TMI Blog2022 (8) TMI 109X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocates For the Respondents : Mr. Viraj Datar , Senior Advocate with Mr. Abhishek Vikram , Mr. A. Muralidharan , Advocates JUDGMENT ( Per Hon ble Mr. Justice M. Satyanarayana Murthy ) This application is filed under Section 425 of Companies Act and Rule 11 of the National Company Law Appellate Tribunal, Rules 2016 read with Sections 12 14 of Contempt of Courts Act. The applicant herein was an applicant in an application filed under Section 9 of IBC filed against Respondent No. 3 on 22.09.2018 before National Company Law Tribunal, Chennai, as the 3rd Respondent committed default in payment of debt due to the applicant. This Petition Interlocutory Application No. 1854 of 2019 along with above Contempt Case is filed by the same Petitioner. The petition in Interlocutory Application No. 1854 of 2019 is filed under Rule-11, read with Rule 31 of NCLAT Rules to recall the order dated 11.03.2019 passed by this Tribunal in CA (AT) (Insolvency) No. 170 of 2019. Since both the Contempt and the present petition are filed based on same contention raised by both the Petitioner and the Respondents, we therefore find it appropriate to decide both Contempt and Interlocutor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the Settlement Agreement. The Respondent Nos. 1 2 categorically stated in the affidavits that, in case of non-payment of any installments as per the terms stipulated in the Settlement Agreement, the applicant shall be entitled to deposit the post dated cheques drawn by the Respondent No. 1 on his personal account to discharge the obligation of respondents to make payment to the applicant. The respondents counsel, on 04.02.2019 addressed a letter to the counsel for the applicant seeking extension of time for making payment of 1st installment due on 08.04.2019. The applicant through its counsel informed the respondent that no extension would be granted and that the respondent should comply with the directions of this Tribunal as per the orders. As Respondents failed to make payment of the 1st installment amount of Rs. 7,00,00,000/- (Rupees Seven Crores only) on the due date i.e. 08.04.2019 the applicant in strict adherence of Clause 2.3 of the settlement agreement, therefore, deposited the post dated cheque to realize the amount due as 1st installment with the banker on 09.04.2019, but, the cheque was returned unpaid/dishonored by the banker due to insufficiency of funds. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n record and ratify the terms thereof. But the Board urged to take steps immediately to raise the attachment over the bank account of the company made by the Income Tax Corporate Circle-5, Chennai and declined to take the settlement on record and ratify the terms therein. The respondents filed I.A. No. 1285 of 2019 in Comp. App. (AT) (Ins.) No. 170 of 2019 seeking extension of time narrating the details of income tax notice issued under Section 226 (3) of Income Tax Act, annexed a copy of order passed by the High Court of Madras dated 03.04.2019 in Writ Petition Nos. 9789, 9925 of 2019 whereby the High Court quashed the impugned order, notices, raised the attachment over the bank account of the Respondent No.3. However, this Tribunal dismissed the Interlocutory Application No. 1285 of 2019 by order dated 11.04.2019. Again meeting of Board of Directors was convened on 15.04.2019 to obtain consent of the board, to take Settlement Agreement on record and ratify the terms. But, the Board of Directors refused to give consent to the Settlement Agreement dated 08.03.2019 and ratify the terms. The Board of Directors raised serious objection regarding liability, breach, relationship a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... APMDC under the contract meant for serving the export contract or orders of the respondents with the foreign buyers by the Respondents. In the background, the respondent entered into MOU Strategic Business Alliance dated 23.06.2016 with M/s Sojitz Corporation, a holding company of Respondent. As per the terms of memorandum of understanding cum strategic business alliance dated 23.06.2016, the parties agreed to become strategic partners to pursue collaboration opportunities relating to the oil and gas field business, but Sojitz India Pvt. Ltd. did not undertake study for investment activities with OREN, the 3rd Respondent herein to develop further relationship between OREN and Sojitz. However, there was correspondence within Sojitz and APMDC for supply of varieties, for assignment of 38,000 MTs A grade Barytes in favour of the Applicant out of 1,80,000 MT under the agreement dated 09.06.2016. As the supply is not for domestic sale as per conditions of the agreement dated 20.06.2016, the applicant cannot sell A Grade Barytes in India, as, such sale is prohibited in terms of the agreement. Hence the claim of applicant is not sustainable. Later, the applicant sent email dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned Senior Counsel Sri Arun Kathpalia demonstrated as to how respondents/contemnors violated the undertaking and willfully disobeyed the order referring certain documents which will be discussed at appropriate stage while deciding the issue of contempt. Whereas the learned Counsel for the Respondent Sh. Viraj Datar would contend that mere default in compliance of order is not sufficient to punish the respondents/contemnors, it must be a willful disobedience and willful breach of undertaking. It is further contended that the Respondent made every endeavor to comply the order of this Tribunal but unsuccessful, therefore the disobedience or breach of undertaking cannot be said to be willful and consequently not liable for punishment, requested to dismiss the contempt case holding these respondents not guilty. Both the learned counsel filed their written-submissions and those submissions will be considered in detail at appropriate stage. Considering rival contentions, perusing the material on record, the sole point that arises for consideration is: Whether the Respondent Nos. 1 2/ Contemnors committed breach of settlement agreement dated 08.03.2019 and disobeyed the or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t relevant terms and conditions of the Settlement Agreement between the Applicant and the Respondents. Clause 1 deals with settlement amount and 1.1 specified the schedule of payment and the same is extracted hereunder: OREN hereby undertakes and confirms that it shall, and RA and RK hereby undertake and assure SJI that they shall take all such actions as may be necessary to ensure that OREN pays an amount of INR 24,27,64,004 ( Settlement Amount ) to SJI, without any deductions, reductions or set-offs whatsoever, in the respective amounts set out in the second column of the following table (each such amount being referred to as an Installment ) and on the scheduled dates set out against each instalment in third column of the following (each such amount being referred to as an Due Date ): S. No. Installment (INR) Due Date 1. 7,00,00,000/- ( First Installment ) 8 April 2019 2. 6,00,00,000/- ( Second Installment ) 8 May 2019 (if such day is not a business day for banks in New Delhi (Business Day) then th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Adjudicating Authority and dispose of the application under Section 9 filed by the Operational Creditor as withdrawn. 8. In effect, order (s), passed by the Adjudicating Authority declaring moratorium and action, if any, taken by the Interim Resolution Professional all such orders and actions are set aside. The Corporate Debtor (Company) is released from all the rigour of law and is allowed to function independently through its Board of Directors with immediate effect. 9. The matter is remitted to the Adjudicating Authority for determination of the fee of the Interim Resolution Professional the Corporate Debtor will pay the same. 10. We make it clear that in case agreement is not complied with in its letter and spirit, it will be open to the Respondents not only to file a petition for contempt for flouting the direction of this Appellate Tribunal, it will be open to the Respondents to revive the prayer for any proceeding under Corporate Insolvency Resolution Process and request this Appellate Tribunal to recall the order and to dismiss the appeal for non-compliance. It is an undisputed fact that, respondent failed to comply with the direction in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rly conduct of contemnor causing serious damage to the institution of justice administration. Such conduct, with reference to its adverse effects and consequences, can be discernibly classified into two categories one which has a transient effect on the system and/or the person concerned and is likely to wither by the passage of time while the other causes permanent damage to the institution and administration of Justice (Vide: Kalyaneshwari vs. Union of India and others (2011) 6 SCALE 220). 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and this jurisdiction is enjoyed by this Tribunal, is only for the purpose of upholding the jurisdiction of the judicial system that exists. While exercising this power, the Tribunal must not react by the emotion, but must act judicially. Contempt proceedings are intended to ensure compliance of the orders of the Court, Tribunals and strict adhering of rule of law. Once, the essentials for initiation of contempt proceedings are satisfied, the Court shall initiate action, uninfluenced by the nature of direction in a pending lis before the Court vide judgment of Apex Court in Priya Gupta and others vs. Additional Secretary, Ministry of Health and Family Welfare and others JT 2013 (1) SC 27, 2012 (12) SCALE 289. Contempt jurisdiction enjoyed by the Courts is only for the purpose of upholding the majesty of judicial system that exists. While exercising this power, the Courts must not be hyper sensitive or swung by emotions, but must act judicially (Vide: Chairman, West Bengal Administrative Tribunal vs. SK. Monobbor Hossain (2012) 3 SCALE 534). Keeping in view of the limits of contempt jurisdiction and principles regarding standard of proof in contempt case, we would like to anal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Directors in the meeting dated 13.03.2019 the respondents ought to have mentioned the said fact in I.A. No.1285/2019, the copy of the affidavit and petition in I.A. No.1285/2019 are not placed on record to substantiate such contention, hence the excuse pleaded by the respondent for non-compliance of order of this Tribunal dated 11.03.2019 is hereby rejected. It is contended by the Applicant that the order passed by this Tribunal dated 11.03.2019 is violated by the respondents consciously though the respondents are aware about the consequences that flow from such violation and it can be described as culpable/willful disobedience of order of the Court. Filing of I.A. No.1285/2019, inviting an order from the Court for extension of time to comply the directions is strong ground to conclude that the respondents violated the order willfully. Apart from the above facts, Respondent Nos. 1 2 filed affidavits before this Tribunal on 02.10.2019 during the pendency of the contempt case, stating that the Respondent Nos. 1 2 paid Rupees One crore to the applicant, while requesting to grant some more time to make further payment. Further time, till 31.12.2019, as they intend to pay full a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unconditional apology while agreeing to comply with the directions issued by this Tribunal 11.03.2019 by filing two separate notarised affidavits as stated above. But tendering an apology is neither a weapon of defence to purge the guilty of their offence nor it is intended to operate as universal panacea as held in Patel Ranjikant Dhulabhai and Anr. Vs. Patel Chandrakant Dhulabhai and Others 2008 (10) SCALE 349. In view of the principles laid down in the above judgment, the unconditional apology tendered by the respondents is not an excuse for non-compliance of the order dated 11.03.2019, moreover, the respondents themselves sought time to pay the amount in full to the applicant but not paid. As such, non-payment of the amount even after granting three adjournments is another strong circumstance to reject the defence of Respondent Nos. 1 2. On the other hand, it appears that the respondents are resorting to different methods to avoid payment to the applicant, total conduct of respondents/ contemnors is blame worthy, therefore, they are not entitled to raise any plea to justify their acts, when they repeatedly flouted the order of this Tribunal many a times. As there is no dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... money. In Mrs. Pushpalata Ors. Vs. Bhimrao Dinkar Fadtare Ors. (referred supra) observed as under: .23. The main argument advanced on behalf of the Respondents is that merely because they are unable to comply with the orders because of the financial condition of the trust or the sugar factory that should not be a reason for punishing the Respondents for contempt. It is not wilful disobedience on their part, but it is their inability to comply with the orders of the court because of financial difficulties and inability to raise funds After going through the same I am satisfied that it is not a case of wilful disobedience, but financial difficulties is the main reason for non-compliance of the order of the court .. The principles laid down in above judgment is not in quarrel, but the conduct of the respondent directly established their intention in disobeying the order of this Tribunal deliberately, the learned counsel also relied on the judgment of Apex Court in Niaz Mohammad Ors. vs State of Haryana Ors [1994] 6 SCC 332, the Apex Court observed that: 9 .. The Court while considering the issue as to whether the alleged contemnor should be punished ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the settlement agreement in case of breach, that itself is not an excuse to hold that the Respondent Nos. 1 2, not liable for contempt for violation of the order dated 11.03.2019 passed by this Tribunal, as it made clear that the applicant is at liberty to initiate contempt proceedings in case the order is violated. 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, we find that Respondent Nos. 1 2 did not commit any willful breach of Settlement Agreement dated 08.03.2019. Considering totality of the facts and circumstances of the case, we hold that the respondents 1 2 contemnors wilfully disobeyed the order of this Tribunal dated 11.03 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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