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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 ..... ipper 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, proceedings were taken for canceling the bid. Skipper went to court and on May 29, 1982, obtained stay of cancellation*. The DDA applied for vacating the stay. Nothing happened but the usual adjournments. Skipper was simultaneously making representations to the DDA to give it further time. In January, 1983, the DDA constituted a committee to consider the request of Skipper and other similar requests and to devise a formula for ensuring timely payments by such purchasers. The committee reported that cancellation of bids in such matters usually land the DDA in protracted litigation and suggested that to enable them to pay the monies due to the DDA, the purchasers be given permission to commence development/construction on the plot [though possession as such be not delivered] subject to the condition that the property in the land would remain with the DDA unti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 was provided that in default of such payment, the licence [revised agreement dated August 11, 1987] would stand determined and the DDA would be entitled to re-enter the plot. Reasons for the order were given on January 14, 1991. Skipper d failed to deposit the amount as per the direction of the High Court. It approached this court by way of Special Leave Petition (C) No. 196 of 1991. On January 29, 1991, this court granted an interim order subject to Skipper depositing Rs. 2.5 crores within one month and another sum of Rs. 2.5 crores before April 8, 19t91. Skipper was expressly prohibited from inducting any person in the building and from creating any rights in favour of third parties. In spite of the said prohibitory orders from this court, Skipper issued an advertisement on February 4, 1991, in the leading newspapers of Delhi inviting persons to purc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er 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 months and to pay a fine of Rs. 50,000 (rupees fifty thousand only). We further sentence contemner-respondent No. 2, Surinder Kaur, to undergo simple imprisonment for a period of one month and to pay a fine of Rs. 50,000 (rupees fifty thousand only). In default of payment of fine, the contemners shall further undergo simple imprisonment for one month. The payment of fine shall be made within one month from today. All the properties and the bank accounts standing in the names of the contemners and the directors of Skipper Construction Co. (Pvt.) Ltd. and their wives, sons and unmarried daughters will stand attached." At that stage, Sri G. Ramaswamy, learned counsel appearing for the contemners, requested for deferment of the sentence of imprisonment subject to conditions indicated by Inm. On the basis of the said offer, this court deferred the sentence of imprisonment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rchaser. 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 who purchased the space before January 29, 1991, and the persons who purchased the space thereafter. The first concern of this court was to reimburse the persons who purchased space in the said building prior to January 29, 1991. Their claims were said to be in the region of Rs. 14 crores. Accordingly, this court directed the DDA to set apart a sum of rupees sixteen crores [out of the said amount of rupees seventy crores] and to make it available to such purchasers in accordance with the orders of this court. This court also requested Justice R. S. Lahoti of the Delhi High Court to act as a one-man Commission to prepare a list of persons who had paid the amounts prior to January 29, 1991, and to determine the amount paid by each of them. After an elaborate enquiry, the Justice Lahoti Commission submitted a report dated February 2, 1996, according to which a sum of Rs. 13,27,37,561 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 of attachment of the properties of Tejwant Singh and his wife and children was an order independent from the order of punishment imposing sentence of imprisonment and that the attachment was meant for realising amounts necessary for reimbursing the persons defrauded. The attached properties should now be sold and the proceeds therefrom utilised for paying the post-January 29, 1991, claimants, it is submitted. Sri Arun Jaitley further submitted that the claim of the pre-January 29,1991, purchasers for interest on the amounts paid by them is still there and has to be kept in mind while passing orders in these applications. It is submitted that the contemners should not be allowed to keep or enjoy the fruits of their contempt and that until all the persons defrauded by Skipper are fully re-compensated, the contemners' liability does not cease. S/Sri Harish Salve and Rajeev Dhavan, appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, at Noida [of which he and his wife are directors] has nothing to do with the funds or activities of their parents. The fourth respondent, Prabhjit Singh, also submitted that he and his wife are the directors of Tej Properties Private Limited, of which his parents were directors earlier but that the affairs of Tej Properties are in no way connected with the affairs and funds of his parents. He is a director of Tej Properties as well as Skipper Properties Private Limited. The DDA has filed a list of properties held by Tejwant Singh, his wife, Surinder Kaur, and their sons and daughters which according to them really belong to and are the properties of Tejwant Singh and his wife. They submitted that the various companies created by Tejwant Singh, his wife and his children are merely fronts and devices to defraud and defeat the claims of the purchasers and that for doing complete justice be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 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 power it cannot be limited or conditioned by any statutory provision" (para. 48). It is also held that "the jurisdiction and powers of this court under article 142 are supplementary in nature and are provided to do complete justice in any matter . . .". In other words, the power under article 142 is meant to supplement the existing legal framework-to do complete justice between the parties-and not to supplant it. It is conceived to meet situations which cannot be effectively and appropriately tackled by the existing provisions of law. As a matter of fact, we think it advisable to leave this power undefined and uncatalogued so that it remains elastic enough to be moulded to suit the given situation. The very fact that this power is conferred only upon this court, and on no one else, is itself an assurance that it will be used with due restraint and circumspection, keeping in view the ultimate object of doi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 learned judge was not justified in giving the aforesaid directions in addition to punishing the petitioners for contempt of court. The argument was rejected holding that "the single judge was quite right in giving appropriate directions to close the breach (of undertaking)". The above principle has been applied even in the case of violation of orders of injunction issued by civil courts. In Clarke v. Chadburn [1985] 1 All ER 211 (Ch. D), Sir Robert Megarry V. C. observed (page 213) : "I need not cite authority for the proposition that it is of high importance that orders of the court should be obeyed. Wilful disobedience to an order of the court is punishable as a contempt of court, and I feel no doubt that such disobedience may properly be described as being illegal. If by such disobedience the persons enjoined claim that they have validly effected some change in the rights and liabilities of others, I cannot see ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 justice between the parties before it. Claims of Prabhjot Singh and Prabhjit Singh ( sons of Tejwant Singh) : Prabhjot Singh Sabharwal, third respondent, stated in his counter-affidavit filed in Interlocutory Application No. 29 of 1996 that he is in no way concerned with the several-companies pointed out by the DDA (as belonging to Tejwant Singh and members of his family) and that he is interested only in one company, Technological Park Private Limited, NOIDA. He stated that he and his wife are the directors of this company and that it does not deal in any manner with the Delhi Development Authority. He stated that his parents are in no way concerned with Technological Park Private Limited. He stated "I have separated from my father and I have no dealings with the Delhi Development Authority". It is significant to notice that this respondent does not say when was he separated from his father, whether the said "separation" is evidenced by writ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lenghi, 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 by Sanborn J. and cited since then as the law, is that 'when the notion of legal entity is used to defeat public convenience, justify wrong, protect fraud, or defend crime, the law will regard the corporation as an association of persons. The same can be seen in various European jurisdictions". ([1990] 53 Modern Law Review 338). Indeed, as far back as 1912, another American Professor, L. Maurice Wormser, examined the American decisions on the subject in a brilliantly written article Piercing the Veil of Corporate Entity [published in [1912] XII Columbia Law Review 496] and summarised their central holding in the following words : "The various classes of cases where the concept of corporate entity should be ignored and the veil drawn aside have now been briefly reviewed. What general rule, if any, can be laid down ? The nearest approximation to generalisation which the present state of the authorities would warrant is this : When the conception of corporate entity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olls 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 concept of corporate entity was evolved to encourage and promote trade and commerce but not to commit illegalities or to defraud people. Where, therefore, the corporate character is employed for the purpose of committing illegality or for defrauding others, the court would ignore the corporate character and will look at the reality behind the corporate veil so as to enable it to pass appropriate orders to do justice between the parties concerned. The fact that Tejwant Singh and members of his family have created several corporate bodies does not prevent this court from treating all of them as one entity belonging to and controlled by Tejwant Singh and family if it is found that these corporate bodies are merely cloaks behind which lurks Tejwant Singh and/or members of his family and that the device of incorporation was really a ploy adopted for committing illegalities and/or to defraud people. The concept of resulting trust and equity : In Attorney-General for India v. Amratlal Praji ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 had to pay to the injured person the difference between that value and the initial amount of the bribe, and if the property increased in value the fiduciary was not entitled to retain the excess since equity would not allow him to make any profit from his breach of duty. Accordingly, it is held that to the extent that they represented bribes received by the first respondent, the New Zealand properties were held in trust for the Crown, and the Crown had an equitable interest therein. The learned Law Lord observed further that if the theory of constructive trust is not applied and properties interdicted when available, the properties 'can be sold and the proceeds whisked away to some Shangri La which hides bribes and other corrupt moneys in numbered bank accounts' -to which we are tempted to add-one can understand the immorality of the bankers who maintained numbered accounts but it is difficult to understand the amorality of the Governments and their laws which sanction such practices-in effect enc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ach 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, whether in cash or in kind, the false fiduciary held the bribe on a constructive trust for the person injured ... If the property representing the bribe exceeds the original bribe in value, the fiduciary cannot retain the benefit of the increase in value which he obtained solely as a result of his breach of duty . . . When a bribe is accepted by a fiduciary in breach of his duty then he holds that bribe in trust for the person to whom the duty was owed. If the property representing the bribe decreases in value the fiduciary must pay the difference between that value and the initial amount of the bribe because he should not have accepted the bribe or inpurred the risk of loss. If the property increases in value, the fiduciary is hot entitled to any surplus in excess of the initial value of the bribe because he is not allowed by any means to make a profit out of a breach of duty." We respectfully agree with each and every statement contained in the above extract. May we say in parenthesis that a law providing for forf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 someone has acquired properties by defrauding the people and if it is found that the persons defrauded should be restored to the position in which they would have been but for the said fraud, the court can make all necessary orders. This is what equity means and in India the courts are not only courts of law but also courts of equity. DDA's responsibility to reimburse the purchasers : S/Sri Bobde and Dave, learned counsel for the purchasers, contended that inasmuch as several top officials of the DDA had colluded with Skipper and connived at their wrongdoing, the DDA must be held equally liable to reimburse the purchasers. Indeed, their submission is that the DDA stood by and took no action whatsoever while Skipper was issuing repeated advertisements (even after January 29, 1991, in open and brazen defiance of this court's orders) and, therefore, it must be made equally liable to reimburse the said purchasers in full. We find it difficult to agree. Firstly, the said contention is not factually correct. As has been pointed out hereinabove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ission). Secondly, the post-January 29, 1991, purchasers have also to be reimbursed in full. According to Skipper, the amounts collected from the post-January 29, 1991, purchasers are in the region of rupees eleven crores. Counsel for the petitioners, however, say that some of them are bogus purchasers set up by Skipper itself to defeat genuine claims. As against these claims, only an amount of about Rs. 6 crores is now available which is kept in fixed deposits in nationalised banks. The balance has to be realised. In our opinion, as at present advised, it would be enough for the above purpose if we proceed against one property, viz., No. 3, Aurangzeb Road, New Delhi, which appears to us, on the facts and material placed before us, to belong wholly and exclusively to Tejwant Singh and his wife. We ignore the corporate veil and we ignore the fact that at present their son, Prabhjit Singh, and his wife are the directors. (We have already held that Prabhjit Singh has not explained in his affidavit how he and his wife became directors in place of his parents.) Tej Properties Private Ltd., which is said to own the said property, was initially having only two directors, viz., Tejwant Sin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deposit the same until further orders. Such deposit in court shall discharge the Embassy of its obligation to pay rent to "Maple Leaf", its landlord. (3)Tejwant Singh and his wife, Surinder Kaur, are directed to deposit in this court a sum of Rs. 10 crores within two months from today. In default, steps will be taken to sell the property at No. 3, Aurangzeb Road, New Delhi, by inviting tenders from the public. The said amount of Rs. 10 crores is tentatively arrived at as the amount required to reimburse the pre-January 29, 1991 purchasers in full, as explained herein- above, and also to reimburse the post-January 29, 1991 purchasers in full. (This shall not be treated as the final figure required in this behalf). While fixing this amount, we have taken into account the fact that about Rs. 6 crores is now available with this court as stated supra ; (4)the attachment of properties belonging to Tejwant Singh, his wife and children, already effected, including the properties mentioned in the application, I. A. No. 29 of 1996, filed by the DDA shall continue to be in force pending further orders. It is, however, open to any of them to come forward with a proposal to sell any of those ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dges of this court are also permitted, we presume, to ask in anguish, "what have we made of our country in less than fifty years" ? Where has the respect and regard for law gone ? And who is responsible for it ? On this occasion, we must refer to the mechanical manner in which some of the courts have been granting interim orders-injunctions and stay orders without realising the harm such mechanical orders cause to the other side and in some cases to public interest. It is no answer to say "let us make the order and if the other side is aggrieved, let it come and apply for vacating it". With respect, this is not a correct attitude. Before making the order, the court must be satisfied that it is a case which calls for such an order. This obligation cannot be jettisoned and the onus placed upon the respondents/defendants to apply for vacating it. Take this very case : a person purchases a property in auction. He does not pay as per the stipulated terms. He obtains a series of extensions. Still he doesn't deposit and when the vendor proposes to cancel the allotment, the court is approached and it stays the cancellation. The vendor (DDA) applies for vacating it but nothing happens exce ..... X X X X Extracts X X X X X X X X Extracts X X X X
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