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Sunday, April 20, 2025

Contempt of Court – When – Appellants gave undertaking before the Trial Court to not alienate the property which was the subject matter of the suit – Respondents filed application alleging violation thereof – Trial Court held that the Appellants were not guilty of wilful disobedience of the undertaking given by them – Order set aside by High Court – Correctness: Held: Plea of the appellants that the undertaking to not alienate the subject matter property was given by the lawyer without requisite authority, not accepted – The undertaking in question was given in July 2007 and reiterated in August 2007 –Trial Court made such an undertaking into an order of the Court in November 2007, which was extended at regular intervals – The application for violation of the undertaking/order of the Court under Order XXXIX Rule 2A was made in 2011 i.e., after a period of four and a half years – Had the undertaking been without requisite authority, the appellants were well within their rights to seek discharge of that order, however, no such step was taken – Alienation of the subject matter property was despite express orders of the Court and thus, in violation thereof – High Court rightly punished the appellants for contempt of Court – However, order modified, as directed – Code of Civil Procedure, 1908 – Or. XXXIX R. 2A. [Paras 6, 11, 12, 14] Legal Profession – Relationship between Advocate and client – Nature: Held: A lawyer-client relationship is fiduciary in nature and the former is cast in terms of agency of the latter – The lawyer must respect the decision-making right of the client – Any undertaking given to a Court cannot be without requisite authority from the client. [Para 9]

[2025] 3 S.C.R. 450 : 2025 INSC 325


Smt. Lavanya C & Anr. v. Vittal Gurudas Pai Since Deseased By LRs. & Ors.

(Civil Appeal No. 13999 of 2024)


05 March 2025


[Pankaj Mithal and Sanjay Karol,* JJ.]

Issue for Consideration


Whether the High Court was correct in setting aside the order of the Trial Court holding the appellants not guilty of wilful disobedience of their undertaking given to the Court.


Headnotes


Contempt of Court – When – Appellants gave undertaking before the Trial Court to not alienate the property which was the subject matter of the suit – Respondents filed application alleging violation thereof – Trial Court held that the Appellants were not guilty of wilful disobedience of the undertaking given by them – Order set aside by High Court – Correctness:


Held: Plea of the appellants that the undertaking to not alienate the subject matter property was given by the lawyer without requisite authority, not accepted – The undertaking in question was given in July 2007 and reiterated in August 2007 –Trial Court made such an undertaking into an order of the Court in November 2007, which was extended at regular intervals – The application for violation of the undertaking/order of the Court under Order XXXIX Rule 2A was made in 2011 i.e., after a period of four and a half years – Had the undertaking been without requisite authority, the appellants were well within their rights to seek discharge of that order, however, no such step was taken – Alienation of the subject matter property was despite express orders of the Court and thus, in violation thereof – High Court rightly punished the appellants for contempt of Court – However, order modified, as directed – Code of Civil Procedure, 1908 – Or. XXXIX R. 2A. [Paras 6, 11, 12, 14]


Legal Profession – Relationship between Advocate and client – Nature:


Held: A lawyer-client relationship is fiduciary in nature and the former is cast in terms of agency of the latter – The lawyer must respect the decision-making right of the client – Any undertaking given to a Court cannot be without requisite authority from the client. [Para 9]


Case Law Cited


Samee Khan v. Bindu Khan [1998] Supp. 1 SCR 244 : (1998) 7 SCC 59; Wander Limited & Anr. v. Antox India Pvt. Ltd. (1990) Supp. 1 SCC 727; Ramakant Ambalal Choksi v. Harish Ambalal Choksi, 2024 SCC OnLine 3538; Dalpat Kumar v. Prahlad Singh [1991] Supp. 3 SCR 472 : (1992) 1 SCC 719; Kanwar Singh Saini v. High Court of Delhi [2011] 15 SCR 972 : (2012) 4 SCC 307; Kokkanda B. Poondacha v. K.D. Ganapathi [2011] 4 SCR 417 : (2011) 12 SCC 600; State of U.P. v. U.P. State Law Officers' Assn. [1994] 1 SCR 348 : (1994) 2 SCC 204; Himalayan Coop. Group Housing Society v. Balwan Singh [2015] 4 SCR 616 : (2015) 7 SCC 373; Bar of Indian Lawyers v. National Institute of Communicable Diseases (2024) 8 SCC 430; Supreme Court Bar Assn. v. Union of India [1998] 2 SCR 795 : (1998) 4 SCC 409 – referred to.


List of Acts


Contempt of Courts Act, 1971; Code of Civil Procedure, 1908.


List of Keywords


Contempt of Court; Express violation of order of Court; Disobedience of Undertaking; Or. XXXIX R. 2A of Civil Procedure Code, 1908; Civil contempt; Fiduciary relationship between Advocate and client; Undertaking without requisite authority from client; Alienation of subject matter property; Disobedience of an order of temporary injunction.


Case Arising From


CIVIL APPELLATE JURISDICTION: Civil Appeal No. 13999 of 2024


From the Judgment and Order dated 23.02.2021 of the High Court of Karnataka at Bengaluru in MFA No. 7055 of 2013


Appearances for Parties


Advs. for the Appellants:


Radhakrishna S Hegde, Rajeev Singh.


Advs. for the Respondents:


Vikram Hegde, Abhinav Hansaraman.


Judgment / Order of the Supreme Court


Judgment


Sanjay Karol J.


1.This appeal arises out of judgment and order dated 23rd February 2021/16th March, 2021 passed in Miscellaneous First Appeal No.7055/2013(CPC) by the High Court of Karnataka at Bengaluru, whereby the respondents before the High Court, appellants herein (defendants in Trial Court), were held guilty of disobedience of their undertaking before the Trial Court of not alienating the property, subject matter of the suit.


The original defendants in the Trial Court through their counsel gave an undertaking which was allegedly disobeyed. The plaintiffs aggrieved thereby filed the case, which was dismissed, and they appealed to the High Court, ultimately resulting in a favourable order. The original defendants now aggrieved by being held in contempt, are appellants herein.


2.A brief resume of facts leading to the appeal are :


2.1The respondents herein were the original plaintiffs in Original Suit No.4191 of 2007 seeking a declaration to the effect that agreement between the parties dated 30th April 2004, i.e., ‘Joint Development Agreement’1 to be “revoked rescinded and terminated.” The JDA was entered into regarding the construction of residential apartments within a period of 24 months, on a turnkey basis.


2.2Said construction was to be completed by 31st October 2006. However, the same could not be done. Legal notice intimating the cancellation of the JDA was issued on 23rd March 2007, and eventually, the subject Original Suit came to be filed.


2.3The learned Trial Court eventually concluded vide judgment and order dated 2nd January 2017 that the plaintiffs could not prove that the construction made was in violation of the JDA and instead, the defendants proved that the construction made by them was in accordance thereof. It was held that the plaintiffs were not entitled to the declaration and permanent injunction, as prayed for.


2.4In the pendency of the above proceedings, record reveals that the counsel for the defendants undertook, on two occasions, i.e., 11th July 2007 and 13th August 2007 that they will not alienate the subject property to any third person. Allegedly, however, such undertaking was not abided by, which led to the filing of Interlocutory Application No.3 that came to be registered as Civil Misc. Application No.38 of 2011 under Order XXXIX Rule 2A of the Civil Procedure Code, 19082.


2.5The concerned Court framed the following issues :


"1)Whether the petitioners have made out a case of breach or willful disobedience by the respondents of order passed by this court in pursuance of undertaking given by the defendant and order of injunction dated 17.11.2007 beyond all reasonable doubts?


2)What order?”


2.6The Court considered the jurisdiction which has been agitated, observing that the said power is punitive in nature and akin to imposing punishment for civil contempt under the Contempt of Courts Act, 1971. It was concluded as under :


“38. It is significant to note that advocate for petitioners have produced 10 photos of suit property, which depict that suit property is still vacant and foundation is lying. But, here in this case, the petitioners have contended that the flats were sold by the respondents inspite of Court Order. Moreover,, the description of the suit property is incomplete and ambiguous. Therefore, the averment/contention of the petitioners is not believable.


39. In view of aforesaid reasons and observations made, I can safely conclude that the petitioners are failed to prove their case beyond all reasonable doubt that the respondents are knowingly and willfully disobeyed the injunction order of this Court. : There is no sufficient and satisfactory materials on record to come to conclusion that the respondents have knowingly and willfully disobeyed and committed the breach of order of this Court. Hence, respondents are entitled for benefit of doubt. Therefore, I answer aforesaid point No.1 in Negative.


40. Point No.2 : For the foregoing reasons and in view of my findings and discussions, I proceed to pas the following :


ORDER


In the result, therefore this Civil Misc. petition (I.A. No.3) filed by the petitioners U/o XXXIX Rule 2A and U/s.151 of CPC against the respondents is liable to be rejected. Accordingly, it is dismissed.


Parties shall bear their own costs.”


2.7Aggrieved by this order, the High Court was approached by way of Misc. First Appeal No.7055 of 2013 (CPC) under Order XLIII Rule 1(r) read with 104(i) of CPC. The question to be considered was whether the lower Court’s order is sustainable in law.


Impugned Judgment


3.A question of maintainability of the application under Order XXXIX Rule 2A was raised. With reference to Samee Khan v. Bindu Khan,3 it was held that even if the injunction order was subsequently set aside, the disobedience thereof is not erased. The subsequent dismissal of a suit does not absolve the party of liability of breach of injunction order. That apart, it was observed that an appeal against the Trial Court’s dismissal of the Original Suit was also pending before the High Court bearing R.F.A.No.592/2017.


3.1The substance of the dispute is that on 11th July 2007, the counsel for the appellants herein filed memo as follows :


“The undersigned counsel undertake that the defendants have not alienate the suit schedule property to any third person”


3.2Subsequently, on two dates 13th August and 17th November, 2007 the proceedings of the Trial Court have been taken note of by the Trial Court in paras 26 to 28, which read as follows :


“26. Then the matter was adjourned to 13.08.2007. On 13.08.2007, the advocate for the defendants filed another memo which reads as follows :


“The undersigned counsel undertake that they have not alienate the suit schedule property in the above case.”


27. Then the trial Court ordered to list the matter on 17.11.2007. On 17.11.2007, the defendants’ Counsel failed to appear before the Court. The plaintiffs’ Counsel submitted to the Court about the undertaking given by the defendants’ Counsel. Under such circumstances, the trial Court passed the following order:


“Parties to the suit called out. Absent. Learned Counsel for the plaintiff is present. Learned Counsel for the defendant is absent. On the last date the learned Counsel for the defendants had undertaken that the defendants will not alienate suit property. Today neither defendants nor learned Counsel for the defendants are present. I.A. I & II cannot be heard as the defendants and learned Counsel for defendant Nos.1 to 3 are absent. Hence, it is hereby ordered that defendants 1 to 3 shall not alienate the suit property till next date. For hearing of IA I & II and to call the parties under Section 89 of CPC. Call on 08.12.2007.”


28. That order was extended from time to time. Subsequent to 17.11.2007, the defendants executed the sale deeds under Exs.P3 to P5, Ex.P7 to P13, the dates of which are as follows :


Ex.P3–19.11.2007 Ex.P4-03.12.2008


Ex.P5–01.07.2008 Ex.P7-15.06.2009


Ex.P8–06.08.2008 Ex.P9-13.12.2011


Ex.P10–19.11.2007Ex.P11-01.07.2008


Ex.P12-03.12.2008 Ex.P13-15.06.2009”


3.3The Court citing various judicial pronouncements observed that there was no merit in the contention that injunction order is invalid. The order of the lower Court was set aside, and the appellants herein were held guilty of disobedience of their undertaking made before the Trial Court.


3.4Vide order dated 16th March 2021 the appellants were held guilty of contempt of Court. Contemnor No.3, namely, Chalsani R.B. who is the second appellant herein, was directed to be detained in a civil prison for a period of three months and his property, subject matter of suit, to be attached for a period of one year. Contemnor No.2, namely, Smt. Lavanya C., the first appellant herein, qua her it was directed that the subject matter property be attached for a period of one year. It was further directed that both the contemnors shall pay a sum of Rs.10 lakhs within four weeks, as compensation for the hardship caused to the respondents herein. The part of the order directing attachment was stayed for a period of 60 days.


Our Consideration


4.It is this order of the High Court which is sought to be challenged in this appeal. By way of the special leave petition, it has been urged, inter alia :


a)In the prayers made in the application under Order XXXIX Rule 1 and 2, no specific prayer, restraining the parties from creating third party rights, has been made. The Trial Court has observed that the description of property is ambiguous, incomplete and that no satisfactory material has been brought on record to show wilful disobedience on the part of the appellants, hence, they are entitled to the benefit of doubt.


b)There has been deliberate suppression of facts on the part of the respondents herein regarding construction of apartments and selling off a part thereof, even prior to filing of the original Suit.


c)An unconditional apology has been tendered before the Court and the appellants herein have no intent or desire to disrespect any order passed by a competent Court.


d)The sentence imposed, in the attending facts and circumstances, is unjustified given that the second appellant is a person of advanced years and suffers from various ailments.


5.We have heard learned counsel for the parties and perused the record. The question to be considered is whether the High Court was correct in setting aside the order of the Court below, holding the appellants herein not guilty of wilful disobedience of their undertaking given to the Court.


6.A few dates require immediate recall. The undertaking subject matter of controversy was given by the counsel on 11th July 2007 and reiterated on 13th August 2007. The Trial Court made such an undertaking into an order of the Court on 17th November 2007. The same was extended at regular intervals. The application for violation of the undertaking/order of the Court under Order XXXIX Rule 2A was made in 2011. An order was made dismissing the application on 2nd August 2013. Immediately thereafter, an appeal was filed before the High Court. In the pendency of this appeal, the Original Suit came to be decided on 2nd January 2017. An appeal against such dismissal of the Original Suit was pending before the High Court on the date that the impugned judgment came to be passed.


7.Although of primary concern, in this appeal is the sentence of imprisonment and compensation to be paid by the appellants herein, it would be apposite to take note of the contours of Order XXXIX Rule 1, Rule 2 and Rule 2A.


7.1A Three-Judge Bench in Wander Limited & Anr. v. Antox India Pvt. Ltd.4 observed as follows :


“9. .....


“...is to protect the plaintiff against injury by violation of his rights for which he could not adequately be compensated in damages recoverable in the action if the uncertainty were resolved in his favour at the trial. The need for such protection must be weighed against the corresponding need of the defendant to be protected against injury resulting from his having been prevented from exercising his own legal rights for which he could not be adequately compensated. The court must weigh one need against another and determine where the ‘balance of convenience’ lies.”


x


x


x


x


14. The appeals before the Division Bench were against the exercise of discretion by the Single Judge. In such appeals, the appellate court will not interfere with the exercise of discretion of the court of first instance and substitute its own discretion except where the discretion has been shown to have been exercised arbitrarily, or capriciously or perversely or where the court had ignored the settled principles of law regulating grant or refusal of interlocutory injunctions. An appeal against exercise of discretion is said to be an appeal on principle. Appellate court will not reassess the material and seek to reach a conclusion different from the one reached by the court below if the one reached by that court was reasonably possible on the material. The appellate court would normally not be justified in interfering with the exercise of discretion under appeal solely on the ground that if it had considered the matter at the trial stage it would have come to a contrary conclusion. If the discretion has been exercised by the trial court reasonably and in a judicial manner the fact that the appellate court would have taken a different view may not justify interference with the trial court’s exercise of discretion. After referring to these principles Gajendragadkar, J. in Printers (Mysore) Private Ltd. v. Pothan Joseph [(1960) 3 SCR 713 : AIR 1960 SC 1156] : (SCR 721)


“... These principles are well established, but as has been observed by Viscount Simon in Charles Osenton & Co. v. Jhanaton [1942 AC 130] ‘...the law as to the reversal by a court of appeal of an order made by a judge below in the exercise of his discretion is well established, and any difficulty that arises is due only to the application of well settled principles in an individual case’.”


The appellate judgment does not seem to defer to this principle.”


(Emphasis supplied)


7.2A recent judgment of this Court in Ramakant Ambalal Choksi v. Harish Ambalal Choksi,5 referring to Dalpat Kumar v. Prahlad Singh6 has reiterated the principles governing the grant of temporary injunction.


7.3The aspect of disobedience of an order of temporary injunction has been discussed in detail in Kanwar Singh Saini v. High Court of Delhi,7 in the following terms :


“17. Application under Order 39 Rule 2-A CPC lies only where disobedience/breach of an injunction granted or order complained of was one that is granted by the court under Order 39 Rules 1 and 2 CPC, which is naturally to enure during the pendency of the suit. However, once a suit is decreed, the interim order, if any, merges into the final order. No litigant can derive any benefit from mere pendency of case in a court of law, as the interim order always merges in the final order to be passed in the case and if the case is ultimately dismissed, the interim order stands nullified automatically. (Vide A.R. Sircar v. State of U.P. [1993 Supp (2) SCC 734 : 1993 SCC (L&S) 896 : (1993) 24 ATC 832], Shiv Shanker v. U.P. SRTC [1995 Supp (2) SCC 726 : 1995 SCC (L&S) 1018 : (1995) 30 ATC 317], Arya Nagar Inter College v. Sree Kumar Tiwary [(1997) 4 SCC 388 : 1997 SCC (L&S) 967 : AIR 1997 SC 3071], GTC Industries Ltd. v. Union of India [(1998) 3 SCC 376 : AIR 1998 SC 1566] and Jaipur Municipal Corpn. v. C.L. Mishra [(2005) 8 SCC 423].)


18. In case there is a grievance of non-compliance with the terms of the decree passed in the civil suit, the remedy available to the aggrieved person is to approach the execution court under Order 21 Rule 32 CPC which provides for elaborate proceedings in which the parties can adduce their evidence and can examine and cross-examine the witnesses as opposed to the proceedings in contempt which are summary in nature. Application under Order 39 Rule 2-A CPC is not maintainable once the suit stood decreed. Law does not permit to skip the remedies available under Order 21 Rule 32 CPC and resort to the contempt proceedings for the reason that the court has to exercise its discretion under the 1971 Act when an effective and alternative remedy is not available to the person concerned. Thus, when the matter relates to the infringement of a decree or decretal order embodies rights, as between the parties, it is not expedient to invoke and exercise contempt jurisdiction, in essence, as a mode of executing the decree or merely because other remedies may take time or are more circumlocutory in character. Thus, the violation of permanent injunction can be set right in executing the proceedings and not the contempt proceedings. There is a complete fallacy in the argument that the provisions of Order 39 Rule 2-A CPC would also include the case of violation or breach of permanent injunction granted at the time of passing of the decree.”


7.4In Samee Khan (supra), it was observed that :


“12. But the position under Rule 2-A of Order 39 is different. Even if the injunction order was subsequently set aside, the disobedience does not get erased. It may be a different matter that the rigour of such disobedience may be toned down if the order is subsequently set aside. For what purpose is the property to be attached in the case of disobedience of the order of injunction? Sub-rule (2) provides that if the disobedience or breach continues beyond one year from the date of attachment, the court is empowered to sell the property under attachment and compensate the affected party from such sale proceeds.”


8.There is no question as to the maintainability of the application before this Court. It is also true that the order, in the challenge against which the impugned judgment was passed, was made in the pendency of the original suit and, therefore, it is saved from that bar as well. No error, therefore, can be found on the exercise of such jurisdiction.


9.The next point which needs consideration is the relationship between an advocate and his client. The appellants have cast certain aspersions on their counsel to the effect that he, allegedly, gave the undertaking, germane to the instant controversy, without express authorization. This Court has, time and again, taken note of the fiduciary relationship between an advocate and his client. We may notice a few decisions as follows:


9.1In Kokkanda B. Poondacha v. K.D. Ganapathi,8 it was held :


“12. At this stage, we may also advert to the nature of relationship between a lawyer and his client, which is solely founded on trust and confidence. A lawyer cannot pass on the confidential information to anyone else. This is so because he is a fiduciary of his client, who reposes trust and confidence in the lawyer. Therefore, he has a duty to fulfil all his obligations towards his client with care and act in good faith. Since the client entrusts the whole obligation of handling legal proceedings to an advocate, he has to act according to the principles of uberrima fides i.e. the utmost good faith, integrity, fairness and loyalty.


x


x


x


14. An analysis of the above reproduced Rules shows that one of the most important duties imposed upon an advocate is to uphold the interest of the client fearlessly by all fair and honourable means. An advocate cannot ordinarily withdraw from engagement without sufficient cause and without giving reasonable and sufficient notice to the client. If he has reason to believe that he will be a witness in the case, the advocate should not accept a brief or appear in the case.”


9.2The nature of the profession was highlighted by a Bench of this Court in State of U.P. v. U.P. State Law Officers’ Assn.,9 in the following terms :


“14. Legal profession is essentially a service-oriented profession. The ancestor of today’s lawyer was no more than a spokesman who rendered his services to the needy members of the society by articulating their case before the authorities that be. The services were rendered without regard to the remuneration received or to be received. With the growth of litigation, lawyering became a full-time occupation and most of the lawyers came to depend upon it as the sole source of livelihood. The nature of the service rendered by the lawyers was private till the Government and the public bodies started engaging them to conduct cases on their behalf. The Government and the public bodies engaged the services of the lawyers purely on a contractual basis either for a specified case or for a specified or an unspecified period. Although the contract in some cases prohibited the lawyers from accepting private briefs, the nature of the contract did not alter from one of professional engagement to that of employment. The lawyer of the Government or a public body was not its employee but was a professional practitioner engaged to do the specified work. This is so even today, though the lawyers on the full-time rolls of the Government and the public bodies are described as their law officers. It is precisely for this reason that in the case of such law officers, the saving clause of Rule 49 of the Bar Council of India Rules waives the prohibition imposed by the said rule against the acceptance by a lawyer of a full-time employment.


15. The relationship between the lawyer and his client is one of trust and confidence. The client engages a lawyer for personal reasons and is at liberty to leave him also, for the same reasons. He is under no obligation to give reasons for withdrawing his brief from his lawyer. The lawyer in turn is not an agent of his client but his dignified, responsible spokesman. He is not bound to tell the court every fact or urge every proposition of law which his client wants him to do, however irrelevant it may be. He is essentially an adviser to his client and is rightly called a counsel in some jurisdictions. Once acquainted with the facts of the case, it is the lawyer’s discretion to choose the facts and the points of law which he would advance. Being a responsible officer of the court and an important adjunct of the administration of justice, the lawyer also owes a duty to the court as well as to the opposite side. He has to be fair to ensure that justice is done. He demeans himself if he acts merely as a mouthpiece of his client. This relationship between the lawyer and the private client is equally valid between him and the public bodies.”


9.3Observations made in Himalayan Coop. Group Housing Society v. Balwan Singh,10 by a Bench of three Judges are also instructive for our purposes presently :


“22. Apart from the above, in our view lawyers are perceived to be their client’s agents. The law of agency may not strictly apply to the client-lawyer’s relationship as lawyers or agents, lawyers have certain authority and certain duties. Because lawyers are also fiduciaries, their duties will sometimes be more demanding than those imposed on other agents. The authority-agency status affords the lawyers to act for the client on the subject-matter of the retainer. One of the most basic principles of the lawyer-client relationship is that lawyers owe fiduciary duties to their clients. As part of those duties, lawyers assume all the traditional duties that agents owe to their principals and, thus, have to respect the client’s autonomy to make decisions at a minimum, as to the objectives of the representation. Thus, according to generally accepted notions of professional responsibility, lawyers should follow the client’s instructions rather than substitute their judgment for that of the client. The law is now well settled that a lawyer must be specifically authorised to settle and compromise a claim, that merely on the basis of his employment he has no implied or ostensible authority to bind his client to a compromise/settlement. To put it alternatively that a lawyer by virtue of retention, has the authority to choose the means for achieving the client’s legal goal, while the client has the right to decide on what the goal will be. If the decision in question falls within those that clearly belong to the client, the lawyer’s conduct in failing to consult the client or in making the decision for the client, is more likely to constitute ineffective assistance of counsel.


x


x


x


30. The Privy Council in Sourendra Nath Mitra v. Tarubala Dasi [(1929-30) 57 IA 133 : (1930) 31 LW 803 : AIR 1930 PC 158] , has made the following two observations which hold relevance to the present discussion : (IA pp. 140-41)


“Two observations may be added. First, the implied authority of counsel is not an appendage of office, a dignity added by the courts to the status of barrister or advocate at law. It is implied in the interests of the client, to give the fullest beneficial effect to his employment of the advocate. Secondly, the implied authority can always be countermanded by the express directions of the client. No advocate has actual authority to settle a case against the express instructions of his client. If he considers such express instructions contrary to the interests of his client, his remedy is to return his brief.”


(See: Jamilabai Abdul Kadar v. Shankarlal Gulabchand [(1975) 2 SCC 609] and Svenska Handelsbanken v. Indian Charge Chrome Ltd. [(1994) 2 SCC 155])


31. Therefore, it is the solemn duty of an advocate not to transgress the authority conferred on him by the client. It is always better to seek appropriate instructions from the client or his authorised agent before making any concession which may, directly or remotely, affect the rightful legal right of the client. The advocate represents the client before the court and conducts proceedings on behalf of the client. He is the only link between the court and the client. Therefore his responsibility is onerous. He is expected to follow the instructions of his client rather than substitute his judgment.


32. Generally, admissions of fact made by a counsel are binding upon their principals as long as they are unequivocal; where, however, doubt exists as to a purported admission, the court should be wary to accept such admissions until and unless the counsel or the advocate is authorised by his principal to make such admissions. Furthermore, a client is not bound by a statement or admission which he or his lawyer was not authorised to make. A lawyer generally has no implied or apparent authority to make an admission or statement which would directly surrender or conclude the substantial legal rights of the client unless such an admission or statement is clearly a proper step in accomplishing the purpose for which the lawyer was employed. We hasten to add neither the client nor the court is bound by the lawyer’s statements or admissions as to matters of law or legal conclusions. Thus, according to generally accepted notions of professional responsibility, lawyers should follow the client’s instructions rather than substitute their judgment for that of the client. We may add that in some cases, lawyers can make decisions without consulting the client. While in others, the decision is reserved for the client. It is often said that the lawyer can make decisions as to tactics without consulting the client, while the client has a right to make decisions that can affect his rights.”


(Emphasis supplied)


9.4Recently, a coordinate Bench of this Court in Bar of Indian Lawyers v. National Institute of Communicable Diseases,11 which also comprised one of us (Mithal J.) speaking through Trivedi J., observed :


“51. When we examine the relationship between an advocate and his client from this point of view, the following unique attributes become clear:


51.1. Advocates are generally perceived to be their client’s agents and owe fiduciary duties to their clients.


51.2. Advocates are fastened with all the traditional duties that agents owe to their principals. For example, advocates have to respect the client’s autonomy to make decisions at a minimum, as to the objectives of the representation.


51.3. Advocates are not entitled to make concessions or give any undertaking to the court without express instructions from the client.


51.4. It is the solemn duty of an advocate not to transgress the authority conferred on him by his client.


51.5. An advocate is bound to seek appropriate instructions from the client or his authorised agent before taking any action or making any statement or concession which may, directly or remotely, affect the legal rights of the client.


51.6. The Advocate represents the client before the court and conducts proceedings on behalf of the client. He is the only link between the court and the client. Therefore, his responsibility is onerous. He is expected to follow the instructions of his client rather than substitute his judgment.”


(Emphasis supplied)


10.The above judgments make clear that a lawyer-client relationship is fiduciary in nature and the former is cast in terms of agency of the latter. It is also clear that the lawyer is to respect the decision-making right of the client. It flows from this that any undertaking given to a Court cannot be without requisite authority from the client.


11.The appellants herein would have us believe that the undertaking to not alienate the subject matter property, which, undoubtedly, has far-reaching implications, extending over a large period of time. We find such a situation difficult to accept. The undertaking, subject matter of controversy, was given in July 2007 and the miscellaneous application was filed in the year 2011, i.e., after a period of four and a half years. Had the situation been that the said undertaking was without requisite authority, the clients were perfectly within their rights to seek discharge of that order, however, no such step was taken.


12.The same undertaking was re-emphasized a month later, on 13th August 2007 and was later made into an order of the Court which, as already observed supra, was extended from time to time. Alienation of the subject matter property despite express orders of the Court, in our view, entirely justify the stand taken by the High Court in punishing the appellants for contempt of Court.


13.The powers of contempt of Court have been provided for the purposes of ensuring that the dignity and majesty of law is always maintained. Such purpose is aptly captured in the words of the Constitution Bench in Supreme Court Bar Assn. v. Union of India12, as follows:


“42. The contempt of court is a special jurisdiction to be exercised sparingly and with caution whenever an act adversely affects the administration of justice or which tends to impede its course or tends to shake public confidence in the judicial institutions. This jurisdiction may also be exercised when the act complained of adversely affects the majesty of law or dignity of the courts. The purpose of contempt jurisdiction is to uphold the majesty and dignity of the courts of law. It is an unusual type of jurisdiction combining “the jury, the judge and the hangman” and it is so because the court is not adjudicating upon any claim between litigating parties. This jurisdiction is not exercised to protect the dignity of an individual judge but to protect the administration of justice from being maligned. In the general interest of the community it is imperative that the authority of courts should not be imperilled and there should be no unjustifiable interference in the administration of justice. It is a matter between the court and the contemner and third parties cannot intervene. It is exercised in a summary manner in aid of the administration of justice, the majesty of law and the dignity of the courts. No such act can be permitted which may have the tendency to shake the public confidence in the fairness and impartiality of the administration of justice.”


When there has been an express violation of an order of a Court, as is in the present case, the exercise of contempt jurisdiction cannot be faulted with. The judgment of the High Court is, therefore, confirmed.


14.In the attending facts and circumstances, keeping in view the fact that at the time of filing of this appeal, the appellant No.1 herein, who was the contemnor No.3 before the High Court, was 63 years of age and today must approximately be of 68 years of age, we modify the impugned order to the extent that the three months confinement in civil prison shall stand deleted. The rest of the order regarding attachment of property remains undisturbed. Additionally, the amount of compensation payable by the appellants herein shall stand enhanced from a sum of Rs.10 lakhs to Rs.13 lakhs.


15.The appeal is partly allowed and disposed of with the above modification to the impugned order. The amount of compensation shall also carry simple interest @6% from the date of the judgment of the lower Court, i.e., 2nd August 2013.


Pending application, if any, shall stand disposed of.


Result of the case: Appeal partly allowed.


1 ‘JDA’, for short


2 Hereafter ‘CPC’


3 (1998) 7 SCC 59


4 (1990) Supp. 1 SCC 727


5 2024 SCC OnLine 3538


6 (1992) 1 SCC 719


7 (2012) 4 SCC 307


8 (2011) 12 SCC 600


9 1994 (2) SCC 204


10 (2015) 7 SCC 373


11 (2024) 8 SCC 430


12 (1998) 4 SCC 409

Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 – Detenu was detained under the provisions of the COFEPOSA Act – It was contended that there was non-application of mind since the allegations were raised under clauses (i) to (iv) of s.3(1) of the COFEPOSA Act, in an omnibus manner, revealing the bias of the detaining officer – It was further contended that the attempt was to somehow obtain preventive detention of the person who was arrested on the basis of the offences alleged; in which crime he was granted bail by the jurisdictional Court, imposing very stringent conditions: Held: In the instant case, the facts reveal that the detenu has not only been involved in smuggling of goods, but also has abetted such smuggling of goods through carriers, engaged in receiving the same, dispatching it to middle-men for keeping it concealed in their premises and effecting sale through them; who were paid a commission – This definitely brings in the ingredients of each of the clauses under (i) to (iv) of s.3(1) – The jurisdictional Magistrate released the detenu on bail vide order dated 16.04.2024 on certain conditions – The specific ground raised by the prosecution of apprehension of involvement in similar type of smuggling activity was reckoned by the jurisdictional Magistrate while granting bail and imposing conditions to prevent the detenu from engaging in such smuggling activities – However, nothing is stated by the detaining authority as to why the conditions are not sufficient to prevent the detenu from engaging in further activities of smuggling; which was the specific ground on which the conditions were imposed while granting bail – It was for the detaining authority to look into the conditions imposed by the Magistrate and enter into a subjective satisfaction as to whether the same was sufficient to avoid a preventive detention or otherwise, insufficient to restrain him from further involvement in similar smuggling activities – The criminal prosecution launched and the preventive detention ordered are on the very same allegations of organised smuggling activities – The detaining authority ought to have examined the bail conditions – Whether they were sufficient to curb the evil of further indulgence in identical activities; which is the very basis of the preventive detention ordered – Since detention order is silent on that aspect, the detention order is interfered with – Hence, the order of detention is set aside – The detenu directed to be released forthwith. [Paras 7, 14, 15, 19, 20, 22]

[2025] 3 S.C.R. 419 : 2025 INSC 327


Joyi Kitty Joseph v. Union of India & Ors.

(Criminal Appeal No. 1180 of 2025)


06 March 2025


[Sudhanshu Dhulia and K. Vinod Chandran, JJ.]

Issue for Consideration


The wife of the detenu; detained under the provisions of the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 (COFEPOSA Act) is challenging the order of detention.


Headnotes


Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 – Detenu was detained under the provisions of the COFEPOSA Act – It was contended that there was non-application of mind since the allegations were raised under clauses (i) to (iv) of s.3(1) of the COFEPOSA Act, in an omnibus manner, revealing the bias of the detaining officer – It was further contended that the attempt was to somehow obtain preventive detention of the person who was arrested on the basis of the offences alleged; in which crime he was granted bail by the jurisdictional Court, imposing very stringent conditions:


Held: In the instant case, the facts reveal that the detenu has not only been involved in smuggling of goods, but also has abetted such smuggling of goods through carriers, engaged in receiving the same, dispatching it to middle-men for keeping it concealed in their premises and effecting sale through them; who were paid a commission – This definitely brings in the ingredients of each of the clauses under (i) to (iv) of s.3(1) – The jurisdictional Magistrate released the detenu on bail vide order dated 16.04.2024 on certain conditions – The specific ground raised by the prosecution of apprehension of involvement in similar type of smuggling activity was reckoned by the jurisdictional Magistrate while granting bail and imposing conditions to prevent the detenu from engaging in such smuggling activities – However, nothing is stated by the detaining authority as to why the conditions are not sufficient to prevent the detenu from engaging in further activities of smuggling; which was the specific ground on which the conditions were imposed while granting bail – It was for the detaining authority to look into the conditions imposed by the Magistrate and enter into a subjective satisfaction as to whether the same was sufficient to avoid a preventive detention or otherwise, insufficient to restrain him from further involvement in similar smuggling activities – The criminal prosecution launched and the preventive detention ordered are on the very same allegations of organised smuggling activities – The detaining authority ought to have examined the bail conditions – Whether they were sufficient to curb the evil of further indulgence in identical activities; which is the very basis of the preventive detention ordered – Since detention order is silent on that aspect, the detention order is interfered with – Hence, the order of detention is set aside – The detenu directed to be released forthwith. [Paras 7, 14, 15, 19, 20, 22]


Case Law Cited


Rameshwar Lal Patwari v. State of Bihar [1968] 2 SCR 505 : AIR 1968 SC 1303; Vijay Narain Singh v. State of Bihar [1984] 3 SCR 435 : (1984) 3 SCC 14 – relied on.


Narendra Purshotam Umrao v. B.B. Gujral [1979] 2 SCR 315 : (1979) 2 SCC 637; Khaja Bilal Ahmed v. State of Telangana [2019] 18 SCR 1174 : (2020) 13 SCC 632; Ameena Begum v. State of Telangana and Others (2023) 9 SCC 587; Rekha v. State of T.N. [2011] 4 SCR 740 : (2011) 5 SCC 244; Haradhan Saha v. State of W.B. [1975] 1 SCR 778 : (1975) 3 SCC 198 – referred to.


List of Acts


Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974; Narcotic Drugs and Psychotropic Substances Act, 1985; Customs Act, 1962; Constitution of India.


List of Keywords


Detenu; Preventive detention; Bail; Bail conditions; Smuggling; Section 3(1) of the COFEPOSA Act; Reasonableness of consideration; Subjective satisfaction; Judicial Review; Detaining authority; Liberty.


Case Arising From


CRIMINAL APPELLATE JURISDICTION: Criminal Appeal No. 1180 of 2025


From the Judgment and Order dated 29.10.2024 of the High Court of Delhi at New Delhi in WPCRL No. 1901 of 2024


Appearances for Parties


Advs. for the Appellant:


Farook M. Razack, Sr. Adv., Faisal Farook, Shubail Farook, Kshitij Kumar, Sharad Kumar Puri, Mrs. Priya Puri.


Advs. for the Respondents:


Vikramjit Banerjee, A.S.G., Gurmeet Singh Makker, Anuj Srinivas Udupa, Shubhendu Anand, Kartikeya Asthana, Sarthak Karol,

Ms. Priyanka Terdal.


Judgment / Order of the Supreme Court


Judgment


Leave granted.


2.The wife of the detenu; detained under the provisions of the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 19741, is before us challenging the order of detention. There is no challenge to the procedural aspects which have been scrupulously complied with. The High Court, before whom the detention order and its subsequent confirmation have been assailed rejected the contentions; which decision is impugned in the above appeal. The detention order, impugned before the High Court, is produced as Annexure P-1.


3.We have heard Mr. Farook M. Razack, learned Senior Counsel for appellant and Mr. Vikramjit Banerjee, learned Additional Solicitor General for India for the respondents.


4.Essentially, three grounds are raised before us to secure the release of the detenu who is behind bars for almost a year, the arrest being on 05.03.2024. That there is clear non-application of mind since the allegations are raised under clauses (i) to (iv) of Section 3(1) of the COFEPOSA Act, in an omnibus manner, clearly revealing the bias of the detaining officer. The attempt was to somehow obtain preventive detention of the person who was arrested on the basis of the offences alleged; in which crime he was granted bail by the jurisdictional Court, imposing very stringent conditions. Then, the Department had moved an application for cancellation of bail which was never pursued and importantly, the said application was not placed before the detaining authority. The detaining authority, thus, did not have the opportunity to consider the grounds raised for cancellation of bail and to consider as to why preventive detention should be made when such an application for cancellation of bail was pending before the competent Court. A cancellation would have resulted in the detenu being taken back in custody, in which event there was no cause for shackling the appellant on a preventive basis. When a judicious consideration was possible, as to whether the appellant should be taken back in custody, an order for preventive detention ought to have been avoided, which would also be in violation of the salutary provisions under Article 14, 19 and 21 of the Constitution of India, 1951. The last ground urged is that the impugned order refers to a conviction in a case involving narcotics which conviction is challenged before the Hon’ble Supreme Court by way of an appeal in which the detenu is also released on bail. The crime itself was registered way back and the incident has no live link with the order of detention. It is also urged that the proviso to Section 3(1) of the COFEPOSA Act specifically prohibited a detention under that provision if an order of detention can be made under Section 3 of the Narcotic Drugs and Psychotropic Substances Act, 19852.


5.To press home the contention of complete non-application of mind, the learned Senior Counsel for the appellant relied on a number of decisions. Clauses (i) to (iv) of Section 3(1) in seriatim refers to, smuggling goods (i), abetting the smuggling of goods (ii), engaging in transporting or concealing or keeping smuggled goods (iii) and dealing in smuggled goods otherwise than by engaging in transporting or concealing or keeping smuggled goods (iv). To consider whether the allegations against the detenu falls within all these, necessarily, we have to go through the detention order detailing the allegations raised against the detenu.


6.There was intelligence gathered that the detenu along with his wife (appellant-herein) were operating a syndicate involved in smuggling foreign original gold into India and selling it in the market. There was also specific intelligence regarding the transmission of 10 kg. of smuggled gold through named persons for selling in the local Mumbai market at a specified location; a shop room, wherein a raid was conducted on 05.03.2024. Huge cache of gold bars, coins and cut pieces along with a huge quantity of Indian currency was recovered from the premises. On enquiry with the persons present in the shop, it was disclosed that the contraband was brought in by Mohammad Rafique Noor Mohammad Razvi @ Aarif and Mahendra Jain and kept therein for sale in the local market on a cash basis without any invoice or bill. Mohammad Rafique Noor Mohammad Razvi @ Aarif and Mahendra Jain on being questioned admitted to the gold having been brought and kept at the shop on instructions from the detenu and they were stated to be acting as agents to sell the gold in the market on a commission basis. There were no documents produced pertaining to the cash and gold, to substantiate the legal sourcing of such goods and the same was seized by the officers of the Directorate of Revenue Intelligence3 who had conducted the raid.


7.The DRI officers then, based on the statements under Section 108 of the Customs Act, 19624, raided the residential premises of the detenu. The attempt made by the inmates to prevent entry was thwarted by the officers and the premises were found to be in complete disarray clearly indicating attempts to conceal contraband and other evidence regarding the smuggling activities carried on by the residents therein. The mobile phones and contraband, thrown away, were recovered from the office bearers of the Society of the residential complex and further contraband was also recovered from the residential premises of the detenu. The statements under Section 108 of the Customs Act reveal that continued smuggling activities involving gold bars and cut pieces of foreign origin was carried on by a syndicate headed by the detenu, in which Mohammad Rafique Noor Mohammad Razvi @ Aarif and Mahendra Jain acted as commission agents, the actual sale having been carried out through Ummed Singh and Mahipal Vyas, employees of the agents. All of them confirmed their involvement in the smuggling activities carried on by the detenu, who was the kingpin of the operation. Mohammad Rafique Noor Mohammad Razvi @ Aarif confessed to his involvement of smuggling gold bars acting as an agent for the detenu at a commission of Rs. 2000/- per kilogram. According to him, the detenu used to send 2 to 3 kilograms of smuggled gold, with foreign markings, every day for sale, upon which, the agent used to contact Mahendra Jain at his shop; which was the subject matter of the raid from which premises, the sale was effected. On the basis of the statement recorded of the aforesaid persons which was confirmed by the statement of the detenu under Section 108 of the Customs Act, the modus operandi of smuggling gold from Dubai to India through carriers, receipt of the same at Mumbai Airport at a pre-determined location by the detenu and his wife, the subsequent delivery to Mohammad Rafique Noor Mohammad Razvi @ Aarif and sale through him on a commission basis has been detailed in the order of detention. We are convinced that the above facts reveal that the detenu has not only been involved in smuggling of goods, but also has abetted such smuggling of goods through carriers, engaged in receiving the same, dispatching it to middle-men for keeping it concealed in their premises and effecting sale through them; who were paid a commission. This definitely brings in the ingredients of each of the clauses under (i) to (iv) of Section 3(1)1.


8.Narendra Purshotam Umrao v. B.B. Gujral,5 held that the different grounds mentioned in Section 3(1) are all regarding smuggling of goods and the word smuggling includes abetting smuggling activities. Therein also, the contention of non-application of mind was held to be not sustainable since there is always, on facts, overlapping of smuggling and its abetting. As was noticed above, in the present case it has been clearly substantiated that the detenu was at the helm of affairs of the smuggling of gold, a continuing activity, wherein he had engaged carriers to carry out the act of smuggling, from whom the smuggled goods were received either by him or his wife, alone or together and then transmitted to the agents who would sell them in the market on a cash basis without invoices or bills; the proceeds of which minus the commission is received by the detenu. There is a complete chain of activity revealed which commences with the detenu and ends with him, bringing in the ingredients of all the four provisions.


9.We, further, notice from the detention order, which has been extracted in the judgment of the High Court, from paragraph 3 to 9 where the satisfaction has been entered by the detaining authority. The detenu was found to be a habitual offender and a key person of the well-organized syndicate involved in smuggling and disposal of foreign gold brought illegally into India, which activity was habitually carried out through his associates without declaration before the customs authorities and without payment of applicable duties. The smuggling of gold was for the purpose of illegal profiteering putting the national economy into danger which activity was sought to be curbed by the detention order. The detenu was found to have indulged in the activities amounting to smuggling under both the Customs Act and the COFEPOSA Act. The detenu was also found to have an innate propensity to devise ways and means to smuggle foreign gold into India which was done through a well-organized smuggling network and an established mechanism operated through trusted associates. The habitual indulgence in such fraudulent activities by way of smuggling goods, abetting of smuggling of goods, engaging in transporting and concealing or keeping the smuggled goods and dealing in such smuggled goods at the cost of government revenue and national security was found to be with a clear motive of illegal enrichment with no concern to the general economy and national security interests. The detenu was found to have played a vital role in smuggling foreign original gold through the organized network and executing disposal of such smuggled goods with meticulous planning and deliberate design, regardless of the consequences to the society at large. The detaining authority not only has detailed the various aspects of smuggling carried out by the detenu but has also brought out the ingredients of each of clauses (i) to (iv) of Section 3(1) for the purpose of ordering preventive detention, validated further by the huge seizures made from different locations.


10.The further contention taken by the appellant is of there being no live link insofar as the reference to the case under the NDPS Act; the subject matter of which cannot also be proceeded with under the COFEPOSA Act, due to the prohibition in the proviso to Section 3(1). True, there is a reference to the crime under the NDPS Act as one in which the appellant was involved. However, the same was only in relation to the specific ground taken by the detaining authority that after release of the detenu from jail in Baroda, in October, 2013; pursuant to the bail granted by this Court, the detenu had officially changed his name from ‘Afzal Haroon Batatawala’ to ‘Sameer Haroon Marchant’, in which name he was arrested in a case of gold smuggling in the year 2017. We do not find any reference made to the allegations in the narcotics case in the operative portion of the detention order. It cannot be disputed that there is no live link with the arrest in the narcotics case, in which, by the year 2013, he had spent nine years of the sentence awarded. The subject matter of a narcotics case cannot also be a ground for preventive detention under Section 3(1) of the COFEPOSA Act. Be that as it may, we do not find either of these points, vitiating the impugned order, since, neither is the subject matter of offence under the NDPS Act referred to in the detaining order nor is the involvement in the said crime a ground taken for detention under the COFEPOSA Act. As is noticed above, reference to the NDPS case is only to emphasise the propensity of the detenu to involve in such illegal activities by even changing the name officially, to supress his real identity. We do not find any reason to hold the detention to be illegal on the ground of a mere reference to the NDPS case; which we reiterate is only to emphasise the change in name resorted to by the detenu after being released on bail.


11.The decision in Khaja Bilal Ahmed v. State of Telangana6 deprecated the order of the detaining authority which merely referred to a pending criminal case, without any clear indication and casual connection to hold it as the basis of an order of detention. We have already found that, here, the involvement in a case under the NDPS Act, was not raised as a ground, anywhere in the detention order. The incidents which led to the impugned detention order commenced on a raid in the premises of the detenu’s associates followed up with successive raids at the residence of the detenu and other associates, from all of which locations there was recovery of huge cache of contraband; commending us to uphold the subjective satisfaction entered into by the detaining authority.


12.The last contention raised is with respect to the application for cancellation of bail having not been placed before the detaining authority. The impugned judgment has specifically considered the said ground and finds that the application for cancellation of bail was filed on 06.05.2024 and the detention order was passed on 09.05.2024. There was no possibility of placing the said document before the detaining authority and the same would not amount to non-supply of a vital document, since the cancellation of bail cannot be considered as an alternative to a detention order. We would, rather, emphasise on the undisputed fact that both the parties are in agreement that the cancellation of bail has not been pursued by the department. The grounds for cancellation of bail could not have swayed the detaining authority this way or that way; since it was not competent on the authority to speculate as to whether the jurisdictional Court would permit such cancellation. In fact, if the application for cancellation of bail was allowed then probably the situation would have been different. We are also of the opinion that the non-supply of the application for cancellation of bail would not be a compelling circumstance to find the order itself to be vitiated. We find absolutely no reason to interfere with the preventive detention order on the grounds stated herein above.


13.However, as the sentinel on the qui vive we cannot, but, notice a compelling ground, which was not argued before us. Admittedly, after the successive raids and the arrest of the accused, including the detenu, the accused were remanded to judicial custody. The original confessional statements were retracted when they were produced before the Additional Chief Metropolitan Magistrate at the 19th Court, Esplanade, Mumbai. The detenu was initially placed in judicial custody till 19.03.2024 and an extension was subsequently granted till 01.04.2024 by the jurisdictional Magistrate who further extended the judicial custody till 15.04.2024. The bail application dated 01.04.2024 before the jurisdictional Magistrate was replied to by the DRI, Mumbai on 15.04.2024.


14.The jurisdictional Magistrate released the detenu on bail vide order dated 16.04.2024 on certain conditions. The order of the Magistrate is extracted in the impugned judgment. The contentions raised by the DRI regarding the all-pervasive role of the detenu and his propensity to indulge in such smuggling activities, detrimental to the interest of the nation was considered in juxtaposition with the contention raised by the accused; on the basis of the investigation carried out thus far. The specific ground raised by the prosecution of apprehension of involvement in similar type of smuggling activity was reckoned by the jurisdictional Magistrate while granting bail and imposing conditions to prevent the detenu from engaging in such smuggling activities. The various conditions are revealed from the order extracted and have been referred to in paragraph-(xxii) of the detention order. However, nothing is stated by the detaining authority as to why the conditions are not sufficient to prevent the detenu from engaging in further activities of smuggling; which was the specific ground on which the conditions were imposed while granting bail.


15.We are not examining the conditions imposed by the Magistrate since it was for the detaining authority to look into it and enter into a subjective satisfaction as to whether the same was sufficient to avoid a preventive detention or otherwise, insufficient to restrain him from further involvement in similar smuggling activities. As has been held in Rameshwar Lal Patwari v. State of Bihar7 :


“The formation of the opinion about detention rests with the Government or the officer authorised. Their satisfaction is all that the law speaks of and the courts are not constituted an Appellate Authority. Thus the sufficiency of the grounds cannot be agitated before the court. However, the detention of a person without a trial, merely on the subjective satisfaction of an authority however high, is a serious matter. It must require the closest scrutiny of the material on which the decision is formed, leaving no room for errors or at least avoidable errors. The very reason that the courts do not consider the reasonableness of the opinion formed or the sufficiency of the material on which it is based, indicates the need for the greatest circumspection on the part of those who wield this power over others.’


[underlining by us for emphasis]


16.If there is a consideration, then the reasonableness of the consideration could not have been scrutinised by us in judicial review, since we are not sitting in appeal and the provision for preventive detention provide for such a subjective satisfaction to be left untouched by the Courts. However, when there is no such consideration then we have to interfere.


17.Ameena Begum v. State of Telangana and others8 held that the observations in Rekha v. State of T.N.9; that preventive detention is impermissible when the ordinary law of the land is sufficient to deal with the situation was per incuriam to the Constitution Bench decision in Haradhan Saha v. State of W.B.10, in the limited judicial review available to constitutional courts in preventive detention matters. The Courts would be incapable of interference by substituting their own reasoning to upset the subjective satisfaction arrived at by the detaining authority, especially since preventive detention law is not punitive but preventive and precautionary.


18.In Ameena Begum8, this Court was concerned with the true distinction between a threat to “law and order” and acts “prejudicial to public order”, which was not to be determined merely by the nature or quality of the act complained of, but was held to lie, in the proper degree and extent of its impact on the society. It was held that there could be instances where “disturbance of public order” would not be attracted but still, would fall within the scope of maintenance of “law and order”. It was held that :- “preventive detention laws—an exceptional measure reserved for tackling emergent situations—ought not to have been invoked in this case as a tool for enforcement of “law and order” (sic para 47), especially when the existing legal framework to maintain law and order is sufficient to address the offences under consideration.


19.Likewise, in the present case, we are not concerned as to whether the conditions imposed by the Magistrate would have taken care of the apprehension expressed by the detaining authority; of the detenu indulging in further smuggling activities. We are more concerned with the aspect that the detaining authority did not consider the efficacy of the conditions and enter any satisfaction, however subjective it is, as to the conditions not being sufficient to restrain the detenu from indulging in such activities.


20.Ameena Begum,8 noticed with approval Vijay Narain Singh v. State of Bihar11 and extracted paragraph 32 from the same:


“It is well settled that the law of preventive detention is a hard law and therefore it should be strictly construed. Care should be taken that the liberty of a person is not jeopardised unless his case falls squarely within not be used merely to clip the wings of an accused who is involved in a criminal prosecution. It is not intended for the purpose of keeping a man under detention when under ordinary criminal law it may not be possible to resist the issue of orders of bail, unless the material available is such as would satisfy the requirements of the legal provisions authorising such detention. When a person is enlarged on bail by a competent criminal court, great caution should be exercised in scrutinising the validity of an order of preventive detention which is based on the very same charge which is to be tried by the criminal court.”


[underlining by us for emphasis]


21.The criminal prosecution launched and the preventive detention ordered are on the very same allegations of organised smuggling activities, through a network set up, revealed on successive raids carried on at various locations, on specific information received, leading to recovery of huge cache of contraband. When bail was granted by the jurisdictional Court, that too on conditions, the detaining authority ought to have examined whether they were sufficient to curb the evil of further indulgence in identical activities; which is the very basis of the preventive detention ordered. The detention order being silent on that aspect, we interfere with the detention order only on the ground of the detaining authority having not looked into the conditions imposed by the Magistrate while granting bail for the very same offence; the allegations in which also have led to the preventive detention, assailed herein, to enter a satisfaction as to whether those conditions are sufficient or not to restrain the detenu from indulging in further like activities of smuggling.


22.We, hence, allow the appeal and set aside the order of detention. The detenu shall be released forthwith, if still in custody.


23.Pending application(s), if any, shall stand disposed of.


Result of the case: Appeal allowed.


1 “the COFEPOSA Act”


2 “NDPS Act”


3 “DRI”


4 “Customs Act”


5 (1979) 2 SCC 637


6 (2020) 13 SCC 632


7 AIR 1968 SC 1303


8 (2023) 9 SCC 587


9 (2011) 5 SCC 244


10 (1975) 3 SCC 198


11 (1984) 3 SCC 14

Penal Code, 1860 – ss.376, 384, 323, 504, 506 – Code of Criminal Procedure, 1973 – s.482 – Criminal proceeding against the appellant for having sexually exploited/assaulted the complainant for over a period of 16 years, based on a false promise of marriage – Appellant chargesheeted u/ss.376, 384, 323, 504, 506 – Appellant sought quashing of proceedings – Rejected by the High Court – Justification: Held: Accused is not liable for the offence of rape if the victim has wilfully agreed to maintain sexual relations – Complainant’s allegations seem to be well-arranged story – Complainant, being a highly qualified major woman continued unabatedly in a consensual intimate sexual relationship with the appellant over a period of 16 years, which is sufficient to conclude that there was never an element of force or deceit in the relationship – It cannot be said that the appellant is liable to be prosecuted for having sexually exploited/assaulted the complainant based on a false promise of marriage – Allegations of the complainant are full of material contradictions and are ex facie unbelievable – Throughout the prolonged period of 16 years, the complainant kept completely quiet about the alleged sexual abuse, meted out to her by the appellant until she learnt that the appellant had married another woman – Further in complete contradiction to the case setup in the FIR, the complainant has on many occasions portrayed herself to be the wife of the appellant and thus, evidently, they lived together as man and wife – Long gap of 16 years between the first alleged act of sexual intercourse, continued relations for one and a half decade till the filing of the FIR convinces that it is a clear case of a love affair/live in relationship gone sour – Allowing the prosecution of the appellant to continue for the offences alleged, would be nothing short of a gross abuse of the process of law– Impugned order quashed and set aside – Impugned FIR and proceedings arising thereunder quashed. [Paras 21, 24, 25, 27, 35, 37, 39]

[2025] 3 S.C.R. 303 : 2025 INSC 308


Rajnish Singh @ Soni v. State of U.P. and Another

(Criminal Appeal No. 1055 of 2025)


03 March 2025


[Vikram Nath and Sandeep Mehta,* JJ.]

Issue for Consideration


Matter pertains to the liability of the appellant to be prosecuted for committing rape upon the complainant by giving her a false promise of marriage; and the correctness of the order passed by the High Court dismissing the petition seeking the quashing of the criminal proceedings arising out of the chargesheet u/ss.376, 384, 323, 504, 506 IPC.


Headnotes


Penal Code, 1860 – ss.376, 384, 323, 504, 506 – Code of Criminal Procedure, 1973 – s.482 – Criminal proceeding against the appellant for having sexually exploited/assaulted the complainant for over a period of 16 years, based on a false promise of marriage – Appellant chargesheeted u/ss.376, 384, 323, 504, 506 – Appellant sought quashing of proceedings – Rejected by the High Court – Justification:


Held: Accused is not liable for the offence of rape if the victim has wilfully agreed to maintain sexual relations – Complainant’s allegations seem to be well-arranged story – Complainant, being a highly qualified major woman continued unabatedly in a consensual intimate sexual relationship with the appellant over a period of 16 years, which is sufficient to conclude that there was never an element of force or deceit in the relationship – It cannot be said that the appellant is liable to be prosecuted for having sexually exploited/assaulted the complainant based on a false promise of marriage – Allegations of the complainant are full of material contradictions and are ex facie unbelievable – Throughout the prolonged period of 16 years, the complainant kept completely quiet about the alleged sexual abuse, meted out to her by the appellant until she learnt that the appellant had married another woman – Further in complete contradiction to the case setup in the FIR, the complainant has on many occasions portrayed herself to be the wife of the appellant and thus, evidently, they lived together as man and wife – Long gap of 16 years between the first alleged act of sexual intercourse, continued relations for one and a half decade till the filing of the FIR convinces that it is a clear case of a love affair/live in relationship gone sour – Allowing the prosecution of the appellant to continue for the offences alleged, would be nothing short of a gross abuse of the process of law– Impugned order quashed and set aside – Impugned FIR and proceedings arising thereunder quashed. [Paras 21, 24, 25, 27, 35, 37, 39]


Case Law Cited


Mahesh Damu Khare v. State of Maharashtra, 2024 SCC OnLine SC 3471; Prashant v. State (NCT of Delhi) 2024 SCC OnLine SC 3375; Deepak Gulati v. State of Haryana [2013] 6 SCR 544 : (2013) 7 SCC 675; Shivashankar v. State of Karnataka (2019) 18 SCC 204 – referred to.


List of Acts


Code of Criminal Procedure, 1973; Penal Code, 1860.


List of Keywords


Quashing of criminal proceedings; Forcible sexual intercourse; Promise of marriage; Obscene video; Causing miscarriage; Threat of making the obscene video/pictures viral; Forcibly taking money; Agreement of marriage; Relationship between two consenting adults; Love affair subsisting over one and a half decade; Gross abuse of process of law; Physical relationship directly traceable to false promise; Vitiation of consent under misconception of fact; Misconception of marriage; Secret marriage ceremony; Distinction between rape and consensual intercourse; Living together as man and wife; Ex facie unbelievable allegations.


Case Arising From


CRIMINAL APPELLATE JURISDICTION: Criminal Appeal No. 1055 of 2025


From the Judgment and Order dated 24.04.2023 of the High Court of Judicature at Allahabad In A482 No. 43177 of 2022


Appearances for Parties


Advs. for the Appellant:


Dr. Purvish Malkan, Sr. Adv., Pradeep Kumar Yadav, Vishal Thakre, Ms. Anjale Kumari, Ms. Manshu Sharma, Dinesh Satyapal Sehgal, Aditya Yadav, Sanjeev Malhotra.


Advs. for the Respondents:


Ankit Goel, Vikas Bansal, Harshit Singhal, Nitin Meshram, Saurabh Singh, Rishi Raj Singh, Ranbir Singh Yadav.


Judgment / Order of the Supreme Court


Judgment


Mehta, J.


1.Heard.


2.Leave granted.


3.The appellant herein has preferred the instant appeal by special leave, assailing the order dated 24th April, 2023, passed by the learned Single Judge of the High Court of Judicature at Allahabad1 dismissing the petition filed by the appellant, being Application U/S 482 No. 43177 of 2022, for quashment of the proceedings of Criminal Case No. 1246 of 2022 arising out of chargesheet in Case Crime No. 269 of 2022 under Sections 376, 384, 323, 504, 506 of the Indian Penal Code, 18602 at Police Station Bakewar, District Etawah.


4.Brief facts relevant and essential for the disposal of the present appeal are reproduced hereinbelow.


5.Ms. A, respondent No. 2-complainant,3 lodged an FIR in Case Crime No. 269 of 2022 dated 5th July, 2022, against the appellant at Police Station Bakewar, District Etawah alleging, inter alia, that she is a resident of village Kudaria and was qualified with degrees in M.Com and B.Ed. and since 2008, she had been serving on the post of Lecturer in AFS Bhemora College in Lucknow.


6.It was alleged that the accused, appellant herein, sometime in the year 2006, sneaked into the house of the complainant in the night and subjected her to forcible sexual intercourse. She was neither able to scream nor could call out for help as the appellant had gagged her mouth due to which her parents, who were also present in the house, were unable to get a wind of the incident. She warned the appellant that she would disclose about the incident to her family members, upon which the appellant apologised profoundly and requested her to remain quiet and gave her an assurance of marriage. The complainant, therefore, neither lodged any complaint nor did she take other action in respect of the incident of sexual assault upon her.


7.The appellant initially, was working as a constable in the police department. Later, in 2009, he joined as a Clerk in the State Bank of India in Dhani branch of Maharajganj district. In the intervening period, the intimacy between the appellant and the complainant continued to flourish. The appellant had once called the complainant to Maharajganj, where he made her to consume some intoxicant mixed with ENO, without her knowledge, which made her semi-conscious. Taking advantage, the appellant subjected her to forcible sexual intercourse. He not only video-graphed the offending acts but later, showed it to the complainant when she regained consciousness. The complainant, fearing retribution in society, did not share information about the said incident with anyone. Subsequently, the complainant became pregnant which was confirmed with a pregnancy detection kit. When this information came to the knowledge of the appellant, he mixed some medication in water and made the complainant to drink it in order to cause miscarriage. Since the appellant continuously blackmailed and threatened the complainant using the obscene video, she did not tell anyone about the abortion.


8.The complainant had initially gone to meet the appellant out of her own free will, but the appellant, later on, pressurised her under the threat of making the obscene video/pictures viral. She would therefore, meet him only with the objective of collecting the video from him so that she could delete it. In 2015, the appellant called the complainant to Pratapgarh and threatened her that if she did not accede to his demands, he would make the video viral.


9.Additionally, it was also alleged in the FIR that the appellant forcibly took money from the complainant on a number of occasions. In 2011, the appellant had taken a cheque of Rs.94,000/- from the complainant, however, he did not return a dime to her. As the appellant threatened her by using the obscene video of intimate relations that he possessed, she did not complain to anyone, about the aforesaid criminal acts that had taken place with her between the years 2006 to 2021.


10.In 2021, a woman, named Namrata, entered into the life of the appellant, whereupon the complainant filed a complaint with Lucknow Commissionerate. However, she was advised to go to Etawah Police Station. Thereupon, she lodged a complaint against the appellant at the One Stop Centre, Lalitpur on 23rd March, 2022 which was closed based upon an agreement entered into between the complainant and the appellant, wherein they both agreed to marry each other. However, on 22nd April, 2022, the appellant resiled from his promise and married Namrata. When the factum of appellant’s marriage came to the complainant’s knowledge, she immediately shared the information of the illegal acts and incidents of sexual assaults by the appellant with her family members and the people of her community. Later, when she decided to take police action, the appellant along with his brother-Ashwani and father-Rajbahadur made an attempt to cause harm to her parents. On 1st May, 2022, the appellant barged into her house, in the presence of her parents, and threatened that she would be killed if she continued with the legal cases filed by her.


11.Based on the above allegations, an FIR4 dated 5th July, 2022, came to be registered against the appellant for the offences punishable under Sections 313, 376, 384, 323, 504 and 506 of IPC and investigation was commenced. Almost similar allegations were set in the statements of the complainant recorded under Sections 161 and 164 of Code of Criminal Procedure, 19735 and in addition, she further stated that upon discovering that the appellant had developed relations with Namrata, she had disclosed everything to her but in spite thereof, Namrata got married to appellant on 22nd April, 2022.


12.Consequent to the completion of the investigation, the police submitted a report under Section 173(2) CrPC dated 29th September, 2022, against the appellant for the offences punishable under Sections 376, 384, 323, 504 and 506 IPC in the Court of learned Additional Chief Judicial Magistrate, Court No.-04, Etawah. Vide order dated 10th November, 2022, the learned Magistrate took cognizance for the above offences and issued summons to the appellant. Aggrieved, the appellant filed a criminal petition under Section 482 CrPC seeking quashing of the proceedings in Criminal Case No. 1246 of 2022 in the High Court. The quashing petition stands rejected vide order dated 24th April, 2023, which is assailed in this appeal by special leave.


SUBMISSIONS ON BEHALF OF THE APPELLANT: -


13.Learned counsel for the appellant vehemently and fervently urged that the entire case as set out in the impugned FIR and the chargesheet is false and cooked up. The complainant is a major educated girl, who was fully conscious of the consequences of the intimate relationship which flourished between her and the appellant for a period of almost 16 years. The acts of repeated intimacy and sexual relations were totally consensual in nature and were not established under any false promise, threat, duress or coercion. The appellant all along intended to marry the complainant. He thus, urged that the case of a prolonged voluntary relationship/love affair between two consenting adults has been given a colour of forcible sexual intercourse with oblique purposes and motive.


14.Learned counsel further submitted that, as a matter of fact, the appellant and the complainant had performed the rituals of marriage with each other during the subsistence of their love affair which extended to over one and a half decade. However, the relationship went sour leading to the strife and culminated into the FIR. In this regard, he placed reliance on the application dated 25th May, 2022, given by the complainant to the Senior Superintendent of Police, Etawah and urged that the said application was filed prior to the lodging of the FIR, wherein the complainant had categorically mentioned her marital status as the wife of the appellant. She had also alleged in the complaint that her husband, i.e., the appellant herein, had refused to keep her with him.


15.Learned counsel urged that it is a case of voluntary sexual relationship between two consenting adults and hence, the proceedings of the criminal case registered against the appellant for the aforesaid offences, tantamount to a gross abuse of the process of law and therefore, the same deserve to be quashed.


SUBMISSIONS ON BEHALF OF THE RESPONDENTS: -


16.Per contra, learned counsel for the State and learned counsel appearing for the complainant have vehemently opposed the submissions advanced by the counsel for the appellant. They urged that the appellant won over the confidence of the complainant by giving her false assurances of marriage and based on such promise he sexually exploited her, when in fact, he had no intentions to marry her. After subjecting the complainant to forcible sexual intercourse repeatedly over a period of almost 15 years, the appellant ditched her and married another woman.


17.Learned counsel further contended that the appellant had also recorded intimate videos and pictures of the complainant and blackmailed her under the threat of making them viral. They, urged that the High Court was justified in dismissing the criminal petition filed by the appellant and hence, sought rejection of the present appeal.


ANALYSIS AND CONCLUSION: -


18.We have given our anxious consideration to the submissions advanced at the bar and have carefully gone through the impugned judgment and the material placed on record.


19.The allegation that the appellant spiked the complainant’s drink and caused her miscarriage stands refuted as the Investigation Officer has deleted Section 313 IPC while submitting the police report under Section 173(2) CrPC dated 29th September, 2022. Further, Investigation Officer also concluded that the involvement of the other co-accused, i.e., the relatives of the appellant who were arraigned by the complainant in the FIR, was not substantiated by any reliable evidence and thus, the chargesheet was only submitted against the appellant.


20.Therefore, we have to consider whether in the facts and circumstances of the present case, the appellant is liable to be prosecuted for committing rape upon the complainant by giving her a false promise of marriage.


21.There is no dispute that the complainant, a highly qualified female, was major at the time when her relationship with the appellant sprouted. The first act of sexual intercourse between the appellant and the complainant is alleged to have taken place in the year 2006 and that too in her own house. However, at that time, the complainant did not make any complaint to anyone, including her own family members, that the appellant had established sexual relations with her based on an express promise to marry her in future. It needs to be highlighted that the complainant categorically came out with a case in the FIR that the first act of sexual relation between her and the appellant (albeit forcible as per the complainant) took place in her own house where her parents were also present. The very manner in which this incident is said to have taken place, puts the case of the complainant under serious doubt. It is difficult to swallow that the complainant, a well-qualified major girl, was subjected to forcible sexual intercourse by an outsider in her own house where her parents were present and still, they did not get a whiff about the incident. Thus, the complainant’s allegations seem to be a well-orchestrated story and nothing beyond that.


22.It was nearly 16 years since the first incident, in a highly belated FIR, that the complainant alleged, for the first time, that the appellant, who was on friendly terms with her, forcibly subjected her to sexual intercourse in the year 2006. Further, she also stated that though she initially protested to this act and intended to report the matter to the police, she changed her mind trusting the appellant’s assurance that he loved her and if she refrained from spilling the beans, he would marry her. Under this guise, the appellant continued to establish sexual relations with the complainant.


23.Admittedly, the appellant got a job in the year 2006 as a Constable in the police department and was posted in a different town. The complainant alleged that whenever the appellant would visit the village Kudaria, he would establish sexual relations with her under the promise of marriage. However, she has not clarified or elaborated when and where these acts of fornication took place. In the year 2008, the complainant came to be appointed as a Lecturer in the Kendriya Vidyalaya whereas, the appellant in the year 2009, got a job as a Clerk in the State Bank of India. As per the complainant, in the year 2009, the appellant called her to his residence in the town Farinda, Anand Nagar, where he mixed certain intoxicating substance in her drink and thereafter, subjected her to sexual assault and while she was in the state of drug induced stupor, he recorded her obscene videos and pictures. He, thereafter, sent offensive messages to the complainant on WhatsApp, threatening that he would make her videos and pictures viral unless she continued to have sexual relations with him.


24.It does not stand to reason that when the intimate relations were continuing between the parties without any hitch for more than three years, then why would the appellant be impelled to take the trouble of spiking the drink of the complainant in order to establish sexual relations with her.


25.It is hard to believe that the complainant, being a highly qualified and well-placed major woman, kept on bending to the demands of the appellant for a period of nearly 16 years without raising any protest to any quarter that the appellant was exploiting her sexually under the pretext of a false promise of marriage. The prolonged period of 16 years during which the sexual relations continued unabatedly between the parties, is sufficient to conclude that there was never an element of force or deceit in the relationship. The complainant and the appellant were posted at different places pursuing their respective jobs. On a few occasions, the appellant would visit the complainant at her place whereas on other occasions, the complainant was called by the appellant to his house where these acts of fornication continued unabatedly till the year 2020/2021. It is almost impossible to swallow the version of the complainant that for the entire period of 16 years, she unreservedly allowed the appellant to subject her to repeated acts of sexual intercourse under the impression that the accused would on someday act upon his promise of marriage.


26.In the case of Mahesh Damu Khare v. State of Maharashtra,6 this Court held that to make a man, accused of having sexual relationship by making a false promise of marriage, criminally liable, the physical relationship must be traceable directly to the false promise made and it must not be qualified by other circumstances or consideration. In a situation where the woman knowingly maintains the physical relationship for a prolonged period, it cannot be said with certainty that the said physical relationship was purely because of alleged promise made by the accused to marry her.


27.In conclusion, the Court held that unless it can be shown that the physical relationship was purely because of the promise of marriage and without being influenced by any other consideration, it cannot be said that there was vitiation of consent under misconception of fact. It was further held that even if it is assumed that a false promise of marriage was made to the complainant initially by the accused, the fact that the relationship continued for a period of nine long years would render the plea of the complainant that her consent for all these years was under misconception of the fact that the accused would marry her implausible.


28.In the case of Prashant v. State (NCT of Delhi),7 this Court observed that it is inconceivable that the complainant would continue to meet the accused or maintain a prolonged association or physical relationship with him in the absence of voluntary consent on her part.


29.Testing the facts of the case at hand, on the touchstone of the above precedents, it is clear that the complainant, being a highly qualified major woman continued in a consensual intimate sexual relationship with the appellant over a period of 16 years. At some point in time, the relationship went sour leading to the filing of the FIR. No reasonable man would accept the version that the complainant allowed the accused to establish sexual relations with her over a period of 16 years purely under the misconception of marriage.


30.There is no dispute that from the year 2006 onwards, the complainant and the appellant were residing in different towns. The complainant is an educated woman and there was no pressure whatsoever upon her which could have prevented her from filing a police complaint against the accused if she felt that the sexual relations were under duress or were being established under a false assurance of marriage. On many occasions, she even portrayed herself to be the wife of the appellant thereby, dispelling the allegation that the intention of the appellant was to cheat her right from the inception of the relationship. We cannot remain oblivious to the fact that it was mostly the complainant who used to travel to meet the appellant at his place of posting. Therefore, we are convinced that the relationship between the complainant and appellant was consensual without the existence of any element of deceit or misconception.


31.Further, the application filed by the complainant at One Stop Center, Lalitpur on 23rd March, 2022, makes it abundantly clear that she was in a consensual relationship with the appellant since 2006. It is alleged in the complaint that when she had proposed that they should marry and live together, the appellant physically abused her and beat her up. If at all there was an iota of truth in this allegation then the FIR should have been registered immediately after this incident. However, it is only when it came to the knowledge of the complainant that the appellant was getting married to another woman, in an attempt to stop his marriage, she filed aforesaid complaint at the One Stop Center wherein she also admitted that she was equally guilty as the appellant and therefore, his marriage must be stopped.


32.Further, on the perusal of the statement made by the complainant under Section 161 CrPC, it is evident that she came to know about the relations between the appellant and Namrata in the year 2020-2021. Thus, once the complainant was aware that the appellant had broken the ties with her and was involved in a relationship with another woman, there was no reason for her to hold back from filing the FIR.


33.To the contrary, the complainant has herself set up a case that there was a secret marriage ceremony between her and the appellant. Therefore, in our opinion, even if the allegations made by the complainant are accepted on their face value, it is evident that the appellant and the complainant were in a long-standing live-in relationship during which they even performed marriage rituals albeit informal in nature.


34.It is trite that there is a distinction between rape and consensual intercourse. This Court in Deepak Gulati v. State of Haryana,8 differentiated between a mere breach of promise and not fulfilling a false promise and held that an accused will only be liable if the Courts concludes that his intentions are mala fide and he has clandestine motives. The relevant extract is reproduced hereinbelow: -


“21. Consent may be express or implied, coerced or misguided, obtained willingly or through deceit. Consent is an act of reason, accompanied by deliberation, the mind weighing, as in a balance, the good and evil on each side. There is a clear distinction between rape and consensual sex and in a case like this, the court must very carefully examine whether the accused had actually wanted to marry the victim, or had mala fide motives, and had made a false promise to this effect only to satisfy his lust, as the latter falls within the ambit of cheating or deception. There is a distinction between the mere breach of a promise, and not fulfilling a false promise. Thus, the court must examine whether there was made, at an early stage a false promise of marriage by the accused; and whether the consent involved was given after wholly understanding the nature and consequences of sexual indulgence. There may be a case where the prosecutrix agrees to have sexual intercourse on account of her love and passion for the accused, and not solely on account of misrepresentation made to her by the accused, or where an accused on account of circumstances which he could not have foreseen, or which were beyond his control, was unable to marry her, despite having every intention to do so. Such cases must be treated differently. An accused can be convicted for rape only if the court reaches a conclusion that the intention of the accused was mala fide, and that he had clandestine motives.


. . .


24. Hence, it is evident that there must be adequate evidence to show that at the relevant time i.e. at the initial stage itself, the accused had no intention whatsoever, of keeping his promise to marry the victim. There may, of course, be circumstances, when a person having the best of intentions is unable to marry the victim owing to various unavoidable circumstances. The “failure to keep a promise made with respect to a future uncertain date, due to reasons that are not very clear from the evidence available, does not always amount to misconception of fact. In order to come within the meaning of the term “misconception of fact”, the fact must have an immediate relevance”. Section 90 IPC cannot be called into aid in such a situation, to pardon the act of a girl in entirety, and fasten criminal liability on the other, unless the court is assured of the fact that from the very beginning, the accused had never really intended to marry her.”


(emphasis supplied)


35.It is, therefore, clear that the accused is not liable for the offence of rape if the victim has wilfully agreed to maintain sexual relations. The Court has also recognised that a prosecutrix can agree to have sexual intercourse on account of her love and passion for the accused.


36.This Court in Shivashankar v. State of Karnataka,9 had quashed criminal proceedings on the ground that it is difficult to hold sexual intercourse in the course of a relationship, which continued for eight years, as ‘rape’ especially when the complainant therein had alleged that they lived together as man and wife. The relevant extract is reproduced hereinbelow: -


“4. In the facts and circumstances of the present case, it is difficult to sustain the charges levelled against the appellant who may have possibly, made a false promise of marriage to the complainant. It is, however, difficult to hold sexual intercourse in the course of a relationship which has continued for eight years, as “rape” especially in the face of the complainant’s own allegation that they lived together as man and wife.”


(emphasis supplied)


37.Thus, by no stretch of imagination, can this Court be convinced that present is a case wherein the appellant is liable to be prosecuted for having sexually exploited/assaulted the complainant based on a false promise of marriage. The allegations of the complainant are full of material contradictions and are ex facie unbelievable. Throughout the prolonged period of 16 years, the complainant kept completely quiet about the alleged sexual abuse, meted out to her by the appellant until she learnt that the appellant had married another woman. Further in complete contradiction to the case setup in the FIR, the complainant has on many occasions portrayed herself to be the wife of the appellant and thus, evidently, they lived together as man and wife. Additionally, the long gap of 16 years between the first alleged act of sexual intercourse, continued relations for one and a half decade till the filing of the FIR convinces us that it is a clear case of a love affair/live in relationship gone sour.


38.In this background, we are of the opinion that allowing the prosecution of the appellant to continue for the offences alleged, under Sections 376, 384, 323, 504 and 506 IPC would be nothing short of a gross abuse of the process of law.


39.The order dated 24th April, 2023, passed by the High Court of Judicature at Allahabad is quashed and set aside and as a consequence, the impugned FIR No. 269 of 2022 and all the consequent proceedings sought to be taken thereunder against the appellant are also quashed and set aside.


40.The appeal is allowed accordingly.


41.Pending application(s), if any, shall stand disposed of.


Result of the case: Appeal allowed.


1 Hereinafter, referred to as ‘High Court’.


2 Hereinafter, being referred to as ‘IPC’.


3 For short, ‘complainant’.


4 FIR No. 269 of 2022.


5 Hereinafter, referred to as ‘CrPC’.


6 2024 SCC OnLine SC 3471


7 2024 SCC OnLine SC 3375


8 (2013) 7 SCC 675


9 (2019) 18 SCC 204

Consumer Protection Act, 1986 – s.27 – Insolvency and Bankruptcy Code, 2016 – s.96 – The NCDRC imposed multiple penalties on the appellant for failing to deliver possession of residential units to home-buyers as per the agreed timeline – The appellant sought a stay on the penalty proceedings before the NCDRC, contending that an application u/s.95 of the IBC has been filed against them, triggering an interim moratorium u/s.96 of the IBC – The NCDRC vide the impugned order dated 07.02.2024 rejected this application, holding that consumer claims and the penalty imposed did not fall within the moratorium under the IBC – Correctness: Held: In the present case, the damages awarded by the NCDRC arise from a consumer dispute, where the appellant has been held liable for deficiency in service – Such damages are not in the nature of ordinary contractual debts but rather serve to compensate the consumers for loss suffered and to deter unethical business practices – Courts and tribunals, including the NCDRC, exercise their statutory jurisdiction to award such damages, and these are distinct from purely financial debts that may be subject to restructuring under the IBC – Since such damages are covered under "excluded debts" as per s.79(15) of the IBC, they do not get the benefit of the moratorium u/s.96 of the IBC, and their enforcement remains unaffected by the initiation of insolvency proceedings – The penalties imposed by the NCDRC arise due to non-compliance with consumer protection laws and serve a regulatory function rather than constituting "debt recovery proceedings" – This distinction is crucial – The IBC is designed to deal with insolvency resolution and financial distress, whereas consumer protection laws exist to uphold consumer rights and ensure fair business practices – The penalties u/s. 27 of the CP Act are aimed at compelling compliance and cannot be equated with recovery of an outstanding debt – The appellant cannot claim that such penalties fall within the scope of a debt moratorium, as they do not constitute financial liabilities owed to a creditor but rather statutory obligations enforced to uphold consumer rights. [Paras 33, 35]

[2025] 3 S.C.R. 325 : 2025 INSC 314


Saranga Anilkumar Aggarwal v. Bhavesh Dhirajlal Sheth & Ors.

(Civil Appeal No. 4048 of 2024)


04 March 2025


[Vikram Nath* and Prasanna B. Varale, JJ.]

Issue for Consideration


Whether the execution of penalty orders passed by the NCDRC can be stayed under the interim moratorium provisions of s.96 of the Insolvency and Bankruptcy Code, 2016.


Headnotes


Consumer Protection Act, 1986 – s.27 – Insolvency and Bankruptcy Code, 2016 – s.96 – The NCDRC imposed multiple penalties on the appellant for failing to deliver possession of residential units to home-buyers as per the agreed timeline – The appellant sought a stay on the penalty proceedings before the NCDRC, contending that an application u/s.95 of the IBC has been filed against them, triggering an interim moratorium u/s.96 of the IBC – The NCDRC vide the impugned order dated 07.02.2024 rejected this application, holding that consumer claims and the penalty imposed did not fall within the moratorium under the IBC – Correctness:


Held: In the present case, the damages awarded by the NCDRC arise from a consumer dispute, where the appellant has been held liable for deficiency in service – Such damages are not in the nature of ordinary contractual debts but rather serve to compensate the consumers for loss suffered and to deter unethical business practices – Courts and tribunals, including the NCDRC, exercise their statutory jurisdiction to award such damages, and these are distinct from purely financial debts that may be subject to restructuring under the IBC – Since such damages are covered under "excluded debts" as per s.79(15) of the IBC, they do not get the benefit of the moratorium u/s.96 of the IBC, and their enforcement remains unaffected by the initiation of insolvency proceedings – The penalties imposed by the NCDRC arise due to non-compliance with consumer protection laws and serve a regulatory function rather than constituting "debt recovery proceedings" – This distinction is crucial – The IBC is designed to deal with insolvency resolution and financial distress, whereas consumer protection laws exist to uphold consumer rights and ensure fair business practices – The penalties u/s. 27 of the CP Act are aimed at compelling compliance and cannot be equated with recovery of an outstanding debt – The appellant cannot claim that such penalties fall within the scope of a debt moratorium, as they do not constitute financial liabilities owed to a creditor but rather statutory obligations enforced to uphold consumer rights. [Paras 33, 35]


Consumer Protection Act, 1986 – s.27 – Negotiable Instruments Act, 1881 – s.138 – Distinction between proceedings u/s.138 of NI Act and s.27 of the CP Act:


Held: There is distinction between proceedings u/s.138 of the NI Act and those u/s.27 of the CP Act – Proceedings u/s.138 of the NI Act pertain to dishonour of cheques and are criminal in nature, where the assumption of debt is inherent in the offence itself – The dishonour of a cheque indicates a failure to honour financial obligations, and the proceedings are initiated for the recovery of the debt in question – In contrast, s.27 of the CP Act deals with non-compliance with consumer protection orders, which are remedial in nature rather than criminal – The primary focus of proceedings u/s.27 of the CP Act is to enforce consumer rights and ensure that service providers fulfil their obligations – These proceedings do not assume the existence of a financial debt but rather deal with deficiencies in service and the failure to comply with consumer redressal mechanisms – Thus, the analogy drawn by the appellant between the moratorium on s.138, NI Act proceedings and s.27, CP Act proceedings is misconceived and legally untenable. [Para 36]


Case Law Cited


State Bank of India v. V. Ramakrishnan & Anr. [2018] 10 SCR 974 : (2018) 17 SCC 394; Ajay Kumar Radheyshyam Goenka v. Tourism Finance Corporation of India Ltd. [2023] 4 SCR 986 : (2023) 10 SCC 545; Manish Kumar v. Union of India and Another [2021] 14 SCR 895 : (2021) 5 SCC 1; Sheetal Gupta v. National Spot Exchange Limited and Ors., 2023 SCC OnLine Bom 3095; P. Mohanraj and Others v. Shah Brothers Ispat Private Limited [2021] 14 SCR 204 : (2021) 6 SCC 258; Kaushalya Devi Massand v. Roopkishore Khore [2011] 3 SCR 879 : (2011) 4 SCC 593; Kunhayammed & Ors. v. State of Kerala & Anr. [2000] Supp. 1 SCR 538 : (2000) 6 SCC 359; Khoday Distilleries Limited & Ors. v. Sri Mahadeshwara Sahakara Sakkare Karkhane Limited, Kollegal [2019] 3 SCR 411 : (2019) 4 SCC 376; Satyawati v. Rajinder Singh and Another [2013] 3 SCR 471 : (2013) 9 SCC 491; Vijay Madanlal Chaudhary & Ors. v. Union of India, 2021 SCC OnLine SC 1048 – referred to.


List of Acts


Consumer Protection Act, 1986; Insolvency and Bankruptcy Code, 2016; Negotiable Instruments Act, 1881.


List of Keywords


Section 27 of Consumer Protection Act, 1986; Section 138 of Negotiable Instruments Act, 1881; Section 96 of Insolvency and Bankruptcy Code, 2016; Execution proceeding; Stay of execution; Penalty; Consumer claims; Consumer rights; Moratorium; Criminal proceedings.


Case Arising From


CIVIL APPELLATE JURISDICTION: Civil Appeal No. 4048 of 2024


From the Judgment and Order dated 07.02.2024 of the National Consumers Disputes Redressal Commission, New Delhi in EA No. 140 of 2019


Appearances for Parties


Advs. for the Appellant:


K. Parmeshwar, Sr. Adv., Vipul Jai, Aamir Siraj, Vinam Gupta, Puneet Singh Bindra.


Advs. for the Respondents:


Shashwat Parihar, Dhruva Vig, Deepanshu Badiwal, Shashwat Anand.


Judgment / Order of the Supreme Court


Judgment


Vikram Nath, J.


1.The present appeal has been filed against the final judgment and order passed by the National Consumer Disputes Redressal Commission1, wherein multiple penalties (27 in total) were imposed on the appellant for failing to deliver possession of residential units to homebuyers as per the agreed timeline. The appellant seeks a stay on the penalty proceedings before the NCDRC, contending that an application under Section 95 of the Insolvency and Bankruptcy Code, 20162 has been filed against them, triggering an interim moratorium under Section 96 of the IBC.


2.This Court is called upon to adjudicate whether execution proceedings under Section 27 of the Consumer Protection Act, 19863, can also be stayed during an interim moratorium under Section 96 of the IBC. The present matter arises from an application filed by the appellant, who is the proprietor of proforma respondent no. 3 – East & West Builders (RNA Corp. Group Co.), in an execution application filed by respondent nos. 1 and 2 before the NCDRC, challenging the execution of multiple penalty orders imposed by the NCDRC during the pendency of insolvency proceedings against the Corporation. The appellant contends that the imposition and execution of these penalties should be stayed due to the pendency of insolvency proceedings initiated under Section 95 of the IBC.


3.The appellant is engaged in real estate development and has several pending consumer complaints before the NCDRC filed by homebuyers alleging delay in possession, deficiency in service, and breach of contractual obligations. The NCDRC, in its final judgment dated 10.08.2018 in CC/1362/2017 along with other connected matters, allowed the complaints and directed the appellant to complete construction, obtain the requisite occupancy certificate, and hand over possession and imposed 27 penalties on the appellant for deficiency in service by failing to deliver possession within a reasonable time. The respondent no.1 and 2, as decree holders, subsequently filed execution applications seeking execution of the abovementioned order of the NCDRC as the appellant failed to comply with the directions of the NCDRC.


4.Subsequently, the appellant, facing insolvency proceedings before the National Company Law Tribunal4 under the IBC, moved an application before the NCDRC seeking a stay of execution proceedings. The appellant in the application before the NCDRC sought to contest the execution on various grounds, including financial distress, adverse market conditions in the real estate sector, and its ongoing insolvency proceedings. The appellant contended that it had entered into settlement agreements with several decree holders and had already made significant payments, satisfying a substantial portion of the execution claims. Specifically, the appellant stated that pursuant to entering into respective settlement agreements, it had made entire payments in the matters of seven homebuyers, thereby fully satisfying seven execution petitions, leaving only thirteen execution petitions pending out of a total of twenty. It further stated that a total amount of Rs. 11,57,34,925/- had been paid in execution proceedings. However, some instalment payments were delayed due to reasons beyond its control, particularly adverse economic conditions in the real estate sector. The appellant also contended that it was one of the personal guarantors to credit facilities extended to A.A. Estates Pvt. Ltd. by the State Bank of India (SBI). Due to an alleged default in repayment, insolvency proceedings under Section 7 of the IBC were initiated against A.A. Estates Pvt. Ltd. before the NCLT, Mumbai Bench. Additionally, SBI initiated proceedings under Section 95 of the IBC against the appellant, the proprietor of the Judgment Debtor – proforma respondent no.3. Consequently, an interim moratorium was triggered against the appellant as per Section 96 of the IBC, which the appellant claimed barred further legal proceedings, including the ongoing execution proceedings before the NCDRC.


5.The NCDRC vide the impugned order dated 07.02.2024 rejected this application, holding that consumer claims and the penalty imposed did not fall within the moratorium under the IBC.


6.The NCDRC relied on this Court’s decision in State Bank of India v. V. Ramakrishnan & Anr.,5 which clarified that Sections 96 and 101 of the IBC provide a distinct moratorium applicable to personal guarantors, separate from the moratorium under Section 14 applicable to corporate debtors. The NCDRC emphasized that the stay under Sections 96 and 101 extends only to proceedings concerning the debt and does not necessarily shield the guarantor from all legal actions.


7.Additionally, the NCDRC placed significant reliance on this Court’s ruling in Ajay Kumar Radheyshyam Goenka v. Tourism Finance Corporation of India Ltd.6. In that case, this Court reaffirmed that criminal proceedings against directors or signatories of a company do not abate merely because the corporate debtor is undergoing insolvency resolution. This Court, referring to Manish Kumar v. Union of India and Another,7 held that individuals associated with the corporate debtor remain liable for their acts, and the company’s dissolution does not absolve them of personal liability under statutes like the Negotiable Instruments Act, 18818.


8.Furthermore, the NCDRC rejected the applicant’s reliance on the Bombay High Court’s decision in Sheetal Gupta vs. National Spot Exchange Limited and Ors.,9 wherein the Bombay High Court had directed stay of criminal proceedings under Section 138 of the NI Act against the concerned persons representing the corporate debtors. The Commission noted that while this Court had dismissed an appeal against this ruling in SLP (Criminal) No. 4727 of 2023 in order dated 28.04.2023, the dismissal was by a brief and non-speaking order, without any discussion on legal principles. Given that this Court’s judgment in Ajay Kumar Radheyshyam Goenka (supra) was pronounced in the interim and was not considered in the summary dismissal of the appeal, the NCDRC deemed the earlier Bombay High Court ruling as per incuriam.


9.Accordingly, for the reasons stated above the NCDRC concluded that the interim moratorium under Section 96 of the IBC did not bar the continuation of criminal proceedings under Section 27 of the CP Act, against the applicant in her personal capacity as a guarantor.


10.The appellant is before us challenging this order of the NCDRC.


11.The primary question of law before this Court is whether the execution of penalty orders passed by the NCDRC can be stayed under the interim moratorium provisions of Section 96 of the IBC.


12.The appellant argues that all debts and all proceedings relating to debt are automatically stayed under Section 96 of the IBC. The respondents, on the other hand, contend that the penalties imposed by NCDRC are distinct from “debt recovery” proceedings and should not fall within the ambit of the interim moratorium.


13.The appellant contended that Section 96 of the IBC creates an absolute bar on any proceedings against the debtor relating to any debt once an interim moratorium is in place. It is submitted that the penalties imposed by the NCDRC arise out of financial obligations or debts and must, therefore, be stayed. The appellant submits that as per Section 96 of the IBC when an application is filed under Section 94 or Section 95 of the IBC, an interim moratorium shall commence on the date of the application, in relation to all debts. In the present case the application under Section 95 of the IBC was filed against the appellant on 20.01.2022 and therefore, as per the provisions of Section 96 of the IBC, the interim moratorium commenced against the appellant from 20.01.2022 and thus the proceedings under Section 27 of the CP Act pending before the NCDRC shall be deemed to have been stayed since as per Section 96(1)(b)(i) of the IBC during the interim moratorium period, “any legal action or proceedings, pending in respect of any debt, shall be deemed to have been stayed.”


14.The appellant further submitted that the proceedings under Section 27 of the CP Act are effectively recovery proceedings. Respondent No. 1 and 2 in their execution application have primarily sought for an award of Rs. 1,55,00,000/- while abandoning the other prayers or reliefs granted in the Consumer Complaint. Therefore, the execution proceedings initiated by the Respondent Nos. 1 and 2 are proceedings to recover the amounts under the garb of seeking an award. Since, the interim moratorium has commenced against the appellant, the appellant is estopped from undertaking any preferential payments, as such the continuation of the execution proceedings against the appellant would constitute an act of double jeopardy.


15.The appellant cited P. Mohanraj and Others v. Shah Brothers Ispat Private Limited,10 where it was held that proceedings under Section 138 of the NI Act are covered under “any legal action or proceeding pending” even though they are quasi-criminal in nature, thus also staying criminal proceedings against the corporate debtor. The principle that insolvency proceedings should take precedence over all other claims is reiterated, and the appellant seeks similar protection under Section 96 of the IBC for interim moratoriums applicable to personal guarantors and individuals. It is argued that unless such a stay is granted, the insolvency process will be frustrated, and the appellant will be subjected to conflicting proceedings across multiple fora.


16.The appellant also relied upon the judgment of this Court in the matter of SBI V. V.Ramakrishnan (supra), wherein it was held that when an application is filed under Part III of the IBC, an interim moratorium or a moratorium is applicable in respect of any debt due and that the protection under Section 96 of the IBC is far greater than that under Section 14 of the IBC. Reliance was also placed on the judgment of this Court in Kaushalya Devi Massand vs. Roopkishore Khore,11 holding that the gravity of complaint under the NI Act cannot be equated with an offence under the provisions of the Indian Penal Code, 186012 or other criminal offences and that an offence under Section 138 of the NI Act is almost in the nature of civil wrong which has been given criminal overtones. Thus, it has been submitted, similarly the penal provisions under the CP Act cannot be equated to offences under the IPC. Since these are also recovery proceedings in nature, they would also fall within the ambit of Section 96 of the IBC.


17.It was thus the submission of the appellant that a bare perusal of the aforementioned judgments, would leave no scope of interpretation that the definition of the term ‘debt’ is wide enough to not only include quasi-criminal proceedings but also recovery proceedings. Therefore, it is abundantly clear that the NCDRC erred in dismissing the application filed by the appellant. Furthermore, in view of the settled legal position as enunciated hereinabove, the execution proceeding pending against the appellant must be stayed till the operation of interim moratorium under Section 96 of the IBC.


18.On the other hand, the respondent nos. 1 and 2, primarily homebuyers, contend that the penalties imposed by the NCDRC are not merely monetary claims but punitive measures to deter unfair trade practices. They argue that consumer protection proceedings serve a vital public function in ensuring compliance with orders protecting homebuyers, who are already vulnerable due to the developer’s delays. The respondents assert that staying such penalties would set a dangerous precedent where developers can indefinitely delay justice by invoking insolvency proceedings.


19.The respondents submitted that the moratorium imposed under Section 96 of the IBC does not extend to criminal proceedings under Section 27 of the CP Act. The respondents contend that the moratorium under Section 96 of the IBC is limited to recovery actions and civil proceedings against the debtor, with no applicability to criminal proceedings. It is submitted that Section 27 of the CP Act provides for punitive action against those who fail to comply with orders of the consumer forum, which is penal in nature and distinct from debt recovery proceedings. The NCDRC, by its order dated 07.02.2024, has rightly held that the moratorium under IBC does not cover criminal proceedings, and such an interpretation is consistent with established judicial precedents. Additionally, the respondents contend that the nature of proceedings under Section 27 of the CP Act is inherently punitive, as it prescribes punishment, including imprisonment, for non-compliance with consumer forum orders. Unlike civil recovery proceedings, which aim at debt enforcement, Section 27 of the CP Act serves a penal function by ensuring compliance with consumer rights and providing a deterrent against non-execution of forum orders. The regulatory and penal proceedings are distinct from civil claims and cannot be stalled due to insolvency moratoriums. Since Section 27 of the CP Act explicitly provides for imprisonment as a consequence of non-compliance, it cannot be considered a mere debt recovery mechanism and thus falls outside the scope of the IBC moratorium.


20.The appellant sought to rely on the Bombay High Court’s decision in Sheetal Gupta v. National Spot Exchange Ltd. & Ors. (supra), and this Court’s subsequent dismissal of the challenge in National Spot Exchange Ltd. v. Sheetal Gupta & Anr. (supra). However, the respondents argued that since this Court’s order was a mere dismissal without any reasoning, it does not constitute a binding precedent. Citing Kunhayammed & Ors. v. State of Kerala & Anr.13 and Khoday Distilleries Limited & Ors. v. Sri Mahadeshwara Sahakara Sakkare Karkhane Limited, Kollegal,14 the respondents submitted that a non-speaking dismissal does not decide any legal issue and, therefore, does not attract the doctrine of merger. In contrast, NCDRC correctly applied the ratio of Ajay Kumar Radheyshyam Goenka (supra), which distinguishes civil liability from criminal prosecution.


21.The respondents further argued that the moratorium under IBC is designed to protect the assets of the corporate debtor and the personal guarantor from alienation. However, not all debts are covered under this protection. Section 94 of the IBC clarifies that the moratorium applies only to debts that are not “excluded debts” under Section 79(15) of the IBC. As per this provision, liabilities arising from fines imposed by courts or tribunals, damages for negligence or breach of obligation, maintenance liabilities, student loans, and other prescribed debts are excluded. Since the damages awarded by NCDRC and their execution fall under “excluded debts,” the moratorium under Section 96 of the IBC does not apply.


22.The respondents emphasize that Section 27 of the CP Act, imposes criminal liability, including imprisonment for non-compliance with consumer court orders. This Court in Satyawati v. Rajinder Singh and Another,15 highlighted the severe impact of delays in execution proceedings, observing that such delays deprive decree-holders of the fruits of litigation. Given that the NCDRC award falls within the category of “excluded debts,” the moratorium does not extend to criminal proceedings initiated for its enforcement, these proceedings are merely delay tactics on part of the appellant.


23.The respondents highlighted the prolonged hardship faced by the decree holders due to the appellant’s repeated delays in execution proceedings. Despite this Court’s ruling in Vijay Madanlal Chaudhary & Ors. v. Union of India,16 which held that orders granting “no coercive action” should not be treated as a stay of proceedings, the appellant has used such an order to stall the matter. Through a timeline of events the respondents sought to demonstrate the appellant’s continued non-compliance, starting from the booking of flats in 2011, the filing of consumer complaints in 2017, the NCDRC’s ruling in favour of the consumers in 2018, and the subsequent delays in execution proceedings. Non-bailable warrants were issued against Saranga Aggarwal in 2021 due to non-compliance, yet the appellant has failed to take steps to honour its obligations.


24.Lastly, the respondents counter the appellant’s argument that the execution petition’s prayer is defective. They submit that the prayer must be read holistically, as it seeks to enforce compliance under Section 27 of the CP Act. The execution petition was filed only after the appellant failed to pay compensation or resume construction as per the consumer court’s orders. Given these circumstances, the respondents contended that NCDRC’s order is legally sound and should be upheld, as the moratorium under IBC does not bar the continuation of criminal proceedings for non-compliance with consumer court awards.


25.In light of the above, the respondent submitted that the appeal against the NCDRC’s order is devoid of merit and should be dismissed. The judicial precedents, as well as the legislative intent behind the CP Act and the IBC, make it clear that the moratorium under Section 96 of the IBC is not meant to protect individuals from criminal prosecution. Accepting the appellant’s argument would lead to an anomalous situation where persons violating consumer rights could evade penal consequences merely by initiating insolvency proceedings, thereby frustrating the very purpose of consumer protection laws.


26.We have heard Mr. K. Parmeshwar, learned senior counsel appearing for the appellant and Mr. Shashwat Parihar, learned counsel appearing on behalf of respondent nos.1 and 2.


27.We find that there is a fundamental distinction between civil and criminal proceedings concerning a debt moratorium. While civil proceedings are generally stayed under IBC provisions, criminal proceedings, including penalty enforcement, do not automatically fall within its ambit unless explicitly stated by law. The penalties imposed by the NCDRC are regulatory in nature and arise due to non-compliance with consumer protection laws. They are distinct from “debt recovery proceedings” under the IBC.


28.A moratorium under Section 96 of the IBC is distinct from a corporate moratorium under Section 14 of the IBC. Section 96 of the IBC applies to individuals and personal guarantors and provides that during the interim moratorium period, “any legal action or proceedings relating to any debt shall be deemed to have been stayed.” However, it is pertinent to note that this provision applies only to “debt” as defined under the IBC and not to regulatory penalties imposed for non-compliance with consumer protection laws. A careful reading of the statutory scheme of the IBC suggests that penalties arising from regulatory infractions are not covered under the ambit of “debt” as envisioned under the Code.


29.It is well settled that there exists a distinction between punitive actions and criminal proceedings. While a criminal proceeding is initiated by the State against an accused to determine guilt and impose penal consequences, punitive actions in the regulatory sphere, such as those imposed by the NCDRC, are meant to ensure compliance with the law and to act as a deterrent against future violations. Section 27 of the CP Act empowers consumer fora to impose penalties to ensure adherence to consumer protection norms. These penalties do not arise from any “debt” owed to a creditor but rather from the failure to comply with the remedial mechanisms established under consumer law. Unlike a criminal prosecution, which requires the establishment of mens rea, the penalties imposed by NCDRC are regulatory in nature and aim to protect the public interest rather than to punish criminal behaviour.


30.Further, a distinction must be drawn between the moratorium applicable to a corporate debtor under Section 14 of the IBC and the interim moratorium applicable to individuals and personal guarantors under Section 96 of the IBC. The former is much broader in scope and stays all proceedings against the corporate debtor, including execution and enforcement actions. However, Section 96 of the IBC is more limited in its scope, staying only “legal actions or proceedings in respect of any debt.” Unlike corporate insolvency proceedings, where the goal is a comprehensive resolution of the company’s liabilities, individual insolvency proceedings are designed primarily for restructuring personal debts and providing relief to the debtor. The legislative intent behind limiting the scope of the interim moratorium under Section 96 of the IBC must be respected, and a blanket stay on all regulatory penalties would result in defeating the objectives of consumer protection laws.


31.The moratorium under Section 96 of the IBC is intended to provide temporary relief to debtors by preventing certain proceedings against them during the resolution process. However, this protection is not absolute and does not extend to all categories of debts. The legislative intent behind the moratorium is to ensure that the debtor’s assets are preserved for an efficient resolution process and to prevent creditors from taking unilateral actions that may frustrate the objective of insolvency proceedings. However, the statutory scheme of the IBC makes it clear that the protection under the moratorium does not cover all forms of liabilities, particularly those classified as “excluded debts” under Section 79(15) of the IBC.


32.The respondents have rightly contended that Section 94(3) of the IBC explicitly limits the scope of the moratorium by carving out exceptions for certain categories of debts. Section 79(15) of the IBC defines “excluded debts” to include liabilities arising from fines imposed by courts or tribunals, damages for negligence or breach of obligation, maintenance liabilities, student loans, and other prescribed debts. This classification is based on the nature of such obligations, which are either statutory, penal, or personal in nature, and therefore, they do not form part of the insolvency estate that can be discharged under the resolution process.


33.In the present case, the damages awarded by the NCDRC arise from a consumer dispute, where the appellant has been held liable for deficiency in service. Such damages are not in the nature of ordinary contractual debts but rather serve to compensate the consumers for loss suffered and to deter unethical business practices. Courts and tribunals, including the NCDRC, exercise their statutory jurisdiction to award such damages, and these are distinct from purely financial debts that may be subject to restructuring under the IBC. Since such damages are covered under “excluded debts” as per Section 79(15) of the IBC, they do not get the benefit of the moratorium under Section 96 of the IBC, and their enforcement remains unaffected by the initiation of insolvency proceedings.


34.Furthermore, the rationale behind excluding such liabilities from the moratorium is rooted in public policy considerations. If damages arising from legal violations, consumer protection claims, or penalties imposed by courts and tribunals were to be shielded under the moratorium, it would create an unfair advantage for errant entities and individuals, allowing them to evade their legal obligations under the guise of insolvency. The IBC, being a special law meant to balance the interests of all stakeholders, does not intend to provide relief to those who have been held liable for statutory breaches or misconduct.


35.The penalties imposed by the NCDRC arise due to non-compliance with consumer protection laws and serve a regulatory function rather than constituting “debt recovery proceedings.” This distinction is crucial. The IBC is designed to deal with insolvency resolution and financial distress, whereas consumer protection laws exist to uphold consumer rights and ensure fair business practices. The penalties under Section 27 of the CP Act are aimed at compelling compliance and cannot be equated with recovery of an outstanding debt. The appellant cannot claim that such penalties fall within the scope of a debt moratorium, as they do not constitute financial liabilities owed to a creditor but rather statutory obligations enforced to uphold consumer rights. Allowing the stay of such penalties would effectively enable businesses to flout consumer protection mandates by merely initiating insolvency proceedings, which would be an unintended and dangerous consequence of a misinterpretation of the law.


36.The distinction between proceedings under Section 138 of the NI Act and those under Section 27 of the CP Act must also be examined. Proceedings under Section 138 of the NI Act pertain to dishonour of cheques and are criminal in nature, where the assumption of debt is inherent in the offence itself. The dishonour of a cheque indicates a failure to honour financial obligations, and the proceedings are initiated for the recovery of the debt in question. In contrast, Section 27 of the CP Act deals with non-compliance with consumer protection orders, which are remedial in nature rather than criminal. The primary focus of proceedings under Section 27 of the CP Act is to enforce consumer rights and ensure that service providers fulfil their obligations. These proceedings do not assume the existence of a financial debt but rather deal with deficiencies in service and the failure to comply with consumer redressal mechanisms. Thus, the analogy drawn by the appellant between the moratorium on Section 138, NI Act proceedings and Section 27, CP Act proceedings is misconceived and legally untenable.


37.If the appellant’s argument is accepted, homebuyers, who have already suffered immense delays and financial hardship, would be further deprived of relief. The legislative intent behind consumer protection laws is to safeguard the interests of consumers and ensure accountability from service providers. Permitting a stay on regulatory penalties under the guise of insolvency proceedings would undermine the very purpose of the CP Act and embolden errant developers to escape liability through insolvency proceedings. Homebuyers, many of whom invest their life savings in purchasing residential units, are already in a precarious position due to delays in possession and breaches of contractual obligations. Staying penalties that serve as deterrence against such unfair practices would render consumer protection mechanisms ineffective and erode trust in the regulatory framework.


38.Judicial precedents support the view that statutory penalties and regulatory actions do not automatically fall within the ambit of an insolvency moratorium. In P. Mohanraj (supra) this Court held that a moratorium under Section 14 of the IBC extends to proceedings under Section 138 of the NI Act. However, a distinction between debt recovery proceedings and punitive actions needs to be created, and therefore all criminal liabilities do not fall within the scope of the moratorium unless explicitly covered under the IBC. Consequently, penalties imposed by regulatory bodies in the public interest cannot be stayed merely because insolvency proceedings are ongoing.


39.The present case does not involve a mere financial dispute but concerns the enforcement of consumer rights through regulatory penalties. Given that the legislative intent behind the CP Act is to ensure compliance with consumer welfare measures, staying such penalties would be contrary to public policy. Further, the appellant cannot invoke insolvency proceedings as a shield to evade statutory liabilities. The objective of the IBC is to provide a mechanism for resolving financial distress, not to nullify obligations arising under regulatory statutes.


40.For the foregoing reasons, this Court finds no merit in the appellant’s arguments. The penalties imposed by the NCDRC are regulatory in nature and do not constitute “debt” under the IBC. The moratorium under Section 96 of the IBC does not extend to regulatory penalties imposed for non-compliance with consumer protection laws.


41.The appeal is accordingly dismissed, and the appellant is directed to comply with the penalties imposed by the NCDRC within a period of eight weeks from the date of this judgment.


42.Pending application(s), if any, shall stand disposed of.


Result of the case: Appeal dismissed.


1 NCDRC


2 IBC


3 CP Act


4 NCLT


5 (2018) 17 SCC 394


6 (2023) 10 SCC 545


7 (2021) 5 SCC 1


8 NI Act


9 2023 SCC OnLine Bom 3095


10 (2021) 6 SCC 258


11 (2011) 4 SCC 593


12 IPC


13 (2000) 6 SCC 359


14 (2019) 4 SCC 376


15 (2013) 9 SCC 491


16 2021 SCC OnLine SC 1048