Full Judgment Text
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. __________OF 2025
[Arising out of Special Leave Petition (C) No.17013 of 2024]
RAJAN CHADHA & ANR. …APPELLANT(S)
VERSUS
SANJAY ARORA …RESPONDENT(S)
J U D G M E N T
B.R. GAVAI, J.
1. Leave granted.
2. The present appeal takes exception to the judgment
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and final order dated 3 July 2024 in CONT. CAS(C) 75/2021
passed by a learned Single Judge of the High Court of Delhi at
New Delhi (hereinafter, “High Court”) whereby the contempt
petition filed by the Appellants came to be dismissed .
3. The facts, in brief , giving rise to the present appeal are
as under:
3.1 One company by the name of “ RBT Private Ltd. ” carried
out the business of dyeing, printing and trading of fabrics.
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Rajan Chadha, Rajiv Chadha, Sanjay Arora and Sumit Gupta
were the shareholders as well as Directors of the company.
Rajan Chadha and Rajiv Chadha (Appellants) had a combined
shareholding of 51.36%, Sanjay Arora (Respondent) had 25%
and Sumit Gupta had 23.64%.
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3.2 On 21 December 2019, a Memorandum of
Understanding (MoU) was made and executed by and between
the company, Appellants, Respondent, Sumit Gupta and one
Shilpa Gupta. The MoU was entered into for transfer of
shareholding in the company and to re-organize the company’s
management. In-effect, the Respondent was to purchase the
entire shareholding of the Appellants and thereafter, the
Respondent was responsible to run the affairs of the company.
The MoU also provides that in case of any claim, dispute or
difference, the parties shall seek to resolve the same by mutual
consultation and negotiation. In the event, the parties are
unable to reach a resolution, the dispute is to be settled by
arbitration.
3.3 Alleging that the Respondent has failed to discharge
his obligation under the MoU inasmuch as the Respondent has
started operating another entity from the premises of the
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company, is siphoning off plant and machinery which was
owned by the company and is defaulting in paying instalments
of the term loan – the Appellants issued a legal notice to resolve
the issues.
3.4 On receiving no reply from Respondent, the Appellants
issued a notice in terms of Section 11 of Arbitration and
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Conciliation Act 1996 (hereinafter, “Arbitration Act”), on 17
March 2020. Pursuant thereto, the sole arbitrator was
appointed by the company.
3.5 The Appellants, thereafter, filed a petition in the High
Court under Section 9 of Arbitration Act inter-alia praying for
a direction to restrain the Respondent from disposing
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off/alienating, siphoning off or in any manner creating any 3
party interest or charge in the assets of the company, to
restrain the Respondent from using the premises of the
company for business operations of any other entity, etc.
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3.6 On 11 June 2020, a learned Single Judge of the High
Court disposed of the petition under Section 9 of the
Arbitration Act by recording the submissions of the parties and
by appointing a new arbitrator.
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3.7 On 17 June 2020, before the arbitrator, the
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Appellants contended that the application filed before the High
Court under Section 9 of the Arbitration Act be treated as an
application under Section 17 of the Arbitration Act. The
Respondent objected to the conversion of the application and
its maintainability. The arbitrator, while giving time to the
Respondent to file a reply, recorded that the statements made
by the counsel for Respondent before the High Court (recorded
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in the order dated 11 June 2020) will be binding upon the
Respondent.
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3.8 On 1 July 2020, the arbitrator on a prima facie
reading of the terms of the MoU observed that certain amount
had to be infused into the loan account of the company by the
Respondent and there is nothing on record to show that it has
been done. It was further observed that the collateral security
for the loan is a house which is jointly owned by the Appellant
. It was further observed that if, the EMI qua
No. 1 and his wife
the loan account is not discharged by the company, the
account would become a Non-Performing Asset (NPA) and
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would then be subject matter of SARFESI Act 2002. The
arbitrator, therefore, being of the view that the apprehension
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The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest.
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of the Appellant has been prima facie established directed that,
till the disposal of the petition, the Respondent shall continue
to pay the EMIs into the loan account of the company as per
the terms and conditions of the loan account.
3.9 The Appellants, thereafter, alleging that the
Respondent is not complying with the order of the arbitrator
and is removing the assets of the company illegally, filed an
application before the arbitrator under Section 26 of the
Arbitration Act inter-alia for a Local Commissioner to be
appointed and to prepare an inventory of assets lying at the
factory premises of the company. The same was allowed by the
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arbitrator on 16 December 2020.
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3.10 On 22 December 2020, the report of the Local
Commissioner was received. As per the said report, all the
machines were present and operational at the premises of the
company – a Flat Bed Printing Machine.
except one
3.11 Aggrieved by the findings of the Local Commissioner so
also by the fact that the Respondent till that point of time had
not deposited any amount of EMIs in the loan account, the
Appellants filed a Contempt Petition bearing CONT. CAS(C) No.
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75/2021 before the High Court on 13 January 2021. The
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Appellants inter-alia prayed that the Respondent be prosecuted
and punished; and to ensure the immediate compliance of the
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order dated 11 June 2020 passed by the High Court and
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orders dated 17 June 2020 and 1 July 2020 passed by the
arbitrator.
3.12 During the pendency of the Contempt Petition, the
National Company Law Tribunal (NCLT) Chandigarh admitted
a petition against the company under Section 9 of the
Insolvency and Bankruptcy Code 2016 (hereinafter, “IBC”),
initiated Corporate Insolvency Resolution Process (CIRP) and
declared a moratorium in terms of Section 14 of the IBC.
Resultantly, the arbitrator adjourned the proceedings sine die
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by an order dated 13 July 2021.
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3.13 On 5 December 2023, a learned Single Judge of the
High Court upon hearing the parties observed that the
Respondent has removed material from the premises of the
company and that though the Respondent was directed to pay
EMIs of the loan account, the same has also not been done. It
was further observed that the Respondent and the company
are distinct entities, and the undertaking was given by
Respondent. It was further observed that the Respondent is
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not under liquidation and the Section 14 IBC moratorium will
not apply to the Respondent. The learned Single Judge of the
High Court, in the result, held that the Respondent is guilty of
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intentionally and malafidely violating orders dated 11 June
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2020 and 1 July 2020 and has committed contempt of the
orders of the Court. In light of the same, the learned Single
Judge of the High Court granted 4 weeks’ time to the
Respondent to purge the contempt failing which the
Respondent was directed to file an affidavit stating as to why
he should not be punished under the Contempt of Courts Act,
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1971. The matter was next listed on 5 March 2024.
3.14 Thereafter another learned Single Judge of the High
Court, on change of roster, was seized of the contempt petition
filed by the Appellants.
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3.15 On 3 July 2024, the learned Single Judge of the High
Court by the impugned judgment and final order, came to the
conclusion that there was no willful and deliberate
disobedience by the Respondent of the order passed by the
High Court and the arbitrator. The show cause notice issued
to the Respondent was discharged.
3.16 Aggrieved thereby, the Appellants filed the present
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appeal by way of special leave.
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3.17 On 9 August 2024, this Court while issuing notice –
dispensed with the personal presence of the Respondent until
further orders.
4. We have heard Ms. Vibha Datta Makhija, learned
Senior Counsel appearing on behalf of the Appellants and Mr.
Shikhil Suri, learned Senior Counsel appearing on behalf of
the Respondent.
5. Ms. Vibha Datta Makhija, learned Senior Counsel
appearing on behalf of the Appellants, submits that the
approach of the learned Single Judge of the High Court in
passing the impugned judgment and order is totally in breach
of the settled legal position. It is submitted that once the
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learned Single Judge of the High Court vide order dated 5
December 2023, on merits, held that the Respondent was
guilty of intentionally and malafidely violating the orders dated
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11 June 2020 and 1 July 2020 and, as such, had committed
the contempt of the orders of the Court, another learned Single
Judge of the High Court before whom the matter was
subsequently listed could not have reviewed the matter and
held the Respondent not to be guilty of contempt.
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6. Ms. Vibha Datta Makhija submits that the learned
Single Judge of the High Court vide the impugned judgment
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and final order dated 3 July 2024 has virtually sat in an
appeal over the order passed by another Single Judge of the
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High Court dated 5 December 2023.
7. It is, therefore, submitted that the present appeal
deserves to be allowed and the impugned judgment and order
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passed by the learned Single Judge dated 3 July 2024 be
quashed and set aside.
8. Mr. Shikhil Suri, learned Senior Counsel appearing on
behalf of the Respondent, on the contrary, submits that the
learned Single Judge of the High Court after considering the
affidavit filed by the Respondent and all the subsequent
developments, by a well-reasoned order, has come to a
considered conclusion that there was no deliberate and willful
disobedience of the orders passed by the High Court and has
rightly dismissed the contempt petition.
9. Mr. Suri further submitted that the perusal of Sections
12 and 13 of the Contempt of Courts Act, 1971 would reveal
that the learned Single Judge while passing the impugned
judgment and final order has correctly considered the legal
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provisions and held the Respondent not to be guilty. He,
therefore, submits that the present appeal warrants no
interference and should be dismissed.
10. With the assistance of the learned senior counsel for
the parties, we have perused the record.
11. At the outset, we clarify that we do not propose to go
into the merits of the matter. We are only considering the
correctness of the procedure adopted by the learned Single
Judge of the High Court while passing the impugned judgment
and order.
12. Undisputedly, the another learned Single Judge of the
same Court after considering the merits of the matter and
submissions of the rival parties had observed thus:
“19. For the said reasons, I am of the view
that respondent No.1 is guilty of
intentionally and malafidely violating the
orders dated 11.06.2020 and 01.07.2020
and thus, has committed contempt of the
orders of the Court.
20. 4 weeks are granted to the
respondent to purge the contempt, failing
which respondent No.1 shall file an
affidavit as to why he should not be
punished under the Contempt of Courts
Act within 2 weeks thereafter.
21. List on 05.03.2024.”
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13. It can thus be clearly seen that the learned Single
Judge of the High Court, in unequivocal terms, held the
Respondent to be guilty of intentionally and malafidely
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violating the orders dated 11 June 2020 and 1 July 2020
and thus committing contempt of the orders of the Court. The
learned Single Judge of the High Court vide the said order had
granted time to the Respondent either to purge the contempt
or failing which to file an affidavit as to why he should not be
punished under the Contempt of Courts Act.
14. It is thus clear that the matter was postponed only for
the purposes of enabling the Respondent either to purge the
contempt or in the event he did not purge the contempt, to file
an affidavit showing cause as to why he should not be
punished under the Contempt of Courts Act.
15. When the matter was listed before the another learned
Single Judge of the High Court after the change of roster, again
after considering the rival submissions, the learned Single
Judge of the same Court vide impugned judgment and final
order observed thus:
“38. Having given thoughtful
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consideration to the facts and
circumstances of the present case, and
considering the material on record, it
cannot be said that there is any wilful and
deliberate disobedience by the
respondents of the order passed by this
Court and the learned Arbitrator. No merit
is found in the present petition.
Accordingly, notice to show cause as to
why the respondent No.1 should not be
punished under the Contempt of Courts
Act, is hereby discharged.
39. The present petition is dismissed, in
the aforesaid terms.”
16. It is thus clear that the learned Single Judge of the
High Court while passing the impugned judgment and final
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order dated 3 July 2024 has reviewed the entire order of the
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learned Single Judge dated 5 December 2023. After the order
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was passed on 5 December 2023, another learned Single
Judge could have only considered whether the Respondent had
purged the contempt and if not purged the contempt, as to
whether he should be punished or not under the Contempt of
Courts Act, 1971. It was not permissible for the learned Single
Judge to have revisited the issue as to whether the Respondent
has in fact committed contempt or not.
17. If the Respondent was of the view that the order passed
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by the learned Single Judge dated 5 December 2023 holding
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him to be guilty of contempt was not correct in law, the only
option available to him was to file an appeal under the
provisions of Section 19 of the Contempt of Courts Act, 1971.
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Having accepted the order dated 5 December 2023, the
Respondent could not have contended, or for that matter, the
learned Single Judge could not have held that the Respondent
has not committed contempt of the Court.
18. It is a different matter as to whether the Court while
considering the provisions of Sections 12 and 13 of the
Contempt of Courts Act, 1971 could have arrived at a finding
as to whether the Respondent was liable to be punished or not
or whether in the facts of the case he should be discharged or
the punishment awarded was liable to be remitted on apology
made to the satisfaction of the Court or not. In our view, the
order of the learned Single Judge of the High Court by holding
that the Respondent had not committed contempt amounts to
sitting in an appeal over the order passed by the coordinate
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Bench dated 5 December 2023.
19. In our considered opinion, apart from this being in
excess of the jurisdiction, it is also contrary to the well settled
principles of judicial propriety. When one Judge of the same
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Court has taken a particular view holding the Respondent to
be guilty of contempt, another Judge could not have come to a
finding that the Respondent was not guilty of contempt.
20. In that view of the matter, we are inclined to quash and
set aside the impugned judgment and final order. We order
accordingly. The matter is remitted back to the learned Single
Judge of the High Court for considering the issue from the
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stage of the passing of the order dated 5 December 2023.
21. In the light of the aforesaid observations, the appeal is
allowed in the aforesaid terms. There shall be no order as to
costs.
..............................J
(B.R. GAVAI)
…..………...............................J
(AUGUSTINE GEORGE MASIH)
NEW DELHI;
APRIL 23, 2025
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