Date of decision: May 04,2004

Contempt of Court

M/s.LG Hotline CPT Ltd. .... Petitioner

Through Mr.Sudhir Makkar, Advocate.

Versus

M/s.VIACOM Electronics Ltd. & Another. .... Respondents.

Through Mr.Shashank Kumar,Advocate

for respondent No.2.

CORAM :

HON'BLE MR.JUSTICE MANMOHAN SARIN.

(1) Whether reporters of local paper may be

allowed to see the judgment?

(2) To be referred to the reporter or not?

(3) Whether the judgment should be reported

in the Digest ?

1. Petitioner-M/s. L.G.Hotline CPT Ltd., has filed the present petition under Section 2 and Section 12 of the Contempt of Courts Act, 1971 read with Article 215 of the Constitution of India, seeking initiation of contempt proceedings against respondent Nos.1 to 4. Respondent No.1 being M/s.VIACOM Electronics Ltd., Respondent No.2, Baron International Ltd. and Mr.Kabir Mulchandani and Ms.Shakun Mulchandani, respondent Nos.3 and 4, who are stated to be both having controlling interest in M/s.VIACOM Electronics Ltd.

2. The facts giving rise to the filing of the contempt petition may briefly be noted:-

(i)Petitioner M/s.LG Hotline CPT Ltd., had instituted suit bearing No.2620/2001 under Order XXXVII of the Code of Civil Procedure, 1908 for recovery of a sum of Rs.6,73,08,364/- from the defendants M/s.VIACOM Electronics Ltd., and Baron International Ltd. The defendants in the suit, respondent Nos.1 and 2 herein, had sought leave to defend. Defendant No.1 vide IA.No.8196/2002 had sought leave to contest. Defendant No.2 vide IA.No.5385/2002 had sought leave to defend. Pleadings were completed. On 14.1.2003, adjournment was sought on behalf of counsel for defendant No.2, which was granted, subject to costs. On 7.5.2003, none appeared on behalf of defendant No.1 and counsel for defendant No.2 appeared and argued the application for leave to defend. Arguments were heard and judgment reserved.

(ii)Thereafter IA.No.6014/2003 was moved by defendant No.2, which came up before the Court on 23.5.2003. Notice of the same was issued, returnable on 30.7.2003. On the said date, plaintiff sought time to file reply to the application and the application was listed for arguments on 30.7.2003, when further time of one week was granted to the plaintiff.

(iii)The case was directed to be listed on 22.8.2003. On 22.8.2003 counsel for defendant No.1, Mr.R.S.Endlaw, informed the Court that a reference under Section 15(1) of SICA had been registered as Case No.309/2003. Relying on Pathreja Brothers Forgings and Stamping and Another Vs.ICICI Limited and others reported at (2000) 6 Supreme Court Cases 545, it was submitted that proceedings against the guarantor-defendant No.2, respondentNo.2 herein, could also not proceed. Defendant No.2/Respondent No.2 had stood guarantee for defendant No.1.

(iv)It is in this background of facts that the present application has been moved by the petitioner, who submits that the respondents herein have subverted and abused the legal proceedings and are liable to be punished for contempt.

4. Learned counsel for the petitioner, Mr.Sudhir Makkar, urges that defendant No.2 i.e. respondent No.2 herein, was fully aware of the orders passed, reserving judgment on 7.5.2003. IA.No.6014/2003, to place documents on record, was moved with the ulterior purpose to somehow delay the passing of the judgment on the application for leave to defend. Mr.Makkar submits that by the said application, defendant No.2, purported to bring on record certain facts, which he claimed could not be brought on record on account of lack of communication between defendant No.2 and the counsel.

5. The application to bring on record the filing of a winding up petition by the plaintiff against defendant No.2, pertaining to the subject matter of the suit being Company Petition No.712/2002, which was pending adjudication in the High Court of Mumbai, an Official Liquidator was also appointed and appeal No.391/2003 was preferred against the orders passed for winding up and appointing an ex parte Official Liquidator. In the appeal, the High Court of Mumbai stayed the winding up order, but directed defendant No.2 to deposit amount of Rs.1.50 crores by 8.5.2003 and to furnish a bank guarantee of Rs.2.50 crores. Defendant No.2 claimed that it had deposited a sum of Rs.1.50 crores. Mr.Makkar submits that all these facts were within the knowledge of defendant No.2, even before the application for leave to defend was argued on 7.5.2003. He submits that the winding up petition has since been dismissed and the amount deposited by respondent No.2 has also been returned.

6. Learned counsel for the plaintiff submits that the conduct of the respondents has been reprehensible and by such manipulations, they have subverted the legal process by preventing the Court from proceeding to judgment by seeking to place on record documents and events, which were in their knowledge. He submits that the whole purpose was to gain time so that defendant No.2 obtains an order of reference under Section 15 of the SICA.

7. Learned counsel also placed reliance on what he says a similar order, passed by a learned Single Judge of this Court in CP.No.89/97 & CA.212/97, wherein the learned Single Judge issued notice of contempt, observing that respondent had taken liberties with truth. In the cited case, respondent took time to make the payment according to the schedule of repayment, handing over a cheque without disclosing that he did not have capacity to pay and he was moving an application under Section 15(1) of SICA. On the basis that false representation of repayment was made with an order to gain time to obtain an order under SICA and prevent the admission of the petition, the Court had issued notice for contempt. It is not disputed before me that in the cited case, the contempt notice was ultimately discharged.

8. Let us consider the submissions made by counsel for the petitioner. It is correct that the arguments were concluded on 7.5.2003, when defendant No.1 was not represented and defendant No.2 made his submission. Defendant No.2 subsequently on 22.5.2003, filed the application for bringing on record the factum of filing of winding up petition as also the proceedings resulting therefrom. A perusal of the application for leave to defend, filed by defendant No.2, shows that the case of defendant No.2 was that respondent No.1/defendant No.1 itself owed monies to defendant No.2/respondent No.2. Further, that plaintiff/petitioner was itself in breach of MOU, entered into between respondent/defendant Nos.1 and 2. The filing of winding up petition had not been brought on record. Defendant No.2 moved the said application to bring on record the factum of filing of winding up petition by the plaintiff and the proceedings therefrom. While these facts may be in the knowledge of defendant No.2, counsel claimed that there was a lack of communication. Hence these were not brought on record. Whatever be the worth, as the contention of respondent No.2 was that the winding up petition had been filed on the same subject as that of the suit, it cannot be said that respondent No.2, should not have brought these facts on record, even though belatedly. It may be that respondent No.2 would have been aware of the move by respondent No.1 to obtain an order under Section 15 of SICA, which would result in stay of proceedings. However, legal stratagem and adoption of such means may not be ethical or the action may even be reprehensible in certain cases, the same cannot be regarded as contumacious conduct or actionable as contempt under Section 2 and Section 12 of the Contempt of Courts Act, 1971 read with Article 215 of the Constitution of India. It may be that by such stratagem a party outwits the other in litigation or obtains an advantage, however, the same would not be actionable under contempt. The jurisdiction of contempt is to be exercised sparingly and in clear cases. The averments made and facts, as noted, do not make it a fit case for proceeding for contempt against the respondents.

Contempt notice issued is hereby discharged. Petition is dismissed.

May 04 , 2004 Manmohan Sarin,J.