TMI Blog2007 (3) TMI 380X X X X Extracts X X X X X X X X Extracts X X X X ..... APPEAL NO. 366 OF 1998 - - - Dated:- 15-3-2007 - B.N. AGRAWAL, DALVEER BHANDARI AND LOKESHWAR SINGH PANTA, JJ. Mukul Rohtagi, Gopal Jain, R.N. Karanjawala, Ms. Ritu Sharma, P.S. Baghel and Mrs. Manik Karanjwala for the Petitioner. F.S. Nariman, A. Sibal, Barooaha, A. Swarup and Ms. Bina Gupta for the Respondent. JUDGMENT Dalveer Bhandari, J. - This is an unfortunate litigation amongst the most intimate family members where the father has been driven to file a contempt petition against his sons. The parties are intensely involved in inter se litigation for the last two decades. The petitioner, Rama Narang is the father of Ramesh Narang and Rajesh Narang, the respondents herein. Both are the children of his first wife, namely, Motla, whom he divorced in 1963. The petitioner has three children from his second wife Mona, namely, Rohit, Ramona and Rahul. 2. The petitioner has prayed that the respondents herein namely Ramesh and Rajesh are guilty of committing gross contempt of the orders of this Court dated 12-12-2001 and 8-1-2002. 3. The petitioner in this contempt petition has also prayed that the order dated 12-12-2001 may be recalled. The peti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned counsel submitted that Mona Narang had affixed the signatures and the power of attorney holder of Ramona Narang has signed the above document in his presence. This is recorded. Both sides agreed that all the suits can be disposed of in terms of the settlement evidenced by MINUTES OF CONSENT ORDER produced before us. For disposal of those cases and/or for passing decrees in them we have to pronounce the final formal order in terms of the settlement now produced before us. We, therefore, withdraw all the aforesaid suits to this Court under Article 139-A of the Constitution of India. Prothonotory and Senior Master of the Bombay High Court is directed to transmit the records in the above mentioned suits by special messenger to this Court so as to reach the Registry here within ten days from today. The Bench Officer of the Principal Bench of the Company Law Board, New Delhi is directed to forward the records relating to company petition No. 28 of 1992 to the Registry of this Court so as to reach the Registry within ten days from today. All the parties have undertaken before us that they will implement the terms of the MINUTES OF CONSENT ORDER on or before 1-1-2002 and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the consent order incorporated in the proceedings passed by this Court on 12-12-2001. The order dated 8-1-2002 further provided: "All the above are now being disposed of in terms of the minutes of consent order incorporated in the proceedings passed by us on 12-12-2001. The decree will be drawn up in terms of the minutes of the consent order." 11. On the allegation that the two respondents had violated the terms of the orders specially the clauses 3( c ); ( d ) and ( f ) of the consent minutes, this contempt petition has been filed. It is also the case of the petitioner that the violations of the orders had been admitted by the respondents. According to the petitioner the violations amounted to a wilful disobedience of the orders dated 12-12-2001 and 8-1-2002 and were punishable under this Court s power of contempt. 12. This Court issued notice on the petitioner s application on 9-5-2003. This Court initiated contempt proceedings on 15-9-2003 at the behest of the petitioner. It may be pertinent to mention that this Court requested Justice V.A. Mohta, a retired Chief Justice of the Orissa High Court to act as a mediator for settlement of disputes between the parti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eed to by the parties as follows: ( a ).......... ( b ).......... ( c )Rama and Ramesh shall continue to be in joint management and control of NIHL and Rajesh shall continue to be the Permanent Whole Time Director thereof in charge of day-to-day operations/management. ( d )No decision shall be adopted concerning, or affecting the said Company (and its subsidiaries) without the consent of Rama and Ramesh (or Rajesh) in writing. It is further clarified and agreed that save and except as provided herein no prevailing decisions including appointment of Directors/Executives or any other persons shall continue unless Rama and Ramesh (or Rajesh) consent to the same in writing. ( e )All transactions coming in cash shall continue to be remitted in the bank accounts of the Company and all transactions will only be made in the form of cheques and/or as may hereafter be agreed to between Rama and Ramesh (or Rajesh). ( f )All bank accounts of the Company shall continue to be operated jointly by any two out of the three Directors namely Rama, Ramesh and Rajesh and/or as may hereafter be agreed to between Rama and Ramesh (or Rajesh). If the amount of any transaction exceeds Rs. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 12-12-2001, we clarify that the amount of Rs. 10 lakhs mentioned in that clause refers to a transaction and not to the amount of a cheque; meaning thereby, by splitting the amount of any transaction in two or more parts the cheques cannot be issued if the amount of any transaction exceeds Rs. 10 lakhs. ( ii )The respondents have contended that pursuant to a resolution dated 27-2-2002 which provides the ability to delegate the powers to operate the bank account, cheques above the value of Rs.10 lakhs are not required to be jointly signed by Rama and Ramesh/Rajesh. It is submitted that ( a ) it is not possible for a resolution to override the consent terms, and ( b ) the resolution only provides that the powers to "operate" the bank accounts, which is with any two out of the three directors as per the consent terms may be delegated - it does not provide that the authority to sign cheques above the value of Rs. 10 lakhs may be delegated. On the contrary, the resolution specifically provides that "if the amount of any transaction exceeds Rs. 10 lakhs the same shall be undertaken through a cheque jointly signed by Mr. Rama Narang and Mr. Ramesh Narang (or Mr. Rajesh Narang)". ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uring that the application of company funds are always subject to his consent which he can withhold, thereby pressurizing the respondents". It is submitted that the consent terms explicitly contemplate consent of Rama and Ramesh/Rajesh for application of the company s funds and such a statement by the respondents is evidence of their disregard for the letter and spirit of the consent terms. ( iii ) Foreign Travel : Two different cheques totalling approximately Rs. 12.5 lakhs were issued within one day of each other towards the cost of foreign exchange for the same "business trip", for which no consent of Rama Narang was taken. Similarly, foreign trips were undertaken by the respondents and family without approval of the petitioner also in violation of Clause 3( d ), and payments of air tickets and other expenses were made by issuing multiple cheques. The respondents have argued that the said transaction is justified on the basis that Rama Narang has on numerous occasions undertaken foreign visits at the company expense with no objection being raised by the other directors. It is pertinent to note that for each such foreign visit, Rama Narang has sought and obtained the approval ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iew of "decisions concerning or affecting the said company" that explicitly require the approval of Rama Narang pursuant to Clause 3( d ) of the consent terms. ( b ) Holding-back information sought for by Rama Narang. It is submitted that refusal and blocking of information about the company is the most grave and blatant violation of the clause mandating "joint management" and is clear evidence of his complete exclusion from management of the company. ( c ) Settlement with Trade Union was unilaterally undertaken by the respondents and the petitioner was only asked to sign enhance salary cheques which was refused by the petitioner as he was not consulted as being a management decision. ( d ) Other instances of violation include the Leave and License Agreement entered into by Rajesh Narang and opening of Croissant outlets without the consent of the petitioner, Rama Narang. The respondents have sought to justify these actions on the basis of "day-to-day" operations. It is submitted that there are total of only 11 Croissant outlets that have been opened over the course of several years and the opening of a new outlet, and the taking of high-value lease therefrom, is a strat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missions that the petitioner is deriving all possible advantage from an alleged technical breach of the consent terms which too is based on interpretation of the consent terms contrary to the mutual understanding of the parties. 24. The respondents submitted that it was never the intention of the parties that (the company with an annual turnover of over Rs. 120 crores), the petitioner should enjoy a veto power over the company transactions whose value exceeds Rs. 10 lakhs, allowing the petitioner to create a deadlock. 25. The respondents also submitted that the petitioner at no point of time made any complaint regarding the conduct of the respondents either by sending a letter of protest or otherwise. It is also submitted that the petitioner had not objected to purchase of cars, purchase of hi-lifts etc. In the contempt application, the petitioner has highlighted clear breach of clauses 3( d ), 3( c ), 3( e ) and 3( f ). The petitioner submitted that there has been gross violation of clause 3( f ) of the agreement. Clause 3( f ) reads as under: "If the amount of any transaction (read payment/disbursement ) exceeds Rs. 10 (ten) lakhs the same shall be undertaken throug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ordingly steps were taken to cancel the second BMW car for the petitioner. But the respondents failed to give any explanation how the payment for the first BMW car for the use of Ramesh Narang was made. 29. Similarly, the respondents gave explanation for purchase of Toyota Corolla car by the company for the use of respondent No. 2 by allegedly splitting the transaction whose value exceeded Rs. 10 lakhs by issuing two cheques. The explanation is that the respondents gave Rs. 4 lakhs as advance and the balance amount was paid against delivery. 30. The respondents gave explanation regarding their visit abroad that initially they planned to visit UK, Denmark and Northwest and later on Switzerland and Sweden were also added. Therefore, two cheques were given. The respondents also gave an explanation that the fixed deposits holdings of the company totalling approximately Rs. 39 crores have been split by the respondents into smaller deposits of Rs. 9 lakhs each. The explanation given was that circular resolution dated 27-2-2002 authorized any two Directors of the company to jointly open and close bank accounts, for the respondents failed to give any explanation why the fixed depos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f settled law which has been crystallized in a large number of cases of this Court. 35. Black s Law Dictionary, 5th Edition defines undertaking in the following words: "A promise, engagement, or stipulation. An engagement by one of the parties to a contract to the other, as distinguished from the mutual engagement of the parties to each other. It does not necessarily imply a consideration. In a somewhat special sense, a promise given in the course of legal proceedings by a party or his counsel, generally as a condition to obtaining some concession from the court or the opposite party. A promise or security in any form." 36. Osborn s Concise Law Dictionary, 10th Edition defines undertaking in the following words: "A promise, especially a promise in the course of legal proceedings by a party or his counsel which may be enforced by attachment or otherwise in the same manner as an injunction." 37. In M. v. Home Office [1992] 4 All ER 97 at p. 132, the expression undertaking has been dealt with in the following manner: "If a party, or solicitors or counsel on his behalf, so act as to convey to the court the firm conviction that an undertaking is being giv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndertaking is treated as an order so that an undertaking, if broken, would involve the same consequences on the persons breaking that undertaking as would their disobedience to an order for an injunction. It is settled law that breach of an injunction or breach of an undertaking given to a court by a person in a civil proceeding on the faith of which the court sanctions a particular course of action is misconduct amounting to contempt. . . ." (p. 260) 42. In Mohd. Aslam v. Union of India [1994] 6 SCC 442, this Court dealt with the contempt proceedings raising the issues as to the amenability of the State and of its Ministers for failure of obedience to the judicial pronouncements. In this case, the Chief Minister of Uttar Pradesh had made a statement before National Integration Council that the Government of Uttar Pradesh will hold itself fully responsible for the protection of the Ram Janma Bhumi-Babri Masjid structures. Upon this statement of the Chief Minister, this Court had passed an order. However, in the contempt proceedings it was alleged that the orders passed on the basis of the statements made have been deliberately and wilfully flouted and disobeyed by the State ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e tenant is equally binding upon the occupant of the other portion. This Court again had occasion to deal with a case in Bank of Baroda v. Sadruddin Hasan Daya [2004] 1 SCC 360. In that case, the Court clearly observed as under: ". . .The wilful breach of an undertaking given to a court amounts to "civil contempt" within the meaning of section 2( b ) of the Contempt of Courts Act. The respondents having committed breach of the undertaking given to this Court in the consent terms filed on 28-7-1999, they are clearly liable for having committed contempt of court. . .". (p.370) 45. The respondents placed reliance on Babu Ram Gupta v. Sudhir Bhasin [1980] 3 SCC 47. In this case admittedly no application, affidavit or any undertaking were given by the appellant. Therefore, this case is of no assistance to the respondents. In this case, the Court observed that "even the consent order does not incorporate expressly or clearly that any such undertaking had been given either by the appellant or by his lawyer before the Court that he would handover possession of the property to the receiver. In the absence of any express undertaking given by the appellant or any undertaking i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r to keep the petitioner out of the management and control of the company where the amount of transaction exceeded Rs. 10 lakhs, the payment was made by splitting the amount in two or more cheques. This subterfuge was adopted to keep the petitioner out of the control of the management and company. The respondents were, in fact successful in keeping the petitioner totally out of the management and control of the company. This situation carried on for years together. This was absolutely contrary to the letter and spirit of the undertaking given by the parties to this Court. The orders dated 12-12-2001 and 8-1-2002 are based on the undertaking given by the parties. The respondents blatantly and deliberately violated the orders of this Court based on the undertaking given to the Court. Consequently, the respondents are guilty of deliberately flouting and disregarding the undertaking given to this Court. 51. In order to maintain sanctity of the orders of the highest court of the country, it has become imperative that those who are guilty of deliberately disregarding the orders of the Court in a clandestine manner should be appropriately punished. The Majesty of the Court and the Rul ..... X X X X Extracts X X X X X X X X Extracts X X X X
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