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TMI Blog1996 (5) TMI 326X X X X Extracts X X X X X X X X Extracts X X X X ..... AVE PETITION (C) NO. 21000 OF 1993 - - - Dated:- 6-5-1996 - B. P. JEEVAN REDDY AND K. S. PARIPOORNAN, JJ. G. Ramaswamy, V. A. Bobde, Dushyant Dave, Arun Jaitley, Harish N. Salve, Rajeev Dhavan, K. Madhava Reddy, Ms. Kamini Jaiswal, K. J. John, Ms. Indra Sawhney, V. K. Mehta, J. K. Das, S. Misra, Ms. Rachna Joshi Issar, Din Dayal Sharma, Jaswant Singh, Arvind Nigam, Deepak Dhavan, A. Singh and P.N. Misra for the Appearing Parties. JUDGMENT B.P. Jeevan Reddy, J. A plot of land was put to auction by the Delhi Development Authority (DDA) in October, 1980. Skipper Construction Company (Skipper) offered the highest bid in a sum of Rs. 9.82 crores. It was supposed to be a record bid at that time. According to the conditions of auction, twenty-five per cent, of the amount was payable immediately and the rest within ninety days. Skipper deposited the twenty-five per cent, but did not deposit the balance. It asked for extension repeatedly and it was granted repeatedly. As many as seven extensions were granted spread over the period January, 1981, to April, 1982. Since Skipper failed to deposit the balance consideration even within the last extended period, proceedin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... space in the proposed building and that they would be deprived of their hard-earned monies. Skipper has been making some small token payments from time to time meanwhile. While the endless correspondence and discussions were going on between Skipper and the DDA, Skipper went to the Delhi High Court by way of a writ petition, C. W. No. 2371 of 1989 A asking for a writ of mandamus to the DDA to sanction the building plans or in the alternative to grant permission to him to start construction at his risk. On March 19, 1990, the High Court passed an order permitting Skipper to commence construction in accordance with the sanctioned plans subject to the deposit of a sum of Rs. 20 lakhs in two instalments and B Rs. 1,94,40,000 within one month. Against the said order, the DDA came to this court by way of Special Leave Petitions (C) Nos. 6338 and 6339 of 1990. Meanwhile, Writ Petition (C) No. 2371 of 1989 came up for final hearing on December 21, 1990. The Delhi High Court made an order on that day directing Skipper to pay to the DDA a sum of Rs. 8,12,88,798 c within thirty days and to stop all further construction with effect from January 9, 1991, till the said payment was made. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e amounts due to DDA and that nothing was due from it. It obtained interim orders staying re-auction of the plot. Against the interim order of the High Court staying the re-auction of the plot, the DDA approached this court by way of Special Leave Petition (C) No. 21000 of 1993. Noticing the conduct of Skipper this court initiated suo motu contempt proceedings against Tejwant Singh and his wife, Surinder Kaur, directors of Skipper. They were asked to explain (1) why did they institute Suit No. 770 of 1993 in respect of the very same subject-matter which was already adjudicated by this court on January 23, 1993, i.e. , by affirming the orders of the High Court dated December 21, 1990, and January 14, 1991, and (2) why did they enter into agreements for sale and create interest in the third parties in defiance of the orders of this court dated January 29, 1991. After hearing the contemners, this court found them guilty of contempt of this court in the following words : "We, therefore, invoke our power under article 129 read with article 142 of the Constitution and order as follows : We sentence contemner respondent No. 1, Tejwant Singh, to undergo simple imprisonment for six mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. (8)The attachment of the properties and the bank accounts shall stand raised on the contemners furnishing the bank guarantee as afore said. (9)The order with regard to the disbursal of the amount deposited will be passed after the amounts are deposited as aforesaid." The contemners deposited a sum of Rs. 2 crores but failed to deposit the balance. They also failed to furnish the bank guarantee. As a result of the said failure, they were committed to prison. Both the contemners have served out their sentence. Meanwhile, the DDA invited tenders for the sale of the said plot of land along with the construction raised thereupon. The highest offer received was in the sum of rupees seventy crores from Banganga Investments. It was accepted with the permission of this court. The consideration has been deposited with the DDA and the property transferred in favour of the said purchaser. At this stage, the question arose as to what should be done with the hundreds of persons who have been duped and defrauded by Skipper and who had parted with substantial amounts on the basis of the fraudulent and false representations made by Skipper. This court made a distinction between persons w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iry, on the basis of which this court had directed disciplinary action to be taken against certain officers of the DDA. At this stage, several applications have been filed by the post-January 29, 1991, purchasers to sell the properties of Tejwant Singh, his wife and children, which were attached by this court under its order dated February 8, 1995 [in the suo motu contempt proceedings] and utilise the proceeds so realised to reimburse them along with interest and damages. Notice of the said applications was given to Tejwant Singh and Surinder Kaur and to the sons of the said persons whose properties were attached under the aforesaid orders. We have heard the parties at length on April 18, 1994. S/Sri V. A. Bobde and Dushyant Dave, appearing for the claimants, [post-January 29, 1991, purchasers] and Sri Arun Jaitley for the DDA submitted that undergoing the sentence of imprisonment by Tejwant Singh and his wife, Surinder Kaur, does not erase their obligation to pay back the amounts to the said claimants whom they had deliberately and fraudulently induced into parting with substantial amounts in clear and direct violation of the orders of this court. They submitted that the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould come out of the said amount of Rs. 69 crores now with the DDA. Learned counsel submitted that on account of the various proceedings taken against Skipper and their directors and the attachment of their properties and the adverse publicity in that behalf, it has become impossible for them to generate any monies for depositing in this court. They requested that a Commission be appointed to determine the value of the structure raised by Skipper on the said plot and also to determine the amount received by Skipper from the post-January 29, 1991, purchasers and to direct that the amount required to pay them should come out of the funds with the DDA. Sri K. Madhav Reddy, learned counsel appearing for the two sons of Tejwant Singh and Surinder Kaur [Prabhjot Singh and Prabhjit Singh], submitted that the businesses of the sons are independent and distinct from their parents and that none of the monies received by their parents from the aforesaid purchasers has been diverted to them or to the companies of which they are directors. In fact, the case of the third respondent, Prabhjot Singh, is that he has separated from his father and that the company, Technological Park (P.) Limited, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all the monies due to the persons defrauded by the said contemners. The issues arising from the contentions of the parties are considered hereinafter topic-wise. The nature and ambit of this court's power under article 142 of the Constitution. Article 142(1) of the Constitution of India reads : "142. Enforcement of decrees and orders of the Supreme Court and orders as to discovery, etc. (1) The Supreme Court in the exercise of its jurisdiction may pass such decree or make such order as is necessary for doing complete justice in any cause or matter pending before it, and any decree so passed or order so made shall be enforceable throughout the territory of India in such manner as may be prescribed by or under any law made by Parliament and, until provision in that behalf is so made, in such manner as the President may by order prescribe." In Vinay Chandra Mishra, In re [1995] 2 SCC 584, this court dealt with the scope and width of the power of this court under article 142. After referring to the earlier decisions of the court in extenso, it is held that "statutory provisions cannot override the constitutional provisions and article 142(1) being a constitutional powe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the amount received by the DDA towards sale consideration from Skipper or the value of the construction raised by Skipper on the said plot should be made available for paying out the persons defrauded by Skipper. We must treat those decisions and orders as final and yet devise ways and means of doing complete justice between the parties before us. "The contemner should not be allowed to enjoy or retain the fruits of his contempt" : The principle that a contemner ought not to be permitted to enjoy and/or keep the fruits of his contempt is well-settled. In Mohd. Idris v. R. J. Babuji [1985] 1 SCR 598, this court held clearly that undergoing the punishment for contempt does not mean that the court is not entitled to give appropriate directions for remedying and rectifying the things done in violation of its orders. The petitioners therein had given an undertaking to the Bombay High Court. They acted in breach of it. A learned single judge held them guilty of contempt and imposed a sentence of one month's imprisonment. In addition thereto, the learned single judge made appropriate directions to remedy the breach of undertaking. It was contended before this court that le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the holding of the meeting was a legal one. It put back the parties in the same position as they stood immediately prior to the service of the interim order. In Sujit Pal v. Prabir Kumar Sun, AIR 1986 Cal 220, a Division Bench of the Calcutta High Court has taken the same view. There, the defendant forcibly dispossessed the plaintiff in violation of the order of injunction and took possession of the property. The court directed the restoration of possession to the plaintiff with the aid of the police. The court observed that no technicality can prevent the court from doing justice in exercise of its inherent powers. It held that the object of rule 2A of Order 39 will be fulfilled only where such mandatory direction is given for restoration of possession to the aggrieved party. This was necessary, it observed, to prevent the abuse of the process of law. There is no doubt that this salutary rule has to be applied and given effect to by this court, if necessary, by overruling any procedural or other technical objections. Article 129 is a constitutional power and when exercised in tandem with article 142, all such objections should give away. The court must ensure full jus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orporation the business is precisely the same as it was before and the same persons are managers and the same hands receive the profits, the company is not in law the agent of the subscribers or trustee for them. Nor are the subscribers as members liable, in any shape or form, except to the extent and in the manner provided by the Act". Since then, however, the courts have come to recognise several exceptions to the said rule. While it is not necessary to refer to all of them, the one relevant to us is "when the corporate personality is being blatantly used as a cloak for fraud or improper conduct ( Gower: Principles of Modern Company Law, 4th edition, 1979 at page 137. Pennington's Company Law, 5th edition 1985, at page 53, also states that "where the protection of public interests is of paramount importance, or where the company has been formed to evade obligations imposed by the law", the court will disregard the corporate veil. A professor of law, S. Ottolenghi, in his article From Peeping Behind the Corporate Veil, to Ignoring it Completely says "the concept of 'piercing the veil' in the United States is much more developed than in the U.K. The motto, which was laid down ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0) : "Gower has classified seven categories of cases where the veil of a corporate body has been lifted. But it would not be possible to evolve a rational, consistent and inflexible principle which can be invoked in determining the question as to whether the veil of the corporation should be lifted or not. Broadly stated, where fraud is intended to be prevented, or trading with an enemy is sought to be defeated, the veil of a corporation is lifted by judicial decisions and the shareholders are held to be the persons who actually work for the corporation." In DHN Food Distributors Ltd. v. London Borough of Tower Hamlets [1976] 3 All ER 462, 467, the Court of Appeal dealt with a group of companies. Lord Denning quoted with approval the statement in Gower's Company Law that "there is evidence of a general tendency to ignore the separate legal entities of various companies within a group, and to look instead at the economic entity of the whole group". The learned Master of Rolls observed that "this group is virtually the same as a partnership in which all the three companies are partners". He called it a case of "three-in-one" and, alternatively, as "one-in-three". The conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... monies, acquired properties in New Zealand, two of which were held in the name of himself and his wife and the third in the name of his solicitor. He was found guilty of the offence of bribe-taking and sentenced by a criminal court. The administration of Hong Kong claimed that the said properties in New Zealand were held by the owners thereof as constructive trustees for the Crown and must be made over to the Crown. The Privy Council upheld this claim overruling the New Zealand Court of Appeals. Lord Templeman, delivering the opinion of the Judicial Committee, based his conclusion on the simple ground that any benefit obtained by a fiduciary through a breach of duty belongs in equity to the beneficiary. It is held that a gift accepted by a person in a fiduciary position as an incentive for his breach of duty constituted a bribe and, although in law it belonged to the fiduciary, in equity he not only became a debtor for the amount of the bribe to the person to whom the duty was owed but he also held the bribe and any property acquired therewith on constructive trust for that person. It is held further that if the value of the property representing the bribe depreciated the fiduciary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a fiduciary . . . Bribery is an evil practice which threatens the foundations of any civilised society . . . Where bribes are accepted by a trustee, servant, agent or other fiduciary, loss and damage are caused to the beneficiaries, master or principal whose interests have been betrayed . . . When a bribe is offered and accepted in money or in kind, the money or property constituting the bribe belongs in law to the recipient. Money paid to the false fiduciary belongs to him. The legal estate in freehold property conveyed to the false fiduciary by way of bribe vests in him. Equity, however, which acts in personam, insists that it is unconscionable for a fiduciary to obtain and retain a benefit in breach of duty. The provider of a bribe cannot recover it because he committed a criminal offence when he paid the bribe. The false fiduciary who received-the bribe in breach of duty must pay and account for the bribe to the person to whom that duty was owed. In the present case, as soon as Mr. Reid received a bribe in breach of the duties he owed to the Government of Hong Kong, he became a debtor in equity to the Crown for the amount of that bribe ... As soon as the bribe was received, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ession of the plot to Skipper without receiving the full consideration and also in conniving at the construction thereon) has reported that several top officials of the DDA have indeed connived at and acted hand in glove with Skipper to confer illegitimate gain upon the latter. On the basis of the said report, disciplinary enquiries have been ordered against certain officials which are now pending. For the reason that the enquiries are pending, we desist from referring to the findings of the Commission except to broadly mention its conclusion. We are of the opinion that the holding in Attorney-General for India v. Amratlal Prajivandas [1994] 5 SCC 54 ; [1995] 83 Comp. Cas. 804 (SC) and Attorney-General for Hong Kong v. Reid [1993] 3 WLR 1143 (PC) should guide us while exercising the extraordinary powers of this court under article 142 of the Constitution. The absence of a statutory provision will not inhibit this court while acting under the said article from making appropriate orders for doing complete justice between the parties*. The fiduciary relationship may not exist in the present case nor is it a case of a holder of public office, yet if tit is found that someon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntent, it may not be just and fair to bind the DDA with such mala fide acts and deeds. Be that as it may, it is not necessary for the purpose of this case to pursue this line of enquiry further or to express any definite opinion thereon. What are the directions called for in this matter ? In the light of the factual and legal position adumbrated hereinabove, the question arises what are the appropriate directions to be made in the matter ? In other words, the question is what directions and orders are called for by this court acting under its contempt jurisdiction under article 129 and its extraordinary jurisdiction under article 142 to do complete justice between the parties before us ? On the one hand, the position is that the pre-January 29, 1991, purchasers have to be reimbursed in full which means that they should also be paid interest at the appropriate rate on the amounts advanced by them to Skipper. (They have only been paid the principal amount in the sum of Rs. 13,27,37,561.59 pursuant to the report of the Justice Lahoti Commission). Secondly, the post-January 29, 1991, purchasers have also to be reimbursed in full. According to Skipper, the amounts collected from t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f his family and must be available to satisfy the claims of the persons defrauded by him ; ( c ) that while acting under article 142 of the Constitution, this court must do complete justice between the parties and for that purpose, it is necessary to ensure that a person who has defrauded a large number of persons by issuing advertisements in the leading newspapers published from the capital inviting people to come and purchase space in the said building in open and brazen violation of clear and specific orders of this court should not be allowed to benefit from his fraud and/or contemptuous acts. Accordingly, it is directed that : (1)the property at No. 3, Aurangzeb Road, New Delhi, shall be attached, if not already attached and if it has already been attached, it shall continue to be under attachment ; (2)the Embassy of Israel in India, New Delhi, the lessee of the said property, is requested to deposit the monthly rent payable in respect of the said building in this court with effect from the date of receipt of a copy of this order and continue to deposit the same until further orders. Such deposit in court shall discharge the Embassy of its obligation to pay rent to "Mapl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sons in the upper strata (which means the rich and the influential class of the society) have made a "property career" the sole aim of their life. The means have become irrelevant in a land where its greatest son born in this century said "means are more important than the ends". A sense of bravado prevails ; everything can be managed ; every authority and every institution can be managed. All it takes is to. "tackle" or "manage" it in an appropriate manner. They have developed an utter disregard for law-nay, a contempt for it ; the feeling that law is meant for lesser mortals and not for them. The courts in the country have been trying to combat this trend, with some success as recent events show. But how many matters can we handle. How many more of such matters are still there ? The real question is how to swing the polity into action, a polity which has become indolent and soft in its vitals ? Can the courts alone do it ? Even so, to what extent, in the prevailing state of affairs ? Not that we wish to launch upon a diatribe against anyone in particular but judges of this court are also permitted, we presume, to ask in anguish, "what have we made of our country in less than fift ..... X X X X Extracts X X X X X X X X Extracts X X X X
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