Dr. Lalit Surajmal Kanodia vs Office Tiger Database Systems India Pvt. Ltd. and Others

M. Karpagavinayagam, J.—The short facts leading to the filing of these appeals are as follows:

(a) Office Tiger Database Systems India Private Limited is primarily involved in out-sourcing business to various corporate bodies in the United

States and Europe. Shalini Koshy, Anand, Ashish Devkar and Masood Ameen were the employees of this company.

(b) The employees while joining the Company agreed to maintain the highest degree of secrecy and to keep the information confidentially. They

also agreed that in the event of their termination, they would not be concerned with, engaged with or interested in or advice or own any business,

which is in competition with the business carried on by the Office Tiger Database Systems for a period of one year.

(c) In February 2003, these four employees tendered their resignation to the Office Tiger Database Systems. From next day onwards, they were

directed not to attend the office. On coming to know that these employees were induced by Datamatics Information Technology Limited (DITL)

and Datamatics Staffing Services (DSS) to breach their contracts and to take employment with them by adopting unfair trade practices, the Office

Tiger Database Systems on 11.2.2003 filed a suit in C.S.No.153 of 2003 in the Madras High Court against the DITL and DSS and the four

employees for permanent injunction.

(d) On 24.2.2003, the High Court granted ex parte injunction restraining DITL and DSS, the defendants 1 and 2 from employing the four

employees, the defendants 3 to 6 and ex parte injunction restraining the defendants 3 to 6, the four employees from joining the defendants 1 and 2,

the DITL and DSS respectively.

(e) All the defendants entered their appearance through their counsel and filed their respective counters praying for dismissing the injunction

applications. Ultimately, the undertaking was given by the defendants to the effect that the defendants 1 and 2, the companies would not take the

employees, the defendants 3 to 6 and that the defendants 3 to 6, the employees would not join the first and second defendants, viz., DITL and

DTS, on 18.7.2003. This undertaking was recorded and the injunction application was closed.

(f) Some times later, the plaintiff came to know through the detective agency that the said employees, the defendants 3 to 6, in breach of the

undertaking given to the Court, joined DITL and DSS, the defendants 1 and 2 and were working in their premises. Hence, the plaintiff filed

Contempt Petition No.1081 of 2003 seeking for action for the contempt committed against the Companies and its Directors as well as the ex-

employees.

(g) This contempt petition was contested by the defendants through their respective counters stating that the defendants 1 and 2 did not employ the

defendants 3 to 6 and they have already joined Datamatics Technologies Limited, which is a different company and as such, there is no breach of

undertaking.

(h) After hearing the parties, the learned single Judge by the order dated 29.12.2004 found the contemners guilty holding that the DTL, viz.,

Datamatics Technologies Limited where the plaintiff''s ex-employees are working belongs to a group companies forming the single economic entity

comprising DITL and DSS, the defendants 1 and 2 also and therefore, there is a breach of undertaking and punished all the contemners for

contempt. This order of the contempt is the subject matter of challenge in these appeals filed by the contemners.

The case of the Office Tiger Database Systems (P) Limited, the plaintiff/petitioner in the contempt petition is as follows:

The petitioner''s employees were employed by the petitioner on agreeing for the terms of the agreement to the effect that the employees should

maintain the highest degree of secrecy of the company and in the event of their termination, they would not join with any other company doing the

same business for a period of one year. Despite this, immediately after their resignation, they tried to join Datamatics Information Technology

Limited (DITL), the first respondent and Datamatics Staffing Services (DSS), the second respondent. The fact of their attempt to join with the

respondents 1 and 2 came to be known to the petitioner. Therefore, the petitioner filed a suit in C.S.No.153 of 2003 for permanent injunction

restraining DITL (R1) and DSS (R2) from employing its employees, viz., respondents 7 to 10/defendants 3 to 6 and for permanent injunction

restraining the employees, the defendants 3 to 6 from joining the first and second defendants. On 24.2.2003, the petitioner/plaintiff obtained

temporary injunction as prayed for pending the main suit in O.A.Nos.213 and 214 of 2003. However, on 18.7.2003, the counsel for the

defendants 1 and 2, viz.,DITL and DSS gave undertaking that they would not employ the employees of the plaintiff. Similarly, the counsel for the

defendants 3 to 6, viz., the employees, also gave undertaking that they would not join the defendants 1 and 2. On the basis of this undertaking, the

injunction application was closed after recording the said undertaking. Thereupon, the plaintiff/petitioner learnt through the detective agency

engaged by them that the defendants 3 to 6, the employees of the plaintiff/petitioner have been employed by the defendants 1 and 2. As this is

breach of undertaking given to the Court on 18.7.2003, the petitioner/plaintiff filed a petition for contempt on 1.12.2003. Since the counter filed by

the defendants/respondents stating that the employees, viz., the defendants 3 to 6 were not employed by the defendants 1 and 2 and they were

employed by some other company, viz., Datamatics Technologies Limited (DTL), the petitioner/plaintiff conducted their own enquiry and found

that DITL, DSS and DTL are one and the same company and all these companies are one and single economic entity and the companies in which

now they are employed are the companies under the control of the same management which managing the defendants 1 and 2 also and as such,

they are liable to be punished for the breach of undertaking.

The case put forward by the respondents in the contempt petition, is as follows:

The undertaking given by the defendants in the injunction application on 18.7.2003 has not been breached. As a matter of fact, the four

employees, the defendants 3 to 6 have already been employed in Datamatics Technologies Limited on 17.2.2003 itself even prior to the

undertaking given on 18.7.2003. The plaintiff/petitioner even though knew that these persons have joined DTL, they did not choose to mention the

same in the suit filed by them on 11.2.2003 in C.S.No.153 of 2003 nor made the said DTL as one of the defendants. As a matter of fact, the

plaintiff/petitioner wrote a letter on 6.2.2003 to the DTL threatening that legal action would be taken if the plaintiff''s employees are employed in

the said company and the DTL sent a reply on 12.2.2003 stating that they intend to take those employees in their company as they already left the

plaintiff company. Thus, it is clear that knowing fully well that the employees who resigned their job from the plaintiff company have joined DTL,

the plaintiff filed the vexatious suit against DITL and DSS and employees without making DTL as a party to the suit. Having known about the same

and having not chosen to oppose the undertaking which was recorded by the Court on 18.7.2003, the plaintiff cannot now complain that the

undertaking has been breached by employing its employees in DTL which is the sister concern of the defendants 1 and 2, which is not actually

true.

The learned single Judge, having perused the records and having heard the counsel for the parties, found DITL and DSS and Directors of DITL

and also the employees guilty of contempt of Court and imposed punishment.

Mr.A.L.Somayaji, Mr.Arvind P.Dattar and Mr.N.R.Chandran, the learned senior counsel appearing for the appellants, would assail the finding

contending that the finding of the learned single Judge holding the contemners guilty is not based upon the materials available on record and on the

other hand, the learned single Judge has exceeded his limit and gave a wrong finding on the basis of the incorrect particulars by indulging in the

process of lifting corporate veil. The senior counsel would cite the following authorities to substantiate their contention:

1) Chhaganbhai Norsinbhai Vs. Soni Chandubhai Gordhanbhai and Others, ;

2) R.N. Dey v. Bhagyabati Pramanik 200(4) SCC400;

3) Bhatnagars and Co. Ltd. Vs. The Union of India (UOI), ;

4) Bank of Baroda Vs. Sadruddin Hasan Daya and Another, ;

5) Mrityunjoy Das and Another Vs. Sayed Hasibur Rahaman and Others, ;

6) Babu Ram Gupta Vs. Sudhir Bhasin and Another, ;

7) Dr. (Mrs.) Roshan Sam Joyce Vs. S.R. Cotton Mills Ltd. and others, ;

8) State of U.P. and Others Vs. Renusagar Power Co. and Others, ;

9) Delhi Development Authority Vs. Skiper Construction Company (P) Ltd. and another, ;

10)Re Polly Peck International 1996(1) BCLC 428;

11)Rathinasabapthy.N. v. K.S. Palaniappa Kandar

1995 CriLJ 3622 (SC) ;

12) Searle (India) Limited Vs. M.A. Majid, .

Mr.Sri Ram Panchu, the learned senior counsel appearing for the first respondent/plaintiff, in justification of the reasonings given by the learned

single Judge, would contend that the finding of the learned single judge cannot be said to be wrong. He would cite the decision in Dr. (Mrs.)

Roshan Sam Joyce Vs. S.R. Cotton Mills Ltd. and others, .

We have given our thoughtful consideration to the rival contentions.

Before dealing with the core issue, it would be better to refer to some of the observations made by the learned single Judge which are not

factually correct. Those observations are as follows:

(i) From the facts stated above, it is clear that admittedly some of the Managing Directors of R1 and R2 who are parties before the Court in

O.A.Nos.213 and 214 of 2003 in C.S.No.153 of 2003 are the Managing Directors of their sister concerns.

(ii) From the documents placed before the SEBI by Datamatics Technologies Limited, it is seen that Datamatics Technologies treats all its sister

concerns as its own companies for the purpose of financial strength and turn over of business, etc. and on that financial strength they invited

investments from prospective investors in those shares.

(iii) From the above particulars, it is seen that ""Datamatics Technologies Limitied"" has a joint venture along with ""Datamatics Information

Technology Limited"" and ""Datamatics Staffing Services"", which are R1 and R2 in O.A.Nos.213 and 214 of 2003.

(iv) When it is a joint venture with another company, which is also managed by the very same managerial personnel and his relatives, it is in fact

controlled and managed by the same managerial personnel.

(v) When the corporate veil is lifted, it is clear that the Managing Directors of R1 and R2 are also the Managing Directors of ""Datamatics

Technologies Limited"" of which R1 and R2 are subsidiary companies.

(vi) As seen from the prospectus issued, all the subsidiary companies and associate companies are treated as one for its financial strength. Thus,

profit or loss of all those companies are treated as profit and loss of Datamatics Technologies Limited.

On going through the entire records, it is clear that the above observations on the basis of which the conclusions are arrived at by the learned

single Judge, are factually wrong. As such, the learned single Judge has blindly accepted the reply affidavit filed by the plaintiff/petitioner stating that

the contemners 1 and 2 are the sister concerns of Datamatics Technologies Limited and all the companies are under the control of the same

management without any verification whatsoever. In other words, the learned single Judge has not chosen to conduct further enquiry with regard to

the additional particulars given in the reply affidavit filed by the plaintiff/petitioner which is a clear improvement from the original version given by

the plaintiff/petitioner in the contempt petition.

As per the contempt petition, the plaintiff''s employees, i.e. the respondents 7 to 10 have been employed by the respondents 1 and 2 (DITL

and DSS)in breach of undertaking given on 18.7.2003 before the Court. On the contrary, according to the second affidavit by way of reply filed

by the plaintiff/petitioner in the contempt petition, the employees, the contemners were employed by DTL which is the sister concern of DITL and

DSS, the respondents 1 and 2. These two statements at two different stages are not consistent. When such being the case, the learned single Judge

ought to have directed the parties to produce the relevant materials by giving opportunity to both of them to verify whether such improved version

is true.

According to the learned senior counsel for the petitioner/plaintiff, even though the contemners/respondents received the additional affidavit,

have not chosen to file their affidavit with reference to the contentions contained in the same. On the other hand, according to the learned senior

counsel for the contemners, the reply affidavit was not served on them. However, showing the endorsement made by the counsel for the

respondents in the additional affidavit filed before the Court, the learned senior counsel appearing for the plaintiff/petitioner would submit that the

reply affidavit had been received.

Let us assume that the copy of the additional affidavit had been received by the respondents. But, it is the bounden duty of the the learned

single Judge to see whether the DTL in which the employees have now been employed is a sister concern or subsidiary company of the

respondents 1 and 2 by asking the parties concerned to produce the materials in order to find out truth. This was not done. On the other hand, the

learned single Judge, as indicated above, without any verification, has fully placed reliance on the additional affidavit and made incorrect

observations and rushed to the hasty conclusion that DTL is a sister concern of DITL and DSS and as such, DITL and DSS are liable to be

punished for the breach of undertaking. We are unable to appreciate this approach of the learned single Judge.

While the proceedings for the contempt is pending and when the petitioner wants to introduce a new case that the employees were employed

in DTL which is the sister company of the respondents 1 and 2, the plaintiff/petitioner should have taken steps to implead DTL at least in the

contempt proceeding though not in the suit in order to establish that DTL, which is said to be a sister concern of the respondents 1 and 2, was a

party to the contempt. It is strange to see that no such attempt has been made and no reason has been given as to why such steps have not been

taken. Similarly, the learned single Judge also has not thought it fit to issue notice to DTL in order to find out whether DTL is a party to the

contempt.

In fact, this Court feels that there is a failure both on the part of the learned single Judge and on the part of the plaintiff/petitioner in impleading

DTL in which the employees were employed as a party to the contempt proceeding in order to find out as to whether all the three joined together

and committed contempt and all the three are responsible for the breach of undertaking. As permitted by this Court, the contemners/appellants

have filed the affidavit before this Court by way of reply to the said additional affidavit filed by the petitioner before the learned single Judge. The

perusal of the same would indicate that all these three companies are separate economic entities, though all these companies would belong to same

group companies.

The following paragraphs in the affidavit filed before this Court on behalf of the appellant/contemner in Contempt Appeal No.18 of 2004

would clarify the said position:

6.9 (b) I affirm that I and my wife Mrs.Asha L.Kanodia are the promoters of Datamatics group companies, which comprises of 41 entities.

However, this cannot justify the the clubbing of all the entities promoted by me as one single economic entity. It is further submitted that though we

are the promoters of Datamatics group companies, the management of each entity is done by their respective M.Ds or CEOs are given below:

i. Datamatics Technologies Limited: Mr. Manish Modi, MD & CEO, holding an M.S. Degree in Computer Science from the Virginia Tech

University, Virginia. The annual reports of Datamatics Technologies Limited for the year 2003 and 2004 are already placed on record. Hereto

annexed and marked as Annexure ''C'' is the copy of the Form No.18 confirming the registered office address of the Company with the Registrar

of Companies, Maharashtra, Mumbai.

ii. Datamatics Information Technology Limited: Mr.R.R.Gupta, CEO, M.Tech & Gold Medalist from Banaras Hindu University. Hereto annexed

and marked as Annexure ''D'' is the copy of the Form No.18 confirming the registered office address of the Company with the Registrar of

Companies, Maharashtra, Mumbai.

iii. Datamatics Staffing Services: (Being the sole proprietaryship firm of Mrs. Asha L.Kanodia) Mr.S.C. Bhatia, CEO, (BA & LL.B) is managing

Datamatics Staffing Services since last 20 years. Hereto annexed and marked as Annexure''E'' & ''F'' are the copies of the Income Tax Returns for

the period 2002-2003 & 2003-2004 of Datamatics Staffing Services establishing its principal place of office in Mumbai.

(c) I further affirm that the trademarks and logo of the three entities viz. Datamatics Technologies Limited, Datamatics Information Technologies

Limited and Datamatics Staffing Services are not similar. This can be verified from their logo/trademark affixed on the letterheads of the respective

entity. Hereto annexed in the select papers and marked as Annexure ''G'', ''H'' and ''I'' are the copies of the letterhead of the three entities

respectively.

(d) I also affirm that the registered office of the three entities viz. Datamatics Technologies Limited, Information Technologies Limited and

Datamatics Staffing Services are different. This can also be verified from the annual accounts of the three entities.

The Registered/Principal Offices of these three entities as on 31.3.20003 are as follows:-

Registered Office of Datamatics Technologies Limited Unit No. 117-120, SDF-IV, Seepz, Andheri(East), Mumbai-400 096.

Registered Office of Datamatics Information Technology Limited Plot No. F-17, Technology Centre, Andheri (East), Mumbai-400 093.

Principal Office of Datamatics Staffing Services for 30 years is located at:

Eucharistic Congress Building III, 5 Convent Street, Colaba, Mumbai-400 039.

All the above three entities are also haing their offices/branches in Chennai apart from other cities. It so happened that in the year 2003, all the

three entities, being Datamatics group companies, were having their offices in the same building in Chennai viz. 101, Kanagashri Nagar,

Gopalapuram, Chennai - 600 086. However, currently, all the three entities are having separate branch offices in Chennai as hereunder:

Branch Office of Datamatics Technologies Limited:

36, Barnaby Road, Kilpauk, Chennai-600 010

Office of Datamatics Information Technology Limited:

Famous Towers No.42, Cathedral Road, Chennai-600 086

Office of Datamatics Staffing Services:

Golden Perch, 1st Floor, No. 3 Wheat Crops Road, Nungambakkam, Chennai-600 034

(e) I submit that the shareholding patterns of all the three entities are entirely different and have been mentioned in detail in the Red-herring

Prospectus as per the legal requirements. The copy of the said Red-Herring Prospectus is already on the record.

(f) I submit that all the three entities are in separate lines of business. Datamatics Technologies Limited is a 100% export company engaged in the

Business Process Outsourcing"". Its principle activities are Content Management, Back Office Processing and Related Software Services. Over

90% of its revenue comes from American clients. This company was publicly listed on the 7th May, 2004, and currently has about 20,000

shareholders. Its independent Directors include: (i) Mr.MG.Diwan, Former Chairman of LIC; (ii) Mr.Shahzaad Dalal, Vice President of IL&FS;

(iii) Mr.Sudhir Deshpande, M.E.(Civil Engineer), Cambridge, UK. Datamatcis Information Technology Limited is in the business of selling and

servicing of security equipments, such as Smoke Detectors, TV surveillance camera, etc. and does business in domestic India. Datamatics Staffing

Services is in recruitment business since more than 30 years. It recruits while collared staff for its customers/clients in India and abroad. It has

hundreds of companies who call on their services to provide senior level personnel. Over 90% of its revenues come from companies, not in the

Datamatics Group.

The above paragraphs in the affidavit sworn to by the contemner/appellant would give the following details in gist:

(1) Though Kanodia, one of the contemners, and his wife Mrs.Asha L.Kanodia are the promoters of Datamatics group companies, which

comprises of 41 entities, the management of each entity is done by their respective M.Ds or CEOs.

(2) The trademarks and logo of the three entities viz. Datamatics Technologies Limited, Datamatics Information Technologies Limited and

Datamatics Staffing Services are not similar.

(3) The registered office of the three entities viz. Datamatics Technologies Limited, Information Technologies Limited and Datamatics Staffing

Services are different.

(4) All the above three entities are also having their offices/branches in Chennai apart from other cities. Currently, all the three entities are having

separate branch offices in areas in Chennai.

(5) They are not single economic entities. The shareholding patterns of all the three entities are entirely different. These things have been mentioned

in detail in the Red-Herring Prospectus.

(6) All the three entities are in separate lines of business. Datamatics Technologies Limited is a 100% export company. It currently has about

20,000 shareholders. Datamatcis Information Technology Limited is in the business of selling and servicing of security equipments. Datamatics

Staffing Services is in recruitment business.

These details given in the affidavit filed before this Court on 31.8.2005 have not been disputed by the other side. When there are undisputed

materials which would show that they are separate entities, how can we hold conclusively that the Datamatics Technologies Limited (DTL) has

employed the plaintiff''s employees in breach of undertaking on the mere assertion that DTL is a sister concern of DITL and DSS, that too without

hearing DTL which is said to have abetted the contempt? The memo filed by the plaintiff/petitioner before this Court showing some of the Directors

are common, would not help in establishing that they are the same economic entities.

This could be seen from yet another angle as well. The prayer in the contempt petition filed by the petitioner in C.P.No.1081 of 2003 is to

punish the contemners/respondents for contempt of Court for breach of undertaking recorded in the order dated 18.7.2003 in O.A.Nos.213 and

214 of 2003. The order dated 18.7.2003 passed by Justice A.K.Rajan is as follows:

Learned counsel for the respondents 1 and 2 has given an undertaking that respondents 1 and 2 are not taking employees of the plaintiff. This

undertaking is placed on record.

Learned counsel for the respondents 3 to 6 has also given an undertaking that respondents 3 to 6 have not joined the first and second respondent

companies. This undertaking is placed on record.

Originally, the order of injunction was passed in O.A.Nos.213 and 214 of 2003 on 24.2.2003. In that order, the first defendant Datamatics

Information Technology Limited (DITL) and the second defendant Datamatics Staffing Services (DSS) were restrained by an interim injunction for

a period of four weeks till 24.3.2003 from in any manner directly or indirectly employing the employees. Similarly, the defendants 3 to 6, the

employees were restrained by an interim injunction for a period of four weeks till 24.3.2003 from joining the first defendant DITL and the second

defendant DSS and their men, agents, assigns, or representatives under them as employees. This was in force till 24.3.2003. Subsequently, the

injunction was not extended.

However, in the meantime, the counter-affidavits have been filed by the defendants in the injunction application praying for dismissal of the said

application. Ultimately, in view of the undertaking given by the learned counsel for the companies as well as the employees on 18.7.2003, the

learned single Judge closed the injunction application after recording the undertaking.

The core of the contention contained in the affidavit filed on 30.11.2003 in Contempt Petition No.1081 of 2003 filed by the petitioner/plaintiff

is that despite the undertaking given on 18.7.2003, the plaintiff''s employees were employed by the defendants 1 and 2 in their companies as per

the information gathered by a detective agency which has been hired by the plaintiff. The relevant portions in the affidavit relating to the contempt

are as follows:

Pursuant to the above order the Applicant came to learn through reliable sources and from some of the Respondents themselves that Respondents

7-10 herein are employed with Respondents 1 and 2 and are operating from the office of the Respondents 1 and 2 at 101 Kanagashri Nagar,

Gopalapuram, Chennai-600 086.

The information gathered by Force One includes material clearly indicating that Respondents 7-10 are operating from the premises of the First and

Second Respondents. The Respondents 7-10 were seen entering and leaving the office premises of Defendant Nos.1 and 2 at 101 Kanagashri

Nagar, Gopalapuram, Chennai-600 086. Further the Respondents 7-10 are in contact with many persons presently employed with the Applicant.

These employees have informed the Applicant that Respondents 7-10 are employed with Respondents 1 and 2. Shockingly it was also discovered

that many other ex-employees of the Applicant were employed with or working for the First and Second Respondents.

The Applicant submits that this clearly is in violation of the order of this Hon''ble Court dated 18th July 2003. It is submitted that the said order

was passed based on the undertaking of the 1st and 2nd Respondents herein that they did not have any employee of the Applicant on their rolls

and that they would not employ any employee of the Applicant herein. However, the above facts clearly prove that the First and Second

Respondents have contravened the order dated 18-07-2003 of this Hon''ble Court by employing the employes of the Applicant. The First and

Second Respondents have shown scant respect to the order of the Hon''ble High Court and have contemptuously employed or have arranged for

employment of the employees of the Applicant herein directly or indirectly in order to fraudulently defeat and violate the order of this Hon''ble

Court dated 18-07-2003. The 1st and 2nd Respondents are committing a fraud on the proceedings of this Hon''ble Court. The 1st and 2nd

Respondents had undertaken not to employ the employees of the Applicant. However, in wilful disobedience they are now employing the services

of the employees of the Applicant herein.

The above paragraphs in the affidavit would indicate that the contempt petition was filed only on the materials collected by the detective agency

and as per the report, as referred to in the paragraphs, the defendants 1 and 2 employed the employees of the plaintiff and the employees have

joined the defendants 1 and 2 in breach of the undertaking which was recorded by the order dated 18.7.2003. But the materials placed before the

learned single Judge and also the relevant records produced before this Court would clearly indicate that the employees resigned from the plaintiff

company on 5.2.2003 and they were employed in DTL, Mumbai on 17.2.2003 itself.

In this context, it has to be remembered that injunction has been granted by the learned single Judge only on 24.2.2003 and the same was in

force till 24.3.2003. Subsequently, it was not extended. However, on 18.7.2003, on the undertaking given by the defendants 1 and 2, the

companies and the defendants 3 to 6, the employees, that they would not be employed in the companies of the defendants 1 and 2, the injunction

application was closed. Thus, it is clear that on the date of undertaking, they had already joined DTL and as such, they felt no difficulty in giving

such undertaking.

According to the learned senior counsel appearing for the lst respondent/plaintiff, it is a deceitful undertaking and as such, the learned single

Judge was misled to accept the undertaking and to close the injunction application.

It is true that the said undertaking is quite unnecessary as the employees of the plaintiff were already employed in DTL. It is equally true that

the employees could have very well informed the Court that they had already been employed in DTL and as such, the injunction application has

become infructuous. Yet, they did not choose to mention the same. We are not called upon to decide the question as to why they did not mention

the same. On the other hand, the question before this Court is whether the defendants 1 and 2 committed the act of breach of undertaking given on

18.7.2003?

As indicated above, the records would show that the employees had joined DTL on 17.2.2003 and as such, nothing happened subsequent to

18.7.2003, i.e. the date of undertaking. In such circumstances, the prayer cannot be for punishing the contemners for breach of undertaking. At the

most, it could be said that the contemners, viz., DITL and DSS and the employees have not intimated to the Court on 18.7.2003 the relevant fact

of the employees having already been employed in some other company. As indicated above, this is not the subject matter of the accusation in the

contempt petition.

However, we cannot but express our disapproval for the act of the contemners as respondents in the injunction application in not having

informed about the employment in some other concern. But at the same time, we cannot accept the contention of the learned senior counsel

appearing for the lst respondent/plaintiff that the said undertaking has been purposely given to mislead the Court. Even if such a fact had been

informed the Court on 18.7.2003, then the learned single Judge would have to consider the question as to whether injunction application becomes

infructuous or not.

The defendants/contemners could have very well requested for dismissal of the injunction application on the ground that the defendants 3 to 6,

the employees have already joined the other company and so, the injunction application became infructuous. Instead of doing so, they have simply

given undertaking that they would not join the defendants 1 and 2. This undertaking, in our view, has no meaning. On the other hand, the

contemners/employees should have informed the Court about their employment by the DTL even prior to the date of injunction and requested the

Court to dismiss the injunction application. Strangely, this was not done.

Even assuming that the undertaking was given knowing fully well that they have already been employed, the non-disclosure of the same

resulting in the Court closing of the injunction application, in our view, would not amount to breach of undertaking which was recorded in the order

by the learned single Judge on 18.7.2003. But in fairness, the defendants/contemners ought to have informed the Court so that the learned single

Judge would have dismissed the injunction application itself by recording the said fact of their having joined some other company, which again

would be advantageous to the employees.

Whatever it is. In our considered opinion, the act of obtaining employment in DTL which is not a party to the suit, in violation of the contract

entered into between the plaintiff and the employees would not amount to breach of undertaking. It may give rise to a different cause of action for

the plaintiff to claim some other relief against the employees.

In this context, let us now refer to some of the guidelines given by the Supreme Court, while dealing with the contempt matters. They are as

follows:

(A) The weapon of contempt is not to be used in abundance or misused. The discretion given to the court is to be exercised to maintain the court''s

dignity and majesty of law.

(B) The power to punish for contempt must always be exercised consciously, wisely and with circumspection. At the same time, the court should

act with seriousness and severity where justice is jeopardized by a grossly contemptuous act of a party.

(C) Exercise of powers under the Contempt of Courts Act shall have to be rather cautious and use of it rather sparingly after addressing itself to

the true effect of the contemptuous conduct. The court must otherwise come to a conclusion that the conduct complained of tantamounts to

obstruction of justice which if allowed, would even permeate in our society.

(D) The common English phrase ""he who asserts must prove"" has its due application in the matter of proof of the allegations said to be constituting

the act of contempt. As regards the ""standard of proof"", be it noted that a proceeding under the extraordinary jurisdiction of the court in terms of

the provisions of the Contempt of Courts Act is quasi-criminal, and as such, the standard of proof required is that of a criminal proceeding and the

breach shall have to be established beyond reasonable doubt.

(E) The contempt of court is an offence of a criminal character. A man may be sent to prison for it. It must be satisfactorily proved. To use the

time-honoured phrase, it must be proved beyond reasonable doubt. It is not proved by showing that, when the man was asked about it, he told

lies. There must be some further evidence to incriminate him. Once some evidence is given, then his lies can be thrown into the scale against him.

But there must be some other evidence. Where there are two equally consistent possibilities open to the court, it is not right to hold that the offence

is proved beyond reasonable doubt.

(F) The party giving undertaking to Court based on implications or assumptions which are false to its knowledge is guilty of misconduct amounting

to contempt.

(G) Of course, willful disobedience of the Court''s order undermines the rule of law. However, Courts are required to exercise with great care and

act with circumspection. In view of the fact that this is a drastic jurisdiction where personal freedom is in peril, contempt jurisdiction being quasi-

criminal in nature is not to be exercised except in clear cases.

(H) No person is to be regarded as having violated the order of the Court unless it is shown with reasonable certainty. First, there exists an order

of the Court which directs or prohibits the commission of the act. Second, the order so made is not vague or ambiguous, but is reasonably clear

and certain. Third, the person who is alleged to have disobeyed the order had knowledge of the order. Fourth, the disobedience of such an order

of the Court by the alleged contemner was willful.

In the light of the above guidelines, it we look at the facts of the present case, we are unable to hold that any contempt has been committed by

the contemners. It is true that in fairness, the respondents/defendants should have mentioned to the Court, while giving undertaking about the fact of

the employees have already been employed in the other company, to enable the Court to decide as to whether merely to record the undertaking or

to dispose of the injunction application on merits. This was not done. But, the failure to do the same, as stated above, would not be construed to

be the act of contempt as we are concerned with the breach of undertaking dated 18.7.2003.

When we openly expressed our displeasure over the conduct of the contemners/appellants in not informing the Court on 18.7.2003, the

learned senior counsel appearing for the appellants, all would in one voice, said that this must have been informed the Court in fairness and as a

token of expressing the regret for the same, the contemners have volunteered to pay some costs which can be given as donation to be given to

some organization to be spent for good purpose.

This gesture on the part of the counsel for the appellants in admitting the appellants'' fault, is quite appreciable. Accordingly, while we hold that

the contemners/appellants are not liable for contempt, they are directed to pay costs of Rs.15,000/- as volunteered by them as donation to the

Tamil Nadu Mediation and Conciliation Centre, Chennai, within two weeks from today.

With the above direction, all the contempt appeals are allowed setting aside the order of the learned single Judge dated 29.12.2004. Fine, if

paid, shall be refunded to the appellants. Consequently, all the connected C.M.Ps. are closed.