Delhi High Court
Atul Kumar Rai vs M/S Koshika Telecom Limited & Ors. on 17 April, 2012
Author: Sanjay Kishan Kaul
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Reserved on : 21.03 2012
% Date of decision : 17.04.2012
+ CONT.APPEAL (C) No.6 of 2012
ATUL KUMAR RAI ... APPELLANT
Through : Mr.Mukul Rohatgi, Sr.Adv. with
Mr.Suresh Dobhal, Ms.Alpana Poddar
and Mr.Rahul Tyagi, Advocates.
-VERSUS-
M/s KOSHIKA TELECOM LIMITED & ORS. ... RESPONDENTS
Through : Mr.Rajiv Bahl, Advocate for R-1/OL.
Mr.P.S.Bindra, Advocate for R-2.
AND
Reserved on : 28.03 2012
% Date of decision : 17.04.2012
+ CONT.APPEAL (C) No.8 of 2012
SHALINI SONI ... APPELLANT
Through : Mr.Mukul Rohatgi, Sr.Adv. with
Mr.Pawanjit S.Bindra & Ms.Alpana
Poddar, Advocates.
-VERSUS-
M/s KOSHIKA TELECOM LIMITED ... ... RESPONDENT
Through : Mr.Rajiv Bahl, Advocate for the Official
Liquidator.
_____________________________________________________________________________________________
Cont.Appeal (C) Nos.6/2012, 08/2012 & 09/2012 Page 1 of 33
AND
Reserved on : 30.03 2012
% Date of decision : 17.04.2012
+ CONT.APPEAL (C) No.9 of 2012
R.K.BANSAL ... APPELLANT
Through : Mr.Rakesh Tiku, Sr.Adv. with
Mr.R.P.Agrawal, Mr.Arvind Kumar
Singh and Ms.Priyadarshini Verma,
Advocates.
-VERSUS-
M/s KOSHIKA TELECOM LTD & ORS. ... ... RESPONDENTS
Through : Mr.Suresh Dutt Dobhal, Adv.for R-3.
Ms.Shalini Soni, R-4 in person.
Mr.Rajiv Bahl, Advocate for the Official
Liquidator.
HON'BLE MR. JUSTICE SANJAY KISHAN KAUL
HON‟BLE MR. JUSTICE RAJIV SHAKDHER
SANJAY KISHAN KAUL, J.
1. The contempt jurisdiction has to be exercised with care and
caution by a court. It is not to be used either with
vindictiveness or to "teach a lesson". The civil contempt
involves a private injury and ought to be punished when a
degree of misconduct is involved and proved. "The defiance
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should be willful and intentional as opposed to unintentional,
accidental, casual or bona fide conduct."{Central Bank of India
Vs. Sarojini Kumari; 1999 Cri L.J. 2130 (RAJ)}. There has to be
a conscious effort or attempt on the part of the contemnor to
willfully disobey the orders of a court and the discretion given
to the Court, while arming it with contempt power, has to be
exercised to ensure that the dignity of the court and majesty
of law is maintained.
2. A contemnor must always be given an opportunity to repent.
The repentence on the part of the contemnor and tendering of
unqualified apology should be permitted to help him escape
from rigorous punishment. The courts cannot be unduly
touchy on the issue of contempt where orders have not been
implemented forthwith especially when the effect of those
very orders is effaced by pronouncements from appellate
courts. We hasten to add that this is not meant to be a licence
for violation of an order till it subsists. It is in this context that
it was observed by a Constitution Bench of the Supreme Court
in Shri Baradakanta Mishra v. The Registrar of Orissa HC and
Anr. and State of Orissa v. Shri Baradakanta Mishra & Anr; AIR
1974 SC 710 that "A heavy hand is wasted severity where a
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lighter sentence may serve as well." In the same judgment, it
was observed as under:
"We ought never to forget that the power to
punish for contempt large as it is, must always be
exercised cautionsly, wisely, and with
circumspection. Frequent or indiscriminate use of
this power in anger or irritation would not help to
sustain the dignity or status of the court, but may
sometimes affect it adversely." (Special
Reference No.1 of 1964; (1965) 1 SCR 413;
referred to in Baradakanta Mishra)
3. We have set out the parameters and the legal position at the
threshold itself before analyzing the facts of the case. This
became necessary as we are faced with a situation where
despite the opposite party expressing against pursuing the
contempt in view of certain subsequent orders, the learned
single Judge has taken upon himself to proceed with the civil
contempt, to convict the parties of contumacious conduct and
willful disobedience and thereafter sentence them to heavy
fine and simple imprisonment.
4. IFCI limited advanced loans to M/s Koshika Telecom Ltd. for
setting up a telecom business. The loans were secured by
hypothecation of the tower and other movable assets and two
of the directors of the company gave personal guarantees.
The service of the loan became irregular and since there were
persistent defaults, IFCI filed proceedings before DRT for
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recovery of its debts, which was registered as OA
No.148/2002. The financial status of M/s Koshika Telecom
Limited, however, continued to deteriorate, resulting in a
winding up petition bearing No.75/2002 being filed before the
company court titled as "Lord Krishna Bank Ltd. v. Koshika
Telecom Limited". The company was wound up vide order
dated 02.08.2005 and the Official Liquidator took over charge
of its assets.
5. The application filed by IFCI before the DRT was disposed of
on 20.04.2006 holding M/s Koshika Telecom Limited liable for
a sum of Rs.233,73,92,900.27 along with pendente lite and
future interest @ 10% per annum from 19.07.2002 till
realization with costs of Rs.1.5 lakhs and the Recovery
Certificate was issued in terms thereof.
6. In order to recover its dues, IFCI filed recovery proceedings
which were registered as RC No.43/2006. In those
proceedings, IFCI filed an application for sale of property
(towers) mentioned in schedule, which were hypothecated
with it. The Recovery Officer on 18.12.2007 directed
attachment and sale of the hypothecated properties of M/s
Koshika. However, in view of the appointment of the Official
Liquidator, an application was filed in the company petition by
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the Official Liquidator aggrieved by the order dated
18.12.2007. In the meantime, some of the hypothecated
assets were sold by IFCI in its auction and part of the sale
proceeds amounting to Rs. 12 crores came to be deposited
with it. The application so filed by the Official Liquidator was,
however, withdrawn on 05.02.2008 with liberty to file an
appeal under Section 30 of The Recovery Of Debts Due To
Banks And Financial Institutions Act, 1993. („the RDDBFI Act‟
for short)
7. The Official Liquidator thereafter filed an appeal before the
DRT against the order dated 18.12.2007 of the Recovery
Officer which was dismissed on 25.07.2008. The DRT relied
upon the judgment in Allahabad Bank v. Canara Bank & Anr.;
2000(4) SCC 406 where it was held that even if a company is
in liquidation, the provisions of RDDBFI Act allow the RO to sell
the properties of the debtors by giving notice and hearing to
the OL and that the adjudication, execution and distribution of
the sale proceeds and working out priorities as between
banking and financial institutions and other creditors of the
company so far as the monies realized under the RDDBFI act
are concerned, has to be done by the Tribunal and not by the
Company Court.
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8. The Official Liquidator thereafter filed an appeal before the
DRAT which was disposed of on 05.11.2008 as compromised
by the parties and thereafter the Recovery Officer proceeded
to sell the remaining properties in auction.
9. The IFCI filed an application before the Recovery Officer
praying for the proceeds realized from sale of assets to be
made over to IFCI as the Official Liquidator had received only
one claim which was yet to be verified and no other claim had
been received either from the workmen or from secured or
unsecured creditors. The total realization from the assets sold
by IFCI, being in the range of about 12 crores, a large amount
of the debt of IFCI remained unsatisfied. This application was,
however, opposed by the Official Liquidator. It appears that
that the Official Liquidator had a meeting with Ms.Shalini Soni,
AGM (one of the contemnors) on 19.08.2009 where a decision
was taken that the sale proceeds of the land will be deposited
with the Official Liquidator. The Official Liquidator filed a
compliance/status report No.281/2009 dated 06.10.2009
before the learned Company Judge and requested for
appropriate directions to be issued inter alia for publishing the
claims once again in newspapers with the expenses to be
borne by the IFCI, the secured creditor, and for directions to
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be given to IFCI to deposit the sale proceedings with the
Official Liquidator forthwith. On 08.10.2009, the learned
Single Judge took the report on record and issued the
following order:
"Directions may also issue to IFCI, as
prayed for, including a direction to the IFCI
to pay for the expenses of the publication
of the advertisement inviting the claims."
10. The aforesaid order thus shows that while a specific direction
was issued to the IFCI to pay the expenses of the publication
of advertisement inviting the claims, no other specific
direction was issued. A specific direction was worded in a
manner as if it was "inclusive" while the general directions
were that all the directions, as prayed for, may be issued to
the IFCI. If one was to turn to the report dated 06.10.2009,
there were a number of directions prayed for against IFCI:
i) Permission to publish the claims once again in newspapers
with costs borne by IFCI.
ii) IFCI to provide details consisting of date of sale, amount of
sale and date of handing over the possession to the auction
purchasers.
iii) IFCI to deposit the sale proceeds with the Official
Liquidator forthwith.
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iv) IFCI to ensure availability of security guards for protection
of properties of the M/s Koshika Telecom Limited and to
provide details of guards along with photographs, details of
PF/ESI and details of payment made to them, attendance
sheet, the attendance sheet, the salary register and the
account form which payment is realized to guards etc.
11. A meeting is stated to have been held again between the
Official Liquidator and Ms Shalini Soni on 26.10.2009 for
deposit of sale proceeds and expenses for advertisement and
the Official Liquidator filed a report bearing no.13/2010 on
12.01.2010 for directions to IFCI to deposit the sale proceeds
with the Official Liquidator.
12. The IFCI limited instead of depositing the sale proceeds with
the Official Liquidator, chose to file an application on
09.12.2009 before the Recovery Officer praying that the sale
proceedings received from the sale of assets of M/s Koshika
Telecom Limited be directed to be appropriated by the IFCI
Limited in partial discharge of the Recovery Certificate. This
application was allowed by the Recovery Officer on
22.02.2010 with a direction that IFCI would furnish an
undertaking by an competent officer that in future if any
eligible claim in excess of the amount available with the
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Official Liquidator is received by the Official Liquidator, the
requisite amount will be remitted to the Official Liquidator
within seven days. This was apparently so because other than
the amount realized from the movable assets, IFCI stands in
queue with other unsecured creditors, secured creditors and
the workmen‟s liability naturally take precedence over it. The
Recovery Officer also directed that a sum of Rs.1 crore will be
kept with the Official Liquidator on provisional basis for
defraying various expenses. The Official Liquidator was,
however, aggrieved by the non compliance of the directions of
the learned Company Judge dated 08.10.2009 and thus filed a
petition under Sections 11 and 12 of The Contempt of Courts
Act, 1971, which was registered as CCP No.30/2010 in
Company Petition No.75/2002 arraying Ms. Shalini Soni alone
as a respondent/contemnor for not depositing the sale
proceeds with the Official Liquidator.
13. The Official Liquidator also filed an appeal before the DRT
against the order of the Recovery Officer dated 22.02.2010
which was allowed by the DRT on 11.06.2010 partially
observing that that the Official Liquidator would be entitled to
the amount to the extent of value of the land of the company
while IFCI is entitled to the amount received from the sale of
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movable assets including microwave ovens and machineries.
The IFCI also preferred an appeal being Appeal No.286/2010
before the DRAT being aggrieved by the aforesaid order of the
DRT. This appeal was dismissed on 13.07.2010 by the DRAT.
14. The IFCI assailed the order of the DRT and DRAT in WP(C)
No.5014/2010. The Division Bench (of which one of us Sanjay
Kishan Kaul, J. was a member) issued notice on the writ
petition on 28.07.2010 and stayed the orders of the DRT and
DRAT relating to realization of the amounts from the IFCI.
15. Since the contempt petition filed in the company petition was
pending, Ms Shalini Soni filed reply to the contempt petition
pleading that IFCI had given all the information called for by
the Official Liquidator; though IFCI was ready to bear the
expenses for the advertisement, the Official Liquidator had not
quantified the expenses, and that, the sale proceeds as per
the order of the Recovery Officer had been kept by IFCI in a
no-lien interesting bearing account and the rest in FDR with a
nationalized bank. It was stated that when no claims were
received by the Official Liquidator, the IFCI filed the
application for release of the entire amount to it and the
Recovery Officer had allowed that application except a sum of
Rs.1 crore to be kept with the Official Liquidator. The DRT had
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modified the order to the extent that the IFCI will be allowed
to retain monies received from the sale of movable properties
and the appeal of IFCI before DRAT was dismissed. The
matter was pending in writ petition before the High Court.
16. The WP(C) No.5014/2010 was allowed on 06.12.2010. The
Division Bench noticed that the counsel for IFCI on the first
date itself had confined the grievance to the direction
contained in the order dated 11.06.2010 of the DRT affirmed
by the DRAT vide Order dated 13.07.2010 to the extent that it
directed that realization from sale of immovable assets should
be deposited with the Official Liquidator. The order dated
28.07.2010 issuing notice recorded the concession of the
learned senior counsel for IFCI that there was no dispute with
the proposition that IFCI is not a secured creditor qua the
amount realized from sale of immovable properties and thus
the lien of employees would have precedence and if there
was any other unsecured creditor, whose claim is verified, the
claim of the IFCI would stand alongside such unsecured
creditor. However, no such claim had been received despite
an earlier advertisement, but in case any such claim was
received in pursuance to a subsequent advertisement, the
same could be dealt with as recorded in that order especially
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keeping in mind the undertaking already given by the IFCI
pursuant to the order of the Recovery Officer dated
22.02.2010. Learned counsel conceded that the expenses for
future advertisements would be borne by the IFCI out of the
amount lying in account with IFCI. The Division Bench noted
in its order dated 06.12.2010 that the counter affidavit of the
Official Liquidator did not enlighten them any further and it
was not disputed that no claims had been received in
pursuance to the first advertisement except one claim, but
even the particulars of that claim had not been set out nor the
same had been verified. The costs of advertisements were
not indicated nor was the Official Liquidator in a position to
state so even on the date of hearing. The Division Bench
found that the facts of the case were peculiar as the money
was lying with IFCI, a public financial institution, to the extent
of sale realization from the immovable properties in respect of
which the IFCI was not a secured creditor, but no other claims
had been verified to show that there were other unsecured
creditors or claim of workmen which was yet to be satisfied.
The amount realized from sale of both the movable and
immovable assets was not even fraction of the amount which
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was due to the petitioner under the decree. The operative
paragraphs of the order dated 06.12.2010 are as under:
"11.The function of the OL is only to ensure
that the claims of secured creditors are
satisfied to the extent it can be and unsecured
creditors get the remaining amount pari passu.
No such unsecured creditor has come to light
despite an advertisement being issued. The OL
is somehow keen only for the amount to be
transmitted to it, the objective of which is not
clear to us. If there were other claims then
naturally the role of OL comes into play and he
would have to distribute the amount pari
passu. The amount is secured as it is lying
with the petitioner-Corporation, which is a
public financial institution, and has been only
provisionally appropriated in terms of the
orders of the Recovery Officer.
12. We thus consider it appropriate to modify
the impugned orders and permit the petitioner
to retain the amount realized against sale of
immovable properties making it clear that the
claims of any unsecured creditors would rank
pari passu with that of the petitioner-
Corporation to that extent and the claim of
workmen would first have to be satisfied.
Insofar as the advertisement costs are
concerned, the OL to communicate the costs in
writing to the petitioner-Corporation and the
petitioner-Corporation will make the payment
to OL of that amount along with 20 per cent
additional amount to defray the incidental
expenses. The petitioner-Corporation will abide
by the undertaking given on its behalf before
the DRT as well as before us on 28.07.2010.
13. The writ petition is allowed in the aforesaid
terms leaving the parties to bear their own
costs."
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17. The effect of the aforesaid order is that IFCI was held entitled to
retain the amounts both from the sale of movable and
immovable assets of M/s Koshika Telecom Limited subject to
the other directions contained as aforesaid. This should have
brought an end to the controversy qua the amount i.e. the
issue arising as to whether this amount had to be deposited by
the IFCI with the Official Liquidator. However, this did not
happen even though the Official Liquidator sought to withdraw
the contempt proceedings on 08.03.2011 before the learned
single Judge in view of the orders passed by the Division bench
on 06.12.2010. The learned single Judge in effect declined the
prayer for withdrawal of the contempt proceedings and wanted
to enquire as to whether the Recovery Officer was aware of the
orders passed by the learned Company Judge on 08.10.2009
while passing the orders dated 22.02.2010 and consequently
the Official Liquidator did not press the withdrawal of the
contempt proceedings. The learned single Judge proceeded to
issue notice for the first time on 23.05.2011 to IFCI through its
Managing Director (contemnor herein) and the Recovery Officer
(contemnor herein). The Recovery Officer was issued the notice
as to why he had passed the order on 22.02.2010 contrary to
the order of the learned Company Judge dated 08.10.2009. It
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may be added that Mr.Atul Kumar Rai is the Managing Director
of IFCI Limited and the contemnor before us, but no notice was
issued to him by name, but only by designation. This order was
passed despite the learned single Judge being apprised of the
order passed by the Division Bench on 06.12.2010 putting the
controversy at rest.
18. In response to the contempt notice, affidavits were filed by all
the three contemnors. It would be appropriate now to deal with
each of these affidavits separately.
19. On behalf of IFCI, initially a reply supported by an affidavit of
Sh.Avinash Kumar as Assistant General Manager was filed
whereby an unconditional apology was tendered to the Court.
The relevant facts which have already been sketched out
hereinabove were set out in the affidavit. The affidavit states
that the IFCI was given copies of the orders passed by the
learned Company Judge on 08.10.2009 for the first time on
22.02.2010 as annexures to the reply filed before the Recovery
Officer and that in the prior meeting held on 26.10.2009 in the
chamber of the Official Liquidator, attended by Ms Shalini Soni,
AGM, copies of the order dated 08.10.2009 and report
no.281/2009 were not supplied. It is also stated that since the
Official Liquidator was aggrieved by the order passed by the
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Recover Officer on 22.02.2010, an appeal was filed before the
DRT which was partially allowed on 11.06.2010. The order
dated 11.06.2010 had been challenged by the IFCI before the
DRAT which challenge was rejected on 13.07.2010 and it is
thereafter that WP(C) No.5014/2010 was filed. The Official
Liquidator filed a counter affidavit in that writ petition taking all
the pleas including that IFCI was in contempt of order dated
08.10.2009, but the writ petition was allowed on 06.12.2010. It
was also emphasized that the plea of the Official Liquidator
seeking appropriation of the amount was contrary to the
judgment of the Supreme Court in Allahabad Bank v. Canara
Bank & Anr.'s case (supra) as it is the Recovery Office alone
who could have prioritized the debt amongst banks, financial
institutions and other creditors. It appears that at the insistence
of the learned Single Judge, the Managing Director also filed a
personal affidavit on 11.08.2011 tendering an unconditional
apology stating that he had no knowledge of the developments
leading to the filing of the contempt petition nor was he aware
of the orders passed on 08.10.2009.
20. The affidavit filed by Ms.Shalini Soni is more or less in the same
terms as of Mr.Avinash Kumar. While tendering an unqualified
apology, it has been categorically stated that she had attended
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a meeting called by the Official Liquidator on 26.10.2009 where
she had expressed her readiness to fulfil all the requirements
for compliance of the orders of the court and to furnish the
relevant information. However, the expenses were not
quantified for inviting the claims and thus IFCI could not have
deposited the amount without knowing how much to deposit.
The Official Liquidator was also a party to the sale proceedings
conducted by the Recovery Officer and was a part of the Assets
Sale Committee constituted for purposes of sale of assets of
M/s Koshika Telecom Limited.
21. The affidavit of Mr.R.K.Bansal, the Recovery Officer, also
tenders unqualified apology. The factual position has been
explained in the affidavit stating that the copy of the order
dated 08.10.2009 itself did not indicate that IFCI had been
directed to remit the entire sale proceeds of the assets of the
M/s Koshika Telecom Limited to the Official Liquidator. This
aspect became clear only when the order dated 08.10.2009 is
read with the compliance/status report no. 281/2009 dated
06.10.2009. At the time of hearing of the application of IFCI, it
is pleaded that true spirit of the order dated 08.10.2009 passed
by the learned Company Judge was not brought to the notice of
the Recovery Officer by any of the parties during the course of
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the arguments. He further goes on state in para 10 of the
affidavit as under:
" 10. That in the hindsight, the Deponent states
that he ought to have read the entire application
and the reliefs/directions that had been sought by
the Official Liquidator. This as stated, was a bona
fide oversight and was totally unintentional."
22. We may notice that all the contemnors had appeared before
the Court also and submitted to tender an unqualified apology.
The learned single Judge, however, in terms of the order dated
06.02.2012 while noticing the apology tendered in the
affidavits, has still found them guilty of contempt and stated
that the fact of the apology was only a matter to be considered
as a mitigating circumstance on the point of sentence. The
learned single Judge found that the order passed by the
Recovery Officer on 22.02.2010 showed that the order passed
on 08.10.2009 by the learned Company Judge was duly
communicated to Ms Shalini Soni which in turn would amount
to a communication to IFCI including its Managing Director. The
remedy, as per the opinion of the learned single Judge, if IFCI
was aggrieved by the order dated 08.10.2009, was to assail it
in appeal and merely because the order dated 08.10.2009
ultimately became inoperative on account of orders passed by
the Division Bench was held not to assist the contemnors. The
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learned single Judge from observations in para 16 appears to
have been weighed down by the fact that the IFCI is a public
financial institution having a legal department and thus should
have acted in accordance with law. Similarly, qua the Recovery
Officer, it has been found that the order dated 08.10.2009 had
been placed before him in the record, the defence that this was
not specifically pointed out to him cannot be accepted.
23. Mr.Atul Kumar Rai assailed the order of the learned single Judge
dated 06.02.2012 holding him guilty of contempt by filing a
special leave petition being SLP No.6394/2010 before the
Supreme Court which was disposed of on 17.02.2012. The
Supreme Court noticed that the controversy related to the
issue as to whether an appeal would lie under Section 19 of the
Contempt of Courts Act, 1971 before the Division Bench of the
High Court against the order of conviction or whether both the
order of conviction and sentence have to be assailed only at
the stage when the order of sentence is passed i.e. that the
order of conviction cannot be assailed in appeal. The Supreme
Court did not express any final opinion on this question in the
order dated 17.02.2012 as undisputably an appeal would be
maintainable after pronouncement of punishment/sentence by
the High Court. The special leave petition was accordingly
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disposed of with a direction that the punishment/sentence
imposed upon the petitioner would remain suspended for a
period of four weeks to enable the petitioner to file an appeal to
seek an appropriate order from the appellate court in terms of
Section 19(2) of the Contempt of Courts Act, 1971. The SLP of
Ms.Shalini Soni was, however, listed on 23.02.2012 which was
disposed of on the analogy of SLP(C) No.6394/2012.
Mr.R.K.Bansal, however, did not file any SLP. The learned
single Judge thereafter heard the parties on 24.02.2012,
01.03.2012 and 06.03.2012 before reserving the judgment. It
may be noticed that in the meantime an application for review
had also been filed by Mr.Atul Kumar Rai on 21.02.2012, on
which also arguments were heard. The learned single Judge
found that adopting the path of pardon for the contemnors was
yielding disastrous results as far as the sanctity and obedience
of judicial orders was concerned and litigants were gathering
the impression that the moment apology is tendered even
while maintaining that no contempt was committed, the Court
would melt down and pardon them. The learned single Judge
was thus not inclined to show any leniency and found it a
dangerous trend that the parties obtained relief from the
subordinate authorities which stood declined by this Court. All
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the three contemnors were sentenced to undergo simple
imprisonment for a period of one month. IFCI as an institution
has been imposed with a fine of Rs. 5 lakhs, out of which
Rs.3,50,000/- should be deducted from the salary of Mr.Atul
Kumar Rai while the balance amount should be deducted from
the salary of Ms.Shalini Soni.
24. The three contemnors have thus assailed the orders of
conviction and sentence before us in these appeals.
25. We have heard the learned counsel for the appellants as well
as the learned counsel for the Official Liquidator. The learned
counsel for the Official Liquidator has really nothing to add and
in fact stated that the Official Liquidator had formed an opinion
to withdraw the contempt proceedings in view of the
subsequent orders of the Division Bench dated 06.12.2010, but
this request was declined by the learned single Judge who
proceeded to hear the contempt petition on merits. One
common thread which permeates the submissions advanced on
behalf of all the three contemnors is that the counsels accept
that the appropriate remedy against the order dated
08.10.2009 of the learned Company Judge was for IFCI to have
approached the appellate court. This was not done. It was,
however, submitted that the appellants had tendered
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unqualified apology and were not motivated by any personal
gains. The IFCI was only seeking to recover its dues and the
amounts realized were only a fraction of the total amount found
due under the Recovery Certificate. The function of the Official
Liquidator was to protect the monies and assets of the
company in liquidation (M/s Koshika Telecom Limited), to meet
liabilities of the creditors, statutory dues, workmen‟s dues etc.
An advertisement was published by the Official Liquidator in
various newspapers, but except for one claim no other claims
were lodged. This shows that there were no other secured or
unsecured creditors or workmen‟s dues. The single claim
received had also not been verified. The IFCI is a public sector
enterprise and the money was as safe with it as with the
Official Liquidator. The assets had been sold with the Official
Liquidator on the Assets Sale Committee and thus there was
complete transparency in the sale of the assets. The IFCI had
already given an undertaking that in case any claims were
lodged by even unsecured creditors, they would stand pari
passu with such claims or workers claims qua the unsecured
assets of M/s Koshika Telecom Limited.
26. The learned counsel appearing for Ms.Shalini Soni confessed
that it may have been a case of over-enthusiasm on the part of
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Ms.Shalini Soni to secure the amount for IFCI Limited on the
basis of a legal understanding that there were two separate
proceedings and that the rights of IFCI were protected in the
proceedings before the DRT. This was stated to be not a
whimsical view of Ms.Shalini Soni, but that the Supreme Court
itself in Allahabad Bank v. Canara Bank & Anr.'s case (supra)
had opined that for a company in liquidation, the proceedings
of the RDDBFI Act allow the Recovery Officer to sell the
properties of the debtors by giving notice and hearing to the OL
and that the adjudication, execution and distribution of the sale
proceeds and working and priorities as between banking and
financial institutions and other creditors of the company so far
as the monies realized under the RDDBFI Act are concerned,
has to be done by the Tribunal and not by the Company Court.
It was under the belief of such a bona fide view that the
proceedings were initiated before the Recovery Officer.
27. One may add that it cannot be disputed that the controversy
qua these amounts stood at rest in view of the judgment of the
Division Bench of this Court on 06.12.2010 and interim
protection had been granted in those proceedings on
28.07.2010. Thus the view propounded by IFCI, in fact,
prevailed. This order has not been assailed further and has
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become final and binding. Of course, this would not be an
answer to the plea that between 08.10.2009 and the orders
being passed by the Division Bench, the IFCI was required to
comply with the directions of the learned Company Judge or
ought to have assailed the same in appeal which they failed to
do.
28. One cannot but take notice of another fact. On the company
going into liquidation, reports are filed by the Official Liquidator
from time to time on which orders/directions are passed by the
Company Court. These are stated to be in the nature of
chamber proceedings though we are informed that as per the
current practice, the learned Judge for convenience sake takes
these matters in court. The compliance/status report
no.281/2009 filed by the Official Liquidator on 06.10.2009
sought various directions which have been set out by us while
discussing this report. The learned Company Judge while
passing the order dated 08.10.2009 did not issue specific
directions qua all the prayers made. In fact, what was observed
was that the directions may also issue to IFCI, "as prayed for",
followed up with the expression "including a direction to the
IFCI to pay for the expenses of the publication of the
advertisement inviting the claims." Thus, on the one hand,
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learned Company Judge considering one of the directions as an
important one, has issued a specific direction while not issuing
such a specific direction qua the issue of deposit of the amount
by IFCI with the Official Liquidator. If one may say so, certainly
some ambiguity could arise from the interim directions passed.
29. We are of the view that the complete controversy stood
examined in the order passed by the Division Bench on
06.12.2010. We have already reproduced the operative portion
of the directions hereinbefore to indicate the line of reasoning
which weighed with the Division Bench. The function of the
Official Liquidator was not to keep monies with itself for the
sake of it. The Official Liquidator is a custodian for purposes of
meeting the claims of various kinds of creditors, statutory dues
and workmen‟s dues. In the facts of the present case, even the
first advertisement issued by the Official Liquidator did not
result in any claims whatsoever except one claim. This fact had
to be balanced with the astronomical claim outstanding to IFCI
from the company in liquidation (M/s Koshika Telecom Limited)
where only a fraction was realized from sale of assets. IFCI is a
public sector enterprise and the monies were fully secured with
it. IFCI had also given an undertaking that it is only qua the
hypothecated material that it could appropriate the amounts
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while the amounts realized from the remaining assets were
available for all kinds of creditors. Thus whether the amount
would lie with the Official Liquidator or IFCI, it was equally
secure especially when there were no other claims forthcoming
which would reduce the entitlement of IFCI to appropriate the
balance amount.
30. One cannot also lose sight of the fact that, it is not an
endeavour by any individual to appropriate the amounts to
itself contrary to orders of the Court. Ms.Shalini Soni was of the
bona fide view that the rights of the IFCI to appropriate the
amount should be agitated before the Recovery Officer on
account of the proceedings arising from the Recovery
Certificate. This view apparently had its basis in the judgment
of the Supreme Court in Allahabad Bank v. Canara Bank &
Anr.'s case (supra). The only fault of Ms.Shalini Soni was that
once the order was passed by the learned Company Judge on
08.10.2009 and the IFCI was aggrieved by it, before
approaching the Recovery Officer, judicial propriety demanded
that the order dated 08.10.2009 ought to have been assailed
before the appellate court.
31. Similarly, the Recovery Officer ought to have been also more
careful (the fact which he admits in its affidavit) before passing
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the order dated 22.02.2010, to call upon the IFCI to take out
the necessary proceedings to first get the order dated
08.10.2009 stayed.
32. Insofar as Mr.Atul Kumar Rai is concerned, we may note that it
is not as if the head of the institution looks to the nitty gritty of
each transaction or each dispute. The matter pertained to a
loan account which had resulted in a Recovery Certificate. It is
not as if this aspect was brought to the notice of the board or
the Managing Director at any stage when proceedings were
taking place with discussions between Ms.Shalini Soni and the
Official Liquidator for utilization of the sale proceeds. Merely
because Mr.Atul Kumar Rai happens to be the Managing
Director will not fasten him with a vicarious liability especially
in the nature of such contempt jurisdiction and thus Mr.Atul
Kumar Rai cannot be faulted at all. Despite this, assuming the
overall responsibility as a head of the organization, Mr.Atul
Kumar Rai had tendered an unqualified apology while stating
that it was the then Chief General Manager of IFCI who was
looking to the aspect in question. Mr.Atul Kumar Rai is the CEO
and MD of IFCI apart from the additional responsibilities of
subsidiaries of IFCI being IFCI Infrastructure Limited, IFCI
Factors Limited, IFCI Venture Capital Funds Limited and IFCI
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Financial Services Limited. The organizations work in an
established procedure of hierarchy and it is informed that IFCI
alone has more than 600 cases pending all over the country,
having a lending portfolio in excess of Rs.16,000 crores.
33. We may usefully refer to the provisions of Section 12 of the
Contempt of Courts Act, 1971 in respect of the aforesaid.
Section 12(4) of the said Act reads as under:
" (4) Where the person found guilty of contempt
of court in respect of any undertaking given to a
court is a company, every person who, at the time
the contempt was committed, was in charge of,
and was responsible to, the company for the
conduct of business of the company, as well as
the company, shall be deemed to be guilty of the
contempt and the punishment may be enforced,
with the leave of the court, by the detention in
civil prison of each such person.
Provided that nothing contained in this sub
section shall render any such person liable to
such punishment if he proves that the contempt
was committed without his knowledge or that he
exercised all due diligence to prevent its
commission."
(emphasis supplied)
Thus, the aforesaid makes it clear that merely because a
corporate entity is alleged to have committed contempt would
not be a ground to make the CEO/Managing Director or head of
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the organization liable for contempt if he had no knowledge of
the same. If in the perspective of this Section, the aforesaid
facts are analyzed, we find that Mr.Atul Kumar Rai as CEO has
categorically averred in his affidavit that he was not aware of
the proceedings which is not unusual considering 600 cases are
pending in respect of IFCI and the CEO cannot be expected to
look to each case unless it is brought to his notice.
34. We are of the view that especially taking into consideration the
orders of the Division Bench dated 06.12.2010, the controversy
ought to have been put to a rest when the Official Liquidator
itself wanted to withdraw the contempt petition on 08.03.2011.
The learned single Judge did not even permit that but
proceeded to issue notices further to the Managing Director of
IFCI by designation and Recovery Officer ostensibly to know
whether the Recovery Officer was aware of the orders passed
by the learned Company Judge on 08.10.2009 when he passed
the orders dated 22.02.2010. No notice was issued to Mr.Atul
Kumar Rai in person, but since the affidavits filed on behalf of
IFCI were not by the Managing Director, even the Managing
Director filed his personal affidavit. All the three contemnors
had tendered unqualified apology and the Recovery Officer had
stated in so many words that he should have been more careful
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in analyzing the papers before him. This is of course apart from
the fact that we are of the view that the order dated
08.10.2009 itself was not free from doubt for the manner in
which it was framed.
35. We find that there is no case whatsoever of contempt made out
against Mr.Atul Kumar Rai while Ms.Shalini Soni ought to have
been more careful in first assailing the order dated 08.10.2009
in appeal before filing an application before the Recovery
Officer on which orders were passed on 22.02.2010. Similarly,
the Recovery Officer ought to have perused the reply filed by
the Official Liquidator. Given this situation, unqualified apology
tendered more than met the requirement as it was not a case
of any willful contumacious conduct for the court to either
proceed with conviction or impose sentence and that too such a
harsh one.
36. The question whether there is contempt of court or not is
a serious one as the court is both the accuser as well as the
judge of the accusation requiring the court to act with as great
circumspection as possible making all allowances for errors of
judgment and difficulties arising from inveterate practices in
courts and tribunals. The punishment and that too with such
severity would arise only in a case of clear contumacious
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conduct, which has not been explained. It is only in the case of
a deliberate lapse and disregard to one‟s duties and in defiance
of authority that such extreme measures are called for. To take
action in a case where the contemnor has unconditionally
apologized even though the lapse is not deliberate would
"certainly sound the death knell of what Dean Roscoe Pound
calls "judicial justice" and the Rule of Law." (In Re:
S.Mulgaonkar (1978) 3 SCC 339)
37. We are, thus, of the unequivocal view that all the three appeals
are liable to be allowed, orders of conviction dated 06.02.2012
and order on sentence dated 19.03.2012 are liable to be set
aside with the acceptance of apology on the part of Ms.Shalini
Soni and Mr.R.K.Bansal while Mr.Atul Kumar Rai is held not to
have any role in the matter in issue.
38. We may also notice another aspect of the matter arising from
the quantum of fine imposed on the contemnors. Section 12(1)
of the Contempt of Courts Act, 1971 Act provides for a fine
which may extend to Rs.2,000/-, but the fine imposed in the
present case is running into lakhs. This is contrary to the
statutory provisions. Such fine would not be sustainable in view
of the observations of a Constitution Bench of the Supreme
Court in Supreme Court Bar Association v. Union of India & Anr.;
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(1998) 4 SCC 409. However, this matter need not detain us any
further since we have already held that the present case is not
one which should have invited either a conviction or a
sentence.
39. The appeals are allowed in the aforesaid terms leaving the
parties to bear their own costs.
CM No.5248/2012 in Cont.Appeal (C) No.06/2012
CM No.5834/2012 in Cont.Appeal (C) No.08/2012
CM No.6108/2012 in Cont.Appeal (C) No.09/2012
No further directions are called for on these applications in view
of the disposal of the appeals.
The applications stand disposed of.
SANJAY KISHAN KAUL, J.
APRIL 17, 2012 RAJIV SHAKDHER, J.
dm
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