Bombay High Court Issues Contempt Notices To Lilavati Hospital's Founder Trustee & Son On HDFC's Plea

The Bombay High Court has issued contempt notices against the founder trustee of Lilavati Hospital – octogenarian Kishore Mehta and his son Rajesh for alleged breach of undertakings given to the court and for allegedly failing to deposit 25% of debt amount, in proceedings filed by HDFC Bank.

HDFC claimed the respondents had deposited only Rs 3.68 crore whereas they were supposed to deposit 25% of Rs. 14.74 crore with 16% interest from 2004.

Justice AS Chandurkar and Justice Jitendra Jain noted that the duo avoided execution of the arrest warrant and automatic dismissal of their appeal, by affirming payment of amount.

“The aforesaid reasons are prima facie sufficient for the Court to proceed in accordance with Rule 1036 of the Contempt of Courts (Bombay High Court) Rules, 1994.”

In 2002, the HDFC Bank had filed proceedings with the DRT-II, Mumbai against Splendour Gems Ltd. (known as Beautiful Diamonds Ltd.) to recover its dues of Rs 14.74 crore from Kishor K. Mehta, his son Rajesh K. Mehta and Rajiv K Mehta. They were guarantors.

The bank pursued the case with vehemence after learning that “defaulted guarantors” as trustees are setting up Lilavati Hospital in Gift City, Gandhinagar, Gujarat.

On 25, October 2023, the Recovery Officer of the Tribunal issued an arrest warrant against the respondents and further ordered attachment of their bank accounts. The recovery officer further granted recovery of due along with 16% interest.

Kishore and Rajesh approached the Bombay High Court against the order. While granting interim relief to the duo on November 8, 2023, the HC directed payment of 25% of the amount of debt “as of today in this Court” within two weeks failing which the petition would stand dismissed.

Accordingly, the court stayed their arrest till the next date on the condition that an affidavit would be filed after the amount was deposited. Subsequently, on an SLP by the Mehtas, the SC extended the time to file the undertaking till December 15, 2023.

By December 27, 2023, the Mehtas deposited Rs 3,68,63,000 following which HDFC approached the HC in a contempt petition.

Senior Advocate Kevic Setalvad for HDFC submitted that the respondents made a made a show of seeking to deposit part of the said amount as if the order dated 08/11/2023 was being complied with and deferred execution of the arrest warrant.

Senior Advocate Anil Anturkar for Mehta submitted that SC's orders were not breached. The condition to deposit 25% of debt amount was only so that the court could consider the writ petition and not a direction to deposit the amount.

Non-compliance of depositing 25% would only result in dismissal of the writ petition, not breach of the order or civil contempt under Section 2(b). Non-compliance of a conditional order does not amount to its breach or civil contempt.

After hearing arguments, the High Court held that a prima facie case for contempt is made out as the amount deposited falls short of the 25% debt amount stipulated in its November 8 order.

It noted that the order had categorically stated any breach of undertaking will be considered as contempt of court. The respondents appeared to have taken undue advantage by seeking deferment of arrest warrant on the basis of part deposit of amount, it said.

Accordingly, the High Court issued notices to the respondents asking them to show cause why contempt action should not be initiated against them for wilful breach of the undertakings. The respondents have been given four weeks to file their reply affidavits.

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