Non-Reportable
IN THE SUPREME COURT OF INDIA
CIVIL ORIGINAL JURISDICTION
CONTEMPT PETITION (CIVIL) NO.338 OF 2014
IN
CIVIL APPEAL NO.10221 OF 2014
Ghanshyam Sarda ……Petitioner
Versus
Sashikant Jha, Director, ..….
Respondents
M/s JK Jute Mills Co. Ltd. & Ors.
with
Contempt Petition (C) Nos.24-25/2015 in
Civil Appeal Nos.10224-10225/2014
with
Contempt Petition (C) No.375/2014 in
Civil Appeal No.10223/2014
with
Contempt Petition (C) No.307/2015 in
Civil Appeal No.10221/2014
JUDGMENT
Uday Umesh Lalit, J.
1. Contempt Petition (Civil) Nos.338 of 2014 and 375 of 2014 at the
instance of Ghanshyam Sarda, appellant in Civil Appeal No.10221 of
2014 and J.K. Jute Mills Mazdoor Ekta Union, appellant in Civil Appeal
No.10223 of 2014 (‘applicants’, for short) seek to highlight
disobedience and violation of the Order dated 08.05.2014 (“Order of
08.05.2014”, for short) passed by this Court in said Civil Appeals and
other connected matters. The text of the Order of 08.05.2014 was to
the following effect:-
“Since it is not possible for us to take up the matter today,
learned senior counsel appearing for the parties seek leave to
mention before the Vacation Bench for seeking urgent hearing of
the matter.
Permission is granted.
It would be open to the parties to mention before the Vacation
Bench for urgent hearing of the matter.
However, it is directed that till further orders, capital assets
of the Company shall not be disposed of without taking
permission of this Court.”
2. The aforesaid Civil Appeals had challenged the judgment and order
dated 06.01.2014 passed by the High Court of Gauhati in FAO No.10 of 2013,
Writ Petition No.4303 of 2013 and Writ Petition No.6286 of 2013 and were
disposed of by this Court vide its Judgment dated 13.11.2014[1]. The facts
leading to the filing of those appeals and connected matters are dealt with
in said Judgment dated 13.11.2014. It is alleged in the present contempt
petitions that in violation of the Order of 08.05.2014, which was passed
during the pendency of the aforesaid Appeals, the assets owned by the
Company, namely, J.K. Jute Mills Company Ltd. (hereinafter referred to as
the Company) at Saifganj, Katihar, Bihar spread across 1.6 acres of land
(“Katihar property”, for short) were sold vide Conveyance Deed dated
02.07.2014 and consequently the persons arrayed as contemnors interfered
with due administration of justice. It is prayed that the contemnors be
punished for disobeying the Order of 08.05.2014 and at the same time the
Conveyance Deed dated 02.07.2014 alienating Katihar property be declared
null and void.
3. The Company had filed Reference No.149 of 1994 before the Board
for Industrial and Financial Reconstruction (“the BIFR” for short)
under the provisions of Sick Industrial Companies (Special Provisions)
Act, 1985 (“Act” for short), pursuant to which, various steps for
revival of the Company were being considered. By order dated
17.12.2008 the BIFR had directed “…The Company would not
encumber/alienate/lease/sale any property without specific prior
approval of the Board.” In the proceedings dated 26.08.2009, the BIFR
had constituted Assets Sale Committee (“ASC” for short) in respect of
properties of the Company including Katihar property. The proceedings
of ASC dated 08.11.2012 of which Shri R.N. Lahoti, CEO of the Company
was also a member show that the sale of Katihar property was engaging
the attention of ASC.
4. The proceedings of the BIFR dated 07.02.2013 show that in
compliance of the earlier directions, the Operating Agency was in the
process of finalizing a Draft Rehabilitation Scheme (“DRS” for short)
and in furtherance of the directions of sale of certain assets,
notices were already sent to the Company, secured creditors and State
of Bihar to nominate their representatives in ASC. The proceedings
further show that the Operating Agency by letter dated 29.01.2013 had
requested the BIFR to grant permission to proceed further for sale of
assets of the Company situated in Bihar. The next proceedings of the
BIFR dated 18.02.2013 indicate that the Operating Agency had got the
assets valued and had sent notices to all parties to nominate their
representatives in the ASC.
5. While the matter stood thus, Auditors’ Report dated 15.02.2013
for the period ending 31.12.2012 stated that the Net Worth of the
Company had become positive. It was also mentioned in the Directors’
Report dated 19.02.2013 that the Net Worth of the Company had now
turned positive. Around this time, the BIFR vide its Order dated
26.02.2013 had formulated DRS for the revival of the Company. On
28.02.2013 four advertisements were issued in prominent newspapers by
the Operating Agency inviting Bids for sale of properties of the
Company including Katihar property. The Reserve Price for Katihar
property was Rs.354.99 Lakhs. The advertisement stated that the Bid
documents could be obtained, inter alia, from S.K. Jha of M/S J.K.
Jute Mills Co. Ltd, 70 Golf Links, New Delhi 110003.
6. When the matter was thus being considered for finalization of
DRS and for sale of assets of the Company, in the proceedings of the
BIFR dated 04.04.2013 it was submitted on behalf of the Company that
the Net Worth of the Company having turned positive, BIFR no longer
retained jurisdiction over the Company. The BIFR observed that as per
Annual Balance Sheet of the Company as on 31.03.2012 the Net worth of
the Company was Rs.5.71 Crores and the accumulated losses were
Rs.36.23 crores and it would like to satisfy itself about the Balance
Sheet as at 31.12.2012. The BIFR passed following directions:-
“4.13. Having considered the submissions made in the hearing,
materials on record, the Bench issued the following directions:
i) The Company to submit certified copy of its ABS as on 31-12-2012
along with all relevant papers and documents in support of its
net worth within one week from today with copy to IDBI (OA) and
all parties concerned along with documentary evidence;
ii) ASC would go ahead as per its schedule and confirmation of sale,
if any, will take place upon the approval of DRS on 20-5-2013,
with the consent of the Bench.
(iii) The Bench fixed the next date of hearing on 26-4-2013 at
11.30 a.m. for considering the submission of the Company that
its net worth has turned positive as on 31-12-2012 and also hear
MA No.162/BC of 2012 on the said date.”
7. On 16.04.2013 meeting of ASC was held but Shri. R.N. Lahoti CEO
of the Company did not attend. The meeting took note of the letter
dated 16.04.20013 from the Company signed by Shri S.K. Jha, Director
that their representative would not take part in the ASC meeting as
the Net worth of the Company having turned positive, it was no more
covered under the Act. The proceedings of the BIFR dated 16.04.2013
disclose that the BIFR had observed that manipulation of accounts had
been alleged against the Company and the BIFR would examine the same
and enquire whether the Net Worth of the Company had turned positive
or not.
8. At this stage, various proceedings including those at Gauhati
were instituted, as detailed in the Judgment of this Court dated
13.11.2014. In Title Suit No.166 of 2013, Civil Court at Kamroop,
Gauhati by an interim order dated 13.05.2013 restrained the defendants
therein including the BIFR from proceeding with Reference No.149 of
1994. This Order and subsequent proceedings taken up in Gauhati High
Court led to the filing of Special Leave Petitions giving rise to
aforementioned Civil Appeal Nos.10221 of 2014 and 10223 of 2014 and
other connected matters in which this Court passed the Order of
08.05.2014.
9. During the pendency of the aforesaid Civil Appeals in this
Court, aforementioned Contempt Petition Nos.338 of 2014 and 375 of
2014 were filed alleging alienation of Katihar property vide
Conveyance Deed dated 02.07.2014 in violation of the Order of
08.05.2014. Contempt Petition (C) No.338 of 2014 was taken as the
lead petition and the basic allegations about the involvement of
various contemnors as detailed in paragraphs 4 and 7 to 14 in the
contempt petition are to the following effect:-
“4. That the Contemnor Nos.1 to 3 in conspiracy and collusion
with other Contemnors, the particulars of which are given
hereinafter have after 08.05.2014 sold away by executing a
Registered Conveyance Deed dated 02.07.2014 capital assets of
the Contemnor No.1 Company being the land, factory buildings
etc. to one M/S. Thapar Herbs & Spices Pvt. Ltd. (Contemnor
No.14 herein) through its Director Mr. Mrityunjay Kumar Singh,
Contemnor No.17 herein (who is also the stooge and the employee
of the Contemnor Nos.2 and 3); hence the present Petition.
7. The Contemnor Nos.4 to 8, Mr. Sashi Kant Jha, Mr. Sudhir
Kumar Singh, Mr. Rakesh Kumar Singhania and Mr. Sobhanand Jha
alias Mr. Ravishankar Prabhakar and Mr. Damodar Prasad Bhatter
are the stooges and employees of Mr. Govind Sarda and Mr. Aditya
Sarda and were/are the Directors and persons who with the
Contemnor Nos.2 and 3 are in day to day management and control
of the Contemnor No.1 Company being Directors and key employees
of the Contemnor No.1 Company during the relevant period when
the acts of contempt have been perpetrated and these Contemnor
Nos.4 to 8 were/are actively involved in consciously defying the
orders dated 08.05.2014 passed by this Hon’ble Court.
8. The Contemnor No.9, Mr. Prakash Kumar, IAS is the District
Magistrate and Collector of Katihar, Bihar who despite the
orders dated 08.05.2014 passed by this Hon’ble Court took no
steps in order to restrain the sale and registration of the
Katihar capital assets of the Contemnor No.1 Company. The
Contemnor No.10 (whose name could not be ascertained ) is the
Dy. Collector, District Legal Branch, Katihar who on 31.05.2014
sent the orders dated 21.03.2014 of the Collector, Katihar to
the Distirict Sub-Registrar, Katihar for information and
necessary action. The Contemnor No.11, Mr. Sanjay Kumar Gwalia
is the District Sub-Registrar (Sub-Registry Office), Katihar,
Bihar who has registered the Conveyance Deed of the Katihar
capital asset of the Contemnor No.1 company on 02.07.2014
despite being in full and complete knowledge of the orders dated
08.05.2014 passed by this Hon’ble Court. The Contemnor No.12,
Mr. Rajender Singh is the Circle Officer, Katihar who is taking
steps to mutate the Katihar capital assets of the Contemnor No.1
Company in favour of Contemnor No.14 which is transferred by
the illegal registered Conveyance Deed dated 02.07.2014. The
Contemnor No.13 is Mr. Pankaj Kumar, IAS who was occupying the
post of Divisional Commissioner, Purnia Division at the relevant
point of time and to whom letter was sent on 10.06.2014 (and
duly served on 11.06.2014) informing of the orders dated
08.05.2014 passed by this Hon’ble Court and did not take any
steps or issue any directions to the Contemnor Nos.9 to 12 to
restrain the sale and registration of the Katihar capital assets
of the Contemnor No.1 Company.
9. The counsel for the Petitioner by his letter dated
10.06.2014 was sent to Contemnor No.11 with a copy endorsed to
Contemnor Nos.9,12,13 and to Registrar of Assurance, Katihar and
to the Chief Minister and a letter dated 13.06.2014 was sent by
the counsel for the petitioner to Contemnor Nos.9,11,12 and to
the Finance Minister, Chief Secretary and Asstt. I.G. of
Registration and all of them given full and complete knowledge
of the orders dated 08.05.2014 passed by this Hon’ble Court but
all of them and in particular Contemnor Nos.9, 11, 12 and 13
showed scant regard to the same and did not take any steps to
restrain the sale and transfer and registration of the Katihar
capital asset of the Contemnor No.1 Company. Rather, the
Contemnor Nos.9 to 13 showed scant regards to the orders dated
08.05.2014 passed by this Hon’ble Court and facilitated the
sale, transfer and registration of the Katihar capital asset of
the Contemnor No.1 Company in conspiracy and collusion with
Contemnor Nos.2 to 8 and Contemnor Nos.14 to 18 have become
parties to the present Contempt Petition.
10. The Contemnor No.14 is M/s. Thapar Herbs and Spices Pvt.
Ltd., which is a company owned and controlled by the Contemnor
No.2 and which has purchased the Katihar capital asset of the
Contemnor No.1 Company in violation of the order dated
08.05.2014 passed by this Hon’ble Court. Contemnor No.15 is Mr.
Krishan Kumar, Contemnor No.16 is Mr. Rakesh Kabra and Contemnor
No.17 is Mr. Mritunjay Kumar Singh who are also the Directors of
the Contemnor No.14 Company and are the employees/stooges of Mr.
Govind Kumar Sarda (Contemnor No.2) who have acted in collusion
and conspiracy with the Contemnor Nos.1 to 13 consciously and
with full and complete knowledge of the facts defied/violated
the orders dated 08.05.2014 passed by this Hon’ble Court.
11. That in willful disobedience to the orders dated
08.05.2014 passed by this Hon’ble Court, the Contemnor Nos.1 to
8 in collusion and conspiracy with the Contemnor Nos.9 to 13 and
in willful disobedience of the orders dated 08.05.2014 sold away
the Katihar capital assets of the Contemnor No.1 Company to the
Contemnor No.14 Company (which is managed and controlled by
Contemnor Nos.2 and 3) for a paltry sum of Rs.3.55 crores as
against the Circle rate of Rs.15.37 crores whereas the market
value is above Rs.20 crores. It is submitted that:-
i) Contemnor No.14 through one of its Directors i.e. Mr.
Mrityunjay Kumar Singh, Contemnor No.17 (who is an employee
of the Contemnor No.2 and works at 70, Golf Links, New
Delhi office of the Contemnor Nos.1 to 3) filed application
before the Contemnor No.11 (District Sub-Registrar,
Katihar) for transfer of the Katihar capital asset of the
Contemnor No.1 Company. This application was dismissed
vide orders dated 28.10.2013.
ii) On an appeal filed by the Contemnor No.14 Company through
Contemnor No.17 before the Contemnor No.9 (District
Magistrate & Collector, Katihar) being Registration Appeal
Case No.235/13-14 the Collector, Katihar, inter-alia,
passed the following orders on 21.03.2014 (English
translation):-
“From the aforesaid facts it is clear that the
land under reference is Reyati Land (belonged to
Juggi Lal Kamlapati Company, Katihar). Therein the
Government has no vested interest. Accordingly,
there appears to be no purpose for stay of its
registration. Therefore the District Sub-Registrar,
Katihar is free for conducting the proceedings under
the Registration Act and the Rules framed under it.
With this order the present case hereby disposed
off.”
……………………………………………………..
iii) As stated above, this Hon’ble Court by orders dated
08.05.2014 directed that till further orders, capital
assets of the company shall not be disposed of without
taking permission of this Hon’ble Court.
iv) On 31.05.2014, the Contemnor No.10, Deputy Collector,
District Legal Branch, Katihar made the following
endorsement (English translation) on the orders dated
21.03.2014 passed by the Contemnor No.9 to the Contemnor
No.11:-
“Memo 1346/Law, dated 31.05.2014
Copy to District Sub-Registrar, Katihar for
information and necessary action.”
v) On coming to know of the fact that the Contemnors are in
the process of illegally selling away the Katihar capital
asset of the Contemnor No.1 Company to the Contemnor No.14
Company (being the company controlled and managed by the
Contemnor Nos.2 and 3), the petitioner through its counsel
wrote a letter dated 10.06.2014 to the District Magistrate
& Collector and brought to his notice the orders passed by
the Allahabad High Court and this Hon’ble Court regarding
restraint order on the sale of land and property of the
Contemnor No.1 Company…………………….
vi) The counsel for the petitioner also wrote another letter
dated 10.06.2014 to the Contemnor No.10, with copy endorsed
to the Contemnor No.9, 12, 13 and to the Registrar of
Assurance, Dist. Katihar and the Chief Minister and
specifically pointed out the restraint orders passed by the
Allahabad High Court and by this Hon’ble Court and enclosed
the copy of the said orders alongwith the letter dated
10.06.2014. …………………………
vii) Thereafter, the counsel for the Petitioner wrote a letter
dated 13.06.2014 to Contemnor Nos.9, 11, 12 and to the
Finance Minister, Chief Secretary and Asstt. I.G. of
Registration specifically bringing to their notice the
orders dated 8.05.2014 passed by this Hon’ble Court and
requested that the Conveyance Deed in respect of the
Katihar capital asset be not registered. ………………..
viii) Despite the letters dated 10.06.2014 and 13.06.2014 of the
counsel for the Petitioner bringing to the notice of the
Contemnor Nos.9 to 13 of the orders dated 08.05.2014 passed
by this Hon’ble Court, the Contemnor Nos.1 to 17 in willful
disobedience proceeded ahead with the process of the
registering the Conveyance Deed in respect of Katihar
capital asset of the Contemnor No.1 Company and by a
Registered Conveyance Deed dated 02.07.2014 conveyed the
Katihar capital asset of the Contemnor No.1 Company to the
Contemnor No.14 Company (which is owned and controlled by
Contemnor Nos.2 and 3) for a paltry sum of Rs.3.55 crores
as against the Circle rate of Rs.15.37 crores whereas the
market value is above Rs.20 crores.
……………………………………………………………
12. Another instance of fraud and back-dating of the
Conveyance Deed is evident from the fact that the Conveyance
Deed is signed by one Mr. Sobhanand Jha (Contemnor No.7) as
Director of Contemnor No.1 Company but as on the date of the
signing and/or execution of the Conveyance Deed, he had on
17.02.2014 resigned as a Director of the Contemnor No.1 Company.
The said Mr. Sobhanand Jha long back changed his name to Mr.
Ravishankar Prabhakar and got his name changed in the records
with the Registrar of Companies but he still signed the
Conveyance Deed on behalf of the Contemnor No.1 Company as a
Director with his name written as Mr. Sobhanand Jha.
……………………………………………………………
13. That the Contemnor Nos.1 to 17 have thus willfully,
consciously and contumaciously and with full and complete
knowledge violated and disobeyed the orders dated 08.05.2014
passed by this Hon’ble Court in SLP(Civil) No.5249 of 2014 and
as such each one of Contemnors have made themselves jointly and
severally liable to be punished for the contempt of the orders
passed by this Hon’ble Court.
14. That the subject matter of the Katihar capital asset is
part of the scheme before the BIFR and in respect of the
permissions granted for sale of the Katihar capital assets and
other assets of the Contemnor No.1 Company on an appeal being
Special Appeal No.539 of 2013 filed before the Allahabad High
Court, the Allahabad High Court by orders dated 15.04.2013 and
16.04.2013 passed directing that the bid already received by the
Asset Sale Committee (ASC) will not be opened till the next
date…………………………………………………………….
10. By its Judgment dated 13.11.2014, this Court allowed the
aforesaid appeals and set aside the judgment of Gauhati High Court.
It was observed:-
“…When all the financial affairs of such company were directly
under the supervisory control of BIFR, the power to decide
whether it has since then lost the jurisdiction or not, is also
in the exclusive domain of BIFR. BIFR alone is empowered to
determine whether net worth has become positive as a result of
which it would cease to have such jurisdiction. Any inquiry into
such issue regarding net worth by anyone outside the Act
including civil court, would be against the express intent of
the Act and would lead to incongruous and undesired results.”
This Court relegated the matter to the BIFR to determine whether
the Net Worth of the Company had turned positive. Since the alienation
dated 02.07.2014 was effected without the express leave of the BIFR,
that part of the matter was also left for BIFR to consider, as would
be evident from paragraphs 37 and 38 of the judgment:-
“37. In the circumstances, we allow the present appeals and set
aside the order dated 06-01-2014 passed by the High Court of
Gauhati in Ghanshyam Sarda v. Shiv Shankar Trading Co. It is
held that Title Suit No.166 of 2013 pending on the file of the
learned Civil Court at Kamroop, Gauhati is not maintainable
insofar as it seeks declaration that the Company was no longer a
sick company within the meaning of the Act and that BIFR ceased
to have jurisdiction over the Company and that all the
proceedings in BIFR after filing of the positive balance sheet
were without jurisdiction. Consequently the order of injunction
passed by the civil court is set aside. Insofar as the said suit
pertains to the claim for recovery of money from the Company,
the suit could lie and be proceeded with only after express
consent of BIFR is received by the plaintiff. We direct that the
Company i.e. J.K. Jute Mills Co. Ltd. having its registered
office at Kanpur, U.P. continues to be under the jurisdiction of
BIFR. We leave it to BIFR to satisfy itself and determine the
issues whether the net worth of the Company has turned positive
or not. If BIFR is so satisfied, it shall deregister the Company
and upon such declaration the Company will be out of the
supervisory jurisdiction of BIFR under the Act. Needless to say
that if BIFR is not satisfied that the net worth of the Company
has turned positive, it shall go ahead and consider the scheme
for revival of the Company. We direct BIFR to complete this
exercise within two months from the date of receipt of this
order. We have refrained from dealing with the matter concerning
the merits or demerits of the claim that the net worth has
turned positive nor have we dealt with the report made by State
Bank of India in its special investigative audit. We leave these
issues to be considered by BIFR at an appropriate stage. We have
also not dealt with the submissions alleging bias as the matters
in that behalf are still pending consideration before the
authorities and we leave these issues to be dealt with at an
appropriate stage.
38. Since in our view the Company continues to be a sick company
and it was not competent for anyone except BIFR to determine
whether the net worth of the Company had turned positive, we
hold the sale of Katihar property effected by the Company
without express leave or permission of BIFR to be questionable.
However, since the transferee of that property is not before
this Court we relegate this matter for appropriate assessment by
BIFR after issuing due notice to the transferee. We also leave
it to BIFR to consider and assess whether there was any
necessity or expediency to sell the property in question. If in
its opinion such expediency and necessity are established, BIFR
may also consider whether the value that the property has
fetched is adequate or not. If the value is adequate it may
confirm the sale in favour of the transferee. However, if the
value in its opinion is inadequate, it shall give offer and
adequate time to the transferee to make good the deficit. In any
case if the sale is held to be bad or if the transferee is not
willing to make good the deficit, the entire consideration for
the transaction be returned to the transferee. In such
eventuality whatever the transferee has paid in excess of the
consideration money towards stamp duty and registration shall be
recovered from the Directors and persons responsible for
effecting such sale on behalf of the Company.”
11. Thus, the infirmity in the transfer or alienation of assets of
the Company found by this Court was on account of absence of express
leave or permission of the BIFR. Further, the transferee not being
party to the proceedings before this Court, the matter was directed to
be considered after giving it hearing and opportunity. The present
Contempt Petitions were not dealt with and notices were directed to be
issued by a separate order passed on 13.11.2014.
12. Pursuant to such notices, the alleged contemnors filed their
responses as under:-
A. In his reply which was also on behalf of the Company, Shri
Shashikant Jha, Director submitted that Katihar property was
sold and transferred to alleged Contemnor No.14 on 04.04.2013
for consideration of Rs.3.55 crores, long before the filing of
the matter in this Court and passing of the Order of 08.05.2014.
It was submitted that the entire consideration was received by
the Company on 04.04.2013 by cheques and constructive possession
was also handed over to the purchaser on 16.04.2013. The reply
further stated:-
“The deed was presented for registration before the
Registrar on 16.04.2014. As per the Revenue Department, the
stamp duty payable was higher than affixed and accordingly, the
matter was pending adjudication. It is only thereafter, that
this Hon’ble Court had passed the interim Order dated 08.05.2014
restraining the Company from disposing off capital assets of the
Company without taking permission from the Hon’ble Court. By
this time, the property in question had for all practical
purposes already been transferred. Only, the ministerial act of
actual registration by the Authority concerned was remaining
which also was being pursued by the purchaser, it is submitted
that vide board resolution dated 06.02.2013 an authority had
been given by the Company to the alleged Contemnor No.7 herein
to sign and execute the sale deed. Subsequently, the alleged
contemnor No.7 had resigned from the directorship of the
Company. The alleged Contemnor No.7 was called upon by the
purchaser for getting the sale deed registered. Therefore, there
was no willful or deliberate violation of the interim Order
dated 08.05.2014 passed by this Hon’ble Court. ”
B. In his reply, alleged Contemnor No.2 Govind Sarda
submitted that he was not a party to the proceedings disposed of
by this Court vide Judgment dated 13.11.2014. It was denied that
the Company belonged to or was being managed by him or his son
or that Katihar property was sold away by him in conspiracy
with other contemnors. Similarly in his reply, alleged Contemnor
No.3 Aditya Sarda submitted that he was neither a shareholder
nor a director in the Company nor did he have any connection
with the management of the Company. It was denied that he along
with other contemnors, in conspiracy had sold away Katihar
property.
C. In his reply alleged Contemnor No.6 Rakesh Kr. Singhania
submitted that Katihar property was transferred well before the
Order of 08.05.2014. Alleged Contemnor No.8, D.P. Bhattar
another Director of the Company submitted on same lines. Alleged
Contemnor No.7 Shobhanand Jha who had executed the Deed on
behalf of the Company, submitted:-
“That the Respondent herein has not violated the Order
dated 8.5.2014 passed by this Hon’ble Court. In fact, he had
resigned as Director of JK Jute Mills Ltd. On 17.02.2014 because
of personal reasons and was subsequently, not in touch with the
Company. He was not aware of the Order dated 08.05.2014 passed
by this Hon’ble Court. The Respondent had been authorized by
the Board of Directors to execute the sale deed to be entered
into between the company and M/s Thapar Herbs & Spices (P) Ltd.
When he was a Director of the company. The sale deed was
executed on 03.04.2013 under the answering respondents signature
and the sale consideration was received by the company on
04.04.2013 itself. Symbolic possession of the property was also
handed over on 16.04.2013. The deed was presented for
registration by the buyer on 16.04.2013 but as the stamp duty as
assessed by the revenue authorities was on the higher side, the
registration of the deed did not take place. The buyer after
certain correspondences with the revenue authorities was able to
reduce the value of stamp duty payable on such registration. As
a considerable time of more than one year had elapsed, the buyer
had contacted the answering respondent to get a fresh deed
executed and to get the same registered. As the answering
respondent had been given the authority which was not revoked
till then the answering respondent on good faith executed the
fresh sale deed which was presented for registration and was
finally registered on 02.07.2014. As the answering respondent
had resigned from the Directorship of the company he was unaware
of any orders being passed in the meantime and was also not
served by a copy of the said order. In any event the entire
exercise of sale was completed in 2013 itself when the deed was
executed, payment received and possession handed over.”
In his supplementary affidavit Shobhanand Jha further submitted:-
“1. That on 02.07.2014 at the time of registration of the
conveyance deed I had produced the authorization being board
resolution of 06.02.2013 given in my favour by the Board of J K
Jute Mills Co. Ltd.
2. That although the sale deed of 2014 mentions my
designation as Director, it is a typographical error and which
has been carried forward from the earlier sale deed of April
2013 and nothing more. It was not my intention to show myself as
Director of JK Jute Mills Co. Ltd. at the time of registration
as I had resigned from the Board of Directors in February, 2014.
The only authorization in my favour was the one mentioned in
para 1 above. “
D. Alleged Contemnor No.10, Mohammad Istaba Husain, Senior
Deputy Collector, Gaya submitted that soon after receipt of the
letter dated 10.06.2014 sent by the Counsel for the appellant
along with copy of the order dated 08.05.2014 passed by this
Court, he had ensured that the same was sent to the concerned
Sub-Registrar to take necessary action as per Rules vide letter
dated 26.06.2014. However, despite such letter the Sale Deed
was registered on 02.07.2014 whereafter charges were framed
against District Sub-Registrar, Katihar and Circle Officer,
Katihar for disobeying the order passed by this Court on
08.05.2014. In his reply alleged Contemnor No.11, Sanjay Kumar
Gwalia, District Sub-Registrar, Katihar submitted that he was
not a party to the proceedings before this Court, that he was
bound to act under the provisions of the Registration Act in
connection with registration of documents. He further submitted
that in view of the prevalent opinion from the office of the
Advocate General, Bihar that the Registering Authorities, if not
parties to the proceedings, are bound to register documents
submitted for registration, he had sought opinion of the
Government Pleader on 30.06.2014. The opinion was thereafter
given by the Government Pleader, Katihar on 01.07.2014 that the
documents could be registered, whereafter the Sale Deed was
registered on 02.07.2014. Alleged Contemnor No.12, Rajendra
Singh, the then Circle Officer in his reply submitted that he
had caused mutation to be effected in pursuance of the
registration of document and mutation by itself did not confer
any title upon the transferee. Alleged Contemnor No.13, Pankaj
Kumar, Secretary Registration, Excise and Prohibition
Department, Government of Bihar denied having any connection
with the violation of the Order of 08.05.2014.
E. In their common reply, alleged Contemnor Nos.14 and 17
submitted that the transfer under the document dated 02.07.2014
was a bonafide purchase for consideration, that the property was
already in the possession of the transferee under a long term
lease and that the transferee had no knowledge about the Order
of 08.05.2014 nor was that order ever served upon the
transferee. It was denied that the transferee had any
connection with alleged Contemnor Nos.2 and 3. The replies
filed by alleged Contemnor Nos.15 and 16 were to the similar
effect denying knowledge about the Order of 08.05.2014.
13. The applicants filed their rejoinder affidavits to the replies filed
by all the alleged contemnors. As regards the reply of alleged Contemnor
No.17 Mrityunjay Kumar Singh, it was submitted that he was authorized
respresentative of the Company as well as Director in the transferee
company. Reliance was placed on the authority letter dated 17.06.2013
issued by the Company authorizing said alleged Contemnor No.17 to collect
certified copies of the orders from the office of the BIFR. It was
submitted that he being privy to the proceedings before the BIFR and being
aware of the Order of 08.05.2014, ought not to have registered the document
on 02.07.2014. In his subsequent affidavit dated 27.01.2016, alleged
Contemnor No.17 submitted that he directly worked under alleged Contemnor
Nos.2 and 3 and that he used to sign documents on their instructions. He
submitted as under:
“I wish to further state that I, under instructions from Mr.
Aditya Sarda, had visited Katihar twice. My first visit was in
the month of May, 2014 for 15 days and second time in the last
week of June 2014. The first time in May 2014 I was accompanied
by Mr. Sashi Kant Jha and second time in June 2014 with
Shobhanand Jha, both employees of Mr. Govind Sarda. In June
2014, on reaching Katihar I and Mr. Shobhanand Jha met by Shri.
Damodar Prasad Bhatter another employee of Mr. Govind Sarda and
Mr. Aditya Sarda. I stayed in Katihar for a week. During both
my visits I was told that I had to sign some documents; details
of which were not disclosed to me.
e. That on 02.07.2014, I and Mr. Sobhanand Jha signed certain
documents before the Registrar’s office on the instructions of
Mr. Aditya Sarda. I did not have any occasion to read the said
document nor was I aware of the contents of the said document
and the particulars of the property in respect of the sale deed
was signed by me. After putting the signature, photographs were
taken. Thereafter, I returned to Delhi and informed Mr. Aditya
Sarda that the papers had been signed.”
14. During the pendency of these contempt petitions, IA Nos.9 and 10 of
2016 were filed by the applicants inviting attention of the Court to
proceedings in Calcutta High Court, namely, Writ Petition No.5670(W) of
2016 filed by one Dinesh Sarda. It was submitted that said Dinesh Sarda
was a Chartered Accountant who used to work for alleged Contemnor Nos.2 and
3. Relying on certain documents filed in said writ petition, it was
submitted that alleged Contemnor Nos.2 and 3 were exercising control and
management over the transferee company and that the transaction in question
registered on 02.07.2014 was a device employed by them. It was further
submitted that these documents indicate the involvement of the said alleged
Contemnor Nos.2 and 3 and established that they were the key conspirators
on whose instructions the transaction was entered into and registered on
02.07.2014. Concerned parties including alleged Contemnor Nos.2 and 3
filed their responses to I.A. Nos.9 and 10 of 2016 and denied the
allegations.
15. We heard M/s Krishnan Venugopal, Amit S. Chadha and Sanjiv Sen,
learned Senior Advocates in support of these contempt petitions. We also
heard M/s Ram Jhethmalani, Vikas Singh, V. Giri, Nidesh Gupta, Jayant
Bhushan, learned Senior Advocates and Mr. Braj K. Mishra, learned Advocate
who appeared on behalf of alleged contemnors. We have gone through the
record and considered the rival submissions.
16. The first question that arises is whether any alienation or transfer
was effected after the Order of 08.05.2014.The submission of the alleged
contemnors is that the conveyance deed was executed on 04.04.2013 on which
date the entire consideration stood paid by the transferee and was
credited to the account of the Company and as such the title passed in
favour of the transferee well before the Order of 08.05.2014 and what was
done on 02.07.2014 was a mere ministerial act. According to the alleged
contemnors, the documents presented for registration in April 2013 were not
accepted for want of adequate stamp and registration fees. This infirmity
was removed and the documents were then presented for registration. In such
circumstances the order of 08.05.2014 was not in any way violated by them.
17. The Order of 08.05.2014 had directed “….capital assets of the company
shall not be disposed of without taking permission of this Court”. The
expression “shall not be disposed” in the context connotes action or
process of sale of assets. Going by Section 54 of the Transfer of Property
Act, 1882, transfer of any tangible immovable property of the value of
Rupees hundred and upwards can be made only by a registered instrument.
The expression ‘only’ in the Section is significant. The transfer comes
into effect and becomes valid and effective only by a registered
instrument. It is true that the document was sought to be registered in
April, 2013 but the registration in question was duly effected only on
02.07.2014. In the eyes of law, it is this document registered on
02.07.2014 which alone effectuates transfer of interest in Katihar
property in favour of the transferee. The transfer was thus effected on
02.07.2014 i.e. well after the Order of 08.05.2014. In Suraj Lamp &
Industries Pvt. Ltd. v State of Haryana and another[2], this Court had
observed as under:
“19. Any contract of sale (agreement to sell) which is not a
registered deed of conveyance (deed of sale) would fall short of
the requirements of Sections 54 and 55 of the TP Act and will
not confer any title nor transfer any interest in an immovable
property (except to the limited right granted under Section 53-A
of the TP Act). According to the TP Act, an agreement of sale,
whether with possession or without possession, is not a
conveyance. Section 54 of the TP Act enacts that sale of
immovable property can be made only by a registered instrument
and an agreement of sale does not create any interest or charge
on its subject-matter.”
18. The document dated 04.04.2013 did not by itself create any interest
nor did the title pass upon execution of such document on 04.04.2013 but it
was only after the registration on 02.07.2014 that the title in Katihar
property passed from the Company in favour of the transferee. The
submission of the contemnors however, is that by virtue of Section 47 of
the Registration Act, the document in question would operate from
04.04.2013. In our view, the principle embodied in Section 47 of the
Registration Act is completely for different purposes. In so far as the
issue of transfer is concerned, Section 54 of the Transfer of Property Act
is the governing principle, which is quite clear. It is the date of
registration of document which is crucial inasmuch as the transfer is
effected and the title passes only upon registration. Viewed thus, it is
clear that Katihar property was transferred in the teeth of the Order of
08.05.2014 and ex facie there has been violation of the Order passed by
this Court. It is crucial to note that on 08.05.2014, the company had
appeared on caveat before this Court and certainly had express knowledge
about the Order of 08.05.2014. It was party to the proceedings and was
bound by the order passed by this Court in every respect.
19. The submission on part of alleged Contemnor Nos.1,4,5,6,7 and 8
namely the Company and its directors/servants is that the document was
executed by alleged Contemnor No.7 Sobhanand Jha in pursuance of the
authority given to him by the Company way back on 06.02.2013. As on
06.02.2013, the company was definitely a sick company and the Reference
was pending before the BIFR. Around that time the ASC was constituted
which was considering sale of assets including Katihar property. It was
only after the Auditors’ report dated 15.02.2013 that the Company started
projecting that its net worth had become positive on which account it
ceased to be governed under the provisions of the Act and was outside the
jurisdiction of the BIFR. Though this Court rejected such submission in
its judgment dated 13.11.2014, at this stage we are considering the
bonafides and tenability of the assertions made by the alleged contemnors.
There could not have been any occasion for the Company before 19.02.2013,
even accepting the submission that it ceased to be a sick company as
alleged, to enable the Company to execute an authority on 06.02.2013 in
favour of alleged Contemnor No.7. That authorization is wholly defective
and unsustainable. It is not the case of the alleged contemnors that after
the adoption of the Auditors’ Report and Directors’ Report dated 19.02.2013
a decision was taken by the Company to sell or dispose of its Katihar
property in pursuance of which due authorization was given to a competent
person to execute the documents on behalf of the Company.
20. Further, the facts on record disclose that said Sobhanand Jha changed
his name to R.S. Prabhakar on and with effect from 18.03.2013. However,
the document mentioned his name as Sobhanand Jha which he signed as
Sobhanand Jha on 04.04.2013. He tendered his resignation on 17.02.2014 as
R.S. Prabhakar. Despite such resignation, he thereafter executed the
document on 02.07.2014 in the name of Sobhanand Jha and signed as Sobhanand
Jha. In any event of the matter as on 02.07.2014, the person was not a
Director of the Company. He submitted that the Company had given him an
authority way back on 06.02.2013 pursuant to which the document was
executed on 04.04.2013 on which date the sale for all practical purposes
stood completed and what remained was only a ministerial act which was done
by him independently of the Company on 02.07.2014. It is on the basis of
this submission that the Company as well as its Directors/servants namely
alleged Contemnor Nos.4, 5, 6 and 8 seek to wriggle themselves out of any
liability for violation of Order of 08.05.2014. If the order was passed
on 08.05.2014 restraining any alienation of the capital assets of the
Company, the Directors/servants of the company ought to have taken steps to
inform alleged Contemnor No.7 to refrain from registering the document on
02.07.2014. Neither such steps were taken nor was the Court informed on
08.05.2014 about the document executed on 04.04.2013, in which event this
Court could have passed appropriate Orders including restraint on
registration. Similarly, if Sobhanand Jha, alleged Contemnor No.7 had
resigned on 17.02.2014, he had no authority to register the document on
behalf of the Company. In our view, the entire exercise was a clever
device employed by the Company and its Directors, in that, first an
authority in favour of a Director was created who then resigned as Director
but continued to register the document on the basis of erstwhile
authorization and at the same time the person having resigned could claim
lack of knowledge of the Order of restraint passed by this Court. Their
actions were deliberate and designed to flout the Order of 08.05.2014.The
involvement of alleged Contemnor Nos.1,4,5,6,7 and 8 in the transfer the
assets of the Company in the teeth of the Order of 08.05.2014 is thus
apparent and clear.
21. We now turn to the involvement of those officials concerned with
registration, who went ahead and registered the document on 02.07.2014
despite having been put to notice and served with a copy of the Order
of 08.05.2014. Our attention has been invited to the opinion rendered
by the office of the Advocate General, Bihar to the effect that even
if there be any order passed by a civil court in connection with a
private dispute between the parties, the registering authorities are
bound to register a document presented for registration. This opinion
was relied upon by the Government Advocate who then opined that the
document in the present case could be registered. The request was
allegedly made on 30.06.2014 and the opinion of the Government
Advocate was promptly given on 01.07.2014. There is no register
maintained diarizing the inward and outward letters and prima facie
the entire theory appears to be suspicious and designed to confer a
favour. However, since these are government servants, we grant them
benefit of doubt and would only caution them. It is shocking that an
order passed by this Court, in the face of the provisions of Article
142 of the Constitution, could be ignored or disregarded by the
officials who went ahead and registered the document. However, we do
not find sufficient grounds to invoke our Contempt Jurisdiction to
punish them for violation of the Order of 08.05.2014.
22. We now turn to the involvement of alleged Contemnor Nos.14, 15
and 16 who are the transferee Company and its Directors/servants.
These alleged contemnors were neither parties to the proceedings
pending in this Court in which Order of 08.05.2014 was passed nor is
there any material to indicate that such order was ever served on them
or brought to the notice of these alleged contemnors. The role played
by alleged Contemnor No.17, however, stands on a different footing.
The documents on record do show that he used to represent the Company
and was also given authority to collect documents on behalf of the
Company from the office of the BIFR. Further, on his own showing, he
had gone ahead and registered the document not on the asking of the
transferee. He had gone along with the Directors of the Company and
on the directions of alleged Contemnor No.3. The knowledge about the
passing of Order of 08.05.2014 to the Company and its Directors having
been established, there is room for suspecting the involvement of
alleged Contemnor No.17. But mere suspicion may not be enough and we
give him benefit of doubt. Thus, none of the alleged Contemnor Nos.14
to 17 have been proved to be guilty of violation of Order of
08.05.2014.
23. As regards the involvement of alleged Contemnor Nos.2 and 3,
they were neither Directors nor Shareholders of the Company nor has it
been shown that they have any stake or interest in the Transferee
Company. It is undoubtedly true that alleged Contemnor No.17 in his
affidavit stated that he used to work under the directions of alleged
Contemnor Nos.2 and 3 and that the registration of the document on
02.07.2014 was done under the express directions and alleged Contemnor
No.3. However, such a statement coming from a co-contemnor, in our
view, is not sufficient to reach a conclusion about the involvement of
alleged Contemnor No.3. Further, the documents pertaining to Writ
Petition No.5670 (W) of 2016 pending in Calcutta High Court as well as
the affidavit filed by Dinesh Sarda are also not conclusive enough.
The criticism that such documents and the affidavit of Dinesh Sarda
are conveniently brought on record, would also require assessment of
facts. Thus, though there is room to suspect the involvement of said
Contemnor Nos.2 and 3, the material on record is not conclusive enough
to hold them guilty of violation of Order of 08.05.2015. We,
therefore, close these proceedings as against them.
24. We now come to the crucial question as to the effect of transfer
or alienation of Katihar property in violation of the Order of
08.05.2014. The law on the point is well settled in the decision of
this Court in D.D.A. v. Skipper Construction Co. (P) Ltd.[3] that
legal consequences of what has been done in breach of or in violation
of the order of stay or injunction can be undone and the parties could
be put back to the same position as they stood immediately prior to
such order of stay or injunction. Paragraphs 18 to 21 of the decision
in D.D.A. v. Skipper Construction Co. (P) Ltd. (supra) are quite
instructive and are:-
“18. The above principle has been applied even in the case of
violation of orders of injunction issued by civil courts. In
Clarke v. Chadbur (1985)1 All ER 211 Sir Robert Megarry V-C
observed:
“I need not cite authority for the proposition that it is of
high importance that orders of the court should be obeyed.
Wilful disobedience to an order of the court is punishable as a
contempt of court, and I feel no doubt that such disobedience
may properly be described as being illegal. If by such
disobedience the persons enjoined claim that they have validly
effected some charge in the rights and liabilities of others, I
cannot see why it should be said that although they are liable
to penalties for contempt of court for doing what they did,
nevertheless those acts were validly done. Of course, if an act
is done, it is not undone merely by pointing out that it was
done in breach of the law. If a meeting is held in breach of an
injunction, it cannot be said that the meeting has not been
held. But the legal consequences of what has been done in breach
of the law may plainly be very much affected by the illegality.
It seems to me on principle that those who defy a prohibition
ought not to be able to claim that the fruits of their defiance
are good, and not tainted by the illegality that produced them.”
19. To the same effect are the decisions of the Madras and
Calcutta High Courts in Century Flour Mills Ltd. v. S. Suppiah
(AIR 1975 Mad270) and Sujit Pal v. Prabir Kumar Sun (AIR 1986
Cal 220). In Century Flour Mills Ltd.(supra) it was held by a
Full Bench of the Madras High Court that where an act is done in
violation of an order of stay or injunction, it is the duty of
the court, as a policy, to set the wrong right and not allow the
perpetuation of the wrongdoing. The inherent power of the court,
it was held, is not only available in such a case, but it is
bound to exercise it to undo the wrong in the interest of
justice. That was a case where a meeting was held contrary to an
order of injunction. The Court refused to recognise that the
holding of the meeting is a legal one. It put back the parties
in the same position as they stood immediately prior to the
service of the interim order.
20. In Sujit Pal(supra) a Division Bench of the Calcutta High
Court has taken the same view. There, the defendant forcibly
dispossessed the plaintiff in violation of the order of
injunction and took possession of the property. The Court
directed the restoration of possession to the plaintiff with the
aid of police. The Court observed that no technicality can
prevent the court from doing justice in exercise of its inherent
powers. It held that the object of Rule 2-A of Order 39 will be
fulfilled only where such mandatory direction is given for
restoration of possession to the aggrieved party. This was
necessary, it observed, to prevent the abuse of process of law.
21. There is no doubt that this salutary rule has to be
applied and given effect to by this Court, if necessary, by
overruling any procedural or other technical objections. Article
129 is a constitutional power and when exercised in tandem with
Article 142, all such objections should give way. The court must
ensure full justice between the parties before it.”
25. In the present case the Company and its Directors/servants were
certainly guilty of transgressing or violating the Order of 08.05.2014
but as found hereinabove, the transferee and its Directors/servants
have not violated the Order of 08.05.2014. The transferee and its
Directors/servants were neither parties to the proceedings nor were
they served with the Order of 08.05.2014. In para 38 of the judgment
of this Court dated 13.11.2014, this Court had found the transfer in
favour of the transferee to be questionable and had relegated the
matter to the BIFR to consider the matter in the light of directions
contained in said para 38. In the circumstances, no further orders
are called for invalidating the registration dated 02.07.2014.
Further, according to the record the transferee had parted with full
consideration way back on 04.04.2013. In the totality of these
circumstances we do not think it appropriate to exercise our power to
invalidate the effect of registration of the document on 02.07.2014.
26. We thus find the Company and its Directors/servants namely
alleged Contemnor Nos.1, 4, 5, 6, 7 and 8 guilty of having violated
the Order of 08.05.2014. In our view, ends of justice would be met if
fine is imposed on the Contemnors. We impose fine of Rs.2,000/- on
the Company. Further, fine of Rs.2,000/- each is imposed on Contemnor
Nos.4, 5, 6, 7 and 8. Fine shall be deposited with the Registry of
this Court within four weeks from today. In case of failure by
Contemnor Nos.4, 5, 6, 7 and 8 to deposit the amount of fine within
the time stipulated, they shall undergo sentence of simple
imprisonment for one month.
27. With these observations, we close Contempt Petition Nos.338 of
2014 and 375 of 2014 and the same stand disposed of.
28. In Contempt Petition Nos.24-25 of 2015 it is submitted that the
contemnors have obstructed the implementation of the judgment dated
13.11.2014 passed by this Court. The acts alleged are in the nature
of legal proceedings initiated by the contemnors and as such we do not
find any reason to invoke our contempt jurisdiction. Said Contempt
Petition Nos.24-25 of 2015 thus stand dismissed.
29. In Contempt Petition No.307 of 2015 it is alleged that the
direction issued by this Court in paragraph No.33 of its Judgment
dated 13.11.2014 has not been complied with by the contemnors. Since
no notice as regards this Contempt Petition was issued to the
contemnors we issue notice to the contemnors returnable in six weeks.
The matter shall be placed before the appropriate Bench.
………………………….J.
(Anil R. Dave)
..……………………….J.
(Uday Umesh Lalit)
New Delhi,
November 18, 2016
-----------------------
[1] (2015) 1 SCC 298
[2] 2012 1 SCC 656
[3] (1996) 4 SCC 622
IN THE SUPREME COURT OF INDIA
CIVIL ORIGINAL JURISDICTION
CONTEMPT PETITION (CIVIL) NO.338 OF 2014
IN
CIVIL APPEAL NO.10221 OF 2014
Ghanshyam Sarda ……Petitioner
Versus
Sashikant Jha, Director, ..….
Respondents
M/s JK Jute Mills Co. Ltd. & Ors.
with
Contempt Petition (C) Nos.24-25/2015 in
Civil Appeal Nos.10224-10225/2014
with
Contempt Petition (C) No.375/2014 in
Civil Appeal No.10223/2014
with
Contempt Petition (C) No.307/2015 in
Civil Appeal No.10221/2014
JUDGMENT
Uday Umesh Lalit, J.
1. Contempt Petition (Civil) Nos.338 of 2014 and 375 of 2014 at the
instance of Ghanshyam Sarda, appellant in Civil Appeal No.10221 of
2014 and J.K. Jute Mills Mazdoor Ekta Union, appellant in Civil Appeal
No.10223 of 2014 (‘applicants’, for short) seek to highlight
disobedience and violation of the Order dated 08.05.2014 (“Order of
08.05.2014”, for short) passed by this Court in said Civil Appeals and
other connected matters. The text of the Order of 08.05.2014 was to
the following effect:-
“Since it is not possible for us to take up the matter today,
learned senior counsel appearing for the parties seek leave to
mention before the Vacation Bench for seeking urgent hearing of
the matter.
Permission is granted.
It would be open to the parties to mention before the Vacation
Bench for urgent hearing of the matter.
However, it is directed that till further orders, capital assets
of the Company shall not be disposed of without taking
permission of this Court.”
2. The aforesaid Civil Appeals had challenged the judgment and order
dated 06.01.2014 passed by the High Court of Gauhati in FAO No.10 of 2013,
Writ Petition No.4303 of 2013 and Writ Petition No.6286 of 2013 and were
disposed of by this Court vide its Judgment dated 13.11.2014[1]. The facts
leading to the filing of those appeals and connected matters are dealt with
in said Judgment dated 13.11.2014. It is alleged in the present contempt
petitions that in violation of the Order of 08.05.2014, which was passed
during the pendency of the aforesaid Appeals, the assets owned by the
Company, namely, J.K. Jute Mills Company Ltd. (hereinafter referred to as
the Company) at Saifganj, Katihar, Bihar spread across 1.6 acres of land
(“Katihar property”, for short) were sold vide Conveyance Deed dated
02.07.2014 and consequently the persons arrayed as contemnors interfered
with due administration of justice. It is prayed that the contemnors be
punished for disobeying the Order of 08.05.2014 and at the same time the
Conveyance Deed dated 02.07.2014 alienating Katihar property be declared
null and void.
3. The Company had filed Reference No.149 of 1994 before the Board
for Industrial and Financial Reconstruction (“the BIFR” for short)
under the provisions of Sick Industrial Companies (Special Provisions)
Act, 1985 (“Act” for short), pursuant to which, various steps for
revival of the Company were being considered. By order dated
17.12.2008 the BIFR had directed “…The Company would not
encumber/alienate/lease/sale any property without specific prior
approval of the Board.” In the proceedings dated 26.08.2009, the BIFR
had constituted Assets Sale Committee (“ASC” for short) in respect of
properties of the Company including Katihar property. The proceedings
of ASC dated 08.11.2012 of which Shri R.N. Lahoti, CEO of the Company
was also a member show that the sale of Katihar property was engaging
the attention of ASC.
4. The proceedings of the BIFR dated 07.02.2013 show that in
compliance of the earlier directions, the Operating Agency was in the
process of finalizing a Draft Rehabilitation Scheme (“DRS” for short)
and in furtherance of the directions of sale of certain assets,
notices were already sent to the Company, secured creditors and State
of Bihar to nominate their representatives in ASC. The proceedings
further show that the Operating Agency by letter dated 29.01.2013 had
requested the BIFR to grant permission to proceed further for sale of
assets of the Company situated in Bihar. The next proceedings of the
BIFR dated 18.02.2013 indicate that the Operating Agency had got the
assets valued and had sent notices to all parties to nominate their
representatives in the ASC.
5. While the matter stood thus, Auditors’ Report dated 15.02.2013
for the period ending 31.12.2012 stated that the Net Worth of the
Company had become positive. It was also mentioned in the Directors’
Report dated 19.02.2013 that the Net Worth of the Company had now
turned positive. Around this time, the BIFR vide its Order dated
26.02.2013 had formulated DRS for the revival of the Company. On
28.02.2013 four advertisements were issued in prominent newspapers by
the Operating Agency inviting Bids for sale of properties of the
Company including Katihar property. The Reserve Price for Katihar
property was Rs.354.99 Lakhs. The advertisement stated that the Bid
documents could be obtained, inter alia, from S.K. Jha of M/S J.K.
Jute Mills Co. Ltd, 70 Golf Links, New Delhi 110003.
6. When the matter was thus being considered for finalization of
DRS and for sale of assets of the Company, in the proceedings of the
BIFR dated 04.04.2013 it was submitted on behalf of the Company that
the Net Worth of the Company having turned positive, BIFR no longer
retained jurisdiction over the Company. The BIFR observed that as per
Annual Balance Sheet of the Company as on 31.03.2012 the Net worth of
the Company was Rs.5.71 Crores and the accumulated losses were
Rs.36.23 crores and it would like to satisfy itself about the Balance
Sheet as at 31.12.2012. The BIFR passed following directions:-
“4.13. Having considered the submissions made in the hearing,
materials on record, the Bench issued the following directions:
i) The Company to submit certified copy of its ABS as on 31-12-2012
along with all relevant papers and documents in support of its
net worth within one week from today with copy to IDBI (OA) and
all parties concerned along with documentary evidence;
ii) ASC would go ahead as per its schedule and confirmation of sale,
if any, will take place upon the approval of DRS on 20-5-2013,
with the consent of the Bench.
(iii) The Bench fixed the next date of hearing on 26-4-2013 at
11.30 a.m. for considering the submission of the Company that
its net worth has turned positive as on 31-12-2012 and also hear
MA No.162/BC of 2012 on the said date.”
7. On 16.04.2013 meeting of ASC was held but Shri. R.N. Lahoti CEO
of the Company did not attend. The meeting took note of the letter
dated 16.04.20013 from the Company signed by Shri S.K. Jha, Director
that their representative would not take part in the ASC meeting as
the Net worth of the Company having turned positive, it was no more
covered under the Act. The proceedings of the BIFR dated 16.04.2013
disclose that the BIFR had observed that manipulation of accounts had
been alleged against the Company and the BIFR would examine the same
and enquire whether the Net Worth of the Company had turned positive
or not.
8. At this stage, various proceedings including those at Gauhati
were instituted, as detailed in the Judgment of this Court dated
13.11.2014. In Title Suit No.166 of 2013, Civil Court at Kamroop,
Gauhati by an interim order dated 13.05.2013 restrained the defendants
therein including the BIFR from proceeding with Reference No.149 of
1994. This Order and subsequent proceedings taken up in Gauhati High
Court led to the filing of Special Leave Petitions giving rise to
aforementioned Civil Appeal Nos.10221 of 2014 and 10223 of 2014 and
other connected matters in which this Court passed the Order of
08.05.2014.
9. During the pendency of the aforesaid Civil Appeals in this
Court, aforementioned Contempt Petition Nos.338 of 2014 and 375 of
2014 were filed alleging alienation of Katihar property vide
Conveyance Deed dated 02.07.2014 in violation of the Order of
08.05.2014. Contempt Petition (C) No.338 of 2014 was taken as the
lead petition and the basic allegations about the involvement of
various contemnors as detailed in paragraphs 4 and 7 to 14 in the
contempt petition are to the following effect:-
“4. That the Contemnor Nos.1 to 3 in conspiracy and collusion
with other Contemnors, the particulars of which are given
hereinafter have after 08.05.2014 sold away by executing a
Registered Conveyance Deed dated 02.07.2014 capital assets of
the Contemnor No.1 Company being the land, factory buildings
etc. to one M/S. Thapar Herbs & Spices Pvt. Ltd. (Contemnor
No.14 herein) through its Director Mr. Mrityunjay Kumar Singh,
Contemnor No.17 herein (who is also the stooge and the employee
of the Contemnor Nos.2 and 3); hence the present Petition.
7. The Contemnor Nos.4 to 8, Mr. Sashi Kant Jha, Mr. Sudhir
Kumar Singh, Mr. Rakesh Kumar Singhania and Mr. Sobhanand Jha
alias Mr. Ravishankar Prabhakar and Mr. Damodar Prasad Bhatter
are the stooges and employees of Mr. Govind Sarda and Mr. Aditya
Sarda and were/are the Directors and persons who with the
Contemnor Nos.2 and 3 are in day to day management and control
of the Contemnor No.1 Company being Directors and key employees
of the Contemnor No.1 Company during the relevant period when
the acts of contempt have been perpetrated and these Contemnor
Nos.4 to 8 were/are actively involved in consciously defying the
orders dated 08.05.2014 passed by this Hon’ble Court.
8. The Contemnor No.9, Mr. Prakash Kumar, IAS is the District
Magistrate and Collector of Katihar, Bihar who despite the
orders dated 08.05.2014 passed by this Hon’ble Court took no
steps in order to restrain the sale and registration of the
Katihar capital assets of the Contemnor No.1 Company. The
Contemnor No.10 (whose name could not be ascertained ) is the
Dy. Collector, District Legal Branch, Katihar who on 31.05.2014
sent the orders dated 21.03.2014 of the Collector, Katihar to
the Distirict Sub-Registrar, Katihar for information and
necessary action. The Contemnor No.11, Mr. Sanjay Kumar Gwalia
is the District Sub-Registrar (Sub-Registry Office), Katihar,
Bihar who has registered the Conveyance Deed of the Katihar
capital asset of the Contemnor No.1 company on 02.07.2014
despite being in full and complete knowledge of the orders dated
08.05.2014 passed by this Hon’ble Court. The Contemnor No.12,
Mr. Rajender Singh is the Circle Officer, Katihar who is taking
steps to mutate the Katihar capital assets of the Contemnor No.1
Company in favour of Contemnor No.14 which is transferred by
the illegal registered Conveyance Deed dated 02.07.2014. The
Contemnor No.13 is Mr. Pankaj Kumar, IAS who was occupying the
post of Divisional Commissioner, Purnia Division at the relevant
point of time and to whom letter was sent on 10.06.2014 (and
duly served on 11.06.2014) informing of the orders dated
08.05.2014 passed by this Hon’ble Court and did not take any
steps or issue any directions to the Contemnor Nos.9 to 12 to
restrain the sale and registration of the Katihar capital assets
of the Contemnor No.1 Company.
9. The counsel for the Petitioner by his letter dated
10.06.2014 was sent to Contemnor No.11 with a copy endorsed to
Contemnor Nos.9,12,13 and to Registrar of Assurance, Katihar and
to the Chief Minister and a letter dated 13.06.2014 was sent by
the counsel for the petitioner to Contemnor Nos.9,11,12 and to
the Finance Minister, Chief Secretary and Asstt. I.G. of
Registration and all of them given full and complete knowledge
of the orders dated 08.05.2014 passed by this Hon’ble Court but
all of them and in particular Contemnor Nos.9, 11, 12 and 13
showed scant regard to the same and did not take any steps to
restrain the sale and transfer and registration of the Katihar
capital asset of the Contemnor No.1 Company. Rather, the
Contemnor Nos.9 to 13 showed scant regards to the orders dated
08.05.2014 passed by this Hon’ble Court and facilitated the
sale, transfer and registration of the Katihar capital asset of
the Contemnor No.1 Company in conspiracy and collusion with
Contemnor Nos.2 to 8 and Contemnor Nos.14 to 18 have become
parties to the present Contempt Petition.
10. The Contemnor No.14 is M/s. Thapar Herbs and Spices Pvt.
Ltd., which is a company owned and controlled by the Contemnor
No.2 and which has purchased the Katihar capital asset of the
Contemnor No.1 Company in violation of the order dated
08.05.2014 passed by this Hon’ble Court. Contemnor No.15 is Mr.
Krishan Kumar, Contemnor No.16 is Mr. Rakesh Kabra and Contemnor
No.17 is Mr. Mritunjay Kumar Singh who are also the Directors of
the Contemnor No.14 Company and are the employees/stooges of Mr.
Govind Kumar Sarda (Contemnor No.2) who have acted in collusion
and conspiracy with the Contemnor Nos.1 to 13 consciously and
with full and complete knowledge of the facts defied/violated
the orders dated 08.05.2014 passed by this Hon’ble Court.
11. That in willful disobedience to the orders dated
08.05.2014 passed by this Hon’ble Court, the Contemnor Nos.1 to
8 in collusion and conspiracy with the Contemnor Nos.9 to 13 and
in willful disobedience of the orders dated 08.05.2014 sold away
the Katihar capital assets of the Contemnor No.1 Company to the
Contemnor No.14 Company (which is managed and controlled by
Contemnor Nos.2 and 3) for a paltry sum of Rs.3.55 crores as
against the Circle rate of Rs.15.37 crores whereas the market
value is above Rs.20 crores. It is submitted that:-
i) Contemnor No.14 through one of its Directors i.e. Mr.
Mrityunjay Kumar Singh, Contemnor No.17 (who is an employee
of the Contemnor No.2 and works at 70, Golf Links, New
Delhi office of the Contemnor Nos.1 to 3) filed application
before the Contemnor No.11 (District Sub-Registrar,
Katihar) for transfer of the Katihar capital asset of the
Contemnor No.1 Company. This application was dismissed
vide orders dated 28.10.2013.
ii) On an appeal filed by the Contemnor No.14 Company through
Contemnor No.17 before the Contemnor No.9 (District
Magistrate & Collector, Katihar) being Registration Appeal
Case No.235/13-14 the Collector, Katihar, inter-alia,
passed the following orders on 21.03.2014 (English
translation):-
“From the aforesaid facts it is clear that the
land under reference is Reyati Land (belonged to
Juggi Lal Kamlapati Company, Katihar). Therein the
Government has no vested interest. Accordingly,
there appears to be no purpose for stay of its
registration. Therefore the District Sub-Registrar,
Katihar is free for conducting the proceedings under
the Registration Act and the Rules framed under it.
With this order the present case hereby disposed
off.”
……………………………………………………..
iii) As stated above, this Hon’ble Court by orders dated
08.05.2014 directed that till further orders, capital
assets of the company shall not be disposed of without
taking permission of this Hon’ble Court.
iv) On 31.05.2014, the Contemnor No.10, Deputy Collector,
District Legal Branch, Katihar made the following
endorsement (English translation) on the orders dated
21.03.2014 passed by the Contemnor No.9 to the Contemnor
No.11:-
“Memo 1346/Law, dated 31.05.2014
Copy to District Sub-Registrar, Katihar for
information and necessary action.”
v) On coming to know of the fact that the Contemnors are in
the process of illegally selling away the Katihar capital
asset of the Contemnor No.1 Company to the Contemnor No.14
Company (being the company controlled and managed by the
Contemnor Nos.2 and 3), the petitioner through its counsel
wrote a letter dated 10.06.2014 to the District Magistrate
& Collector and brought to his notice the orders passed by
the Allahabad High Court and this Hon’ble Court regarding
restraint order on the sale of land and property of the
Contemnor No.1 Company…………………….
vi) The counsel for the petitioner also wrote another letter
dated 10.06.2014 to the Contemnor No.10, with copy endorsed
to the Contemnor No.9, 12, 13 and to the Registrar of
Assurance, Dist. Katihar and the Chief Minister and
specifically pointed out the restraint orders passed by the
Allahabad High Court and by this Hon’ble Court and enclosed
the copy of the said orders alongwith the letter dated
10.06.2014. …………………………
vii) Thereafter, the counsel for the Petitioner wrote a letter
dated 13.06.2014 to Contemnor Nos.9, 11, 12 and to the
Finance Minister, Chief Secretary and Asstt. I.G. of
Registration specifically bringing to their notice the
orders dated 8.05.2014 passed by this Hon’ble Court and
requested that the Conveyance Deed in respect of the
Katihar capital asset be not registered. ………………..
viii) Despite the letters dated 10.06.2014 and 13.06.2014 of the
counsel for the Petitioner bringing to the notice of the
Contemnor Nos.9 to 13 of the orders dated 08.05.2014 passed
by this Hon’ble Court, the Contemnor Nos.1 to 17 in willful
disobedience proceeded ahead with the process of the
registering the Conveyance Deed in respect of Katihar
capital asset of the Contemnor No.1 Company and by a
Registered Conveyance Deed dated 02.07.2014 conveyed the
Katihar capital asset of the Contemnor No.1 Company to the
Contemnor No.14 Company (which is owned and controlled by
Contemnor Nos.2 and 3) for a paltry sum of Rs.3.55 crores
as against the Circle rate of Rs.15.37 crores whereas the
market value is above Rs.20 crores.
……………………………………………………………
12. Another instance of fraud and back-dating of the
Conveyance Deed is evident from the fact that the Conveyance
Deed is signed by one Mr. Sobhanand Jha (Contemnor No.7) as
Director of Contemnor No.1 Company but as on the date of the
signing and/or execution of the Conveyance Deed, he had on
17.02.2014 resigned as a Director of the Contemnor No.1 Company.
The said Mr. Sobhanand Jha long back changed his name to Mr.
Ravishankar Prabhakar and got his name changed in the records
with the Registrar of Companies but he still signed the
Conveyance Deed on behalf of the Contemnor No.1 Company as a
Director with his name written as Mr. Sobhanand Jha.
……………………………………………………………
13. That the Contemnor Nos.1 to 17 have thus willfully,
consciously and contumaciously and with full and complete
knowledge violated and disobeyed the orders dated 08.05.2014
passed by this Hon’ble Court in SLP(Civil) No.5249 of 2014 and
as such each one of Contemnors have made themselves jointly and
severally liable to be punished for the contempt of the orders
passed by this Hon’ble Court.
14. That the subject matter of the Katihar capital asset is
part of the scheme before the BIFR and in respect of the
permissions granted for sale of the Katihar capital assets and
other assets of the Contemnor No.1 Company on an appeal being
Special Appeal No.539 of 2013 filed before the Allahabad High
Court, the Allahabad High Court by orders dated 15.04.2013 and
16.04.2013 passed directing that the bid already received by the
Asset Sale Committee (ASC) will not be opened till the next
date…………………………………………………………….
10. By its Judgment dated 13.11.2014, this Court allowed the
aforesaid appeals and set aside the judgment of Gauhati High Court.
It was observed:-
“…When all the financial affairs of such company were directly
under the supervisory control of BIFR, the power to decide
whether it has since then lost the jurisdiction or not, is also
in the exclusive domain of BIFR. BIFR alone is empowered to
determine whether net worth has become positive as a result of
which it would cease to have such jurisdiction. Any inquiry into
such issue regarding net worth by anyone outside the Act
including civil court, would be against the express intent of
the Act and would lead to incongruous and undesired results.”
This Court relegated the matter to the BIFR to determine whether
the Net Worth of the Company had turned positive. Since the alienation
dated 02.07.2014 was effected without the express leave of the BIFR,
that part of the matter was also left for BIFR to consider, as would
be evident from paragraphs 37 and 38 of the judgment:-
“37. In the circumstances, we allow the present appeals and set
aside the order dated 06-01-2014 passed by the High Court of
Gauhati in Ghanshyam Sarda v. Shiv Shankar Trading Co. It is
held that Title Suit No.166 of 2013 pending on the file of the
learned Civil Court at Kamroop, Gauhati is not maintainable
insofar as it seeks declaration that the Company was no longer a
sick company within the meaning of the Act and that BIFR ceased
to have jurisdiction over the Company and that all the
proceedings in BIFR after filing of the positive balance sheet
were without jurisdiction. Consequently the order of injunction
passed by the civil court is set aside. Insofar as the said suit
pertains to the claim for recovery of money from the Company,
the suit could lie and be proceeded with only after express
consent of BIFR is received by the plaintiff. We direct that the
Company i.e. J.K. Jute Mills Co. Ltd. having its registered
office at Kanpur, U.P. continues to be under the jurisdiction of
BIFR. We leave it to BIFR to satisfy itself and determine the
issues whether the net worth of the Company has turned positive
or not. If BIFR is so satisfied, it shall deregister the Company
and upon such declaration the Company will be out of the
supervisory jurisdiction of BIFR under the Act. Needless to say
that if BIFR is not satisfied that the net worth of the Company
has turned positive, it shall go ahead and consider the scheme
for revival of the Company. We direct BIFR to complete this
exercise within two months from the date of receipt of this
order. We have refrained from dealing with the matter concerning
the merits or demerits of the claim that the net worth has
turned positive nor have we dealt with the report made by State
Bank of India in its special investigative audit. We leave these
issues to be considered by BIFR at an appropriate stage. We have
also not dealt with the submissions alleging bias as the matters
in that behalf are still pending consideration before the
authorities and we leave these issues to be dealt with at an
appropriate stage.
38. Since in our view the Company continues to be a sick company
and it was not competent for anyone except BIFR to determine
whether the net worth of the Company had turned positive, we
hold the sale of Katihar property effected by the Company
without express leave or permission of BIFR to be questionable.
However, since the transferee of that property is not before
this Court we relegate this matter for appropriate assessment by
BIFR after issuing due notice to the transferee. We also leave
it to BIFR to consider and assess whether there was any
necessity or expediency to sell the property in question. If in
its opinion such expediency and necessity are established, BIFR
may also consider whether the value that the property has
fetched is adequate or not. If the value is adequate it may
confirm the sale in favour of the transferee. However, if the
value in its opinion is inadequate, it shall give offer and
adequate time to the transferee to make good the deficit. In any
case if the sale is held to be bad or if the transferee is not
willing to make good the deficit, the entire consideration for
the transaction be returned to the transferee. In such
eventuality whatever the transferee has paid in excess of the
consideration money towards stamp duty and registration shall be
recovered from the Directors and persons responsible for
effecting such sale on behalf of the Company.”
11. Thus, the infirmity in the transfer or alienation of assets of
the Company found by this Court was on account of absence of express
leave or permission of the BIFR. Further, the transferee not being
party to the proceedings before this Court, the matter was directed to
be considered after giving it hearing and opportunity. The present
Contempt Petitions were not dealt with and notices were directed to be
issued by a separate order passed on 13.11.2014.
12. Pursuant to such notices, the alleged contemnors filed their
responses as under:-
A. In his reply which was also on behalf of the Company, Shri
Shashikant Jha, Director submitted that Katihar property was
sold and transferred to alleged Contemnor No.14 on 04.04.2013
for consideration of Rs.3.55 crores, long before the filing of
the matter in this Court and passing of the Order of 08.05.2014.
It was submitted that the entire consideration was received by
the Company on 04.04.2013 by cheques and constructive possession
was also handed over to the purchaser on 16.04.2013. The reply
further stated:-
“The deed was presented for registration before the
Registrar on 16.04.2014. As per the Revenue Department, the
stamp duty payable was higher than affixed and accordingly, the
matter was pending adjudication. It is only thereafter, that
this Hon’ble Court had passed the interim Order dated 08.05.2014
restraining the Company from disposing off capital assets of the
Company without taking permission from the Hon’ble Court. By
this time, the property in question had for all practical
purposes already been transferred. Only, the ministerial act of
actual registration by the Authority concerned was remaining
which also was being pursued by the purchaser, it is submitted
that vide board resolution dated 06.02.2013 an authority had
been given by the Company to the alleged Contemnor No.7 herein
to sign and execute the sale deed. Subsequently, the alleged
contemnor No.7 had resigned from the directorship of the
Company. The alleged Contemnor No.7 was called upon by the
purchaser for getting the sale deed registered. Therefore, there
was no willful or deliberate violation of the interim Order
dated 08.05.2014 passed by this Hon’ble Court. ”
B. In his reply, alleged Contemnor No.2 Govind Sarda
submitted that he was not a party to the proceedings disposed of
by this Court vide Judgment dated 13.11.2014. It was denied that
the Company belonged to or was being managed by him or his son
or that Katihar property was sold away by him in conspiracy
with other contemnors. Similarly in his reply, alleged Contemnor
No.3 Aditya Sarda submitted that he was neither a shareholder
nor a director in the Company nor did he have any connection
with the management of the Company. It was denied that he along
with other contemnors, in conspiracy had sold away Katihar
property.
C. In his reply alleged Contemnor No.6 Rakesh Kr. Singhania
submitted that Katihar property was transferred well before the
Order of 08.05.2014. Alleged Contemnor No.8, D.P. Bhattar
another Director of the Company submitted on same lines. Alleged
Contemnor No.7 Shobhanand Jha who had executed the Deed on
behalf of the Company, submitted:-
“That the Respondent herein has not violated the Order
dated 8.5.2014 passed by this Hon’ble Court. In fact, he had
resigned as Director of JK Jute Mills Ltd. On 17.02.2014 because
of personal reasons and was subsequently, not in touch with the
Company. He was not aware of the Order dated 08.05.2014 passed
by this Hon’ble Court. The Respondent had been authorized by
the Board of Directors to execute the sale deed to be entered
into between the company and M/s Thapar Herbs & Spices (P) Ltd.
When he was a Director of the company. The sale deed was
executed on 03.04.2013 under the answering respondents signature
and the sale consideration was received by the company on
04.04.2013 itself. Symbolic possession of the property was also
handed over on 16.04.2013. The deed was presented for
registration by the buyer on 16.04.2013 but as the stamp duty as
assessed by the revenue authorities was on the higher side, the
registration of the deed did not take place. The buyer after
certain correspondences with the revenue authorities was able to
reduce the value of stamp duty payable on such registration. As
a considerable time of more than one year had elapsed, the buyer
had contacted the answering respondent to get a fresh deed
executed and to get the same registered. As the answering
respondent had been given the authority which was not revoked
till then the answering respondent on good faith executed the
fresh sale deed which was presented for registration and was
finally registered on 02.07.2014. As the answering respondent
had resigned from the Directorship of the company he was unaware
of any orders being passed in the meantime and was also not
served by a copy of the said order. In any event the entire
exercise of sale was completed in 2013 itself when the deed was
executed, payment received and possession handed over.”
In his supplementary affidavit Shobhanand Jha further submitted:-
“1. That on 02.07.2014 at the time of registration of the
conveyance deed I had produced the authorization being board
resolution of 06.02.2013 given in my favour by the Board of J K
Jute Mills Co. Ltd.
2. That although the sale deed of 2014 mentions my
designation as Director, it is a typographical error and which
has been carried forward from the earlier sale deed of April
2013 and nothing more. It was not my intention to show myself as
Director of JK Jute Mills Co. Ltd. at the time of registration
as I had resigned from the Board of Directors in February, 2014.
The only authorization in my favour was the one mentioned in
para 1 above. “
D. Alleged Contemnor No.10, Mohammad Istaba Husain, Senior
Deputy Collector, Gaya submitted that soon after receipt of the
letter dated 10.06.2014 sent by the Counsel for the appellant
along with copy of the order dated 08.05.2014 passed by this
Court, he had ensured that the same was sent to the concerned
Sub-Registrar to take necessary action as per Rules vide letter
dated 26.06.2014. However, despite such letter the Sale Deed
was registered on 02.07.2014 whereafter charges were framed
against District Sub-Registrar, Katihar and Circle Officer,
Katihar for disobeying the order passed by this Court on
08.05.2014. In his reply alleged Contemnor No.11, Sanjay Kumar
Gwalia, District Sub-Registrar, Katihar submitted that he was
not a party to the proceedings before this Court, that he was
bound to act under the provisions of the Registration Act in
connection with registration of documents. He further submitted
that in view of the prevalent opinion from the office of the
Advocate General, Bihar that the Registering Authorities, if not
parties to the proceedings, are bound to register documents
submitted for registration, he had sought opinion of the
Government Pleader on 30.06.2014. The opinion was thereafter
given by the Government Pleader, Katihar on 01.07.2014 that the
documents could be registered, whereafter the Sale Deed was
registered on 02.07.2014. Alleged Contemnor No.12, Rajendra
Singh, the then Circle Officer in his reply submitted that he
had caused mutation to be effected in pursuance of the
registration of document and mutation by itself did not confer
any title upon the transferee. Alleged Contemnor No.13, Pankaj
Kumar, Secretary Registration, Excise and Prohibition
Department, Government of Bihar denied having any connection
with the violation of the Order of 08.05.2014.
E. In their common reply, alleged Contemnor Nos.14 and 17
submitted that the transfer under the document dated 02.07.2014
was a bonafide purchase for consideration, that the property was
already in the possession of the transferee under a long term
lease and that the transferee had no knowledge about the Order
of 08.05.2014 nor was that order ever served upon the
transferee. It was denied that the transferee had any
connection with alleged Contemnor Nos.2 and 3. The replies
filed by alleged Contemnor Nos.15 and 16 were to the similar
effect denying knowledge about the Order of 08.05.2014.
13. The applicants filed their rejoinder affidavits to the replies filed
by all the alleged contemnors. As regards the reply of alleged Contemnor
No.17 Mrityunjay Kumar Singh, it was submitted that he was authorized
respresentative of the Company as well as Director in the transferee
company. Reliance was placed on the authority letter dated 17.06.2013
issued by the Company authorizing said alleged Contemnor No.17 to collect
certified copies of the orders from the office of the BIFR. It was
submitted that he being privy to the proceedings before the BIFR and being
aware of the Order of 08.05.2014, ought not to have registered the document
on 02.07.2014. In his subsequent affidavit dated 27.01.2016, alleged
Contemnor No.17 submitted that he directly worked under alleged Contemnor
Nos.2 and 3 and that he used to sign documents on their instructions. He
submitted as under:
“I wish to further state that I, under instructions from Mr.
Aditya Sarda, had visited Katihar twice. My first visit was in
the month of May, 2014 for 15 days and second time in the last
week of June 2014. The first time in May 2014 I was accompanied
by Mr. Sashi Kant Jha and second time in June 2014 with
Shobhanand Jha, both employees of Mr. Govind Sarda. In June
2014, on reaching Katihar I and Mr. Shobhanand Jha met by Shri.
Damodar Prasad Bhatter another employee of Mr. Govind Sarda and
Mr. Aditya Sarda. I stayed in Katihar for a week. During both
my visits I was told that I had to sign some documents; details
of which were not disclosed to me.
e. That on 02.07.2014, I and Mr. Sobhanand Jha signed certain
documents before the Registrar’s office on the instructions of
Mr. Aditya Sarda. I did not have any occasion to read the said
document nor was I aware of the contents of the said document
and the particulars of the property in respect of the sale deed
was signed by me. After putting the signature, photographs were
taken. Thereafter, I returned to Delhi and informed Mr. Aditya
Sarda that the papers had been signed.”
14. During the pendency of these contempt petitions, IA Nos.9 and 10 of
2016 were filed by the applicants inviting attention of the Court to
proceedings in Calcutta High Court, namely, Writ Petition No.5670(W) of
2016 filed by one Dinesh Sarda. It was submitted that said Dinesh Sarda
was a Chartered Accountant who used to work for alleged Contemnor Nos.2 and
3. Relying on certain documents filed in said writ petition, it was
submitted that alleged Contemnor Nos.2 and 3 were exercising control and
management over the transferee company and that the transaction in question
registered on 02.07.2014 was a device employed by them. It was further
submitted that these documents indicate the involvement of the said alleged
Contemnor Nos.2 and 3 and established that they were the key conspirators
on whose instructions the transaction was entered into and registered on
02.07.2014. Concerned parties including alleged Contemnor Nos.2 and 3
filed their responses to I.A. Nos.9 and 10 of 2016 and denied the
allegations.
15. We heard M/s Krishnan Venugopal, Amit S. Chadha and Sanjiv Sen,
learned Senior Advocates in support of these contempt petitions. We also
heard M/s Ram Jhethmalani, Vikas Singh, V. Giri, Nidesh Gupta, Jayant
Bhushan, learned Senior Advocates and Mr. Braj K. Mishra, learned Advocate
who appeared on behalf of alleged contemnors. We have gone through the
record and considered the rival submissions.
16. The first question that arises is whether any alienation or transfer
was effected after the Order of 08.05.2014.The submission of the alleged
contemnors is that the conveyance deed was executed on 04.04.2013 on which
date the entire consideration stood paid by the transferee and was
credited to the account of the Company and as such the title passed in
favour of the transferee well before the Order of 08.05.2014 and what was
done on 02.07.2014 was a mere ministerial act. According to the alleged
contemnors, the documents presented for registration in April 2013 were not
accepted for want of adequate stamp and registration fees. This infirmity
was removed and the documents were then presented for registration. In such
circumstances the order of 08.05.2014 was not in any way violated by them.
17. The Order of 08.05.2014 had directed “….capital assets of the company
shall not be disposed of without taking permission of this Court”. The
expression “shall not be disposed” in the context connotes action or
process of sale of assets. Going by Section 54 of the Transfer of Property
Act, 1882, transfer of any tangible immovable property of the value of
Rupees hundred and upwards can be made only by a registered instrument.
The expression ‘only’ in the Section is significant. The transfer comes
into effect and becomes valid and effective only by a registered
instrument. It is true that the document was sought to be registered in
April, 2013 but the registration in question was duly effected only on
02.07.2014. In the eyes of law, it is this document registered on
02.07.2014 which alone effectuates transfer of interest in Katihar
property in favour of the transferee. The transfer was thus effected on
02.07.2014 i.e. well after the Order of 08.05.2014. In Suraj Lamp &
Industries Pvt. Ltd. v State of Haryana and another[2], this Court had
observed as under:
“19. Any contract of sale (agreement to sell) which is not a
registered deed of conveyance (deed of sale) would fall short of
the requirements of Sections 54 and 55 of the TP Act and will
not confer any title nor transfer any interest in an immovable
property (except to the limited right granted under Section 53-A
of the TP Act). According to the TP Act, an agreement of sale,
whether with possession or without possession, is not a
conveyance. Section 54 of the TP Act enacts that sale of
immovable property can be made only by a registered instrument
and an agreement of sale does not create any interest or charge
on its subject-matter.”
18. The document dated 04.04.2013 did not by itself create any interest
nor did the title pass upon execution of such document on 04.04.2013 but it
was only after the registration on 02.07.2014 that the title in Katihar
property passed from the Company in favour of the transferee. The
submission of the contemnors however, is that by virtue of Section 47 of
the Registration Act, the document in question would operate from
04.04.2013. In our view, the principle embodied in Section 47 of the
Registration Act is completely for different purposes. In so far as the
issue of transfer is concerned, Section 54 of the Transfer of Property Act
is the governing principle, which is quite clear. It is the date of
registration of document which is crucial inasmuch as the transfer is
effected and the title passes only upon registration. Viewed thus, it is
clear that Katihar property was transferred in the teeth of the Order of
08.05.2014 and ex facie there has been violation of the Order passed by
this Court. It is crucial to note that on 08.05.2014, the company had
appeared on caveat before this Court and certainly had express knowledge
about the Order of 08.05.2014. It was party to the proceedings and was
bound by the order passed by this Court in every respect.
19. The submission on part of alleged Contemnor Nos.1,4,5,6,7 and 8
namely the Company and its directors/servants is that the document was
executed by alleged Contemnor No.7 Sobhanand Jha in pursuance of the
authority given to him by the Company way back on 06.02.2013. As on
06.02.2013, the company was definitely a sick company and the Reference
was pending before the BIFR. Around that time the ASC was constituted
which was considering sale of assets including Katihar property. It was
only after the Auditors’ report dated 15.02.2013 that the Company started
projecting that its net worth had become positive on which account it
ceased to be governed under the provisions of the Act and was outside the
jurisdiction of the BIFR. Though this Court rejected such submission in
its judgment dated 13.11.2014, at this stage we are considering the
bonafides and tenability of the assertions made by the alleged contemnors.
There could not have been any occasion for the Company before 19.02.2013,
even accepting the submission that it ceased to be a sick company as
alleged, to enable the Company to execute an authority on 06.02.2013 in
favour of alleged Contemnor No.7. That authorization is wholly defective
and unsustainable. It is not the case of the alleged contemnors that after
the adoption of the Auditors’ Report and Directors’ Report dated 19.02.2013
a decision was taken by the Company to sell or dispose of its Katihar
property in pursuance of which due authorization was given to a competent
person to execute the documents on behalf of the Company.
20. Further, the facts on record disclose that said Sobhanand Jha changed
his name to R.S. Prabhakar on and with effect from 18.03.2013. However,
the document mentioned his name as Sobhanand Jha which he signed as
Sobhanand Jha on 04.04.2013. He tendered his resignation on 17.02.2014 as
R.S. Prabhakar. Despite such resignation, he thereafter executed the
document on 02.07.2014 in the name of Sobhanand Jha and signed as Sobhanand
Jha. In any event of the matter as on 02.07.2014, the person was not a
Director of the Company. He submitted that the Company had given him an
authority way back on 06.02.2013 pursuant to which the document was
executed on 04.04.2013 on which date the sale for all practical purposes
stood completed and what remained was only a ministerial act which was done
by him independently of the Company on 02.07.2014. It is on the basis of
this submission that the Company as well as its Directors/servants namely
alleged Contemnor Nos.4, 5, 6 and 8 seek to wriggle themselves out of any
liability for violation of Order of 08.05.2014. If the order was passed
on 08.05.2014 restraining any alienation of the capital assets of the
Company, the Directors/servants of the company ought to have taken steps to
inform alleged Contemnor No.7 to refrain from registering the document on
02.07.2014. Neither such steps were taken nor was the Court informed on
08.05.2014 about the document executed on 04.04.2013, in which event this
Court could have passed appropriate Orders including restraint on
registration. Similarly, if Sobhanand Jha, alleged Contemnor No.7 had
resigned on 17.02.2014, he had no authority to register the document on
behalf of the Company. In our view, the entire exercise was a clever
device employed by the Company and its Directors, in that, first an
authority in favour of a Director was created who then resigned as Director
but continued to register the document on the basis of erstwhile
authorization and at the same time the person having resigned could claim
lack of knowledge of the Order of restraint passed by this Court. Their
actions were deliberate and designed to flout the Order of 08.05.2014.The
involvement of alleged Contemnor Nos.1,4,5,6,7 and 8 in the transfer the
assets of the Company in the teeth of the Order of 08.05.2014 is thus
apparent and clear.
21. We now turn to the involvement of those officials concerned with
registration, who went ahead and registered the document on 02.07.2014
despite having been put to notice and served with a copy of the Order
of 08.05.2014. Our attention has been invited to the opinion rendered
by the office of the Advocate General, Bihar to the effect that even
if there be any order passed by a civil court in connection with a
private dispute between the parties, the registering authorities are
bound to register a document presented for registration. This opinion
was relied upon by the Government Advocate who then opined that the
document in the present case could be registered. The request was
allegedly made on 30.06.2014 and the opinion of the Government
Advocate was promptly given on 01.07.2014. There is no register
maintained diarizing the inward and outward letters and prima facie
the entire theory appears to be suspicious and designed to confer a
favour. However, since these are government servants, we grant them
benefit of doubt and would only caution them. It is shocking that an
order passed by this Court, in the face of the provisions of Article
142 of the Constitution, could be ignored or disregarded by the
officials who went ahead and registered the document. However, we do
not find sufficient grounds to invoke our Contempt Jurisdiction to
punish them for violation of the Order of 08.05.2014.
22. We now turn to the involvement of alleged Contemnor Nos.14, 15
and 16 who are the transferee Company and its Directors/servants.
These alleged contemnors were neither parties to the proceedings
pending in this Court in which Order of 08.05.2014 was passed nor is
there any material to indicate that such order was ever served on them
or brought to the notice of these alleged contemnors. The role played
by alleged Contemnor No.17, however, stands on a different footing.
The documents on record do show that he used to represent the Company
and was also given authority to collect documents on behalf of the
Company from the office of the BIFR. Further, on his own showing, he
had gone ahead and registered the document not on the asking of the
transferee. He had gone along with the Directors of the Company and
on the directions of alleged Contemnor No.3. The knowledge about the
passing of Order of 08.05.2014 to the Company and its Directors having
been established, there is room for suspecting the involvement of
alleged Contemnor No.17. But mere suspicion may not be enough and we
give him benefit of doubt. Thus, none of the alleged Contemnor Nos.14
to 17 have been proved to be guilty of violation of Order of
08.05.2014.
23. As regards the involvement of alleged Contemnor Nos.2 and 3,
they were neither Directors nor Shareholders of the Company nor has it
been shown that they have any stake or interest in the Transferee
Company. It is undoubtedly true that alleged Contemnor No.17 in his
affidavit stated that he used to work under the directions of alleged
Contemnor Nos.2 and 3 and that the registration of the document on
02.07.2014 was done under the express directions and alleged Contemnor
No.3. However, such a statement coming from a co-contemnor, in our
view, is not sufficient to reach a conclusion about the involvement of
alleged Contemnor No.3. Further, the documents pertaining to Writ
Petition No.5670 (W) of 2016 pending in Calcutta High Court as well as
the affidavit filed by Dinesh Sarda are also not conclusive enough.
The criticism that such documents and the affidavit of Dinesh Sarda
are conveniently brought on record, would also require assessment of
facts. Thus, though there is room to suspect the involvement of said
Contemnor Nos.2 and 3, the material on record is not conclusive enough
to hold them guilty of violation of Order of 08.05.2015. We,
therefore, close these proceedings as against them.
24. We now come to the crucial question as to the effect of transfer
or alienation of Katihar property in violation of the Order of
08.05.2014. The law on the point is well settled in the decision of
this Court in D.D.A. v. Skipper Construction Co. (P) Ltd.[3] that
legal consequences of what has been done in breach of or in violation
of the order of stay or injunction can be undone and the parties could
be put back to the same position as they stood immediately prior to
such order of stay or injunction. Paragraphs 18 to 21 of the decision
in D.D.A. v. Skipper Construction Co. (P) Ltd. (supra) are quite
instructive and are:-
“18. The above principle has been applied even in the case of
violation of orders of injunction issued by civil courts. In
Clarke v. Chadbur (1985)1 All ER 211 Sir Robert Megarry V-C
observed:
“I need not cite authority for the proposition that it is of
high importance that orders of the court should be obeyed.
Wilful disobedience to an order of the court is punishable as a
contempt of court, and I feel no doubt that such disobedience
may properly be described as being illegal. If by such
disobedience the persons enjoined claim that they have validly
effected some charge in the rights and liabilities of others, I
cannot see why it should be said that although they are liable
to penalties for contempt of court for doing what they did,
nevertheless those acts were validly done. Of course, if an act
is done, it is not undone merely by pointing out that it was
done in breach of the law. If a meeting is held in breach of an
injunction, it cannot be said that the meeting has not been
held. But the legal consequences of what has been done in breach
of the law may plainly be very much affected by the illegality.
It seems to me on principle that those who defy a prohibition
ought not to be able to claim that the fruits of their defiance
are good, and not tainted by the illegality that produced them.”
19. To the same effect are the decisions of the Madras and
Calcutta High Courts in Century Flour Mills Ltd. v. S. Suppiah
(AIR 1975 Mad270) and Sujit Pal v. Prabir Kumar Sun (AIR 1986
Cal 220). In Century Flour Mills Ltd.(supra) it was held by a
Full Bench of the Madras High Court that where an act is done in
violation of an order of stay or injunction, it is the duty of
the court, as a policy, to set the wrong right and not allow the
perpetuation of the wrongdoing. The inherent power of the court,
it was held, is not only available in such a case, but it is
bound to exercise it to undo the wrong in the interest of
justice. That was a case where a meeting was held contrary to an
order of injunction. The Court refused to recognise that the
holding of the meeting is a legal one. It put back the parties
in the same position as they stood immediately prior to the
service of the interim order.
20. In Sujit Pal(supra) a Division Bench of the Calcutta High
Court has taken the same view. There, the defendant forcibly
dispossessed the plaintiff in violation of the order of
injunction and took possession of the property. The Court
directed the restoration of possession to the plaintiff with the
aid of police. The Court observed that no technicality can
prevent the court from doing justice in exercise of its inherent
powers. It held that the object of Rule 2-A of Order 39 will be
fulfilled only where such mandatory direction is given for
restoration of possession to the aggrieved party. This was
necessary, it observed, to prevent the abuse of process of law.
21. There is no doubt that this salutary rule has to be
applied and given effect to by this Court, if necessary, by
overruling any procedural or other technical objections. Article
129 is a constitutional power and when exercised in tandem with
Article 142, all such objections should give way. The court must
ensure full justice between the parties before it.”
25. In the present case the Company and its Directors/servants were
certainly guilty of transgressing or violating the Order of 08.05.2014
but as found hereinabove, the transferee and its Directors/servants
have not violated the Order of 08.05.2014. The transferee and its
Directors/servants were neither parties to the proceedings nor were
they served with the Order of 08.05.2014. In para 38 of the judgment
of this Court dated 13.11.2014, this Court had found the transfer in
favour of the transferee to be questionable and had relegated the
matter to the BIFR to consider the matter in the light of directions
contained in said para 38. In the circumstances, no further orders
are called for invalidating the registration dated 02.07.2014.
Further, according to the record the transferee had parted with full
consideration way back on 04.04.2013. In the totality of these
circumstances we do not think it appropriate to exercise our power to
invalidate the effect of registration of the document on 02.07.2014.
26. We thus find the Company and its Directors/servants namely
alleged Contemnor Nos.1, 4, 5, 6, 7 and 8 guilty of having violated
the Order of 08.05.2014. In our view, ends of justice would be met if
fine is imposed on the Contemnors. We impose fine of Rs.2,000/- on
the Company. Further, fine of Rs.2,000/- each is imposed on Contemnor
Nos.4, 5, 6, 7 and 8. Fine shall be deposited with the Registry of
this Court within four weeks from today. In case of failure by
Contemnor Nos.4, 5, 6, 7 and 8 to deposit the amount of fine within
the time stipulated, they shall undergo sentence of simple
imprisonment for one month.
27. With these observations, we close Contempt Petition Nos.338 of
2014 and 375 of 2014 and the same stand disposed of.
28. In Contempt Petition Nos.24-25 of 2015 it is submitted that the
contemnors have obstructed the implementation of the judgment dated
13.11.2014 passed by this Court. The acts alleged are in the nature
of legal proceedings initiated by the contemnors and as such we do not
find any reason to invoke our contempt jurisdiction. Said Contempt
Petition Nos.24-25 of 2015 thus stand dismissed.
29. In Contempt Petition No.307 of 2015 it is alleged that the
direction issued by this Court in paragraph No.33 of its Judgment
dated 13.11.2014 has not been complied with by the contemnors. Since
no notice as regards this Contempt Petition was issued to the
contemnors we issue notice to the contemnors returnable in six weeks.
The matter shall be placed before the appropriate Bench.
………………………….J.
(Anil R. Dave)
..……………………….J.
(Uday Umesh Lalit)
New Delhi,
November 18, 2016
-----------------------
[1] (2015) 1 SCC 298
[2] 2012 1 SCC 656
[3] (1996) 4 SCC 622
