Whether wilful breach of undertaking given to Court would amount to Contempt of Court under S. 2(b) of Contempt of Courts Act? SC elaborates

Supreme Court: The Division Bench of Indira Banerjee and V. Ramasubramanian, JJ., observed that,

an undertaking given by a party should be seen in the context in which it was made and (i) the benefits that accrued to the undertaking party; and (ii) the detriment/injury suffered by the counter party.

Petitioners husband and wife were sentenced by Delhi High Court on being found guilty of committing – Contempt of Court.

The said Order having been confirmed by the Division Bench of the High Court in an appeal under Section 19 of the Contempt of Courts Act, 1971, the petitioners came up with the Special Leave Petition.

Wilful and Deliberate Breach of Undertaking

Respondent­Bank filed a petition under Sections 10 and 12 of the Contempt of Courts Act, 1971 for punishing the petitioners for wilful and deliberate breach of their undertaking. Petitioners resisted the contempt petition on the ground that breach of an undertaking, made with a view to secure a conditional order of stay may not tantamount to contempt, especially when the consequences of breach of such undertaking are spelt out in the Court order itself, the Judge was not convinced.

Hence, the High Court held the petitioners guilty.

Analysis, Law and Decision

Petitioners have already served simple imprisonment of 11 days out of the penalty of simple imprisonment for 3 months and along with that fine has also been paid.

What was the undertaking that led to the contempt proceedings?

“Statement of Mr. Suman Chadha S/o Jangi Lal Chadha R/o H­3/50 Sector­18, Rohini, Delhi

I am the petitioner and the director of the third petitioner in this case. I am duly authorised to make a statement on its behalf. I have also filed an affidavit in support of the petition and have taken advice from my lawyer who is present with me in Court.

I hereby state and confirm that the sum of Rs.28,82,25,942.24 (Twenty Eight Crores Two Lakh Twenty Five thousand Nine Hundred Forty Two and Paise Twenty Four only) as on 18.8.2014 is due and payable to the respondent i.e. the Central Bank of India as per notice u/s 13(2) of SARFAESI Act. I request that in view of the demand I may be granted relief of some deferment with regard to the repayment of the loan liability. I hereby agree on behalf of self and other petitioners to deposit a total amount of Rs.7 (seven) crores with respondent –Bank on or before 30.6.2015. An amount of Rs. 2(two) crores of the said amount shall be paid on or before 30.04.2015; the balance would be paid in equal instalments i.e. Rs.2.5 (Two and a half) crores on or before 31.5.2015 and 30.06.2015.

I also agree and affirm that in the event of default, the Bank is free to initiate any such proceedings and avail of legal remedies as are available.”

It is true that this Court has held in a series of decisions that the wilful breach of the undertaking given to the Court amounts to contempt of Court under Section 2(b) of the Act.

But the Court has always seen:

• the nature of the undertaking made;

• the benefit if any, reaped by the party giving the undertaking; and

• whether the filing of the undertaking was with a view to play fraud upon the court or to hoodwink the opposite party.

Further, the Court adds that, the distinction between an order passed on consent terms and order passed solely on the basis of an undertaking given to the court and the distinction between a person playing fraud on the court thereby obstructing the course of justice and a person playing fraud on one of the parties, was brought out by this Court in Babu Ram Gupta v. Sudhir Bhasin, (1980) 3 SCC 47.

Bench added that in Rama Narang v. Ramesh Narang, (2006) 11 SCC 114, this Court pointed out the distinction between two categories of cases covered by Section 2(b) of the Act namely

• wilful disobedience to a process of court; and
• wilful breach of an undertaking given to a court.

In Court’s opinion, this Court in the above-stated case went to the extent of holding that it would neither be in consonance with the statute, judicial authority, principle or logic to draw any distinction between the wilful violation of the terms of a consent decree and wilful violation of a decree passed on adjudication.

We have our own doubts whether the first category of cases covered by Section 2(b) can be stretched so far. Anyway, that question does not arise in this case and hence we leave it at that.

In compliance to the undertakings given to the Court and the order passed thereon, the petitioners issued 4 cheques and the said cheques were handed over to the Bank but all the cheques were post-dated bearing the date 06.05.2015, though the undertaking given to the Court was to deposit the amount on or before 30.04.2015.

In view of the above conduct of the petitioner, Bench held that conduct of the petitioners first in issuing post­dated cheques and then in allowing them to be dishonoured, showed the petitioners in poor light. The petitioners could have at least mend their ways thereafter. However, they did not.

It is also true that normally the question whether a party is guilty of contempt is to be seen in the specific context of the disobedience and the wilful nature of the same and not on the basis of the conduct subsequent thereto. While it is open to the court to see whether the subsequent conduct of the alleged contemnor would tantamount to an aggravation of the contempt already committed, the very determination of an act of contempt cannot simply be based upon the subsequent conduct.

Reason why this Court upheld the decision of Delhi High Court

The series of acts committed by the petitioners

• in issuing post­dated cheques, which were dated beyond the date within which they had agreed to make payment;
• in allowing those cheques to be dishonoured;
• in not appearing before the Court on the first date of hearing with an excuse that was found to be false;
• in coming up with an explanation about their own debtors committing default; and
• in getting exposed through the report of the SFIO, convinced the High Court to believe that the undertaking given by the petitioners on 08-04-2015 was not based upon good faith but intended to hoodwink the Court.

While upholding the finding of the Delhi High Court that the petitioners were guilty of contempt of court, but reducing the period of sentence from 3 months to the period of imprisonment already suffered by the petitioners, the SLP was disposed of. [Suman Chadha v. Central Bank of India, 2021 SCC OnLine SC 564, decided on 9-08-2021]