The CEO of United Group of Companies, a 350-plus truck fleet in Mississauga, Ont., was sentenced to four days in jail for contempt of court for his involvement in bankruptcy proceedings against trucking firm Canadian Motor Freight (CMF).

The ruling came after a Jan. 13 hearing in which the CEO, Davinder Singh Mangat, successfully had his original 15-day sentence reduced. A similar 15-day sentence against United Group director and founder Makhan Bajwa was dropped, as was a 10-day sentence against Taj Dhaliwal, the company’s manager of logistics and operations.

Meanwhile, CMF officials Imran Hussein, Satbir Singh Kahlon and Sukhdeep Singh Arora were spared jail time, but each ordered to pay receiver Ernst & Young $20,000 after also being found in contempt.

“While I find that these contemnors have not cooperated with the receiver or otherwise purged their contempt, I also find that their contempt, while serious, was not in a category sufficiently serious to require imprisonment,” the judge ruled.

In addition to the four-day sentence against Mangat, he was ordered to pay the receiver $30,000, while Dhaliwal was ordered to pay $5,000. United itself was ordered to pay $213,887.87 to the receiver, to cover costs incurred due to its inability to access affected assets despite a court order.

What went down?

Canadian Motor Freight and a related numbered company in Ontario sought creditor protection under the Companies’ Creditors Arrangement Act (CCAA) last year.

However, they — along with United Group of Companies — are accused of defying court orders granting the receiver access to the company’s assets, which were moved to a United Group yard at 1191 Eglinton Ave. East in Mississauga, Ont.

Ernst & Young told the court its officer was denied access to the yard, and that some of the vehicles had been relocated elsewhere.

“From the inception of these court proceedings, each of the breaching parties have repeatedly taken various steps to mislead and obstruct the receiver, a court officer, from discharging its duties,” the receiver wrote, noting it took six weeks from the time of the order to secure possession of the 50 assets involved.

In its own factum, legal counsel for United Group management acknowledged they were found in contempt for two primary reasons: Dhaliwal refused to grant the receiver access to the United yard and refused to release any fleet assets between Nov. 21 and Nov. 26, 2024; and United advised the receiver that it would have to pay outstanding lien invoices before United released the assets.

The liens in question were held by Edge Transportation, a company related to United Group, and the receiver said they were written after CMF entered creditor protection.

Lessor Mitsubishi HC Capital Canada accused Edge Transport – which shared an address with United Group – of registering liens against six assets to which it laid claim.

“The purported Edge liens were registered well after the effective date of the receivership order and after the significant effort undertaken by the receiver to persuade the United Group to release the fleet assets,” the receiver reported.

“If Edge Transport is not at arm’s length with the United Group, as appears to be the case…then the United Group and its representatives have failed to take critical steps toward purging their contempt of court by failing to voluntarily discharge the purported Edge liens.”

Assets relocated

The receiver notes CMF assets were removed from the United yard without notice, and Dhaliwal refused to tell the receiver how and where they were moved to.

Mangat accepted responsibility for his role in the case but argued company founder and director Bajwa should not be punished, as he had no knowledge of the events and isn’t involved in the day-to-day operations of United Group of Companies.

He “comes to United’s office as it gives him a sense of pride, joy and purpose…[and he] has had no involvement or decision making authority on behalf of United with respect to the contemptuous conduct found by this Honourable Court, but rather such decision making authority was exercised solely by Mangat,” a United Group factum claims.

Additionally, Bajwa has a heart condition and requires medical appointments as a result, and a prison sentence would be detrimental to his health.

“It would not be justified to incarcerate or fine Makhan,” the factum argues.

Mangat also said Dhaliwal should not be punished, as he was only following Mangat’s “misguided directions.” For his part, Mangat took “full responsibility for any actions and omissions that Taj may have engaged in.”

United Management put forth a request that the judge consider a fine and/or community service instead of jail time, and no penalty for founder Bajwa. It also argued that jailing CEO Mangat would disrupt United Group’s – and its 400 truck drivers’ – ability to deliver essential goods such as groceries, health care supplies and building materials.

“The trucking industry as a whole has suffered a staggering number of insolvencies lately such that a punitive fine and incarceration would only increase the chances that United would become the next corporation facing a receivership/insolvency,” the company argued.

It called for fines of $5,000 and a period of community service, in addition to the $50,000 the court already demanded United Group pay to the receiver for its troubles.

And while Mangat has been contrite, and accepted responsibility for his actions, United Group’s factum points out the principals at CMF – also found in contempt of court – have instead “attempted to justify it.” As such, the company argues, they should have to pay a larger portion of the receiver’s costs.

Judge’s decision

Justice W.D. Black said while “I am singularly unimpressed with the conduct of the debtors and debtor management (CMF)…[I] do not find their conduct to warrant time in jail.”

The CMF representatives have 60 days to pay their $20,000 in costs to E&Y; failure to do so could result in incarceration.

“For United Management, in the case of Mr. Mangat, I find that a period of incarceration of four days is appropriate, and that the sentence may be served on consecutive weekends so as not to interfere with Mr. Mangat’s management role at United,” the judge ruled.

“I find United and United Management’s contempt sufficiently serious as to warrant and require incarceration, but that a brief incarceration will be sufficient to send the messages of deterrence and denunciation required here.

“I decline to incarcerate Mr. Dhaliwal or Mr. Bajwa. In the case of Mr. Dhaliwal, it was a close call, but I am prepared to accept that he was ‘following orders’ from management, and accept his acknowledgement that he regrets his actions. I am also taking into account that Mr. Dhaliwal is relatively young, and has a young family.”

The judge agreed that founder/director Bajwa was not involved in any wrongdoing.

UPDATE: This story has been updated to reflect that Mangat has appealed the sentencing, with the appeal scheduled to be heard April 1. “The basis for the appeal is that the sentencing imposed by the judge was disproportionate to the act of contempt. We believe the sentence was unfair and does not appropriately reflect the circumstances of the case,” a lawyer representing Mangat said in an email.