Suman Chadha & Anr. v. Central Bank of India
V. RAMASUBRAMANIAN, J.
1. Upon being found guilty of committing contempt of Court, the
petitioners who are husband and wife respectively, were sente nced to
simple imprisonment for three months along with a fine of Rs.2000 /-
each, by a learned Judge of the Delhi High Court. The said Order
having been confirmed by the Division Bench of the High Court in an
appeal under Section 19 of the Contempt of Courts Act, 1971 (‘Act’ for
short), the petitioners have come up with the above Spec ial Leave
Petition.
2. We have heard Mr. Santosh Kumar, learned counsel appearing
for the petitioners and Mr. Anuj Jain, learned counsel appearing for the
respondent-Bank.
375
3. The background facts which led to the petitioners being hel d
guilty of contempt of Court, are lucidly recorded in the Order dated
18.07.2017 of the learned Judge. They are as follows:
(i) The petitioners were Directors of a company by nam e Parul
Polymers Private Limited, which availed loan/credit facilities from the
respondent Bank. The petitioners guaranteed the repayment of the loan
and had also offered immovable properties as security.
(ii) On 24th July, 2014, the loan of the respondents was categorized
as a Non Performing Asset due to defaults in repayment. On 18th August,
2014, a notice under Section 13(2) of SARFAESI Act was issued for
recovery of Rs. 28,82,25,942.24 plus interest. It was followed b y a
possession notice under section 13(4) in respect of two properties.
(iii) Aggrieved by the same, the petitioners filed S.A. No. 367/
2014 before the Debts Recovery Tribunal-III, New Delhi (‘DRT- III’
for short), under Section 17 of the SARFAESI Act. How ever, the
DRT-III declined to grant any interim relief against the physical
possession of the aforesaid properties.
(iv) The petitioners filed an appeal but could not deposit Rs . 7
crores being 25% of the amount demanded in the noti ce under
Section 13(2). Eventually the appeal was dismissed as withdr awn on
31.03.2015.
(v) However, on 01 st April, 2015, the petitioners secured a
conditional order of stay from DRT-III, New Delhi in S.A. No. 367/
2014 whereby the petitioners were required to deposit a sum of Rs. 5
crores within thirty days. The order also stipulated that Rs. 2 crores
would be deposited by 03rd April, 2015.
(vi) On 03 rd April, 2015, the petitioners gave a letter to SHO,
Police Station Katju Marg, Rohini, Delhi showing their intenti on to
deposit the amount of Rs. 2 crores by way of four cheques. Therefore,
the Receiver was unable to take possession of the prope rties.
(vii) Thereafter, the petitioners challenged the conditional order
of stay passed by DRT-III on 01 st April, 2015 before the High Court
by way of W.P. (C) No. 3406/2015 stating that the Bank and DRT-III
were acting unfairly and unjustly in not accepting their cheques totalling
to Rs. 2 crores.
(viii) When the writ petition came for admission and interim orders
on 8th April, 2015, the petitioners admitted liability and offered, by way
SUMAN CHADHA & ANR. v. CENTRAL BANK OF INDIA
[V. RAMASUBRAMANIAN, J.]
of a statement under oath, to deposit Rs. 7 crores, i.e. 25% of the notice
amount in three instalments on or before 30 th June, 2015. The Bank
gave its assent and thereafter the Court ordered that the pos session of
the properties of the petitioners shall not be disturbed su bject to the
petitioners depositing Rs. 7 crores on or before 30 th June, 2015, i.e.
Rs. 2 crores on 30th April, 2015, Rs. 2.5 crores each on 31st May, 2015
& 30th June, 2015.
(ix) On 29th April, 2015, the petitioners gave a letter along with
four cheques for Rs. 50 lakhs each dated 06 th May, 2015 purportedly
in compliance of the order dated 08th April, 2015.
(x) Accordingly, the possession proceedings for one property
scheduled for 30th April, 2015 were deferred by the Bank. But on 08 th
May, 2015, all the four cheques bounced.
4. Therefore, the respondent-Bank filed a petition under Sections
10 and 12 of the Contempt of Courts Act, 1971 for punishing the
petitioners for wilful and deliberate breach of their undert aking dated
08.04.2015. Though the petitioners resisted the contempt petition on
the ground that breach of an undertaking, made with a view to s ecure
a conditional order of stay may not tantamount to contempt, especially
when the consequences of breach of such undertaking are spelt out in
the order of the Court itself, the learned Judge was not c onvinced.
Therefore, by an Order dated 18.07.2017, the learned Judge of the High
Court held the petitioners guilty of contempt and sentenced them simple
imprisonment for three months with a fine of Rs. 2000 each. The Division
Bench upheld the said order and the petitioners are before us.
5. Before we proceed further we should record certa in
developments which have taken place after the order of si ngle Judge
dated 18.07.2017. They are as follows:-
(i) The learned Judge himself granted suspension of the sentence
of imprisonment till 26.07.2017, to enable the petitioners to m ove an
intra-court appeal;
(ii) The petitioners moved an intra-court appeal, which came up
before the Division Bench on 25.07.2017. The Division Bench wanted
the petitioners to comply at least with a part of their undertaking before
the sentence could be suspended. But the petitioners could not. Therefore,
the Division Bench did not grant suspension of sentence on 25.07.2017;
377
(iii) The petitioners filed a Special Leave Petition along with an
application for exemption from surrendering. But the said appli cation
was dismissed by an order in Chamber dated 31.07.2017;
(iv) On 03.08.2017, the Division Bench of the High Court dismissed
the miscellaneous application seeking suspension of sentence;
(v) Challenging the said order dated 03.08.2017, the petitioners
moved a Special Leave Petition along with an application seeking
exemption from surrendering. This application was dismissed vide order
in Chamber dated 18.08.2017.
(vi) On a subsequent application seeking extension of time, this
Court granted three weeks’ time vide order dated 11.09.2017;
(vii) Eventually, the petitioners surrendered and were taken into
custody on 06.11.2017. After being in custody for 11 days, the petitioners
were released on interim bail by Order dated 16.11.2017;
(viii) The contempt appeal was thereafter dismissed by the Division
Bench of the High Court by an Order dated 27.09.2018, with a direction
to the petitioners to surrender within 10 days. However on 01.11.2018,
this Court ordered notice in the present SLP and also granted stay of
the impugned order.
6. The reason why we have noted certain events post the order
of the learned single Judge is to bring on record the fact that the petitioners
have already served simple imprisonment for a period of 1 1 days, out
of the penalty of simple imprisonment for three months. They have also
paid the fine.
7. The main grounds of attack of the petitioners to the impugned
order, as articulated by Mr. Santosh Kumar, learned couns el for the
petitioners, are: (i) that the failure of a party to comply with an
undertaking, on the basis of which a conditional order of stay was
granted, cannot be treated as a wilful disobedience warranting the
invocation of the contempt jurisdiction; (ii) that the failure of the petitioners
to honour the undertaking cannot be taken to substantially interfere with
the due course of justice and, hence, the case woul d fall under
Section 13(a) of the Act; (iii) that when an order indicates the
consequences of the failure of a party to comply with a condit ion or
honour the undertaking, the invocation of the contempt jurisdiction may
not be appropriate; and (iv) that in any case if the defaulting party has
relied upon an interpretation of the order that the consequences of failure
SUMAN CHADHA & ANR. v. CENTRAL BANK OF INDIA
[V. RAMASUBRAMANIAN, J.]
are already inbuilt in the order, such an understanding of the order is to
be treated as reasonable and rational and he cannot be held guilty of
contempt.
8. In support of his first contention, the learned counsel for the
petitioners, relies upon the decisions of a few High Courts. They are: (a)
Narain Singh vs. Lala Rajendra Lal & Ors .1; (b) Indian Overseas
Bank vs. Lalit Kumar Aggarwal & Anr. 2; (c) K. Saravankumar vs.
Sheela & Ors. 3; and (d) National Agricultural Cor. Marketing vs.
Reliance Polycrete Ltd.4.
9. In support of his third contention, the learned counsel relies
upon the decision of this Court in Dinesh Kumar Gupta vs. United
India Insurance Company Limited 5. In addition, the learned counsel
also submitted that in the light of the decision of this Court in Niaz
Mohammad vs. State of Haryana6, the disobedience should be wilful
and intentional, to tantamount to contempt.
10. In response to the aforesaid, Shri Anuj Jain, learned counsel
for the respondent submitted that the petitioners had several opportunities
to honour their commitments, but they repeatedly adopted dilatory tactics.
The learned counsel took us through various orders passed by the High
Court and the orders passed in various proceedings before other forums
including the DRT and the Chief Metropolitan Magistrate and sought to
impress upon us that the conduct of the petitioners throughout, has been
one of deceit and that such persons do not deserve any leniency. Inviting
our attention to the decisions in (i) Bank of Baroda vs. Sadruddin
Hasan Daya & Anr 7.; (ii) Rama Narang vs. Ramesh Narang &
Another 8 and (iii) Rama Narang(5) vs. Ramesh Narang and
Another9, the learned counsel contended that the availability of oth er
modes of enforcementneed not deter the Court from invoking its contempt
jurisdiction and that the deliberate failure to comply with a solemn
undertaking given to a Court has always been frowned upon by Courts.
1 1976 SCC Online All 425
2 2000 SCC Online Del 710
3 2008 (3) CTC 669
4 (2009) 163 DLT 441
5 (2010) 12 SCC 770
6 (1994) 6 SCC 332
7 (2004) 1 SCC 360
8 (2006) 11 SCC 114
9 (2009) 16 SCC 126
379
11. We have carefully considered the rival submissions.
12. Before we analyze the rival contentions, it will be useful first
to see the actual undertaking given by the petitioners on 08.04.201 5,
which led to the contempt proceedings. The undertaking given by t he
first petitioner on 08.04.2015 reads as follows:-
“Statement of Mr. Suman Chadha S/o Jangi Lal Chadha R/o
H-3/50 Sector-18, Rohini, Delhi
I am the petitioner and the director of the third petitioner
in this case. I am duly authorised to make a statement on its
behalf. I have also filed an affidavit in support of the petit ion
and have taken advice from my lawyer who is present with
me in Court.
I hereby state and confirm that the sum of
Rs.28,82,25,942.24 (Twenty Eight Crores Two Lakh Tw enty
Five thousand Nine Hundred Forty Two and Paise Twen ty
Four only) as on 18.8.2014 is due and payable to th e
respondent i.e. the Central Bank of India as per no tice
u/s 13(2) of SARFAESI Act. I request that in view of the demand
I may be granted relief of some deferment with regard to t he
repayment of the loan liability. I hereby agree on beh alf of
self and other petitioners to deposit a total amoun t of
Rs.7 (seven) crores with respondent –Bank on or bef ore
30.6.2015. An amount of Rs. 2 (two) crores of the said amount
shall be paid on or before 30.04.2015; the balance would be
paid in equal instalments i.e. Rs. 2.5 (Two and a half) crores
on or before 31.5.2015 and 30.06.2015.
I also agree and affirm that in the event of default, the
Bank is free to initiate any such proceedings and ava il of
legal remedies as are available.”
13. The above undertaking given by the first petitioner was also
accompanied by an affidavit sworn to by the second petitio ner. In the
said affidavit, it was stated by the second petitioner that her husband has
made a statement before the Court which she had understood from him
and that she and her husband undertake to abide by the same.
14. On the basis of the undertaking filed as aforesaid on 08.04.2015,
the High Court passed an order in W.P (C) No. 3406 of 2015 on t he
SUMAN CHADHA & ANR. v. CENTRAL BANK OF INDIA
[V. RAMASUBRAMANIAN, J.]
same day, namely, 08.04.2015. Paragraphs 6 to 8 of the said order of the
High Court dated 08.04.2015 read as follows:-
“6. In view of the submission of the parties, it is ordered
that the possession of the petitioners over the pro perty in
question shall not be disturbed subject to their com pliance
with the following conditions:
(1) Deposit by the petitioners on or before 30.04.201 5 – the
sum of Rs. 2 crores with the respondent Bank and thereafte r
deposit of Rs.2.5 crores each on or before 31.05.20 15 and
30.06.2015.
(2) The second petitioner shall file an affidavit/ under taking,
to comply with the above said arrangement.
(3) In the event of default, the respondent Bank shall be at
liberty to take recourse to law including the enforcement o f
further action in follow up order of appointment of the re ceiver
by the Chief Metropolitan Magistrate (CMM). The order t o
such effect passed by CMM shall be kept in abeyance to
ensure compliance in the meanwhile till 30.6.2015.
7. Petitioners’ counsel requests that after complian ce of the
above order, any application for relief to the Bank includ ing
the restructuring of the account may be considered
reasonably. The Bank shall consider such application if made
on its merits independently having regard to its app licable
policy. This will not in any way preclude the right s of the
Bank for recovering the amounts due.
8. Subject to the petitioner filing the necessary af fidavit/
undertaking copy of which shall be provided to the c ounsel
for the respondent within a week from today, the writ petit ion
is disposed of.”
15. It is seen from the portion of the order of the High Cour t
dated 08.04.2015 that it was not an order passed on the basis of a n
affidavit/undertaking. It was on the basis of an offer m ade by the
petitioners, the first of whom was actually present in Court. The offer so
made was accepted by the Bank and hence the order was actually based
upon the consent of parties. This is made clear by what is recorded by
381
the Court in Paragraph 5 of its order dated 08.04.2015. Paragraph 5
reads as follows:-
“5. During the course of hearing counsel for the peti tioner
Dr. Sharma stated that the petitioners are admitting the liability
provided some time is granted in order to settle the matter
finally. It was suggested by the counsel that the pet itioners
may be afforded opportunity of depositing Rs. 7 (seven) cr ores
i.e. 25% of the notice amount in three instalments on or before
30.06.2015. The first petitioner is present in Court. H e is a
director of the third petitioner and authorised to d epose on
its behalf. His statement to above effect has been re corded
under oath separately and has been kept on record. The
second petitioner is directed to file an affidavit/unde rtaking
within one week confirming the statement of the first peti tioner.
The counsel for the respondent submitted his assent to the
disposal of the writ petition on terms offered.”
16. It is true that this Court has held in a series of decisions that
the wilful breach of the undertaking given to the Court amou nts to
contempt of Court under Section 2(b) of the Act. But the Cou rt has
always seen (i) the nature of the undertaking made; (ii) the benefit if
any, reaped by the party giving the undertaking; and (iii) whether the
filing of the undertaking was with a view to play fraud upon the court or
to hoodwink the opposite party. The distinction between an order passed
on consent terms and an order passed solely on the basis of an undertaking
given to court and the distinction between a person playing fraud on the
court thereby obstructing the course of justice and a p erson playing
fraud on one of the parties, was brought out by this Court in Babu Ram
Gupta vs. Sudhir Bhasin10, in the following words:-
“…Indeed, if we were to hold that non-compliance of a
compromise decree or consent order amounts to contempt o f
court, the provisions of the Code of Civil Procedure relat ing
to execution of decrees may not be resorted to at all. In fact,
the reason why a breach of clear undertaking given to the
court amounts to contempt of court is that the contemner by
making a false representation to the court obtains a benefit
for himself and if he fails to honour the undertaking, he plays
10 (1980) 3 SCC 47
SUMAN CHADHA & ANR. v. CENTRAL BANK OF INDIA
[V. RAMASUBRAMANIAN, J.]
a serious fraud on the court itself and thereby obstruct s the
course of justice and brings into disrepute the jud icial
institution. The same cannot, however, be said of a c onsent
order or a compromise decree where the fraud, if an y, is
practised by the person concerned not on the court bu t on
one of the parties. Thus, the offence committed by the per son
concerned is qua the party not qua the court, and, therefore,
the very foundation for proceeding for contempt of co urt is
completely absent in such cases.”
17. But the decision in Babu Ram Gupta (supra) was clarified
and held in part to be obiter by a three member Bench of this C ourt in
Rama Narang vs. Ramesh Narang and Another 11. In Rama Narang
(supra), this Court pointed out the distinction between two categories of
cases covered by Section 2(b) of the Act namely (i) wilful disobedience
to a process of court; and (ii) wilful breach of an undertaking given to a
court.
18. In fact, in Rama Narang (supra), this Court went to the extent
of holding that it would neither be in consonance with the statute, judicial
authority, principle or logic to draw any distinction between the wilful
violation of the terms of a consent decree and wilful violation of a decree
passed on adjudication. We have our own doubts whether t he first
category of cases covered by Section 2(b) can be stretch ed so far.
Anyway, that question does not arise in this case and hence we leave it
at that.
19. But what has happened in this case is that the subsequent
conduct of the petitioners after the order dated 08.04.2015, seems to
have tilted the balance against the petitioners. Purportedly in compliance
of the undertaking given to Court on 08.04.2015 and the order pas sed
thereon, the petitioners issued four cheques for Rs.50 lakhs each. These
cheques were handed over to the Bank on 29.04.2015 along with a
covering letter. But all the four cheques were post-dated, b earing the
date 06.05.2015, though the undertaking given to the Court was to deposit
the amount on or before 30.04.2015.
20. On 08.05.2015, all the four cheques bounced. The conduct of
the petitioners first in issuing post-dated cheques and then in allowing
them to be dishonoured, showed the petitioners in poor light. The
11 (2006) 11 SCC 114
383
petitioners could have at least mend their ways thereafter . However
they did not.
21. On 14.07.2015, the learned Single Judge seems to have
ordered the issue of notice in the Contempt Petition. The noti ce was
made returnable by 05.11.2015 and the petitioners were directed to be
present personally in Court. But what happened on 05.11.2015, as brought
on record by the learned Judge reads as follows:-
“When the matter was taken up at first call, this Court
was informed that none of the respondents were in St ation
and even summons had been received by their daughter.
However, a perusal of the file reveals that notices /
summons had been received by respondent No. 1 person ally
and by respondent No. 2’s husband by dasti as well as by
speed post.
Though this Court was inclined to issue warrants against
the respondents No. 1 and 2, yet as learned counsel for
respondents states that he would ensure that not on ly the
respondents are personally present in Court on the next date
of hearing, but the matter is amicably resolved, ma tter is
adjourned to 16 th November, 2015.”
22. On the next date of hearing, the petitioners raised a defe nce
that they had issued post-dated cheques in the hope of receiving amounts
due to them from their debtors and that their debtors fail ed to make
payment. The petitioners also named three debtors from whom t hey
were expected to receive money.
23. Doubting the genuineness of the claim made by the petitioners,
the learned Judge before whom the Contempt Petition came up, passed
an order on 07.12.2015 directing an investigation by Serious Fr aud
Investigation Office (‘SFIO’ for short). To the mis fortune of the
petitioners, SFIO submitted a report that the alleged debtors of the
petitioners are only shell entities of Parul Polymers Priva te Ltd., of
which the petitioners were Directors.
24. All the above events that happened after 08.04.2015, convinced
the High Court to come to the conclusion that the petitioners had actually
played a fraud upon the Court. This is why the learned Single Judge as
SUMAN CHADHA & ANR. v. CENTRAL BANK OF INDIA
[V. RAMASUBRAMANIAN, J.]
well as the Division Bench of the High Court held the petitioners guilty
of contempt of court.
25. It is true that an undertaking given by a party should be seen
in the context in which it was made and (i) the benefits that accrued to
the undertaking party; and (ii) the detriment/injury suffered by the counter
party. It is also true that normally the question whether a party is guilty
of contempt is to be seen in the specific context of the disobedience and
the wilful nature of the same and not on the basis of the conduct
subsequent thereto. While it is open to the court to see whet her the
subsequent conduct of the alleged contemnor would tantamount to an
aggravation of the contempt already committed, the very determination
of an act of contempt cannot simply be based upon the s ubsequent
conduct.
26. But the subsequent conduct of the party may throw light
upon one important aspect namely whether it was just the inability of
the party to honour the commitment or it was part of a larger design to
hoodwink the court.
27. In this case, the series of acts committed by the petitioners (i)
in issuing post-dated cheques, which were dated beyond the date within
which they had agreed to make payment; (ii) in allowing those cheques
to be dishonoured; (iii) in not appearing before the Court on the first
date of hearing with an excuse that was found to be f alse; (iv) in
coming up with an explanation about their own debtors comm itting
default; and (v) in getting exposed through the report of the SFIO,
convinced the High Court to believe that the undertaking given by the
petitioners on 08.04.2015 was not based upon good faith but intended to
hoodwink the Court. Therefore, we are unable to find fault with t he
High Court holding the petitioners guilty of contempt.
28. The 1st contention of Mr. Santosh Kumar, learned counsel for
the petitioners that the failure to honour a commitment made wh ile
securing a conditional order of stay, cannot be tre ated as wilful
disobedience, could have been accepted by us, but for the fact that the
petitioners issued post-dated cheques purportedly in compliance of the
undertaking, but allowed them to be dishonoured. The story cooked up
for the dishonor of the cheques having been found to be false, it is not
open to the petitioners to raise the contention that there was no wilful
disobedience.
385
29. The 2nd contention based upon the language of Section 13(a)
of the Act also does not appeal to us, in the light of what had happened
after 08.04.2015. The fact that the order dated 08.04.2015 also indicated
certain other consequences to follow, may not take away the contempt
jurisdiction of the Court. In appropriate cases where a party ha d acted
bonafide while giving an undertaking, but could not h onour the
undertaking on account of reasons that are reasonable and g enuine,
the Court could certainly withhold its stick from being wielded. But in
this case there are findings of fact to the effect that the petitioners did
not act bonafide. Therefore, the 3rd contention is also unsustainable.
30. The last contention that if the order dated 08.04.2015 is capable
of being interpreted and understood in more than one way as t o the
consequences flowing out of the same, the party understanding an d
interpreting the said order in one particular manner must be allowed the
benefit, is perfectly correct, as a pure and simple propos ition of law.
But in this case, the same cannot be permitted to be used, to cover up
whatever the petitioners have done. On the contention of the lear ned
counsel for the petitioners that the disobedience, if any, was not wilful
and intentional, less said the better.
31. In the light of the above, we are clearly of the view that the
finding of the High Court that the petitioners are guilty of contempt,
does not call for our interference under Article 136.
32. However, Mr. Santosh Kumar, learned counsel for the
petitioners, pleaded that the Court may show sympathy on the petitioners,
in view of the fact that the immovable properties which the petitioners
attempted to save, by approaching the DRT and the High Court, hav e
already been sold. All the attempts made by the petitioners from 2015
onwards, to save the mortgaged properties have been in vain.
33. There is no dispute on facts that the mortgaged propertie s
have now been sold and with extraordinary efforts, the Bank has also
taken possession. The petitioners have also spent 11 days in cus tody
out of the total period of imprisonment of three months imposed by the
High Court. In such circumstances, we think that it is sufficient
punishment for the petitioners.
34. Therefore, the SLP is disposed of upholding the finding of
the learned Single Judge and the Division Bench of the High Court that
the petitioners are guilty of contempt of court, but reducing the period
SUMAN CHADHA & ANR. v. CENTRAL BANK OF INDIA
[V. RAMASUBRAMANIAN, J.]
of sentence from three months to the period of imprisonment already
suffered/undergone by the petitioners. There will be no ord er as to
costs.
35. Pending application(s) if any, shall also stand disposed of.
Nidhi Jain SLP disposed of.