2007 (3) TMI 380 - SC - Companies Law

Whether the respondents have violated the terms of the undertaking given to the Court and if so, what are its consequences? Whether deliberate breach of undertaking can attract section 2(b) of the Contempt of Courts Act? Held that - The respondents are clearly guilty of committing contempt of court by deliberate and wilful disobedience of the undertaking given by them to this Court. In this view of the matter, in order to maintain sanctity of the orders of this Court, the respondents must receive appropriate punishment for deliberately flouting the orders of this Court. Consequently, convict the respondents under section 2(b) of the Contempt of Courts Act and sentence them to a simple imprisonment for a period of two months & further impose a fine of ₹ 2,000 to be deposited by each of them within one week failing which they shall further undergo imprisonment for one month.

Issues Involved:
1. Contempt of court by respondents for violating court orders.
2. Maintainability of the contempt petition.
3. Violation of specific clauses of the consent order.
4. Consequences of the breach of undertaking given to the court.

Detailed Analysis:

1. Contempt of Court by Respondents for Violating Court Orders:
The petitioner filed a contempt petition against his sons, alleging that they were guilty of committing gross contempt of the court orders dated 12-12-2001 and 8-1-2002. The court found that the respondents had deliberately violated the terms of the consent order, specifically clauses 3(c), 3(d), and 3(f), which amounted to wilful disobedience of the court's orders. The respondents had systematically circumvented the requirement for joint signatures on transactions exceeding Rs. 10 lakhs by splitting payments into smaller amounts, thereby excluding the petitioner from the management and control of the company.

2. Maintainability of the Contempt Petition:
The respondents raised a preliminary objection regarding the maintainability of the contempt petition, arguing that in the absence of an undertaking given to the court, mere violation of the consent order could not invoke the court's contempt jurisdiction. However, the court rejected this objection, citing a three-Judge Bench decision in Rama Narang v. Ramesh Narang, which held that violation of the consent order terms amounted to a violation of the court's orders and was punishable under section 2(b) of the Contempt of Courts Act, 1971.

3. Violation of Specific Clauses of the Consent Order:
The petitioner provided numerous instances of the respondents' violations of the consent order:
- Clause 3(c): The respondents took absolute control of the company, excluding the petitioner from joint management and control.
- Clause 3(d): The respondents made unilateral decisions affecting the company without the petitioner's consent.
- Clause 3(f): The respondents split transactions exceeding Rs. 10 lakhs into multiple smaller cheques to avoid the requirement for joint signatures.

The court found these violations to be deliberate and systematic, undermining the spirit of the consent order and the court's authority.

4. Consequences of the Breach of Undertaking Given to the Court:
The court emphasized the importance of maintaining the sanctity of its orders and the rule of law. It cited several precedents to underline that wilful breach of an undertaking given to the court amounts to contempt. The court concluded that the respondents were guilty of contempt for their deliberate and wilful disobedience of the undertaking given to the court. Consequently, the respondents were convicted under section 2(b) of the Contempt of Courts Act and sentenced to simple imprisonment for two months and a fine of Rs. 2,000 each. However, considering the potential chaos in the company and its impact on employees, the court kept the sentence in abeyance, warning that any further violations would result in immediate imprisonment.

Conclusion:
The court found the respondents guilty of contempt for violating the consent order's terms and sentenced them to imprisonment and a fine. The sentence was kept in abeyance to avoid chaos in the company, with a stern warning against future violations. The judgment underscores the importance of adhering to court orders and the severe consequences of contempt.

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