Bombay High Court
Rashtriya Mill Mazdoor Sangh vs Khatau Makanji Spg. And Wvg. Co. Ltd. And ... on 20 August, 1997
Author: R.M. Lodha
Bench: R.M. Lodha
JUDGMENT
1. On May 6, 1997, this Court while modifying the earlier order dated May 5, 1997 directed Khatau Makanji Spg. & Wvg. Co. Ltd. ('the company') to make payment of salary of its workers for February 1997 on or before May 20, 1997.
2. The matter came before me on June 9, 1997 and Ms. Buch, the learned counsel appearing for the writ petitioner submitted that the order dated May 6, 1997 has not been complied with by the company. On that date Mr. K. V. Yakkundi, the learned counsel, appeared for the company and did not dispute the fact of non-compliance of the order dated May 6, 1997 by the company. He admitted that the payment to the workers towards salary for February 1997 was not made till that date. The said non compliance on the part of the company was indeed serious. At that time Mr. Yakkundi, the learned counsel appearing for the company, prayed for short time to file affidavit setting out the reasons for not complying the order dated May 6, 1997. As requested by Mr. Yakkundi, the matter was adjourned to June 13, 1997.
3. On June 17, 1997 Mr. Naik, the learned counsel appeared for the company and he also admitted that the order dated May 6, 1997 has not been complied with by the company and no payment of the salary to the workers for the month of February 1997 has been made though it was required to be made on or before May 20, 1997. An affidavit on behalf of the company was filed by Mr. Ashok Chellaram Rangani-the mill manager of the company. On perusal of the said affidavit prima facie. I found that there was no justification for the company for not making payment of the salary to the workers for the month of February 1997 as directed by this Court and prima facie case of civil contempt was made out against the company. I accordingly ordered issuance of show cause notices to the Company and its two directors, namely, Smt. Panna S. Khatau and Shri Shyamsunder Kumar (hereinafter 'Shri S. S. Kumar') whose names were disclosed. Mr. Naik, the learned counsel for the company on that day waived service of the show cause notice on the Company. The notices on two directors, namely, Smt. Panna S. Khatau and Shri S. S. Kumar were made returnable on July 10, 1997.
4. In response to the show cause notices. The two directors of the Company, namely, Smt. Panna S. Khatau and Shri S. S. Kumar appeared. Shri S. S. Kumar also filed his affidavit. In paragraph 10 of his affidavit he stated that the affairs of the Company are managed by the management committee appointed under the directions of the BIFR which comprises of a nominee director of the SBI designated as a director finance, a nominee director of ICICI Ltd., a representative of the State Government of Maharashtra, a special director nominated by BIFR and Smt. Panna S. Khatau (the executive director). In view of the averments made in the affidavit of Shri S. S. Kumar, office was directed to issue notices to Mr. H. S. Saxena, director finance of the Company returnable on July 29, 1997.
5. On July 29, 1997. Mr. D. S. Chopra, advocate appeared for Mr. H. S. Saxena director finance. Smt. Panna S. Khatau filed her affidavit on that date. Upon perusal of the affidavit filed by Smt. Panna S. Khatau, I found prima facie that the Company and its directors were not desirous of obeying the order passed by this Court on May 6, 1997 and no serious steps were taken by the Company and its directors in due compliance of this Court's order. Each director was seeking to pass on the buck to the other director and that they were unable to comply with the order of this Court. Therefore, I thought it fit that all directors of the Company should answer and show cause why they should not be committed to civil contempt for disobedience of the order of this Court by the Company. Accordingly show cause notices were ordered to be issued to remaining directors, viz., Shri Kailash Prasad - special director, BIFR, Shri K. Madhava Kumar-nominee of Unit Trust of India, Shri Melvin P. Tellis-nominee director from ICICI Ltd., and Mr. B. D. Basu-nominee director from IDBI. In the interest of justice one more opportunity was given to the Company to show cause why it should not be committed to civil contempt and punished for breach of the order of this Court dated May 6, 1997. On August 8, 1997 all directors, namely, Smt. Panna S. Khatau and Shri S. S. Kumar, H. S. Saxena, K. Madhava Kumar, Melvin P. Telis, B. D. Basu and Kaliash Prasad appeared in person and placed on records the resolution passed by them on August 6, 1997. In terms thereof, some arrangement was sought to be evolved whereby the SBI, IDBI, ICICI were to release each 20 per cent of the amount of wages payable to the workers for the month of February 1997 by way of loan to the Company on execution of documents as power resolution. Smt. Panna S. Khatau was to put in 20 per cent of the said wages payable and for remaining 20 per cent the Board of Directors was to make further request to the SBI. Mr. Vazifdar, the learned counsel appearing for Smt. Panna S. Khatau, also made statement in the Court after seeking instructions from his client that she would put in 20 per cent of the total wages payable to the workers for the month of February 1997 by way of demand draft/pay order on or before August 18, 1997. Mr. Dwarkadas, the learned senior counsel and Mr. Tulzapurkar also assured the Court on that day that immediately on execution of the documents for and on behalf of the Company, the amount shall be realsed by SBI, IDBI and ICICI. It may be observed that earlier also on the date the order was passed on May 6, 1997, such arrangement was in the offing but could not be through. However, since the main concern and primary objective was to ensure that 6,000 workers who have not been paid their wages for the month of February 1997 despite the order passed by this Court on May 6, 1997 are paid their due wages so that they do not starve and by the arrangement suggested by the learned counsel for notice and reflected in the resolution dated August 6, 1997 the said objective could have been achieved I thought it fit to give one more opportunity to them and accordingly passed detailed order on August 8, 1997 and the matter was adjourned to August 19, 1997 for further order. When the matter came up on August 19, 1997, Mr. Tulzapurkar informed the Court that necessary permission has been granted by BIFR but the requisite documents have not been executed by Mr. H. S. Saxena and Smt. Panna S. Khatau who were authorised as per resolution nor has Smt. Panna S. Khatau put in 20 per cent of wages for the month of February payable to workers as agreed by her. Mr. T. Cooper, advocate appearing for Smt. Panna S. Khatau candied admitted that his client has not put in 20 per cent of the total wages payable to the workers for the month of February 1997 till date though a statement was made by her through her counsel to do it by way of demand draft/pay order on or before August 18, 1997. Mr. Cooper, prayed for further two days time to enable Smt. Panna S. Khatau to pay 20 per cent of the total amount of wages payable to the workers for the month of February 1997 but the said prayer was rejected by me looking to her conduct, frequent change of stance and her affidavit filed on August 19, 1997. Lack of collaboration amongst directors and the fact that each director was taking stance against the other and they were not collectively cooperating to ensure that the order passed by this Court on May 6, 1997 is complied with, despite all indulgence shown by me, I was left with no other option but to proceed with the matter whether the Company and its directors are guilty of civil contempt and to pass appropriate orders of punishment in case they are so held.
6. Smt. Panna S. Khatau has filed three affidavits The first affidavit was filed on July 29, 1997 and subsequent two affidavits were filed on August 7, 1997 and August 19, 1997. Shri S. S. Kumar has filed the affidavits on July 8, 1997 and August 2, 1997. Mr. H. S. Saxena filed three affidavits on August 7, 1997, August 19, 1997 and August 20, 1997 respectively. Mr. K. Madhava Kumar Mr. M. P. Tellis and Mr. B. D. Basu filed their affidavits on August 7, 1997. No affidavit has been filed by Mr. Kailash Prasad, nominee director of BIFR. The contemnors, Smt. Panna S. Khatau, Shri S. S. Kumar. K. Madhava Kumar,. M. P. Tellis, B. D. Basu and Kailash Prasad are present in person today and were present on earlier dates. Mr. H. S. Saxena though appeared on earlier dates is not present today. He ought to have been present and his non appearance compounds his conduct. His appearance could have been ensured by issuance of nonbailable warrant but I thought the said exercise would unnecessarily delay the disposal of the matter.
7. The substance of the cause shown by Smt. Panna S. Khatau in her affidavits is that she is an ordinary director of the Company subject to election by shareholders and retirement by rotation. She is not whole time director of the Company and has not authority to do such acts, deeds, things or matters and/or omit to do acts, deeds, things or matters whereby she can in any manner undertake any management of financial activities for the Company. She has submitted in her affidavit that she has no power and/or authority to comply with the orders of this Court. It is stated on oath by Smt. Panna S. Khatau that the finances of the Company are managed and controlled by the whole time director of the Company designated as director (finance). Mr. Saxena has been nominated by the SBI and he controls the finances and it is his duty to take care of the finances of the Company and to ensure that provision is always made for the cash flow of the Company for the salaries and wages of the workmen. She has also stated on oath that majority of the directors on the Board of Directors of the Company comprises of the nominees of the bank and financial institutions. She in her affidavit also stated that due to delay in getting the sale proceeds from developer in accordance with sanctioned scheme, the Company suffered enormous loss. In paragraph 15 of her affidavit she admitted that she has been designated as executive director though she was not entrusted with any executive power in the Company. She admittedly is member of the asset sale management committee. After receipt of show cause notice she initiated steps to hold discussions with the representatives of the financial institution and the SBI and also attended a meeting requisitioned by Shri S. S. Kumar to consider the order passed by this Court for payment of the said wages. In paragraph 22 of the affidavit filed on July 29, 1997, the notices Smt. Panna S. Khatau has terms set out that she was not capable of fulfilling the order of this Court dated May 6, 1997. By the affidavit dated August 7, 1997, she has sought to reiterate the very facts stated by her in her earlier affidavit and also stated certain facts and events which took place subsequent to the filing of the earlier affidavit. It would be pertinent to note that in the affidavit filed on August 7, 1997 it is admitted by her that towards the sale consideration of land agreed to be sold by the Company, a sum of Rs. 10 crores has been received as earnest money from the said builders. However, she has not given any date. According to her the Company is unable to discharge the liabilities towards workers and she is also unable to do anything in the matter. The third affidavit is filed by her on August 19, 1997. By the said affidavit she has in effect sought to wriggle out of her commitment made before the Court on August 8, 1997, albeit by giving it a shape of explanation. Shri S. S. Kumar, one of the Directors of the Company filed his affidavit on July 8, 1997. He says that he is ordinary director subject to retirement by rotation and not a full time as director. He states that he has no power and/or authority or justification and/or ability to comply with the orders of the Court. In paragraph 5 of his affidavit filed on July 8, 1997, Shri S. S. Kumar states that the finances of the Company are managed and controlled by the whole time director designated as director finance, nominated by the SBI and the management committee appointed by BIFR. According to him, he is nonworking, non-executive and ordinary director. In his affidavit he denies the knowledge of the order passed by this Court on May 6, 1997 until the receipt of the show cause notice and he states that immediately on receipt of the notice he requisitioned the meeting of the Board of Directors by his letter dated July 4, 1997. The aforesaid statements in the affidavit are preceded by unconditional apology. In the subsequent affidavit filed on August 2, 1997 he has reiterated the substance of the facts stated in his earlier affidavit and so also has brought to the notice of the Court the events which took place after receipt of the notice by him. In his affidavit dated August 2, 1997, he has referred to the Board meeting held on July 9, 1997 and the steps taken by him to prevent the commission of the contempt of this Court.
8. Mr. Hiralal Sunderlal Saxena, filed his first affidavit on August 7, 1997. In his affidavit he has admitted that he has been appointed as director finance but according to him his whole function was to monitor the finances and control expenditure but ever since he joined as director finance, the Company was not able to draw funds from its working capital account with the SBI as the same was placed irregular even before he joined as director and there was no such expenditure which had to be monitored or required any controlling on his part. He has also admitted that pursuant to the agreement entered by the Company for sale of large portion of land at Borivili with one Rishina Constructions an advance amount of Rs. 10 crores was received. He has tried to put entire blame on Smt. Panna S. Khatau for the present state of affairs by not bringing in the money required to be brought by her under the scheme framed by BIFR. In paragraph 5 of his affidavit, Mr. Saxena has stated that as part of the arrangement to pay the workers their salary for the month of February 1997, the SBI agreed to contribute 20 per cent of the financial requirements along with the ICICI and IDBI, by way of loan to the Company on certain terms and conditions but since the Company did not comply with the terms and conditions laid down by the SBI for loan and the things could not proceed further. He has reiterated that he was only a representative of the SBI on the Board of the Company and whatever was required to be done for the implementation of the order passed by this Court on May 6, 1997 was done to the best of his ability. He has controverted the affidavit filed by Shri S. S. Kumar and urged that there was no distinction in law between the whole time director and part time director as regards the liabilities of the Company. He has also stated that Shri S. S. Kumar has been a director for a long time or at least 10 years in a row in the Company. According to him, Shri S. S. Kumar has remained Chairman of the Annual General Meeting in 1995 and 1996 in which he promised the shareholders to rehabilitate the Company. According to him, Shri S. S. Kumar cannot be absolved of his liability as a Director of the Company. The stance taken by Smt. Panna S. Khatau in her affidavit is also stoutly contested by Mr. Saxena and he states that she being the executive director is completely responsible and liable for affairs of the company. In paragraphs 10 and 11 of his affidavit, he has stated that Smt. Panna S. Khatau agreed in the meeting before the Chief Minister to contribute 20 per cent of the wages for the month of February 1997 and despite that commitment made before the Chief Minister she has failed to comply and honour her commitment. Mr. Saxena has stated that the entire effort of Smt. Panna S. Khatau was that the financial institutions should continue to give financial aid without her putting in her share of money. According to him, Smt. Panna S. Khatau as executive director and member of the asset sale-cum-management committee made no efforts to ensure compliance of the orders of this Court. He has highlighted that the entire financial powers of the Company are vested in the Board of Directors and he works only on the basis of decision taken by Board. In the subsequent affidavit filed on August 19, 1997, he has stated on oath that all the nominee directors and Shri S. S. Kumar refused to approach their respective institutions and request them to consider contribution of part of additional sum of Rs. 43 lakhs. In this affidavit, Mr. Saxena has stated that all the records, company seal, the old documents of loan, etc., are in possession of the executive director Smt. Panna S. Khatau and Shri V. J. Ashar, company Secretary, Vice President (consultant) and that unwillingness of Smt. Panna S. Khatau has made it impossible to proceed with the execution of the documents and obtain the loan from financial institutions. Yet another affidavit has been filed by Mr. Saxena today though he is not personally present. When his counsel was asked about his presence, the learned counsel submitted that he did not inform her before leaving. Then the learned counsel said that he might have left because of high blood pressure.
9. Mr. K. Madhav Kumar who is Deputy General Manager of Unit Trust of India and has been nominated on the Board of the Company as nominee Director has stated in his affidavit filed on August 7, 1997 that he was neither incharge nor aware of the day-to-day, functioning of the company. He has stated that he has been nominated on the Board since the UTI has invested in the company and to ensure the security of the investment made by the UTI, his nomination was made on the Board. He has also tendered unconditional apology.
10. Mr. M. P. Tellis, nominee Director of ICICI has also filed his affidavit on August 7, 1997. He has admitted that he has been nominated by ICICI on the Board of the company and is also member of the asset sale-cum-management committee. According to him, he received a letter of appointment from ICICI on the Board of the Company on April 20, 1997 and consent was given on May 6, 1997. According to him, the nominee directors are nominated on Board with a view to safeguard the interest of the financial institutions and banks which have advanced finances to the Company and to ensure that the money of the Company are properly dealt with and in a manner so as not to jeopardise the interest of the financial institutions. According to him, the nominee directors are never responsible for and nor they would participate in the day-to-day management or the financial management of the Company and, therefore, as nominee director he was not responsible for the actions of the Company, not being incharge of the day-to-day management thereof.
11. Mr. B. D. Basu, the nominee director of the Industrial Investment Bank of India has stated in his affidavit dated August 7, 1997 that he was appointed as nominee director on May 13, 1997 after the order dated May 6, 1997 came to be passed by this Court and the first meeting of the Company was attended by him on July 9, 1997. In the meeting he came to know of the order passed by this Court and the proceedings before this Court. According to him, he has not attended any further meetings. He received show cause notice on August 4, 1997. According to him, as a nominee director of the company he does not participate in the day-to-day functioning of the company. He is not a member of the asset sale-cwn-management committee and he has no control over the day-to-day financial functioning of the company. He has also tendered an unconditional apology in the event this Court holds him guilty of civil contempt.
12. The learned counsel for the notices reiterated the averments made in the affidavits and sought to urge that no case of civil contempt is made against them. First of all I may deal with the contention raised by Mr. Tulzapurkar on behalf of K. Madhav Kumar, Melvin Tellis and B. D. Basu. By referring to Rule 647 of the High Court Rules (OS), he would urge that the order passed by this Court on May 6, 1997 is executable as decree and therefore, question of civil contempt does not arise. In support of his contention he relied upon Babu Ram Gupta v. Sudhir Bhasin . He would also place reliance on Jolly George Varghese v. Bank of Cochin and submit that in execution of money decree, if judgment debtor has no means to pay, he cannot be arrested and detained in the absence of mala fides and dishonesty, a fortiori, for non-compliance of the order passed by this Court due to non-availability of funds with the Company, its directors cannot be held guilty of civil contempt and ordered to suffer punishment.
13. The contention of Mr. Tulzapurkar is not acceptable. The direction contained in the order dated May 6, 1997 is couched in terms of mandate to the Company to pay its workers salary for the month of February 1997, on or before May 20, 1997. Such order passed by this Court in exercise of its extraordinary jurisdiction under Article 226 of the Constitution of India, when not complied and if wilfully disobeyed, would definitely render the Company liable to civil contempt under Contempt of Courts Act, 1971 as well as under Article 215 of Constitution. Merely because the High Court Rules provide that order passed by this Court under Article 226 is executable as decree, it shall not take away its power to punish for contempt of itself as a Court of record. As it is, the High Court being Court of record has inherent power to punish for its contempt; the constitutional provision under Article 215 leaves no manner of doubt about High Court's power to commit for its contempt. A money decree, contested or on compromise, passed in exercise of ordinary civil jurisdiction, bereft of any undertaking, if not satisfied can be executed as per the execution machinery provided under Code of Civil Procedure and shall not entail the consequence of committing the judgment debtor to contempt but the said principle cannot hold good for wilful disobedience or non-compliance of the order or direction in the nature of command given by the High Court in exercise of extraordinary jurisdiction, though such order or direction may be executable as decree. An offending party, may be guilty of civil contempt for deliberate and intentional disobedience of the order of this Court passed under Article 226 although such order is capable of execution as decree. Babu Ram's case (supra) relates to consent order, a prohibitive one, passed in exercise of ordinary appellate civil jurisdiction which had no undertaking and in that context the Apex Court held that disobedience of compromise decree or consent order by itself does not amount to contempt. Babu Ram's case (supra), thus, cannot be applied to the present case. Reliance placed on Jolly George Varghese's case (supra) by Mr. Tulzapurkar is also misplaced. The said judgment refers to the provisions contained in Section 51 and order 21 Rule 37 CPC and the question is posed whether the proviso to Section 51 read with order 21 Rule 37 CPC is in excess of constitutional mandate in Article 21 of Constitution and bad in part but the said question is not decided. In Jolly George Varghese case (supra) the judgment debtors suffered a decree and in execution of that decree warrant of arrest and detention was issued under Section 51 and order 21 Rule 37 CPC. The executing Court did not investigate the current ability of judgment debtors to clear off the debts or their mala fide refusal before issuance of warrant of arrest and detention. The observations made by the Apex Court in paragraphs 9, 10, 11, 12 and 13 have to be read in the background of said facts and provisions of Section 51 and order 21 Rule 37 CPC which I am afraid cannot be applied to the case in hand, a case wherein direction was given by this Court to pay wages to its workers (6,000 in number) on or before particular date and the said direction has not been complied with so far.
14. Turning back to facts it is admitted that the order dated May 6, 1997 has not been complied with by the Company. It is also not disputed that the said order was challenged by the Company by filing a Letters Patent Appeal and the said appeal was dismissed by the Division Bench on June 11, 1997. The Division Bench observed that no interference was called for in the order dated May 6, 1997 since the order to pay wages is restricted for the month of February 1997. When the order came to be passed on May 6, 1997 this Court was not oblivious to the unsound and fragile financial condition of the company. The Company is sick industry and it was urged by the learned counsel for Company that it was not in position to comply with the terms and conditions of banks and financial institutions for lending the money. However, this Court directed the Company to pay wages to the workers for the month off February 1997 on or before May 20, 1997. In this fact situation, once the order was passed by this Court on May 6, 1997 to make payment of wages to the workers for the month of February 1997 before May 20, 1997, the said direction was required to be obeyed by the Company and the financial difficulty cannot be permitted to be set up as a defence for disobeying the direction of this Court particularly when it related to the payment of wages to the workers which was earned by them. It would be thus seen that the order passed by this Court on May 6, 1997 which has been maintained by the Division Bench in Letters Patent Appeal remains not complied with by the Company. In these circumstances, the question that falls for determination is whether by not complying with the order passed by this Court on May 6, 1997, the Company and its directors have committed civil contempt and if so what order should be passed. The affidavit filed by Mr. Saxena, director finance, shows that all the directors of the company are equally responsible for the management and the affairs of the company. According to him, though he is whole time director, there is no distinction between whole time director and part time directors as regards the liability of the Company is concerned. He has in his affidavit tried to pass on blame substantially on Smt. Panna S. Khatau for her omissions and inactions and not honouring her commitments at every stage and in every proceeding namely, commitment made by her before the BIFR, commitment made by her in the meeting held before the Chief Minister and the commitment made before this Court. The management of the affairs of the Company and its administration are in the hands of the Board and in view of the affidavit filed by Mr. Saxena that the entire financial powers of the Company are vested in the Board of Directors and all directors are equally responsible, in my view, it can be safely held that all directors are responsible for the management of the company or lack of it and all of them are responsible to having not taken positive steps and ensuring that the direction issued by this Court on May 6, 1997 is complied with by the Company. After the order was passed by this Court on May 6, 1997 directing the Company to make payment of wages to its workers for the month of February 1997 on or before May 20, 1997, it was required of the Board of Directors to take all steps effectively and positively in ensuring that the order passed by this Court on May 6, 1997 was duly complied with before May 20, 1997 and if there was any difficulty forthcoming, the Company ought to have moved this Court setting out the steps taken by the Board for due implementation of the order dated May 6, 1997 and the hurdles which came in their way in delaying compliance of the order dated May 6, 1997. On the other hand, it transpires that even after the appeal filed by the Company challenging the order dated May 6, 1997 was dismissed on June 11, 1997, no steps worth the name were taken before the contempt notices were issued by this Court. Clearly, therefore, the non-compliance of the order passed by this Court on May 6, 1997 by the company is attributable to the neglect of its directors having not taken any effective and positive steps in seeing the compliance of the order passed on May 6, 1997.
14.1 Section 2(b) of the Contempt of Courts Act defines civil contempt which means wilful disobedience to any judgment, decree, direction, order, writ or other process of a Court or wilful breach of undertaking given to a Court. Neglect to do the act required to be done under the order of the Court within the time specified in the order can be said to be a civil contempt. In Halsbury's Laws of England IV edn., Vol.9, it is stated thus :
"52. Disobedience to process - It is civil contempt of Court to refuse or neglect to do an act required by a judgment or order of the Court within the time specified in the judgment or order, or to disobey a judgment or order requiring a person to abstain from doing a specified act, or to act in breach of an undertaking given to the Court by a person, on the faith of which the Court sanctions a particular course of action or inaction.
In such a case, a judgment or order against an individual or an undertaking given by an individual may, subject to certain exceptions, be enforced by an order of committal or by a writ of sequestration against the individual's property. A judgment or order against a corporate body (whether or not incorporated under the Companies Act, 1948) may be enforced by an order of committal against the directors or other officers of the corporation. Further, the Court may give leave for the issue of a writ of sequestration against the property of the corporation or of any of its directors or officers, the corporation itself cannot be committed, but it can be fined."
14.2 In the present case the order passed by this Court on May 6, 1997 is in the nature of command to the Company to pay wages to its workers for the month of February 1997 before May 20, 1997 and the Company and its directors were necessarily required to take steps in seeing that the order is complied with. The directors ought to have swung into action immediately after the order was passed on May 6, 1997 to ensure that the payment of wages to the workers was made within time as directed. The order had to be implemented and even the appeal filed by the Company challenging the said order was dismissed by the Division Bench. The explanation that the Company had no funds does not justify the inaction and negligence, in discharge of the duties by the directors. It is not that the company does not have movable or immovable properties and the least expected of the Board of Directors of the Company was to take steps in securing loans; majority of them are nominated by bank and financial institutions, and obey this Court's order. On the other hand, the affidavits filed by each of the directors clearly showed that each of them has tried to shirk his responsibility by stating that he was not in position to do anything nor can he comply with the order passed by this Court. It is not the case of incapability of individual director but collective efforts of the Board in ensuring due compliance of the direction of this Court and in that exercise they neglected. The order passed by this Court on May 6, 1997 is clear and explicit and the circumstances which have come on record leave no manner of doubt that the Company and its directors failed to comply and obey the order passed by this Court. The omission or neglect and inaction on the part of the directors also lead to an inference that they wilfully disobeyed the order passed by this Court on May 6, 1997; after all whether the order or direction of the Court is wilfully disobeyed is an inferential fact to be deduced from the attending facts and circumstances.
14.3 Under Section 12(5) of the Contempt of Courts Act, 1971 where the contempt of Court has been committed by a Company and it is proved that the contempt is attributable to any neglect on the part of any director, such director shall also be deemed to be in contempt and punishment may be enforced with the leave of the Court, by the detention in civil prison of such director. The facts and circumstances clearly indicate that the Company never intended to comply with the direction given by this Court on May 6, 1997 and, therefore, can be formally held to have wilfully disobeyed the order passed by this Court on May 6, 1997. The Company having committed civil contempt, as I have observed, the said civil contempt was attributable to the neglect on the part of its directors and, therefore, all the directors are guilty of contempt for non-compliance of the order passed by this Court on May 6, 1997.
15. Even after show cause notice of committal to civil contempt was issued by this Court and served upon each of the directors, I gave time to them to enter into such arrangement by which the workers could be paid their wages for the month of February 1997. The financial institutions responded well and three of them agreed to the proposal of the Company for each contributing by way of loan 20 per cent of the wages payable on execution of documents by the Company and release of 20 per cent of the wages by the promoter-executive director Smt. Panna S. Khatau. In view of the statement made by the directors through their counsel on August 8, 1997 and the resolution passed by them on August 6, 1997 an opportunity was given to them to ensure that the arrangement is made for making payment to the workers of their wages for the month of February 1997. The relevant portion of the order passed on August 8, 1997 which is contained in paragraphs 3, 4 and 5 of the order reads thus :
"(3) Mr. Vazifdar, the learned counsel appearing for notice Smt. Panna S. Khatau submits that her client will put in 20 per cent of the total amount of wages payable to the workers for the month of February 1997 by way of Demand Draft/Pay Order on or before August 18, 1997. Mr. Dwarkadas, the learned senior counsel appearing for notice Mr. H. S. Saxena submits that the State Bank of India is prepared to release 20 per cent of the amount of wages payable to the workers for the month of February 1997 by way of loan to the Company on execution of the documents as per resolution dated August 6, 1997.
(4) Mr. Tulzapurkar, the learned counsel appearing for notices Mr. K. Madhav Kumar, Mr. Tellis and Mr. Basu, submits that the ICICI and IDBI have also agreed to release 20 per cent each of the wages payable to the workers for the month of February 1997 on execution of documents as per the resolution dated August 6, 1997.
(5) The necessary documents should be executed by the authorised directors as per resolution dated August 6, 1997 passed by the Board of Directors as early as possible and before the next date to enable the State Bank of India, IDBI, the ICICI to release the aforesaid amount as loan to the Company to enable it to make payment of wages to the workers for the month of February 1997. If necessary, the Company/the directors and/or concerned financial institutions may move the BIFR for necessary permission and sanction on creating any charge over the movable or immovable properties owned by the Company. The learned counsel for the notices submit that though the matter is fixed before the BIFR on August 20, 1997 yet looking to the urgency of the situation BIFR would be requested to take up the matter for the aforesaid purpose on or before August 13, 1997. As regards remaining 20 per cent of amount of wages payable to the workers for the month of February 1997. Since IFCI has not agreed to release the funds, the Company and its Board of Directors may act in accordance with the resolution dated August 6, 1997."
16. Smt. Panna S. Khatau did not comply with the assurance given by her on August 8, 1997 that she would bring in 20 per cent of the amount of wages on or before August 19, 1997 nor did she and Mr. Saxena (the two authorised directors by the Board) executed the documents to enable the bank and financial institutions to release the fund as agreed and noted in the order dated August 8, 1997.
16.1 The question now arises, the Company and its directors having been held guilty of civil contempt, what punishment should be awarded to them.
17. The three nominee directors, Shri K. Madhav Kumar, Shri M. P. Tellis and Shri B. D. Basu have tendered unconditional apology for their acts and omissions and that was reiterated by their learned counsel during arguments. After the show cause notices were received by them they also made efforts to ensure that financial institutions release the fund and the order passed by this Court is complied with, though belatedly, in my view, the unconditional apology tendered by these three directors namely, Shri K. Madhav Kumar, Shri M. P. Tellis and Shri B. D. Basu deserves to be accepted and interest of justice would be met if they are cautioned to take immediate steps in ensuring that the order dated May 6 1997 is complied with by the Company without further delay and the large number of workers are saved from virtual economic death. Mr. Kailash Prasad has also orally tendered unconditional apology and did not try to justify his neglect and omissions. I accept this apology.
18. As regards Shri S. S. Kumar, it may be observed that immediately after the receipt of notice of contempt he started taking active steps in calling the Board meeting and making the Board understand about the gravity of the situation. He has also tendered unconditional apology. In this view of the matter, no further order needs to be passed against Shri S. S. Kumar.
19. Mr. H. S. Saxena, the director (finance) and Smt. Panna S. Khatau, apparently have not conducted themselves expected of them as director (finance) and the executive director of the Company. Both of them have tried to blame each other for the present situation which has resulted in non-compliance of this Court's order. Both of them are members of the asset sale - cum-management committee constituted by BIFR. Both of them even during the pendency of the contempt proceedings have acted in a manner which compounds their culpability. It would be seen that even during the course of this contempt proceedings a statement was made by the counsel for Smt. Panna S. Khatau on August 8, 1997 that she would put in 20 per cent of the total amount of wages payable to the workers for the month of February 1997 by Demand Draft/Pay Order on or before August 18, 1997, yet the said commitment was dishonored and the 20 per cent of the amount which was required to be put in by her was not put in. Not only that, in the affidavit filed by her on August 19, 1997, she has tried to make out a new case that she was not liable, to put in Rs. 43 lakhs, i.e., 20 per cent of the total amount of wages payable to the workers for the month of February 1997 for which commitment was made by her through her counsel on August 8, 1997. She also did not execute the documents on behalf of the Company which she was required to execute as per Board's resolution dated August 6, 1997 being one of the authorised directors for that purpose. Mr. Saxena, who was also authorised director as per the resolution dated August 6, 1997, did not execute the documents as per the resolution dated August 6, 1997 before August 19, 1997 as was directed in the order dated August 8, 1997. Due to the deliberate inaction of Smt. Panna S. Khatau and Mr. Saxena, the financial institutions namely, ICICI, IDBI and SBI could not release the amount which they agreed to release as per the resolution dated August 6, 1997. The conduct of both Mr. Saxena and Smt. Panna S. Khatau is reprehensible and despite all opportunities granted to them to ensure that the order passed by this Court on May 6, 1997 is complied with by the Company of which they were director (finance) and executive director respectively, they failed in discharging their duty and honouring their commitment which has resulted in tremendous hardship to the 6,000 employees of the Company and of course non-compliance of this Court's order. As regards punishment their case is different from the other directors. Smt. Panna S. Khatau, though has tendered apology, the same does not deserve to be accepted for the reasons aforestated; Mr. Saxena, has not even tendered apology and is also absent today without intimation to his counsel. The ultimate objective of the contempt jurisdiction is to uphold the dignity of the Court and majesty of law; and users of the Court for whom the maintenance of the authority of the Court is of supreme importance. Contempt jurisdiction is sparingly invoked and punishment by way of imprisonment still rarely and in exceptional circumstances yet keeping in view suffering of large number of employees around 6,000 in number and the persistent deliberate disobedience, the custodial sentence of Mr. Saxena and Smt. Panna S. Khatau becomes inevitable. In the facts and circumstances of the case it would be expedient and the interest of justice would be served if both Mr. Hiralal Sunderlal Saxena and Smt. Panna S. Khatau are awarded sentence of simple imprisonment for one month and fine of Rs.2000 each.
20. Consequently, the Company and its directors Smt. Panna S. Khatau and Shri S. S. Kumar, Mr. Hiralal Sunderlal Saxena, Mr. M. P. Tellis, Mr. K. Madhava Kumar, Mr. B. D. Basu and Mr. Kailash Prasad are held guilty of civil contempt. The apology tendered by Shri S. S. Kumar, Mr. M. P. Tellis, Mr. K. Madhav Kumar, Mr. B. D. Basu and Mr. Kailash Prasad are accepted and no further order needs to be, passed against the aforesaid directors. Smt. Panna S. Khatau and Mr. Hiralal Sunderlal Saxena are awarded punishment of simple imprisonment of one month and fine of Rs. 2,000 each payable personally by them and not from the funds of the Company. The sentence awarded to Smt. Panna S. Khatau and Mr. Hiralal Sunderlal Saxena shall remain suspended for a period of two weeks and in case the Company complies with the order passed by this Court on May 6, 1997 and the entire wages for the month of February 1997 are paid to the workers within two weeks from today, the sentence awarded to Smt. Panna S. Khatau and Mr. Hiralal Sunderlal Saxena shall stand waived.
21. Oral prayer made by Mr. Tulzapurkar for stay of the operation of the findings recorded against Mr. K. Madhav Kumar, Mr. M. P. Tellis and Mr. B. D. Basu is rejected since I have already accepted the unconditional apology tendered by them.
22. Suo motu contempt proceedings and show cause notice stand disposed of accordingly.
23. Notice made partly absolute.