TaxTMI 
TaxTMI 
2007 (3) TMI 380
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....econd wife Mona, namely, Rohit, Ramona and Rahul. 2. The petitioner has prayed that the respondents herein namely Ramesh and Rajesh are guilty of committing gross contempt of the orders of this Court dated 12-12-2001 and 8-1-2002. 3. The petitioner in this contempt petition has also prayed that the order dated 12-12-2001 may be recalled. The petitioner has further prayed that respondent No. 2, Rajesh Narang be restrained from interfering in the affairs of Narang International Hotels Ltd. (for short, NIHL) and its joint management by the petitioner; Rama Narang and respondent No. 1, Ramesh Narang. 4. It is further prayed that the bank accounts of the company hereinafter be operated jointly for all amounts and transactions by the petitioner and respondent No. 1 only. 5. The petitioner stated that the disputes between the petitioner and the respondent-contemnors inter se were subject-matter of diverse court proceedings with regard to shareholdings and control and management of the company, NIHL and Fashion Wears Pvt. Ltd. 6. It is incorporated in the contempt petition that for accomplishing the object of ever-lasting peace in the family and having regard to the views ex....
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....he Principal Bench of the Company Law Board, New Delhi is directed to forward the records relating to company petition No. 28 of 1992 to the Registry of this Court so as to reach the Registry within ten days from today. All the parties have undertaken before us that they will implement the terms of the 'MINUTES OF CONSENT ORDER' on or before 1-1-2002 and that no further time will be sought for in the matter. Clause (f) of the compromise relates to the operation of the bank accounts. That clause will come into force from today onwards." 8. The aforementioned suits and company petition were posted before this Court on 8-1-2002 along with the contempt proceedings. The consent minutes as agreed amongst the parties are reproduced: (a)With effect from 4-5-1999 Rama, Ramesh and Rajesh are the only Directors of NIHL (and its subsidiaries). Any increase in the Board of Directors shall be with the mutual consent of Rama and Ramesh/Rajesh. (b)None of the Directors (Rama, Ramesh and Rajesh) can be removed from the directorship. (c)Rama and Ramesh shall continue to be in joint management and control of NIHL and Rajesh shall continue to be the 'Permanent Whole Time Director' th....
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....s Court issued notice on the petitioner's application on 9-5-2003. This Court initiated contempt proceedings on 15-9-2003 at the behest of the petitioner. It may be pertinent to mention that this Court requested Justice V.A. Mohta, a retired Chief Justice of the Orissa High Court to act as a mediator for settlement of disputes between the parties. Despite very serious efforts by the mediator, the settlement could not be arrived at between the parties. 13. The contempt petition was directed to be listed in the Court. A preliminary objection was taken regarding the maintainability of the contempt petition. According to the respondents, in the absence of the undertaking given to the Court and an allegation that such an undertaking had been violated, this Court could not exercise its jurisdiction over mere violation of the terms of the consent order. According to the respondents, the order dated 12-12-2001 has been implemented within the stipulated time. The respondents also pleaded that order dated 12-12-2001 had merged in the final order dated 8-1-2002. 14. A three-Judge Bench of this Court in Rama Narang v. Ramesh Narang 2006 (4) Scale 280 came to a definite finding that viola....
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.... hereafter be agreed to between Rama and Ramesh (or Rajesh). (f)All bank accounts of the Company shall continue to be operated jointly by any two out of the three Directors namely Rama, Ramesh and Rajesh and/or as may hereafter be agreed to between Rama and Ramesh (or Rajesh). If the amount of any transaction exceeds Rs. 10 (ten) lakhs the same shall be undertaken through a cheque signed jointly by Rama and Ramesh/Rajesh.' The clear and manifest intention of the parties was that the petitioner had a say/role in management and affairs of the company and all transactions above Rs. 10 lakhs required his signature. The respondents have in a systematic and continuous manner violated this understanding between the parties and in a blatant and defiant manner have breached the order passed by this Court and have till date continued to do so with impunity, which undermines the majesty of the court as it shows scant regard and respect for the order passed by this Court. The petitioner further states that in these proceedings this Court also passed the following order dated 25-1-2005: 'by reference to paragraph 3(f ) of the minutes of consent order dated 12-12-2001, we clarify tha....
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....y to sign cheques above the value of Rs. 10 lakhs may be delegated. On the contrary, the resolution specifically provides that "if the amount of any transaction exceeds Rs. 10 lakhs the same shall be undertaken through a cheque jointly signed by Mr. Rama Narang and Mr. Ramesh Narang (or Mr. Rajesh Narang)". 18. According to the petitioner, the following instances would reveal how the Court's orders have been flouted by the respondents in a clandestine manner both in letter and spirit. "(i )Purchase of cars: The respondents purchased a Ford Mondeo, Honda Accord and Toyota Corolla, and proposed to purchase a BMW, all transactions above the value of Rs. 10 lakhs, admittedly without the consent of Rama Narang, and as the record evidences, by issuing multiple cheques just under the value of Rs. 10 lakhs. The respondents have, in their reply argued that the general Clause 3(h) which provides that "all three directors will enjoy equal remuneration and perquisites" gives them the right to give themselves remuneration and perquisites of over Rs. 10 lakhs without the consent of the other directors. It is submitted that not only is this against the principles of contractual interpretati....
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....transaction is justified on the basis that Rama Narang has on numerous occasions undertaken foreign visits at the company expense with no objection being raised by the other directors. It is pertinent to note that for each such foreign visit, Rama Narang has sought and obtained the approval of Ramesh/Rajesh in accordance with the consent terms. Notwithstanding whether Rama took, or did not take approval from Ramesh/Rajesh, it is no justification in law for Ramesh/Rajesh to violate the consent terms." 19. According to the petitioner, there has been clear violation of Clause 3(c) also. Respondent Nos. 1 and 2 and particularly respondent No. 2 have taken absolute control of the company NIHL to the total exclusion of the petitioner. All the management decisions and other decisions affecting the company are being taken by Rajesh Narang, the whole-time Director under the guise of the day-to-day operation/management in clear violation of Clause 3(c) of the consent terms which states that Rama and Ramesh shall continue to be in "joint management and control". 20. According to the petitioner, he was not being consulted. The petitioner has been deliberately kept out of the management a....
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....se actions on the basis of "day-to-day" operations. It is submitted that there are total of only 11 Croissant outlets that have been opened over the course of several years and the opening of a new outlet, and the taking of high-value lease therefrom, is a strategic and business decision and not something undertaken on a 'day-to-day' basis." 22. The petitioner also asserted that there is a clear violation of Clause (d) of the Court's order which reads as under: "The respondents have unilaterally, without the consent of Rama Narang, taken several decisions affecting the Company including unilateral appointment and promotion of personnel such as Vice-Presidents (Accounts) etc.; issuance of tenders and executing contracts outside the ordinary course of business, in clear violation of Clause 3(d) of the consent terms which requires that "no decision shall be adopted concerning or affecting the Company and its subsidiaries shall be made without the consent of Rama and Ramesh/Rajesh in writing". The respondents contend that decisions relating to appointment only relate to "prevailing decisions". It is submitted that the first part of Clause 3(d) which states that "no decision shall....
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....ubmitted that there has been gross violation of clause 3(f) of the agreement. Clause 3(f) reads as under: "If the amount of any 'transaction' (read 'payment/disbursement') exceeds Rs. 10 (ten) lakhs the same shall be undertaken through a cheque signed jointly by Rama and Ramesh/Rajesh." 26. The respondents also submitted that immediately after the consent terms, the circular resolution dated 27-2-2002 was entered into between the parties. The said resolution reads as under: "RESOLVED THAT any two out of three Directors of the Company namely Mr. Rama Narang, Mr. Ramesh Narang and Mr. Rajesh Narang, be and are hereby jointly authorized to open and close bank accounts and place fixed deposits with such banks and on such terms and conditions as they deem fit and proper and to operate and issue instructions to the said bankers as well as the existing bankers of the company." 27. The respondents submitted that clause 3(f) was meant purely for operation of bank accounts and as an instruction to the company bankers is borne out by the fact that through the aforesaid circular resolution dated 27-2-2002, Rama Narang and Ramesh Narang, inter alia, resolved that if the amount of an....
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....ach. The explanation given was that circular resolution dated 27-2-2002 authorized any two Directors of the company to jointly open and close bank accounts, for the respondents failed to give any explanation why the fixed deposits of Rs. 39 crores were split into smaller deposits of Rs. 9 lakhs each. The explanation given was that high-lift vehicles were purchased separately and then assembled rather than purchasing a fully assembled vehicle. The respondents have similarly given explanation for other transactions where the cheques amount had been split by the respondents. Similar explanation has been given regarding tender of high-lifts totalling Rs. 40 lakhs without consulting the petitioner and regarding unilateral promotion of persons. 31. The explanations given by the respondents for splitting up the cheques are wholly untenable. In case of genuine difficulty or confusion, the respondents ought to have approached the Court for directions. 32. The object of entering into consent terms and jointly filing the undertaking was to run the family business harmoniously with the active participation of all as a family business but the respondents had taken absolute control of the ....
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....expression 'undertaking' has been dealt with in the following manner: "If a party, or solicitors or counsel on his behalf, so act as to convey to the court the firm conviction that an undertaking is being given, that party will be bound and it will be no answer that he did not think that he was giving it or that he was misunderstood." 38. In Re, Hudson [1966] Ch. 209 the English Court observed as under: "An undertaking to the court confers no personal right or remedy on any other party. The only sanctions for breach are imprisonment for contempt, sequestration or a fine." 39. Similarly, in Shoreham-by-Sea U.D.C. v. Dolphin Canadian Proteins [1972] 71 L.G.R. 261, the Court observed as under: "Failure to comply with an undertaking to abate a nuisance may be visited with a substantial fine." 40. The Division Bench of the Bombay High Court in Bajranglal Gangadhar Khemka v. Kapurchand Ltd. AIR 1950 Bom. 336 had an occasion to deal with similar facts. Chagla, C.J., speaking for the Court, observed as under: "We are not prepared to accept a position which seems to us contrary to the long practice that has been established in this Court, and, apparently, also in Englan....
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.... an order. However, in the contempt proceedings it was alleged that the orders passed on the basis of the statements made have been deliberately and wilfully flouted and disobeyed by the State of Uttar Pradesh. While dealing with the expression "undertaking", this Court observed as under: ". . .The Chief Minister having given a solemn assurance to the National Integration Council and permitted the terms of that assurance to be incorporated as his own undertaking to this court and allowed an order to be passed in those terms cannot absolve himself of the responsibility unless he placed before the Court sufficient material which would justify that he had taken all reasonable steps and precautions to prevent the occurrence. . . ." (p. 453) 43. In Rita Markandey v. Surjit Singh Arora [1996] 6 SCC 14, this Court came to the conclusion that even if the parties have not filed an undertaking before the Court, but if the Court is induced to sanction a particular course of action or inaction on the basis of the representation of such a party and the court ultimately finds that the party never intended to act on such representation or such representation was false, even then the party w....
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....awyer before the Court that he would handover possession of the property to the receiver. In the absence of any express undertaking given by the appellant or any undertaking incorporated in the order impugned, it will be difficult to hold that the appellant wilfully disobeyed or committed breach of such an undertaking". 46. The Court even in this case observed that "in fact, the reason why a breach of clear undertaking given to the court amounts to contempt of court is that the contemnor by making a false representation to the court obtains a benefit for himself and if he fails to honour the undertaking, he plays a serious fraud on the court itself and thereby obstructs the course of justice and brings into disrepute the judicial institution". 47. The critical analysis of the decided cases of this Court clearly leads to the conclusion that wilful breach of an undertaking given to the Court amounts to contempt of court under section 2(b) of the Act. 48. The orders of this Court dated 12-12-2001 and 8-1-2002 are based on undertaking given by the petitioner and the respondents to this Court. Apart from several other conditions it is explicitly incorporated in the undertaking ....