Page 1

1

Reportable

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

I.A. NOS.9-12 & 13-16 OF 2016  

IN  

SLP (C) NOS.6828-6831 OF 2016

STATE BANK OF INDIA AND ORS.        ……PETITIONERS

VERSUS

KINGFISHER AIRLINES LTD. AND ORS.     ..…. RESPONDENTS

With

I.A. NOS.1-4 OF 2016  IN  

AND WITH CONTEMPT PETITION (C) NOS.421-424 OF 2016  

IN  SLP (C) NOS.6828-6831 OF 2016

JUDGMENT

Uday Umesh Lalit, J.   1. State Bank of India and 13 other banks1 have filed the instant special

leave petitions challenging the order dated 04.03.2016 passed by the High

Court of Karnataka at Bengaluru in Writ Petition Nos.12191-12194 of 2016 1State Bank of India, Axis Bank Limited, Bank of Baroda, Corporation Bank, The Federal Bank Limited, IDBI Bank Limited, Indian Overseas Bank, Jammu & Kashmir Bank Limited,  Punjab & Sind Bank, Punjab National Bank, State Bank of  Mysore, UCO Bank, United Bank of India and  Oriental Bank of Commerce.

Page 2

2

refusing to pass any ad interim order against Respondent Nos.3, 10 and 11.

According  to  the  petitioners–banks  they  had  individually  advanced  to

Respondent No.1 loans of thousands of crores of rupees; that by Master Debts

Recast Agreement dated 21.10.2010 and other related documents the existing

loans were restructured and treated as a single facility; and that Respondent

Nos.2 and 3 executed a corporate guarantee dated 21.12.2010 and a personal

guarantee dated 21.12.2010 respectively, guaranteeing repayment of the entire

amount  due.   Further,  since  the  above  accounts  were  classified  as

non-performing assets, the petitioners–banks filed OA No.766 of 2013 against

Respondent Nos.1 to 9 before Debt Recovery Tribunal, Bengaluru (for short

“DRT  Bengaluru),  inter  alia  seeking  recovery  of  Rs.6203,35,03,879.32

(Rupees Six Thousand Two Hundred and Three Crores Thirty Five Lakhs

Three thousand Eight Hundred and Seventy Nine and Paise Thirty Two only)

from Respondent  Nos.1  to  4.   It  is  the  case  of  the  petitioners-banks  that

despite  applications having been filed requiring Respondent  Nos.1 to 4 to

disclose details of their assets on oath, said respondents never disclosed the

assets and instead, said respondents secretly tried to dispose of their assets

with an intention to  defeat  the recovery proceedings  pending before DRT

Bengaluru.

Page 3

3

2. According to the petitioners–banks, on 25.02.2016 Respondent Nos.10

and 11 disclosed to London Stock Exchange and Bombay Stock Exchange

respectively that Respondent No.3 had resigned as Chairman of Respondent

No.11;  that Respondent No.10 would pay to Respondent No.3 a sum of US$

75 million;  that out of said amount a sum of US$ 40 million would be paid

immediately;  and that  Respondent No.3 had made a statement to the press

confirming   said  transaction  and  had  stated  that  he  intended  to  settle  in

London.   In  these  circumstances,  the  petitioners–banks  moved  four

interlocutory  applications  before  DRT  Bengaluru  on  02.03.2016  seeking

interim prayers:

“(i) to freeze the passport of Respondent No.3 (ii) to issue an arrest warrant against Respondent No.3,  (iii) to issue a garnishee order against Respondent Nos.10 and 11 from disbursing US$ 75 million, and (iv) to issue a direction to Respondent No.3 to disclose his assets on oath.”   

3. It  is  the  case  of  the  petitioners–banks  that  DRT Bengaluru  heard

arguments only with respect to the Garnishee Application on 02.03.2016 and

posted the matters for orders on 04.03.2016 but failed to consider the other

applications.  Aggrieved  by  such  non-consideration  of  the  interlocutory

applications  by  DRT  Bengaluru,  despite  the  urgency  and  the  enormous

amounts involved in the matter, the petitioners–banks moved the High Court

Page 4

4

of  Karnataka  by  filing  Writ  Petition  Nos.12191-12194  of  2016  seeking

appropriate  directions  to  DRT  Bengaluru  to  hear  and  dispose  of  the

applications  moved  by  the  petitioners–banks  on  02.03.2016  expeditiously.

Since the High Court refused to pass any ad interim direction, the aforesaid

special leave petitions were filed in this Court.   4.      By  Order  dated  09.03.2016  this  Court  issued  notice  returnable  on

30.03.2016  and  also  permitted  the  petitioners–banks  to  serve  notice  on

Respondent No.3 through the Indian High Commission, London or any other

Embassy.  The Order dated 30.03.2016 discloses that Mr. C.S. Vaidyanathan,

learned Senior Advocate appeared on behalf of Respondent Nos.1 and 3 and

the Order recorded his submission that a proposal was already given to the

Chairperson  of  State  Bank  of  India  (Consortium  leader  of  banks)  for

settlement of dues of Respondent Nos.1 to 4.

5. The matter came up on 07.04.2016 when the Counsel appearing for the

petitioners–banks submitted that the offer made by Respondent Nos.1 to 4

was not  acceptable though the Consortium was not  against  any settlement

provided  the  respondents  showed  their  bona  fides  for  a  meaningful

negotiation.  This Court observed in its Order dated 7.04.2016:-

“As  a  pre-condition  to  such  steps  on  bona  fides,  it  is submitted that the third respondent should first of all disclose, on oath,  the  details  of  all  the  properties  -  movable,  immovable, tangible, intangible, shareholdings and any right, title or interest

Page 5

5

including beneficial interest and those held in fiduciary capacity, in private trusts, public trusts, companies, partnerships, limited liability  partnerships,  and/or  any other  entity/ies  both in  India and abroad etc.  in any form and there should be a substantial deposit made before this Court…….. ………………………………………………………………..

…..Mr. C. S.  Vaidyanathan and Mr. Parag P. Tripathi,  learned Senior  Counsel  appearing  for  Respondent  Nos.1  to  4  have submitted that they may be given short time to file their response to the main petition.  

Accordingly, they are granted time upto 21.04.2016 to file their response. In the response filed by the third respondent, he shall  disclose  the  details  of  all  his  properties  -  movable, immovable,  tangible,  intangible,  shareholdings  and  any  right, title  or  interest  including beneficial  interest  and those  held in fiduciary  capacity,  in  private  trusts,  public  trusts,  companies, partnerships,  limited  liability  partnerships,  and/or  any  other entity/ies both in India and abroad etc. in any form whatsoever and also the rights, indicated above, in the name also of his wife and children, as on 31.03.2016.  

It shall also be indicated in the response as to what is the amount he is prepared to deposit before this Court so as to show his bonafide for a meaningful negotiation. Mr. C.S. Vaidyanathan and  Mr.  Parag  P.  Tripathi,  learned  Senior  Counsel,  have submitted that on the next date of hearing, specific instruction shall  be obtained from the third respondent as to his probable date of appearance in person before this Court.”

6. The matter thereafter came up on 26.04.2016, by which time counter

affidavit was filed by Respondent No.3 disclosing his personal assets to the

tune of Rs.20,174,146,601, majority of which had been under attachment by

the Income Tax Department.  The details of the assets of Respondent No.3

Page 6

6

situated outside the country and those of his wife and children were furnished

in a sealed cover.  This Court, in its Order dated 26.04.2016 observed:-

“…….It  is  also  submitted  that  the  personal  guarantee executed by the 3rd respondent with the banks do not cover his assets  abroad.  We  have  no  problem  in  recording  the  above submissions and we do so. However, we find that in the Order dated 7.04.2016, this Court had directed the Respondent No.3 to disclose  the  assets  in  an  affidavit.  The  only  purpose  for disclosing the assets was to have a fair idea for the petitioners to go  for  a  meaningful  settlement  on  the  proposals  made  by Respondent No.3. There is no petition before us for clarification or  modification  of  Order  dated  07.04.2016.  In  the  above circumstances, we do not find any tenable objection in disclosing these assets to the petitioners.  

The learned senior counsel further submits that the wife and children are American citizens and they are not the parties before this Court. Whatever protection is available to them under law, they are free to avail. This disclosure is only for the purpose of enabling the petitioners to have a fair idea for a meaningful settlement.  

We are distressed to note that Respondent  No.3 has not responded to our Order dated 7th April, 2016 in the letter and spirit  of  the said Order. He was to  show us his  bonafides by showing the color of money in the form of a substantial deposit towards  dues  in  the  region  of  18,000  crores  to  arrive  at  a meaningful  settlement.  It  appears  there is  no bonafides  in  his offer for settlement. Apparently, statements made by counsel on his behalf were made only as a ploy to gain time.  

The Registry is directed to disclose the statement of assets furnished in the sealed cover, to the petitioners.”

7.     On 28.06.2016 Respondent No.10 filed a memo in O.A. No.766 of 2013

pending before DRT, Bengaluru along with two documents stating that an

Page 7

7

amount of US$ 40 million was paid to Respondent No.3 on 25.02.2016. Said

memo was to the following effect:- “MEMO

The  opponent  2  in  the  above  application  begs  to  submit  the below mentioned documents: 1. Extract confirming payment of US$ (US Dollars) 40 Million

to Defendant No.3 on 25.02.2016. 2. Resignation  of  Defendant  No.3  from  the  Board  of  United

Spirits Ltd. WHEREFORE the Opponent No.2 prays that this Memo and

enclosures be taken on record in the interests of justice.”

8.      On  14.7.2016  I.A.  Nos.9  to  12  of  2016  were  filed  by  the

petitioners-banks stating that the disclosure statement made by Respondent

No.3 and furnished to the petitioners-banks in terms of the aforesaid Order

dated  26.04.2016  was  vague  and  lacked  in  material  particulars;  that  the

location of the assets mentioned in the statement was so unclear that it would

be impossible for any person to identify the location of the property; and that

Respondent  No.3  had undisputedly  received  a  sum of  US$ 40  million  as

disclosed in the memo dated 28.06.2016 but there was no whisper about said

amount in the disclosure statement. It was submitted:- “18.  It  is  therefore  clear  that  Respondent  No.3  has  willfully disobeyed  the  directions  issued  by  this  Hon’ble  Court  on 7.04.2016. Respondent No.3 is therefore guilty of contempt of the Order dated 29.04.2016 passed by this Hon’ble Court. The Petitioners’  reserve  liberty  to  initiate  appropriate  proceedings against the Respondent No.3 in this regards.

……….

22. In  view of  the  above,  it  is  just  and necessary  that  this Application  is  allowed  and  Respondent  No.3  is  directed  to

Page 8

8

disclose and furnish all particulars and all descriptions of all his properties-  movable,  immovable,  tangible,  intangible, shareholdings and any right, title or interest including beneficial interest  and those  held  in  fiduciary capacity, in  private  trusts, public  trusts,  companies,  partnerships,  limited  liability partnerships, and/or any other entity/ies both in India and abroad etc. in any form whatsoever as on 31.03.2016. If this application is not allowed as prayed for, the Petitioner and the public at large will be put to irreparable loss and injury.”

In the circumstances it was prayed that Respondent No.3 be directed to

make a  complete  and detailed  disclosure  of  the assets  as  directed  by this

Court in its Order dated 7.04.2016.

9.     On 14.07.2016 itself  the petitioners-banks filed Contempt Petition Nos.

421-424  of  2016  submitting  that  appropriate  contempt  proceedings  be

initiated  for  deliberate  and  willful  violation  of  the  Order  dated  7.04.2016

passed by this Court. Paragraphs 20 to 24 of the petition were as under:- “20. A  reading  of  the  Disclosure  Statement  made  by Contemnor  clearly  reveals  that  the  Contemnor  has  not  at  all obeyed the directions of this Hon’ble Court dated 07.04.2016. One of the primary directions given by this Hon’ble Court to the Contemnor was that he should disclose the proper details of all his  properties-movable,  immovable,  tangible,  intangible, shareholdings and any right, title or interest including beneficial interests and those held in fiduciary capacity, in private trusts, public  trusts,  companies,  partnerships,  limited  liability partnerships, and/or any other entity/ies both in India and abroad etc.  in  any  form  whatsoever,  as  on  31.03.2016.  However, Contemnor has not at all disclosed the details of the assets in various forms/entities such as beneficial interest, etc. and thereby intentionally  concealing  the  information.  In  fact,  there  is  no whisper regarding the said details in the Disclosure Statement.

Page 9

9

21. The disclosure is prima facie vague and lacks any material particulars.  The  location  of  the  assets  mentioned  in  the Disclosure  Statement  is  so  unclear  that  it  is  not  practically possible  for  any  person other  than the  Alleged  Contemnor  to identify the location of the properties.

22. Further, it is stated that the Alleged Contemnor had received a sum of US$ 40 million from Respondent No.10 pursuant to an Agreement dated 25.02.2016 entered into between Respondent No.3 and Respondent No.10.

23.  It  is  pertinent  to  mention  here  that  after  disposal  of  the captioned Special Leave Petition, on 28.06.2016 the Respondent No.10  filed  a  Memo along  with  two documents  in  the  DRT, stating that the above mentioned amount of US$ 40 million was paid to alleged Contemnor on 25.02.2016. A copy of the said Memo dated 28.06.2016 is annexed herewith …………

24. A reading of the above documents clearly establishes that as on 26.04.2016 when the alleged Contemnor filed the Disclosure Statement  in  this  Hon’ble  Court,  the  alleged  Contemnor  had already received the above mentioned amount of US$ 40 million before 31.03.2016. In fact the memo clearly shows that the said amount of US$ 40 million was transferred by Citi Bank, being Respondent  No.10’s bank,  via  J.P. Morgan  Chase  N.A.  Bank (intermediary Bank) to the account  of  the Alleged Contemnor being  maintained  with  Edmond  De  Rothschild  (Suisse)  SA Geneva. However, there is no whisper of the above mentioned amount  or  the  transaction  in  the  Disclosure  Statement.  The alleged  Contemnor  had  deliberately,  willfully  and contumaciously  concealed  the  aforementioned payment/transaction which is against the letter and spirit of the Order dated 07.04.2016.”  

10.    On 25.07.2016 this Court issued notice in aforesaid contempt petition as

well as in I.A Nos.9 to 12 of 2016.

Page 10

10

11.  On 24.08.2016 counter affidavit  was filed on behalf of Respondent

Nos.1 to 4 in I.A. Nos.9 to 12 of 2016. It was submitted:-  “… it is incorrect that in the disclosures the Respondent No.3 has provided information pertaining to only a few of his overseas assets  as  on  31.03.2016  as  alleged.   The  Respondent  No.3 reiterates  that  the  disclosures  made to  this  Hon’ble  Court  are accurate.   It  is  respectfully  submitted  that  in  view of  what  is recorded in the Order dated 26th April, 2016 as to the purpose of the disclosures,  it  is  now not open to the Petitioners-banks to contend  that  in  the  event  that  the  DRT allows  the  Original Application,  the Petitioners-banks may not be able to proceed against the properties mentioned in the disclosures as alleged or for reasons alleged. In this regard, it is pertinent to mention that the  Respondent  No.3  had  expressly  submitted  before  this Hon’ble Court on 26th April, 2016 that “the personal guarantee executed by the 3rd Respondent with the banks do not cover his assets  abroad”.   It  is  denied  that  all  particulars  and  all descriptions of the assets as contemplated by the Order dated 7th April, 2016 have not been provided, deliberately or otherwise. It is  denied  that  there  is  any  reason  or  basis  for  directing  the Respondent No.3 to once again disclose and furnish particulars and  description  of  his  properties  as  alleged  or  in  the  manner alleged.    It is denied that if the I.A. of the Petitioners-banks is not allowed, the Petitioners or the public at large will be put to irreparable loss or injury.”

12. Applications being I.A. Nos.1 to 4 of 2016 were also filed on behalf of

Respondent  No.3/Alleged Contemnor for  recall  of Order dated 25.07.2016

passed by this Court issuing notice in contempt petition. It was submitted by

Respondent No.3:- “………….It is further submitted that the disclosures made by Respondent No.3/Alleged Contemnor to this Hon’ble Court were (a) pursuant to the Order dated 7th April, 2016 were made “as on 31.03.2016” and were accurate as on 31.03.2016”, and (b) far from being made under the provisions of Order 21 Rule 41(2) of

Page 11

11

the Code of Civil Procedure, 1908, were “only for the purpose of enabling  the  petitioners  to  have  a  fair  idea  for  a  meaningful settlement” as observed in the order dated 26th April, 2016. It is respectfully submitted that the Petitioners are incorrectly alleging that  the  disclosures  are  inaccurate,  and  are  now  seeking  to substantially alter the basis and purpose of the disclosures, as is evident from a mere perusal of the submissions in paragraphs 21 and 25 of the present Contempt Petition.

……It  is  denied  that  Respondent  No.3  has  not  obeyed  the directions of this Hon’ble Court dated 7th April, 2016 or has not disclosed the details of the assets  as alleged or  in the manner alleged. It is denied that the disclosure is vague or lacks material particulars.  It  is  denied  that  the  location  of  the  assets  in  the disclosure is unclear  as alleged or in the manner alleged.  The statement of assets is as on a particular date, obviously it cannot detail the day to day transactions of receipts or expenditures; nor did the order require the present respondent to do so. It is denied that the Respondent No.3/Alleged Contemnor has deliberately or willfully  or  contumaciously  concealed  the  aforesaid  payment against the letter and spirit of the Order dated 7th April, 2016.”

While seeking recall of the Order dated 25.07.2016 it was also prayed

that the personal appearance of Respondent No.3/Alleged Contemnor in the

present contempt petition be dispensed with.

13.   Around this time I.A. Nos.13 to 16 were filed on behalf of B.N.P Paribas

seeking impleadment in aforesaid Special Leave Petition Nos. 6828-6831 of

2016.

14.  On 29.08.2016, this Court issued notice in respect of I.A. Nos.1 to 4 of

2016 seeking recall  of  the Order dated 25.07.2016. In their reply filed on

07.09.2016 to aforesaid I.A.  Nos.1 to 4 of  2016,  it  was submitted by the

Page 12

12

petitioners-banks that the alleged contemnor had not filed any reply to the

contempt petition nor had he appeared in person in response to the contempt

petition  as  required  by  Rule  6(1)  of  Rules  to  Regulate   Proceedings  for

Contempt of Supreme Court 1975 and that present application for recall was a

mere ruse to circumvent the law. It was submitted:- “6. The Alleged Contemnor has received the sum of US$

40 million from Respondent  No.10 pursuant  to  an Agreement dated  25-02-2016  entered  into  between  Respondent  No.3  and Respondent  No.10.  However,  the  Alleged  Contemnor  has suppressed the receipt of US$ 40 million from Respondent No.10 even  in  the  Application  under  reply.  The  non  disclosure  of whereabouts of US$ 40 million received from Respondent No.10 further discredits the Alleged Contemnor.

7. The Alleged Contemnor has not denied the existence of his bank account held in Edmond De Rothschild Bank, Geneva. However, details of this bank account did not find mention in the list  of  his  foreign  assets  filed  before  this  Hon’ble  Court  on 26.04.2016.  It  is  respectfully  submitted  that  this  is  an  act  of willful concealment and the Alleged Contemnor is in violation of Order dated 07-04-2016 passed by this Hon’ble Court.”

15. When  IA  Nos.9-12  of  2016  along  with  Contempt  Petition

Nos.421-424 of 2016 came up before this Court on 25.10.2016, it was prima

facie found that Respondent No.3 had not made a proper disclosure.  In the

premises, this Court observed and directed:- “Having  heard  learned  Attorney  General  appearing  for  the applicants  and Shri  C.S.Vaidyanathan,  learned Senior  Counsel appearing for Respondent No.3, we are prima facie of the view that Respondent No.3 has not made a proper disclosure in terms of our Order dated 07.04.2016. Therefore, Respondent No.3 is directed to make a complete disclosure of all his properties and

Page 13

13

in  particular, about  the receipt  of  US$ 40 Million.  It  shall  be disclosed as  to  when this  amount  was received;  where was it deposited  and  how the  same  has  been  dealt  with  up  to  date. Respondent No.3 shall also furnish the particulars of the assets abroad with full details thereof, as has been given with regard to the assets in India.”

16. Respondent  No.3  thereafter  filed  “further  counter  affidavit”  in

aforementioned I.A. Nos.9-12 of 2016 on 23.11.2016.  The affidavit enclosed

letter  dated  18.11.2016  issued  by  Edmond  De  Rothschild  (Suisse)  S.A.

Paragraph 3 of the affidavit was to the following effect: “On  a  mere  perusal  of  the  letter  dated  18th November,

2016 issued by Edmond De Rothschild (Suisse)  S.A.  (Annex. “R-2” hereto), it is evident that the US$ 39,999,994 million paid by  Diageo  Plc  was  received  on  25th February,  2016.  On instructions  of  Respondent  No.3,  an  aggregate  sum  of  US$ 39,999,993.99 was paid to the following parties on 26th and 29th February, 2016 respectively:

NAME OF PARTY AMOUNT S. Three Gift Settlement (a Trust the sole beneficiary of which is Siddartha Mallya, son of Respondent No.3)  

US$13,000,000 (On  26.02.2016)  &  US$ 333,331.33 (on 29.02.2016)

L. Three Gift Settlement (a Trust the sole beneficiary of which  is  Leena  Mallya, daughter of Respondent No.3)  

US$13,000,000 (On  26.02.2016)  &  US$ 333,331.33 (on 29.02.2016)

T. Three Gift Settlement (a Trust the sole beneficiary of which  is  Tanya  Mallya, daughter of Respondent No.3)  

US$13,000,000 (On  26.02.2016)  &  US$ 333,331.33 (on 29.02.2016)

                                TOTAL US$ 39,999,993.99

Each of the three children of Respondent No.3, who are the sole beneficiaries of the aforesaid Trusts, are majors and are

Page 14

14

citizens of the United States of America.  Respondent No.3 is neither the Settlor nor the Trustee nor the beneficiary of any of the aforesaid named Trusts, and has no control over the Trusts or the  manner  in  which  the  respective  corpuses  of  each  of  the aforesaid Trusts is utilized.   However, the respective corpuses as they  stood  on  31st March,  2016  have  been  included  in  the statements  of  assets  of  the  three  children  handed over  to  this Hon’ble Court in sealed envelope on 26th April, 2016.”

 17. The  response  was  thereafter  filed  by  the  petitioners-banks  to  the

aforementioned  “further  counter  affidavit”  filed  by  Respondent  No.3.

Attention was invited to the restraint  Orders passed by the High Court  of

Karnataka on 03.09.2013 and 13.11.2013. It was submitted that the transfer of

US$ 40 million by Respondent No.3 to his children was not only in contempt

of the Orders passed by the High Court but was also an attempt to subvert the

Course  of  Justice  by  diverting  the  funds  to  shield  them  from  ongoing

recovery proceedings.  Paragraphs 13 to 16 of the reply were as under:  

“13. Notwithstanding  the  above,  it  is  respectfully  submitted that pursuant to filing of O.A. No.766/2013 before the Hon’ble DRT, Bengaluru, on 26.07.2013, Respondent Nos.1 to 3 gave an oral undertaking before the Hon’ble DRT, that they would not alienate  or  dispose  of  their  properties.   Thereafter,  since  no interim order was passed by the Hon’ble DRT, Petitioners filed a writ  petition  bearing  W.P.No.38870/2013  & W.P.No.39048-39052/2013  before  the  Hon’ble  High  Court  of Karnataka, seeking a writ in the nature of Mandamus directing the  Hon’ble  DRT  to  hear  and  dispose  of  the  interlocutory applications  filed  by  the  petitioners  in  the  OA  i.e.  IA  No. 2593/2013 to 2598/2013 & IA No.3034/2013 expeditiously.  In the aforesaid writ  petition, the Hon’ble High Court of Karnataka

Page 15

15

was  pleased  to  pass  a  restraint  Order  on  03.09.2013  against respondent Nos. 1 to 3 herein in the following terms:

“In that view, there shall be interim order of injunction against the  Respondent  Nos.1  to  3  from  transferring,  alienating, disposing or creating third party rights in respect of movable as well  as  immovable  properties  belonging  to  them  until  further order in these petitions.” (emphasis supplied)

14. The said order was further confirmed by the order dated 13.11.2013  passed  in  the  above  mentioned  writ  petitions, whereby the said writ petitions were disposed of.  Copy of the orders dated 03.09.2013 and 13.11.2013 passed by the Hon’ble High  Court  of  Karnataka  in  W.P.No.38870/2013  &  W.P. No.39048-39052/2013 are annexed ………. .

15. Therefore, it is clear that the Respondent No.3 has clearly and flagrantly violated the orders of the Hon’ble High Court of Karnataka and is guilty of contempt of Court.  It is stated that by transferring the US$ 40 million to his children, the Respondent No.3 has not only acted in contempt  of the Hon’ble High Court, but has also tried to subvert the course of justice by diverting the funds  offshore  to  shield  it  from the  recovery  proceedings  on going before the Hon’ble DRT.  Therefore, it is essential that the said US$ 40 million be brought back by the Respondent No.3 and be deposited with this Hon’ble Court, or the Hon’ble DRT, pending the disposal of the recovery proceedings.  It is further submitted that it is settled law that this Hon’ble Court has the power  to  punish  for  contempt  of  its  subordinate  Courts. Therefore,  it  is  prayed  that  this  Hon’ble  Court  hold  the Respondent No.3 guilty of contempt of the Hon’ble High Court of Karnataka.

16. It is further pointed out that even the statement that the Respondent No.3 has transferred the said US$ 40 million to his children does not hold water.  On perusal of the further counter affidavit  of the Respondent No.3, the explanation provided by the Respondent No.3 regarding the disbursal of US$ 40 million prima  facie  does  not  correlate  with  the  statements  given  on behalf  of  his  children.   The  Respondent  No.3  has  failed  to

Page 16

16

explain why the US$ 40 million was disbursed to his children despite  an  oral  undertaking  to  the  contrary  given  before  the Hon’ble DRT on 26.07.2014, and despite being injuncted by way of  orders  dated  03.09.2013  and  13.11.2013  passed  by  the Hon’ble High Court of Karnataka in W.P. No.38870/2013 & W.P. No.39048-39052/2013.   The  said  orders  injuncting  the Respondent No.3 from alienating his assets has attained finality as it was never challenged by the Respondent No.3 till date.”

18. I.A. Nos.9-12 of 2016 along with Contempt Petition Nos.421-424 of

2016  thereafter  came  up  before  this  Court  on  11.01.2017.   Having  gone

through  the  response  filed  by  the  petitioners-banks  to  “further  counter

affidavit” filed by Respondent No.3 which inter alia referred to the orders

dated 03.09.2013 and 13.11.2013 passed by the High Court of Karnataka, this

Court passed the following Order:

“In the affidavit filed on 10.12.2016, the petitioners have brought to the notice of this Court that the transfer of US$ 40 Million  in  favour  of  the  children  of  Respondent  No.3  is  in flagrant  violation  of  the  orders  passed  by  the  High  Court  of Karnataka. Therefore, it is prayed that appropriate orders may be issued  to  secure  the  deposit  of  the  said  amount  of  US$  40 Million before this Court or the DRT forthwith, pending disposal of the further recovery proceedings.

 The learned senior counsel appearing for Respondent No.3

seeks three weeks' time to file reply to the submission.”

19. Despite the aforesaid Order dated 11.01.2017 which took note of the

violation of the orders passed by the High Court of Karnataka and though

Page 17

17

time  was  sought  to  file  reply,  nothing  was  filed  in  reply  or  rebuttal  by

Respondent No.3.

20. When the aforesaid IA Nos.9-12 of 2016 along with Contempt Petition

Nos.421-424 of 2016 with application IA Nos.1-4 of 2016 seeking recall of

the Order dated 25.07.2016, came up for hearing, Mr. Mukul Rohtagi, learned

Attorney General for India and Mr. Shyam Divan, learned senior advocate

appeared  on behalf  of  the  petitioners-banks  while  Mr. C.S.  Vaidyanathan,

learned senior advocate appeared for Respondent No.3. It was submitted by

the  learned  Attorney  General  that  Respondent  No.3  had  made  no  honest

disclosure and in fact there was a deliberate attempt to flout the Order of this

Court.  In his submission, Respondent No.3 must first of all be directed to

deposit US$ 40 million which he had transferred in violation of the Orders of

the Courts, before he could be heard in the matter. Mr. Divan, learned senior

counsel submitted that the orders dated 3.9.2013 and 13.11.2013 were clear

and unambiguous. He further submitted that the breach on part of Respondent

No.3  was  willful  and  deliberate  and  that  it  was  a  clear  attempt  in  over-

reaching the Court and putting the amounts beyond the reach of the Court.

Mr. Vaidyanathan, learned senior advocate on the other hand submitted

that Respondent No.3 was not asked or called upon to disclose all transactions

Page 18

18

but  to  disclose  the  status  as  it  obtained  on  31.03.2016 and  as  such  the

disclosure by Respondent  No.3 was consistent  with the tenor of  the order

passed by this Court.  In his submission the amount of US$ 40 million was

pursuant to Non-Compete agreement  with Diageo Plc and was received after

the  orders  passed  by  the  High  Court  of  Karnataka  on  03.09.2013  and

13.11.2013.  He further submitted that the width of those orders did not cover

or include any moneys which the respondents would receive in future and as

such there was no violation of those orders at all.  He relied upon the decision

of this Court in Indian Airports Employees’ Union v. Ranjan Chatterjee and

Another2 and submitted that since the matter involved interpretation of the

orders at 3.09.2013 and 13.11.2013 it cannot be said that there was any willful

disobedience of the orders.  He further submitted that the violation if any, was

that of the orders passed by the High Court of Karnataka and as such this

Court ought not to take cognizance of such alleged violation inasmuch as it

would deny Respondent No.3 the opportunity to place the matter before the

High Court.   

21.  The  orders  passed  by  this  court  were  clear  and  unambiguous  and

Respondent No.3 was called upon to make complete disclosure of his assets.

Whether the assets to be so disclosed were covered by the personal guarantee

2 (1999) 2 SCC 537

Page 19

19

given by Respondent  No.3 or  not  was immaterial.  He was called upon to

make a complete disclosure and was bound to comply with the directions.

The  assertion  made  by  the  petitioners-banks  that  the  details  of  the  bank

account  held  in  Edmond  De  Rothschild  Bank  were  never  disclosed  by

Respondent  No.3  is  correct.  In  fact,  no  details  of  any bank account  with

overseas banks were given by Respondent No.3. The violation by Respondent

No.3 could not be termed as a mere infraction. The violation by Respondent

No.3 regarding non-disclosure becomes more pronounced because it is this

very  account  held  in  Edmand  De  Rothschild  Bank  that  was  utilized  to

transmit funds to the tune of US$ 40 Million.  

22. We now turn to the alleged violation of orders dated 03.09.2013 and

13.11.2013 passed by the High Court of Karnataka. It  is not disputed that

such  orders  were  passed  restraining  the  concerned  respondents  including

Respondent No.3 and  that the orders were passed in proceedings arising from

O.A. No.766 of 2013 before  DRT Bengaluru. The present proceedings before

this court have also arisen from the very same O.A.  No.766 of 2013. The

orders of restraints passed by the High Court were therefore in the very same

proceedings with which we are presently concerned. Said orders bound the

concerned respondents including Respondent No.3 and restrained them from

transferring, alienating, disposing or creating third party rights in respect of

Page 20

20

movable as well as immovable properties belonging to them till further orders

in the proceedings.  A question has been raised by   Mr. Vaidyanathan learned

senior  advocate  whether the orders  would be restricted only so far  as  the

properties which were in the hands of the concerned respondents as on the

date when those orders of restraint were passed.  In other words, whether any

properties which in future or subsequent to the Orders had come in the hands

or control of the concerned respondent would be covered by such orders or

not.   On plain reading of the Orders, in our view, whether the properties were

in the hands of the concerned respondents on the date when the orders of

restraint were passed by the High Court or had come in their hands or under

their  control  at  a  later  point  in  time,  regardless  of  such  qualification  all

properties whether movable or immovable were governed by the orders of

restraint.  There is no ambiguity of any sort and the Orders of restraint are

quite clear. Consequently, funds amounting to US$ 40 million which came to

be under the control of and in the hands of Respondent No.3 were completely

covered and governed by said orders of restraint.    

23. The memo dated 28.06.2016 filed by Respondent No.10 in said O.A.

No.766 of 2013 annexed, “Extract confirming payment of US$ (US Dollars)

40 Million to Defendant No.3 on 25.02.2016”. It is thus beyond any doubt

that  the payment  of  US$ 40Million was received by Respondent  No.3 on

Page 21

21

25.02.2016. These facts are admitted by Respondent No.3 in Paragraph 3 of

his  “further  counter  affidavit”.  The  explanation  that  the  funds  now stand

transferred in favour of the trusts over which Respondent No.3 has no control

at all, in fact aggravates the extent of violation. It is clear that the funds which

were in control of Respondent No.3 have now been sought to be put beyond

the reach of processes of court, which is reflective of the intent.

24.   The  applications  moved  by  the  petitioners-banks  on  02.03.2016

themselves  had  made  clear  reference  to  the  fact  that  as  disclosed  by

respondent  Nos.10 and 11 to  London Stock Exchange and Bombay Stock

Exchange respectively Respondent No.10 would pay to Respondent No.3 a

sum of  US$75 million  and accordingly  petitioners-banks  had  moved  four

interlocutory applications  for  orders  against  respondent  Nos.10 and 11 for

disbursing said amount of US$ 75 million. The amount of US$ 40 Million so

received  by Respondent  No.3  was  therefore  subject  matter  of  the  present

controversy. The least that was expected of Respondent No.3 was to disclose

relevant facts pertaining to receipt and disbursement of US$ 40 million. The

violation on that count is thus not only against the directions issued by this

court  but  also  against  express  mandate  of  orders  dated  03.09.2013  and

13.11.2013 passed in the proceedings in question.

Page 22

22

25. Having thus found that the actions on the part of Respondent No.3 in

disbursing the amount of US$ 40 million was against the text and tenor of the

orders  passed  by  the  High  Court  of  Karnataka,   the  question  then  arises

whether this Court can take  cognizance of such violation or should it leave it

to be decided by the High Court of Karnataka itself in a properly instituted

legal proceeding.     

26. In  Delhi  Judicial  Service  Association,  Tis  Hazari  Court,  Delhi  v.

State  of  Gujarat  and  others3,  a  question  arose  whether  the  power  and

jurisdiction of this Court under Article 129 of the Constitution is confined to

“the contempt of  this Court” alone.    Submissions advanced in that behalf

were noted in paragraph 14 of the judgment which sets out the submission of

the learned Attorney General:

“...The Supreme Court as the Apex Court is  the protector and guardian of justice throughout the land, therefore, it has a right and also a duty to protect the courts whose orders and judgments are  amenable  to  correction,  from  commission  of  contempt against them.”

The  subsequent  paragraphs  of  the  judgment  namely  paragraph  26

onwards  show  that  the  contentions  so  advanced  by  the  learned  Attorney

General were accepted by this Court.  It is true that the discussion was in the

context of   the contempt of a subordinate court.   However, the nature of

3 (1991) 4 SCC 406

Page 23

23

power  exercisable  by this  Court  was  considered in  the  backdrop that  this

Court has supreme appellate jurisdiction over all courts and tribunals in the

country which is clear from the observations in paragraph 31 of the judgment.

We must say that Mr. Vaidyanathan did not seriously contend to the contrary

but his submission was that if the jurisdiction is so assumed and cognizance is

taken by this Court, Respondent No.3 would lose one opportunity of having

the matter assessed at the level of the High Court.    In our considered view,

since we are dealing with the very same cause in which the orders of restraint

were passed by the High Court and since it is coupled with the violation of

orders of this Court as well, the matter can and ought to be dealt with by this

Court.  

27. The record shows that by order dated 11.01.2017 the violation of those

orders for restraint passed by the High Court of Karnataka was taken note of

by this Court and the Counsel appearing for respondent had sought time to

file an appropriate reply.  However, no such reply was filed.  Respondent

No.3  was  thus  put  to  clear  notice  about  the  violation  of  those  orders  of

restraints passed by the High Court of Karnataka.  As such, no prejudice has

been caused or visited upon Respondent No.3.

Page 24

24

28. We find that the allegations against Respondent No.3 of committing of

contempt are on two counts, in that -

a) He is guilty of disobeying the Orders passed by this Court in

not disclosing full particulars of the assets as was directed by this

Court.

b) He is guilty of violating the express Orders of Restraint passed

by the High Court of Karnataka in the same Cause from which

the present proceedings have arisen.

Though the contempt on the second count is theoretically of the orders

passed by the High Court of Karnataka since those orders pertain to the very

same Cause and the actions on part of Respondent No.3 in not disclosing the

account in question through which the transfers were affected also fall with

respect  to  contempt  on  first  count,  we  proceed  to  exercise  our  contempt

jurisdiction  even  with  regard  to  the  second  count.  As  stated  above,

Respondent  No.3 was adequately put  to notice and no prejudice has been

caused as a result of such assumption of jurisdiction by this court.

29. Having considered the entirety of the matter, we find that Respondent

No.3 is guilty of having committed contempt of court on both the counts. At

this stage it must be stated that in terms of Rule 6 (1) of Rules to Regulate

Proceeding  for  Contempt  of  Supreme  Court  1975,  Respondent  No.3  was

Page 25

25

obliged and duty bound to appear in person in response to the notice issued

by  this  Court  in  Contempt  Petition.  Instead,  he  chose  to  file  application

seeking recall of the orders issuing notice. Having considered the matter, we

see  no  reason  to  recall  that  order  and  dismiss  I.A.  Nos.1  to  4  of  2016

preferred  by  Respondent  No.3  in  Contempt  Petition  Civil  No.421-424  of

2016. Respondent No.3 is therefore duty bound to appear in person in the

present contempt proceedings.

30. Since Respondent No.3 has not filed any reply to the Contempt Petition

nor did he appear  in person,  though we have found him guilty of  having

committed contempt of court, we deem it necessary to give him one more

opportunity and also  hear  him on the  proposed punishment.  We therefore

adjourn  matter  to  10.07.2017  for  hearing  Respondent  No.3  in  person  on

matters  in  issue  including  one  regarding  the  proposed  punishment  to  be

awarded to him for contempt of court.  The instant  contempt petitions and

connected cases shall now be listed at 2 o'clock on 10.07.2017. Respondent

No.3 may keep his affidavit ready to be tendered on the same day by stating

mitigating circumstances,  if  any and any other  submissions  he chooses  to

advance.

Page 26

26

31. We direct the Ministry of Home Affairs,  Government of India, New

Delhi to secure and ensure presence of Respondent No.3 before this Court on

10.07.2017.  A copy of this Judgment be sent to the Ministry of Home Affairs

for compliance.  

………………………J. (Adarsh Kumar Goel)

…………………..……J. (Uday Umesh Lalit)

New Delhi, May 09, 2017