Summary
In a Section 9 petition under the Arbitration and Conciliation Act, 1996, the Bombay High Court in 2014 directed the promoters of Avitel to maintain USD 60 million, the sum invested by HSBC, in the company's bank account; the Supreme Court restored that order on 19.08.2020 after the Division Bench had halved it, a Singapore award for USD 60 million having meanwhile been upheld under Sections 34 and 37. The promoters did not deposit the shortfall of about USD 42 million, pleaded a pending review, and in these contempt proceedings were again directed on 06.05.2021 to deposit within six weeks; their application for exemption pleading inability to liquidate assets was dismissed on 02.07.2021, yet they repeated the same plea.
Issues
- Whether contempt proceedings lie for non-compliance with an interim order under Section 9 of the Arbitration and Conciliation Act, 1996 affirmed by the Supreme Court, when the order is otherwise executable before the High Court.
- Whether a plea of inability to arrange funds, already rejected in an application for exemption, can be re-urged as a defence to contempt, and whether such repetition itself evidences wilful disobedience.
- Whether pendency of a review petition or an offer of an undertaking not to alienate assets excuses non-compliance with a direction to deposit money.
Provisions considered
- Sections 2(b) and 12, Contempt of Courts Act, 1971Wilful disobedience of the judgment of 19.08.2020 and of the direction of 06.05.2021 was established; the defence of want of funds lacked bona fides, having been rejected when exemption was refused, and its repetition tantamounted to contempt. To maintain the rule of law and public confidence the case was fit for punishment, but an additional four weeks were allowed to deposit the shortfall, compliance to bear directly on the punishment. (¶¶ 10, 11, 12)
- Section 9, Arbitration and Conciliation Act, 1996The interim measure directing maintenance of USD 60 million in the Corporation Bank account, passed by the Single Judge on 22.01.2014 and restored by the Supreme Court, was the order disobeyed; the argument that it should be executed rather than enforced by contempt was rejected since there was also a specific direction of this Court in the contempt petition. (¶¶ 2.4, 2.5, 6, 8, 9)
- Sections 34, 37 and 48, Arbitration and Conciliation Act, 1996The Singapore final award of USD 60 million in HSBC's favour survived challenges under Sections 34 and 37 and its enforcement was pending before the Bombay High Court, reinforcing the respondents' obligation. (¶¶ 2.6, 6)
- Articles 129 and 137, Constitution of IndiaThe respondents refused to comply citing a contemplated review under Article 137; mere pendency of a review does not excuse non-compliance, and the Court's power to punish contempt of its orders under Article 129 was exercised. (¶¶ 2.7, 4.11, 4.22, 11)
Held
- Merely because an order or decree is executable, the court's jurisdiction to deal with its violation in contempt is not taken away where the violation substantially interferes with the course of justice (Rama Narang, explaining R.N. Dey); contempt is between the contemnor and the court. Here the non-compliance was not of the High Court's order alone but of this Court's specific direction of 06.05.2021 and of the rejection of exemption, so the objection to maintainability was overruled. (¶¶ 8, 8.1, 8.2, 9)
- A party in breach of any order, interlocutory or final, acts at its peril (Welset Engineers), and non-compliance with orders of this Court shakes the foundation of the judicial system and calls for an iron hand (SEBI v. Sahara). (¶¶ 8.3, 8.4)
- The plea of inability to liquidate assets and the offer of an undertaking not to alienate them had been considered and rejected on 06.05.2021 and 02.07.2021; the respondents cannot repeat the same submissions, and such repetition is itself wilful disobedience showing their conduct. Sufficient opportunity had been given since the 2014 order, and the defence lacked bona fides. (¶¶ 6.1, 10, 11)
- The respondents were held guilty of deliberate and wilful disobedience of the judgment of 19.08.2020 and the order of 06.05.2021 and liable to punishment, but before conviction and sentence were given an additional four weeks to deposit the shortfall so as to maintain USD 60 million, which would bear directly on the punishment. (¶ 12)
Result
Respondents held guilty of deliberate and wilful disobedience of the judgment of 19.08.2020 in Civil Appeal No. 5158 of 2016 and the order of 06.05.2021; four weeks granted to deposit the shortfall to maintain USD 60 million in the Corporation Bank account; matter listed on 12.08.2022 for orders on punishment.