Contempt petition alleging breach of an undertaking to keep eight bank guarantees alive pending arbitration was dismissed. The final arbitral award rejected the government's counterclaim for liquidated damages and awarded costs against it, so the interim direction lost force and no wilful disobedience existed.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
$~117
GOVERNMENT OF NCT OF DELHI ..... Petitioner Through: Ms. Sarita Pandey, proxy counsel for Mr. Anupam Srivastava, ASC for GNCTD. (M:9205174429)
versus
MOHINDER SINGH NARULA ..... Respondent Through: Mr. Akhil Sibal, Sr. Advocate with Mr. Deepak Khurana, Mr. Vineet Tayal and Ms. Nishtha, Advocates Email: [email protected]
% Date of Decision: 22nd May, 2024
CORAM: HON'BLE MS. JUSTICE MINI PUSHKARNA
J U D G M E N T
MINI PUSHKARNA, J: (ORAL)
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CONT.CAS(C) 28/2020 Page 1 of 29
not adhered to, and the respondent failed to keep the said Bank Guarantees alive.
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CONT.CAS(C) 28/2020 Page 2 of 29
Digitally Signed By:CHARU CHAUDHARY Signing Date:05.06.2024 19:08:29
“1. I am informed by the counsels for the parties that an arbitrator has already been appointed.
2. Mr. Dholakia, who appears for the petitioner, has drawn my attention to order dated 16.12.2011, as modified by order dated 21.12.2011. By virtue of this order, the petitioner was directed to keep the bank guarantees referred to in Annexure P13 (page 99 volume II of the paper book) alive .
3. Mr. Dholakia says that the said bank guarantees are alive, and that, the petitioner will continue to keep them alive during the pendency of the dispute before the Arbitrator and, therefore, for a further period of eight weeks post the pronouncement of the award .
4. Having regard to the above, both counsels agree that the captioned petition can be placed before the learned Arbitrator, who will adjudicate upon the same by treating it as an application under Section 17 of the Arbitration and Conciliation Act, 1996 (in short the Act) .
4.1. It is also agreed that pending adjudication of the petition, interim order dated 16.12.2011, as modified by order dated 21.12.2011, will continue to operate.
5. At this stage, learned counsel for the petitioner draws my attention to letter dated 1.3.2012 (Annexure P16, page 59 of the paper book), whereby an intimation has been sent to the petitioner with regard to the appointment of the arbitrator.
5.1. To be noted, the arbitrator appointed by the respondent is one Mr. K.N. Agarwal. Retired DG(W), CPWD.
5.2. The said letter is accompanied by a document, which details the list of claims.
5.3. In connection with the said document, Mr. Dholakia says that in so far as claim No. 1 is concerned, the remarks column shows that what the arbitrator is called upon to do is to determine the arbitrability of the said claim. Mr. Dholakia says that the apprehension of the petitioner is that, in case, the arbitrator, comes to the conclusion that the dispute is arbitrable, he may not proceed further to decide the claim on merits.
xxx xxx xxx
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CONT.CAS(C) 28/2020 Page 3 of 29
8. Mr. Salwan, raises another issue which is that the respondents would need protection with regard to release of payments that the petitioner may call upon them to make based on its reading of the terms of the contract obtaining between parties.
8.1. In this connection, all that can be said that the respondents are at liberty to move ah appropriate application. The learned Arbitrator will pass an order in accordance with; law after hearing the parties.
9. It is made clear though that if an award' is passed which is adverse to the interest of the petitioner, the respondents shall not encash the bank guarantees, which are the subject matter of the present petition, for a period of four weeks to enable the petitioner to take appropriate steps, albeit in accordance with law.
xxx xxx xxx”
(Emphasis Supplied)
“xxx xxx xxx
4. Issue notice. Learned counsel for the respondent accepts notice.
5. The petitioner has filed the present petition under Section 34 of the Arbitration and Conciliation Act, 1996 (hereafter 'the Act') impugning an arbitral award dated 21.12.2017 (hereafter 'the impugned award') rendered by the Arbitral Tribunal constituted by a Sole Arbitrator
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CONT.CAS(C) 28/2020 Page 4 of 29
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(hereafter 'the Arbitral Tribunal').
6. Mr. Dholakia, learned counsel appearing for the petitioner has restricted the challenge to the extent of claim no.1 which pertains to the petitioner's claim regarding levy of liquidated damages. The aforesaid disputes were referred to the arbitrator by a letter dated 01.03.2012. The contents of the said letter read as under:-
"Whereas M/s DSC Ltd. vide their letter dt. 15.12.2011 have written that certain disputes have arisen between the above noted parties in respect of the above noted work, I, S.A. Khan, Chief Engineer, Flyover Project Zone F-1, PWD, New Delhi by powers conferred on me under clause-25 of the said agreement hereby appoint Sh. K.N. Agarwal, (Retd. DG(W), CPWD)) as sole Arbitrator to decide and make his award regarding the claims/disputes by M/s DSC Ltd., if any, shown in the statement enclosed subject always, however, to their admissibility under clause-25 of the aforesaid agreement. The Arbitrator shall determine the arbitrability of claim No.1 under the provisions of agreement.
The amount of the claims in disputes being above Rs. 1,00,000/- the arbitrator shall give reasons for the award.”
7. The Arbitral Tribunal has declined to adjudicate claim no. 1 on the ground that the reference is incomplete. According to the Arbitral Tribunal, the only dispute referred was with regard to the question of arbitrability of claim no. 1. Since, according to the Arbitral Tribunal, the scope of arbitration did not include any further adjudication, the Arbitral Tribunal has declined to consider the said claim.
8. There is much merit in Mr Dholakia's contention that the letter dated 01.03.2012 cannot be read in the manner in which it has been read by the Arbitral Tribunal inasmuch as the claim no. 1, including the question of arbitrability of the said claim, was referred to the Arbitral Tribunal and the reference was not limited to the question of arbitrability of claim no. 1 alone.
9. In the aforesaid view, the impugned award to the extent it deals with claim no. 1 is set aside. The petitioner would be at liberty to seek reference of its claim no. 1 (relating to the levy of liquidated damages) to arbitration. It is clarified that all rights and contentions of the parties in this regard including whether the said dispute is arbitrable are reserved.
10. The petition is disposed of in the above terms.
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CONT.CAS(C) 28/2020 Page 5 of 29
xxx xxx xxx”
(Emphasis Supplied)
“xxx xxx xxx
55. And thus, it is held that neither the original time of contract nor the extended time were of the essence of the contract.
xxx xxx xxx
56.5 And therefore, mentioning “without prejudice to the right of Government to recover liquidated damages in accordance with the provisions of clause 2 of the said agreement. “is of no consequence.
xxx xxx xxx
57.4 Therefore, since time was not the essence of the contract, the levy of compensation for Liquidated damages by the Respondent is not justified on this count also.
xxx xxx xxx
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58.4 And therefore, I agree with the Claimant‟s argument that it completed the work within the extended date of completion and on this count also, the Respondent is not entitled to levy any compensation under clause 2 of the contract .
xxx xxx xxx
62.14 It is therefore held that since the Respondent has not suffered any loss as admitted and certified by the Respondent itself, the levy of compensation on account of liquidated damages is not justified in terms of law.
xxx xxx xxx
63.5 In view of above, it is held that since delay in handing over land to the Claimant was more than six months, condition No. 4 at page 10 of the agreement disentitles the Respondent from levying any compensation for delay and the compensation levied by the Respondent is violative of the contract provisions .
xxx xxx xxx
64.7 I therefore conclude that the answer to the question as to „Whether Claimant was responsible for delay in the work as contended by the Respondent?‟. is in NEGATIVE .
xxx xxx xxx
66. To sum up, levy of compensation by the Respondent under clause 2 of the contract is not justified considering the facts and circumstances of the case & contract provisions and also bad in law due to following reasons:
1. Since neither the contracted time nor the extended time was of the essence of the contract, the levy of compensation for Liquidated damages by the Respondent under clause 2 of the contract is not justified.
2. Since Claimant completed the work within extended date of completion i.e. 31.10.2011, Respondent is not entitled to levy any compensation under clause 2 of the contract.
3. Even for the argument's sake, if it is assumed that the provisional extensions were provisional only and these were not final even after expiry of the provisionally extended date, and the
CONT.CAS(C) 28/2020 Page 7 of 29
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Digitally Signed By:CHARU CHAUDHARY Signing Date:05.06.2024 19:08:29
Respondent had reserved its right to levy compensation; the fact remains that the Respondent granted regular valid extension only up to 30.06.2010 and did not impose any compensation under clause 2 for work not been completed by this extended date. The Respondent did not fix any new date for completion of the work and the work was allowed to be executed by the Claimant and performance accepted by the Respondent even after this extended date. Not fixing any new date of completion after expiry of such extended date makes the time at large and only obligation of the Claimant contractor remains to complete the work in reasonable time; and LD clause becomes inapplicable. Consequently, the Respondent is not entitled to levy any compensation under clause 2 of the agreement.
4. Since the Respondent has not suffered any loss, as admitted by the Respondent itself, the levy of compensation on account of liquidated damages is not justified. It is unilateral, categorical admission & certification of the fact, on the body of EOT Proforma, in unequivocal terms by the Respondent Executive Engineer, who happens to be the Engineer-in-Charge, that the Govt. has not suffered any damages on account of this delay.
5. Since delay in handing over major portion of land to the Claimant was more than six months, condition No.4 at page 10 of the agreement disentitles the Respondent from levying any compensation for delay and the compensation levied by the Respondent is violative of the contract provisions.
6. The entire delay in the execution of work was beyond the control of the Claimant and Claimant was not responsible for delay in the work as contended by the Respondent . This is further strengthened from the facts that (1) Respondent shifted Milestones as per clause 5 of the agreement without deducting or withholding any amount on account of these Milestones, (2) Respondent did not withheld any amount on account of nonachievement of any Activity Wise Milestones' as provided at page 26 d the contract, (3) Respondent also did not deduct or withheld any amount in case of not achieving the targets for any activity as per condition mentioned at page 55 and 56 of the agreement.
xxx xxx xxx
AWARD:
67. I declare that the levy of compensation upon the Claimant under clause 2 is unjustified in terms of the contract .
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CONT.CAS(C) 28/2020 Page 8 of 29
68. Counter Claim No.1: Recovery on account of levy of compensation under clause 2 of the agreement.
Rs. 26,50,43,038/-
xxx xxx xxx
68.3. I have already concluded and declared that the levy of compensation upon the Claimant under clause 2 of the agreement is unjustified in terms of the contract. Therefore, there is no question any recovery on this account and counter claim of the Respondent fails.
AWARD:
68.4 I award NIL amount against Counter claim No. 1 in favour of the Respondent .
xxx xxx xxx
70. COST:
70.1. Claimant has succeeded in its claim and the Respondent has failed in its counterclaim. Cost has been claimed by the Respondent under counter claim No. 2 and no cost has been claimed by the Claimant. I, therefore, decide that the parties will bear their own cost .
70.2 AWARD Under Section 38(2) of the Arbitration and Conciliation Act .
xxx xxx xxx
70.2.12 In view of the above, Under Section 38(2) of the Arbitration and Conciliation Act, I award a sum of Rs. 13,45,000/- in favour of the Claimant.
xxx xxx xxx
71. Summary of AWARD is given below:
| Claim No. |
Description of Claim/Counter Claim |
AWARD |
|---|---|---|
| CLAIM: | ||
| Claim | On account of | I declare that |
| No. 1 | Declaratory award that levy |
the levy of compensation |
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| of compensation under clause 2 is |
upon Claima |
the nt |
|
|---|---|---|---|
| unjustified in |
under | clause | |
| terms of the contract. |
2 unjusti terms contrac |
is fied in of the t. |
|
| Counter Claim No. 1 |
Recovery on account of levy of compensation under clause 2 of the agreement Rs. 26,50,43,038/- |
NIL | |
| COST | Counter Claim No. 2: Cost of arbitration– Rs. 17,45,000/- |
Both parties bear respect costs. |
the will their ive |
| Award under Section 38(2) of A& C Act. |
Rs. 13,45,0 favour Claima |
00/- in of the nt. |
xxx xxx xxx
V. OVERALL CONCLUSION:
I. Levy of compensation upon the Claimant under clause 2 is held as unjustified in terms of the contract & law with its attached consequences.
II. Both the Counter claims of the Respondent fail.
III. Respondent shall pay a sum of Rs.13,45,000/- (Rupees Thirteen Lakh, Forty-Five Thousand Only) to the Claimant under Section 38(2) of A & C Act, 1996, as amended in 2015.
xxx xxx xxx”
(Emphasis Supplied)
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CONT.CAS(C) 28/2020 Page 10 of 29
have been rejected. The Arbitral Award has been passed in favour of the respondent herein, wherein it is directed that the petitioner herein shall pay a sum of ₹ 13,45,000/-, to the respondent herein.
“xxx xxx xxx
6. The aforesaid premise and contention of the Petitioner, however, is wholly erroneous, misleading and misconceived. In this respect, for ease of reference, the Respondent herein has tabulated its response
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qua each of the Bank Guarantees referred to by the Petitioner in its Petition, as under:
| S. NO. |
Bank Guarant ee No. |
Issuing Bank |
Amount | Original Date of Issuance |
Valid till | Respondent‟s Response |
|---|---|---|---|---|---|---|
| 1. | 0007BG00 233608 (inadverte ntly mentioned as 14010PG O83 45002) |
ICICI Bank |
7,00,00,000/- | 17.10.2008 | 02.03.2017 (even as per Petitioner’s Statement of Defence filed in the Arbitral Proceedings, more specifically in Para 10.1 thereof) |
As per practice, the beneficiary under the Bank Guarantee had to send a request for extension/ encashment, as the case may be, before the expiry of the Bank Guarantee. The said Bank Guarantee could not have been extended by M/s DSC Limited without a request letter in this regard by the beneficiary i.e. the Petitioner. The aforesaid position is fortified by the fact that the Petitioner had been sending request for extension within the validity period of the Bank Guarantee, basis which the said Bank Guarantee came to be extended by the Bank from time to time. The same is evident from some of such letters dated 16.08.2016, 14.09.2016, 21.10.2016, 23.11.2016, issued by the Petitioner to the Bank, which are collectively annexed |
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CONT.CAS(C) 28/2020 Page 12 of 29
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| herewith as |
|---|
| Annexure R-1 |
| (Colly). |
| However, the |
| Petitioner's last |
| request for extension |
| was made only on |
| 04.03.2017 i.e. after |
| expiry of the validity |
| of the Bank |
| Guarantee on |
| 02.03.2017. Having |
| failed to act in time, |
| the Petitioner |
| cannot seek to hold |
| M/s DSC I Limited |
| responsible for lapse |
| of the said Bank |
| Guarantee, much |
| less allege 'wilful' |
| disobedience on the |
| part of M/s DSC |
| Limited in having to |
| keep the same alive. |
| With respect to the |
| above, it would also |
| be otherwise |
| relevant to mention |
| that M/s DSC |
| Limited in all |
| bonafides had sent |
| a request for |
| extension of the |
| subject Bank |
| Guarantee to the |
| Bank vide letter |
| dated 13.02.2017, |
| which was received |
| by the Bank on |
| 01.03.2017. |
| However, the Bank |
| orally informed M/s |
| DSC Limited that |
| since the |
| Petitioner/Beneficia |
| ry had not sent its |
| request for |
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| extension by the |
|---|
| said date, the Bank |
| would not accept |
| _M/s DSC Limited's _ |
| extension. request |
| for Accordingly, |
| though the said |
| letter was received |
| on 01.03.2017 by |
| the Bank, the same |
| was returned back |
| to M/s DSC |
| Limited. |
| The _Petitioner's _ |
| request for |
| extension, being its |
| letter dated |
| 04.03.2017 i.e. after |
| the expiry of the |
| Bank Guarantee on |
| 02.03.2017, was |
| physically served |
| upon M/s DSC |
| Limited only on |
| 20.03.2017. In this |
| respect, it would be |
| relevant to mention |
| that the said letter |
| enclosed a return |
| envelope along with |
| a Speed Post receipt |
| dated 07.03.2017, |
| purportedly |
| addressed to M/s |
| DSC Limited. A |
| perusal of the said |
| enclosure, however, |
| would show that the |
| return envelope |
| bore the wrong |
| address of M/s DSC |
| Limited, basis |
| which it appears |
that the same was |
| returned back to the |
| Petitioner. |
| Be that as it may, |
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| upon physically |
|---|
| _Petitioner's _ |
| receiving the |
| request for |
| extension on |
| 20.03.2017, M/s |
| DSC Limited once |
| again submitted |
| request for |
| extension of Bank |
| Guarantee to the |
| Bank on |
| 24.03.2017. |
| True copy of M/s |
| DSC Limited's |
| request letter dated |
13.02.2017, received |
| by the Bank on |
| 01.03.2017 and |
| 24.03.2017 is |
| annexed herewith as Annexure R-2. |
| True copy of |
| Petitioner's request |
| letter dated |
| 04.03.2017, along |
with its enclosures, |
| as served upon M/s |
| DSC Limited is |
| annexed herewith as Annexure R-3. |
| However, as |
| brought out above, |
| since the |
| Petitioner's request |
| was much after the |
| expiry of the Bank |
| Guarantee, the |
| same was not |
| renewed by the |
| Bank. |
| In view of all the |
| above, there was no |
| non-compliance on |
| part of M/s DSC |
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| Limited as regards its statement made before this Hon'ble Court on 24.07.2014, much less any 'wilful' disobedience, as sought to be contended by the Petitioner. |
||||||
|---|---|---|---|---|---|---|
| 2. | Old BG No. 5079408B G0001611 |
State Bank of Patiala |
6,25,21,519/- | 16.10.2008 | Valid till 30.06.2022 and Claim period |
The subject Bank Guarantee was valid and subsisting till 30.06.2022, |
| NewBG | expired on 30.06.2023. |
having a claim period till |
||||
| No.– | 30.06.2023- all of which dates were |
|||||
| 0410916B | much after the |
|||||
| G1 000454 |
expiry of 8 weeks from the date of passing of the Final Arbitral Award dated 30.12.2021. |
|||||
| Therefore, M/s DSC Limited had complied with its undertaking in |
||||||
| keeping the subject Bank Guarantee alive, as was given before this Hon'ble |
||||||
| Court on |
||||||
| 24.07.2014. | ||||||
| True copy of the last extension dated 16.06.2021 of the said Bank Guarantee issued by the Bank, is annexed |
||||||
| herewith as Annexure R-4. |
||||||
| Such being the |
||||||
| case, there is no basis whatsoever for |
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| the Petitioner to |
|||||
|---|---|---|---|---|---|
| maintain the present contempt proceedings qua the subject Bank Guarantee. |
|||||
| 3. 517/2008 |
Canara Bank |
1,68,00,000/- | 23.07.2008 | 31.03.2017 (with a valid Claim period upto 30.09.2017) |
With reference to the said Bank Guarantee, the Petitioner vide its Letter dated 22.03.2017 sent a request for |
| extension of the validity period to the Bank. True copy of the Petitioner's letter dated 22.03.2017 is annexed herewith as Annexure R-5. |
|||||
| It would also be relevant to mention that M/s DSC Limited also issued a request letter for extension of the subject Bank Guarantee on 24.03.2017, true copy of which is annexed herewith as Annexure R-6. |
|||||
| As such, there was no disobedience, much less'wilful' disobedience on the part of M/s DSC Limited, as sought to be contended by the Petitioner. |
|||||
| However, the Bank neither extended |
|||||
| nor released the proceeds of the said |
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| Bank Guarantee in favour of the Petitioner, who also did not follow-up on the same, even though the claim period of the subject Bank Guarantee subsisted till 30.09.2017. |
||||||
|---|---|---|---|---|---|---|
| Having failed to act in time, the Petitioner cannot seek to hold M/s DSC Limited responsible for lapse of the said Bank Guarantee, much less allege 'wilful' disobedience on the part of M/s DSC Limited in having to keep the same alive. |
||||||
| 4. | 2995DT | State Bank of |
2,65,04,303/- | 20.08.2010 | 05.05.2018 | The subject Bank Guarantees were |
| Patiala | released by the |
|||||
| 5. | 2997DT | State Bank of |
2,65,04,303/- | 20.08.2010 | 05.05.2018 | Petitioner itself in favour of M/s DSC |
| Patiala | Limited on |
|||||
| 6. | 2998DT | State Bank of Patiala |
2,65,04,303/- | 20.08.2010 | 05.05.2018 | 05.05.2018. The said aspect is borne out from the endorsement captioned 'Released' made by the Petitioner itself on the subject Bank Guarantees on |
| 05.05.2018. True copies of the Bank Guarantees bearing the Petitioner's endorsement for release are annexed collectively annexed _herewith _ as |
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| Annexure R-7 (Colly). Pursuant to & in line with the aforesaid endorsement for release, M/s DSC |
|||||
|---|---|---|---|---|---|
| Limited issued |
|||||
| corresponding letter dated 23.05.2018 to the Bank , true copy of which is annexed |
|||||
| herewith as Annexure R-8. |
|||||
| Such being the |
|||||
| case, there is no basis whatsoever for |
|||||
| the Petitioner to |
|||||
| maintain the |
|||||
| present contempt |
|||||
| proceedings qua the |
|||||
| subject Bank |
|||||
| Guarantees. This |
|||||
| also shows that the | |||||
| present Petition is based on assertions, which are factually incorrect and have been made in a wholly irresponsible manner. |
|||||
| 7. 140GOPG 11297000 |
Canara Bank |
97,04,303/- | 24.10.2011 | 24.10.2011 | With reference to the said Bank |
| 2 | Guarantee, the |
||||
| Petitioner vide its | |||||
| Letter dated |
|||||
| 05.09.2018 sent a | |||||
| request for |
|||||
| extension of the |
|||||
| validity period |
|||||
thereof to the Bank. |
|||||
| True copy of the | |||||
| Petitioner's letter dated 05.09.2018 is |
|||||
| annexed herewith as Annexure R-9. |
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| It would be relevant |
|---|
| to mention herein |
| that such request |
| was also made by |
| M/s DSC Limited |
| vide its letter dated |
| 11.09.2018, true |
| copy of which is |
| annexed herewith as Annexure R-10. |
| However, the Bank |
| vide its letter dated |
| 27.11.2018 for the |
| first time stated that |
| it could renew the |
| said Bank |
| Guarantee only |
| upon M/s DSC |
| Limited providing |
| 100% margin |
| money. True copy of |
| letter dated |
| 27.11.2018 issued |
| by the Bank is |
| annexed herewith as Annexure R-11. |
| M/s DSC Limited, |
| however, did not |
| have the requisite |
| financial capacity to |
| provide such |
| margin money. In |
| this regard, it is |
| stated that due to |
| various issues and |
| difficulties, which |
| were being faced by |
| the infrastructure/ |
| construction sector, |
| the projects which |
| were undertaken by |
| M/s DSC Limited, |
| were delayed and/or |
| stalled. which |
| consequently led to |
M/s DSC Limited |
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| suffering huge |
||||
|---|---|---|---|---|
| losses, inter- alia, on account of cost and time overruns, non-recovery of payments etc., all of which were totally beyond its control, with no support from the Employers. |
||||
| With respect to the above, reference & reliance is placed upon the Profit & Loss Account of M/s DSC Limited for the Financial Year 2018- 19, which is part of its Audited Financial Statement for the relevant year and filed with the Registrar of Companies. True copy of the Profit & Loss |
||||
| Account of M/s DSC Limited for the Financial Year 2018-19 (being part of the Audited Financial Statement of the said year) is annexed herewith as Annexure R-12. |
||||
| In such view, there | ||||
| was no |
||||
| disobedience, much | ||||
| less 'wilful' |
||||
| disobedience on the | ||||
| part of M/s DSC | ||||
| Limited in keeping | ||||
| the said Bank |
||||
| Guarantee alive. | ||||
| 8. 5079410B |
State | 21.10.2010 | 12.12.2013 | The subject Bank |
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| G0003700 | Bank of 2,65,04,300/- |
Guarantee was |
|---|---|---|
| Patiala | released by the |
|
| Petitioner itself in |
||
| favour of M/s DSC Limited. The said |
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| aspect is borne out |
||
| from the |
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| endorsement captioned 'B.G. |
||
| Released in favour | ||
| of M/s DSC Ltd' | ||
| made by the |
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| Petitioner itself on | ||
| the subject Bank | ||
| Guarantee. True |
||
| copy of the Bank | ||
| Guarantee bearing |
||
| the Petitioner's |
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| endorsement for |
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| release is annexed | ||
| herewith as |
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| Annexure R-13. | ||
| Pursuant to & in | ||
| line with the |
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| aforesaid |
||
| endorsement for |
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| release, M/s DSC | ||
| Limited issued |
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| corresponding letter dated 12.12.2013 to |
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| the Bank , true copy |
||
| of which is annexed | ||
| herewith as |
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| Annexure R-14. | ||
| Such being the |
||
| case, there is no | ||
| basis whatsoever for | ||
| the Petitioner to |
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| maintain the |
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| present contempt |
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| proceedings qua the | ||
| subject Bank |
||
Guarantees. |
A perusal of the aforesaid table would show that the stance of the Petitioner that M/s DSC Limited did not comply with the statement
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made by it before this Hon’ble Court, as recorded in Order dated 24.07.2014, is wholly erroneous, baseless and untenable. Infact, as is evident from the above, 5 out of the 8 referred Bank Guarantees were released by the Petitioner itself in favour of M/s DSC Limited, and still the Petitioner has filed the present Petition seeking to initiate contempt proceeding, in a wholly irresponsible manner .
7. Without prejudice to the above, and most pertinently, the aforesaid factual position, does not in any manner whatsoever suggest any „wilful” disobedience on the part of M/s DSC Limited as regards continuing to keep the remaining 3 out of 8 Bank Guarantees alive. The said position assumes significance, inasmuch as, absence of „wilful” disobedience would not warrant contempt proceedings, as have been preferred by the Petitioner herein.
With respect to the above, it would also be relevant to mention that the Petitioner has in its Petition failed to make out a case of „wilful‟ disobedience on part of M/s DSC Limited, much less having to substantiate the same. Having not so done, it is most respectfully and humbly stated that the present contempt proceedings are not maintainable, and which, merit being dismissed .
xxx xxx xxx”
(Emphasis Supplied)
“xxx xxx xxx
11. The contempt jurisdiction conferred on to the law courts power to punish an offender for his wilful disobedience/contumacious
1 (2014) 16 SCC 204
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conduct or obstruction to the majesty of law, for the reason that respect and authority commanded by the courts of law are the greatest guarantee to an ordinary citizen that his rights shall be protected and the entire democratic fabric of the society will crumble down if the respect of the judiciary is undermined. Undoubtedly, the contempt jurisdiction is a powerful weapon in the hands of the courts of law but that by itself operates as a string of caution and unless, thus, otherwise satisfied beyond reasonable doubt, it would neither be fair nor reasonable for the law courts to exercise jurisdiction under the Act. The proceedings are quasicriminal in nature, and therefore, standard of proof required in these proceedings is beyond all reasonable doubt. It would rather be hazardous to impose sentence for contempt on the authorities in exercise of the contempt jurisdiction on mere probabilities . (Vide V.G. Nigam v. Kedar Nath Gupta [V.G. Nigam v. Kedar Nath Gupta, (1992) 4 SCC 697 : 1993 SCC (L&S) 202 : (1993) 23 ATC 400] , Chhotu Ram v. Urvashi Gulati [Chhotu Ram v. Urvashi Gulati, (2001) 7 SCC 530 : 2001 SCC (L&S) 1196] , Anil Ratan Sarkar v. Hirak Ghosh [Anil Ratan Sarkar v. Hirak Ghosh, (2002) 4 SCC 21] , Bank of Baroda v. Sadruddin Hasan Daya [Bank of Baroda v. Sadruddin Hasan Daya, (2004) 1 SCC 360] , Sahdeo v. State of U.P. [Sahdeo v. State of U.P., (2010) 3 SCC 705 : (2010) 2 SCC (Cri) 451] and National Fertilizers Ltd. v. Tuncay Alankus [National Fertilizers Ltd. v. Tuncay Alankus, (2013) 9 SCC 600 : (2013) 4 SCC (Civ) 481 : (2014) 1 SCC (Cri) 172] .)
12. Thus, in order to punish a contemnor, it has to be established that disobedience of the order is “wilful”. The word “wilful” introduces a mental element and hence, requires looking into the mind of a person/contemnor by gauging his actions, which is an indication of one's state of mind. “Wilful” means knowingly intentional, conscious, calculated and deliberate with full knowledge of consequences flowing therefrom. It excludes casual, accidental, bona fide or unintentional acts or genuine inability. Wilful acts does not encompass involuntarily or negligent actions. The act has to be done with a “bad purpose or without justifiable excuse or stubbornly, obstinately or perversely”. Wilful act is to be distinguished from an act done carelessly, thoughtlessly, heedlessly or inadvertently. It does not include any act done negligently or involuntarily. The deliberate conduct of a person means that he knows what he is doing and intends to do the same. Therefore, there has to be a calculated action with evil motive on his part. Even if there is a disobedience of an order, but such disobedience is the result of some compelling circumstances under which it was not possible for the contemnor to comply with the order, the
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contemnor cannot be punished . “Committal or sequestration will not be ordered unless contempt involves a degree of default or misconduct.” (Vide S. Sundaram Pillai v. V.R. Pattabiraman [S. Sundaram Pillai v. V.R. Pattabiraman, (1985) 1 SCC 591] , Rakapalli Raja Ram Gopala Rao v. Naragani Govinda Sehararao [Rakapalli Raja Ram Gopala Rao v. Naragani Govinda Sehararao, (1989) 4 SCC 255 : AIR 1989 SC 2185] , Niaz Mohammad v. State of Haryana [Niaz Mohammad v. State of Haryana, (1994) 6 SCC 332 : AIR 1995 SC 308] , Chordia Automobiles v. S. Moosa [Chordia Automobiles v. S. Moosa, (2000) 3 SCC 282] , Ashok Paper Kamgar Union v. Dharam Godha [Ashok Paper Kamgar Union v. Dharam Godha, (2003) 11 SCC 1] , State of Orissa v. Mohd. Illiyas [State of Orissa v. Mohd. Illiyas, (2006) 1 SCC 275 : 2006 SCC (L&S) 122 : AIR 2006 SC 258] and Uniworth Textiles Ltd. v. CCE [Uniworth Textiles Ltd. v. CCE, (2013) 9 SCC 753] .)
xxx xxx xxx
15. It is well-settled principle of law that if two interpretations are possible, and if the action is not contumacious, a contempt proceeding would not be maintainable. The effect and purport of the order is to be taken into consideration and the same must be read in its entirety. Therefore, the element of willingness is an indispensable requirement to bring home the charge within the meaning of the Act . [See Sushila Raje Holkar v. Anil Kak [Sushila Raje Holkar v. Anil Kak, (2008) 14 SCC 392 : (2009) 2 SCC (L&S) 497] and Three Cheers Entertainment (P) Ltd. v. CESC Ltd. [Three Cheers Entertainment (P) Ltd. v. CESC Ltd., (2008) 16 SCC 592 : AIR 2009 SC 735] ]
xxx xxx xxx”
(Emphasis Supplied)
“xxx xxx xxx
15. It may also be noticed at this juncture that mere disobedience of an order may not be sufficient to amount to a “civil contempt” within the meaning of Section 2(b) of the Act of 1971 — the element of willingness is an indispensable requirement to bring home the charge within the meaning of the Act and lastly, in the
2 (2002) 4 SCC 21
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event two interpretations are possible and the action of the alleged contemnor pertains to one such interpretation — the act or acts cannot be ascribed to be otherwise contumacious in nature. A doubt in the matter as regards the wilful nature of the conduct if raised, question of success in a contempt petition would not arise .
xxx xxx xxx”
(Emphasis Supplied)
“xxx xxx xxx
VII. Thus, all issues mentioned under Para 5 to Para 8 and their Sub-Paras of the Hon‟ble High Court‟s abovementioned Order, including the issue of Bank Guarantee, were to be raised by the respective parties before the Ld. Arbitrator Shri K.N. Agrawal, who was already appointed and the Ld. Arbitrator was to pass the order after hearing the parties.
44.5.4. It has not been brought out by the parties whether the said petition was placed, and above issues were raised by the respective parties before the Ld. Arbitrator Shri K.N. Agrawal, or not; if the petition was placed and issued were raised then what were the
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decisions of the Ld. Arbitrator; and if not, then what were the reasons of not placing the petition and raising the issued before the Ld. Arbitrator Shri K.N. Agrawal.
44.5.5. It is also a fact to that none of the parties have made any application, before this Tribunal, under section 17 of the Act for any interim measure of protection in respect of any matter mentioned under section 17 (1) (ii) of the Act.
xxx xxx xxx
44.5.7. Respondent, in its submissions before this Tribunal, has stated that the Claimant had committed contempt of the Hon’ble High Court of Delhi by not keeping the Bank Guarantees alive. However, it appears that neither the Respondent placed the matter before the Ld. Arbitrator Shri K.N. Agrawal for his decision nor it filed any contempt petition against the Claimant in the Court till 15.01.2020. It is to mention here that the Arbitral Tribunal of Ld. Arbitrator Shri K.N. Agrawal was in existence for more than 3 years after the Order was passed by Hon‟ble High Court on 24.07.2014 in O.M.P. 932/2011 as the Award was issued by the Ld. Arbitrator on 21.12.2017. As intimated by the Respondent vide its letter dated 03.02.2020, a Contempt Petition was filed by the Respondent in the Hon‟ble High Court of Delhi which was admitted on 15.01.2020.
xxx xxx xxx”
(Emphasis Supplied)
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Award in favour of the respondent, and against the petitioner, it cannot be said that there are any existing or continuing directions of this Court, which have been violated by the respondent.
“xxx xxx xxx
10. The same is unacceptable for the reason that the order of which contempt is alleged must be existing. In addition, it is a settled principle in law that punishment under contempt requires wilful disobedience of an existing and continuing direction of this court. Reliance is placed on the judgment of the Hon‟ble Supreme Court dated 21.07.2008 in Patel Rajnikant Dhulabhai and Anr. v Patel Chandrakant Dhulabhai and Ors., Cont.Cas.(C) 12-13 of 2006 in SLP(C) 7659-7660 of 2004. The operative portion reads as under-:
“48. Reading of the above clause makes it clear that the following conditions must be satisfied before a person can be held to have committed a civil contempt;
(i) there must be a judgment, decree, direction, order, writ or other process of a Court (or an undertaking given to a Court);
(ii) there must be disobedience to such judgment, decree, direction, order, writ or other process of a Court (or breach of undertaking given to a Court); and
(iii) such disobedience of judgment, decree, direction, order, writ or other process of a Court (or breach of undertaking) must be wilful.
11. Reliance is further placed on Star Residents Society (Regd.) and Others versus M.N. Bhardwaj and Others (2001) SCC OnLine Del 1294, wherein the operative portion reads as under:-
3 2023 SCC OnLine Del 6402
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“5. Be it may, it would not be sufficient to proceed for initiating proceedings for contempt, which require blatant defiance of an existing order, which was missing in this case. Counsel then attempted to urge that even after 19.1.2000, construction was carried out. He placed reliance on photographs taken on 26.1.2000 and 72.2000 to show the progress in construction. Examination of the photographs prima facie shows that the shutterings had been removed. Although on the first flush, it appears that there is progress of construction work. But a careful examination reveals it to be a case of removal of shuttering. In any case it is not one of those cases where it can be stated with certainty that there has been contumacious defiance of the order passed, which is required for initiating proceedings for contempt.”
12. As of today, no amount is found due and payable by the respondent to petitioner. Hence, the respondent cannot be said to be flouting the directions of this court, when in view of the subsequent developments, the order dated 23.03.2007, of which non-compliance is alleged, no longer stands or exists.
13. The contempt petition is accordingly dismissed.
xxx xxx xxx”
(Emphasis Supplied)
MINI PUSHKARNA, J
MAY 22, 2024 ak
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2 issues framed by the court
Whether the respondent committed wilful disobedience of its undertaking to keep bank guarantees alive recorded in the order dated 24 July 2014.
Whether contempt proceedings can survive after the arbitral award rejected the petitioner's claims underlying the undertaking.
Colour shows how this judgement treated each authority
Ram Kishan Versus Tarun Bajaj and OthersRelied on¶20
(2014) 16 SCC 204 · Who else cites this
Anil Ratan Sarakar and Others Versus Hirak Ghosh and OthersRelied on¶21
(2002) 4 SCC 21 · Who else cites this
M.M.T.C. LTD. Versus Priyanka Overseas Ltd. and AnotherRelied on¶27
2023 SCC OnLine Del 6402 · Who else cites this
5 provisions across 2 enactments
Government of NCT of Delhi
Mohinder Singh Narula
Mini Pushkarna
As recorded by the court registry
Proceedings for wilful disobedience of a court order under the Contempt of Courts Act 1971.
Judgements on the same questions, provisions and authorities, from every court
