Supreme Court of India
VINAY PRAKASH SINGHversusSAMEER GEHLAUT & ORS.
- Citation
- 2019 INSC 1251
- Decided
- 15 November 2019
- Disposal
- Directions issued
Holding
The Supreme Court held that the respondents knowingly and wilfully violated the Court's interim orders, thereby committing contempt of court, and ordered them to purge the contempt by depositing the prescribed amounts while also directing a suo‑motu contempt petition for further violations.
Summary
The petitioner sought enforcement of a Singapore arbitral award of about Rs.3,500 crore against respondents who owned Fortis Healthcare. The Supreme Court had earlier ordered a status‑quo on 11 August 2017, clarified on 31 August 2017 and modified on 15 February 2018, prohibiting any change in the shareholding of Fortis Healthcare Holding Private Limited (FHHPL) in Fortis Healthcare Limited (FHL). The Court found that the respondents, including directors of Indiabulls Housing Finance Ltd., Indiabulls Ventures Ltd., Oscar Investments Ltd. and RHC Holding Pvt. Ltd., transferred 12,25,000 shares that were unencumbered and violated those orders. The Court held that such wilful disobedience amounted to contempt of court under the Contempt of Courts Act, 1971, and ordered the contemnors to purge the contempt by depositing the value of the shares or a monetary sum. It also directed a suo‑motu contempt petition for alleged breach of the order dated 14 December 2018 and set dates for hearing on sentence.
Issues considered
- The respondents' transfer of 12,25,000 shares constituted a violation of the Supreme Court's interim orders dated 11 Aug 2017, 31 Aug 2017, 15 Feb 2018 and 23 Feb 2018.
- Whether the transferred shares were unencumbered at the relevant date, making the transfer contemptuous.
- Whether the conduct attracted civil contempt under s.2(b) of the Contempt of Courts Act, 1971 or criminal contempt under s.2(c).
- Whether the contemnors could purge the contempt by depositing the market value of the shares or a specified monetary amount.
- Whether a fresh suo‑motu contempt petition should be issued for the alleged breach of the order dated 14 Dec 2018.
Legislation cited
- Arbitration and Conciliation Act, 1996s. 48
- Contempt of Courts Act, 1971s. 2(b), s. 2(c)
Subjects
contempt of courtcivil contemptshareholdingstatus quointernational arbitrationenforcement of foreign awardcorporate governancesecurities pledgewilful disobedience
Judgment
[2019] 17 S.C.R. 89 89
VINAY PRAKASH SINGH A
v.
SAMEER GEHLAUT & ORS.
(Contempt Petition (Civil) No. 2120 of 2018)
In B
(Special Leave Petition (Civil) No. 20417 of 2017)
NOVEMBER 15, 2019
[RANJAN GOGOI, CJI, DEEPAK GUPTA AND
SANJIV KHANNA, JJ.] C
Contempt of Courts Act, 1971 – ss.2(b), (c) – Dispute between
the petitioner and the respondents in SLP (C) No.20417/17 referred
to international arbitration – As on 31.03.2017, ‘MMS’ & ‘SMS’-
Directors (contemnor nos.9 & 12 and 10 & 13, respectively) of
Oscar Investments Limited (OIL-respondent no.1 in SLP) and RHC D
Holding Private Limited (RHC-respondent no.8 in SLP) through
OIL and RHC held 100% stake in Fortis Healthcare Holding
Private Limited (FHHPL) which in turn held majority stake in
Fortis Healthcare Limited (FHL)– Petitioner filed enforcement
proceedings in the Delhi High Court for the arbitral award passed
in Singapore holding it entitled to receive Rs.3500 crores approx. E
from respondent nos.1-15 – Therein, it filed applications for
restraining the respondents from encumbering their assets – Several
assurances given by the respondents that no action would be taken
to prejudice petitioner’s rights – Petitioner filed contempt petition
before the High Court alleging violation of its orders by which in F
effect, OIL & RHC were restrained from reducing their
shareholding in FHL through FHHPL – High Court recorded fifth
assurance given by the respondents – Challenged by the petitioner
in SLP(C) No.20417/17 – On 11.08.2017, status quo was directed
to be maintained w.r.t the shareholding of FHHPL in FHL –
Petitioner filed contempt petition in this Court alleging that the G
conduct of the respondents in creating pledge on 14.08.2017 is
violative of the said order – On 31.08.2017, contempt petition
disposed of clarifying that the order dated. 11.08.2017 was in
respect of both the encumbered and unencumbered shares –
Aforesaid orders clarified by order dated. 15.02.2018 – Another
H
89
90 SUPREME COURT REPORTS [2019] 17 S.C.R.
A order passed on 23.02.2018 stating that interim order dated.
15.02.2018 will continue to hold the field till the High Court
decides the matter– Further, Indiabulls Ventures Limited (IVL), with
which FHHPL maintains a demat account transferred 12,25,000
shares of FHL held by FHHPL to Indiabulls Housing Finance
Limited (IHFL) – Present contempt petition filed alleging that this
B was in contempt of the aforesaid orders – Held: Transaction of
12,25,000 shares is out of the unencumbered shares because after
31.03.2018, the encumbered shares were much below 12,25,000–
Official record shows that these shares were not encumbered –
Contemnors failed to place any cogent material on record to show
C that these 12,25,000 shares were pledged on or before
31.08.2017– Contemnor nos.1-8, active directors of IHFL & IVL
are guilty of knowingly and wilfully disobeying the orders of this
Court and of committing contempt of Court – To be heard on the
question of sentence – Further directions issued – In the case of
contemnors 9, 10, 12 & 13, they knowingly and willingly lost
D control of FHL – Undertakings given to the Delhi High Court as
also the orders of this Court were violated – Delhi High Court will
deal with the issue in so far as the undertakings made before it
are concerned – Contemnor nos.9 & 10 have also wilfully and
contumaciously disobeyed the orders of Supreme Court – Action
E for committing criminal contempt could have been taken against
contemnor nos. 9 & 10, but by taking a lenient view of the matter
it is being treated only as civil contempt– To be heard on the
question of sentence – Directions issued – Further, suo moto notice
of contempt also issued – Registry to register fresh contempt
petition w.r.t the violation of the order dated. 14.12.2018 in which
F RHC, OIL, ‘MMS’, ‘SMS’ and FHL be arrayed as contemnors.
While issuing directions, the Court
HELD: 1.1 Contemnor Nos. 1 to 8
The stand of IHFL that no pledge was created after
11.08.2017 is incorrect. The disclosure made on 21.08.2017 by
G
FHHPL to BSE and NSE clearly discloses that 30,59,260 shares
of FHL held by FHHPL were pledged on 14.08.2017 in favour
of IHFL. This disclosure of 21.08.2017 is a part of the record
and not specifically denied by IHFL. This Court on 11.08.2017
directed that status quo with regard to shareholding of FHHPL
H in FHL be maintained. On 31.08.2017 it was clarified that the
VINAY PRAKASH SINGH v. SAMEER GEHLAUT & ORS. 91
order would apply to both encumbered and unencumbered A
shares.On 14.08.2017, 30,59,260, unencumbered shares were
pledged in favour of IHFL. As far as this violation of the order
dated 11.08.2017 is concerned, in view of the order dated
31.08.2017, the same stands condoned. This would further mean
that the unencumbered shares should have been reduced to
3,52,55,957. However, the figures of September 2017 show a B
totally different situation. The total shareholding has fallen to
17,80,26,597 and the unencumbered shares to 26,31,777. This
means that in addition to 30,59,260 shares pledged on
14.08.2017, 3,26,24,180 number of shares were encumbered or
transferred during this period. There is no explanation by OIL, C
RHC, MMS or SMS, as to how these unencumbered shares
were encumbered or transferred in total violation of the orders
of the courts. The order dated 11.08.2017 clearly debars FHHPL
from changing its shareholding in IHFL. Vide order dated
31.08.2017, it was clarified that the order dated 11.08.2017 would
apply both to encumbered and unencumbered shares. It was only D
on 15.02.2018 that the order was clarified that it would not apply
to shares encumbered prior to 11.08.2017 and 31.08.2017. A
reading of the 3 orders makes it clear that no unencumbered
shares could be charged after 31.08.2017 at least. Even if
FHHPL had given power of attorney empowering IVL to transfer E
shares from its demat account to top up the security value, that
power of attorney could not be used to violate the orders of this
Court. What FHHPL could not do, could obviously not be done
by its agent or attorney. The shares which were used to top up
the security after 31.08.2017 were obviously unencumbered
shares prior to this date. The plea is clearly unacceptable and a F
lame excuse for the wilful disobedience of the order directing
maintenance of status quo which, as modified, was to apply to the
unencumbered shares. The respondents were aware and cannot
claim ignorance of the purported agreements under which they
were required to top-up upon the securities, in case of fall of
market value of the shares. In other words, the interim order G
passed by this Court was to apply even if there was a fall in
market value of the securities held by the creditors. The
transaction of 12,25,000 shares therefore is out of the
unencumbered shares because after 31.03.2018, the
encumbered shares were much below 12,25,000. The official H
92 SUPREME COURT REPORTS [2019] 17 S.C.R.
A record shows that these shares were not encumbered and the
contemnors have failed to place any cogent material on record
to show that these 12,25,000 shares were pledged on or before
31.08.2017. IHFL, in fact, flagrantly violated this Court’s orders
and made various transactions transferring even unencumbered
shares. The best course available to IHFL would have been to
B approach this Court seeking a clarification before it made the
transfers. This they did not do. [Paras 25, 26, 28-31] [108-C-F;
109-B-F; 110-A-D]
2.1 Contemnors 9 & 10, 12 & 13
Unfortunately, the actions of these contemnors clearly
C
show that these statements were made without the least
intention of complying with them. These contemnors had already
prepared a well thought out scheme of diluting their
shareholdings directly or indirectly in FHL to defeat the rights
of the petitioner. The explanations provided are not worth
D consideration. There has been wilful violation of the orders of
this Court. It is apparent that the contemnors knowingly and
willingly lost control of FHL. A litigant should always be truthful
and honest in court. One who seeks equity must not hide any
relevant material. In the present case, the petitioner has violated
the undertakings given to the Delhi High Court as also the
E
orders of this Court. The Delhi High Court will deal with the
issue in so far as the undertakings made before it are concerned.
Contemnor nos.9 and 10 have also wilfully and contumaciously
disobeyed the orders of this Court. What has happened during
the period when this matter has been pending in this Court is
F that the shareholdings of FHHPL, which is wholly owned by OIL
and RHC which in turn are controlled by SMS and MMS, have
virtually vanished in FHL. FHHPL owns no shares in FHL now.
It may be true that IHH Healthcare Bhd. (Malaysian Company)
through its actually owned subsidiary Northern TK Venture Pte
Ltd. is now the majority stake holder but that is due to allotment
G
of preferential shares. In addition to the preferential shares
allotted to them, the shares which were owned by MMS and SMS
through their holdings in FHHPL in FHL have vanished into thin
air and the only conclusion which can be drawn is that this was
a well thought out plan to deprive the petitioner from the amounts
H due to it. [Paras 37-39] [112-B-E-G-H; 113-A]
VINAY PRAKASH SINGH v. SAMEER GEHLAUT & ORS. 93
2.2 No person or institution howsoever powerful, can be A
permitted to misuse the process of the Court. Contempt of court
can be committed in various ways. Civil contempt is defined
under the Contempt of Courts Act, 1971 under Section 2(b) to
mean wilful disobedience of any judgment, decree, direction,
order of the Court of wilful breach of an undertaking given to
the Court. Criminal contempt has been defined under Section B
2(c) to include anything which scandalises or tends to scandalise
or lower or tends to lower the authority of the Court. Criminal
contempt also means any act which prejudices or interferes or
tends to interfere with the due course of judicial proceedings.
The conduct of contemnor nos.9 and 10 definitely undermines C
the authority of the Court. The Court is dealing with an
international arbitration which has fructified into an award but
by misusing the legal process contemnor nos.9 and 10 have
successfully avoided paying off the petitioner. Action for
committing criminal contempt could have been taken against
contemnor nos. 9 and 10, but by taking a lenient view of the D
matter it is only being treated as a civil contempt. The order
passed by this Court on 11.08.2017 with a clarification on
31.08.2017, and modification made on 15.02.2018, is not to be
read in isolation but along with the solemn undertakings and
assurances given by the contemnors on as many as five occasions E
before the Delhi High Court, the last one being as late as on
21.06.2017. These assurances were to the effect that even if the
Court permits sale of encumbered shares for payment of debt,
it would not have any impact on the (potential) creditors and
availability of the funds would only pare down the debt and
increase the value of the shares. Contrary to the aforesaid F
solemn assurances and undertakings, which were repeatedly
reiterated to procure orders, the shareholding went into a
downward spiral, as is apparent from the table in paragraph 23.
There was a significant decline in the total number of shares held
by FHHPL, both encumbered and unencumbered, which fell
down from 27,21,59,955 and 5,29,31,574 in September 2016 to G
5,51,484 and 6,01,607 in December 2018. The aforesaid fact with
the impact on valuation was never brought to the notice of the
Court and was concealed with the knowledge that these facts, if
brought to the notice, would have substantial bearing on the
orders that would be passed to protect the interest of the H
94 SUPREME COURT REPORTS [2019] 17 S.C.R.
A petitioner. What is even more shocking and clearly
contemptuous is the manner in which, in a well thought off plan,
the authorised capital of FHL was increased with the objective
and purpose to transfer controlling interest in the company.
Consequently, the controlling interest of MMS and SMS came
down in FHL, as the company changed hands. Controlling
B interest held by the majority shareholders has considerable
market value. Further, the amount brought in by a foreign
shareholder, who now has the controlling interest in FHL, has
been transferred in a dubious and clandestine manner without
full facts being brought on record. This amount is not available
C for payment and satisfaction of the Award. About Rs.4,600 crores
has been transferred in a very hurried and clandestine manner
to a trust registered in Singapore i.e. RHT Health Trust (RHT).
Coincidentally, respondents no.9 & 10 themselves or through
their holding companies were at one time the biggest unitholders
in the trust. It is obvious that the respondents being debtors
D are manoeuvring, transferring and converting the assets of value,
with the desire and intent that the petitioners would not be able
to recover the decretal amount as per the award. [Paras 40-42]
[113-B-H; 114-A-D]
2.3 Directions given by this Court and the orders passed
E were in light of the fact that the contemnors always projected
that the assurances and undertakings were binding and adhered.
There can be no manner of doubt that contemnors 9 and 10 have
changed the shareholding of FHHPL in FHL knowingly and
wilfully. They have done this with a view to defeat the rights of
the petitioner. They have also wilfully and contumaciously
F violated the orders of this Court dated 11.08.2017, 31.08.2017
and 15.02.2018. They are accordingly held guilty of committing
contempt of court. [Paras 43, 44] [11-E-G]
3. Violation of order dated 14.12.2018
Suo moto notice of contempt is issued and the Registry
G
id directed to register a fresh contempt petition with regard to
the violation of the order dated 14.12.2018 in which RHC, OIL,
MMS, SMS and FHL shall be arrayed as contemnors. FHL is
directed to disclose the list of directors/officials actively involved
in the running of the company for the period 01.01.2018 to
H 31.01.2019. [Para 50] [116-E-F]
VINAY PRAKASH SINGH v. SAMEER GEHLAUT & ORS. 95
4. Directions A
This contempt petition is disposed of in the following
terms :-
(i) Contemnor Nos.1 to 8, who are active directors of IHFL
and IVL are found guilty of knowingly and wilfully disobeying the
orders of this Court dated 11.08.2017, 31.08.2017 and 15.02.2018 B
as continued on 23.02.2018 and are found guilty of committing
contempt of this Court. To be heard on the question of sentence.
An opportunity is afforded to them to purge themselves of the
contempt by depositing the value of 12,25,000 shares as on
31.08.2017 in the Bombay Stock Exchange within eight weeks C
from today. In case, the said respondents purge themselves of
the contempt, a lenient view may be taken while imposing
sentence.
(ii) ‘MMS’, Director of Oscar Investments Limited and
Director of RHC Holding Private Limited (Contemnor Nos.9 and D
12) and ‘SMS’, Director of Oscar Investments Limited and
Director of RHC Holding Private Limited (Contemnor Nos.10
and 13) have knowingly and wilfully violated the orders of this
Court dated 11.08.2017, 31.08.2017 and 15.02.2018 as continued
on 23.02.2018. Therefore, both of them are held guilty of
committing Contempt of this Court. One chance is given to them E
to purge themselves of the contempt. It is directed that in case
each of the contemnors deposits a sum of Rs.1170.95 crores in
this Court within eight weeks from today then the Court may
consider dealing with them in a lenient manner, while imposing
sentence. F
(iii) In case any of the contemnors deposits the amount as
directed hereinabove, this Court shall decide on the next date
as to how this amount is to be disbursed.
(iv) The Registry is directed to register a suo motu
contempt petition against RHC Holding Private Limited, Oscar G
Investments Limited, ‘MMS’, ‘SMS’ and Fortis Healthcare
Limited, for having wilfully violated the order of this Court dated
14.12.2018 and issue notice to them returnable for 03.02.2020
asking them to show cause why they should not be punished for
contempt. [Paras 51, 52] [116-G-H; 117-A-H; 118-A] H
96 SUPREME COURT REPORTS [2019] 17 S.C.R.
A INHERENT JURISDICTION : Contempt Petition (C) No. 2120
of 2018 In Special Leave Petition (Civil) No. 20417 of 2017.
Petition filed for wilfully violation of this Court’s Order dated
11.08.2017, 31.08.2017, 15.02.2018 and 23.02.2018 passed in S.L.P.(C)
No. 20417 of 2017.
B Fali S. Nariman, Arvind P. Datar, Krishnan Venugopal, Dushyant
Dave, Kailash Vasdev, Neeraj Kishan Kaul, Dr. A.M. Singhvi, Shyam
Divan, Gopal Shankarnarayanan, Rakesh Dwivedi, C.S. Vaidyanathan,
Parag Tripathi, Sr. Advs., Subhash Sharma, Amit Kumar Mishra, Mohit
Singh, Ms. Samridhi Hota, Ms. Kanika Singhal, Shashank Manish, Turab
Ali Kazmi, Aditya Shankar, Rohan Jaitley, Kunal Chatterji, Shivam
C Pandey, Ms. B. Vijayalakshmi Menon, Ms. Suman Yadav, Aditya Sarin,
Shobhit Ahuja, Kunal Dutt, Pradeep Chhindra, Abhishek Agarwal,
Gagan Gupta, M/S. Karanjawala & Co., Mahesh Agarwal, Rishi
Agrawala, Ankur Saigal, Himanshu Satija, Nishant Rao, E. C. Agrawala,
Ms. Aastha Mehta, Ms. Neeha Nagpal, Nirvikar Singh, Ms. Aditi P.,
Ms. Gayatri Verma, Mrs. Priya Puri, Sumit Goel, Ms. Sonal Gupta, Ms.
D Aishwarya Dash, Ms. Sumedha Sindhu, Manu Bajaj, M/s Parekh &
Co., H.S. Chandhoke, Vaibhav Kakkar, Saleem Hasan, Abhishek E.
Kisku, Rohit Dahiya, Akshay Nagarajan, Sandeep Das, Ms. Anusha
Nagarajan, Hiresh Choudhary, Lalltaksh Joshi, Ms. Surbhi Sharma,
Advs. for the appearing parties.
E The Judgment of the Court was delivered by
DEEPAK GUPTA, J.
The Backdrop
1. A dispute between Daiichi Sankyo Company Limited
(hereinafter ‘the petitioner’) and the respondents in Special Leave
F Petition (Civil) No.20417 of 2017, was referred to international
arbitration. An arbitral award was passed on 29.04.2016 in Singapore
whereby the petitioner was held entitled to receive Rs. 3500 crores
approximately from respondent no.1 to 15 in S.L.P.(C) No.20417 of
2017. This award was challenged both in Singapore and India. The
objections have been dismissed and the award has become final.
G Though the respondents submit that in Singapore they have filed an
appeal to the Court of Appeal, however they have not placed any stay
order of the Court of Appeal on record. Admittedly, the award can be
enforced.
2. The petitioner filed proceedings for the enforcement of the
H foreign award in Delhi High Court. The respondents no.1 to 15 in the
VINAY PRAKASH SINGH v. SAMEER GEHLAUT & ORS. 97
[DEEPAK GUPTA, J.]
SLP objected to the same and filed objections under Section 48 of the A
Arbitration and Conciliation Act, 1996 (for short ‘the Act’). These
objections were dismissed except insofar as respondents no. 5 and 9
to 12 before the High Court were concerned since these respondents
were minors. The challenge to the judgment of the High Court has
been rejected by this Court on 16.02.2018 in SLP (C) No.4276 of 2018.
B
3. Before dealing with the issues in detail it would be helpful to
lay out the following chart to explain the relation between various
entities belonging to the respondents in the SLP as on 31.03.2017 as
reflected from order of SEBI dated 14.03.2019:
C
Shivinder
Malvinder Mohan Singh
Mohan Singh (Alleged
(Alleged Contemnor No.9))
Contemnor No.10)
99% 99%
D
Shivi Holdings Pvt. Ltd. Malav Holdings Pvt.. Ltd. 12%
50% RHC Holding Pvt. Ltd. 50%
(Respondent No.8 in SLP)
81% 44% 12%
E
Fortis Healthcare 19% Oscar Investments Ltd.
Holding Pvt. Ltd. (Respondent No.1 in SLP)
52%
67% 33%
Fortis Healthcare RHC Finance
Ltd. Pvt. Ltd. F
100%
22% 16% 6% 6%
Fortis Healthcare Religare
Ltd. Enterprises Ltd.
G
85%
Religare Finvest
Ltd.
H
98 SUPREME COURT REPORTS [2019] 17 S.C.R.
A This chart clearly shows that as on March 31, 2017, Malvinder
Mohan Singh (MMS) and Shivinder Mohan Singh (SMS) through Oscar
Investments Limited (OIL) and RHC Holding Private Limited (RHC)
held 100% stake in Fortis Healthcare Holding Private Limited (FHHPL)
which in turn held a majority stake in Fortis Healthcare Limited (FHL).
B Proceedings before the Delhi High Court
The first assurance
4. During the enforcement proceedings, the petitioner filed I.A.
No.6558 of 2016 before the High Court of Delhi praying that the
respondents be restrained from alienating or encumbering their assets.
C
The petitioner expressed an apprehension that the respondents would
fritter away their assets which would make the award unenforceable.
On 24.05.2016 Mr. Kapil Sibal, learned senior counsel appearing for
the respondents assured the High Court that the interest of the petitioner
will be protected. Though this assurance was not recorded by the Court,
D the same forms a part of the letter sent by the counsel for petitioner,
relevant portion of which reads as follows:-
“1…Further, while directing that, inter alia, the Arbitration Award
dated 29 April 2016, be kept confidential, a formal protective order
has not been passed by the Hon’ble Court on the strength of
E duly instructed oral assurance tendered by Learned Senior
Counsel Mr. Kapil Sibal (appearing for the Respondents) that the
Petitioner’s interest would be protected to the extent of the total
sum awarded under the Arbitral Award dated 29 April 2016, and
there would be no fait accompli. Mr. Kapil Sibal had also
submitted that even recording of his personal statement in the
F
order would affect the respondents’ interest in the share market
as some of his clients are listed in stock exchange.”
It appears that the respondents had urged before the Court that
their assurance should not be recorded in the order of the Court, since
that might affect the value of their shares in the share market. This
G
was the first assurance given by the respondents to the High Court
of Delhi. It would be pertinent to mention that the fact that such an
assurance was made is also recorded in the order of the High Court
dated 23.01.2017 wherein Mr. Harish N. Salve, learned senior counsel
appearing for the respondents 1 to 4 and 13 therein reiterated the
H assurance given to the Court as recorded in the letter dated 24.05.2016.
VINAY PRAKASH SINGH v. SAMEER GEHLAUT & ORS. 99
[DEEPAK GUPTA, J.]
The second assurance A
5. On 25.07.2016, the High Court of Delhi passed an order
directing the respondents to disclose the details of their immovable assets
and also to disclose the details of assets that have been alienated and
encumbered to third parties. It appears that during this period reports
appeared in various newspapers that the respondents were disposing B
their stakes in subsidiary companies and were also clandestinely
disposing of their assets. Left with no alternative, the petitioner filed
an Interlocutory Application being I. A. No. 618 of 2017 before the
High Court of Delhi in which the following prayer was made:-
a. “Urgently pass an order directing the Respondents to C
secure the Award amount by depositing it with the
Registrar of the Delhi High Court or by providing
adequate security or by bank guarantee or by any other
means that this Hon’ble Court may deem fit;
b. Pass an order directing the attachment of the movable D
and immovable assets and properties of the Respondents,
and any assets and properties in which the Respondents
have any beneficial interests until the disposal of the
present petition, at least to the extent of the amounts
awarded in the Award;
E
c. Pass an order restraining the Respondents and their
group companies from selling, alienating or encumbering
their movable or immovable properties/assets in any
manner whatsoever;
d. Pass ex-parte, ad interim orders in terms of prayers (a), F
(b) and (c) above and confirm the same after notice to
the Respondents;”
On 23.01.2017, Mr. Harish N. Salve, learned senior counsel for
some of the respondents before the High Court of Delhi reiterated the
assurance given in the letter dated 24.05.2016 and sought two weeks’
G
time to furnish an affidavit by one of the respondents giving the details
of assets of all the respondents. This was the second assurance.
The third assurance
6. The information was not provided in the manner sought by
the High Court which is reflected in the order dated 06.03.2017. The H
100 SUPREME COURT REPORTS [2019] 17 S.C.R.
A order records that the respondents have been directed to furnish details
of all unencumbered assets both movable and immovable and not merely
the list of the investments, loans and advances as reflected in the
affidavit filed by the respondents. The respondents were directed to
furnish further details and the counsel for respondents had submitted
that this would be done within 1 week. The High Court in its order
B
dated 06.03.2017 clarified as follows:-
“8. The Court would like to clarify that the above understanding
by Respondent No.19 of what was required to be furnished in
terms of the order dated 23rd January 2017 is not correct. The
Respondents were in fact required to furnish the information
C
relating to all the unencumbered assets, both moveable and
immovable, and not merely investments and loans and advances.”
7. On 06.03.2017 Dr. Abhishek Manu Singhvi and Mr. Rajiv
Nayar, learned senior counsel appearing for the respondents made a
statement that the complete details/particulars of all unencumbered
D
assets would be filed before the Registrar within one week. Certificates
of Chartered Accountants of the respondents were also directed to be
filed giving the following details:-
(i) “the value of all the unencumbered assets, including both
movable and immovable assets of Respondents 14 and
E
19, both the book value as well as the fair value;
(ii) where these assets include investments in equity shares,
preference shares and debentures, to indicate to what
extent are these investments in related/group entities of
F the Respondents and in companies whose shares are
listed and which of these shares have a condition of
right of first refusal.
(iii) a clarification as to how much of the borrowings
reflected in the balance sheets are secured by way of
G pari passu charge on the present and future current
assets of the companies.”
The Court again noted the statement of Dr. A. M. Singhvi and
Mr. Rajiv Nayar to the following effect:-
“12. Both Dr. Singhvi and Mr. Nayar state that if any change is
H proposed in the status of any of the unencumbered assets whose
VINAY PRAKASH SINGH v. SAMEER GEHLAUT & ORS. 101
[DEEPAK GUPTA, J.]
details are to be furnished as directed hereinbefore, the A
Respondents will first apply to the Court.”
This was the third assurance on behalf of the respondents.
The fourth assurance
8. OIL and RHC filed the certificates disclosing the value of the B
unencumbered assets and investments. On 28.02.2017 OIL had
unencumbered assets of a book value of 1953.70 crores and fair value
of 1204.78 crores. The fair value of the unencumbered investments of
OIL in listed entities including related/group entities was valued at 854.64
crores. As far as RHC is concerned, the book value of the
C
unencumbered assets was shown as 6,346.69 crores and the fair value
thereof at 3579.26 crores. The fair value of unencumbered investments
was shown as 3246.76 crores. Therefore, it was projected by the
respondents that these two companies had a net value which was much
more than the amount claimed by the petitioner.
D
9. As pointed out earlier FHL is a Public Limited Company in
which OIL and RHC held majority shares amounting to 52.20% through
their wholly owned subsidiary, Fortis Healthcare Holdings Private
Limited (FHHPL) up till March, 2017. On 25.05.2017, FHL issued
notice to its shareholders proposing that the shareholding of foreign
investors would be increased. Immediately, thereafter, the petitioner E
filed I.A. No.7142 of 2017 before the High Court of Delhi praying that
OIL and RHC be restrained from reducing their 100% shareholding in
FHHPL and be restrained from indirectly transferring FHHPL shares
in FHL. It was prayed that these two companies be directed to maintain
their holding of 52% in FHHPL. In the meantime, the disclosures made
F
by FHL to the Bombay Stock Exchange (BSE) showed that the
shareholding of FHHPL in FHL had fallen to 45.7%.
10. On 19.06.2017 the High Court of Delhi recorded in its order
that the learned senior counsel appearing for both OIL and RHC
submitted that they are not seeking to change the status of any
unencumbered assets as disclosed to the Court and the shareholding G
as disclosed in terms of the order dated 06.03.2017 shall not be affected.
The statement was taken on record by the High Court and the
application disposed of in terms of this statement. This effectively
meant that the Court had restrained OIL and RHC from reducing their
shareholding in FHL through FHHPL in any manner. Relevant portion H
102 SUPREME COURT REPORTS [2019] 17 S.C.R.
A of the order passed by the High Court of Delhi dated 19.06.2017 reads
as follows:-
“5. Learned Senior Counsel for respondent no.14 and 19 submits
that they are not seeking to change the status of any
unencumbered asset as disclosed to the court and by mere passing
B of the impugned resolution, the shareholding as disclosed, in terms
of order dated 06.03.2017, shall not be affected.
6. The statement is taken on record.
7. In view of the above statement, the application is disposed
of.”
C
This was the fourth assurance given by the respondents.
The fifth assurance / undertaking
11. Despite this order having been passed, it appears that an
attempt was made to reduce the shareholding of OIL and RHC through
D FHHPL in FHL. A newspaper report was published on 20.06.2017 one
day after the order had been passed by the Court reporting that IHH
Healthcare Bhd. (Malaysian Company) was set to acquire 26% stake
in FHL.
12. Thereafter, the petitioner filed a contempt petition before the
E High Court of Delhi alleging that the orders dated 06.03.2017 and
19.06.2017 had been violated. The matter was taken up by the High
Court of Delhi on 21.06.2017. The High Court again recorded the
undertaking of the learned senior counsel appearing for respondents 14
and 19 therein by which the High Court of Delhi was assured that the
value of the shares held by OIL and RHC which have been disclosed
F as 452.60 crores and 1889.30 crores would not be hampered or
diminished in any manner. Relevant portion of the order is as follows:-
“9. Learned Senior Counsel appearing for respondent no.14 and
19 submits that the value of the unencumbered asset comprising
of equity share in Fortis Healthcare Holding Private Limited has
G been disclosed as Rs.452.60 Crores by respondent no.14 and
Rs.1889.30 crores by respondent no.19.
10. Learned Senior Counsel appearing on behalf of respondent
No.14 and 19 undertakes that, irrespective of any transaction that
the said respondent may enter into, the value as disclosed to the
H court would not be, in any manner, hampered or diminished.
VINAY PRAKASH SINGH v. SAMEER GEHLAUT & ORS. 103
[DEEPAK GUPTA, J.]
11. The effect of the above statement of learned Senior Counsel A
for respondent no.14 and 19 is that the sum of Rs. 2341.90 Crores
(i.e. Rs.452.60 + Rs.1889.30 crores) would always be available
and realizable as an asset of respondent no.14 and 19, in fortis
Healthcare Holding Pvt. Ltd. towards the satisfaction of the
decretal amount as and when the stages so arises. B
12.The statement is taken on record and the Undertaking
accepted.”
This undertaking is the fifth assurance given by the respondents
to the Delhi High Court.
C
Proceedings before this Court
13. The order dated 21.6.2017 of the Delhi High Court was
challenged by the petitioner before this Court and the main contention
of the petitioner was that despite the respondents violating the
undertakings time and again restraint orders were not being passed. D
In the Special Leave Petition (Civil) No.20417 of 2017 filed by the
petitioner this Court passed the following order on 11.08.2017:-
“In the interim it is directed that status quo as on today with
regard to the shareholding of Fortis Healthcare Holding Private
E
Limited in Fortis Healthcare Limited shall be maintained.”
As per the statutory disclosures made by FHHPL to the BSE
and National Stock Exchange (NSE), it was disclosed that on
14.08.2017, 30,59,260 shares of FHHPL in FHL were pledged in favour
of Indiabulls Housing Finance Limited (IHFL). F
14. The petitioner filed a contempt petition being Diary No.27334
of 2017 alleging that the conduct of the respondents in creating a pledge
on 14.08.2017 is violative of the order dated 11.08.2017 In the meantime
on 21.08.2017, OIL filed an application being I.A. 77497 of 2017 for
directions permitting sale of encumbered shares to pay its debts and G
also prayed that a clarification be issued that the order dated 11.08.2017
is limited to shares other than to those pledged to banks and financial
institutions. In I.A. 77497 of 2017, OIL had stated as follows:-
“24.It is in these circumstances that the Respondent Company
seeks a direction from this Hon’ble Court that the order dated H
104 SUPREME COURT REPORTS [2019] 17 S.C.R.
A 11 August 2017 passed by this Hon’ble Court is limited to shares
other than those pledged to the banks and the financial institutions,
the sale of which is being made after obtaining prior consent of
the pledgee(s).
25. It is submitted that the said direction will not, in any event,
B have an impact on the potential creditors and that the availability
of these funds will only help pare down the debt. This will only
raise the value of the shares held by Respondents.”
Similar application being I.A. No.76959 of 2017 with identical
paragraphs 24 and 25 was filed by RHC.
C 15. On 31.08.2017, this Court directed as follows:-
“As the present Special Leave Petition is due to come up for a
fuller consideration on 23rd October, 2017, we do not consider it
necessary to delve into the issues raised at this stage as the time
taken to answer the same would be the same as would be
D required to hear and decide the matter finally. We, therefore,
decline to pass any order in the matter, save and except, to put
on record that the interim order of this Court dated 11th August,
2017 was intended to be in respect of both the encumbered and
unencumbered shares of Fortis Healthcare Limited held by Fortis
E Healthcare Holding Private Limited. Consequently, there will be
no transfer of the shares to the extent indicated above.
Parties may complete the pleadings in the meantime.
As we have now clarified the previous order of this Court dated
11th August, 2017 no case for contempt is made out. However,
F it is needless to say that the present order and the above
clarification would govern the rights of the parties henceforth.
The contempt petition is accordingly disposed of.”
16. On this date, the contempt petition was disposed of and at
the same time it was mentioned that the order and the clarification
G contained therein would govern the rights of the parties henceforth. The
order dated 11.08.2017 and 31.08.2017 were later clarified by this Court
vide order dated 15.02.2018 which reads as follows:-
“Having heard the learned counsels for the parties, we clarify
our interim orders dated 11th August, 2017 and 31st August, 2017
H to mean that the status quo granted shall not apply to shares of
VINAY PRAKASH SINGH v. SAMEER GEHLAUT & ORS. 105
[DEEPAK GUPTA, J.]
Fortis Healthcare Limited held by Fortis Healthcare Holding Pvt. A
Ltd. as may have been encumbered on or before the interim
orders of this Court dated 11th August, 2017 and 31st August,
2017.
The applications for directions are disposed of in the above
terms.” B
It would be pertinent to mention that on 23.02.2018, this Court
passed the following order:
“Interim order of this Court dated 15th February, 2018 will
continue to hold the field till the High Court decides the matter.”
C
17. During the period 06.09.2018 to 18.09.2018 Indiabulls
Ventures Limited (IVL), with which FHHPL maintains a demat account
transferred 12,25,000 shares of FHL held by FHHPL to IHFL. In the
present contempt petition filed in October, 2018, it is alleged that this
transfer of shares was in contempt of the orders dated 11.08.2017,
D
31.08.2017, 15.02.2018 and 23.02.2018.
18. We can divide the contemnors into two sets. One set being
contemnors 1 to 8 and the second set of contemnors is 9 to 15.
Contemnors 1 and 5 & 2 and 6 are the same namely Sameer Gehlaut
and Gagan Banga. They have been arrayed twice separately in their
E
capacities as Directors of IHFL and IVL. From the materials on record
as far as the second set is concerned, we are only inclined to proceed
against Malvinder Mohan Singh (contemnor nos. 9 and 12) and
Shivinder Mohan Singh (contemnor nos. 10 and 13) both of whom have
been arrayed twice separately in their capacities as Directors of Oscar
Investments Limited and Directors of RHC Holding Private Limited. F
Contemnor Nos. 1 to 8
19. We shall first deal with the issue whether contemnor nos. 1
to 8 have violated the aforesaid orders. The stand of the contemnor
nos.1 to 8 is that loan facilities had been granted by IHFL to various
G
companies controlled by MMS and SMS. As per the loan agreements
and other documents executed, the borrower(s) created encumbrances
on their immovable and movable properties including shares. Some
shares were pledged or charged for repayment of the loan and IHFL
was given a right to sell these encumbered shares without reference
to the borrower(s). The stand of contemnors nos.1 to 8 is that the H
106 SUPREME COURT REPORTS [2019] 17 S.C.R.
A borrower(s) had a demat account of their shares with IVL and a power
of attorney dated 28.11.2016 was issued in favour of IHFL permitting
it to transfer shares from the demat account so as to ensure that the
value of the security matches the outstanding amount. There is another
undated power of attorney pursuant to the loan agreement dated
30.11.2016 which appears to have been registered on 03.12.2016.
B
According to IHFL, after 11.08.2017 no shares were credited into the
designated demat account by the pledger.
20. It would be pertinent to mention that IHFL filed an application
in October, 2017 for clarification of order dated 31.08.2017. The stand
of IHFL is that they have not transferred any shares encumbered after
C
11.08.2017. The case of the petitioner is that 12,25,000 shares were
transferred in September, 2018. This fact is also not denied by IHFL.
However, according to IHFL this was done on the basis of instructions
issued to IVL by IHFL pursuant to the loan document including a power
of attorney dated 28.11.2016. The stand of MMS and RHC is that
D IHFL used some pre-signed instruction slips to make these transfers
but these facts were denied by IHFL. Reliance by IHFL is also placed
on the order dated 15.02.2018 quoted hereinabove.
21. The main issue is whether these 12,25,000 shares were
pledged prior to 11.08.2017 or not. At this stage it would be pertinent
E to mention that the stand of IHFL that no pledge was created after
11.08.2017 is incorrect. The disclosure made on 21.08.2017 by FHHPL
to BSE and NSE clearly discloses that 30,59,260 shares of FHL held
by FHHPL were pledged on 14.08.2017 in favour of IHFL. This
disclosure of 21.08.2017 is a part of the record and not specifically
denied by IHFL.
F
22. We may point out that till October 2017, IHFL was not
represented in this Court. However, on 16.08.2017 and 31.08.2017
through emails RHC informed IHFL about the status quo order passed
by this Court. Thus, IHFL cannot claim that they were not aware of
this Court’s orders. However, from the material on record especially
G the replies filed by OIL, RHC, MMS and SMS it is apparent that on
06.09.2018, 07.09.2018, 08.09.2018 IHFL transferred 6,00,000 shares
of FHL held by FHHPL. When RHC came to know about these
transfers, it immediately informed IHFL that transfers were in violation
of the orders passed by this Court on 11.09.2017. Despite the
H communication dated 11.09.2018, IHFL continued to transfer shares of
VINAY PRAKASH SINGH v. SAMEER GEHLAUT & ORS. 107
[DEEPAK GUPTA, J.]
FHL held by FHHPL on 11.09.2018, 12.09.2018, 14.09.2018, 17.09.2018 A
and 18.09.2018. On 24.09.2018, this Court was informed that IHFL
had transferred 12,25,000 shares held by FHHPL in FHL in violation
of the Court’s orders. As on 29.09.2018, another transaction of 9,04,760
shares had taken place. The main issue is whether 12,25,000 shares
were encumbered or not.
B
23. FHL is a public company and being a listed company, it has
to disclose its shareholding patterns to the stock exchange. A chart
showing share holding pattern of FHHPL in FHL will show the position
of holdings at various stages:
S. Quarter Total Shares Encumbered Unencumbered C
Ending Shares shareholding of
No. FHHPL in FHL
1. September 32,50,91,529 27,21,59,955 5,29,31,574
2016
2. December 32,50,91,529 25,22,63,248 7,28,28,281 D
2016
3. 28th Jan 2017 32,50,91,529 25,19,23,248 7,31,68,281
4. March 2017 27,02,41,529 23,18,01,440 3,84,40,089
5. June 2017 22,22,11,701 18,38,96,484 3,83,15,217
E
6. September 17,80,26,597 17,53,94,820 26,31,777
2017
7. December 17,80,26,597 17,53,94,820 26,31,777
2017
8. March 2018 34,20,451 6,89,084 27,31,367
F
9. June 2018 32,82,851 5,51,484 27,31,367
10. September 11,53,091 5,51,484 6,01,607
2018
11. December 11,53,091 5,51,484 6,01,607
2018 G
It is true that we have to decide whether there is any
disobedience of the orders of this Court, but while doing so we will
make reference to the proceedings before the Delhi High Court and
the above chart to show how both sets of respondents have violated
the orders of the courts. As pointed above, on 19.06.2017 learned H
108 SUPREME COURT REPORTS [2019] 17 S.C.R.
A counsel for OIL and RHC had made a statement before the Delhi High
Court that the status of unencumbered assets as disclosed to the court
would not be changed and the shareholding as disclosed in terms of
order dated 06.03.2017 shall not be affected. When the petitioner felt
that this order is not being complied with, it filed contempt petition in
the Delhi High Court. Within two days another order was passed by
B
the Delhi High Court on the basis of the undertaking given to it.
24. The above chart would show that in the quarter ending June
2017, the total shares held by FHHPL in FHL were 22,22,11,701 and
the encumbered shares were 18,38,96,484. Only 3,83,15,217, were
unencumbered.
C
25. This Court on 11.08.2017 directed that status quo with regard
to shareholding of FHHPL in FHL be maintained. On 31.08.2017 it
was clarified that the order would apply to both encumbered and
unencumbered shares. On 14.08.2017, 30,59,260, unencumbered shares
were pledged in favour of IHFL. As far as this violation of the order
D
dated 11.08.2017 is concerned, in view of the order dated 31.08.2017,
the same stands condoned. This would further mean that the
unencumbered shares should have been reduced to 3,52,55,957.
26. However, the figures of September 2017 show a totally
different situation. The total shareholding has fallen to 17,80,26,597 and
E
the unencumbered shares to 26,31,777. This means that in addition to
30,59,260 shares pledged on 14.08.2017, 3,26,24,180 number of shares
were encumbered or transferred during this period. There is no
explanation by OIL, RHC, MMS or SMS, as to how these
unencumbered shares were encumbered or transferred in total violation
F of the orders of the courts.
27. We shall now deal with the issue as to whether IHFL and
IVL had violated the orders of this Court or not? To decide this issue,
it would be appropriate to determine whether IHFL transferred any
shares which were not encumbered up to 14.08.2017.
G 28. This brings us to the shareholding pattern of FHL for the
period between 01.07.2018 and 30.09.2018 because it is during this
period that IHFL transferred the shares. According to IHFL these
12,25,000 shares stood pledged with them. Neither in I.A. No.109493
of 2017 nor in the reply filed by contemnor nos. 1-8, is there any clear-
H cut statement as to how and when the different pledges were created.
VINAY PRAKASH SINGH v. SAMEER GEHLAUT & ORS. 109
[DEEPAK GUPTA, J.]
Reference has been made to loan documents of 2016 and also to the A
pledge of 14.08.2017. According to alleged contemnor nos. 1 to 8, FHL
was maintaining a demat account with IVL. The case set up is that
when the value of the shares of IHFL fell in the market, to make the
security equal to the outstanding due to IHFL, further shares were
transferred by IVL to IHFL. It is urged that this was done in view of
B
the instructions given prior to 11.08.2017 by FHHPL to IVL and IHFL.
These transfers were done on the basis of the delivery instructions slips
executed by IHFL as power of attorney holder of FHHPL. Even if
this be true, the alleged contemnors are guilty of violating the orders of
this Court. The order dated 11.08.2017 clearly debars FHHPL from
changing its shareholding in IHFL. Vide order dated 31.08.2017, it was C
clarified that the order dated 11.08.2017 would apply both to encumbered
and unencumbered shares. It was only on 15.02.2018 that the order
was clarified that it would not apply to shares encumbered prior to
11.08.2017 and 31.08.2017. A reading of the 3 orders makes it clear
that no unencumbered shares could be charged after 31.08.2017 at
D
least. Even if FHHPL had given power of attorney empowering IVL
to transfer shares from its demat account to top up the security value,
that power of attorney could not be used to violate the orders of this
Court. What FHHPL could not do, could obviously not be done by its
agent or attorney. The shares which were used to top up the security
after 31.08.2017 were obviously unencumbered shares prior to E
this date. The plea is clearly unacceptable and a lame excuse for the
wilful disobedience of the order directing maintenance of status quo
which, as modified, was to apply to the unencumbered shares. The
respondents were aware and cannot claim ignorance of the purported
agreements under which they were required to top-up upon the
F
securities, in case of fall of market value of the shares. In other words,
the interim order passed by this Court was to apply even if there was
a fall in market value of the securities held by the creditors.
29. To make this position clear, we may refer to the disclosures
made by FHL to BSE. The above chart shows that in the quarter
ending 30.06.2018, FHHPL held 32,82,851 shares in FHL out of which G
only 5,51,484 were encumbered, meaning that the balance 27,31,367
were unencumbered shares. The disclosure of 30.09.2018 and
31.12.2018 both reflect that the number of encumbered shares have
not changed but the total shareholding of FHHPL in FHL has reduced
from 32,82,851 to 11,53,091. This means that what was transferred H
110 SUPREME COURT REPORTS [2019] 17 S.C.R.
A were 21,29,760 unencumbered shares and not encumbered shares. The
transaction of 12,25,000 shares therefore is out of the unencumbered
shares because after 31.03.2018, the encumbered shares were much
below 12,25,000.
30. We are not entering into the dispute whether the shares were
B transferred on the basis of pre-signed slips or delivery instruction slips
based on the power of attorney but the fact remains that the official
record shows that these shares were not encumbered and the
contemnors have failed to place any cogent material on record to show
that these 12,25,000 shares were pledged on or before 31.08.2017.
C 31. IHFL, in fact, flagrantly violated this Court’s orders and made
various transactions transferring even unencumbered shares. The best
course available to IHFL would have been to approach this Court
seeking a clarification before it made the transfers. This they did not
do. We are, therefore, clearly of the view that IHFL and IVL and their
officials i.e. contemnor nos. 1 to 8 knowing fully well that this Court
D had passed an order directing status quo to be maintained with regard
to the holding of FHHPL in FHL, violated the order. There can be no
manner of doubt that IHFL and IVL have violated these orders and,
therefore, we find contemnor nos.1-8 who are active directors of IHFL
and IVL guilty of knowingly and wilfully disobeying the orders of this
E Court and find them guilty of committing Contempt of Court. We will
hear them on the question of sentence.
32. We afford an opportunity to contemnor nos.1-8 to purge
themselves of the contempt by depositing the value of 12,25,000 shares
as on 31.08.2017 in the BSE within eight weeks from today. In case,
F the said contemnors purge themselves of the contempt, we may take
a lenient view while imposing sentence.
Contemnors 9 & 10, 12 & 13
33. We shall now consider whether MMS, SMS have violated
this Court’s orders both in their individual capacity and as directors of
G OIL and RHC. We are dropping contempt proceedings against
contemnor nos. 11, 14 and 15 because nothing has been placed on record
to show that they were actively concerned with the running of the two
companies.
34. We have given detailed facts of the shareholding of FHHPL
H in FHL during the period of quarter ending September 2016 to
VINAY PRAKASH SINGH v. SAMEER GEHLAUT & ORS. 111
[DEEPAK GUPTA, J.]
December 2018 hereinabove. As far as these contemnors are A
concerned, the first assurance given by them to the High Court of Delhi
was on 24.05.2016 when they assured the High Court of Delhi that
any dealings made by them would not affect the rights of the petitioners.
As on 30.09.2016, FHHPL held 32,50,91,529 shares in FHL out of which
27,21,59,955 shares were encumbered shares and 5,29,31,574 shares
B
were unencumbered shares. For various reasons, the total number of
shares fell to 22,22,11,701 in quarter ending June 2017 and the number
of encumbered shares became 18,38,96,484 and the unencumbered
shares dropped by about 1.5 crore shares to 3,83,15,217. Even after
giving an assurance on 21.06.2017 to the High Court of Delhi,
unencumbered shares were encumbered or transferred as is apparent C
from the above table.
35. The petitioner came to this Court when the order dated
11.08.2017 was passed and clarified by order dated 31.08.2017. During
this period also the total shareholding of FHHPL in FHL fell from
22,22,11,701 to 17,80,26,597 by 4,41,85,104 shares. MMS and SMS D
have not furnished any explanation as to how this happened. The
contemnors were the best persons to disclose how this happened. They
have not done so. The only explanation we have before us is about
the pledge of 30,59,260 shares on 14.08.2018. It is difficult to ignore
this huge drop in shareholding but even if we were to ignore this, we
do not understand how in March 2018, the shareholding fell to 34,20,451 E
and finally in December 2018 to 11,53,091. The undertaking given to
the High Court of Delhi was that the shareholding as on 19.06.2017
and 21.06.2017 would be maintained. On 11.08.2017, this Court
injuncted the respondents from changing the shareholding. On
11.08.2017, this Court passed the order of status quo referred to above. F
Despite that specific order, on 14.08.2017 a pledge was created. This
was a violation of the orders of this Court. RHC and OIL filed
applications before this Court on 21.08.2017 praying for modification
of the order and for a direction that the order dated 11.08.2017 may
be limited to the shares other than those which already stood pledged
to banks and financial institutions. Though separate applications have G
been filed, Paragraph 25 of both the applications are identical and has
been quoted hereinabove.
36. These applications were filed on affidavit and it has held out
to this Court that if the order dated 11.08.2017 is limited to
unencumbered shares it would have no impact on the availability of funds H
112 SUPREME COURT REPORTS [2019] 17 S.C.R.
A to protect the interest of the petitioner. On the basis of this statement,
the order dated 31.08.2017 was passed and this Court took a lenient
view on the matter and disposed of the contempt without taking any
action.
37. Unfortunately, the actions of these contemnors clearly show
B that these statements were made without the least intention of complying
with them. These contemnors had already prepared a well thought out
scheme of diluting their shareholdings directly or indirectly in FHL to
defeat the rights of the petitioner.
38. The explanations provided are not worth consideration.
C According to SMS he was not even taking part in the administration of
these companies and had gone into religious service. This is belied from
the fact that he has been attending most of the meetings of the Board
of Directors. The next defence taken by both the contemnors is that
they lost control over the companies because the encumbered shares
were sold. As pointed out above it is not only the encumbered shares
D but also the unencumbered shares which have been transferred. In
December 2017, the unencumbered shares of FHHPL in FHL were
26,31,777 and in December, 2018 there were only 6,01,607
unencumbered shares. This shows beyond any manner of doubt that
there has been wilful violation of the orders of this Court. It is apparent
E that the contemnors knowingly and willingly lost control of FHL.
39. A litigant should always be truthful and honest in court. One
who seeks equity must not hide any relevant material. In the present
case, the petitioner has violated the undertakings given to the Delhi High
Court as also the orders of this Court. The Delhi High Court will deal
F with the issue in so far as the undertakings made before it are
concerned. We have no doubt in our mind that contemnor nos.9 and
10 have also wilfully and contumaciously disobeyed the orders of this
Court. What has happened during the period when this matter has been
pending in this Court is that the shareholdings of FHHPL, which is
wholly owned by OIL and RHC which in turn are controlled by SMS
G and MMS, have virtually vanished in FHL. FHHPL owns no shares
in FHL now. It may be true that IHH Healthcare Bhd. (Malaysian
Company) through its actually owned subsidiary Northern TK Venture
Pte Ltd. is now the majority stake holder but that is due to allotment of
preferential shares. In addition to the preferential shares allotted to
H them, the shares which were owned by MMS and SMS through their
VINAY PRAKASH SINGH v. SAMEER GEHLAUT & ORS. 113
[DEEPAK GUPTA, J.]
holdings in FHHPL in FHL have vanished into thin air and the only A
conclusion which we can draw is that this was a well thought out plan
to deprive the petitioner from the amounts due to it.
40. No person or institution howsoever powerful, can be
permitted to misuse the process of the Court. Contempt of court can
be committed in various ways. Civil contempt is defined under the B
Contempt of Courts Act, 1971 under Section 2(b) to mean wilful
disobedience of any judgment, decree, direction, order of the Court of
wilful breach of an undertaking given to the Court. Criminal contempt
has been defined under Section 2(c) to include anything which
scandalises or tends to scandalise or lower or tends to lower the
authority of the Court. Criminal contempt also means any act which C
prejudices or interferes or tends to interfere with the due course of
judicial proceedings. As far as the present case is concerned, the
conduct of contemnor nos.9 and 10 definitely undermines the authority
of the Court. We are dealing with an international arbitration which
has fructified into an award but by misusing the legal process contemnor D
nos.9 and 10 have successfully avoided paying off the petitioner. In
our view, action for committing criminal contempt could have been taken
against contemnor nos. 9 and 10, but by taking a lenient view of the
matter we are only treating it as a civil contempt.
41. The order passed by this Court on 11.08.2017 with a
E
clarification on 31.08.2017, and modification made on 15.02.2018, is not
to be read in isolation but along with the solemn undertakings and
assurances given by the contemnors on as many as five occasions before
the Delhi High Court, the last one being as late as on 21.06.2017. These
assurances were to the effect that even if the Court permits sale of
encumbered shares for payment of debt, it would not have any impact F
on the (potential) creditors and availability of the funds would only pare
down the debt and increase the value of the shares. Contrary to the
aforesaid solemn assurances and undertakings, which were repeatedly
reiterated to procure orders, the shareholding went into a downward
spiral, as is apparent from the table in paragraph 23. There was a
G
significant decline in the total number of shares held by FHHPL, both
encumbered and unencumbered, which fell down from 27,21,59,955 and
5,29,31,574 in September 2016 to 5,51,484 and 6,01,607 in December
2018. The aforesaid fact with the impact on valuation was never
brought to the notice of the Court and was concealed with the
knowledge that these facts, if brought to the notice, would have H
114 SUPREME COURT REPORTS [2019] 17 S.C.R.
A substantial bearing on the orders that would be passed to protect the
interest of the petitioner.
42. What is even more shocking and clearly contemptuous is the
manner in which, in a well thought off plan, the authorised capital of
FHL was increased with the objective and purpose to transfer
B controlling interest in the company. Consequently, the controlling interest
of MMS and SMS came down in FHL, as the company changed hands.
Controlling interest held by the majority shareholders has considerable
market value. Further, the amount brought in by a foreign shareholder,
who now has the controlling interest in FHL, has been transferred in a
dubious and clandestine manner without full facts being brought on
C record. This amount is not available for payment and satisfaction of
the Award. About Rs.4,600 crores has been transferred in a very
hurried and clandestine manner to a trust registered in Singapore i.e.
RHT Health Trust (RHT). Coincidentally, respondents no.9 and 10
themselves or through their holding companies were at one time the
D biggest unitholders in the trust. It is obvious that the respondents being
debtors are manoeuvring, transferring and converting the assets of
value, with the desire and intent that the petitioners would not be able
to recover the decretal amount as per the award.
43. We would, therefore, not read the orders of this Court in
E isolation but along with the five solemn assurances and undertakings
given before the High Court. Directions given by this Court and the
orders passed were in light of the fact that the contemnors always
projected that the said assurances and undertakings were binding and
adhered.
F 44. There can be no manner of doubt that contemnors 9 and 10
have changed the shareholding of FHHPL in FHL knowingly and
wilfully. They have done this with a view to defeat the rights of the
petitioner. They have also wilfully and contumaciously violated the orders
of this Court dated 11.08.2017, 31.08.2017 and 15.02.2018. They are
accordingly held guilty of committing contempt of court. We shall hear
G them on the question of sentence. We give one chance to the
contemnors no.9 and 10 to purge themselves of the contempt.
45. On 21.06.2017, a statement was made on behalf of
contemnor nos. 9 and 10 before the High Court of Delhi that in respect
of any transaction that these respondents may enter into, a sum of
H Rs.2341.90 crores i.e. Rs.452.60 crores of OIL and Rs.1889.30 crores
VINAY PRAKASH SINGH v. SAMEER GEHLAUT & ORS. 115
[DEEPAK GUPTA, J.]
of RHC would always be made available and realisable from the assets A
of the company. We, therefore, direct that in case each of the
respondents deposits a sum of Rs.1170.95 crores i.e. 50% of
Rs.2341.90 crores in this Court within eight weeks from today then we
may consider dealing with them in a lenient manner.
Violation of order dated 14.12.2018 B
46. It was also argued that contemnor nos.9 and 10 have also
violated the order dated 14.12.2018. Since this is not the subject matter
of the main contempt petition and no notice has been issued to the
concerned parties in this regard, we feel that this issue has to be
segregated from the rest of the contempt petitions because the main C
pleadings and replies are in respect of the alleged contempt of orders
dated 11.08.2017, 31.08.2017, 15.02.2018 and 23.02.2018.
47. However, we cannot let the matters stand as they are. On
14.12.2018, this Court had passed the following order:
“Issue notice. D
The personal presence of the alleged respondents-contemnors
is dispensed with for the present.
Status quo with regard to sale of the controlling stake in Fortis
Healthcare to Malaysian IHH Healthcare Berhad be maintained.”
E
The order directs that the status quo with respect to the sale of
controlling stake in FHL to IHH Healthcare Bhd. (Malaysian Company)
should be maintained. We are now told that this sale had already taken
place. This matter needs to be enquired into and we have to be certain
when this sale actually took place and when was the controlling stake
F
in FHL transferred to the IHH Healthcare Bhd. (Malaysian Company).
Furthermore, on 09.01.2019, FHL moved an application in this Court
and stated that the transaction between the FHL and IHH Healthcare
Bhd. (Malaysian Company) had been completed on 13.11.2018 and
prayed that the order dated 14.12.2018 be modified insofar as it pertains
to sale of controlling stake in IHH Healthcare Bhd. (Malaysian G
Company).
48. I.A. No.8948 of 2019 was filed by the petitioner on
15.01.2019 stating that FHL is proposing to transfer Rs.4,000/- crores
approximately, received by it [as a result of the transferring of shares
to the IHH Healthcare Bhd. (Malaysian Company)] to RHT Health H
116 SUPREME COURT REPORTS [2019] 17 S.C.R.
A Trust, Singapore (RHT). Petitioner prayed for restraining this transfer
of funds and compliance of order dated 14.12.2018. FHL filed a reply
to this I.A., which made it apparent that on 15.01.2019 itself FHL had
completed the transaction involving acquisition of assets from Singapore
based RHT even though it was fully aware that this Court was seized
of the matter.
B
49. Interestingly, the main promoters of RHC and OIL i.e. MMS
and SMS were the biggest unit holders in RHT when it was initially
incorporated. The statistics of unit holding as on 20.06.2017 of RHT
Trust, Singapore shows that SMS, MMS, their family members,
FHHPL, FHL and RHC virtually owned the RHT trust. That situation
C
has now changed and now the situation is such that the companies/
associations of which MMS and SMS are partners are no longer visibly
present and there are other persons who are there. When and how
the holdings in RHT trust were transferred by various people is a matter
which is required to be gone into.
D 50. We are prima facie of the view that these transactions were
made by MMS, SMS, RHC, OIL and FHL to defeat the rights of the
petitioner despite making undertakings to the High Court of Delhi that
no action would be taken to prejudice petitioner’s rights. We are prima
facie of the view that these transactions are in wilful disobedience of
E the order of this Court dated 14.12.2018 read in conjunction with the
earlier orders. We, therefore, issue suo moto notice of contempt and
direct the Registry to register a fresh contempt petition with regard to
the violation of the order dated 14.12.2018 in which RHC, OIL, MMS,
SMS and FHL shall be arrayed as contemnors. FHL is directed to
disclose the list of directors/officials actively involved in the running of
F the company for the period 01.01.2018 to 31.01.2019.
Directions
51. In view of the above discussion, we, dispose of this contempt
petition in the following terms :-
G (i) We find Sameer Gehlaut, Director of Indiabulls Housing
Finance Limited and Director of Indiabulls Ventures
Limited (Contemnor Nos.1 & 5), Gagan Banga, Director
of Indiabulls Housing Finance Limited and Director of
Indiabulls Ventures Limited (Contemnor Nos.2 & 6),
H Ashwini Kumar Hooda, Director of Indiabulls Housing
VINAY PRAKASH SINGH v. SAMEER GEHLAUT & ORS. 117
[DEEPAK GUPTA, J.]
Finance Limited (Contemnor No.3), Sachin Chaudhary, A
Director of Indiabulls Housing Finance Limited
(Contemnor No.4), Divyesh Bharat Kumar Shah,
Director of Indiabulls Ventures Limited (Contemnor
No.7) and Pinank Jayant Shah, Director of Indiabulls
Ventures Limited (Contemnor No.8), who are active
B
directors of IHFL and IVL of knowingly and wilfully
disobeying the orders of this Court dated 11.08.2017,
31.08.2017 and 15.02.2018 as continued on 23.02.2018
and find them guilty of committing contempt of this Court.
We will hear them on the question of sentence. We
afford an opportunity to contemnor nos.1-8 to purge C
themselves of the contempt by depositing the value of
12,25,000 shares as on 31.08.2017 in the Bombay Stock
Exchange within eight weeks from today. In case, the
said respondents purge themselves of the contempt, we
may take a lenient view while imposing sentence.
D
(ii) Malvinder Mohan Singh, Director of Oscar Investments
Limited and Director of RHC Holding Private Limited
(Contemnor Nos.9 and 12) and Shivinder Mohan Singh,
Director of Oscar Investments Limited and Director of
RHC Holding Private Limited (Contemnor Nos.10 and
13) have knowingly and wilfully violated the orders of E
this Court dated 11.08.2017, 31.08.2017 and 15.02.2018
as continued on 23.02.2018. Therefore, we hold both
of them guilty of committing Contempt of this Court.
We give one chance to them to purge themselves of the
contempt. We, direct that in case each of the F
contemnors deposits a sum of Rs.1170.95 crores in this
Court within eight weeks from today then we may
consider dealing with them in a lenient manner, while
imposing sentence.
(iii) In case any of the contemnors deposits the amount as G
directed hereinabove, this Court shall decide on the next
date as to how this amount is to be disbursed.
(iv) The Registry is directed to register a suo motu contempt
petition against RHC Holding Private Limited, Oscar
Investments Limited, Malvinder Mohan Singh, Shivinder H
118 SUPREME COURT REPORTS [2019] 17 S.C.R.
A Mohan Singh and Fortis Healthcare Limited, for having
wilfully violated the order of this Court dated 14.12.2018
and issue notice to them returnable for 03.02.2020 asking
them to show cause why they should not be punished
for contempt.
B 52. List the present contempt petition on 03.02.2020 when all the
contemnors named hereinabove shall remain present in the Court. On
that day, we shall hear them on the issue of sentence. Along with this,
the contempt petition which has been ordered to be registered shall also
be listed on 03.02.2020.
C
Divya Pandey Directions Issued.
D
E
F
G
H
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