Supreme Court Orders Imprisonment and Recovery in Contempt Case Against Vijay Mallya

Date of the Judgment: July 11, 2022

Citation: Not Available

Judges: Uday Umesh Lalit, J., S. Ravindra Bhat, J., Pamidighantam Sri Narasimha, J.

Can a contemnor avoid punishment by simply undergoing a penalty without reversing the actions that led to the contempt? The Supreme Court of India recently addressed this question in a contempt case against Dr. Vijay Mallya. The court found Mallya guilty of contempt for disobeying court orders and transferring funds, subsequently imposing a four-month imprisonment and a fine, while also directing the recovery of the transferred funds.

This judgment was delivered by a three-judge bench comprising Justices Uday Umesh Lalit, S. Ravindra Bhat, and Pamidighantam Sri Narasimha. Justice Uday Umesh Lalit authored the judgment.

Case Background

The case originated from recovery proceedings initiated by banks against Dr. Vijay Mallya. The High Court of Karnataka had issued orders on September 3, 2013, and November 13, 2013, restraining Mallya and other respondents from transferring or creating third-party rights on their properties. Despite these orders, Mallya received US$ 40 million on February 25, 2016, and subsequently transferred this amount to trusts benefiting his children on February 26 and 29, 2016. This transfer was deemed a violation of the High Court’s orders, leading to contempt proceedings.

Timeline

Course of Proceedings

The proceedings began with the banks filing applications against Mallya for disbursing US$ 75 million. The Supreme Court took note of the violation of the High Court’s orders. Despite being given multiple opportunities, Mallya did not file a reply or appear in person. The Supreme Court found Mallya guilty of contempt on May 9, 2017, for disobeying court orders and for violating the High Court’s restraint orders. Mallya’s review petition was rejected on August 3, 2020. The matter was then listed for hearing on the quantum of punishment. The court appointed Mr. Jaideep Gupta as Amicus Curiae to assist the court.

Legal Framework

The legal framework includes the orders of restraint passed by the High Court of Karnataka on September 3, 2013, and November 13, 2013, which prohibited Mallya from transferring or creating third-party rights on his properties. The Supreme Court also considered its own powers under Article 129 of the Constitution, which allows it to punish for contempt of itself and subordinate courts. The Contempt of Courts Act was also considered, which categorizes contempt into civil and criminal contempt. Civil contempt includes willful disobedience of court orders, while criminal contempt includes actions that scandalize the court or obstruct the administration of justice. The Supreme Court relied on the principle that a contemnor must purge the contempt by undoing the wrong, not just by undergoing the punishment.

Arguments

The primary argument against Mallya was that he had violated the High Court’s orders by transferring US$ 40 million after the restraint orders were in place. The funds were transferred to trusts benefiting his children, which the court viewed as an attempt to put the funds beyond the reach of the court. The Amicus Curiae, Mr. Jaideep Gupta, argued that the transactions should be declared void, and the funds should be recovered. He also suggested that the court could order sequestration of Mallya’s assets and appoint a forensic auditor to trace his assets. The Amicus Curiae relied on several cases to argue that the court has the power to direct the contemnor to reverse the contumacious action and that punishment alone is not sufficient to purge the contempt.

Issues Framed by the Supreme Court

The Supreme Court framed the following issues:

1. Whether the contemnor had disobeyed the orders of the High Court of Karnataka by transferring US$ 40 million after the restraint orders were in place?
2. What should be the appropriate punishment for the contempt of court?
3. What directions are necessary to ensure the contemnor purges the contempt?

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues:

Authorities

The Supreme Court relied on the following authorities:

Judgment

The Supreme Court held that Mallya was guilty of contempt for disobeying the High Court’s orders and for not disclosing full particulars of his assets. The court emphasized that merely undergoing punishment is not sufficient to purge contempt, especially in cases of criminal contempt. The court directed that the transactions by which US$ 40 million was transferred to trusts be declared void and that the funds be recovered with interest. The court imposed a sentence of four months imprisonment and a fine of Rs. 2,000 on Mallya.

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

• Delhi Judicial Service Association, Tis Hazari Court, Delhi v. State of Gujarat and others [(1991) 4 SCC 406]:* The Court relied on this case to assert its power to take cognizance of contempt of subordinate courts.
• Supreme Court Bar Association v. Union of India & Anr. [(1998) 4 SCC 409]: The Court referred to this case to highlight the various punishments for contempt, including sequestration of assets, fine, and imprisonment.
• Noorali Babul Thanewala v. K.M.M. Shetty & Ors. [(1990) 1 SCC 259]: The Court used this case to emphasize that breach of an undertaking given to the court is contempt and requires reversal of the contumacious action.
• Rama Narang v. Ramesh Narang [(2009) 16 SCC 126]: The Court cited this case to support the view that a contemnor must purge the contempt by undoing the wrong.
• Pravin C. Shah v. K.A. Mohd. Ali & Anr. [(2001) 8 SCC 650]: The Court relied on this case to emphasize that undergoing punishment is not sufficient to purge contempt.
• Rose v. Laskington [(1989) 3 AllER 306]:* The Court relied on this case to support the remedy of sequestration of assets.
• Mir v. Mir [(1992) 1 AllER 765]:* The Court relied on this case to support the remedy of sequestration of assets.
• Richardson v. Richardson [(1989) 3 AllER 779]:* The Court relied on this case to support the remedy of sequestration of assets.

What weighed in the mind of the Court?

The Supreme Court was primarily concerned with upholding the majesty of law and ensuring that contemnors do not benefit from their contumacious actions. The court emphasized that purging contempt requires reversing the wrong committed, not just undergoing punishment. The court also took into account the fact that Mallya never showed any remorse or tendered an apology for his actions.

Logical Reasoning:

The court considered the argument that Mallya had transferred the funds to trusts benefiting his children and rejected the argument that the funds were beyond his control. The court emphasized that the purpose of contempt proceedings is not just to punish but also to ensure that the contemnor does not benefit from their contumacious actions. The court held that undergoing punishment is not sufficient to purge contempt and that the contemnor must undo the wrong. The court also considered the fact that Mallya never showed any remorse or tendered an apology for his actions.

“Having considered the entirety of the matter, we find that Respondent No.3 is guilty of having committed contempt of court on both the counts.”

“We cannot therefore approve the view that merely undergoing the penalty imposed on a contemnor is sufficient to complete the process of purging himself of the contempt, particularly in a case where the contemnor is convicted of criminal contempt.”

“In a given case, to meet the ends of justice, the concept of purging of the contempt would call for complete disgorging of all the benefits secured as a result of actions which are found by the court to be contumacious.”

Key Takeaways

• ✓ Contemnors must not only undergo punishment but also reverse the actions that led to the contempt.
• ✓ Courts can direct the reversal of transactions that are found to be contumacious.
• ✓ The Supreme Court has the power to take cognizance of contempt of subordinate courts.
• ✓ Lack of remorse or apology from the contemnor can be a factor in determining the punishment.
• ✓ The concept of purging contempt requires complete disgorging of benefits secured through contumacious actions.

This judgment has significant implications for future contempt cases, emphasizing that the focus is not just on punishing the contemnor but also on ensuring that they do not benefit from their actions. It reinforces the principle that the majesty of law must be upheld, and contemnors must take steps to undo the wrong committed.

Directions

The Supreme Court issued the following directions:

1. Mallya was sentenced to four months imprisonment and a fine of Rs. 2,000.
2. The transactions by which US$ 40 million was transferred to trusts were declared void and inoperative.
3. Mallya and the beneficiaries of the trusts were directed to deposit the amount received with interest at 8% per annum with the concerned Recovery Officer within four weeks.
4. If the amounts are not deposited, the Recovery Officer can take appropriate proceedings for recovery.
5. The Government of India and all concerned agencies were directed to extend assistance and complete cooperation.

Development of Law

The ratio decidendi of this case is that a contemnor must not only undergo punishment but also reverse the actions that led to the contempt. This judgment reinforces the principle that the purpose of contempt proceedings is not just to punish but also to ensure that the contemnor does not benefit from their contumacious actions. It clarifies that undergoing punishment is not sufficient to purge contempt, especially in cases of criminal contempt, and the contemnor must undo the wrong committed.

Conclusion

The Supreme Court’s judgment in the contempt case against Dr. Vijay Mallya is a significant step in ensuring that contemnors are held accountable for their actions. The court not only imposed a sentence of imprisonment and fine but also directed the reversal of contumacious transactions, emphasizing that the concept of purging contempt requires complete disgorging of all the benefits secured through such actions. This judgment reinforces the principle that the majesty of law must be upheld and that contemnors cannot benefit from their disobedience of court orders.

Category

• Contempt of Court
  • Disobedience of Court Orders
  • Contempt of Courts Act
  • Purging of Contempt
• Constitution of India
  • Article 129 of the Constitution of India
• Civil Procedure
  • Recovery Proceedings
  • Orders of Restraint
• Contempt of Court
  • Contempt of Courts Act, 1971

FAQ

Q: What was the main issue in the Vijay Mallya contempt case?

A: The main issue was whether Dr. Vijay Mallya was guilty of contempt of court for disobeying the orders of the High Court of Karnataka by transferring US$ 40 million despite restraint orders.

Q: What did the Supreme Court decide?

A: The Supreme Court found Mallya guilty of contempt and sentenced him to four months imprisonment and a fine of Rs. 2,000. The court also directed that the transactions by which the US$ 40 million was transferred be declared void, and the funds be recovered with interest.

Q: What does it mean to “purge” contempt?

A: To “purge” contempt means to reverse the actions that led to the contempt, not just to undergo the punishment. In this case, it meant returning the transferred funds.

Q: Can a contemnor avoid punishment by just paying a fine?

A: No, according to this judgment, merely undergoing the penalty is not sufficient to purge contempt. The contemnor must also undo the wrong committed.

Q: What is the significance of this judgment?

A: This judgment reinforces the principle that contemnors cannot benefit from their disobedience of court orders and that the courts have the power to direct the reversal of contumacious transactions.

Q: What happens if the funds are not returned?

A: If the funds are not deposited, the concerned Recovery Officer can take appropriate proceedings for recovery, and the Government of India and all concerned agencies are directed to extend assistance and complete cooperation.