Supreme Court contempt judgement sends strong message to foreign investors

Updated: February 25, 2019 3:29:02 PM

The message across to the investing community of the world is this: do business in India and courts are here to take care and protect your interests. Have no fear.

Supreme Court, Supreme Court  contempt judgement, RCom, foreign investors, ericson india private limited, indian legal system, RTLThe direction was given in a Contempt plea initiated by Ericsson for failure on the part of the Chairmen of the three defaulting companies to comply with its undertaking given earlier to the Supreme Court to pay the sum of Rs. 550 Crores with interest within the stipulated period.

By Alangad Raghunath

Recently, the Supreme Court of India has delivered a judgment in a contempt jurisdiction, wherein the Court directed the chairmen of the defaulting companies namely RCom, RTL and RITL to pay to Ericsson India Pvt. Ltd. an amount of Rs. 550 Crores with interest, within four weeks from the date of the judgment. The direction was given in a Contempt plea initiated by Ericsson for failure on the part of the Chairmen of the three defaulting companies to comply with its undertaking given earlier to the Supreme Court to pay the sum of Rs. 550 Crores with interest within the stipulated period.

In fact, what makes the above judgment remarkable and exceptional is not the rationale of the judgment or the correctness of it in finding a party guilty of contempt of court which is not so uncommon and atypical but the message it sends across to the investing community of the world that India is now a safe place to do business with and the contracts, if reneged would be swiftly looked into by the Courts of law in India.

The message across to the investing community of the world is this: do business in India and courts are here to take care and protect your interests. Have no fear.

Earlier, the big companies of the world were circumspect and chary of doing business with India and Indians particularly due to the painful and tortuous path of having to go through the labyrinth of the Indian legal system, which is notorious for endless delays and inefficiencies. A party to a business contract shudders to think of the remedy of having to approach the Indian legal system to have his rights enforced in case of a breach or renege. Consequently, a prospective foreign investor in India would avoid the legal system of India by totally avoiding any business activity altogether.

The recent apex court judgment, mentioned above, deserves appreciation for more reasons than one. Firstly, the judgment swiftly concludes the contempt petition in no time and without the usual delays which courts in India are infamously known for. The judgment disposes off a contempt petition filed within a year, which is swift even by the standards of the developed nations.

Secondly, the judgment is unambiguous and clear. It refused to be drawn in to the quicksands of clever arguments of a hair splitting nature as to what constitutes ‘willful disobedience’ of judgment or undertaking given to court, by a party to a litigation.

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Thirdly, the judgment cites an English case of Attorney-General v. British Broadcasting Corporation, [1980] 3 All ER 161 [House of Lords], which held that:

“The description “contempt of court” no doubt has an [sic] historical basis but it is nevertheless most misleading. Its object is not to protect the dignity of the courts or the judges but to protect the administration of justice…….”

Fourthly, it correctly distinguishes as to what constitutes disobedience of an order in contrast to what may be the bona fide or genuine belief of the alleged contemnor as to the order. By this judgment, it puts paid to the commonplace argument that the contemnor never committed contempt of court as he believed the order said something otherwise.

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Fifthly and most importantly, and what can be viewed as the crux of the judgment, is the direction to pay the contracted amount of Rs. 550 crores within four weeks and the imprisonment of three months is contingent upon the non-payment.

This direction recognises the soul of business. A party who alleges violation of a contract in a business is not approaching courts primarily to ensure that the contravening party undergoes a sentence or suffers ignominy but is more interested that the loss caused to him is sufficiently compensated in terms of money to ensure that, the promoters and in case of public limited companies, its shareholders are not short-changed.

While the judgment under discussion deserves appreciation for the above reasons, hopefully, it would also encourage multinational companies and foreign institutions to do more business and dealings with India. While it is well known that India is a huge market with great potential to generate both profit to the investors and employment to Indians, what made the foreigners chary was the maze of the Indian bureaucracy and the judicial system. While the Indian bureaucracy has taken huge strides in the ‘ease of doing business’ in recent years, it is hoped that the present judgment will do its bit to untangle the labyrinth of the Indian judicial system.

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Hopefully, the foreign investor may not give much heed to the famous words of Woody Allen: “While the lamb may lie down with the lion, the lamb shouldn’t count on getting a whole lot of sleep.”Expectantly, the lamb (in this case the foreign investor) can get a sound sleep with the lion (in this case represented by the Indian bureaucracy and judiciary).

(The author is Advocate on Record, Supreme Court. Views expressed are personal.)

 

 

 

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