Case Note & Summary
The case arises from a dispute between Daiichi Sankyo Company Limited (the petitioner) and the respondents in Special Leave Petition (Civil) No.20417 of 2017, which was referred to international arbitration. An arbitral award was passed on 29.04.2016 in Singapore, holding the petitioner entitled to receive approximately Rs. 3500 crores from the respondents. The award was challenged both in Singapore and India, but the objections were dismissed, and the award became final. The petitioner filed enforcement proceedings in the Delhi High Court. During these proceedings, the respondents gave multiple assurances to the court that they would protect the petitioner's interest and not alienate or encumber their assets. Specifically, on 24.05.2016, senior counsel Kapil Sibal assured that the petitioner's interest would be protected. On 23.01.2017, senior counsel Harish N. Salve reiterated this assurance. On 06.03.2017, senior counsel Dr. Abhishek Manu Singhvi and Rajiv Nayar stated that if any change was proposed in the status of unencumbered assets, the respondents would first apply to the court. On 19.06.2017, senior counsel for OIL and RHC submitted that they were not seeking to change the status of any unencumbered asset and that the shareholding as disclosed would not be affected. Despite these assurances, the respondents transferred their shares in Fortis Healthcare Limited to a third party, IHH Healthcare Bhd., without seeking court permission. The petitioner filed a contempt petition alleging willful breach of the undertakings. The Supreme Court examined the facts and found that the respondents had indeed breached the assurances given to the court. The court held that the breach was willful and deliberate, amounting to civil contempt under Article 129 of the Constitution and Section 2(b) of the Contempt of Courts Act, 1971. The court rejected the respondents' defense that the assurances were not recorded in the court orders, noting that the assurances were made in court and recorded in subsequent orders. The court also rejected the argument that the transfer was necessary for business reasons, holding that the respondents should have sought court permission before acting. The court sentenced the contemnors to imprisonment for three months and imposed a fine of Rs. 2000 each, with further imprisonment in default of payment of fine. The court also directed that the contemnors be taken into custody forthwith.
Headnote
A) Contempt of Court - Civil Contempt - Breach of Undertaking - Article 129 of the Constitution of India, Section 2(b) of the Contempt of Courts Act, 1971 - The alleged contemnors gave repeated assurances to the Delhi High Court that they would not alienate or encumber their assets and would maintain the status quo of their shareholding in Fortis Healthcare Limited. Despite these assurances, they transferred their shares to a third party, thereby breaching the undertakings. The Supreme Court held that such breach amounts to willful disobedience of the court's orders and constitutes civil contempt. (Paras 4-11, 20-25) B) Arbitration - Enforcement of Foreign Award - Section 48 of the Arbitration and Conciliation Act, 1996 - The foreign arbitral award dated 29.04.2016 was challenged but upheld, becoming final. The award holder sought enforcement in Delhi High Court, and the respondents gave assurances to protect the award amount. The court held that the breach of these assurances during enforcement proceedings is a serious matter affecting the efficacy of the arbitral process. (Paras 1-3, 20-25) C) Contempt of Court - Sentencing - Section 12 of the Contempt of Courts Act, 1971 - The contemnors were found guilty of civil contempt. The court considered the gravity of the breach and the amount involved (Rs. 3500 crores) and sentenced them to imprisonment for a period of three months and imposed a fine of Rs. 2000 each. (Paras 26-30)
Issue of Consideration
Whether the alleged contemnors committed civil contempt by breaching the undertakings and assurances given to the Delhi High Court regarding protection of assets during enforcement of a foreign arbitral award.
Final Decision
The Supreme Court held the alleged contemnors guilty of civil contempt and sentenced them to imprisonment for a period of three months and imposed a fine of Rs. 2000 each, with further imprisonment of one month in default of payment of fine. The court directed that the contemnors be taken into custody forthwith.
Law Points
- Civil contempt
- Breach of undertaking
- Enforcement of foreign award
- Article 129
- Contempt of Courts Act
- 1971
- Section 2(b)
- Section 12
- Arbitration and Conciliation Act
- 1996
- Section 48
