Mere Conduct Of Parties Aimed At Frustrating Court Proceedings Or Circumventing Its Decisions, Even Without An Explicit Prohibitory Order, Constitutes Contempt: SC
The Supreme Court has held that the mere conduct of parties aimed at frustrating Court proceedings or circumventing its decisions, even without an explicit prohibitory order, constitutes contempt.
The Court explained that any attempts to sidestep the Court’s jurisdiction or manipulate the course of litigation through “dishonest or obstructive conduct” or malign or distort the decision of the Courts would “inevitably tantamount to contempt sans any prohibitory order or direction to such effect.”
The Bench of Justice J.B. Pardiwala and Justice Manoj Misra observed, “The contempt jurisdiction of this court cannot be construed by any formulaic or rigid approach. Merely because there is no prohibitory order or no specific direction issued the same would not mean that the parties cannot be held guilty of contempt. The Contempt jurisdiction of the court extends beyond the mere direct disobedience of explicit orders or prohibitory directions issued by the court. Even in the absence of such specific mandates, the deliberate conduct of parties aimed at frustrating court proceedings or circumventing its eventual decision may amount to contempt. This is because such actions strike at the heart of the judicial process, undermining its authority and obstructing its ability to deliver justice effectively. The authority of courts must be respected not only in the letter of their orders but also in the broader spirit of the proceedings before them.”
Senior Advocates Mukul Rohatgi, Neeraj Kishan Kaul and Raju Ramachandran represented the Petitioner, while Senior Advocates A.M. Singhvi, Parag Tripathi, Nikhil Nayar, Devadatt Kamat, Kapil Sibal and Chander Uday Singh appeared for the Respondent.
The Original Borrower (Respondent) availed a Lease Rental Discounting (LRD) credit facility from the Union Bank of India (Bank), secured by a simple mortgage over a parcel of land. After defaulting on loan repayments, the Borrower’s LRD Term Loan Account was classified as a Non-Performing Asset (NPA), prompting the Bank to initiate proceedings under the Securitization and Reconstruction of Financial Assets and Enforcement of Securities Interest (SARFAESI) Act, 2002.
Aggrieved by the Bank’s actions, the Borrower filed a Securitization Application under Section 17 of the SARFAESI Act before the Debt Recovery Tribunal (DRT). Meanwhile, the Bank proceeded to auction the Secured Asset, with Celir LLP (Petitioner) emerging as the highest bidder. Realizing that the asset was about to be sold, the Borrower filed an Interlocutory Application seeking to redeem the mortgage by paying the total outstanding amount against the LRD Term Loan.
The Petitioner contended that both the Borrower and the Subsequent Transferee/Third Party Purchaser were acting in tandem with each other to frustrate the implementation of the decision of the Court in the Main Appeals by misleading various authorities and by mischievously instituting proceedings before different forums & thereby thwart any attempt of the petitioner and the borrower to obtain physical possession and original title deeds to the Secured Asset.
The Supreme Court in the Main Appeals confirmed the sale in favour of the Petitioner and brought the auction proceedings to its logical conclusion by directing the issuance of the sale certificate. It stated that “the mere conduct of parties aimed at frustrating the court proceedings or circumventing its decisions, even without an explicit prohibitory order, constitutes contempt. Such actions interfere with the administration of justice, undermine the respect and authority of the judiciary, and threaten the rule of law.”
“The aforementioned acts of the contemnors are nothing more than a gamble on their part to circumvent and undermine the findings and directions passed by this Court in the Main Appeals. Similarly, the lame excuses offered by them for explaining their conduct are also nothing more than a calculated attempt in the hope that they would get away with legitimizing the illegal Assignment Agreement even after the decision of this Court, and is equally contemptuous,” the bench remarked.
The Court stated, “When judicial orders are openly flouted or court proceedings are disrespected, it sends a signal that the rule of law is ineffective, leading to a loss of trust in the system. Judicial decisions must remain unimpaired, free from external pressures, manipulation, or circumvention. Acts that attempt to mislead the court, obstruct its functioning or frustrate its decisions distort the process of justice and would amount to contempt.”
Consequently, the Court held, “Thus, we are inclined to provide one last opportunity to the Borrower herein and the Subsequent Transferee to abide by the judgement and order dated 21.09.2023 passed by this Court and further comply with the directions issued in the present contempt petition, and thus, deem it fit to not hold them guilty of contempt for the present moment.”
Cause Title: Celir LLP v. Sumati Prasad Bafna & Ors. (Neutral Citation: 2024 INSC 978)
Appearance:
Petitioner: Senior Advocates Mukul Rohatgi, Neeraj Kishan Kaul and Raju Ramachandran; Advocates Shyel Trehan, Gaurav Y., Krushi Barfiwala, Divyanshu Gupta, Shivalika Rudrabatla, Apoorva Singh, Ira Mahajan, Keshav Sehgal and Sachindra Karn; AOR Pranav Sarthi and O. P. Gaggar
Respondent: Senior Advocates A.M. Singhvi, Parag Tripathi, Nikhil Nayar, Devadatt Kamat, Kapil Sibal and Chander Uday Singh; Advocates Avishkar Singhvi, Shreeyash Uday Lalit, Sanam Tripathi, Sugandha Batra, Priyansha Sharma, Arushi Mishra, Shreyash Choudhary, Runjhun Garg, Himanshu Vats, Angad Pahal, Lavam Tyagi, Sumeet Lal, Sidhant Kapoor, Masoom Shah, D. Girish Kumar, Jay Nirupam, Pranav Giri, Ekansh Sisodia, A.M. Harsavardhini, Sumedha Ray Sarkar, Rupali Francesca Samuel and Palak Rawat; AOR Ishaan George and Shubhranshu Padhi
