Deutsche Bank A. G. Banking Corporation Incorporated, Germany and Bombay Vs. Nikhil Traders Private Ltd. and Others - Court Judgment

Excerpt:
- - 452/s/91, 494/s/91 as well as in the above matter. was expected to be sanctioned by the end of august 1998. he therefore hoped that the respondents would be in a position to pay the defaulted instalments as well as the third instalment which was due on 30-9-98 if the time is extended. if they have failed to do so, the law must take its course. contempt proceeding against a person who has failed to comply with the court's order serves a dual purpose:ordersmt. ranjana desai, j.1. these three contempt petitions were disposed of by common order since the parties are the same and they relate to the same facts. the contempt petitions were disposed of by justice lodha on 23rd and 29th january, 1998. the facts giving rise to these petitions have been narrated in the judgment dated 23rd and 29th january, 1998 by justice lodha. it is necessary to narrate them here for the purpose of getting to know the real issues involved. 2. respondent nos. 1 to 3 issued three cheques for amounts of rs. 17 lacs, 15 lacs and 15 lacs towards their liability of outstanding loans and other facilities extended by the bank. the said three cheques in all amounting to rs. 47 lacs which were duly signed by respondent nos. 2 and 3 therein were dishonoured for insufficient funds. this led to the filing of three criminal complaints by the petitioner bank before the additional chief metropolitan magistrate, 37th esplanade court, bombay. in all the three complaints the concerned magistrate issued process which was challenged before the high court in three different criminal applications. in the said criminal applications, respondent nos. 1 to 3 submitted consent terms and admitted their liability of rs. 49,95,500.60 towards the petitioner bank together with interest thereon at @ 25% per annum from 31st october, 1991 till full payment and realisation to the bank. the respondents undertook in the said consent terms that, the said amount of rs. 49.95,500.60 together with interest @ 25% per annum from 31-10-91 shall be repaid to the petitioner bank by paying rs. 5 lacs on or before 31st december 1991, rs. 15 lacs on or before 29th february 1992 and the entire balance together with upto date interest and the balance remaining due and payable on or before 31st march 1992. in terms of the consent terms, the high court disposed of all the three criminal applications on 28-11-91. by further consent terms dated 12th february 1992, the period of payment as undertook by the respondents was extended by further undertakings of respondent nos. 1 to 3 that the balance amount of rs. 49,95,500.60 was to be paid with interest @ 25% per annum by paying rs. 15 lacs on or before 17th february 1992, rs. 15 lacs on or before 20th march 1992 and the entire balance together with interest on or before 20th april 1992. respondent nos. 1 to 3 also undertook to pay additional interest @ 5% per annum for the extended time. 3. it is the case of the petitioner bank that, in terms of the consent terms and the undertakings submitted by respondent nos. 1 to 3, payment has not been made. as on 31st october, 1997, the amount outstanding was more than a crore of rupees. it is on these facts that the present contempt petitions came to be filed. in response to the notice issued replies came to be filed. 4. the contempt petitions were argued before mr. justice lodha. it appears from the judgment dated 23rd and 29th january, 1998 that the learned counsel appearing for the contemnors made various submissions. he urged that the consent terms dated 28-11-91 and 12-2-92 were in the nature of agreements between the parties and therefore, for-non compliance of the said consent terms the contempt proceedings were misconceived and the respondents cannot be held guilty of civil contempt under section 2(b) of the contempt of courts act, 1971. he also urged that in the order dated 28-11-91 passed by the high court, the undertakings given by respondents contemnors have not been specifically accepted and in terms of the second consent terms filed on 12-2-92 even no order has been passed. he also urged that after the consent terms were filed and undertakings were furnished the contemnors have paid a sum of rs. 22 lacs to the bank and, therefore, it cannot be said that respondents have not complied with the undertakings willfully and deliberately. judgment of the supreme court in rita markandey v. surjit singh arora, reported in : 1997crilj2503 was also cited. 5. it appears that after the order was dictated there was some talk of settlement and the possibility of settlement was explored by the parties. on 28-1-98 when the matter came up for further dictation, the counsel for the contemnors submitted that the parties had settled their disputes and written minutes to that effect would be submitted on the next day. on the next day, the contemnors, through their counsel, submitted minutes and the undertakings. the said minutes and the undertakings read thus: '1) the respondent nos. .1 to 3 abovenamed hereby confirm and acknowledge their liability to the extent of rs. 33,00,000/- in full and final settlement and payable by us to the petitioners as on 29-01-98. 2) the respondent nos. 1 to 3 admit their defaults and breach of their undertaking given to this hon'ble court as set out in orders dated 28th november, 1991 as modified by consent terms dated 12th february, 1992. 3) the respondent nos. 1 to 3 crave indulgence of this hon'ble court and seek further time to make payment to the petitioners and to comply with the undertakings given to this hon'ble court. the respondent nos. 1 to 3 are aware that it is on the basis of undertakings and assurances given by respondent nos. 1 to 3 as set out below and their further undertaking to this hon'ble court duly to abide by and fulfill the said undertakings that this hon'ble court is being requested not to pass any sentence against respondent nos. 1 to 3 in contempt petition no. 351 of 1997. contempt petition nos. 353 of 1997 but to give further time to respondent nos. 1 to 3 make payment to the petitioners. 4) the respondent nos. 1 to 3 undertake to this hon'ble court that they will and do pay to the petitioners a sum of rs. 33,00,000/- with interest thereon @ 21% p.a. from 29-01-98 till payment. 5) if however the respondent nos. 1 to 3 pay to the petitioners a sum of rs. 33,00,000/- in the following manner. rs. 4 lacs before 28-02-98rs. 5 lacs before 30-06-98rs. 6 lacs before 30-09-98rs. 6 lacs before 31-12-98rs. 6 lacs before 31-03-99rs. 6 lacs before 30-06-99without any single default, the petitioners as a concession agree to accept the same in full settlement. if however, there is any default in payment of any two instalments or the last instalment for any reason whatsoever, the respondent nos. 1 to 3 undertake to this hon'ble court to pay and do pay to the petitioners, the sum then due and payable with interest as aforesaid within 15 days of default. 6) the respondent nos. 1 to 3 hereby expressly undertake to this hon'ble court to abide by and perform their undertakings as set out above. the respondent nos. 1 to 3 acknowledge that it is on the basis of these undertakings that this hon'ble court has granted further time to the respondents to pay the petitioners dues. 7) the petitioners hereby agree and undertake that in the event of the respondent nos. 1 to 3 abovenamed complying with the undertaking in making payment as mentioned in paragraph 4 hereinabove, the criminal complaint nos. 452/s/91, 494/s/91 initiated by the petitioners against respondent nos. 1 to 3 will stand automatically withdrawn in the court of additional chief metropolitan magistrate, 37th court, esplanade, bombay. 8) the petitioner agrees and undertakes not to proceed with cases nos. 452/s/91, 494/s/91 filed by the petitioners against respondent nos, 1 to 3 in the additional chief metropolitan magistrate, 37th court, esplanade, bombay unless and until there is default in payment of any two instalments or the last instalment on their due date(s) specified in clause 4 hereinabove. 9) the respondent nos. 1 to 3 that in the event of default in payment of any instalment on due date as undertaken hereinabove or in the event ofdefault the said cases shall automatically revive and the petitioner will be at liberty to proceed with the trial in the said case nos. 452/s/91, 494/s/91 in additional chief metropolitan magistrate's court, 37th court esplanade, mumbai in accordance with law. the trial in respect of the above complaints nos. 452/s/91, 494/s/91 to be concluded within 3 months from date of revival thereof. 10) the respondents no. 1 to 3 agree to pay rs. 500/- to the petitioner towards the costs (including advocate fees and out of pocket) incurred by the petitioner in each of the said case nos. 452/s/91, 494/s/91 as well as in the above matter. 10-a) the contempt petition nos. 351/97, 352/97 and 353/97 accordingly stand disposed of. this hon'ble court accepts the undertakings given by the respondent nos. 1 to 3 this hon'ble court. 11) the certified copy of the minutes of this order be furnished within one week of the filing of these consent terms.' 6. justice lodha accepted the undertakings given by the respondents in paragraphs 4, 5, 6, 7 and 8. he has also observed that: 'since now the contemnors/respondents have acknowledged that they are liable to pay a sum of rs. 33 lacs in full and final settlement of the amount outstanding with the petitioner bank and their further undertaking to make the payment of the said amount in the mode and manner given in paragraph 5 of the minutes. 1 do not intend to pass any further order in the civil contempt petitions. it is, however, made clear that in case of breach of undertaking by the respondents no. 1 to 3 in any manner whatsoever, it shall be presumed that the contemnors respondents no. 1 to 3 never intended to make payment of the outstanding amount and would be accordingly proceeded with for contempt by revival of these civil contempt petitions and other consequences flowing from the minutes 'x'.it appears that the first and second instalments as contemplated under clause 5 of the said minutes were not paid and affidavit dated 13th july, 1998 came to be filed by respondent no. 3 stating inter alia that, because of the tremendous financial crunch in the market the amount could not be raised and the first instalment could not be paid to the petitioners under the order passed by justice lodha on 23rd/29th january, 1998. it was stated that respondent no. 2 had gone to u.k. for atleast 2 to 3 times for arranging the loans so that after getting the amount, the same can be paid to the petitioner. respondent no. 2 has already left for u.k. for the purpose of arranging the loan. a reference was made to the fax sent by respondent no. 2 to the petitioner on 25th june, 1998 to the effect that the loan would be granted positively from u.k. and the amounts due as on that day would be paid to the petitioner. it was also stated that in the fax it was clarified that, the second instalment which was due on 30th june, 1998 could not be paid because of the delay in granting loan from u.k. it was therefore prayed that the instalments which were due on 28-2-98 and 30-6-98 be extended till 31st july, 1998. however, inspite of getting time, not a single instalment as contemplated in clause 5 of the consent terms has been paid by the respondents. it is against this background that these petitions were mentioned before methe learned counsel appearing for the petitioners submitted that inasmuch as the 1st and 2nd instalments have not been paid by the respondents, the contempt petitions must revive as ordered by justice lodha in paragraph 9 of his judgment and other consequences must flow from theminutes marked 'x'. when the petitions were first mentioned before this court shri dalvi learned counsel appearing for the respondents made a statement that respondent no. 2 was in u.k. in order to arrange for the loan and was due to come back to india soon and, in the circumstances, the petitions may be adjourned. this prayer was objected to by the learned counsel appearing for the petitioners, miss. ghone. however, just to give one chance to the respondents, i adjourned the petitions. again the petitions were mentioned in the court and a statement came to be made by the learned counsel appearing for the respondents that efforts to get the loans sanctioned are on and, therefore, further time be given. the learned counsel for the petitioners submitted that it would be very difficult for the respondents to obtain loans from a foreign country in view of the r.b.i. regulations and the provisions of the foreign exchange regulation act and, therefore, obtaining of such a loan is almost an impossibility and that the court should not grant further time. however, hoping that the respondents would still arrange the money i adjourned the petitions and directed the learned counsel appearing for the petitioners to file affidavit. the learned counsel for the respondents was told that, in the meantime, some arrangements should be made to pay the outstanding amount or at least a major portion of it. however, till date, the respondents have not paid any amount to the petitioner bank. two affidavits have been filed on behalf of the respondents. respondent no. 3's affidavit is dated 20th august 1998 and respondent no. 2's affidavit is dated 28th august 1998. 7. the gist of these two affidavits filed on behalf of the respondents is that respondents no. 2 and 3 have made all the possible efforts to get loans from financial institutions, friends, relatives, but were not successful because of the financial crunch. the second instalment which was due on 28-2-98 therefore, could not be paid. respondent no. 2 states that he went to u.k. on 27th august, 1998 for the purpose of making arrangements for loans so as to be able to pay 1st and 2nd instalments. he applied to m/s. parkway investment ltd. for loan. he also applied for loan to m/s. sumarinda holdings ltd. he returned on 24-5-98. he expected the loan to be granted by 10th june, 1998. however, the loan was not sanctioned and he had to go to u.k. again on 14th june, 1998. intervening summer vacation also made it difficult for him to get loan. the final proposal is required to be passed by the committee in respect of the sanction of proposal with m/s. sumarinda holdings ltd., u.k. and the committee meeting was to take place on 27-8-98. another proposal with m/ s. parkway investment ltd., u.k. was expected to be sanctioned by the end of august 1998. he therefore hoped that the respondents would be in a position to pay the defaulted instalments as well as the third instalment which was due on 30-9-98 if the time is extended. respondent no. 2 has made a reference to circular issued by the reserve bank of india on 30-1-97 whereby, the corporates and institutions are permitted to raise external commercial borrowings upto u.s. $ 3 million or its equivalent at a minimum simple maturity of three years subject to the caveat that only one such loan should be outstanding at any point of time. it is submitted that application is required to be made to the reserve bank of india as per the scheme for sanction of the loan by financial institutions. after the loan is sanctioned by the financial institutions approval under theforeign exchange regulation act 1973 will take about 2 or 3 weeks and thereafter the sanction amount will be made available in another two weeks time of the completion of loan agreement formalities. there is a reference to the liberalised policy of the government as regards the external commercial borrowings norms. it is also stated that under the scheme borrowers may utilise the proceeds under the window for general corporate objective without any end-use restrictions excluding investments in stock markets or in real estate and that, as per the policies circulars and procedures, the approval of r.b.i. will be required to be taken only on final sanction of the loan from the said financial institutions and that the said sanctions are awaited and expected within a short time. it is also stated that ecb loan is being raised by the company for a project to set up machine shop for doing machining of steel components. the said project is eligible for obtaining ecb loans. formerly the ceiling limit of ecb loans was u.s. $ 3 million approval upto r.b.i. level. now this limit has been raised to u.s. $ 5 million. in short, it is an application for condonation of delay and extension of further time. 8. a careful perusal of these affidavits will show that except making promises to pay, these affidavits have nothing more to offer. the affidavits also do not positively indicate as to exactly at what point of time the monies would be available. at this stage, it is also necessary to make a reference to the affidavit filed by k. balakrishnan, senior assistant manager of the petitioner. in paragraph 12 of the affidavit, mr. balakrishnan has stated that obtainment of loans from foreign banks is subject to the necessary prior approvals of the ministry of finance or reserve bank of india. it is also stated that the external commercial borrowing policy lays down the terms and conditions on which foreign loans can be obtained by an indian company. normally under the ecb policy, loans if any are approved by ministry of finance and/or r.b.i. only for projects in the infrastructure or core sectors such as power, telecom, oil exploration, railways, roads and bridges, ports, industrial parks and urban infrastructure and the export sector and not simpliciter as a loan. obtainment of the foreign loan specifically for repayment of indian loans would be granted on a case to case basis and under special circumstances. the petitioners have called upon the respondents to produce any application made to the ministry of finance and/or r.b.i. and/or any letter of approval obtained by the respondents for obtainment of the loan from a foreign party for repaying the loan of the petitioners. as of today, no such application is forth coming. absence of such an application is sought to be explained by the learned counsel for the respondents by saying that, such an application could be made only after the loan is sanctioned. assuming this to be true, one really does not know as to when and whether the loan would be at all sanctioned and when would the other formalities be completed. in fact, it is rightly argued by mr. dharmadhikari appearing for the petitioners that one really does not have to go into all these matters as justice lodha's order is a self operative order. the last paragraph of the said judgment makes it abundantly clear that in case of breach of undertakings by the respondents in any manner whatsoever, it shall be presumed that the contemnors never intended to make payment of the outstanding and would be accordingly prosecuted for contempt by revival of the civil contempt petitions and other consequences flowing from the minutes marked 'x'. this really gives no scope for the contemnors to plead that they have made all possible efforts to get the loanssanctioned. however, it is only with a fond hope that the respondents would see reason and make some effort to pay the outstanding dues to the petitioners that the court adjourned the matter on two occasions. consideration of the explanation given by the respondents was with a view to giving them chance purge the contempt. i have gone through the affidavits filed by the contemnors and also by the petitioners and i am of the considered opinion that despite sufficient accommodation having been given to the contemnors, the contemnors have not made genuine efforts to arrange for money. it is significant to note that respondent no. 2 went to u.k. to arrange for loan on 27th april 1998 that is after 28th february 1998 when the first instalment was due. if there was a genuine desire to procure money he would have immediately left after the judgment dated 29-1-98. he should have left for u.k. in the first week of february itself. this shows the scant regard he has for the high court's order. as i have stated earlier and as the minutes indicate, the undertakings and assurances were given and accepted by the court in order to avoid sentence being passed for contempt of the undertakings by the court and this is abundantly clear from clause 3 of the minutes, which reads: 'the respondents nos. 1 to 3 are aware that it is on the basis of the undertakings and assurances given by respondents nos. 1 to 3 as set-out below and further undertakings duly to abide by and fulfil that this hon'ble court is being requested not to pass any sentence against the respondents no. 1 to 3 in contempt petition nos. 351 of 1997, 352 of 1997 and 353 of 1997, but to give further chance to respondents no. 1 to 3 to make payment to the petitioners.'having made the court to believe that the contemnors would abide by the undertakings, having made the court defer the imposition of sentence, it was the bounden duty of the contemnors to make arrangement to pay the bank's dues. if they have failed to do so, the law must take its course. 9. in this connection, mr. dharmadhikari has drawn my attention to the judgment of the supreme court reported in pritam pal v. high court of m.p. : 1992crilj1269 where, while dealing with the power of supreme court and the high court to punish contemnors, the supreme court has observed as under : 'the power of the supreme court and the high court being the courts of record as embodied under articles. 129 and 215 respectively cannot be restricted and trammelled by any ordinary legislation including the provisions of the contempt of courts act. their inherent power is elastic, unfettered and not subjected to any limit. the power conferred upon the supreme court and the high court, being courts of record under articles, 129 and 215 of the constitution respectively is an inherent power and the jurisdiction vested is a special one not derived from any other statute but derived only from articles. 129 and 215 of the constitution of india and therefore the constitutionally vested right cannot be either abridged by any legislation or abrogated or cut down. nor can they be controlled or limited by any statute or by any provision of the code of criminal procedure or any rules. the caution that has to be observed in exercising this inherent power by summary procedure is that the power should be used sparingly, that the procedure to be followed should be fair and that the contemnor should be made aware of the charge against him and given a reasonable opportunity to defend himself.'in the light of these observations i am of the opinion that the respondents can be proceeded with under contempt of courts act. the respondents are aware of the nature of charge of contempt against them. present petitions were in fact heard extensively on 23rd and 29th january, 1998 before mr. justice lodha. affidavits and counter affidavits have been filed. upon knowing exactly the nature of charges levelled against them that the contemnors submitted to the court minutes of which have been accepted by justice lodha and recorded in the judgment. it must be said therefore, that opportunity has been given to the contemnors to defend themselves not only before mr. justice lodha, but even before this court, as this court has adjourned these matters on 10th august, 1998 to 20th august, 1998. on 20th august, 1998 to 27th august 1998 and 27th august 1998 to 28th august 1998 and finally to 31st august 1998. affidavits on behalf of respondents dated 20th august 1998 and 28th august 1998 have been tendered in the court and earlier affidavit dated 13th july 1998 is also on record. therefore, a fair procedure has been adopted and reasonable opportunity has been given to the contemnors to defend themselves. in the same judgment, the supreme court has gone on the observe: 'where the contemnor has been served with a notice of contempt and thereafter permitted to go through the record and finally has been afforded a fair opportunity of putting forth his explanation for the charge levelled against him it could not be said that the order holding him guilty of committing contempt is vitiated by procedural irregularities.'i therefore see no reason why' in the facts and circumstances of this case. respondents should not be held guilty of contempt. 10. at this stage, it is also necessary to refer to another judgment cited by mr. dharmadhikari reported in the aligarh municipal board & others v. ekka tanga mazdoor & others, : 1970crilj1520 . while dealing with the imposition of sentence under the contempt of courts act, supreme court observed: 'contempt proceeding against a person who has failed to comply with the court's order serves a dual purpose: (1) vindication of the public interest by punishment of contemptuous conduct and (2) coercion to compel the contemnor to do what the law requires of him. the sentence imposed should effectuate both these purposes. to employ a subterfuge to avoid compliance of a court's order about which there could be no reasonable doubt may in certain circumstances aggravate the contempt.'in my opinion, the observations of the supreme court in this case apply aptly to the facts of the present case. 11. it is also important to note that in the affidavit of respondent no. 2 dated 20th august 1998, he has stated that the respondents are bound and liable to pay under the orders of this hon'ble court. he has also further stated that the breach is committed because of the situation beyond control. on behalf of himself and other respondents, respondent no. 2 has tendered unconditional apology to the court. in this connection, mr. dalvi referred to section 12 of the contempt of courts act, which reads thus: ' 12. punishment for contempt of court-- (1) save as otherwise expressly provided in this act or in any other law, a contempt of court may bepunished with simple imprisonment for a term which may extend to six months, or with fine which may extend to two thousand rupees, or with both: provided that the accused may be discharged or the punishment awarded may be remitted on apology being made to the satisfaction of the court. explanation-an apology shall not be rejected merely on the ground that it is qualified or conditional if the accused makes it bona fide. 2..................... 3..................... 4..................... 5.....................' he submitted that inasmuch as unconditional apology has been tendered and acceptable explanation has been given this court should accept the apology and the contempt notice be discharged. 12. in this case admittedly the respondents have committed contempt of the high court. the undertakings and assurances given to the high court have been violated with impunity. to defer the imposition of sentence further undertakings were given, which also have been breached. the so called explanation given in the affidavits is far from satisfactory. the affidavits are in the nature of mercy petitions and except seeking condonation of delay and asking for more time, they have nothing to say. the affidavits are vague. they do not offer any explanation for the past lapses nor do they give any concrete plan of repayment for future. in terms of paragraph 9 of justice lodha's judgment the present civil contempt petitions have therefore revived. the other consequences must flow from the minutes marked 'x'. in the circumstances, i hold that the respondents are guilty of contempt in as much as they have breached the undertakings given to the high court as set out in order dated 28th november, 1991, as modified by consent terms dated 12th february 1992 in c.r.a. no. 304 of 1991. respondents are also guilty of having committed contempt of undertakings given by them in paragraphs 4, 5,6,7 and 8 of the minutes filed in the court and recorded by justice lodha in his judgment and order dated 28th and 29th january 1998. in the facts and circumstances, narrated hereinabove i am of the opinion that this case warrants order of conviction. i am not inclined to accept the apology tendered by the contemnors as i do not find the said apology to be bona fide. 13. in the result, respondent nos. 2 and 3 namely, bhupendra mansukhlal shah and ram mohan mishra are held guilty of having committed contempt as set out in the preceding paragraph and are sentenced to suffer simple imprisonment for a period of two months each and to pay a fine of rs. 2000/ - each. respondent no. 1 company is also held guilty of contempt as aforesaid and is sentenced to pay a fine of rs. 2000/-.14. at this stage, mr. dalvi, learned counsel for the respondents prayed that the operative part of this order be stayed for a period of eight weeks. miss ghone, learned counsel for the petitioners objects to this. however, considering the facts and circumstances of the case, the operative part of this order is stayed for a period of 8 weeks. certified copy expedited. 16. petition allowed.

Judgment:
ORDER

Smt. Ranjana Desai, J.

1. These three Contempt Petitions were disposed of by common order since the parties are the same and they relate to the same facts. The Contempt Petitions were disposed of by Justice Lodha on 23rd and 29th January, 1998. The facts giving rise to these petitions have been narrated in the judgment dated 23rd and 29th January, 1998 by Justice Lodha. It is necessary to narrate them here for the purpose of getting to know the real issues involved.

2. Respondent Nos. 1 to 3 issued three cheques for amounts of Rs. 17 lacs, 15 lacs and 15 lacs towards their liability of outstanding loans and other facilities extended by the Bank. The said three cheques in all amounting to Rs. 47 lacs which were duly signed by respondent Nos. 2 and 3 therein were dishonoured for insufficient funds. This led to the filing of three criminal complaints by the petitioner Bank before the Additional Chief Metropolitan Magistrate, 37th Esplanade Court, Bombay. In all the three complaints the concerned Magistrate issued process which was challenged before the High Court in three different Criminal Applications.

In the said Criminal Applications, respondent Nos. 1 to 3 submitted consent terms and admitted their liability of Rs. 49,95,500.60 towards the petitioner Bank together with interest thereon at @ 25% per annum from 31st October, 1991 till full payment and realisation to the Bank. The respondents undertook in the said consent terms that, the said amount of Rs. 49.95,500.60 together with interest @ 25% per annum from 31-10-91 shall be repaid to the petitioner Bank by paying Rs. 5 lacs on or before 31st December 1991, Rs. 15 lacs on or before 29th February 1992 and the entire balance together with upto date interest and the balance remaining due and payable on or before 31st March 1992. In terms of the consent terms, the High Court disposed of all the three Criminal Applications on 28-11-91.

By further consent terms dated 12th February 1992, the period of payment as undertook by the respondents was extended by further undertakings of respondent Nos. 1 to 3 that the balance amount of Rs. 49,95,500.60 was to be paid with interest @ 25% per annum by paying Rs. 15 lacs on or before 17th February 1992, Rs. 15 lacs on or before 20th March 1992 and the entire balance together with interest on or before 20th April 1992. Respondent Nos. 1 to 3 also undertook to pay additional interest @ 5% per annum for the extended time.

3. It is the case of the petitioner Bank that, in terms of the consent terms and the undertakings submitted by respondent Nos. 1 to 3, payment has not been made. As on 31st October, 1997, the amount outstanding was more than a crore of rupees. It is on these facts that the present Contempt Petitions came to be filed. In response to the notice issued replies came to be filed.

4. The contempt petitions were argued before Mr. Justice Lodha. It appears from the judgment dated 23rd and 29th January, 1998 that the learned Counsel appearing for the Contemnors made various submissions. He urged that the consent terms dated 28-11-91 and 12-2-92 were in the nature of agreements between the parties and therefore, for-non compliance of the said consent terms the contempt proceedings were misconceived and the respondents cannot be held guilty of civil contempt under section 2(b) of the Contempt of Courts Act, 1971. He also urged that in the order dated 28-11-91 passed by the High Court, the undertakings given by respondents contemnors have not been specifically accepted and in terms of the second consent terms filed on 12-2-92 even no order has been passed. He also urged that after the consent terms were filed and undertakings were furnished the contemnors have paid a sum of Rs. 22 lacs to the Bank and, therefore, it cannot be said that respondents have not complied with the undertakings willfully and deliberately. Judgment of the Supreme Court in Rita Markandey v. Surjit Singh Arora, reported in : 1997CriLJ2503 was also cited.

5. It appears that after the order was dictated there was some talk of settlement and the possibility of Settlement was explored by the parties. On 28-1-98 when the matter came up for further dictation, the Counsel for the contemnors submitted that the parties had settled their disputes and written minutes to that effect would be submitted on the next day. On the next day, the contemnors, through their Counsel, submitted minutes and the undertakings. The said minutes and the undertakings read thus:

'1) The respondent Nos. .1 to 3 abovenamed hereby confirm and acknowledge their liability to the extent of Rs. 33,00,000/- in full and final settlement and payable by us to the petitioners as on 29-01-98.

2) The respondent Nos. 1 to 3 admit their defaults and breach of their undertaking given to this Hon'ble Court as set out in Orders dated 28th November, 1991 as modified by Consent Terms dated 12th February, 1992.

3) The respondent Nos. 1 to 3 crave indulgence of this Hon'ble Court and seek further time to make payment to the petitioners and to comply with the undertakings given to this Hon'ble Court. The respondent Nos. 1 to 3 are aware that it is on the basis of undertakings and assurances given by respondent Nos. 1 to 3 as set out below and their further undertaking to this Hon'ble Court duly to abide by and fulfill the said undertakings that this Hon'ble Court is being requested not to pass any sentence against respondent Nos. 1 to 3 in Contempt Petition No. 351 of 1997. Contempt Petition Nos. 353 of 1997 but to give further time to respondent Nos. 1 to 3 make payment to the petitioners.

4) The respondent Nos. 1 to 3 undertake to this Hon'ble Court that they will and do pay to the petitioners a sum of Rs. 33,00,000/- with interest thereon @ 21% p.a. from 29-01-98 till payment.

5) If however the respondent Nos. 1 to 3 pay to the petitioners a sum of Rs. 33,00,000/- in the following manner.

Rs. 4 lacs before 28-02-98Rs. 5 lacs before 30-06-98Rs. 6 lacs before 30-09-98Rs. 6 lacs before 31-12-98Rs. 6 lacs before 31-03-99Rs. 6 lacs before 30-06-99

Without any single default, the petitioners as a concession agree to accept the same in full settlement. If however, there is any default in payment of any two instalments or the last instalment for any reason whatsoever, the respondent Nos. 1 to 3 undertake to this Hon'ble Court to pay and do pay to the petitioners, the sum then due and payable with interest as aforesaid within 15 days of default.

6) The respondent Nos. 1 to 3 hereby expressly undertake to this Hon'ble Court to abide by and perform their undertakings as set out above. The respondent Nos. 1 to 3 acknowledge that it is on the basis of these undertakings that this Hon'ble Court has granted further time to the respondents to pay the petitioners dues.

7) The petitioners hereby agree and undertake that in the event of the respondent Nos. 1 to 3 abovenamed complying with the undertaking in making payment as mentioned in paragraph 4 hereinabove, the Criminal Complaint Nos. 452/S/91, 494/S/91 initiated by the petitioners against respondent Nos. 1 to 3 will stand automatically withdrawn in the Court of Additional Chief Metropolitan Magistrate, 37th Court, Esplanade, Bombay.

8) The petitioner agrees and undertakes not to proceed with cases Nos. 452/S/91, 494/S/91 filed by the petitioners against respondent Nos, 1 to 3 in the Additional Chief Metropolitan Magistrate, 37th Court, Esplanade, Bombay unless and until there is default in payment of any two instalments or the last instalment on their due date(s) specified in clause 4 hereinabove.

9) The respondent Nos. 1 to 3 that in the event of default in payment of any instalment on due date as undertaken hereinabove or in the event ofdefault the said cases shall automatically revive and the petitioner will be at liberty to proceed with the trial in the said Case Nos. 452/S/91, 494/S/91 in Additional Chief Metropolitan Magistrate's Court, 37th Court Esplanade, Mumbai in accordance with law. The trial in respect of the above complaints Nos. 452/S/91, 494/S/91 to be concluded within 3 months from date of revival thereof.

10) The respondents No. 1 to 3 agree to pay Rs. 500/- to the petitioner towards the costs (including Advocate fees and out of pocket) incurred by the petitioner in each of the said case Nos. 452/S/91, 494/S/91 as well as in the above matter.

10-A) The Contempt Petition Nos. 351/97, 352/97 and 353/97 accordingly stand disposed of. This Hon'ble Court accepts the undertakings given by the respondent Nos. 1 to 3 this Hon'ble Court.

11) The certified copy of the Minutes of this order be furnished within one week of the filing of these Consent Terms.'

6. Justice Lodha accepted the undertakings given by the respondents in paragraphs 4, 5, 6, 7 and 8. He has also observed that:

'Since now the contemnors/respondents have acknowledged that they are liable to pay a sum of Rs. 33 lacs in full and final settlement of the amount outstanding with the petitioner bank and their further undertaking to make the payment of the said amount in the mode and manner given in paragraph 5 of the minutes. 1 do not intend to pass any further order in the civil contempt petitions. It is, however, made clear that in case of breach of undertaking by the respondents No. 1 to 3 in any manner whatsoever, it shall be presumed that the contemnors respondents No. 1 to 3 never intended to make payment of the outstanding amount and would be accordingly proceeded with for contempt by revival of these civil contempt petitions and other consequences flowing from the minutes 'X'.

It appears that the first and second instalments as contemplated under Clause 5 of the said minutes were not paid and affidavit dated 13th July, 1998 came to be filed by respondent No. 3 stating inter alia that, because of the tremendous financial crunch in the market the amount could not be raised and the first instalment could not be paid to the petitioners under the order passed by Justice Lodha on 23rd/29th January, 1998. It was stated that respondent No. 2 had gone to U.K. for atleast 2 to 3 times for arranging the loans so that after getting the amount, the same can be paid to the petitioner. Respondent No. 2 has already left for U.K. for the purpose of arranging the loan. A reference was made to the fax sent by respondent No. 2 to the petitioner on 25th June, 1998 to the effect that the loan would be granted positively from U.K. and the amounts due as on that day would be paid to the petitioner. It was also stated that in the fax it was clarified that, the second instalment which was due on 30th June, 1998 could not be paid because of the delay in granting loan from U.K. It was therefore prayed that the instalments which were due on 28-2-98 and 30-6-98 be extended till 31st July, 1998. However, inspite of getting time, not a single instalment as contemplated in clause 5 of the consent terms has been paid by the respondents. It is against this background that these petitions were mentioned before me

The learned Counsel appearing for the petitioners submitted that inasmuch as the 1st and 2nd instalments have not been paid by the respondents, the contempt petitions must revive as ordered by Justice Lodha in paragraph 9 of his judgment and other consequences must flow from theminutes marked 'X'. When the petitions were first mentioned before this Court Shri Dalvi learned Counsel appearing for the respondents made a statement that respondent No. 2 was in U.K. in order to arrange for the loan and was due to come back to India soon and, in the circumstances, the petitions may be adjourned. This prayer was objected to by the learned Counsel appearing for the petitioners, Miss. Ghone. However, just to give one chance to the respondents, I adjourned the petitions.

Again the petitions were mentioned in the Court and a statement came to be made by the learned Counsel appearing for the respondents that efforts to get the loans sanctioned are on and, therefore, further time be given. The learned Counsel for the petitioners submitted that it would be very difficult for the respondents to obtain loans from a foreign country in view of the R.B.I. regulations and the provisions of the Foreign Exchange Regulation Act and, therefore, obtaining of such a loan is almost an impossibility and that the Court should not grant further time. However, hoping that the respondents would still arrange the money I adjourned the petitions and directed the learned Counsel appearing for the petitioners to file affidavit. The learned Counsel for the respondents was told that, in the meantime, some arrangements should be made to pay the outstanding amount or at least a major portion of it.

However, till date, the respondents have not paid any amount to the petitioner Bank. Two affidavits have been filed on behalf of the respondents. Respondent No. 3's affidavit is dated 20th August 1998 and respondent No. 2's affidavit is dated 28th August 1998.

7. The gist of these two affidavits filed on behalf of the respondents is that respondents No. 2 and 3 have made all the possible efforts to get loans from financial institutions, friends, relatives, but were not successful because of the financial crunch. The second instalment which was due on 28-2-98 therefore, could not be paid. Respondent No. 2 states that he went to U.K. on 27th August, 1998 for the purpose of making arrangements for loans so as to be able to pay 1st and 2nd instalments. He applied to M/s. Parkway Investment Ltd. for loan. He also applied for loan to M/s. Sumarinda Holdings Ltd. He returned on 24-5-98. He expected the loan to be granted by 10th June, 1998. However, the loan was not sanctioned and he had to go to U.K. again on 14th June, 1998. Intervening summer vacation also made it difficult for him to get loan. The final proposal is required to be passed by the committee in respect of the sanction of proposal with M/s. Sumarinda Holdings Ltd., U.K. and the committee meeting was to take place on 27-8-98. Another proposal with M/ s. Parkway Investment Ltd., U.K. was expected to be sanctioned by the end of August 1998. He therefore hoped that the respondents would be in a position to pay the defaulted instalments as well as the third instalment which was due on 30-9-98 if the time is extended.

Respondent No. 2 has made a reference to circular issued by the Reserve Bank of India on 30-1-97 whereby, the Corporates and institutions are permitted to raise external commercial borrowings upto U.S. $ 3 million or its equivalent at a minimum simple maturity of three years subject to the caveat that only one such loan should be outstanding at any point of time. It is submitted that application is required to be made to the Reserve Bank of India as per the scheme for sanction of the loan by financial institutions. After the loan is sanctioned by the financial institutions approval under theForeign Exchange Regulation Act 1973 will take about 2 or 3 weeks and thereafter the sanction amount will be made available in another two weeks time of the completion of loan agreement formalities. There is a reference to the liberalised policy of the Government as regards the external commercial borrowings norms. It is also stated that under the scheme borrowers may utilise the proceeds under the window for general corporate objective without any end-use restrictions excluding investments in stock markets or in real estate and that, as per the policies circulars and procedures, the approval of R.B.I. will be required to be taken only on final sanction of the loan from the said financial institutions and that the said sanctions are awaited and expected within a short time. It is also stated that ECB loan is being raised by the company for a project to set up machine shop for doing machining of steel components. The said project is eligible for obtaining ECB loans. Formerly the ceiling limit of ECB loans was U.S. $ 3 million approval upto R.B.I. level. Now this limit has been raised to U.S. $ 5 million. In short, it is an application for condonation of delay and extension of further time.

8. A careful perusal of these affidavits will show that except making promises to pay, these affidavits have nothing more to offer. The affidavits also do not positively indicate as to exactly at what point of time the monies would be available. At this stage, it is also necessary to make a reference to the affidavit filed by K. Balakrishnan, Senior Assistant Manager of the petitioner. In paragraph 12 of the affidavit, Mr. Balakrishnan has stated that obtainment of loans from foreign banks is subject to the necessary prior approvals of the Ministry of Finance or Reserve Bank of India. It is also stated that the External Commercial Borrowing Policy lays down the terms and conditions on which foreign loans can be obtained by an Indian Company. Normally under the ECB Policy, loans if any are approved by Ministry of Finance and/or R.B.I. only for projects in the infrastructure or core sectors such as power, telecom, oil exploration, railways, roads and bridges, ports, industrial parks and urban infrastructure and the export sector and not simpliciter as a loan. Obtainment of the foreign loan specifically for repayment of Indian loans would be granted on a case to case basis and under special circumstances. The petitioners have called upon the respondents to produce any application made to the Ministry of Finance and/or R.B.I. and/or any letter of approval obtained by the respondents for obtainment of the loan from a foreign party for repaying the loan of the petitioners. As of today, no such application is forth coming. Absence of such an application is sought to be explained by the learned Counsel for the respondents by saying that, such an application could be made only after the loan is sanctioned. Assuming this to be true, one really does not know as to when and whether the loan would be at all sanctioned and when would the other formalities be completed. In fact, it is rightly argued by Mr. Dharmadhikari appearing for the petitioners that one really does not have to go into all these matters as Justice Lodha's order is a self operative order. The last paragraph of the said judgment makes it abundantly clear that in case of breach of undertakings by the respondents in any manner whatsoever, it shall be presumed that the contemnors never intended to make payment of the outstanding and would be accordingly prosecuted for contempt by revival of the Civil Contempt Petitions and other consequences flowing from the minutes marked 'x'. This really gives no scope for the contemnors to plead that they have made all possible efforts to get the loanssanctioned. However, it is only with a fond hope that the respondents would see reason and make some effort to pay the outstanding dues to the petitioners that the Court adjourned the matter on two occasions.

Consideration of the explanation given by the respondents was with a view to giving them chance purge the contempt.

I have gone through the affidavits filed by the contemnors and also by the petitioners and I am of the considered opinion that despite sufficient accommodation having been given to the contemnors, the contemnors have not made genuine efforts to arrange for money. It is significant to note that respondent No. 2 went to U.K. to arrange for loan on 27th April 1998 that is after 28th February 1998 when the first instalment was due. If there was a genuine desire to procure money he would have immediately left after the judgment dated 29-1-98. He should have left for U.K. in the first week of February itself. This shows the scant regard he has for the High Court's Order. As I have stated earlier and as the minutes indicate, the undertakings and assurances were given and accepted by the Court in order to avoid sentence being passed for contempt of the undertakings by the Court and this is abundantly clear from Clause 3 of the minutes, which reads:

'the respondents Nos. 1 to 3 are aware that it is on the basis of the undertakings and assurances given by respondents Nos. 1 to 3 as set-out below and further undertakings duly to abide by and fulfil that this Hon'ble Court is being requested not to pass any sentence against the respondents No. 1 to 3 in Contempt Petition Nos. 351 of 1997, 352 of 1997 and 353 of 1997, but to give further chance to respondents No. 1 to 3 to make payment to the petitioners.'

Having made the Court to believe that the contemnors would abide by the undertakings, having made the Court defer the imposition of sentence, it was the bounden duty of the contemnors to make arrangement to pay the bank's dues. If they have failed to do so, the law must take its course.

9. In this connection, Mr. Dharmadhikari has drawn my attention to the judgment of the Supreme Court reported in Pritam Pal v. High Court of M.P. : 1992CriLJ1269 where, while dealing with the power of Supreme Court and the High Court to punish contemnors, the Supreme Court has observed as under :

'The power of the Supreme Court and the High Court being the Courts of Record as embodied under Articles. 129 and 215 respectively cannot be restricted and trammelled by any ordinary legislation including the provisions of the Contempt of Courts Act. Their inherent power is elastic, unfettered and not subjected to any limit. The power conferred upon the Supreme Court and the High Court, being Courts of Record under Articles, 129 and 215 of the Constitution respectively is an inherent power and the jurisdiction vested is a special one not derived from any other statute but derived only from Articles. 129 and 215 of the Constitution of India and therefore the constitutionally vested right cannot be either abridged by any legislation or abrogated or cut down. Nor can they be controlled or limited by any statute or by any provision of the Code of Criminal Procedure or any Rules. The caution that has to be observed in exercising this inherent power by summary procedure is that the power should be used sparingly, that the procedure to be followed should be fair and that the contemnor should be made aware of the charge against him and given a reasonable opportunity to defend himself.'

In the light of these observations I am of the opinion that the respondents can be proceeded with under Contempt of Courts Act. The respondents are aware of the nature of charge of contempt against them. Present petitions were in fact heard extensively on 23rd and 29th January, 1998 before Mr. Justice Lodha. Affidavits and counter affidavits have been filed. Upon knowing exactly the nature of charges levelled against them that the contemnors submitted to the Court minutes of which have been accepted by Justice Lodha and recorded in the judgment. It must be said therefore, that opportunity has been given to the contemnors to defend themselves not only before Mr. Justice Lodha, but even before this Court, as this Court has adjourned these matters on 10th August, 1998 to 20th August, 1998. On 20th August, 1998 to 27th August 1998 and 27th August 1998 to 28th August 1998 and finally to 31st August 1998. Affidavits on behalf of respondents dated 20th August 1998 and 28th August 1998 have been tendered in the Court and earlier affidavit dated 13th July 1998 is also on record. Therefore, a fair procedure has been adopted and reasonable opportunity has been given to the contemnors to defend themselves. In the same judgment, the Supreme Court has gone on the observe:

'Where the contemnor has been served with a notice of contempt and thereafter permitted to go through the record and finally has been afforded a fair opportunity of putting forth his explanation for the charge levelled against him it could not be said that the order holding him guilty of committing contempt is vitiated by procedural irregularities.'

I therefore see no reason why' in the facts and circumstances of this case. Respondents should not be held guilty of contempt.

10. At this stage, it is also necessary to refer to another judgment cited by Mr. Dharmadhikari reported in The Aligarh Municipal Board & others v. Ekka Tanga Mazdoor & others, : 1970CriLJ1520 . While dealing with the imposition of sentence under the Contempt of Courts Act, Supreme Court observed:

'Contempt proceeding against a person who has failed to comply with the Court's order serves a dual purpose: (1) Vindication of the public interest by punishment of contemptuous conduct and (2) coercion to compel the contemnor to do what the law requires of him. The sentence imposed should effectuate both these purposes. To employ a subterfuge to avoid compliance of a Court's order about which there could be no reasonable doubt may in certain circumstances aggravate the contempt.'

In my opinion, the observations of the Supreme Court in this case apply aptly to the facts of the present case.

11. It is also important to note that in the affidavit of respondent No. 2 dated 20th August 1998, he has stated that the respondents are bound and liable to pay under the orders of this Hon'ble Court. He has also further stated that the breach is committed because of the situation beyond control. On behalf of himself and other respondents, respondent No. 2 has tendered unconditional apology to the Court. In this connection, Mr. Dalvi referred to section 12 of the Contempt of Courts Act, which reads thus:

' 12. Punishment for Contempt of Court-- (1) Save as otherwise expressly provided in this Act or in any other law, a Contempt of Court may bepunished with simple imprisonment for a term which may extend to six months, or with fine which may extend to two thousand rupees, or with both:

Provided that the accused may be discharged or the punishment awarded may be remitted on apology being made to the satisfaction of the Court.

Explanation-An apology shall not be rejected merely on the ground that it is qualified or conditional if the accused makes it bona fide.

2.....................

3.....................

4.....................

5.....................'

He submitted that inasmuch as unconditional apology has been tendered and acceptable explanation has been given this Court should accept the apology and the contempt notice be discharged.

12. In this case admittedly the respondents have committed contempt of the High Court. The undertakings and assurances given to the High Court have been violated with impunity. To defer the imposition of sentence further undertakings were given, which also have been breached. The so called explanation given in the affidavits is far from satisfactory. The affidavits are in the nature of mercy petitions and except seeking condonation of delay and asking for more time, they have nothing to say. The affidavits are vague. They do not offer any explanation for the past lapses nor do they give any concrete plan of repayment for future. In terms of paragraph 9 of Justice Lodha's judgment the present Civil Contempt Petitions have therefore revived. The other consequences must flow from the minutes marked 'X'. In the circumstances, I hold that the respondents are guilty of contempt in as much as they have breached the undertakings given to the High Court as set out in order dated 28th November, 1991, as modified by consent terms dated 12th February 1992 in C.R.A. No. 304 of 1991. Respondents are also guilty of having committed contempt of undertakings given by them in paragraphs 4, 5,6,7 and 8 of the minutes filed in the Court and recorded by Justice LODHA in his judgment and order dated 28th and 29th January 1998. In the facts and circumstances, narrated hereinabove I am of the opinion that this case warrants order of conviction. I am not inclined to accept the apology tendered by the contemnors as I do not find the said apology to be bona fide.

13. In the result, respondent Nos. 2 and 3 namely, Bhupendra Mansukhlal Shah and Ram Mohan Mishra are held guilty of having committed contempt as set out in the preceding paragraph and are sentenced to suffer simple imprisonment for a period of two months each and to pay a fine of Rs. 2000/ - each. Respondent No. 1 company is also held guilty of contempt as aforesaid and is sentenced to pay a fine of Rs. 2000/-.

14. At this stage, Mr. Dalvi, learned Counsel for the respondents prayed that the operative part of this order be stayed for a period of eight weeks. Miss Ghone, learned Counsel for the petitioners objects to this. However, considering the facts and circumstances of the case, the operative part of this order is stayed for a period of 8 weeks.

Certified copy expedited.

16. Petition allowed.