Consequences Of Contempt?

Published on Sat, Jul 13,2013 | 14:15, Updated at Sat, Jul 13 at 14:17Source : CNBC-TV18 | Watch Video :

The Constitution says a Supreme Court decision amounts to the law of the land. Sahara has disobeyed not one but two Supreme Court decisions and has faced no consequences so far. Next week SEBI's first contempt petition will come up for hearing. The regulator needs the court's muscle to get Sahara to pay up, without which it will have to resort to the long winding, laborious process of attaching assets.

Payaswini Upadhyay looks at the history of contempt in India to understand just how much trouble Sahara could be in or not!

First on August 31st and then again December 5th – twice the Supreme Court of India has ordered Sahara to pay some 24000 crore rupees to SEBI, the last deadline being February this year. But Sahara has to date paid just 5120 crores, claiming it refunded the rest directly to the OFCD investors. In November last year SEBI filed its first contempt petition against Sahara under Article 129 of the Constitution that says- "The Supreme Court shall be a court of record and shall have all the powers of such a court including the power to punish for contempt of itself."

AS Chandhiok
Additional Solicitor General, SC
"You see, Article 129 as you see from the Constitution and the constitutional provision Supreme Court is actually a court of record and when you're committing contempt to the order of the honorable Supreme Court obviously Article 129, in any case, would get attracted."

SEBI's contempt petition also alleges willful disobediences under Sec 2(b) of the Contempt of Courts Act. That prompted Sahara's counsel Ram Jethmalani to argue in the previous hearing that SEBI must prove willful disobedience. A 2003 Supreme Court order has held willful disobedience to be a deliberate action done with evil intent or with a bad motive or purpose.

AK Ganguly
Retired Supreme Court Judge
"Whether the disobedience is willful or not will depend on the stand the contemnor takes in his affidavit. In his affidavit, the alleged contemnor may take a defense that he could not comply with the order despite his knowledge because of some circumstances and if the circumstances are reasonable according to the court's perception, then it is not willful."

AS Chandhiok
Additional Solicitor General, SC
"Please look at it from 2 points of view- The Supreme Court order, whatever be the order, is the law of the land. It is not only binding on Sahara it's binding on everyone. It's a principle of law laid down by the Supreme Court which is binding on each one of us, every high court everybody. Whereas 2(b) has a very limited scope, in the sense, 2(b) will be against a particular person who has willfully defaulted. So, though the court will have to look at it from the point of view that there's a default on my part and there's some willful negligence or default on my part to do so. But the fact remains is when you're disobeying an order of the apex code of the country, that stress on willfulness will really not come into play to my mind. That's how the Supreme Court will interpret it."

Whether the Supreme Court concludes just contempt or willful disobedience the scope of punishment is the same. Under the Contempt of Courts Act it can order up to 6 months in prison or impose a fine of up to 2000 rupees or both. But lawyers say, the apex court resorts to imprisonment in very rare cases.

For instance, in 1979, in the case of Pushpaben vs Narandas Badiani, the Bombay High Court sentenced Pushpaben to one month simple imprisonment for willfully disobeying an undertaking given to the court. But the Supreme Court struck down the prison term on grounds that the intention of the legislature was to impose fine in normal circumstances - if the court concludes that ends of justice would be met by imposing imprisonment; it must give special reasons for doing so.

AK Ganguly
Retired Supreme Court Judge
"In very rare cases, in contempt cases, SC passes an order of imprisonment. Normally SC takes an apology, reprimands, or passes an order to secure compliance to its order or imposes a fine or gives token imprisonment of staying in the court for the whole day but imprisonment which is provided under Section 12 is very very rarely applied by the SC."

AS Chandhiok
Additional Solicitor General, SC
"The Supreme Court may in the circumstances when you're able to show…supposing Sahara is able to show some mitigating factors that it made its attempt, it doesn't have so much of money, it's trying to generate funds, it may still take a lenient view and say "Okay. Give something more to the people to whom the payment needs to be made or to the person concerned. I'll let you off" But if it finds that you have means to pay, you're not taking any steps, and you want to continue to take the same defense that you took on the merits when the main petition came before the Supreme Court, sorry the Supreme Court will say "I've had enough of you. Please go behind bars and I'll also impose a fine on you."

It may rarely order imprisonment but there have been cases where the Supreme Court has gone a step further than prison and penalty - as it did in the Skipper Construction case

In 1991, the Supreme Court prohibited Skipper Construction from creating third party rights in a disputed building. Skipper violated the order by issuing an advertisement in leading newspapers inviting buyers for the same building. The apex court initiated suo motu contempt proceedings against the Directors of Skipper Construction and found them guilty of contempt, ordered simple imprisonment and also attached their properties. The apex court laid down that 'when a contemnor has defrauded a large number of persons, he should not be allowed to enjoy or retain the fruits of his contempt.'

AK Ganguly
Retired Supreme Court Judge
If the alleged contemnors have failed to carry the Courts order, the court can not only send the alleged contemnor to jail but the court can also see that's its orders are executed by acquisition of properties or seizure of the properties of the alleged contemnor; that's quite possible. I do not know what will happen but the power of the court doesn't come to an end by merely sending the alleged contemnor to jail; court has the duty to ensure that is orders are complied with.

AS Chandhiok
Additional Solicitor General, SC
"Supposing I have a property, and I'm trying to sell it but there's no buyer in the market, obviously the court says "He's making an effort. Maybe he'll do it not today, maybe tomorrow." But if I'm not making an effort and I continue to take the same defense that I took when the original petition was filed. Obviously the court will say it's a willful defense, willful contempt. Please go in, and also I'll sell this property and give it to whatever debtors there are. They'll do that. So really speaking, it's a discretion vested in court by the constitution."

Next month, on August 31st, it will be one year since the SC passed its landmark judgment against Sahara - ordering it to pay some 24000 crore rupees to SEBI within 3 months. But in the past one year Sahara has paid just 5120 crore rupees. Will the Supreme Court let Sahara off or use the many powers at its disposal to enforce its own orders? The answer to that question will set a precedent for others who fail to comply with the apex court's orders. Hopefully, we'll know next week!