Case Note & Summary
The Supreme Court of India disposed of contempt petitions filed by Kotak Mahindra Bank Limited (KMBL) against Alchemist Assets Reconstruction Company Ltd. (formerly Dhir and Dhir Asset Reconstruction and Securitisation Company Ltd.) and its officers for alleged wilful disobedience of the Court's order dated 07.05.2012. The factual background involves a borrower company, Coventry Coil-Omatic (Haryana) Limited, which had taken loans from a consortium of banks including ICICI Bank, IDBI, and IFCI. ICICI Bank assigned its debt to KMBL, while IFCI and IDBI assigned their debts to Alchemist. KMBL filed recovery proceedings before the Debts Recovery Tribunal, and Alchemist initiated proceedings under the SARFAESI Act. The Punjab and Haryana High Court, in a Letters Patent Appeal, passed an interim order on 09.08.2011 directing the borrower to pay Rs. 12 crores to Alchemist and Rs. 6.5 crores to KMBL, with sale of land by tripartite agreement. The Supreme Court, on 07.05.2012, modified this order, directing Alchemist to get the land evaluated, give the borrower an option to purchase, and if not accepted, sell the land under Rules 8 and 9 of the Security Interest (Enforcement) Rules, 2002. Out of the sale proceeds, Alchemist was to pay Rs. 4.5 crores to KMBL (in addition to Rs. 2 crores already paid from a deposit) and retain Rs. 9 crores, with surplus deposited in the High Court. Alchemist's review petition was dismissed on 24.07.2012. On 02.07.2014, the Supreme Court disposed of Alchemist's SLP, permitting it to approach the High Court for modification of the interim order. Alchemist sold the property in January 2016 for Rs. 13.5 crores but did not pay Rs. 4.5 crores to KMBL, leading to the contempt petitions. KMBL alleged clandestine sale without notice. Alchemist contended that KMBL was entitled to only 1.88% or 9.76% of the total recoveries and had already been paid Rs. 2 crores, which was in excess. Alchemist also stated that it had filed an application in February 2017 before the High Court for modification, which was pending. The Supreme Court held that the order dated 07.05.2012 was not varied or modified, and Alchemist was bound to obey it. The permission to approach the High Court did not suspend compliance. The Court noted that Alchemist delayed filing the modification application for three years. However, since Alchemist deposited Rs. 4.5 crores during the proceedings, the Court declined to take contempt action. It directed that the deposited amount be paid to KMBL, subject to the High Court's determination of the actual amount due, with KMBL to refund any excess with interest. The contempt petitions were closed.
Headnote
A) Contempt of Court - Wilful Disobedience - Payment of Amount - Supreme Court order dated 07.05.2012 directed Alchemist to pay Rs. 4.5 crores to Kotak Mahindra Bank from sale proceeds of borrower's property - Alchemist failed to pay despite sale, leading to contempt petitions - Held that the order was not varied or modified, and Alchemist was bound to obey until modified - However, since Alchemist deposited the amount during proceedings, contempt action was not taken (Paras 11-12). B) SARFAESI Act - Sale of Property - Compliance with Rules - Sale conducted by Alchemist under Rules 8 and 9 of Security Interest (Enforcement) Rules, 2002 - Kotak Mahindra Bank alleged clandestine sale without notice - Court declined to decide on propriety of sale, leaving it to High Court (Para 7). C) Interim Orders - Modification - Effect of Subsequent Order - Supreme Court order dated 02.07.2014 permitted Alchemist to approach High Court for modification of interim order - Alchemist filed application only in February 2017, after sale and demands - Held that such permission does not suspend compliance with earlier order; Alchemist was bound to obey until modification (Paras 11-12). D) Payment - Adjustment of Amounts - Dispute over Entitlement - Alchemist contended that Kotak Mahindra Bank had already been paid more than its due share - Supreme Court directed payment of Rs. 4.5 crores deposited to Kotak Mahindra Bank, subject to High Court's determination of actual amount due, with refund of excess if any (Paras 13-14).
Issue of Consideration
Whether the alleged contemnors (Alchemist Assets Reconstruction Company Ltd. and its officers) are guilty of contempt of court for failing to pay Rs. 4.5 crores to Kotak Mahindra Bank Limited in terms of the Supreme Court order dated 07.05.2012, and whether the subsequent order dated 02.07.2014 permitting Alchemist to approach the High Court absolves them of compliance.
Final Decision
The Supreme Court closed the contempt petitions, directing that the amount of Rs. 4.5 crores deposited by Alchemist be paid to Kotak Mahindra Bank along with accrued interest, subject to the High Court's determination of the actual amount due. If the High Court finds a lesser amount is due, KMBL shall refund the excess with interest. No contempt action was taken as Alchemist deposited the amount during proceedings.
Law Points
- Contempt of Court
- Wilful Disobedience
- Interim Orders
- Payment of Decretal Amount
- Modification of Orders
- SARFAESI Act
- Security Interest (Enforcement) Rules
- 2002
