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2016 (2) TMI 536 - BOMBAY HIGH COURT

2016 (2) TMI 536 - BOMBAY HIGH COURT - TMI - Contempt proceedings for not obeying court orders - Remedy for getting the orders or the Court executed - Fight for control over the various entities under the Supermax group which is supposedly the 2nd largest manufacturer of razor blades and allied products in the world. - family fight, between the father and one son on one side and the other son on the other side. - Held that:- contempt proceedings and execution proceedings, are two separate remedi .....

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ve to take recourse to other proceedings known to law. - one cannot use contempt jurisdiction for enforcement of money decrees.

The conduct of Respondent no.3 and Respondent no.4 actually makes a mockery of the judicial process. Their conduct extends beyond the parties to the action and affects the interest of the public in the administration of justice. Their conduct is specifically intended to impede and prejudice the administration of justice. Judiciary is the bed rock and hand mai .....

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the disobedience of its order, he does not use those proceedings to get the order executed but merely brings to the notice of the court the objectionable conduct of the party disobeying the order and seeks action against that party for committing contempt of court. There is a clear distinction taken - having order executed and bringing to notice of the court willful disobedience on the part of the guilty party and seek to have him punished for contempt of court.

Offender to undergo si .....

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ek Adke, Mr.Vaibhav Charalwar & Mr.Palkit Sharma i/by M/s.Legasis Partners, Mr.Ankit Lohia with Mr.Ranjit Shetty i/by Argus Partners JUDGMENT:- 1 The petitioner has approached this court with an allegation against the respondents that the respondents are guilty of having willfully disobeyed a direction contained in an order dated 21.10.2013 (copy whereof is at Exhibit-A to the petition), passed in Company Application (L) No.70 of 2013 in Company Appeal No.15 of 2013 (the said order). The por .....

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bound to comply with the said order. 3 The respondent nos.1 to 3 have been represented by Shri Sancheti i/by M/s.Legasis partners and respondent no.4 was represented by Shri Ankit Lohia i/by Argus Partners. 4 At the outset it should be mentioned that no formal order of admitting the petition or court notice to the alleged Contemnors was issued. I asked a specific question to the counsel appearing for the respondents and they stated that they have instructions to waive such a notice and they wou .....

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) - Interim Order dated 21st October, 2013 has not been continued in the final Order dated 12th / 20th August, 2014; A(ii) - It is well settled that once a final order is passed, the Interim Order merges into the final Order and the Interim Order (including all directions thereunder) automatically cease to operate; A(iii) - Contempt Petition for an interim order is not maintainable once the interim order has ceased to exist / have any force in law; A(iv) - Ratio in Bagasarwalla has no applicatio .....

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and not against Respondent Nos. 1 to 3; B(ii) - In the absence of SPCPL, no finding of breach of order (much less contempt) can be rendered. Hence, contempt proceedings not maintainable; B(iii) - The Petitioners have failed to prove the contempt under provisions of Contempt of Courts Act, 1971 includings Section 12(4) and 12 (5); B(iv) - The allegation / charge of contempt cannot be framed on the basis of the order dated October 21, 2013; moreover though the order dated December 9, 2013 is anne .....

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oner cannot rely on the documents, not annexed to the Contempt Petition to support its submission; E - Contempt proceedings cannot be invoked and is not intended to be used for enforcement of money decree or directions / orders for payment of money. 7 The additional defence that respondent nos.1 & 2 have taken is that they, any way ceased to be the directors of VMPL w.e.f. November, 2014 and therefore, there cannot be any contempt against them. 8 As regards respondent no.4, the counsel adopt .....

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contain any direction against Respondent No.4 is also clear from the Order dated 9th December, 2013 which holds Respondent Nos.1 and 2 liable for non-compliance of the directions contained in the Order dated 21st October, 2013 ; (v) SPCPL is not a party either to the proceedings which led to the Order dated 21st October, 2013 being passed or to the present proceedings ; (vi) The petitioner has failed to make out any case for holding Respondent No.4 responsible for any purported non-compliance b .....

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empt of Court to refuse or neglect to do an act required by a judgment or order of the Court within the time specified in the judgment or order, or to disobey a judgment or order requiring a person to abstain from doing a specified act, or to act in breach of an undertaking given to the Court by a person, on the faith of which the Court sanctions a particular course of action or inaction. In such a case, a judgment or order against an individual or an undertaking given by an individual may, subj .....

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ach of these appeals, there was company application. The contest in the appeals primarily was between Rakesh Malhotra (R3) on one side and on the other side his father Rajender Kumar Malhotra (petitioner), mother of respondent no.3 and wife of petitioner Mrs.Veena Rajender Malhotra, and brother of respondent no.3 and son of petitioner Rajeev Malhotra and Rajeev's wife Kunika R.Malhotra. In short, respondent no.3-Rakesh Malhotra against rest of the family. The fight was for control over the v .....

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be transferred to a newly incorporated company under the control of respondent no.3. The Indian companies were to receive substantial funds in consideration. Various business restructuring agreements were entered into including some supplementary agreements. Respondent no.3 was given sole authority to represent the entire family in all the transactions. The principal object of the proposed restructuring was to allow the petitioner and his younger son an exit from full time involvement in the af .....

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irectors of the petitioner held Indian companies became employees of the entities controlled and held by respondent no.3. These directors of the petitioner's companies were not giving any information to the petitioner though he controlled over 99% shares because those directors were employed by the entities controlled and held by respondent no.3. They refused to divulge any information. This, in short, was the cause for the petitioner to file petition before the Company Law Board alleging op .....

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tent that it appointed an observer-cum-facilitator. Certain findings in the company applications filed by respondent no.3 for reference to arbitration were also challenged. This is how the matters came before this court. 11 While hearing the company application taken out in each of the said 4 company appeals viz. Company Appeal No.15 of 2013, 16 of 2013, 17 of 2013 and 18 of 2013, the said order dated 21.10.2013 came to be passed in which this court had directed SPCPL to pay an amount of 12% on .....

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aring of those appeals the consistent stand that the respondent no.3 took was that he was in control of SPCPL. Even in the affidavits in reply filed by respondent no.3 in those appeals the stand of the respondent no.3 was that he was incharge and management of SPCPL. There were matters pending even in London between the parties where the stand of the respondent no.3 was he was given complete control of SPCPL. In the 4 appeals in which the said order was passed, SPCPL was not a respondent but the .....

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ears that the directors are acting against the applicant at the behest of respondent no.6........... 12 It is also necessary to reproduce paragraphs 14 to 17 along with paragraphs 18 and 21 of the said order in order to comprehend as to how the directions in paragraphs 18 and 21 came to be passed. They read as under :- 14. Both the learned counsel for the parties have advanced detailed arguments as regards the amount of ₹ 67.5 crores which according to the applicant comes to respondent no. .....

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r the applicant stated that there has been a mistake and the amount of ₹ 67.5 crores has not been kept aside in Fixed Deposit but in view of supplementary BTA was entered into on 18 March 2011 which modified the earlier BTA dated 30 December 2010, there was no responsibility to pay the amount of ₹ 67.5 crores to the respondent no.1. The supplementary agreement dated 18 March 2011 was sought to be produced by way of an affidavit. The learned counsel for the applicant vehemently oppose .....

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it is the hostile directors who have signed an agreement which takes way the benefit which was supposed to accrue to respondent no.1. Whatever may be the merit of the amended BTA and it is admissibility at this stage, it appears that the directors who are not under control of the applicant, who is owner of almost 100% shares of the company, have been signed certain documents, which record that the dues which were to be received by the respondent company are now not needed to be paid. The appreh .....

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ompany which is reflected in the bank accounts. The matter was adjourned for respondent to produce such record. On the next date, the learned counsel for the respondent conceded that the statement made on instructions was incorrect and no such interest is paid. 17. As per the agreement, the Supermax Personal Care Private Limited is liable to pay 12% interst to Vidyut Metallics Private Limited on the amount of 67.5 crores. This fact as stated above, has also been acknowledged by the respondent an .....

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sets, there is a need to provide further safeguard to ensure that companies retain their substratum till the appeals are heard. 18. However, in view of the injunction granted, at this stage I am not inclined to appoint an administrator to take away the complete control from the respondent. I am however of the opinion that an independent observer is necessary to ensure the smooth functioning of the company till disposal of the appeals. Furthermore the amount of 12% on ₹ 67.5 crores under th .....

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all documents and records of the companies, with copies, as required ; (b) That the statutory liabilities of the respondent no.1 Companies are duly discharged and any proceedings in respect thereof are duly defended/prosecuted ; (c) The litigations involving the companies or its properties or assets are duly defended and/or appropriate steps are taken for protection of the properties or assets of the companies. Legitimate fees of the advocate are paid for that purpose. The observer will disburse .....

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to be paid thereunder by SPCPL to VMPL. If no job work activities are being conducted make a report to the Court for consideration of further directions to be passed in respect of ₹ 67.50 crores ; (g) That the other liabilities of the Companies are disclosed to the observer for ascertaining the correctness thereof ; (h) The respondents shall pay a sum of ₹ 1.36 crores or such other amount as required as the pre-deposit amount in regard to the Income Tax Appeal filed by VMPL for A.Y. .....

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ndent on instructions that the interest of 12% on the amount of ₹ 67.50 crores as per the agreement is being paid to respondent no.1 company which is reflected in the bank accounts.......... ; On the next date, the learned counsel for the respondents conceded that the statement made on instructions was incorrect and no such interest is paid. In paragraph-15 it is recorded as ….........Abhishek Kumar is presently the director of SPCPL and at that relevant time, he was a director of V .....

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e of ₹ 67.50 crores and the interest thereon. It is for that reason the court directed SPCPL to pay the amount of 12% on ₹ 67.5 crores under the agreement even though SPCPL was not a party. The respondents have represented to the court that they are in control of SPCPL. It is also necessary to record that SPCPL did not challenge this direction of the single Judge. 13 Coming to deal with defences of Respondent no.1 to Respondent No.3 : A (i) : Interim order dated 21.10.2013 has not be .....

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ased to exist upon passing the final order dated 12-20/8/2014. I am afraid, I cannot accept this position because in paragraph-139, it is stated it is clarified that except for those 2 orders, there will be no interim order in place as regards any of the 4 respondents-companies . SPCPL was not a respondent to the company appeals and the respondents herein also are not companies. Therefore, this submission of the respondent nos.1 to 3 is of no value. 14 A(ii) : It is well settled that an interim .....

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im orders ceased to exist. Therefore, on the date of the initiation of the contempt proceedings against the said interim order dated 21.10.2013, all interim orders including the said order and the order dated 9.12.2013 and all directions thereunder have ceased to exist since the same have merged into the final order dated 12-20/8/2014. As such contempt proceedings against such interim order does not lie. The counsel relied on (2009) 11 Supreme Court Cases 479Prem Chandra Agarwal Vs. Uttar Prades .....

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same subject matter at a given point of time. Once the matter is finally disposed, it is that decree or order of final disposal that is final, binding and operative and all other interim order merges into that final order passed by the court. 15 The respondents also submitted that the contempt petition for an interim order is not maintainable once the interim order has merged with the final order [ point A (iii)] and the only remedy if at all the petitioner had, was to have filed the contempt pe .....

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eme Court of Minnesota, USA delivered on June 30, 1944, 15 North Western Reporter, 2nd Series 127Richardson Vs. Richardson. 16 It is very difficult to accept the proposition of the respondents in as much as it would give rise to a very unacceptable situation. At interim stage the court would direct the party to deposit certain amounts in court. The party does not deposit the amount and after many years the main matter comes up for hearing and is disposed and the party who had to deposit the amou .....

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It is for the respondents to come forth and request for an extension of time or make an application to be relieved from their obligations to comply with the order. In a situation like the present case, the question of the direction of deposit getting merged with the final order does not arise. In the final order the court has disposed of the appeals wherein the petitioner had raised allegations of oppression and mismanagement in respondent companies in the appeals. The court while disposing has .....

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s. That conclusion on para 139 had no bearing to the respondents herein or SPCPL. Moreover, even if there is a merger, that would not absolve the respondents from their consequences of failure to comply with the order while it was in force. Contempt is between the court and the alleged contempnor. When the court asked the respondents as to why they had not complied with the directions contained in the order dated 21.10.2013, the respondents cannot cock a snook and tell the court now that the app .....

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with regards to the doctrine of merger, the same have been considered by the Apex court in (2010) 11 SCC 153Commissioner of Central Excise, Delhi Vs. Pearl Drinks Limited. The Apex Court has held that the doctrine of merger is not a doctrine of rigid and universal application. Paragraphs-11, 12, 16 & 17 read as under :- 11. Appearing for the appellant Mr.Gourab Banerjee, learned Additional Solicitor General argued that the Tribunal had fallen in a palpable error in applying the doctrine of .....

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in Mauria Udyog Ltd. v.CCE to contend that the doctrine of merger is not a doctrine of universal application and that the difference in the subject-matter or the content of the proceedings could take a decision inter se parties out of the purview of the said doctrine. 12. On behalf of the respondent company it was per contra argued that the order passed by the adjudicating authority could not be split into two and that the doctrine of merger applied no matter the issues which arose for determina .....

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ng words : (SCC p.384) 44. To sum up, our conclusions are : (iii) The doctrine of merger is not a doctrine of universal or unlimited application. It will depend on the nature of jurisdiction exercised by the superior forum and the content or subject-matter of challenge laid or capable of being laid shall be determinative of the applicability of merger. The superior jurisdiction should be capable of reversing, modifying or affirming the order put in issue before it. Under Article 136 of the Const .....

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by the superior court and the content or the subject-matter of challenge laid or capable of being laid before it. 19 Therefore, it will depend on the nature of jurisdiction exercised and the content and subject matter of challenge laid or capable of being laid shall be determinative of the applicability of merger. On the facts and circumstances of the present case the direction in the interim order to make payment of 12% interest on ₹ 65.7 crores to be made within a stipulated time, i.e., .....

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KAR 2936 New Hope Granites V.s. Shri Lokanath, The Deputy Conservator of Forest. 9. Courts passing final or interim orders do some times specify the time frame within which the order is to be carried out. Where the Court indicates that it was conscientiously directed expedition or forthwith execution, that direction shall be implemented in letter and spirit. Conversely, where no such time limit is prescribed, it shall be obligatory on the part of the authority to implement the order with the le .....

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e offence of contempt is complete immediately when the breach has occurred and this being the position, by merely reporting compliance, the offence cannot be undone. Where a contemnor drags on the proceedings before the Court even after a contempt petition has been filed, and complies with the order much later, the contempt is aggravated. We need in passing, to refer to the plea that is often adopted namely that the order that has been breached has subsequently been vacated or that the main proc .....

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re both in the context of proceedings filed under Order 39 Rule 2(A) of the Code of Civil Procedure and the interim order was in the nature of an order for injunction. Even in the case of Union of India Vs. West Coast Paper Mills Limited (supra) the facts are different in as much as that relates to a case where the court came to a conclusion that once an appeal is filed before the Apex Court and the same is entertained the judgment of the High Court or the Tribunal court and the subject matter o .....

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r of M/s.Milestone Soft. Tech Pvt. Ltd. (supra) to contend that the contempt petition could not be filed after the main proceeding was disposed of. With due respect, there is no reason given to support the court's finding in paragraph-21 which reads as under :- 21. Thus contempt proceedings for disobedience of order dated 23.09.2014 at this stage, cannot be initiated as there is no enforceable order for maintaining and initiating contempt petition against the respondent/contemnor. 22 The lea .....

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t the facts of the present case are quite distinguishable as in the instant case no contempt petition praying for initiation of contempt proceeding was filed by the contemnor during the period that is 23.09.2014 to 21.11.2014, when the interim order was in operation and enforceable. But has nonetheless proceeded to hold, without giving any reason, that contempt proceedings for disobedience of an order cannot be initiated as it was not filed when the interim order was in operation and enforceable .....

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he husband for failing to make payments of alimony, pendente lite. The court held that an order granting wife temporary alimony during pendency of her divorce suit was merged in judgment and decree granting her divorce and no longer effective or enforceable and contempt proceedings against husband could not be based thereon. In other words, the court held that the outstanding amount payable by way of interim alimony was subsumed into the final decree. The facts in the matter is totally in varian .....

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te of Jharkhand and New Hope Granites, the courts support the proposition that a party is liable to be punished for contempt that is committed of an interim order when it is in force. 26 In Tayabbhai Bagasarwalla (supra) the Apex court has gone to the extent of even holding that even if it is ultimately held that the proceedings in which the order was passed was without jurisdiction, the breach of such an order would nonetheless amount to contempt. Paragraphs-14, 15 & 16 read as under :- 14. .....

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..... Would it be right to say that violation of and disobedience to the said orders of injunction is no punishable because it has been found later that the Civil Court had no jurisdiction to entertain the suit. Mr.Sorabjee suggests that saying so would be subversive of the Rule of Law and would seriously erode the majesty and dignity of the court. It would mean, suggests learned counsel, that it would be open to the defendants-respondents to decide for themselves whether the order was with or w .....

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ch has been recognised and incorporation in Section 9-A of Civil Procedure Code (inserted by Maharashtra Amendment Act No. 65 of 1977), says Mr.Sorabjee. Section 9-A reads as follows: "9-A. Where by an application for interim relief is sought or is sought to be set aside in any suit and objection to jurisdiction is taken, such issue to be decided by the Court as preliminary issue at hearing of the application. (1) If, at the hearing of any application of granting or setting aside an order g .....

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in any case be adjourned to the hearing of the suit. (2) Notwithstanding anything contained in sub-section (1), at the hearing of any such application, the court may grant such interim relief as it may consider necessary pending determination by it of the preliminary issue to the jurisdiction." 16...........The defendants filed an appeal against the decision on the question of jurisdiction. While that appeal was pending, several other interim orders were passed both by the Civil Court as w .....

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s whether the said decision of the High Court means that no person can be punished for flouting or disobeying the interim/interlocutory orders while they were in force, i.e., for violations and disobedience committed prior to the decision of the High Court on the question of jurisdiction. Holding that by virtue of the said decision of the High Court [on the question of jurisdiction], on one can be punished thereafter for disobedience or violation of the interim orders committed prior to the said .....

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unction committed by them prior to the High Court's decision on the question of jurisdiction. Therefore, the submissions of respondents cannot be accepted. 27 As regards A(iv) : Shri Sancheti submitted that the ratio in Tayabbhai Bagasarwalla (supra) has no application because it would apply in a case where contempt petition was filed when orders in force had been breached and as the final order in our case has been passed :- It was submitted that the contempt petition in Bagasarwalla (supra .....

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has no jurisdiction, still a party cannot escape consequences of disobedience and violation of the interim order committed by them prior to the court's decision on the question of jurisdiction. If we accept the statement of Shri Sancheti, it would mean that the said order passed on 21.10.2013 was non est and the respondents despite having flouted the said order can merrily live without fear of any consequence just because the petitioner had not filed the petition earlier. The issue for cons .....

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rs. [1991 Karnataka Law Journey 352], the Karnataka High Court stated the law in the following terms, with reference to the decision of the Court of Appeal in Hadkinson v. Hadkinson: "the principle laid down in the said decision is, a party who knows an order, whether it is null or valid, regular or irregular, cannot be permitted to disobey it and it would be dangerous to allow the party to decide as to whether an order was null or valid or whether it was regular or irregular". 23. In .....

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1 Coop. Temp. Cott.342). A party, who knows of an order, whether null or valid, regular or irregular, cannot be permitted to disobey it....It would be most dangerous to hold that the suitors, or their solicitors, could themselves judge whether an order was null or valid-whether it was regular or irregular. that they should come to the court and not take upon themselves to determine such a question. That the course of a party knowing of an order, which was null or irregular, and who might be affe .....

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he court by such a person will be entertained until he has purged himself of his contempt." 24. …. 25. …. 26. …. 27. The learned counsel for the Defendants 1 and 2 submitted that this is not a proceeding for contempt but a proceeding under Rule 2-A of Order 39 of the Civil Procedure Code. Learned counsel submitted that proceedings under Order 39 Rule 2-A are a part of the coercive process to secure obedience to its injunction and that once it is found that the Court has .....

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t possible to agree with any of these submission not only on principle but also in the light of the specific provision contained in Section 9-A of Code of Civil Procedure (Maharashtra Amendment). In the light of the said provision, it would not be right to say that the Civil Court had no jurisdiction to pass interim order or interim injunction, as the case may be, pending decision on the question of jurisdiction. The orders made were within the jurisdiction of the Court and once this is so, they .....

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ntil that decision. If they had that power they must also have the power to enforce them. In the light of the said provision, it cannot also be held that those orders could be enforced only till the said decision but not thereafter. The said decision does not render them (the interim orders passed meanwhile) either non-est or without jurisdiction. Punishing the defendants for violation of the said order committed before the said decision (Vishanji Virji Mepani) does not amount, in any event, to .....

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not accept the submission of the counsel for the respondents that the order of 21.10.2013 could be enforced only till 12-20.8.2014 and not thereafter. It was open to the respondents to apply to the court for modifying the interim order dated 21.10.2013. It was also open to the respondents to apply to the court on 12-20.8.2014 that they be relieved of their responsibility under the interim order. In my view, the proposition that emanates from Tayabbhai (supra) is that the interim order has to be .....

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the rightness or wrongness of the order cannot be urged in contempt proceedings. 31 Therefore, a party has no ground for disobedience of any interim order even if ultimately the interim order is vacated or relief in the main proceedings is not granted to the party or it is held that the court did not have jurisdiction to hear that matter. Right or wrong the order has to be obeyed even if the matter is ultimately disposed. This takes care of the 4th ground of defence. 32 The conclusion above woul .....

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y is against SPCPL as could be seen from paragraph-17 read with paragraphs 18 & 21 of the said order dated 21.10.2013, minutes of the meeting held on 31.10.2013, the letter dated 4.1.2015 exchanged between VMPL and SPCPL and also as alleged in the petition. There is no doubt that the amount had to come from the pockets of SPCPL. The order is very clear that SPCPL should pay. 35 As could be seen from paragraphs reproduced above, from the said order dated 21.10.2013, SPCPL was not a party to t .....

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tituted Attorney respondent no.2, during the meeting held on 31.10.2013 before the court appointed observer Mr.Justice Suresh (retired) sought some additional time to make the payment which has been recorded in paragraph-4 of the minutes of the meeting. The same reads as under :- 4. One of the items in the order says that the Observer should ensure due payments of interest by SPCPL on the amount of ₹ 67.50 crores. However, Mr. Chaudhari for the Respondents states that according to him, the .....

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ondent no.2 had accepted two things. Firstly, the fact that the obligation to comply with the order was cast upon them and secondly it was within their power to comply with the said order. None of the respondents have even attempted to contend that they took any steps to comply with the order. They have also not contended that they did not have it within their power and ability to comply with the order. All the respondents have in their respective affidavits in reply only purported to restrict t .....

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uld therefore, be in a position along with respondent nos.1, 2 & 4 to comply with the order by ensuring that the amount was paid by SPCPL to VMPL. It is necessary to note that the learned single Judge proceeded to issue the said order even though SPCPL was not a party to the said proceedings. It is also necessary to note that SPCPL has not even contested the said order. The court issued the direction on the basis of the then undisputed position that respondent no.3 controlled SPCPL on the ba .....

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e case of any of the respondents that they were not in a position to ensure compliance with the order. The approach was they are not liable to be punished for a breach or disobedience and/or it is legally impermissible for the court to punish them in its contempt jurisdiction. Respondent nos.1 & 2 have also contended that they have ceased to act as directors of VMPL since 20.11.2014. The stand of respondent no.3 is that he did not control SPCPL and just because he was the main beneficiary of .....

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the order was passed and thereafter at the meetings before the court appointed Observer) believe that the order was not directed against them and/or that the order in question was intended to be an order against SPCPL ; (iii) No explanation was forthcoming from any of the respondents either for their failure to comply with the order or for their actions pursuant thereto including the fact that they requested the Court appointed observer for some additional time to comply with the order; (iv) No .....

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d of respondent no.3 that he had no control over SPCPL is false could be seen from the following facts. Respondent no.3, under the terms of an agreement entered into with the petitioner had the power to appoint the board of directors of SPCPL. The fact that respondent no.3 was at the relevant time being in control of SPCPL is clear from various affidavits and orders passed in matters between the petitioner - father and respondent no.3 - son. 39 In the affidavit in rejoinder filed by the petition .....

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t is admitted position that Respondent No.3 is the chairman of the Supermax Group of Companies, and that SPCPL is a part of the Supermax Group of Companies, and as such is under his control. Reproduced below are Respondent No.3's own admissions in this regard which are made by him in various legal proceedings between members of the Malhotra family and /or entities controlled by them. (a) Witness Statements dated 23.03.2012, 30.05.2012, 14.06.2012, 19.09.2012, 27.09.2012 and 01.10.2012 filed .....

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SuperMax group. It was intended that I would take over the management of the business. Accordingly the parties to the SSD (including RKM and RJM) chose to grant me very wideranging powers under the SSD to take all necessary actions in that behalf. I was given complete control over the SuperMax group companies, including the newly created company, SPCPL. (@ pg.4-5 of the witness statement) (c) Points of claim filed by Respondent No.3 on 15th June, 2012 in proceedings before the Queens Bench Comme .....

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Care Pvt. Ltd. and that if the present order is allowed to continue the Respondent shall take control of the other Indian Companies and cancel all Agreements mandated to be entered into by the SSD and the business of the Petitioner company will come to a standstill. (@ pg.223 of the SLP) I crave leave to refer to and rely upon the aforesaid documents when produced. 6. In addition to the various admissions by Respondent No.3, it is also pertinent to note that this Hon'ble Court has by its ord .....

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t was paid by SPCPL on the amount of ₹ 67.5 crores to VMPL and that Respondent No.3's attempt to now contend that he does not control SPCPL is a false case, which ought not to be countenanced by this Hon'ble Court. The respondent no.3 has not controverted or denied these allegations. 40 This court in its order dated 12-20.8.2014, while disposing the Appeals, has observed as under :- 5. …..the Indian companies assets, businesses and plants were to be transferred to a newly in .....

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amily relationships and business. RKM and Rajiv acted in good faith; Rakesh was, as agreed, given full control of the SuperMax companies. The funds that were, in exchange, to come to the RKM-controlled Indian companies (the Transauto companies) were wrested - perhaps hijacked might be a more apposite term -and deployed to further the interests of the entities Rakesh controls. In effect, Rakesh engineered a coup d état and assumed control of the entire group. Keeping the directors of the T .....

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ks a continuance. 41 This court in its order dated 12.8.2015 passed in Company Appeal (L) No.52 of 2015 has taken judicial notice of the fact that respondent no.3 controls both Supermax group. Paragraph-4 reads as under :- 4. In March 2011, pursuant to an investment made by Actis Consumer Grooming Products Ltd. ( Actis ), a private equity firm, in one of the holding companies of Supermax Personal Care Pvt. Ltd. ( Supermax ), the business of some of the RKM group companies was transferred to Supe .....

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ourt in its judgment pronounced on 30.11.2015 in Company Appeal (L) No.10 of 2015 has in paragraphs 3, 4, 4.5 4.6, 4.7, 5.6, 5.8, 5.11, 5.15, 5.32, 20, 21, 22, 22.1 & 23 noted as under :- 3.........Rakesh Malhotra ( Rakesh ) who in fact has admitted in the proceedings filed before the Hon'ble Supreme Court of India that he is in charge and control of SPCPL...............In view of Rakesh admittedly being in charge and control of SPCPL, the said statement/ explanation by SPCPL, to put it .....

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een RKM and Rakesh, and that Rakesh is neither on the Board of Directors of SPCPL or concerned with the day to day affairs of SPCPL, one of the queries put to the Advocate for SPCPL by this court was whether SPCPL had financed Rakesh qua any of the litigations that were fought against RKM before the CLB and/or before this Court or before the Hon'ble Supreme Court, and in the event of SPCPL having financed Rakesh to pursue the litigation against his father, whether the Board of Directors of S .....

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SPCPL and there is no Board Resolution on record of SPCPL qua the litigation costs having been borne by SPCPL on behalf of Rakesh. 4.7 It is therefore clear that the entire cost incurred throughout by Rakesh in the fight between RKM and Rakesh is borne by SPCPL and shown by SPCPL in its accounts as legal expenses of SPCPL. This fact therefore clearly demonstrates that incorrect statements have been made by SPCPL in the Appeal, in the affidavits filed on behalf of SPCPL therein and in the Arbitr .....

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but to approach the Court only because, since December 2014 RKM/VMPL started inferring with the business of the Appellant; and that SPCPL is a professionally led and managed Company where Rakesh is not a member of the Board of Directors of the SPCPL and is also not concerned with the day to day affairs of SPCPL. 5.6 ….........Through these pliant Directors, Rakesh also sought to utilize the funds, assets and properties of the five Companies (including VMPL) for the benefit of SPCPL/himse .....

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4, Rakesh preferred a Special Leave Petition before the Hon'ble Supreme Court of India. Rakesh applied for a stay of the said Judgment and Order dated 20th August, 2014, inter alia on the grounds set out below : A. Because the petitioner is in control of the newly formed Indian Company called Supermax Personal Care Pvt. Ltd. And that if the present order is allowed to continue, the respondent shall take control of the other Indian Companies and cancel all Agreements mandated to be entered in .....

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as petitioner in the SLP, has categorically admitted that he is in control of SPCPL and if RKM shall take control of the Indian Companies (including VMPL) and cancel all agreements mandated to be entered into by the Share Subscription Deed (SSD) the business of SPCPL will come to a standstill. It will again not be out of place to mention here that Rakesh who admitted before the Hon'ble Supreme Court to be in control of SPCPL............... 5.32 …..... However, the said erstwhile Direc .....

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L and allowed Rakesh to deal with the finances and assets of VMPL as per his wishes.............. All these happenings were only because Rakesh, who controlled SPCPL, also controlled Vyas and Chaudhari, who were employees/consultants of SPCPL and also the ex-directors of VMPL and through them acted completely against the interest of VMPL and RKM.......... Rakesh who admittedly controls SPCPL started prevailing upon Vyas and Chaudhari and through them was dealing with the finance and assets of VM .....

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...... SPCPL filed the present Appeal on 3rd February, 2015 alleging that it has nothing to do with the disputes between Rakesh and RKM and was forced to approach the Court only in view of certain instances of interference on the part of VMPL/RKM commencing from December, 2014. As set out in paragraph 4 hereinabove, SPCPL repeatedly represented to this Court that it was not concerned with the fights between RKM and Rakesh. In answer to the contention of VMPL/RKM that Rakesh admittedly controls S .....

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ather, whether the Board of Directors of SPCPL had passed any Resolution approving the same. After seeking time from the Court on two occasions, the Court was informed by the Counsel appearing for SPCPL that the entire litigation initiated/defended by Rakesh i.e., since the year 2012 has been throughout financed by SPCPL and there is no Board of Resolution on record qua the litigation expenses having been borne by SPCPL on behalf of Rakesh............. He has therefore put up SPCPL to file the a .....

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y declined to stay the same, the CLB was completely justified in directing police assistance which was required to maintain peace and order at the time of implementation of its Order by VMPL/RKM............... (emphasis supplied) 43 Notwithstanding the above statements and averments made by him on oath in a number of different legal proceedings and notwithstanding the findings contained in the orders referred to above, the message conveyed by respondent no.3, in his affidavit dated 21.8.2015 fil .....

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in view of his previous statements made on oath. The counsel for respondent Shri Sancheti submitted that the petitioner cannot rely on documents not annexed to the contempt petition or any other pleadings to support his submission as Contempt petition is quasi criminal in nature which requires standard of proof which is beyond reasonable doubt. This defence which is mentioned at point-(D) of paragraph 6 above, was raised because the petitioner had sought to rely on certain affidavits filed by re .....

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nts to which they were not a party. The petitioners have only relied on the affidavits filed by respondent nos.3 & 4 in the company petitions and orders passed by this court. Certainly respondent no.3 would have known the stand that he had taken in the other affidavits filed by him, respondent no.4 in proceedings to which he was a party and orders passed by this court in proceedings to which he was a party. He cannot today file a false affidavit and take a contrary stand and state that the p .....

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3's legal costs in his fight against the petitioner and shown it as legal expenses and that also even without a resolution being passed by SPCPL. It is also not his stand that he could not comply with or he requested/instructed the Board of Directors who refused to comply with his request. Moreover, on 31.10.2013 at a meeting held by the court appointed observer, respondent no.3, through his Constituted Attorney viz. respondent no.2 above named has stated as under :- One of the items in the .....

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13), the Observer pointed out that he will not be able to give any direction as requested by the Respondents. Mr.Chaudhari then hands over a letter addressed to the Observer stating that they intend to file a Special Leave Petition in the Supreme Court of India against this Order dated 21st October 2013. The said letter is taken on record. (emphasis supplied) 45 As could be seen from the order dated 9.12.2013, following which there was another meeting before the court appointed observer, it was .....

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MPL when the order of 21st October, 2013 was passed and in any case until 20th November, 2014 and hence were duty bound to ensure that VMPL took steps to receive/recover the interest from SPCPL. The affidavits in reply filed by both the respondents are almost identical. Both basically contain only bare denials. Of course they say that they ceased to be directors of VMPL in November, 2014 and as directors of VMPL they had fulfilled their fiduciary duties and obligations to the best of their abili .....

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were directors of VMPL could be held guilty of contempt and alleged to have willfully disobeyed orders of the court when in the order dated 21st October, 2013 the direction to pay is only against SPCPL which, was as observed earlier was under the control of respondent no.3. Respondent no.4 is a director of SPCPL. 49 I have mentioned earlier that the dispute primarily is between the petitioner, his wife and another son on one side and the respondent no.3 on the other. It is a family fight. Respo .....

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was passed and after two meetings with the court appointed Observer and pursuant to the directions of the court appointed observer at the meeting held on 3rd January, 2014. 50 Be that as it may, it is difficult for me to hold that respondent nos.1 and 2, who were not even the directors in SPCPL, just because they were under the control of respondent no.3 could have ensured that SPCPL made the payment to VMPL. Even if I take the case a step further and say that they deliberately slept over the ma .....

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r, 2013 directed SPCPL to make the payment, in the absence of SPCPL, no finding of breach of order (much less contempt) can be rendered. It was also submitted that the petitioners have failed to prove the contempt under provisions of Contempt of Courts Act, 1971 including section 12(4) and section 12(5). It was submitted that in a contempt petition a specific charge must be framed and the Contemnor must be given notice of that charge and if interpretation of the order is an issue, contempt petit .....

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elhi Law Times 649Matrix Cellular Services Pvt. Ltd. vs. Sanjoy Mukherji & Ors.; (2012) 5 SCC 661Aneeta Hada vs. Godfather Travels & Tours Pvt. Ltd.; Supreme Court, Criminal Appeal No.1584 of 2007 Sharad Kumar Sanghi vs. Sangita Rane. 52 The counsel submitted that under section 12(4) and section 12(5) of the Contempt of Courts Act, 1971, when there is a prosecution against any director or officer of a company, it is a mandatory requirement of law that company is impleaded as one of the a .....

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punishment may be enforced, with the leave of the court, by the detention in civil prison of each such person: Provided that nothing contained in this sub-section shall render any such person liable to such punishment if he proves that the contempt was committed without his knowledge or that he exercised all due diligence to prevent its commission. (5) Notwithstanding anything contained in sub-section (4), where the contempt of court referred to therein has been committed by a company and it is .....

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nd (5),- (a) company means any body corporate and includes a firm or other association of individuals; and (b) director , in relation to a firm, means a partner in the firm. 53 The counsel submitted that therefore, prosecution against the directors, officers, etc., of the company without arraying the company as an accused is not maintainable. The counsel further submitted that this statutory provision is based on the principle that (a) in the absence of the company, the court cannot render a fin .....

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tted that under section 12(5) where the contempt of court referred to therein has been committed by a company and it is proved that the contempt has been committed with the consent and connivance of, or is attributable to any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of the contempt. The counsel submitted that as respondent no.3 is neither a director or manger or s .....

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or of a company cannot be maintained where a company has not been made a party to the proceedings under section 12(5) of the said act. 54 It was further submitted by Shri Sancheti that under section 13 of the said act, no court shall impose a sentence for a contempt of court unless it is satisfied that the contempt is of such a nature that it substantially interferes, or tends substantially to interfere with the due course of justice. The counsel submitted that contempt of the orders of the cour .....

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rix of the case and has to be read as a whole. It is well settled that an order of a court must be construed having regard to the facts and context in which the same was passed. For that, the order has to be read in its entirety. Observations made should not be read in isolation or out of context ((2010) 5 SCC 388 Goan Real Estate and Construction Limited and another vs. Union of India). When you read the said order dated 21st October, 2013 as a whole, though the order states SPCPL to pay 12% in .....

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terpretation of the order also required. In any event the order dated 9th December, 2013 passed by the same judge who passed the order dated 21st October, 2013 lays to rest the so called ambiguity because he holds that the respondents were to comply with the same. Paragraphs 1 and 4 of the order dated 9th December, 2013 reads as under :- 1. On 21 October 2013 in Company application taken out in these appeals, detailed interim directions were issued, including appointment of an observer. 2. &hell .....

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nies have not complied with the order dated 21 October 2013, these two directors shall also be held personally liable apart from the Companies thereof. Paragraph 21(e) of the said order dated 21st October, 2013 relates to ensuring payments at 12% p.a. on the amount of ₹ 67.50 Crores by SPCPL to VMPL and is continued to be paid. 57 The entire charge or the basis on which the contempt petition is filed is not that the said order dated 21st October, 2013 was against SPCPL. The petitioner' .....

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VMPL. 58 The learned single Judge proceeded to issue the said order even though SPCPL was not a party to the said proceedings on the basis that respondent no.3 controlled SPCPL and on the basis of the statements/representations made in the court by respondent no.3 and other respondents at the time of hearing. 59 Therefore, the submissions that the petition cannot be proceeded with as SPCPL has not been made a party or section 12(4) and section 12(5) are applicable, is on the basis of misreading .....

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ot a stranger because respondent no.4 who was also the respondent in those appeals was also a director in SPCPL and respondent no.3 has stated on oath and it has been observed by the various orders of the court that he controlled SPCPL. Infact in the order dated 30th November, 2015 passed by this court it has also been observed that it was SPCPL that was funding the litigation cost of respondent no.3 against the petitioner. Therefore, in my view, section 12(4) and section 12(5) of the said Act h .....

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se (supra) was rendered in the context of section 138 and 141 of the Negotiable Instrument Act. As regards Sharad Kumar Sanghi's case (supra) also it was principally directed against the company and not against the directors. What will be applicable to the present case is section 12(3) of the Contempt of Courts Act, 1971 which reads as under : 12. Punishment for contempt of court.- (1) ….... (2) ….... (3) Notwithstanding anything contained in this section, where a person is fou .....

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held to be not only in contempt but his act should interfere with the due course of justice is the settled position. These are general rules pertaining to law of contempt. The counsel for the respondents also relied on the judgments in (2002) 5 SCC 352 Jhareswar Prasad Paul & another vs. Tarak Nath Ganguly and others; (2001) 7 SCC 530 Chhotu Ram vs. Urvashi Gulati and another; (2014) 3 SCC 373 Sudhir Vasudeva and M. George Ravishekaran and others; 159 (2009) DLT 764 Dr. D.K. Attery vs. Mr. .....

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given case a person may have violated the directions of the court by not depositing the amount as directed which would mean he has committed a breach of the order. He may, however, explain that all his bank accounts have been attached by some party or he has no money to pay. That is why we have to see whether there was a willful disobedience. If his stand is not that he has not been able to comply with the orders of the court due to various factors, certainly it will amount to interference with .....

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able to be punished for a breach or disobedience of the said order and it is legally impermissible to the court in its contempt jurisdiction to punish them for disobedience of the said order. 62 The other submission that was raised on behalf of the respondents, was, i.e., (E) that no contempt proceedings can be invoked and is not intended to be used for enforcement of money decree or directions/orders for payment of money :- The counsel for the respondents relied on three judgments of the Apex C .....

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, 2013 has been filed by the petitioner and the present petition is to only seek direction against SPCPL to make the payment to VMPL which cannot be permitted. 63 It is pertinent to note that the respondents have taken a stand that the said order dated 21st October, 2013 is not enforceable against the respondents but are also contending that no contempt would lie in respect of executable order. As regards the judgments relied upon by the respondents, in my view, none of the judgments lay down an .....

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der :- 29. The next decision relied upon by the respondents is the decision of this Court in Bank of Baroda Vs. Sadruddin Hasan Daya & Anr. 2004(1) SCC 360. The petitioner in that case had filed a suit against the respondents for recovery of money. The suit was disposed of by consent and a decree was passed incorporating the consent terms. The consent terms inter alia, provided for payment of the decretal amount in installments. Pending the clearance of the decretal amount the respondents un .....

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th possession of the same properties which had already formed part of the undertaking in the first decree. The respondents defaulted in making payment of the installments under the first decree. The petitioner put the decree into execution. It also filed a contempt petition alleging that the second consent decree violated the undertaking given in the first decree. The Court found that by placing the same property under attachment in the second decree the respondent had intentionally and delibera .....

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ded) 30. This decision reinforces our view of the law. It does not in any way run contrary to our opinion as expressed earlier on the interpretation to be put on Section 2(b) of the Act. On the other hand the Court repelled the submission of the respondents that the petitioners remedy lay in executing the decree in the following words:- " The fact that the petitioner can execute the decree can have no bearing on the contempt committed by the respondents." 31. The decision in R.N. Dey a .....

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ntempt application, the respondent should have proceeded with the execution of the decree or award made in the land acquisition proceedings. The Court said that:- " the weapon of contempt is not to be used in abundance or misused. Normally, it cannot be used for execution of the decree or implementation of an order for which alternative remedy in law is provided for. Discretion given to the court is to be exercised for maintenance of the court's dignity and majesty of law." Further .....

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oceedings should have been dropped. 32. As we read the decision, its ratio runs counter to the submission of the respondents, namely, that the contempt would not lie if the decree or order is executable. Ultimately, the matter is one of the Court's discretion having regard to the facts of the case. As we have said the fact that a decree is executable does not take away the Court's jurisdiction in contempt. 65 The contempt jurisdiction is primarily to ensure compliance of the court's .....

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t and deemed Contemnor and the complainant therein may not receive any relief to his benefit. The discretion given to the court in its contempt jurisdiction is for the maintenance of the court's dignity and majesty of law. Paragraph 39 of the said judgment reads as under :- 39. Merely because the order is an executable order, it cannot be said that no contempt proceedings would lie against the defaulter in such cases nor it can be said that in case of monetary claim under a order or undertak .....

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s and they can be invoked simultaneously. The purpose behind the execution proceedings is solely to enable the decree holder to enjoy the fruits of the decree in his favour while the contempt proceedings are primarily to ensure the compliance of the Court's order and in case of failure thereof to punish the contemner. 67 In every case like our present case, the party may simply not take any step to comply with the order and will simply keep quite. It is for the party to take all possible ste .....

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The Apex Court held that the Appeal Court should not have interfered with the order passed by the single Judge and set aside the order of the Appeal Court. In the matter of 2004 (5) Bom. C.R. 341Santosh Dattaram Nadkarni and others vs. New India Industries Limited and others a single Judge of this court again held that contempt proceedings and execution proceedings, are two separate remedies available and can be invoked simultaneously and that contempt is a matter between the court and the pers .....

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of the provisions of any other law. The court has held that the object of proceedings under the Contempt of Courts Act, 1971, is to punish a party guilty of the disobedience as contemplated by section 2(b) of the said act. The purpose is not to execute any order, for which purpose the aggrieved party shall have to take recourse to other proceedings known to law. Paragraph 13 of the said judgment reads as under :- 13. The submission on behalf of the learned senior counsel for the appellant that s .....

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t, is in any way affected. As a matter of fact, a perusal of S.22 of the 1971, shall be in addition to, and not in derogation of the provisions of any other law. The section, unmistakably declares that its provisions are to be taken in addition to and not in derogation of the other laws. In view of this express inhibition in absolute terms against the provisions of the 1971 Act being considered in derogation of any other law, the argument that since the order, disobedience of which is complained .....

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an order has been made approaches the court to punish the disobedience of its order, he does not use those proceedings to get the order executed but merely brings to the notice of the court the objectionable conduct of the party disobeying the order and seeks action against that party for committing contempt of court. There is a clear distinction taken - having order executed and bringing to notice of the court willful disobedience on the part of the guilty party and seek to have him punished fo .....

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dia (supra) has held that one cannot use contempt jurisdiction for enforcement of money decrees, it should be noted that the application in that matter as mentioned in paragraph 13 of the said judgment was for enforcement of the order by attachment of the property by seizing and auctioning the movable and immovable properties of FCI. No such relief in the nature of execution is being sought in the present matter. 71 Coming to Respondent no.4, Respondent no.4 admittedly, at all material times, wa .....

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on, if any, was to the Learned Observer appointed by this Hon ble Court to ensure that appropriate steps for recovery of money are taken; (iii) The Order dated 21st October, 2013 had ceased to operate at the time when the petition was filed; (iv) The fact that the Order dated 21st October, 2013 did not contain any direction against Respondent No. 4 is also clear from the Order dated 9th December, 2013 which holds Respondent Nos. 1 and 2 liable for non-compliance of the directions contained in th .....

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ove while dealing with respondent nos.1 to 3. The same applies to Respondent no.4 as well. So we need not re-enter that arena. 73 As regards point (ii) and (vi) in paragraph 71 above that the direction, if any, was to the Learned Observer to ensure that appropriate steps for recovery of money was taken is absolutely unintelligible. In any event that cannot absolve the respondent no.4 in ensuring that SPCPL, of which he was a director, comply with the directions of the court. The respondent no.4 .....

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L stating in paragraph 10 thereto an amount equivalent to interest of 12% p.a. on ₹ 67.5 Crores has been and is being paid to VMPL, as per the terms of the Supplemental BTA. Knowingly and deliberately and willfully he made a false statement in the said affidavit as no amount has been paid. Infact in paragraph 16 of the said order it is also recorded that the counsel for the respondents on instructions made a specific statement that the interest of 12% on the amount of ₹ 67.50 Crores .....

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s per the terms of the Supplemental BTA. The respondents have been making false statements to the court on affidavits thereby interfering with due course of justice. The statements are being made willfully. The respondent no.4 cannot be trusted at all because he has been exposed and has been lying to the court on affidavits. The statement that the counsel made to the court as recorded in the said order dated 21st October, 2013 could have been made only on instructions from respondent no.3 and re .....

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he powers of such a court including the power to punish for contempt of itself. 76 Therefore, as the direction was against the respondents to the company application which included respondent no.4, the respondent no.4 having not even made an attempt to explain what steps he took to comply with the directions of the court as contained in the said order dated 21st October, 2013, the Respondent no.4 certainly is guilty of willfully disobeying the orders of this court. The conduct of Respondent no.3 .....

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fragment of civilized society would get broken up and crumble down. 77 In the circumstances, considering the facts and circumstances of the case, I am of the view that no case is made out against respondent nos.1 and 2 and the proceedings against the said respondents are dropped. Respondent nos.3 and 4 are held to be guilty of contempt of court for willful disobedience of the directions given by the court in its order dated 21st October, 2013. I sentence Respondent no.3 Rakesh Malhotra to under .....

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