Calcutta High Court
Federation (Rosimushcestvo) vs Saraf Agency Pvt. Ltd. & Ors on 19 May, 2020
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IN THE HIGH COURT AT CALCUTTA
Civil Appellate Jurisdiction
ORIGINAL SIDE
Present:
The Hon'ble Justice Soumen Sen
CC No. 117 of 2017
A.P. No. 1013 of 2016
The Federal Agency for State Property Management of the Russian
Federation (ROSIMUSHCESTVO)
vs.
Saraf Agency Pvt. Ltd. & Ors.
For the Petitioner : Mr. Ratnanko Banerjee, Sr. Adv.
Mr. Sakabda Roy, Adv.
For the Contemnors : Mr. Jishnu Saha , Sr.Adv
Mr. Jishnu Chowdhury, Adv.
Mr. Soumabho Ghosh, Adv.
Mr. S.K. Singhi, Adv.
Ms. Riti Basu, Adv.
Ms. Chandrani Das, Adv.
Hearing concluded on : 13th March 2020.
Judgment on : 19th May, 2020
Soumen Sen, J.:- This is a contempt application.
This application is filed against the alleged contemnors for wilful,
deliberate, intentional and contumacious disobedience and disregard of the
order dated 29th November, 2016 passed by this Court in A.P. 1013 of 2016
filed under Section 9 of the Arbitration and Conciliation Act, 1996. The said
order was an interim order. By the interim order I had restrained the
contemnor no. 1 namely, Saraf Agency Pvt. Ltd. from alienating,
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encumbering and/or creating any third party interest over its fixed
assets and properties. The contemnors no. 2 to 7 are the directors of
contemnor no.1. It is alleged that the directors of the contemnor no.1 have
in pursuance of the Board Meeting dated 6th February, 2017 taken a
decision to act contrary and in violation and contumacious disregard to the
interim order by the following acts:
(i) Executed a Term Loan Agreement against Hypothecation of
Movables for a Term Loan of Rs.140.39 crores, on February 7, 2017 creating
a charge in favour of M/s. Allahabad Bank, Kolkata.
(ii) Executed Agreement cut letter of Hypothecation/ Pledge for
packing Credit Advances for a Packing Credit of Rs.55 crores on February 7,
2017 creating a charge in favour of M/s Allahabad Bank, Kolkata
(iii) Executed a Supplementary Letter confirming deposit of Tile Deeds
through constructive delivery of properties situate at Chhatarpur, District
Ganjam, Odisha on February 21, 2017 creating charge in favour of M/s
Allahabad Bank, Kolkata.
(iv) Executed a Deed of Corporate Guarantee to secure a borrowing of
Rs.70 crores by a Saraf group company namely Forum Projects Private Ltd.
on June 14, 2017 and as per the Master Data of Contemnor No.1 available
at the MCA website, contemnor no.1 has also created a floating charge
worth Rs.70,00,00,000 (Rs.70 crores) in favour of Union Bank of India on
June 14, 2017.
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It is thus contended that the contemnors have wilfully breached
the interim order by the aforesaid acts.
It is stated in the petition that contemnor no.1 has on 7th February,
2017, executed a Term Loan Agreement against Hypothecation of Movables
(Term Loan Hypothecation Agreement) in favour of M/s Allahabad Bank,
Industrial Finance Branch. The recital to the Term Loan Hypothecation
Agreement states that contemnor no.1 has applied for and is being
sanctioned Term Loan Facility of Rs.140.30 crore and contemnor no.1 has
hypothecated and charged to the Bank:
(a) All machinery/plant/capital goods/assets purchased or to be
purchased out of the loan as set out in Annexure A (1) to the Agreement and
all existing and future machinery, plant, vehicles, capital goods, assets and
those assets/ movable properties capable of passing by delivery as specified
in Schedule A(2).
(b) Exclusive charge on 39 acres of land related to Titanium Slag Plant
and movable and immovable assets relating to Titanium Slag Plant on pari
passu basis and an exclusive on 57.30 acres of land and all movable and
immovable assets related to captive plant on pari passu basis. Further the
Bank shall have exclusive charge on Corporate Office Land and Building at
4,4/1 Red Cross Place Kolkata on pari passu basis.
(c) Exclusive charge on all the bank accounts into which all the
operating cash flows, other incomes, and revenues/receivables would be
deposited. Exclusive charge over a FDR of Rs.6 .32 crores has been created.
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(d) Bank has a general line and set off on the other accounts of
contemnor no.1 with the Bank.
As ascertained from the Term Loan Hypothecation Agreement the
same has been signed for and on behalf of contemnor no.1 "pursuant to
Board Resolution passed at the Board Meeting dated 6th February, 2017 of
contemnor no.1. The Term Loan Hypothecation Agreement has been signed
by and on behalf of contemnor no.1 by Mr. Ajeet Raj Mehta, Director,
contemnor no.4".
Furthermore, on 7th February, 2017 an Agreement-cum-Letter of
Hypothecation/ pledge for Packing Credit Advances has also been entered
into by contemnor no.1 with Allahabad Bank for Rs.55 crores against inter
alia charge over all the project assess including but not limited to the
tangible movable machineries, plant, machinery fixture, fittings, other
installations etc.
The Packing Credit Agreement too has been signed for and on behalf
of contemnor no.1 pursuant to Board Resolution passed at the Board
Meeting dated 6th February, 2017 of contemnor no.1 and by and on behalf of
contemnor no. 1 by Mr. Ajeet Raj Mehta, Director, contemnor no.4.
The contemnor no.1 in particular has also executed a Supplemental
Letter confirming deposit of Title Deeds through constructive delivery of
properties situate at Chatarpur, District Ganjam, Odisha on 21st February,
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2017 for grant of Rs.195.39 crores of Credit Facilities in 2017 by the Bank
to contemnor no.1. The Equitable mortgage confirmation records that in
addition to the mortgage created by way of deposit of title deed on 6th June,
2014 for Term Loan Facility in the sum of Rs.234.21 crores, Bank has
granted the aforesaid Term Loan and Packing Credit Facility to the tune of
Rs.195.39 crores and that consequent to the restructuring of credit facilities
and for the purpose of having the restructuring of limits covered, the
security of mortgage over land described in Schedule B and the title deeds
mentioned in Schedule A deposited with an intention to create mortgage
security, is being extended/shall apply/cover/ be available to cover the
enhanced/ reviewed aggregate limit of Rs.195.39 crores inclusive of interest.
The contemnor no.1 filed Form CHG I for registration of the charges
created with respect to the facilities granted in 2017 with the Registrar of
Companies. By way of certificate dated 24th March, 2017 the charge created
in favour of the Bank has been recorded and the Registration of Charge
Certificate has been issued by the Registrar of Companies.
Pertinently the contemnor no.1 has stood corporate guarantor for a
group company namely Forum Projects Private Ltd. on 14th June, 2017 and
as per the Master Data of contemnor no.1 available at the MCA website,
contemnor no.1 has also created a floating charge worth Rs.70 crores in
favour of Union Bank of India on 14th June, 2017. The said Deed of
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Guarantee inter alia provides that "in the event of any default on the part of
the Borrower to repay the Loan together with interest, the Guarantor shall,
upon demand, forthwith pay without demur all amounts remaining unpaid
under the Rupee Loan Agreement and the Borrower's liability is
notwithstanding any variation alteration or modification of the terms of
lending between the borrower and the Lender".
It is further stated that the charges, including the floating charge,
created in the year 2017 over the assets of contemnor no.1 to secure the
facilities of 2017 as aforementioned, are in addition to the charges already
created over the assets of contemnor no.1 for securing the facilities in the
sum of Rs.234.21 crores granted to contemnor no.1 in the year 2014.
The fact that the charges created in 2017, including the floating
charge, are in addition to the already existing charge of 2014 over the assets
of contemnor no.1 is clearly discernible from the fact that Form CHG 1 of
2017 filed with the ROC clearly states that the same is for "creating of
charge". Furthermore as per the Index of charges of contemnor no.1
available on the MCA website clearly shows that the charges created in the
year 2017 are in addition to the charges created in the year 2014.
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Thus despite the Interim Order being clear and unequivocal and
subsisting and binding contemnor no.1 and its directors and person in
control of its affairs have wilfully disobeyed the same and created a charge/
extended charge over the immovable / fixed assets of contemnor no.1. All
the Directors of contemnor no.1 present or not at the Board Meeting of 6th
February, 2017 and arrayed as contemnors no. 2 to 7 have directly and/or if
not present are deemed to have participated in and are bound by the
decision taken on 6th February, 2017 to create charge over the assets of
contemnor no.1 despite and inspite of the Interim Order and have
participated in the contumacious wilful disobedience and deliberate defiance
of the Interim Order.
Initially I did not issue any rule but called for affidavits, thereafter,
being prima facie satisfied that the acts of contempt has been committed,
rule was issued and pursuant to the rule the alleged contemnors appeared
in person and filed their affidavits in answer to the Rule.
Mr. Ratnakno Banerjee, the learned Senior Counsel appearing on
behalf of the petitioner has submitted that the term loan agreement dated
7th February, 2017 creating inter alia, and exclusive charge in favour of the
Bank on 39 acres of land relating to the Titanium Slag Plant and movable
and immovable assets relating to Titanium Slag Plant on pari passu basis
and an exclusive on 57.30 acres of land and all movable and immovable
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assets related to captive plant on pari passu basis and exclusive charge on
Corporate Office Land and Building etc. are all after the interim award was
passed on 14th October, 2016 and the interim order passed in the
application under Section 9 of the Arbitration and Conciliation Act, 1996 on
29th November, 2016 in order to defeat the award and rendered it nugatory.
Mr. Banerjee has referred to the letter of Hypothecation/pledge dated
7th February, 2017 for packing and credit advances with Allahabad Bank,
Supplemental Letter of confirming deposit of Title Deeds dated 21st
February, 2017 creating charge by way of equitable mortgage by depositing
Title Deeds including a lease deed executed on 25th April 2016 are wilful and
deliberate acts of violation of the order dated 29th November, 2016. It is
submitted that the above charges created by the contemnor no.1 in
February, 2017 to secure the term loan of Rs. 140 crores and packing credit
in the sum of Rs.55 crores, are fresh /new charges created in wilful violation
of the interim order and are not charges for a restructuring /step down of an
existing loan of Rs.234 crores of vintage 2014 has attempted to be explained
and put up as a defence by the contemnors.
Mr. Banerjee has referred to Form CHG 1 under Section 77,78 and 79
read with Section 384 of the Companies Act, 2013 and Rule 3(1) of the
Companies (Registration of Charges) Rules 2014 for registration of creation
of charges and has submitted that the said form is not for modification of
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charge. Mr. Banerjee, by referring to paragraphs 3(a), 7, 8, 11(a), (d) and
14(viii) of the said form CHG-1 has submitted that it is interesting to note
that the contemnor no.1 although had the option of opting for modification
of the charge in the same form but selected creation of charge instead which
supports the contention of the petitioner that the charge created in 2017
was distinct and fresh. Moreover certificate of registration of charge dated
24th March, 2017 issued by the Ministry of Corporate Affairs with respect of
registration of charges to secure the amount of INR 195 crores by way of
which a unique and distinct registration number was allotted to the charge
also supports the contention of the petitioner that it is a fresh charge.
Mr. Banerjee has drawn my attention to the status of the charges at
different point of time. By referring to page 145 of the petition it is
submitted that the charge created in 1987 was closed, the charge created in
2008 was closed, the charge created in 2014 to secure borrowing of Rs.234
crores is open without there being any modification to the same note. This
has further been closed only in 2018 but the revised MCA document is not
on the record. Ergo at the time of creating charges to secure Rs.195 crores
in February, 2017, the charge of Rs.234 was separate and distinct. The
charge credited in 2017 is shown as open. The index of charges would also
show that the charge of Rs.234 crores dated 6th June, 2014 is separate and
distinct. The charges created for Rs.195 crores dated 7th February, 2017 is
also distinct from the charge created in 2014.
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The learned Senior Counsel has referred to the supplemental
letter of confirming deposit of title deeds dated 21st February, 2017 and has
submitted that it creates a fresh charge and the very fact that it creates a
mortgage inter alia over a property which is a subject matter of lease deed
executed on 25.04.2016 substantiates the position that the equitable
mortgage of 21st February, 2017 is a new charge and distinct from any
previous charge and ergo is in violation of interim order. Apart from above it
is submitted that the contemnor no.1 has also created a floating charge over
its assets pursuant to executing a deed of corporate guarantee on 14th June,
2017 to secure a borrowing of INR 70 crores by Saraf Group Company
namely Forum Project Pvt. Ltd. even when the interim order has been in
force. The deed reflects the financial position of contemnor as on 31st
March, 2017 to INR 188.23 crores. It has been argued that the floating
charges over the assets of contemnor no.1 created by contemnor no.1 in
June 2017 to secure the borrowing of Forum Projects, is a fresh / new
charge, created in wilful violation of the interim order and the submission of
contemnors that charge creation documents have been incorrectly filed does
not hold any merit as even till date, the said alleged error has not been
rectified and the floating charge over the assets of the contemnor no.1
pursuant to the corporate guarantee given by it in June 2017.
Mr. Banerjee has referred to Form CHG-1 at page 137 and the
corporate guarantee relied upon by the contemnor no.1 as also various other
documents in support of his submission. My attention is also drawn to the
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orders passed by the coordinate benches where it has been held that
the contemnor no.1 had created various charges on all its assets and
properties in favour of its bankers in defiance of subsisting injunction by
order dated 29th November, 2016 passed in A.P. 1013 of 2016.
Mr. Banerjee in this regard has also referred to the order dated 22nd
February, 2017, 5th February, 2018 of coordinate benches and the order of
the Division Bench dated 8th May, 2018 being an appeal preferred against
the order dated 29th November, 2016. Mr. Banerjee has been quite
emphatic in his submission that these charges are over and above created in
2014 which has still shown in the MCA website as open. The charge of 2014
was for a sum of Rs.234 crores. The documentation for the 2014 borrowing
would show that it was closed only in 2018 but the revised MCA document
is not on record.
Per Contra, Mr. Jishnu Saha, learned Senior Counsel appearing on
behalf of the alleged contemnors has submitted that the contemnors have
given justification for the creation of the charges which are misinterpreted to
be a creation of a fresh charge over the assets and properties of the company
in violation of the order dated 29th November, 2016. Mr. Saha has submitted
that it will appear from the said documents that the term loan agreement
dated 7th February, 2017 is for term loan facility of Rs.140.39 crores which,
inter alia, provides that the security for the same will be the exclusive charge
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on 39 acres of land relating to the Titanium Slag Plant and 57.30 acres
of land relating to the captive power Plant at Chhatrapur in Ganjam District
of Odisha. The agreement cum letter of hypothecation dated 7th February,
2017 is in respect of a packing credit advance not exceeding Rs.55 crores.
The supplementary letter confirming the deposit of title deeds executed on
21st February 2017 is only a confirmation of deposit of title deeds which
were deposited earlier in 2014 to secure loans and advances which the
respondent no.1 had enjoyed from the Allahabad Bank since June, 2014.
The said letter written by one Ajeet Raj Mehta records that "I had deposited
with you on 06.06.2014 the title deeds relating to immovable property of the
company situated at Chhatrapur in Ganjam District of Odisha with the
intention to create an equitable mortgage by deposit of title deeds in favour
of Allahabad Bank as securities for the amount due to the bank from Saraf
Agency Private Limited." The said letter further records the current nature or
facility extended to the respondent No. 1 to be Working Capital/PC(CC) - Rs.
55 crores and Term Loan - Rs. 140.39 crores, Total Rs. 195.39 crores. The
letter records that deposit of the title deeds which was initially made to
secure a term loan of Rs.234.21 crores would now "cover the
enhanced/received aggregate limit of Rs.195.39 crores." It is as such clear
that the execution of the said banking documents did not amount to
alienation, encumbrance or creation of third party interest over the fixed
assets and properties of the respondent No.1 as the 2017 documents were
executed merely to continue the mortgage created earlier in June, 2014, to
now secure the rundown balance in the credit facilities extended by the
Allahabad Bank to the respondent No.1
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Similarly, the corporate guarantee dated 14th June, 2017 referred to
by the petitioner cannot and does not amount to alienation or encumbering
of and/or creation of any third party interest over any fixed asset or property
of the respondent No.1, and as such cannot amount to a violation of the
order dated 29th November, 2016. It is submitted that reference has,
however, been made to a charge document (CHG-I) to contend that the same
amounted to a creation of a floating charge, which amounted to a violation
of the order dated 29th November, 2016. It will appear from clause 7(b) of the
said document that in the row providing for particulars of "Nature
description and brief particulars of the instruments creating or modifying
the charge", that the only entry is "Deed of corporate guarantee". Although
the box next to floating charge has been crossed in row 8 of the form, it will
appear from Row 12 of the form that there are no particulars mentioned
against item no. 12(a) requiring mention of "Date of Creating Security
interest by actual/constructive deposit of title deeds with bank/housing
finance company". Against item no. 12(j) of the form requiring particulars of
"Extent and operation of the charge it is made clear that "The company has
not created charge on any specific assets, however, the floating charge so
created to be fixed / crystalized only after the borrower fails to comply with
the terms of sanction of the Member Banks. Reference is also made to a
certificate of Registration of Charge which shows details of charged amount,
date of creation, date of medication and status. Although at the time, the
sanction limit of the respondent no.1 which stood at Rs.234,21,00,000/- on
6th June, 2014, stood reduced to Rs.195,39,00,000/- the status of both
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these charged amounts is shown as open. This is itself clearly indicates
that the said document is not conclusive of the nature or extent of the
charge created or subsisting. Although there is also mention of a floating
charge against the sum of Rs.70 crores, it is interesting that there are no
particulars of such floating charge provided in the document. In this
context it may be noted that although against the figure of
Rs.234,21,00,000/- the assets under charge are mentioned as "immovable
property or any interest therein; book debts, floating charge; movable
property (not being pledge)" and against the figure of Rs.195,39,00,000/- the
assets under charge are similarly mentioned as "immovable property or any
interest therein; book debts, floating charge; movable property (not being
pledge)", there is no mention of any asset under charge against the figure of
Rs.70 crores. This coupled with fact that the form clearly mentions that "the
company has not created charge on any specific assets, and that floating
charge will be fixed/crystalized only after the borrower fails to comply with
the terms of sanction of the Member banks" shows that there is no present
alienation, encumbrance or creation of any third party interest over any
fixed asset or property of the respondent no.1.
Mr. Saha has drawn my attention to paragraph 9 of the Affidavit in
opposition filed by the alleged contemnors where it has been stated that the
form CHG 1 had been incorrectly filed. The said paragraph 9 has been dealt
with by the petitioner in its affidavit in reply wherein it has, inter alia, been
stated that "Arguendo if it is assumed that the same has been filed
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incorrectly as alleged then the contemnor no 2 is acceding to the
fact that it has made incorrect statutory filings before the ROC, therefore, is
in violation of the Companies Act, 2013, while also playing an active fraud
on the process of this Hon'ble Court and the ROC.
It is submitted that the respondent No. 1 has disclosed documents in
its affidavit which would clearly demonstrate that the charge of the
immovable property in question was created in 2014, much before the order
dated 29th November, 2016. This will appear from the Term Loan Agreement
dated 6th June, 2014, the Letter of Hypothecation dated 6th June, 2014 and
the Letter of Mortgage confirming the Deposit of Title Deeds dated 6th June,
2014. The said documents clearly show that the mortgage of the immovable
property of the respondent No. 1 at Chhatrapur in the Ganjam District of
Odisha was created on 6th June, 2014 to secure the term loan of Rs. 234.21
crores.
The documents of 2017 referred to and relied on by the petitioner have
clearly been executed to renew the loan facility granted by the Allahabad
Bank to the respondent No.1 and that too for the rundown balance of
Rs.195.39 crores.
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It will appear from the Board Resolution passed by the
respondent No. 1 company at the time of execution of the banking
documents in 2017 that it was only the reduced facility of Rs.195.39 crores
that was sought to be secured by the same properties mortgaged in 2014.
On 18th January, 2018 the Allahabad Bank has itself written a letter
certifying that the existing Term Loan Facility of the respondent no.1 is the
rundown balance of Rs.140.39 crores which has been secured by the
equitable mortgage of the lands at Chhatrapur in Ganjam District, Odisha
created on 6th June, 2014
There is in the circumstances mentioned hereinabove, no violation of
the order dated 29th November, 2016. There is in any event clearly no wilful
disobedience of the order which can give rise to civil contempt within the
meaning of Section 2(b) of the Contempt of Courts Act, 1971.
The banking documents executed in 2017 were only documents of
renewal of the undischarged mortgage of the immovable properties created
in 2014 by deposit of title deeds. It is not as if the said mortgage would have
been discharged if the respondent No. 1 had not executed the renewal
documents, which it did at the behest of the bank, as required by the bank.
The documents of renewal were executed by the respondent No.1 at the
behest of the bank. It is reiterated that the mortgage created in 2014, was
security in 2017 only for a rundown balance of the term loan of the
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respondent No.1 at Rs. 140.39 crores. It is as such evident that the
contempt application has been filed relying on these banking documents
executed by the respondent No. 1 in 2017 only with the object of vexing and
harassing the respondents.
It is clear from the Form CHG-1 that the same does not in fact create
any charge. There are no fixed assets identified and the document clearly
mentions that the charge, which is in effect only the corporate guarantee as
mentioned in CHG-1, would take effect only in the event of a default on the
part of the borrower company. It has been stated by the respondent No.1
that CHG-1 mentioning a floating charge has been filed by mistake. The
petitioner has in its reply accepted that the same might in fact be a mistake
and has proceeded to allege that such mistake would, in any event,
constitute a violation of the provisions of the Companies Act 2013. In the
circumstances, the factum of creation of floating charge, if at all, become a
matter of dispute. It is now well settled that in respect of disputed matters it
cannot be stated that a party has acted wilfully in contempt of court.
Reference in this regard has been made to the following decisions:
Gopal Chandra Biswas v. State of West Bengal & Ors.; AIR 1974
Cal 3.
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Dilip Mitra & Anr. V. Swadesh Chandra Bhandra
& Ors.; (2009) 17 SCC 645, (paragraph 8).
East Delhi Fruits & Vegetables Thok Vikreta Association & Ors.
v. Mukhtiar Singh & Ors., (2005) SCC online Delhi 856 (paragraph 18).
Mr. Saha also stated that even if it is assumed that a floating charge
has been created, the same could not have and has not resulted in
contempt, wilful or otherwise, committed as a floating charge does not
amount to alienation or encumbering of an asset or the creation of a third
party interest over the same. It is now settled law that creation of floating
charge does not amount to creation of right, title or interest in the property.
In this regard reference was made to:
Yorkshine Woolcombers' Association Ltd., (1903) 2 Ch 284
affirmed in Illingworth v. Houldworth, (1904) AC 355 and Armagh Shoes
Ltd. Re, 1984 BCLC 405 CH D;
Mr. Saha refers to Section 100 of the Transfer of Property Act, 1882
that defines a charge and includes within its ambit mortgage. It is argued
that even if it is assumed that a floating charge has been created, such
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charge does not and cannot amount to a mortgage. As the same does not
immediately create any right in favour of any third party, the creation of a
floating charge cannot amount to violation of the order dated 26th November
2016. The learned Senior Counsel in this regard has referred to the following
decisions:
i) National P. & U. Bank v. Charnley, (1924) 1 KB 431 at 449
and
ii) Dublin City Distillery Co. V. Doherty, 1914 AC 823.
Mr. Saha submitted that as will appear from the said decisions it is
only when a floating charge crystallises into a fixed charge by an order of
court that the same will prevent further alienation of the property
concerned. Such an eventuality cannot arise in the instant case in view of
the orders dated 26th November, 2016, 8th December 2016 and 22nd
February 2017 whereby this Hon'ble court has restrained alienation of the
fixed assets of the respondent no.1.
Neither the petitioner and nor the floating charge holder or a fixed
charge holder would have any preferential right to recover dues directly from
the concerned properties. The orders restraining alienation of fixed assets of
the respondent no.1 have the same effect of preventing alienation, to
facilitate recovery upon decree, in future. Therefore, the petitioner could not
have and has not suffered any prejudice by reason of creation of floating
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charge, if at all created. Reference and in support of his submission has
been made to in RE Bright-life Ltd., 1987 Ch. 200.
In view of the character of a floating charge, the same cannot in any
event amount to a wilful or deliberate violation of the order dated 26th
November, 2016 as extended thereafter.
In their affidavit, the respondents have in any event offered their
unqualified apology to this Hon'ble Court in the event their acts have, even
unintentionally, amounted to a violation of the order dated 29th November,
2016.
For the aforesaid reasons it is submitted that the contempt
application being CC No. 117 of 2017 deserves to be and should be
dismissed.
The jurisdiction of the court under Contempt of Courts Act, 1971 is a
special jurisdiction conferred upon the court to punish the contemnor if it is
found that the alleged contemnors have wilfully, intentionally and
deliberately violated the order of which he has been charged with contempt.
Before a contemnor is punished for acts of contempt it is the duty of the
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court to find out if the acts complained of is wilful and/or
deliberate. Every act of omission or commission may not amount to
contempt. It has to be a deliberate, wilful and intentional act. The court
needs to find out if the acts complained of is a wilful and deliberate act to
circumvent the order and is an attempt to nullify the efficacy of the order.
'Wilful' connotes purposefulness and clear intention to flout'. It
connotes deliberate and conscious disregard of the order of court.
In Ashok Paper Kamgar Union v. Dharam Godha; [(2003) 11 SCC
1], the Court had an occasion to consider the concept of "wilful
disobedience" of an order of the Court. It was stated that "wilful" means an
act or omission which is done voluntarily and with the specific intent to do
something the law forbids or with the specific intent to fail to do something
the law requires to be done, that is to say, with bad purpose either to
disobey or to disregard the law. It signifies the act done with evil intent or
with a bad motive or purpose. It was observed that the act or omission has
to be judged having regard to the facts and circumstances of each case."
In Kapildeo Prasad Sah & Ors. v. State of Bihar & ors; ((1999) 7
SCC 569) it was held that for holding a person to have committed contempt,
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it must be shown that there was wilful disobedience of the judgment
or order of the court. But it was indicated that even negligence and
carelessness may amount to contempt. It was further observed that
issuance of notice for contempt of court and power to punish are having far-
reaching consequences, and as such, they should be resorted to only when a
clear case of wilful disobedience of the court's order is made out. A petitioner
who complains (sic of a) breach of court's order must allege deliberate or
contumacious disobedience of the court's order and if such allegation is
proved, contempt can be said to have been made out, not otherwise. The
Court noted that power to punish for contempt is intended to maintain
effective legal system. It is exercised to prevent perversion of the course of
justice.
In the celebrated decision of Attorney General v. Times Newspaper
Ltd.1974 AC 273 Lord Diplock stated: (AC p.308 A) ... There is an element of
public policy in punishing civil contempt, since the administration of justice
would be undermined if the order of any court of law could be disregarded
with impunity...
In Anil Ratan Sarkar v. Hirak Ghosh; [(2002) 4 SCC 21] this Court
held that the Contempt of Courts Act has been introduced in the statute
book for securing confidence of people in the administration of justice. If an
order passed by a competent court is clear and unambiguous and not
capable of more than one interpretation, disobedience or breach of such
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order would amount to contempt of court. There can be no laxity in such
a situation because otherwise the court orders would become the subject of
mockery. Misunderstanding or own understanding of the court's order
would not be a permissible defence.
It was observed that power to punish a person for contempt is
undoubtedly a powerful weapon in the hands of judiciary but that by itself
operates as a string of caution and cannot be used unless the court is
satisfied beyond doubt that the person has deliberately and intentionally
violated the order of the court. The power under the Act must be exercised
with utmost care and caution and sparingly in the larger interest of the
society and for proper administration of justice-delivery system. Mere
disobedience of an order is not enough to hold a person guilty of civil
contempt. The element of willingness is an indispensable requirement to
bring home the charge within the meaning of the Act.
In All Bengal Excise Licensees Assn. v. Raghabendra Singh
reported at [(2007) 11 SCC 374] the Apex Court considered several cases
and observed that wilful and deliberate act of violation of interim order
passed by a competent court would amount to contempt of court.
24
The aforesaid decisions have been followed and principles
laid down in those decisions have been reiterated in C. Elumalai vs. A.G.L.
Irudayaraj reported at 2009 (4) SCC 213
In the instant case, there cannot any doubt that the alleged
contemnors were enjoying credit facilities from the Allahabad Bank. The
creation of charges for enjoying various credit facilities are all prior to 2016,
more precisely before the order dated 29th November 2016.
In the affidavit in opposition the contemnor no.1 has stated that after
the order dated 29th November, 2016 the credit facilities alleged to have been
obtained by the said contemnor against further charge of its fixed assets and
properties are, in fact, only a restructuring of the existing facilities that the
said respondent no.1 was already enjoying from the Allahabad Bank. The
contemnor no.1 has referred to a letter dated 18th January, 2018 issued by
the Allahabad Bank to the respondent no.1 at the request of the respondent
to put the matter in the correct perspective. The certificate reads:
"we hereby certify that the review of limit of M/s. Saraf Agencies
Pvt. Ltd. vide letter dated 24.01.2017 is renewal of existing Term Loan
facility at run down balance of Rs.140.39 Crore. Original sanction dated
30.01.2014 was for underwriting of Rs.234.21 Crore for setting up of
36,000 TPA Titanium slag plant and 15 MW coal based captive power
25
plant with our holding position of Rs. 100.00 Crore (out of total limit
of Rs.234.21 Crore).
Apart from other property collaterally mortgaged to us, equitable
mortgage has been created on the entire project land of 259.94 acres
(details annexed) at Chatrapur, Dist. Ganjam, Odhisa, on 06.06.2014,
out of which, 39 acres was for titanium slag project and 57.30 acres
was for proposed CPP project. Pari-passu charge may be created in
favour of other lenders if the company comes up with new projects on
balance land in future.
This certificate is issued on the request of M/s. Saraf agencies Pvt
Ltd of 4/1 Red cross place, Kolkata 700001". (Emphasis supplied)
The said certificate unusual in its contents shows that the original
sanction was granted on 30th January, 2014 for underwriting of Rs.234.21
crores for setting up of 36000 TPA Titanium Slag plant and 15 MW coal
based captive power plant with the Allahabad Banks holding position of
Rs.100 crores out of total limit of Rs.234.21 crores. Furthermore, equitable
mortgage was created on various properties mentioned in the said certificate
on 6th June 2014. Thus it shows that on 18th January, 2018 the alleged
contemnor no.1 was enjoying credit facilities of Rs.100 crores with a
sanctioned outer limit of Rs.234.21 crores. However, on a review of the
credit facilities the bank vide letter dated 24th January, 2017 renewed the
existing Term Loan facility at a run down balance of Rs.140.39 crores. Thus
the exposure of the respondent no.1 to the Allahabad Bank appears to have
been reduced. However, surprisingly instead of proportionate release of
26
securities for a reduced borrowing the securities not only remained the
same but more assets were included towards security. This makes the
certificate suspect and raises doubt about its authenticity. The creation of
such additional security was clearly prohibited by the interim order.
The alleged contemnors have maintained its stand that the document
CHG1 dated 14th June 2014 showing charge on assets has been incorrectly
filed. After the first set of affidavits filed Rule has been issued primarily on
the ground that the document at page 145 although have shown that the
limits of the respondent no.1 had reduced from 234.21 to 195.39 crores but
no satisfactory explanation was offered for creation of floating charge of
Rs.70 crores. It appears to have been created subsequent to the bank's letter
dated 24th January, 2017 for a fresh charge, I was not satisfied with the
explanation offered towards execution of the deed of corporate guarantee
dated 14th June, 2017 in favour of Union Bank of India in relation to the
floating charge. I was prima facie satisfied with the submission made by Mr.
Banerjee that it is a new facility with different terms. The contemnors have
filed their respective affidavits in answer to the rule. The contemnors have
denied creations of floating charge and claimed that the MCA portal showing
such creation of charge is by mistake. It, however, could not be said to be an
accidental or an involuntary act. Although it was open for the contemnor to
rectify the MCA portal by deleting charge of 14th June, 2017 but no attempt
has been made by the contemnors to rectify the said MCA.
27
The petitioner in the contempt application has filed an
affidavit affirmed on 20th November, 2019 reiterating that the documents
filed by the contemnors before the Registrar of Companies would show that
the contemnors created fresh charge over the assets of the contemnor No.l
in favour of the Allahabad Bank after the order and these documents are:-
(i) Form CHG-1 filed with the ROC for registering of 'creation' of the
charges created by way of the aforesaid documents for a Loan of INR 195.39
crores and a floating charge of INR 70 crores.
(ii) Certificates of Registration of Charges issued by the Ministry of
Corporate Affairs ("MCA") with respect to registration of charges to secure
Loan of INR 195.39 crores and floating charge of INR 70 crores, allotting
unique and distinct registration numbers to each charge.
(iii) Master Data of the Contemnor No.1 as available on the MCA
Website where distinct charges appears to have been created in 2014 to
secure loan of INR 234 crores, 2017 to secure loan of INR 195.39 crores and
floating charge of INR 70 crores.
28
(iv) Index of Charges of Contemnor No.1 available on the
MCA Website where once again the charge created in 2014 is independent
and distinct from the charges created in 2017.
In the said affidavit the petitioner has disclosed a mortgage deed that
recently had come to the knowledge of the petitioner. It is stated that the
mortgage deed was executed by the sister concern of contemnor No. 1
namely Hind Ceramics Private Limited (hereinafter referred as Hind
Ceramics) on February 21, 2017 by which mortgage without possession has
been created in favour of Allahabad Bank by Hind Ceramics to secure the
loan of INR 195.39 crores availed by the Contemnor No. 1 from the
Allahabad Bank. The creation of the additional mortgage to secure the
contemnor no.1 is unregistered and undeclared on the ROC Website. The
market value of the property upon which the mortgage has been created is,
as stated in the INR 222 Corers. It is thus, submitted that a bare perusal of
the said mortgage would show that the contemnor No.1 applied to
Allahabad Bank for grant of loan /credit facilities of INR 195.39 crores as
contemnor no. 1 was in need of funds. The Allahabad Bank had agreed to
grant loan/credit facilities to the extent of INR 140.39 crores in term loan
amount of INR 55 crores in FBWC/Pre shipment account. It is contended
that, even though contemnor No. 1 passed a Resolution dated February 06,
2017 resolving that additional mortgage by way of mortgage of immovable
properties situated at 147, Nilgunge Road, Belghoria, Kolkata of Hind
Ceramics Private Limited to an extent of INR 40 crore with the bank
29
however, contemnor No. 1 has mischievously averred that there has
been only a re-structuring of the earlier loan/credit facilities, whereas the
deed of mortgage executed by Hind Ceramics clearly shows to the contrary
and states mortgage has been created to secure fresh facilities of contemnor
No.1 and that too not for INR 40 Crores but for INR 140.39 crores in term
loan account and INR 55 crores in FBWC/Pre shipment account.
The petitioner disclosed the document creating mortgage which shows
that the contemnor No. 4 executed the said deed of mortgage in favour of the
Allahabad Bank. The nexus between the appellant and Hind Ceramics
Private Limited is clearly established. The Court can always lift the
corporate veil of Hind Ceramics to find out who are the real fraud stars.
However, in the instant matter I am not to travel that far in absence of any
order restraining Hind ceramics Private Limited or its directors from
alienating or encumbering its interlocutory assets. What could have been a
relief possibly available to the petitioner in the pending proceeding cannot
form the basis in a contempt jurisdiction as the scrutiny of the Court in a
contempt jurisdiction is limited to ascertain if the order has been wilfully
and deliberately violated. In the affidavit in opposition to the said affidavit
by one Sudhakar Ayalasomayajula claiming himself to be the authorised
representative of the contemnor No. 4 Ajeetraj Mehta has stated that the
security of the property on Belghoria was to ensure improvement of credit
ratings and in this regard has disclosed a letter dated 13th July, 2017 issued
by the respondent No. 1 along with extracts of the India Rating and
30
Research Website. It is stateed that the credit rating has improved and
the property of Hind Ceramics private Limited has been released from
mortgage, as would appear from the deed of release dated 13th October,
2017 and a letter dated 15th October, 2017.
The Hon'ble Supreme Court in Advocate-General, State of Bihar v. M. P.
Khair Industries; AIR 1980 SC 946 at 949 has discussed the nature of
the contempt proceedings in the following words:
".....it may be necessary to punish as contempt, a course of
conduct which abuses and makes a mockery of the judicial process and
which thus extends its pernicious influence beyond the parties to the
action and affects the interest of the public in the administration of
justice. The public have an interest, an abiding and a real interest, and
a vital stake in the effective and orderly administration of justice,
because, unless justice is so administered, there is the peril of all rights
and liberties perishing. The court has the duty of protecting the interest
of the public in the due administration of justice and, so, it is entrusted
with the power to commit for contempt of court, not in order to protect
the dignity of the court against insult or injury as the expression
'contempt of court' may seem to suggest, but, to protect and to vindicate
the right of the public that the administration of justice shall not be
prevented, prejudiced, obstructed or interfered with. 'It is a mode of
vindicating the majesty of law, in its active manifestation against
obstruction and outrage'. Per Frankfurter J. in Offutt v. U.S (1954) 348
US 11.
31
'The law should not be seen to sit by limply, while those who defy it go
free, and those who seek its protection lose hope.' Per Judge, Curtis-Raleigh
quoted in Jennison v. Baker (1972) 1 All ER 997, 1006 (CA).'
In Phonographic Performance Ltd. v. Amusement Caterers
(Peckham) Ltd.; (1963) 3 All ER 493, 496 (Ch D) Cross J. said:
"As is pointed out in Halsbury's Laws of England, third edition,
Volume 8, pages 20, 21, where there has been wilful disobedience to an
order of the court and a measure of contumacy on the part of the
defendants, then civil contempt, what is called contempt in procedure,
'bears a two-fold character, implying as between the parties to the
proceedings merely a right to exercise and a liability to submit to a form
of civil execution, but as between the party in default and the state, a
penal or disciplinary jurisdiction to be exercised by the court in the
public interest'."
Thus, it is clear that the law of contempt is conceived in the public
interest. In the event the corporate veil is being blatantly used as a cloak to
wilfully disobey the orders of the court - an improper purpose, lifting the
corporate veil, in those circumstances, is imperative to punish improper
conduct. Public interest requires that the corporate veil must be lifted to
find out the person who disobeyed the order of the court.
32
The third parties may also be liable for contempt if he "knowing of an
injunction, aids and abets the defendant in breaking it". (See. Seaward vs.
Paterson, 1895-99 ALL ER Rep. 1127)
Guilt of third person not bound by court order, but through his
conduct committing contempt of court came up for consideration in Sita
Ram v. Balbir; (2017) 2 SCC 456. It is stated that despite dual perceived
character of such liability: (i) as aiding and abetting contempt by another,
and (ii) as committing contempt himself, held, such conduct will amount to
contempt by himself. Proceeding against a person for breach of court order
where he is bound by that order is one thing and proceeding against a
person who is not party to that court order but he is conducting himself so
as to obstruct course of justice is different thing. In former case, court
proceeds against violator for enforcing its order for benefit of person who got
it. In latter case, court will not allow its process to be set at naught and
treated with contempt. A third person can also be held liable for contempt
of Court if he, knowing terms of order wilfully assists person bound by it to
disobey that order.
In my order dated 29th November, 2016 I have not restrained Hind
Ceramics or the respondent No. 2 to7 from alienating encumbering and a
33
third party interest over its assets and properties. There is no
indication in the order to rope in any of the sister concern of the respondent
no. 1 as well as companies where the contemnor Nos. 2 to7 could have
controlling block of shares. Nor my order put any restrain on any properties
of the said contemnors as Hind Ceramics. It would not be proper to stretch
this jurisdiction to nullify such transactions. Moreover from the affidavit
filed on behalf of the contemnor No. 4 affirmed on 22nd January, 2020, it
appears that this property has already been released by the Allahabad Bank
on 15th September, 2017.
Even if I accept the submission of Mr. Saha that all the related
documents after 29th November, 2016 are essentially for restructuring of the
existing loan but I am unable to accept that no fresh charge has been crated
particularly in view of the document at page 145 which clearly shows that a
fresh charge was created on 14th June, 2017 for Rs. 70 crores. There is
another interesting feature in this matter. While the loan was claimed to
have been reduced to 195 crores, the floating charge of Rs.70 crores put
together would exceed the original credit facilities that the contemnor no.1
was originally enjoying in 2014 namely 234.21 crores as the total exposure
now if the said document is accepted to be correct would be little over 265
crores. The creation of floating charge or any charge after the order dated
21st November, 2016 has not been satisfactorily answered. The Deed of
Corporate guarantee dated 14th June, 2017 to secure a borrowing of INR 70
crores is a clear and deliberate interference with the interim order. In fact
34
the coordinate bench by order dated 5th February, 2018 has relied upon
my order dated 29th November, 2016 to arrive at a conclusion that all those
charges in favour of its bankers are in defiance of the order dated 29th
November, 2016. The said order reads:
"Now, with regard to the merit of the prayer of the petitioner I
find, that in this case from the documents disclosed by the petitioner in
the application namely, the Term Loan Agreement dated February 07,
2017, the Packing Credit Agreement dated February 07, 2017, the
Supplemental Letter of Confirmation dated February 21, 2017, the deed
of corporate guarantee dated June 14, 2017 and the Master Data of the
respondent no. 1 available at the website of the MCA and the copies of
the relevant forms CHG-1 filed by the respondent no. 1 with the
Registrar of Companies, it is evidently clear that the respondent no. 1
has created various charges on all its assets and properties in favour of
its bankers in defiance of the order of the subsisting injunction dated
November 29, 2016, passed in A.P. No. 1013 of 2016. The respondent
no. 1 has even charged all its bank accounts in favour of its bankers.
The alleged contemnors in this proceeding has made same and
/or similar submissions and raised and/or same and similar pleas with
regard to creation of additional charges which was nullified by
coordinate bench in the order dated 5th February, 2018 and the appeal
preferred before the Hon'ble Division Bench was withdrawn as would
be evident from the order of the Hon'ble Division Bench dated 8th May,
2018 in APO No. 53 of 2018."
The unwillingness of the contemnors to carry out necessary
rectification in the MCA portal (at page 145) with regard to creation of
floating charge although it had enough opportunities to do so and failure to
disclose necessary documents in relation to floating charge creates genuine
doubt in the mind of the court about the stand taken by the contemnors
with regard to creation of floating charge. Any corporate guarantee creating
additional charges was clearly prohibited by the interim order and the
35
certificate of the Allahabad Bank appears to the tailor made and
procured to stave off contempt. Although the contemnors have stated in
their affidavits that the entry of Rs.70 crores were incorrect however, having
regard to the fact that record still shows otherwise, I hold the contemnors
guilty of contempt.
At this point it is necessary to consider the apology tendered by the
contemnor. The contemnors have contested the interlocutory application
where the petitioner has specifically contended that there has been a
violation of the order dated 29th November, 2016. They had due knowledge
regarding creation of mortgage and additional charge over its assets. The
repeated and relentless attempt on the part of the contemnors to justify that
there has been no breach of the interim order dated 29th November, 2016
did not find favour with the coordinate bench and also the Hon'ble Division
Bench. In this proceeding, in defence, the contemnors have raised same
pleas as raised in earlier proceedings before me with an apology that in the
event that they are held to have acted in breach, the apology may be
accepted. At this stage it would be proper to consider some of the decisions
on apology in a contempt proceeding.
Apology is an act of contrition. Unless apology is offered at the
earliest opportunity and in good grace apology is shorn of penitence. If
apology is offered at a time when the contemnor finds that the court is going
36
to impose punishment it cease to be an apology and it becomes an act of
cringing coward. Mulk Raj V. State of Punjab, (1972) 3 SCC (Cri) 24.
In T.N Godavarman Thirumulpad (102) v. Ahsok Khot; 2006 (5)
SCC 1 in paragraphs 31 and 32 the defence of apology was considered . The
said paragraphs read:
"31. Apology is an act of contrition. Unless apology is offered at
the earliest opportunity and in good grace, the apology is shorn of
penitence and hence it is liable to be rejected. If the apology is offered at
the time when the contemnor finds that the court is going to impose
punishment it ceases to be an apology and becomes an act of a cringing
coward.
32. Apology is not a weapon of defence to purge the guilty of their
offence, nor is it intended to operate as universal panacea, but it is
intended to the evidence of real contriteness. As was noted in L.D
Jaikwal Vs. State of U.P: (SCC P.406, para1)".
We are sorry to say we cannot subscribe to the 'slap-say sorry-and
forget' school of thought in administration of contempt jurisprudence.
Saying 'sorry' does not make the slapper taken the slap smart less upon the
said hypocritical word being uttered. Apology shall not be paper apology
shall not be paper apology and expression of sorrow should come from the
heart and not from the pen. For it is one thing to 'say' sorry-it is another to
'feel sorry."
37
This view has been reiterated in C. Elumalai (supra).
Apology cannot be a defence, justification, or a calculated strategy to
avoid punishment for act which tantamount to contempt of court, and is not
to be accepted as a matter of course. However, apology can be accepted
where conduct for which apology is given is such that it can be ignored
without compromising dignity of court, or evidences real contrition, and is
sincere. Apology cannot be accepted where it is hollow, there is no remorse,
no regret, no repentance, or if it is only a device to escape rigour of law i.e. it
is merely "paper apology", (See. Bal Krishan Giri V. State of U.P.; (2014) 7
SCC 280.)
Since this Court is of the view that the apology is not genuine and it is
intended to get rid of the consequences of acts of contempt, I am not
accepting the said apology. It is sometimes necessary to vindicate the
outraged dignity of the court by fining or imprisonment of the offender.
Unless respect for the court is maintained, the administration of justice
becomes a meaningless travesty. Accordingly, I hold the contemnor nos. 1, 2
and 3 guilty of contempt.
It would be clear from the aforesaid decision that punishing a person
for contempt is indeed a drastic step and serious matter. The court is to act
38
with care and great contemptuous and it is only when a clear case of
contemporaneous conduct not explainable otherwise; arises that the
contemnor must be punished. If for proper administration of justice and to
ensure due compliance of the orders passed by a court it is necessary and
required to take strict view under the Act, it should not hesitate in wielding
the potent weapon of contempt. In Patel Rajnikant Dhulabhai Vs. Patel
Chandrakant Dhulabhai reported at (2008) 14 SCC 561) at SCC pages
575-79, paragraphs 56-57, 60-64, 66 & 70 the Hon'ble Supreme Court has
discussed the width and ambit of the power of the Court in exercising its
contempt jurisdiction in the following words:
"56. The next question is whether for disobedience of the order passed
by this Court, the respondents/contemners are liable to punishment? In
this connection, we may refer to some of the legal provisions. Article
129 of the Constitution declares this Court (Supreme Court) to be "a
Court of Record having all the powers of such a Court including the
power to punish for the contempt of itself".
57. Clause (c) of Section 94 of the Code of Civil Procedure, 1908 enacts
that in order to prevent the ends of justice from being defeated, the
Court may, commit the person guilty of disobedience of an order of
interim injunction to civil prison and direct his property be attached and
sold. Rule 2A of Order XXXIX as inserted by the Code of Civil Procedure
(Amendment) Act, 1976 (Act 104 of 1976) reads thus:
2A. Consequence of disobedience or breach of injunction--(1) In
the case of disobedience of any injunction granted or other order made
under rule 1 or rule 2 or breach of any of the terms on which the
injunction was granted or the order made, the Court granting the
injunction or making the order, or any Court to which the suit or
proceeding is transferred, may order the property of the person guilty of
such disobedience or breach to be attached, and may also order such
person to be detained in the civil prison for a term not exceeding three
months, unless in the meantime the Court directs his release.
39
(2) No attachment made under this rule shall remain in force for
more than one year, at the end of which time, if the disobedience or
breach continues, the property attached may be sold and out of the
proceeds, the Court may award such compensation as it thinks fit to the
injured party and shall pay the balance, if any, to the party entitled
thereto.
60. In Ashok Paper Kamgar Union v. Dharam Godha & Ors., (2003) 11
SCC 1, this Court had an occasion to consider the concept of `wilful
disobedience' of an order of the Court. It was stated that `wilful' means
an act or omission which is done voluntarily and with the specific intent
to do something the law forbids or with the specific intent to fail to do
something the law requires to be done, that is to say, with bad purpose
either to disobey or to disregard the law. According to the Court, it
signifies the act done with evil intent or with a bad motive for the
purpose. It was observed that the act or omission has to be judged
having regard to the facts and circumstances of each case.
61. In Kapildeo Prasad Sah & Ors. v. State of Bihar & Ors., (1999) 7
SCC 569, it was held that for holding a person to have committed
contempt, it must be shown that there was wilful disobedience of the
judgment or order of the Court. But it was indicated that even
negligence and carelessness may amount to contempt. It was further
observed that issuance of notice for contempt of Court and power to
punish are having far reaching consequences, and as such, they should
be resorted to only when a clear case of wilful disobedience of the
court's order is made out. A petitioner who complains breach of Court's
order must allege deliberate or contumacious disobedience of the
Court's order and if such allegation is proved, contempt can be said to
have been made out, not otherwise. The Court noted that power to
punish for contempt is intended to maintain effective legal system. It is
exercised to prevent perversion of the course of justice.
40
62. In the celebrated decision of Attorney General v. Times Newspaper
Ltd.; 1974 AC 273 : (1973) 3 All ER 54 : (1973) 3 WLR 298; Lord Diplock
stated:
"There is an element of public policy in punishing civil contempt, since
the administration of justice would be undermined if the order of any
court of law could be disregarded with impunity."
63. In Anil Ratan Sarkar & Ors. v. Hirak Ghosh & Ors., (2002) 4 SCC
21, this Court held that the Contempt of Courts Act has been introduced
in the statute-book for securing confidence of people in the
administration of justice. If an order passed by a competent Court is
clear and unambiguous and not capable of more than one
interpretation, disobedience or breach of such order would amount to
contempt of Court. There can be no laxity in such a situation because
otherwise the Court orders would become the subject of mockery.
Misunderstanding or own understanding of the Court's order would not
be a permissible defence.
64. It was observed that power to punish a person for contempt is
undoubtedly a powerful weapon in the hands of Judiciary but that by
itself operates as a string of caution and cannot be used unless the
Court is satisfied beyond doubt that the person has deliberately and
intentionally violated the order of the Court. The power under the Act
must be exercised with utmost care and caution and sparingly in the
larger interest of the society and for proper administration of justice
delivery system. Mere disobedience of an order is not enough to hold a
person guilty of civil contempt. The element of willingness is an
indispensable requirement to bring home the charge within the meaning
of the Act.
66. In All Bengal Excise Licensees Association v. Raghabendra Singh &
Ors., (2007) 11 SCC 374, this Court considered several cases and
observed that wilful and deliberate act of violation of interim order
passed by a competent Court would amount to contempt of Court.
41
67. A reference in this connection may also be made to a
decision of this Court in Tayabbhai M. Bagasarawala v. Hind Rubber
Industries (P) Ltd., (1997) 3 SCC 443. In that case, the plaintiff-landlord
filed a suit against the defendant-tenant in the City Civil Court for
permanent injunction restraining the defendant from carrying on
construction in the suit premises. Ad interim injunction was granted by
the Court. Defendant's application for vacating injunction was
dismissed. The defendant, however, committed breach of injunction.
The plaintiff, hence, filed an application under Order XXXIX, Rule 2-A of
the Code. The defendant came forward and raised an objection as to
jurisdiction of the Court and power to grant injunction. The High Court,
ultimately, upheld the objection and ruled that City Civil Court had no
jurisdiction to entertain the suit. It was, therefore, argued by the
defendant that he cannot be punished for disobedience of an order
passed by a Court which had no jurisdiction to entertain a suit or to
grant injunction. The High Court upheld the contention. The plaintiff
approached this Court.
68. This Court observed that until the question of jurisdiction had been
decided, the City Civil Court possessed power to make interim orders.
The Court could also enforce them. A subsequent decision that the Court
had no jurisdiction to entertain the suit did not render interim orders
passed earlier non est or without jurisdiction. A party committing breach
of such orders could not escape the consequences of such disobedience
and violation thereof. Accordingly, the Court held the defendant guilty
for intentionally and deliberately violating interim order and convicted
him under Rule 2-A of Order XXXIX of the Code and sentenced him to
one month's imprisonment.
69. Speaking for the Court, Jeevan Reddy, J. stated;
"Can it be said that orders passed by the Civil Court and the High
Court during this period of six years were all non est and that it is open
to the defendants to flout them merrily, without fear of any
consequence. The question is whether the said decision of the High
Court means that no person can be punished for flouting or disobeying
the interim/ interlocutory orders while they were in force, i.e., for
violations and disobedience committed prior to the decision of the High
Court on the question of jurisdiction. Holding that by virtue of the said
decision of the High Court (on the question of jurisdiction), no one can be
punished thereafter for disobedience or violation of the interim orders
42
committed prior to the said decision of the High Court, would
indeed be subversive of the Rule of Law and would seriously erode the
dignity and the authority of the courts.
70. From the above decisions, it is clear that punishing a person for
contempt of Court is indeed a drastic step and normally such action
should not be taken. At the same time, however, it is not only the power
but the duty of the Court to uphold and maintain the dignity of Courts
and majesty of law which may call for such extreme step. If for proper
administration of justice and to ensure due compliance with the orders
passed by a Court, it is required to take strict view under the Act, it
should not hesitate in wielding the potent weapon of contempt."
On consideration of the aforesaid facts and circumstances of the case
and various aspects discussed above, I am satisfied there has been
disobedience of the impugned order passed by me on 29th November, 2016.
In view thereof, in exercise of the power conferred under Article 129 of the
Constitution of India read with Section 12 of the Contempt of Courts Act,
1971 I impose exemplary costs of Rs.30,000/- on each of the contemnors to
be deposited with the learned Registrar General in cash or by bank draft in
the name of Learned Registrar General within six weeks from date. On such
deposit being made, a sum of Rs.1 lakh shall be transferred to the State
Legal Service Authority and the balance amount of Rs.80,000/- shall be
transferred to the West Bengal State Emergency Relief Fund,
A/C.No.628005501339, IFS Code- ICIC0006280. The learned Registrar
General shall file a report as to compliance of this order after eight weeks. In
case of non-payment the contemnor found to be in breach shall suffer
simple imprisonment for three weeks. Any third party right created after
order dated 29th November, 2016 is void and is of no consequence.
43
The Member Secretary, SLSA shall earmark the said fund for
"juvenile".
The contempt petition is disposed of.
Soumen Sen, J.
