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2024 Supreme(Bom) 423

IN THE HIGH COURT OF BOMBAY
Manish Pitale, J.
Starlift Services Pvt. Ltd. - Appellant
Versus
Alba Asia Pvt. Ltd. & Ors. - Respondents
Contempt Petition No. 3 of 2021 in Arbitration Petition No. 309 of 2020
Decided On : 26-04-2024

Advocates appeared:
Mr. Sharan Jagtiani, Senior Advocate, a/w. Mr. Nirman Sharma, Mr. Ranjit Shetty, Ms. Priyanka Shetty and Ms. Avina Karnad, i/b. Argus Partners for Petitioner; Mr. Navroz H. Seervai, Senior Counsel, a/w. Mr. Shyam Kapadia, Mr. Farhad Sorabjee, Ms. Shanaya Cyrus Irani and Mr. Siddhesh S. Pradhan, i/b. J. Sagar Associates for respondent Nos.2 to 4 in CONP/3/21.

The court ruled that civil contempt requires clear evidence of willful disobedience, which was not established due to the respondents' financial difficulties.

Headnote:(A) Contempt of Courts Act, 1971 - Section 2(b) and Section 12 - Civil contempt - Allegation of willful disobedience of court order, directing deposit of Rs. 1,21,80,000/- within four weeks - Respondents faced financial difficulties and closed business operations - Self-operating order providing for adverse consequences upon non-compliance was considered - Court found no willful disobedience established based on present circumstances and financial crunch - Petition dismissed - (Para 69).

(B) Corporate governance - Liability of directors regarding contempt - Court ruled that they could be held liable if the company willfully disobeys court directives, but in this case, no willful disobedience was demonstrated - (Paras 44-46, 68).

(C) Arbitration proceedings - Consequences of failing to deposit amount as directed by court leading to loss of right to defend in arbitral proceedings - Court emphasized that prior actions led to execution of the arbitral award - (Paras 60-62).

Facts of the case:
The petitioner alleged contempt against the respondents for failing to deposit a specified amount per court order due to claimed financial hardships, closure of business, and COVID-19 pandemic effects.

Findings of Court:
The court found no clear willful contempt established, dismissing the petition.

Issues: Whether the respondents willfully disobeyed the court order, the applicability of self-operating clauses in contempt proceedings, and the maintainability of contempt claims against directors.

Ratio Decidendi: The court reasoned that financial incapacity and closure resulting from external factors were significant, thus negating claims of willful contempt.

Result: Petition dismissed.

Table of Content
1. petitioner alleges contempt by respondents. (Para 1 , 2)
2. overview of facts surrounding the contempt petition. (Para 3)
3. details of parties and joint venture structure. (Para 4 , 5 , 6)
4. chronology of events prior to contempt petition. (Para 7 , 8 , 10 , 12)
5. details of contempt allegations and legal definitions. (Para 11 , 13 , 15 , 17)
6. discussion of legal standing and defenses. (Para 14 , 18 , 20 , 22)
7. arguments surrounding financial difficulties. (Para 24 , 26 , 28)
8. contentions on the maintainability of contempt jurisdiction. (Para 30 , 32 , 34 , 36)
9. interpretation of contempt laws and analysis. (Para 39 , 41 , 43)
10. judicial analysis of key arguments and evidence. (Para 44 , 46 , 48)
11. court’s conclusion on willful disobedience and implications. (Para 56 , 58 , 60)
12. decision regarding willful disobedience. (Para 62)
13. final dismissal of the contempt petition. (Para 68 , 69)

JUDGMENT

Manish Pitale, J. - The petitioner-company has alleged in this petition that the respondents have committed contempt of this Court, by willfully disobeying specific direction issued by this Court in the order dated 17.02.2020 passed in Arbitration Petition (Lodging) No.7/2020 (later numbered as Arbitration Petition No.309/2020). The petitioner seeks imposition of maximum punishment on respondent Nos.2 to 4 as Directors and persons in-charge of the affairs of the respondent No.1-company. The respondent Nos.2 to 4 filed their affidavits in reply in the contempt petition. It is relevant to note that at pre-admission stage, respondent No.4 had filed an affidavit in reply on behalf of respondent No.1-company.

2. After admission of this contempt petition, the notice issued to respondent No.1-company, was returned with the remark 'left'. The petitioner contends that in such circumstances, the present petition can be heard even against the respondent No.1-company.

3. Before adverting to the rival submissions, it would be appropriate to briefly refer to the chronology of events leading to filing of the present contempt petition.

4. The respondent No.1-company i.e. Alba Asia Private Limited was incorporated on 18.11.2008 as a 50-50 joint venture between Louis Dreyfus Armateurs SAS (LDA) and Starport Logistics Limited (earlier called ABG Ports Limited). The said Starport Logistics Limited is a wholly owned subsidiary of Starlog Enterprises Limited, which is the parent company of the petitioner herein. It is stated on behalf of the respondents and not denied by the petitioner that Starlog Enterprises Limited has 84.99% shareholding in the petitioner-company i.e. Starlift Services Private Limited.

5. On 25.10.2017, the petitioner and respondent No.1 entered into a contract for hiring Mobile Harbour Crane (MHC) from December 2017 to February 2019, which was subsequently extended for a further period of one year. The respondents have placed much emphasis on the fact that at the said stage when the aforesaid contract was executed in the year 2017, the promoter of Starport Logistics Limited i.e. Mr. Saket Agarwal was also the director of respondent No.1-company alongwith one Mr. Ravishankar Gopalan, with respondent Nos.2 and 3 i.e. Gildas Patrick Michel Maire and Antoine Louis Henri Person, both French nationals, being the other two directors. It is also a matter of record that during the period between 2018 to 2019, the said Mr. Saket Agarwal proposed the name of respondent No.4 i.e. Mr. Anurabh Tripathi as director of respondent No.1-company, but the said proposal was rejected by respondent No.2. However, respondent No.4 continued to provide assistance and consultation to respondent No.1-company.

6. On 18.02.2019, the said Mr. Saket Agarwal and Mr. Ravishankar Gopalan resigned as directors of respondent No.1-company, with the result that only respondent Nos.2 and 3 were left as the directors.

7. It is the case of the petitioner that till October 2019, the hire charges for MHC were paid every month by respondent No.1, on the basis

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