2014 (5) TMI 289 - SC - Companies Law

Abuse of the judicial process - Held that - We should not be taken to have suggested, that the cost of litigation should be enhanced. It is not our suggestion, that Court fee or other litigation related costs, should be raised. Access to justice and related costs, should be as free and as low, as possible. What is sought to be redressed is a habituation, to press illegitimate claims. This practice and pattern is so rampant, that in most cases, disputes which ought to have been settled in no time at all, before the first Court of incidence, are prolonged endlessly, for years and years, and from Court to Court, upto the highest Court. Does the concerned litigant realize, that the litigant on the other side has had to defend himself, from Court to Court, and has had to incur expenses towards such defence? And there are some litigants who continue to pursue senseless and ill-considered claims, to somehow or the other, defeat the process of law. The present case, is a classic illustration of what we wish to express. Herein the regulating authority has had to suffer litigation from Court to Court, incurring public expense in its defence, against frivolous litigation. Every order was consistently and systematically disobeyed. Every order passed by the SEBI was assailed before the next higher authority, and then before this Court. Even though High Courts have no jurisdiction, in respect of issues regulated by the SEBI Act, some matters were taken to the High Court of Judicature at Allahabad (before its Lucknow Bench). Every such endeavour resulted in failure, and was also sometimes, accompanied with strictures. Even after the matter had concluded, after the controversy had attained finality, the judicial process is still being abused, for close to two years. A conscious effort on the part of the legislature in this behalf, would serve several purposes. It would, besides everything else, reduce frivolous litigation. When the litigating party understands, that it would have to compensate the party which succeeds, unnecessary litigation will be substantially reduced. At the end of the day, Court time lost is a direct loss to the nation. It is about time, that the legislature should evolve ways and means to curtail this unmindful activity. We are sure, that an eventual determination, one way or the other, would be in the best interest of this country, as also, its countrymen.

Issues Involved:
1. Jurisdiction of the Court to hear the case.
2. Compliance with judicial orders.
3. Demeanor and conduct of the companies and individuals involved.
4. Efforts made by the Court to ensure compliance.
5. Legal provisions for arrest and detention for execution of a money-decree.
6. Procedure under Section 51 and other provisions of the CPC.
7. Allegations of bias.
8. Defense of redemption of OFCDs.
9. Maintainability of the petition.

Detailed Analysis:

I. Jurisdiction of the Court to Hear the Case:
The Court examined whether it should hear the case or if another Bench would be more appropriate. The petitioner had previously filed responses and was aware of the proceedings, including the prayers for arrest and detention. The Court concluded that it had the jurisdiction to hear and decide the matter, emphasizing that judicial orders must be obeyed and enforced.

II. Compliance with Judicial Orders:
The Court emphasized that judicial orders must be obeyed at all costs to maintain the rule of law. It stated that disobedience of court orders undermines the judicial system and the rule of law. The Court has the power to enforce compliance and punish for contempt to ensure adherence to its orders.

III. Demeanor and Conduct of the Companies and Individuals Involved:
The Court detailed the defiant and non-cooperative behavior of the companies and individuals involved, including the petitioner. Despite multiple opportunities and directions, the companies failed to provide authentic information or comply with the Court's orders. The Court noted that the companies' actions were aimed at delaying and obstructing the judicial process.

IV. Efforts Made by the Court to Ensure Compliance:
The Court made numerous efforts to cajole the companies into compliance, including proposing intermediary solutions and granting time extensions. However, these efforts were systematically frustrated by the companies. The Court eventually resorted to issuing stricter orders, including the arrest and detention of the petitioner and other contemnors, to enforce compliance.

V. Legal Provisions for Arrest and Detention for Execution of a Money-Decree:
The Court clarified that the CPC and CrPC provide for arrest and detention to enforce a money-decree or financial liability. The submission that such procedures were unknown to law was rejected. The Court emphasized that judicial orders must be enforced, and non-compliance can lead to arrest and detention.

VI. Procedure Under Section 51 and Other Provisions of the CPC:
The Court examined whether the procedure under Section 51 and related provisions of the CPC was followed before ordering the arrest and detention of the petitioner. It concluded that the SEBI Act does not adopt these provisions, and even if they were applicable, the Court had followed the necessary procedures. The Court found that the conditions for arrest and detention were met, including the likelihood of the petitioner absconding and the companies' refusal to pay despite having the means.

VII. Allegations of Bias:
The Court addressed the allegations of bias and concluded that they were unfounded. It noted that the petitioner and his counsel were aware of the proceedings and had been given ample opportunity to present their case. The Court emphasized that it had no predisposition or bias and had acted within its jurisdiction to enforce compliance with its orders.

VIII. Defense of Redemption of OFCDs:
The Court examined the defense that the companies had redeemed the OFCDs and found it to be untenable. It noted that the defense was not legally available after being rejected by a three-Judge Bench in 2012. The Court also found that the companies failed to provide credible evidence of redemption, relying instead on unauthenticated general ledger entries.

IX. Maintainability of the Petition:
The Court considered the maintainability of the petition under various provisions, including Article 32, Articles 129 and 142, and the maxim of ex debito justitiae. It concluded that the petition was not maintainable under any of these provisions. The Court emphasized that judicial orders cannot be challenged through a writ petition and that the proper recourse was through review or curative petitions.

Conclusion:
The Court dismissed the petition, finding no merit in the arguments presented by the petitioner. It emphasized the importance of compliance with judicial orders and the need to deter frivolous litigation. The Court also suggested that the legislature consider measures to address the abuse of the judicial process and reduce unnecessary litigation.

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