RELIANCE COMMUNICATION LIMITED v. STATE BANK OF INDIA & ORS

W.P. (C)NO. 845 OF 2018

FACTS-

In this case, three contempt petitions were filed by Ericsson India Private Limited against Reliance Communications Ltd., Reliance Telecom Ltd. and Reliance Infratel Ltd. (the petitioners). These petitions were filed on the ground that the Petitioners had defaulted in making a payment of Rs 550 Crores to the Respondents even when affidavits had been filed by the representatives of the Petitioners, both in front of the National Company Law Appellate Tribunal (NCLAT) and the Supreme Court for making the payments in a time bound manner.

The controversy started when Ericsson who had been hired by one of the Petitioner Reliance communications for carrying out certain works on its behalf approached the Petitioner for making payments of its outstanding payments.

The payments were not made and as such Ericsson served a notice on the Petitioner for making the payments as per the law enshrined under the Insolvency and Bankruptcy Code, 2016 (IBC).

The petitioners refuted the notices and rejected the same by making claims that Ericsson had provided poor services but an understanding was reached between the two parties for making the payments. However, the same were not made by the Petitioners and as such Ericsson terminated its agreements with the Petitioners and again requested for the payments.

Ericsson then filed an application before the National Company Law Tribunal for starting the insolvency and bankruptcy proceedings against the Petitioner and the same were allowed by the NCLT.

Aggrieved by the proceedings, the Petitioners approached the NCLAT and the proceedings were stayed by the NCLAT on the ground that the Petitioners agreed to settle the dispute with Ericsson for an amount of Rs. 550 Crores and the Petitioners also gave an undertaking before the NCLAT in an affidavit form for making the payments within 120 days.

The Petitioners then approached the Supreme Court for getting the insolvency proceedings before the CLT quashed in light of the settlement arrived at before the NCLAT.

The Supreme Court initially ordered that the timeline that was laid down by the NCLAT of 120 days was to be followed and the payment to Ericsson was to be made by 03.09.2018.

In the meanwhile, two applications were filed by the Petitioners for increasing the time limit for making the payments to Ericsson. The first application was allowed and time was granted however, the Supreme Court refused to further increase the time limit and ordered the Petitioners to make the payments by 15.12.2018.

On the failure to make the payments another contempt petition was filed by Ericsson and the third contempt petition was also filed subsequently.

ISSUES-

The primary issue before the Supreme Court of India was the veracity of the Undertakings filed by the Representatives of the Petitioners both before the Supreme Court and the NCLAT.

The undertaking that was given before the NCLAT only said that the Petitioners would pay the amounts to Ericsson whereas the undertaking that was given by the Petitioners in the Supreme Court said that they would make the payment when the assets of the company would be sold.

Thus the Supreme Court was baffled with an issue where the administration of Justice was being hampered.

PETITIONER’S ARGUMENTS-

It was contended by the Petitioners that the Assets of the company could not be sold due to certain objections by the Department of Telecommunications. They further stated that there was no breach of the undertakings and the undertakings were in consonance with the orders of the NCLAT and the Supreme Court.

They further submitted that since the assets could not be sold by the Petitioners, thus the insolvency proceedings were to start afresh and then Ericsson could take its debts back by acting as a creditor.

They also stated that they had deposited some percentage of the amounts (which they received as Income Tax Returns) to be paid to Ericsson with the Registrar of the Supreme Court.

RESPONDENT’S ARGUMENTS-

It was contended by Ericsson that the NCLAT order and the Supreme Court order never said that the amount of RS 550 crore that was to be paid was conditional on the assets or the spectrum of the Petitioner getting sold.

It was further argued that no bonafide attempts were made by the Petitioners to pay the amount and the various communications made by the Petitioners stating that the amount shall be paid and also the undertakings which were furnished were in contravention of the orders of the NCLAT and the Supreme Court, thus the Petitioners were liable for contempt.

Judgment-

The Supreme Court found the Petitioners guilty of hampering with the administration of Justice by giving two different undertakings before the NCLAT and the Supreme Court. It was found that the Petitioners had malafidely included the conditional clause to wither away from its liability of paying its liability.

The Supreme Court took strict cognizance of the nefarious conduct of the Petitioners and found them guilty of being in contempt of its orders as the Petitioners had failed to make good its promises even after the time was extended by the Supreme Court.

As such it directed the Registry of the Court to disburse the sum of Rs. 118 Crore deposited by the Petitioners to Ericsson.

It further directed the Petitioners to pay the outstanding amount of Rs. 453 Crore (inclusive of interest) to Ericsson within a week. It further penalized the Petitioners and directed them to pay Rs. 1 Crore each to the Supreme Court Legal Services Committee (SCLSC) for being in contempt.

It was also made clear by the Supreme Court that in case the Petitioners defaulted in making the payment to Ericsson the chairman or person who gave the undertaking would have to undergo three months imprisonment and in case the Petitioners made a default in making the payment to the  SCLSC, then they would have to undergo an imprisonment of one month.