1995 (9) TMI 268 - HC - Companies Law

Summary

Issues:
1. Contempt of court for not honoring promise and undertaking given in a company petition.
2. Enforceability of consent terms and undertaking under Section 634 of the Companies Act, 1956.
3. Relationship between contempt proceedings and execution process.
4. Allegation of civil contempt for breach of undertaking before the court.

Detailed Analysis:
1. The petition was filed under the Contempt of Courts Act against respondents for not honoring a promise and undertaking made in a company petition. The undertaking by J.P. Patel and P.J. Patel stated that they would be personally liable if the company failed to pay the agreed amount. The petitioner alleged wilful breach of the promise and sought action under the Contempt of Courts Act.

2. The consent terms required the company to pay the principal amount in 12 monthly installments. The respondents' undertaking made them personally liable if the company defaulted. Section 634 of the Companies Act, 1956, allows court orders to be enforced like decrees. The consent terms and undertaking could have been enforced through execution under the Civil Procedure Code.

3. The judgment highlighted that contempt proceedings are not a substitute for the execution process, citing the Supreme Court case of Alhar Co-operative Credit Service Society v. Sham Lai. The petitioner could have executed the order as a decree under the Civil Procedure Code. Contempt proceedings are not intended to be a substitute for execution, making the petition not maintainable.

4. The alleged civil contempt was based on the respondents' failure to honor their undertaking before the court. However, the judgment noted that there was no evidence of the company failing to discharge its liability. Without such evidence, the situation outlined in the undertaking did not become operative. The consent terms were seen as a means to resolve the dispute, with the petitioner retaining the right to revive the petition if the arrangement failed. Therefore, no case of contempt was established against the respondents under the Contempt of Courts Act. The petition was deemed not maintainable and dismissed, with no costs awarded.