IMPORTANT POINT
In order to expose a person to the liability of a prosecution of making false statement there must be a false statement of fact and not a mere pleading made on the basis of facts which are themselves not false.

Headnote:Special Court (Trial of Offences relating to Transaction in Securities) Act, 1992-Section 10(1)-Appeal-Suit filed by Standard Chartered Bank against Canbank Mutual Fund for refund of a sum of Rs. 72.25 crores due under security transactions-CMF stating that transactions were squared off on basis of documents made available to appellant-Special Court held that taking up a false defence as pleaded in written statement and repeating the same in evidence in chief amounts to contempt of court-Conviction of appellant-Special Court rejected apology tendered by appellant-Appeal against-Whether defence taken by appellant would amount to contempt of Court-(No).
Held : The written statement had been verified by the appellant that what is contained in written statement is based on the information received from the records of the defendants Nos. 2 to 11 and he believed the same to be true. The verification of facts adverted to in the written statement is not made on the basis of personal knowledge of the appellant and the defence set up by him is on the basis of the stand taken by CMF in the companion suit. When in a suit of the CMF the stand had been accepted, but in the suit against CMF such stand had been dis-believed, it becomes difficult to say that the appellant had deliberately stated falsehood to mislead the court or to simply gain time to the disadvantage of the other party in this matter. Where a verification is specific and deliberately false, there is nothing in law to prevent a person from being proceeded for contempt. But it must be remembered that the very essence of crimes of this kind is not how such statements may injure this or that party to litigation but how they may deceive and mislead to courts and thus produce mischievous consequences to the administration of civil and criminal justice. A person is under a legal obligation to verify the allegations of fact made in the pleadings and if he verifies falsely, he comes under the clutches of law. In order to expose a person to the liability of a prosecution of making false statement there must be a false statement of fact and not a mere pleading made on the basis of facts which are themselves not false. Merely because an action or defence can be an abuse or process of the court those responsible for its formulation cannot be regarded as committing contempt, but an attempt to deceive the court by disguising the nature of a claim is contempt. If the facts leading to a claim or defence are set out, but an inference is drawn thereby stating that the stand of the plaintiff or defendant is one way or the other it will not amount to contempt unless it be that the facts as pleaded themselves are false. Further, when the appellant tried to explain his case in his evidence, the same was shut out on the basis that it is hearsay. An officer of bank who had no personal knowledge of the transactions in question, and was deposing on the basis of material on record, his evidence cannot be from his knowledge and necessarily has to be hearsay. Hence, the learned Judge was not justified in shutting out that part of the evidence. We, therefore, set aside the order made by the learned Judge of the Special Court initiating the proceedings for contempt and convicting the appellant for the same. The entire proceedings in relation to contempt of court shall stand set aside. (Paras 8 and 9)

JUDGMENT

Rajendra Babu, J.-This appeal is filed under Section 10(1) of the Special Court (Trial of Offences relating to Transaction in Securities) Act, 1992 (hereinafter referred to as the Act ). A suit had been filed by the Standard Chartered Bank (SCB) against Canbank Mutual Fund (CMF) for refund of a sum of Rs. 72.25 crores claiming the same to be due under three SGL transfer forms in Government of India security transactions purported to have been undertaken between SCB and CMF in August/September 1991. In the course of the written statement CMF took the stand that the transactions were squared off on the basis of documents made available to the appellant before affirming the written statement and tendering evidence.

2. The Special Court held that taking up a false defence as pleaded in the written statement and repeating the same in the evidence in chief amounts to contempt of court and convicted the appellant to undergo simple imprisonment for a period of two weeks and pay fine of Rs. 2 thousand. The learned Judge in the course of the order held that perjury is contempt and there is a growing tendency amongst parties not to honour their commitments and pay up their dues and liabilities and file any sort of defence irrespective of whether it is true or not; that, therefore, it is for courts to actively curb such tendencies. The Special Court prima facie felt that the defendant and deponent of written statement were aware that the defence was false at the time when written statements were filed and knowing it to be false took the same and sought to persist with it at the trial. Two show cause notices were issued-one under Sections 182, 183, 191, 192, 193, 199, 200 and 209 of the Indian Penal Code and another for contempt of court, however, no action was taken pursuant to the notice issued for offences under the Indian Penal Code and these proceedings stood dropped.

3. At the very outset, on behalf of the appellant an unconditional apology was tendered. It was stated that in spite of fact that the appellant had a good answer to the show cause notice the apology was being tendered. However, the Special Court rejected the apology tendered by the appellant by observing that there is an increasing tendency to first commit the perjury or contempt and, when caught out, tender an unconditional apology and such an apology is not an expression of genuine remorse. In the course of the order, the learned Judge noticed as follows:-

"In evidence in chief an explanation was sought to be given as to why such averments were made in the written statements. Of course, as the explanations themselves showed that the averments in the written statements were based on hearsay evidence the court did not allow the explanations to come on record. The fact remains that in evidence in chief the false statements were sought to be supported. Thereafter in cross-examination an attempt was first made to justify the false averments. Only when it was found that the falsehood could not be maintained that the truth was admitted."

4. Though several contentions had been raised before the Special Court, it in unnecessary to advert to the same. All that we need to examine in this case is whether the defence taken by the appellant would amount to contempt of court.

In this case, the false statement alleged is as under:-

"5(e) On 27th May 1991, the 1st defendant, in the course of their investment business, had purchased certain securities being 11.50% GOI 2008 securities of the aggregate face value of Rs. 58.39 crores from the Bank of Karad Ltd. Hiten Dalal had acted as a broker in this transaction. The said Bank of Karad Ltd., in order to effect transfer of the said securities to the first Defendant issued its combined SGL transfer form authorising the Reserve Bank of India to operate its SGL account and transfer and assign the said securities to the SGL account of the 1st Defendant. In consideration of the said securities purchased by the 1st Defendant, the 1st Defenda

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2003 Supreme(SC) 776

IMPORTANT POINT In order to expose a person to the liability of a prosecution of making false statement there must be a false statement of fact and not a mere pleading made on the basis of facts which are themselves not false.

IMPORTANT POINT
In order to expose a person to the liability of a prosecution of making false statement there must be a false statement of fact and not a mere pleading made on the basis of facts which are themselves not false.