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Suman Chadha v. Central Bank of India

Special Leave Petition (Civil) · 2021 INSC 386Decided 9 Aug 2021
Special Leave Petition (Civil) No. 28592 of 2018
Justice Indira Banerjee · Justice V. Ramasubramanian

Background

The petitioners, a husband and wife who were directors of a company that had defaulted on a bank loan, gave a written undertaking to the Delhi High Court to deposit Rs. 7 crores in instalments in exchange for the Bank not disturbing their possession of mortgaged properties. They later issued post-dated cheques that bounced, and when questioned, falsely claimed their own debtors had failed to pay them: a claim later exposed as fabricated by a Serious Fraud Investigation Office probe, which found the "debtors" were shell entities the petitioners themselves controlled. The High Court held them guilty of contempt of court and sentenced them to three months' simple imprisonment plus a fine; the Division Bench upheld this on appeal.

Decision Breakdown

The Supreme Court held that a wilful breach of an undertaking given to a court amounts to contempt where it is shown the undertaking was given in bad faith to secure a benefit (here, protection from losing possession) and not honoured. The Court examined the petitioners' conduct after giving the undertaking, issuing cheques post-dated beyond the agreed deadline, letting them bounce, giving a false explanation involving fictitious debtors, and being exposed by the SFIO report, and found this showed the undertaking was never made in good faith but was intended to "hoodwink" the Court. The Court upheld the finding of contempt but, considering that the petitioners had already spent 11 days in custody, had paid the fine, and that the mortgaged properties had since been sold with the Bank regaining possession, reduced the sentence to the period already served rather than the full three months.

Lesson Learnt

Breaking a solemn undertaking given to a court, especially where it was used to obtain a tactical benefit like protection from dispossession, can amount to contempt of court, independent of any separate civil remedies available to the other side; but courts retain discretion to moderate the punishment once its purpose (compliance, or accountability) has substantially been achieved.

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

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