Arun Kumar Tiwari And Another ... vs Rajesh Pandey And Ors.
2015 Latest Caselaw 482 ALL

HIGH COURT OF JUDICATURE AT ALLAHABAD, LUCKNOW BENCH
 
 

AFR
 
Chief Justice's Court
 

 
Case :- SPECIAL APPEAL No. - 181 of 2015
 

 
Appellants :- Arun Kumar Tiwari And Another 1122 (Cont)2014
 
Respondents :- Rajesh Pandey And Ors.

Counsel for Appellants :- Sudeep Seth

Counsel for Respondents :- Manish Kumar,Vivek Raghuvanshi

Hon'ble Dr Dhananjaya Yeshwant Chandrachud, Chief Justice

Hon'ble Shri Narayan Shukla, J

(Per Dr D Y Chandrachud, CJ)

This special appeal has been filed against an order dated 29 April 2015 passed by a learned Single Judge. The learned Single Judge rejected an objection to the maintainability of contempt proceedings initiated by the first, second and third respondents. The breach alleged was of an order passed by a Division Bench in a company appeal, recording the terms of a settlement entered into in pursuance of mediation proceedings which took place before the Mediation and Conciliation Centre of this Court at Lucknow.

On 8 August 2012, a reference was made to the Board for Industrial and Financial Reconstruction1 under the Sick Industrial Companies (Special Provision) Act, 19852. The reference was registered on 3 December 2012. The company in respect of which the reference was registered is J R Organics Ltd of which the appellants as well as the third and fourth respondents are Directors. The reference, admittedly, was registered at the behest of the appellants. Winding up proceedings had been instituted against the company by Balrampur Chini Mills Ltd3. An order was passed by a learned Single Judge of this Court on 15 February 2011 rejecting an application of the creditor in the petition for winding up, for withdrawal of the company petition. Instead and in place of the original creditor, the learned Single Judge permitted the transposition of Somaiya Organics Employees Union, Barabanki as the applicant for pursuing the petition for winding up. A company appeal was filed against the order of the learned Single Judge4. By an order dated 21 November 2011, the Division Bench noted that counsel for the parties had agreed to attempt a solution by entering into negotiations. The Division Bench referred the matter to the Mediation and Conciliation Centre of this Court at Lucknow where the representatives of the workmen and the management were permitted to appear together with the creditors. On 4 January 2013, the Division Bench noted that a settlement agreement had been entered into and signed by the parties before the Mediation Centre on 1 June 2012. Under the agreement, the management agreed to pay the outstanding dues of the workmen and employees in the amount of Rs 9.38 crores and outstanding dues of creditors in the amount of Rs 2.76 crores. These dues were directed by the Division Bench, with the consent of counsel, to be paid by 31 December 2013. The workmen and employees were to be entitled to the payment of their dues up to 31 December 2012. The Division Bench recorded that all the settlement agreements shall form part of the judgment. Keeping in view the amicable settlement between the parties, the Division Bench set aside the order of the learned Single Judge, expressing a hope and expectation that parties would cooperate in the implementation of the settlement agreement and would not create any disturbance in the functioning of the company and the sugar mill. The settlement agreements were to be binding on the signatories. The appeal was, accordingly, disposed of. The order of the Division Bench was confirmed by the dismissal of a special leave petition filed by the appellants, on 7 May 2014 by the Supreme Court.

In the meantime, on 12 December 2013, the BIFR passed an order declaring the company as a sick industrial company under Section 3 (1) (o) of SICA and appointed Punjab National Bank as the Operating Agency under Section 17 (3). The following order was passed by the BIFR:

"(i) The company shall prepare a fully tied up draft rehabilitation scheme (DRS) within four weeks and submit the same to OA, with a copy to the Board.

(ii) The OA shall examine the DRS prepared by the company within further six weeks' time and hold a joint meeting of all the stakeholders to consider the company's DRS and submit a report with a fully tied up DRS, if it emerges. The Guidelines and Checklist for preparation of DRS is also enclosed herewith.

(iii) The company shall not dispose of any of its assets as per provisions of Section 22 of SICA without prior approval of the Board."

Subsequently, a draft rehabilitation scheme is stated to have been filed before the BIFR on 21/22 May 2014.

A contempt proceeding was initiated on 13 June 2014 by the first, second and third respondents for breach of the order of the Division Bench for failure to pay the outstanding dues. When the contempt petition came up before the learned Single Judge, a preliminary objection was raised to its maintainability, inter alia, on the ground that since the order of the Division Bench dated 4 January 2013 had been passed in a company appeal, the order had to be executed and enforced in accordance with the provisions of Section 634 of the Companies Act, 19565. The learned Single Judge rejected the preliminary objection with the following observations:

"...No doubt the order has been passed by Division Bench in company appeal. In the present case, High Court has been actively involved in getting this matter solved. In the present case, the parties have themselves agreed to go to mediation and conciliation center. The said centre is part of High Court and is situated inside the campus of High Court. There is a supervisory committee of five High Court Judges which looks after the mediation process. Once the parties have themselves requested the Court to send their matter to mediation centre, actively participated in the mediation, reached an agreement, reported the matter to the High Court and finally the Court has made the agreement part of the judgment, it cannot be said that violation of this Court's order can only be dealt with under the Companies Act. Opposite parties cannot be allowed to blow hot and cold in the same breath."

The learned Single Judge noted that two of the four Directors of the company are willing to comply with the terms of settlement; that by approaching the BIFR without seeking the permission of the Court and obtaining an ex parte interim order, the appellants resorted to delaying tactics; and that all elements which constitute a willful disobedience of the orders of the Court are present. The appellants are in appeal against the rejection of their objection to the maintainability of the contempt petition.

The maintainability of the appeal was challenged on the ground that a special appeal will not lie against an order of the learned Single Judge in the exercise of the contempt jurisdiction and that only an appeal under Section 19 of the Contempt of Courts Act, 19716 would be maintainable.

While considering the merits of the objection to the maintainability of the appeal, it must be noted that under Section 19 (1), an appeal lies as of right from any order or decision of the High Court in the exercise of its jurisdiction to punish for contempt. Under sub-section (2) of Section 19, the appellate court is empowered to direct that the execution of the punishment or the order appealed against be suspended; that the appellant, if he is in confinement, be released on bail; and that the appeal be heard, though the appellant has not purged his contempt. In the present case, no appeal would be maintainable under Section 19 (1) (a) for the simple reason that the impugned order of the learned Single Judge has not been passed in the exercise of the jurisdiction to punish for contempt.

That still leaves the question as to whether a special appeal would be maintainable under Chapter VIII Rule 5 of the Allahabad High Court Rules, 1952. In our view, the impugned order of the learned Single Judge does constitute a judgment within the meaning of Rule 5 of Chapter VIII. In order to constitute a judgment, a decision of the judge must contain, as the Supreme Court held in Shah Babulal Khimji Vs Jayaben D Kania7, the traits and trappings of finality either when the order decides the question in controversy in an ancillary proceeding or in the suit itself or in a part of the proceedings. Hence, it has been held that every interlocutory order may not necessarily be regarded as a judgment but only those orders would constitute judgments which decide matters of moment or affect vital and valuable rights of the parties and which work serious injustice to the parties concerned8.

In a judgment of a Division Bench of this Court in Prof Y C Simhadri, Vice Chancellor, BHU Vs Deen Bandhu Pathak9, it has been held that where a learned Single Judge has exercised jurisdiction not vested in him, an order concerning the jurisdiction to entertain a contempt proceeding would fall within the definition of the expression 'judgment' and would be appealable. Such an order, it has been held, would affect the rights of the appellant and by causing injustice to him, could form the subject matter of a special appeal. In the present case, the learned Single Judge has overruled the objection of the appellants to the maintainability of the contempt petition. The decision holding the contempt petition to be maintainable has the trappings of a judgment because it finally and conclusively decides the issue in regard to the maintainability of such a petition invoking the contempt jurisdiction. The special appeal would, therefore, be maintainable.

On merits, the issue which falls for consideration before the Court is whether a contempt petition of this nature, complaining of a breach of a settlement agreement which was entered into between the parties before the Mediation and Conciliation Centre of this Court and in terms whereof the company appeal was disposed of, was maintainable.

The facts are not in dispute. Against the order of the learned Single Judge declining permission to withdraw a company petition for winding up and allowing a prayer for substitution of a petitioning creditor, an appeal was filed before the Division Bench. During the pendency of the appeal, parties were referred to the Mediation and Conciliation Centre. A settlement agreement was arrived at on 1 June 2012 under which the dues of the workmen and other creditors were quantified which the management agreed to pay. The Division Bench, by its judgment dated 4 January 2013 disposed of the company appeal in terms of the amicable settlement which was arrived at before the Mediation and Conciliation Centre.

The agreement which was arrived at in the course of mediation was a settlement by which the dispute was compromised. When the Division Bench disposed of the appeal in terms of the compromise, the mediated settlement received the imprimatur of the Court. Section 634 of the Companies Act provides that any order made by a Court under the Act may be enforced in the same manner as a decree made by the Court in a suit pending therein. In a regular civil suit, a decree can be passed in terms of a compromise which is arrived at, under Order XXIII Rule 3 of the Civil Procedure Code, 190810. Order XXIII Rule 3 provides as follows:

"3. Compromise of suit.- Where it is proved to the satisfaction of the court that a suit has been adjusted wholly or in part by any lawful agreement or compromise in writing and signed by the parties or where the defendant satisfies the plaintiff in respect of the whole or any part of the subject matter of the suit, the court shall order such agreement, compromise or satisfaction to be recorded, and shall pass a decree in accordance therewith so far as it relates to the parties to the suit, whether or not the subject matter of the agreement, compromise or satisfaction is the same as the subject matter of the suit:

Provided that where it is alleged by one party and denied by the other than an adjustment or satisfaction has been arrived at, the court shall decide the question; but no adjournment shall be granted for the purpose of deciding the question, unless the court, for reasons to be recorded, thinks fit to grant such adjournment.

Explanation : An agreement or compromise which is void or avoidable under the Indian Contract Act, 1872 (9 of 1872), shall not be deemed to be lawful within the meaning of this rule.

A mediated settlement, upon the passing of a judicial order in terms of the settlement, has the effect of a decree of the Court. As a decree, the terms of the settlement are enforceable and executable in accordance with the process known to law. A decree for the payment of money is capable of being executed in the manner indicated by the provisions contained in Order XXI of CPC. Rules 1 and 2 of Order XXI provide for the mode of paying money under a decree and for the payment out of Court to a decree holder. Consequently, where a settlement agreement which has been arrived at between the parties is embodied in a final order or decree of the Court, the remedy of a party which is aggrieved by the non-payment of sums due and payable under it is to enforce and execute the decree in accordance with law.

In Kanwar Singh Saini Vs High Court of Delhi11, the Supreme Court held as follows:

"In case there is a grievance of non-compliance of the terms of the decree passed in the civil suit, the remedy available to the aggrieved person is to approach the execution court under Order XXI Rule 32 CPC which provides for elaborate proceedings in which the parties can adduce their evidence and can examine and cross-examine the witnesses as opposed to the proceedings in contempt which are summary in nature. Application under Order XXXIX Rule 2A CPC is not maintainable once the suit stood decreed. Law does not permit to skip the remedies available under Order XXI Rule 32 CPC and resort to the contempt proceedings for the reason that the court has to exercise its discretion under the Act 1971 when an effective and alternative remedy is not available to the person concerned. Thus, when the matter relates to the infringement of a decree or decretal order embodies rights, as between the parties, it is not expedient to invoke and exercise contempt jurisdiction, in essence, as a mode of executing the decree or merely because other remedies may take time or are more circumlocutory in character." (emphasis supplied)

The same view was expressed in a judgment of a Division Bench of the Gujarat High Court in Jitesh Trading Co Vs Gita Fabrics P Ltd12, where it was held that a breach of consent terms which were arrived at in the course of a company petition, could only be remedied by seeking enforcement of the order of the Court under Section 634 of the Companies' Act 1956. The Gujarat High Court held that contempt proceedings are not intended to be a substitute for the process of execution. Section 634 provides for treating the order of the company Court as a decree and, if it is a decree, it would have to be executed under Order XXI of the CPC.

The learned Single Judge, in the present case, has been persuaded to take the view that the contempt petition was maintainable on the ground that the High Court had been actively involved in getting the matter resolved. The fact that the settlement was arrived at in pursuance of the intervention of the Mediation and Conciliation Centre of the High Court; that the Centre is part of the High Court and is situated inside the campus of the High Court and there is a supervisory committee of judges which looks after the mediation process weighed with the learned Single Judge in rejecting the objection to the maintainability of the contempt proceedings. None of these factors can make any difference to the essential attributes of a settlement in the course of mediation proceedings. Once a settlement is arrived at in the course of a mediation proceeding, the enforcement of the terms of settlement as a decree of the Court, upon a final order of the Court passed in terms of the settlement, must take place in a manner provided for the enforcement of decrees and orders. Recourse to the contempt jurisdiction would not be warranted. The issue in regard to the maintainability of a contempt petition cannot, with respect, be resolved on the basis of the importance of the mediation and conciliation centre as a court annexed institution. The essence of the matter is that the terms of the settlement agreement which was arrived at in the course of mediation proceedings would have to be enforced as a decree of the Court once a final order was passed by the Division Bench in its terms on 4 January 2013.

For these reasons, we are of the view that the learned Single Judge erred in rejecting the preliminary objection to the maintainability of the contempt petition. The contempt petition was, in our view, not maintainable. The first, second and third respondents or any party aggrieved by a breach of the mediated settlement would be at liberty to pursue the remedy available in law.

The special appeal is, accordingly, allowed by setting aside the impugned judgment and order dated 29 April 2015. The contempt petition, Contempt No 1122 of 2014, shall stand dismissed.

The special appeal is, accordingly, disposed of. There shall be no order as to costs.

Order Date :- 13.5.2015

AHA

(Dr D Y Chandrachud, CJ)

(S N Shukla, J)