1 PGK IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION Contempt Petition No.84 of 2008 IN Appeal (L) No.199 of 2008 IN Notice of Motion No.1030 of 2008 IN Suit No.854 of 2008 Parikh Glass Co. Pvt. Ltd. .. Petitioner v/s. M/s.Orbit Finance Pvt. Ltd. & ors. .. Respondents Ms.Rajani Iyer, Sr.Advocate with Mr.Prakash Ganwani, Mrs.Anila Acharya and Mr.Raj Mehta, Ms.Shilpa Baria i/by RKM Legal Services for Petitioner. Mr.Shailesh Naidu i/by India Law Alliance for Respondent No.2. ----- CORAM : SMT.ROSHAN DALVI, J. Date of reserving the order : 30th April, 2010 Date of pronouncing the order : 3rd May, 2010 P.C. : 1.The Petitioner in this Petition is the Plaintiff in Suit No.854 of 2008. Respondent Nos.1, 4 and 5 are the Defendants in this Suit. The relief in this Petition is pressed against Respondent Nos.1, 2 and 3, 2 Respondent Nos.2 and 3 being the Directors of Respondent No.1. Though the application of the Petitioner (Plaintiff) is made out by way of a Contempt Petition, the reliefs pressed for by the Petitioner are not only for punitive action to be taken against Respondent Nos.1, 2 and 3 under Section 12 of the Contempt of Courts Act, 1971, but for taking an action upon perjury stated to have been committed by Respondent Nos.1, 2 and 3, for attachment of the office and residential premises of Respondent Nos.1, 2 and 3, for declaration of their personal assets and for appointment of Court Receiver. 2.The Petitioner sued the Respondents herein consequent upon the agreements entered into by the Petitioner for 2 units constructed by Respondent No.1 on the 4 th floor in the suit building being Units 402 and 403, which came to be later sold by the Petitioner to Respondent Nos.4 and 5 for a separate consideration. The Petitioner challenged the subsequent sale and the subsequent possession being given of the units initially purchased by it to Respondent Nos.4 and 5 herein. The Petitioner applied for interim relief. After interim order came to be passed, an Appeal came to be filed being the aforesaid Appeal (Lodging) No.199 of 2008. In Appeal the Petitioner and Respondent No.1 represented by Respondent Nos.2 and 3 as its Directors 3 entered into certain Consent Terms. The Petitioner has alleged wilful disobedience and breach of the action required to be taken by Respondent No.1 under the Consent Terms. 3.Under the Consent Terms, the Petitioner was to be provided certain premises on the 6 th floor of the suit building instead of the premises on the 4 th floor which were initially purchased by the Petitioner but possession of which could not be given to the Petitioner in view of the subsequent sale of the said premises to Respondent Nos.4 and 5. 4.Under the Consent Terms, Respondent No.1 declared that it had entered into an arrangement with one D.P. Jain (Jain) for an area of 2005 sq. ft. on the 6 th floor of the building but had given possession of 1150 sq. ft. to Jain. He had to give possession of area of 855 sq. ft. to Jain. The remaining area would be 4622 sq. ft. which was not sold to Jain or any other person. He agreed to give the Petitioner possession of an area of 4622 sq. ft. (carpet) on the 6 th floor of the building in consideration of the Agreement dated 14.6.2006, which the Petitioner had entered into with Respondent No.1. He agreed to give possession after obtaining all requisite permissions from the Mumbai Municipal Corporation (MMC), including the Occupation 4 Certificate. The parties agreed to enter into a Deed of Rectification upon such possession being given. The possession that would be given was to be a premises earmarked as commercial premises. 5.The possession has not been given as agreed. The Petitioner contends that the agreement of Respondent No.1 in the Consent Terms making a representation that it would be entitled to and, therefore, give possession of the aforesaid premises was, to its knowledge, false because the arrangement that was entered into by Respondent No.1 with Jain was to be specifically performed within a stipulated time frame which was initially 7 months and later extended by 4 additional months. Respondent No.1 did not and could not construct the premises for Jain within that time. 6.Under the Consent Terms entered into by Respondent No.1 with Jain in a Suit filed by Jain being Suit No.49 of 2007 in this Court, the arrangement was by way of Consent Terms filed by and between Respondent No.1 and Jain. Under that Consent Terms if Jain was not given the premises agreed to be given of additional 855 sq. ft. duly constructed by Respondent No.1 herein, Jain would be entitled to a larger premises of 1150 sq. ft. carpet area already constructed on the 6 th floor of the building which he would be entitled to keep himself 5 albeit upon payment of consideration as agreed between the parties. 7.Part of the 6 th floor was constructed. Part was not constructed because additional FSI was required. Additional FSI was to be granted to Respondent No.1 upon payment of premium and other cheques of Rs.4.48 Crores. If such premium was not paid to MMC and the additional FSI was not granted, no further construction would be made by Respondent No.1 on the 6 th floor of the building. Jain, under his arrangement / Consent Terms, was protected since he was in possession of another premises already constructed on the 6 th floor. He would, therefore, continue in possession. Consequently, the Petitioner s Consent Terms would not be honoured by Respondent No.1 unless Respondent No.1 made payment of the necessary premium which Respondent No.1 failed to make. 8.It is the case of the Petitioner that Respondent No.1 knew at the time he entered into the Consent Terms with the Petitioner that he had not and he could not make payment of the premium, by which he would get the additional FSI to be able to honour his commitment in the arrangement / Consent Terms of Jain to build extra premises where Jain could be accommodated so that the Petitioner could be given the remainder of the premises 6 of 4622 sq. ft. carpet area on the 6 th floor of the suit building. 9.For this purpose, the chronology of certain dates and events would become necessary to consider. The Consent Terms with Jain were entered into by Respondent No.1 on 12.9.2007. Respondent No.1 had to construct the premises initially within a 7-month period. That would expire on 11.4.2008. Respondent No.1 was given a further 4-month period to complete his obligation under the Consent Terms with Jain. That period would expire on 10.8.2008. The Consent Terms with the Petitioner were filed on 8.7.2008. 10.Construction of the 4622 sq. ft. of area was to be put up upon purchase of additional FSI at a premium.I have been shown a photo copy of the letter of the MMC dated 27.11.2008 addressed to Respondent No.1 requiring payments to be made for the premium for additional FSI, IOD deposit and security fee aggregating to Rs. 4,48,96,850/-. 11.Hence Respondent No.1 knew the already existing liability which it had to discharge to perform its part of the CTS. At the fag end of the period of 11 months granted to Respondent No.1, during which Respondent No. 1 did not do anything to be able to perform his 7 obligation of construction of the said area, he entered into Consent Terms with the Petitioner for completing construction of the remaining area of the 6 th floor, as commercial premises, obtaining the requisite permissions of the MMC, including the Occupation Certificate and handing over possession to the Petitioner. 12.Consequently, it is seen that Respondent No.1 never intended to perform its part of the Consent Terms or discharge its obligation under the Consent Terms, though representing to the Petitioner that it could do so. 13.Consent Terms between the parties constitute an agreement between the parties to discharge their respective obligation thereunder. The agreement so entered into would constitute a contract between them which would be enforceable at law. Consequently, the representations made by a party to induce another to enter into such a contract, if falsely and dishonestly made, would constitute a fraud upon the other party to the contract. Aside from such fact, such a contract would be voidable at the option of such other party. The representations show that the party making such representations induced the other party to enter into the contract which such party would not enter into, had 8 such representations not been made. 14.The representations of Respondent No.1 came to be made by its Directors acting as its agent for and on behalf of the Company, Respondent No.1. Respondent No.3 is stated to have signed the Consent Terms. Respondent No.2 is the other Director of Respondent No.1 who acted on behalf of Respondent No.1. It may be mentioned that the Consent Terms were entered into under circumstances in which Respondent Nos.2 and 3 were acting on behalf of Respondent No.1 were being sued for selling and transferring the premises initially sold by them to the Petitioner later to Respondent Nos.4 and 5. In an Appeal from an interim order, an order could have been passed by the Court with regard to the acts of Respondent No.1 in selling the same premises to at- least two parties for consideration. Under those circumstances, Respondent No.1, through its two Directors, entered into the Consent Terms knowing fully well that they would not be able to honour the Consent Terms because Jain, who was already in possession, would not hand over possession of the premises that he occupied and further because they had not paid premium called upon by MMC, no further FSI would be granted to enable them to put up construction that they represented to the Petitioner that they would put up to give them possession thereof. 9 15.Respondent No.1 has neither denied execution of agreements / sale-deed with regard to the same premises to the Petitioner as well as Respondent Nos.4 and 5 nor the arrangement with the said Jain under the Consent Terms entered into with the said Jain and the time limit thereof or the issue of the letter by the MMC for payment of premium. 16.The only justification for not being able to perform its obligation under the Consent Terms and not performing the said obligation is that the dispute has been raised by the Petitioner with the MMC so that the MMC has refrained from issuing or granting additional FSI. The copy letter of the complaint made by the Attorneys of the Petitioner to the MMC has been produced before this Court. The letter is dated 30 th April 2008, which is well prior to the execution of the Consent Terms. The letter sets out the acts of Respondent No.1 executing multiple agreements for the same premises with various parties for consideration and opposing the grant of additional FSI to Respondent No.1 without its permission. The restraint by the MMC would have, therefore, been made known to Respondent No.1 prior to the execution of the Consent Terms and during the period the Appeal was being prosecuted in 10 which the Consent Terms came to be filed. The justification of Respondent No.1 is, therefore, totally devoid of merits. 17.Further the FSI, which was to be allowed on payment of premium, was to be used for IT purpose. Respondent No. 1 had to have converted part of the FSI for commercial use which the Petitioner required and which Respondent No.1 under the Consent Terms agreed to make available to the Petitioner by way of construction on the 6 th floor of the suit building. This would entail further time, effort and finance which also Respondent No.1 did not have. 18.The case of the Petitioner that Respondent No.1 wilfully defaulted in complying with the Consent Terms from the very inception and that it had no intention to perform its obligation under the Consent Terms has much substance. 19.The Plaintiff would be entitled to reliefs in equity. 20.A case is made out for attachment of the properties of Respondent No.1 and other incidental reliefs. However, since this Petition is filed under Section 12 of the Contempt of Courts Act, only punitive action is contemplated, such corrective action cannot be taken. 11 21.No case for committing Respondent Nos.2 and 3 to civil prison is made out. However, since it is seen that Respondent Nos.1, 2 and 3 are seen not to have had the intention to honour the Consent Terms inasmuch as they were, from the inception, though unknown to the Petitioner, not in a position to honour the Consent Terms and in fact did not honour the same despite signing them, must be taken to have committed contempt of Court in signing Consent Terms incapable of execution. Hence the order :- ORDER (i) Respondent Nos.1, 2 and 3 are held liable in contempt and ordered to pay fine of Rs.2,000/-. The Petitioner shall be entitled to pursue such further remedies in law, as they may be entitled. (ii)The Contempt Petition is disposed of accordingly. (SMT.ROSHAN DALVI, J.)