TaxTMI 
TaxTMI 
2022 (8) TMI 109
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....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 Interlocutory Application by a common judgment. The application was admitted by the Tribunal by its order dated 12.02.2019, a Resolution Professional was appointed in respect of Respondent No.3 to take over the management of its affairs and exercise all other statut....
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....d 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. Thus, the respondents not only failed to pay the 1st installment, on due date stipulated in the settlement agreement but also failed to maintain balance in the account. The respondents have repeatedly and blatantly disobeyed the directions of this Tribunal an....
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.... 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 and jurisdiction in the meeting and resolved to invoke arbitration clause. On 22.02.2018 the applicant sent a mail which runs as follows: "as discussed, we are monitoring Saudi's situation closely, since this will be a significant amount to reduc....
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....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 22.02.2018 which runs as follows: "as discussed, we are monitoring Saudi's situation closely, since this will be a significant amount to reduce our outstanding amount. However, we don't have any intention for us to get this receivab....
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....e 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 order of this Tribunal dated 11.03.2019 willfully? If so, are the Respondent Nos. 1 & 2/Contemnors liable for punishment as per Section 12 of Contempt of Court Act?" POINT: The undisputed facts are that the applicant herein filed p....
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....by 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 the next Business Day 3. 6,00,00,000/- ('Third Installment') 7 June 2019 (if such day is not a business day for banks in New Delhi then the next Business Day 4. 5,27,64,004/- ('Final Installment') 8 July 2019 (if such day is not a business day for banks in New Delhi then the next Business Day Clause 2.4 permits the applicant to present cheques for collection give....
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....t. 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 terms of settlement agreement dated 08.03.2019, but filed notarized undertaking affidavits of Respondent No. 1 & Respondent No. 2 dated 27.03.2019. The specific undertaking in para 2 (a), (b) is also relevant for deciding the issue, it runs as follows: (a) That the Appellant No. 1 will adhere to the terms and conditions set out in the settlement agreement annexed hereto and take all such actions as may be necessary to pay an amount of INR 24,27,64,004 to the Respond....
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....a 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 the standard of proof in criminal cases. In Kanwar Singh Saini Vs. High Court of Delhi (2012) 4 SCC 307 the Apex Court held that contempt proceedings being quasi criminal in nature, the standard of proof requires in the same manner as in other criminal cases. The contemnor is entitled to the protection of all safe guards/ rights which are provided in criminal jurisdiction including the benefit of doubt. In Mrityunjoy Das vs. Sayed Hasibur Rahman (2001) 3 SCC 7....
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....all 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 analyze the pleas of both parties. In the instant case, the respondents not only gave an undertaking but also agreed to pay the amount as directed by this Tribunal by order dated 11.03.2019. It is also an admitted fact that the petitioner filed an I.A. No. 1285 of 2019 seeking extension of time for compliance of order of this Tribunal, admittedly the Interlocutory application was dismissed on 11.04.2019 holding that no case has been made out to extend the ti....
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....s 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 amount in terms of the order, while tendering unconditional apology, till date no amount is paid. The conduct of the Respondent Nos. 1 & 2 during the pendency of contempt case prior to initiation of contempt case is sufficient to conclude that the violation of order is willful and deliberate. The Learned Counsel for the Applicant Sri Arun Kathpalia contended that disobedience and breach of the orders by the contemnors is a matter of serious concern.....
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.... 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 dispute about the jurisdiction of this Tribunal the judgements relied on by the applicants counsel Sri Arun Kathpalia needs no further consideration, as such, those judgments relating to jurisdiction are not discussed. The Learned Senior Counsel for the Respondents Nos. 1 & 2 Sh. Viraj Datar contended that in view of the facts narrated in the reply, the respondents did not disobey the order wilfully. In the absence of a finding as to the intentional or wi....
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.... 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 for not having complied and carried out the direction of the Court, has to take into consideration all facts and circumstances of a particular case. That is why the framers of the Act while defining civil contempt, have said that it must be wilful disobedience to any judgment, decree, direction, order, writ or other process of a court. Before a contemnor is punished for non compliance of the direction of a court the co....
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....t 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 11.03.2019. Since the excuse pleaded by the respondents is not bonafide. In view of our foregoing discussion, we found that the Respondent Nos. 1 & 2/ Contemnors are guilty for wilful disobedience of order dated 11.03.2019, while holding that the Respondent Nos. 1 & 2/ Contemnors not guilty for wilful breach of settlement agreement dated 08.11.2019. Coming to the sentence to be imposed under Section 12 of Contempt of ....