Summary
By judgment of 09.05.2017 the Court had found the contemnor guilty of contempt on two counts: failing to disclose his assets as directed, and transferring USD 40 million received from Diageo in February 2016 to trusts for his children in breach of the Karnataka High Court's restraint orders in the banks' recovery proceedings. Sentencing was deferred for him to appear, but he remained in the United Kingdom, where extradition had been upheld but was stalled by a confidential proceeding, and never appeared or showed remorse; his counsel declined to argue and an amicus curiae assisted. The Court held that beyond punishing the contemnor, the majesty of law requires directions nullifying every advantage secured by the contumacious conduct, which may include declaring the offending transactions void, since purging contempt calls for disgorging all benefits.
Issues
- What punishment and consequential directions should follow a finding of contempt where the contemnor transferred USD 40 million to trusts for his children in breach of restraint orders and never appeared, apologised or purged the contempt.
- Whether, in contempt jurisdiction, the Court may declare the contumacious transactions void and direct the contemnor and third-party beneficiaries to restore the funds for execution of the decrees.
Provisions considered
- Section 2 (civil and criminal contempt) and Section 12 (punishment), Contempt of Courts Act, 1971Civil contempt is wilful disobedience of a court order or breach of an undertaking; merely undergoing the penalty does not complete the purging of contempt, which requires obeying the order or undoing the wrong (Pravin C. Shah). Having regard to the absence of remorse or apology, a sentence of four months' imprisonment and a fine of Rs 2,000, with two months' further imprisonment in default, was imposed. (¶¶ 10, 13, 16)
- Articles 129 and 142, Constitution of IndiaThe Court's contempt power extends to violation of the High Court's restraint orders passed in the same cause (Delhi Judicial Service Association), and the recognised punishments for civil contempt include sequestration of assets, fine and committal; beyond punishment the Court may issue directions to enforce compliance and nullify the advantage gained (Supreme Court Bar Association, Noorali Babul Thanewala). (¶¶ 2, 11, 12, 13)
- Rule 6(1), Rules to Regulate Proceedings for Contempt of the Supreme Court, 1975The contemnor was bound to appear in person in response to the contempt notice; his applications to recall the notice and for review were dismissed and the Home Ministry was repeatedly directed to secure his presence, which could not be done owing to proceedings in the United Kingdom. (¶¶ 2, 5, 6)
Held
- The 2017 judgment established that the restraint orders of the Karnataka High Court covered all property coming into the contemnor's hands, that the USD 40 million received on 25.02.2016 was paid away on his instructions on 26 and 29 February 2016 to three trusts whose sole beneficiaries were his children, and that the explanation that the funds were now beyond his control aggravated the violation, reflecting an intent to put them beyond the reach of the court's process. (¶¶ 2, 3, 14)
- Despite repeated opportunities, liberty to argue through counsel, the appointment of an amicus curiae and service of orders through the UK Home Office, no submissions were advanced on purging the contempt or on punishment; the extradition order had attained finality in the United Kingdom but surrender was held up by a confidential legal issue. (¶¶ 6, 7, 9)
- Purging contempt is a cleansing process; it is not completed merely by undergoing the penalty, especially in criminal contempt, and in civil contempt requires obedience to the order or undoing of the wrong (Pravin C. Shah). Breach of an injunction or undertaking may be met by a direction to purge the contempt, imprisonment, fine or all of them, and the court may issue consequential directions such as delivery of possession (Noorali Babul Thanewala). The object of punishment being curative and corrective, apart from punishing the contemnor the court may direct that the advantage secured by the contumacious conduct be completely nullified, by declaring the transactions void or directing authorities to ensure the benefit does not continue to enure to the contemnor or anyone claiming under him; purging may call for complete disgorging of all benefits. (¶¶ 10, 11, 12, 13)
- To maintain the majesty of law, adequate punishment must be imposed and directions passed so that the advantages secured by the contemnor or those claiming under him are set at naught and the funds are available in execution of the recovery decrees; the transactions disbursing USD 40 million were declared void and inoperative, the contemnor and the beneficiaries directed to deposit the amounts with 8% interest with the Recovery Officer within four weeks, failing which the Recovery Officer may proceed to recover them with the assistance of the Government of India, including through forensic auditors. (¶¶ 15, 16, 17)
Result
Contempt petitions disposed of: contemnor sentenced to four months' imprisonment and a fine of Rs 2,000 payable within four weeks to the Supreme Court Legal Services Committee, with two months' further imprisonment in default; the transfers of USD 40 million declared void and inoperative, the amounts with 8% interest to be deposited with the Recovery Officer within four weeks; the Ministry of Home Affairs to secure the contemnor's presence to undergo the sentence and file a compliance report.