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TMI Blog2019 (2) TMI 1254X X X X Extracts X X X X X X X X Extracts X X X X ..... nt, ultimately issued three notices, each dated 07.05.2017, under the Insolvency and Bankruptcy Code, 2016 ["Insolvency Code"] to the three Reliance Companies, calling upon them to pay an amount of INR 9.78 crore. These notices were replied to on 19.05.2017, whereby the three Reliance Companies stated that the performance of Ericsson had been inconsistent. After this date, discussions took place between the parties, and an understanding was reached for making payment of the outstanding invoices. However, even this understanding fell through, and on 07.09.2017, Ericsson issued a letter to the three Reliance Companies, terminating the agreement between them, and calling upon them to pay the outstanding amount in full. At this stage, on 08.09.2017, Ericsson filed three applications under Section 9 of the Code as operational creditors. On 15.05.2018, the National Company Law Tribunal ["NCLT"] admitted the aforesaid petitions and appointed three Interim Resolution Professionals on 18.05.2018 to carry out the corporate insolvency resolution process. At this stage, appeals were filed against the NCLT order. The National Company Law Appellate Tribunal ["NCLAT"], by order dated 30.05.2018, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 30.09.2018. It was also made clear that the petition for contempt may be revived if payment is not so made by this date. A second application to extend time was moved on 12.12.2018, citing the same excuse of other spectrum not yet being saleable. This time, extension of time was asked for making the payment within two weeks from the date on which a No-Objection Certificate ["NOC"] is given by the Department of Telecommunications ["DoT"] for sale of other spectrum. On 13.12.2018, this Court made it clear that it was not inclined to grant any such extension, as a result of which, the second application for extension of time was dismissed as withdrawn. While matters stood thus, a letter dated 21.01.2019 was written by the advocates of the three Reliance Companies, who stated that on 09.01.2019, INR 118 crore had already been deposited with the Registry of this Court, and that the total outstanding, as on date, together with interest, would be roughly INR 570 crore. This letter specifically states that the net figure of INR 453 crore would be paid by 31.01.2019, conditional upon withdrawal of the two contempt petitions (a second contempt petition, being Contempt Petition No. 55 of 2019 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 's orders, the administration of justice has been sought to be interfered with. He cited judgments in order to buttress these contentions. 4. On the other hand, Shri Mukul Rohatgi and Shri Kapil Sibal, learned Senior Advocates appearing on behalf of RCom, and RITL and RTL, respectively, have argued that at best, if the settled amount of INR 550 crore, in the place of INR 1500 crore, was not paid to Ericsson, the corporate insolvency resolution process, which was stalled, would begin afresh, and Ericsson would then stand in line as an operational creditor to claim the entire sum of INR 1500 crore. In any case, it is also obvious from the NCLAT order dated 30.05.2018, which was referred to by the orders of this Court, that the sum of INR 550 crore was to be paid from the sale of assets of the corporate debtor, which is part and parcel of the order dated 30.05.2018. The undertakings given by the Chairmen of the three Reliance Companies, dated 09.08.2018, are therefore, in accordance with the NCLAT order as well as the order of this Court dated 03.08.2018. They further argued that, in any case, even if such undertakings were not in accordance with these orders, no complaint was ever m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SBI to bring in amounts due and payable so as to purge itself of contempt does not lie against the Joint Lenders' Forum in view of the fact that the Ericsson transaction is wholly independent of sale of assets. 6. Since everything turns on the order of NCLAT dated 30.05.2018, and the three orders of this Court, these orders are set out hereunder: The order of the NCLAT, dated 30.05.2018, states: "These appeals have been preferred by the Appellants-Directors and Shareholders of 'Reliance Infratel Ltd.'; 'Reliance Telecom Ltd.' and 'Reliance Communications Ltd.' against the common orders dated 15th May, 2018 and 18th May, 2018, passed by the Adjudicating Authority (National Company Law Tribunal), Mumbai Bench, Mumbai, whereby and whereunder, the application(s) under Section 9 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as "I&B Code") preferred by the Respondent- 'Ericsson India Pvt. Ltd.'- ('Operational Creditor') have been admitted, order of 'Moratorium' has been passed and 'Insolvency Resolution Professional' has been appointed. Apart from the ground that an arbitration proceeding is pending and the Hon'ble Supreme Court has passed an order, some oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... '), on instructions from the Respondent, informed that the 1st Respondent has agreed to receive a sum of Rs. 550 Crores (Rupees Five hundred fifty Crores only), if the total amount is paid within 120 days as proposed by the learned Senior Counsel for the Appellants. 11. Taking into consideration the stand taken by the parties and the fact that if the 'Corporate Insolvency Resolution Process' is allowed to continue, all the 'Financial Creditors' as also the 'Operational Creditors' may suffer more loss and the Appellants have made out a prima facie case, as agreed and suggested by learned Senior Counsel for the Appellants and learned Senior Counsel for the 'Joint Lenders Forum' and the learned Senior Counsel for the 'Operational Creditor'- 'Ericsson India Pvt. Ltd.', we pass the following orders: i. Until further orders, the impugned orders dated 15th May, 2018 and 18th May, 2018, passed by the Adjudicating Authority, Mumbai Bench in C.P. (IB) 1385, 1386 & 1387 (MB)/2017, shall remain stayed. The 'Resolution Professional' will allow the managements of the 'Corporate Debtors' to function. He may attend the office of the 'Corporate Debtors' till further order is passed by this Appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re allowed. Permission to file Appeals is granted. Applications for impleadment are allowed. Reading the interim Order dated 30.05.2018 of the National Company Law Appellate Tribunal, it is clear that Ericsson India Pvt. Ltd., who is an Operational Creditor, is willing to settle its debt of over Rs. 1500 Crores for a sum of Rs. 550 Crores (Rupees Five Hundred Fifty Crores only) which is to be paid within 120 days from the date of that order i.e. by 30th September, 2018. Having heard Mr. P. Chidambaram, learned Senior Counsel for Neptune Steel Strips Ltd. and Mahima Mercantile Credits Ltd., Mr. Kapil Sibal, learned Senior Counsel for Reliance Communications Limited & Ors. and Mr. Tushar Mehta, learned ASG for Joint Lenders Forum/SBI, we are of the view that this time-line shall be strictly adhered to and payment of Rs. 550 Crores (Rupees Five Hundred Fifty Crores only) be made on or before 30th September, 2018. In the meanwhile, the undertaking that is to be given by the Chairman of the Company concerned shall be given within a period of one week from today. Mr. Tushar Mehta, learned ASG appearing for the Joint Lenders Forum agrees to this. Mr. Dushyant Dave, learned Sen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deposit the amount so received in an account of the lead bank, i.e., SBI; and the sum of INR 550 crore was directed to be paid by 30.09.2018. It was made clear that in case of non-payment, the concerned appeals may be dismissed, and the NCLAT may direct the completion of the corporate insolvency resolution process. In any case, the amount so deposited with the financial creditors'/Joint Lenders' Forum would be subject to the decision of these appeals, and that if the appeals are dismissed, the financial creditors'/Joint Lenders' Forum will pay back this amount to the corporate debtors. Most importantly, the corporate debtors and creditors were directed to file their respective affidavits of undertaking in terms of the statements recorded. 8. At this stage, it is important to set out one sample undertaking that has been filed on behalf of one of the Reliance Companies, i.e., by the Director of RITL. This affidavit of undertaking reads as follows: "BEFORE THE NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI xxx xxx xxx AFFIDAVIT OF UNDERTAKING OF THE APPELLANTS I, Suresh Madihally Rangchar, S/o Sh. Rangachar M. Raghavachar, aged about 54 years, R/o Imperial Tower, Flat No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... panies to that effect. The order separately noted that the sale of assets will continue, as has been stated in the orders of the NCLT and the NCLAT. A reading of this order also leaves no manner of doubt that the undertakings that were to be given by the Chairmen of the Companies concerned were only that the payment of INR 550 crore was to be made on or before 30.09.2018. There is no doubt whatsoever that there was no linkage with any sale of assets of these Companies. 10. Despite the aforesaid position being clear, on 09.08.2018, the affidavits of undertaking, in pursuance of this Court's order dated 03.08.2018, were given by the Chairmen of the Reliance Companies. A sample undertaking, filed by the Chairman of RCom, reads as follows: "IN THE SUPREME COURT OF INDIA xxx xxx xxx AFFIDAVIT OF UNDERTAKING/COMPLIANCE I, Anil Dhirubhai Ambani, S/o Late Shri Dhirajlal Dhirubhai Hirachand Ambani, aged about 60 years, residing at 39, 'Sea Wind', Cuffe Parade Colaba, Mumbai - 400005, do hereby solemnly affirm and state on oath as under: 1. That I am the Chairman of the Reliance Communications Limited ("Company"), the holding company of Reliance Telecom Limited and Reliance Infrat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 01.10.2018, in which it was clearly pointed out that the said undertaking would show contumacious behavior coupled with the fact that the Reliance Companies were wriggling out of the commitment made to this Court. When the first contempt petition and the first application for extension of time came up for hearing before this Court, this Court, vide order dated 23.10.2018, made it clear that as a matter of indulgence, a last opportunity would be granted to pay the aforesaid sum on or before 15.12.2018, making it clear that this is conditional upon payment of interest of 12% per annum for delayed payment beyond 30.09.2018. It was also made clear that no further extension would be granted and that Ericsson may revive the petition for contempt if payment is not so made. This order again leads to only one conclusion - that the averment made in the application for extension of time that the sum of INR 550 crore will be paid out of sale of assets was not accepted by this Court, as sale of assets could have taken place even beyond 15.12.2018. This further becomes clear from the fact that the contempt petition would be revived if this payment were not to be made, i.e., it would be open f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the corporate insolvency resolution process could be revived. 14. The law of contempt has been recognized in English law at least from the 12th Century A.D. to the present time [see The History of Contempt of Court: The Form of Trial and the Mode of Punishment by Sir John C. Fox, at page 1]. It is always important to bear in mind, as was stated in Attorney-General v. British Broadcasting Corporation, [1980] 3 All ER 161 [House of Lords], per Lord Salmond, that: "The description "contempt of court" no doubt has an [sic] historical basis but it is nevertheless most misleading. Its object is not to protect the dignity of the courts or the judges but to protect the administration of justice......." (at page 170) In the same judgment, Lord Scarman added: "It is high time, I would think, that we re-arranged our law so that the ancient but misleading term "contempt of court" disappeared from the law's vocabulary." (at page 184) Another edifying statement, by Lord Diplock in Attorney-General v. Leveller Magazine Ltd. and Ors., [1979] 1 All ER 745 [House of Lords], reads as follows: "...... It is justice itself that is flouted by contempt of court, not the individual court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e limit of 60 days plus, as was given by way of indulgence, by the order dated 23.10.2018. The undertakings given on the footing that the amount of INR 550 crore would be paid only out of the sale of assets was false to the knowledge of the three Reliance Companies. This itself affects the administration of justice, and is therefore, contempt of court. What is of greater relevance is the fact that, despite the Reliance Companies' continuous protestations to the contrary, the letter dated 21.01.2019 from the advocate for the three Reliance Companies made it clear that the entire payment would be made by 31.01.2019, albeit on fulfilment of two conditions. This letter is of great importance and is set out in entirety hereinbelow: "21 January, 2019 To, xxx xxx xxx SUB: COMPLETION OF SETTLEMENT Dear Sir, We are concerned for our clients Reliance Communications Limited (RCom), Reliance Infratel Limited (RITL) and Reliance Telecom Limited (RTL, and collectively with RCom and RITL, the RCom Group), who have instructed us to write to you on behalf of your client Ericsson India Private Limited (Ericsson) as under: 1. The Hon'ble Supreme Court has vide its order dated 3 August, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng handed over to Ericsson on 31 January 2019. Yours sincerely, xxx xxx xxx" 18. It may be pointed out that in their reply to the Contempt Petition No.55 of 2019, RCom and its group companies had stated that they were "disabled" from paying the amount of INR 550 crore plus interest; that they "were and are unable to pay"; and finally, that: "xxx xxx xxx 39. The Respondents had submitted the Undertaking on behalf of RCom Group Companies based on the lenders' consent for monetization of the Other Spectrum for Rs. 975 crores and in the genuine hope and bonafide belief that Asset Monetization Scheme would be implemented and Ericsson shall be paid an amount of Rs. 550 crores along with interest, however, the same has become impossible to be achieved. xxx xxx xxx" 19. Obviously, the letter dated 21.01.2019 by the advocates on behalf of the Reliance Companies would belie each of the aforesaid statements made in the said reply affidavit. There is, therefore, no doubt whatsoever that the three Reliance Companies have wilfully not paid the sum of INR 550 crore plus interest and have thus breached the undertakings given to this Court. 20. Another disturbing feature of the reply a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that right from the beginning, the sum of INR 550 crore was undertaken to be paid, without having to depend upon any act or omission of a third party. To say that the sum of INR 550 crore would be paid only out of sale of assets of the three Reliance Companies is a deliberate misstatement made in the undertakings as well as the applications for extension of time filed before this Court, which was done with the purpose of circumventing the orders of this Court. We are also of the view that in the facts of the present case, wilful default is made out, as has been pointed out in this judgment. (iii) In Dinesh Kumar Gupta v. United India Insurance Co. Ltd., (2010) 12 SCC 770, this Court held: "23. Besides this, it would also not be correct to overlook or ignore an important statutory ingredient of contempt of a civil nature given out under Section 2(b) of the Contempt of Courts Act, 1971 that the disobedience to the order alleging contempt has to satisfy the test that it is a wilful disobedience to the order. Bearing this important factor in mind, it is relevant to note that a proceeding for civil contempt would not lie if the order alleged to have been disobeyed itself provides sc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompliance. 22. At this stage, we may point out that the contempt petition against the Chairman of SBI would not lie inasmuch as the Ericsson transaction and the sale of assets by the Joint Lenders' Forum are completely independent of each other, as argued by Shri Dave himself, and as has been held by us hereinabove. Also, the statement made in paragraph 18 of the Contempt Petition No. 185 of 2019 that, "all the respondents in the contempt petition were bound to have handed over the amount of INR 550 crore to the petitioner on or before 15.12.2018 ......" is patently incorrect inasmuch as respondent no. 4 (SBI) has nothing to do with this amount of INR 550 crore which had to be paid over to Ericsson only by the three Reliance Companies. The contempt petition against the Chairman of SBI is, therefore, dismissed. 23. Having held the three Reliance Companies guilty of contempt of this Court, it is now necessary to point out Section 12(4) of the Contempt of Courts Act, 1971, which reads as follows: "12. Punishment for contempt of court.- xxx xxx xxx (4) Where the person found guilty of contempt of court in respect of any undertaking given to a court is a company, every person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court rightly observed that it had no option except to convict the appellant and sentence him to three months' imprisonment, with which this Court agreed. He also pointed out that in Patel Rajnikant Dhulabhai v. Patel Chandrakant Dhulabhai, (2008) 14 SCC 561, so-called apologies, which are only tactful moves when contemnors are in a tight corner, should not be accepted and a jail sentence should be awarded [see paragraphs 77 and 78]. He also referred to and relied upon Noorali Babul Thanewala v. K.M.M. Shetty, (1990) 1 SCC 259, where this Court held: "11. When a court accepts an undertaking given by one of the parties and passes orders based on such undertaking, the order amounts in substance to an injunction restraining that party from acting in breach thereof. The breach of an undertaking given to the court by or on behalf of a party to a civil proceedings is, therefore, regarded as tantamount to a breach of injunction although the remedies were not always identical. For the purpose of enforcing an undertaking that undertaking is treated as an order so that an undertaking, if broken, would involve the same consequences on the persons breaking that undertaking as would thei ..... X X X X Extracts X X X X X X X X Extracts X X X X
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