Badar Durrez Ahmed, J.— In this contempt petition filed by the Collectors of Central Excise at Mumbai and Vadodra, it is prayed that appropriate action under the Contempt of Courts Act, 1971 be initiated and taken by this Court in view of the alleged breach of undertaking dated 21.2.1995 and the alleged wilful disobedience of the order of this Court dated 26.5.1997 on the part of the respondent Nos. 1 to 4 (alleged contemners). The respondent No. 5 who was earlier arrayed as a party was deleted by virtue of the order dated 10.3.1998
2. It is alleged that the respondents wilfully disobeyed the order of this Court dated 265.1997 as well as wilfully breached the undertaking given to the Court on 21.2.1995 inasmuch as a Bank Guarantee to the tune of Rs. 7 crores (being Bank Guarantee No. 7/1995 issued by Punjab and Sind Bank) was not kept alive and, therefore, could not be encashed. It is further alleged that even the direction of the Court for deposit of the amount of Rs. 7 crores given in the order dated 26.5.1997 has not been complied with by the respondents. According to the petitioners a clear case of civil contempt under Section 2(b) of the Contempt of Courts Act, 1971 has been made out and, accordingly, the respondents are liable to be punished under Section 12 of the said Act.
3. On the other hand, the respondents contend that the undertaking dated 21.2.1995 and the order dated 25.4.1997 stood modified by the subsequent order of this Court dated 26.5.1997 and, therefore, insofar as the question of breach of undertaking dated 21.2.1995 is concerned that issue is no longer alive and has been washed away by the subsequent order of this Court passed on 26.5.1997 Insofar as the compliance with the directions contained in the order dated 265.1997 is concerned the respondents contend that the direction to deposit the amount of Rs. 7 crores could not be complied with despite their best efforts as, in the meanwhile, the respondent No. 1 company had become a sick company and proceedings in respect thereof under The Sick Industrial Companies (Special Provisions) Act, 1985 (hereinafter referred to as “SICA” were pending before the Board for Industrial and Financial Reconstruction (hereinafter referred to as “BIFR”) and that the BIFR had even passed an order on 3.4.1997 whereby the respondent No. 1 was declared to be a sick company and a direction was made that the respondent No. 1 shall not alienate any assets in terms of Section 22A of SICA. Thus, according to the respondents, there was no wilful disobedience of any order of this Court and particularly the order dated 26.5.1997 and subsequent orders. As such, it was contended that no case for civil contempt was made out and the petition ought to be dismissed and the respondents ought to be discharged. This, in short) is the entire scope of the present contempt petition.
4. In order to fully appreciate the arguments of the petitioners and the respondents, it would be necessary to refer to the facts and circumstances giving rise to this petition:
4.1 The respondent No. 1 was faced with a demand of about Rs. 70 crores in respect of Central Excise Duty. This demand was confirmed in an appeal by the Collector of Central Excise and, being aggrieved thereby, the respondent No. 1 filed appeals (being Appeal Nos. E-5233/92 and E-5208/92) before the erstwhile Customs Excise and Gold Control Appellate Tribunal (CEGAT). As a condition to hear the appeals, the said Tribunal directed pre-deposit of Rs. 18 crores in cash and further directed that the respondent No. 1 should furnish Bank Guarantees for Rs. 51 crores. Not being satisfied with the pre-deposit order passed by the Tribunal, the respondent No. 1 approached this Court by way of a writ petition (CW No. 834/1994) for waiver of the entire pre-deposit amount. By its order dated 26.8.1994 passed in CM No. 5681/1994 and 5777/1994 in the said CW 834/1994, this Court directed that if the respondent No. 1 deposited an amount of Rs. 18 crores in cash and furnished Bank Guarantees for the sum of Rs. 17 crores and further furnished an undertaking not to alienate its assets to safeguard the payment of the balance amount of Rs. 34 crores, the appeals of the respondent No. 1 would be entertained by the said Tribunal.
4.2 In terms of the order dated 26.8.1994 a sum of Rs. 18 crores was paid. Four Bank Guarantees for a total amount of Rs. 17 crores were furnished (including the Bank Guarantee for Rs. 7 crores issued by the Punjab and Sind Bank). On 21.2.1995 a statement of one Kamal Budhiraja on behalf of the petitioner was recorded before the Registrar of this Court inter alia to the following effect:
“I undertake that the banks shall remain bound by the terms of the Bank Guarantees marked A, B, C and D and that the petitioner shall get the Bank Guarantees renewed from time-to-time and shall keep the same alive during the pendency of the case as per Court's order.”
5. On the same date after recording statements of other persons the Registrar of this Court, inter alia, issued the following order:
“Having regard to their statements made on oath and documentary evidence produced by them I am satisfied that the Bank Guarantees marked ‘A’ to ‘D’ are in order. They are hereby accepted. The undertaking given by the petitioner is accepted. The petitioner shall get these Bank Guarantees renewed from time-to-time and they shall be kept alive during the pendency of these proceedings in accordance with the orders of the Hon'ble Court.”
6. Thereafter the Bank Guarantees were renewed.
7. The Bank Guarantee issued by the Punjab and Sind Bank for Rs. 7 crores was extended by letter dated 13.3.1996 As a result of this extension, the Bank Guarantee was to expire on 31.1.1997 The Bank Guarantee was not renewed beyond 31.1.1997 although the respondents allege that a request for renewal was sent to the bank on 28.1.1997 However, the fact of the matter is that the said Bank Guarantee expired on 31.1.1997
8. On 3.3.1997 the Tribunal dismissed the appeals of the respondent No. 1 and on 11.4.1997 the Central Excise Department moved an application being CM 2855/1997 in the said CW 834/1994 seeking a direction for the deposit of the proceeds of the four Bank Guarantees forthwith. By an order dated 25.4.1997 this Court while disposing of the said CM 2855/1997 passed the following order:
“The Registry is directed to invoke Bank Guarantees forthwith and the same will be deemed to be invoked today. The Registry shall take steps to inform the bank about the invocation so that the banks can remit the amounts of the Bank Guarantees to the respondents.”
9. Pursuant to the order dated 25.4.1997 the amount represented by three bank guarantees totalling to Rs. 10 crores had been received in the Court. However, the amount of Rs. 7 crores in respect of the bank guarantee issued by the Punjab and Sind Bank was not received as the Bank Guarantee had, by then, expired. According to the Punjab and Sind Bank it had no liability to make the payment under the Bank Guarantee and, therefore, by an application (CM 3898/97) prayed that the order dated 25.4.1997 insofar as it directed payment of Rs. 7 crores under the Bank Guarantee in question be recalled and modified. The said application came up for consideration before this Court on 26.5.1997 After examining the original bank guarantee No. 7/1995 and the terms thereof as well as the renewal in terms of the extension letter dated 13.3.1996 this Court came to the conclusion that whatever may have been the position under the original Bank Guarantee of 1.2.1995, prima facie, it appeared that the liability of the bank was to extinguish, if no claim or demand was made upon the bank on or before 31.1.1997 It further concluded that in view of the terms of the extension letter, prima facie, the bank, in law, could not be directed to pay Rs. 7 crores since admittedly the demand was not made from the bank on or before 31.1.1997 The Court in its order dated 26.5.1997 further recorded as under:
“The aforesaid, however, is not the end of the matter. The petitioner had undertaken to furnish the Bank Guarantee for Rs. 17 crores and to keep the same alive in terms of the order dated 26th August, 1994. The petitioner has not kept alive this Bank Guarantee of Rs. 7 crores. This Court in fact is not concerned with the disputes, if any, between Punjab and Sind Bank on one hand and the petitioner on the other. We may notice that according to petitioner the bank is liable to deposit Rs. 7 crores under the extension letter dated 13th March, 1996. Prima facie, we have not accepted the said stand of the petitioner. Besides recovery of Rs. 7 crores, the petitioner could have been proceeded for breach of undertaking but having regard to the facts and circumstances of the case, at this stage, we refrain from so doing and instead we direct the petitioner to deposit within eight weeks Rs. 7 Crores with Commissioner of Central Excise-II, Mumbai. The order dated 25th April, 1997 stands modified to the extent noticed hereinbefore. CMs are disposed of in the above terms. A copy of the order be given dasti to Counsel for the parties.”
10. The order dated 26.5.1997 makes it clear that the Court consciously refrained from proceeding against the respondents herein for the purported breach of undertaking and instead directed the respondent No. 1 to deposit the sum of Rs. 7 crores within eight weeks with the Commissioner of Central Excise-II Mumbai and, accordingly, it modified its order dated 25.4.1997
11. Thereafter, the respondent No. 1 filed an application being CM 5616/1997 in the said CW 834/1994 seeking extension of time for depositing the amount of Rs. 7 crores. By an order dated 29.7.1997 the Court allowed the prayer and, inter alia, passed the following order:
“After hearing learned Counsel for the parties, the petitioner is allowed last opportunity of six weeks calculated from today for depositing the amount of Rs. 7 crores, in terms of the order dated 26th May, 1997.”
12. As stated above, in the meanwhile the BIFR had on 3.4.1997 declared respondent No. 1 to be a sick company and directed it not to alienate any of its assets. The respondent No. 1 moved an application being CM 6525/1997 in the said CW 834/1994 seeking further extension of time for compliance with the order dated 29.7.1997 This application came to be disposed of by this Court on 29.8.1997 In the order of this Court it is recorded that after passing of the order dated 29.7.1997, the respondent No. 1 approached the Supreme Court for some interlocutory relief and the Supreme Court by an order dated 11.8.1997 adjourned the hearing to enable the petitioner to comply with the order of this Court dated 29.7.1997 extending the time for depositing the sum of Rs. 7 crores by six weeks. It is further recorded in the said order dated 20.8.1997 that the respondent No. 1 had submitted that it had become a sick company and that BIFR was seized of the proceedings under SICA. The respondent No. 1 sought extension of time for making the deposit until the conclusion of the proceedings before BIFR. This Court directed as under:
“Such a relief cannot be allowed by this Court. It is an independent issue. The petitioner is at liberty to approach BIFR or seek directions from the Supreme Court where petitioner's appeal is pending. The application is rejected so far as this Court is concerned.”
13. On 5.9.1997 the respondent No. 1 filed an application for direction before the BIFR wherein it prayed that keeping in view the financial hardship being faced by it and the provisions of Section 22 (1) of SICA, 1985; the Excise Authorities be restrained from initiating any proceedings for recovery of the said liability of Rs. 7 crores till the approval of the rehabilitation scheme by the BIFR. It was also indicated in the application that the respondent No. 1 shall make the payment if the said liability as per schedule of payment formed part of the scheme after its sanction from BIFR.
14. On 12.9.1997 the respondent No. 1's Civil Appeal Nos. 5134-5135/1997 and SLP (Civil) No. 14324/1997 were dismissed by the Supreme Court.
15. Ultimately, the application which was pending before the BIFR was disposed of by an order dated 16.12.2002 sanctioning the rehabilitation scheme in respect of the respondent No. 1. In CM 360/2003 filed in this contempt petition, the respondent No. 1 has stated that it had made bona fide efforts to make the payment of Rs. 7 crores to the petitioner departments and that it was unable to do so in time. It further stated that it was genuinely suffering from a cash crunch and was also disabled from liquidating any asset or from doing anything except in the ordinary course of business for the reason that the company was a sick industrial company and its scheme for rehabilitation was pending before the BIFR. Although, the said scheme was sanctioned only on 16.12.2002, even prior to that the respondent No. 1 had made efforts to liquidate its dues of Rs. 7 crores and had made certain payments. In any event, by 29.3.2003 it had paid up the entire amount of Rs. 7 crores.
16. It is also pertinent to note that each of the respondents in response to the contempt petition have filed their replies and have also tendered their apologies to the Court.
17. In this context the learned Counsel appearing on behalf of the respondents contended that any non-compliance with the orders of this Court was not wilful and, therefore, no contempt was made out. He placed reliance on the following cases:
1. Tata Davy v. State of Orissa, (1997) 6 SCC 669.
2. Niaz Mohd v. State of Haryana, (1994) 6 SCC 332.
3. Gram Panchayat v. Vallabh Glass, (1990) 2 SCC 440.
18. The learned Counsel for the respondents also contended that contempt proceedings cannot be used for execution and for this proposition he placed reliance on:
1. R.N Dey v. Bhagyavathi Pramanik, (2000) 4 SCC 400.
2. Kapildeo Prasad Sah v. State of Bihar, (1999) 7 SCC 569.
19. The learned Counsel appearing on behalf of the respondents submitted that any non-compliance with the orders of this Court was not “wilful”. This was particularly so in view of the important circumstance that the respondent No. 1 had been declared as a sick company and a scheme for its rehabilitation was pending before the BIFR. The Learned Counsel also referred to the provisions of Section 22 of the SICA Act, to show that in any event, inasmuch as a scheme was under preparation/consideration, no proceedings, inter alia, for execution, distress or the like against any of the properties of the industrial company and no suit for the recovery of money or for the enforcement of any security or of any guarantee in respect of any loan or advance granted to the industrial company could lie or be proceeded with further, except with the consent of the Board or as the case may be the Appellate Authority. In the context of this ameliorative provision of SICA the learned Counsel for the respondents referred to the Supreme Court decision in the case of Tata Davy Ltd. v. State of Orissa, (supra), in which, following its earlier decision in Gram Panchayat v. Shree Vallabh Glass Works Ltd. (supra), the Supreme Court held that “arrears of taxes and the like due from sick industrial companies that satisfy the conditions set out in Section 22(1) of the Central Act cannot be recovered by coercive process unless the said Board gives its consent thereto”. No such consent had been obtained to proceed against the respondent No. 1 in respect of which a scheme was pending consideration before the BIFR. As such also, it was contended that the delay in the payment of the said amount of Rs. 7 crores was not wilful but due to circumstances beyond the control of the respondents.
20. Against this, the learned Counsel for the petitioner contended that the decision of the Supreme Court in the case of Tata Davy (supra) was not applicable to the facts of the present case as the present case was one of breach of an undertaking given to the Court. 1 am unable to agree with this submission. First of all, as will be clear from the discussion below, the undertaking was washed away by the subsequent orders of this Court. Secondly, the Tata Davy decision (supra) was only relied upon by the learned Counsel for the respondents to show the inability on the part of the respondents to pay the sum of Rs. 7 crores which did represent tax arrears. And, the decision also established that even tax arrears could not be recovered without the consent of BEFR.
21. It was further contended by the earned Counsel for the petitioner that the default or disobedience in payment of the said sum of Rs. 7 crores within the time specified was wilful and amounted to civil contempt which was punishable under the Contempt of Courts Act, 1971.
22. Before I examine this question as to whether, in this case, the respondents are guilty of “wilful disobedience” of the orders of this Court, it would be proper for me to refer to some decisions of the Supreme Court which clearly settle the issue as to the meaning and scope of “wilful disobedience” in the context of civil contempt, First, I shall refer to Niaz Mohd. v. State of Haryana, (1994) 6 SCC 332 wherein the Supreme Court held (at page 337):
“9. Section 2(b) of the Contempt of Courts Act, 1971 (hereinafter referred to as ‘the Act’) defines “civil contempt” to mean “wilful disobedience to any judgment, decree, direction, order, writ or other process of a Court…”. Where the contempt consists in failure to comply with or carry out an order of a Court made in favour of a party, it is a civil contempt. The person or persons in whose favour such order or direction has been made can move the Court for initiating proceeding for contempt against the alleged contemner, with a view to enforce the right flowing from the order or direction in question. But such a proceeding is not like an execution proceeding under Code of Civil Procedure. The party in whose favour an order has been passed, is entitled to the benefit of such order. The Court while considering the issue as to whether the alleged contemner should be punished for not having complied with and carried out the direction of the Court, has to take into consideration all facts and circumstances of a particular case. That is why the framers of the Act while defining civil contempt, have said that it must be wilful disobedience to any judgment, decree, direction, order, writ or other process of a Court. Before a contemner is punished for non-compliance of the direction of a Court, the Court must not only be satisfied about the disobedience of any judgment, decree, direction or writ but should also be satisfied that such disobedience was wilful and intentional. The civil Court while executing a decree against the judgment-debtor is not concerned and bothered whether the disobedience to any judgment, or decree, was wilful. Once a decree has been passed it is the duty of the Court to execute the decree whatever may be consequence thereof. But while examining the grievance of the person who has invoked the jurisdiction of the Court to initiate the proceeding for contempt for disobedience of its order, before any such contemner is held guilty and punished, the Court has to record a finding that such disobedience was wilful and intentional. If from the circumstances of a particular case, brought to the notice of the Court, the Court is satisfied that although there has been a disobedience but such disobedience is the result of some compelling circumstances under which it was not possible for the contemner to comply with the order, the Court may not punish the alleged contemner.”
23. So, disobedience alone will not make the alleged contemner liable for contempt. The disobedience must be “wilful” it must be intentional. And, a finding to this effect must be recorded. If there are extenuating circumstances which have resulted in non-compliance with the orders, then, clearly, it would not be a case of “wilful disobedience”. This is also exactly what the Supreme Court says in Indian Airports Employees' Union v. Ranjan Chatterjee, (1999) 2 SCC 537:
“7. It is well settled that disobedience of orders of the Court, in order to amount to “civil contempt” under Section, 2(b) of the Contempt of Courts Act, 1971 must be “wilful” and proof of mere disobedience is not sufficient (S.S Roy v. State of Orissa), Where there is no deliberate flouting of the orders of the Court but a mere misinterpretation of the executive instructions, it would not be a case of civil contempt (Ashok Kumar Singh v. State of Bihar).”
24. As observed by the Supreme Court in Kapildea Prasad Sah v. State of Bihar, (1999) 7 SCC 569 (at page 573), the power to punish for contempt is to be resorted to when there is clear violation of the Court's order. Since notice of contempt and punishment for contempt is of far-reaching consequence, these powers should be invoked only when a clear case of wilful disobedience of the Court's order has been made out. And, whether disobedience is wilful in a particular case depends on the facts and circumstances of that case. In this very decision the Supreme Court held that:
“Wilful would exclude casual, accidental, bona fide or unintentional acts or genuine inability to comply with the terms of the order. A petitioner who complains breach of the Court's order must allege deliberate or contumacious disobedience of the Court's order.”
25. A similar chord is struck in Anil Ratan Sarkar v. Hirak Ghosh, (2002) 4 SCC 21, wherein, the Supreme Court observed as under:
“14. Similar is the situation in Mritunjoy Das v. Sayed Hasibur Rahaman and as such we need not dilate thereon further as to the burden and standard of proof vis-a-vis the Contempt of Courts Act—suffice it to record that powers under the Act should be exercised with utmost care and caution and that too rather sparingly and in the larger interest of the society and for proper administration of the justice delivery system in the country. Exercise of power within the meaning of the Act of 1971 shall thus be a rarity and that too in a matter on which there exists no doubt as regards the initiation of the action being bona fide.
15. It may also be noticed at this juncture that mere disobedience of an order may not be sufficient to amount to a “civil contempt” within the meaning of Section 2(b) of the Act of 1971—the element of willingness is an indispensable requirement to bring home the charge within the meaning of the Act and lastly, in the event two interpretations are possible and the action of the alleged contemnor pertains to one such interpretation—the Act or Acts cannot be ascribed to be otherwise contumacious in nature. A doubt in the matter as regards the wilful nature of the conduct if raised, question of success in a contempt petition would not arise.”
26. Finally, I refer to the recent decision in Ashok Paper Kantgar Union v. Dharam Godha, (2003) 11 SCC 1. The Supreme Court reiterated the well settled principles as follows:
“Section 2(b), Contempt of Courts Act defines ‘civil contempt’ and it means wilful disobedience to any judgment, decree, direction, order, writ or other process of a Court or wilful breach of undertaking given to a Court. ‘Wilful’ means an act or omission which is done voluntarily and intentionally and with the specific intent to do something the law forbids or with the specific intent to fail to do something the law requires to be done, that is to say with bad purpose either to disobey or to disregard the law. It signifies a deliberate action done with evil intent or with a bad motive or purpose. Therefore, in order to constitute contempt the order of the Court must be of such a nature which is capable of execution by the person charged in normal circumstances. It should not require any extraordinary effort nor should be dependent, either wholly or in part, upon any act or omission of a third party for its compliance. This has to be judged having regard to the facts and circumstances of each case.”
27. In the backdrop of these clear legal principles, let me now examine whether in the case at hand a case for civil contempt is made out. Before dealing with the question of “wilful disobedience” let me first clear the issue with regard to the alleged breach of the undertaking. From the facts stated above, it is quite clear that the original undertaking dated 21.2.1995 recorded before the Registrar of this Court is no longer of any consequence in view of the specific direction given by this Court on 25.4.1997 for invocation of the Bank Guarantees. This direction for invocation of the Bank Guarantees also came to be modified by the order dated 26.5.1997 In that order it was specifically recorded that the petitioner could have been proceeded against for breach of undertaking but having regard to the facts and circumstances of the case at that stage, this Court refrained from doing so and instead directed the petitioner to deposit the said sum of Rs. 7 crores within eight weeks. The order dated 25.4.1997 therefore stood modified to this extent. In these circumstances after the passing of the order dated 25.4.1997 and the order dated 26.5.1997 it would not be appropriate to proceed against the respondents in respect of an undertaking given on 21.2.1995 with regard to keeping the Bank Guarantee alive when the respondents had specifically been directed by this Court to make the payment of the said amount. The issue of breach of undertaking, therefore, is no longer alive.
28. The only question that remains is whether the direction given by the Court to the respondents to deposit the amount of Rs. 7 crores has been disobeyed wilfully. It is an admitted fact that the amount of Rs. 7 crores was not paid within the time it was required to be paid. It is also an admitted fact that the amount of Rs. 7 crores has subsequently been paid by the respondents as indicated above. The issue is whether the delay in payment of the said amount of Rs. 7 crores was wilful and/or whether the respondent lacked bona fides? From the narration of the facts and circumstances, it does appear to me that the delay in the payment was not occasioned by any attitude on the part of the respondents displaying an affront to the orders of this Court but was the result of the circumstances under which they were placed and which were beyond their control. It is quite clear that the respondent No. 1 had been declared to be a sick company on 3.4.1997 It is also clear that on the same date, the BIFR had directed respondent No. 1 not to alienate any of its assets in terms of Section 22A of SICA. In these circumstances, it became extremely difficult, if not impossible, for the respondent No. 1 to pay up the amount of Rs. 7 crores. The scheme of rehabilitation which was under preparation was ultimately sanctioned by the BIFR on 16.12.2002 It is to be noted that the respondent No. 1 had started making payment towards the said sum of Rs. 7 crores even before the said order dated 16.12.2002 In any event, by March 2003 the entire amount of Rs. 7 crores had been paid to the petitioners. The conduct of the respondents did not lack any bom fides and it does not appear to me to be a case where the respondents and in particular respondent No. 1 had the money but, refused to pay. That would clearly be an affront to the orders of this Court. Here the situation is different. The respondents did not have the wherewithal to deposit the said amount of Rs. 7 crores and they ran from pillar to post to seek their legal remedies and as soon as the respondents were placed with funds they made the payment of the entire amount. It cannot, therefore, be said that the respondents committed any wilful disobedience of the orders of this Court. Their disobedience was neither intentional nor was their conduct contumacious.
29. Accordingly, the contempt proceedings against the respondents 1 to 4 are dropped and the petition is dismissed.
Petition dismissed.