2015 (10) TMI 2440 - Board - Companies Law

Construction to asset Passed status quo order Construction over building whereupon status quo granted is nothing but wilful disobedience of orders passed Respondent contends that property impugned leased out in 2005 to a non-party and no order has been passed over this tenancy - It is not indicated anywhere in Observation Report that existing building has been demolished and new structure erected in place of old structure upon which status quo was granted - Held That - Photographs filed by observer showed that it is an old building and 8 years have gone by after passing of order, if building is left without any upkeep, it is endangering to persons living in it Tenant thus may attend not only to repair but he may proceed with as these orders cannot be said to be passed against tenant from attending to renovation and repair - Actions of tenant are not hit by any contempt as tenant is not a party and there is no creation of third party rights - Order is to read in context it is passed, not beyond context - Since renovation will add value to property, same cannot be considered as detriment to interest of anybody Decided in favour of Respondent.

Summary

Issues:
Contempt of court for disobeying status quo orders regarding construction on company asset.

Analysis:
1. The Petitioners filed a Contempt Application against the Respondents for making construction on the company asset despite status quo orders. The Petitioner Counsel argued that the status quo order was to maintain the existing position until the termination of the orders, not limited to alienation or creating third party rights. An Observer confirmed construction was ongoing, indicating disobedience of the court orders by the Respondents.

2. The Respondents' Counsel argued that the status quo order was related to restraining alienation of the property, not repairs or maintenance. She stated that the construction was in accordance with the terms of the Lease Agreement and not in violation of the court orders. The Respondents claimed that the orders did not restrict the tenant from attending to repair and renovation work on the property.

3. The court examined the orders passed in 2007 and the current situation in 2015. It was noted that the orders were passed in the context of preventing third party rights over the asset, and not to restrict repair or renovation work. The court emphasized that the orders should be interpreted within the context they were passed and observed that the tenant, not a party to the proceedings, had been in possession for 8 years.

4. The court considered the Contempt Application filed by the Petitioners in 2014 and concluded that the construction work by the Respondents did not amount to contempt. It was highlighted that contempt proceedings have punitive consequences and should be approached with caution. The court clarified that the status quo order was limited to preventing third party rights and did not prohibit repair or renovation work.

5. Referring to the principles outlined in Bharat Coking Coal Ltd. v. State of Bihar AIR 1988 SC 127, the court reiterated that status quo means maintaining the existing position until modified or revoked. Both parties cited the same case to support their arguments regarding the interpretation of status quo orders.

6. The court emphasized that orders should be interpreted within the context they were passed and not beyond. It was highlighted that each case's ratio must be considered based on its applicability to the specific facts. The court also noted that the issue of tenancy should be addressed during the main proceedings and that repair or renovation work adding value to the property should not be considered detrimental.

7. Ultimately, the court found no merit in the Contempt Application and dismissed it, stating that the construction work did not constitute wilful disobedience of the court orders. The court clarified that its observations in the application would not impact the parties' rights and contentions or influence the outcome of the main case.