Reliance Communication Limited & Ors. vs State Bank of India & Ors.

118 crore to Ericsson within one week from today – RCom group is directed to purge the contempt of this Court by payment to Ericsson of the sum of INR 453 crore within four weeks from today – In default, the Chairmen who have given undertakings to Supreme Court will suffer three months’ imprisonment – In addition to the aforesaid sum being paid, a fine amounting to INR 1 crore for each Company must also be paid to the Registry within four weeks from today, which sum will be paid to the Supreme Court Legal Services Committee – In default, the Chairmen of these Companies will suffer one month’s imprisonment – Insolvency & Bankruptcy Code, 2016. Disposing of the Contempt Petitions, the Court HELD: 1.1 The undertaking makes it clear that the understanding of the three Reliance Companies with regard to the NCLAT order dated 30.05.2018 was that a sum of INR 550 crore will be paid by 30.09.2018 without there being any linkage to sale of assets, as separately stated in the order. Even otherwise, reading the order as a whole, it is clear that whereas INR 550 crore had to be paid within 120 days, sale of assets could take place at any time in the future without any time limit being mentioned. This being the case, it is futile to contend that this order itself made it clear that the sum of INR 550 crore was to be obtained only from sale of assets. Both the undertakings as well as a plain reading of the NCLAT order, militate against any such linkage. [Para 8][82-G-H; 83-A-B]

1.2 The order dated 03.08.2018 clearly recorded that the payment of INR 550 crore will be made on or before 30.09.2018, and an undertaking was to be given by the Chairmen of the Reliance Companies to that effect. The order separately noted that the sale of assets will continue, as has been stated in the orders of the NCLT and the NCLAT. A reading of this order also leaves no manner of doubt that the undertakings that were to be given by the Chairmen of the Companies concerned were only that the payment of INR 550 crore was to be made on or before 30.09.2018. There is no doubt whatsoever that there was no linkage with any sale of assets of these Companies. Despite the aforesaid position being clear, on 09.08.2018, the affidavits of undertaking, in pursuance of Supreme Court’s order dated 03.08.2018, were given by the Chairmen of the Reliance Companies. Similar undertakings were filed on behalf of the Chairmen of the other two Reliance Companies. A perusal of these undertakings would show that they are contrary to the undertakings given by the authorized persons of these very Companies pursuant to the NCLAT order dated 30.05.2018. Whereas those undertakings were unconditional, these undertakings are now conditional upon sale of assets of the Companies. These undertakings have obviously not been given in accordance with Supreme Court’s order dated 03.08.2018. To further compound this misdemeanor, an application to extend time by 60 days was moved on 27.09.2018, in which the same linkage was made to sale of assets before the sum of INR 550 crore could be paid. Ericsson immediately protested in the form of a contempt petition, being the first contempt petition that was filed on 01.10.2018, in which it was clearly pointed out that the said undertaking would show contumacious behavior coupled with the fact that the Reliance Companies were wriggling out of the commitment made to Supreme Court. When the first contempt petition and the first application for extension of time came up for hearing before Supreme Court, vide order dated 23.10.2018, it was made clear that as a matter of indulgence, a last opportunity would be granted to pay the aforesaid sum on or before 15.12.2018, making it clear that this is conditional upon payment of interest of 12% per annum for delayed payment beyond 30.09.2018. It was also made clear that no further extension would be granted and that Ericsson may revive the petition for contempt if payment is not so made. This order again leads to only one conclusion – that the averment made in the application for extension of time that the sum of INR 550 crore will be paid out of sale of assets was not accepted by this Court, as sale of assets could have taken place even beyond 15.12.2018. This further becomes clear from the fact that the contempt petition would be revived if this payment were not to be made, i.e., it would be open for Ericsson to contend that the undertaking given to this Court was not as per this Court’s order, and that there had been wilful and contumacious default on part of the Reliance Companies. [Paras 9,10][83-B-E; 84-F-H; 85-A-D]

1.3 When a further application for extension of time was made on the selfsame ground, Supreme Court made it clear by its order dated 13.12.2018 that in view of the order passed on 23.10.2018, no further extension of time could be granted, and revival of the contempt petition would necessarily follow. As a result of this, this I.A. was dismissed as withdrawn on the said date. Meanwhile, in parallel proceedings, Supreme Court did its utmost to lend a helping hand, so that, independently of these orders, sale of assets could also be affected. The DoT was called before this Court and was asked to give its NOC for sale of spectrum. However, it was pointed out that this NOC could only be given according to certain guidelines, one of which mandated that the buyer of the spectrum would have to undertake that it would be responsible for payment of the erstwhile debts of the seller. The sale of spectrum to Reliance Jio, therefore, did not fructify, not because the DoT wrongfully refused to give its NOC, as has been alleged by the Reliance Companies in their pleadings filed in this case. It fell through only because the prospective buyer, Reliance Jio, refused to give the undertaking that if called upon, it would pay the erstwhile debts of the seller of the spectrum. [Paras 11, 12][85-E-H; 86-A]

1.4 Contempt Petition No.55 of 2019 dated 02.01.2019 was filed in view of non-payment of the sum of INR 550 crore on or before 15.12.2018. Contempt Petition No.185 of 2019 dated 05.02.2019 was filed pointing out two subsequent facts. First, that by a letter dated 21.01.2019, the Reliance Companies were willing to pay the entire sum of INR 550 crore with interest if two conditions were met, namely, withdrawal of contempt petitions and withdrawal of arbitration proceedings. Ericsson replied on 23.01.2019, stating that this could only be done by moving an application before this Court as contempt proceedings were pending. Secondly, this petition points out that, maliciously, instead of moving such appropriate application, from 01.02.2019 onwards, an about-turn was taken, and Ericsson was left in the lurch as a decision was taken by the three Reliance Companies that the corporate insolvency resolution process could be revived. [Para 13][86-B-D]

1.5 The undertakings given on 09.08.2018 by the three Chairmen of the three Reliance Companies were neither as per the Court’s understanding of its order dated 03.08.2018, nor the understanding of the three Companies themselves, as is clear from the undertakings given by the three Directors pursuant to the order dated 30.05.2018. In this view of the matter, it is clear that the three Reliance Companies had no intention, at the very least, of adhering to the time limit of 120 days or to the extended time limit of 60 days plus, as was given by way of indulgence, by the order dated 23.10.2018. The undertakings given on the footing that the amount of INR 550 crore would be paid only out of the sale of assets was false to the knowledge of the three Reliance Companies. This itself affects the administration of justice, and is therefore, contempt of court. Despite the Reliance Companies’ continuous protestations to the contrary, the letter dated 21.01.2019 from the advocate for the three Reliance Companies made it clear that the entire payment would be made by 31.01.2019, albeit on fulfilment of two conditions. In their reply to the Contempt Petition No.55 of 2019, RCom and its group companies had stated that they were “disabled” from paying the amount of INR 550 crore plus interest; that they “were and are unable to pay”. Obviously, the letter dated 21.01.2019 by the advocates on behalf of the Reliance Companies would belie each of the aforesaid statements made in the said reply affidavit. The three Reliance Companies have wilfully not paid the sum of INR

550 crore plus interest and have thus breached the undertakings given to this Court. [Paras 17, 18 and 19][87-G-H; 88-A-C; 89-H; 90-C]

1.6 Another disturbing feature of the reply affidavit filed in this Court by the Chairman of RCom to Contempt Petition No.

55 of 2019 is the statement that RCom has not taken or received any advantage on account of the undertaking submitted before this Court. This, again, is a wholly incorrect statement, given the fact that a writ petition was filed in this Court seeking quashing of the corporate insolvency resolution process on settlement of the matter with Ericsson, which could not be achieved without such undertaking being given to this Court. Any unconditional apology given that there was no intention to make any wrongful undertaking or that the undertaking was submitted bona fide must be rejected. It is clear that this reply affidavit clearly demonstrates the cavalier attitude of the deponent of this affidavit to the highest court of the land. To say that the sum of INR 550 crore would be paid only out of sale of assets of the three Reliance Companies is a deliberate misstatement made in the undertakings as well as the applications for extension of time filed before this Court, which was done with the purpose of circumventing the orders of this Court. In the facts of the present case, wilful default is made out. INR 550 crore plus interest was to be paid without any linkage to sale of assets within a fixed time limit. As is clear from the letter dated 21.01.2019, the Reliance Companies are able to pay this amount, but are wilfully refusing to do so. [Paras 20, 21][90-D-F; 91-D-E; 92-E-F]

1.7 The contempt petition against the Chairman of SBI would not lie inasmuch as the Ericsson transaction and the sale of assets by the Joint Lenders’ Forum are completely independent of each other. Also, the statement made in paragraph

18 of the Contempt Petition No. 185 of 2019 that, “all the respondents in the contempt petition were bound to have handed over the amount of INR 550 crore to the petitioner on or before 15.12.2018 ……” is patently incorrect inasmuch as respondent no. 4 (SBI) has nothing to do with this amount of INR 550 crore which had to be paid over to Ericsson only by the three Reliance Companies. The contempt petition against the Chairman of SBI is, therefore, dismissed. [Para 22][92-G-H; 93-A-B]

1.8 The contempt of this Court needs to be purged by payment of the sum of INR 550 crore together with interest till date. As stated by the letter dated 21.01.2019, subject to any calculation error, an amount of INR 453 crore must be paid to Ericsson in addition to the deposit of INR 118 crore made in the Registry of Supreme Court. The Registry of this Court is directed to pay over the sum of INR 118 crore to Ericsson within a period of one week from today. The RCom group is directed to purge the contempt of this Court by payment to Ericsson of the sum of INR 453 crore within a period of four weeks from today. In default of such payment, the Chairmen who have given undertakings to this Court will suffer three months’ imprisonment. In addition to the aforesaid sum being paid, a fine amounting to INR 1 crore for each Company must also be paid to the Registry of this Court within four weeks from today. This sum will be paid over to the Supreme Court Legal Services Committee. In default of payment of such fine, the Chairmen of these Companies will suffer one month’s imprisonment. [Para 24][95-C-F]

Lakshman Prasad Agarwal v. Syed Mohammad Kareem 2009 (6) SCALE 413; Rosnan Sam Boyce v. B.R. Cotton Mills Ltd. (1990) 2 SCC 636 : [1990] 2 SCR 381 – relied on.

Babu Ram Gupta v. Sudhir Bhasin (1980) 3 SCC 47 : [1979] 3 SCR 685; Ashok Paper Kamgar Union v. Dharam Godha (2003) 11 SCC 1; Dinesh Kumar Gupta v. United India Insurance Co. Ltd. (2010) 12 SCC

770 : [2010] 13 SCR 599; Mohd. Iqbal Khanday v. Abdul Majid Rather (1994) 4 SCC 34; Gyanichand v. State of A.P. (2016) 15 SCC 164 – held inapplicable. Attorney-General v. British Broadcasting Corporation [1980] 3 All ER 161; Attorney-General v. Leveller Magazine Ltd. and Ors. [1979] 1 All ER 745; Patel Rajnikant Dhulabhai v. Patel Chandrakant Dhulabhai (2008) 14 SCC 561 : [2008] 10 SCR 1169; Noorali Babul Thanewala v. K.M.M. Shetty (1990) 1 SCC 259 : [1989] 2 Suppl. SCR 561; Supreme Court Bar Assn. v. Union of India (1998) 4 SCC 409 : [1998] 2 SCR

795 ; Chhaganbhai Norsinbhai v. Soni Chandubhai Gordhanbhai (1976) 2 SCC 951 : [1976] 2 SCR 786 – referred to.