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REPORTABLE

SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS.  4298-4299  OF 2017 (Arising out of S.L.P.(Civil) Nos.25733-25734/2015)

BARANAGORE JUTE FACTORY PLC. MAZDOOR SANGH (BMS) ETC. ...  APPELLANT (S)

VERSUS

BARANAGORE JUTE FACTORY PLC. ETC.           ... RESPONDENT  (S)

WITH

CIVIL APPEAL NOS.  4302-4305 OF 2017 (Arising out of S.L.P.(Civil) Nos.28212-28215/2015)

AND

CIVIL APPEAL NOS.  4306-4308  OF 2017 (Arising out of S.L.P.(Civil) Nos.28198-28200/2015)

J  U  D  G  M  E  N  T

KURIAN, J.:

Leave granted.  

2. The appellants are the petitioners/applicants before the

learned Single Judge in an application filed by them for taking

appropriate action against the respondents herein for violating

the order dated 23.02.2011. According to the appellants, the

entire money paid by the National Highway Authority of India

(‘NHAI’ for short) on account of acquisition of the company’s

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land, should have been deposited with the High Court, in the

true  spirit  of  the  order  dated  23.02.2011.  To  the  extent

relevant, for the purpose of the present case, it may be noted

that of the total amount due to the company, the NHAI issued a

cheque  for  an  amount  of  Rs.94.16  crores  approximately  in

favour  of  the Registrar  of  the High Court  after  deducting an

amount of Rs.10,55,60,331/- by way of tax deducted at source

(‘TDS’ for short). Thereafter, the company filed its income-tax

return  for  the  assessment  year  2013-2014  and  claimed  and

received refund of the entire amount covered by the TDS, after

deducting the tax. According to the respondents, the amount

was utilised for various purposes in connection with the affairs

of  the  company.  It  is  the stand of  the respondents  that  the

direction to deposit the amount with the High Court was given

to the NHAI, and in having claimed, received and utilised the

refund received from the Income-Tax Department, there is no

violation of the order dated 23.02.2011.

3. Learned  Single  Judge  was  prima facie of  the  opinion

that  there  was   deliberate  violation  of  the  order  dated

23.02.2011,  and  therefore,  issued  Rule  to  the  respondents,

returnable  in  six  weeks,  vide  order  dated 26.06.2015.  There

was also a direction that the respondents shall not operate the

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bank  accounts  of  the  company  without  securing  the

afore-mentioned amount of Rs.10,55,60,331/-.  

4. Aggrieved,  the  respondents  took  up  the  matter  in

appeal  before  the  Division  Bench  leading  to  the  impugned

order.

5. The Division  Bench,  in  the  impugned order,  took the

view that the learned Single Judge should not have passed an

order affecting the operation of bank accounts, and therefore,

to  that  extent,  the  order  of  the  learned  Single  Judge  was

vacated.  And  thus  aggrieved,  the  appellants  are  before  this

Court.

6. It may specifically be noted that the Division Bench has

not interfered with the Rule issued to the respondents in the

proceedings initiated under The Contempt of Courts Act, 1971

(hereinafter referred to as ‘the Act’) for the alleged violation of

the order dated 23.02.2011. The Division Bench only vacated

the  order  regarding  operation  of  the  bank  accounts  of  the

company without securing the amount of rupees ten crores and

odd. To quote from the impugned order:

“The order under appeal cannot, in our view, be  sustained  to  the  extent  that  the  appellants have  been  restrained  from operating  their  bank accounts without setting apart ten crores and odd. The  two  appeals  and  the  connected  stay applications are disposed of.”  

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(Emphasis supplied)   

7. Still further, the Division Bench also clarified that:  

“Having  regard  to  the  urgency  and considering  the  fact  that  the  contempt proceedings  and  the  company  applications  are pending before the learned Single Bench, we have not issued any direction for affidavits.”

 8. Thus,  the  limited  question  before  us  is  whether  the

Division Bench was justified in interfering with the order passed

by the learned Single Judge for securing the amount received

by  the  respondents  by  way  of  refund  from  the  Income-Tax

Department.

9. In  order  to  appreciate  the  above  question,  it  is

necessary to refer to the background under which the relevant

orders have been passed by the learned Single Judge.

10. The most relevant amongst the orders is the one dated

23.02.2011 passed by the learned Single Judge, which is one

alleged to have been violated by the respondents. The text of

the order reads as follows:  

“The Court: Mr.  S.N.  Mitra,  learned  senior Advocate  appearing  for  the  Baranagore  Jute Factory PLC Mazdoor Sangh (BMS), the applicant in CA 906 of 2010 submitted that  a portion of  the vacant  land  of  the  company  in  liquidation  has been acquired by the National Highway Authority of  India  and  on  account  of  compensation  huge amounts are likely to be paid to the company in liquidation.  He  submitted  that  considering  the

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conflicting  claims made by  various  persons  who are either in management or who are seeking to take over  management  in  liquidation the money likely  to  come  may  not  be  safe.  Therefore,  he submitted that  the money should be adequately protected.

Mr.  Sen,  learned Senior Advocate appearing for  Chaitan Chowdhury and Ridh Karan Rakeeha submitted that the submission made by Mr.  S.N. Mitra is a reasonable one.

Mr.  Anindya  Kumar  Mitra,  learned  Senior Advocate appearing for  Damodar Prasad Bhattar, Sunil Toshniwal, S.Jha & Ors, submitted that there is no objection to the money being protected but he submitted that his clients are presently running the  management  of  the  company  in  liquidation and therefore  his  clients  should be permitted to receive the compensation and to keep the same in fixed deposit subject to further order of Court.

Mr.  Subhranshu  Ganguly,  learned  Advocate representing Yashdeep Trexim Pvt. Ltd. supported the submission of Mr. S.N. Mitra.

Ms.  Manju  Agarwal,  learned  Advocate, appearing  for  some  of  the  creditors  of  the company  in  liquidation  also  supported  the contention of Mr. S.N. Mitra.

Mr.  D.K.  Singh,  learned Advocate appearing for the Official Liquidator submitted that pursuant to earlier orders passed by the Apex Court it  is, only proper that the money should be deposited with the Registrar, Original Side.

Mr.  Niloy  Sengupta,  learned  Advocate appearing  for  Krishna  Kumar  Kapadia,  who, according to him, holds controlling block of shares in the company submitted that the submission of Mr. S.N. Mitra should be accepted.

Considering  the  submissions  made  by  the learned Advocates appearing for the parties I am of the opinion that the submission made on behalf of the Official Liquidator is also in conformity with the submission made by Mr. S.N. Mitra which has largest  support  of  the  parties  appearing  before me.

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In that view of the matter, National Highway Authority  of India  is  restrained from making any payment  on  account  of  compensation  to  the company  in  liquidation  except  by  way  of  an account  payee cheque to  the  Registrar,  Original Side. The Registrar, Original Side upon receipt of such payment shall keep the same in a short term fixed deposit subject to further order of Court with the SBI Main Branch. Upon receipt of the money, he shall keep the parties informed about it.

It  is  clarified  that  I  have  referred  to  the company  as  a  company  in  liquidation  because there is already a winding up order passed by this Court.  Fuller  effect  of  that  order  is  yet  to  be examined. xxxx       xxxx   xxxx”

(Emphasis supplied)

11. After the deposit of the amount of around Rs.95 crores,

as  paid  by  the  NHAI,  in  terms  of  the  said  order,  several

attempts  have  been  made  by  the  respondents  herein  for

withdrawal of the said amounts purportedly for meeting some

of the liabilities of the company. We shall refer to only one order

passed  by  this  Court  on  12.03.2015  wherein  this  Court,  at

paragraph-4, has taken note of the order passed by the Division

Bench  of  the  High  Court  dated  14.08.2014.  To  the  extent

relevant, paragraphs-4, 6, and 7 of the order dated 12.03.2015

passed by this Court in Civil Appeal Nos. 2814-2815 of 2015,

read as follows:

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“4. The Division bench while affirming the order passed by the Company Judge observed as under:-

“  Considering the amount of deposit which  the  appellants  want  to withdraw,  and  the  company’s indebtness to its  various creditors and  the  quantum  of  its  liability, coupled  with  the  facts  that  even the  workers  have  not  been  paid their dues, we do not feel it safe to allow  a  particular  group  of shareholders, who are described as interloper  by  the  creditors,  to withdraw the money deposited with the Registrar,  Original Side of this Court  without  deciding  the  said issue finally  particularly  when  we find  that  the  appellant/applicant themselves  have  filed  an application  being  C.A.  No.957  of 2010 praying for permanent stay of the company petition No.2 of 1987 which is yet to be decided finally. In the  aforesaid  context,  we  do  not find any illegality in the impugned order  passed  by  the  learned Company  Court  proposing  to dispose  of  all  the  pending applications simultaneously.”  

xxxx       xxxx   xxxx

6. It  has been brought to  our  notice that  the impugned order dated 14.8.2014 was earlier challenged in SLP (C) No.29330 of 2014 (@ SLP  CC  No.16278/2014).  The  said  Special Leave Petition was dismissed as withdrawn on  27.10.2014  by  passing  the  following order.

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“Mr.  Ajit  Kumar  Sinha,  learned senior  counsel  appearing  for  the petitioner,  seeks  permission  to withdraw this petition with a liberty to  move  the  Company  Judge  to dispose of the pending matters as expeditiously  as  possible. Therefore,  in  view  of  the  fair submission  made  by  the  learned senior  counsel,  we  dismiss  this special leave petition as withdrawn with  a  request  to  the  Company Judge  to  dispose  of  the  pending matters  as  expeditiously  as possible preferably within a period of three months from today.”

7. In the facts and circumstances of the case, we  are  of  the  opinion  that  the  Company Judge  before  whom  all  applications  are pending  should  dispose  of  the  same  as expeditiously as possible within a period of two months from today.”

(Emphasis supplied)

12. Thus,  it  may  be  noted  that  this  Court  declined  to

interfere with the order passed by the Division Bench of the

High Court, which in turn refused the prayer for withdrawal of

the deposit lying with the Court.

13. Despite  the  above  background,  the  respondents

received cheque dated 13.06.2014 by way of Income-Tax refund

to  the  tune of  Rs.10,21,28,520/-  after  conceding  the  tax  for

Rs.34,31,807/-  from  the  total  TDS  of  Rs.10,55,60,331/-  and

utilised the same for various purposes without any clarification

or permission from the company court which passed the order

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dated 23.02.2011 regarding the deposit  of  the entire  money

paid by the NHAI towards compensation for the acquired land.

This  conduct,  according  to  the  learned  Single  Judge,  prima

facie,  was  in  violation  of  the  order  dated  23.02.2011,  and

hence, the Rule with a further direction to secure the entire TDS

amount. Thus, the learned Single Judge, after referring to the

order  dated  23.02.2011,  passed  the  following  order  on

26.06.2015. To the extent relevant, the order reads as follows:  

“...  Pursuant  to  the  aforesaid  order,  the National  Highway  Authority  issued  a  cheque  of Rs.94.16  crores  approximately  in  favour  of  the Registrar, Original Side of this Court. The National Highway  Authority  had  issued  the  aforesaid cheque after deducting a sum of Rs.10,55,60,331/- on  account  of  tax  deducted  at  source.  Such payment  appears  to  have been received by  the Registrar, Original Side of this Court on or about November, 2012. The fixed deposit was made by the Registrar, Original Side on 9th November, 2012, that is  to say, during the financial  year 2012-13 corresponding to assessment year 2013-14. In the return  filed  on  behalf  of  the  company  for  the assessment year 2013-14, a claim for refund was made on the basis of the aforesaid deposit made by the National Highway Authority on account of the tax deducted at source as would appear from page 101 of  the application.  It  appears that  the claim  for  refund  was  met  by  the  Income  Tax Authority by issuing a cheque on 13th June, 2014 as would appear from page 102 of the application. There is, as such, clear evidence of the fact that the  alleged  contemnors  received  the  refund  in violation of the order dated 23rd February, 2011. Assuming that receipt of the cheque on account of refund of income tax was in the usual course of business,  there  can  be  no  gainsaying  that  the

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cheque should  not  have been encashed without leave of Court. From Annexure-E to the application appearing at page 102, it appears that a cheque dated 13th June, 2014 was received on account of refund  and  has  also  been  encashed.  Such encashment of the cheque on account of refund which  has  its  origin  in  the  amount  paid  by  the National Highway Authority was in the teeth of the order dated 23rd February, 2011.  

I  am,  therefore,  prima  facie  of  the  opinion that there has been a deliberate violation of the order passed by this court.  

It appears from the return appearing at page 101 that a sum of Rs.34,31,807/- was payable on account  of  tax by  the  company.  After  deducting the  aforesaid  sum  from  the  amount  of Rs.10,55,60,331/-,  the  balance  sum  of Rs.10,21,28,520/- was claimed by way of refund. The liability on account of income tax is payable by  the  present  management  from  their  own resource  and  for  that  any  part  of  the  money received  from  the  National  Highway  Authority could  not  be  used. Therefore,  the  alleged contemnors, managing the affairs of the company, in  liquidation,  appear  to  have  appropriated  the aforesaid  sum  of  Rs.10,55,60,331/-  which  was deposited by way of tax deducted at source with the  Income  Tax  Department  by  the  National Highway Authority.

For the aforesaid reasons, issue Rule against the alleged contemnor Nos. 1 to 6. Returnable six weeks hence.

Since  the  company,  in  liquidation,  through the machination  of  the  alleged contemnors,  has been enriched by the aforesaid sum and in order to  preserve  the  aforesaid  sum  the  alleged contemnors  are  restrained  from  operating  the bank  account/accounts  of  the  company  without setting  aside  the  aforesaid  sum  of Rs.10,55,60,331/-. …”

(Emphasis supplied)

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14. The above order was the subject matter of challenge

before the Division Bench, leading to the impugned order.

15. The  Division  Bench,  as  we  have  already  referred  to

above, was not happy with the order regarding restriction on

operation  of  the  bank  account  without  securing  the  TDS

amount.  To  the  extent  relevant,  the  consideration  in  the

impugned order reads as follows:

“… With the greatest respect we are of the view that the learned Court should perhaps have given  the  appellants  an  opportunity  to  explain and should perhaps also have ascertained what was the balance in  the accounts maintained by the company before passing an order which has in effect  and  substance  restrained  the  company from operating its accounts.

It  is not in dispute that the turnover of the company  is  in  crores.  This  was  the  submission made  on  behalf  of  the  respondents  as  well.  A Company with such turnover cannot possibly carry on  its  business  without  operating  any  bank accounts  at  all.  The  livelihood  of  4000  workers employed by the company is involved. We are not concerned with whether the present management will  continue or  not;  we are  also  not  concerned with  whether  the  management  is  managing  the affairs  of  the company well  or  mismanaging the company. These are matters which will be decided in the appropriate proceedings at the appropriate stage.  It  is  however  reiterated,  at  the  cost  of repetition that there was no specific order against the  Company  restraining  the  Company  from encashing cheques towards Income Tax refund, or from utilising the same.  

The order under appeal cannot, in our view, be  sustained  to  the  extent  that  the  appellants have  been  restrained  from operating  their  bank

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accounts without setting apart ten crores and odd. The two appeals and the connected stay applications are disposed of.”  

(Emphasis supplied)

16. As we have already clarified, the Division Bench, in the

impugned order, has not interfered with the Rule issued in the

contempt proceedings. The interference is only to the extent of

direction to secure the TDS amount Rs.10,55,60,331/-.

17. Though  Shri  Shyam  Divan,  learned  Senior  Counsel

invited our attention to the judgment of this Court in  Sudhir

Vasudeva,  Chairman  and  Managing  Director,  Oil  and

Natural Gas Corporation Limited and others v. M. George

Ravishekaran and others1,  and contended that  the courts

must not travel beyond the four corners of the order which is

alleged to have been flouted, in the background which we have

explained  above,  we  find  it  difficult  to  appreciate  the

submission. This Court, in the judgment referred to above, in

paragraph-19, has clarified that the directions which are explicit

in the judgment or “are plainly self-evident” can be taken into

account for the purpose of consideration as to whether there

has  been  any  disobedience  or  wilful  violation  of  the  same.

Prima facie, we are of the view that learned Single Judge has

1 (2014) 3 SCC 373

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taken note only of the plainly self-evident facts while issuing

the Rule and order regarding securing the amounts which the

respondents  received by way of  refund from the Income-Tax

Department and utilized.

18. It  may  be  seen  that  the  order  dated  23.02.2011

regarding the deposit in court was passed to secure the entire

compensation from the NHAI. The court was concerned about

the  money  to  be  received  from  the  NHAI  towards  the

compensation  and  appropriately  protecting  the  same  from

being used by the company. Even the respondents herein had

“... no objection to money being protected...”. The court had, in

fact,  declined  the  request  made  by  the  respondents  ...  “to

receive  the  compensation  and  to  keep  the  same  in  fixed

deposit  subject  to  further  orders  of  the  court”.  The  Official

Liquidator  was  of  the  view  that  ...  “the  money  should  be

deposited with the Registrar, Original Side”.

19. After  considering  the  submissions  of  the  learned

Counsel  appearing  for  the  parties,  the  learned Single  Judge,

formed the opinion that ... “the submission made on behalf of

the Official Liquidator is also in conformity with the submission

made by Mr. S.N. Mitra, who has largest support of the parties

before me (the court)”. Hence, the learned Single Judge made it

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clear that “In that view of the matter,  the National  Highway

Authority was restrained from making any payment on account

of compensation to the company in liquidation except by way of

an account payee cheque to the Registrar, Original Side of the

High Court”. Therefore, it is fairly clear that the court had in

mind the entire compensation paid by the NHAI in respect of

the land acquired by them. Since the NHAI was bound to deduct

TDS,  an  amount  of  Rs.10,55,60,331/-  was  paid  to  the

Income-Tax  Department.  There  can  be  no  doubt  whatsoever

that the said amount formed part of the compensation. What

the court in its order dated 23.02.2011 was requested and the

court intended too was to protect the compensation amount.

Merely  because it  goes through the Income-Tax Department,

the same does not cease to be part of compensation. Even the

respondents herein had submitted before the court at the time

of passing the order dated 23.02.2011 that the compensation

amount needed to be protected and they were willing to protect

it subject to the order of the court. Therefore, the respondents,

while handling of the compensation amount, had to seek orders

from  the  court;  going  by  the  way  they  understood  the

proceedings.

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20. In that background of the case, we are of the view that

the respondents should not have appropriated the refund they

received  from  the  Income-Tax  Department.  There  is  nothing

wrong in claiming the refund.  The problem is in utilising the

refund  received.  The  refund  they  received  is  actually  the

compensation  in  respect  of  the  land  acquired  from  the

company  and  it  is  that  amount  which  the  court  wanted  to

protect by its order dated 23.02.2011. Hence,  prima facie, we

are of the view that the appropriation made by the respondents

of  the  refund  amount  they  received  from  the  Income-Tax

Department was in violation of the order dated 23.02.2011. It

appears, for that reason only, even the Division Bench declined

to disturb the Rule in the contempt proceedings issued against

respondents.  However, the Division Bench is wholly wrong in

entering a finding that there is no violation of the order dated

23.02.2011 in utilising the refund. No doubt, had the refund and

subsequent appropriation been of any amount other than the

compensation, there would not have been any contempt at all.

21. Unfortunately,  the  Division  Bench,  in  the  impugned

order, failed to recapitulate the background of the order dated

23.02.2011 and its own earlier orders with regard to the refusal

for  withdrawal  by  the  respondents  of  the  compensation

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deposited in court. Even if there be pressing needs, there could

not  have  been  any  utilisation  of  the  compensation  amount

without leave of the court. We find that the Division Bench has

taken note of the expenditure made by the respondents of the

amount they received. To quote the relevant background:

“We  have  also  looked  into  the  details  of utilisation of the refund as given in the schedule being  Annexure  ‘L’  to  the  stay  application  filed before  us,  wherefrom  it  appears  that Rs.1,19,18,723/-  was  paid  towards  arrear electricity  charges  by  three  account  payee cheques  drawn  on  Axis  Bank  Ltd.,  particulars whereof have been given in the schedule. Another Rs.2,23,00,000/- has been kept in fixed deposit as lien  for  issuance  of  bank  guarantee  favouring CESC Ltd., against the security deposit to be paid to  CESC  Ltd.,  for  continuation  of  supply  of electricity.  This  payment  has  been  made  by cheque dated 28th June, 2014 and also by transfer from Syndicate Bank on 28th June, 2014. A sum of Rs.24,92,582/-  has  been  paid  towards  arrear Central Sales Tax [Partial Payment]; Rs.34,56,910/- towards Employees State Insurance contribution; Rs.44,44,044/-  towards  Provident  Fund contribution; Rs.66,00,000/- towards arrear dues of Jute  Corporation,  a  government  body  and Rs.4,68,85,198/- towards arrear wages, arrear ex gratia  payment,  arrear  gratuity  and other  arrear dues of the workmen.”   

22. It is also seen from the order that the Division Bench

had taken note of  the paltry balance in  the accounts of  the

company as on 27.06.2015. To quote:

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“We directed the company to furnish us with details of its bank operations. It appears that the company  has  about  twelve  bank  accounts  in operation in India and the combined balance in all these accounts  taken together  as  on  27th  June, 2015  was  Rs.13,96,188.79P.  Our  attention  has been  drawn  by  Mr.  Mookherjee  to  the  fact  that there  are  three  other  bank  accounts  with combined balance of not more than Rs.3,44,436/- which have not  been used for  over  seven years and the company also has a bank account outside India that has a balance of 936 pounds [less than Rs.1,00,000/- in value in Indian currency].”

23. It  may  be  seen  that  the  respondents  have  been

managing the affairs of the company for a few years despite

the  futile  attempts  made  by  them  to  withdraw  the

compensation lying in deposit in court.

24. As  held  by  this  Court  in  Delhi  Development

Authority v.  Skipper  Construction  Co.  (P)  Ltd.  and

another2,  and going a step further, the Court has a duty to

issue  appropriate  directions  for  remedying  or  rectifying  the

things done in violation of the orders. In that regard, the Court

may  even  take  restitutive  measures  at  any  stage  of  the

proceedings.

25. In the background as above of the case, the Division

Bench  should  not  have  interfered  with  the  order  dated

26.06.2015  passed  by  the  learned  Single  Judge.  However,

2 (1996) 4 SCC 622

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taking note of the fact, an amount of Rs.2,23,00,000/- has been

kept  in  fixed  deposit  towards  lien  for  issuance  of  bank

guarantee,  we  make  it  clear  that  the  respondents  shall  not

operate the bank accounts of the company after  03.04.2017

without securing an amount of Rs.8,32,60,331/-. We also make

it clear that without leave of the High Court, the fixed deposit of

Rs.2,23,00,000/-  with  the  Axis  Bank  shall  not  be  withdrawn.

However,  it  would  be  open  to  the  respondents  to  apply  for

appropriate  clarification  or  modification  of  the  order  dated

26.06.2015, after making the deposit as above and it will be

open to the learned Single Judge to pass the appropriate orders

on merits of the application.

26. We make it clear that any observations made by us are

only  for  the  purpose  of  this  order  and  shall  not  have  any

bearing on the consideration by the learned Single Judge in the

contempt proceedings.

27. The appeals are allowed as above.  There shall  be no

order as to costs.

.......................J.      (KURIAN JOSEPH)

.......................J.        (R. BANUMATHI)

NEW DELHI; MARCH 21, 2017.

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