Case Note & Summary
The Supreme Court of India dealt with three contempt petitions filed by Ericsson India Pvt. Ltd. against Reliance Communications Ltd., Reliance Telecom Ltd., and Reliance Infratel Ltd. (collectively, the Reliance Companies). The dispute arose from a Managed Service Agreement entered into on 25.01.2013, under which Ericsson provided network management services. Ericsson raised invoices totaling INR 9.78 crore, but the Reliance Companies failed to pay. Ericsson issued notices under the Insolvency and Bankruptcy Code, 2016, and filed applications under Section 9 of the Code before the NCLT. The NCLT admitted the petitions on 15.05.2018 and appointed Interim Resolution Professionals. On appeal, the NCLAT stayed the NCLT orders on 30.05.2018, recording a settlement for INR 550 crore to be paid within 120 days. The Reliance Companies filed a writ petition in the Supreme Court, which on 03.08.2018 directed that the payment of INR 550 crore be made on or before 30.09.2018, and undertakings were to be filed. The undertakings filed on 09.08.2018 stated that payment would be made 'upon sale of assets', which Ericsson contended was contrary to the court's order. Ericsson filed the first contempt petition on 01.10.2018. The Supreme Court granted extensions, ultimately requiring payment by 15.12.2018 with 12% interest. The Reliance Companies failed to pay, citing inability to sell spectrum due to lack of NOC from the DoT. They deposited only INR 118 crore from income tax refunds. Ericsson filed two more contempt petitions. The court found that the undertakings were not in terms of its order and that the Reliance Companies wilfully breached the undertakings and orders, interfering with the administration of justice. The court rejected the argument that payment was conditional upon sale of assets, noting that the NCLAT order did not impose such a condition. The court also noted that the Reliance Companies' own advocate's letter dated 21.01.2019 offered to pay the full amount within 10 days, contradicting their claim of inability. The court held the Chairmen and Directors guilty of contempt and sentenced them to three months' imprisonment and a fine of INR 1 crore each, with further imprisonment for non-payment. The companies were directed to pay INR 550 crore with 12% interest from 30.09.2018 within four weeks, failing which the corporate insolvency resolution process would continue.
Headnote
A) Contempt of Court - Breach of Undertaking - Wilful Disobedience - The Reliance Companies filed undertakings before the Supreme Court stating that payment of INR 550 crore would be made 'upon sale of assets', which was contrary to the court's order dated 03.08.2018 that required unconditional payment by 30.09.2018. The court held that this amounted to a wilful breach and interference with the administration of justice (Paras 3, 6-8). B) Contempt of Court - Conditional Payment - Sale of Assets - The NCLAT order dated 30.05.2018 did not make payment conditional upon sale of assets; the condition was introduced only in the undertakings filed before the Supreme Court. The court rejected the argument that the condition was part of the earlier orders (Paras 3, 6-8). C) Contempt of Court - Wilful Default - Inability to Pay - The Reliance Companies' claim of inability to pay was belied by their own advocate's letter dated 21.01.2019 offering to pay the full amount within 10 days, and by their subsequent deposit of only INR 118 crore. The court found no bona fide efforts to pay and held that the default was wilful (Paras 3, 8-9). D) Contempt of Court - Sentencing - Quantum of Punishment - The court sentenced the Chairmen and Directors of the Reliance Companies to three months' imprisonment and imposed a fine of INR 1 crore each, with further imprisonment for non-payment. The companies were directed to pay INR 550 crore with 12% interest from 30.09.2018 within four weeks, failing which the corporate insolvency resolution process would continue (Paras 10-11).
Issue of Consideration
Whether the Reliance Companies committed contempt of court by filing undertakings that made payment conditional upon sale of assets, contrary to the court's order, and by wilfully failing to pay the settled amount of INR 550 crore within the stipulated time.
Final Decision
The Supreme Court held the Chairmen and Directors of Reliance Communications Ltd., Reliance Telecom Ltd., and Reliance Infratel Ltd. guilty of contempt and sentenced them to three months' imprisonment and a fine of INR 1 crore each, with further imprisonment for non-payment. The companies were directed to pay INR 550 crore with 12% interest from 30.09.2018 within four weeks, failing which the corporate insolvency resolution process would continue.
Law Points
- Contempt of court
- Breach of undertaking
- Wilful disobedience
- Administration of justice
- Conditional payment
- Sale of assets
