Mr. Vinay Prakash Singh Vs Sameer Gehlaut

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REPORTABLE

IN THE SUPREME COURT OF INDIA

INHERENT JURISDICTION

CONTEMPT PETITION (CIVIL) NO. 2120 OF 2018

IN

SPECIAL LEAVE PETITION (CIVIL) NO. 20417 OF 2017

VINAY PRAKASH SINGH …PETITIONER(S)

Versus

SAMEER GEHLAUT & ORS. …ALLEGED CONTEMNOR(S)

J U D G M E N T

Deepak Gupta, J.

The Backdrop

A dispute between Daiichi Sankyo Company Limited

(hereinafter ‘the petitioner’) and the respondents in Special Leave

Petition (Civil) No.20417 of 2017, was referred to international

arbitration. An arbitral award was passed on 29.04.2016 in

Singapore whereby the petitioner was held entitled to receive Rs.

3500 crores approximately from respondent no.1 to 15 in S.L.P.(C)

No.20417 of 2017. This award was challenged both in Singapore

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and India. The objections have been dismissed and the award has

become final. Though the respondents submit that in Singapore

they have filed an appeal to the Court of Appeal, however they have

not placed any stay order of the Court of Appeal on record.

Admittedly, the award can be enforced.

2. The petitioner filed proceedings for the enforcement of the

foreign award in Delhi High Court. The respondents no.1 to 15 in

the SLP objected to the same and filed objections under Section 48

of the Arbitration and Conciliation Act, 1996 (for short ‘the Act’).

These objections were dismissed except insofar as respondents no.

5 and 9 to 12 before the High Court were concerned since these

respondents were minors. The challenge to the judgment of the

High Court has been rejected by this Court on 16.02.2018 in SLP

(C) No.4276 of 2018.

3. Before dealing with the issues in detail it would be helpful to

lay out the following chart to explain the relation between various

entities belonging to the respondents in the SLP as on 31.03.2017

as reflected from order of SEBI dated 14.03.2019:

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99% 99%

50% 50%

12%

81% 44% 12%

19%

52% 67% 33%

100% 22% 16% 6% 6%

85%

This chart clearly shows that as on March 31, 2017, Malvinder

Mohan Singh (MMS) and Shivinder Mohan Singh (SMS) through

Oscar Investments Limited (OIL) and RHC Holding Private Limited

(RHC) held 100% stake in Fortis Healthcare Holding Private

Limited (FHHPL) which in turn held a majority stake in Fortis

Healthcare Limited (FHL).

Shivinder Mohan Singh (Alleged

Contemnor No.10)

Malvinder Mohan Singh

(Alleged Contemnor

No.9))

Shivi Holdings Pvt. Ltd. Malav Holdings Pvt..

Ltd.

Oscar Investments Ltd.

(Respondent No.1 in SLP)

RHC Finance Pvt. Ltd.

Religare Enterprises Ltd.

Religare Finvest Ltd.

Fortis Healthcare

Holding Pvt. Ltd.

Fortis Healthcare Ltd.

Fortis Hospitals Ltd.

RHC Holding Pvt.

Ltd. (Respondent

No.8 in SLP)

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Proceedings before the Delhi High Court

The first assurance 4. During the enforcement proceedings, the petitioner filed I.A.

No.6558 of 2016 before the High Court of Delhi praying that the

respondents be restrained from alienating or encumbering their

assets. The petitioner expressed an apprehension that the

respondents would fritter away their assets which would make the

award unenforceable. On 24.05.2016 Mr. Kapil Sibal, learned

senior counsel appearing for the respondents assured the High

Court that the interest of the petitioner will be protected. Though

this assurance was not recorded by the Court, the same forms a

part of the letter sent by the counsel for petitioner, relevant portion

of which reads as follows:-

“1…Further, while directing that, inter alia, the Arbitration Award dated 29 April 2016, be kept confidential,

a formal protective order has not been passed by the Hon’ble Court on the strength of duly instructed oral assurance tendered by Learned Senior Counsel Mr. Kapil Sibal

(appearing for the Respondents) that the Petitioner’s interest would be protected to the extent of the total sum

awarded under the Arbitral Award dated 29 April 2016, and there would be no fait accompli. Mr. Kapil Sibal had also submitted that even recording of his personal statement in

the order would affect the respondents’ interest in the share market as some of his clients are listed in stock exchange.”

It appears that the respondents had urged before the Court that

their assurance should not be recorded in the order of the Court,

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since that might affect the value of their shares in the share

market. This was the first assurance given by the respondents to

the High Court of Delhi. It would be pertinent to mention that the

fact that such an assurance was made is also recorded in the order

of the High Court dated 23.01.2017 wherein Mr. Harish N. Salve,

learned senior counsel appearing for the respondents 1 to 4 and

13 therein reiterated the assurance given to the Court as recorded

in the letter dated 24.05.2016.

The second assurance 5. On 25.07.2016, the High Court of Delhi passed an order

directing the respondents to disclose the details of their immovable

assets and also to disclose the details of assets that have been

alienated and encumbered to third parties. It appears that during

this period reports appeared in various newspapers that the

respondents were disposing their stakes in subsidiary companies

and were also clandestinely disposing of their assets. Left with no

alternative, the petitioner filed an Interlocutory Application being

I. A. No. 618 of 2017 before the High Court of Delhi in which the

following prayer was made:-

a. “Urgently pass an order directing the Respondents to secure the Award amount by depositing it with the Registrar of the Delhi High Court or by providing

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adequate security or by bank guarantee or by any other means that this Hon’ble Court may deem fit;

b. Pass an order directing the attachment of the movable

and immovable assets and properties of the Respondents, and any assets and properties in which the Respondents have any beneficial interests until the

disposal of the present petition, at least to the extent of the amounts awarded in the Award;

c. Pass an order restraining the Respondents and their

group companies from selling, alienating or encumbering their movable or immovable properties/assets in any manner whatsoever;

d. Pass ex-parte, ad interim orders in terms of prayers (a), (b) and (c) above and confirm the same after notice to the Respondents;”

On 23.01.2017, Mr. Harish N. Salve, learned senior counsel for

some of the respondents before the High Court of Delhi reiterated

the assurance given in the letter dated 24.05.2016 and sought two

weeks’ time to furnish an affidavit by one of the respondents giving

the details of assets of all the respondents. This was the second

assurance.

The third assurance

6. The information was not provided in the manner sought by

the High Court which is reflected in the order dated 06.03.2017.

The order records that the respondents have been directed to

furnish details of all unencumbered assets both movable and

immovable and not merely the list of the investments, loans and

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advances as reflected in the affidavit filed by the respondents. The

respondents were directed to furnish further details and the

counsel for respondents had submitted that this would be done

within 1 week. The High Court in its order dated 06.03.2017

clarified as follows:-

“8. The Court would like to clarify that the above

understanding by Respondent No.19 of what was required to be furnished in terms of the order dated 23rd January 2017 is not correct. The Respondents were in fact required

to furnish the information relating to all the unencumbered assets, both moveable and immovable, and not merely investments and loans and advances.”

7. On 06.03.2017 Dr. Abhishek Manu Singhvi and Mr. Rajiv

Nayar, learned senior counsel appearing for the respondents made

a statement that the complete details/particulars of all

unencumbered assets would be filed before the Registrar within

one week. Certificates of Chartered Accountants of the

respondents were also directed to be filed giving the following

details:-

(i) “the value of all the unencumbered assets, including

both movable and immovable assets of Respondents

14 and 19, both the book value as well as the fair

value;

(ii) where these assets include investments in equity

shares, preference shares and debentures, to

indicate to what extent are these investments in

related/group entities of the Respondents and in

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companies whose shares are listed and which of

these shares have a condition of right of first refusal.

(iii) a clarification as to how much of the borrowings

reflected in the balance sheets are secured by way

of pari passu charge on the present and future

current assets of the companies.”

The Court again noted the statement of Dr. A. M. Singhvi and Mr.

Rajiv Nayar to the following effect:-

“12. Both Dr. Singhvi and Mr. Nayar state that if any change is proposed in the status of any of the unencumbered assets whose details are to be furnished as

directed hereinbefore, the Respondents will first apply to the Court.”

This was the third assurance on behalf of the respondents.

The fourth assurance

8. OIL and RHC filed the certificates disclosing the value of the

unencumbered assets and investments. On 28.02.2017 OIL had

unencumbered assets of a book value of 1953.70 crores and fair

value of 1204.78 crores. The fair value of the unencumbered

investments of OIL in listed entities including related/group

entities was valued at 854.64 crores. As far as RHC is concerned,

the book value of the unencumbered assets was shown as

6,346.69 crores and the fair value thereof at 3579.26 crores. The

fair value of unencumbered investments was shown as 3246.76

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crores. Therefore, it was projected by the respondents that these

two companies had a net value which was much more than the

amount claimed by the petitioner.

9. As pointed out earlier FHL is a Public Limited Company in

which OIL and RHC held majority shares amounting to 52.20%

through their wholly owned subsidiary, Fortis Healthcare Holdings

Private Limited (FHHPL) up till March, 2017. On 25.05.2017, FHL

issued notice to its shareholders proposing that the shareholding

of foreign investors would be increased. Immediately, thereafter,

the petitioner filed I.A. No.7142 of 2017 before the High Court of

Delhi praying that OIL and RHC be restrained from reducing their

100% shareholding in FHHPL and be restrained from indirectly

transferring FHHPL shares in FHL. It was prayed that these two

companies be directed to maintain their holding of 52% in FHHPL.

In the meantime, the disclosures made by FHL to the Bombay

Stock Exchange (BSE) showed that the shareholding of FHHPL in

FHL had fallen to 45.7%.

10. On 19.06.2017 the High Court of Delhi recorded in its order

that the learned senior counsel appearing for both OIL and RHC

submitted that they are not seeking to change the status of any

unencumbered assets as disclosed to the Court and the

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shareholding as disclosed in terms of the order dated 06.03.2017

shall not be affected. The statement was taken on record by the

High Court and the application disposed of in terms of this

statement. This effectively meant that the Court had restrained

OIL and RHC from reducing their shareholding in FHL through

FHHPL in any manner. Relevant portion of the order passed by

the High Court of Delhi dated 19.06.2017 reads as follows:-

“5. Learned Senior Counsel for respondent no.14 and 19 submits that they are not seeking to change the status

of any unencumbered asset as disclosed to the court and by mere passing of the impugned resolution, the shareholding as disclosed, in terms of order dated

06.03.2017, shall not be affected.

6. The statement is taken on record.

7. In view of the above statement, the application is disposed of.”

This was the fourth assurance given by the respondents.

The fifth assurance / undertaking

11. Despite this order having been passed, it appears that an

attempt was made to reduce the shareholding of OIL and RHC

through FHHPL in FHL. A newspaper report was published on

20.06.2017 one day after the order had been passed by the Court

reporting that IHH Healthcare Bhd. (Malaysian Company) was set

to acquire 26% stake in FHL.

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12. Thereafter, the petitioner filed a contempt petition before the

High Court of Delhi alleging that the orders dated 06.03.2017 and

19.06.2017 had been violated. The matter was taken up by the

High Court of Delhi on 21.06.2017. The High Court again recorded

the undertaking of the learned senior counsel appearing for

respondents 14 and 19 therein by which the High Court of Delhi

was assured that the value of the shares held by OIL and RHC

which have been disclosed as 452.60 crores and 1889.30 crores

would not be hampered or diminished in any manner. Relevant

portion of the order is as follows:-

“9. Learned Senior Counsel appearing for respondent

no.14 and 19 submits that the value of the unencumbered asset comprising of equity share in Fortis Healthcare Holding Private Limited has been disclosed as Rs.452.60

Crores by respondent no.14 and Rs.1889.30 crores by respondent no.19.

10. Learned Senior Counsel appearing on behalf of respondent No.14 and 19 undertakes that, irrespective of any transaction that the said respondent may enter into, the value as disclosed to the court would not be, in any

manner, hampered or diminished.

11. The effect of the above statement of learned Senior Counsel for respondent no.14 and 19 is that the sum of

Rs. 2341.90 Crores (i.e. Rs.452.60 + Rs.1889.30 crores) would always be available and realizable as an asset of respondent no.14 and 19, in fortis Healthcare Holding Pvt.

Ltd. towards the satisfaction of the decretal amount as and when the stages so arises.

12. The statement is taken on record and the Undertaking accepted.”

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This undertaking is the fifth assurance given by the respondents

to the Delhi High Court.

Proceedings before this Court

13. The order dated 21.6.2017 of the Delhi High Court was

challenged by the petitioner before this Court and the main

contention of the petitioner was that despite the respondents

violating the undertakings time and again restraint orders were

not being passed. In the Special Leave Petition (Civil) No.20417 of

2017 filed by the petitioner this Court passed the following order

on 11.08.2017:-

“In the interim it is directed that status quo as on today with regard to the shareholding of Fortis Healthcare Holding Private Limited in Fortis Healthcare Limited shall be

maintained.”

As per the statutory disclosures made by FHHPL to the BSE and

National Stock Exchange (NSE), it was disclosed that on

14.08.2017, 30,59,260 shares of FHHPL in FHL were pledged in

favour of Indiabulls Housing Finance Limited (IHFL).

14. The petitioner filed a contempt petition being Diary No.27334

of 2017 alleging that the conduct of the respondents in creating a

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pledge on 14.08.2017 is violative of the order dated 11.08.2017 In

the meantime on 21.08.2017, OIL filed an application being I.A.

77497 of 2017 for directions permitting sale of encumbered shares

to pay its debts and also prayed that a clarification be issued that

the order dated 11.08.2017 is limited to shares other than to those

pledged to banks and financial institutions. In I.A. 77497 of

2017, OIL had stated as follows:-

“24. It is in these circumstances that the Respondent Company seeks a direction from this Hon’ble Court that the

order dated 11 August 2017 passed by this Hon’ble Court is limited to shares other than those pledged to the banks and the financial institutions, the sale of which is being

made after obtaining prior consent of the pledgee(s).

25. It is submitted that the said direction will not, in any event, have an impact on the potential creditors and that

the availability of these funds will only help pare down the debt. This will only raise the value of the shares held by Respondents.”

Similar application being I.A. No.76959 of 2017 with identical

paragraphs 24 and 25 was filed by RHC.

15. On 31.08.2017, this Court directed as follows:-

“As the present Special Leave Petition is due to come up

for a fuller consideration on 23rd October, 2017, we do not consider it necessary to delve into the issues raised at this stage as the time taken to answer the same would be the

same as would be required to hear and decide the matter finally. We, therefore, decline to pass any order in the

matter, save and except, to put on record that the interim order of this Court dated 11th August, 2017 was intended to be in respect of both the encumbered and unencumbered

shares of Fortis Healthcare Limited held by Fortis

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Healthcare Holding Private Limited. Consequently, there will be no transfer of the shares to the extent indicated

above.

Parties may complete the pleadings in the meantime.

As we have now clarified the previous order of this Court

dated 11th August, 2017 no case for contempt is made out. However, it is needless to say that the present order and the

above clarification would govern the rights of the parties henceforth. The contempt petition is accordingly disposed of.”

16. On this date, the contempt petition was disposed of and at

the same time it was mentioned that the order and the clarification

contained therein would govern the rights of the parties

henceforth. The order dated 11.08.2017 and 31.08.2017 were

later clarified by this Court vide order dated 15.02.2018 which

reads as follows:-

“Having heard the learned counsels for the parties, we clarify our interim orders dated 11th August, 2017 and 31st

August, 2017 to mean that the status quo granted shall not apply to shares of Fortis Healthcare Limited held by Fortis Healthcare Holding Pvt. Ltd. as may have been encumbered

on or before the interim orders of this Court dated 11th August, 2017 and 31st August, 2017.

The applications for directions are disposed of in the above terms.”

It would be pertinent to mention that on 23.02.2018, this Court

passed the following order:

“Interim order of this Court dated 15th February, 2018 will continue to hold the field till the High Court decides the

matter.”

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17. During the period 06.09.2018 to 18.09.2018 Indiabulls

Ventures Limited (IVL), with which FHHPL maintains a demat

account transferred 12,25,000 shares of FHL held by FHHPL to

IHFL. In the present contempt petition filed in October, 2018, it is

alleged that this transfer of shares was in contempt of the orders

dated 11.08.2017, 31.08.2017, 15.02.2018 and 23.02.2018.

18. We can divide the contemnors into two sets. One set being

contemnors 1 to 8 and the second set of contemnors is 9 to 15.

Contemnors 1 and 5 & 2 and 6 are the same namely Sameer

Gehlaut and Gagan Banga. They have been arrayed twice

separately in their capacities as Directors of IHFL and IVL. From

the materials on record as far as the second set is concerned, we

are only inclined to proceed against Malvinder Mohan Singh

(contemnor nos. 9 and 12) and Shivinder Mohan Singh

(contemnor nos. 10 and 13) both of whom have been arrayed twice

separately in their capacities as Directors of Oscar Investments

Limited and Directors of RHC Holding Private Limited.

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Contemnor Nos. 1 to 8

19. We shall first deal with the issue whether contemnor nos. 1

to 8 have violated the aforesaid orders. The stand of the contemnor

nos.1 to 8 is that loan facilities had been granted by IHFL to

various companies controlled by MMS and SMS. As per the

loan agreements and other documents executed, the borrower(s)

created encumbrances on their immovable and movable properties

including shares. Some shares were pledged or charged for

repayment of the loan and IHFL was given a right to sell these

encumbered shares without reference to the borrower(s). The

stand of contemnors nos.1 to 8 is that the borrower(s) had a demat

account of their shares with IVL and a power of attorney dated

28.11.2016 was issued in favour of IHFL permitting it to transfer

shares from the demat account so as to ensure that the value of

the security matches the outstanding amount. There is another

undated power of attorney pursuant to the loan agreement dated

30.11.2016 which appears to have been registered on 03.12.2016.

According to IHFL, after 11.08.2017 no shares were credited into

the designated demat account by the pledger.

20. It would be pertinent to mention that IHFL filed an

application in October, 2017 for clarification of order dated

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31.08.2017. The stand of IHFL is that they have not transferred

any shares encumbered after 11.08.2017. The case of the

petitioner is that 12,25,000 shares were transferred in September,

2018. This fact is also not denied by IHFL. However, according to

IHFL this was done on the basis of instructions issued to IVL by

IHFL pursuant to the loan document including a power of attorney

dated 28.11.2016. The stand of MMS and RHC is that IHFL used

some pre-signed instruction slips to make these transfers but

these facts were denied by IHFL. Reliance by IHFL is also placed

on the order dated 15.02.2018 quoted hereinabove.

21. The main issue is whether these 12,25,000 shares were

pledged prior to 11.08.2017 or not. At this stage it would be

pertinent to mention that the stand of IHFL that no pledge was

created after 11.08.2017 is incorrect. The disclosure made on

21.08.2017 by FHHPL to BSE and NSE clearly discloses that

30,59,260 shares of FHL held by FHHPL were pledged on

14.08.2017 in favour of IHFL. This disclosure of 21.08.2017 is a

part of the record and not specifically denied by IHFL.

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22. We may point out that till October 2017, IHFL was not

represented in this Court. However, on 16.08.2017 and

31.08.2017 through emails RHC informed IHFL about the status

quo order passed by this Court. Thus, IHFL cannot claim that they

were not aware of this Court’s orders. However, from the material

on record especially the replies filed by OIL, RHC, MMS and SMS

it is apparent that on 06.09.2018, 07.09.2018, 08.09.2018 IHFL

transferred 6,00,000 shares of FHL held by FHHPL. When RHC

came to know about these transfers, it immediately informed IHFL

that transfers were in violation of the orders passed by this Court

on 11.09.2017. Despite the communication dated 11.09.2018,

IHFL continued to transfer shares of FHL held by FHHPL on

11.09.2018, 12.09.2018, 14.09.2018, 17.09.2018 and

18.09.2018. On 24.09.2018, this Court was informed that IHFL

had transferred 12,25,000 shares held by FHHPL in FHL in

violation of the Court’s orders. As on 29.09.2018, another

transaction of 9,04,760 shares had taken place. The main issue

is whether 12,25,000 shares were encumbered or not.

23. FHL is a public company and being a listed company, it has

to disclose its shareholding patterns to the stock exchange. A

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chart showing share holding pattern of FHHPL in FHL will show

the position of holdings at various stages:

S.

No.

Quarter Ending

Total Shares Encumbered Shares

Unencumbered shareholding of FHHPL in

FHL

1. September

2016

32,50,91,529 27,21,59,955 5,29,31,574

2. December

2016

32,50,91,529 25,22,63,248 7,28,28,281

3. 28th Jan

2017

32,50,91,529 25,19,23,248 7,31,68,281

4. March 2017

27,02,41,529 23,18,01,440 3,84,40,089

5. June 2017 22,22,11,701 18,38,96,484 3,83,15,217

6. September 2017

17,80,26,597 17,53,94,820 26,31,777

7. December 2017

17,80,26,597 17,53,94,820 26,31,777

8. March 2018

34,20,451 6,89,084 27,31,367

9. June 2018 32,82,851 5,51,484 27,31,367

10. September 2018

11,53,091 5,51,484 6,01,607

11. December 2018

11,53,091 5,51,484 6,01,607

It is true that we have to decide whether there is any disobedience

of the orders of this Court, but while doing so we will make reference

to the proceedings before the Delhi High Court and the above chart

to show how both sets of respondents have violated the orders of the

courts. As pointed above, on 19.06.2017 learned counsel for OIL

and RHC had made a statement before the Delhi High Court that

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the status of unencumbered assets as disclosed to the court would

not be changed and the shareholding as disclosed in terms of order

dated 06.03.2017 shall not be affected. When the petitioner felt that

this order is not being complied with, it filed contempt petition in

the Delhi High Court. Within two days another order was passed

by the Delhi High Court on the basis of the undertaking given to it.

24. The above chart would show that in the quarter ending June

2017, the total shares held by FHHPL in FHL were 22,22,11,701

and the encumbered shares were 18,38,96,484. Only 3,83,15,217,

were unencumbered.

25. This Court on 11.08.2017 directed that status quo with regard

to shareholding of FHHPL in FHL be maintained. On 31.08.2017 it

was clarified that the order would apply to both encumbered and

unencumbered shares. On 14.08.2017, 30,59,260, unencumbered

shares were pledged in favour of IHFL. As far as this violation of the

order dated 11.08.2017 is concerned, in view of the order dated

31.08.2017, the same stands condoned. This would further mean

that the unencumbered shares should have been reduced to

3,52,55,957.

26. However, the figures of September 2017 show a totally different

situation. The total shareholding has fallen to 17,80,26,597 and

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the unencumbered shares to 26,31,777. This means that in addition

to 30,59,260 shares pledged on 14.08.2017, 3,26,24,180 number of

shares were encumbered or transferred during this period. There is

no explanation by OIL, RHC, MMS or SMS, as to how these

unencumbered shares were encumbered or transferred in total

violation of the orders of the courts.

27. We shall now deal with the issue as to whether IHFL and IVL

had violated the orders of this Court or not? To decide this issue, it

would be appropriate to determine whether IHFL transferred any

shares which were not encumbered up to 14.08.2017.

28. This brings us to the shareholding pattern of FHL for the

period between 01.07.2018 and 30.09.2018 because it is during

this period that IHFL transferred the shares. According to IHFL

these 12,25,000 shares stood pledged with them. Neither in I.A.

No.109493 of 2017 nor in the reply filed by contemnor nos. 1-8, is

there any clear-cut statement as to how and when the different

pledges were created. Reference has been made to loan documents

of 2016 and also to the pledge of 14.08.2017. According to alleged

contemnor nos. 1 to 8, FHL was maintaining a demat account with

IVL. The case set up is that when the value of the shares of IHFL

fell in the market, to make the security equal to the outstanding

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due to IHFL, further shares were transferred by IVL to IHFL. It is

urged that this was done in view of the instructions given prior to

11.08.2017 by FHHPL to IVL and IHFL. These transfers were done

on the basis of the delivery instructions slips executed by IHFL as

power of attorney holder of FHHPL. Even if this be true, the alleged

contemnors are guilty of violating the orders of this Court. The

order dated 11.08.2017 clearly debars FHHPL from changing its

shareholding in IHFL. Vide order dated 31.08.2017, it was

clarified that the order dated 11.08.2017 would apply both to

encumbered and unencumbered shares. It was only on

15.02.2018 that the order was clarified that it would not apply to

shares encumbered prior to 11.08.2017 and 31.08.2017. A

reading of the 3 orders makes it clear that no unencumbered

shares could be charged after 31.08.2017 at least. Even if FHHPL

had given power of attorney empowering IVL to transfer shares

from its demat account to top up the security value, that power of

attorney could not be used to violate the orders of this Court. What

FHHPL could not do, could obviously not be done by its agent or

attorney. The shares which were used to top up the security after

31.08.2017 were obviously unencumbered shares prior to

this date. The plea is clearly unacceptable and a lame excuse for

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the wilful disobedience of the order directing maintenance of status

quo which, as modified, was to apply to the unencumbered shares.

The respondents were aware and cannot claim ignorance of the

purported agreements under which they were required to top-up

upon the securities, in case of fall of market value of the shares.

In other words, the interim order passed by this Court was to apply

even if there was a fall in market value of the securities held by the

creditors.

29. To make this position clear, we may refer to the disclosures

made by FHL to BSE. The above chart shows that in the quarter

ending 30.06.2018, FHHPL held 32,82,851 shares in FHL out of

which only 5,51,484 were encumbered, meaning that the balance

27,31,367 were unencumbered shares. The disclosure of

30.09.2018 and 31.12.2018 both reflect that the number of

encumbered shares have not changed but the total shareholding

of FHHPL in FHL has reduced from 32,82,851 to 11,53,091. This

means that what was transferred were 21,29,760 unencumbered

shares and not encumbered shares. The transaction of 12,25,000

shares therefore is out of the unencumbered shares because after

31.03.2018, the encumbered shares were much below 12,25,000.

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30. We are not entering into the dispute whether the shares were

transferred on the basis of pre-signed slips or delivery instruction

slips based on the power of attorney but the fact remains that the

official record shows that these shares were not encumbered and

the contemnors have failed to place any cogent material on record

to show that these 12,25,000 shares were pledged on or before

31.08.2017.

31. IHFL, in fact, flagrantly violated this Court’s orders and made

various transactions transferring even unencumbered shares. The

best course available to IHFL would have been to approach this

Court seeking a clarification before it made the transfers. This

they did not do. We are, therefore, clearly of the view that IHFL

and IVL and their officials i.e. contemnor nos. 1 to 8 knowing fully

well that this Court had passed an order directing status quo to be

maintained with regard to the holding of FHHPL in FHL, violated

the order. There can be no manner of doubt that IHFL and IVL

have violated these orders and, therefore, we find contemnor

nos.1-8 who are active directors of IHFL and IVL guilty of

knowingly and wilfully disobeying the orders of this Court and find

them guilty of committing Contempt of Court. We will hear them

on the question of sentence.

25

32. We afford an opportunity to contemnor nos.1-8 to purge

themselves of the contempt by depositing the value of 12,25,000

shares as on 31.08.2017 in the BSE within eight weeks from today.

In case, the said contemnors purge themselves of the contempt,

we may take a lenient view while imposing sentence.

Contemnors 9 & 10, 12 & 13

33. We shall now consider whether MMS, SMS have violated this

Court’s orders both in their individual capacity and as directors of

OIL and RHC. We are dropping contempt proceedings against

contemnor nos. 11, 14 and 15 because nothing has been placed

on record to show that they were actively concerned with the

running of the two companies.

34. We have given detailed facts of the shareholding of FHHPL in

FHL during the period of quarter ending September 2016 to

December 2018 hereinabove. As far as these contemnors are

concerned, the first assurance given by them to the High Court of

Delhi was on 24.05.2016 when they assured the High Court of

Delhi that any dealings made by them would not affect the rights

of the petitioners. As on 30.09.2016, FHHPL held 32,50,91,529

shares in FHL out of which 27,21,59,955 shares were encumbered

shares and 5,29,31,574 shares were unencumbered shares. For

26

various reasons, the total number of shares fell to 22,22,11,701 in

quarter ending June 2017 and the number of encumbered shares

became 18,38,96,484 and the unencumbered shares dropped by

about 1.5 crore shares to 3,83,15,217. Even after giving an

assurance on 21.06.2017 to the High Court of Delhi,

unencumbered shares were encumbered or transferred as is

apparent from the above table.

35. The petitioner came to this Court when the order dated

11.08.2017 was passed and clarified by order dated 31.08.2017.

During this period also the total shareholding of FHHPL in FHL fell

from 22,22,11,701 to 17,80,26,597 by 4,41,85,104 shares. MMS

and SMS have not furnished any explanation as to how this

happened. The contemnors were the best persons to disclose how

this happened. They have not done so. The only explanation we

have before us is about the pledge of 30,59,260 shares on

14.08.2018. It is difficult to ignore this huge drop in shareholding

but even if we were to ignore this, we do not understand how in

March 2018, the shareholding fell to 34,20,451 and finally in

December 2018 to 11,53,091. The undertaking given to the High

Court of Delhi was that the shareholding as on 19.06.2017 and

21.06.2017 would be maintained. On 11.08.2017, this Court

27

injuncted the respondents from changing the shareholding. On

11.08.2017, this Court passed the order of status quo referred to

above. Despite that specific order, on 14.08.2017 a pledge was

created. This was a violation of the orders of this Court. RHC and

OIL filed applications before this Court on 21.08.2017 praying for

modification of the order and for a direction that the order dated

11.08.2017 may be limited to the shares other than those which

already stood pledged to banks and financial institutions. Though

separate applications have been filed, Paragraph 25 of both the

applications are identical and has been quoted hereinabove.

36. These applications were filed on affidavit and it has held out

to this Court that if the order dated 11.08.2017 is limited to

unencumbered shares it would have no impact on the availability

of funds to protect the interest of the petitioner. On the basis of

this statement, the order dated 31.08.2017 was passed and this

Court took a lenient view on the matter and disposed of the

contempt without taking any action.

37. Unfortunately, the actions of these contemnors clearly show

that these statements were made without the least intention of

complying with them. These contemnors had already prepared a

28

well thought out scheme of diluting their shareholdings directly or

indirectly in FHL to defeat the rights of the petitioner.

38. The explanations provided are not worth consideration.

According to SMS he was not even taking part in the

administration of these companies and had gone into religious

service. This is belied from the fact that he has been attending

most of the meetings of the Board of Directors. The next defence

taken by both the contemnors is that they lost control over the

companies because the encumbered shares were sold. As pointed

out above it is not only the encumbered shares but also the

unencumbered shares which have been transferred. In December

2017, the unencumbered shares of FHHPL in FHL were 26,31,777

and in December, 2018 there were only 6,01,607 unencumbered

shares. This shows beyond any manner of doubt that there has

been wilful violation of the orders of this Court. It is apparent that

the contemnors knowingly and willingly lost control of FHL.

39. A litigant should always be truthful and honest in court. One

who seeks equity must not hide any relevant material. In the

present case, the petitioner has violated the undertakings given to

the Delhi High Court as also the orders of this Court. The Delhi

High Court will deal with the issue in so far as the undertakings

29

made before it are concerned. We have no doubt in our mind that

contemnor nos.9 and 10 have also wilfully and contumaciously

disobeyed the orders of this Court. What has happened during the

period when this matter has been pending in this Court is that the

shareholdings of FHHPL, which is wholly owned by OIL and RHC

which in turn are controlled by SMS and MMS, have virtually

vanished in FHL. FHHPL owns no shares in FHL now. It may be

true that IHH Healthcare Bhd. (Malaysian Company) through its

actually owned subsidiary Northern TK Venture Pte Ltd. is now the

majority stake holder but that is due to allotment of preferential

shares. In addition to the preferential shares allotted to them, the

shares which were owned by MMS and SMS through their holdings

in FHHPL in FHL have vanished into thin air and the only

conclusion which we can draw is that this was a well thought out

plan to deprive the petitioner from the amounts due to it.

40. No person or institution howsoever powerful, can be

permitted to misuse the process of the Court. Contempt of court

can be committed in various ways. Civil contempt is defined under

the Contempt of Courts Act, 1971 under Section 2(b) to mean

wilful disobedience of any judgment, decree, direction, order of the

Court of wilful breach of an undertaking given to the Court.

30

Criminal contempt has been defined under Section 2(c) to include

anything which scandalises or tends to scandalise or lower or

tends to lower the authority of the Court. Criminal contempt also

means any act which prejudices or interferes or tends to interfere

with the due course of judicial proceedings. As far as the present

case is concerned, the conduct of contemnor nos.9 and 10

definitely undermines the authority of the Court. We are dealing

with an international arbitration which has fructified into an

award but by misusing the legal process contemnor nos.9 and 10

have successfully avoided paying off the petitioner. In our view,

action for committing criminal contempt could have been taken

against contemnor nos. 9 and 10, but by taking a lenient view of

the matter we are only treating it as a civil contempt.

41. The order passed by this Court on 11.08.2017 with a

clarification on 31.08.2017, and modification made on

15.02.2018, is not to be read in isolation but along with the solemn

undertakings and assurances given by the contemnors on as many

as five occasions before the Delhi High Court, the last one being as

late as on 21.06.2017. These assurances were to the effect that

even if the Court permits sale of encumbered shares for payment

of debt, it would not have any impact on the (potential) creditors

31

and availability of the funds would only pare down the debt and

increase the value of the shares. Contrary to the aforesaid solemn

assurances and undertakings, which were repeatedly reiterated to

procure orders, the shareholding went into a downward spiral, as

is apparent from the table in paragraph 23. There was a significant

decline in the total number of shares held by FHHPL, both

encumbered and unencumbered, which fell down from

27,21,59,955 and 5,29,31,574 in September 2016 to 5,51,484 and

6,01,607 in December 2018. The aforesaid fact with the impact

on valuation was never brought to the notice of the Court and was

concealed with the knowledge that these facts, if brought to the

notice, would have substantial bearing on the orders that would

be passed to protect the interest of the petitioner.

42. What is even more shocking and clearly contemptuous is the

manner in which, in a well thought off plan, the authorised capital

of FHL was increased with the objective and purpose to transfer

controlling interest in the company. Consequently, the controlling

interest of MMS and SMS came down in FHL, as the company

changed hands. Controlling interest held by the majority

shareholders has considerable market value. Further, the amount

brought in by a foreign shareholder, who now has the controlling

32

interest in FHL, has been transferred in a dubious and clandestine

manner without full facts being brought on record. This amount

is not available for payment and satisfaction of the Award. About

Rs.4,600 crores has been transferred in a very hurried and

clandestine manner to a trust registered in Singapore i.e. RHT

Health Trust (RHT). Coincidentally, respondents no.9 and 10

themselves or through their holding companies were at one time

the biggest unitholders in the trust. It is obvious that the

respondents being debtors are manoeuvring, transferring and

converting the assets of value, with the desire and intent that the

petitioners would not be able to recover the decretal amount as per

the award.

43. We would, therefore, not read the orders of this Court in

isolation but along with the five solemn assurances and

undertakings given before the High Court. Directions given by this

Court and the orders passed were in light of the fact that the

contemnors always projected that the said assurances and

undertakings were binding and adhered.

44. There can be no manner of doubt that contemnors 9 and 10

have changed the shareholding of FHHPL in FHL knowingly and

wilfully. They have done this with a view to defeat the rights of the

33

petitioner. They have also wilfully and contumaciously violated

the orders of this Court dated 11.08.2017, 31.08.2017 and

15.02.2018. They are accordingly held guilty of committing

contempt of court. We shall hear them on the question of

sentence. We give one chance to the contemnors no.9 and 10 to

purge themselves of the contempt.

45. On 21.06.2017, a statement was made on behalf of

contemnor nos. 9 and 10 before the High Court of Delhi that in

respect of any transaction that these respondents may enter into,

a sum of Rs.2341.90 crores i.e. Rs.452.60 crores of OIL and

Rs.1889.30 crores of RHC would always be made available and

realisable from the assets of the company. We, therefore, direct

that in case each of the respondents deposits a sum of Rs.1170.95

crores i.e. 50% of Rs.2341.90 crores in this Court within eight

weeks from today then we may consider dealing with them in a

lenient manner.

Violation of order dated 14.12.2018

46. It was also argued that contemnor nos.9 and 10 have also

violated the order dated 14.12.2018. Since this is not the subject

matter of the main contempt petition and no notice has been

issued to the concerned parties in this regard, we feel that this

34

issue has to be segregated from the rest of the contempt petitions

because the main pleadings and replies are in respect of the alleged

contempt of orders dated 11.08.2017, 31.08.2017, 15.02.2018

and 23.02.2018.

47. However, we cannot let the matters stand as they are. On

14.12.2018, this Court had passed the following order:

“Issue notice. The personal presence of the alleged respondents-

contemnors is dispensed with for the present.

Status quo with regard to sale of the controlling stake in Fortis Healthcare to Malaysian IHH Healthcare Berhad be maintained.”

The order directs that the status quo with respect to the sale of

controlling stake in FHL to IHH Healthcare Bhd. (Malaysian

Company) should be maintained. We are now told that this sale

had already taken place. This matter needs to be enquired into

and we have to be certain when this sale actually took place and

when was the controlling stake in FHL transferred to the IHH

Healthcare Bhd. (Malaysian Company). Furthermore, on

09.01.2019, FHL moved an application in this Court and stated

that the transaction between the FHL and IHH Healthcare Bhd.

(Malaysian Company) had been completed on 13.11.2018 and

35

prayed that the order dated 14.12.2018 be modified insofar as it

pertains to sale of controlling stake in IHH Healthcare Bhd.

(Malaysian Company).

48. I.A. No.8948 of 2019 was filed by the petitioner on

15.01.2019 stating that FHL is proposing to transfer Rs.4,000/-

crores approximately, received by it [as a result of the transferring

of shares to the IHH Healthcare Bhd. (Malaysian Company)] to RHT

Health Trust, Singapore (RHT). Petitioner prayed for restraining

this transfer of funds and compliance of order dated 14.12.2018.

FHL filed a reply to this I.A., which made it apparent that on

15.01.2019 itself FHL had completed the transaction involving

acquisition of assets from Singapore based RHT even though it was

fully aware that this Court was seized of the matter.

49. Interestingly, the main promoters of RHC and OIL i.e. MMS

and SMS were the biggest unit holders in RHT when it was initially

incorporated. The statistics of unit holding as on 20.06.2017 of

RHT Trust, Singapore shows that SMS, MMS, their family

members, FHHPL, FHL and RHC virtually owned the RHT trust.

That situation has now changed and now the situation is such that

the companies/associations of which MMS and SMS are partners

are no longer visibly present and there are other persons who are

36

there. When and how the holdings in RHT trust were transferred

by various people is a matter which is required to be gone into.

50. We are prima facie of the view that these transactions were

made by MMS, SMS, RHC, OIL and FHL to defeat the rights of the

petitioner despite making undertakings to the High Court of Delhi

that no action would be taken to prejudice petitioner’s rights. We

are prima facie of the view that these transactions are in wilful

disobedience of the order of this Court dated 14.12.2018 read in

conjunction with the earlier orders. We, therefore, issue suo moto

notice of contempt and direct the Registry to register a fresh

contempt petition with regard to the violation of the order dated

14.12.2018 in which RHC, OIL, MMS, SMS and FHL shall be

arrayed as contemnors. FHL is directed to disclose the list of

directors/officials actively involved in the running of the company

for the period 01.01.2018 to 31.01.2019.

Directions

51. In view of the above discussion, we, dispose of this contempt

petition in the following terms :-

(i) We find Sameer Gehlaut, Director of Indiabulls Housing

Finance Limited and Director of Indiabulls Ventures

37

Limited (Contemnor Nos.1 & 5), Gagan Banga, Director

of Indiabulls Housing Finance Limited and Director of

Indiabulls Ventures Limited (Contemnor Nos.2 & 6),

Ashwini Kumar Hooda, Director of Indiabulls Housing

Finance Limited (Contemnor No.3), Sachin Chaudhary,

Director of Indiabulls Housing Finance Limited

(Contemnor No.4), Divyesh Bharat Kumar Shah,

Director of Indiabulls Ventures Limited (Contemnor

No.7) and Pinank Jayant Shah, Director of Indiabulls

Ventures Limited (Contemnor No.8), who are active

directors of IHFL and IVL of knowingly and wilfully

disobeying the orders of this Court dated 11.08.2017,

31.08.2017 and 15.02.2018 as continued on

23.02.2018 and find them guilty of committing

contempt of this Court. We will hear them on the

question of sentence. We afford an opportunity to

contemnor nos.1-8 to purge themselves of the contempt

by depositing the value of 12,25,000 shares as on

31.08.2017 in the Bombay Stock Exchange within eight

weeks from today. In case, the said respondents purge

38

themselves of the contempt, we may take a lenient view

while imposing sentence.

(ii) Malvinder Mohan Singh, Director of Oscar Investments

Limited and Director of RHC Holding Private Limited

(Contemnor Nos.9 and 12) and Shivinder Mohan Singh,

Director of Oscar Investments Limited and Director of

RHC Holding Private Limited (Contemnor Nos.10 and

13) have knowingly and wilfully violated the orders of

this Court dated 11.08.2017, 31.08.2017 and

15.02.2018 as continued on 23.02.2018. Therefore, we

hold both of them guilty of committing Contempt of this

Court. We give one chance to them to purge themselves

of the contempt. We, direct that in case each of the

contemnors deposits a sum of Rs.1170.95 crores in this

Court within eight weeks from today then we may

consider dealing with them in a lenient manner, while

imposing sentence.

(iii) In case any of the contemnors deposits the amount as

directed hereinabove, this Court shall decide on the next

date as to how this amount is to be disbursed.

39

(iv) The Registry is directed to register a suo motu contempt

petition against RHC Holding Private Limited, Oscar

Investments Limited, Malvinder Mohan Singh,

Shivinder Mohan Singh and Fortis Healthcare Limited,

for having wilfully violated the order of this Court dated

14.12.2018 and issue notice to them returnable for

03.02.2020 asking them to show cause why they should

not be punished for contempt.

52. List the present contempt petition on 03.02.2020 when all

the contemnors named hereinabove shall remain present in the

Court. On that day, we shall hear them on the issue of sentence.

Along with this, the contempt petition which has been ordered to

be registered shall also be listed on 03.02.2020.

………………………….CJI.

(Ranjan Gogoi)

…………………………….J.

(Deepak Gupta)

……………………………..J.

(Sanjiv Khanna)

New Delhi November 15, 2019

MR. VINAY PRAKASH SINGH Vs SAMEER GEHLAUT

MR. VINAY PRAKASH SINGH Vs SAMEER GEHLAUT