2019 (11) TMI 1844 - SC - Indian Laws

Directors found guilty of contempt for transferring trust holdings to defeat foreign arbitral award enforcement rights

SC held respondents guilty of contempt for violating court orders regarding enforcement of foreign arbitral award. Despite undertakings to HC Delhi not to ... Enforcement of an international/foreign arbitral award - violation of court order - main contention of the petitioner was that despite the respondents violating the undertakings time and again restraint orders were not being passed - HELD THAT:- Interestingly, the main promoters of RHC and OIL i.e. MMS and SMS were the biggest unit holders in RHT when it was initially incorporated. The statistics of unit holding as on 20.06.2017 of RHT Trust, Singapore shows that SMS, MMS, their family members, FHHPL, FHL and RHC virtually owned the RHT trust. That situation has now changed and now the situation is such that the companies/associations of which MMS and SMS are partners are no longer visibly present and there are other persons who are there. When and how the holdings in RHT trust were transferred by various people is a matter which is required to be gone into. The transactions were made by MMS, SMS, RHC, OIL and FHL to defeat the rights of the petitioner despite making undertakings to the High Court of Delhi that no action would be taken to prejudice petitioner’s rights. These transactions are in wilful disobedience of the order of this Court dated 14.12.2018 read in conjunction with the earlier orders. Suo moto notice of contempt issued and the Registry directed to register a fresh contempt petition with regard to the violation of the order dated 14.12.2018 in which RHC, OIL, MMS, SMS and FHL shall be arrayed as contemnors. FHL is directed to disclose the list of directors/officials actively involved in the running of the company for the period 01.01.2018 to 31.01.2019. Sameer Gehlaut, Director of Indiabulls Housing Finance Limited and Director of Indiabulls Ventures Limited (Contemnor Nos.1 & 5), Gagan Banga, Director of Indiabulls Housing Finance Limited and Director of Indiabulls Ventures Limited (Contemnor Nos.2 & 6), Ashwini Kumar Hooda, Director of Indiabulls Housing Finance Limited (Contemnor No.3), Sachin Chaudhary, Director of Indiabulls Housing Finance Limited (Contemnor No.4), Divyesh Bharat Kumar Shah, Director of Indiabulls Ventures Limited (Contemnor No.7) and Pinank Jayant Shah, Director of Indiabulls Ventures Limited (Contemnor No.8), who are active directors of IHFL and IVL of knowingly and wilfully disobeying the orders of this Court dated 11.08.2017, 31.08.2017 and 15.02.2018 as continued on 23.02.2018 and find them guilty of committing contempt of this Court. Malvinder Mohan Singh, Director of Oscar Investments Limited and Director of RHC Holding Private Limited (Contemnor Nos.9 and 12) and Shivinder Mohan Singh, Director of Oscar Investments Limited and Director of RHC Holding Private Limited (Contemnor Nos.10 and 13) have knowingly and wilfully violated the orders of this Court dated 11.08.2017, 31.08.2017 and 15.02.2018 as continued on 23.02.2018 - both of them are held guilty of committing Contempt of this Court. We give one chance to them to purge themselves of the contempt. List the present contempt petition on 03.02.2020 when all the contemnors named hereinabove shall remain present in the Court. Issues Involved:1. Enforcement of an international arbitral award.2. Alleged violation of court orders and undertakings.3. Contempt proceedings against individuals and entities.4. Allegations of asset alienation to defeat creditor rights.5. Clarification and modification of interim court orders.Issue-wise Analysis:1. Enforcement of an International Arbitral Award:The petitioner sought enforcement of an arbitral award granted in Singapore, which entitled them to approximately Rs. 3500 crores from the respondents. The award was challenged in both Singapore and India, but the objections were dismissed, making the award enforceable. The petitioner initiated enforcement proceedings in the Delhi High Court, where objections under Section 48 of the Arbitration and Conciliation Act, 1996, were largely dismissed, except for certain respondents who were minors.2. Alleged Violation of Court Orders and Undertakings:During the enforcement proceedings, the petitioner expressed concerns that the respondents might dissipate their assets, rendering the award unenforceable. Multiple assurances were given by the respondents to the Delhi High Court, stating that the petitioner's interests would be protected. Despite these assurances, it was alleged that the respondents attempted to reduce their shareholding in Fortis Healthcare Limited (FHL) through various transactions, potentially violating court orders and undertakings.3. Contempt Proceedings Against Individuals and Entities:The Supreme Court examined whether the respondents, including individuals and entities such as Indiabulls Housing Finance Limited (IHFL) and Indiabulls Ventures Limited (IVL), violated court orders. The court found that IHFL and IVL, along with their directors, knowingly and willfully disobeyed orders by transferring shares despite being aware of the status quo order. Similarly, Malvinder Mohan Singh and Shivinder Mohan Singh were found guilty of contempt for violating court orders and undertakings.4. Allegations of Asset Alienation to Defeat Creditor Rights:The court noted that the respondents engaged in transactions that appeared to be part of a scheme to dilute their shareholding in FHL, thereby defeating the petitioner's rights. The transactions included pledging and transferring shares, which reduced the value of the assets available to satisfy the arbitral award. The court highlighted that these actions were contrary to the assurances given to the Delhi High Court.5. Clarification and Modification of Interim Court Orders:The Supreme Court clarified its interim orders to ensure that both encumbered and unencumbered shares were covered by the status quo order. Despite the clarification, the respondents continued to engage in transactions that violated the court's directives. The court emphasized that the respondents' actions were in contempt of its orders, as they failed to maintain the shareholding as directed.Conclusion:The Supreme Court found the respondents guilty of contempt for willfully violating court orders and undertakings. The court provided an opportunity for the contemnors to purge themselves of contempt by depositing significant sums in court. Additionally, the court initiated suo motu contempt proceedings against certain entities for alleged violations of a subsequent order. The case underscores the importance of adhering to court orders and the consequences of failing to do so.