The Bombay High Court has issued contempt notices against the founder trustee of Lilavati Hospital – 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 asserted that the respondents had only deposited Rs 3.68 crore, whereas they were obligated to deposit 25% of Rs. 14.74 crore, along with 16% interest from 2004.

Justice AS Chandurkar and Justice Jitendra Jain observed that the duo avoided the execution of the arrest warrant and the automatic dismissal of their appeal by affirming the payment of the 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, HDFC Bank initiated legal proceedings with DRT-II, Mumbai against Splendour Gems Ltd., also known as Beautiful Diamonds Ltd., in pursuit of recovering outstanding dues totaling Rs 14.74 crore from Kishor K. Mehta, his son Rajesh K. Mehta, and Rajiv K. Mehta, who acted as guarantors.

The bank intensified its pursuit of the case upon discovering that the "defaulted guarantors," acting as trustees, were involved in establishing Lilavati Hospital in Gift City, Gandhinagar, Gujarat. On October 25, 2023, the Recovery Officer of the Tribunal issued arrest warrants against the respondents and additionally ordered the attachment of their bank accounts. Furthermore, the recovery officer granted permission for the recovery of the outstanding dues along with 16% interest.

Kishore and Rajesh approached the Bombay High Court against the order.  Granting interim relief to the pair on November 8, 2023, the High Court directed them to pay 25% of the current debt amount within two weeks in court. Failure to comply would result in the dismissal of their petition. Consequently, the court suspended their arrest pending the next hearing, provided they submitted an affidavit after depositing the specified amount. Later, upon a Special Leave Petition (SLP) filed by the Mehtas, the Supreme Court extended the deadline for submitting the undertaking until December 15, 2023.

On December 27, 2023, the Mehtas deposited Rs 3,68,63,000. Following this, HDFC filed a contempt petition in the High Court. Senior Advocate Kevic Setalvad, representing HDFC, argued that the respondents attempted to create an appearance of compliance with the order dated November 8, 2023, by depositing a portion of the specified amount. He contended that this action was merely a show to delay the execution of the arrest warrant.

Senior Advocate Anil Anturkar, representing Mehta, argued that the orders of the Supreme Court were not violated. He contended that the requirement to deposit 25% of the debt amount was not a directive to deposit the amount itself, but rather a condition for the court to consider the writ petition. Anturkar emphasized that the failure to deposit the specified amount would only lead to the dismissal of the writ petition and not constitute a breach of the order or civil contempt under Section 2(b). He further asserted that non-compliance with a conditional order does not inherently amount to a breach or civil contempt.

After considering the arguments, the High Court concluded that a prima facie case for contempt had been established, as the amount deposited by the Mehtas fell short of the 25% debt amount specified in its November 8 order.

The court highlighted that its order explicitly stated that any breach of the undertaking would be regarded as contempt of court. It observed that the respondents seemed to have exploited the situation by attempting to delay the execution of the arrest warrant based on a partial deposit of the amount.

In line with its decision, the High Court issued notices to the respondents, instructing them to demonstrate why contempt action should not be taken against them for willfully breaching the undertakings. The respondents have been granted a period of four weeks to submit their reply affidavits.