$~42 * IN THE HIGH COURT OF DELHI AT NEW DELHI + CONT.CAS(C) 970/2013 Decided on :
4. H December, 2014 VLS FINANCE LTD Through: ..... Petitioner Mr. Jayant K. Mehta, Ms. Madhavi Khare & Mr. Ashok K. Sharma, Advocates. versus SOUTHEND INFRASTRUCTURE PVT LTD THR ITS DIRECTOR, MR DINESH KUMAR GUPTA, @ D K GUPTA & ANR ..... Respondents Through: Mr. Kapil Arora & Ms. Sanghitra Sawant, Advocates for R-1. Mr. Dushyant Dave & Mr. Chetan Sharma, Senior Advocates with Mr. Vijay K. Sondhi, Mr. Venancio D’Costa, Mr. Ashish Kr. Singh & Mr. Azeem Samuel, Advs. for R-2. CORAM: HON’BLE MR. JUSTICE V.K. SHALI V.K. SHALI, J.
(ORAL) 1. By virtue of the present order CM No.4181/2014 filed by respondent No.2 is being decided. The question which has arisen for consideration in this application is as to whether the contempt court, which has passed the order dated 09.01.2014 in CM No.20181 of 2013, to the R-2/Wonder Space Properties Pvt. Ltd in whose favour rights have been created by respondent No.1 as described in conveyance deed dated 01.06.2013 in respect of property No.B-319, Okhla Industrial Area, Phase I, New Delhi can be continued or not.
2. It may be pertinent here to mention that by the aforesaid order dated 29.01.2014, the respondent No.2 was directed to maintain status quo while as the present application has prayed for vacation of that order.
3. Before dealing with the contentions of the learned senior counsel appearing for respondent No.2/applicant, it will be pertinent to give a brief background of the case.
4. The petitioner had entered into some property transaction for the development of a plot of land measuring 34,275 square meters bearing No.C-20, 1A/10, Block C, Sector 62, NOIDA. The aforesaid plot was to be developed for IT and IT enabled services. The petitioner had entered into this agreement with M/s BMS IT Institute Private Limited. There were some disputes between these two contracting parties which led to filing of a petition under Section 9 of the Arbitration and Conciliation Act, 1996 by the present petitioner/VLS Finance Limited against BMS IT Institute and eleven other parties. The respondent Nos.2 to 10 were individuals and a private company while respondent Nos.11 & 12 were two other companies. The allegations made respondent Nos.2 to 9 were the individuals/contractors of respondent No.1/company. It was further alleged that apart from these individual respondents, who were the contractors/office bearers of respondent No.1/company, were also having the controlling effect in respect of other three companies who were impleaded as respondent Nos.10 to 12. These companies included respondent No.1 herein/Southend Infrastructure Pvt. Ltd. having its office at B-319, which is the property in question in respect of which restraint order has been issued on 09.01.2014. The court passed an order on 27.04.2012 in OMP NO.383/2012 restraining the respondent Nos.2 to 12 from alienating, selling, transferring, mortgaging, encumbering, disposing of or in any manner dealing with their immovable property. On 04.09.2012, the learned single Judge which was dealing with OMP No.383/2012 was informed that the affected parties have approached for arbitration of their disputes and consequently there was no need to continue with the OMP and it can be treated as disposed of. The learned single Judge after hearing the learned counsel for the parties made the order dated 27.04.2012 absolute during the pendency of arbitration proceedings with the direction that the said order shall continue to be in operation till the time the same is varied or modified by the learned arbitrator on an application being filed by any of the parties.
5. The present petitioner/VLS Finance Limited filed subsequent thereto CCP No.970/2013 alleging that the aforesaid restraint order has been wilfully and deliberately violated by R-1 herein i.e.Southend Infrastructure Pvt.Ltd. by executing a conveyance deed in favour of the R-2/Wonder Space Properties Pvt. Ltd on 10.06.2013 in respect of property bearing No.B-319, Okhla Industrial Area Phase I, New Delhi and thus they are both guilty of having wilfully disobeyed the orders of the court and deserve to be proceeded against under the Contempt of Courts Act, 1971. Notices were issued to both the parties on 09.01.2014 and while doing so, the learned Judge issued a fresh ad interim order directing that the respondents shall maintain status quo as of that date in respect of property bearing No.B-319, Okhla Industrial Area, Phase I, New Delhi.
6. The respondent No.2 filed its reply and contested the claim. Similarly, the respondent No.1 filed its reply and contested the claim. Now CM No.4181/2014 has been filed by the respondent No.2 seeking modification/variation of the ad interim order passed by the court on 09.01.2014.
9. I have heard Mr. Dave, the learned senior counsel for the applicant/respondent No.2 on the application as well as Mr.Jayant K.Mehta, the learned counsel for the petitioner/non applicant and have also gone through the record. 10.The learned senior counsel for respondent No.2 has contended that the ad interim order dated 09.01.2014 deserves to be vacated on account of the fact that the respondent No.2 was neither a party to the OMP proceedings nor is a party before the learned arbitrator as there is no privity of contract between the petitioner and the respondent No.2. It has been contended that even the proceedings which have been initiated before the arbitrator by way of statement of claim by the present petitioner, does not include the respondent No.1/ Southend Infrastructure Pvt.Ltd as a party and, therefore, the ad interim order which was passed by the court on 27.04.2012 and confirmed on 04.09.2012 ceases to have any validity qua respondent No.1 so far as property bearing No.B-319, Okhla Industrial Area, Phase I, New Delhi is concerned.
11. It has next been contended by the learned senior counsel that moreover the property in question in respect of which order of status quo has been passed was not at all involved in the agreement between the petitioner and the BMS IT Institute Private Limited for the purpose of development of IT and IT-enabled services. The property which was to be developed was in Sector 62, NOIDA and not the property bearing No.B-319, Okhla Industrial Area, Phase I, New Delhi and, therefore, the aforesaid restraint order could not have been passed.
12. Thirdly, it has been contended by the learned senior counsel for respondent No.2 that assuming though not admitting that such an order could have been passed, the said order does not affect the right of the respondent No.2/Wonder Space Properties Pvt. Ltd which is a company registered under the Companies Act, 1956 and is a bona fide purchaser of the land in question vide conveyance deed dated 10.06.2013. In the reply, it has been contended by him that the respondent No.2 has acted with due diligence. It had inserted advertisements inviting objections from the parties having any right, title or interest in the property in question and pursuant thereto objections were received from three different parties and dealt with by the respondent No.2, but no objections whatsoever were either received from the side of the petitioner and, therefore, it could not be contended that respondent No.2 was not a bona fide purchaser. Moreover, it was stated that the respondent No.2 had also conducted an inspection in the office of the Sub Registrar and a certificate of search showing that the property was free from encumbrances was also obtained from a counsel pursuant to which they went ahead for the purpose of transacting that property. Therefore, it was contended that the rights of the respondent No.2 in respect of the property in question could not be estopped, acquired or impaired by the ad interim order issued by this court on 09.01.2014. The learned senior counsel has also placed reliance on the judgments of the apex court in Parents Association of Students v. M.A.Khan and Anrs. (2009) 2 SCC641to contend that the contempt court was not the court which could enlarge the scope of the original order by passing an ad interim order.
13. The learned counsel for the petitioner has very vehemently contested the submissions made by the learned senior counsel for R-2. He has contended that the restraint order which was passed by the court on 27.04.2012 and confirmed on 04.09.2012 in OMP No.383/2012 was not only against respondent Nos.2 to 9, who were the Directors of the respondent No.1/BMS IT Institute Private Ltd. in respect of which a contract had been entered into, but also in effect with respect to the property owned by three other companies including the respondent No.1 herein also. This was so because these respondents had a controlling interest in the three companies which were made parties in the OMP which included respondent No.1/Southend Infrastructure Pvt.Ltd also. It has been contended by the learned counsel that in a matter of this nature, the court is required to lift the veil and see as to who have the controlling interest and whether by the act and omission of the respondents, the orders of the court are being flouted or not.
14. It has also been contended by the learned counsel for the petitioner that the apex court has also ruled in a number of cases that where a contempt is committed by a party, the party who is guilty of contempt prima facie must restore status quo ante and it cannot be permitted to enjoy fruits of its illegal acts of having committed the contempt. The reliance in this regard is being placed on i) Mohammad Idris and Anr. Rustam Jehandir Babuji and Ors; (1984) 4 SCC216and ii) DDA v. Skipper Construction Company Private Ltd and Anr; AIR1996SC2005 15. I have carefully considered the submissions made by the learned counsel for the parties. There is no dispute about the fact that the restraint order which was issued on 27.04.2012 in the OMP No.383/2012 was against respondent Nos.2 to 12 where respondent No.1 herein was a party as respondent No.12. It is also not in dispute that the respondent No.1 was the only party which was a signatory to the agreement between the petitioner and the respondent No.1 through its director for the purpose of development of a plot of land situated in NOIDA and so far as the plot No.B-319, Okhla Industrial Area, Phase I, New Delhi is concerned, that was not all in issue either in the OMP or in the statement of claim filed before the learned arbitrator.
16. Therefore, even if it is assumed that an order of restraint was issued directing the respondent Nos.2 to 12 to maintain the status quo with regard to the properties in question, that order was subject to modification/variation by the arbitrator on an application under Section 17 of the Arbitration and Conciliation Act, 1996. Admittedly no application has been moved by any of the parties before the learned arbitrator and certainly not filed by the respondent No.1. But at the same time, the fact remains that the respondent No.1 is not a party before the arbitrator and rightly so because it was not signatory to the arbitration agreement with the petitioner. Therefore, even if there was an interim order passed by the arbitrator, the very fact that it was not made as a party before the arbitrator, the stay order passed on 27.04.2012 and confirmed on 04.09.2012 ceases to exist qua respondent No.1.
17. I do not agree with the contention of the learned counsel for the petitioner that while considering the contempt committed by a person which would include the juristic or a natural person, the court will be called upon to lift the corporate veil and see as to whether the directors of a company ‘X’ has a controlling interest in another company ‘Y’ and then by a process of deduction and presumption hold the company ‘Y’ guilty of contempt. This cannot be permitted to be done as the law of contempt carries punitive sanction and like other criminal law, which has to be construed strictly, the contempt law has also to be construed strictly as it entails incarceration and imposition of fine by way of punishment. Therefore, in my considered opinion, this submission of the learned counsel for the petitioner does not have any merit.
18. So far as passing of an interim order by the contempt court is concerned on 09.01.2014, in this regard also I feel such an order ought not to have been passed. The reason for this is that the job of a contempt court is to see as to whether the order/direction/judgment which has been passed by a court has been disobeyed by a party or not and if disobeyed whether this disobedience is wilful and deliberate. If both these conditions are satisfied, the contempt court undoubtedly has the power to visit such a person with a sanction and the person who has got the benefit, must necessarily cause reparation of the benefit which he has taken. But it is not a case of reparation. The question is the contempt court cannot in my view enlarge the scope of an original order and then pass fresh ad interim order on account of the alleged wilful breach, which may give rise to a fresh cause of action to the petitioner to obtain such appropriate relief which it may want against the third party. In other words, the contempt court, could not have passed an ad interim order directing a party/respondent No.2 who was not a party to the arbitration proceedings to maintain status quo with regard to the property which was not all at all in issue in contract itself between the petitioner and that too between a third party and not the party which owned the property.
19. The learned counsel for the petitioner has referred to aforementioned two judgments of the apex court where the Supreme Court has observed that a party cannot be permitted to retain the benefits of the contempt and has been made to repay or purge the same.
20. I have gone through both these judgments but the facts are totally distinguishable from the facts of the present case. Therefore, those authorities do not help the petitioner in any manner. Moreover, I am fully satisfied that the respondent No.2 could not have been directed to maintain status quo with regard to property No.B-319, Okhla Industrial Area, Phase I, New Delhi and in any case the respondent No.2 is a bona fide purchaser who has taken all steps which are expected of a normal person to be taken by taking due diligence before a property is transacted.
21. There is absolutely no defence in this regard to be put up by the petitioner and therefore I feel that the evidence which has been brought on record by the respondent No.2 shows by preponderance of probability that it is a bona fide purchaser.
22. Another argument of the learned counsel for the petitioner is that in case the court does not intend to continue the ad interim order dated 09.01.2013 against the respondent No.2, it is liable to pay some money to the respondent No.1 and, therefore, it should be directed to pay the said money either to the petitioner or alternatively it be ordered to deposit in this court.
23. I do not agree with the contention of the learned counsel that such an order can be passed by the court in a contempt petition. Assuming that such an order can be passed, it is liable to be unsustainable in which the present order is being vacated. Therefore, this prayer of the petitioner is disallowed.
24. For the reasons mentioned above, I feel that the application of the respondent No.2 deserves to be allowed and the ad interim order dated 09.01.2014 deserves to be recalled/vacated.
25. Ordered accordingly.
26. The parties are left to bear their own costs. V.K. SHALI, J DECEMBER04 2014/dm