Determination Of Act Of Contempt Cannot Be Based Upon Subsequent Conduct Of Contemner: Supreme Court

The Appellants before the Supreme Court, i.e. the Respondents in a contempt petition filed by a Bank before a Single Judge of the Delhi High Court, had availed loan from the Respondent Bank by mortgaging immovable properties. Upon non-repayment of loan, the Bank initiated proceedings under the SARFAESI Act by issuing 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.

Subsequently, the Appellants made an application before the DRT (Debts Recovery Tribunal) under Section 17 of the Act. The DRT initially declined to grant interim relief against handing over physical possession of the properties. Later, the Appellants secured a conditional order from the DRT requiring the Appellants to deposit certain amount. But the Appellants challenged the order before the High Court and obtained an interim order subject to depositing 7 crores. However, the cheques issued by the Appellants towards the said deposit bounced. The Respondent Bank filed a petition under Sections 10 and 12 of the Contempt of Courts Act, 1971 for wilful and deliberate breach of undertaking by the Appellants.

The Single Judge of the Delhi High Court held the Appellants guilty of contempt and sentenced them to simple imprisonment for three months with a fine of Rs.2000 each. The decision was upheld by the Division Bench of the High Court.

The main contentions of the Appellants before the Supreme Court was that the failure of a party to comply with an undertaking, on the basis of which a conditional order of stay was granted, cannot be treated as a wilful disobedience warranting the invocation of the contempt jurisdiction. It was also argued that the disobedience should be wilful and intentional, to tantamount to contempt. On the other hand, the Respondents Bank contended that the Appellants had several opportunities to honour their commitments, but they repeatedly adopted dilatory tactics. It was also submitted that the availability of other modes of enforcement need not deter the Court from invoking its contempt jurisdiction and that the deliberate failure to comply with a solemn undertaking given to a Court has always been frowned upon by Courts.

The Court arrived at a conclusion based on the facts of the case that the Appellants had actually played a fraud upon the Court. The Court found, "But the subsequent conduct of the party may throw light upon one important aspect namely whether it was just the inability of the party to honour the commitment or it was part of a larger design to hoodwink the court."

On the question of considering the subsequent conduct of the contemnor, the Court held that, "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."

Hence, the Apex Court upheld the Judgement of the Single Bench and the Division Bench of the High Court, while reducing the period of sentence from three months to the period of 11 days imprisonment already undergone by the Appellants.