Full Judgment Text
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
SPECIAL LEAVE PETITION (C) No.28592 of 2018
SUMAN CHADHA & ANR. .... PETITIONER(S)
Versus
CENTRAL BANK OF INDIA ... RESPONDENT(S)
J U D G M E N T
V. Ramasubramanian, J.
1. Upon being found guilty of committing contempt of Court, the
petitioners who are husband and wife respectively, were sentenced to
simple imprisonment for three months along with a fine of Rs.2000/
each, by a learned Judge of the Delhi High Court. The said Order
having been confirmed by the Division Bench of the High Court in an
appeal under Section 19 of the Contempt of Courts Act, 1971 (‘Act’ for
Signature Not Verified
Digitally signed by
SUNIL KUMAR
Date: 2021.08.09
17:07:11 IST
Reason:
short), the petitioners have come up with the above Special Leave
Petition.
1
2. We have heard Mr. Santosh Kumar, learned counsel appearing for
the petitioners and Mr. Anuj Jain, learned counsel appearing for the
respondentBank.
3. The background facts which led to the petitioners being held guilty
of contempt of Court, are lucidly recorded in the Order dated
18.07.2017 of the learned Judge. They are as follows:
(i) The petitioners were Directors of a company by name Parul
Polymers Private Limited, which availed loan/credit facilities from the
respondent Bank. The petitioners guaranteed the repayment of the
loan and had also offered immovable properties as security.
th
(ii) On 24 July, 2014, the loan of the respondents was
categorized as a Non Performing Asset due to defaults in repayment.
th
On 18 August, 2014, a notice under Section 13(2) of SARFAESI Act
was issued for recovery of Rs. 28,82,25,942.24 plus interest. It was
followed by a possession notice under section 13(4) in respect of two
properties.
(iii) Aggrieved by the same, the petitioners filed S.A. No. 367/2014
before the Debts Recovery TribunalIII, New Delhi (‘DRTIII’ for short),
under Section 17 of the SARFAESI Act. However, the DRTIII declined
2
to grant any interim relief against the physical possession of the
aforesaid properties.
(iv) The petitioners filed an appeal but could not deposit Rs. 7
crores being 25% of the amount demanded in the notice under Section
13(2). Eventually the appeal was dismissed as withdrawn on
31.03.2015.
st
(v) However, on 01 April, 2015, the petitioners secured a
conditional order of stay from DRTIII, New Delhi in S.A. No. 367/2014
whereby the petitioners were required to deposit a sum of Rs. 5 crores
within thirty days. The order also stipulated that Rs. 2 crores would be
rd
deposited by 03 April, 2015.
rd
(vi) On 03 April, 2015, the petitioners gave a letter to SHO,
Police Station Katju Marg, Rohini, Delhi showing their intention to
deposit the amount of Rs. 2 crores by way of four cheques. Therefore,
the Receiver was unable to take possession of the properties.
(vii) Thereafter, the petitioners challenged the conditional order
st
of stay passed by DRTIII on 01 April, 2015 before the High Court by
way of W.P.(C)No.3406/2015 stating that the Bank and DRTIII were
acting unfairly and unjustly in not accepting their cheques totalling to
Rs. 2 crores.
3
(viii) When the writ petition came for admission and interim
th
orders on 8 April, 2015, the petitioners admitted liability and offered,
by way of a statement under oath, to deposit Rs. 7 crores, i.e. 25% of
th
the notice amount in three instalments on or before 30 June, 2015.
The Bank gave its assent and thereafter the Court ordered that the
possession of the properties of the petitioners shall not be disturbed
th
subject to the petitioners depositing Rs. 7 crores on or before 30
th
June, 2015, i.e. Rs. 2 crores on 30 April, 2015, Rs. 2.5 crores each on
st th
31 May, 2015 & 30 June, 2015.
th
(ix) On 29 April, 2015, the petitioners gave a letter along with
th
four cheques for Rs. 50 lakhs each dated 06 May, 2015 purportedly
th
in compliance of the order dated 08 April, 2015.
(x) Accordingly, the possession proceedings for one property
th th
scheduled for 30 April, 2015 were deferred by the Bank. But on 08
May, 2015, all the four cheques bounced.
4. Therefore, the respondentBank filed a petition under Sections 10
and 12 of the Contempt of Courts Act, 1971 for punishing the
petitioners for wilful and deliberate breach of their undertaking dated
08.04.2015. Though the petitioners resisted the contempt petition on
the ground that breach of an undertaking, made with a view to secure
4
a conditional order of stay may not tantamount to contempt, especially
when the consequences of breach of such undertaking are spelt out in
the order of the Court itself, the learned Judge was not convinced.
Therefore, by an Order dated 18.07.2017, the learned Judge of the
High Court held the petitioners guilty of contempt and sentenced them
simple imprisonment for three months with a fine of Rs.2000 each. The
Division Bench upheld the said order and the petitioners are before us.
5. Before we proceed further we should record certain developments
which have taken place after the order of single Judge dated
18.07.2017. They are as follows:
(i) The learned Judge himself granted suspension of the sentence
of imprisonment till 26.07.2017, to enable the petitioners to move an
intracourt appeal;
(ii) The petitioners moved an intracourt appeal, which came up
before the Division Bench on 25.07.2017. The Division Bench wanted
the petitioners to comply at least with a part of their undertaking
before the sentence could be suspended. But the petitioners could not.
Therefore, the Division Bench did not grant suspension of sentence on
25.07.2017;
(iii) The petitioners filed a Special Leave Petition along with an
5
application for exemption from surrendering. But the said application
was dismissed by an order in Chamber dated 31.07.2017;
(iv) On 03.08.2017, the Division Bench of the High Court
dismissed the miscellaneous application seeking suspension of
sentence;
(v) Challenging the said order dated 03.08.2017, the petitioners
moved a Special Leave Petition along with an application seeking
exemption from surrendering. This application was dismissed vide
order in Chamber dated 18.08.2017.
(vi) On a subsequent application seeking extension of time, this
Court granted three weeks’ time vide order dated 11.09.2017;
(vii) Eventually, the petitioners surrendered and were taken into
custody on 06.11.2017. After being in custody for 11 days, the
petitioners were released on interim bail by Order dated 16.11.2017;
(viii) The contempt appeal was thereafter dismissed by the Division
Bench of the High Court by an Order dated 27.09.2018, with a
direction to the petitioners to surrender within 10 days. However on
01.11.2018, this Court ordered notice in the present SLP and also
granted stay of the impugned order.
6. The reason why we have noted certain events post the order of the
6
learned single Judge is to bring on record the fact that the petitioners
have already served simple imprisonment for a period of 11 days, out
of the penalty of simple imprisonment for three months. They have also
paid the fine.
7. The main grounds of attack of the petitioners to the impugned
order, as articulated by Mr. Santosh Kumar, learned counsel for the
petitioners, are: (i) that the failure of a party to comply with an
undertaking, on the basis of which a conditional order of stay was
granted, cannot be treated as a wilful disobedience warranting the
invocation of the contempt jurisdiction; (ii) that the failure of the
petitioners to honour the undertaking cannot be taken to substantially
interfere with the due course of justice and, hence, the case would fall
under Section 13(a) of the Act; (iii) that when an order indicates the
consequences of the failure of a party to comply with a condition or
honour the undertaking, the invocation of the contempt jurisdiction
may not be appropriate; and that in any case if the defaulting
(iv)
party has relied upon an interpretation of the order that the
consequences of failure are already inbuilt in the order, such an
understanding of the order is to be treated as reasonable and rational
and he cannot be held guilty of contempt.
7
8. In support of his first contention, the learned counsel for the
petitioners, relies upon the decisions of a few High Courts. They are: (a)
1
vs. . ; (b)
Narain Singh Lala Rajendra Lal & Ors Indian Overseas
2
Bank vs. Lalit Kumar Aggarwal & Anr. ; (c) K. Saravankumar
3
vs. ; and (d)
Sheela & Ors. National Agricultural Cor. Marketing
4
vs. Reliance Polycrete Ltd. .
9. In support of his third contention, the learned counsel relies upon
the decision of this Court in Dinesh Kumar Gupta vs. United India
5
Insurance Company Limited . In addition, the learned counsel also
submitted that in the light of the decision of this Court in
Niaz
6
Mohammad vs. State of Haryana , the disobedience should be wilful
and intentional, to tantamount to contempt.
10. In response to the aforesaid, Shri Anuj Jain, learned counsel for
the respondent submitted that the petitioners had several
opportunities to honour their commitments, but they repeatedly
adopted dilatory tactics. The learned counsel took us through various
orders passed by the High Court and the orders passed in various
1 1976 SCC Online All 425
2
2000 SCC Online Del 710
3
2008 (3) CTC 669
4 (2009) 163 DLT 441
5 (2010) 12 SCC 770
6 (1994) 6 SCC 332
8
proceedings before other forums including the DRT and the Chief
Metropolitan Magistrate and sought to impress upon us that the
conduct of the petitioners throughout, has been one of deceit and that
such persons do not deserve any leniency. Inviting our attention to the
decisions in (i) Bank of Baroda vs. Sadruddin Hasan Daya &
7 8
.; (ii) vs. and (iii)
Anr Rama Narang Ramesh Narang & Another
9
Rama Narang(5) vs. Ramesh Narang and Another , the learned
counsel contended that the availability of other modes of enforcement
need not deter the Court from invoking its contempt jurisdiction and
that the deliberate failure to comply with a solemn undertaking given
to a Court has always been frowned upon by Courts.
11. We have carefully considered the rival submissions.
12. Before we analyze the rival contentions, it will be useful first to
see the actual undertaking given by the petitioners on 08.04.2015,
which led to the contempt proceedings. The undertaking given by the
first petitioner on 08.04.2015 reads as follows:
“ Statement of Mr. Suman Chadha S/o Jangi Lal Chadha R/o
H3/50 Sector18, Rohini, Delhi
I am the petitioner and the director of the third petitioner
in this case. I am duly authorised to make a statement on its
behalf. I have also filed an affidavit in support of the petition
7 (2004) 1 SCC 360
8 (2006) 11 SCC 114
9 (2009) 16 SCC 126
9
and have taken advice from my lawyer who is present with
me in Court.
I hereby state and confirm that the sum of
Rs.28,82,25,942.24 (Twenty Eight Crores Two Lakh Twenty
Five thousand Nine Hundred Forty Two and Paise Twenty
Four only) as on 18.8.2014 is due and payable to the
respondent i.e. the Central Bank of India as per notice u/s
13(2) of SARFAESI Act. I request that in view of the demand I
may be granted relief of some deferment with regard to the
repayment of the loan liability. I hereby agree on behalf of self
and other petitioners to deposit a total amount of Rs.7 (seven)
crores with respondent –Bank on or before 30.6.2015. An
amount of Rs. 2(two) crores of the said amount shall be paid
on or before 30.04.2015; the balance would be paid in equal
instalments i.e. Rs.2.5 (Two and a half) crores on or before
31.5.2015 and 30.06.2015.
I also agree and affirm that in the event of default, the
Bank is free to initiate any such proceedings and avail of
legal remedies as are available.”
13. The above undertaking given by the first petitioner was also
accompanied by an affidavit sworn to by the second petitioner. In the
said affidavit, it was stated by the second petitioner that her husband
has made a statement before the Court which she had understood
from him and that she and her husband undertake to abide by the
same.
14. On the basis of the undertaking filed as aforesaid on 08.04.2015,
the High Court passed an order in W.P (C) No.3406 of 2015 on the
same day, namely, 08.04.2015. Paragraphs 6 to 8 of the said order of
the High Court dated 08.04.2015 read as follows:
“6. In view of the submission of the parties, it is ordered
that the possession of the petitioners over the property in
10
question shall not be disturbed subject to their compliance
with the following conditions:
(1) Deposit by the petitioners on or before 30.04.2015
– the sum of Rs. 2 crores with the respondent Bank and
thereafter deposit of Rs.2.5 crores each on or before
31.05.2015 and 30.06.2015.
(2) The second petitioner shall file an affidavit/
undertaking, to comply with the above said arrangement.
(3) In the event of default, the respondent Bank shall
be at liberty to take recourse to law including the enforcement
of further action in follow up order of appointment of the
receiver by the Chief Metropolitan Magistrate (CMM). The
order to such effect passed by CMM shall be kept in abeyance
to ensure compliance in the meanwhile till 30.6.2015.
7. Petitioners’ counsel requests that after compliance of the
above order, any application for relief to the Bank including
the restructuring of the account may be considered
reasonably. The Bank shall consider such application if made
on its merits independently having regard to its applicable
policy. This will not in any way preclude the rights of the
Bank for recovering the amounts due.
8. Subject to the petitioner filing the necessary
affidavit/undertaking copy of which shall be provided to the
counsel for the respondent within a week from today, the writ
petition is disposed of.”
15. It is seen from the portion of the order of the High Court dated
08.04.2015 that it was not an order passed on the basis of an
affidavit/undertaking. It was on the basis of an offer made by the
petitioners, the first of whom was actually present in Court. The offer
so made was accepted by the Bank and hence the order was actually
based upon the consent of parties. This is made clear by what is
recorded by the Court in Paragraph 5 of its order dated 08.04.2015.
Paragraph 5 reads as follows:
11
“5. During the course of hearing counsel for the petitioner
Dr. Sharma stated that the petitioners are admitting the
liability provided some time is granted in order to settle the
matter finally. It was suggested by the counsel that the
petitioners may be afforded opportunity of depositing Rs. 7
(seven) crores i.e. 25% of the notice amount in three
instalments on or before 30.06.2015. The first petitioner is
present in Court. He is a director of the third petitioner and
authorised to depose on its behalf. His statement to above
effect has been recorded under oath separately and has been
kept on record. The second petitioner is directed to file an
affidavit/undertaking within one week confirming the
statement of the first petitioner. The counsel for the
respondent submitted his assent to the disposal of the writ
petition on terms offered.”
16. It is true that this Court has held in a series of decisions that the
wilful breach of the undertaking given to the Court amounts to
contempt of Court under Section 2(b) of the Act. But the Court has
always seen the nature of the undertaking made; the benefit if
(i) (ii)
any, reaped by the party giving the undertaking; and (iii) whether the
filing of the undertaking was with a view to play fraud upon the court
or to hoodwink the opposite party. The distinction between an order
passed on consent terms and an order passed solely on the basis of an
undertaking given to court and the distinction between a person
playing fraud on the court thereby obstructing the course of justice
and a person playing fraud on one of the parties, was brought out by
10
this Court in Babu Ram Gupta vs. Sudhir Bhasin , in the following
10 (1980) 3 SCC 47
12
words:
“…Indeed, if we were to hold that noncompliance of a
compromise decree or consent order amounts to contempt of
court, the provisions of the Code of Civil Procedure relating to
execution of decrees may not be resorted to at all. In fact, the
reason why a breach of clear undertaking given to the court
amounts to contempt of court is that the contemner by making
a false representation to the court obtains a benefit for himself
and if he fails to honour the undertaking, he plays a serious
fraud on the court itself and thereby obstructs the course of
justice and brings into disrepute the judicial institution. The
same cannot, however, be said of a consent order or a
compromise decree where the fraud, if any, is practised by
the person concerned not on the court but on one of the
parties. Thus, the offence committed by the person concerned
is qua the party not qua the court, and, therefore, the very
foundation for proceeding for contempt of court is completely
absent in such cases.”
17. But the decision in (supra) was clarified and
Babu Ram Gupta
held in part to be obiter by a three member Bench of this Court in
11
Rama Narang vs. Ramesh Narang and Another . In Rama
(supra), this Court pointed out the distinction between two
Narang
categories of cases covered by Section 2(b) of the Act namely (i) wilful
disobedience to a process of court; and (ii) wilful breach of an
undertaking given to a court.
18. In fact, in (supra), this Court went to the extent of
Rama Narang
holding that it would neither be in consonance with the statute,
judicial authority, principle or logic to draw any distinction between
11 (2006) 11 SCC 114
13
the wilful violation of the terms of a consent decree and wilful violation
of a decree passed on adjudication. We have our own doubts whether
the first category of cases covered by Section 2(b) can be stretched so
far. Anyway, that question does not arise in this case and hence we
leave it at that.
19. But what has happened in this case is that the subsequent
conduct of the petitioners after the order dated 08.04.2015, seems to
have tilted the balance against the petitioners. Purportedly in
compliance of the undertaking given to Court on 08.04.2015 and the
order passed thereon, the petitioners issued four cheques for Rs.50
lakhs each. These cheques were handed over to the Bank on
29.04.2015 along with a covering letter. But all the four cheques were
postdated, bearing the date 06.05.2015, though the undertaking given
to the Court was to deposit the amount on or before 30.04.2015.
20. On 08.05.2015, all the four cheques bounced. The conduct of the
petitioners first in issuing postdated cheques and then in allowing
them to be dishonoured, showed the petitioners in poor light. The
petitioners could have at least mend their ways thereafter. However
they did not.
21. On 14.07.2015, the learned Single Judge seems to have ordered
14
the issue of notice in the Contempt Petition. The notice was made
returnable by 05.11.2015 and the petitioners were directed to be
present personally in Court. But what happened on 05.11.2015, as
brought on record by the learned Judge reads as follows:
“When the matter was taken up at first call, this Court
was informed that none of the respondents were in Station
and even summons had been received by their daughter.
However, a perusal of the file reveals that
notices/summons had been received by respondent No. 1
personally and by respondent No. 2’s husband by dasti as
well as by speed post.
Though this Court was inclined to issue warrants
against the respondents No. 1 and 2, yet as learned counsel
for respondents states that he would ensure that not only the
respondents are personally present in Court on the next date
of hearing, but the matter is amicably resolved, matter is
th
adjourned to 16 November, 2015.”
22. On the next date of hearing, the petitioners raised a defence that
they had issued postdated cheques in the hope of receiving amounts
due to them from their debtors and that their debtors failed to make
payment. The petitioners also named three debtors from whom they
were expected to receive money.
23. Doubting the genuineness of the claim made by the petitioners,
the learned Judge before whom the Contempt Petition came up, passed
an order on 07.12.2015 directing an investigation by Serious Fraud
15
Investigation Office (‘SFIO’ for short). To the misfortune of the
petitioners, SFIO submitted a report that the alleged debtors of the
petitioners are only shell entities of Parul Polymers Private Ltd., of
which the petitioners were Directors.
24. All the above events that happened after 08.04.2015, convinced
the High Court to come to the conclusion that the petitioners had
actually played a fraud upon the Court. This is why the learned Single
Judge as well as the Division Bench of the High Court held the
petitioners guilty of contempt of court.
25. It is true that an undertaking given by a party should be seen in
the context in which it was made and (i) the benefits that accrued to
the undertaking party; and the detriment/injury suffered by the
(ii)
counter party. It is also true that normally the question whether a
party is guilty of contempt is to be seen in the specific context of the
disobedience and the wilful nature of the same and not on the basis of
the conduct subsequent thereto. While it is open to the court to see
whether the subsequent conduct of the alleged contemnor would
tantamount to an aggravation of the contempt already committed, the
very determination of an act of contempt cannot simply be based upon
the subsequent conduct.
16
26. But the subsequent conduct of the party may throw light upon
one important aspect namely whether it was just the inability of the
party to honour the commitment or it was part of a larger design to
hoodwink the court.
27. In this case, the series of acts committed by the petitioners (i) in
issuing postdated cheques, which were dated beyond the date within
which they had agreed to make payment; in allowing those cheques
(ii)
to be dishonoured; (iii) in not appearing before the Court on the first
date of hearing with an excuse that was found to be false; in
(iv)
coming up with an explanation about their own debtors committing
default; and (v) in getting exposed through the report of the SFIO,
convinced the High Court to believe that the undertaking given by the
petitioners on 08.04.2015 was not based upon good faith but intended
to hoodwink the Court. Therefore, we are unable to find fault with the
High Court holding the petitioners guilty of contempt.
st
28. The 1 contention of Mr. Santosh Kumar, learned counsel for the
petitioners that the failure to honour a commitment made while
securing a conditional order of stay, cannot be treated as wilful
disobedience, could have been accepted by us, but for the fact that the
petitioners issued postdated cheques purportedly in compliance of the
17
undertaking, but allowed them to be dishonoured. The story cooked up
for the dishonor of the cheques having been found to be false, it is not
open to the petitioners to raise the contention that there was no wilful
disobedience.
nd
29. The 2 contention based upon the language of Section 13(a) of
the Act also does not appeal to us, in the light of what had happened
after 08.04.2015. The fact that the order dated 08.04.2015 also
indicated certain other consequences to follow, may not take away the
contempt jurisdiction of the Court. In appropriate cases where a party
had acted bonafide while giving an undertaking, but could not honour
the undertaking on account of reasons that are reasonable and
genuine, the Court could certainly withhold its stick from being
wielded. But in this case there are findings of fact to the effect that the
rd
petitioners did not act bonafide. Therefore, the 3 contention is also
unsustainable.
30. The last contention that if the order dated 08.04.2015 is capable
of being interpreted and understood in more than one way as to the
consequences flowing out of the same, the party understanding and
interpreting the said order in one particular manner must be allowed
the benefit, is perfectly correct, as a pure and simple proposition of
18
law. But in this case, the same cannot be permitted to be used, to
cover up whatever the petitioners have done. On the contention of the
learned counsel for the petitioners that the disobedience, if any, was
not wilful and intentional, less said the better.
31. In the light of the above, we are clearly of the view that the finding
of the High Court that the petitioners are guilty of contempt, does not
call for our interference under Article 136.
32. However, Mr. Santosh Kumar, learned counsel for the petitioners,
pleaded that the Court may show sympathy on the petitioners, in view
of the fact that the immovable properties which the petitioners
attempted to save, by approaching the DRT and the High Court, have
already been sold. All the attempts made by the petitioners from 2015
onwards, to save the mortgaged properties have been in vain.
33. There is no dispute on facts that the mortgaged properties have
now been sold and with extraordinary efforts, the Bank has also taken
possession. The petitioners have also spent 11 days in custody out of
the total period of imprisonment of three months imposed by the High
Court. In such circumstances, we think that it is sufficient
punishment for the petitioners.
34. Therefore, the SLP is disposed of upholding the finding of the
19
learned Single Judge and the Division Bench of the High Court that
the petitioners are guilty of contempt of court, but reducing the period
of sentence from three months to the period of imprisonment already
suffered/undergone by the petitioners. There will be no order as to
costs.
32. Pending application(s) if any, shall also stand disposed of.
…..…………....................J.
(Indira Banerjee)
…..………........................J
(V. Ramasubramanian)
August 9, 2021
New Delhi .
20