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Ghanshyam Sarda v. Sashikant Jha, Director, M/s JK Jute Mills Co. Ltd. & Ors.

Contempt Petition (Civil) · Neutral citation not assigned (Contempt Petition (Civil) No. 338 of 2014)Decided 18 Nov 2016
Contempt Petition (Civil) No. 338 of 2014
Justice Anil R. Dave · Justice Uday Umesh Lalit

Background

During the pendency of civil appeals concerning J.K. Jute Mills Company Ltd. (which had earlier been disposed of by the Supreme Court's judgment dated 13.11.2014, reported at (2015) 1 SCC 298), the Court had passed an order on 08.05.2014 directing that the Company's capital assets not be disposed of without the Court's permission. The petitioner, Ghanshyam Sarda (an appellant in the underlying appeal), alleged that the Company and its Directors violated this order by selling a company property at Saifganj, Katihar, Bihar (about 1.6 acres) to a third-party transferee via a conveyance deed dated 02.07.2014, after the restraining order was already in force.

Decision Breakdown

The Court found that the Company and several of its Directors/servants (Contemnors Nos. 1, 4, 5, 6, 7 and 8) were indeed guilty of violating the 08.05.2014 order by going ahead with the sale. However, it held that the third-party transferee and its own directors/servants had not violated the order, since they were neither parties to the proceedings nor served with it, and the transferee had already paid full consideration back in April 2013, so the Court declined to invalidate the registration of the sale deed itself. For the violation, the Court imposed a fine of Rs. 2,000 on the Company and Rs. 2,000 each on Contemnors 4 through 8, payable within four weeks, with a default sentence of one month's simple imprisonment for individuals who failed to pay. With this, Contempt Petition Nos. 338/2014 and 375/2014 were closed and disposed of (the judgment also dealt with related Contempt Petitions 24-25/2015, which were dismissed, and 307/2015, on which fresh notice was issued and which was left pending before another bench).

Lesson Learnt

Violating a Supreme Court restraint order on disposing of assets while litigation is pending can expose a company and its officers to contempt liability and fines (or imprisonment in default), even though a bona fide third-party buyer who had no notice of the order and paid in full earlier may still keep the property.

Official source (sci.gov.in)View Judgment (PDF)

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