Touton Far East PTE Ltd v Shri Lal Mahal Ltd & Ors

This is the resumed hearing of an application by which the claimant seeks an order giving permission to issue writs of sequestration against the defendants and to commit to prison for contempt of court the second to seventh defendants by reason of their breaches of a worldwide freezing injunction.

At the hearing of the application last Friday, the first defendant company, Shri Lal Mahal Limited, was represented by solicitors and counsel. At that hearing I made findings that the company is in breach of its disclosure obligations under the worldwide freezing injunction in two respects which amount to contempts of court. The first is that the company has wilfully disobeyed an order to make and file an affidavit giving information about its assets. The second is that the company has wilfully failed to disclose, and has indeed deliberately withheld, details of its assets that it was ordered to provide.

On that occasion I adjourned the case for sentence in part so as to give the first defendant an opportunity to reconsider its position and to decide whether, even at this late stage, it will take steps to purge its contempt and comply with the court's order. In the event, the solicitors and counsel who represented the first defendant at the hearing last Friday have since withdrawn from the case and are no longer acting. The company has done nothing to purge its contempt and has said nothing to indicate that it has any intention of complying with the court's order. As a result of the withdrawal of its legal representatives, both the company and the individual defendants are not represented and have not appeared today.

I have been taken carefully by Mr Karia QC through the evidence. He has, in addition to the evidence which was before the court last week, produced a further witness statement from a Mr Sid Kapur, a representative of GCS Risk, a firm of investigators retained by the claimant. In that statement, Mr Kapur describes how on 2 February 2016 he personally attended offices of a company called Mala Impex Proprietary Limited in New South Wales, Australia. From that visit he learned from a director of Mala Impex information about imports which that company has been making into Australia of Basmati rice purchased from the first defendant in India. I am satisfied on the basis of that evidence and the evidence contained in an earlier report provided by GCS Risk that there have been shipments made since the worldwide freezing injunction was issued of rice to Australia on at least three occasions, which each had a value of more than $20,000. In particular, such shipments were made on 17 March 2016, 29 March 2016 and 10 August 2016. The significance of the figure of $20,000 is that the worldwide freezing injunction contains a provision which orders the first defendant to disclose to the claimant any disposal of any asset which exceeds the value of $20,000. I am satisfied on the evidence and find it proved to the criminal standard of proof that there have in respect of those three shipments been additional breaches of the worldwide freezing injunction by reason of the failure of the company to comply with its obligation to disclose the transactions.

In relation to each of the individual defendants, in order to establish a contempt of court the claimant needs to prove, first, a breach of the court's order; second, that at the time of the relevant breach the defendant was aware of the court's order; and third, that the defendant is responsible for the breach - which is established by showing that the defendant was at the relevant time either a director as a matter of law or a de facto director of the company which was the subject of the order. Fourth, it is necessary to show that the committal proceedings have been served on the relevant defendant so that it has had due notice of this application and has had the opportunity to appear or to be represented before the court today. I have already dealt with the matters which constitute breaches of the court's order and have explained those breaches which I have found to be established. I will address now in relation to each of the individual defendants the further matters which the claimant needs to prove.

I start with the second defendant, Mr Prem Garg. There is ample evidence to show that he is, if not the controlling mind, then the person with primary control over the first defendant company. He was formerly a director of the company. He resigned from that office on 11 May 2015, but there is clear evidence to show that he still acts de facto, not only as a director, but as the managing director of the company. In particular, he is held out on the company's own website as the owner of the Shri Lal Mahal Group and as its managing director. He has also been referred to as such in various reports in Indian newspapers which I have been shown, and he continued to be shown as a director notwithstanding his purported resignation in a report obtained in July of last year based on corporate documents which were available on the official website of the Ministry of Corporate Affairs in India.

In addition, there is evidence given by Mr Espir, who is charged with responsibility for seeking to recover the monies owing to the claimant, of a conversation with Mr Prem Garg which took place on 10 March 2016. On that date, which was the day before the return date for the worldwide freezing order in London, a conference call took place between them. Mr Garg made various threats during that conversation, including a threat to lodge a criminal complaint against the claimant in India – a threat which was, as I will mention later, subsequently carried out. It was clear from the tenor of the conversation that Mr Prem Garg was the person chiefly responsible for the affairs of the first defendant.

There is also evidence that Mr Prem Garg was aware of the order of the court from a very early stage. In particular, the order was emailed to his email address and couriered to the company's office in New Delhi at which he works on 26 and 29 February 2016 respectively. The order was also served on the English solicitors who were on the record as acting for the first defendant at that time. Mr Prem Garg was plainly aware of the order at the time of his telephone conversation with Mr Espir on 10 March 2016. To add to that, he was personally served with a copy of the order in India on 10 July 2016.

There is also evidence which demonstrates that he has had notice and is aware of the committal application. An attempt was made to serve it personally on him on 21 November 2016. He refused to accept the document and requested that it be given to his “London lawyers”, which can only have been a reference to the solicitors who were, until this week, acting for the first defendant. On 2 December 2016, a lawyer acting for Mr Prem Garg in India corresponded with the claimant's solicitors indicating that Mr Prem Garg was aware of the proceedings and all the documents relied on for this application were emailed to that lawyer in India on 8 December 2016. Although Mr Prem Garg has not been personally served with the committal application, the only reason why that has not happened is because he refused to accept the documents. In those circumstances, and when he is plainly perfectly well aware of the application, it is just to dispense with the requirement of personal service, and I do so.

It is plain from the fact that, as I have indicated, Mr Prem Garg is the person chiefly responsible for managing the company that he is also responsible, and indeed bears principal responsibility, for the wilful breaches of the order which I have already identified. I accordingly find that he is in contempt of court in the same three respects as the company, namely: (1) wilfully disobeying the order of the court to make and file an affidavit giving information about the company's assets; (2) deliberately withholding details of the company's assets that it was ordered to provide; and (3) failing to disclose the fact that the company had made at least three shipments of goods with a value in excess of $20,000.

I shall come to the question of sentence at the end of this judgment after I have dealt with each of the other individual defendants.

I turn next to the third defendant, Mrs Anita Garg. She is the wife of Mr Prem Garg, the second defendant. She has been de jure managing director of the company since 1 July 2014. As such, she plainly also has a responsibility for managing its affairs, including ensuring the company's compliance with the freezing order. She was notified of the order and served with it by the same means and at the same time as her husband. In particular, copies of the order were emailed to her email address on 26 February 2016 and couriered to the company's office on 29 February 2016 for her attention. In addition, she was personally served with a copy of the freezing order on 10 July 2016. I am satisfied that she has also had due notice and is aware of these committal proceedings. The committal application and supporting documents were sent to her by email on 10 November 2016. Copies of all the relevant documents were left both at the company's office and at the residence at which she lives with her husband on 21 November 2016 and this was repeated on 7 January 2017. I find that she is also in contempt of court in the same respects and for the same reasons as Mr Prem Garg.

The fourth defendant, Mr Devasish Garg, is the son of the second and third defendants. He was at one time a director of the first defendant company; however, he resigned from that position on 19 November 2015. In order to demonstrate that he is in contempt of court, it is therefore necessary for the claimant to show that he was at a relevant time a de facto director of the company. A de facto director for this purpose means someone who has assumed the status and function of a director so as to make himself responsible as if he were one (see, albeit in a different context, Smithton v Naggar [2015] 1 WLR 189, para 33). In that regard, a relevant factor is whether the person concerned has been held out by the company as a director.

Mr Devasish Garg received the order by email and courier, as I am satisfied, on 26 and 29 February 2016 and was personally served with a copy of it on 14 September 2016. He has also, I am satisfied, received due notice of these committal proceedings. In his case, however, I do not consider that there is sufficient evidence to prove to the necessary criminal standard that he has assumed the status and function of a director of the company since the time of his resignation in November 2015. He has not been held out on the website of the company nor on any other documents that I have been shown as a director and the only evidence of his responsibility would appear to be evidence that he has been seen attending the company's offices on a number of occasions. That, in my view, is far from sufficient to show that he has acted as a de facto director. I therefore find in relation to him that the allegations of contempt of court have not been made out.

The fifth defendant, Mr Harnarain Aggarwal, appears from various documents to be the father of Mr Prem Garg, the second defendant. He is the second largest shareholder of the first defendant company, the largest shareholder being Mr Prem Garg. He is also the chairman of the company and a director and is held out as such on the company's website. It is clear in those circumstances that he has a responsibility for the company's affairs and had a responsibility to ensure its compliance with the court's order. The evidence shows that a copy of the freezing order was couriered to the company's office in New Delhi marked for his attention on 29 February 2016. I would not be satisfied on the strength of that alone that he was aware of the terms of the order. However, there is evidence showing that he was personally served with a copy of the order on 14 September 2016 and so he has plainly been aware of it since then.

Copies of the documents in the committal proceedings were left at the company's New Delhi office for his attention and at his residence on 21 November 2016, and again on 7 January 2017. By reason of that evidence and of the evidence showing his family relationship with the second and third defendants, I am satisfied that he is aware of these proceedings. The obligations under the freezing order were continuing obligations. I find accordingly that he is in contempt of court by reason of the company's failure to comply with the order requiring disclosure of information about its assets as from 14 September 2016.

The sixth defendant, Mr Anil Nair, has been a director of the first defendant company since 19 November 2015, the date when Mr Devasish Garg resigned. He does not work at the New Delhi office, but at the company's warehouse in Gandhidham in Gujurat. He was responsible for carrying out the threat made by Mr Prem Garg to make a criminal complaint about the conduct of the claimants. He did so in Gujurat in, it would appear, July 2016: a copy of that complaint is in evidence. He made allegations to the police to the effect that Mr Espir had hired a member of the mafia to murder members of Mr Prem Garg's family if they did not pay an arbitration award said to be in an amount of US$ 605 million. Needless to say, those allegations were entirely fictitious. The making of those allegations is not itself a breach of any order of the court, but it is evidence that Mr Nair was aware of the court's order, at least by the time that he was making that complaint to the police. At all events, he was personally served with a copy of the freezing order on 27 August 2016. He was subsequently served on 30 November 2016, again personally, with copies of the committal application and supporting evidence. By reason of his position as a director of the company, I am satisfied that he also bears responsibility for the wilful disobedience of the court's order – in his case at least since 27 August 2016, which is the date by which I can be satisfied that he was aware of all the terms of the order, including the disclosure obligations.

The last defendant, Mr Ganesh Gulati, has been at least until very recently the company secretary of Shri Lal Mahal Limited. He was, I am satisfied, aware of the court's order from the outset. It was sent to his email address on 26 February 2016. He was subsequently personally served with the order on 12 July 2016. Importantly, he was the individual who made a witness statement dated 17 March 2016 on behalf of the company and in purported compliance with the order for disclosure of information about the company's assets. I have already found that that witness statement was incomplete and false in a number of respects. Those included, in particular, the failure to disclose any information about bank accounts held by the company. The statement also failed to disclose details required by the order about property and other assets owned by the company. The respects in which the information was deficient must have been known to Mr Gulati when he made that witness statement. He was plainly aware of the terms of the order with which he was purporting to comply and plainly knew that the statement that he made did not comply with the court's order.

Mr Gulati was sent copies of the committal application and supporting evidence by email on 10 November 2016 and was personally served with those documents on 10 January 2017. He did after that correspond with the claimant's solicitor, Mr Walker, first of all by sending him a letter dated 18 January 2017 and, secondly, by a further email sent on 24 January 2017. In those documents he claimed, first of all, that he has resigned from the post of company secretary with effect from 5 January 2017 and now has no connection with the company. He has also asserted, although without providing any further information or details to support it, that he has previously acted under duress on orders and instructions given to him by Mr Prem Garg with "a threat to spoil my career". Whilst it may be relevant in considering the appropriate sentence that Mr Gulati has now resigned from his position as company secretary and, if his evidence be true, has no continuing responsibility for its affairs, this does not in any way detract from his responsibility for the deliberate disobedience of the court's order from the time that he became aware of it almost immediately after the order was made.

I accordingly and for those reasons find that the claimant's case has been established against all of the individual defendants with the exception of Mr Devasish Garg, the fourth defendant.

I turn now to the question of sentence. I deal first with the position of the first defendant company. Against the company the claimant seeks an order authorising the issue of a writ of sequestration of the company's assets. That writ only runs within the jurisdiction of this court and there is no evidence that the company has at present any assets within the court's jurisdiction. I do not consider, however, that that makes the issue of a writ of sequestration futile. In the case of Vis Trading Co Ltd v Nazarov [2015] EWHC 3327 (QB), on an application seeking committal to prison for contempt of court against an individual who was not within the jurisdiction of the court, Whipple J said at paragraph 58:

I respectfully agree with the points made in those comments and consider that they have equal application in relation to the issue of a writ of sequestration against the first defendant's assets. The court cannot in this case just stand by and allow the deliberate and flagrant breach of its orders to go unmarked. A writ of sequestration outstanding against the first defendant in this country will not be a meaningless order. It is an order which I consider just and appropriate in the circumstances of this case. It is an order which I shall make.

I turn to the individual defendants whom I have found in contempt of court. In deciding whether an order of committal to prison is appropriate, a list of relevant considerations was set out by Popplewell J in the case of Asia Islamic Trade Finance Fund Ltd v Drum Risk Management Ltd & Ors [2015] EWHC 3748 (Comm) at para 7(6). Those considerations include: (a) whether the claimant has been prejudiced by the contempt and whether the prejudice is capable of remedy; (b) the extent to which the contemnor has acted under pressure; (c) whether the breach of the order was deliberate or unintentional; (d) the degree of culpability; (e) whether the contemnor has been placed in breach of the order by reason of the conduct of others; (f) whether the contemnor appreciates the seriousness of the deliberate breach; (g) whether the contemnor has co-operated; and (h) whether there has been any acceptance of responsibility, any apology, any remorse or any reasonable excuse put forward.

Those considerations were taken into account by Flaux J in the case of Navig8 Chemical Pools Inc v NU Tek HK Pvt Limited, Sharma, Karthikeyan [2016] EWHC 1790 (Comm), when imposing orders of committal in a case which, like this, involved breaches of orders to disclose assets made as part of a worldwide freezing injunction. As Flaux J observed at paragraph 34:

The disobedience of the court's order in this case has plainly been deliberate on the part of those defendants who are directors or de facto directors of the company and have known of the terms of the court's order. It has persisted over many months. There has been no attempt whatever, apart from the wholly inadequate witness statement made by Mr Gulati in March 2016, to comply with the court's order regarding disclosure of assets. I have no doubt that all the defendants appreciate the seriousness of the matter, not least because they have all had clear notice not only of the order, which contained a penal notice concerning the consequences of breach, but also of this committal application. They have in each case either been served with or received by other means the documents relied on in support of the committal application which make plain the allegations made and the seriousness of those allegations.

Save in the case of Mr Gulati, no attempt of any kind has been made to put forward any excuse for the deliberate breaches of the court's orders. What chiefly differentiates the defendants, as it seems to me, is their respective roles in the management of the company and their degree of responsibility for the company's affairs.

It is plain, as I have already indicated, that the person who has primary responsibility for the affairs of the company and hence for ensuring compliance with the court's order is and has at all times been Mr Prem Garg, the second defendant. His contempts of court have been further aggravated by the making of the criminal complaint which he threatened to make, and which I am sure he was responsible for causing Mr Nair to make, which advanced gratuitously false allegations in what was plainly a further attempt to defeat and frustrate compliance with the outstanding judgment. Although he is outside the jurisdiction and there is no evidence to indicate that at any time soon he is likely to set foot in it, the pertinent observations of Whipple J which I quoted earlier apply in his case.

In relation to Mr Prem Garg, the contempt of the court's order is such that it is necessary to impose a prison sentence and the sentence that I impose in his case will be one of 18 months.

The third defendant, Mrs Anita Garg, the wife of Mr Prem Garg, is the current managing director of the company. Although it is her husband who is plainly the main driving force of the company, the evidence indicates that her role is much more than merely nominal and she attends the company's offices. Her disobedience of the court's orders is equally serious and I am satisfied that in her case too only a prison sentence would be appropriate. It should, however, be a lesser sentence than that of Mr Prem Garg, the driving force of the company, and in her case I consider that nine months is the appropriate sentence.

Mr Aggarwal, the chairman of the company, is – as I infer from the fact that he holds that position and from the fact that he is the second largest shareholder in the company after his son, Mr Prem Garg – the second most important person in the company structure. In his case again, for the same contempts of court, a prison sentence is necessary. I bear in mind, however, that I have only been satisfied that he was aware of the terms of the court's order from 14 September 2016 when he was first personally served with it. In those circumstances, I consider that, in his case, nine months is again the appropriate sentence.

The sixth defendant, Mr Anil Nair, has been a director, as I said earlier, since 19 November 2015. He was personally served with the order on 27 August 2016 and I have taken that date as the starting point for his responsibility. Although a director, he does not work at the company's main office in New Delhi and he appears to be a person further down the chain of command who acts on instructions from Mr Prem Garg. That does not relieve him of responsibility in his capacity as a director for procuring compliance with the court's order. It is plain that he has made no attempt to do so and nor has he sought to put forward any excuse to the court. In his case I consider that a prison sentence is again necessary and that the appropriate sentence is one of six months' imprisonment.

Finally, Mr Ganesh Gulati, the former company secretary, is the person who made a knowingly false and incomplete statement of disclosure of the company's assets in March 2016. I am prepared to accept his evidence, at least to the extent that I find that it has not been established that he still remains an employee or company secretary of the first defendant. That means that the sentence imposed on him will not have any potential coercive effect as to the future in bringing about any future compliance with the order. Nevertheless, he bears a high degree of responsibility for the past breaches of the order which I have found amount to contempts of court. In the circumstances I find that a prison sentence is again necessary and appropriate in his case and that the sentence should be one of nine months' imprisonment.

I have been asked to authorise the issue of writs of sequestration in relation to the individual defendants. There is no evidence that they have any assets within the UK. I was shown a passage in the criminal complaint in India which indicates that Mr Devasish Garg has been educated as a student in this country. However, he is no longer here and I have not found in relation to him that the case of contempt of court has been established. I do not consider that issuing writs of sequestration would serve any additional purpose in circumstances where I have made orders for committal. That being so, I refuse the application for the issue of writs of sequestration against the individual defendants.