15 Jul 2121

If a breach or non-compliance with a court's order is deliberate, and it harms the administration of justice, it is considered civil contempt of court - Bombay High Court

Case : Rustam Phiroze Mehta v. State of Maharashtra and Ors. Writ Petition (St) No. 3221 of 2020

Court : Bombay High Court

Bench : Justice S. J. Kathawalla and Justice Milind Jadhav

Decided on : 15 Jul 2121

The Relevant Statutes

Article 226, 227, 215 of the Constitution of India

Section 14(1) of the Contempt of Courts Act, 1971

Section 2(d) of the Real Estate (Regulation and Development) Act, 2016

Indian Penal Code, 1860

Order 21 Rule 41(3), Order 39 Rule 2A, Order 21 Rule 32 of the Code o Civil Procedure, 1908

Companies Act, 1956

Section 46 of the Factories Act, 1948

Rules 8, 9, 10, 22, 24, 4 of the Chapter XXXIV o the Bombay High Court Rules, Appellate Side, 1960

Maharashtra Ownership of Flat Purchasers Act, 1963

Maharashtra Land Revenue Code, 1966

Rule 17 of the Maharashtra Realisation of Land Revenue Rules, 1967

Brief Facts & Procedural History

1. The Petitioner had eluded Respondent No. 4 in Complaint No. CC005000000010528 filed under Sections 12, 14, 18, and 19 of the Real Estate (Regulation and Development) Act, 2016. The Petitioner paid the whole amount of Rs.10,61,18,790/- to Respondent No. 4 under Articles of Agreement dated 1st August 2014 for purchase of Flat No. 1001 measuring 326.55 sq. metres. on the 10th floor, ‘A' Wing in Respondent No. 4's Project ‘Marvel Ribera' in Pune, together with two covered vehicle parking spots and an open terrace totalling 119.10 sq. metres. (Carpet area), generally referred to as (‘the said Premises'), and that there was a significant delay in passing over ownership of the said Premises. As a result, the Petitioner filed a Complaint demanding a refund of the money paid, plus interest, as well as compensation under RERA's aforementioned provisions.

2. The Adjudicating Officer granted the abovementioned Complaint and ordered Respondent No. 4 to pay the Petitioner Rs.14,05,57,705.46 plus interest at the rate of 10.05 per cent per year (‘the Decretal Amount').

3. The Petitioner started execution procedures against Respondent No. 4 because he failed to pay the Decretal Amount. RERA granted the execution proceedings, and as a result, RERA issued a Recovery Certificate, against Respondent No. 4 to recover the Decretal Amount as arrears of land revenue. Following that, RERA instructed the Collector to execute the aforementioned Recovery Certificate in a letter dated the same day. The Petitioner was not given a copy of this letter. The Collector instructed the Tahsildar to execute the Recovery Certificate in his letter. There was a reference to the prior RERA Letter written to the Collector. The Petitioner received a copy of this letter. Despite the aforementioned instruction, the Collector and the Tahsildar, according to the Petitioner, both failed to comply with the stated direction and failed to fulfil their statutory responsibilities.

4. The Petitioner sent a letter to Respondent No. 3 - Tahsildar, requesting that he make efforts to recover the money owed to him. Despite the aforementioned instruction, the Collector and the Tahsildar, according to the Petitioner, both failed to comply with the stated direction and failed to fulfil their statutory responsibilities. The Petitioner sent a letter to Respondent No. 3 - Tahsildar, requesting that he make efforts to recover the money owed to him. Because Respondent No. 3 and Respondent No. 2 took no action, the Petitioner filed a Writ Petition under Articles 226 and 227 of the Indian Constitution, seeking issuance of a Writ of Mandamus against the Collector and Tahsildar to comply with the Direction and to perform their statutory duties to recover the amounts under the Recovery Certificate as arrears of land revenue. According to the Petitioner, Respondent No. 4 owes the Petitioner an amount of about Rs.17,45,50,137.14/- until now.

5. In support of the final relief sought against Respondents Nos. 2 and 3, the Petitioner seeks interim relief against Respondent No. 4 and its group companies, so that the amount due to the Petitioner under the Recovery Certificate is safeguarded until the statutory authorities secure its recovery as land revenue arrears.

6. Respondent No. 4 filed Interim Application (L) No. 2044 o 2021 contesting the maintainability of the current Writ Petition after the Petitioner filed the Writ Petition and numerous Orders of Disclosure were issued against Respondent No. 4, which are referred to below. Respondent No. 4 also escaped Writ Petition No. 2657 of 2020, which challenged the Collector's Order instructing the Tahsildar to execute the RERA Recovery Certificate issued against Respondent No. 4. Because Respondent No. 4 contested the Writ Petition's maintainability, the Honourable High Court of Judicature at Bombay deemed it essential to rule on the stated Interim Application before proceeding with the application or interim reliefs in this Writ Petition. Because Respondent No. 4's challenge to the maintainability of the current Writ Petition raised in the aforementioned Interim Application and Respondent No. 4's challenge to the manner of execution of the Recovery Certificate in Writ Petition No. 2657 of 2020 were substantially the same, both were heard together.

7. The aforementioned Interim Application and Writ Petition No. 2657 of 2020 were dismissed by an Order and Judgment, and the hearing of the current Writ Petition, including the Petitioner's application for interim reliefs, was instructed to proceed. Respondent No. 4 has filed a Special Leave Petition against the Order and Judgment before the Honourable High Court of Judicature in Bombay. The Special Leave Petition does not appear to have been distributed or listed, and there is no stay in place for the current proceedings.

8. Despite Honourable High Court of Judicature at Bombay's explicit order that Respondent No. 4 reveal all assets of Respondent No. 4 and its group businesses in its 1st Disclosure Affidavit, Respondent No. 4 only submitted information on its project "Marvel Ribera." Respondent No. 4, knowing full well that this was not Respondent No. 4's and its group companies' sole project and/or asset, falsely stated that it had no other assets save the aforementioned project, Marvel Ribera. He argued that Respondent No. 4's subsequent filing of three more affidavits proves that the aforementioned statement was false and was made knowingly and deliberately to deceive the Honourable High Court of Judicature at Bombay in the first instance.

9. Respondent No. 4 attempted to explain its 1st Disclosure Affidavit by claiming that it did not disclose additional assets because it believed that disclosure of the project Marvel Ribera and the assets in the project would be "sufficient" to comply with the Court's Order. The 1st Disclosure Affidavit claimed that 11 of the 27 flats had been sold, with the other 16 units being mortgaged. In addition, it was mentioned in the said Affidavit that a sum of Rs. 18,54,05,681/- was due from the purchasers of the sold units, but when Honourable High Court of Judicature at Bombay asked if the said payment had been received, Respondent No. 4 replied in the negative. Respondent No. 4 could never have believed that the assets reported in the 1st Disclosure were sufficient under the aforementioned circumstances.

10. Respondent No. 4's first three affidavits only identified a few organisations and projects, attempting to persuade the Honourable High Court of Judicature at Bombay that these were the sole entities and projects of Respondent No. 4 and its group entities. Respondent No. 4 admitted in the 4th Disclosure Affidavit that it had only disclosed “major” entities and projects o Respondent No. 4 and its group entities because disclosure for others was “irrelevant” after the Petitioner pointed out in its Affidavit that Respondent No. 4 had not disclosed various other entities and projects.

11. Respondent No. 4 asserted in the 4th Disclosure Affidavit that it did not declare assets for projects Marvel Orial, Marvel Fria, and Marvel Piazza because they are "finished" projects. The conduct of Respondent No. 4 claiming on its official website that these three projects are "ongoing" projects of Respondent No. 4 contradicts the above assertion.

12. Respondent No. 4 said in the 4th Disclosure Affidavit that it did not disclose the group businesses Marvel Precast Structures India LLP and Marvel Ora Residences LLP because they are inactive. This assertion by Respondent No. 4 is contradicted by the Petitioner's financial accounts, which reveal that one of the LLPs provided loan sums of about Rs. 60 crores to its connected parties in the Financial Year 2019-2020. That raises the question of how these organisations could have had the funds to make such large loans if they were not in existence.

13. Respondent No. 4 challenged these Orders by filing SLP (C) No. 2122/2021 and SLP (C) No. 2123/2021 with the Supreme Court after Honourable High Court of Judicature at Bombay had given Respondent No. 4 three chances to completely comply with the Orders of Disclosure and Respondent No. 4 had filed three Disclosure Affidavits.

14. The Supreme Court rejected the SLPs while maintaining the approach taken by the Honourable High Court of Judicature at Bombay. It's worth noting that Respondent No. 4 never served the Petitioner with a copy of the aforementioned SLPs. The Petitioner had not escaped a caveat from the Supreme Court and was unaware of the SLP's or Order's fling. Moreover, although the issue had been heard after that, Respondent No. 4 concealed the aforementioned Order from the Honourable High Court of Judicature at Bombay. Only after receiving a copy of the aforementioned Order from the Supreme Court Registry did the Honourable High Court of Judicature at Bombay become aware of, it. Advocate Shri Amit Gharte, who represents Respondent No. 4 before us, informed us that he was unaware of the SLPs filed by Respondent No. 4 before the Supreme Court since they were filed with the help of other lawyers.

The Issue(s) of the Case

Whether Respondent No. 4 and its Director Shri Jhavar interfering with the administration of justice by submitting false and inaccurate Affidavits of Disclosure and also disobeying and breaching several Orders of Honourable High Court of Judicature at Bombay? If so, the consequences of such breach?

Whether the Petitioner is entitled to the interim reliefs sought in the current Writ Petition's petition sections (b)(ii) and (b)(iii), especially because Respondent No. 4 is a Private Limited Company?

The Observations of the Court

1. Honourable High Court of Judicature at Bombay observes that Respondent No. 4's affidavit is unsatisfactory and shows that he had no intention of making genuine attempts to comply with our Orders as stated above. As the 4th Disclosure Affidavit demonstrates, the reason for not making full disclosures in the earlier Affidavits is not because Respondent No. 4 or its Director could not access details of Respondent No. 4's projects and assets or those of its group entities, but rather because Respondent No. 4 or its Director could not access details of Respondent No. 4's projects and assets or those of its group entities, but because Respondent No. 4 and Shri Jhavar only decided to disclose assets of "significant" businesses and projects that they thought were important. This is a flagrant violation of our Orders, which are unambiguous and unqualified in terms of the information that was needed.

2. Honourable High Court of Judicature at Bombay also observes that The Petitioner's Affidavit has emphasised the erroneous and partial disclosures up to the filing of the 3rd Disclosure Affidavit. The contents and statements related to this affidavit have already been laid out and addressed in the preceding paragraphs, therefore they will not be repeated here. However, it is important to highlight that the disclosures of various group organisations had not been made before the filing of the 3rd Disclosure Affidavit. Some of the entities in such groups appear to be working on ongoing projects. In other cases, they may have finished projects and, as a result, will most likely have unsold goods. Other group businesses appear to have assets in the form of receivables or loans made by them, such as Marvel Precast Structures LLP and Marvel Ora Residences LLP.

3. In the instance of Marvel Ora Residences, the loan amount is significant, at over Rs. 59.99 crores. This information is significant because it shows that group entities have cash and resources, or have access to monies and resources, that are being utilised to pay other group entities rather than the Marvel Group discharging its responsibility to individuals like the Petitioner. The fact that these disclosures were never made by Respondent No. 4 and were brought to light by the Petitioner in its Affidavit is more relevant to state at this point.

4. Honourable High Court of Judicature at Bombay also observes that the argument for not flinging disclosure of the entities indicated in paragraph 4 of the 4th Disclosure Affidavit is completely unsustainable since it is described as irrelevant because disclosure of key group companies had been made. The Petitioner's answer to this section of Respondent No. 4's Affidavit further demonstrates that at least some of those organisations possessed considerable assets or unsold goods that required to be reported, as stated above.

5. The Honourable Bombay High Court of Judicature reiterates that it is not for Respondent No. 4 to decide what is relevant and irrelevant in complying with an Order of Disclosure on its own. As previously stated, Marvel Ora Residences LLP's current assets (including receivables from short-term loans granted) are significant, indicating that the Marvel Group has access to cash, the source of which is unknown. Even some of the other group organisations had assets, which Respondent No. 4 never revealed since it classified them as "irrelevant" and outside the category of "significant" businesses, as indicated in the Petitioner's Affidavit of.

6. Honourable High Court of Judicature at Bombay also observes that Respondents Nos. 2 and 3 have done nothing to ensure the recovery of the Decretal Amounts under the Recovery Certificate, notwithstanding their statutory obligations. Even though the Tahsildar issued a demand notice, no action was done, especially because Respondent No. 4 did not respond to the notification. The Tahsildar has rights to aid such recovery under the Maharashtra Land Revenue Code's provisions, including Sections 263 and 267 read with Rule 17 of the Maharashtra Realisation of Land Revenue Rules, 1967. No action was done in reliance on the authority granted by these laws. Despite the Petitioner's letters requesting that the Tahsildar take action or make the recovery under the Recovery Certificate, the Tahsildar did nothing.

7. Honourable High Court of Judicature at Bombay also observes that The Tahsildar's position is that no action or recovery can be conducted since there is no project or property in the Property Card that contains the name of Respondent No. 4. Marvel Crest is a project of Respondent No. 4 - Marvel Sigma Homes Pvt. Ltd., according to the Property Card appended to the Affidavit. Despite this, the Tahsildar took no action concerning the Marvel Crest project. This demonstrates the Tahsildar's office's total lack of effort and application of thought in carrying out its statutory obligation.

8. Honourable High Court of Judicature at Bombay also observes that The Tahsildar had done nothing to ensure the execution and realisation of money owed under the Recovery Certificate as of the date of sending the letter to RERA. This letter is another evidence that the Tahsildar was uninterested in seeing that the money owed under the Recovery Certificate was collected.

9. Honourable High Court of Judicature at Bombay also observes that the sole remedy is taken throughout the pendency of the Writ Petition and that too after severe inactivity and abandonment of responsibility, is insufficient to satisfy that Respondents Nos. 2 and 3 are following the law. Respondents Nos. 2 and 3 do not argue that the Petition should be rejected because of the actions they have taken. Their affidavit on file reveals that they have admitted to being helpless in obtaining the monies owed under the Recovery Certificate. It is not for Respondent No. 4 to make a self-serving argument that Respondent Nos. 2 and 3's activities against Respondent No. 4 are sufficient to satisfy the Honourable High Court of Judicature at Bombay.

10. Honourable High Court of Judicature at Bombay also observes that in the facts and circumstances of the present case, recovery of monies under the Recovery Certificate would also be permissible against the assets of group companies, especially if the non-payment of a clear undisputed amount is being illegally and dishonestly avoided, while the same group is raising and spending large sums of money or carrying on large real estate developments project. Allowing such individuals to defeat and impede the recovery of funds by individual purchasers while continuing to do business as normal would undermine the rule of law and damage the public's trust.

The Decision Held by the Court

1. Honourable High Court of Judicature at Bombay held that Instead, inclined to take suo moto notice of Respondent No. 4's and Shri Jhavar's actions and order that a Notice be given to them under Section 14 of the Contempt of Courts Act, 1971 and Rule 4 of the Appellate Side Rules, 1960, and demand that Respondent No. 4 and Shri Jhavar explain why Shri Jhavar should not be punished for obstructing and interfering with the administration of justice and lowering the dignity of High Court of Judicature at Bombay under the aforementioned laws. The Appellate Side Registry of the Bombay High Court will issue such a notice.

2. The provisions of the Contempt of Courts Act, 1971 and the Appellate Side Rules will govern any actions relating to such Notice. The aforesaid observations may only be relevant for our decision to take Suo moto cognizance and/or the issuing of the abovementioned Notice to Respondent No. 4 and Shri Jhavar.

3. If instructed, the Petitioner will be free to bring civil contempt proceedings under the terms of the Contempt of Courts Act, 1971.

4. Honourable High Court of Judicature at Bombay held that within four weeks of the date of posting of this Order, Respondent No. 4 must deposit in High Court of Judicature at Bombay an amount of Rs. 11,36,33,625/-, which is the primary sum owing to the Petitioner. If such a deposit is paid, the above-mentioned decree of the injunction will be dismissed. The Petitioner would be free to request that this sum be withdrawn in partial fulfilment of the Recovery Certificate. The Tahsildar's charge by letter on Respondent No. 4's land or the value of Rs. 6.5 crores successfully secure the Petitioner's claim or interest at 10.05 per cent (p.a.) on the amount stated in the Recovery Certificate. Without the permission of the Honourable High Court of Judicature at Bombay, the Tahsildar will not dismiss the charge. Furthermore, the Tahsildar must pursue legal action in respect to that land, and any money recovered against that land must be paid to the Petitioner in part fulfilment of the Recovery Certificate.

5. As a result, the application for temporary relief is granted under the aforementioned terms. Parties are free to submit applications. Costs will be considered when the Writ Petition is finally decided.

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