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The state trading corporation of india ... Versus ms sheela abhay lodha @ ors.

On 18 december, 2023 author: jasmeet singh bench: jasmeet singh $~11 * in the high court of delhi at new delhi judgment reserved on: 19.09.2023 judgment pronounced on: 18.12.2023 + cont.cas(c) 232/2015, cm appl.

40592/2019, cm appl. 14365/2021 the state trading corporation of india ltd ..... Petitioner through: mr. Dinesh agnani, sr. Adv. With ms. Madhu sudan bhayana, mr. Vikrant rana, advs.

Versus sheela abhay lodha & ors ..... Respondents through: mr. Siddharth dave, sr. Adv., mr. Jeevesh nagrath, spp 12 + cont.cas(c) 233/2015, cm appl. 14364/2021, cm appl.

40625/2019 the state trading corporation of india ltd ..... Petitioner through: mr. Dinesh agnani, sr. Adv. With ms. Madhu sudan bhayana, mr. Vikrant rana, advs. Versus ms sheela abhay lodha & ors. ..... Respondents through: mr. Siddharth dave, sr.

Adv., mr. Jeevesh nagrath, spp signature not verified digitally signed cont.cas(c) 232/2015 & cont.cas(c) 233/2015 page 1 of 21 by:amit arora signing date:18.12.2023 18:54:31 coram: hon'ble mr. Justice jasmeet singhthe state trading corporation of india ...

Versus ms sheela abhay lodha @ ors. On 18 december, 2023 : jasmeet singh, j cont.cas(c) 232/2015 1.

This is a petition seeking initiation of contempt proceedings for violation of the undertaking given on 04.08.2014 before the learned mm, patiala house court, new delhi in cc number 3452/1 titled "the state trading corporation of india ltd. V. Akshata mercantile pvt. Ltd.

&ors.". Brief facts 2. The brief facts as per the petitioner are as under:- 3. The petitioner company filed a complaint under sections 138, 141, 142 of the negotiable instruments act, 1881(hereinafter "ni act") against akshata mercantile pvt.

Ltd. (hereinafter "ampl"), and respondent nos. 1 and 2, wherein it stated that respondent nos. 1 and 2, on behalf of ampl, approached the petitioner-company and requested financial assistance so that ampl can purchase and import hr coil/hms1 and 2 etc.

(hereinafter "raw material") from domestic market as well as from overseas countries. 4. After various negotiations and discussions, petitioner company consented to grant financial assistance to ampl to buy from domestic market as well as overseas countries. 5.

The memorandum of agreement (hereinafter "moa") and the addendum thereto were executed and signed by and between the petitioner and ampl on 26.11.2007/23.04.2009 and 18.03.2008/22.05.2008 respectively, which contained all terms and conditions so agreed between the parties.

6. As per clause 1.0 of the moa, it was the duty of ampl to identify and finalise procurement of raw materials with foreign/indian suppliers and inform to the petitioner, details of quantities, specifications, price, shipment/delivery schedule etc.

On receipt of details, the petitioner was to sign contract with foreign/indian suppliers and open foreign/indian letter of credit (hereinafter "l/c") in favour of supplier for each indent/transaction. Further, it was the obligation of ampl to discharge the amount of l/c on its respective due date.

It was further stated in the moa that overdue payment would attract interest @ 15%/18% per annum. 7.

The petitioner, on request of ampl, opened 69 l/cs in favour of suppliers, out of which 7 l/cs became overdue much beyond their respective due dates, totalling to rupees 124 crores (excluding interest).

It is stated that the material in respect of these 7 l/cs were duly received by the respondent number 1. 8. Ampl and respondent nos.

1 and 2issued 5 cheques bearing number 013056 dates 30.06.2011 for rupees 10 crores, cheque bearing number no.013057 dated 20.07.2011 for rs.15 crores, cheque bearing no.013058 dated 31.07.2011 for rs.20 crores, cheque bearing no.013059 dated 20.08.2011 for rs.20 crores and cheque bearing no.013060 dated 31.08.2011 for rs.20 crores to the petitioner towards discharge of their part legal debt liability amounting to rupees 85 crores.

All the said cheques were signed and issued by respondent no.2 for and on behalf of ampl. The respondents assuredthe state trading corporation of india ... Versus ms sheela abhay lodha @ ors. On 18 december, 2023 Presentation. 9.

The petitioner presented the cheques bearing number 013059 dated 20.08.2011 for rupees 20 crores and cheque bearing number 013060 dated 31.08.2011 for rupees 20 crores to its bankers for collection but both cheques were dishonoured on presentation with the remarks "funds insufficient".

The petitioner issued legal notice dated 09.09.2011 to the respondent nos. 1 and 2 and ampl to liquidate amount of dishonoured cheques, but the same was not done despite receipt of the legal notice. 10. Criminal complaint under section 138 of the ni act was filed by the petitioner against ampl and respondent nos.

1 and 2 in patiala house court, new delhi on 22.10.2011 for dishonour of the cheques. 11. On 04.08.2014, respondent number 3 on behalf of ampl and respondent nos.

1 and 2 apprised the learned trial court that proposal of ampl dated 22.07.2014 has been accepted by the petitioner, as per which ampl had irrevocably undertaken to repay, without demur or protest, to petitioner-company an amount of rupees 10 crores to rupees 15 crores each and every continuing month and ensure that the total outstanding of the petitioner is liquidated within a period of 6 to 8 months.

The payments were to start from 01.08.2014. 12.

The outstanding liability payable by ampl to the petitioner was quantified at rupees 1,00,05,39,803/-, and the same was reflected in the statement of account dated 31.07.2014 filed in the trial court on 04.08.2014. 13.

On 20.10.2014, the complaint was returned to the petitioner for filing the same in the appropriate court in view of the judgment passed by the honorable supreme court in dashrath rupsingh rathod v. State of maharashtra, (2014) 9 scc 129.

The cheques were drawn on a bank branch located in mumbai, hence, as per the judgment, courts of mumbai had the jurisdiction to try the case. 14. Subsequently, in view of the negotiable instruments (amendment) second ordinance 2015, the complaints were refilled in patiala house court, new delhi. 15.

Since the respondents did not make payments as per the undertaking given before the learned mm dated 04.08.2014, the present contempt petition was filed. Petitioner's submissions 16.

It is argued by the learned counsel for the petitioners that the respondents have always acknowledged the liability which is due and payable to the petitioner and never disputed the same.

It has been time and again acknowledged and stated by the respondents, including on 04.08.2014, that the matter has been settled between the parties and payments will be made to the petitioner and some part payments have also been made. Thus, there is no dispute regarding the liability of the respondents towards the petitioner.the state trading corporation of india ...

Versus ms sheela abhay lodha @ ors. On 18 december, 2023 By the board of directors for giving undertaking before the trial court on 04.08.2014 on the instructions of ampl and the respondent nos. 1 and 2, and has mislead the trial court to delay adjudication of the complaint of the petitioner by giving such false undertaking.

Respondent's submissions 18.

It is stated by the learned senior counsel for the respondents that the order dated 04.08.2014 cannot be read in isolation for the purpose of deciding whether any undertaking was flouted by the respondents and the same has to be read with the letter for proposal to settle dated 22.07.2014 and the statement recorded on 04.08.2014.

The letter dated 22.07.2014 states that an amount of rupees 10 to 15 crores will be paid each month to liquidate the total outstanding of the petitioner within 6-8 months. The statement dated 04.08.2014 records: "the present matter has been settled between us.

In pursuance of the settlement the accused has filed letter dated 22.07.2014. The same is ex. Aw 1/1. The accused has agreed to abide by the contents of the said letter. The ar of the complainant has agreed to release the goods as per the settlement."

thus, the statement/undertaking given before the learned trial court was a two-way statement wherein the respondents agreed to make payments and the petitioner agreed to release the goods. 19.

It is argued that the respondent issued request letters to the petitioner seeking issuance of delivery orders for the payment made towards the outstanding dues, however, the petitioner did not issue any delivery order and itself flouted the terms of the undertaking.

It is further argued that the petitioner, instead of releasing goods to ampl, had admittedly sold the goods in open market by way of auction. The selling of goods would itself make the undertaking given before the learned trial court infructuous.

It was also contended by the petitioner in court that the payment was made before the undertaking was given on 04.08.2014, however, since the payment was made in respect of the same debt, in view of receipt of the said payment, the petitioner ought to have released the goods. 20.

The contempt proceedings are not maintainable against the respondent number 1, as he had resigned from the board of ampl on 24.11.2010 i.e. Before the issuance of the cheques in question, and thus, he had no role to play in the cheque bouncing as well as the settlement with the petitioner.

Even the cheque bouncing cases have been quashed against the respondent number 1 by this court vide judgment dated 19.11.2022 in crl. Mc number 5213/2019 and crl. Mc number 5219/2019 on these grounds. 21.

The learned senior counsel argues that the respondents have tendered an unqualified and unconditional apology by way of affidavit-cum-reply dated 01.10.2015 filed in response to the present contempt petition.

Therefore, it is bona fide and not an afterthought, and the respondents should be discharged based upon the apology if this court comes to the conclusion that the respondents have committed contempt. Reliance is placed upon section 12(1) of the contempt of courts act, 1971 and priya gupta and anr.

V. Additional secretary, ministry of health and familythe state trading corporation of india ... Versus ms sheela abhay lodha @ ors. On 18 december, 2023 22.

It is further argued that the non-fulfilment of the undertaking dated 04.08.2014 has not led to any benefit accruing to the respondents as the cheque bouncing cases are still pending against the respondents. It is stated that the alleged non-fulfilment of undertaking is not of such a nature that it will substantially interfere with the due course of justice.

Reliance is placed upon section 13 of the contempt of courts act, 1971 and suman chadha and another versus central bank of india (2021) scc online sc 564. 23. Mr. Dave, learned senior counsel further states that the undertaking given by the respondents was vague and conditional.

There was no timeline given by the respondents to make the payment. 24. Lastly, he submits that the complaint under section 138 of the ni act filed by the petitioner against the respondents has not been closed and the proceedings are still continuing. For the aforesaid reasons, the contempt proceedings cannot proceed and the respondents must be discharged.

Analysis 25. I have heard learned counsels for the parties. 26. Since the fountain head of the present contempt case is section 138 ni act complaint and the complaint has already been quashed vis-a-vis the respondent number 1, i am of the view that respondent number 1 is not a contemnor in the present petition.

This court has held that the respondent no.1 was not a director of ampl on the date when the cheques were issued. He was also not a director on 04.08.2014, when the statement was made before the learned mm. 27.

Further, the respondent number 3 is only an employee of ampl and there are no allegations in the contempt petition that he is involved in the day-to-day affairs of ampl or is the person who is guilty of non- compliance of the undertaking. Respondent number 3 had given the undertaking for and on behalf of ampl and not in his personal capacity. 28.

Thus, i am of the view that no contempt is made out against respondent nos. 1 and 3, and they need to be deleted from the array of parties. 29.

As regards the respondent number 2 is concerned, the respondent gave an undertaking dated 22.07.2014 to repay without any demur or protest, an amount of rupees 10 - 15 crores every continuing month.

The undertaking given by the respondent vide letter dated 22.07.2014 which is stated to be the settlement reads as under: "this is with reference to the ongoing 138 cases.

We here by irrevocably undertake to repay without any demur or protest to stc an amount of rupees 10 crores to 15 crores each and every continuing month and ensure that the total outstanding of stc is liquidated within a period of 6 months to 8 months. The payment will start from 01st august, 2014.

"the state trading corporation of india ... Versus ms sheela abhay lodha @ ors. On 18 december, 2023 "the present matter has been settled between us. In pursuance of the settlement the accused has filed letter dated 22.07.2014. The same is ex.aw 1/1.

The authority letter of ar is ex.aw 1/2. The accused has agreed to abide by the contents of the said letter. The ar of the complainant has agreed to release the goods as per the settlement." 31.

Thereafter, on 04.08.2014, the following order was passed by the learned mm: "authority letter filed. Same is taken on record. Ld. Counsel for the complainant has also filed the proposal sent by the accused to the complainant regarding settlement. The same is taken on record.

As per the proposal, the accused has undertaken to make the entire payment within a period of 6-8 months, starting from 1st august, 2014. Let statement of ar of accused be recorded to this effect separately. Statement record. Ld. Counsel for the accused has filed statement of account. Same is taken on record.

Now put up on 20.10.2014, to apprise the court regarding payment made by the accused. As prayed copy of order be given dasti." 32. There is solemnity and seriousness attached to court proceedings.

Parties to court proceedings cannot give undertakings without intending to honour them, or at least, they must make sincere and conscious efforts to comply with the same. If undertakings are given and the parties are permitted to resile from the same without any reasons, the judicial system cannot function.

The court in contempt proceedings is to ensure that the dignity and majesty of the court are maintained and any act and conduct of a party tantamount to lowering the dignity and majesty of the court would amount to contempt. 33.

In commr., agra v. Rohtas singh, (1998) 1 scc 349, the honorable supreme court held: "6....a contempt proceeding is often described as a quasi- criminal proceeding because it results in punishment for the contemner. The proceeding, however, cannot be equated with the prosecution of a criminal by the state.

Contempt proceedings are essentially a matter between the court and the contemner. Contempt jurisdiction enables the court to ensure proper administration of justice and maintenance of the rule of law.

It is meant to ensure that the courts are able to discharge their functions properly, unhampered and unsullied by wanton attacks on the system of administration of justice or on officials who administer it, and to prevent wilful defiance of orders of the court or undertakings given to the court.

That is why the supreme court and the high courts have an inherent power to punish for contempt even dehors legislation pertaining to contempt of court.the state trading corporation of india ... Versus ms sheela abhay lodha @ ors. On 18 december, 2023 Courts act, 1971. Two types of contempt are defined.

Under section 2(b), civil contempt means wilful disobedience of any judgment, decree, direction, order, writ or other process of a court or wilful breach of an undertaking given to a court.

While criminal contempt is defined under section 2(c) to mean the publication (whether by words, spoken or written, or by signs, or by visible representations, or otherwise), of any matter or the doing of any other act whatsoever which -- (i) scandalises or tends to scandalise, or lowers or tends to lower the authority of any court; or (ii) prejudices, or interferes or tends to interfere with, the due course of any judicial proceeding; or (iii) interferes or tends to interfere with, or obstructs or tends to obstruct, the administration of justice in any other manner.

From this definition it is clear that the courts' power to punish for contempt is a power which is required in furtherance of proper administration of justice and preserving the authority of the court. This power is expressly preserved under articles 129 and 215 of the constitution.

That is why the question of contempt is a question which is essentially between the court and the contemner." (emphasis supplied) 34. In the present case, the respondents undertook to repay the outstanding amount to the petitioner. The statement was recorded on solemn affirmation by the ar of the accused/respondent.

Based on the undertaking and the statement, the learned mm was pleased to record and put the 138 complaint after two months for reporting status of the payment. 35.

The argument of the learned senior counsel for the respondent that the undertaking was a conditional undertaking, and that there was no timeline fixed and no benefit derived by the respondents is without merit. 36.

The amount due and payable by the petitioner to the respondents is admitted by the respondents as on 04.08.2014, and the respondents themselves had filed the statement of account. The respondents had also undertaken to pay rupees 10 - 15 crores every month and to liquidate the total outstanding within 6 - 8 months starting from 01.08.2014.

Hence, the terms of the settlement are neither vague nor devoid of timelines. 37. The reliance of mr. Dave, learned senior counsel on the judgment of the honorable supreme court in suman chadha v. Central bank of india, 2021 scc online sc 564, is misconceived.

Paragraph 25 of the said judgment reads as under:- "25. It is true 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.

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 thethe state trading corporation of india ... Versus ms sheela abhay lodha @ ors.

On 18 december, 2023 The contempt already committed, the very determination of an act of contempt cannot simply be based upon the subsequent conduct." 38.

It also cannot be said that no benefit has accrued to the respondents and no injury has been suffered by the petitioner because based on the settlement, the proceedings before the learned mm have been delayed.

The learned mm, for a long period of time, was adjourning the complaint of the petitioner in order to enable the respondents to make payments and comply with its undertaking. 39. The benefit accrued to a party and the detriment/injury suffered by another party is not to be measured only in terms of pecuniary loss or injury.

The very fact that proceedings initiated by the petitioner before the learned mm have been delayed on account of the undertaking and assurances given by the respondents which it never intended to honour is itself benefit accrued to the respondents and injury suffered by the petitioner.

The objective of contempt proceedings is to maintain dignity of the orders passed by the courts. Even if no pecuniary loss/injury to the petitioner is made out, false assurance given by a party to the court in the absence of injury would still make the party liable for contempt. 40.

The contention of the respondent that it had made payment of rupees 8 crores on 01.07.2014 and despite the same, the petitioner-company did not release the delivery order, is also devoid of merits as there is nothing on record to show that the respondent made payment of rupees 10 - 15 crores every month after the undertaking dated 04.08.2014.

The minutes of meeting regarding reconciliation of accounts dated 21.12.2015 show rupees 101,76,70,308/- as due and payable to the petitioner by ampl (even though the ampl representatives did not agree to the above recoverable without citing any reasons).

The reply filed by the respondent to the contempt petition does not disclose the reasons as to why the undertaking given to the court has not been complied with. 41. The fact that the petitioner had undertaken to release the goods was conditional upon the respondent making payment which the respondent never did.

In addition, the respondent also challenged the act of the petitioner to dispose of the goods of the respondents by filing an application being notice of motion (l) number 2648/2014 in suit number 1108/2014 in mumbai high court.

The learned single judge vide order dated 26.11.2014 permitted the petitioner to sell the pledged goods of the respondents. 42. Further, the argument of the respondent that they tendered an unconditional apology at the first instance on 01.10.2015 in their affidavit- cum-reply, making it bonafide, is also without merit.

For this, reliance is placed upon section 12(1) of the contempt of courts act, 1971, which reads as under: "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 be punished 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.the state trading corporation of india ... Versus ms sheela abhay lodha @ ors.

On 18 december, 2023 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." 43.

The respondent has further relied upon priya gupta v. Ministry of health & family welfare, (2013) 11 scc 404, which reads as under: "7.tendering an apology is not a satisfactory way of resolving contempt proceedings.

An apology tendered at the very initial stage of the proceedings being bona fide and preferably unconditional would normally persuade the court to accept such apology, if this would not leave a serious scar on the dignity/authority of the court and interfere with the administration of justice under the orders of the court.

8....all that we have to examine is whether the apology tendered is bona fide when examined in the light of the attendant b circumstances and whether it will be in the interest of justice to accept the same." 44. I am of the view that the respondent's reliance on the provision as well as the aforementioned judgment is misconceived. 45.

The court in priya gupta (supra) has also observed: "8. '...bona fide' is an expression which has to be examined in the context of a given case. It cannot be understood in the abstract.

The attendant circumstances, behaviour of the contemnor and the remorse or regret on his part are some of the relevant considerations which would weigh with the court in deciding such an issue.

Where, persistently, a person has attempted to over-reach the process of court and has persisted with the illegal act done in wilful violation to the orders of the court, it will be difficult for the court to accept unconditional apology even if it is made at the threshold of the proceedings.

It is not necessary for us to examine in any greater detail the factual matrix of the case since the disobedience, manipulation of procedure and violation of the schedule prescribed under the orders of the court is an admitted position...." 46. The afore-stated provision and judgment suggest that apology may be considered as a mitigating circumstance.

However, the apology has to be seen with regard to the nature of disobedience and the pre and post circumstances surrounding the apology.

In the present factual matrix, and the conduct of the respondent to not make the payment as agreed between the parties and recorded as per the order dated 04.08.2014, as well as repeatedly ask for extensions in order to delay the proceedings, i am of the view that the apology of the respondent cannot be said to be bona fide.the state trading corporation of india ...

Versus ms sheela abhay lodha @ ors. On 18 december, 2023 Non-compliance of the undertaking dated 04.08.2014. 48. Respondent number 2 is the whole time director of ampl and is responsible for the affairs of ampl.

Hence, it is the respondent number 2 who is responsible for non-compliance of the undertakings for and on behalf of ampl before the learned mm. 49. For the said reasons, i am of the view that the respondent number 2 is guilty of contempt and must be punished accordingly. 50.

The respondent number 2 is given 4 weeks to file a reply to show-cause as to why he should not be punished for contempt for non-compliance of the undertaking given before the learned mm on 04.08.2014. Cm appl. 26480/2020(modification) 51.