Full Judgment Text
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CASE NO.:
Contempt Petition (civil) 289 of 2003
PETITIONER:
Maruti Udyog Limited
RESPONDENT:
Mahinder C. Mehta and Others
DATE OF JUDGMENT: 10/10/2007
BENCH:
S.B. Sinha & Harjit Singh Bedi
JUDGMENT:
J U D G M E N T
CONTEMPT PETITION (CIVIL) NO. 289 OF 2003
IN
SLP (Civil) No. 13305 of 2002
S.B. SINHA, J :
1. This contempt petition arises in a somewhat peculiar circumstance.
Petitioner herein is manufacturer of cars. Alleged contemnors were
Directors of a Company known as M/s. Mahalaxmi Motors Limited
(Company). The Company obtained various advances from the customers
on behalf of the petitioner. It, however, did not pay the amount to petitioner
herein. Respondents admitted their liability of the petitioner to the extent of
Rs. 7.63 crores in respect of supply of vehicles made by it, as would appear
from the minutes of the meeting dated 5.04.1997 which is as under:
\0237. MML also provided a letter No. 021/MML/97
dated 5.4.1997 wherein they admitted that there
was a shortfall of Rs. 7.63 Cr.\024
Respondents also by an affidavit filed before the Andhra Pradesh
High Court admitted their liability stating:
\02315. In this instance also the Petitioner company
had on its own given the particulars of the amounts
due from it to the complainant company by its
letter dated 5th April, 1997 wherein it accepted a
liability of Rs. 763.22 lakhs and also gave the
repayment schedule. Prior to that it gave a list of
all the pending customers at Hybderabad and
Vijayawada. In fact vehicles have been delivered
to meet of these in the said list, and deliveries are
still on to the remaining persons. The complainant
company had been delivering these vehicles
through other dealers as with the advent of this
dispute with the Petitioner company it terminated
its dealership.
16. It is respectfully submitted that after the
Petitioner company gave the said undertaking to
pay off the due about Rs. 763.22 lakhs, there has
been a change in thinking in the concerned
officials of the complainant company had they
started making exaggerated claims over and above
the amounts actually due to it from customer
bookings. As far as the Petitioner company is
concerned it also made funds available to honour
its commitment to the complainant company and
took a draft for the said amount in May 1997 itself
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which is to the knowledge of the complainant
company.\024
2. As the Company or its Directors did not pay even the said admitted
amount to the petitioner, it filed a suit for recovery thereof. Indisputably,
there existed an arbitration agreement in the contract entered into by and
between the parties, Clause 57 whereof reads as under:
\023If the differences or disputes, except dispute
pertaining to termination, shall arise between the
parties hereto as to the construction or true intent
and meaning of any of the terms and conditions
herein contained or as to any payment to be made
in pursuance hereof or as to any other matter
arising out of or connected with or/ incidental to
these presents or as to the rights, duties and
obligation of either party, such difference or
dispute whenever and so often as the same shall
arise, shall be referred to the Indian Council of
Arbitration, New Delhi under their rules for the
time being in force and the award in pursuance
thereof shall be binding on the parties.\024
3. Relying on or on the basis of the said arbitration agreement, the
respondents herein filed an application purported to be under Section 8 of
the Arbitration and Conciliation Act, 1996 (for short \023the Act\024). A learned
Single Judge of the Delhi High Court rejected the said application. An
appeal was preferred thereagainst before a Division Bench which was also
dismissed. A Special Leave Petition was filed before this Court. Petitioner
herein agreed for reference of the disputes and differences between the
parties to arbitration inter alia on the condition that the respondents shall
deposit the amount or furnish security and/ or comply with the directions of
the learned Arbitrator in case such directions and/ or interim orders are
passed by the learned Arbitrator in the following terms:
\0234. All the parties to this S.L.P. shall by way of
affidavit give undertaking to this Hon\022ble Court to
furnish the security and/ or comply with the
directions of learned Arbitrator in case the learned
Arbitrator directs any of the parties to furnish the
security and/ or comply with any other interim
order of the learned Arbitrator.\024
The proposed term of reference was also agreed to by the respondents.
4. On the basis of the said representations, this Court by an order dated
6.09.2002 referred the subject matter of the dispute to the arbitration of
Justice A.M. Ahmadi, a former Chief Justice of this Court.
5. The question as to whether the respondents should furnish bank
guarantee or not came up for consideration before the learned Arbitrator and
by an order dated 25.03.2003 a direction was issued upon the respondents to
furnish bank guarantee for the sum of Rs. 763.22 lakhs within a period of
four weeks from the said date directing:
\023Since the documents relied upon by the claimant
company in support of its claim for Rs. 763.22
lakhs are in dispute, I am not inclined to make an
interim award under section 17 of the Act read
with Order 12 Rule 6, CPC. However, I am prima
facie satisfied that the claimant company has made
out a prima facie case for an interim order
directing the respondents to furnish a bank
guarantee in the sum of Rs. 763.22 lakhs within a
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period of four weeks from today. Needless to state
that under the Supreme Court order dated 6.9.2002
(paragraph 3) the interim order has to be complied
with within four weeks from the date of the order.\024
6. An interlocutory application was filed by the respondents before this
Court being IA No. 2 of 2003. But, the same was withdrawn on 6.05.2003.
An application was thereafter filed by them before the learned Arbitrator for
modification of the said order dated 25.03.2003 by offering to furnish
property security purported to have been situate at Secunderabad in the State
of Andhra Pradesh instead of bank guarantee. Curiously enough, it was not
disclosed that the said property was encumbered in more than one way and,
as would appear from the discussions made hereinafter, the property was
being claimed by the State of Andhra Pradesh as having vested in it.
However, on or about 28.06.2003, it was disclosed that the property was
encumbered. The learned Arbitrator rejected the application for
modification by an order dated 2.08.2003 but extended time for furnishing
bank guarantee upto 27.08.2003. In the meantime, the petitioner filed a
contempt petition before this Court on 26.07.2003.
7. It appears from the records that the respondents herein had given an
undertaking not to alienate their assets or encumber or create third party
interest in the property at Secunderabad. It is also not in dispute that despite
pendency of the aforementioned contempt petition, the property belonging to
company at Bangalore was disposed of. It was disclosed before the learned
Arbitrator by the respondents in their reply to application under Section 17
of the Act filed by the petitioner and the same was reiterated in the affidavit
affirmed by Respondent No. 1 herein on 7.07.2004.
8. On or about 23.07.2004, this Court directed the alleged contemnors to
file affidavit disclosing details of their present assets as also that of the
Company; pursuant whereto, an affidavit was filed by Respondent No. 1
stating:
(i) The property of M/s. Mahalaxmi Motors Ltd. at Secunderabad was
encumbered.
(ii) He had a flat at D-1, Maya Apartment admeasuring 800 sq. ft. at
Ashoka Road, Bangalore which was sold on 3.02.2004 for Rs.
8,00,700/-.
(iii) He was the manager of Hyderabad Auto Services and drawing a
salary of Rs. 15,000/- p.m.
Petitioner in its reply denied and disputed the said statement and
contended that by reason of sale of property at Bangalore, a further contempt
has been committed. It was urged that the affidavit of Respondent No. 1 not
only amounted to suppression of facts but also perjury.
An award was made on 10.04.2005 as against the Company for a sum
of Rs. 7.63 crores with interest at the rate of 8% in favour of the petitioner
along with costs and expenses.
9. Before this Court, however, a proposal for settlement was made by
Respondent No. 1 in terms of an affidavit; paragraph 13 whereof reads thus:
\02313. I say that I pray this Hon\022ble Court to kindly
consider my pecuniary circumstances and helpless
position to mobilize monies to an extent of 763.22
lakhs and I pray which inability of mere may not
be termed as contempt of this Hon\022ble Court. I
once again reiterate and pray this Hon\022ble Court to
kindly consider my adverse financial
circumstances and kindly accept the landed
property as security which the Petitioner has
accepted and consequently the orders passed by
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the Arbitrator was complied with and thus there is
no cause of action to proceed with the present
contempt case. Even otherwise I have also
established a prima facie case over the title of the
said land before the High Court of Andhra Pradesh
before the Sole Arbitrator and before this Hon\022ble
Court. I am even now ready and willing to
relinquish all my rights over the landed property in
favour of the Petitioner. I further agree that I will
execute the General Power of Attorney in favour
of the petitioner for the purpose of getting
clearance from the Government of Andhra Pradesh
and regularization of the land in question in favour
of the Mahalaxmi Motors\005I will fully cooperate
with the Petitioner to get the land transferred in its
name or for its disposal and the Respondent
unhestitatingly sign on every paper which the
petitioner brings before him in the matter of the
said landed property\005\024
10. Relying on or on the basis of the said representation made by the
respondents, a Division Bench formed an impression that it is possible to
settle the dues of the petitioner as also other creditors. By an order dated
9.02.2007, therefore, it was directed:
\023(1) The parties hereto should find out ways and
means to sell the property belonging to the first
respondent company herein, situate at
Secunderabad, jointly by the petitioner as also the
Indian Overseas Bank, Hyderabad. For the said
purpose, the Chief Manager of the Indian Overseas
Bank, the Collector of the Hyderabad District as
also the Managing Director of respondent No. 1
Mahendra C. Mehta, who is present in Court
today, shall meet in the office of the Collector,
Hyderabad on 26th February, 2007 at 11.00 a.m.
(2) As it is stated that a writ petition bearing No.
15920/2004 is pending before the High Court of
Andhra Pradesh in regard to the said property, we
request the Chief Justice of the High court to
consider the desirability of placing the said writ
petition before an appropriate Bench for its very
early disposal.\024
11. In furtherance of the said order, the Collector of the Hyderabad
District held a meeting. In the said meeting, it transpired that the property in
question, which is in dispute, belonged to the State of Andhra Pradesh and it
claiming right, title and interest therein had initiated a proceeding against the
respondents in respect thereof under the provisions of the Andhra Pradesh
Land Grabbing (Prohibition) Act, 1982. The said proceeding was decided in
favour of the State of Andhra Pradesh.
12. Respondents filed a writ petition before the High Court thereagainst
being Writ Petition No. 15920 of 2004. The said writ petition having been
dismissed, the appeal of the respondents and the Company preferred
thereagainst was taken up for hearing along with this matter and by reason of
a judgment and order of this date, we are disposing of the same also.
13. The Collector filed a status report inter alia noticing:
\02310. It may be informed to this Hon\022ble Court that
on detailed enquiry by the revenue officials it is
learnt that one Sri R. Praveen Kumar, S/0 R. Vijay
Kumar, claiming to be GPA holder (Un-registered)
of M/s Mahalakshmi Motors Ltd. is reportedly
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running Mahalaxmi Motors workshop on the suit
schedule land but on ground a company under the
name and style of M/s Hyundai Lakshmi is being
run, involving business of buying, selling and
servicing of vehicles. Further, there are two
prominent display boards at the entrance showing
as \023Hyundai Lakshmi\024. The copy of the GPA
furnished by Sri Praveen Kumar, is not registered
and has no legal authenticity. This office has
reason to believe that a third party is in illegal
possession of the land and the relationship between
M/s Mahalaxmi Motors and present occupant is
not known. In this regard, necessary action is
being initiated separately\005\024
It was, therefore, opined:
\02311. The very fact that M/s Mahalaxmi Motors
have applied for regularization proves that they are
in illegal occupation of Government land. Thus,
they do not have any locus standi over the suit
scheduled property. Further the intention of
selling of the land as proposed by the Indian
Overseas Bank and Maruti Udyog Ltd. cannot be
considered at this juncture as the suit property does
not belong to Mahendra C. Mehta and others and
the suit scheduled land is required for public
purpose.\024
14. Mr. T.K. Ganju, learned senior counsel appearing on behalf of the
petitioner would submit that by brazenly flouting the order of this Court
dated 6.09.2002, the respondents have committed gross contempt of this
Court. It was submitted that the alleged contemnors were bound to comply
with the orders passed by the learned Arbitrator in terms of this Court\022s
order dated 6.09.2002. as they had not furnished bank guarantee pursuant
thereto or in furtherance thereof and in fact the alleged contemnors have
committed a contempt of this Court.
It was furthermore contended that that the contempt stands aggravated
as even during pendency of this proceeding as also the arbitration
proceeding before the learned Arbitrator, they have sold their flat situate at
Bangalore.
15. Mr. Shyam Divan, learned senior counsel appearing on behalf of the
alleged contemnors, on the other hand, has drawn our attention to the
additional affidavits filed by the contemnors herein tendering unconditional
apology. We would refer to only one of them filed by Respondent No. 1. It
was averred therein:
\0231. I unconditionally apologize to this Hon\022ble
Court with respect to the contempt which is the
subject matter of the Contempt Petition. I have
highest respect for the judiciary and for the judges
of this Hon\022ble Court as well as the Ld. Arbitrator.
2. I was unable to arrange for Bank Guarantee
of Rs. 763.22 lakhs since the company was not in a
position to mobilize resources. Moreover, I did
not have personal resources to raise funds and to
ensure that the Bank Guarantee is provided.
3. I request this Hon\022ble Court to accept the
unconditional apology tendered by me.\024
A further reply has also been filed by the respondents stating:
\0236. That the District Collector has needlessly
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and unwarrantly traced earlier rejection of the
regularization proposals by the government by
cryptic and non-speaking order and consequent
filing of writ petition No. 15 of 2000 by the
respondent when the matter was remitted back to
government to pass appropriate orders taking into
account the recommendations of the District
Collector and the Commissioner of Land Revenue
dated 22.10.1997 and 30.9.1997 which facts are
already in the record of this Honourable Court.
While so doing, the District Collector, Hyderabad
made a false report that a report was submitted to
the government that the lands are required for
public purpose like establishment of hospitals,
schools, play grounds, etc., referring to his report
dated 17.6.2003 and his report is not based on the
recommendations based by him and the
Commissioner Land Revenue referred to above
which is definitely an after thought and to
prejudice the mind of this Honourable Court.
Further it is not a relevant issue at this juncture
which he never pleaded before any of the courts
below.
7. The Respondent submits that the Collector,
Hyderabad deliberately, wantonly and maliciously
sent a misleading report to this Hon\022ble Court.
When the District Collector himself recommended
for the regularization of the lands in question in
favour of the Respondent collecting market rate at
Rs. 1240/- per sq. yard in his letter No. 14-87-
89/1993 dated 22.10.1994, the District Collector
suppressed this letter and quoted a different one.
In fact the Hon\022ble High Court directed the
Government to take into consideration the same
letter dated 22.10.1994 in its order dated 30.7.2001
in W.P. No. 15/2000. the District Collector,
Hyderabad deliberately suppressed the said letter
and gave a false and misleading report to this
Hon\022ble Court and this is highly reprehensible.\024
In regard to possession of the property by M/s. Lakshmi Hyundai, it
was stated:
\02311. The Respondent submits that it is not true to
say that the land in question is under illegal
occupation of third party Sri R. Praveen Kumar
S/o Vijaya Kumar Rao as reported by the District
Collector, Hyderabad. The fact remained is that
the Managing Direcotr of M/s Mahalaxmi Motors
Ltd., and Lakshmi Hyundai had association with
each other. M/s. Lakshmi Hyundai has its own
showroom and workshop at Humayathnagar,
Hyderabad. That company has some customers in
the Secunderabad area and for the convenience of
its customers the Managing Director of M/s.
Hyundai Lakshmi sought the oral permission of
the Managing Director of M/s. Mahalaxmi Motors
to carry on servicing of the cars of its customers in
the workshop of Mahalaxmi Motors Ltd. Except
this there is no jural relationship between M/s.
Mahalaxmi Motors Ltd., and Hyundai Lakshmi
Motors. The latter has no right, claim, title or
interest over the workshop of M/s. Mahalaxmi
Motors Ltd., and no financial transaction took
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place between these two companies. M/s.
Mahalaxmi Motors Ltd. ever executed any GPA
either registered or unregistered in favour of
anybody muchless in favour of R. Praveen Kumar
S/o Vijaya Kumar Rao.\024
16. Our attention was drawn to an affidavit affirmed by the alleged
Contemnor No. 3 wherein he stated that he was only an employee of the
Company and he was made Director of the Company only because of his
experience in the sale and service of automobiles. He has allegedly tendered
his resignation as Director in 1997 and the Company has accepted the same.
17. Our attention was further drawn to a counter affidavit dated 6.04.2004
filed by Respondent No. 2 wherein it was stated that he was not a signatory
to the original dealership agreement and was not involved in any of the day
to day affairs of Mahalxmi Motors Ltd.
18. Our attention was also drawn to a counter affidavit dated 16.2.2004,
and further affidavits dated 1.08.2004, 5.08.2005 and 4.10.2005 wherein, as
noticed hereinbefore, Respondent No. 1 had tendered unconditional apology
for his inability to raise the resources and furnish a bank guarantee to the
tune of Rs. 763.22 lakhs. Respondent No. 2 had also stated that he was
forced to sell his personal flat at Bangalore to meet his debts and obligations
and he was ready and willing to relinquish all rights with the respect to the
land in Secunderabad.
19. It was furthermore submitted that as the learned Arbitrator has passed
an award only against the Company, the interlocutory order passed by this
Court having merged with the final award, no contempt of this Court has
been committed.
20. The fact of the matter, as noticed hereinbefore, clearly goes to show
that the alleged contemnors not only prevaricated their stand at different
stages in different proceedings, they intended to prolong the litigation one
way or the other. They had accepted their liability at least to the extent of
7.63 crores. They must have invested the said amount. The parties hereto
accepted that the disputes and differences pending between them should be
referred to an arbitrator. It was agreed to by the petitioner only on the
representation made by the alleged contemnors that they would furnish a
bank guarantee provided an order is passed in that behalf by the learned
Arbitrator.
21. The fact that the learned Arbitrator issued such a direction is not in
dispute. The learned Arbitrator even otherwise had the jurisdiction to pass
interim order in terms of Section 9 of the Act. Correctness or otherwise of
the said order has not been questioned. Despite undertaking given before
this Court, in the aforesaid matter, the alleged contemnors did not furnish
any bank guarantee. Admittedly, their application for modification was also
dismissed. Not only, they went back from the undertaking given before this
Court, they also sold away the only property which was in their possession.
The property situate at Secunderabad admittedly had been claimed by the
State of Andhra Pradesh. The alleged contemnors even did not disclose that
the said property was an encumbered one. The same was disclosed only at a
later stage.
22. If they were not in a position to furnish any bank guarantee or
otherwise, they could have taken such an unequivocal stand before the
courts. They not only suppressed material facts, but also made a wrong
representation that in the event the property at Secunderabad is sold, the
price whereof is about 11 crores and, thus, from the sale proceeds the dues
of the debtors would be satisfied. Such a claim was evidently made, as
would now appear, that an application for regularization was pending before
the State. The alleged contemnors did not have any subsisting right, title and
interest in or over the said property. They could not have made a proposal
before this Court for sale of the property only on the basis of a title which
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they could only derive on happening of a contingency, viz., regularization
thereof by the State. A proposal for sale of the property could be made only
if the respondents had any subsisting title thereto and not otherwise.
23. We, therefore, are of the opinion that the alleged contemnors have
misled this Court and have committed gross contempt of this Court.
24. In Bank of Baroda v. Sadruddin Hasan Daya and Another [(2004) 1
SCC 360], even in relation to a consent order, this Court held:
\02310. A legal plea taken by a party that a decree
passed by a court (including Supreme Court) is
without jurisdiction and therefore a nullity, will not
normally amount to a contemptuous statement.
However, the written submission made by the
respondents before the Debts Recovery Tribunal,
wherein they said that the Supreme Court had no
jurisdiction to pass the decree dated 28-7-1999 and
the decree had no validity and is a nullity, has to be
seen in the factual background of the case. It may
be noted that the decree had been passed on the
basis of consent terms. It is not the case of the
respondents that any fraud was played upon them
by any party when they entered into a settlement
and signed the minutes of the decree. It appears
that the respondents from the very inception had
no intention of paying the amount, but they agreed
for a settlement and consent terms only for the
purpose of gaining time whereunder instalments
were fixed. They adopted the same procedure in
the suit instituted by Oman International Bank,
SAOD, wherein they offered the same property to
remain under attachment till the decree was
satisfied. Placing the same property under
attachment is bound to create problems for the
decree-holders of either of the suits as no one
wants to buy such property in court auction which
may land him in further litigation. The respondents
intentionally and deliberately adopted such a
course of action so that further hurdles may come
in the way of execution of the decree and therefore
it is clearly a case of wilful breach of an
undertaking given to the Court.\024
25. This Court in Babu Ram Gupta v. Sudhir Bhasin [(1980) 3 SCC 47]
held:
\02310\005Indeed, if we were to hold that non-
compliance 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
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the party not qua the court, and, therefore, the very
foundation for proceeding for contempt of court is
completely absent in such cases. In these
circumstances, we are satisfied that unless there is
an express undertaking given in writing before the
Court by the contemner or incorporated by the
court in its order, there can be no question of
wilful disobedience of such an undertaking. In the
instant case, we have already held that there is
neither any written undertaking filed by the
appellant nor was any such undertaking impliedly
or expressly incorporated in the order impugned.
Thus there being no undertaking at all the question
of breach of such undertaking does not arise.\024
26. Mr. Divan, however, relied upon a decision of this Court in R.N. Dey
and Others v. Bhagyabati Pramanik and Others [(2000) 4 SCC 400] wherein
it has been held:
\0237 . We may reiterate that the weapon of contempt
is not to be used in abundance or misused.
Normally, it cannot be used for execution of the
decree or implementation of an order for which
alternative remedy in law is provided for.
Discretion given to the court is to be exercised for
maintenance of the court\022s dignity and majesty of
law. Further, an aggrieved party has no right to
insist that the court should exercise such
jurisdiction as contempt is between a contemner
and the court\005\024
This Court in R.N. Dey (supra) has categorically held that the
contempt is a matter between the court and the contemnor. Unlike R.N. Dey
(supra), here in the respondents are not disputing their liability to pay the
awarded amount. Therein no undertaking had been given.
27. In Rama Narang v. Ramesh Narang and Another [(2006) 11 SCC 114]
whereupon reliance has been placed by Mr. Divan, the question revolved
round the alleged violation of certain clauses of the consent terms. In that
case the consent order did not contain an undertaking. It, on that premise,
opined:
\02424. All decrees and orders are executable under
the Code of Civil Procedure. Consent decrees or
orders are of course also executable. But merely
because an order or decree is executable, would
not take away the court\022s jurisdiction to deal with a
matter under the Act provided the court is satisfied
that the violation of the order or decree is such,
that if proved, it would warrant punishment under
Section 13 of the Act on the ground that the
contempt substantially interferes or tends
substantially to inter fere with the due course of
justice. The decisions relied upon by the
respondents themselves hold so as we shall
subsequently see.\024
This Court in Rama Narang (supra), thus, clearly laid down the
proposition of law that when an undertaking has been recorded in
accordance with law, a contempt proceeding would be maintainable.
28. We, therefore, keeping in view the peculiar facts and circumstances of
this case and the conduct of the alleged contemnors, are of the opinion that
they have committed contempt of this Court. We are clearly of the opinion
that it is eminently a fit case where jurisdiction of this Court under Article
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129 of the Constitution of India as also the provisions of the Contempt of
Courts Act, 1970 should be invoked.
29. However, the fact that the alleged contemnor No. 3 has resigned,
being not in dispute, no action is being taken against him. So far as, the
alleged contemnor No. 1 is concerned, we are of the opinion that he being
the Managing Director of the Company, is liable to be punished. He is
sentenced to undergo six months imprisonment. The alleged contemnor No.
2 is also held guilty but as he was not the Managing Director, we are of the
view that sentencing him three months imprisonment shall meet the ends of
justice.
30. The contempt petition is allowed with the aforementioned directions.