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TMI Blog2022 (7) TMI 568X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 5145/2016). HSBC made an investment in the equity capital of Avitel India for a consideration of USD 60 million in order to acquire 7.8% of its paidup capital. That the said SSA contained an arbitration clause. 2.2 That thereafter, both the parties entered into a Shareholders Agreement (SHA) on 06.05.2011, which defined the relationship between the parties after SSA dated 21.04.2011 had been entered into. The said SHA also contained an arbitration clause. As disputes arose between the parties, on 11.05.2012, notices of arbitration were issued by HSBC to the Singapore International Arbitration Centre (SIAC) to commence arbitral proceedings. The SIAC appointed an Emergency Arbitrator. The Emergency Arbitrator passed two interim awards dated 28.05.2012 and 29.05.2012, in the SSA and SHA, respectively, in favour of HSBC, directing the alleged contemnors - Avitel Dubai to refrain from disposing of or dealing with or diminishing the value of their assets up to USD 50 million, and permitting HSBC to deliver a copy of the interim awards to financial institutions in India and the UAE with which any of them hold or may hold or be signatory to accounts, together with a request that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... D 30 million (instead of USD 60 million as ordered by the learned Single Judge). 2.5 Feeling aggrieved and dissatisfied with order dated 31.07.2014 passed by the Division Bench of the High Court, both Avitel and HSBC preferred appeals before this Court. (being Civil Appeal No. 5145/2016 by Avitel and Civil Appeal No. 5158/2016 by HSBC). By a common judgment and order dated 19.08.2020, this Court set aside the order passed by the Division Bench of the High Court, directing the Avital to deposit USD 60 million and restored the order dated 22.01.2014 passed by the learned Single Judge. Thus, by the judgment and order dated 19.08.2020, the alleged contemnors - respondents herein - Avitel and others were required to deposit and/or maintain USD 60 million in the Corporation Bank account. It is alleged that not depositing the shortfall amount and/or maintaining USD 60 million in the Corporation Bank account, the respondents herein have rendered themselves liable for suitable punishment under the Contempt of Courts Act. 2.6 At this stage, it is required to be noted that in the meanwhile the Arbitral Tribunal in Singapore had passed a final award dated 27.09.2014, awarding USD 60 million ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d offered the same undertaking, which was earlier rejected by this Court on 06.05.2021 (IA No. 68388/2021). The said exemption application was opposed by HSBC vide their reply dated 01.07.2021. This Court dismissed the exemption application vide order dated 02.07.2021 and directed the alleged contemnors to file their counter affidavit to the contempt petition in two weeks. It is the case on behalf of HSBC that instead of complying with the judgment and order dated 19.08.2020 and subsequent order dated 06.05.2021, the alleged contemnors have filed another application being I.A. No. 82521/2021 (application for directions) raising the same grounds that were earlier rejected by this Court. 2.12 As the respondents herein - alleged contemnors have failed to comply with the order passed by the learned Single Judge and the judgment and order passed by this Court dated 19.08.2020 and subsequent order dated 06.05.2021 in not depositing the shortfall of approx. USD 42 million (approx. INR 3,09,07,88,400 as on 18.09.2020), so as to maintain a sum of at least USD 60 million (approx. 4,41,54,12,000 as on 18.09.2020) in the Corporation Bank account, the petitioner herein - HSBC has preferred the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the same has been upheld by the arbitral tribunal in the Foreign Final Award and prima facie accepted by this Hon'ble Court in the August Judgment. 4.3 It is submitted that the respondents - alleged contemnors did not challenge the final arbitral award in Singapore. However, they filed a petition under Section 34 of the Act, 1996 before the Bombay High Court, which has been dismissed on 28.09.2015. It is submitted that the Division Bench of the Bombay High Court has confirmed the order passed by the learned Single Judge dated 28.09.2015 rejecting Section 34 application. It is submitted that the Foreign Final Award has not been challenged in Singapore, the findings made therein are final and binding on the alleged contemnors. 4.4 It is submitted that despite the petitioner served a legal notice to the respondents - alleged contemnors and Avitel, which was after and pursuant to the August Judgment delivered by this Hon'ble Court, calling upon them to interalia, deposit the shortfall amount in the Corporation Bank account to maintain a total of USD 60 million, the respondents - alleged contemnors have refused to deposit the shortfall amount at that time on the ground that they ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... another IA No. 82521/2021 (application for directions) raising the same grounds that were rejected by this Hon'ble Court. 4.7 It is submitted that on 16.07.2021, respondents - alleged contemnors also filed their counter affidavit, interalia, stating that they are in the process of collecting offers in respect of their immovable and movable assets including their shareholding in Avitel to arrange the shortfall amount and have filed a review petition (Diary No. 20098/2020) against the August Judgment which is pending before the Supreme Court. It is submitted that all grounds raised by the respondents - alleged contemnors in the counter affidavit have already been rejected by this Hon'ble Court in this contempt petition itself. It is submitted that therefore, the respondents - alleged contemnors are seeking to reagitate the same issue again is abuse of process of the Court, as held by this Hon'ble Court in the case of KK Modi Vs. KN Modi and Ors.; (1998) 3 SCC 573. 4.8 It is further submitted by Shri Kaul, learned Senior Advocate appearing on behalf of the petitioner - HSBC that as such the respondents have accepted that are duty bound to comply with the directions of this Hon'ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Avitel Mauritius has been provided to lend credence to the value of the company; (viii) In light of findings of the arbitral tribunal and the Supreme Court in August Judgment that the petitioner's investment of USD 60 Million was diverted to entities related to the alleged contemnors; the list of assets owned by the alleged contemnors and Avitel are even less reliable. 4.11 It is further submitted by Shri Kaul, learned Senior Advocate appearing on behalf of the respondents that as such they have not raised the issue of maintainability of the contempt petition either in its counter or the two applications filed earlier. It is submitted that therefore, the belated submissions challenging the maintainability of the present contempt petition deserves to be dismissed on this ground alone. It is submitted that even the Supreme Court has jurisdiction under Article 129 of the Constitution of India to punish any person for contempt of its orders. 4.12 It is submitted that the submissions on behalf of the alleged contemnors that the contempt petition cannot lie as the petitioner can execute the August judgment passed under Section 9 of the Act, 1996 under the Code of Civil procedure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntempt proceedings. Reliance is placed on the decision of this Court in the case of Rama Narang Vs. Ramesh Narang and Anr.; (2006) 11 SCC 114. 4.16 It is submitted that in order to constitute, the order of the court must be of such a nature which is capable of execution by the person charged in normal circumstances. 4.17 It is submitted that as observed and held by the Delhi High Court in the case of M/s Terra Manufacturing & Sales Vs. M/s Alagendiraa Apparels 2011 SCC Online Del 4458, once an order passed under Section 9 of the Arbitration Act is wilfully violated, the person is liable for contempt. 4.18 It is submitted that the power of Court to punish for contempt is wide and the recognized. A party in breach of any order of court whether interlocutory or final is subject to being proceeded against in contempt. It is submitted that as observed and held by this Hon'ble Court in the case of Welset Engineers & Anr. Vs. Vikas Auto Industries & Ors.; (2015) 10 SCC 609 and in the case of SEBI Vs. Sahara India Real Estate Corp. Ltd. & Ors.; (2014) 5 SCC 429, noncompliance with the orders passed by the Hon'ble Supreme Court shakes the foundation of judicial system and undermines rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e list of assets indicates that even if the alleged contemnors are allowed to sell their assets; the same would not fetch any substantial amount to match USD 60 Million, as under: (i) The total value of the assets of the alleged contemnors is approximately Rs. 16 crores; (ii) Alleged contemnors have submitted that Avitel has assets worth approx. Rs. 365 crores; (iii) Out of Rs. 365 crores, Rs. 84 crores approximately are the monies lying in the Corporation Bank account Rs. 247 crores, is the value of investment of Avitel in the form of shares in Avitel Mauritius. (iv) The submissions of alleged contemnors that Avitel holds shares worth Rs. 274 Crore in a subsidiary called Avitel Mauritius is also completely unreliable and misleading. The underlying value of Avitel Mauritius arose only from the transfer of USD 60 Million that the petitioners had invested in Avitel or in any event is not supported by any credible proof. The valuation of Avitel Mauritius is unreliable and no independent valuation report of Avitel Mauritius has been provided to lend credence to the value of the company. (v) The Foreign Final Award held that the value of investment made by petitioner in Av ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has suffered irreparable loss due to the fraudulent conduct of Avitel and alleged contemnors and in light of the same; the petitioner's petition for enforcement of Foreign Award before the Bombay High Court may be expedited by this Hon'ble Court; it is submitted that the respondents have sought to employ dilatory tactics at every stage and therefore, any further delay will continue to cause prejudice to the petitioner. It is submitted that such delay would also discourage foreign investors like the petitioner who has been waiting to enjoy fruits of the Foreign Final Award passed in its favour since 2014 and seeks to safeguard the subject matter of its dispute as directed in the August Judgment under Section 9 of the Act, 1996. 5. Present contempt proceedings are vehemently opposed by Shri Mukul Rohatgi, learned Senior Advocate appearing on behalf of the contesting respondents - alleged contemnors. 5.1 It is submitted that the present proceedings have been initiated by the petitioner - HSBC alleging noncompliance of order dated 22.01.2014 passed by the learned Single Judge in Arbitration Petition No. 1062/2012 by which the respondents are directed to deposit USD 60 million. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at therefore while considering the present contempt proceedings the aforesaid aspects may be taken into consideration. 5.4 Shri Rohatgi, learned Senior Advocate appearing on behalf of the respondents - alleged contemnors has further submitted that the present contempt petition is not maintainable before this Hon'ble Court on the grounds, interalia, (i) by way of the present proceedings in contempt, the petitioner is seeking to execute the order of the learned Single Judge dated 22.01.2014 in Arbitration Petition No. 1062/2012, which is executable before appropriate court/forum; (ii) the contempt proceedings cannot substitute the execution/enforcement proceedings (already being availed by the petitioner) and as such the present contempt proceedings are misconceived in law and facts. In support of above submissions, Shri Rohatgi, learned Senior Advocate has relied upon the decisions of this Court in the cases of Food Corpn. of India Vs. Sukh Deo Prasad; (2009) 5 SCC 665 (para 31) and R.N. Dey Vs. Bhagyabati Pramanik; (2000) 4 SCC 400 (para 7) as well as in the case of Court Liquidator Employees' Assn. Vs. P.G. Mankad; (2002) 10 SCC 477. 5.5 It is submitted that in the present case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o deposit the same in the bank account of the company maintained with the Corporation Bank is also pending before this Hon'ble Court. 5.10 It is submitted that the respondents have genuine inability and do not have the wherewithal to deposit the shortfall amount in the Corporation Bank despite their best intentions, unless they are permitted to sell/encumber their assets to generate further funds for depositing the shortfall amount in the Corporation Bank account. 5.11 It is further submitted that contempt proceedings can only be attracted when the lapse on the part of the parties is deliberate and with the intention to defy the authority of the Court and there has to be wilful disobedience on the part of the party. 5.12 It is submitted that as held by this Hon'ble Court in catena of decisions mere noncompliance cannot be a ground to punish a person/judgmentdebtor under the provisions of the Contempt of Courts Act. 5.13 It is submitted that in the present case, as such, the order of the learned Single Judge has not yet become a decree and enforcement of the arbitral award is still pending before the High Court. It is submitted that even if it is assumed that the order of the le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt and order dated 19.08.2020, this Court in Civil Appeal No. 5158/2016 has restored the order passed by the learned Single Judge dated 22.01.2014. Thus, the respondents herein - alleged contemnors are directed to deposit the shortfall in their account with the Corporation Bank so as to maintain a balance of USD 60 million. The said order has not been complied with till date and the respondents have failed to maintain a balance of USD 60 million in their bank account with the Corporation Bank. At this stage, it is required to be noted that in the meanwhile the Arbitral Tribunal in Singapore had also passed a Final Award dated 27.09.2014 awarding USD 60 million as damages in favour of the HSBC - petitioner herein and against the respondents. The applications under Section 34 and 37 of the Act, 1996 against the Award passed by the Arbitral Tribunal in Singapore had been dismissed and the execution proceedings moved by the HSBC in the Bombay High Court to enforce Foreign Final Award dated 27.09.2014 are reported to be pending. By a notice dated 04.09.2020, the petitioner had served a legal notice upon the alleged contemnors - respondents and Avitel calling upon them to, interalia, dep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to 16, it was stated as under: " 5. At the outset, the Applicants most humbly state and submit that they have the utmost respect of this Hon'ble Court and are duty bound to comply with every order passed by this Hon'ble Court. The applicants herein never had and do not have any intention whatsoever to disobey the order passed by this Hon'ble Court. Despite their absolute willingness and best efforts, the applicants are helpless in complying with the directions of this Hon'ble Court for such reasons which are absolutely beyond their control and for want of adequate funds at this stage. There is no intent whatsoever to bring the authority and administration of law into disrespect or disregard or to interfere with or to undermine the authority of this Hon'ble Court or to cause any prejudice to the petitioner. 6. The Applicants tender an unqualified and unconditional apology to this Hon'ble Court for being unable to implement and comply with the directions passed by this Hon'ble Court vide its order dated 06.05.2021 in the instant contempt petition. 7. The applicants submit that on 06.05.2011, the petitioner HSBC PI Holdings (Mauritius) Limited was a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Applicants herein tender an unqualified apology to this Hon'ble Court for their genuine inability to comply with the directions of this Hon'ble Court vide order dated 06.05.2021 in the instant Contempt Petition for lack of adequate liquid funds. 11. The applicants however are willing to undertake to this Hon'ble Court that they would not create any encumbrance and would preserve all the above assets belonging to them or the Company for the future benefit of the petitioner subject to the final outcome of the enforcement of award proceedings/Section 48 proceedings pending before the Hon'ble Bombay High Court, wherein the pleadings are also complete. The applicants would also give such further undertaking to this Hon'ble Court as may deem just and expedient. 12. The applicants say that so far as the office premises of the Company at Mumbai, and the residential premises where the applicants reside in Mumbai or Panchgani are concerned, it is submitted that Mrs. Sudha Pradeep Jain wife of Applicant no.1 is registered owner of office premises Unit No. A7 & A8, Vimal Udyog Bhavan, Taikalwadi Road, Mumbai since 08071999 and 19072001 respectively, and registered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to order dated 06.05.2021. Therefore, while considering the present contempt proceedings, the aforesaid factual scenario and the conduct on the part of the respondents are required to be considered. 7. The present contempt proceedings are opposed by the respondents - alleged contemnors on the grounds, interalia, that (i) the order passed by the learned Single Judge dated 22.01.2014, which has been confirmed by this Court vide order dated 19.08.2020 in Civil Appeal No. 5158/2016, is an order executable and therefore, the present contempt proceedings may not be entertained; (ii) that there is no wilful disobedience on the part of the respondents - alleged contemnors in not depositing the shortfall amount in their Corporation Bank account to maintain a balance of USD 60 million as they have no sufficient funds and therefore, noncompliance is beyond their control and therefore, their inability to comply with the order despite their best efforts does not warrant any punishment under the Contempt of Courts Act. 8. Now so far as the first contention resisting the present contempt proceedings, namely, the order passed by the learned Single Judge by the High Court by which the respondents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions relied upon by the respondents themselves hold so as we shall subsequently see." 8.2 Apart from the fact that the facts in the case of R.N. Dey (supra) is distinguishable in as much as in the present case, there is further specific directions issued by this Court vide order dated 06.05.2021 even in the said decision also it is observed and held by this Court that discretion given to the court is to be exercised for maintenance of the court's dignity and majesty of law. It is further observed that the contempt is between a contemnor and the court and that an aggrieved party has no right to insist that the court should not exercise such jurisdiction. 8.3 In the case of Welset Engineers and Anr. (supra), it is observed and held by this Court that a party in breach of any order of court whether interlocutory or final is subject to being proceeded against in contempt. Orders are meant to be obeyed and a person, acting in breach of the order does so at that person's peril. 8.4 In the case of SEBI (supra), it is observed and held by this Court that noncompliance with the orders passed by this Court shakes the very foundation of our judicial system and undermines the rule of law, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dismissed by this Court. Despite the above, the respondents have failed to deposit the shortfall amount and therefore, they have rendered themselves liable for suitable punishment under the provisions of the Contempt of Courts Act for wilful disobedience of not only the judgment and order passed by this Court dated 19.08.2020 in Civil Appeal No. 5158/2016 but also for wilful disobedience and noncompliance of order passed by this Court dated 06.05.2021 in the present application. The defence on behalf of the respondents lack bona fides. To maintain the rule of law and majesty of justice and so as to see that the faith and confidence of the people in judiciary is maintained, this is a fit case to entertain the present contempt proceedings and to punish the respondents under the provisions of the Contempt of Courts Act. 12. In view of the above and for the reasons stated above, we hold the respondents guilty for deliberate and wilful disobedience of judgment and order dated 19.08.2020 passed by this Court in Civil Appeal No. 5158/2016 as well as order dated 06.05.2021 passed by this Court in the present petition. The respondents have rendered themselves liable for suitable punishmen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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