Suman Chadha Vs Central Bank Of India: Wilful Breach Of Undertaking Given To Court Is Contempt

DATE OF JUDGEMENT:
9th August 2021

JUDGES:
Justice Indira Banerjee
Justice V Ramasubramanian

PARTIES:
Appellant- Suman Chadha & Anr.
Respondent- Central Bank of India

SUBJECT

• The Supreme Court observed that the wilful breach of an undertaking given to the court can amount to contempt under Section 2(b) of the Contempt of Courts Act.

OVERVIEW

• The petitioners were the directors of a company that availed loan/credit facilities from the respondent bank with respect to the immovable property as security. Due to the default of payment, the loan was categorized as NPA (non-performing asset). Therefore, the respondent bank issued a notice under Section 13(2) of the SARFEASI Act for the repayment of Rs.28,82,25,952.24 with the interest amount and this was followed by a possession notice under Section 13(4) of the Act.
• The petitioner made an application before the DRT (Debts Recovery Tribunal) under Section 17 of the Act and the DRT had declined to grant interim relief against physical possession over the properties.
• The petitioner secured a conditional order from the DRT whereby the petitioner had been required to deposit Rs.5 crores within thirty days and also stipulate that Rs.2 crores would be deposited by 3rd April 2015.
• The petitioner challenged the order before the High Court. The petitioner had admitted his liability by way of a statement in an oath, to deposit Rs.7 crores with 25% of the notice amount in three instalments, before 30th June 2015. The Court also ordered that the possession of the properties shall not be disturbed until 30th June 2015.
• The petitioner had given a letter, along with four cheques of Rs.50 lakh each on 29th April 2015. So, the possession proceeding for one property, which was scheduled for 30th April, was deferred by the respondent bank, but on 8th May, all four cheques bounced.
• Thereafter, the respondent bank filed a petition under Sections 10 and 12 of the Contempt of Courts Act, 1971 for wilful and deliberate breach of their undertaking. The High Court held the petitioners guilty of contempt and sentenced them to simple imprisonment for three months with a fine of Rs.2000 each.

LEGAL PROVISIONS

• Section 2(b) of Contempt of Courts Act, 1971: “Civil Contempt” means wilful disobedience to any judgment, decree, direction, order, writ, or other processes of a court or wilful breach of an undertaking given to a court.

ISSUES

• Whether a wilful breach of the undertaking given to court would amount to contempt of court under S. 2(b) of the Contempt of Courts Act?

JUDGEMENT ANALYSIS

• Firstly, the Court observed the actual undertaking given by the petitioners which led to the contempt proceedings. The undertaking given by the first petitioner was accompanied by an affidavit sworn to by the second petitioner. In the said affidavit, it was stated by the second petitioner that her husband has made a statement before the Court which she had understood from him and that she and her husband had undertaken to abide by the same. Based on the affidavit/undertaking, the High court passed the order.
• Later, it was shown in the judgement that it was not an order passed based on an affidavit/undertaking, but rather based on an offer made by the petitioners.
• The High Court has held that the wilful breach of the undertaking given to the Court amounts to contempt of Court under Section 2(b) of the Act.
• In addition to that, the Hon’ble court cited the judgement of Rama Narang v. Rama Narang & anr case, the Court pointed out the distinction between the two categories of cases covered by Section 2(b) of the Act, namely (i) willful disobedience to a process of the court; and ( ii) willful breach of an undertaking given to a court.
• The Court has held that, after the observation was made, the question does not arise in the present case. But the question raised in this case was of the subsequent conduct of the petitioners. The conduct of the petitioner to issue the post­dated cheques and then allowing them to be dishonoured showed the petitioners in poor light. The petitioners did not mend their ways thereafter.
• One of the defences raised by the petitioner was that they had issued post­dated cheques in the hope that they would receive amounts due to them from their debtors and their debtors failed to make payment. To make it a fair and just trial, the High Court directed an investigation by Serious Investigation Office (SFIO). The officer submitted the report that the alleged debtors of the petitioners were only the shell entities of the Company of the petitioner.
• Lastly, the Court made a clear observation that the series of acts were committed by the petitioners i.e. (i) in issuing the post­dated cheques, which were dated beyond the date within which they had agreed to make payment; (ii) in allowing those cheques to be dishonoured; (iii) in not appearing before the Court on the first date of hearing with an excuse that was found to be false; (iv) in coming up with an explanation about their debtors committing default; and (v) in getting exposed through the report of the SFIO, were analogous with contempt.
• Therefore, the SLP was disposed of and the Court upheld the findings of the High Court.

CONCLUSION

The petitioners were found guilty of contempt of court by the Division Bench and the High Court. The bench has reduced the period of sentence from three months to the period of imprisonment which has already been undergone by the petitioners. If there are any pending applications, they will be dismissed.

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