Supreme Court Overturns High Court’s Contempt Ruling in Corporate Dispute Case

The Supreme Court of India recently delivered a significant judgment in the case of Rajan Chadha & Anr. versus Sanjay Arora, overturning the Delhi High Court’s decision in a contempt matter arising from a corporate dispute. The case involved complex issues of arbitration, contempt of court, and judicial propriety. Below is a detailed narrative of the case, the arguments presented, and the court’s reasoning.

The dispute originated from a Memorandum of Understanding (MoU) dated 21st December 2019 between shareholders of RBT Private Ltd., a fabric trading company. The appellants (Rajan Chadha and Rajiv Chadha) held 51.36% shares, while the respondent (Sanjay Arora) held 25%. The MoU provided for transfer of shareholding and dispute resolution through arbitration. When conflicts arose regarding alleged siphoning of company assets and default in loan payments, the matter went through arbitration and subsequently reached the courts.

The key issue before the Supreme Court was whether the second High Court judge could overturn a previous judge’s finding of contempt. The first High Court judge on 5th December 2023 had held: “I am of the view that respondent No.1 is guilty of intentionally and malafidely violating the orders dated 11.06.2020 and 01.07.2020 and thus, has committed contempt of the orders of the Court.” However, a subsequent judge on 3rd July 2024 discharged the contempt notice, finding no willful disobedience.

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The Supreme Court, comprising Justices B.R. Gavai and Augustine George Masih, strongly criticized this judicial approach. The bench observed: “When one Judge of the same Court has taken a particular view holding the Respondent to be guilty of contempt, another Judge could not have come to a finding that the Respondent was not guilty of contempt.” The court emphasized that the proper recourse for the respondent was to file an appeal under Section 19 of the Contempt of Courts Act, not seek reconsideration from another judge of the same court.

The judgment clarifies important principles of judicial hierarchy and propriety. The Supreme Court quashed the High Court’s later order and remanded the matter for reconsideration from the stage of the December 2023 order. This decision reinforces the binding nature of judicial findings and maintains the sanctity of the contempt jurisdiction.

Petitioner Name: Rajan Chadha & Anr..
Respondent Name: Sanjay Arora.
Judgment By: Justice B.R. GAVAI, Justice AUGUSTINE GEORGE MASIH.
Place Of Incident: Delhi.
Judgment Date: 23-04-2025.
Result: allowed.

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