Vls Finance Ltd vs Southend Infrastructure Pvt Ltd ...
2014 Latest Caselaw 6476 Del

$~42
*      IN THE HIGH COURT OF DELHI AT NEW DELHI
+                         CONT.CAS(C) 970/2013
                                        Decided on : 4TH December, 2014
       VLS FINANCE LTD                                    ..... Petitioner
                   Through:        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 SCC

641 to 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 SCC 216 and ii) DDA v. Skipper Construction Company Private Ltd and Anr; AIR 1996 SC

2005.

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 DECEMBER 04, 2014/dm