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TMI Blog2019 (8) TMI 531X X X X Extracts X X X X X X X X Extracts X X X X ..... he respondents regarding the non-maintainability of the petition is rejected. Now coming in to the merits of the case, in order to hold a person guilty of civil contempt, it has to be established by the person alleging contempt that the alleged contemner was guilty of a willful breach or a willful disobedience of an order or a direction, decree etc. of any Court. The emphasis, therefore, has to be on the word willful. The word willful means an act or omission which is done voluntarily and with an intent to do something which is forbidden by law or failing to do something which the law requires to be done. The Apex Court in the case of NIAZ MOHAMMAD AND ORS. VERSUS STATE OF HARYANA AND ORS. [ 1994 (9) TMI 364 - SUPREME COURT] had the occasion to explain willful disobedience as used in Section 2(b) of the Contempt of Courts Act. It was held that before a contemnor is punished for non-compliance of the direction of a Court, the Court must be satisfied not only of the fact that there is disobedience of a judgment or decree or direction but also must satisfy itself that such disobedience was willful and intentional. The Civil Court in an execution proceeding is not concern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Ankit Agarwal, Advocate. Respondents Through: Mr. Jawahar Raja, Advocate. JUDGMENT JYOTI SINGH, J. C.M. Appl. No.3887/2019 (for delay) 1. This is an application seeking condonation of delay of 9 days in filing rejoinder. 2. For the reasons stated in the application, the same is allowed and the delay of 9 days in filing the rejoinder is condoned. C.M. stands disposed of. C.M. Appl. No. 19227/2019 (for delay) 3. This is an application seeking condonation of delay of 34 days in filing reply. 4. For the reasons stated in the application, the same is allowed and the delay of 34 days in filing the reply is condoned. C.M. stands disposed of. CONT.CAS (C) No.579/2017 5. The present contempt petition has been filed by the petitioner under Sections 10 and 12 of the Contempt of Courts Act, 1961 read with Article 215 of the Constitution of India, seeking a direction to punish respondent No. 7 and its key officers/directors (respondent Nos. 1 to 6) for willful disobedience of the undertaking dated 21.04.2017 given on behalf of respondent No. 7, in respect of a settl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uant to the said settlement, on 04.05.2017, the cheque given by respondent No. 7 for ₹ 1,50,000/- towards the first installment, was dishonored on the ground account blocked . On being informed of the dishonor, respondent No. 6 deposited ₹ 1,50,000/- by RTGS on 05.05.2017 and the cheque was to be used towards the second installment. 9. On 14.06.2017, the cheque for ₹ 1,50,000/- for the second installment also bounced and a legal notice under Section 138 of Negotiable Instruments Act, 1882 ( NI Act ), was sent to the respondents on 08.07.2017, by the petitioner. 10. On 20.06.2017, IRP (Interim Resolution Professional) was appointed by the National Company Law Tribunal (NCLT) in an application filed by respondent No. 7 under Section 10 of the Insolvency and Bankruptcy Code, 2016 (IBC). On 10.07.2017, the Trial Court recorded the settlement between the parties and the suit was disposed of by passing a compromise decree. 11. On 19.02.2018, during the course of proceedings, under Section 138 of the NI Act, a demand draft of ₹ 1,50,000/- was given by the authorized representative of respondent No. 7 to the petitioner. 12. O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 of IBC, no doubt, categorically bars the filing of executing petitions but the contempt petition would still be maintainable. 17. Learned senior counsel for the petitioner further submits that the claim for money filed by the petitioner sole proprietorship, as operational creditor under Section 15 of the IBC is irrelevant inasmuch as the present proceeding has been filed seeking to punish the respondents under Contempt of Courts Act and not for recovery of the money due. In contempt proceedings, the Courts are required to lift the Corporate veil and punish the Directors / Officers In-charge, responsible for contempt by the Company. Learned senior counsel has placed reliance upon the following judgments: a) Delhi Development Authority v. Skipper Construction Co. (P) Ltd. Anr., (1996) 4 SCC 622 at paragraph 28; b) Aligarh Municipal Board Ors. v. Ekka Tonga Mazdoor Union Ors. (1970) 3 SCC 98 at paragraph 6; c) Jyoti Ltd. v. Kanwaljit Kaur Bhasin, 32 (1987) DLT 198 at paragraph 21. 18. I quote hereunder the paragraphs cited and relied upon by the learned senior counsel for the appellant: 1. Delhi Deve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate veil, in these circumstances, is imperative to punish improper conduct. Public interest requires the corporate veil must be lifted to find out the person who disobeyed the order of the court. 19. It is thus submitted that respondent No. 7 Company as well as its Directors/ Officers In-charge are guilty of willful disobedience and should be punished under Section 12 of the Contempt of Courts Act. 20. Per contra, learned counsel for the respondents at the outset submitted that there is at best a compromise arrived at between the parties and there is no categorical undertaking given by the respondents to a Court. In such a case, the contempt petition does not lie and at best the petitioner would have a right to enforce the compromise decree through the process of execution. In support of his submission on the maintainability of the petition, the learned counsel has relied upon a judgment of the Apex Court in the case of Babu Ram Gupta Vs. Sudhir Bhasin (1980) 3 SCC 47. I quote the relevant para as under:- There is a clear-cut distinction between a compromise arrived at between the parties or a consent order passed by the court at the instance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ull and true account of all its assets and liabilities. It is further submitted that alongwith the application, a list of respondent No. 7 s creditors viz. 25 Financial Creditors and 954 operational creditors were filed, to whom respondent No. 7 owed approximately 3146.23 crores and 42.9 crores respectively. It is submitted that the petitioner was listed at Serial No. 341 of the list of operational creditors and the debts towards him was stipulated at 14.44 lakhs, i.e., the decretal amount plus interest in the suit. 24. It is further stated by the counsel for the respondents that on 20.06.2017, the NCLT admitted respondent No. 7 s petition and appointed an Interim Resolution Professional (IRP) to take over its management. With the appointment of the IRP, the powers of the Board of respondent No. 7 stood suspended by virtue of Section 17 IBC and the management vested in the IRP. Thus, the Board of Directors lost control of respondent No. 7. 25. The IRP constituted a Committee of Creditors under Section 21 of the IBC and floated several schemes for revival of the Company, but no success was achieved. Finally, on 20.03.2018, after going through the statutory proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... means an act or omission done voluntarily and intentionally with the specific intent to do something the law forbids or with an intent to omit to do something, that the law requires to be done. In order to constitute contempt, the order of the Court must be of such a nature which is capable of execution in normal circumstances. 30. Learned counsel also relies on the judgments in the case of Niyaz Mohammad Others vs. State of Haryana and Others, (1994) 6 SCC 332, where the Apex Court held that while the contemnors had not obeyed the judgment and released the salary, but this disobedience was not willful so as to amount to a civil contempt and the Court drew a distinction between a Court executing an order and punishing for contempt. I quote the relevant portion of the said judgment as under: The Civil Court while executing a decree against the judgment debtor is not concerned and bothered whether the disobedience to any judgment, or decree, was willful. Once a decree has been passed it is the duty of the court to execute the decree whatever may be consequences thereof. But . Before any such contemnor is held guilty and punished, the Court has to record a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... merit and a decree by way of consent. The contention of the respondents on the other hand is that the compromise decree does not contain any undertaking to the Court and mere noncompliance of the terms of the compromise decree cannot be the basis of a contempt petition. Only those consent or compromise orders which are coupled with undertakings or injunctions can be the subject matter of contempt jurisdiction. 36. Having given my thoughtful consideration to the preliminary objection, I am of the view that the learned counsel for the respondents is not correct in his submission that the contempt proceeding is not maintainable. The Apex Court in the case of Babu Ram Gupta (supra) has held that in the absence of an undertaking, the non-compliance of a compromise decree or consent order would not amount to contempt of Court. It was also held that it is only when there is a breach of clear undertaking given to the Court that it amounts to a contempt of Court and not otherwise. However, the judgment in the case of Babu Ram Gupta (supra) was considered and distinguished by the Apex Court in the case of Rama Narang vs. Ramesh Narang Ors. (2006) 11 SCC 114. The Apex Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, it cannot be said that the Court s jurisdiction to deal with the matter under the Contempt of Courts Act is taken away. Following the ratio of the judgment in the case of Rama Narang (supra), the preliminary objection raised by the respondents regarding the non-maintainability of the petition is rejected. 38. On merits, it is contended by the petitioner that there has been a willful disobedience of the settlement agreement and the compromise decree passed by the Civil Court. The respondents never had any intention to make good the payment as even prior to the appointment of the IRP, it had defaulted twice and the cheques had bounced. The plea of the appointment of IRP raised by the respondents is sought to be defended by the petitioner on the ground that the payment was made by the respondent of an amount of ₹ 1,50,000/- on 19.02.2018, which was seven months after the appointment of the IRP. 39. The respondents per contra has contended that there is no willful disobedience or willful breach by the respondents. The respondents have made every endeavor to pay the outstanding dues but after making the payment of the first installment, the business of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se. In our considered opinion, the answer clearly has to be in the negative in view of the wellsettled legal position reflected in a catena of decisions of this Court that contempt of a civil nature can be held to have been made out only if there has been a wilful disobedience of the order and even though there may be disobedience, yet if the same does not reflect that it has been a conscious and wilful disobedience, a case for contempt cannot be held to have been made out. In fact, if an order is capable of more than one interpretation giving rise to variety of consequences, non-compliance with the same cannot be held to be wilful disobedience of the order so as to make out a case of contempt entailing the serious consequence including imposition of punishment. However, when the courts are confronted with a question as to whether a given situation could be treated to be a case of wilful disobedience, or a case of a lame excuse, in order to subvert its compliance, howsoever articulate it may be, will obviously depend on the facts and circumstances of a particular case; but while deciding so, it would not be legally correct to be too speculative based on assumption as the Contempt o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. Satyabrata Chakravorty (1990) 4 SCC 737 , the Apex Court held as under: 6. In our opinion, before a party can be committed for contempt, there must be a willful or deliberate disobedience of the orders of the court. In the present case, we do not find that any such willful or deliberate or reckless disobedience of our order dated January 16, 1990, has been committed by the respondent to the contempt petition. Hence, the contempt petition is dismissed .. 43. The occasion to interpret and analyse the effect of Section 2(b) again arose in the case of Ashok Paper Kamgar Union (supra). The Apex Court in the said case held as under: 17. Section 2(b) of the Contempt of Courts Act defines civil contempt and it means wilful disobedience to any judgment, decree, direction, order, writ or other process of a court or wilful breach of undertaking given to a court. Wilful means an act or omission which is done voluntarily and intentionally and with the specific intent to do something the law forbids or with the specific intent to fail to do something the law requires to be done, that is to say, with bad purpose either to disobey or to disregard the law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anner by the rights or obligations of the parties to the litigation inter se. 15. Shri Nariman has referred to the affidavit filed by Respondent 1 before the Debts Recovery Tribunal, Bombay in the recovery proceedings initiated by Oman International Bank, SAOD and has submitted that the respondents have no money or assets apart from the immovable property, which is lying under attachment, to pay the amount. The learned counsel has also submitted that the respondents have themselves tried their best to secure a purchaser for the property at Versova which is the only valuable property in order to pay the amount to the petitioner. Copy of a letter sent to the Recovery Officer, Debts Recovery Tribunal-II, Bombay on 10-10-2003 by the solicitors of an intending buyer, who had made an offer to purchase the said property for ₹ 3 crores along with a demand draft of ₹ 30 lakhs was also placed before us. Shri Rohatgi, learned Additional Solicitor General has, on the other hand, submitted that apart from Oman International Bank, SAOD, one Shiraj Taher Alli Lokhandwala has also obtained a money decree against the respondents due to which several problems have arisen in e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed whether the act of the alleged contemnor can be termed as willful disobedience or not. The question, therefore, that arises is whether by not paying the money to the petitioner in terms of the compromise decree, the respondents have willfully disobeyed the order, with an intent to do so or there are any compelling circumstances, which has prevented the respondents from paying the balance amount in terms of the compromise decree. 48. The defence of the respondents to the present petition is that the respondents had initially made part payments in satisfaction of the compromise decree but soon thereafter the business of the Company suffered mounting debts. The ICICI Bank, one of its significant financial creditors, recalled its financial assistance to the tune of 412 Crores and the Bank issued notice under the SARFAESI Act. Respondent No. 7 thereafter applied under Section 10 of the IBC asking for Insolvency Resolution process to be set in motion. An IRP was appointed to take over the management and the powers of the Board of respondent No. 7 were suspended. The IRP has applied to the NCLT to liquidate the Company. Respondent No. 7 owes over ₹ 2000 Crores to variou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ention of the petitioner that because some amount was paid initially through the cheques, there was a malafide intent not to pay further, and therefore, a contempt is made out. The chronology of dates and events shows that after the initial installment was paid, the respondent No.7 suffered losses and the ICICI Bank had issued notice under the SARFAESI Act and soon thereafter, the IRP was appointed and liquidation proceedings started. While this may be an unfortunate coincidence, but the fact of the matter is that pending the insolvency proceedings, the respondents cannot pay to the petitioner by jumping the queue. In response to the contention of the petitioner that the representative of respondent No. 7 had given a Demand Draft of ₹ 1,50,000/- even after the appointment of the IRP, and therefore, the rest of the money should also be paid, the respondents have clarified that the petitioner had filed a criminal complaint under Section 138 of the Negotiable Instruments Act (NIA) against respondent No. 7 for the dishonor of the cheque towards the second installment and some of the respondents were named as accused in view of Section 141 of the NIA. It was in this background tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Act, read with Article 215 of the Constitution of India and is in the nature of civil contempt. 54. The next judgment relied upon by the learned senior counsel for the petitioner is the judgment of a Single Bench of this Court in the case of Deputy Director, Directorate of Enforcement, Delhi vs. Axis Bank Ors. in Criminal Appeal No. 143/2018 decided on 02.04.2019. In the said case, the Court was considering a challenge to a decision of the Appellate Tribunal under the PMLA which had held that SARFAESI, IBC and RDBA prevailed over the PMLA and this Court had reversed the finding of the Appellate Tribunal holding that these Acts operated in their own spheres. In reaching the said finding, the Court found that even where there were assets in the name of the persons against whom there was material to show complexity in money laundering, the prerogative power of the State to act under PMLA could not jeopardize the bonafide third party claimant s interests in those assets. In my view, the said judgment is of no avail to the petitioner. In fact, by following this judgment, the proceedings under the IBC in which claims of third parties against respondent No. 7 are being a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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