2017 (4) TMI 130 - SC - Indian Laws

Appropriation of refund amount - compensation paid by the NHAI in respect of the land acquired by them - direction to secure the TDS amount - Held that - The respondents should not have appropriated the refund they received from the Income-Tax Department. There is nothing wrong in claiming the refund. The problem is in utilising the refund received. The refund they received is actually the compensation in respect of the land acquired from the company and it is that amount which the court wanted to protect by its order dated 23.02.2011. Hence, prima facie, we are of the view that the appropriation made by the respondents of the refund amount they received from the Income-Tax Department was in violation of the order dated 23.02.2011. It appears, for that reason only, even the Division Bench declined to disturb the Rule in the contempt proceedings issued against respondents. However, the Division Bench is wholly wrong in entering a finding that there is no violation of the order dated 23.02.2011 in utilising the refund. No doubt, had the refund and subsequent appropriation been of any amount other than the compensation, there would not have been any contempt at all. Unfortunately, the Division Bench, in the impugned order, failed to recapitulate the background of the order dated 23.02.2011 and its own earlier orders with regard to the refusal for withdrawal by the respondents of the compensation deposited in court. Even if there be pressing needs, there could not have been any utilisation of the compensation amount without leave of the court. Division Bench should not have interfered with the order dated 26.06.2015 passed by the learned Single Judge. However, taking note of the fact, an amount of ₹ 2,23,00,000/- has been kept in fixed deposit towards lien for issuance of bank guarantee, we make it clear that the respondents shall not operate the bank accounts of the company after 03.04.2017 without securing an amount of ₹ 8,32,60,331/-. We also make it clear that without leave of the High Court, the fixed deposit of ₹ 2,23,00,000/- with the Axis Bank shall not be withdrawn. However, it would be open to the respondents to apply for appropriate clarification or modification of the order dated 26.06.2015, after making the deposit as above and it will be open to the learned Single Judge to pass the appropriate orders on merits of the application.

Summary

Issues Involved:
1. Violation of the order dated 23.02.2011 regarding the deposit of compensation money.
2. Legitimacy of the respondents' utilization of the Income-Tax refund.
3. Interference by the Division Bench with the Single Judge's order restricting the operation of bank accounts.

Detailed Analysis:

1. Violation of the order dated 23.02.2011 regarding the deposit of compensation money:
The appellants contended that the compensation paid by the National Highway Authority of India (NHAI) for the acquisition of the company's land should have been deposited with the High Court as per the order dated 23.02.2011. The NHAI issued a cheque of ?94.16 crores to the Registrar of the High Court after deducting ?10,55,60,331/- as Tax Deducted at Source (TDS). The respondents claimed and received a refund of the TDS amount from the Income-Tax Department and utilized it for various purposes. The appellants alleged this was a violation of the order, which mandated the entire compensation amount to be protected by the court.

2. Legitimacy of the respondents' utilization of the Income-Tax refund:
The Single Judge found prima facie evidence of deliberate violation of the order dated 23.02.2011 by the respondents, who received and utilized the TDS refund without court permission. The court noted that the refund was part of the compensation intended to be protected. The respondents argued that the direction to deposit the amount was given to the NHAI, not to them, and hence they did not violate the order by using the refund. However, the Single Judge issued a Rule and directed the respondents to secure the amount of ?10,55,60,331/-.

3. Interference by the Division Bench with the Single Judge's order restricting the operation of bank accounts:
The Division Bench vacated the Single Judge's order that restrained the respondents from operating the company's bank accounts without securing the TDS amount. The Division Bench reasoned that the company, with a significant turnover and employing 4000 workers, could not operate without access to its bank accounts. The Bench found no specific order restraining the company from using the Income-Tax refund. However, the Division Bench did not interfere with the Rule issued in the contempt proceedings.

Supreme Court's Judgment:
The Supreme Court examined whether the Division Bench was justified in interfering with the Single Judge's order. It emphasized that the order dated 23.02.2011 aimed to protect the entire compensation amount, including the TDS component. The court highlighted that the respondents should not have utilized the refund without court permission, as it was part of the compensation meant to be protected. The Supreme Court found the Division Bench's interference inappropriate and reinstated the Single Judge's order with modifications. The respondents were directed not to operate the bank accounts without securing ?8,32,60,331/- and were restricted from withdrawing the fixed deposit of ?2,23,00,000/- without the High Court's leave.

Conclusion:
The Supreme Court allowed the appeals, emphasizing the need to protect the entire compensation amount, including the TDS refund, and directed the respondents to secure the specified amount before operating the bank accounts. The observations made were specific to this order and would not affect the contempt proceedings' merits.