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2022 (8) TMI 109 - AT - Insolvency and BankruptcyContempt of Court - willful disobedience - willful breach of settlement agreement - Whether the Respondent Nos. 1 2/ Contemnors committed breach of settlement agreement dated 08.03.2019 and disobeyed the order of this Tribunal dated 11.03.2019 willfully? - If so are the Respondent Nos. 1 2/Contemnors liable for punishment as per Section 12 of Contempt of Court Act? - HELD THAT - Based on the Settlement Agreement dated 08.03.2019 the respondents/contemnors invited an order from the Court dated 11.03.2019. Thus it is clear that the respondents gave an undertaking to pay Rs. 24, 27, 64, 004/- as per the schedule mentioned in Clause 1.1 of the settlement agreement extracted above. At the same time the order passed by the Court dated 11.03.2019 permitted the Applicant to file a application for contempt and to take steps to revive the prayer for CIRP. Thus this Tribunal in anticipation of such violation cautiously permitted the Applicant to file contempt in the event of failure to comply with the undertaking and directions issued by this Tribunal the order became final. The Apex Court time and again discussed about the standard of proof in a contempt proceeding concluded that the standard of proof is almost identical to the standard of proof in a criminal case since the proceedings in contempt is quasi criminal in nature. The main endeavor of respondents is that the applicant failed to establish that the violation of the order is willful in the absence of any material to establish that the violation is willful this Tribunal cannot find the respondents guilty for contempt to punish in terms of Section of 12 of the Contempt of Court Act. No doubt the proceedings in contempt are quasi criminal in nature and the standard of proof is almost identical to the standard of proof in criminal cases - The power of contempt is conferred on the courts and Tribunals only to uphold the dignity of courts and to see that the orders passed by the Courts and Tribunals shall not be disobeyed and to avoid substantial loss to the parties. If no such power is conferred on the courts and Tribunals courts and tribunals will remain as a paper tigers therefore the legislature thought it fit to provide claws and jaws to prevent abuse of process of the justice system. Thus the courts and Tribunals are conferred power of contempt to punish the party who disobeyed the order of the Court or Tribunal. The breach of undertaking amounts to contempt as defined under Section 2 (b) of Contempt of Court Act but a remedy is provided in the Clause 11.2 of Settlement Agreement to invoke arbitration clause in case of breach of undertaking. As the respondents invoked arbitration clause and filed application under Section 11 of Arbitration and Conciliation Act before the High Court of Delhi since such remedy is available as per the term of the settlement agreement it is difficult to hold that the Respondent Nos. 1 2/ Contemnors committed wilful breach of settlement agreement. Accordingly it is found that Respondent Nos. 1 2 did not commit any willful breach of Settlement Agreement dated 08.03.2019. Thus the Respondent Nos. 1 2/ Contemnors are guilty for wilful disobedience of order dated 11.03.2019 while holding that the Respondent Nos. 1 2/ Contemnors not guilty for wilful breach of settlement agreement dated 08.11.2019. Sentence to be imposed under Section 12 of Contempt of Courts Act - HELD THAT - The maximum sentence is simple imprisonment for a term which may extend to six months or with fine which may extend to Two Thousand rupees or with both. However the proviso to Section 12 obligates the Court or Tribunal to consider the apology tendered by the Petitioner while considering the quantum of punishment - On the other hand they did not comply with the direction of this Tribunal as agreed in the affidavit filed on 23.09.2019 03.10.2019 before this Tribunal during the pendency of this contempt case also. Application disposed off.
Issues Involved:
1. Willful breach of the settlement agreement dated 08.03.2019. 2. Willful disobedience of the order of the Tribunal dated 11.03.2019. Detailed Analysis: 1. Willful Breach of Settlement Agreement: The Tribunal examined whether the Respondent Nos. 1 & 2 committed a willful breach of the settlement agreement dated 08.03.2019. The respondents entered into a settlement agreement to pay Rs. 24,27,64,004/- in four installments, with the first installment due on 08.04.2019. The respondents failed to make the payment, and the post-dated cheque issued was dishonored due to insufficient funds. The respondents argued that the breach was not willful but due to circumstances beyond their control, including the Board of Directors' refusal to ratify the settlement agreement. They invoked the arbitration clause and filed a petition under Section 11 of the Arbitration and Conciliation Act before the High Court of Delhi. The Tribunal found that the respondents did not commit a willful breach of the settlement agreement, considering the invocation of the arbitration clause as a legitimate remedy. 2. Willful Disobedience of Tribunal's Order: The Tribunal considered whether the respondents willfully disobeyed the order dated 11.03.2019, which directed them to comply with the terms of the settlement agreement. The respondents admitted their failure to comply with the order but contended that it was not willful. The Tribunal noted that the respondents were aware of their obligations and had sought an extension of time to comply, which was denied. The Tribunal found that the respondents' conduct, including filing affidavits and tendering an unconditional apology while failing to make any payments, indicated willful disobedience. The Tribunal concluded that the respondents willfully disobeyed the order, as their excuses were not bona fide. Conclusion and Sentence: The Tribunal held the respondents guilty of willful disobedience of the order dated 11.03.2019 but not guilty of willful breach of the settlement agreement. The respondents were sentenced to pay a fine of Rs. 2,000/- within two days, failing which they were directed to appear before the Registry for committal to civil prison. The Tribunal also declared the order dated 11.03.2019 inoperative and revived the Corporate Insolvency Resolution Process as requested by the petitioner. Summary: The Tribunal addressed two main issues: the willful breach of the settlement agreement and the willful disobedience of the Tribunal's order. It found the respondents guilty of willful disobedience but not of willful breach, imposing a fine and reviving the Corporate Insolvency Resolution Process. The judgment emphasizes the importance of compliance with judicial orders and the consequences of willful disobedience.
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