Pallav Sheth v. Custodian and Others
"Section 20 of the Contempt of Courts Act regulates, without abrogating, the contempt powers of courts of record under Articles 129 and 215; proceedings are initiated in time if an application is filed, or notice is issued suo motu, within one year, and where the contempt was concealed by fraud the year runs from its discovery."
Issues Before the Court
- (i)
Whether contempt proceedings against the appellant were barred by Section 20 of the Contempt of Courts Act, 1971, under which no court shall initiate proceedings for contempt after one year from the date on which the contempt is alleged to have been committed?
- (ii)
Whether Parliament can limit the contempt powers of the Supreme Court and the High Courts under Articles 129 and 215, and when contempt proceedings are 'initiated'?
- (iii)
Whether, where the contempt was concealed by fraud, the period runs from the date of its discovery?
Law & Rules Applicable
- (i)
Contempt of Courts Act, 1971, Section 2(b) (civil contempt) and Section 20 (limitation for actions for contempt).
- (ii)
Constitution of India, Article 129 and Article 215 (the Supreme Court and the High Courts as courts of record).
- (iii)
Limitation Act, 1963, Section 17 (effect of fraud); and Supreme Court Bar Association v. Union of India on the inherent contempt jurisdiction of courts of record.
Application to Facts & Circumstances
In 1994 the Special Court constituted under the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992 passed a consent decree of about ₹51.49 crores against the appellant and restrained him from transferring his assets. He paid ₹2 crores and defaulted. Information reported by the income tax authorities in May 1998 showed that he had set up benami companies and transferred assets in breach of the restraint. A contempt application was filed in June 1998, and the Special Court held him guilty of civil contempt and sentenced him to one month's simple imprisonment and a fine.
Writing for the Court, Kirpal J. held that the Special Court has the same power as a High Court in respect of contempt of itself. The inherent power of the Supreme Court and the High Courts under Articles 129 and 215 cannot be taken away by legislation, but Parliament may regulate its exercise, and Section 20 is to be read harmoniously with those Articles, so that it applies to them as well.
Proceedings are 'initiated' for the purpose of Section 20 when an application for contempt is filed, or when the court issues notice on its own motion, within one year of the contempt; a narrower reading requiring the court itself to have taken action within the year was not accepted.
The principle of Section 17 of the Limitation Act applies to contempt proceedings: a party who has acted fraudulently cannot take the benefit of limitation, which runs from the discovery of the fraud. The contempt had been concealed until May 1998, and the application was filed within a year of its discovery.
Conclusion & Ruling
- (i)
The appeals were dismissed, the finding of contempt and the sentence were upheld, and the appellant was directed to surrender.
- (ii)
Section 20 of the Contempt of Courts Act applies to the Supreme Court and the High Courts; proceedings are within time if an application is filed, or notice issued suo motu, within one year of the contempt.
- (iii)
Where the contempt has been concealed by fraud, the one-year period runs from its discovery.
Authorities Cited
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- Supreme Court Bar Association v. Union of India, [1998] 2 SCR 795 : (1998) 4 SCC 409Case brief →Full text of Supreme Court Bar Association v. Union of India on Indian Kanoon