REPORTABLE
SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NOS. 4298-4299 OF 2017
(Arising out of S.L.P.(Civil) Nos.25733-25734/2015)
BARANAGORE JUTE FACTORY PLC.
MAZDOOR SANGH (BMS) ETC. ... APPELLANT (S)
VERSUS
BARANAGORE JUTE FACTORY PLC. ETC. ... RESPONDENT (S)
WITH
CIVIL APPEAL NOS. 4302-4305 OF 2017
(Arising out of S.L.P.(Civil) Nos.28212-28215/2015)
AND
CIVIL APPEAL NOS. 4306-4308 OF 2017
(Arising out of S.L.P.(Civil) Nos.28198-28200/2015)
J U D G M E N T
KURIAN, J.:
Leave granted.
The appellants are the petitioners/applicants before the learned Single
Judge in an application filed by them for taking appropriate action against
the respondents herein for violating the order dated 23.02.2011. According
to the appellants, the entire money paid by the National Highway Authority
of India (‘NHAI’ for short) on account of acquisition of the company’s
land, should have been deposited with the High Court, in the true spirit of
the order dated 23.02.2011. To the extent relevant, for the purpose of the
present case, it may be noted that of the total amount due to the company,
the NHAI issued a cheque for an amount of Rs.94.16 crores approximately in
favour of the Registrar of the High Court after deducting an amount of
Rs.10,55,60,331/- by way of tax deducted at source (‘TDS’ for short).
Thereafter, the company filed its income-tax return for the assessment year
2013-2014 and claimed and received refund of the entire amount covered by
the TDS, after deducting the tax. According to the respondents, the amount
was utilised for various purposes in connection with the affairs of the
company. It is the stand of the respondents that the direction to deposit
the amount with the High Court was given to the NHAI, and in having
claimed, received and utilised the refund received from the Income-Tax
Department, there is no violation of the order dated 23.02.2011.
Learned Single Judge was prima facie of the opinion that there was
deliberate violation of the order dated 23.02.2011, and therefore, issued
Rule to the respondents, returnable in six weeks, vide order dated
26.06.2015. There was also a direction that the respondents shall not
operate the bank accounts of the company without securing the afore-
mentioned amount of Rs.10,55,60,331/-.
Aggrieved, the respondents took up the matter in appeal before the Division
Bench leading to the impugned order.
The Division Bench, in the impugned order, took the view that the learned
Single Judge should not have passed an order affecting the operation of
bank accounts, and therefore, to that extent, the order of the learned
Single Judge was vacated. And thus aggrieved, the appellants are before
this Court.
It may specifically be noted that the Division Bench has not interfered
with the Rule issued to the respondents in the proceedings initiated under
The Contempt of Courts Act, 1971 (hereinafter referred to as ‘the Act’) for
the alleged violation of the order dated 23.02.2011. The Division Bench
only vacated the order regarding operation of the bank accounts of the
company without securing the amount of rupees ten crores and odd. To quote
from the impugned order:
“The order under appeal cannot, in our view, be sustained to the extent
that the appellants have been restrained from operating their bank accounts
without setting apart ten crores and odd. The two appeals and the connected
stay applications are disposed of.”
(Emphasis supplied)
Still further, the Division Bench also clarified that:
“Having regard to the urgency and considering the fact that the contempt
proceedings and the company applications are pending before the learned
Single Bench, we have not issued any direction for affidavits.”
Thus, the limited question before us is whether the Division Bench was
justified in interfering with the order passed by the learned Single Judge
for securing the amount received by the respondents by way of refund from
the Income-Tax Department.
In order to appreciate the above question, it is necessary to refer to the
background under which the relevant orders have been passed by the learned
Single Judge.
The most relevant amongst the orders is the one dated 23.02.2011 passed by
the learned Single Judge, which is one alleged to have been violated by the
respondents. The text of the order reads as follows:
“The Court: Mr. S.N. Mitra, learned senior Advocate appearing for the
Baranagore Jute Factory PLC Mazdoor Sangh (BMS), the applicant in CA 906 of
2010 submitted that a portion of the vacant land of the company in
liquidation has been acquired by the National Highway Authority of India
and on account of compensation huge amounts are likely to be paid to the
company in liquidation. He submitted that considering the conflicting
claims made by various persons who are either in management or who are
seeking to take over management in liquidation the money likely to come may
not be safe. Therefore, he submitted that the money should be adequately
protected.
Mr. Sen, learned Senior Advocate appearing for Chaitan Chowdhury and
Ridh Karan Rakeeha submitted that the submission made by Mr. S.N. Mitra is
a reasonable one.
Mr. Anindya Kumar Mitra, learned Senior Advocate appearing for
Damodar Prasad Bhattar, Sunil Toshniwal, S.Jha & Ors, submitted that there
is no objection to the money being protected but he submitted that his
clients are presently running the management of the company in liquidation
and therefore his clients should be permitted to receive the compensation
and to keep the same in fixed deposit subject to further order of Court.
Mr. Subhranshu Ganguly, learned Advocate representing Yashdeep Trexim
Pvt. Ltd. supported the submission of Mr. S.N. Mitra.
Ms. Manju Agarwal, learned Advocate, appearing for some of the
creditors of the company in liquidation also supported the contention of
Mr. S.N. Mitra.
Mr. D.K. Singh, learned Advocate appearing for the Official
Liquidator submitted that pursuant to earlier orders passed by the Apex
Court it is, only proper that the money should be deposited with the
Registrar, Original Side.
Mr. Niloy Sengupta, learned Advocate appearing for Krishna Kumar
Kapadia, who, according to him, holds controlling block of shares in the
company submitted that the submission of Mr. S.N. Mitra should be accepted.
Considering the submissions made by the learned Advocates appearing
for the parties I am of the opinion that the submission made on behalf of
the Official Liquidator is also in conformity with the submission made by
Mr. S.N. Mitra which has largest support of the parties appearing before
me.
In that view of the matter, National Highway Authority of India is
restrained from making any payment on account of compensation to the
company in liquidation except by way of an account payee cheque to the
Registrar, Original Side. The Registrar, Original Side upon receipt of such
payment shall keep the same in a short term fixed deposit subject to
further order of Court with the SBI Main Branch. Upon receipt of the money,
he shall keep the parties informed about it.
It is clarified that I have referred to the company as a company in
liquidation because there is already a winding up order passed by this
Court. Fuller effect of that order is yet to be examined.
xxxx xxxx xxxx”
(Emphasis supplied)
After the deposit of the amount of around Rs.95 crores, as paid by the
NHAI, in terms of the said order, several attempts have been made by the
respondents herein for withdrawal of the said amounts purportedly for
meeting some of the liabilities of the company. We shall refer to only one
order passed by this Court on 12.03.2015 wherein this Court, at paragraph-
4, has taken note of the order passed by the Division Bench of the High
Court dated 14.08.2014. To the extent relevant, paragraphs-4, 6, and 7 of
the order dated 12.03.2015 passed by this Court in Civil Appeal Nos. 2814-
2815 of 2015, read as follows:
“4. The Division bench while affirming the order passed by the Company
Judge observed as under:-
“Considering the amount of deposit which the appellants want to withdraw,
and the company’s indebtness to its various creditors and the quantum of
its liability, coupled with the facts that even the workers have not been
paid their dues, we do not feel it safe to allow a particular group of
shareholders, who are described as interloper by the creditors, to withdraw
the money deposited with the Registrar, Original Side of this Court without
deciding the said issue finally particularly when we find that the
appellant/applicant themselves have filed an application being C.A. No.957
of 2010 praying for permanent stay of the company petition No.2 of 1987
which is yet to be decided finally. In the aforesaid context, we do not
find any illegality in the impugned order passed by the learned Company
Court proposing to dispose of all the pending applications simultaneously.”
xxxx xxxx xxxx
6. It has been brought to our notice that the impugned order dated
14.8.2014 was earlier challenged in SLP (C) No.29330 of 2014 (@ SLP CC
No.16278/2014). The said Special Leave Petition was dismissed as withdrawn
on 27.10.2014 by passing the following order.
“Mr. Ajit Kumar Sinha, learned senior counsel appearing for the petitioner,
seeks permission to withdraw this petition with a liberty to move the
Company Judge to dispose of the pending matters as expeditiously as
possible. Therefore, in view of the fair submission made by the learned
senior counsel, we dismiss this special leave petition as withdrawn with a
request to the Company Judge to dispose of the pending matters as
expeditiously as possible preferably within a period of three months from
today.”
7. In the facts and circumstances of the case, we are of the opinion
that the Company Judge before whom all applications are pending should
dispose of the same as expeditiously as possible within a period of two
months from today.”
(Emphasis supplied)
Thus, it may be noted that this Court declined to interfere with the order
passed by the Division Bench of the High Court, which in turn refused the
prayer for withdrawal of the deposit lying with the Court.
Despite the above background, the respondents received cheque dated
13.06.2014 by way of Income-Tax refund to the tune of Rs.10,21,28,520/-
after conceding the tax for Rs.34,31,807/- from the total TDS of
Rs.10,55,60,331/- and utilised the same for various purposes without any
clarification or permission from the company court which passed the order
dated 23.02.2011 regarding the deposit of the entire money paid by the NHAI
towards compensation for the acquired land. This conduct, according to the
learned Single Judge, prima facie, was in violation of the order dated
23.02.2011, and hence, the Rule with a further direction to secure the
entire TDS amount. Thus, the learned Single Judge, after referring to the
order dated 23.02.2011, passed the following order on 26.06.2015. To the
extent relevant, the order reads as follows:
“... Pursuant to the aforesaid order, the National Highway Authority issued
a cheque of Rs.94.16 crores approximately in favour of the Registrar,
Original Side of this Court. The National Highway Authority had issued the
aforesaid cheque after deducting a sum of Rs.10,55,60,331/- on account of
tax deducted at source. Such payment appears to have been received by the
Registrar, Original Side of this Court on or about November, 2012. The
fixed deposit was made by the Registrar, Original Side on 9th November,
2012, that is to say, during the financial year 2012-13 corresponding to
assessment year 2013-14. In the return filed on behalf of the company for
the assessment year 2013-14, a claim for refund was made on the basis of
the aforesaid deposit made by the National Highway Authority on account of
the tax deducted at source as would appear from page 101 of the
application. It appears that the claim for refund was met by the Income Tax
Authority by issuing a cheque on 13th June, 2014 as would appear from page
102 of the application. There is, as such, clear evidence of the fact that
the alleged contemnors received the refund in violation of the order dated
23rd February, 2011. Assuming that receipt of the cheque on account of
refund of income tax was in the usual course of business, there can be no
gainsaying that the cheque should not have been encashed without leave of
Court. From Annexure-E to the application appearing at page 102, it appears
that a cheque dated 13th June, 2014 was received on account of refund and
has also been encashed. Such encashment of the cheque on account of refund
which has its origin in the amount paid by the National Highway Authority
was in the teeth of the order dated 23rd February, 2011.
I am, therefore, prima facie of the opinion that there has been a
deliberate violation of the order passed by this court.
It appears from the return appearing at page 101 that a sum of
Rs.34,31,807/- was payable on account of tax by the company. After
deducting the aforesaid sum from the amount of Rs.10,55,60,331/-, the
balance sum of Rs.10,21,28,520/- was claimed by way of refund. The
liability on account of income tax is payable by the present management
from their own resource and for that any part of the money received from
the National Highway Authority could not be used. Therefore, the alleged
contemnors, managing the affairs of the company, in liquidation, appear to
have appropriated the aforesaid sum of Rs.10,55,60,331/- which was
deposited by way of tax deducted at source with the Income Tax Department
by the National Highway Authority.
For the aforesaid reasons, issue Rule against the alleged contemnor Nos. 1
to 6. Returnable six weeks hence.
Since the company, in liquidation, through the machination of the alleged
contemnors, has been enriched by the aforesaid sum and in order to preserve
the aforesaid sum the alleged contemnors are restrained from operating the
bank account/accounts of the company without setting aside the aforesaid
sum of Rs.10,55,60,331/-. …”
(Emphasis supplied)
The above order was the subject matter of challenge before the Division
Bench, leading to the impugned order.
The Division Bench, as we have already referred to above, was not happy
with the order regarding restriction on operation of the bank account
without securing the TDS amount. To the extent relevant, the consideration
in the impugned order reads as follows:
“… With the greatest respect we are of the view that the learned Court
should perhaps have given the appellants an opportunity to explain and
should perhaps also have ascertained what was the balance in the accounts
maintained by the company before passing an order which has in effect and
substance restrained the company from operating its accounts.
It is not in dispute that the turnover of the company is in crores. This
was the submission made on behalf of the respondents as well. A Company
with such turnover cannot possibly carry on its business without operating
any bank accounts at all. The livelihood of 4000 workers employed by the
company is involved. We are not concerned with whether the present
management will continue or not; we are also not concerned with whether the
management is managing the affairs of the company well or mismanaging the
company. These are matters which will be decided in the appropriate
proceedings at the appropriate stage. It is however reiterated, at the cost
of repetition that there was no specific order against the Company
restraining the Company from encashing cheques towards Income Tax refund,
or from utilising the same.
The order under appeal cannot, in our view, be sustained to the extent
that the appellants have been restrained from operating their bank accounts
without setting apart ten crores and odd. The two appeals and
the connected stay applications are disposed of.”
(Emphasis supplied)
As we have already clarified, the Division Bench, in the impugned order,
has not interfered with the Rule issued in the contempt proceedings. The
interference is only to the extent of direction to secure the TDS amount
Rs.10,55,60,331/-.
Though Shri Shyam Divan, learned Senior Counsel invited our attention to
the judgment of this Court in Sudhir Vasudeva, Chairman and Managing
Director, Oil and Natural Gas Corporation Limited and others v. M. George
Ravishekaran and others[1], and contended that the courts must not travel
beyond the four corners of the order which is alleged to have been flouted,
in the background which we have explained above, we find it difficult to
appreciate the submission. This Court, in the judgment referred to above,
in paragraph-19, has clarified that the directions which are explicit in
the judgment or “are plainly self-evident” can be taken into account for
the purpose of consideration as to whether there has been any disobedience
or wilful violation of the same. Prima facie, we are of the view that
learned Single Judge has taken note only of the plainly self-evident facts
while issuing the Rule and order regarding securing the amounts which the
respondents received by way of refund from the Income-Tax Department and
utilized.
It may be seen that the order dated 23.02.2011 regarding the deposit in
court was passed to secure the entire compensation from the NHAI. The court
was concerned about the money to be received from the NHAI towards the
compensation and appropriately protecting the same from being used by the
company. Even the respondents herein had “... no objection to money being
protected...”. The court had, in fact, declined the request made by the
respondents ... “to receive the compensation and to keep the same in fixed
deposit subject to further orders of the court”. The Official Liquidator
was of the view that ... “the money should be deposited with the Registrar,
Original Side”.
After considering the submissions of the learned Counsel appearing for the
parties, the learned Single Judge, formed the opinion that ... “the
submission made on behalf of the Official Liquidator is also in conformity
with the submission made by Mr. S.N. Mitra, who has largest support of the
parties before me (the court)”. Hence, the learned Single Judge made it
clear that “In that view of the matter, the National Highway Authority was
restrained from making any payment on account of compensation to the
company in liquidation except by way of an account payee cheque to the
Registrar, Original Side of the High Court”. Therefore, it is fairly clear
that the court had in mind the entire compensation paid by the NHAI in
respect of the land acquired by them. Since the NHAI was bound to deduct
TDS, an amount of Rs.10,55,60,331/- was paid to the Income-Tax Department.
There can be no doubt whatsoever that the said amount formed part of the
compensation. What the court in its order dated 23.02.2011 was requested
and the court intended too was to protect the compensation amount. Merely
because it goes through the Income-Tax Department, the same does not cease
to be part of compensation. Even the respondents herein had submitted
before the court at the time of passing the order dated 23.02.2011 that the
compensation amount needed to be protected and they were willing to protect
it subject to the order of the court. Therefore, the respondents, while
handling of the compensation amount, had to seek orders from the court;
going by the way they understood the proceedings.
In that background of the case, we are of the view that the respondents
should not have appropriated the refund they received from the Income-Tax
Department. There is nothing wrong in claiming the refund. The problem is
in utilising the refund received. The refund they received is actually the
compensation in respect of the land acquired from the company and it is
that amount which the court wanted to protect by its order dated
23.02.2011. Hence, prima facie, we are of the view that the appropriation
made by the respondents of the refund amount they received from the Income-
Tax Department was in violation of the order dated 23.02.2011. It appears,
for that reason only, even the Division Bench declined to disturb the Rule
in the contempt proceedings issued against respondents. However, the
Division Bench is wholly wrong in entering a finding that there is no
violation of the order dated 23.02.2011 in utilising the refund. No doubt,
had the refund and subsequent appropriation been of any amount other than
the compensation, there would not have been any contempt at all.
Unfortunately, the Division Bench, in the impugned order, failed to
recapitulate the background of the order dated 23.02.2011 and its own
earlier orders with regard to the refusal for withdrawal by the respondents
of the compensation deposited in court. Even if there be pressing needs,
there could not have been any utilisation of the compensation amount
without leave of the court. We find that the Division Bench has taken note
of the expenditure made by the respondents of the amount they received. To
quote the relevant background:
“We have also looked into the details of utilisation of the refund as given
in the schedule being Annexure ‘L’ to the stay application filed before us,
wherefrom it appears that Rs.1,19,18,723/- was paid towards arrear
electricity charges by three account payee cheques drawn on Axis Bank Ltd.,
particulars whereof have been given in the schedule. Another
Rs.2,23,00,000/- has been kept in fixed deposit as lien for issuance of
bank guarantee favouring CESC Ltd., against the security deposit to be paid
to CESC Ltd., for continuation of supply of electricity. This payment has
been made by cheque dated 28th June, 2014 and also by transfer from
Syndicate Bank on 28th June, 2014. A sum of Rs.24,92,582/- has been paid
towards arrear Central Sales Tax [Partial Payment]; Rs.34,56,910/- towards
Employees State Insurance contribution; Rs.44,44,044/- towards Provident
Fund contribution; Rs.66,00,000/- towards arrear dues of Jute Corporation,
a government body and Rs.4,68,85,198/- towards arrear wages, arrear ex
gratia payment, arrear gratuity and other arrear dues of the workmen.”
It is also seen from the order that the Division Bench had taken note of
the paltry balance in the accounts of the company as on 27.06.2015. To
quote:
“We directed the company to furnish us with details of its bank operations.
It appears that the company has about twelve bank accounts in operation in
India and the combined balance in all these accounts taken together as on
27th June, 2015 was Rs.13,96,188.79P. Our attention has been drawn by Mr.
Mookherjee to the fact that there are three other bank accounts with
combined balance of not more than Rs.3,44,436/- which have not been used
for over seven years and the company also has a bank account outside India
that has a balance of 936 pounds [less than Rs.1,00,000/- in value in
Indian currency].”
It may be seen that the respondents have been managing the affairs of the
company for a few years despite the futile attempts made by them to
withdraw the compensation lying in deposit in court.
As held by this Court in Delhi Development Authority v. Skipper
Construction Co. (P) Ltd. and another[2], and going a step further, the
Court has a duty to issue appropriate directions for remedying or
rectifying the things done in violation of the orders. In that regard, the
Court may even take restitutive measures at any stage of the proceedings.
In the background as above of the case, the Division Bench should not have
interfered with the order dated 26.06.2015 passed by the learned Single
Judge. However, taking note of the fact, an amount of Rs.2,23,00,000/- has
been kept in fixed deposit towards lien for issuance of bank guarantee, we
make it clear that the respondents shall not operate the bank accounts of
the company after 03.04.2017 without securing an amount of Rs.8,32,60,331/-
. We also make it clear that without leave of the High Court, the fixed
deposit of Rs.2,23,00,000/- with the Axis Bank shall not be withdrawn.
However, it would be open to the respondents to apply for appropriate
clarification or modification of the order dated 26.06.2015, after making
the deposit as above and it will be open to the learned Single Judge to
pass the appropriate orders on merits of the application.
We make it clear that any observations made by us are only for the purpose
of this order and shall not have any bearing on the consideration by the
learned Single Judge in the contempt proceedings.
The appeals are allowed as above. There shall be no order as to costs.
.......................J.
(KURIAN JOSEPH)
.......................J.
(R. BANUMATHI)
NEW DELHI;
MARCH 21, 2017.
-----------------------
[1] (2014) 3 SCC 373
[2] (1996) 4 SCC 622
SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NOS. 4298-4299 OF 2017
(Arising out of S.L.P.(Civil) Nos.25733-25734/2015)
BARANAGORE JUTE FACTORY PLC.
MAZDOOR SANGH (BMS) ETC. ... APPELLANT (S)
VERSUS
BARANAGORE JUTE FACTORY PLC. ETC. ... RESPONDENT (S)
WITH
CIVIL APPEAL NOS. 4302-4305 OF 2017
(Arising out of S.L.P.(Civil) Nos.28212-28215/2015)
AND
CIVIL APPEAL NOS. 4306-4308 OF 2017
(Arising out of S.L.P.(Civil) Nos.28198-28200/2015)
J U D G M E N T
KURIAN, J.:
Leave granted.
The appellants are the petitioners/applicants before the learned Single
Judge in an application filed by them for taking appropriate action against
the respondents herein for violating the order dated 23.02.2011. According
to the appellants, the entire money paid by the National Highway Authority
of India (‘NHAI’ for short) on account of acquisition of the company’s
land, should have been deposited with the High Court, in the true spirit of
the order dated 23.02.2011. To the extent relevant, for the purpose of the
present case, it may be noted that of the total amount due to the company,
the NHAI issued a cheque for an amount of Rs.94.16 crores approximately in
favour of the Registrar of the High Court after deducting an amount of
Rs.10,55,60,331/- by way of tax deducted at source (‘TDS’ for short).
Thereafter, the company filed its income-tax return for the assessment year
2013-2014 and claimed and received refund of the entire amount covered by
the TDS, after deducting the tax. According to the respondents, the amount
was utilised for various purposes in connection with the affairs of the
company. It is the stand of the respondents that the direction to deposit
the amount with the High Court was given to the NHAI, and in having
claimed, received and utilised the refund received from the Income-Tax
Department, there is no violation of the order dated 23.02.2011.
Learned Single Judge was prima facie of the opinion that there was
deliberate violation of the order dated 23.02.2011, and therefore, issued
Rule to the respondents, returnable in six weeks, vide order dated
26.06.2015. There was also a direction that the respondents shall not
operate the bank accounts of the company without securing the afore-
mentioned amount of Rs.10,55,60,331/-.
Aggrieved, the respondents took up the matter in appeal before the Division
Bench leading to the impugned order.
The Division Bench, in the impugned order, took the view that the learned
Single Judge should not have passed an order affecting the operation of
bank accounts, and therefore, to that extent, the order of the learned
Single Judge was vacated. And thus aggrieved, the appellants are before
this Court.
It may specifically be noted that the Division Bench has not interfered
with the Rule issued to the respondents in the proceedings initiated under
The Contempt of Courts Act, 1971 (hereinafter referred to as ‘the Act’) for
the alleged violation of the order dated 23.02.2011. The Division Bench
only vacated the order regarding operation of the bank accounts of the
company without securing the amount of rupees ten crores and odd. To quote
from the impugned order:
“The order under appeal cannot, in our view, be sustained to the extent
that the appellants have been restrained from operating their bank accounts
without setting apart ten crores and odd. The two appeals and the connected
stay applications are disposed of.”
(Emphasis supplied)
Still further, the Division Bench also clarified that:
“Having regard to the urgency and considering the fact that the contempt
proceedings and the company applications are pending before the learned
Single Bench, we have not issued any direction for affidavits.”
Thus, the limited question before us is whether the Division Bench was
justified in interfering with the order passed by the learned Single Judge
for securing the amount received by the respondents by way of refund from
the Income-Tax Department.
In order to appreciate the above question, it is necessary to refer to the
background under which the relevant orders have been passed by the learned
Single Judge.
The most relevant amongst the orders is the one dated 23.02.2011 passed by
the learned Single Judge, which is one alleged to have been violated by the
respondents. The text of the order reads as follows:
“The Court: Mr. S.N. Mitra, learned senior Advocate appearing for the
Baranagore Jute Factory PLC Mazdoor Sangh (BMS), the applicant in CA 906 of
2010 submitted that a portion of the vacant land of the company in
liquidation has been acquired by the National Highway Authority of India
and on account of compensation huge amounts are likely to be paid to the
company in liquidation. He submitted that considering the conflicting
claims made by various persons who are either in management or who are
seeking to take over management in liquidation the money likely to come may
not be safe. Therefore, he submitted that the money should be adequately
protected.
Mr. Sen, learned Senior Advocate appearing for Chaitan Chowdhury and
Ridh Karan Rakeeha submitted that the submission made by Mr. S.N. Mitra is
a reasonable one.
Mr. Anindya Kumar Mitra, learned Senior Advocate appearing for
Damodar Prasad Bhattar, Sunil Toshniwal, S.Jha & Ors, submitted that there
is no objection to the money being protected but he submitted that his
clients are presently running the management of the company in liquidation
and therefore his clients should be permitted to receive the compensation
and to keep the same in fixed deposit subject to further order of Court.
Mr. Subhranshu Ganguly, learned Advocate representing Yashdeep Trexim
Pvt. Ltd. supported the submission of Mr. S.N. Mitra.
Ms. Manju Agarwal, learned Advocate, appearing for some of the
creditors of the company in liquidation also supported the contention of
Mr. S.N. Mitra.
Mr. D.K. Singh, learned Advocate appearing for the Official
Liquidator submitted that pursuant to earlier orders passed by the Apex
Court it is, only proper that the money should be deposited with the
Registrar, Original Side.
Mr. Niloy Sengupta, learned Advocate appearing for Krishna Kumar
Kapadia, who, according to him, holds controlling block of shares in the
company submitted that the submission of Mr. S.N. Mitra should be accepted.
Considering the submissions made by the learned Advocates appearing
for the parties I am of the opinion that the submission made on behalf of
the Official Liquidator is also in conformity with the submission made by
Mr. S.N. Mitra which has largest support of the parties appearing before
me.
In that view of the matter, National Highway Authority of India is
restrained from making any payment on account of compensation to the
company in liquidation except by way of an account payee cheque to the
Registrar, Original Side. The Registrar, Original Side upon receipt of such
payment shall keep the same in a short term fixed deposit subject to
further order of Court with the SBI Main Branch. Upon receipt of the money,
he shall keep the parties informed about it.
It is clarified that I have referred to the company as a company in
liquidation because there is already a winding up order passed by this
Court. Fuller effect of that order is yet to be examined.
xxxx xxxx xxxx”
(Emphasis supplied)
After the deposit of the amount of around Rs.95 crores, as paid by the
NHAI, in terms of the said order, several attempts have been made by the
respondents herein for withdrawal of the said amounts purportedly for
meeting some of the liabilities of the company. We shall refer to only one
order passed by this Court on 12.03.2015 wherein this Court, at paragraph-
4, has taken note of the order passed by the Division Bench of the High
Court dated 14.08.2014. To the extent relevant, paragraphs-4, 6, and 7 of
the order dated 12.03.2015 passed by this Court in Civil Appeal Nos. 2814-
2815 of 2015, read as follows:
“4. The Division bench while affirming the order passed by the Company
Judge observed as under:-
“Considering the amount of deposit which the appellants want to withdraw,
and the company’s indebtness to its various creditors and the quantum of
its liability, coupled with the facts that even the workers have not been
paid their dues, we do not feel it safe to allow a particular group of
shareholders, who are described as interloper by the creditors, to withdraw
the money deposited with the Registrar, Original Side of this Court without
deciding the said issue finally particularly when we find that the
appellant/applicant themselves have filed an application being C.A. No.957
of 2010 praying for permanent stay of the company petition No.2 of 1987
which is yet to be decided finally. In the aforesaid context, we do not
find any illegality in the impugned order passed by the learned Company
Court proposing to dispose of all the pending applications simultaneously.”
xxxx xxxx xxxx
6. It has been brought to our notice that the impugned order dated
14.8.2014 was earlier challenged in SLP (C) No.29330 of 2014 (@ SLP CC
No.16278/2014). The said Special Leave Petition was dismissed as withdrawn
on 27.10.2014 by passing the following order.
“Mr. Ajit Kumar Sinha, learned senior counsel appearing for the petitioner,
seeks permission to withdraw this petition with a liberty to move the
Company Judge to dispose of the pending matters as expeditiously as
possible. Therefore, in view of the fair submission made by the learned
senior counsel, we dismiss this special leave petition as withdrawn with a
request to the Company Judge to dispose of the pending matters as
expeditiously as possible preferably within a period of three months from
today.”
7. In the facts and circumstances of the case, we are of the opinion
that the Company Judge before whom all applications are pending should
dispose of the same as expeditiously as possible within a period of two
months from today.”
(Emphasis supplied)
Thus, it may be noted that this Court declined to interfere with the order
passed by the Division Bench of the High Court, which in turn refused the
prayer for withdrawal of the deposit lying with the Court.
Despite the above background, the respondents received cheque dated
13.06.2014 by way of Income-Tax refund to the tune of Rs.10,21,28,520/-
after conceding the tax for Rs.34,31,807/- from the total TDS of
Rs.10,55,60,331/- and utilised the same for various purposes without any
clarification or permission from the company court which passed the order
dated 23.02.2011 regarding the deposit of the entire money paid by the NHAI
towards compensation for the acquired land. This conduct, according to the
learned Single Judge, prima facie, was in violation of the order dated
23.02.2011, and hence, the Rule with a further direction to secure the
entire TDS amount. Thus, the learned Single Judge, after referring to the
order dated 23.02.2011, passed the following order on 26.06.2015. To the
extent relevant, the order reads as follows:
“... Pursuant to the aforesaid order, the National Highway Authority issued
a cheque of Rs.94.16 crores approximately in favour of the Registrar,
Original Side of this Court. The National Highway Authority had issued the
aforesaid cheque after deducting a sum of Rs.10,55,60,331/- on account of
tax deducted at source. Such payment appears to have been received by the
Registrar, Original Side of this Court on or about November, 2012. The
fixed deposit was made by the Registrar, Original Side on 9th November,
2012, that is to say, during the financial year 2012-13 corresponding to
assessment year 2013-14. In the return filed on behalf of the company for
the assessment year 2013-14, a claim for refund was made on the basis of
the aforesaid deposit made by the National Highway Authority on account of
the tax deducted at source as would appear from page 101 of the
application. It appears that the claim for refund was met by the Income Tax
Authority by issuing a cheque on 13th June, 2014 as would appear from page
102 of the application. There is, as such, clear evidence of the fact that
the alleged contemnors received the refund in violation of the order dated
23rd February, 2011. Assuming that receipt of the cheque on account of
refund of income tax was in the usual course of business, there can be no
gainsaying that the cheque should not have been encashed without leave of
Court. From Annexure-E to the application appearing at page 102, it appears
that a cheque dated 13th June, 2014 was received on account of refund and
has also been encashed. Such encashment of the cheque on account of refund
which has its origin in the amount paid by the National Highway Authority
was in the teeth of the order dated 23rd February, 2011.
I am, therefore, prima facie of the opinion that there has been a
deliberate violation of the order passed by this court.
It appears from the return appearing at page 101 that a sum of
Rs.34,31,807/- was payable on account of tax by the company. After
deducting the aforesaid sum from the amount of Rs.10,55,60,331/-, the
balance sum of Rs.10,21,28,520/- was claimed by way of refund. The
liability on account of income tax is payable by the present management
from their own resource and for that any part of the money received from
the National Highway Authority could not be used. Therefore, the alleged
contemnors, managing the affairs of the company, in liquidation, appear to
have appropriated the aforesaid sum of Rs.10,55,60,331/- which was
deposited by way of tax deducted at source with the Income Tax Department
by the National Highway Authority.
For the aforesaid reasons, issue Rule against the alleged contemnor Nos. 1
to 6. Returnable six weeks hence.
Since the company, in liquidation, through the machination of the alleged
contemnors, has been enriched by the aforesaid sum and in order to preserve
the aforesaid sum the alleged contemnors are restrained from operating the
bank account/accounts of the company without setting aside the aforesaid
sum of Rs.10,55,60,331/-. …”
(Emphasis supplied)
The above order was the subject matter of challenge before the Division
Bench, leading to the impugned order.
The Division Bench, as we have already referred to above, was not happy
with the order regarding restriction on operation of the bank account
without securing the TDS amount. To the extent relevant, the consideration
in the impugned order reads as follows:
“… With the greatest respect we are of the view that the learned Court
should perhaps have given the appellants an opportunity to explain and
should perhaps also have ascertained what was the balance in the accounts
maintained by the company before passing an order which has in effect and
substance restrained the company from operating its accounts.
It is not in dispute that the turnover of the company is in crores. This
was the submission made on behalf of the respondents as well. A Company
with such turnover cannot possibly carry on its business without operating
any bank accounts at all. The livelihood of 4000 workers employed by the
company is involved. We are not concerned with whether the present
management will continue or not; we are also not concerned with whether the
management is managing the affairs of the company well or mismanaging the
company. These are matters which will be decided in the appropriate
proceedings at the appropriate stage. It is however reiterated, at the cost
of repetition that there was no specific order against the Company
restraining the Company from encashing cheques towards Income Tax refund,
or from utilising the same.
The order under appeal cannot, in our view, be sustained to the extent
that the appellants have been restrained from operating their bank accounts
without setting apart ten crores and odd. The two appeals and
the connected stay applications are disposed of.”
(Emphasis supplied)
As we have already clarified, the Division Bench, in the impugned order,
has not interfered with the Rule issued in the contempt proceedings. The
interference is only to the extent of direction to secure the TDS amount
Rs.10,55,60,331/-.
Though Shri Shyam Divan, learned Senior Counsel invited our attention to
the judgment of this Court in Sudhir Vasudeva, Chairman and Managing
Director, Oil and Natural Gas Corporation Limited and others v. M. George
Ravishekaran and others[1], and contended that the courts must not travel
beyond the four corners of the order which is alleged to have been flouted,
in the background which we have explained above, we find it difficult to
appreciate the submission. This Court, in the judgment referred to above,
in paragraph-19, has clarified that the directions which are explicit in
the judgment or “are plainly self-evident” can be taken into account for
the purpose of consideration as to whether there has been any disobedience
or wilful violation of the same. Prima facie, we are of the view that
learned Single Judge has taken note only of the plainly self-evident facts
while issuing the Rule and order regarding securing the amounts which the
respondents received by way of refund from the Income-Tax Department and
utilized.
It may be seen that the order dated 23.02.2011 regarding the deposit in
court was passed to secure the entire compensation from the NHAI. The court
was concerned about the money to be received from the NHAI towards the
compensation and appropriately protecting the same from being used by the
company. Even the respondents herein had “... no objection to money being
protected...”. The court had, in fact, declined the request made by the
respondents ... “to receive the compensation and to keep the same in fixed
deposit subject to further orders of the court”. The Official Liquidator
was of the view that ... “the money should be deposited with the Registrar,
Original Side”.
After considering the submissions of the learned Counsel appearing for the
parties, the learned Single Judge, formed the opinion that ... “the
submission made on behalf of the Official Liquidator is also in conformity
with the submission made by Mr. S.N. Mitra, who has largest support of the
parties before me (the court)”. Hence, the learned Single Judge made it
clear that “In that view of the matter, the National Highway Authority was
restrained from making any payment on account of compensation to the
company in liquidation except by way of an account payee cheque to the
Registrar, Original Side of the High Court”. Therefore, it is fairly clear
that the court had in mind the entire compensation paid by the NHAI in
respect of the land acquired by them. Since the NHAI was bound to deduct
TDS, an amount of Rs.10,55,60,331/- was paid to the Income-Tax Department.
There can be no doubt whatsoever that the said amount formed part of the
compensation. What the court in its order dated 23.02.2011 was requested
and the court intended too was to protect the compensation amount. Merely
because it goes through the Income-Tax Department, the same does not cease
to be part of compensation. Even the respondents herein had submitted
before the court at the time of passing the order dated 23.02.2011 that the
compensation amount needed to be protected and they were willing to protect
it subject to the order of the court. Therefore, the respondents, while
handling of the compensation amount, had to seek orders from the court;
going by the way they understood the proceedings.
In that background of the case, we are of the view that the respondents
should not have appropriated the refund they received from the Income-Tax
Department. There is nothing wrong in claiming the refund. The problem is
in utilising the refund received. The refund they received is actually the
compensation in respect of the land acquired from the company and it is
that amount which the court wanted to protect by its order dated
23.02.2011. Hence, prima facie, we are of the view that the appropriation
made by the respondents of the refund amount they received from the Income-
Tax Department was in violation of the order dated 23.02.2011. It appears,
for that reason only, even the Division Bench declined to disturb the Rule
in the contempt proceedings issued against respondents. However, the
Division Bench is wholly wrong in entering a finding that there is no
violation of the order dated 23.02.2011 in utilising the refund. No doubt,
had the refund and subsequent appropriation been of any amount other than
the compensation, there would not have been any contempt at all.
Unfortunately, the Division Bench, in the impugned order, failed to
recapitulate the background of the order dated 23.02.2011 and its own
earlier orders with regard to the refusal for withdrawal by the respondents
of the compensation deposited in court. Even if there be pressing needs,
there could not have been any utilisation of the compensation amount
without leave of the court. We find that the Division Bench has taken note
of the expenditure made by the respondents of the amount they received. To
quote the relevant background:
“We have also looked into the details of utilisation of the refund as given
in the schedule being Annexure ‘L’ to the stay application filed before us,
wherefrom it appears that Rs.1,19,18,723/- was paid towards arrear
electricity charges by three account payee cheques drawn on Axis Bank Ltd.,
particulars whereof have been given in the schedule. Another
Rs.2,23,00,000/- has been kept in fixed deposit as lien for issuance of
bank guarantee favouring CESC Ltd., against the security deposit to be paid
to CESC Ltd., for continuation of supply of electricity. This payment has
been made by cheque dated 28th June, 2014 and also by transfer from
Syndicate Bank on 28th June, 2014. A sum of Rs.24,92,582/- has been paid
towards arrear Central Sales Tax [Partial Payment]; Rs.34,56,910/- towards
Employees State Insurance contribution; Rs.44,44,044/- towards Provident
Fund contribution; Rs.66,00,000/- towards arrear dues of Jute Corporation,
a government body and Rs.4,68,85,198/- towards arrear wages, arrear ex
gratia payment, arrear gratuity and other arrear dues of the workmen.”
It is also seen from the order that the Division Bench had taken note of
the paltry balance in the accounts of the company as on 27.06.2015. To
quote:
“We directed the company to furnish us with details of its bank operations.
It appears that the company has about twelve bank accounts in operation in
India and the combined balance in all these accounts taken together as on
27th June, 2015 was Rs.13,96,188.79P. Our attention has been drawn by Mr.
Mookherjee to the fact that there are three other bank accounts with
combined balance of not more than Rs.3,44,436/- which have not been used
for over seven years and the company also has a bank account outside India
that has a balance of 936 pounds [less than Rs.1,00,000/- in value in
Indian currency].”
It may be seen that the respondents have been managing the affairs of the
company for a few years despite the futile attempts made by them to
withdraw the compensation lying in deposit in court.
As held by this Court in Delhi Development Authority v. Skipper
Construction Co. (P) Ltd. and another[2], and going a step further, the
Court has a duty to issue appropriate directions for remedying or
rectifying the things done in violation of the orders. In that regard, the
Court may even take restitutive measures at any stage of the proceedings.
In the background as above of the case, the Division Bench should not have
interfered with the order dated 26.06.2015 passed by the learned Single
Judge. However, taking note of the fact, an amount of Rs.2,23,00,000/- has
been kept in fixed deposit towards lien for issuance of bank guarantee, we
make it clear that the respondents shall not operate the bank accounts of
the company after 03.04.2017 without securing an amount of Rs.8,32,60,331/-
. We also make it clear that without leave of the High Court, the fixed
deposit of Rs.2,23,00,000/- with the Axis Bank shall not be withdrawn.
However, it would be open to the respondents to apply for appropriate
clarification or modification of the order dated 26.06.2015, after making
the deposit as above and it will be open to the learned Single Judge to
pass the appropriate orders on merits of the application.
We make it clear that any observations made by us are only for the purpose
of this order and shall not have any bearing on the consideration by the
learned Single Judge in the contempt proceedings.
The appeals are allowed as above. There shall be no order as to costs.
.......................J.
(KURIAN JOSEPH)
.......................J.
(R. BANUMATHI)
NEW DELHI;
MARCH 21, 2017.
-----------------------
[1] (2014) 3 SCC 373
[2] (1996) 4 SCC 622
