2022 (9) TMI 1292 - SC - Indian Laws

Supreme Court Holds Contemnors Guilty of Contempt, Orders Forensic Audit

The Supreme Court found Contemnor Nos. 9 and 10 guilty of contempt for inadequate purging and sentenced them to imprisonment. The Court directed forensic ... Enforcement of Foreign Arbitral Award - contempt of the order of court or not - acts of commission or omission on part of Contemnor Nos.9 and 10 and the entities controlled by them - control on assets of entity - banks and financial institutions sold the shares which were pledged with them, purely as a matter of commercial expediency or whether there was any deliberate act of defiance to defeat the rigour and width of the orders passed by the High Court and this Court ? - deliberate attempt to defeat the processes of Court or not - Whether the acts of commission or omission on part of Contemnor Nos.9 and 10 and the entities controlled by them, were calculated to put the assets of the companies under their control beyond the reach of Daiichi? - Having given clear assurances to the High Court and this Court, whether such acts of commission and omission on part of Contemnor Nos.9 and 10 amount to contempt of the orders passed by the High Court and this Court? HELD THAT:- On these two questions raised hereinabove need no further elaboration as the conduct of contemnor Nos.9 and 10 was considered and they were held guilty of having committed contempt of the orders passed by the High Court and this Court. While holding them guilty, by its judgment and order dated 15.11.2019 this Court had given them an opportunity to purge themselves of contempt. Therefore, insofar as the role played by Contemnor Nos.9 and 10 is concerned, the matter rests in a narrow compass i.e., whether they have purged themselves of contempt or not? The kind of assets that have been offered by said Contemnor Nos.9 and 10 in their affidavit are so inadequate that it is impossible to satisfy the amount awarded in favour of Daiichi in the foreign arbitral award - there are no alternative but to hold that said Contemnor Nos.9 and 10 have failed to purge themselves of contempt. As a matter of fact, there is no genuine attempt on their part. The question then comes up is about the quantum of sentence. Considering the enormity of their actions, in our view, the maximum sentence that can be awarded, must be imposed. Role played by the noticee banks and financial institutions - HELD THAT:- With the assistance of the learned counsel appearing for the parties we made an attempt to go through the documents placed on record but find ourselves unable to come to a definite conclusion whether there were antecedent arrangements which enabled said banks and financial institutions to keep attaching the shares and keep on converting large quantity of shares from the compartment of “unencumbered shares” to that of “encumbered shares” and thereafter keep disposing of said shares. Contemnor Nos. 9 and 10 are sentenced to suffer six months imprisonment and pay fine in the sum of Rs.5,000/- each within four weeks from today. In case of default of payment of fine, the contemnors shall undergo further imprisonment of two months - Applications disposed off. Issues Involved:1. Enforcement of Foreign Arbitral Award2. Alleged Contempt of Court Orders3. Role of Banks and Financial Institutions4. Transactions with IHH/NTK5. Purging of Contempt by ContemnorsDetailed Analysis:1. Enforcement of Foreign Arbitral Award:The proceedings originated from Daiichi Sankyo Company Limited's (Daiichi) action to enforce a Foreign Arbitral Award dated 29.04.2016, made in Singapore, directing the Respondents to jointly and severally pay approximately INR 2562 crores with interest. The award was challenged in both Singapore and India but became final after objections were dismissed. During enforcement in the High Court of Delhi, an objection under Section 48 of the Arbitration and Conciliation Act, 1996, was dismissed except for certain respondents who were minors. The Special Leave Petition (Civil) No. 4276 of 2018 challenging this was dismissed by the Supreme Court on 16.02.2018.2. Alleged Contempt of Court Orders:In enforcement proceedings, Daiichi expressed concerns that the Respondents were moving assets beyond its reach. An undertaking was given by the Respondents' counsel that the value of unencumbered assets disclosed would not be diminished. The Supreme Court recorded multiple assurances given by the Respondents to protect Daiichi's interests, which were allegedly violated. The Court found that the Respondents had diluted their shareholdings in Fortis Healthcare Limited (FHL) in violation of these assurances, leading to contempt proceedings.3. Role of Banks and Financial Institutions:The Supreme Court examined whether banks and financial institutions acted within commercial expediency or in connivance with the Respondents to defeat the court's orders. The Court noted that multiple banks had pledged and sold shares of FHL, which were allegedly encumbered before the court's orders. The Court directed the High Court to consider appointing forensic auditors to analyze these transactions to determine if they were bona fide.4. Transactions with IHH/NTK:The transactions involving IHH Healthcare Berhad (IHH) and NTK were scrutinized to determine if they were bona fide or intended to defeat the court's processes. It was argued that the acquisition of proprietary interests in hospitals and diagnostic centers by FHL was to streamline its business structure. The Court left it to the executing court to appoint forensic auditors to analyze these transactions.5. Purging of Contempt by Contemnors:The Court found that the assets offered by Contemnor Nos. 9 and 10 were inadequate to satisfy the award amount. The Court sentenced them to six months imprisonment and a fine of Rs.5,000/- each for contempt of court. The Court also directed the High Court to consider forensic audits and issue appropriate processes for execution of the award.Conclusion:The Supreme Court held Contemnor Nos. 9 and 10 guilty of contempt for failing to purge themselves adequately and sentenced them to imprisonment. The Court directed the High Court to appoint forensic auditors to analyze the transactions by banks and financial institutions and the dealings with IHH/NTK. The Court also ordered the transmission of Rs.17,93,40,000/- deposited in the Registry to the executing court for the enforcement of the arbitral award.