A judge cannot overturn another judge's finding of contempt without an appeal, ensuring judicial consistency and propriety.

JUDGMENT :

B.R. GAVAI, J.

1. Leave granted.

2. The present appeal takes exception to the judgment and final order dated 3rd July 2024 in CONT. CAS(C) 75/2021 passed by a learned Single Judge of the High Court of Delhi at New Delhi (hereinafter “High Court”) whereby the contempt petition filed by the Appellants came to be dismissed.

3. The facts, in brief, giving rise to the present appeal are as under:

3.1 One company by the name of “RBT Private Ltd.” Carried out the business of dyeing, printing and trading of fabrics. Rajan Chadha, Rajiv Chadha, Sanjay Arora and Sumit Gupta were the shareholders as well as Directors of the company. Rajan Chadha and Rajiv Chadha (Appellants) had a combined shareholding of 51.36% Sanjay Arora (Respondent) had 25% and Sumit Gupta had 23.64%.

3.2 On 21st December 2019, a Memorandum of Understanding (MoU) was made and executed by and between the company, Appellants, Respondent, Sumit Gupta and one Shilpa Gupta. The MoU was entered into for transfer of shareholding in the company and to re-organize the company’s management. In-effect, the Respondent was to purchase the entire shareholding of the Appellants and thereafter, the Respondent was responsible to run the affairs of the company. The MoU also provides that in case of any claim, dispute or difference, the parties shall seek to resolve the same by mutual consultation and negotiation. In the event, the parties are unable to reach a resolution, the dispute is to be settled by arbitration.

3.3 Alleging that the Respondent has failed to discharge his obligation under the MoU inasmuch as the Respondent has started operating another entity from the premises of the company, is siphoning off plant and machinery which was owned by the company and is defaulting in paying instalments of the term loan the Appellants issued a legal notice to resolve the issues.

3.4 On receiving no reply from Respondent, the Appellants issued a notice in terms of Section 11 of Arbitration and Conciliation Act 1996 (hereinafter “Arbitration Act”) on 17th March 2020. Pursuant thereto, the sole arbitrator was appointed by the company.

3.5 The Appellants, thereafter, filed a petition in the High Court under Section 9 of Arbitration Act inter-alia praying for a direction to restrain the Respondent from disposing off/alienating, siphoning off or in any manner creating any 3rd party interest or charge in the assets of the company, to restrain the Respondent from using the premises of the company for business operations of any other entity, etc.

3.6 On 11th June 2020, a learned Single Judge of the High Court disposed of the petition under Section 9 of the Arbitration Act by recording the submissions of the parties and by appointing a new arbitrator.

3.7 On 17th June 2020, before the arbitrator, the Appellants contended that the application filed before the High Court under Section 9 of the Arbitration Act be treated as an application under Section 17 of the Arbitration Act. The Respondent objected to the conversion of the application and its maintainability. The arbitrator, while giving time to the Respondent to file a reply, recorded that the statements made by the counsel for Respondent before the High Court (recorded in the order dated 11th June 2020) will be binding upon the Respondent.

3.8 On 1st July 2020, the arbitrator on a prima facie reading of the terms of the MoU observed that certain amount had to be infused into the loan account of the company by the Respondent and there is nothing on record to show that it has been done. It was further observed that the collateral security for the loan is a house which is jointly owned by the Appellant No. 1 and his wife. It was further observed that if, the EMI qua the loan account is not discharged by the company, the account would become a Non-Performing Asset (NPA) and would then be subject matter of SARFESI¹ [The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest] Act 2002. The arbitrator, therefore,