Case: M/S. Maruti Udyog Ltd Vs. Mahendra C. Mehta

This contempt petition arises in a somewhat peculiar circumstance. Petitioner herein is manufacturer of cars. Alleged contemnors were Directors of a Company known as M/s. Mahalaxmi Motors Limited (Company). The Company obtained various advances from the customers on behalf of the petitioner. It, however, did not pay the amount to petitioner herein. Respondents admitted their liability of the petitioner to the extent of Rs. 7.63 crores in respect of supply of vehicles made by it, as would appear from the minutes of the meeting dated 5.04.1997 which is as under:7. MML also provided a letter No. 021/MML/97 dated 5.4.1997 wherein they admitted that there was a shortfall of Rs. 7.63 CrRespondents also by an affidavit filed before the Andhra Pradesh High Court admitted their liability stating:15. In this instance also the Petitioner company had on its own given the particulars of the amounts due from it to the complainant company by its letter dated 5th April, 1997 wherein it accepted a liability of Rs. 763.22 lakhs and also gave the repayment schedule. Prior to that it gave a list of all the pending customers at Hybderabad and Vijayawada. In fact vehicles have been delivered to meet of these in the said list, and deliveries are still on to the remaining persons. The complainant company had been delivering these vehicles through other dealers as with the advent of this dispute with the Petitioner company it terminated its dealership16. It is respectfully submitted that after the Petitioner company gave the said undertaking to pay off the due about Rs. 763.22 lakhs, there has been a change in thinking in the concerned officials of the complainant company had they started making exaggerated claims over and above the amounts actually due to it from customer bookings. As far as the Petitioner company is concerned it also made funds available to honour its commitment to the complainant company and took a draft for the said amount in May 1997 itself which is to the knowledge of the complainant companyAs the Company or its Directors did not pay even the said admitted amount to the petitioner, it filed a suit for recovery thereof. Indisputably, there existed an arbitration agreement in the contract entered into by and between the parties, Clause 57 whereof reads as under:If the differences or disputes, except dispute pertaining to termination, shall arise between the parties hereto as to the construction or true intent and meaning of any of the terms and conditions herein contained or as to any payment to be made in pursuance hereof or as to any other matter arising out of or connected with or/ incidental to these presents or as to the rights, duties and obligation of either party, such difference or dispute whenever and so often as the same shall arise, shall be referred to the Indian Council of Arbitration, New Delhi under their rules for the time being in force and the award in pursuance thereof shall be binding on the partiesRelying on or on the basis of the said arbitration agreement, the respondents herein filed an application purported to be under Section 8 of the Arbitration and Conciliation Act, 1996 (for short the Act). A learned Single Judge of the Delhi High Court rejected the said application. An appeal was preferred thereagainst before a Division Bench which was also dismissed. A Special Leave Petition was filed before this Court. Petitioner herein agreed for reference of the disputes and differences between the parties to arbitration inter alia on the condition that the respondents shall deposit the amount or furnish security and/ or comply with the directions of the learned Arbitrator in case such directions and/ or interim orders are passed by the learned Arbitrator in the following terms:4. All the parties to this S.L.P. shall by way of affidavit give undertaking to this Honble Court to furnish the security and/ or comply with the directions of learned Arbitrator in case the learned Arbitrator directs any of the parties to furnish the security and/ or comply with any other interim order of the learned ArbitratorThe proposed term of reference was also agreed to by the respondentsOn the basis of the said representations, this Court by an order dated 6.09.2002 referred the subject matter of the dispute to the arbitration of Justice A.M. Ahmadi, a former Chief Justice of this Court.

Court's reasoning:
We, therefore, keeping in view the peculiar facts and circumstances of this case and the conduct of the alleged contemnors, are of the opinion that they have committed contempt of this Court. We are clearly of the opinion that it is eminently a fit case where jurisdiction of this Court under Article 129 of the Constitution of India as also the provisions of the Contempt of Courts Act, 1970 should be invokedHowever, the fact that the alleged contemnor No. 3 has resigned, being not in dispute, no action is being taken against him. So far as, the alleged contemnor No. 1 is