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Judgment
K.M. Thaker, J.—Present appeal is taken out u/s 483 of the Companies Act, 1956 and is directed against the order dated 21.09.2010 (hereafter referred to as the "order in question") passed in exercise of original jurisdiction in Company Application. By the order impugned in present appeal, the Court has directed the Registrar to initiate proceedings against the Appellant-applicant Company and also against its Director Mr. K.G. Bhatia, for perjury. The Court has also directed the Official Liquidator to issue notice u/s 138 of the Negotiable Instruments Act and to file criminal complaint, if so required, against the Appellant-applicant Company as well as its Director. Besides the aforesaid directions, the Court has also directed the Official Liquidator to not to entertain or accept any offer by the Appellant-applicant Company and/or its Director in future for purchase of property through Court auction and to also issue advertisement to the said effect in English daily newspaper "Indian Express" and Gujarati daily newspaper "Divya Bhaskar" (Ahmedabad editions).
Aggrieved by the said directions, the Appellant-applicant Company has filed present appeal.
So as to appreciate the relief prayed for by the Appellant and the directions, aggrieved by which the original applicant Company has preferred present appeal, it is relevant to travel through the factual background. The facts which emerge from the record are as follows:
3.1 From the record, it appears that Company Application Nos. 97 of 2010 and 191 of 2010 were pending at the relevant time. It appears that the said two applications viz. Company Application Nos. 97 of 2010 and 191 of 2010 have been filed by the respective applicants for submitting "Scheme for Revival" of the company in liquidation, for consideration by the Court.
3.2 From the record it transpires that the Court, therefore, considered it appropriate and in the interest of the company in liquidation to take into account the offer made by present Appellant. The events which occurred after the Appellant made such offer for the first time and the chronology of the said events are relevant and need to be taken into account for appreciating the factual background and the reasons on account of which, the orders in question came to be passed by the Court.
3.3 It appears that the said two applications were listed for hearing on 10th August, 2010. During the hearing, the Court noted that the applicant of the said two applications had offered the Scheme for Revival with an eye on the immovable properties particularly the aforesaid parcels of land of the company in liquidation.
3.4 Therefore, the Court inquired from the Official Liquidator about the valuation.
In response to which, the Court was informed that the valuer had valued the three plots approximately at Rs. 125 crores.
3.5 Having regard to the said information given by the Official Liquidator, the Court passed following order:
....
After hearing the counsels to some extent, the Court is of the view that though the schemes are proposed by the applicants in both these applications, the applicants are more or less interested in purchasing the land. Hence, the court inquired from the Official Liquidator as to what would be the market value of the land in question. The Official Liquidator on instruction received from the valuer stated that the present market value of the land in question would be approximately Rs. 125 crores. If any of the applicants in these two applications are ready and willing to deposit Rs. 125 crores with the Court, they would be permitted to proceed with the schemes. In this connection Mr. Shah seeks time to take necessary instruction in the matter.
Hence, the matters are adjourned to 13th August, 2010.
3.6 The hearing of the application was adjourned to 13th August, 2010. It was on the said date that the Appellant herein came forward with its offer of Rs. 150 crores for two plots viz. Final Plot Nos. 32 and 33 of T.P. Scheme No. 18.
3.7 During the process of hearing of the said two applications, M/s. Jay-Kanan Build Con Pvt. Ltd., through its Managing Director Mr. K.G. Bhatia, on 13th August, 2010 came forward with its offer for sale and purchase of Final Plot Nos. 32 and 33 (properties of the company in liquidation) admeasuring about 36,280 sq.mtrs. and 6,858 sq.mtrs. respectively of T.P. Scheme No. 18.
3.8 The said applicant offered Rs. 150 crores for the said two plots. The Court was required to evaluate and appreciate the said offer as against the valuation report according to which, the valuation of three plots was assessed by the valuer at Rs. 125 crores. The Appellant offered to pay Rs. 150 crores for two plots as against value of Rs. 125 crores for three plots.
3.9 At this stage, it is necessary to note that on 13th August, 2010, the learned advocate for the applicant in Company Application No. 97 of 2010 had categorically stated before the Court that if the Court would consider the scheme of the applicant in Company Application No. 97 of 2010 then the said applicant was ready and willing to deposit Rs. 125 crores.
3.10 On the other hand, the Appellant, through its advocate, made an offer on 13th August, 2010, to pay Rs. 150 crores for two plots. The Appellant was required to deposit 10% of the offered amount of EMD. However, since the Appellant allegedly did not have the demand draft of necessary amount ready with it at the time of hearing, it appears that he offered, as an ad-hoc/temporary arrangement, to tender a cheque for a sum of Rs. 15 crores a stop-gap arrangement instead of the demand draft with a stipulation that he would replace it by demand draft in the sum of Rs. 15 crores, in place of the cheque, as per the requirement.
3.11 The Court, so as to facilitate the Appellant, accepted the request and granted time to the Appellant. The said developments came to be recorded in the order dated 13.08.2010. The said order reads thus:
This Court has passed an order on 10.8.2010 wherein the Court has observed that the applicants are more or less interested in purchasing the land. Hence, the court inquired from the Official Liquidator as to what would be the market value of the land in question. The Official Liquidator on instruction received from the valuer stated that the present market value of the land in question would be approximately Rs. 125 crores. The Court, therefore, asked the applicants of these two applications as to whether they are ready and willing to deposit Rs. 125 crores with the Court, and on that condition the Court would permit them to proceed with the Scheme. Since the matter was adjourned to seek necessary instructions in the matter no further order was passed in the matter and the matter is adjourned to today i.e. 13.8.2010.
Today before the matter starts Mr. Chhaya, learned advocate states that he has instructions to appear on behalf of Jay - Kanan Buildcon Pvt. Ltd., and he makes an offer for Final Plot Nos. 32 and 33 admeasuring about 36,250/- sq.mtrs., and 6,858 sq.mtrs., respectively, which is freehold land, for Rs. 150 crores. Mr. Sunit Shah, learned advocate appearing for the applicant in Company Application No. 191 of 2010 filed purshis that his client is ready and willing to deposit Rs. 125 crores with this Court for the scheme within one week.
Mr. R.M. Desai, learned advocate appearing for the applicant in Company Application No. 97 of 2010 has also made a statement that if the Court is going to consider the scheme of his client, his client is ready and willing to deposit Rs. 125 crores.
Court has considered submissions made in this regard. However, Rs. 125 crores are for all the three final plots i.e. Final Plot Nos. 31, 32 and 33. Final Plot Nos. 32 and 33 are freehold land whereas Final Plot No. 31 is leasehold land. Since the offer is made by Mr. Chhaya''s client for Rs. 150 crores for two plots the Court is exploring the possibility of putting freehold land for sale fixing the upset price for these two plots for Rs. 150 crores and hence this Court asked Mr. Chhaya to deposit Rs. 15 crores by way of EMD and on that basis the advertisement etc., would be issued. Mr. Chhaya has, therefore, asked for some time to make the payment of Rs. 15 crores by way of EMD. He has also tendered a cheque of Rs. 15 crores dated 18.8.2010 duly signed by Jay - Kanan Buildcon Pvt. Ltd., Director. It is understood that the cheque would be returned to the said party only on deposit of Demand Draft of Rs. 15 crores by way of EMD for these two plots.
In the above view of the matter, further hearing of these two applications is adjourned to next Friday i.e. 20.8.2010. It is open for the Jay - Kanan Buildcon Pvt. Ltd., to move appropriate application to this Court in this regard making its offer for sale of lands for these two plots for Rs. 150 crores.
The Official Liquidator is directed to retain cheque of Rs. 15 crores till the next Friday i.e. 20.8.2010.
The applicant of Company Application No. 191 of 2010 is present in the Court.
S.O. to 20.8.2010. 1st Board."
3.12 Accordingly, the proceedings were adjourned to 20th August, 2010. It also appears from the record that the Court was guided by the Appellant''s offer and the fact that the consideration offered by the Appellant was higher than apparent valuation as per the jantri. The view of the Court is recorded in para-3 of the order in question which reads thus:
It is further stated in the said affidavit that the applicant is ready and willing to purchase the land bearing Final Plot Nos. 32 and 33 admesuring 36,250 sq.mtrs., and 6,858 sq.mtrs., respectively in total consideration of Rs. 150 crores. The price which has been offered by the applicant is much higher to the market value even as per the jantri. As per report of the Official Liquidator, market value of the three Final Plots No. 31, 32 and 33 comes to Rs. 125 crores, whereas the applicant has offered Rs. 150 crores for Final Plot Nos. 32 and 33 leaving aside Final Plot No. 31 admesuring 20,487 sq.mtrs. Thus, it was more than clear that the offer of the applicant is genuine and bonafide and the applicant is paying the price which is higher than the market value as per the valuation of the valuer.
(emphasis supplied)
3.13 On 20th August, 2010, present Appellant''s submitted to the Court that because of death in the family of one of the Directors of the company (i.e. present Appellant), necessary appropriate directions in the order dated 13.08.2010 could not be moved and the demand draft in the sum of Rs. 15 crores also could not be deposited with the Official Liquidator. On such submission, the advocate of present Appellant requested the Court to adjourn the hearing to 25th August, 2010.
3.14 The learned advocate for the Appellant also stated before the Court that the Appellant would either handover a pay-slip or demand draft of sum of Rs. 15 crores in the office of Official Liquidator on or before the next date of hearing i.e. 25.08.2010. The statements were recorded by the Court in the order dated 20.08.2010, which reads thus:
Mr. Viral Shah, learned advocate appearing for Jay - Kanan Buildcon Private Limited submits that because of the death in the family of one of the Directors of the Company, necessary application could not be moved nor the amount of Rs. 15 Crores by way of Demand Draft is deposited with the Official Liquidator. He, therefore, requests this Court to keep this matter on 25.08.2010. Mr. Shah further submits that his client would hand over a pay slip or Demand Draft of Rs. 15 Crores to the Official Liquidator on or before 25.08.2010. Further order will be passed on that day. S.O. to 25.08.2010. To be placed in the first Board.
(emphasis supplied)
3.15 In this way, though the Appellant had earlier promised to deposit the demand draft in the sum of Rs. 15 crores in exchange of the cheque submitted on 13th August, 2010 towards EMD in support of its offer to pay Rs. 150 crores for two plots, the Appellant did not act as per its assurance to the Court and did not deposit the amount by way of demand draft. The Appellant also did not file necessary application for which the direction was passed in the order dated 13.08.2010. For the said purpose also the Appellant''s request for time was granted and the proceedings adjourned (on 20th August, 2010) to 25th August, 2010.
3.16 On 25th August, 2010, the Appellant''s advocate appeared before the Court and presented before the Court absolutely changed stand of the Appellant and submitted that he was informed by his client i.e. the Appellant that if even after his offer, the Court were to still require issuance of the advertisement so as to invite offers and then consider the highest offer, then he (i.e. Appellant) was not interested in pursuing his offer. The developments, which took place on 25th August, 2010, have been summarized by the Court in para-5 of the order in question which reads thus:
3.17 In this context, it is necessary to take note of paras-1 to 4 of the order dated 25.08.2010, which reads thus:
This Court has passed two orders, first on 13.08.2010 and thereafter on 20.08.2010. On 13.08.2010, Mr. Satyam Chhaya, learned advocate appeared and submitted that his client, namely, Jay Kanan Buildcon Pvt. Ltd. is interested in purchasing the lands bearing Survey Nos. 32 & 33. An offer was made for Rs. 150 Crores. A cheque of Rs. 15 Crores was also given to the Official Liquidator. It was made clear that on furnishing the Demand Draft, cheque would be given back to the said party. The matter was, therefore, adjourned to 20.08.2010.
On 20.08.2010, Mr. Viral Shah, learned advocate appeared on behalf of the said party and submitted that because of the death in the family of the said party, the Demand Draft could not be given and time was granted. Accordingly, the matter is adjourned to today.
On 20.08.2010, Mr. Shah also submitted that application is already ready and it is to be filed in the Registry and he will see to it that the said application will be listed for hearing today. As a matter of fact, copy of the said application is also given to the learned advocates appearing in Company Application Nos. 97 and 191 of 2010.
Today when the matter is called out, neither Mr. Shah nor Mr. Chhaya is present in the Court. The said party has also not moved any application before this Court.No one is present on behalf of the said party nor an amount of Rs. 15 Crores by way of Demand Draft is given to the Official Liquidator. The learned advocates have also no courtesy to remain present before the Court at the time when the matter is called out and to convey the decision of the said party to the Court. It appears that the said party as well as the learned advocates appearing for the said party have taken the Court proceedings very lightly and their conduct itself indicates a contemptuous act on their part. Before taking any further order in the matter, one more opportunity is given to the said party to indicate as to why they have not acted as per the assurance given to this Court on 13.08.2010 as well as on 20.08.2010. For this purpose, Jay Kanan Buildcon Pvt. Ltd. be joined as party - Respondent in Company Application Nos. 97 & 191 of 2010 and its Managing Director, namely, K. G. Bhatia is directed to remain personally present before the Court. Since the cheque of Rs. 15 Crores bearing No. 377832 drawn on Dena Bank, Law Garden Branch, Navrangpura, Ahmedabad is given towards EMD and it was to be replaced by the Demand Draft and since this has not been done till this date, the Official Liquidator is hereby directed to deposit the said cheque today itself. Learned advocates Mr. Viral Shah and Mr. Satyam Chhaya are hereby directed to inform their client that the matter is kept for further hearing on 27.08.2010 and he should remain personally present before the Court and if he would not remain present, the Court would take very adverse view in the matter.
(emphasis supplied)
3.18 Having noted thus, the Court also observed in the said order that the submission by Mr. Shah, learned advocate do not inspire confidence. The Court, thereafter, adjourned the proceedings to 27th August, 2010 directing the Appellant to remain present before the Court.
3.19 In para-5 of the order in question, the Court has recorded that:
....on 25.08.2010, Mr. Viral Shah, learned advocate appearing for the present application in Company Application Nos. 97 and 191 of 2010 has made the statement before the Court that when the applicant was given to understand that the applicant has to deposit Rs. 15 crores by way of EMD and the upset price of the property would be fixed for Rs. 150 crores and, thereafter, advertisement would be issued and whosoever will make higher offer will get the property, the applicant has said to him that in that case the applicant is not interested and the applicant is not pursuing the application which is filed in the Registry. The Court has not accepted the said submission and directed the office to notify the said application on 27.8.2010....
3.20 It appears that during the hearing on 25th August, 2010, after the order was passed, further request by the learned advocate of the Appellant was made which came to be recorded by the Court in paras-7 and 8 of the order dated 25.08.2010.
The said observations by the Court read thus:
After the above order is passed and just before the recess, Mr. Viral Shah, learned advocate appearing for Jay Kanan Buildcon Ltd., has requested this Court not to sign the order and he will make his submission at 2:30. He has submitted that as informed by him earlier on 20.8.2010, the applicant has filed the application today in the Registry. He has further submitted that the applicant was under the impression that on deposit of Rs. 150 crores the sale of the property in question would be confirmed in favour of the applicant. However, the applicant was given to understand that the applicant has to deposit an amount of Rs. 15 crores by way of EMD and the upset price of the property would be fixed at Rs. 150 crores and, thereafter, advertisement would be issued and whosoever will make higher offer will get the property. When this was communicated to the applicant, the applicant has said that in that case the applicant is not interested and the applicant is not pursuing the application which is filed in the Registry. Mr. Shah has, therefore, requested this Court to allow him to retire from the proceedings.
The submissions made by Mr. Shah do not inspire the confidence of the Court. It was made very clear on earlier occasion that amount of Rs. 15 crores is to be deposited by way of EMD and on that understanding even the cheque of Rs. 15 crores was given by the applicant. There is no question of straightway confirming sale in favour of the applicant. Be that as it may, the Court is of the view that the applicant is now finding excuses and he wants to back out from his commitment made before the Court. The Court, therefore, as indicated in earlier part of this order, fixed up the matter on 27.8.2010. As per direction issued therein if the applicant would not remain present or those directions are not complied with, further order will be passed on that day.
(emphasis supplied)
3.21 Accordingly, the proceedings were adjourned to 27th August, 2010. It may be seen from the said order dated 25.08.2010 that the Court had taken serious note of the conduct of the Appellant and observed that "it appears that the said party as well as the learned advocates appearing for the said party have taken the Court proceedings very lightly and their conduct itself indicates a contemptuous act on their part." The Court, therefore, also directed that the Managing Director to remain present on the next date of hearing i.e. on 27th August, 2010. Furthermore, since the Appellant had failed to submit the demand draft as originally assured, the Court also directed the Official Liquidator to deposit the cheque.
3.22 On the next date of hearing i.e. on 27th August, 2010, the learned Senior Counsel appeared for the Appellant and tendered unconditional apology and sought pardon of the Court for consuming valuable time. The learned Senior Counsel for the Appellant also appears to have submitted that the Appellant did not want to participate in future, in any auction proceedings before the Court. With a direction to the Official Liquidator to file report about the result of the encasement of the cheque tendered by the Appellant, the proceedings were adjourned to 30th August, 2010.
3.23 On 30th August, 2010, at the request of the Appellant''s Senior Counsel, the proceedings were adjourned to 3rd September, 2010. Thereafter, upon hearing the parties and taking into account the Appellant''s conduct and other material on record, the Court passed the order in question by which the Appellant is aggrieved and has filed present appeal.
Mr. M.J. Thakore, learned Senior Counsel with Mr. S.N. Thakkar, learned advocate has appeared for the Appellant and Ms. Yajnik, learned advocate has appeared for the Official Liquidator. We have heard the learned Counsel for the parties and have also perused the record.
4.1 Mr. Thakore, learned Senior Counsel has, in his brief submission, submitted only on one point i.e. about the rigour of the directions issued by the Court vide order in question, which, inter-alia, include the directions to initiate the contempt proceedings against the Appellant and also institute criminal proceedings u/s 138 of the Negotiable Instruments Act. Mr. Thakore, learned Senior Counsel, has submitted that though the conduct of the Appellant would invite and justify the displeasure of the Court as well as appropriate order, however, the directions in question, are too harsh. He also submitted that in the facts of the case, the Court may impose appropriate cost and for that matter even heavy cost may be imposed, but having regard to the fact that the Appellant had submitted his bid/offer, his bona fide conduct ought not have been construed as contemptuous and when the Appellant''s advocate had, on 25th August, 2010, submitted before the Court that the upon realizing that auction proceedings shall take place, the Appellant was not willing to participate further in the proceedings, the directions for initiating proceedings u/s 138 of the Negotiable Instruments Act is unwarranted.Mr. Thakore, learned Senior Counsel submitted that the direction to institute proceedings under the Contempt of Courts Act, 1971 and the direction to initiate criminal proceedings u/s 138 of the Negotiable Instruments Act and to issue advertisement in two news papers about the directions debarring the Appellant from participating in auction proceedings, may be set side. He submitted that in the facts of the case, the said directions are unwarranted and harsh and on the totality of facts and circumstances, an order imposing cost would be in the fitness of things and would be justified. He submitted that the Appellant is ready and willing to pay cost but the directions passed vide order in question may be set aside and may be substituted by appropriate order imposing cost.
4.2 Ms. Yajnik, learned advocate for the Official Liquidator, has, on the other hand, submitted that the Court may make appropriate order having regard to the Appellant''s conduct which is recorded by the learned Company Court in the order in question .
Upon complete reading of the order in question and on perusal of the record, it is not a matter of doubt or conjecture that the Appellant herein took the proceedings very casually and by his conduct, he completely derailed and abused the proceedings, which also resulted into unnecessary and unwarranted and avoidable delay and he also led the Court to believe the aspects and/or the statement in respect of which he was not sincere and/or sure and certain.
5.1 It is a fact that right from 10th August, 2010 until at least 3rd September, 2010, the proceedings of the two applications got derailed and substantial proceedings as well as Court''s time also got consumed in considering and disposing Appellant''s offer, solely because of the Appellant''s conduct.
5.2 We have noticed that the Appellant, after being aware about the report (based on jantri) assessing the market value approximately at Rs. 125 crores for three plots, consciously made offered of Rs. 150 crores for two plots. The Appellant also tendered cheque in the sum of Rs. 15 crores towards EMD with an assurance that the cheque would be substituted by the demand draft. The Appellant did not deposit the demand draft, but he also did not move necessary application as directed by the order dated 13th August, 2010. Instead, on 20.08.2010, the Appellant''s advocate made an excuse before the Court on the ground that the relative of the Appellant''s Director had expired. In this context, the observations by the learned Company Court are relevant and deserves to be taken into account. The Court has observed that:
The Court, therefore, decided to explore possibility of putting free hold land for sale fixing the upset price for these two plots for Rs. 150 crores and asked Mr. Satyam Chhaya, learned advocate appearing for the present applicant to deposit Rs. 15 crores by way of EMD and on that basis an advertisement etc., would be issued. Since demand draft was not ready, a cheque of Rs. 15 crores was tendered by the applicant with an understanding that the cheque shall be returned to the applicant only on deposit of demand draft of Rs. 15 crores by way of EMD for the said two plots. The Court, therefore, postponed the hearing of these two applications and adjourned to 20.8.2010. The Court has also permitted the present applicant to move proper application to this Court in this regard making an offer for sale of land for these two plots for Rs. 150 crores.
Though the present application is ready on 18.8.2010 and though it is duly affirmed on 18.8.2010 it was not filed before the Court. On the contrary, Mr. Viral Shah, learned advocate appearing for the applicant has made the statement before the Court on 20.8.2010 that because of the death in the family of one of the Directors of the Company, necessary application could not be moved nor the amount of Rs. 15 crores by way of demand draft was deposited with the Official Liquidator.A request was, therefore, made to keep the matter on 25.8.2010. It was also assured by Mr. Shah that his client would hand over a pay-slip or demand draft of Rs. 15 crores to the Official Liquidator on or before 25.8.2010. While making all these submissions before the Court on 20.8.2010 there is no whisper about the fact that the applicant was given to understand that straightway the Sale Deed would be executed in favour of the applicant on deposit of amount of Rs. 150 crores. On the contrary, order dated 13.8.2010 itself is very clear to the effect that the applicant is required to deposit an amount of Rs. 15 crores by way of EMD and upset price would be fixed at Rs. 150 crores and on deposit of draft of EMD of Rs. 15 crores, an advertisement etc., would be issued. There is no question of misunderstanding about the order of this Court or the communication by the learned advocates to their client upto 25.8.2010.
Even on the next returnable date i.e. 25.8.2010 when neither any application was moved by the applicant nor amount of Rs. 15 crores was deposited by way of demand draft with the Official Liquidator, the Court has passed an order in the first session that no application is moved by the applicant nor any amount of Rs. 15 crores by way of demand draft is deposited with the Official Liquidator. Since no one was present on behalf of the applicant the Court was constrained to observe that the learned advocates have no curtsy to remain present before the Court at the time when the matter was called out and to convey the decision of the said party to the Court. The Court was further constrained to observe that the said party as well as the learned advocates appearing for the said party have taken the Court proceedings very lightly and their conduct itself indicates a contemptuous act on their part.... The Court has adjourned the hearing on 27.08.2010 and it was made clear that if the said party would not remain present, the Court would take very adverse view in the matter.
5.3 Having taken note of the aforesaid aspects, we have also noted that the learned Company Court has rightly and justifiably observed that after the said order dated 25.08.2010 was passed and despite the observations therein, the Appellant''s advocate made request to permit him to make submission in the second session which was granted, and thereafter, it was submitted on behalf of the Appellant that "the applicant has to deposit an amount of Rs. 15 crores by way of EMD and the upset price of the property would be fixed at Rs. 150 crores and, thereafter, advertisement would be issued and whosoever will make higher offer will get the property. When this was communicated to the applicant, the applicant has conveyed to him that he is not interested in pursuing the application which is filed in the Registry."
5.4 The learned Court has, with regard to the said submission, noted that "...this submission of Mr. Shah did not inspire confidence of the Court and hence the order was kept as it was....".
5.5 After all these events and submissions on 25th August, 2010, the Appellant appears to have raised the plea on the ground of misunderstanding as regards the learned Court has noted that in light of the orders dated 13.08.2010 and 20.08.2010, there was no question of any misunderstanding or even chances of any misunderstanding. The learned Court took note of the fact that the application was affirmed on 18th August, 2010 but it was not filed on or before 20th August, 2010, despite the assurance and statement made on 13th August, 2010. The Court has also recorded that "...Even the averments made in the Company Application No. 250 of 2010 make it abundantly clear and specific prayer is made in the Judges Summons that the Official Liquidator may be directed to take appropriate proceedings for confirmation of sale in favour of applicant by accepting Rs. 150 crores towards total consideration of Final Plot Nos. 32 and 33. The word ''appropriate proceedings'' speak volume about the applicant''s understanding....".
5.6 It is also relevant to note that the cheque which was tendered by the Appellant was dishonored by the bank. The said event also casts shadow on the Appellant''s conduct.
5.7 On consideration of the entire set of events, it transpires that the Appellant actually wanted to get the property without undergoing the procedure of auction and without facing competitive bidding.
5.8 It is pertinent to note that out of the three plots, two plots for which the Appellant opted, are free hold land whereas the third plot happen to be lease hold land. The Appellant, therefore, was obviously interested only in free hold land and wanted to take hold of the said land without participating in auction proceeding. Not only this, but the Appellant, at the same time, also did not want to deposit earnest money, and therefore, on the ground that in short-time, he would deposit the demand draft, the Appellant tendered a cheque and thereby, the Appellant, on one hand, complied with the requirement of depositing earnest money so as to ward off any allegations of irregularities in procedure and on the other hand, it also ensured that his funds were not out of pocket and he would not pay/deposit single penny inasmuch as he had also requested that the cheque may not be deposited as the cheque would be exchanged for the demand draft.
5.9 It does not call for much guesswork to look through the Appellant''s design. However, when the Appellant realized that the offer would not be finalized without auction proceedings, immediately on the very next date, the Appellant decided to back-out but did not intimate the Court on 20th August, 2010 and got the proceedings adjourned to 25th August, 2010, 27th August, 2010 and then to 30th August, 2010 etc.
5.10 It is pertinent to note that the facts are not in dispute. It is not in dispute that when the Appellant entered into the proceedings related to other two applications were already in progress. The Appellant tendered a cheque in the sum of Rs. 15 crores and assured the Court to submit, as per the requirements, a demand draft of equal amount in exchange of the said cheque towards EMD, and thereby, comply the requirements of making an offer with regard to the property of company in liquidation.
5.11 The Appellant, thereby, gave promise to the Court that the cheque will be substituted and demand draft will be submitted. The Appellant did not fulfill the said promise.
5.12 He had also promised that on or before the next date of hearing, appropriate application supported by an affidavit containing the offer would be filed. However, the Appellant did not file the application and he, thereby, committed another breach of promise.
5.13 Thereafter, the Appellant got the proceedings adjourned on the ground that due to personal difficulties, the assurance could not be fulfilled, however needful will be done before the next date of hearing. The Appellant, on such assurance, got the proceedings adjourned.
5.14 On the next date, the Appellant simply ignored the proceedings and neither the Appellant nor his advocate attended the hearing. The Court, therefore, rightly and justifiably, made observations against the conduct of the Appellant. The Appellant''s conduct was, by any yardstick, absolutely unacceptable and amounted to demeaning the dignity of the Court.
5.15 When the Court, compelled by the conduct of the Appellant, directed the Managing Director to remain personally present in the Court, the Appellant came out with the excuse on the ground of misunderstanding the proceedings and advanced the excuse of being novice to the proceedings overlooking the fact that right from beginning the Appellant was guided and represented by an advocate.
5.16 The said fact and conduct of the Appellant i.e. of advancing such excuse was an act of showing scant respect for the proceedings and the dignity of the Court.
5.17 On top of this, having tendered the cheque, the Appellant allowed the cheque to be dishonored. By any standard, the said act and conduct of the Appellant was contemptuous.
5.18 The Appellant was aware that the Court had passed the order directing the Official Liquidator to deposit the cheque and yet the Appellant neither requested the Court to not to get the cheque deposited nor did he make arrangement for sufficient funds in his account so that the cheque may not be dishonored.
5.19 The Appellant, thus, consciously and with knowledge misdirected the Court and obstructed the proceedings.
5.20 Ultimately, when the Appellant found himself in tight situation and realized that the Court had taken his misconduct and misbehavior seriously, he came out with aforesaid the excuse and ultimately tendered the apology.
5.21 The Court has, prima-facie, considered the Appellant''s conduct as contemptuous, and in our view rightly so.
5.22 As noted above, it is also not in dispute that the cheque has been dishonored, and that therefore, there is a prima-facie cause for initiating proceedings under the Negotiable Instruments Act as directed by the impugned order.
5.23 So far as the third direction in the impugned order is concerned, the Appellant has declared and stipulated that it will not be participating in the auction proceedings in the Court.
It is in this background that we have to consider the Appellant''s request to accept his unconditional apology and consider his request to not to institute contempt proceedings and/or criminal proceedings under the Negotiable Instruments Act and instead modify the impugned direction or substitute them by the direction to pay cost, and for that matter even heavy cost. In response to the Court''s querry about the amount which the Appellant had in mind while stipulating about heavy cost, the Senior Counsel responded by stating that the amount which the Court considers appropriate may be awarded towards cost.
6.1 On the overall view of the matter and after considering the submissions of the Appellant''s counsel, we are not convinced to hold that the learned Court is unjustified in recording a prima-facie observation that the Appellant''s conduct was contemptuous in nature and the Appellant''s conduct amounted to interference with the process of law and Court proceedings.
6.2 Furthermore, in view of the established fact that the cheque submitted by the Appellant was dishonored, the learned Counsel for the Appellant could not convince us to accept the submission that the Court has erred in issuing the directions to initiate proceedings under the Negotiable Instruments Act.
6.3 So far as the directions prohibiting the Appellant from participating in auction proceedings is concerned, it deserves to be noted that before the learned Company Court, the Appellant''s counsel had submitted, while tendering unconditional apology that the Appellant does not intend to participate in any auction proceedings. In that view of the matter, even before us, the learned Counsel for the Appellant has not made grievance with regard to the Court''s direction prohibiting the Appellant from participating in auction proceedings and has reiterated the same stipulations.
The dignity of the Court of the proceedings is always paramount. It is the obligation of the litigants also to uphold, maintain and respect the dignity of the Court and the proceedings. He, who conducts himself or undertakes the proceedings in such a way that his conduct may undermine the dignity and honour of the Court and the proceedings, must understand that such conduct is a wrong to and against the society and the Court proceedings should not be tinkered, much less to make profit by throwing a spanner in the wheel. In our view, such conduct i.e. the conduct narrated in the order by the Court, cannot be viewed lightly.
True, the Court may not become ultra sensitive, however, when it is noticed that due to the conduct and actions of the Appellant the proceedings was obstructed or abused and the proceedings also got derailed and thereby the Appellant undermined the Court''s dignity, then the Court would not and cannot overlook such conduct and it cannot be ignored or discounted lightly. The concerned person must realize not only his folly but also the fact that such conduct and its effect cannot be wiped out or cleaned by offering to pay cost.
Those who seek justice and equity must behold the dignity of Court and the proceedings.
We need to put on record that certain facts and details of events, which have been recorded by the learned Court, has distressed us. We may, in particular, refer to the following observations:
Considering the entire facts and circumstances of the case the Court is of the view that after making an offer before the Court on 13.8.2010 some pressure might have brought on the applicant either by the applicants of Company Application No. 97 and 191 of 2010 or by somebody else. In absence of any proof or evidence in this regard it is difficult to arrive at any conclusion but such shift in the approach of the applicant would not have been noticed but for some external pressure or reward of any kind which might have been received from some one in the matter. Be that as it may, the Court is of the view that there was no genuine or bonafide offer made by the applicant. The explanation tendered subsequently is not trustworthy nor it is acceptable. The applicant has created in-roads in the Court proceeding and it clearly amounts to a contempt of court. The Registry is, therefore, directed to initiate suo-motu contempt proceedings....
(emphasis supplied)
. The Court has also observed in the order that:
Though the present application is ready on 18.8.2010 and though it is duly affirmed on 18.8.2010 it was not filed before the Court. On the contrary, Mr. Viral Shah, learned advocate appearing for the applicant has made the statement before the Court on 20.8.2010 that because of the death in the family of one of the Directors of the Company, necessary application could not be moved nor the amount of Rs. 15 crores by way of demand draft was deposited with the Official Liquidator. A request was, therefore, made to keep the matter on 25.8.2010. It was also assured by Mr. Shah that his client would hand over a pay-slip or demand draft of Rs. 15 crores to the Official Liquidator on or before 25.8.2010. While making all these submissions before the Court on 20.8.2010 there is no whisper about the fact that the applicant was given to understand that straightway the Sale Deed would be executed in favour of the applicant on deposit of amount of Rs. 150 crores. On the contrary, order dated 13.8.2010 itself is very clear to the effect that the applicant is required to deposit an amount of Rs. 15 crores by way of EMD and upset price would be fixed at Rs. 150 crores and on deposit of draft of EMD of Rs. 15 crores, an advertisement etc., would be issued. There is no question of misunderstanding about the order of this Court or the communication by the learned advocates to their client upto 25.8.2010.
The plea regarding misunderstanding of the Court''s order was made for the first time on 25.8.2010. Before that two orders were passed by the Court on 13.8.2010 and 20.8.2010. Even the present Company Application was duly sworn on 18.8.2010 and it was withheld and absolutely under false pretext not filed before the Court though assured to the Court on 13.8.2010....
One more aspect which is very relevant and which requires consideration by this Court while deciding this application is that though the applicant is not having adequate balance in its Bank account a cheque of Rs. 15 crores was issued. After having deposited the said cheque pursuant to the direction of this Court, the cheque was bounced for want of sufficient funds. This itself shows that there was no genuine or bonafide intention on the part of the applicant. A person who cannot clear cheque of Rs. 15 crores cannot be expected to pay the amount of Rs. 150 crores, even if the sale is confirmed and Sale Deed is executed in his favour. This is nothing but lame excuse which cannot be accepted by any one. The applicant through its Managing Director has virtually made the Court proceeding a mere farce. When the Court has taken the strict view in the matter on 25.8.2010, an unconditional apology was tendered in writing on 30.8.2010....
(emphasis supplied)
During the hearing of the appeal and while advancing his submission, the learned Senior Counsel for the Appellant responded to the aforesaid position and submitted that in present case, the Appellant has already tendered apology and the proceedings related to the two company applications are still pending and that therefore, instead of initiating contempt proceedings against him and directing initiation of criminal prosecution, the Court may take a lenient view and the said directions may be substituted by the order directing the payment of any appropriate amount (towards cost) which the Court considers appropriate and the Appellant''s apology may be accepted. The learned Senior Counsel also expressed Appellant''s willingness to subject himself to the order imposing even heavy cost.
In present case, we have noted that the Appellant has already tendered unconditional apology. We have also noticed that the proceedings in respect of the Company Application Nos. 97 of 2010 and 191 of 2010 are still alive and fortunately they were not and have not been closed (after the offer made by the Appellant) and to that extent, the proceedings are still alive and are saved for further direction, including the directions with regard to the proposed scheme. In this background, we do find some substance in the request made by the Senior Counsel on behalf of the Appellant.
We should mention at this stage that having regard to the Appellant''s submission and request to substitute the impugned directions with the order directing payment of cost, we expressly and clearly put it to the learned Senior Counsel for the Appellant that if the order directing payment of cost is made, then it will be at-least 10% of the amount of the EMD/cheque amount (which came to be dishonored after it was deposited by the Official Liquidator) or more, to which the learned Senior Counsel responded by submitting that the Court may prescribe/order whatever amount the Court considers appropriate.
Having regard to the aforesaid aspects, we are of the view that the Appellant''s request to not to initiate the proceedings as per the impugned directions and to substitute them with the order directing payment of heavy cost would be commensurate and would also set an example to the Appellant to not to indulge in such conduct in respect of the Court proceedings.
We are, thus, inclined to dispose of present appeal with following order.
Having regard to the submissions and request of the Appellant, we are of the view that if the Appellant is directed to pay a sum of Rs. 15 lacs towards costs coupled with the directions to not to participate directly or indirectly in any auction proceedings before the learned Company Court then it would be commensurate to and substitution for, the impugned direction against the Appellant''s conduct. On the aforesaid conditions and upon their compliance the order and impugned directions passed by the learned Company Court shall stand modified. The Appellant shall pay the said sum of Rs. 15 lacs towards costs by way of demand draft/s from Nationalized Bank and such amount shall be paid within two weeks from today. Besides the payment of the said sum of Rs. 15 lacs, the Appellant shall stand barred from participating in any auction proceedings before the learned Company Court. The Appellant (the Directors including the Managing Director Mr. K.G. Bhatia) shall, within two weeks from today file an undertaking to the effect that company and/or Managing Director Mr. K.G. Bhatia shall not, directly or indirectly participate in the auction proceedings before the learned Company Court. The amount paid by the Appellant towards costs shall be paid over in favour of the Gujarat State Legal Services Authority/Legal Aid Committee and the Official Liquidator''s establishment in proportion of Rs. 12.5 lacs and Rs. 2.5 lacs respectively i.e. Rs. 12.5 lacs in favour of the Gujarat State Legal Services Authority/Legal Aid Committee and Rs. 2.5 lacs in favour of the establishment of the Official Liquidator.
With the aforesaid modifications in the impugned order and with the aforesaid directions, the appeal is partly allowed and the order in question is, to the aforesaid extent, modified. The appeal stands disposed of accordingly.