IMPORTANT POINTS
Willful disobedience of orders of the Court is contempt of the Court.
Disobedience of an order to pay a sum of money may be countered by orders of attachment instead of committal to prison.
RCom group directed to pay to Ericsson the sum of INR 453 crore within a period of four weeks. In default, Chairmen to suffer three months’ imprisonment.
Each Chairman also directed to pay a fine of 1 crore each.

Headnote:(a) Constitution of India – Article 215 r/w section 12, Contempt of Courts Act, 1971 – Contempt – NCLAT directing payment of 550 crores to Ericsson India – No linkage to sale of assets by financial creditors – Accordingly, appellants filing undertaking affidavit before NCLAT to pay a sum of INR 550 crores by 30.09.2018 – Undertaking not mentioning any linkage to ale of assets – a without there being any linkage to sale of assets – Supreme Court ordering on 03.08.2018 appellants to file undertaking to pay 550 crores on or before 30.09.2018 – No linkage to sale of assets – Undertakings filed in pursuance of Supreme Court, for the first time, making payment conditional to sale of assets – First contempt petition filed on 01.10.2018 – Plea in the application for extension of time that payment will be made on sale of assets not accepted by Supreme Court – Second contempt petition filed for non-payment of the due amount on or before 15.12.2018 – Third contempt petition filed on ground that (1) appellants expressed to Ericsson Indian their willingness to pay entire sum of INR 550 crore with interest if contempt petitions and arbitration proceedings were withdrawn and (2) appellants’ decision to to revive insolvency proceedings – Advocates of appellants stating payment of 118 crores and their willingness to pay the rest – On the other hand, appellants filing affidavit that they “were and are unable to pay” – Held, appellants have wilfully not paid the sum of INR 550 crore plus interest and have thus breached the undertakings given to this Court. (Para 8, 9, 10, 13, 19)
       2009 (6) SCALE 413; (1990) 2 SCC 636 – Relied upon
       [1980] 3 All ER 161; [1979] 1 All ER 745 – Referred
       (1980) 3 SCC 47; (2003) 11 SCC 1; (2010) 12 SCC 770; (1994) 4 SCC 34; (2016) 15 SCC 164 – Distinguished
       (b) Constitution of India – Article 215 r/w section 12, Contempt of Courts Act, 1971 – Appellants filing undertakings to pay due amount – Then filing writ petition for quashing insolvency proceedings – Filing wrong reply-affidavit in contempt petition no. 55 of 2019 that they have not taken or received any advantage on account of the undertaking – Unconditional apology that there was no intention of filing wrongful undertaking rejected. (Para 20)
       (c) Contempt of Courts Act, 1971 – Section 12(4) – Appellants held guilty of disobeying orders of Supreme Court to pay 550 crores to Ericsson India – Disobedience of an order to pay a sum of money may be countered by orders of attachment instead of committal to prison – RCom group directed to pay to Ericsson the sum of INR 453 crore within a period of four weeks – In default, Chairmen to suffer three months’ imprisonment – Each Chairman also directed to pay a fine of 1 crore each. (Para 23, 24)
       (1998) 4 SCC 409; (1976) 2 SCC 951; (2008) 14 SCC 561; (1990) 1 SCC 259 – Relied upon
       Facts of the case:
       On 25.01.2013, Ericsson and RCom entered into a Managed Service Agreement whereby Ericsson agreed to provide RCom managed services, i.e., operation, maintenance, and management of RCom’s network. Ericsson raised invoices from time to time in consideration of services provided, and on receiving no payment, ultimately issued three notices, each dated 07.05.2017, under the Insolvency and Bankruptcy Code, 2016 to the three Reliance Companies, calling upon them to pay an amount of INR 9.78 crore. These notices were replied to on 19.05.2017, whereby the three Reliance Companies stated that the performance of Ericsson had been inconsistent. Thereafter an understanding was reached for making payment of the outstanding invoices. However, even this understanding fell through, and on 07.09.2017, Ericsson issued a letter to the three Reliance Companies, terminating the agreement between them, and calling upon them to pay the outstanding amount in full. On 08.09.2017, Ericsson filed three applications under Section 9 of the Code as operational creditors. On 15.05.2018, the National Company Law Tribunal admitted the aforesaid petitions and appointed three Interim Resolution Professionals on 18.05.2018 to carry out the corporate insolvency resolution process. The National Company Law Appellate Tribunal stayed the orders dated 15.05.2018 and 18.05.2018 passed by the NCLT, and recorded the statement of counsel appearing on behalf of the Reliance Companies that the matter had been agreed to be settled for a sum of INR 550 crore, which would be paid within 120 days’ time. The order recorded that both the Reliance Companies as well as Ericsson were to file respective affidavits of undertaking in terms of the statements made before the NCLT. These undertakings were so filed in June, 2018.
       The three Reliance Companies filed a writ petition in Supreme Court on 17.07.2018 asking for quashing/closure of the corporate insolvency resolution process in view of settlement of disputes between them and Ericsson. The Supreme Court recorded that the timeline of 120 days shall be strictly adhered to and payment of INR 550 crore is to be made on or before 30.09.2018. Undertakings to this effect were to be filed by Chairmen of the Companies concerned. The undertakings that were given by the Chairmen of these Companies were dated 09.08.2018 stating that the sum of INR 550 crore will be paid “upon sale of assets of the company”. This being the case, a contempt petition, being Contempt Petition No. 1838 of 2018 dated 01.10.2018, was moved by Ericsson, in which it was expressly stated that the undertakings were not in terms of this Court’s order and that the Companies aforestated have no intention of abiding by their commitment to pay the necessary sum of money within the time stated. On 27.09.2018, the Reliance Companies applied for extension of time for payment by 60 days, expressly stating that since sale of other spectrum had not reached a stage of completion, in order to enable the Companies to make payments, they would require this extension. It was made clear, as a last opportunity, that the aforesaid amount must be paid on or before 15.12.2018, and that interest at the rate of 12% per annum would also have to be paid for delayed payment beyond 30.09.2018. It was also made clear that the petition for contempt may be revived if payment is not so made by this date. A letter dated 21.01.2019 was written by the advocates of the three Reliance Companies, who stated that on 09.01.2019, INR 118 crore had already been deposited with the Registry of this Court, and that the total outstanding, as on date, together with interest, would be roughly INR 570 crore. This letter specifically states that the net figure of INR 453 crore would be paid by 31.01.2019, conditional upon withdrawal of the two contempt petitions (a second contempt petition, being Contempt Petition No. 55 of 2019, was also filed on 02.01.2019) and upon withdrawal of pending arbitration proceedings. This was replied to by the advocates of Ericsson, stating that an appropriate application may be moved in the Supreme Court, as once notice of contempt is issued, the Court alone can pass necessary orders to effectuate the settlement. However, on 01.02.2019, the RCom group wrote to various stock exchanges, making it clear that they will now not resist the corporate insolvency resolution process that had hitherto been stayed. This led to the filing of a third contempt petition, namely, Contempt Petition No. 185 of 2019, in which, various prayers were asked for, including issuance of a notice of contempt against the Chairman of the State Bank of India, who headed the Joint Lenders’ Forum comprising of 46 financial creditors of the RCom group.
       Finding of the Court:
       Appellants are guilty of contempt of the Supreme Court.
       Result: Contempt petitions disposed of.

JUDGMENT

R.F. Nariman, J.

1. Three contempt petitions are before us, having been filed by Ericsson India Pvt. Ltd. [“Ericsson”] against Reliance Communications Ltd. [“RCom”], Reliance Telecom Ltd. [“RTL”], and Reliance Infratel Ltd. [“RITL”] [hereinafter, collectively referred to as the “Reliance Companies” or “Companies”].

2. The brief facts necessary to appreciate these matters are as follows:

On 25.01.2013, Ericsson and RCom entered into a Managed Service Agreement whereby Ericsson agreed to provide RCom managed services, i.e., operation, maintenance, and management of RCom’s network. Ericsson raised invoices from time to time in consideration of services provided, and on receiving no payment, ultimately issued three notices, each dated 07.05.2017, under the Insolvency and Bankruptcy Code, 2016 [“Insolvency Code”] to the three Reliance Companies, calling upon them to pay an amount of INR 9.78 crore. These notices were replied to on 19.05.2017, whereby the three Reliance Companies stated that the performance of Ericsson had been inconsistent. After this date, discussions took place between the parties, and an understanding was reached for making payment of the outstanding invoices. However, even this understanding fell through, and on 07.09.2017, Ericsson issued a letter to the three Reliance Companies, terminating the agreement between them, and calling upon them to pay the outstanding amount in full. At this stage, on 08.09.2017, Ericsson filed three applications under Section 9 of the Code as operational creditors. On 15.05.2018, the National Company Law Tribunal [“NCLT”] admitted the aforesaid petitions and appointed three Interim Resolution Professionals on 18.05.2018 to carry out the corporate insolvency resolution process. At this stage, appeals were filed against the NCLT order. The National Company Law Appellate Tribunal [“NCLAT”], by order dated 30.05.2018, stayed the orders dated 15.05.2018 and 18.05.2018 passed by the NCLT, and recorded the statement of counsel appearing on behalf of the Reliance Companies that the matter had been agreed to be settled for a sum of INR 550 crore, which would be paid within 120 days’ time. The order recorded that both the Reliance Companies as well as Ericsson were to file respective affidavits of undertaking in terms of the statements made before the NCLT. These undertakings were so filed in June, 2018. At this stage, the three Reliance Companies filed a writ petition in this Court on 17.07.2018 in which they asked for quashing/closure of the corporate insolvency resolution process in view of settlement of disputes between them and Ericsson. In this writ petition, by an order dated 03.08.2018, this Court heard learned counsel who appeared on behalf of RCom and its group companies, and recorded that the timeline of 120 days shall be strictly adhered to and payment of INR 550 crore is to be made on or before 30.09.2018. Undertakings to this effect were to be filed before this Court by Chairmen of the Companies concerned. The undertakings that were given by the Chairmen of these Companies, pursuant to this order, were dated 09.08.2018 and are a serious bone of contention between the parties in that these undertakings stated that the sum of INR 550 crore will be paid “upon sale of assets of the company”. This being the case, a contempt petition, being Contempt Petition No. 1838 of 2018 [“first contempt petition”], dated 01.10.2018, was moved by Ericsson, in which it was expressly stated that the undertakings were not in terms of this Court’s order and that the Companies aforestated have no intention of abiding by their commitment to pay the necessary sum of money within the time stated. Meanwhile, on 27.09.2018, the Reliance Companies applied for extension of time for payment by 60 days, expressly stating that since sale of other spectrum had not reached a stage of completion, in order to enable the Companies to make payments, they would require this extension. Both the application for ex

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2019 Supreme(SC) 187

Cases Referred (11)