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2007 (10) TMI 394 - SC - Companies LawContempt of court - Held that - Contempt petition is allowed. Keeping in view the peculiar facts and circumstances of this case and the conduct of the alleged contemnors, are of the opinion that they have committed contempt of this court. We are clearly of the opinion that. It is eminently a fit case where jurisdiction of this court under article 129 of the Constitution of India as also the provisions of the Contempt of Courts Act, 1971, should be invoked. However, the fact that the alleged contemnor No. 3 has resigned, being not in dispute, no action is being taken against him. So far as, the alleged contemnor No. 1 is concerned he being the managing director of the company, is liable to be punished. He is sentenced to undergo six months imprisonment. The alleged contemnor No. 2 is also held guilty but as he was not the managing director, sentencing him three months imprisonment shall meet the ends of justice.
Issues Involved:
1. Contempt of Court 2. Arbitration Agreement and Proceedings 3. Non-compliance with Court Orders 4. Misrepresentation and Suppression of Facts 5. Sale of Encumbered Property Issue-wise Detailed Analysis: 1. Contempt of Court The contempt petition arises from the respondents' failure to comply with the court's order to furnish a bank guarantee. The Supreme Court found that the respondents committed gross contempt by misleading the court and failing to honor their undertaking. Despite the respondents' apologies and claims of financial incapacity, the court held that their actions amounted to a serious fraud on the judicial institution, obstructing the course of justice. 2. Arbitration Agreement and Proceedings The dispute between the petitioner and the respondents was subject to an arbitration agreement, which mandated that any differences or disputes be referred to the Indian Council of Arbitration. The respondents filed an application under section 8 of the Arbitration and Conciliation Act, 1996, which was rejected by the Delhi High Court and upheld by the Supreme Court. The Supreme Court referred the matter to arbitration, with the condition that the respondents furnish security as directed by the arbitrator. 3. Non-compliance with Court Orders The respondents failed to comply with the arbitrator's order to furnish a bank guarantee of Rs. 763.22 lakhs. Despite multiple opportunities and extensions, the respondents did not provide the required guarantee. They also sold a property in Bangalore during the pendency of the contempt proceedings, further aggravating the contempt. The court held that the respondents' actions demonstrated a blatant disregard for its orders and the arbitration process. 4. Misrepresentation and Suppression of Facts The respondents misrepresented their financial situation and the status of their properties. They offered to furnish property security instead of a bank guarantee, without disclosing that the property was encumbered and claimed by the State of Andhra Pradesh. The court found that the respondents had suppressed material facts and made false representations to gain time and avoid compliance with the court's orders. 5. Sale of Encumbered Property The property at Secunderabad, which the respondents offered as security, was encumbered and claimed by the State of Andhra Pradesh. The respondents did not disclose this fact until much later. The court noted that the respondents did not have a subsisting right, title, or interest in the property and could not propose its sale to settle their debts. The sale of the Bangalore property during the proceedings further demonstrated their intent to evade compliance with the court's orders. Conclusion The Supreme Court found the respondents guilty of contempt of court for failing to comply with its orders and misleading the court. The managing director (respondent No. 1) was sentenced to six months imprisonment, and respondent No. 2 was sentenced to three months imprisonment. The contempt petition was allowed, with no action taken against respondent No. 3, who had resigned. The court emphasized the seriousness of the respondents' actions, which undermined the judicial process and obstructed justice.
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