: 1 : conp-01-07-Judgement=.sxw USJ IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION CONTEMPT PETITION NO. 1 OF 2007 IN COMPANY PETITION NO. 298 OF 2007 M/s. Wall Street Finance Ltd. A company incorporated under the Companies Act, 1956, having their Registered Office at 52, Natasha, Hill Road, Bandra, Mumbai – 50 .. Petitioners v/s. 1. M/s. Corporate Courier Ltd. 484, Parvati Vishram Sadan, Veer Sawarkar Marg, Prabhadevi, Mumbai – 25. 2. P. Krishnakumar, director of M/s. Corporate Couriers Ltd. and Signatory of Consent terms dated 08.07.99, having his address at 484, Parvati Vishram Sadan, Veer Sawarkar Marg, Prabhadevi, Mumbai – 25. 3. Suresh V. Iyer, Director of M/s. Corporate Couriers Ltd. and Signatory of MOU dated 24.08.05, having his address at 484, Parvati Vishram Sadan, Veer Sawarkar Marg, Prabhadevi, Mumbai – 25. : 2 : conp-01-07-Judgement=.sxw 4. T. Raghavan Sarathy, Managing Director in the Consent terms dated 08.07.99, residing at Room No.5, 1st floor, Parvati Vishram Sadan, Veer Sawarkar Marg, Prabhadevi, Mumbai - 25. .. Respondents ......... Ms. Shilpa Kapil for the petitioners Mr. Surel S. Shah i/b Khare Legal Chambers for respondent no.4 ......... CORAM : R.Y.GANOO, J. DATE : 3rd FEBRUARY, 2011 ORAL JUDGMENT : 1. The petitioners herein had filed Company Petition No.298 of 1997 against respondent no.1 being a company incorporated under the Companies Act. Respondent nos. 2, 3 and 4 are the Directors of the said company. It is a common ground that Respondent no.1 was liable to pay Rs.77 lakhs and odd amount to the petitioners and for that Company Petition No.298 of 1997 was filed. It is a common ground that in the said company Petition No.298 of 1997, parties arrived at terms in order to put an end to said Company Petition by consent terms dated 8th July, 1999. 2. A perusal of the said consent terms goes to show that the respondents in the said company petition had agreed to pay to : 3 : conp-01-07-Judgement=.sxw petitioners Rs.77 lakhs and the scheme of payment was set out in clause 2. Clause 6 of the said consent terms clearly indicates that if the monies as set out in clause 1 are not paid then Mr. Raghvan Sarathy i.e. respondent no.4 would be personally liable to pay the said monies to the petitioners and an undertaking in that behalf was given by respondent no.4. 3. Clause 7 of the consent terms have imposed restrictions upon the respondents namely respondents in the said company petition had undertaken to the Court that respondents shall not dispose of the assets and / or immovable properties without written consent of the petitioners till payment of the amounts agreed to be paid under the consent terms. It is noticed that the said company is respondent no.1 in the said petition and present respondent nos. 2, 3 and 4 were the respondents in the company petition. 4. It is also noticed that the monies were not paid by the respondent no.1 herein or respondent no.4 herein. It is noticed that the Memorandum of Understanding (MOU) came to be executed on 24th August, 2005 by and between the petitioners and respondent nos. 1 herein. By clause 1, it was agreed that Rs.33,93,501/- would be paid by respondent no.1 by 31.03.2006. This was excluding Rs.15 lakhs : 4 : conp-01-07-Judgement=.sxw towards overdue charges. It was specifically agreed that respondent no.1 will pay the outstanding loan, strictly in terms of MOU on or before 5th March, 2006 and in the event of breach of terms and conditions of the said MOU, the party of the first part i.e. the petitioners were entitled to call upon the party of the second part to repay the entire amount outstanding along with the interest @ 24% per annum in terms of consent terms filed in Company Petition No.298 of 1997. 5. According to the petitioners the respondents herein have not paid the amount despite the consent terms and MOU dated 24th August, 2005. 6. I have heard learned Counsel on both sides. Learned advocate for the petitioners drew my attention to the relevant portion of the consent terms filed in the Company Petition and submitted that respondent no.4 had given an undertaking to the Court that he will pay the amount if not paid by respondent no.1. According to the learned Counsel for the petitioners non-payment of the amount by respondent no.1 as well as respondent no.4 amounts to contempt and, therefore, they should be dealt with in accordance with the provisions of law. 7. It was also contended by learned Counsel for the petitioners that : 5 : conp-01-07-Judgement=.sxw the respondents have transferred various properties then held by the respondents and, therefore, respondents have violated the undertakings given in the consent terms in clause 7. It was argued that respondents have thus committed contempt on the second count. Learned Counsel for the petitioners pray for appropriate orders in terms of the present petition. 8. Learned Counsel Mr. Surel Shah appearing on behalf of the respondents submitted that it is true that on account of consent terms, certain monetary liability was fixed upon the present respondent no.1 as also respondent no.4. He submitted that on account of MOU dated 24th August, 2005, the said arrangement arrived at as a result of the consent terms got altered and thereafter parties were governed by the terms of MOU dated 24th August, 2005 resulting into relieving the respondents from undertaking given in the said consent terms. Mr. Shah further submitted that in so far as the payment of monies, clause 5 clearly indicates that petitioners were required to call respondents to make the payment and that is how the change in the terms as regards payment took place. It is seen that amount of Rs.33 lakhs and odd was to be paid on or before 5th March, 2006. Learned Counsel Mr. Shah therefore submitted that the stand of the petitioners that respondents have committed contempt with reference to clause 1 and clause 2 of : 6 : conp-01-07-Judgement=.sxw the consent terms cannot be accepted. 9. Learned Counsel Mr. Shah submitted that respondents cannot be held responsible for contempt as regards clause 7 as petitioners have not come out with specific averments as to which properties have been disposed of by the respondents. He also pointed out that in the absence of necessary allegations in that behalf, the averments in the contempt petition should be treated as vague. He submitted that it is well settled that if the averments in the contempt petition are vague, said averments should not be accepted by the Court to hold that the contempt is committed. 10. Learned Counsel Mr. Shah alternatively submitted that whatever assets were held by the respondents at the time of signing consent terms were either mortgaged or dealt with in the usual course of business. He, therefore, submitted that the contempt petition be dismissed. 11. After having heard learned Counsel on both sides and perusing necessary record, I am inclined to dismiss the contempt petition for the following reasons. : 7 : conp-01-07-Judgement=.sxw 12. Perusal of the consent terms read with the MOU dated 24th August, 2005, it is clear that upon non-payment of monies by respondents the petitioners were to demand monies from the respondents. This will mean that the initial understanding between the parties arrived at at the time of final consent terms is modified. 13. The MOU dated 24th August, 2005 was executed and in terms of clause 1, it was agreed that the respondents shall pay a sum of Rs.33 lakhs and odd amount on or before 5th March, 2006 and if the said amount is not paid on or before 5th March, 2006, the respondents are liable to pay Rs.77 lakhs and odd amount along with the interest @ 24% per annum. It is noticed that the petitioners had addressed a notice dated 22nd March, 2007 and called upon the respondents to make payment of Rs.33 lakhs and odd amount as stated in clause 9 of the said notice within a period of 3 days on receipt of the said notice. This will clearly show that the petitioners were not pressing for recovery of Rs.77 lakhs and odd amount. If this be so that the petitioners have given a go by to what transpired between the parties as regards payment of Rs.77 lakhs in terms of clause 5 of the MOU. In view of the above, I am inclined to observe that the petitioners have failed to make out a case that respondents have committed contempt as regards to the consent terms arrived in company petition. : 8 : conp-01-07-Judgement=.sxw 14. In so far as the stand of the petitioners as regards transfer of the assets without the permission of the petitioners, it is noticed that at the time when the consent terms were filed, list of the assets then held by the respondents was not finalized and, therefore, today it is not possible for this Court to determine on the basis of the pleadings of this Contempt Petition as to which properties have not been sold by the respondents. Apart from that in the pleading of the petition, there are no details as to which properties have been disposed of by the respondents in violation of the undertaking. The averments in the petition are absolutely vague. In my view, in order to call upon the respondents to face this contempt petition, it was necessary for the petitioners to state the details as to which properties were transferred by the respondents in violation of the undertaking so that respondents could have countered the said allegations. In the absence of said averments, the Court is not in a position to determine the correctness of the averments as regards violation of the undertaking. In view of the above, the stand of the petitioners that the respondents have violated the undertaking as mentioned in the clause 7 of the consent terms, cannot be accepted. Hence, contempt petition is required to be dismissed by passing following order. : 9 : conp-01-07-Judgement=.sxw ORDER (i) Contempt Petition is dismissed. (ii) Petitioners to pay the respondents Rs. 2,000/- as quantified costs. (R.Y.GANOO, J.)