1987 (3) TMI 418 - HC - Companies Law

Summary

Issues Involved:
1. Wilful disobedience of court orders.
2. Use of corporate veil to evade compliance.
3. Validity of apology in contempt proceedings.
4. Appropriate punishment for contempt.

Issue-Wise Detailed Analysis:

1. Wilful Disobedience of Court Orders:
The petitioner filed a suit seeking a decree for specific performance of an agreement dated March 3, 1980, and obtained a temporary injunction on May 13, 1980, restraining the respondents from transferring the third and fourth floors of a building. Despite this, the respondents transferred these floors, violating the court's order. The court emphasized that every person against whom an order is made must obey it unless it is discharged, as highlighted in Hadkinson v. Hadkinson [1952] 2 All ER 567, 569 (CA). The respondents admitted to the transfer, constituting wilful disobedience.

2. Use of Corporate Veil to Evade Compliance:
The respondents argued that the transfer was made by M/s. Tower Height Builders Pvt. Ltd., a company they promoted. The court noted that a company is a distinct legal entity, but this doctrine has exceptions, particularly when the corporate personality is used to cloak fraud or improper conduct. The court referred to cases like Aron Salomon v. A. Salomon & Co. Ltd. [1897] AC 22 (HL) and Life Insurance Corporation of India v. Escorts Ltd. [1986] 59 Comp. Cas. 548 (SC), which allow lifting the corporate veil in cases of fraud or improper conduct. The court found that the corporate veil was used to wilfully disobey the court's orders, necessitating its lifting to identify the true contemnors.

3. Validity of Apology in Contempt Proceedings:
The respondents tendered an unconditional apology after the conclusion of arguments. The court held that an apology made at such a late stage lacks value and is often a device to escape punishment. The court cited E. T. Sen v. Edatata Narayanan, AIR 1969 Delhi 201, 211 [FB], stating that an apology must be offered at the earliest opportunity and indicate genuine remorse. The court rejected the respondents' apology as it was not bona fide and did not purge the contempt.

4. Appropriate Punishment for Contempt:
The court emphasized that the purpose of punishment in contempt proceedings is to vindicate public interest and ensure compliance with court orders. The respondents' conduct was deemed a serious and flagrant disobedience of the court's orders. Despite considering severe punishment, the court took into account the respondents' personal circumstances, including health issues and family responsibilities. Consequently, the court ordered the respondents to be detained in civil prison for 15 days, with the petitioner directed to deposit Rs. 3,000 for their expenses.

Conclusion:
The court found the respondents guilty of wilful disobedience of its orders and using the corporate veil to evade compliance. The late apology was rejected as insincere. The respondents were sentenced to 15 days in civil prison to meet the ends of justice, balancing the severity of the contempt with their personal circumstances.