Hon'ble Mr. Justice R.F. Nariman
1
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL ORIGINAL/INHERENT JURISDICTION
WRIT PETITION (CIVIL) NO. 845 OF 2018
RELIANCE COMMUNICATION LIMITED & ORS. …..PETITIONERS
VERSUS
STATE BANK OF INDIA & ORS. …..RESPONDENTS
WITH
CONTEMPT PETN. (C) NO. 1838 OF 2018 IN W.P. (C) NO. 845 OF
2018
CONTEMPT PETN. (C) NO. 55 OF 2019 IN W.P. (C) NO. 845 OF
2018
AND
CONTEMPT PETN. (C) NO. 185 OF 2019 IN W.P. (C) NO. 845 OF
2018
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J U D G M E N T
R.F. Nariman, J.
1. Three contempt petitions are before us, having been filed by
Ericsson India Pvt. Ltd. [“Ericsson”] against Reliance Communications
Ltd. [“RCom”], Reliance Telecom Ltd. [“RTL”], and Reliance Infratel
Ltd. [“RITL”] [hereinafter, collectively referred to as the “Reliance
Companies” or “Companies”].
2. The brief facts necessary to appreciate these matters are as
follows:
On 25.01.2013, Ericsson and RCom entered into a Managed
Service Agreement whereby Ericsson agreed to provide RCom
managed services, i.e., operation, maintenance, and management of
RCom’s network. Ericsson raised invoices from time to time in
consideration of services provided, and on receiving no payment,
ultimately issued three notices, each dated 07.05.2017, under the
Insolvency and Bankruptcy Code, 2016 [“Insolvency Code”] to the
three Reliance Companies, calling upon them to pay an amount of INR
9.78 crore. These notices were replied to on 19.05.2017, whereby the
three Reliance Companies stated that the performance of Ericsson had
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been inconsistent. After this date, discussions took place between the
parties, and an understanding was reached for making payment of the
outstanding invoices. However, even this understanding fell through,
and on 07.09.2017, Ericsson issued a letter to the three Reliance
Companies, terminating the agreement between them, and calling
upon them to pay the outstanding amount in full. At this stage, on
08.09.2017, Ericsson filed three applications under Section 9 of the
Code as operational creditors. On 15.05.2018, the National Company
Law Tribunal [“NCLT”] admitted the aforesaid petitions and appointed
three Interim Resolution Professionals on 18.05.2018 to carry out the
corporate insolvency resolution process. At this stage, appeals were
filed against the NCLT order. The National Company Law Appellate
Tribunal [“NCLAT”], by order dated 30.05.2018, stayed the orders
dated 15.05.2018 and 18.05.2018 passed by the NCLT, and recorded
the statement of counsel appearing on behalf of the Reliance
Companies that the matter had been agreed to be settled for a sum of
INR 550 crore, which would be paid within 120 days’ time. The order
recorded that both the Reliance Companies as well as Ericsson were
to file respective affidavits of undertaking in terms of the statements
made before the NCLT. These undertakings were so filed in June,
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2018. At this stage, the three Reliance Companies filed a writ petition
in this Court on 17.07.2018 in which they asked for quashing/closure of
the corporate insolvency resolution process in view of settlement of
disputes between them and Ericsson. In this writ petition, by an order
dated 03.08.2018, this Court heard learned counsel who appeared on
behalf of RCom and its group companies, and recorded that the
timeline of 120 days shall be strictly adhered to and payment of INR
550 crore is to be made on or before 30.09.2018. Undertakings to this
effect were to be filed before this Court by Chairmen of the Companies
concerned. The undertakings that were given by the Chairmen of these
Companies, pursuant to this order, were dated 09.08.2018 and are a
serious bone of contention between the parties in that these
undertakings stated that the sum of INR 550 crore will be paid “upon
sale of assets of the company”. This being the case, a contempt
petition, being Contempt Petition No. 1838 of 2018 [“first contempt
petition”], dated 01.10.2018, was moved by Ericsson, in which it was
expressly stated that the undertakings were not in terms of this Court’s
order and that the Companies aforestated have no intention of abiding
by their commitment to pay the necessary sum of money within the
time stated. Meanwhile, on 27.09.2018, the Reliance Companies
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applied for extension of time for payment by 60 days, expressly stating
that since sale of other spectrum had not reached a stage of
completion, in order to enable the Companies to make payments, they
would require this extension. Both the application for extension and the
contempt petition came up for hearing before this Court on 23.10.2018,
and it was made clear, as a last opportunity, that the aforesaid amount
must be paid on or before 15.12.2018, and that interest at the rate of
12% per annum would also have to be paid for delayed payment
beyond 30.09.2018. It was also made clear that the petition for
contempt may be revived if payment is not so made by this date. A
second application to extend time was moved on 12.12.2018, citing the
same excuse of other spectrum not yet being saleable. This time,
extension of time was asked for making the payment within two weeks
from the date on which a No-Objection Certificate [“NOC”] is given by
the Department of Telecommunications [“DoT”] for sale of other
spectrum. On 13.12.2018, this Court made it clear that it was not
inclined to grant any such extension, as a result of which, the second
application for extension of time was dismissed as withdrawn. While
matters stood thus, a letter dated 21.01.2019 was written by the
advocates of the three Reliance Companies, who stated that on
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09.01.2019, INR 118 crore had already been deposited with the
Registry of this Court, and that the total outstanding, as on date,
together with interest, would be roughly INR 570 crore. This letter
specifically states that the net figure of INR 453 crore would be paid by
31.01.2019, conditional upon withdrawal of the two contempt petitions
(a second contempt petition, being Contempt Petition No. 55 of 2019,
was also filed on 02.01.2019) and upon withdrawal of pending
arbitration proceedings. This was replied to by the advocates of
Ericsson, stating that an appropriate application may be moved in the
Supreme Court, as once notice of contempt is issued, the Court alone
can pass necessary orders to effectuate the settlement. However, on
01.02.2019, the RCom group wrote to various stock exchanges,
making it clear that they will now not resist the corporate insolvency
resolution process that had hitherto been stayed. This led to the filing
of a third contempt petition, namely, Contempt Petition No. 185 of
2019, in which, various prayers were asked for, including issuance of a
notice of contempt against the Chairman of the State Bank of India
[“SBI”], who headed the Joint Lenders’ Forum comprising of 46
financial creditors of the RCom group.
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3. Shri Dushyant Dave, learned Senior Advocate appearing on
behalf of Ericsson, painstakingly took us through the NCLAT order
dated 30.05.2018 as well as our orders. According to the learned
Senior Advocate, the administration of justice has been sought to be
interfered with by the Reliance Companies in two ways. First and
foremost, the payment of INR 550 crore to his client was not
conditional upon sale of spectrum as is clear from all the orders
passed. In fact, this was the understanding of the NCLAT order dated
30.05.2018 by the Reliance Companies, as was clear from the
undertakings that were filed by their Directors pursuant to this order.
However, mischievously, the undertakings filed pursuant to this Court’s
order dated 03.08.2018 brought in this condition for the first time, and
was directly contrary to this Court’s order dated 03.08.2018. He argued
that this was the occasion for moving the first contempt petition on
01.10.2018 in which this was pointed out. He also argued that the reply
made to the contempt petition, together with the correspondence
between the parties, would show that no bona fide efforts were made
to pay this sum of INR 550 crore at any stage, and that the plea that
the Companies were unable to pay is clearly belied by their own
advocates’ letter dated 21.01.2019, in which it was stated that full
8
payment would be made within a period of 10 days. He, therefore,
argued that both on account of furnishing false undertakings to this
Court as well as wilfully breaching the said undertakings and this
Court’s orders, the administration of justice has been sought to be
interfered with. He cited judgments in order to buttress these
contentions.
4. On the other hand, Shri Mukul Rohatgi and Shri Kapil Sibal,
learned Senior Advocates appearing on behalf of RCom, and RITL and
RTL, respectively, have argued that at best, if the settled amount of
INR 550 crore, in the place of INR 1500 crore, was not paid to
Ericsson, the corporate insolvency resolution process, which was
stalled, would begin afresh, and Ericsson would then stand in line as
an operational creditor to claim the entire sum of INR 1500 crore. In
any case, it is also obvious from the NCLAT order dated 30.05.2018,
which was referred to by the orders of this Court, that the sum of INR
550 crore was to be paid from the sale of assets of the corporate
debtor, which is part and parcel of the order dated 30.05.2018. The
undertakings given by the Chairmen of the three Reliance Companies,
dated 09.08.2018, are therefore, in accordance with the NCLAT order
as well as the order of this Court dated 03.08.2018. They further
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argued that, in any case, even if such undertakings were not in
accordance with these orders, no complaint was ever made by
Ericsson, which went along with the undertakings. They also argued
that, throughout, the three Reliance Companies did their best to pay
INR 550 crore, as is clear from the correspondence between the
parties and their conduct. Also, as recently as 07.01.2019, the moment
they got income tax refunds amounting to INR 118 crore, this sum was
deposited in the Registry of this Court, in compliance of this Court’s
orders. Therefore, according to them, there was no breach of
undertakings, nor has there been any wilful default. Despite their best
efforts, the DoT insisted on adhering to certain guidelines, as a result
of which, it did not give its NOC for sale of spectrum, and therefore, it
had now become impossible for the three Reliance Companies to pay
the aforesaid amount. The very fact that they have now succumbed to
the corporate insolvency resolution process going forward would show
their bona fides. In any case, they stated that they are still ready and
willing to pay whatever they can, by way of income tax refunds.
Another sum of INR 129 crore has now come by way of income tax
refunds, which can be further adjusted. Also, an extremely recent
refund order of INR 134 crore can also be used in part payment of the
10
sum of INR 550 crore. Thus, a total sum of INR 391 crore, out of INR
550 crore, can, in fact, be paid as of today. All this would show that
they are doing their best to make this payment, and therefore, cannot
be characterized as wilful defaulters. They also made a fervent prayer
that the special leave petition and the writ petition should be dismissed
as withdrawn, as the inevitable has now occurred, and the corporate
insolvency resolution process has to now go forward. They also cited
various judgments to buttress their submissions.
5. Shri Neeraj Kishan Kaul, learned Senior Advocate appearing on
behalf of the Chairman, SBI, has argued that the Joint Lenders’ Forum,
being allowed to sell assets outside of the corporate insolvency
resolution process has nothing to do with the Ericsson transaction.
According to him, prayers (c) and (j) of the Contempt Petition No. 185
of 2019 are not reliefs that can be given in a contempt petition. Also, it
is wholly unnecessary to file an affidavit stating the total amount
received from sale of assets of the corporate debtors post the
settlement dated 30.05.2018. Equally, prayer (j), asking for a direction
for SBI to bring in amounts due and payable so as to purge itself of
contempt does not lie against the Joint Lenders’ Forum in view of the
11
fact that the Ericsson transaction is wholly independent of sale of
assets.
6. Since everything turns on the order of NCLAT dated 30.05.2018,
and the three orders of this Court, these orders are set out hereunder:
The order of the NCLAT, dated 30.05.2018, states:
“These appeals have been preferred by the
Appellants-Directors and Shareholders of ‘Reliance
Infratel Ltd.’; ‘Reliance Telecom Ltd.’ and ‘Reliance
Communications Ltd.’ against the common orders
dated 15th May, 2018 and 18th May, 2018, passed
by the Adjudicating Authority (National Company
Law Tribunal), Mumbai Bench, Mumbai, whereby
and whereunder, the application(s) under Section 9
of the Insolvency and Bankruptcy Code, 2016
(hereinafter referred to as “I&B Code”) preferred by
the Respondent- ‘Ericsson India Pvt. Ltd.’-
(‘Operational Creditor’) have been admitted, order of
‘Moratorium’ has been passed and ‘Insolvency
Resolution Professional’ has been appointed.
Apart from the ground that an arbitration
proceeding is pending and the Hon’ble Supreme
Court has passed an order, some other grounds
have also been taken to assail the impugned orders.
2. The ‘Financial Creditors’- ‘Joint Lenders
Forum’, some other Banks and ‘Ericsson India Pvt.
Ltd.’- (‘Operational Creditor’) have appeared. It is
informed that interests of a number of Banks are
involved who are awaiting the decision of this
Appellate Tribunal as they intend to recover the
amount.
3. Mr. Tushar Mehta, learned Senior Counsel
for the ‘Joint Lenders Forum’- (‘Financial Creditors’)
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submitted that they have reached an agreement with
the ‘Corporate Debtors’ for sale of assets of the
‘Corporate Debtors’, pursuant to which, the
‘Financial Creditors’ can recover a sum of Rs.
18,100 crores approximately. He further submits that
on re-structuring and sale of assets, the ‘Financial
Creditors’ can recover Rs. 37,000 Crores
approximately.
4. According to them, in view of the impugned
order, the Bank is not in a position to recover the
amount and there is recurring loss of more than
crores per day.
5. Mr. Rajeeve Mehra, learned Senior Counsel
appearing on behalf of the ‘Standard Chartered
Bank’ has also taken similar plea and supported the
stand taken by the learned Senior Counsel for the
‘Joint Lenders Forum’.
6. Mr. Kapil Sibal, learned Senior Counsel
appearing on behalf of the Appellants submitted that
if the impugned order is stayed and/or set aside, the
parties may settle the matter.
7. The case was taken up yesterday (29th May,
2018) and on the request of the parties, the case
was adjourned to find out whether the Appellants
and the ‘Operational Creditors’ can settle the matter.
8. Mr. Salman Khursid, Mr. Arun Kathpalia and
Mr. Anil Kher, learned Senior Counsel appear on
behalf of the ‘Operational Creditors’ in the respective
cases. They submitted that the Respondent-
‘Ericsson India Pvt. Ltd.’- (‘Operational Creditor’) has
agreed to settle the matter if affront payment of Rs.
600 Crores (Rupees Six hundred Crores Only) is
made by the Appellants/’Corporate Debtors’.
9. Mr. Kapil Sibal, learned Senior Counsel for
the Appellants informed that the Appellants have
agreed to pay a sum of Rs. 550 Crores (Rupees five
hundred fifty Crores only) (jointly) in favor of
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‘Ericsson India Pvt. Ltd.’- (‘Operational Creditor’) and
sought for 120 days’ time to pay the total amount.
10. Learned Senior Counsel appearing on
behalf of ‘Ericsson India Private Limited’-
(‘Operational Creditor’), on instructions from the
Respondent, informed that the 1st Respondent has
agreed to receive a sum of Rs. 550 Crores (Rupees
Five hundred fifty Crores only), if the total amount is
paid within 120 days as proposed by the learned
Senior Counsel for the Appellants.
11. Taking into consideration the stand taken by
the parties and the fact that if the ‘Corporate
Insolvency Resolution Process’ is allowed to
continue, all the ‘Financial Creditors’ as also the
‘Operational Creditors’ may suffer more loss and the
Appellants have made out a prima facie case, as
agreed and suggested by learned Senior Counsel
for the Appellants and learned Senior Counsel for
the ‘Joint Lenders Forum’ and the learned Senior
Counsel for the ‘Operational Creditor’- ‘Ericsson
India Pvt. Ltd.’, we pass the following orders:
i. Until further orders, the impugned orders
dated 15th May, 2018 and 18th May, 2018,
passed by the Adjudicating Authority,
Mumbai Bench in C.P. (IB) 1385, 1386 &
1387 (MB)/2017, shall remain stayed. The
‘Resolution Professional’ will allow the
managements of the ‘Corporate Debtors’ to
function. He may attend the office of the
‘Corporate Debtors’ till further order is
passed by this Appellate Tribunal. Thereby,
the ‘Corporate Insolvency Resolution
Process’ initiated against the ‘Corporate
Debtors’ namely— ‘Reliance Infratel Ltd.’;
‘Reliance Telecom Ltd.’ and ‘Reliance
Communications Ltd.’ shall remain stayed,
until further orders.
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ii. The ‘Financial Creditors’/’Joint Lenders
Forum’ with whom the assets of the
‘Corporate Debtors’ have been mortgaged
as also the ‘Corporate Debtors’ are given
liberty to sell the assets of the ‘Corporate
Debtors’ and to deposit the total amount in
the account of the lead Bank of Joint
Lenders Forum which shall be subject to
the decision of these appeals. If the
appeals are rejected, in such case, the
‘Financial Creditors’/’Joint Lenders Forum’
and other Banks with whom the amount is
deposited, will have to return the total
amount in the respective accounts of the
‘Corporate Debtors’.
iii. The Chairman, Managing Directors,
Directors and other members of the
‘Corporate Debtors’ namely— ‘Reliance
Infratel Ltd.’; ‘Reliance Telecom Ltd.’ and
‘Reliance Communications Ltd.’ are
directed to pay a sum of Rs. 550 Crores
(Rupees Five Hundred Fifty Crores Only)
(jointly) in favour of ‘Ericsson India Pvt. Ltd.’
within 120 days i.e. by 30th September,
2018. In case of non-payment of the
amount and part of the same, the
concerned appeal(s) may be dismissed and
this Appellate Tribunal may direct to
complete the ‘Corporate Insolvency
Resolution Process’ and may pass
appropriate order. The payment of Rs. 550
Crores (Rupees Five Hundred Fifty Crores
Only) in favour of the ‘Operational Creditor’
shall be subject to the decision of these
appeals. If the appeals are dismissed, the
‘Operational Creditor’ will pay back the
amount to the ‘Corporate Debtors’.
12. The Appellants and the ‘Operational
Creditors’ are directed to file their respective
15
affidavits of undertaking in terms of their statement
as made and recorded above within 10 days.
Let the appeals be listed ‘for admission’ on 3rd
October, 2018.
13. In the meantime, it will be open to the
parties to file Interlocutory Application if orders and
directions given above are not complied.
Interlocutory Application Nos. 701-702, 709-710 and
712-713 of 2018 stand disposed of with aforesaid
observations and directions.
xxx xxx xxx”
The order of the Supreme Court, dated 03.08.2018, states:
“Applications seeking exemption from filing
certified copy of the impugned orders are allowed.
Permission to file Appeals is granted.
Applications for impleadment are allowed.
Reading the interim Order dated 30.05.2018 of
the National Company Law Appellate Tribunal, it is
clear that Ericsson India Pvt. Ltd., who is an
Operational Creditor, is willing to settle its debt of
over Rs. 1500 Crores for a sum of Rs. 550 Crores
(Rupees Five Hundred Fifty Crores only) which is to
be paid within 120 days from the date of that order
i.e. by 30th September, 2018.
Having heard Mr. P. Chidambaram, learned
Senior Counsel for Neptune Steel Strips Ltd. and
Mahima Mercantile Credits Ltd., Mr. Kapil Sibal,
learned Senior Counsel for Reliance
Communications Limited & Ors. and Mr. Tushar
Mehta, learned ASG for Joint Lenders Forum/SBI,
we are of the view that this time-line shall be strictly
adhered to and payment of Rs. 550 Crores (Rupees
Five Hundred Fifty Crores only) be made on or
before 30th September, 2018.
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In the meanwhile, the undertaking that is to be
given by the Chairman of the Company concerned
shall be given within a period of one week from
today.
Mr. Tushar Mehta, learned ASG appearing for
the Joint Lenders Forum agrees to this. Mr.
Dushyant Dave, learned Senior Counsel for
Ericsson India Pvt. Ltd. also agrees to it.
In this view of the matter, list on Monday, the 1st
October, 2018.
Needless to say, the sale of the assets
concerned will go through as has been stated in the
orders of the Tribunal and Appellate Tribunal.
xxx xxx xxx”
The order of the Supreme Court, dated 23.10.2018, states:
“I.A. No. 141871/2018:
The applicants in this I.A. state that - thanks to a
situation which is beyond their control - they have
not been able to make the requisite payment on or
before 30.09.2018 in accordance with the
undertaking given to this Court.
At the request of Mr. Kapil Sibal, as a last
opportunity, we make it clear that the amount that is
to be paid to Mr. Dave’s client shall be paid on or
before 15.12.2018. We also make it clear that
interest shall begin ticking on this amount at the rate
of 12% p.a. for delayed payment beyond
30.09.2018.
We make it clear that no time beyond
15.12.2018, in any case, will be given. We also
make it clear that Mr. Dave may revive his I.A. for
contempt, if payment is not made.
I.A. stands disposed of accordingly.
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C.A. Nos. 9337-9338/2018:
The Civil Appeals are dismissed in terms of the
signed order.
Pending applications, if any, stand disposed of.
xxx xxx xxx”
The order of the Supreme Court, dated 13.12.2018, states:
“IA No. 180453/2018 in W.P. (C.) No. 845/2018
is dismissed as withdrawn.
List the matters on Friday, the 14th December,
2018.
xxx xxx xxx”
7. A perusal of the NCLAT order dated 30.05.2018 would show that
the financial creditors’/Joint Lenders’ Forum stated that they have
reached an agreement with the corporate debtors for the sale of assets
of the corporate debtors, pursuant to which they can recover a sum of
INR 18,100 crore. Also, from restructuring and sale of further assets, a
further sum of INR 37,000 crore could be recovered, which would then
suffice to pay off the entire debt of the secured creditors. This order
also recorded that Ericsson had agreed to settle the debt in its favour
(which amounted to roughly INR 1500 crore) for the sum of INR 550
crore within a period of 120 days. As a result of this, the erstwhile
management continued in the saddle; the corporate insolvency
resolution process was stayed until further orders; the financial
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creditors’/Joint Lenders’ Forum was given liberty to sell assets of the
corporate debtors and to deposit the amount so received in an account
of the lead bank, i.e., SBI; and the sum of INR 550 crore was directed
to be paid by 30.09.2018. It was made clear that in case of nonpayment, the concerned appeals may be dismissed, and the NCLAT
may direct the completion of the corporate insolvency resolution
process. In any case, the amount so deposited with the financial
creditors’/Joint Lenders’ Forum would be subject to the decision of
these appeals, and that if the appeals are dismissed, the financial
creditors’/Joint Lenders’ Forum will pay back this amount to the
corporate debtors. Most importantly, the corporate debtors and
creditors were directed to file their respective affidavits of undertaking
in terms of the statements recorded.
8. At this stage, it is important to set out one sample undertaking
that has been filed on behalf of one of the Reliance Companies, i.e., by
the Director of RITL. This affidavit of undertaking reads as follows:
“BEFORE THE NATIONAL COMPANY LAW
APPELLATE TRIBUNAL, NEW DELHI
xxx xxx xxx
AFFIDAVIT OF UNDERTAKING OF THE
APPELLANTS
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I, Suresh Madihally Rangchar, S/o Sh. Rangachar M.
Raghavachar, aged about 54 years, R/o Imperial
Tower, Flat No. 3604, 36th Floor, South Wing, BB
Nakashe Marg, Tardeo, Mumbai – 400 036, do hereby
solemnly affirm and state as under:
1) That I am the Appellant and the Director of
the Reliance Infratel Ltd. in the above said
matter and as such I am well acquainted with
all the facts and circumstances of the case
and am fully competent to swear this affidavit
for the Reliance Infratel Ltd.
2) That I am giving this affidavit cum
undertaking on behalf of the Reliance Infratel
Ltd. pursuant to the order of this Hon’ble
Tribunal dated 30.05.2018.
3) That the Reliance Infratel Ltd. alongwith
Reliance Communications Ltd. and Reliance
Telecom Ltd. and their respective directors
shall jointly pay a sum of Rs.550 Crores
(Rupees Five Hundred Fifty Crores Only) to
Ericsson India Pvt. Ltd. (Operational
Creditors) within a period of 120 days i.e. by
30th September, 2018.
xxx xxx xxx”
This undertaking makes it clear that the understanding of the three
Reliance Companies with regard to the NCLAT order dated 30.05.2018
was that a sum of INR 550 crore will be paid by 30.09.2018 without
there being any linkage to sale of assets, as separately stated in the
order. Even otherwise, reading the order as a whole, it is clear that
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whereas INR 550 crore had to be paid within 120 days, sale of assets
could take place at any time in the future without any time limit being
mentioned. This being the case, it is futile to contend that this order
itself made it clear that the sum of INR 550 crore was to be obtained
only from sale of assets. Both the undertakings as well as a plain
reading of the NCLAT order, militate against any such linkage.
9. On 03.08.2018, the writ petition that was filed before this Court
was taken up. It is important to note that this writ petition expressly
states that this Court was approached so that it could pass orders
under Article 142 of the Constitution of India to quash/close the
corporate insolvency resolution process, which no other court or
tribunal could do. This was done on the footing that the parties have
“fully, mutually, and finally settled all the disputes between them” as
has been noted in the NCLAT order dated 30.05.2018. When this writ
petition came up for hearing, the order dated 03.08.2018 clearly
records that the payment of INR 550 crore will be made on or before
30.09.2018, and an undertaking was to be given by the Chairmen of
the Reliance Companies to that effect. The order separately noted that
the sale of assets will continue, as has been stated in the orders of the
NCLT and the NCLAT. A reading of this order also leaves no manner
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of doubt that the undertakings that were to be given by the Chairmen
of the Companies concerned were only that the payment of INR 550
crore was to be made on or before 30.09.2018. There is no doubt
whatsoever that there was no linkage with any sale of assets of these
Companies.
10. Despite the aforesaid position being clear, on 09.08.2018, the
affidavits of undertaking, in pursuance of this Court’s order dated
03.08.2018, were given by the Chairmen of the Reliance Companies.
A sample undertaking, filed by the Chairman of RCom, reads as
follows:
“IN THE SUPREME COURT OF INDIA
xxx xxx xxx
AFFIDAVIT OF UNDERTAKING/COMPLIANCE
I, Anil Dhirubhai Ambani, S/o Late Shri Dhirajlal
Dhirubhai Hirachand Ambani, aged about 60 years,
residing at 39, ‘Sea Wind’, Cuffe Parade Colaba,
Mumbai – 400005, do hereby solemnly affirm and
state on oath as under:
1. That I am the Chairman of the Reliance
Communications Limited (“Company”), the
holding company of Reliance Telecom
Limited and Reliance Infratel Limited, the
Petitioners in the above Writ Petition, I am
well acquainted with the facts of the case and
as such I am competent to swear this
affidavit.
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2. By order dated 30 May, 2018, the Hon’ble
National Company Law Appellate Tribunal
(“NCLAT”) by way of an interim order
recorded settlement between the parties and
permitted sale of the assets for repayment to
the banks. Pursuant to the said order, the
Petitioner gave an Undertaking dated 1
st
June 2018 before the NCLAT inter alia
stating as under:
“that the Reliance Infratel Ltd.
alongwith Reliance Communications
Ltd. and Reliance Telecom Ltd. and
their respective Director shall jointly
pay a sum of Rs.550 Crores
(Rupees Five Hundred Fifty Crores
only) to Ericson India Pvt. Ltd.
(Operational Creditors) within a
period of 120 days i.e. 30th
September, 2018.”
3. In the Petitions filed before this Hon’ble Court for
orders under Article 142 of the Constitution of India to
be able to proceed with the sale and to effectuate the
settlement, this Hon’ble Court passed the following
order:
“......In the meanwhile, the undertaking that is
to be given by the Chairman of the Company
concerned shall be given within a period of
one week from today.”
4. Accordingly, in light of the order of this Hon’ble
Court dated 3
rd August, 2018, read with the order of
the Hon’ble NCLAT dated 30th May, 2018, I hereby
undertake that upon the sale of the assets of the
Company, the Company and its directors will honour
their undertaking extracted above.”
23
Similar undertakings were filed on behalf of the Chairmen of the other
two Reliance Companies. A perusal of these undertakings would show
that they are contrary to the undertakings given by the authorized
persons of these very Companies pursuant to the NCLAT order dated
30.05.2018. We have seen that whereas those undertakings were
unconditional, these undertakings are now conditional upon sale of
assets of the Companies. These undertakings have obviously not been
given in accordance with this Court’s order dated 03.08.2018. To
further compound this misdemeanor, an application to extend time by
60 days was moved on 27.09.2018, in which the same linkage was
made to sale of assets before the sum of INR 550 crore could be paid.
Contrary to Shri Rohatgi’s argument, Ericsson immediately protested in
the form of a contempt petition, being the first contempt petition that
was filed on 01.10.2018, in which it was clearly pointed out that the
said undertaking would show contumacious behavior coupled with the
fact that the Reliance Companies were wriggling out of the
commitment made to this Court. When the first contempt petition and
the first application for extension of time came up for hearing before
this Court, this Court, vide order dated 23.10.2018, made it clear that
as a matter of indulgence, a last opportunity would be granted to pay
24
the aforesaid sum on or before 15.12.2018, making it clear that this is
conditional upon payment of interest of 12% per annum for delayed
payment beyond 30.09.2018. It was also made clear that no further
extension would be granted and that Ericsson may revive the petition
for contempt if payment is not so made. This order again leads to only
one conclusion – that the averment made in the application for
extension of time that the sum of INR 550 crore will be paid out of sale
of assets was not accepted by this Court, as sale of assets could have
taken place even beyond 15.12.2018. This further becomes clear from
the fact that the contempt petition would be revived if this payment
were not to be made, i.e., it would be open for Ericsson to contend that
the undertaking given to this Court was not as per this Court’s order,
and that there had been wilful and contumacious default on part of the
Reliance Companies.
11. When a further application for extension of time was made on the
selfsame ground, this Court made it clear by its order dated
13.12.2018 that in view of the order passed on 23.10.2018, no further
extension of time could be granted, and revival of the contempt petition
would necessarily follow. As a result of this, this I.A. was dismissed as
withdrawn on the said date.
25
12. Meanwhile, in parallel proceedings, this Court did its utmost to
lend a helping hand, so that, independently of these orders, sale of
assets could also be affected. The DoT was called before this Court
and was asked to give its NOC for sale of spectrum. However, it was
pointed out that this NOC could only be given according to certain
guidelines, one of which mandated that the buyer of the spectrum
would have to undertake that it would be responsible for payment of
the erstwhile debts of the seller. The sale of spectrum to Reliance Jio,
therefore, did not fructify, not because the DoT wrongfully refused to
give its NOC, as has been alleged by the Reliance Companies in their
pleadings filed in this case. It fell through only because the prospective
buyer, Reliance Jio, refused to give the undertaking that if called upon,
it would pay the erstwhile debts of the seller of the spectrum.
13. We now come to two other contempt petitions that were filed.
Contempt Petition No.55 of 2019 dated 02.01.2019 was filed in view of
non-payment of the sum of INR 550 crore on or before 15.12.2018.
Contempt Petition No.185 of 2019 dated 05.02.2019 was filed pointing
out two subsequent facts. First, that by a letter dated 21.01.2019, the
Reliance Companies were willing to pay the entire sum of INR 550
crore with interest if two conditions were met, namely, withdrawal of
26
contempt petitions and withdrawal of arbitration proceedings. Ericsson
replied on 23.01.2019, stating that this could only be done by moving
an application before this Court as contempt proceedings were
pending. Secondly, this petition points out that, maliciously, instead of
moving such appropriate application, from 01.02.2019 onwards, an
about-turn was taken, and Ericsson was left in the lurch as a decision
was taken by the three Reliance Companies that the corporate
insolvency resolution process could be revived.
14. The law of contempt has been recognized in English law at least
from the 12th Century A.D. to the present time [see The History of
Contempt of Court: The Form of Trial and the Mode of Punishment by
Sir John C. Fox, at page 1]. It is always important to bear in mind, as
was stated in Attorney-General v. British Broadcasting
Corporation, [1980] 3 All ER 161 [House of Lords], per Lord Salmond,
that:
“The description “contempt of court” no doubt has an
[sic] historical basis but it is nevertheless most
misleading. Its object is not to protect the dignity of the
courts or the judges but to protect the administration of
justice…....”
(at page 170)
27
In the same judgment, Lord Scarman added:
“It is high time, I would think, that we re-arranged our
law so that the ancient but misleading term “contempt
of court” disappeared from the law's vocabulary.”
(at page 184)
Another edifying statement, by Lord Diplock in Attorney-General v.
Leveller Magazine Ltd. and Ors., [1979] 1 All ER 745 [House of
Lords], reads as follows:
“…… It is justice itself that is flouted by contempt of
court, not the individual court or judge who is
attempting to administer it.
(at page 749)
15. It is also important to remember that while considering the
question of disobedience of an order, what must be regarded is the
letter and the spirit of the order, together with the bona fide or genuine
belief of the alleged contemnor as to such order [see Lakshman
Prasad Agarwal v. Syed Mohammad Kareem, 2009 (6) SCALE 413
at paragraph 5].
16. In Rosnan Sam Boyce v. B.R. Cotton Mills Ltd., (1990) 2 SCC
636, this Court referred to a party who gave an undertaking based on
an implication or assumption which was false to its knowledge. This
Court held:
28
“9. …… We are, of course, quite conscious of the fact
that the proceedings in the contempt are quasicriminal in nature, that the law of contempt has to be
strictly interpreted and that the requirements of that
law must be strictly complied with before any person
can be committed for contempt. However, as we have
pointed out, respondent 1 gave an undertaking based
on an implication or assumption which was false to its
knowledge and to the knowledge of respondent 2.
Respondent 2 was equally instrumental in the giving of
this undertaking. This implication or assumption was
made explicit by the clarification given by the learned
counsel for respondent 1 as set out earlier.
Respondent 2 was equally responsible for instructing
counsel to give this clarification which was false to the
knowledge of both, respondents 1 and 2. Both
respondent 1 and respondent 2 have tried to deceive
the court and the appellant. In view of this, we fail to
see how it can be said that they are not guilty of
contempt.……”
Finally, the Court directed the court receiver to take possession of the
suit premises from the tenant/sub-tenant and hand it over to the
landlord, as agent, so that the contempt committed be purged.
17. We have seen from the above narration of facts that the
undertakings given on 09.08.2018 by the three Chairmen of the three
Reliance Companies were neither as per the Court’s understanding of
its order dated 03.08.2018, nor the understanding of the three
Companies themselves, as is clear from the undertakings given by the
three Directors pursuant to the order dated 30.05.2018. In this view of
29
the matter, it is clear that the three Reliance Companies had no
intention, at the very least, of adhering to the time limit of 120 days or
to the extended time limit of 60 days plus, as was given by way of
indulgence, by the order dated 23.10.2018. The undertakings given on
the footing that the amount of INR 550 crore would be paid only out of
the sale of assets was false to the knowledge of the three Reliance
Companies. This itself affects the administration of justice, and is
therefore, contempt of court. What is of greater relevance is the fact
that, despite the Reliance Companies’ continuous protestations to the
contrary, the letter dated 21.01.2019 from the advocate for the three
Reliance Companies made it clear that the entire payment would be
made by 31.01.2019, albeit on fulfilment of two conditions. This letter is
of great importance and is set out in entirety hereinbelow:
“21 January, 2019
To,
xxx xxx xxx
SUB: COMPLETION OF SETTLEMENT
Dear Sir,
We are concerned for our clients Reliance
Communications Limited (RCom), Reliance Infratel
Limited (RITL) and Reliance Telecom Limited (RTL,
30
and collectively with RCom and RITL, the RCom
Group), who have instructed us to write to you on
behalf of your client Ericsson India Private Limited
(Ericsson) as under:
1. The Hon’ble Supreme Court has vide its
order dated 3 August, 2018 in Writ Petition
(C) No. 845 of 2018, recorded the settlement
arrived at between the RCom Group and
Ericsson before the Hon’ble National
Company Law Appellate Tribunal (NCLAT)
on 30 May, 2018, pursuant to which Rs.550
crores was to be paid to Ericsson by 30
September, 2018 as full and final settlement
of all dues and claims.
2. Vide its order dated 23 October, 2018,
the Hon’ble Supreme Court extended the
date for the RCom Group to make payment
to Ericsson and directed that interest at 12%
p.a. on such amount to be paid from 1
October, 2018. As on 31 January 2019, such
interest would amount to Rs.20.016 crores
being an amount of Rs.22.24 crores less TDS
of Rs. 2.224 crores.
3. Thus, the total net amount payable by the
RCom Group to Ericsson on 31 January,
2019 is Rs.570.016 crores.
4. Out of the total settlement payment set
out in para 3 above, the RCom Group has
deposited an amount of Rs.118 crores with
the Registry of the Supreme Court on 9
January, 2019 (Deposited Payment),
pursuant to the Hon’ble Supreme Court’s
order dated 7 January, 2019.
5. The RCom Group will make the balance
net settlement payment of Rs.452.016 crores
(Balance Settlement Payment) in favour of
Ericsson on 31 January, 2019 to complete all
their payment obligations to Ericsson.
31
6. Ericsson is therefore required to:
a. Withdraw Contempt Petition
(Civil) Diary No.122/2019 and
Contempt Petition (C) No.1838/2018
in W.P.(C) No.845/2018 filed on its
behalf, immediately upon receipt of
the Balance Settlement Payment
and towards the same, prepare and
send for our consideration and for
us to mutually agree by 29 January,
2019, the draft application to be
made to the Hon’ble Supreme Court
for withdrawal of the said Contempt
Petitions;
b. Withdraw all its claims and
contentions as per the Arbitration
between RCom and its affiliates,
and Ericsson, pending before the
Hon’ble Arbitral Tribunal comprising
Justice Mr. S.B. Sinha, Justice Mr.
Swatanter Kumar, and Justice V.S.
Sirpurkar, and towards the same,
prepare and sent for our
consideration and for us to mutually
agree by 29 January 2019, the draft
application to be made to the
Hon’ble Arbitral Tribunal for
withdrawal of all claims and
contentions, and the consequent
termination of proceedings.
c. Sign and return the attached No
Dues Confirmation simultaneous
with the Demand Draft for an
amount of Rs. 452.016 crores, being
handed over to Ericsson on 31
January 2019.
Yours sincerely,
xxx xxx xxx”
32
18. It may be pointed out that in their reply to the Contempt Petition
No.55 of 2019, RCom and its group companies had stated that they
were “disabled” from paying the amount of INR 550 crore plus interest;
that they “were and are unable to pay”; and finally, that:
“xxx xxx xxx
39. The Respondents had submitted the Undertaking
on behalf of RCom Group Companies based on the
lenders’ consent for monetization of the Other
Spectrum for Rs.975 crores and in the genuine hope
and bonafide belief that Asset Monetization Scheme
would be implemented and Ericsson shall be paid an
amount of Rs.550 crores along with interest, however,
the same has become impossible to be achieved.
xxx xxx xxx”
19. Obviously, the letter dated 21.01.2019 by the advocates on
behalf of the Reliance Companies would belie each of the aforesaid
statements made in the said reply affidavit. There is, therefore, no
doubt whatsoever that the three Reliance Companies have wilfully not
paid the sum of INR 550 crore plus interest and have thus breached
the undertakings given to this Court.
20. Another disturbing feature of the reply affidavit filed in this Court
by the Chairman of RCom to Contempt Petition No. 55 of 2019 is the
statement that RCom has not taken or received any advantage on
33
account of the undertaking submitted before this Court. This, again, is
a wholly incorrect statement, given the fact that a writ petition was filed
in this Court seeking quashing of the corporate insolvency resolution
process on settlement of the matter with Ericsson, which could not be
achieved without such undertaking being given to this Court. We are of
the view that any unconditional apology given that there was no
intention to make any wrongful undertaking or that the undertaking was
submitted bona fide must be rejected. It is clear that this reply affidavit
clearly demonstrates the cavalier attitude of the deponent of this
affidavit to the highest court of the land.
21. However, Shri Rohatgi and Shri Sibal relied upon the following
judgments:
(i) Babu Ram Gupta v. Sudhir Bhasin, (1980) 3 SCC 47 was a
case where an express undertaking to hand over possession to a
receiver was not given. In this view of the matter, it was held that it
would not be possible to state that the appellant had wilfully disobeyed
or committed breach of such undertaking. This case has no application
on facts to the present case.
34
(ii) In Ashok Paper Kamgar Union v. Dharam Godha, (2003) 11
SCC 1, this Court held:
“17. Section 2(b) of the Contempt of Courts Act
defines “civil contempt” and it means wilful
disobedience to any judgment, decree, direction,
order, writ or other process of a court or wilful breach
of undertaking given to a court. “Wilful” means an act
or omission which is done voluntarily and intentionally
and with the specific intent to do something the law
forbids or with the specific intent to fail to do something
the law requires to be done, that is to say, with bad
purpose either to disobey or to disregard the law. It
signifies a deliberate action done with evil intent or
with a bad motive or purpose. Therefore, in order to
constitute contempt the order of the court must be of
such a nature which is capable of execution by the
person charged in normal circumstances. It should not
require any extraordinary effort nor should be
dependent, either wholly or in part, upon any act or
omission of a third party for its compliance…….”
This case again has no application to the facts of this case. We have
seen that right from the beginning, the sum of INR 550 crore was
undertaken to be paid, without having to depend upon any act or
omission of a third party. To say that the sum of INR 550 crore would
be paid only out of sale of assets of the three Reliance Companies is a
deliberate misstatement made in the undertakings as well as the
applications for extension of time filed before this Court, which was
done with the purpose of circumventing the orders of this Court. We
35
are also of the view that in the facts of the present case, wilful default
is made out, as has been pointed out in this judgment.
(iii) In Dinesh Kumar Gupta v. United India Insurance Co. Ltd.,
(2010) 12 SCC 770, this Court held:
“23. Besides this, it would also not be correct to
overlook or ignore an important statutory ingredient of
contempt of a civil nature given out under Section 2(b)
of the Contempt of Courts Act, 1971 that the
disobedience to the order alleging contempt has to
satisfy the test that it is a wilful disobedience to the
order. Bearing this important factor in mind, it is
relevant to note that a proceeding for civil contempt
would not lie if the order alleged to have been
disobeyed itself provides scope for reasonable or
rational interpretation of an order or circumstance
which is the factual position in the instant matter. It
would equally not be correct to infer that a party
although acting due to misapprehension of the correct
legal position and in good faith without any motive to
defeat or defy the order of the Court, should be viewed
as a serious ground so as to give rise to a contempt
proceeding.
24. To reinforce the aforesaid legal position further, it
would be relevant and appropriate to take into
consideration the settled legal position as reflected in
the judgment and order delivered in Ahmed Ali v.
Supdt., District Jail [1987 Cri LJ 1845 (Gau)] as also in
B.K. Kar v. High Court of Orissa [AIR 1961 SC 1367 :
(1961) 2 Cri LJ 438] that mere unintentional
disobedience is not enough to hold anyone guilty of
contempt and although disobedience might have been
established, absence of wilful disobedience on the part
of the contemnor, will not hold him guilty unless the
contempt involves a degree of fault or misconduct.
Thus, accidental or unintentional disobedience is not
36
sufficient to justify for holding one guilty of contempt. It
is further relevant to bear in mind the settled law on
the law of contempt that casual or accidental or
unintentional acts of disobedience under the
circumstances which negate any suggestion of
contumacy, would amount to a contempt in theory only
and does not render the contemnor liable to
punishment and this was the view expressed also in
State of Bihar v. Rani Sonabati Kumari [AIR 1954 Pat
513] and N. Baksi v. O.K. Ghosh [AIR 1957 Pat 528].”
This judgment also has no application to the facts of this case as the
only reasonable or rational interpretation of the orders involved in this
case leads to the result that INR 550 crore plus interest was to be paid
without any linkage to sale of assets within a fixed time limit. This is
also not a case of accidental or unintentional disobedience. As is clear
from the letter dated 21.01.2019, the Reliance Companies are able to
pay this amount, but are wilfully refusing to do so. Similarly, the
judgments in Mohd. Iqbal Khanday v. Abdul Majid Rather, (1994) 4
SCC 34, at paragraph 34, and Gyanichand v. State of A.P., (2016) 15
SCC 164, at paragraph 11 also do not apply on the facts of this case.
The facts of this case are far from cases where directions or orders are
impossible of compliance.
22. At this stage, we may point out that the contempt petition against
the Chairman of SBI would not lie inasmuch as the Ericsson
37
transaction and the sale of assets by the Joint Lenders’ Forum are
completely independent of each other, as argued by Shri Dave himself,
and as has been held by us hereinabove. Also, the statement made in
paragraph 18 of the Contempt Petition No. 185 of 2019 that, “all the
respondents in the contempt petition were bound to have handed over
the amount of INR 550 crore to the petitioner on or before 15.12.2018
……” is patently incorrect inasmuch as respondent no. 4 (SBI) has
nothing to do with this amount of INR 550 crore which had to be paid
over to Ericsson only by the three Reliance Companies. The contempt
petition against the Chairman of SBI is, therefore, dismissed.
23. Having held the three Reliance Companies guilty of contempt of
this Court, it is now necessary to point out Section 12(4) of the
Contempt of Courts Act, 1971, which reads as follows:
“12. Punishment for contempt of court.—
xxx xxx xxx
(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 the 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 :
38
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.
xxx xxx xxx”
The question now is as to the punishment to be awarded. Shri Rohatgi
pointed out that in Supreme Court Bar Assn. v. Union of India,
(1998) 4 SCC 409, this Court had held:
“34. The object of punishment being both curative and
corrective, these coercions are meant to assist an
individual complainant to enforce his remedy and there
is also an element of public policy for punishing civil
contempt, since the administration of justice would be
undermined if the order of any court of law is to be
disregarded with impunity. Under some circumstances,
compliance of the order may be secured without resort
to coercion, through the contempt power. For example,
disobedience of an order to pay a sum of money may
be effectively countered by attaching the earnings of
the contemner. In the same manner, committing the
person of the defaulter to prison for failure to comply
with an order of specific performance of conveyance of
property, may be met also by the court directing that
the conveyance be completed by an appointed person.
Disobedience of an undertaking may in the like
manner be enforced through process other than
committal to prison as for example where the breach
of undertaking is to deliver possession of property in a
landlord-tenant dispute. Apart from punishing the
contemner, the court to maintain the majesty of law
may direct the police force to be utilised for recovery of
39
possession and burden the contemner with costs,
exemplary or otherwise.”
Thus, disobedience of an order to pay a sum of money may be
countered by orders of attachment instead of committal to prison. On
the other hand, Shri Dave pointed out that this Court had, in
Chhaganbhai Norsinbhai v. Soni Chandubhai Gordhanbhai, (1976)
2 SCC 951, held that in cases of perverse and deliberate flouting of
undertakings, the High Court rightly observed that it had no option
except to convict the appellant and sentence him to three months’
imprisonment, with which this Court agreed. He also pointed out that in
Patel Rajnikant Dhulabhai v. Patel Chandrakant Dhulabhai, (2008)
14 SCC 561, so-called apologies, which are only tactful moves when
contemnors are in a tight corner, should not be accepted and a jail
sentence should be awarded [see paragraphs 77 and 78]. He also
referred to and relied upon Noorali Babul Thanewala v. K.M.M.
Shetty, (1990) 1 SCC 259, where this Court held:
“11. When a court accepts an undertaking given by
one of the parties and passes orders based on such
undertaking, the order amounts in substance to an
injunction restraining that party from acting in breach
thereof. The breach of an undertaking given to the
court by or on behalf of a party to a civil proceedings
is, therefore, regarded as tantamount to a breach of
injunction although the remedies were not always
40
identical. For the purpose of enforcing an undertaking
that undertaking is treated as an order so that an
undertaking, if broken, would involve the same
consequences on the persons breaking that
undertaking as would their disobedience to an order
for an injunction. It is settled law that breach of an
injunction or breach of an undertaking given to a
court by a person in a civil proceeding on the faith of
which the court sanctions a particular course of action
is misconduct amounting to contempt. The remedy in
such circumstances may be in the form of a direction
to the contemnor to purge the contempt or a
sentence of imprisonment or fine or all of them. On
the facts and circumstances of this case in the light of
our finding that there was a breach of the undertaking
we think that mere imposition of imprisonment or fine
will not meet the ends of justice. There will have to be
an order to purge the contempt by directing
respondent 1-contemnor to deliver vacant possession
immediately and issuing necessary further and
consequential directions for enforcing the same.”
24. Given the facts as aforesaid, we are of the view that the
contempt of this Court needs to be purged by payment of the sum of
INR 550 crore together with interest till date. As stated by the letter
dated 21.01.2019, subject to any calculation error, an amount of INR
453 crore must be paid to Ericsson in addition to the deposit of INR
118 crore made in the Registry of this Court. The Registry of this Court
is directed to pay over the sum of INR 118 crore to Ericsson within a
period of one week from today. The RCom group is directed to purge
the contempt of this Court by payment to Ericsson of the sum of INR
41
453 crore within a period of four weeks from today. In default of such
payment, the Chairmen who have given undertakings to this Court will
suffer three months’ imprisonment. In addition to the aforesaid sum
being paid, a fine amounting to INR 1 crore for each Company must
also be paid to the Registry of this Court within four weeks from today.
This sum will be paid over to the Supreme Court Legal Services
Committee. In default of payment of such fine, the Chairmen of these
Companies will suffer one month’s imprisonment.
Contempt Petitions are disposed of, as aforesaid.
………………………….J.
(R.F. Nariman)
………………………….J.
(Vineet Saran)
New Delhi;
February 20, 2019.
