A court which has competence to pass an order – interim or final, is entitled to take notice of its disobedience: Delhi High Court

IN THE HIGH COURT OF DELHI AT NEW DELHI Date of Decision: 22.04.2021 W.P.(C) 4539 2021 SHEIKH M. MAROOF PHOENIX ARC PVT LTD & ORS. ..... Petitioner Through Mr. Sanjiv Kakra Sr. Adv with Mr. Anand Agrawal Adv Respondent Through Mr. Amit Kumar Chadha Sr Adv Mr. Suresh Dutt Dobhal Adv Mr. Nirmal Goenka Adv for Respondent No. 1 Phoenix ARC HON BLE MR. JUSTICE VIPIN SANGHI HON BLE MS. JUSTICE REKHA PALLI VIPIN SANGHI JCM APPL. 13901 2021 Exemption allowed subject to all just exceptions. The application stands disposed of. W.P.(C) 4539 2021 & CM APPL. 13900 2021 The petitioner has preferred the present writ petition to seek the following reliefs: “(a) set aside order dated 23.03.2021 passed by the Hon’ble Debts Recovery Appellate Tribunal New Delhi dismissing application Miscellaneous Appeal No. 128 of 2020 titled as Sheikh M. Mahroof Versus Phoenix ARC and others pending before the Hon’ble Debts Recovery Appellate Tribunal dismissing securitisation application no. 78 of 2020 pending before the learned Debts Recovery Tribunal and also forfeiting the amount of Rs.30.00 lakhs deposited by the Petitioner along with interlocutory application no. 621 seeking extension W.P.(C) 4539 2021 of time to deposit a sum of Rs.2.00 crores directed to be deposited vide order dated 09.11.2020 restore Miscellaneous Appeal No. 128 of 2020 titled as Sheikh M. Mahroof Versus Phoenix ARC and others pending before Hon’ble Debts Recovery Appellate Tribunal. with direction to be heard and decide the same on merits restore Miscellaneous Securitisation Application No.78 of 2020 titled as Sheikh M. Mahroof Versus Phoenix ARC and Others pending before the learned Debts Recovery Tribunal with direction to be heard and decide the same on merits order for the refund of Rs.30.00 lacs deposited by the petitioner with the Hon’ble Debts Recovery Appellate Tribunal Respondent no.1 Phoenix ARC Pvt. Ltd. as the assignee of the loan granted by the Canara Bank to the respondent nos.2 and 3 i.e. ZAZ Mustang a partnership firm and ZAZMAN Exports another partnership firm has been pursuing its remedies under both the SARFESI Act and the RDDBFI Act. The respondent no.1 sought to invoke its powers under the SARFEASI Act in order to take possession of the mortgaged properties i.e. two flats being Flat No.3 Taj Apartments situated on Plot No.2B Rao Tula Marg Sector 12 R.K. Puram New Delhi and Flat No.3 Taj Apartments situated on Plot No.2C Rao Tula Marg Sector 12 R.K. Puram New Delhi. The petitioner claims that he is a tenant in these two flats and on that premise sought to move a Securitisation Applicationbefore the DRT under Section 17 of the SARFEASI ACT. The petitioner also sought protection against dispossession before the DRT. The DRT did not find any merit in the said claim for interim relief on the premise that the petitioner had not been able to establish even prima W.P.(C) 4539 2021 facie that he is a tenant in the said property as the petitioner did not produce any rent receipts or other record to establish that the petitioner is a tenant or had been paying any rent. Moreover the petitioner is the brother in law of the partner of the debtor firms. Consequently the DRT dismissed his application to seek stay against dispossession. This led to the petitioner preferring Miscellaneous Appeal No.128 2020 before the DRAT. When the matter came up before the DRAT on 09.11.2020 the petitioner again pressed for stay of dispossession wherein the DRAT granted a conditional stay against the dispossession to the petitioner by directing that he should pay Rs. 2 crores to the Receiver in case the Receiver approaches the petitioner to take physical possession of the properties. The dues against the respondent nos.2 and 3 herein were to the tune of Rs.4.55 crores in the loan account in question whereas the total liability of the respondent nos.2 and 3 is stated to be to the tune of Rs.185 crores. Thus the petitioner was not immediately dispossessed on account of the passing of the said conditional order of stay by the DRAT. However the petitioner was not satisfied with the aforesaid order passed by the DRAT and preferred W.P.(C) No. 9329 2020 before this Court to assail the order dated 09.11.2020. The said writ petition was rejected by this Court on 24.11.2020 by observing that the order passed by DRAT appears to be equitable and tests the bona fides of the petitioner. Despite the said order the petitioner did not deposit the said amount of Rs.2 crores and once again approached the DRAT seeking extension of time on the ground that the petitioner was making arrangements for the amount and in the interregnum the petitioner deposited an amount of Rs.30 W.P.(C) 4539 2021 10.02.2021. lakhs with the DRAT. However the DRAT rejected the application of the Thereafter the order refusing the grant of extension of time was assailed by the petitioner before this Court in W.P.(C) No. 1731 2021 however the said writ petition was also rejected by this Court on Since the petitioner did not deposit the amount of Rs.2 crores the petitioner was issued a show cause notice on 17.12.2020 on the ground that the petitioner had disobeyed the interim direction issued by DRAT and therefore the petitioner was required to show cause as to why action should not be taken against him. It is in pursuance of the said show cause notice that the impugned order has been passed by the DRAT. The DRAT has held the conduct of the petitioner to be contumacious by placing reliance on the judgment of the Supreme Court in M s Prestige Lights Limited v. State Bank of India 4539 2021 undertaking had been flouted. The explanation furnished by the petitioner when confronted with the said undertaking was that he had given the undertaking since he had no option and if the same had not been given he would have lost the possession of flats in question. 10. The submission of Mr.Kakra learned senior counsel for the petitioner is that the DRAT at the highest could have rejected the M.A.128 2020 which arose from an interim order passed by the DRT rejecting the petitioner’s application to seek stay against dispossession. The petitioner already stands dispossessed from the said properties as noticed in the impugned order. He submits that firstly the DRAT could not have forfeited the amount of Rs.30 lakhs deposited by the petitioner since it had vide its earlier order dated 03.02.2021 observed that the petitioner may withdraw the said amount and secondly the DRAT could not have directed the dismissal of the petitioner’s S.A. under Section 17 of the SARFEASI Act pending before the DRT since the petitioner is neither the borrower nor the guarantor in respect of the loan accounts. Mr. Kakra has submitted that the DRAT had no jurisdiction to direct dismissal of the S.A. as the same had not been adjudicated on merits and it is for the DRT to deal with the same on merits. In support of his submissions he sought to place reliance on Prem Kumar Gupta v. Bank of India & Ors.decided on 18.09.2018 wherein this Court had ruled on the extent of jurisdiction exercised by the DRAT. He also places reliance on Standard W.P.(C) 4539 2021 Chartered Bank v. Dharminder Bhohi & Ors. SCC 341] in support of his aforesaid submissions. 12. We have considered the submissions of Mr.Kakra in the light of the decisions relied upon by him. 13. No doubt the petitioner is not the borrower or the guarantor in the loan account however he was occupying valuable properties of the borrowers which are mortgaged for the purpose of liquidation of the loan account of the respondent nos. 2 & 3. Though he claims to be a tenant in the premises he has not been able to produce any creditable material before the Tribunal in support of the said claim. The Tribunal prima facie did not find any merit in the petitioner’s submission that he is a tenant. Pertinently and admittedly the petitioner gave an undertaking to the DRT that he would deliver possession of the two properties in question which he did not honour. It is no answer for the petitioner to say that the undertaking was given only to avoid dispossession when his intention was not to honour the same. This itself reflects on the dishonesty of the petitioner and is a ground in itself to completely non suit him. The DRAT granted protection to the petitioner on the condition of his depositing Rs.2 crores when he is sought to be dispossessed by the receiver appointed under the SARFEASI Act. He once again failed to comply with the condition and continued to remain in the possession since the passing of the order by the DRAT on 09.11.2020. If he were not so minded to deposit the amount he should have up front informed the DRAT about the same in which case the DRAT would not have granted the protection in the first place. However he exploited the said indulgence granted by the DRAT and thereafter W.P.(C) 4539 2021 preferred a writ petition which too came to be dismissed as aforesaid. Even thereafter he went back to the DRAT to seek extension of time that application was rejected and yet again he came to this Court only to face dismissal of his second writ petition. The result of the machinations adopted by the petitioner was that he was able to prolong his dispossession from the properties thereby preventing the sale of the said properties by respondent no.1 for a period of about five months. Mr.Chadha who appears for the respondent no.1 points out that the endeavour of the respondent no.1 to take possession has been blocked by the borrowers and the petitioner for the last about 10 years. In the aforesaid context the petitioner was issued the show cause notice on 17.12.2020 which forms the basis of the impugned order. The learned DRAT has taken note of the aforesaid developments in the impugned order and placed heavy reliance on M s Prestige Lights Limited supra) decided on 20.08.2007. We may extract the observations of the Supreme Court in M s Prestige Lights Limitedwhich had been also relied upon by the DRAT in the impugned order: “17. But there is an additional factor also as to why we should not exercise discretionary and equitable jurisdiction in favour of the appellant. It is contended by the learned counsel for the respondent Bank that having obtained interim order and benefit thereunder from this Court the appellant Bank has not paid even a pie. The appellant is thus in contempt of the said order. The Company has never challenged the condition as to payment of amount as directed by this Court. Thus on the one hand it had taken benefit of the order of interim relief and on the other hand did not comply with it and failed to pay instalments as directed. Neither it raised any grievance against the condition as to payment of instalments nor made any application to the Court for modification of the condition. It continued to enjoy the W.P.(C) 4539 2021 benefit of stay ignoring and defying the term as to payment of money. The Company is thus in contempt of the order of this Court has impeded the course of justice and has no right of hearing till it has purged itself of the contempt. 18. As already noted stay of dispossession was granted by this Court on mention being made on April 28 2005. The matter was then notified for admission hearing on May 6 2005. A two Judge Bench of which one of us was a partypassed the following order Permission to file additional documents is granted. Issue notice. Subject to the petitioner s depositing an amount of Rs.20 lakhs per month in this Court there will be stay of the operation of the impugned order. First of such payment shall be made by 6th June 2005 and the subsequent payments by 6th of each succeeding month. In default of payment of any one instalment the stay will stand vacated." 19. From the above order it is clear that notice was issued to the other side and stay granted earlier was ordered to continue on the appellant s depositing a sum of Rs. 20 lakhs per month in this Court. It was also made clear that first of such payment should be made by 6th June 2005 and subsequent payments by 6th of each succeeding month. A default clause was also introduced in the order that if such payment would not be made the stay would stand vacated. It is an admitted fact that the order has not been complied with and no payment as per the order has been made by the appellant Company to the respondent Bank. The said fact has also been reflected in the order of this Court passed on July 25 2007 wherein it was stated It is recorded that the stay is transgressed by reason of the admitted non compliance with the order dated 6th May 2005". 20. The original order was of May 2005 and the matter was heard finally in May 2007. Thus about two years had passed and the order has been thwarted with impunity. In our opinion therefore the learned counsel for the respondent Bank is right that such appellant does not deserve sympathy from the Court. W.P.(C) 4539 2021 21. An order passed by a competent court interim or final has to be obeyed without any reservation. If such order is disobeyed or not complied with the Court may refuse the party violating such order to hear him on merits. We are not unmindful of the situation that refusal to hear a party to the proceeding on merits is a drastic step and such a serious penalty should not be imposed on him except in grave and extraordinary situations but some time such an action is needed in the larger interest of justice when a party obtaining interim relief intentionally and deliberately flouts such order by not abiding the terms and conditions on which a relief is granted by the Court in his favour. 22. In the leading case of Hadkinson v. Hadkinson 2 All ER 567 the custody of a child was given to the mother by an interim order of the court but she was directed not to remove the child out of jurisdiction of the Court without the prior permission of the Court. In spite of the order the mother removed the child to Australia without prior permission of the Court. On a summons by father the Court directed the mother to return the child within the jurisdiction of the Court. Meanwhile an appeal was filed by the mother against that A preliminary objection was raised by the father that as the appellant was in contempt she was not entitled to be heard on merits. 23. Upholding the contention and speaking for the majority Romer L.J. observed I am clearly of the opinion that the mother was not entitled in view of her continuing contempt of court to prosecute the present appeal and that she will not be entitled to be heard in support of it until she had taken the first and essential step towards purging her contempt of returning the child within the jurisdiction. 24. In a concurring judgment Denning L.J. also stated The present case is a good example of a case where the disobedience of the party impedes the course of justice. So long as this boy remains W.P.(C) 4539 2021 in Australia it is impossible for this court to enforce its orders in respect of him. No good reason is shown why he should not be returned to this country so as to be within the jurisdiction of this Court. He should be returned before counsel is heard on the merits of this case so that whatever order is made this court will be able to enforce it. I am prepared to accept the view that in the first instance the mother acted in ignorance of the order but nevertheless once she came to know of it she ought to have put the matter right by bringing the boy back. Until the boy is returned we must decline to hear her appeal."25. That however does not mean that in each and every case in which a party has violated an interim order has no right to be heard at all. Nor the court will refuse to hear him in all circumstances. The normal rule is that an application by a party will not be entertained until he has purged himself of the contempt. There are however certain exceptions to this rule. One of such exceptions is that the party may appeal with a view to setting aside the order on which his alleged contempt is founded. A person against whom contempt is alleged must be heard in support of the submission that having regard to the meaning and intendment of the order which he is said to have disobeyed his actions did not constitute a breach of it. 26. In Gorden v. Gorden 73 LJ 41 : 90 LT 597 : 16 Dig 90 1128 Cozens Hardy L.J. put the principle succinctly in the following words ".I desire expressly to limit my judgment to a case in which the party in contempt] is saying that the order complained of is outside the jurisdiction of the court as distinguished from the case of an order which although it is within the jurisdiction of the court ought not it is said to have been made." 27.Lord Denning made the following pertinent observations in Hadkinson It is a strong thing for a court to refuse to hear a party to a cause and it is only to be justified by grave considerations of public policy. It is step which a court will only take when the contempt itself impedes the course of justice and there is no other effective means of securing his W.P.(C) 4539 2021 36. For the foregoing reasons we hold that by dismissing the petition in limine the High Court has neither committed an error of law nor of jurisdiction. The appellant Company is not entitled to any relief. Though the respondent Bank is right in submitting that the appellant has suppressed material facts from this Court as also that it has not complied with interim order passed by the Court and it has therefore no right to claim hearing on merits we have considered the merits of the matter also and we are of the considered view that no case has been made out for interference with the action taken by the respondent Bank or the order passed by the High 37. The appeal therefore deserves to be dismissed and is accordingly dismissed with costs.”(emphasis supplied) 16. Thus a Court which has competence to pass an order interim or final is entitled to take notice of its disobedience and in a given case the “drastic step” of denying a hearing to the party disobeying the order may be taken in the larger interest of justice when the party obtaining interim relief intentionally or deliberately flouts such order by not abiding with the terms and conditions on which the relief is granted by the Court in his favour. In the present case as noticed hereinabove the petitioner himself furnished an undertaking before the DRT that he would hand over the physical possession of the properties in question. He failed to honour that undertaking. He cannot be heard to argue that even though he may have given the undertaking and on that premise warded off his dispossession from the properties in question and thereby taken respondent No.1 as well as the Tribunal for a ride he should be heard on merits on his Securitization Application particularly when he is not able to make out W.P.(C) 4539 2021 even a prima facie case to establish the so called status of a tenant in the said properties. The DRAT while adjudicating on the show cause issued to the petitioner has taken notice of the aforesaid conduct of the petitioner and it is for the aforesaid reasons that not only his Miscellaneous Appeal pending before the DRAT but also his S.A. pending before the DRT was directed to be dismissed. 18. The decisions relied upon by the petitioner in our view are not attracted in the facts of the present case. Prem Kumar Guptawas a case where the petitioner who had not been served earlier was directed to deposit 25% of the amount demanded by the applicant bank when he appeared even without adjudication of the Original Application. His application for review of the said order was also rejected by the Tribunal. 19. A similar direction was issued against a co respondent to the Original Application which was assailed before the DRAT. The said direction for deposit of 25% of the amount claimed was suspended by the DRAT in the appeal of the co respondent. Though the petitioner had also preferred an appeal to seek the same relief before the said relief could be granted the matter came up before the DRT. Since the petitioner had not made the deposit he was issued a notice to show cause as to why appropriate proceedings should not be initiated against him for defying the orders of the Tribunal. The petitioner then preferred a Writ Petition before this Court. This Court granted interim protection to him with a direction to DRAT to consider the petitioner’s prayer for stay on an early date. The DRAT however dismissed the appeals preferred by the petitioner and the co respondent against the direction of the DRT to W.P.(C) 4539 2021 deposit 25% of the amount claimed in the Original Application. That order of the DRAT was the subject matter of the Writ Petition before the High Court on which the aforesaid decision in Prem Kumar Gupta supra) came to be passed. It was in the aforesaid context that this Court disapproved the observations of the DRAT that Section 19(25) of the RDDBFI Act confers upon the DRT a jurisdiction akin to the one vested in the High Court under Section 482 of the Cr. P.C. This Court held that the Tribunal is not vested with a general power to direct the defendant to furnish security or in case of a default on his part to order attachment of his property. There is no power conferred by the statute on the Tribunal to ask the defendant to deposit the amount claimed in the application under Section 19 before the claim is adjudicated upon. 21. Thus it would be seen that Prem Kumar Guptawas not a case dealing with the conduct of a party which was found to be contumacious or dishonest as in the present case. 22. Padam Singheewas a case where the DRT in the Original Application filed by the Asset Reconstruction Company directed the petitioner before the Court respondent before the DRT to take its prior permission before leaving the country. Against that order the petitioner preferred an appeal before the DRAT. The DRAT instead of dealing with the appeal directed the petitioner to show cause as to why appropriate orders under Section 19(13)(A) and 19(18)(25) of the Recovery of Debts and Bankruptcy Act 1993 including appointment of Receiver for the assets be not passed and further directed the petitioner W.P.(C) 4539 2021 to furnish details of their bank accounts and restrain them from operating any of their bank accounts. The petitioner then decided to withdraw its appeal before the DRAT. Despite the appeal being dismissed as withdrawn the DRAT continued the proceedings with respect to the show cause notice issued by it suo moto on the ground of public interest. It was in this background that this Court disapproved of the action of the DRT DRAT. While doing so this Court relied on Standard Chartered Bank supra). In Standard Chartered Bank the Supreme Court had observed that the Tribunal is required to function within the statutory parameters and it does not have the inherent powers and it is limpid that Section 19(25) confers limited powers. 23. The aforesaid decisions in our view are not attracted in the facts of the case taken note of hereinabove. The conduct of the petitioner both before the DRT and the DRAT which we have taken note of hereinabove was such that it disentitled the petitioner to a hearing. 24. The petitioner gave an undertaking to the DRT which he dishonoured and his only excuse was that if he would have not given the undertaking to vacate the properties he would have lost the possession of the properties in question. This means that when he gave the undertaking he did not even intend to fulfil the same. This could well amount to cheating. Similarly before the DRAT he obtained a conditional interim order of protection against dispossession and failed to fulfil the condition and continued to enjoy the interim protection granted by the DRAT. In our view the decision in M s Prestige Lights Limitedis squarely attracted in the facts of the present case and the three decisions relied W.P.(C) 4539 2021 upon by the petitioner do not deal with the fact situation similar to the one with which we are concerned. 25. For the aforesaid reasons we are not inclined to exercise our discretionary jurisdiction of judicial review in favour of the petitioner. We accordingly dismiss the present petition along with the pending applications with costs quantified at Rs. 2 00 000 to be paid to the Delhi High CourtLegal Aid Society within two weeks. 26. Dismissed. VIPIN SANGHI J REKHA PALLI J APRIL 22 2021 W.P.(C) 4539 2021 

Summary: A court may refuse to hear an appeal on merits involving the exact disputed parties, if its prior order has been willfully disobeyed. This was observed by the quorum of judges Vipin Singh J. and Rekha Palli J. in the matter of Sheikh M. Maroof v Phoenix Arc Pvt. Ltd. [W.P.(C) 4539/2021] where the petitioner had willfully flouted the orders of court for repayment by the Debt Recovery Tribunal (DRT). The petitioner claimed that he was a tenant in the two flats; which were mortgaged properties and had been repossessed by the respondents. The petitioner on that premise sought to move a Securitisation Application (S.A.) before the DRT under Section 17 of the SARFEASI ACT. The petitioner also sought protection against dispossession before the DRT. Despite the said order, the petitioner did not deposit the said amount of Rs.2 crores, and once again approached the DRAT, seeking extension of time on the ground that the petitioner was making arrangements for the amount and, in the interregnum, the petitioner deposited an amount of Rs.30 lakhs with the DRAT. However, the DRAT rejected the application of the petitioner. Since the petitioner did not deposit the amount of Rs.2 crores, the petitioner was issued a show cause notice on 17.12.2020 on the ground that the petitioner had disobeyed the interim direction issued by DRAT and therefore, the petitioner was required to show cause as to why action should not be taken against him. It is in pursuance of the said show cause notice, that the impugned order has been passed by the DRAT. The court relied upon the judgment of M/s Prestige Lights Limited v. State Bank of India [Civil Appeal No.3827/2007] wherein the court decided that an order passed by a competent court interim or final- has to be obeyed without any reservation. If such order is disobeyed or not complied with, the Court may refuse the party violating such order to hear him on merits. Thus, a Court which has competence to pass an order – interim or final, is entitled to take notice of its disobedience and in a given case the “drastic step” of denying a hearing to the party disobeying the order may be taken in the larger interest of justice, when the party obtaining interim relief, intentionally or deliberately, flouts such order by not abiding with the terms and conditions on which the relief is granted by the Court in his favour.  The court observed that the petitioner gave an undertaking to the DRT, which he dishonoured, and his only excuse was that if he would have not given the undertaking to vacate the properties, he would have lost the possession of the properties in question. This meant that when he gave the undertaking, he did not even intend to fulfil the same. The bench sought that it could be well amount to cheating. Similarly, before the DRAT, he obtained a conditional interim order of protection against dispossession and failed to fulfil the condition, and continued to enjoy the interim protection granted by the DRAT.