Case Note & Summary
The Supreme Court dismissed contempt petitions filed by Celir LLP, the successful auction purchaser, alleging wilful disobedience of its earlier judgment dated 21.09.2023 in Civil Appeal Nos. 5542-5543 of 2023. The background involves a secured asset (land and buildings in Navi Mumbai) mortgaged by the original borrower, Sumati Prasad Bafna, to Union Bank of India. After the borrower defaulted, the Bank initiated SARFAESI proceedings and conducted multiple auctions. The ninth auction on 27.06.2023 resulted in Celir LLP being declared the highest bidder for Rs. 105.05 crore. Celir deposited the full amount, and the Bank issued a sale confirmation letter. The borrower challenged the auction before the DRT and the High Court, but the Supreme Court in its earlier judgment upheld the auction and directed the Bank to hand over possession to Celir. Despite this, the borrower allegedly transferred the property to Greenscape IT Park LLP (respondent no. 4) and its director (respondent no. 2) after the judgment. Celir filed contempt petitions alleging wilful disobedience. The Court framed issues including whether contempt was committed, whether the subsequent transfers were in breach of the judgment, and the applicability of lis pendens. After analyzing submissions, the Court held that no contempt was made out because the earlier judgment did not contain any specific injunction against transfers, and the respondents had acted under subsequent orders from the DRT and High Court. The Court also discussed the Henderson principle of constructive res judicata and the concept of abuse of process. It found that the contempt petitions themselves were an abuse of process as they sought to re-litigate issues already decided. The Court dismissed the contempt petitions and the miscellaneous applications, with no order as to costs.
Headnote
A) Contempt of Court - Wilful Disobedience - Section 2(b) of the Contempt of Courts Act, 1971 - Alleged violation of Supreme Court judgment dated 21.09.2023 - The Court examined whether the respondents' actions constituted wilful disobedience of the earlier judgment which had upheld the auction sale in favour of the petitioner. Held that no contempt was made out as the subsequent transfers were not in breach of any specific direction in the judgment and the respondents had acted under colour of subsequent orders from the DRT and High Court (Paras 121-145).
B) Abuse of Process of Court - Collateral Challenge - The Court discussed the concept of abuse of process and held that the respondents' attempt to re-litigate issues already decided in the earlier judgment amounted to an abuse of process. However, the contempt petition itself was found to be an abuse as it sought to enforce rights beyond the scope of the earlier judgment (Paras 50-76).
C) Constructive Res Judicata - Henderson Principle - The Court applied the principle that all issues which ought to have been raised in earlier proceedings are barred. The respondents could not challenge the auction sale after the earlier judgment had attained finality (Paras 83-103).
D) Lis Pendens - Section 52 of the Transfer of Property Act, 1882 - The Court examined whether the subsequent transfers were hit by lis pendens. Held that in the absence of registration as required under the State Amendment to Section 52 of the TPA, the doctrine of lis pendens did not apply to invalidate the transfers (Paras 104-120).
E) SARFAESI Act - Auction Sale - Setting Aside After Confirmation - The Court discussed the circumstances under which a confirmed sale under the SARFAESI Act may be set aside. Held that once the sale is confirmed and the full consideration is paid, the sale is complete and cannot be lightly disturbed (Paras 138-145).
Issue of Consideration
Whether the respondents committed contempt of court by wilfully disobeying the final judgment and order dated 21.09.2023 passed by this Court in Civil Appeal Nos. 5542-5543 of 2023, and whether the subsequent transfers of the secured asset were in violation of the said judgment.
Final Decision
The Supreme Court dismissed the contempt petitions and the miscellaneous applications, holding that no contempt was made out. The Court found that the earlier judgment did not contain any specific direction restraining the respondents from transferring the property, and the respondents had acted under colour of subsequent orders from the DRT and High Court. The contempt petitions were held to be an abuse of process. No order as to costs.
Law Points
- Contempt of Court
- Wilful Disobedience
- Abuse of Process
- Constructive Res Judicata
- Lis Pendens
- SARFAESI Act Auction
- Sale Confirmation
- Redemption Right
- Henderson Principle
Case Details
2024 LawText (SC) (12) 133
Contempt Petition (C) Nos. 158-159 of 2024 in Civil Appeal Nos. 5542-5543 of 2023
Mr. Sumati Prasad Bafna & Ors.
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Nature of Litigation
Contempt proceedings for alleged wilful disobedience of a Supreme Court judgment.
Remedy Sought
Initiation of contempt proceedings against the respondents for wilful disobedience of the final judgment and order dated 21.09.2023 passed by this Court in Civil Appeal Nos. 5542-5543 of 2023.
Filing Reason
Alleged violation of the Supreme Court's judgment by the respondents by transferring the secured asset to third parties despite the judgment directing the Bank to hand over possession to the petitioner.
Previous Decisions
The Supreme Court in Celir LLP v. Bafna Motors (Mumbai) & Ors. (2023 INSC 838) upheld the auction sale in favour of the petitioner and directed the Bank to hand over possession. The DRT and High Court had earlier passed orders allowing the borrower to redeem the mortgage, but those were set aside by the Supreme Court.
Issues
Whether the respondents committed contempt of court by wilfully disobeying the final judgment and order dated 21.09.2023 passed by this Court in Civil Appeal Nos. 5542-5543 of 2023.
Whether the subsequent transfers of the secured asset were in violation of the said judgment.
Whether the contempt petitions themselves constitute an abuse of process of court.
Submissions/Arguments
Petitioner (Celir LLP): The respondents wilfully disobeyed the Supreme Court judgment by transferring the property to third parties despite the judgment directing the Bank to hand over possession to the petitioner. The subsequent transfers were in contempt of court.
Respondent No. 1 (Original Borrower): The judgment did not contain any specific injunction against transfers. The borrower acted under subsequent orders from the DRT and High Court which allowed redemption. No contempt was committed.
Respondent Nos. 2 & 4 (Subsequent Transferee): They were bona fide purchasers for value without notice of any contempt. The transfers were valid and not in breach of any court order.
Respondent No. 3 (Bank): The Bank complied with the Supreme Court judgment and handed over possession to the petitioner. The subsequent transfers were not by the Bank and the Bank had no role in them.
Ratio Decidendi
For contempt to be established, there must be wilful disobedience of a specific and clear direction of the court. The earlier judgment did not contain any injunction against transfers, and the respondents acted under subsequent judicial orders. Therefore, no contempt was committed. Additionally, the contempt petitions themselves were an abuse of process as they sought to re-litigate issues already decided.
Judgment Excerpts
The present petitions have been filed under Section 2(B) of the Contempt of Court Act, 1971 read with Article(s) 129 and 142(2) of the Constitution respectively seeking to initiate contempt proceedings against the respondents / alleged contemnors for wilful disobedience of the final judgment and order dated 21.09.2023 passed by this Court in Civil Appeal Nos. 5542-5543 of 2023.
For the sake of convenience, we clarify that the petitioner herein is the successful auction purchaser, the respondent no. 1, Mr. Sumati Prasad Bafna is the original borrower, the respondent no. 4 ‘Greenscape IT Park LLP’ and its director, Mr. Jayesh A. Vavia i.e., the respondent no. 2 herein are the subsequent transferee / third-party purchaser and the respondent no. 3, ‘Union Bank of India’ is the secured creditor / bank.
Procedural History
The Bank initiated SARFAESI proceedings after the borrower defaulted. The borrower filed S.A. No. 46 of 2022 before the DRT challenging the demand notice and possession notice. The Bank conducted nine auctions; the ninth auction on 27.06.2023 resulted in Celir LLP being the highest bidder. Celir deposited the full amount, and the Bank issued a sale confirmation letter. The borrower filed a redemption application before the DRT and a writ petition before the High Court. The DRT allowed redemption, but the Supreme Court in Civil Appeal Nos. 5542-5543 of 2023 set aside the DRT and High Court orders and upheld the auction sale, directing the Bank to hand over possession to Celir. Thereafter, the borrower allegedly transferred the property to Greenscape IT Park LLP. Celir filed contempt petitions alleging wilful disobedience of the Supreme Court judgment.
Acts & Sections
- Contempt of Courts Act, 1971: Section 2(b)
- Constitution of India: Article 129, Article 142(2)
- Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002: Section 13(2), Section 13(4), Section 17
- Security Interest (Enforcement) Rules, 2002: Rule 8, Rule 8(6)
- Transfer of Property Act, 1882: Section 52
