Chithra Woods Manors Welfare Assn. v. Shaji Augustine - Any person who misuses the process of the Court with ulterior motives cannot be said to be a person having approached the Court with clean hands. A person who tries to tarnish the process of litigation to the extent of misguiding and misleading the proceedings before the Court resulting in passing of order(s) which are to his benefit at the cost of the loss of dignity, leading to shrinkage of the faith of the common man in the judicial process cannot be permitted.

 SCI (2025.04.24) in Chithra Woods Manors Welfare Assn. v. Shaji Augustine  [2025 INSC 567, Contempt Petition (Civil) No. 712 Oo 2023 in SLP (Civil) No. 17433 Oo 2021] held that.

• The power and jurisdiction of this Court to initiate and punish for its contempt has not been disputed. It is well settled by now and it is apparent from the provisions of the Contempt of Court Act that Civil contempt means wilful  disobedience of judgment, decree, or direction, order, writ or other process of the Court or wilful breach of an undertaking given to the Court.

• Civil contempt, as is apparent from Section 2(b) of the Contempt of Court Act 1971, means a wilful disobedience of any judgment, direction or order passed by the Court.

• Any person who misuses the process of the Court with ulterior motives cannot be said to be a person having approached the Court with clean hands. A person who tries to tarnish the process of litigation to the extent of misguiding and misleading the proceedings before the Court resulting in passing of order(s) which are to his benefit at the cost of the loss of dignity, leading to shrinkage of the faith of the common man in the judicial process cannot be permitted.

• This is certainly an extraordinary power which must be sparingly exercised but where the public interest demands it, the court will not shrink from exercising it and imposing punishment even by way of imprisonment, in cases where a mere fine may not be adequate.

• This Court with reference to Section 2 & 12 of Contempt of Courts Act, 1971 held that the jurisdiction so conferred is to be exercised after having come to the conclusion and satisfaction with regard to the commission of contempt.

• A party, misguiding the Court to pass an order which was never intended to be complied with, would constitute an act of overawing the due process of law and, thus, commit contempt of Court.

• The Courts ordinarily take lenient approach in a case of some delay in compliance of the orders, unless the same is deliberate and willful, on confronting the conduct of the contemnor that strikes the very heart of judicial authority.

Excerpts of the Order;

# 1. The instant Contempt Petition (Civil) No. 712 of 2023 (hereinafter referred to as “instant Petition”) in SLP (C) No. 17433 of 2021 (hereinafter referred to as “main Petition”) was filed during its pendency by M/s Chithra Woods Manors Welfare Association, being the Respondent No. 01 therein (hereinafter referred to as “Petitioner Association”), alleging non-payment of arrears of use and occupation charges for period between 20.09.2021 and 31.11.2022 in six monthly instalments beginning 31.12.2022, as directed by this Court vide Order dated 07.11.2022 in the main Petition.

# 2. This petition was then tagged along with the main Petition vide Order dated 24.02.2023 and eventually, owing to the said non-payment of arrears, the main Petition was disposed of as this Court observed to not entertain theprayer of Mr Shaji Augustine, the Petitioner therein

(hereinafter referred to as “Respondent-Contemnor”) but the proceedings in instant Petition sustained. 

# 3. Facts forming the backdrop of the instant Petition are that the Petitioner Association is owner of the decree scheduled building, consisting of 96 furnished studio apartments, at Munnar, Kerala (hereinafter referred to as the “said roperty”). An agreement was entered between the  Petitioner Association and Respondent-Contemnor on 26.01.2014, permitting the latter to occupy and use the said Property for a period of 10 years as against payment of licence fees of INR 12 Lakhs per month (hereinafter referred to as the “said Agreement).

# 4. Within a short period of entering into the said Agreement, Respondent-Contemnor defaulted in payment of the license fees. On persistent default, Petitioner Association was constrained to institute OS No.30 of 2015 before the Sub Court at Thodupuzha, Kerala for realization of the arrears and other reliefs. As there was an arbitrationclause in the said Agreement and on consent of the parties herein, the dispute was referred to a Sole Arbitrator.

# 5. Before the Sole Arbitrator, the Petitioner Association moved I.A. No. 01 of 2016 under Section 17 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as “A&C Act”), seeking direction to the Respondent- Contemnor to deposit INR 1,65,73,459/- (Rupees One crore Sixty-Five Lakhs Seventy-Three Thousand Four Hundred Fifty-Nine only) during pendency of the proceedings. The same was partially allowed vide Order dated 23.06.2016 with direction to deposit INR 1,36,49,439/- (Rupees One crore Thirty-Six Lakhs Forty- Nine Thousand Four Hundred Thirty-Nine only) and per undertaking of the Respondent-Contemnor, payment of INR 12 lakhs per mensem for month of June 2016 onwards, on or before the 10th of the succeeding month, pending disposal of the proceedings.

# 6. Both Respondent-Contemnor and Petitioner Association moved in appeal under Section 37 of the A&C Act before the District Court at Ernakulam, Kerala. A Common Order dated 21.01.2017 was passed, staying the proceedings before the Sole Arbitrator with reiteration of direction to Respondent-Contemnor to pay arrears at the rate of INR 12 Lakhs per month with effect from 08.09.2016 with a further order to continue to pay INR 12 Lakhs per month towards monthly license fee.

# 7. This common order was challenged by the Respondent-Contemnor before the High Court of Kerala in O.P. (C) No 552 of 2017. The matter was referred for mediation at the request of the parties. The said mediation proceedings, lead to a Compromise dated 03.04.2017 (hereinafter referred to as the “Settlement Agreement”), Petitioner Association agreed to reduce the monthly license fees to INR 8 Lakhs per month. Arrears, as claimed before the Sole Arbitrator, were also reduced from INR 1,65,73,439/- to INR 75 Lakhs. Moreover, it was specifically recorded that the settlement entered between the parties would form part of the judgment. There was a specific clause that in case of default by any of the parties to any of the terms of the agreement the other would be entitled to proceed against the other party. The parties resolved their disputes, and the terms of settlement arrived at between them were accepted by the High Court of Kerala and were incorporated in the Order dated 11.04.2017.

# 8. On default on the part of the Respondent-Contemnor in making payment through a promissory note, as per the Settlement Agreement, Petitioner Association preferred Execution Petition No. 58 of 2020 on 11.03.2020, no money was paid by the Respondent-Contemnor with effect from the month of July 2018. The Respondent-Contemnor was unsuccessful before the District Court in EA No. 14 of 2021 in its challenge to the maintainability of the execution petition. The Execution Court passed an Order dated 23.03.2021, giving an instalment facility to the Respondent-Contemnor for payments of its arrears, with the first being due on 01.06.2021 and the last being 01.09.2021. Furthermore, the amount of arrears being undisputed, and nothing having been paid, the Execution Court ordered delivery of the said Property. The Respondent-Contemnor challenged the order of the Execution Court before the High Court of Kerala, which was dismissed vide Judgment dated 20.09.2021.

# 9. It is at this stage that the respondent preferred the main Petition before this Court challenging the Judgment dated 20.09.2021. Notice was issued vide Order dated 12.11.2021 and subsequently, status quo was ordered vide Order dated 04.02.2022 vis-à-vis the said Property. The matter ultimately came for consideration on 07.11.2022 when following Order was passed:- “List on a non-miscellaneous day in the month of March, 2023. In the meanwhile, as an interim measure, we are inclined to direct that the petitioner will pay Rs. 12

lakhs per month to the respondent as use and occupation charges w.e.f. 20.09.2021 (the date of the impugned judgment). As prayed on behalf of the petitioner, the arrears @ Rs. 12 lakhs per month from 20.09.2021 till 31.11.2022, would be paid in six monthly instalments beginning 31.12.2022. The petitioner would also continue to make payment of Rs. 12 lakhs per month in the future by the 10th day of each succeeding calendar month. The payment would be subject to the outcome of the present Special Leave Petition.”

# 10. A perusal of the above would show that a direction was issued to the Respondent-Contemnor to pay arrears for the period specified therein in six monthly instalments beginning from 31.12.2022, totalling to INR 172 Lakhs, at  the rate of INR 12 Lakhs per month, and being INR 28.60 Lakhs per instalment.

# 11. Pursuant to the Order dated 07.11.2022, the Respondent- Contemnor sent an e-mail to the Petitioner Association containing a letter dated 17.11.2022 seeking the concerned account details of the Petitioner Association for the Respondent-Contemnor to transfer the arrears enabling him to affect compliance with Order dated 07.11.2022 passed by this Court. The said details were provided by the Petitioner Association on 14.12.2022 in response to the aforesaid e-mail. Despite getting the required information, no amount was paid to the Petitioner Association and yet, the Respondent-Contemnor continued to enjoy and occupy the said Property. It is apparent that the intention on the part of the Respondent- Contemnor was not to do away with the possession of the said Property and to hold on to it owing to his act of moving the main Petition for challenging the handing over of the possession of the said Property.

# 12. Petitioner Association asserts that deliberate action on behalf of the respondent in not complying with the direction issued by this Court on 17.11.2022 with continuous default on his part amounts to civil contempt which is deliberate and intentional disobedience of the order of this Court.

# 13. Subsequently, on 01.12.2023, when both the main Petition and instant Petition were taken up for hearing following order was passed:-

• “The learned counsel appearing for the petitioner states that the petitioner has already vacated the premises subject matter of this Special Leave Petition. We find that the order dated 7th November, 2022 directing the petitioner to deposit money has not been complied with. The petitioner has expressed inability to pay the money. The jurisdiction of this Court under Article 136 of the Constitution of India is always discretionary. Considering the conduct of the petitioner of not paying a single farthing after 7th November, 2022, we decline to entertain this Special Leave Petition and the same is accordingly dismissed. However, the question of law is kept open to be considered in an appropriate case. Pending application also stand disposed of.

• CONMT. PET. (C) No. 712/2023 in SLP(C) No. 17433/2021. List on 22nd January, 2024.”

# 14. With the main Petition having been dismissed, the instant Petition continued to survive and was taken up for hearing on various dates. Respondent-Contemnor was called upon by this Court on 15.03.2024 to file an affidavit giving details of all his movable and immovable assets as also that of his immediate family members along with the necessary documents. This was in light of the statement of the counsel of the Respondent-Contemnor that he is not

in a position to deposit any amount. 

# 15. After filing of the affidavit by the Respondent-Contemnorand on perusal thereof this Court on 12.09.2024 found the Respondent-Contemnor, who was appearing through video conferencing, of having committed wilful breach of the directions contained in the Order dated 07.11.2022. The Respondent-Contemnor was ordered to be heard on the said charge as no amount had been paid by him and was directed to be personally present in Court. The

Respondent-Contemnor subsequently appeared and an opportunity was given to comply with the Order while being heard on charge. Owing to his non-intention to comply, the case was kept reserved for orders. 

# 16. Stand of the Respondent-Contemnor in the affidavit which has been filed is that the compliance of the Order dated 07.11.2022 passed by this Court is beyond his financial and physical capabilities. It is thus, neither deliberate nor an intentional non-compliance of the order and is only on account of his penury. He has, thus, prayed for dropping of the current contempt proceedings.

# 17. Counsel for the Petitioner Association, on the other hand, has asserted that the conduct of the Respondent- Contemnor from the very beginning was clearly indicative of an attempt on the part of the Respondent-Contemnor to hold on to the possession of the said Property. Despite the Settlement Agreement, which has attained finality by virtue of not being challenged, to retain the possession of the said Property, Respondent-Contemnor has constantly litigated across forums. Such an act on part of the Respondent-Contemnor clearly showed that without making payment of the amount due to the petitioners, he was reaping the fruits of the scheduled property in violation of the terms of settlement.

# 18. Had it not been a viable preposition, the possession could have been easily handed over by the Respondent- Contemnor. Having taken benefit of the said Property, Respondent-Contemnor cannot be now permitted to take the plea of penury. Rather, it is an intentional noncompliance of the directions issued by this Court even after partial monetary benefit had been conferred upon him vide Order dated 07.11.2022. Even till date no payment whatsoever has been made which clearly reflects the malafide of the Respondent-Contemnor. A reference is also made to the Order dated 04.02.2022 when status quo was ordered by this Court in relation to the property in question to be maintained. Prayer has thus been made for punishing the Respondent-Contemnor for having committed contempt of this Court’s Order dated 07.11.2022.

# 19. Having considered the submissions made by the counsels for the parties, we are of the considered view that the Respondent-Contemnor has deliberately and with malafide intention, not only mislead and misused the process of the courts but has also intentionally violated the order passed by this Court on 07.11.2022 by not making the payment as directed therein.

# 20. At the prospect of reiteration of the factual matrix, the conduct of the Respondent-Contemnor since the Settlement Agreement reflects his patent intent to retain the said Property and this indicates that the business proposition was not only a viable one but was yielding profits. No person with a modest business acumen would  continue with a loss-causing endeavour. Respondent- Contemnor has nowhere reflected the receipts from the business being undertaken in the said Property.

# 21. Subsequently, he even sought time from the Execution Court, but failed to comply, prompting an order for delivery of possession of the said Property. This, he then challenged through Revision Petition before the High Court of Kerala and ultimately before this Court through the main Petition.

# 22. It was on his insistence that this Court ordered status quo vide Order dated 04.02.2022. However, he neither paid the dues nor complied with the subsequent Order dated 07.11.2022 mandating payment of INR 12 lakhs per month from 20.09.2021 and arrears in instalments.

# 23. The e-mail dated 17.11.2022, which was addressed to the Petitioner Association by the Respondent-Contemnor, seeking account details for the concerned amount to be transferred, was responded accordingly by the Petitioner Association vide e-mail dated 26.11.2022. Despite all this, not even a rupee was credited to the account of the Petitioner Association.

# 24. Faced with this situation, Petitioner Association had no option but to file the instant Petition before this Court leading to issuance of notice on 24.02.2023 along with an opportunity to the Respondent-Contemnor to remedy the default. After various dates, the matter ultimately came for hearing on 01.12.2023, when, owing to non-compliance of Order dated 07.11.2022 for depositing money, the main Petition was dismissed and the instant Petition survived. 

# 25. It is only on 15.03.2024 that for the first time counsel for the Respondent-Contemnor stated that he was not in a position to deposit any amount, whereupon this Court called for details of his immovable and movable assets and that of his immediate family members, along with necessary documents. Physical presence of the Respondent-Contemnor was also ordered in Court on the next date of hearing.

# 26. Respondent-Contemnor appeared through video conference in Court on 12.07.2024 when the affidavit which was filed by the respondent-contemnor was considered. On perusal thereof, Court found the Respondent-Contemnor having committed a wilful breach of the directions contained in the order dated 07.11.2022. He was, therefore, called upon to face the said charge and with an intention to give him an opportunity of being  heard. The matter was listed for hearing with a direction to the contemnor to personally remain present before the Court. The contemnor was heard in person in Court and  was again given an opportunity to comply with the order of which he had committed contempt i.e. non-payment of the amount and the arrears. The contemnor did not express any remorse nor showed any intention to comply with the order passed by this Court rather asserted that he was not in a position to make any payment. It is in these circumstances that the matter is being considered.

# 27. The e-mail dated 17.11.2022 intrinsically reflects financial capability and liquidity at hands of the Respondent- Contemnor. Had the Respondent-Contemnor been in dire financial difficulty, the said communication would not have come to the fore. Besides, had it been that the Respondent-Contemnor was unable to comply with the Order dated 07.11.2022 he should have moved this Court for modification or withdrawal of the order.

# 28. All throughout, the Respondent-Contemnor had been in possession of the said Property and had been utilising the income generated from running of the said resort. Acceptance on the part of the Respondent-Contemnor with regard to the viability of the project is apparent from the Order dated 07.11.2022 and his conduct. This would not permit the Respondent-Contemnor to now turn around and state that he is unable to make payment of not only the monthly dues for use and occupation charges after passing of the Order dated 07.11.2022 but also the arrears as per which terms and conditions were fixed by this Court in accordance with the prayer made by him. Non- fulfilment of the mandate and direction of this Court which were at the request of the Respondent-Contemnor himself reflects the intent on the part of the Respondent- Contemnor to not to comply with the order rather to violate with the same with impunity. The conduct clearly reflects that the intention of the Respondent-Contemnor was to gain the benefit by running the resort in the subject property without paying the current liability, what to say of the arrears.

# 29. Moreover, the amount which has been earned from the resort being run by the Respondent-Contemnor has not been accounted for. It can therefore easily be said that there has been intentional and deliberate non-compliance on the part of the Respondent-Contemnor of the order passed by this Court, contempt of which stands committed, but on getting an interim order of continuing in possession usurped the earnings instead of paying off the dues.

# 30. The malafide is therefore writ large and reflect the misuse of the process of the Court. After seeking an order from this Court where benefit has been conferred on the basis of the submissions of the Respondent-Contemnor, not complying therewith amounts to contempt of Court. 

# 31. The power and jurisdiction of this Court to initiate and punish for its contempt has not been disputed. It is well settled by now and it is apparent from the provisions of the Contempt of Court Act that Civil contempt means wilful  disobedience of judgment, decree, or direction, order, writ or other process of the Court or wilful breach of an undertaking given to the Court.

# 32. Civil contempt, as is apparent from Section 2(b) of the Contempt of Court Act 1971, means a wilful disobedience of any judgment, direction or order passed by the Court. All through, as has been detailed above, the intention on the part of the Respondent-Contemnor was to use the judicial proceedings for his advantage taking undue benefit at the peril and cost of wrong assertions and submissions put forth before the Court which would amount to misleading the Court into believing the bonafide at the hands of the Respondent-Contemnor. It would amount to an attempt to exploit the procedural process of Court to outreach and manoeuvre it resulting in abuse of law and legal proceedings.

# 33. Any person who misuses the process of the Court with ulterior motives cannot be said to be a person having approached the Court with clean hands. A person who tries to tarnish the process of litigation to the extent of misguiding and misleading the proceedings before the Court resulting in passing of order(s) which are to his benefit at the cost of the loss of dignity, leading to shrinkage of the faith of the common man in the judicial process cannot be permitted.

# 34. This Court, in Hira Lal Dixit v. State of Uttar Pradesh [(1954) 2 SCC 325] in paras 9 and 10 held as follows:

• “9. It should no doubt be constantly borne in mind that the summary jurisdiction exercised by the superior courts in punishing contempt of their authority exists for the purpose of preventing interference with the course of justice and for maintaining the authority of law as is administered in the court and thereby affording protection to public interest in the purity of the administration of justice. This is certainly an extraordinary power which must be sparingly exercised but where the public interest demands it, the court will not shrink from exercising it and imposing punishment even by way of imprisonment, in cases where a mere fine may not be adequate.

• 10. After anxious consideration we have come to the conclusion that in all the circumstances of this case it is a fit case where the power of the Court should be exercised and that it is necessary to impose the punishment of imprisonment. People must know that they cannot with impunity hinder or obstruct or attempt to hinder or obstruct the due course of administration of justice.”

# 35. Further, in Bank of India v. Vijay Transport And Others [(2000) 8 SCC 512], this Court with reference to Section 2 & 12 of Contempt of Courts Act, 1971 held that the jurisdiction so conferred is to be exercised after having come to the conclusion and satisfaction with regard to the commission of contempt. This Court further went on to hold that the said satisfaction can be derived by the Court with regard to the commission of the contempt from the circumstances of the case. The conduct of the party who/which is facing the charge of contempt, not only after the issuance of the  notice but prior thereto, could also be taken into Consideration.

# 36. A party, misguiding the Court to pass an order which was never intended to be complied with, would constitute an act of overawing the due process of law and, thus, commit contempt of Court. In the instant case, the opportunity having been availed, time having been sought and granted by the Court further reflects the intent on the part of the Respondent-Contemnor to discard and tarnish the judicial process by polluting it. Disobedience of the order of the Court in such circumstances would be the only result and

thus, civil contempt.

# 37. The pure stream of justice cannot be allowed to be polluted at all. Reference at this stage needs to be made to the latest decision of this Court in Sitaram Enterprises v. Prithviraj Vardichand Jain [2024 SCC OnLine SC 2493] wherein in para 1 to 3 it has been held as follows:-

• “Disregarding a Court's order may seem bold, but the shadows of its consequences are long and cold.” 

• 1. Contempt of court is a serious legal infraction that strikes at the very soul of justice and the sanctity of legal proceedings. It goes beyond from mere defiance of a Court's authority, but also denotes a profound challenge to the principles that underpin the rule of law. At its core, it is a profound disavowal of the respect and adherence to the judicial process, posing a concerning threat to integrity of judicial system. When a party engages in contempt, it does more than simply refusing to comply with a Court's order. By failing to adhere to judicial directives, a contemnor not only disrespects the specific order, but also directly questions the Court's ability to uphold the rule of law. It erodes the public confidence in the judicial system and it's ability to deliver justice impartially and effectively. Therefore, power to punish for Contempt of Court's order is vital to safeguard the authority and efficiency of the judicial system. By addressing and penalizing contemptuous conduct, the legal system reinforces its own legitimacy and ensures that judicial orders and proceedings are taken seriously. This deterrent effect helps to maintain the rule of law and reinforces public's faith in the judicial process, ensuring that Courts can function effectively without undue interference or disrespect. 

• 2. Contempt powers are integral to maintaining the sanctity of judicial proceedings. The ability to address contempt ensures that the authority of the court is respected and that the administration of justice is not hampered by willful disobedience. In the said context, the power of this Court to punish for contempt is a cornerstone of its authority, integral to the administration of justice and the maintenance of its own dignity. Enshrined in Article 129 of the Constitution of India, this power is essential for upholding the rule of law and ensuring due compliance by addressing actions that undermine its authority, obstruct its proceedings, or diminish the public trust and confidence in the judicial system.

• 3. The Courts ordinarily take lenient approach in a case of some delay in compliance of the orders, unless the same is deliberate and willful, on confronting the conduct of the contemnor that strikes the very heart of judicial authority. Undoubtedly, this appalling breach of legal decorum has in its face challenged the sanctity of the orders passed by this Court and hence we are constrained to examine Contemnor/tenant's willful and deliberate act of non-compliance of the order and also the undertaking furnished by him as directed.”

# 38. The above principles and the observations, as made by this Court, would fully apply to the case at hand where, from the very beginning till the very end the Respondent- Contemnor has been taking the Court for a ride. The misuse of the process of Court with an intent to tarnish the image of judiciary, threatening the integrity, and the efficiency of the judicial system cannot be allowed to be overlooked and ignored in the garb of non-fulfilment of the directions because of now said to be faced financial constraints.

# 39. The Respondent-Contemnor cannot be allowed to go scot free after having taken this Court at a stage where his  conduct leaves this Court with no option but to take strict action and to punish him for the contempt committed by him, i.e., non-compliance of the directions issued by this Court vide Order dated 07.11.2022.

# 40. This case, in our opinion, would not be one where mere imposition of fine would suffice. In the given facts and circumstances of the present case, we are convinced that the Respondent-Contemnor is liable to be punished for the contumacious conduct.

# 41. We, in the above facts and circumstances, hold Shaji Augustine-Respondent, guilty of Civil Contempt and impose punishment of Simple Imprisonment for three months along with fine of INR 20,000/- to be deposited in two weeks, and in case of default, further Simple Imprisonment for one month.

# 42. Giving one more opportunity to the Respondent- Contemnor to purge the contempt, 30 days time is granted to him to comply with the Order dated 07.11.2022 and submit compliance report to the Registrar Judicial of this Court a week thereafter. The punishment, as aforesaid, would come into effect in case the directions as contained in the Order dated 07.11.2022 are not complied with, within 30 days of the pronouncement of this judgment. The contempt proceedings are disposed of.

# 43. Pending application(s), if any, also stand disposed of.

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JSW Steel Ltd. Vs. Pratishtha Thakur Haritwal and Ors. - No doubt that even if any stakeholder is not a party to the proceedings before the NCLT and if such stakeholder does not raise his claim before the Interim Resolution Professional/Resolution Professional, the Resolution Plan as approved by the NCLT would still be binding on him.

  SCI (2025.03.18) in JSW Steel Ltd. Vs. Pratishtha Thakur Haritwal and Ors. [(2025) ibclaw.in 106 SC, 2025 INSC 401, Contempt Petition (Civil) No. 629 of 2023 in Writ Petition (Civil) No. 1177 of 2020] held that;

• All the dues of any of the stakeholders including the statutory dues owed to the Central Government, any State Government or any local authority, which were not part of the Resolution Plan, stood extinguished from the date on which the Resolution Plan stood approved.

• All claims must be submitted to and decided by the resolution professional so that a prospective resolution applicant knows exactly what has to be paid in order that it may then take over and run the business of the corporate debtor. This the successful resolution applicant does on a fresh slate, as has been pointed out by us hereinabove.

• It has also been held that all claims must be submitted to and decided by the RP so that a prospective resolution applicant knows exactly what has to be paid in order that it may then take over and run the business of the corporate debtor.

• No doubt that even if any stakeholder is not a party to the proceedings before the NCLT and if such stakeholder does not raise his claim before the Interim Resolution Professional/Resolution Professional, the Resolution Plan as approved by the NCLT would still be binding on him. 

Excerpts of the Order;

# 1. For the reasons stated, I.A. No. 21914 of 2024 for amendment of cause title is allowed. Cause Title is amended accordingly.

# 2. This Contempt Petition is filed by the Petitioner Company-M/s JSW Ispat Special Products Limited (now M/s JSW Steel Limited) under Article 129 read with Article 142 of the Constitution of India and Section 2(b) of the Contempt of Courts Act, 1971 alleging willful disobedience of the judgment dated 13th April 2021 passed by this court in Civil Appeal No. 8129 of 2019 and other connected matters titled as “Ghanshyam Mishra and Sons Private Limited v. Edelweiss Asset Reconstruction Company Limited and others” by the alleged Contemnors/Respondents.

# 3. Shorn of unnecessary details, the facts which led to the filing of the present Contempt Petition are:

3.1. Insolvency proceedings were initiated against the erstwhile Company- M/s Monnet Ispat and Energy Ltd.1 as per the Insolvency and Bankruptcy Code, 20162. After the Insolvency process was initiated, the Interim Resolution Professional3 was appointed as per the Code, and it was determined that the total debt upon the erstwhile Company was much more than its liquidation value. As per the regulations, an advertisement inviting claims against the erstwhile Company, which were to be submitted to the IRP was issued on 27th July 2017 and the last date for submission of the claim was 7th August 2017. After the claims process was over, the announcement for submission of Resolution Plans by companies was issued. The Petitioner Company was declared as the Successful Resolution Applicant4 after voting by the Committee of Creditors5, and the Resolution Plan was submitted on 12th December 2017. The National Company Law Tribunal, Mumbai Bench6, approved the Resolution Plan vide order dated 24th July 2018 and pursuant to the same, the management of the erstwhile Company was taken over by the Petitioner Company.

3.2. Thereafter, various demand notices were raised upon the Petitioner Company by the Odisha Mining Corporation Ltd. for recovery of Sales Tax against iron ore purchased by the erstwhile Company. Aggrieved by the demand notices, claiming that the dues were extinguished as per the Code because they were raised for a period before the management of the erstwhile Company was taken over by the Petitioner Company, a Writ Petition (Civil) No. 1177 of 2020 was filed before this Court.

3.3. Various similar matters were tagged together by this Court, including the aforesaid Writ Petition. Vide a common judgment in the case of Ghanshyam Mishra (supra), it was held that any and all creditors, including the Central Government, State Government or any local authority are bound by the Resolution Plan as approved by the Adjudicating Authority and all claims which are not a part of the Resolution Plan stand extinguished.

3.4. It appears that thereafter the alleged Contemnor No. 3- Assistant Commissioner, Commercial Taxes, Division-II, Raipur, Chhattisgarh issued a notice dated 15th September 2021. It was stated that the Petitioner Company being a nationalized dealer had not submitted the return or statement for the period from 1st April 2017 to 30th June 2017 and the Petitioner Company was directed to appear in person or through an authorized representative for assessment proceedings before the office of the Divisional Deputy Commissioner, Commercial Taxes, Division-II and to furnish the books of accounts and documents relating to the above period and to show cause as to why the Petitioner Company should not be assessed with a penalty. The Petitioner Company sent a reply dated 8th October 2021 to the alleged Contemnor No. 3 stating that the erstwhile Company has undergone a Corporate Insolvency Resolution Process7 and in light of the judgment of this Court in the case of Ghanshyam Mishra (supra), no dues or liabilities of the erstwhile Company which pertain to the period prior to the taking over of the erstwhile Company by the Petitioner Company and which are not part of the Resolution Plan are not required to be paid as the dues or liabilities stand permanently extinguished. A request was therefore made to withdraw the notice dated 15th September 2021.

3.5. The Petitioner Company thereafter filed a Miscellaneous Application being M.A. No. 259 of 2022 in Writ Petition (Civil) No. 1177 of 2020 seeking clarification of directions given in paragraph 95 of the judgment given by this Court in the case of Ghanshyam Mishra (supra). The same was dismissed as withdrawn with a liberty to file a Contempt Petition by an order dated 2nd May 2022.

3.6. On 13th May 2022, the Petitioner Company issued a letter to the alleged Contemnor No. 1- Assistant Commissioner, Commercial Tax Department, Raipur-II, Raipur, Chhattisgarh, informing him about the order of this Court dated 2nd May 2022 and requesting him that the law laid down by this Court in the case of Ghanshyam Mishra (supra) be adhered to, and any failure to do the same would result in the Petitioner Company initiating contempt proceedings.

3.7. It appears that, in spite of the aforesaid letter by the Petitioner Company, the alleged Contemnor No. 1 went ahead and issued a demand notice dated 17th May 2022 wherein it was stated that since no one had appeared representing the Petitioner Company to get the tax assessment done, an ex parte decision must be taken. The decision resulted in three separate demands under the relevant provisions of Central Sales Tax Act, 1956, Chhattisgarh Value Added Tax Act, 2005 and Entry Tax Act, 1976 for the outstanding amount of Central Tax- Rs. 1,08,25,666/, State Tax- Rs. 2,66,42,094/-, and Entry Tax- Rs. 61,51,689/- for the period between 1st April 2017 to 30th June 2017 and the Petitioner Company was directed to pay the amounts within 30 days of receipt of the demand notice. A reply dated 10th October 2022 was given by the Petitioner Company stating that it is not liable to pay any dues as the period for which the demand is raised is of a period before the approval of the Resolution Plan by the Adjudicating Authority. It was therefore requested that the demand notices be withdrawn in view of the judgment of this Court given in Ghanshyam Mishra (supra).

3.8. It can further be seen from the record that the alleged Contemnor No. 2- Additional Revenue Collector, Commercial Tax Office, Circle-7, Raipur, Government of Chhattisgarh, issued another demand notice to the Petitioner Company dated 9th December 2022 under Section 146 of the Chhattisgarh Land Revenue Code, 1959 containing three separate demands of Central Tax, Sales Tax and Entry Tax for the same amounts as the demand notice dated 17th May 2022 and the Petitioner Company was again directed to pay the outstanding dues within 7 days.

3.9. Being aggrieved by the actions of the alleged contemnors which according to the Petitioner Company were in willful disobedience of the judgment of this Court given in the case of Ghanshyam Mishra (supra), the present Contempt Petition came to be filed.

# 4. Vide order dated 20th February 2023, we had issued notice in the present Contempt Petition, returnable in four weeks. By the said order, we had dispensed with the personal presence of the alleged contemnors until specific orders were passed.

# 5. In response to the notice, the respondents have submitted their replies.

# 6. We have heard Mr. Gopal Jain, learned Senior Counsel appearing for the Petitioner Company and Ms. Pragati Neekhra, learned Counsel for the alleged Contemnors/Respondents.

# 7. Mr. Gopal Jain, learned Senior Counsel submitted that the act of the respondents in initiating proceedings for the dues which are not part of the Resolution Plan are on the face of it contemptuous in nature and in violation of the law laid down by this Court in the case of Ghanshyam Mishra (supra).

# 8. He submits that once a Resolution Plan is duly approved by the Adjudicating Authority under sub-section (1) of Section 31 of the Code, all claims not included in the Resolution Plan are deemed to be frozen and binding on all the stakeholders. It is submitted that this Court has in unequivocal terms clarified that the word “other stakeholders” as mentioned in Section 31(1) of the Code also includes Central, State and any other local authority.

# 9. It is further submitted that though the Petitioner Company had informed the contemnors/respondents about the judgment of this Court in the case of Ghanshyam Mishra (supra) and specifically informed about the order passed in the aforesaid judgment specifically with regard to the Petitioner Company, the contemnors have chosen to proceed further with the recovery proceedings. It is, therefore, submitted that their act amounts to willful disobedience of the orders of this Court.

# 10. Mr. Gopal Jain further submitted that despite a public announcement, the respondents/contemnors failed to file the claim during the resolution process. The demand raised by the contemnors were belated and raised after the approval of the Resolution Plan. It is submitted that the provisions of the Code are clear inasmuch as, after the public announcement, all the creditors including the Central Government, State Government and local authorities are required to come forward and put up their claims before the Resolution Plan. It is submitted that once the Resolution Plan is approved by the Adjudicating Authority, the SRA starts running of the business from a “clean slate”.

# 11. Per contra, Ms. Pragati Neekhra, learned counsel, appearing for the respondents/alleged contemnors submits that the alleged contemnors are the responsible Government Officers and law-abiding citizens. She submits that the demand notices were issued in good faith and not to undermine the dignity of this Court in any manner. She submits that there has been no intention on the part of the alleged contemnors to disobey or disregard the orders passed by this Court.

# 12. Ms. Pragati Neekhra further submitted that the judgment of this Court in the case of Ghanshyam Mishra (supra) was not applicable in the present case inasmuch as neither the State of Chhattisgarh nor any of the authorities were made parties in the insolvency proceedings before the NCLT. She submits that the judgment of this Court in the case of Ghanshyam Mishra (supra) would not bind the respondents and as such, a case of contempt was not made out. It is submitted that the learned NCLT could not have passed an order which ignored all the Government dues including the indirect taxes which is billed and collected by the Debtor Company. It is submitted that the State was entitled to its dues under the Chhattisgarh Value Added Tax Act 2005, Central Sales Tax Act, 1956 and Entry Tax Act, 1976 for the period between 1st April 2017 and 30th June 2017. As such, the alleged contemnor No.2 had rightly raised 3 (three) separate demand notices on 9th December 2022 under Section 146 of the Chhattisgarh Land Revenue Code, 1959. She submits that since the erstwhile Company had neither filed their returns nor paid the dues, the alleged contemnors were justified in raising the demand notices. To buttress her submissions, Ms. Neekhra has relied on the judgment of this Court in the case of State Tax Officer v. Rainbow Papers Limited8.

# 13. She further submits that the Petitioner Company herein had sought clarification of the judgment of this Court dated 13th April, 2021 in the case of Ghanshyam Mishra (supra) by filing a Miscellaneous Application being M.A. No.259 of 2022 in Writ Petition (Civil) No.1177 of 2022 which is rejected by this Court. As such, the present Contempt Petition is not at all tenable.

# 14. The legal position is no more res integra. This Court in the case of Ghanshyam Mishra (supra) has considered a batch of petitions. The questions which fell for consideration before the Court were as under:

“(i) As to whether any creditor including the Central Government, State Government or any local authority is bound by the Resolution Plan once it is approved by an adjudicating authority under sub-section (1) of Section 31 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as ‘I&B Code’)?

(ii) As to whether the amendment to Section 31 by Section 7 of Act 26 of 2019 is clarificatory/declaratory or substantive in nature?

(iii) As to whether after approval of resolution plan by the Adjudicating Authority a creditor including the Central Government, State Government or any local authority is entitled to initiate any proceedings for recovery of any of the dues from the Corporate Debtor, which are not a part of the Resolution Plan approved by the adjudicating authority?”

# 15. Though the judgment is titled as “Ghanshyam Mishra and sons Private Limited through the Authorized Signatory versus Edelweiss Asset Reconstruction Company Limited through the Director & Ors.”, this Court was seized of a batch of cases and the case of the present petitioner was very much up for consideration in the said batch of cases.

# 16. The Petitioner Company had filed Writ Petition (Civil) No.1177 of 2020 (M/s Monnet Ispat & Energy Ltd. & Anr. v. State of Odisha & Anr.). This Court after considering various judgments of this Court, at length, on the issue answered the questions as under:

“95. In the result, we answer the questions framed by us as under:

(i) That once a resolution plan is duly approved by the Adjudicating Authority under sub-section (1) of Section 31, the claims as provided in the resolution plan shall stand frozen and will be binding on the Corporate Debtor and its employees, members, creditors, including the Central Government, any State Government or any local authority, guarantors and other stakeholders. On the date of approval of resolution plan by the Adjudicating Authority, all such claims, which are not a part of resolution plan, shall stand extinguished and no person will be entitled to initiate or continue any proceedings in respect to a claim, which is not part of the resolution plan;

(ii) 2019 amendment to Section 31 of the I&B Code is clarificatory and declaratory in nature and therefore will be effective from the date on which I&B Code has come into effect;

(iii) Consequently all the dues including the statutory dues owed to the Central Government, any State Government or any local authority, if not part of the resolution plan, shall stand extinguished and no proceedings in respect of such dues for the period prior to the date on which the Adjudicating Authority grants its approval under Section 31 could be continued.”

[Emphasis supplied]

# 17. It is thus clear that this Court in unequivocal terms held that all such claims which are not a part of the Resolution Plan, shall stand extinguished and no person will be entitled to initiate or continue any proceedings in respect to a claim, which is not part of the Resolution Plan. The Court further held that the 2019 amendment to Section 31 of the Code is clarificatory and declaratory in nature and therefore will be effective from the date on which the Code has come into effect. The Court clearly held that all the dues including the statutory dues owed to the Central Government, or any State Government or any local authority, if not part of the resolution plan, shall stand extinguished and no proceedings in respect of such dues for the period prior to the date on which the Adjudicating Authority grants its approval under Section 31 could be continued.

# 18. Insofar as the present Petitioner is concerned, the Court considered its case in Paragraphs 133 to 140. It will be relevant to refer to paragraph 140, which reads as under:

“140. We hold and declare, that the respondents are not entitled to recover any claims or claim any debts owed to them from the Corporate Debtor accruing prior to the transfer date. Needless to state, that the consequences thereof shall follow.”

# 19. In the said Writ Petition (No.1177 of 2020), after the completion of CIRP on 5th January 2019, the respondent No.2 therein had sent a reminder to the Petitioner Company calling upon it to pay an amount of Rs.4,49,34,917.00 towards the service tax, etc. for the period between 1st April 2016 to 30th June 2017. In spite of the provisions of the Code pointed out by the Petitioner Company in reply to the notice of the respondents/authorities, the demand was pursued and as such, the present Petitioner was required to approach this Court.

# 20. It will be relevant to note that this Court had also referred to an order dated 10th August 2018 passed in Special Leave Petition (Civil) No.6483 of 2018. In that matter, the Income Tax Authorities had challenged the judgment and order of the Delhi High Court vide which the Delhi High Court had held that in view of the provisions of Section 238 of the Code, the income tax dues after the acceptance of Resolution Plan by the RP stood extinguished.

# 21. It will be relevant to refer to the order dated 10th August 2018 passed by this Court in Special Leave Petition (Civil) No.6483 of 2018, which reads thus:

“Heard.

Delay, if any, is condoned.

Given Section 238 of the Insolvency and Bankruptcy Code, 2016, it is obvious that the Code will override anything inconsistent contained in any other enactment, including the Income-Tax Act.

We may also refer in this Connection to Dena Bank vs. Bhikhabhai Prabhudas Parekh and Co. & Ors. (2000) 5 SCC 694 and its progeny, making it clear that income-tax dues, being in the nature of Crown debts, do not take precedence even over secured creditors, who are private persons.

We are of the view that the High Court of Delhi, is, therefore, correct in law.

Accordingly, the Special Leave Petitions are dismissed.

Pending applications, if any, stand disposed of.”

# 22. It can thus be seen that in view of clear pronouncement of law by this Court, all the dues of any of the stakeholders including the statutory dues owed to the Central Government, any State Government or any local authority, which were not part of the Resolution Plan, stood extinguished from the date on which the Resolution Plan stood approved.

# 23. It is to be noted that even much prior to the judgment of this Court in the case of Ghanshyam Mishra (supra), a 3 Judge Bench of this Court in the case of Committee of Creditors of Essar Steel India Limited through Authorised Signatory v. Satish Kumar Gupta and others9 has observed thus:

• “107. For the same reason, the impugned NCLAT judgment [Standard Chartered Bank v. Satish Kumar Gupta, 2019 SCC OnLine NCLAT 388] in holding that claims that may exist apart from those decided on merits by the resolution professional and by the Adjudicating Authority/Appellate Tribunal can now be decided by an appropriate forum in terms of Section 60(6) of the Code, also militates against the rationale of Section 31 of the Code. A successful resolution applicant cannot suddenly be faced with “undecided” claims after the resolution plan submitted by him has been accepted as this would amount to a hydra head popping up which would throw into uncertainty amounts payable by a prospective resolution applicant who would successfully take over the business of the corporate debtor. All claims must be submitted to and decided by the resolution professional so that a prospective resolution applicant knows exactly what has to be paid in order that it may then take over and run the business of the corporate debtor. This the successful resolution applicant does on a fresh slate, as has been pointed out by us hereinabove. For these reasons, NCLAT judgment must also be set aside on this count.”

• [Emphasis supplied]

# 24. It can thus clearly be seen that this Court has held that a successful resolution applicant cannot suddenly be faced with “undecided” claims after the resolution plan submitted by him has been accepted as this would amount to a hydra head popping up which would throw into uncertainty amounts payable by a prospective resolution applicant who would successfully take over the business of the corporate debtor. It has also been held that all claims must be submitted to and decided by the RP so that a prospective resolution applicant knows exactly what has to be paid in order that it may then take over and run the business of the corporate debtor.

# 25. In Ghanshyam Mishra (supra), this Court has referred to the judgments on the issue in the following cases:

• (i) Innoventive Industries Ltd. vs. ICICI Bank & Anr.10;

• (ii) K. Shashidhar v. Indian Overseas Bank and Others11;

• (iii) Committee of Creditors of Essar Steel India Limited Through Authorized Signatory v. Satish Kumar Gupta and Others12;

• (iv) Maharashtra Seamless Limited v. Padmanabhan Venkatesh and others13;

• (v) Karad Urban Cooperative Bank Ltd. vs. Swwapnil Bhingardevay & Ors.14; and

• (vi) Kalpraj Dharamshi and Another vs. Kotak Investment Advisors Limited and Another15.

# 26. The law laid down by this Court in the case of Ghanshyam Mishra (supra) has been followed by various subsequent judgments of this Court in the following cases:

• (i) K.N. Rajakumar v. V. Nagarajan and others16;

• (ii) Ruchi Soya Industries Limited and others v. Union of India and others17;

• (iii) Ajay Kumar Radheyshyam Goenka v. Tourism Finance Corporation of India Limited18.

# 27. In that view of the matter, we have no hesitation in holding that the demands raised by the respondents/authorities for a period prior to the date on which the learned NCLT has approved the Resolution Plan were totally contemptuous in nature. The respondents could not have raised the said demands inasmuch as they are not part of the Resolution Plan.

# 28. Coming next to the submission of learned counsel for the respondents/alleged contemnors, insofar as reliance placed by her on the judgment of this Court in the case of Rainbow Papers Limited (supra) is concerned, in the said case, this Court was considering the question as to whether the provisions of the Code and in particular Section 53 thereof override Section 48 of the Gujarat Value Added Tax Act, 2003. We find that, on facts, the said judgment is not applicable to the present case.

# 29. In the said case, in response to the advertisement issued by the RP, the State Tax Officer raised its claim before the RP. The claim of the State Tax Officer was rejected by the Committee of Creditors19. The learned NCLT also rejected the claim of the State Tax Officer and an appeal thereagainst also came to be dismissed by the National Company Law Appellate Tribunal20. Aggrieved thereby the State Tax Officer approached this Court.

# 30. This Court held that when a grievance was made before the Adjudicating Authority with regard to the Resolution Plan, the Adjudicating Authority was required to examine if the Resolution Plan met the requirements of Section 30(2) of the Code. This Court also held that under Section 31 of the Code, while approving the Resolution Plan as approved by the CoC, the Adjudicating Authority must come to a satisfaction that the Resolution Plan meets the requirements as referred to in sub-section (2) of Section 30 of the Code. It has further been held by this Court that the condition precedent for approval of a Resolution Plan was that it should meet the requirements of sub-section (2) of Section 30 of the Code.

# 31. In that view of the matter, we are of the considered opinion that the facts in the case of Rainbow Papers Limited (supra) are totally distinguishable to the facts of the present case.

# 32. In Rainbow Papers Limited (supra), the State Tax Officer had raised the claim before the CoC, which was not taken into consideration by the CoC. As such, this Court came to a finding that the satisfaction arrived at by the Adjudicating Authority under Section 31 of the Code was vitiated.

# 33. Undoubtedly, in the present case, in spite of public notice, neither the State of Chhattisgarh nor its authorities raised any claim before the CoC. In that view of the matter, we are of the considered view that the case of the present Petitioner is specifically covered by the judgment of this Court in the case of Ghanshyam Mishra (supra), which judgment was brought to the notice of the respondents/authorities, the respondents/authorities could not have proceeded with the recovery proceedings.

# 34. When the law laid down by this Court in the case of Ghanshyam Mishra (supra) is clear and unambiguous and specifically when the Petitioner’s own case was part of the batch which is specifically dealt with by this Court, the respondents/alleged contemnors ought not to have proceeded further with the recovery proceedings and ought to have dropped them forthwith. The continuation of such proceedings despite the judgment and order of this Court being pointed out to their notice is nothing but contemptuous in nature.

# 35. We have, therefore, no hesitation in holding that the continuation of the proceedings by the respondents/authorities even after the judgment of this Court in Ghanshyam Mishra (supra) was specifically brought to their notice is contemptuous in nature. However, we do not propose to proceed against the respondents/contemnors inasmuch as they are entitled to benefit of doubt.

# 36. It is the contention of the alleged contemnors that the State of Chhattisgarh was not a party to the Writ Petition or to the proceedings before the learned NCLT. No doubt that even if any stakeholder is not a party to the proceedings before the NCLT and if such stakeholder does not raise his claim before the Interim Resolution Professional/Resolution Professional, the Resolution Plan as approved by the NCLT would still be binding on him. However, this being one of the first cases arising out of the judgment of this Court in the case of Ghanshyam Mishra (supra), we do not propose to take any stern action against the respondents/contemnors. In any case, the respondents/ contemnors have tendered their unconditional apology.

# 37. In this view of the matter, though we hold that the act of the alleged contemnors is contemptuous in nature, we do not propose to take any action against them. The demand notices issued by the contemnors on the Petitioner Company and all proceedings pursuant thereto are held to be illegal and the same are quashed and set aside. We dispose of the contempt petition accepting unconditional apology of the contemnors.

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