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Judgment
T.R. Handa, J.—The present Rule which directs the Respondents Sarvshri B. Himatsingka and R.G. Shroff as also one S.S. Fatel puria to show cause why they should not be dealt with for contempt of this Court, was issued by Thakur, J. on two similar petitions made one by the Official Liquidator and the other by Shri Kuldeep Prakash being petitions No. 2 and 6 of 1979. Shri S.S. Fatel puria died after the issue of this Rule and hence proceedings against him had to be dropped.
I may in the first instance sketch the sequence of events culminating in the present contempt proceedings in order to show how the alleged contempt was committed.
The Respondents Shri B. Himatsingka and Shri R.G. Shroff were amongst the Directors of the Company known as Hypine Carbons Ltd., Nalagarh. A petition for winding up of this Company was filed in this Court on 31-3-1977 on the ground that the Company was unable to pay its debts and that looking to its affairs it was just and equitable that it should be wound up. After a protracted trial this Court on 16-5-1978 passed orders that the affairs of the aforesaid Company be compulsorily wound up and necessary further steps in the matter should be taken. During the proceedings of winding up it was an admitted position before this Court that the work of the Company was practically at stand still from the month of November, 1976 and that the wages of labour amounting to lacs of rupees had remained unpaid. Even the water connection, electric connection and telephone connection of the Company had to be disconnected for want of payment of the relevant bills. It was further found by the Court from the balance-sheet of the Company that during the course of its business from 1970 to 30-4-1976 the Company had incurred a loss of more than 69 lacs of rupees as against its paid up capital of 30 lacs of rupees only. The Annual Report of the Company further revealed that the Company had incurred debts in the form of unsecured loans of over Rs. 50 lacs. In addition the Company was indebted to the Himachal Pradesh Financial Corporation to the extent of more than 38 lacs of rupees as on 9-12-1976 and to the extent of Rs. 6,93,234/- to its Bankers as on 30-4-1976. It was for these reasons that this Court observed that it was just and equitable that the affairs of the Company should be wound up as there was practically no possibility of remedying the Company''s business affairs.
Against the order of winding up recorded by this Court on 16-5-1978, the Company preferred an appeal being Coy. Appeal No. 1 of 1978. Along with the appeal an application was filed u/s 466 of the Companies Act, read with Rule 9 of the Companies (Court) Rules, 1959, praying for stay of the operation of the winding up order dated 16-5-1978. That application was put up before Hon''ble Justice T.U. Mehta, the then acting Chief Justice on 31-5-1978 who was pleased to record the following order:
Present: Shri S.S. Ahuja, Advocate, for the Appellants.
O.M.P. No. 6 of 1978
Notice to the Respondents as well as to the Official Liquidator returnable on 20th June, 1978. Meanwhile, winding up proceedings are stayed. Put on Board on 20th June, 1978.
Dasti orders on usual terms which the Appellants'' learned Counsel shall pay in the Registry later on.
Sd/- C.J.
After reply to this stay application having been filed both by the Official Liquidator as also Shri Kuldeep Prakash at whose instance the winding up order was passed, the matter was put up before the acting Chief Justice on 27-6-1978 when the following order was recorded:
Present: Shri S.S. Ahuja, Advocate, for the Appellant.
Shri K.D. Sud, Advocate, for the Respondents.
Shri K. Kumar, Official Liquidator.
O.M.P. 6/78:
Shri Sud, who appears for the Respondents, opposes this application. During the course of the hearing, Shri Ahuja, who appears on behalf of Messrs R.G. Saraf, B. Himat Singka and S.S. Fateh puria, shows his willingness to give an undertaking that his above-named clients are willing to pay off the arrears of the wages of the labour employed by the Company in the past or to arrive at some settlement with the Labour Union with regard to these arrears within one month from now. According to the report of the Official Liquidator, the arrears of wages of labour amounted to about Rs. six lakhs about four to six months ago. Shri Ahuja also states on behalf of his above referred clients that in case the arrears of the labour, as stated above, are not paid up or settlement is not arrived at within one month, his clients would be liable for contempt of Court for breach of the undertaking unless the above referred period of one month is extended by the Court on proper grounds being shown.
Shri Ahuja further states that his above referred clients are prepared to defend the various proceedings pending before the authority under the Payment of Wages Act.
Shri Ahuja also states that his above referred clients further undertake to complete the account of the Company within one month and to hand over all the remaining account books to the Official Liquidator within that time. Shri Ahuja states that the erstwhile servants of the Company are already there to safeguard the property of the Company. Under the circumstances, in view of the suspension of the winding up order, the Official Liquidator will not be responsible for safeguarding the property of the Company at Nalagarh till further orders.
In view of the above undertakings the matter be fixed on 2nd August, 1978.
Dasti orders on usual terms.
Sd/- C.J.
As directed in the above order the matter was taken up on 2-8-1978 when again Shri S.S. Ahuja, Advocate, appeared for the present Respondents. These Respondents had not honoured their undertaking as given by them on 27-6-1978 by that time. On 2-8-1978 the Court observed as under in its order recorded on that date:
It is found that till this date there has been no settlement about the arrears of wages of Company''s labour. Shri Ahuja states that the Directors are already in negotiations with the labour leaders about the same, the result of which will be forth-coming within ten days.
Shri Sud, who appears on behalf of the Respondents, informs Shri Ahuja about the date of 8th August, 1978, which is fixed before the Judicial Magistrate First Class at Nalagarh for proceedings under the Payment of Wages Act.
The matter was again taken up on 17-84978 by which date again the undertaking given on 27-6-1978 had not been fulfilled. In its order recorded on 17-8-1978 the Court made the following observations:
Shri Ahuja states that his clients will be kept present on 23-8-1978 in Court. He further informs the Court that he will try to see that his clients or their representative would remain here present with some instructions and with some amount to be paid to the labourers as their wages. Put the matter on Board on 23-8-1978.
Neither the Respondents nor their representative appeared before the Court on 23-8-1978 as was assured by their Counsel Shri Ahuja on 17-8-1978. On 23-8-1978 the Court made the following observations in its order:
Shri Ahuja undertakes on behalf of his clients to produce all the other account books, pass books, bank books, stock books and vouchers etc. for the purpose of enabling the Auditors to complete the accounts. These materials should be handed over to the Official Liquidator within a week from now. The concerned Directors and other officers of the Company are directed to co-operate with the Auditors and supply all necessary information and materials which could be supplied.
So far as the wages of the labourers are concerned, Shri Ahuja states that about Rs. 20,000/- would be deposited by his clients on 26th August, 1978, with the Court of the Judicial Magistrate, Nalagarh, for payment to the workers.
Since no steps were taken by the Respondents to honour the undertaking given on their behalf on 27-6-1978 Shri Kuldeep Prakash as also the Official Liquidator made an application to this Court praying for vacation of the stay order issued by this Court staying the operation of the winding up order and further praying to proceed against the Respondents for contempt of Court since they had willfully failed to fulfil the undertaking given by them to this Court.
On a Rule being issued to these Respondents to show cause why they should not be proceeded against for contempt of Court a reply was filed on their behalf by their Counsel Shri S.S. Ahuja which was supported by an affidavit filed by one Shri B.P. Sinha. In other words neither of these Respondents filed any affidavit in support of this reply. All that was pleaded in the reply filed on behalf of these Respondents was that the labour leaders were invited to Calcutta at the expenses of the D.rectors for negotiations but due to their non-co-operation the negotiations failed. No mention was made as to why these Respondents had failed to make payment of the labour charges which as pointed out in the order dated 27-6-1978 amounted to about six lacs of rupees. It was further stated that the amount of Rs. 30,000/- mentioned in para 4 of the application could not be deposited because of some misunderstanding amongst the Directors. Readiness and willingness on the part of the Respondents to pay this amount was mentioned in the reply but no amount was actually either paid or tendered.
Yesterday when this matter was listed for orders, both the Respondents Shri B. Himatsingka and Shri R.G. Shroff were present in person along with their Counsel. Since the reply earlier filed on their behalf to the contempt petition had not been supported by affidavits of either of these Respondents it was considered proper to afford these Respondents a fresh opportunity to explain their conduct and for that purpose their oral statements were recorded in Court. Shri B. Himatsingka Respondent in the first instance after hearing the language of the order dated 27-6-1978 passed by this Court and referred to earlier disowned the undertaking given therein on his behalf by his Counsel on the pretext that such undertaking was given by his Counsel without his knowledge and authority. He later had to admit that a copy of this order dated 27-6-78 was supplied to him soon after the date of this order by Shri B.P. Sinha who was a Chief Executive of the Company and who had sworn the affidavit filed in support of the reply to the contempt petition filed on behalf of this Respondent. This Respondent then further stated that he had read the order dated 27-6-1978 but never protested to his Counsel that the undertaking given on his behalf was without his authority. He thus indirectly admitted the authority of his Counsel to give the undertaking on his behalf as recorded in the order dated 27-6-1978. Without caring to explain as to why the aforesaid undertaking could not be honoured, Shri B. Himatsingka stated that he was not in a position to pay labour charges amounting to Rs. 6 lacs at the time when the undertaking was given. This in my view would amount to an admission on the part of this Respondent that this undertaking as finds mention in the order dated 27-6-1978 was given on behalf of this Respondent with his full knowledge that it was not meant to be honoured.
The other Respondent Shri R.G. Shroff owned that the undertaking given by his Counsel as reflected in the order dated 27-6-1978 (supra) was given under his instructions and authority. He, however, stated that after giving certain instructions to his Counsel he went abroad, as if he had nothing to do for fulfilling that undertaking. He then added that before leaving the country he had tried to have negotiations with other parties for arranging the amount but could not succeed. This Respondent thus also indirectly admitted that he had no funds with him to honour the commitment made on 27-6-1978 suggesting thereby that the aforesaid commitment was made with the knowledge that it was beyond the capacity of this Respondent to fulfill the same.
In the written reply to the contempt petition filed on behalf of these Respondents on the affidavit of Shri B.P. Sinha all that finds mention with respect to the labour charges is that they invited the labour leaders to Calcutta at their own expense for negotiations but due to the non-co-operation of the labour leaders the negotiations failed. There is no mention whatsoever if any offer was made to the labour leaders much less a reasonable offer which those labour leaders refused to accept. In view of the admitted position that the Company owed about six lacs of rupees on account of wages to its labour, the settlement with the labourers could obviously be made only by tendering them such wages or a substantial part thereof. No settlement could be made by words without offer of a substantial amount of the labour charges being made in cash. There being no allegation whatsoever if the Respondents made any such offer or any part of the labour charges to the labour leaders. I am unable to accept the contention that the Respondents made any effort to arrive at a settlement with the labour leaders. They thus neither cared to pay the wages of the labourers nor did they care to enter into any amicable settlement with them as per undertaking given by them to the Court on 27-6-1978 while obtaining the confirmation of the interim stay order dated 31-5-1978.
Any willful breach of an undertaking given to a Court is a misconduct which would amount to civil contempt as defined in Section 2 of the Contempt of Courts Act. The gravity of such misconduct would be all the more when the undertaking is given to a Court in a pending proceeding with the intention or object of persuading the Court to sanction a particular course of action or inaction and the person giving the undertaking knows that he has not the requisite means or the capacity to fulfil that undertaking. That would practically amount to playing fraud on the Court for a selfish end. This type of misconduct just cannot be tolerated and must not be condoned. Sanctity of undertakings given to Courts must be up-held and litigants must not be allowed to carry the impression that they can give meaningless undertakings to the Courts for achieving their ends and then commit breach thereof with impunity.
On the facts I have already narrated there can be no escape from the conclusion that both the Respondents Sarvshri B. Himatsingka and R.G. Shroff have committed willful breach of the undertaking given to the Court on 27-6-78 and have committed contempt of this Court and the contempt has been of a gross and flagrant character.
Normally in the circumstances as of present case, one would expect that the contemnors realizing the gravity of the offence committed by them would begin by making a full disclosure of the facts and tendering an unqualified apology to this Court. Nothing whatever about any apology, qualified or unqualified, was, however, heard from the mouth of these contemnors when this case was taken up yesterday. This morning both the contemnors have filed affidavits containing their unqualified apologies. In the circumstances of the case, however, I find that the apologies now tendered are only in the nature of a repetition of a formula which do not deserve to be accepted.
The only question which now remains is as to what order should be passed against the contemnors. As I have already stated the contempt which has been committed by these contemnors is of a very gross and flagrant character. The contemnors being the Directors of the Company and having taken active part in the proceedings for winding up of the Company are supposed to be in the full know of the entire history of this Company. That history as reflected in the order of winding up passed by this Court on 16-5-78 shows that the Company had incurred a loss of more than 69 lacs of rupees as against its paid up capital of 30 lacs of rupees and owed 50 lacs of rupees to unsecured creditors besides another amount of about 45 lacs of rupees to the Himachal Pradesh Financial Corporation and to its Bankers and in addition it had the liability to pay about 6 lacs of rupees to its labourers for their wages. With this history it was just not possible for the contemnors to run this Company unless they were in a position to invest huge quantity of money. The admission on their part that they had no ready money available with them is sufficient to conclude that they had no intention to run the Company and that they were obtaining the stay order with some ulterior motive. The undertaking given to the Court on their behalf was thus most likely in pursuance of some clever scheme to take some undue advantage by keeping the management of the Company with them for as long as they could. In these circumstances I am of the view that the punishment of fine alone would not meet the ends of justice and that in addition to a sentence of fine, a sentence of imprisonment is necessary. I accordingly direct that each of the Respondents be detained in civil prison for a period of two months and shall also pay a fine of Rs. 2000/-.