex Cables.