TaxTMI 
TaxTMI 
2019 (2) TMI 1254
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....rvices provided, and on receiving no payment, 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 Tribu....
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....ave to be paid for delayed payment beyond 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to grant any such extension, as a result of which, the second application for extension of time was dismissed as withdrawn.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 petiti....
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....eaching the said undertakings and this Court'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 accorda....
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.... Equally, prayer (j), asking for a direction for 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 p....
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....total amount. 10. Learned Senior Counsel appearing on behalf of 'Ericsson India Private Limited'- ('Operational Creditor'), 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 ma....
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....ns and directions. xxx xxx xxx" The order of the Supreme Court, dated 03.08.2018, states: "Applications seeking exemption from filing certified copy of the impugned orders are 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 tha....
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....ted to roughly INR 1500 crore) for the sum of INR 550 crore within a period of 120 days. As a result of this, the erstwhile management continued in the saddle; the corporate insolvency resolution process was stayed until further orders; the financial creditors'/Joint Lenders' Forum was given liberty to sell assets of the corporate debtors and to 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....
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....his was done on the footing that the parties have "fully, mutually, and finally settled all the disputes between them" as has been noted in the NCLAT order dated 30.05.2018. When this writ petition came up for hearing, the order dated 03.08.2018 clearly records that the payment of INR 550 crore will be made on or before 30.09.2018, and an undertaking was to be given by the Chairmen of the Reliance Companies 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 ....
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.... the Companies. These undertakings have obviously not been given in accordance with this Court's order dated 03.08.2018. To further compound this misdemeanor, an application to extend time by 60 days was moved on 27.09.2018, in which the same linkage was made to sale of assets before the sum of INR 550 crore could be paid. Contrary to Shri Rohatgi's argument, Ericsson immediately protested in the form of a contempt petition, being the first contempt petition that was filed 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 re....
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.... met, namely, withdrawal of contempt petitions and withdrawal of arbitration proceedings. Ericsson replied on 23.01.2019, stating that this could only be done by moving an application before this Court as contempt proceedings were pending. Secondly, this petition points out that, maliciously, instead of moving such appropriate application, from 01.02.2019 onwards, an about-turn was taken, and Ericsson was left in the lurch as a decision was taken by the three Reliance Companies that 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.........
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....ration of facts that the undertakings given on 09.08.2018 by the three Chairmen of the three Reliance Companies were neither as per the Court's understanding of its order dated 03.08.2018, nor the understanding of the three Companies themselves, as is clear from the undertakings given by the three Directors pursuant to the order dated 30.05.2018. In this view of the matter, it is clear that the three Reliance Companies had no intention, at the very least, of adhering to the time limit of 120 days or to the extended time 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....
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....and contentions as per the Arbitration between RCom and its affiliates, and Ericsson, pending before the Hon'ble Arbitral Tribunal comprising Justice Mr. S.B. Sinha, Justice Mr. Swatanter Kumar, and Justice V.S. Sirpurkar, and towards the same, prepare and sent for our consideration and for us to mutually agree by 29 January 2019, the draft application to be made to the Hon'ble Arbitral Tribunal for withdrawal of all claims and contentions, and the consequent termination of proceedings. c. Sign and return the attached No Dues Confirmation simultaneous with the Demand Draft for an amount of Rs. 452.016 crores, being 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 ....
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....o something the law forbids or with the specific intent to fail to do something the law requires to be done, that is to say, with bad purpose either to disobey or to disregard the law. It signifies a deliberate action done with evil intent or with a bad motive or purpose. Therefore, in order to constitute contempt the order of the court must be of such a nature which is capable of execution by the person charged in normal circumstances. It should not require any extraordinary effort nor should be dependent, either wholly or in part, upon any act or omission of a third party for its compliance......." This case again has no application to the facts of this case. We have seen 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 ....
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.... rational interpretation of the orders involved in this case leads to the result that INR 550 crore plus interest was to be paid without any linkage to sale of assets within a fixed time limit. This is also not a case of accidental or unintentional disobedience. As is clear from the letter dated 21.01.2019, the Reliance Companies are able to pay this amount, but are wilfully refusing to do so. Similarly, the judgments in Mohd. Iqbal Khanday v. Abdul Majid Rather, (1994) 4 SCC 34, at paragraph 34, and Gyanichand v. State of A.P., (2016) 15 SCC 164, at paragraph 11 also do not apply on the facts of this case. The facts of this case are far from cases where directions or orders are impossible of compliance. 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 ....
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....ng may in the like manner be enforced through process other than committal to prison as for example where the breach of undertaking is to deliver possession of property in a landlord-tenant dispute. Apart from punishing the contemner, the court to maintain the majesty of law may direct the police force to be utilised for recovery of possession and burden the contemner with costs, exemplary or otherwise." Thus, disobedience of an order to pay a sum of money may be countered by orders of attachment instead of committal to prison. On the other hand, Shri Dave pointed out that this Court had, in Chhaganbhai Norsinbhai v. Soni Chandubhai Gordhanbhai, (1976) 2 SCC 951, held that in cases of perverse and deliberate flouting of undertakings, the 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 als....