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State Bank of India & Ors. vs Dr. Vijay Mallya

SLP(C) · 2022 INSC 700Decided 11 Jul 2022
SLP(C) Nos. 6828-6831 of 2016
Uday Umesh Lalit · S. Ravindra Bhat · Pamidighantam Sri Narasimha

Background

In an earlier judgment dated 9 May 2017, the Supreme Court had already found businessman Dr. Vijay Mallya guilty of contempt of court on two counts, disobeying a court direction to disclose full details of his assets, and violating Karnataka High Court restraint orders by transferring US$ 40 million received from Diageo Plc to trusts benefitting his three children, in defiance of recovery proceedings brought by a consortium of banks led by SBI. Mallya, who had already left India and was contesting extradition proceedings in the UK, never appeared in person despite repeated directions and never filed any reply or expressed remorse; the matter was repeatedly adjourned over the years pending his UK extradition proceedings, with a court-appointed Amicus Curiae ultimately assisting since Mallya's own counsel could not make submissions on his behalf.

Decision Breakdown

The Supreme Court held that punishing a contemnor is not enough by itself: the "purging" of contempt, especially where a contemnor shows no remorse, may require the Court to also strip away any advantage gained through the contumacious conduct, including by declaring the underlying transactions void. It sentenced Mallya to four months' imprisonment and a fine of Rs. 2,000 (with two additional months if the fine was unpaid), directed the Ministry of Home Affairs to secure his presence to serve the sentence, and separately declared the US$ 40 million transfers to his children's trusts void and inoperative, directing Mallya and the beneficiaries to deposit that amount with 8% annual interest to the Recovery Officer within four weeks for use in the banks' recovery proceedings, failing which forcible recovery (including via forensic audit) could follow.

Lesson Learnt

Courts can go beyond merely punishing a person found guilty of contempt. They can also nullify any financial benefit or transaction obtained through the contemptuous act itself, ensuring that violating a court's restraint order does not let a person keep the fruits of that violation.

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

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