Reportable
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
I.A. NOS.9-12 & 13-16 OF 2016
IN
SLP (C) NOS.6828-6831 OF 2016
STATE BANK OF INDIA AND ORS. ……PETITIONERS
VERSUS
KINGFISHER AIRLINES LTD. AND ORS. ..…. RESPONDENTS
With
I.A. NOS.1-4 OF 2016
IN
AND WITH
CONTEMPT PETITION (C) NOS.421-424 OF 2016
IN
SLP (C) NOS.6828-6831 OF 2016
JUDGMENT
Uday Umesh Lalit, J.
1. State Bank of India and 13 other banks[1] 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 Hundred and Seventy Nine and Paise
Thirty Two only) from Respondent Nos.1 to 4. It is the case of the
petitioners-banks that despite applications having been filed requiring
Respondent Nos.1 to 4 to disclose details of their assets on oath, said
respondents never disclosed the assets and instead, said respondents
secretly tried to dispose of their assets with an intention to defeat the
recovery proceedings pending before DRT Bengaluru.
2. According to the petitioners–banks, on 25.02.2016 Respondent Nos.10
and 11 disclosed to London Stock Exchange and Bombay Stock Exchange
respectively that Respondent No.3 had resigned as Chairman of Respondent
No.11; that Respondent No.10 would pay to Respondent No.3 a sum of US$ 75
million; that out of said amount a sum of US$ 40 million would be paid
immediately; and that Respondent No.3 had made a statement to the press
confirming said transaction and had stated that he intended to settle in
London. In these circumstances, the petitioners–banks moved four
interlocutory applications before DRT Bengaluru on 02.03.2016 seeking
interim prayers:
“(i) to freeze the passport of Respondent No.3
(ii) to issue an arrest warrant against Respondent No.3,
(iii) to issue a garnishee order against Respondent Nos.10 and 11 from
disbursing US$ 75 million, and
(iv) to issue a direction to Respondent No.3 to disclose his assets on
oath.”
3. It is the case of the petitioners–banks that DRT Bengaluru heard
arguments only with respect to the Garnishee Application on 02.03.2016 and
posted the matters for orders on 04.03.2016 but failed to consider the
other applications. Aggrieved by such non-consideration of the
interlocutory applications by DRT Bengaluru, despite the urgency and the
enormous amounts involved in the matter, the petitioners–banks moved the
High Court of Karnataka by filing Writ Petition Nos.12191-12194 of 2016
seeking appropriate directions to DRT Bengaluru to hear and dispose of the
applications moved by the petitioners–banks on 02.03.2016 expeditiously.
Since the High Court refused to pass any ad interim direction, the
aforesaid special leave petitions were filed in this Court.
4. By Order dated 09.03.2016 this Court issued notice returnable on
30.03.2016 and also permitted the petitioners–banks to serve notice on
Respondent No.3 through the Indian High Commission, London or any other
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 be a substantial
deposit made before this Court……..
………………………………………………………………..
…..Mr. C. S. Vaidyanathan and Mr. Parag P. Tripathi, learned Senior Counsel
appearing for Respondent Nos.1 to 4 have submitted that they may be given
short time to file their response to the main petition.
Accordingly, they are granted time upto 21.04.2016 to file their response.
In the response filed by the third respondent, he shall disclose the
details of all his 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 whatsoever and
also the rights, indicated above, in the name also of his wife and
children, as on 31.03.2016.
It shall also be indicated in the response as to what is the amount he is
prepared to deposit before this Court so as to show his bonafide for a
meaningful negotiation. Mr. C.S. Vaidyanathan and Mr. Parag P. Tripathi,
learned Senior Counsel, have submitted that on the next date of hearing,
specific instruction shall be obtained from the third respondent as to his
probable date of appearance in person before this Court.”
6. The matter thereafter came up on 26.04.2016, by which time counter
affidavit was filed by Respondent No.3 disclosing his personal assets to
the tune of Rs.20,174,146,601, majority of which had been under attachment
by the Income Tax Department. The details of the assets of Respondent No.3
situated outside the country and those of his wife and children were
furnished in a sealed cover. This Court, in its Order dated 26.04.2016
observed:-
“…….It is also submitted that the personal guarantee executed by the 3rd
respondent with the banks do not cover his assets abroad. We have no
problem in recording the above submissions and we do so. However, we find
that in the Order dated 7.04.2016, this Court had directed the Respondent
No.3 to disclose the assets in an affidavit. The only purpose for
disclosing the assets was to have a fair idea for the petitioners to go for
a meaningful settlement on the proposals made by Respondent No.3. There is
no petition before us for clarification 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 before DRT, Bengaluru along with two documents stating that an
amount of US$ 40 million was paid to Respondent No.3 on 25.02.2016. Said
memo was to the following effect:-
“MEMO
The opponent 2 in the above application begs to submit the below mentioned
documents:
Extract confirming payment of US$ (US Dollars) 40 Million to Defendant No.3
on 25.02.2016.
Resignation of Defendant No.3 from the Board of United Spirits Ltd.
WHEREFORE the Opponent No.2 prays that this Memo and enclosures be taken on
record in the interests of justice.”
8. On 14.7.2016 I.A. Nos.9 to 12 of 2016 were filed by the petitioners-
banks stating that the disclosure statement made by Respondent No.3 and
furnished to the petitioners-banks in terms of the aforesaid Order dated
26.04.2016 was vague and lacked in material particulars; that the location
of the assets mentioned in the statement was so unclear that it would be
impossible for any person to identify the location of the property; and
that Respondent No.3 had undisputedly received a sum of US$ 40 million as
disclosed in the memo dated 28.06.2016 but there was no whisper about said
amount in the disclosure statement. It was submitted:-
“18. It is therefore clear that Respondent No.3 has willfully disobeyed the
directions issued by this Hon’ble Court on 7.04.2016. Respondent No.3 is
therefore guilty of contempt of the Order dated 29.04.2016 passed by this
Hon’ble Court. The Petitioners’ reserve liberty to initiate appropriate
proceedings against the Respondent No.3 in this regards.
……….
22. In view of the above, it is just and necessary that this Application
is allowed and Respondent No.3 is directed to disclose and furnish all
particulars and all descriptions of all his 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 whatsoever as on 31.03.2016. If this application is not allowed as
prayed for, the Petitioner and the public at large will be put to
irreparable loss and injury.”
In the circumstances it was prayed that Respondent No.3 be directed to make
a complete and detailed disclosure 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 intentionally concealing the information. In fact, there is no
whisper regarding the said details in the Disclosure Statement.
21. The disclosure is prima facie vague and lacks any material particulars.
The location of the assets mentioned in the Disclosure Statement is so
unclear that it is not practically possible for any person other than the
Alleged Contemnor to identify the location of the properties.
22. Further, it is stated that the Alleged Contemnor had received a 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.
23. It is pertinent to mention here that after disposal of the captioned
Special Leave Petition, on 28.06.2016 the Respondent No.10 filed a Memo
along with two documents in the DRT, stating that the above mentioned
amount of US$ 40 million was paid to alleged Contemnor on 25.02.2016. A
copy of the said Memo dated 28.06.2016 is annexed herewith …………
24. A reading of the above documents clearly establishes that as on
26.04.2016 when the alleged Contemnor filed the Disclosure Statement in
this Hon’ble Court, the alleged Contemnor had already received the above
mentioned amount of US$ 40 million before 31.03.2016. In fact the memo
clearly shows that the said amount of US$ 40 million was transferred by
Citi Bank, being Respondent No.10’s bank, via J.P. Morgan Chase N.A. Bank
(intermediary Bank) to the account of the Alleged Contemnor being
maintained with Edmond De Rothschild (Suisse) SA Geneva. However, there is
no whisper of the above mentioned amount or the transaction in the
Disclosure Statement. The alleged Contemnor had deliberately, willfully and
contumaciously concealed the aforementioned payment/transaction which is
against the letter and spirit of the Order dated 07.04.2016.”
10. On 25.07.2016 this Court issued notice in aforesaid contempt
petition as well as in I.A Nos.9 to 12 of 2016.
11. On 24.08.2016 counter affidavit was filed on behalf of Respondent
Nos.1 to 4 in I.A. Nos.9 to 12 of 2016. It was submitted:-
“… it is incorrect that in the disclosures the Respondent No.3 has
provided information pertaining to only a few of his overseas assets as on
31.03.2016 as alleged. The Respondent No.3 reiterates that the disclosures
made to this Hon’ble Court are accurate. It is respectfully submitted 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 on behalf
of Respondent No.3/Alleged Contemnor for recall of Order dated 25.07.2016
passed by this Court issuing notice in contempt petition. It was submitted
by Respondent No.3:-
“………….It is further submitted that the disclosures made by Respondent
No.3/Alleged Contemnor to this Hon’ble Court were (a) pursuant to the Order
dated 7th April, 2016 were made “as on 31.03.2016” and were accurate as on
31.03.2016”, and (b) far from being made under the provisions of Order 21
Rule 41(2) of the Code of Civil Procedure, 1908, were “only for the purpose
of enabling the petitioners to have a fair idea for a meaningful
settlement” as observed in the order dated 26th April, 2016. It is
respectfully submitted that the Petitioners are incorrectly alleging that
the disclosures are inaccurate, and are now seeking to substantially alter
the basis and purpose of the disclosures, as is evident from a mere perusal
of the submissions in paragraphs 21 and 25 of the present Contempt
Petition.
……It is denied that Respondent No.3 has not obeyed the directions of this
Hon’ble Court dated 7th April, 2016 or has not disclosed the details of the
assets as alleged or in the manner alleged. It is denied that the
disclosure is vague or lacks material particulars. It is denied that the
location of the assets in the disclosure is unclear as alleged or in the
manner alleged. The statement of assets is as on a particular date,
obviously it cannot detail the day to day transactions of receipts or
expenditures; nor did the order require the present respondent to do so. It
is denied that the Respondent No.3/Alleged Contemnor has deliberately or
willfully or contumaciously concealed the aforesaid payment against the
letter and spirit of the Order dated 7th April, 2016.”
While seeking recall of the Order dated 25.07.2016 it was also prayed
that the personal appearance of Respondent No.3/Alleged Contemnor in the
present contempt petition be dispensed with.
13. Around this time I.A. Nos.13 to 16 were filed on behalf of B.N.P
Paribas seeking impleadment in aforesaid Special Leave Petition Nos. 6828-
6831 of 2016.
14. On 29.08.2016, this Court issued notice in respect of I.A. Nos.1 to
4 of 2016 seeking recall of the Order dated 25.07.2016. In their reply
filed on 07.09.2016 to aforesaid I.A. Nos.1 to 4 of 2016, it was submitted
by the petitioners-banks that the alleged 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 Hon’ble Court.”
15. When IA Nos.9-12 of 2016 along with Contempt Petition Nos.421-
424 of 2016 came up before this Court on 25.10.2016, it was prima facie
found that Respondent No.3 had not made a proper disclosure. In the
premises, this Court observed and directed:-
“Having heard learned Attorney General appearing for the applicants and
Shri C.S.Vaidyanathan, learned Senior Counsel appearing for Respondent
No.3, we are prima facie of the view that Respondent No.3 has not made a
proper disclosure in terms of our Order dated 07.04.2016. Therefore,
Respondent No.3 is directed to make a complete disclosure of all his
properties and in particular, about the receipt of US$ 40 Million. It shall
be disclosed as to when this amount was received; where was it deposited
and how the same has been dealt with up to date. Respondent No.3 shall
also furnish the particulars of the assets abroad with full details
thereof, as has been given with regard to the assets in India.”
16. Respondent No.3 thereafter filed “further counter affidavit” in
aforementioned I.A. Nos.9-12 of 2016 on 23.11.2016. The affidavit enclosed
letter dated 18.11.2016 issued by Edmond De Rothschild (Suisse) S.A.
Paragraph 3 of the affidavit was to the following effect:
“On a mere perusal of the letter dated 18th November, 2016 issued by Edmond
De Rothschild (Suisse) S.A. (Annex. “R-2” hereto), it is evident that the
US$ 39,999,994 million paid by Diageo Plc was received on 25th February,
2016. On instructions of Respondent No.3, an aggregate sum of US$
39,999,993.99 was paid to the following parties on 26th and 29th February,
2016 respectively:
|NAME OF PARTY |AMOUNT |
|S. Three Gift Settlement |US$13,000,000 |
|(a Trust the sole beneficiary|(On 26.02.2016) & US$ |
|of which is Siddartha Mallya,|333,331.33 (on 29.02.2016)|
|son of Respondent No.3) | |
|L. Three Gift Settlement |US$13,000,000 |
|(a Trust the sole beneficiary|(On 26.02.2016) & US$ |
|of which is Leena Mallya, |333,331.33 (on 29.02.2016)|
|daughter of Respondent No.3) | |
|T. Three Gift Settlement |US$13,000,000 |
|(a Trust the sole beneficiary|(On 26.02.2016) & US$ |
|of which is Tanya Mallya, |333,331.33 (on 29.02.2016)|
|daughter of Respondent No.3) | |
| |US$ 39,999,993.99 |
|TOTAL | |
Each of the three children of Respondent No.3, who are the sole
beneficiaries of the aforesaid Trusts, are majors and are citizens of the
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, Bengaluru, on
26.07.2013, Respondent Nos.1 to 3 gave an oral undertaking before the
Hon’ble DRT, that they would not alienate or dispose of their properties.
Thereafter, since no interim order was passed by the Hon’ble DRT,
Petitioners filed a writ petition bearing W.P.No.38870/2013 & W.P.No.39048-
39052/2013 before the Hon’ble High Court of Karnataka, seeking a writ in
the nature of Mandamus directing the Hon’ble DRT to hear and dispose of the
interlocutory applications filed by the petitioners in the OA i.e. IA No.
2593/2013 to 2598/2013 & IA No.3034/2013 expeditiously. In the aforesaid
writ petition, the Hon’ble High Court of Karnataka was pleased to pass a
restraint Order on 03.09.2013 against respondent Nos. 1 to 3 herein in the
following terms:
“In that view, there shall be interim order of injunction against the
Respondent Nos.1 to 3 from transferring, alienating, disposing or creating
third party rights in respect of movable as well as immovable properties
belonging to them until further order in these petitions.” (emphasis
supplied)
14. The said order was further confirmed by the order dated 13.11.2013
passed in the above mentioned writ petitions, whereby the said writ
petitions were disposed of. Copy of the 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 are annexed ………. .
15. Therefore, it is clear that the Respondent No.3 has clearly and
flagrantly violated the orders of the Hon’ble High Court of Karnataka and
is guilty of contempt of Court. It is stated that by transferring the US$
40 million to his children, the Respondent No.3 has not only acted in
contempt of the Hon’ble High Court, but has also tried to subvert the
course of justice by diverting the funds offshore to shield it from the
recovery proceedings on going before the Hon’ble DRT. Therefore, it is
essential that the said US$ 40 million be brought back by the Respondent
No.3 and be deposited with this Hon’ble Court, or the Hon’ble DRT, pending
the disposal of the recovery proceedings. It is further submitted that it
is settled law that this Hon’ble Court has the power to punish for contempt
of its subordinate Courts. Therefore, it is prayed that this Hon’ble Court
hold the Respondent No.3 guilty of contempt of the Hon’ble High Court of
Karnataka.
16. It is further 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 03.09.2013 and 13.11.2013 passed by the High Court of Karnataka, this
Court passed the following Order:
“In the affidavit filed on 10.12.2016, the petitioners have brought to the
notice of this Court that the transfer of US$ 40 Million in favour of the
children of Respondent No.3 is in flagrant violation of the orders passed
by the High Court of Karnataka. Therefore, it is prayed that appropriate
orders may be issued to secure the deposit of the said amount of US$ 40
Million before this Court or the DRT forthwith, pending disposal of the
further recovery proceedings.
The learned senior counsel appearing for Respondent No.3 seeks three weeks'
time to file reply to the submission.”
19. Despite the aforesaid Order dated 11.01.2017 which took note of the
violation of the orders passed by the High Court of Karnataka and though
time was sought to file reply, nothing was filed in reply or rebuttal by
Respondent No.3.
20. When the aforesaid IA Nos.9-12 of 2016 along with Contempt Petition
Nos.421-424 of 2016 with application IA Nos.1-4 of 2016 seeking recall of
the Order dated 25.07.2016, came up for hearing, Mr. Mukul Rohtagi, learned
Attorney General for India and Mr. Shyam Divan, learned senior advocate
appeared on behalf of the petitioners-banks while Mr. C.S. Vaidyanathan,
learned senior advocate appeared for Respondent No.3. It was submitted by
the learned Attorney General that Respondent No.3 had made no honest
disclosure and in fact there was a deliberate attempt to flout the Order of
this Court. In his submission, Respondent No.3 must first of all be
directed to deposit US$ 40 million which he had transferred in violation of
the Orders of the Courts, before he could be heard in the matter. Mr.
Divan, learned senior counsel submitted that the orders dated 3.9.2013 and
13.11.2013 were clear and unambiguous. He further submitted that the breach
on part of Respondent No.3 was willful and deliberate and that it was a
clear attempt in over- reaching the Court and putting the amounts beyond
the reach of the Court.
Mr. Vaidyanathan, learned senior advocate on the other hand submitted
that Respondent No.3 was not asked or called upon to disclose all
transactions but to disclose the status as it obtained on 31.03.2016 and as
such the disclosure by Respondent No.3 was consistent with the tenor of the
order passed by this Court. In his submission 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[2] 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 given by Respondent No.3 or not was immaterial. He was called
upon to make a complete disclosure and was bound to comply with the
directions. The assertion made by the petitioners-banks that the details of
the bank account held in Edmond De Rothschild Bank were never disclosed by
Respondent No.3 is correct. In fact, no details of any bank account with
overseas banks were given by Respondent No.3. The violation by Respondent
No.3 could not be termed as a mere infraction. The violation by Respondent
No.3 regarding non-disclosure becomes more pronounced because it is this
very account held in Edmand De Rothschild Bank that was utilized to
transmit funds to the tune of US$ 40 Million.
22. We now turn to the alleged violation of orders dated 03.09.2013 and
13.11.2013 passed by the High Court of Karnataka. It is not disputed that
such orders were passed restraining the concerned respondents including
Respondent No.3 and that the orders were passed in proceedings arising
from O.A. No.766 of 2013 before DRT Bengaluru. The present proceedings
before this court have also arisen from the very same O.A. No.766 of 2013.
The orders of restraints passed by the High Court were therefore in the
very same proceedings with which we are presently concerned. Said orders
bound the concerned respondents including Respondent No.3 and restrained
them from transferring, alienating, disposing or creating third party
rights in respect of movable as well as immovable properties belonging to
them till further orders in the proceedings. A question has been raised by
Mr. Vaidyanathan learned senior advocate whether the orders would be
restricted only so far as the properties which were in the hands of the
concerned respondents as on the date when those orders of restraint were
passed. In other words, whether any properties which in future or
subsequent to the Orders had come in the hands or control of the concerned
respondent would be covered by such orders or not. On plain reading of
the Orders, in our view, whether the properties were in the hands of the
concerned respondents on the date when the orders of restraint were passed
by the High Court or had come in their hands or under their control at a
later point in time, regardless of such qualification all properties
whether movable or immovable were governed by the orders of restraint.
There is no ambiguity of any sort and the Orders of 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 would pay to Respondent No.3 a sum of US$75
million and accordingly petitioners-banks had moved four interlocutory
applications for orders against respondent Nos.10 and 11 for disbursing
said amount of US$ 75 million. The amount of US$ 40 Million so received by
Respondent No.3 was therefore subject matter of the present controversy.
The least that was expected of Respondent No.3 was to disclose relevant
facts pertaining to receipt and disbursement of US$ 40 million. The
violation on that count is thus not only against the directions issued by
this court but also against express mandate of orders dated 03.09.2013 and
13.11.2013 passed in the proceedings in question.
25. Having thus found that the actions on the part of Respondent No.3 in
disbursing the amount of US$ 40 million was against the text and tenor of
the orders passed by the High Court of Karnataka, the question then arises
whether this Court can take cognizance of such violation or should it
leave it to be decided by the High Court of Karnataka itself in a properly
instituted legal proceeding.
26. In Delhi Judicial Service Association, Tis Hazari Court, Delhi v.
State of Gujarat and others[3], a question arose whether the power and
jurisdiction of this Court under Article 129 of the Constitution is
confined to “the contempt of this Court” alone. Submissions advanced
in that behalf were noted in paragraph 14 of the judgment which sets out
the submission of the learned Attorney General:
“...The Supreme Court as the Apex Court is the protector and guardian of
justice throughout the land, therefore, it has a right and also a duty to
protect the courts whose orders and judgments are amenable to correction,
from commission of contempt against them.”
The subsequent paragraphs of the judgment namely paragraph 26 onwards
show that the contentions so advanced by the learned Attorney General were
accepted by this Court. It is true that the discussion was in the context
of the contempt of a subordinate court. However, the nature of power
exercisable by this Court was considered in the backdrop that this Court
has supreme appellate jurisdiction over all courts and tribunals in the
country which is clear from the observations in paragraph 31 of the
judgment. We must say that Mr. Vaidyanathan did not seriously contend to
the contrary but his submission was that if the jurisdiction is 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 is guilty of violating the express Orders of Restraint passed by the
High Court of Karnataka in the same Cause from which the present
proceedings have arisen.
Though the contempt on the second count is theoretically of the
orders passed by the High Court of Karnataka since those orders pertain to
the very same Cause and the actions on part of Respondent No.3 in not
disclosing the account in question through which the transfers were
affected also fall with respect to contempt on first count, we proceed to
exercise our contempt jurisdiction even with regard to the second count. As
stated above, Respondent No.3 was adequately put to notice and no prejudice
has been caused as a result of such assumption of jurisdiction by this
court.
29. Having considered the entirety of the matter, we find that Respondent
No.3 is guilty of having committed contempt of court on both the counts. At
this stage it must be stated that in terms of Rule 6 (1) of Rules to
Regulate Proceeding for Contempt of Supreme Court 1975, Respondent No.3 was
obliged and duty bound to appear in person in response to the notice issued
by this Court in Contempt Petition. Instead, he chose to file application
seeking recall of the orders issuing notice. Having considered the matter,
we see no reason to recall that order and dismiss I.A. Nos.1 to 4 of 2016
preferred by Respondent No.3 in Contempt Petition Civil No.421-424 of 2016.
Respondent No.3 is therefore duty bound to appear in person in the present
contempt proceedings.
30. Since Respondent No.3 has not filed any reply to the Contempt
Petition nor did he appear in person, though we have found him guilty of
having committed contempt of court, we deem it necessary to give him one
more opportunity and also hear him on the proposed punishment. We therefore
adjourn matter to 10.07.2017 for hearing Respondent No.3 in person on
matters in issue including one regarding the proposed punishment to be
awarded to him for contempt of court. The instant contempt petitions and
connected cases shall now be listed at 2 o'clock on 10.07.2017. Respondent
No.3 may keep his affidavit ready to be tendered on the same day by stating
mitigating circumstances, if any and any other submissions he chooses to
advance.
31. We direct the Ministry of Home Affairs, Government of India, New
Delhi to secure and ensure presence of Respondent No.3 before this Court on
10.07.2017. A copy of this Judgment be sent to the Ministry of Home
Affairs for compliance.
………………………J.
(Adarsh Kumar Goel)
…………………..……J.
(Uday Umesh Lalit)
New Delhi,
May 09, 2017
-----------------------
[1] State Bank of India, Axis Bank Limited, Bank of Baroda, Corporation
Bank, The Federal Bank Limited, IDBI Bank Limited, Indian Overseas Bank,
Jammu & Kashmir Bank Limited, Punjab & Sind Bank, Punjab National Bank,
State Bank of Mysore, UCO Bank, United Bank of India and Oriental Bank of
Commerce.
[2] (1999) 2 SCC 537
[3] (1991) 4 SCC 406
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
I.A. NOS.9-12 & 13-16 OF 2016
IN
SLP (C) NOS.6828-6831 OF 2016
STATE BANK OF INDIA AND ORS. ……PETITIONERS
VERSUS
KINGFISHER AIRLINES LTD. AND ORS. ..…. RESPONDENTS
With
I.A. NOS.1-4 OF 2016
IN
AND WITH
CONTEMPT PETITION (C) NOS.421-424 OF 2016
IN
SLP (C) NOS.6828-6831 OF 2016
JUDGMENT
Uday Umesh Lalit, J.
1. State Bank of India and 13 other banks[1] 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 Hundred and Seventy Nine and Paise
Thirty Two only) from Respondent Nos.1 to 4. It is the case of the
petitioners-banks that despite applications having been filed requiring
Respondent Nos.1 to 4 to disclose details of their assets on oath, said
respondents never disclosed the assets and instead, said respondents
secretly tried to dispose of their assets with an intention to defeat the
recovery proceedings pending before DRT Bengaluru.
2. According to the petitioners–banks, on 25.02.2016 Respondent Nos.10
and 11 disclosed to London Stock Exchange and Bombay Stock Exchange
respectively that Respondent No.3 had resigned as Chairman of Respondent
No.11; that Respondent No.10 would pay to Respondent No.3 a sum of US$ 75
million; that out of said amount a sum of US$ 40 million would be paid
immediately; and that Respondent No.3 had made a statement to the press
confirming said transaction and had stated that he intended to settle in
London. In these circumstances, the petitioners–banks moved four
interlocutory applications before DRT Bengaluru on 02.03.2016 seeking
interim prayers:
“(i) to freeze the passport of Respondent No.3
(ii) to issue an arrest warrant against Respondent No.3,
(iii) to issue a garnishee order against Respondent Nos.10 and 11 from
disbursing US$ 75 million, and
(iv) to issue a direction to Respondent No.3 to disclose his assets on
oath.”
3. It is the case of the petitioners–banks that DRT Bengaluru heard
arguments only with respect to the Garnishee Application on 02.03.2016 and
posted the matters for orders on 04.03.2016 but failed to consider the
other applications. Aggrieved by such non-consideration of the
interlocutory applications by DRT Bengaluru, despite the urgency and the
enormous amounts involved in the matter, the petitioners–banks moved the
High Court of Karnataka by filing Writ Petition Nos.12191-12194 of 2016
seeking appropriate directions to DRT Bengaluru to hear and dispose of the
applications moved by the petitioners–banks on 02.03.2016 expeditiously.
Since the High Court refused to pass any ad interim direction, the
aforesaid special leave petitions were filed in this Court.
4. By Order dated 09.03.2016 this Court issued notice returnable on
30.03.2016 and also permitted the petitioners–banks to serve notice on
Respondent No.3 through the Indian High Commission, London or any other
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 be a substantial
deposit made before this Court……..
………………………………………………………………..
…..Mr. C. S. Vaidyanathan and Mr. Parag P. Tripathi, learned Senior Counsel
appearing for Respondent Nos.1 to 4 have submitted that they may be given
short time to file their response to the main petition.
Accordingly, they are granted time upto 21.04.2016 to file their response.
In the response filed by the third respondent, he shall disclose the
details of all his 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 whatsoever and
also the rights, indicated above, in the name also of his wife and
children, as on 31.03.2016.
It shall also be indicated in the response as to what is the amount he is
prepared to deposit before this Court so as to show his bonafide for a
meaningful negotiation. Mr. C.S. Vaidyanathan and Mr. Parag P. Tripathi,
learned Senior Counsel, have submitted that on the next date of hearing,
specific instruction shall be obtained from the third respondent as to his
probable date of appearance in person before this Court.”
6. The matter thereafter came up on 26.04.2016, by which time counter
affidavit was filed by Respondent No.3 disclosing his personal assets to
the tune of Rs.20,174,146,601, majority of which had been under attachment
by the Income Tax Department. The details of the assets of Respondent No.3
situated outside the country and those of his wife and children were
furnished in a sealed cover. This Court, in its Order dated 26.04.2016
observed:-
“…….It is also submitted that the personal guarantee executed by the 3rd
respondent with the banks do not cover his assets abroad. We have no
problem in recording the above submissions and we do so. However, we find
that in the Order dated 7.04.2016, this Court had directed the Respondent
No.3 to disclose the assets in an affidavit. The only purpose for
disclosing the assets was to have a fair idea for the petitioners to go for
a meaningful settlement on the proposals made by Respondent No.3. There is
no petition before us for clarification 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 before DRT, Bengaluru along with two documents stating that an
amount of US$ 40 million was paid to Respondent No.3 on 25.02.2016. Said
memo was to the following effect:-
“MEMO
The opponent 2 in the above application begs to submit the below mentioned
documents:
Extract confirming payment of US$ (US Dollars) 40 Million to Defendant No.3
on 25.02.2016.
Resignation of Defendant No.3 from the Board of United Spirits Ltd.
WHEREFORE the Opponent No.2 prays that this Memo and enclosures be taken on
record in the interests of justice.”
8. On 14.7.2016 I.A. Nos.9 to 12 of 2016 were filed by the petitioners-
banks stating that the disclosure statement made by Respondent No.3 and
furnished to the petitioners-banks in terms of the aforesaid Order dated
26.04.2016 was vague and lacked in material particulars; that the location
of the assets mentioned in the statement was so unclear that it would be
impossible for any person to identify the location of the property; and
that Respondent No.3 had undisputedly received a sum of US$ 40 million as
disclosed in the memo dated 28.06.2016 but there was no whisper about said
amount in the disclosure statement. It was submitted:-
“18. It is therefore clear that Respondent No.3 has willfully disobeyed the
directions issued by this Hon’ble Court on 7.04.2016. Respondent No.3 is
therefore guilty of contempt of the Order dated 29.04.2016 passed by this
Hon’ble Court. The Petitioners’ reserve liberty to initiate appropriate
proceedings against the Respondent No.3 in this regards.
……….
22. In view of the above, it is just and necessary that this Application
is allowed and Respondent No.3 is directed to disclose and furnish all
particulars and all descriptions of all his 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 whatsoever as on 31.03.2016. If this application is not allowed as
prayed for, the Petitioner and the public at large will be put to
irreparable loss and injury.”
In the circumstances it was prayed that Respondent No.3 be directed to make
a complete and detailed disclosure 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 intentionally concealing the information. In fact, there is no
whisper regarding the said details in the Disclosure Statement.
21. The disclosure is prima facie vague and lacks any material particulars.
The location of the assets mentioned in the Disclosure Statement is so
unclear that it is not practically possible for any person other than the
Alleged Contemnor to identify the location of the properties.
22. Further, it is stated that the Alleged Contemnor had received a 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.
23. It is pertinent to mention here that after disposal of the captioned
Special Leave Petition, on 28.06.2016 the Respondent No.10 filed a Memo
along with two documents in the DRT, stating that the above mentioned
amount of US$ 40 million was paid to alleged Contemnor on 25.02.2016. A
copy of the said Memo dated 28.06.2016 is annexed herewith …………
24. A reading of the above documents clearly establishes that as on
26.04.2016 when the alleged Contemnor filed the Disclosure Statement in
this Hon’ble Court, the alleged Contemnor had already received the above
mentioned amount of US$ 40 million before 31.03.2016. In fact the memo
clearly shows that the said amount of US$ 40 million was transferred by
Citi Bank, being Respondent No.10’s bank, via J.P. Morgan Chase N.A. Bank
(intermediary Bank) to the account of the Alleged Contemnor being
maintained with Edmond De Rothschild (Suisse) SA Geneva. However, there is
no whisper of the above mentioned amount or the transaction in the
Disclosure Statement. The alleged Contemnor had deliberately, willfully and
contumaciously concealed the aforementioned payment/transaction which is
against the letter and spirit of the Order dated 07.04.2016.”
10. On 25.07.2016 this Court issued notice in aforesaid contempt
petition as well as in I.A Nos.9 to 12 of 2016.
11. On 24.08.2016 counter affidavit was filed on behalf of Respondent
Nos.1 to 4 in I.A. Nos.9 to 12 of 2016. It was submitted:-
“… it is incorrect that in the disclosures the Respondent No.3 has
provided information pertaining to only a few of his overseas assets as on
31.03.2016 as alleged. The Respondent No.3 reiterates that the disclosures
made to this Hon’ble Court are accurate. It is respectfully submitted 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 on behalf
of Respondent No.3/Alleged Contemnor for recall of Order dated 25.07.2016
passed by this Court issuing notice in contempt petition. It was submitted
by Respondent No.3:-
“………….It is further submitted that the disclosures made by Respondent
No.3/Alleged Contemnor to this Hon’ble Court were (a) pursuant to the Order
dated 7th April, 2016 were made “as on 31.03.2016” and were accurate as on
31.03.2016”, and (b) far from being made under the provisions of Order 21
Rule 41(2) of the Code of Civil Procedure, 1908, were “only for the purpose
of enabling the petitioners to have a fair idea for a meaningful
settlement” as observed in the order dated 26th April, 2016. It is
respectfully submitted that the Petitioners are incorrectly alleging that
the disclosures are inaccurate, and are now seeking to substantially alter
the basis and purpose of the disclosures, as is evident from a mere perusal
of the submissions in paragraphs 21 and 25 of the present Contempt
Petition.
……It is denied that Respondent No.3 has not obeyed the directions of this
Hon’ble Court dated 7th April, 2016 or has not disclosed the details of the
assets as alleged or in the manner alleged. It is denied that the
disclosure is vague or lacks material particulars. It is denied that the
location of the assets in the disclosure is unclear as alleged or in the
manner alleged. The statement of assets is as on a particular date,
obviously it cannot detail the day to day transactions of receipts or
expenditures; nor did the order require the present respondent to do so. It
is denied that the Respondent No.3/Alleged Contemnor has deliberately or
willfully or contumaciously concealed the aforesaid payment against the
letter and spirit of the Order dated 7th April, 2016.”
While seeking recall of the Order dated 25.07.2016 it was also prayed
that the personal appearance of Respondent No.3/Alleged Contemnor in the
present contempt petition be dispensed with.
13. Around this time I.A. Nos.13 to 16 were filed on behalf of B.N.P
Paribas seeking impleadment in aforesaid Special Leave Petition Nos. 6828-
6831 of 2016.
14. On 29.08.2016, this Court issued notice in respect of I.A. Nos.1 to
4 of 2016 seeking recall of the Order dated 25.07.2016. In their reply
filed on 07.09.2016 to aforesaid I.A. Nos.1 to 4 of 2016, it was submitted
by the petitioners-banks that the alleged 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 Hon’ble Court.”
15. When IA Nos.9-12 of 2016 along with Contempt Petition Nos.421-
424 of 2016 came up before this Court on 25.10.2016, it was prima facie
found that Respondent No.3 had not made a proper disclosure. In the
premises, this Court observed and directed:-
“Having heard learned Attorney General appearing for the applicants and
Shri C.S.Vaidyanathan, learned Senior Counsel appearing for Respondent
No.3, we are prima facie of the view that Respondent No.3 has not made a
proper disclosure in terms of our Order dated 07.04.2016. Therefore,
Respondent No.3 is directed to make a complete disclosure of all his
properties and in particular, about the receipt of US$ 40 Million. It shall
be disclosed as to when this amount was received; where was it deposited
and how the same has been dealt with up to date. Respondent No.3 shall
also furnish the particulars of the assets abroad with full details
thereof, as has been given with regard to the assets in India.”
16. Respondent No.3 thereafter filed “further counter affidavit” in
aforementioned I.A. Nos.9-12 of 2016 on 23.11.2016. The affidavit enclosed
letter dated 18.11.2016 issued by Edmond De Rothschild (Suisse) S.A.
Paragraph 3 of the affidavit was to the following effect:
“On a mere perusal of the letter dated 18th November, 2016 issued by Edmond
De Rothschild (Suisse) S.A. (Annex. “R-2” hereto), it is evident that the
US$ 39,999,994 million paid by Diageo Plc was received on 25th February,
2016. On instructions of Respondent No.3, an aggregate sum of US$
39,999,993.99 was paid to the following parties on 26th and 29th February,
2016 respectively:
|NAME OF PARTY |AMOUNT |
|S. Three Gift Settlement |US$13,000,000 |
|(a Trust the sole beneficiary|(On 26.02.2016) & US$ |
|of which is Siddartha Mallya,|333,331.33 (on 29.02.2016)|
|son of Respondent No.3) | |
|L. Three Gift Settlement |US$13,000,000 |
|(a Trust the sole beneficiary|(On 26.02.2016) & US$ |
|of which is Leena Mallya, |333,331.33 (on 29.02.2016)|
|daughter of Respondent No.3) | |
|T. Three Gift Settlement |US$13,000,000 |
|(a Trust the sole beneficiary|(On 26.02.2016) & US$ |
|of which is Tanya Mallya, |333,331.33 (on 29.02.2016)|
|daughter of Respondent No.3) | |
| |US$ 39,999,993.99 |
|TOTAL | |
Each of the three children of Respondent No.3, who are the sole
beneficiaries of the aforesaid Trusts, are majors and are citizens of the
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, Bengaluru, on
26.07.2013, Respondent Nos.1 to 3 gave an oral undertaking before the
Hon’ble DRT, that they would not alienate or dispose of their properties.
Thereafter, since no interim order was passed by the Hon’ble DRT,
Petitioners filed a writ petition bearing W.P.No.38870/2013 & W.P.No.39048-
39052/2013 before the Hon’ble High Court of Karnataka, seeking a writ in
the nature of Mandamus directing the Hon’ble DRT to hear and dispose of the
interlocutory applications filed by the petitioners in the OA i.e. IA No.
2593/2013 to 2598/2013 & IA No.3034/2013 expeditiously. In the aforesaid
writ petition, the Hon’ble High Court of Karnataka was pleased to pass a
restraint Order on 03.09.2013 against respondent Nos. 1 to 3 herein in the
following terms:
“In that view, there shall be interim order of injunction against the
Respondent Nos.1 to 3 from transferring, alienating, disposing or creating
third party rights in respect of movable as well as immovable properties
belonging to them until further order in these petitions.” (emphasis
supplied)
14. The said order was further confirmed by the order dated 13.11.2013
passed in the above mentioned writ petitions, whereby the said writ
petitions were disposed of. Copy of the 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 are annexed ………. .
15. Therefore, it is clear that the Respondent No.3 has clearly and
flagrantly violated the orders of the Hon’ble High Court of Karnataka and
is guilty of contempt of Court. It is stated that by transferring the US$
40 million to his children, the Respondent No.3 has not only acted in
contempt of the Hon’ble High Court, but has also tried to subvert the
course of justice by diverting the funds offshore to shield it from the
recovery proceedings on going before the Hon’ble DRT. Therefore, it is
essential that the said US$ 40 million be brought back by the Respondent
No.3 and be deposited with this Hon’ble Court, or the Hon’ble DRT, pending
the disposal of the recovery proceedings. It is further submitted that it
is settled law that this Hon’ble Court has the power to punish for contempt
of its subordinate Courts. Therefore, it is prayed that this Hon’ble Court
hold the Respondent No.3 guilty of contempt of the Hon’ble High Court of
Karnataka.
16. It is further 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 03.09.2013 and 13.11.2013 passed by the High Court of Karnataka, this
Court passed the following Order:
“In the affidavit filed on 10.12.2016, the petitioners have brought to the
notice of this Court that the transfer of US$ 40 Million in favour of the
children of Respondent No.3 is in flagrant violation of the orders passed
by the High Court of Karnataka. Therefore, it is prayed that appropriate
orders may be issued to secure the deposit of the said amount of US$ 40
Million before this Court or the DRT forthwith, pending disposal of the
further recovery proceedings.
The learned senior counsel appearing for Respondent No.3 seeks three weeks'
time to file reply to the submission.”
19. Despite the aforesaid Order dated 11.01.2017 which took note of the
violation of the orders passed by the High Court of Karnataka and though
time was sought to file reply, nothing was filed in reply or rebuttal by
Respondent No.3.
20. When the aforesaid IA Nos.9-12 of 2016 along with Contempt Petition
Nos.421-424 of 2016 with application IA Nos.1-4 of 2016 seeking recall of
the Order dated 25.07.2016, came up for hearing, Mr. Mukul Rohtagi, learned
Attorney General for India and Mr. Shyam Divan, learned senior advocate
appeared on behalf of the petitioners-banks while Mr. C.S. Vaidyanathan,
learned senior advocate appeared for Respondent No.3. It was submitted by
the learned Attorney General that Respondent No.3 had made no honest
disclosure and in fact there was a deliberate attempt to flout the Order of
this Court. In his submission, Respondent No.3 must first of all be
directed to deposit US$ 40 million which he had transferred in violation of
the Orders of the Courts, before he could be heard in the matter. Mr.
Divan, learned senior counsel submitted that the orders dated 3.9.2013 and
13.11.2013 were clear and unambiguous. He further submitted that the breach
on part of Respondent No.3 was willful and deliberate and that it was a
clear attempt in over- reaching the Court and putting the amounts beyond
the reach of the Court.
Mr. Vaidyanathan, learned senior advocate on the other hand submitted
that Respondent No.3 was not asked or called upon to disclose all
transactions but to disclose the status as it obtained on 31.03.2016 and as
such the disclosure by Respondent No.3 was consistent with the tenor of the
order passed by this Court. In his submission 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[2] 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 given by Respondent No.3 or not was immaterial. He was called
upon to make a complete disclosure and was bound to comply with the
directions. The assertion made by the petitioners-banks that the details of
the bank account held in Edmond De Rothschild Bank were never disclosed by
Respondent No.3 is correct. In fact, no details of any bank account with
overseas banks were given by Respondent No.3. The violation by Respondent
No.3 could not be termed as a mere infraction. The violation by Respondent
No.3 regarding non-disclosure becomes more pronounced because it is this
very account held in Edmand De Rothschild Bank that was utilized to
transmit funds to the tune of US$ 40 Million.
22. We now turn to the alleged violation of orders dated 03.09.2013 and
13.11.2013 passed by the High Court of Karnataka. It is not disputed that
such orders were passed restraining the concerned respondents including
Respondent No.3 and that the orders were passed in proceedings arising
from O.A. No.766 of 2013 before DRT Bengaluru. The present proceedings
before this court have also arisen from the very same O.A. No.766 of 2013.
The orders of restraints passed by the High Court were therefore in the
very same proceedings with which we are presently concerned. Said orders
bound the concerned respondents including Respondent No.3 and restrained
them from transferring, alienating, disposing or creating third party
rights in respect of movable as well as immovable properties belonging to
them till further orders in the proceedings. A question has been raised by
Mr. Vaidyanathan learned senior advocate whether the orders would be
restricted only so far as the properties which were in the hands of the
concerned respondents as on the date when those orders of restraint were
passed. In other words, whether any properties which in future or
subsequent to the Orders had come in the hands or control of the concerned
respondent would be covered by such orders or not. On plain reading of
the Orders, in our view, whether the properties were in the hands of the
concerned respondents on the date when the orders of restraint were passed
by the High Court or had come in their hands or under their control at a
later point in time, regardless of such qualification all properties
whether movable or immovable were governed by the orders of restraint.
There is no ambiguity of any sort and the Orders of 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 would pay to Respondent No.3 a sum of US$75
million and accordingly petitioners-banks had moved four interlocutory
applications for orders against respondent Nos.10 and 11 for disbursing
said amount of US$ 75 million. The amount of US$ 40 Million so received by
Respondent No.3 was therefore subject matter of the present controversy.
The least that was expected of Respondent No.3 was to disclose relevant
facts pertaining to receipt and disbursement of US$ 40 million. The
violation on that count is thus not only against the directions issued by
this court but also against express mandate of orders dated 03.09.2013 and
13.11.2013 passed in the proceedings in question.
25. Having thus found that the actions on the part of Respondent No.3 in
disbursing the amount of US$ 40 million was against the text and tenor of
the orders passed by the High Court of Karnataka, the question then arises
whether this Court can take cognizance of such violation or should it
leave it to be decided by the High Court of Karnataka itself in a properly
instituted legal proceeding.
26. In Delhi Judicial Service Association, Tis Hazari Court, Delhi v.
State of Gujarat and others[3], a question arose whether the power and
jurisdiction of this Court under Article 129 of the Constitution is
confined to “the contempt of this Court” alone. Submissions advanced
in that behalf were noted in paragraph 14 of the judgment which sets out
the submission of the learned Attorney General:
“...The Supreme Court as the Apex Court is the protector and guardian of
justice throughout the land, therefore, it has a right and also a duty to
protect the courts whose orders and judgments are amenable to correction,
from commission of contempt against them.”
The subsequent paragraphs of the judgment namely paragraph 26 onwards
show that the contentions so advanced by the learned Attorney General were
accepted by this Court. It is true that the discussion was in the context
of the contempt of a subordinate court. However, the nature of power
exercisable by this Court was considered in the backdrop that this Court
has supreme appellate jurisdiction over all courts and tribunals in the
country which is clear from the observations in paragraph 31 of the
judgment. We must say that Mr. Vaidyanathan did not seriously contend to
the contrary but his submission was that if the jurisdiction is 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 is guilty of violating the express Orders of Restraint passed by the
High Court of Karnataka in the same Cause from which the present
proceedings have arisen.
Though the contempt on the second count is theoretically of the
orders passed by the High Court of Karnataka since those orders pertain to
the very same Cause and the actions on part of Respondent No.3 in not
disclosing the account in question through which the transfers were
affected also fall with respect to contempt on first count, we proceed to
exercise our contempt jurisdiction even with regard to the second count. As
stated above, Respondent No.3 was adequately put to notice and no prejudice
has been caused as a result of such assumption of jurisdiction by this
court.
29. Having considered the entirety of the matter, we find that Respondent
No.3 is guilty of having committed contempt of court on both the counts. At
this stage it must be stated that in terms of Rule 6 (1) of Rules to
Regulate Proceeding for Contempt of Supreme Court 1975, Respondent No.3 was
obliged and duty bound to appear in person in response to the notice issued
by this Court in Contempt Petition. Instead, he chose to file application
seeking recall of the orders issuing notice. Having considered the matter,
we see no reason to recall that order and dismiss I.A. Nos.1 to 4 of 2016
preferred by Respondent No.3 in Contempt Petition Civil No.421-424 of 2016.
Respondent No.3 is therefore duty bound to appear in person in the present
contempt proceedings.
30. Since Respondent No.3 has not filed any reply to the Contempt
Petition nor did he appear in person, though we have found him guilty of
having committed contempt of court, we deem it necessary to give him one
more opportunity and also hear him on the proposed punishment. We therefore
adjourn matter to 10.07.2017 for hearing Respondent No.3 in person on
matters in issue including one regarding the proposed punishment to be
awarded to him for contempt of court. The instant contempt petitions and
connected cases shall now be listed at 2 o'clock on 10.07.2017. Respondent
No.3 may keep his affidavit ready to be tendered on the same day by stating
mitigating circumstances, if any and any other submissions he chooses to
advance.
31. We direct the Ministry of Home Affairs, Government of India, New
Delhi to secure and ensure presence of Respondent No.3 before this Court on
10.07.2017. A copy of this Judgment be sent to the Ministry of Home
Affairs for compliance.
………………………J.
(Adarsh Kumar Goel)
…………………..……J.
(Uday Umesh Lalit)
New Delhi,
May 09, 2017
-----------------------
[1] State Bank of India, Axis Bank Limited, Bank of Baroda, Corporation
Bank, The Federal Bank Limited, IDBI Bank Limited, Indian Overseas Bank,
Jammu & Kashmir Bank Limited, Punjab & Sind Bank, Punjab National Bank,
State Bank of Mysore, UCO Bank, United Bank of India and Oriental Bank of
Commerce.
[2] (1999) 2 SCC 537
[3] (1991) 4 SCC 406
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