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Judgment
Rohit Kapoor, Member (Judicial):
The instant application has been filed by the applicant seeking initiation of contempt proceeding against the Respondent.
The contentions /arguments of by and on behalf of the applicant are summarised as hereunder:-
A. Order dated 30th June 2022 and facts leading thereto
2.1 Pursuant to initiation of insolvency against SREI Infrastructure Finance Limited (“SREI”), on 22nd October 2021 the applicant submitted its claim for INR 50,43,58,533 as a financial creditor. The said claim arises from three separate arbitral awards which have been upheld by the Hon’ble Supreme Court. [Pg. 173 of CC].
2.2 The contemnor without providing any reason failed to collate/ include the claim of the applicant in the list of creditors. Such refusal to collate/include the claim was challenged before this Hon’ble Tribunal in the said Application.
2.3 During the pendency of the said Application, the contemnor purported to reject all claims of the applicant by its email dated 5th February 2022. The same stand was taken in the reply to the said Application. The Contemnor attempted to sustain such rejection on the basis that upon verification of supporting documents and records of SREI, the applicant had no surviving claim and hence its claim was not admitted. Pertinently, the so-called verification included disputing the payment of interest under the arbitral awards. [Pg. 589 @ 605 of CC] This was dealt with in the rejoinder therein.
2.4 After consideration of the said matter, this Hon’ble Tribunal by the said Order set aside the rejection of the applicant’s claim, having regard inter alia to the 2 fact that in doing so the contemnor had adjudicated the claims under the garb of verification. Consequently, the contemnor was directed to collate the claim of the applicant within one week. [Pg.638 @ 647-648 of CC]
B. Facts following the Order
2.5 On 4th July 2022 the said Order was communicated to the contemnor with a request to take necessary steps in terms thereof [Pg. 649 of CC]. In response thereto on 7th July 2022 [Pg. 657 of CC] the contemnor took a stand that it had ‘collated’ the claim and was in process of verifying the same based on the information and records available with SREI. The mendacious and perfunctory stand taken by the contemnor was rebutted by the applicant in its email dated 17th July 2022. [Pg. 658 of CC]
2.6 As a counterblast to the applicant’s letter dated 17th July 2022, the contemnor filed an application on 25th July 2022 seeking clarification of the Order, being IA. No. 734 of 2022. Thereafter, the contemnor took no steps to move this application. It is clear that this application was a hopeless attempt to cover the contemptuous actions of the contemnor.
2.7 Thereafter, on 30th July 2022, the Administrator released an updated list of creditors including the name of the applicant, however with no amount under the column ‘admitted claim’. [Pg. 661 of CC] This act of the contemnor is tantamount to the same finding that had earlier been set aside by the Hon’ble Tribunal by its Order. In any event, even non-ascribing of any amount cannot be regarded as ‘collation’. Also, the contemnor himself does not aver it to be an act of collation.
2.8 Since, the contemnor had deliberately and wilfully failed to comply with the Order, the applicant filed the instant contempt application around 4th September 2022. It was only thereafter that the contemnor moved its application for clarification.
The contentions /arguments of by and on behalf of the Respondent are summarised as hereinbelow:-
3.1 As will appear from the Order dated 30th June, 2022, which discussed the rival contentions of the parties. It will appear therefrom that it was submitted on behalf of the Administrator that Candor was not entitled to any further claim as its entire claim in terms of three arbitral awards had already been paid (Order, para 4). It was submitted that Candor’s claim for interest under the aforesaid awards was not payable as applications had been made by Candor itself – first, for modification of the awards and secondly, for additional awards under Section 33 of the Arbitration and Conciliation Act, 1996. As the said Act of 1996 contemplates the passing of only a single award, it is only from the date of disposal of the applications under Section 33 that the aforesaid three arbitral awards can be said to have attained finality, and it is only thereafter that interest under the awards became payable. It was further submitted that such interest stopped running as soon as deposits were made in court to secure the awarded amounts, which could thereafter not be retrieved by the award debtor. Several judgements (both of High Courts and of the Hon’ble Supreme Court) were cited on behalf of the Administrator. The propositions of law as laid down in the judgement cited on behalf of the Administrator were not disputed either by Candor or by this Hon’ble Tribunal.
3.2 In view of the arguments advanced on behalf of the Administrator, this Hon’ble Tribunal recorded (Paras 6.2 and 6.3 of the Order) that-
“6.2 - It is not in dispute that the Applicant was awarded with three arbitral awards against the Financial Service Provider. Now the matter to be adjudicated is whether the Applicant is a creditor of SIFL or not. The Applicant has filed petition for execution of the Arbitral Awards in full which is still pending. Once, moratorium kicks in, all the pending proceedings come to a standstill and so have the execution proceedings. On perusal of the awards, it is clear that the Applicant may be a creditor of SIFL.
6.3 - The Administrator has passed its decision on the claim of the Applicant by presiding over issues that have to be dealt with in a judicious manner. The function of the Administrator are similar to that of the Resolution Professional and it is a well settled proposition that the duty of the Resolution Professional is to collect, collate and admit the claims of the creditors. The Administrator does not have the power to adjudicate upon the claims”.
3.3 This Hon’ble Tribunal did not as such decide whether Candor was in fact entitled to any claim. This is, inter alia, clear from para-6.2 of the Order where this Hon’ble Tribunal observed that – “On perusal of the awards, it is clear that the Applicant may be a creditor of SIFL”.
3.4 Upon observing that Candor “may be a creditor” of SIFL, in para-6.4 of the Order this Hon’ble Tribunal proceeded to direct the Administrator to collate the claims of the Applicant within one week from the date of the Order. It was, however, not clarified in the Order as to what would be the scope of the expression ‘collate’.
3.5 In this context it may be noted that while Section 18 (1) (b) of the Insolvency and Bankruptcy Code, 2016 (“IBC”), provides that the interim resolution professional (“IRP”) shall - “receive and collate all the claims submitted by creditors to him”, Regulations 13 and 14 of the IBBI (Insolvency Proceedings for Corporate Persons) Regulations, 2016 (“CIRP Regulations”), require the IRP to verify and to determine the amount of the claim. The said Regulations 13 (1) and 14 are reproduced hereunder:
“13. Verification of claims –
(1) The interim resolution professional or the resolution professional, as the case may be, shall verify every claim, as on the insolvency commencement date, within seven days from the last date of receipt of the claims, and thereupon maintain a list of creditors containing names of creditors along with the amount claimed by them, the amount of the claims admitted and the security interest, if any, in respect of such claims and update it.
Determination of amount of claim –
(1) Where the amount claimed by a creditor is not precise due to any contingency or other reason, the interim resolution professional or the resolution professional, as the case may be, shall make the best estimate of the amount of the claim based on the information available with him.
(2) The interim resolution professional or the resolution professional, as the case may be, shall revise the amounts of claims admitted, including the estimates of claims made under sub-regulation (1), as soon as may be practicable, when he comes across additional information warranting such revision”.
3.6 A duty has thus been imposed by the CIRP Regulations on the Administrator to verify every claim, and also to determine the amount of claim; if the same is not precise due to any contingency or “any other reason” based on the information available with him. As the Administrator is clearly a custodian of the assets of the Corporate Debtor and in such capacity acts as a trustee, he is duty bound to ensure that claims which do not appear to be payable upon verification or determination of the amount of the same due to any contingency or other reason, are in fact not paid. The word ‘collate’ must as such be read in conjunction with Regulations 13 and 14 of the CIRP Regulations.
3.7 In such circumstance and as the Administrator had in fact already collected and collated Candor’s claims (even before the passing of the Order), upon taking into account the applications filed by Candor under Section 33 of the Act of 1996, the dates of their disposal, the dates of the deposits made by Candor in court to secure the sums awarded, and the amounts already paid to Candor by SIFL the Administrator filed the Clarification IA inter alia seeking as follows-
“(a) Order dated June 30, 2022, passed by this Hon’ble Tribunal in Interim Application (IB) No. 86/KB/2022 in C. P. (IB) No. 295 of 2021, be clarified in terms of the directions issued to the applicant in paragraph 6.4 to the extent that the same merely directs the Applicant to collate the claims of the Respondent”.
The Clarification IA was filed on 25 July 2022. Candor filed its Contempt Application long thereafter on or around 2 September 2022.
3.8 In the circumstances as aforestated the Administrator was clearly justified in seeking clarification of the Order. Accordingly, pending adjudication of the Clarification IA there could be no question of the Administrator having acted in contempt of the said Order.
3.9 It is settled law that pending appeal against an order, applications filed alleging contempt of such order are not to be proceeded with unless it is shown that the appeals filed have not been or are not being diligently pursued. It is also settled law that when an order is ambiguous and admits of two or more interpretations, there can be no contempt of the same. In the instant case the Administrator had sought clarification of the Order long before the filing of the Contempt Application. It is clear therefrom, that in the absence of any clarity as to what the expression ‘collate’ would mean, particularly in the context of the duties of an RP under Regulations 13 and 14 of the CIRP Regulations, the Administrator sought appropriate clarification with regard thereto. There can as such be no question of any disregard of the Order, leave alone any wilful, deliberate violation of the same.
3.10 It may be noted in this regard that the standard of proving contempt is that of a criminal proceeding. Contempt must be established beyond reasonable doubt; and powers under this special jurisdiction should be exercised by courts cautiously and sparingly and in the larger interest, after examining the true effect of the alleged contemptuous conduct. Reference in this regard may be made to the decision of the Hon’ble Supreme Court in the case of Mrityunjoy Das v. Sayed Hasibur Rahaman reported in (2001) 3 SCC 739 and Ram Kishan v. Tarun Bajaj reported in (2014) 16 SCC 204.
3.11 It has been held by a Division Bench of the Calcutta High Court in the case of Arvind Kumar Newar & Another vs SS Kothari & Others reported in 2021 SCC OnLine Cal 1506 (paragraphs 56 to 65) that the court must be satisfied about the guilt of the alleged contemnor beyond reasonable doubt. Contempt being in the nature of quasi-criminal proceedings, the allegations should be strictly construed. The standard of proof to establish contempt is akin to a criminal proceeding, and that if only a clear case of contumacious conduct not explainable otherwise arises, that the contemnor must be punished. Punishment under contempt law is called for only when the disobedience is deliberate. Contempt being a quasi-criminal proceeding, the standard of proof required to be shown was the same as in a criminal proceeding and the breach complained of would have to be established beyond reasonable doubt. Only such directions which are explicit in the judgment or order or are plainly self-evident ought to be taken into account for the purpose of consideration as to whether there had been any disobedience or wilful violation of the same. In order to punish a contemnor, it has to be established that the disobedience is wilful. This requires an assessment of the mind of the alleged contemnors that is, whether the contemnors knowingly, intentionally, consciously, calculatedly and deliberately with full knowledge of consequences committed a breach of the order. There has to be a calculated action with evil motive. Referring to the case of V.G. Nigam v. Kedar Nath Gupta reported in (1992) 4 SCC 69 the Division Bench of the Hon’ble Supreme Court held that it would be rather hazardous to impose a sentence for contempt in exercise of contempt jurisdiction on mere probabilities. If the doubt persists, the alleged contemnors are entitled to have the benefit or advantage of such a doubt having regard to the nature of the proceeding.
3.12 For the aforesaid reasons, the Contempt Application deserves to be and should be dismissed and the order dated 30 June 2022 should be appropriately clarified by this Hon’ble Tribunal.
Analysis and Findings
Heard Ld. Counsel for the parties and perused the record.
It is an admitted position that the applicant submitted its claims to the Administrator/Respondent herein in terms of its communication dated 22nd October, 2021 which has been annexed at page 173 of the instant application.
That vide communication dated 7th July, 2022 at page 657 of the instant application, the Administrator informed the applicant “to collate the claims of the Applicant within one week from the date of this order…”
Pursuant to the above order kindly note that we have collated the claim and are in the process of verifying the same based on the information and records available with the Company. We will keep you updated.”
The applicant, as is brought out hereinabove is aggrieved of rejection of its claims by Respondent through its email dated 5th February, 2022. It is contended that respondent adjudicated the claims in the garb of verification.
Our attention has also been drawn to page 661 of this instant application, which is an updated list of creditors dated 30th July 2022 including the name of applicant. Vide this list, claim of applicant has been admitted to ‘NIL’. It is stated that this in itself amounts to disregard of orders pronounced on 30th June, 2022 by this Adjudicating Authority, particularly paragraph 6.3.
While perusing the record, we have noted at paragraph 6.3 and the same is reproduced hereinafter at page 662:-
“The said party had submitted its claim as financial creditor which was not admitted based on the verification of the facts and documents pertaining to the matter. Thereafter, the said party filed an application before the Hon’ble NCLT seeking an order, inter alia, directing the Administrator to include the claim of the party in the creditor’s list. The Hon’ble NCLT vide its order dated 30th June 2022 directed the administrator to collate the claim of the said party. The Administrator has in compliance with the said order, already collated the claims as required under the provisions of the law. The Administrator has further filed a clarification application before the Hon’ble NCLT seeking clarification of the order dated 30th July,2022 and the matter is presently sub-judice”.
(emphasis supplied)
This is a part of the above contents reproduced and also are a part of the consolidated list of creditors prepared by the administrator at page 661 of this application.
Before proceeding further, we need to note admitted propositions of law Rama Narang Vs. Ramesh Narang & Others, (2021 SCC Online SC 29) Para 79 & 82 while dealing with an application for contempt. It is an established position that contempt proceedings are not like execution proceedings and also, issues on merit are beyond the scope of contempt proceedings.
Keeping in view the above position of law, even assuming if we find that the administrator collated the claims and not be to the satisfaction of applicant or may be erroneous at the most but this will not constitute an act of contempt. This will not fall within the scope of initiation of contempt proceeding.
The next arguments of the Ld. Counsel for the applicant that the respondent has adjudicated the claims in the garb of verification despite there being a direction in para 6.3, the administrator does not have the power to adjudicate upon the claims and the act of filing clarification application by respondent was merely in reaction to applicant’s letter dated 17th July, 2022.
While carefully reading the reproduced portion hereinabove, we find that while dealing with the claims of applicant, the administrator has mentioned that the claims of the applicant were not admitted based on verification of the facts and documents pertaining to the matter.
Further the administrator has noted that the order dated 30th June, 2022 passed by this Adjudicating Authority for collating the claims is in accordance with the provisions of law. Thus, it cannot be said that the administrator did not collate the claims in terms of directions of this Adjudicating Authority. Even if erroneous, applicant may have some other remedies but at least it does not have remedy to file the contempt petition.
As far as the arguments of Ld. Counsel regarding adjudication is concerned, we are again of the opinion, even if shown, the administrator has not exercised its power according to the provisions of IBC, it will not in itself amount to an act of contempt. Be it erroneous or vitiated for any reasons but at least cannot be said to be an act of contempt as such.
For the foregoing reasons, we find that this contempt petition is not maintainable and therefore the same is hereby rejected. It is made clear that this finding is limited to the preposition of the Contempt and is not a finding of the admissibility or otherwise of the subject claim.
Certified copy of the order may be issued to all the concerned parties, if applied for, upon compliance with all requisite formalities.