TaxTMI 
TaxTMI 
2017 (5) TMI 733
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....nd Bank, Punjab National Bank, State Bank of Mysore, UCO Bank, United Bank of India and Oriental Bank of Commerce.) have filed the instant special leave petitions challenging the order dated 04.03.2016 passed by the High Court of Karnataka at Bengaluru in Writ Petition Nos.12191-12194 of 2016 refusing to pass any ad interim order against Respondent Nos.3, 10 and 11. According to the petitioners-banks they had individually advanced to Respondent No.1 loans of thousands of crores of rupees; that by Master Debts Recast Agreement dated 21.10.2010 and other related documents the existing loans were restructured and treated as a single facility; and that Respondent Nos.2 and 3 executed a corporate guarantee dated 21.12.2010 and a personal guarantee dated 21.12.2010 respectively, guaranteeing repayment of the entire amount due. Further, since the above accounts were classified as non-performing assets, the petitioners-banks filed OA No.766 of 2013 against Respondent Nos.1 to 9 before Debt Recovery Tribunal, Bengaluru (for short "DRT Bengaluru), inter alia seeking recovery of Rs. 6203,35,03,879.32 (Rupees Six Thousand Two Hundred and Three Crores Thirty Five Lakhs Three thousand Eight....
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....ther Embassy. The Order dated 30.03.2016 discloses that Mr. C.S. Vaidyanathan, learned Senior Advocate appeared on behalf of Respondent Nos.1 and 3 and the Order recorded his submission that a proposal was already given to the Chairperson of State Bank of India (Consortium leader of banks) for settlement of dues of Respondent Nos.1 to 4. 5. The matter came up on 07.04.2016 when the Counsel appearing for the petitioners-banks submitted that the offer made by Respondent Nos.1 to 4 was not acceptable though the Consortium was not against any settlement provided the respondents showed their bona fides for a meaningful negotiation. This Court observed in its Order dated 7.04.2016:- "As a pre-condition to such steps on bona fides, it is submitted that the third respondent should first of all disclose, on oath, the details of all the properties - movable, immovable, tangible, intangible, shareholdings and any right, title or interest including beneficial interest and those held in fiduciary capacity, in private trusts, public trusts, companies, partnerships, limited liability partnerships, and/or any other entity/ies both in India and abroad etc. in any form and there should b....
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....ification or modification of Order dated 07.04.2016. In the above circumstances, we do not find any tenable objection in disclosing these assets to the petitioners. The learned senior counsel further submits that the wife and children are American citizens and they are not the parties before this Court. Whatever protection is available to them under law, they are free to avail. This disclosure is only for the purpose of enabling the petitioners to have a fair idea for a meaningful settlement. We are distressed to note that Respondent No.3 has not responded to our Order dated 7th April, 2016 in the letter and spirit of the said Order. He was to show us his bonafides by showing the color of money in the form of a substantial deposit towards dues in the region of 18,000 crores to arrive at a meaningful settlement. It appears there is no bonafides in his offer for settlement. Apparently, statements made by counsel on his behalf were made only as a ploy to gain time. The Registry is directed to disclose the statement of assets furnished in the sealed cover, to the petitioners." 7. On 28.06.2016 Respondent No.10 filed a memo in O.A. No.766 of 2013 pending be....
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....osure of the assets as directed by this Court in its Order dated 7.04.2016. 9. On 14.07.2016 itself the petitioners-banks filed Contempt Petition Nos. 421-424 of 2016 submitting that appropriate contempt proceedings be initiated for deliberate and willful violation of the Order dated 7.04.2016 passed by this Court. Paragraphs 20 to 24 of the petition were as under:- "20. A reading of the Disclosure Statement made by Contemnor clearly reveals that the Contemnor has not at all obeyed the directions of this Hon'ble Court dated 07.04.2016. One of the primary directions given by this Hon'ble Court to the Contemnor was that he should disclose the proper details of all his properties-movable, immovable, tangible, intangible, shareholdings and any right, title or interest including beneficial interests and those held in fiduciary capacity, in private trusts, public trusts, companies, partnerships, limited liability partnerships, and/or any other entity/ies both in India and abroad etc. in any form whatsoever, as on 31.03.2016. However, Contemnor has not at all disclosed the details of the assets in various forms/entities such as beneficial interest, etc. and thereby intentional....
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....d that in view of what is recorded in the Order dated 26th April, 2016 as to the purpose of the disclosures, it is now not open to the Petitioners-banks to contend that in the event that the DRT allows the Original Application, the Petitioners-banks may not be able to proceed against the properties mentioned in the disclosures as alleged or for reasons alleged. In this regard, it is pertinent to mention that the Respondent No.3 had expressly submitted before this Hon'ble Court on 26th April, 2016 that "the personal guarantee executed by the 3rd Respondent with the banks do not cover his assets abroad". It is denied that all particulars and all descriptions of the assets as contemplated by the Order dated 7th April, 2016 have not been provided, deliberately or otherwise. It is denied that there is any reason or basis for directing the Respondent No.3 to once again disclose and furnish particulars and description of his properties as alleged or in the manner alleged. It is denied that if the I.A. of the Petitioners-banks is not allowed, the Petitioners or the public at large will be put to irreparable loss or injury." 12. Applications being I.A. Nos.1 to 4 of 2016 were also filed ....
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....eged contemnor had not filed any reply to the contempt petition nor had he appeared in person in response to the contempt petition as required by Rule 6(1) of Rules to Regulate Proceedings for Contempt of Supreme Court 1975 and that present application for recall was a mere ruse to circumvent the law. It was submitted:- "6. The Alleged Contemnor has received the sum of US$ 40 million from Respondent No.10 pursuant to an Agreement dated 25-02-2016 entered into between Respondent No.3 and Respondent No.10. However, the Alleged Contemnor has suppressed the receipt of US$ 40 million from Respondent No.10 even in the Application under reply. The non disclosure of whereabouts of US$ 40 million received from Respondent No.10 further discredits the Alleged Contemnor. 7. The Alleged Contemnor has not denied the existence of his bank account held in Edmond De Rothschild Bank, Geneva. However, details of this bank account did not find mention in the list of his foreign assets filed before this Hon'ble Court on 26.04.2016. It is respectfully submitted that this is an act of willful concealment and the Alleged Contemnor is in violation of Order dated 07-04-2016 passed by this ....
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....United States of America. Respondent No.3 is neither the Settlor nor the Trustee nor the beneficiary of any of the aforesaid named Trusts, and has no control over the Trusts or the manner in which the respective corpuses of each of the aforesaid Trusts is utilized. However, the respective corpuses as they stood on 31st March, 2016 have been included in the statements of assets of the three children handed over to this Hon'ble Court in sealed envelope on 26th April, 2016." 17. The response was thereafter filed by the petitioners-banks to the aforementioned "further counter affidavit" filed by Respondent No.3. Attention was invited to the restraint Orders passed by the High Court of Karnataka on 03.09.2013 and 13.11.2013. It was submitted that the transfer of US$ 40 million by Respondent No.3 to his children was not only in contempt of the Orders passed by the High Court but was also an attempt to subvert the Course of Justice by diverting the funds to shield them from ongoing recovery proceedings. Paragraphs 13 to 16 of the reply were as under: "13. Notwithstanding the above, it is respectfully submitted that pursuant to filing of O.A. No.766/2013 before the Hon'ble DRT,....
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....ther pointed out that even the statement that the Respondent No.3 has transferred the said US$ 40 million to his children does not hold water. On perusal of the further counter affidavit of the Respondent No.3, the explanation provided by the Respondent No.3 regarding the disbursal of US$ 40 million prima facie does not correlate with the statements given on behalf of his children. The Respondent No.3 has failed to explain why the US$ 40 million was disbursed to his children despite an oral undertaking to the contrary given before the Hon'ble DRT on 26.07.2014, and despite being injuncted by way of orders dated 03.09.2013 and 13.11.2013 passed by the Hon'ble High Court of Karnataka in W.P. No.38870/2013 & W.P. No.39048-39052/2013. The said orders injuncting the Respondent No.3 from alienating his assets has attained finality as it was never challenged by the Respondent No.3 till date." 18. I.A. Nos.9-12 of 2016 along with Contempt Petition Nos.421-424 of 2016 thereafter came up before this Court on 11.01.2017. Having gone through the response filed by the petitioners-banks to "further counter affidavit" filed by Respondent No.3 which inter alia referred to the orders dated 03.09....
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....n the amount of US$ 40 million was pursuant to Non-Compete agreement with Diageo Plc and was received after the orders passed by the High Court of Karnataka on 03.09.2013 and 13.11.2013. He further submitted that the width of those orders did not cover or include any moneys which the respondents would receive in future and as such there was no violation of those orders at all. He relied upon the decision of this Court in Indian Airports Employees' Union v. Ranjan Chatterjee and Another(1999) 2 SCC 537) and submitted that since the matter involved interpretation of the orders at 3.09.2013 and 13.11.2013 it cannot be said that there was any willful disobedience of the orders. He further submitted that the violation if any, was that of the orders passed by the High Court of Karnataka and as such this Court ought not to take cognizance of such alleged violation inasmuch as it would deny Respondent No.3 the opportunity to place the matter before the High Court. 21. The orders passed by this court were clear and unambiguous and Respondent No.3 was called upon to make complete disclosure of his assets. Whether the assets to be so disclosed were covered by the personal guarantee gi....
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....f restraint are quite clear. Consequently, funds amounting to US$ 40 million which came to be under the control of and in the hands of Respondent No.3 were completely covered and governed by said orders of restraint. 23. The memo dated 28.06.2016 filed by Respondent No.10 in said O.A. No.766 of 2013 annexed, "Extract confirming payment of US$ (US Dollars) 40 Million to Defendant No.3 on 25.02.2016". It is thus beyond any doubt that the payment of US$ 40Million was received by Respondent No.3 on 25.02.2016. These facts are admitted by Respondent No.3 in Paragraph 3 of his "further counter affidavit". The explanation that the funds now stand transferred in favour of the trusts over which Respondent No.3 has no control at all, in fact aggravates the extent of violation. It is clear that the funds which were in control of Respondent No.3 have now been sought to be put beyond the reach of processes of court, which is reflective of the intent. 24. The applications moved by the petitioners-banks on 02.03.2016 themselves had made clear reference to the fact that as disclosed by respondent Nos.10 and 11 to London Stock Exchange and Bombay Stock Exchange respectively Respondent No.10 w....
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....s so assumed and cognizance is taken by this Court, Respondent No.3 would lose one opportunity of having the matter assessed at the level of the High Court. In our considered view, since we are dealing with the very same cause in which the orders of restraint were passed by the High Court and since it is coupled with the violation of orders of this Court as well, the matter can and ought to be dealt with by this Court. 27. The record shows that by order dated 11.01.2017 the violation of those orders for restraint passed by the High Court of Karnataka was taken note of by this Court and the Counsel appearing for respondent had sought time to file an appropriate reply. However, no such reply was filed. Respondent No.3 was thus put to clear notice about the violation of those orders of restraints passed by the High Court of Karnataka. As such, no prejudice has been caused or visited upon Respondent No.3. 28. We find that the allegations against Respondent No.3 of committing of contempt are on two counts, in that - a) He is guilty of disobeying the Orders passed by this Court in not disclosing full particulars of the assets as was directed by this Court. b) He i....