Jurisdiction of Court under Contempt of Courts Act would not cease, merely because order or decree of which contempt is alleged, is executable under law, even without having recourse to contempt proceedings: SC

Read Judgment: Urban Infrastructure Real Estate Fund V. Dharmesh S. Jain And Anr. 

Pankaj Bajpai

New Delhi, March 11, 2022:  Finding that the execution proceedings of the arbitral award was delayed in view of the interim order and the subsequent extensions granted by the High Court at the behest of the contemnors (respondents) who failed to comply with the order passed by the High Court and this court as well, the Supreme Court has said that having taken the benefit of the extensions for a period of approximately two years and more, it was not open for the contemnors to contend that since they had not deposited the amount as per the arbitral order, necessary consequences u/s 36 of the Arbitration Act, 1996 should follow and the execution proceedings had to be proceeded further.

A Division Bench of Justice M.R Shah and Justice B.V Nagarathna observed that the action of the respondents in non-compliance of the mandatory directions passed by the Court have aggravated the contempt and contumacious conduct of their abrasive attitude of non-compliance and disobedience. 

Going by the background of the case, by an Arbitral Award passed in arbitral proceedings filed by Urban Infrastructure Real Estate Fund (petitioner–award creditor) against Dharmesh Jain & Another (respondents-alleged contemnors), the Arbitrator awarded specific performance of the Share Purchase Agreement and held that the petitioner is entitled to recover an amount of Rs. 78,33,37,500/- with interest at the rate of 18% p.a. with effect from December 20, 2014 till realization.

Challenging the same, the respondent preferred the Commercial Arbitration Petition and prayed for a stay of the award. The Single Judge of the High Court granted a stay, subject to the fact that the respondents should deposit 50% of the awarded sum within twelve weeks. 

The Single Judge also observed that if such deposit was not made within the time prescribed, the interim stay granted shall stand vacated without further reference to the Court. Simultaneously, the petitioner was also directed to deposit 50% of its shareholding in the respondent company. The Single Judge also made it clear that if the respondents commit any default in making payments as directed, the respondent is not required to deposit such shares.

However, even before the application u/s 34 of the Act of 1996 challenging the award was made, the Award Creditor had filed the execution petition before the High Court, which directed the respondent to file the disclosure affidavit declaring their assets. Such order was, however, not complied with by the respondents and repeated extensions were sought. In the meantime, respondents instituted Commercial Appeal, by which, while staying the award passed by the Arbitrator, the High Court directed them to deposit 50% of the awarded amount. The respondents then filed SLP before this court seeking extension of time to make a deposit, which was granted. However, no deposit was made by them. 

Accordingly, the applicants contended that the respondents had no intention to comply with the order and deposit 50% of the amount awarded by the Arbitrator and further extension was sought only to kill time. Accordingly, this Court observed that non-compliance of the same shall be treated very seriously and non-deposit of the amount as directed by the High Court in the order shall be treated as non-compliance of the order of this Court and also have serious consequences.

Despite the specific directions issued by this Court, the respondents neither complied with the order passed by the High Court nor complied with the order passed by this Court in SLP. The applicant therefore served a legal notice upon the respondents mentioning that if the orders are not complied with, the petitioners shall be constrained to proceed further to initiate appropriate proceedings for willful disobedience of orders passed by the Court. Instead, having realized that the non-compliance of the order may invite serious consequences, the respondents filed a Miscellaneous Application requesting to recall the order passed by this Court. 

After considering the submissions, the Top Court noted that there is an award in favour of the applicant and the Arbitrator had awarded specific performance of the Share Purchase Agreement and held that the applicant is entitled to recover an amount of Rs. 78,33,37,500 with interest at the rate of 18% p.a. till realization and had also awarded Rs.50 lakhs against the respondent company. 

Thereafter the Award Creditor had filed the Execution Petition in 2018 and since then, the respondents successfully avoided the execution of the award till date by initiating proceedings one after another and by getting extensions of the interim order passed by the High Court on Notice of Motion and in Commercial Arbitration Petition, added the Court. 

Speaking for the Bench, Justice Shah observed that the respondents sought a number of extensions which the High Court granted on the belief that the respondents will deposit the amount as ordered, and thus, the respondents took the benefit of the extensions granted by the Court. 

Even the order passed by the High Court passed in Chamber Summons directing the respondents to disclose their assets was even not complied with for a period of approximately two years, which demonstrates the intention and the conduct on the part of the respondents to disregard and disrespect the orders passed by the High Court, added the Bench. 

Justice Shah further observed that the jurisdiction of a Court under the Contempt of Courts Act, 1971 would not cease, merely because the order or decree of which contempt is alleged, is executable under law, even without having recourse to contempt proceedings.

“The conduct of the respondent-contemnors is such as would justify invocation of contempt jurisdiction of this Court. Not only have the contemnors unreasonably delayed and defaulted in compliance of the orders of this Court without explaining the cause for such default, or seeking extension of time for compliance; but they have also sought to avoid compliance of the order, even after taking benefit of the extended time period granted for compliance of the same”, added the Bench. 

The Apex Court therefore concluded that the respondents were guilty of civil contempt and had rendered themselves liable for suitable punishment under the provisions of Contempt of Courts Act.