Court holds that mere board resolution authorizing loan security by charge or pledge insufficient to establish contempt without proof of actual alienation or encumbrance
In a significant ruling delivered on September 23, 2026, the Karnataka High Court (Division Bench) dismissed a civil contempt petition filed by Morgan Securities and Credits Private Limited against BPL Limited and others. The petition alleged willful disobedience of a court order dated July 10, 2020, which restrained the judgment debtor, BPL Limited, from alienating or encumbering its properties until further orders.
The petitioner contended that the respondents had violated this injunction by passing a resolution in an Extraordinary General Meeting (EGM) on November 11, 2025, authorizing the Board of Directors to secure loans through creation of charges or pledges on the company's tangible and intangible assets. The petitioner argued that such authorization, coupled with an increase in share capital diluting their controlling interest, amounted to contempt of the court's order.
However, the Division Bench comprising Justices Jayant Banerji and Tara Vitasta Ganju found that the petitioner failed to produce any concrete evidence showing that any properties of BPL Limited had in fact been alienated, charged, or pledged in breach of the court order. The court emphasized that a mere board resolution authorizing loan security measures does not equate to actual alienation or encumbrance of assets. Furthermore, the lists of properties and trademarks annexed to the petition were insufficient to establish the alleged breach since no transactions related to those assets were demonstrated.
The court reiterated the principle that contempt jurisdiction requires clear material evidence of disobedience and cannot be invoked on apprehension or inference alone. In the absence of any documents evidencing violation of the restraint order, the contempt petition was closed. Nonetheless, the court granted liberty to the petitioner to file a fresh contempt petition should they secure documentary proof of any breach of the July 10, 2020 injunction in the future, subject to compliance with legal requirements.
This judgment highlights the Karnataka High Court's insistence on strict proof requirements in contempt proceedings, ensuring that allegations of court order violations are substantiated by tangible evidence rather than speculative assertions.
Bottom Line:
Contempt - Alleged disobedience of order restraining judgment debtor from alienating or encumbering its properties - Mere resolution passed in EGM authorising Board to secure loan by creation of charge/pledge is not sufficient to constitute contempt in absence of material showing actual alienation or encumbrance of properties covered by restraint order - Contempt petition closed with liberty to file afresh on securing documents evidencing breach.
Statutory provision(s):
Contempt of Courts Act, 1971
