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2011 DIGILAW 410 (CAL)

Ashoka Ghose v. Debsons Ltd.

2011-03-22

SANJIB BANERJEE

body2011
JUDGMENT : SANJIB BANERJEE, J. The plaintiffs’ interlocutory application and a contempt petition are so inescapably connected that they have been taken up together; but separate orders are made. The suit as originally brought to this Court was for eviction on the grounds of default in payment of rent and alleged damage to the property. The plaint has long been amended to incorporate a further ground on account of alleged sub-letting. The plaintiffs’ principal grievance in their latest interlocutory application is of the defendant attempting to change the nature and character of the tenanted premises. The immediate purpose of the application is indicated in the last fifteen or so paragraphs of the petition. Though a part of the plaintiffs’ petition suggests construction work of a permanent nature being carried out at the demised premises by the defendant without notice to the plaintiffs, the application was meant to be somewhat of a shot in the dark angling for bigger things. The contempt petition has been subsequently filed on the charge of violation of interlocutory orders passed in the suit. During the pendency of both matters, a special officer has visited the premises pursuant to an order made on December 24, 2010 on GA No. 2301 of 2010. Though the dispute centres on the commercial exploitation of the property, it is now tinged with the special animosity that landlords and tenants bear against each other; so much so that the rival parties have stood their ground and yielded no quarter despite the Courts prodding. The relationship between the two sets of parties has soured for reasons that may be systemic and beyond the parties. The suit is some thirty-three years young and is a commentary on the institutional delay that plagues the judicial system. At the time that the suit was instituted, the West Bengal Premises Tenancy Act, 1956 – the solitary piece of legislation that landlords in this State have inexorably despised – was in place and the law was heavily loaded in favour of tenants irrespective of the nature of the property or the station or financial prowess of the tenant. The 1997 Act which has replaced the 1956 statute has somewhat balanced the scales. The plaintiffs here have filed repeated interlocutory applications almost as if to vent their angst at the sufferance of their lot. The 1997 Act which has replaced the 1956 statute has somewhat balanced the scales. The plaintiffs here have filed repeated interlocutory applications almost as if to vent their angst at the sufferance of their lot. The defendant feels harassed that it has been subjected to unending intrusions without the plaintiffs showing any inclination to proceed to trial in what the defendant perceives to be an unmeritorious claim. On the other hand, the plaintiffs appear to be outraged at the defendant taking advantage of a law not intended to protect the defendant’s ilk but according uniform succour to all tenants. The first twenty-three paragraphs of the petition relating to the interlocutory application detail the myriad interim attempts made by the plaintiff to cause discomfort to the defendant and the steadfastness of the defendant to continue in its ways undeterred by the restraints put on it by Court. Of the several orders that subsist in the plaintiffs’ favour, the one made on September 16, 2003 is of real significance in the present context. It is necessary that a substantial part of the order is seen in its exact words: “As regards the question with respect to the injunction. The relationship between the parties being landlord and tenant and the ground of subletting having been introduced petitioner in my view is entitled to protection during the pendency of the suit against induction of any other persons in the suit premises in the occupation of the defendant. In the affidavit-in-opposition in paragraph 12 and 16 it has been stated that BPL Limited, Skypack, HCL Stores, Sansui, Whirlpool are Distributors ands/or franchising agents of the respondents. Whether the said contention is correct or whether the case of subletting without prior permission of landlord has been made out is not one which can be adjudicated in the present application. That is a matter of adjudication in the suit. The tenant cannot without consent of landlord induct persons or sub-tenants is well settled. To that extent petitioner is entitled to protection without deciding the question as to whether the aforesaid persons are sub-tenants or franchising agents of the respondent tenant. That is a matter of adjudication in the suit. The tenant cannot without consent of landlord induct persons or sub-tenants is well settled. To that extent petitioner is entitled to protection without deciding the question as to whether the aforesaid persons are sub-tenants or franchising agents of the respondent tenant. Accordingly there shall be an injunction restraining the respondent tenant from inducting any other person, firm or company or putting such persons into possession either as sub-tenants or as franchises or agents except those specifically named in paragraphs 12 and 16 of the affidavit-in-opposition until disposal of the suit. The application accordingly stands disposed of.” The plaintiffs filed GA No. 3695 of 2006 with the prayer for a special officer to inspect the tenanted premises and an injunction restraining the defendant from transferring or otherwise alienating the property. This was based on the allegations that a fast-food counter and sundry other business ventures appeared to have been started at the suit premises as several signboards had sprung up thereat. During the pendency of such application, the plaintiffs brought GA No. 3856 of 2007 for similar orders as in the previous application with some additional requests based on events subsequent to the filing of the previous application. Late in 2007 the plaintiffs brought contempt proceedings complaining of the violation of the order dated September 16, 2003. GA No. 3695 of 2006 and GA No. 3856 of 2007 were disposed of on February 18, 2008 by appointing a special officer to ascertain if the defendant was in exclusive possession of the entirety of the suit premises and to find out whether any construction had been attempted to be carried out by the defendant to change the nature or character of the property. The special officer prepared his report on March 10, 2008 where he recorded that men and agents of the defendant were on the ground floor and on the first floor there were name plates of two other companies and a part thereof was used as a service centre for an electronic goods company. As to the construction carried out at the premises, the special officer reported that there was considerable construction, including the erection of new walls on the ground floor. The flooring of the ground floor was found to have been changed. As to the construction carried out at the premises, the special officer reported that there was considerable construction, including the erection of new walls on the ground floor. The flooring of the ground floor was found to have been changed. Marble tiles had been fitted to a part of one of the walls and washbasins had been installed. The earlier contempt petition was disposed of on May 2, 2008 by holding that to the extent the defendant had permitted two other companies to use the suit premises or parts thereof as their registered office, the defendant was in breach of the order of September 16, 2003. The order dated May 2, 2008 recorded that the defendant had undertaken “to forthwith remove the suit premises as the registered office of Rasika Impex Pvt. Ltd and Loknath Commercial Pvt. Ltd and has given a further undertaking that the order of September 16, 2003 would be strictly adhered to.” The petition in the interlocutory application says that on July 6, 2010 the plaintiffs discovered that the defendant was carrying on “illegal and unauthorized construction on the ground floor of the suit premises” and without the plaintiffs’ permission. The plaintiffs immediately issued a letter demanding inspection of the suit premises. Several allegations have been made that the defendant has demolished certain load-bearing walls on the ground floor, altered the floor tiles and removed the plaster from the walls and the existing plumbing line. The plaintiffs have alleged that there is a board displaying the name of a business entity by the name of Arjun which, according to them, was a sub-tenant operating from the suit premises. Later in the petition, the plaintiffs have complained that the premises lay vacant and not in occupation or use of the defendant. The application was filed on July 15, 2010. In its affidavit to such application, the defendant has denied having acted in derogation of the subsisting orders or having sub-let the premises or attempted to change the nature or character thereof by making any substantial construction thereat. The defendant has claimed that the defendant erected “light partitions” which were necessary to make the premises suitable for the defendant carrying on business thereat, but has denied causing any damage to the premises. The defendant has claimed that the defendant erected “light partitions” which were necessary to make the premises suitable for the defendant carrying on business thereat, but has denied causing any damage to the premises. The defendant has alleged to have asked the landlord to appoint a chartered engineer to inspect the premises and render an opinion as to whether any damage was caused thereat by the defendant. The defendant has insisted that all it did was to repair some broken tiles and carry out regular maintenance work. The defendant has denied having sub-let the premises or having collected any premium or rent in respect thereof. At paragraph 24 of its affidavit, the defendant has claimed, inter alia, as follows; “24. …The respondent has never acted in contumacious disregard of any Order passed by the Hon’ble Court. The respondent has never sub-let or transferred or parted with possession of the suit property or any portion thereof. The respondent neither has nor intends to continue (sic) sub-let or part with possession or induct others at the suit property or create any third party interest in the suit property. However, the respondent intends to carry on business from the suit premises. The petitioners are well aware that the suit premises were let out for commercial purposes and cannot now complain if the respondent is using the same for commercial purposes.” On the present interlocutory application, an ad interim order was made on July 22, 2010 restraining the defendant from carrying out construction of any nature at the premises. The order specified that no construction may be made even on the ruse that it was necessary for the purpose of the defendant’s occupation of the premises. A special officer was appointed for making surprise inspections of the premises without notice to the parties. The special officer paid a visit on August 4, 2010 when he found a banner at the main gate to the premises announcing that an electronics showroom was to open thereat within a short time. He found that a substantial portion of the ground floor had been renovated but it was represented on behalf of the defendant that further renovation work had not been carried out in view of the Court order. He found that a substantial portion of the ground floor had been renovated but it was represented on behalf of the defendant that further renovation work had not been carried out in view of the Court order. On December 24, 2010 the present interlocutory application was taken up and, by then, CC No. 213 of 2010 had been filed by the plaintiffs complaining of a showroom in the name of “Capital Electronics” having been started at the suit premises. Accordingly, the special officer appointed by the order dated July 22, 2010 was directed to visit the premises and seal any part of the premises not being actually used by the defendant. The special officer was given permission to seal the premises if it appeared to the special officer that a third party or another entity had been permitted by the defendant to use the premises. The matter was mentioned on December 24, 2010 at the time of the rising of the Court on the defendant’s representation that the premises had been sealed by the special officer. It was also submitted on behalf of the defendant that “the defendant was operating a unit by the name of Capital Electronics at the premises.” On such mentioning, the defendant’s offer to make a deposit of Rs.5 lakh in the name of the special officer was accepted and the special officer was directed, immediately after receipt of the payment, to undo the sealing of the premises. It transpires that the special officer had not sealed the premises by the time the matter was mentioned in Court, but nothing turns on such aspect since this special officer may have sealed the premises thereafter if the later order of December 24, 2010 had not been made. The special officer has filed a report. Affidavits have been filed on behalf of the alleged contemnors in the contempt proceedings. The alleged contemnors are the manager of the defendant, a director of the defendant who claims to be the managing director and the defendant company. The interlocutory application and the contempt petition were taken up and heard analogously on March 14, 2011. Affidavits have been filed on behalf of the alleged contemnors in the contempt proceedings. The alleged contemnors are the manager of the defendant, a director of the defendant who claims to be the managing director and the defendant company. The interlocutory application and the contempt petition were taken up and heard analogously on March 14, 2011. Submission on behalf of the parties was concluded on both matters but the Court sought the convenience of the first two alleged contemnors to present themselves to be heard on the sentence on the prima facie view being expressed on March 14, 2011 that the contemnors had wilfully and deliberately violated the subsisting orders, particularly the orders dated September 16, 2003 and May 2, 2008. The hearing in the two matters was not formally recorded to have been closed as it could not have been, at least in the contempt proceedings, where the two individual alleged contemnors were to be heard on the sentence that was to be made. It was noticed and observed that there was no challenge to the report filed by the special officer following the Christmas eve visit. In course of the hearing on the two matters, the affidavits filed on behalf of the alleged contemnors on January 24, 2011 were taken into account. The common affidavit of the managing director of the defendant and the defendant company in the contempt proceedings has relied on an agreement on June 15, 2010 between the defendant and one Anand & Co. Electronic Pvt. Ltd. A copy of such agreement has been appended to such affidavit. It is necessary that some of the clauses of such agreement of June 15, 2010, executed on behalf of the defendant by its managing director, are noticed: “1. That instead of 20% (Twenty percent) share as provided in the said Joint Venture Agreement DEBSONS have agreed to and doth hereby accept to become entitled to 2% (Two percent) share in the said Joint Venture Business at the consideration hereinafter mentioned and the remaining 98% (Ninety eight percent) share in the said Joint Venture Business shall belong to the COMPANY. 2. That in lieu of the 18% (Eighteen percent) share of DEBSONS in the said JOINT VENTURE BUSINESS the said DEBSONS doth hereby and by the receipt hereunder written admit and acknowledge to have this day received from the COMPANY a lump sum amount of Rs. 2. That in lieu of the 18% (Eighteen percent) share of DEBSONS in the said JOINT VENTURE BUSINESS the said DEBSONS doth hereby and by the receipt hereunder written admit and acknowledge to have this day received from the COMPANY a lump sum amount of Rs. 10,00,000/- (Rupees ten lacs) only towards part satisfaction of the consideration payable by the COMPANY to DEBSONS in lieu of the aforesaid 18% (Eighteen percent) share in the said premises. 3. That the said COMPANY shall also pay to DEBSONS towards further payment of consideration a sum of Rs. 2,50,000/- (Rupees Two Lac fifty thousand) only, monthly and every month according to English Calendar month during the course of the said Joint Venture Business as and by way of guaranteed amount. 4. That such payment of the monthly amount of Rs. 2,50,000/- (Rupees Two Lac fifty thousand) only shall be made by the COMPANY to DEBSONS irrespective of my profit and loss in the said business and shall be paid within the 7th day of each and every English Calendar Month following the month for which the same is payable. 5. That the payment of monthly guaranteed amount shall be effective from 15th June, 2010 and shall be continue during the period under the said Joint Venture Agreement and all renewals thereof with an increase of 15% every five years. 6. That DEBSONS upon being satisfied towards payment of the consideration in the manner hereinabove mentioned both hereby release relinquish and forever discharge itself from the said 18% (Eighteen percent) share in the said Joint Venture Business unto and in favour of the COMPANY freed and discharged from all or any claim right or interest therein thereby enabling the COMPANY to hold 98% (Ninety eight percent) share in the said Joint Venture Business absolutely and the remaining 2% (Two percent) share therein shall be held by DEBSONS absolutely. 7. That save and except the aforesaid consideration of Rs.10,00,000/- (Rupees Ten lacs) only and the monthly payment of the guaranteed amount of Rs. 2,50,000/-(Rupees Two Lac fifty thousand) only and subsequent increase by 15% every five years DEBSONS shall not have any claim against the COMPANY or against the said Joint Venture Business in any manner nor shall be entitled to the Accounts of the said Business.… “13. 2,50,000/-(Rupees Two Lac fifty thousand) only and subsequent increase by 15% every five years DEBSONS shall not have any claim against the COMPANY or against the said Joint Venture Business in any manner nor shall be entitled to the Accounts of the said Business.… “13. On the parties ceasing to continue with the joint venture for any reason whatsoever then and in that event Debsons shall not be entitled to carry on any business under the name and style of Capital Electronics and the company shall have no claim or right in the space provided by Debsons and shall forthwith quit vacate the said premises.” In the plaintiffs’ interlocutory application there are the twin charges of the defendant carrying out extensive construction at the suit premises to change the nature and character thereof; and, of the defendant having sub-let the premises. It is true that the petition relating to the present application does not refer to the Capital Electronics showroom having been opened at the suit premises or to the circumstances in which such business has commenced thereat. Nonetheless, the contempt petition has been filed during the pendency of the plaintiffs’ application and both matters were taken up together. It is evident from the agreement of June 15, 2010 that there was also a joint venture agreement of June 15, 2010 that had been entered into between the defendant and Anand & Co. Electronic Pvt. Ltd (hereinafter referred to as “Anand”). The joint venture agreement has not been disclosed. It is evident from the agreement of June 15, 2010 that there was also a joint venture agreement of June 15, 2010 that had been entered into between the defendant and Anand & Co. Electronic Pvt. Ltd (hereinafter referred to as “Anand”). The joint venture agreement has not been disclosed. The second recital to the other agreement of June 15, 2010 which has been disclosed records that the joint venture agreement (JVA) stipulated that the defendant would be entitled to 20% share in the net profits arising out of the joint venture business and the remaining share would be Anand’s. The third recital stipulates that “considering the volume of investment to be made by the company (Anand) towards the business and uncertainty in the profits to be derived” therefrom, the defendant had proposed to Anand that instead of the 20% share in the business the defendant was agreeable to have a fixed share of two per cent upon Anand paying to the defendant an amount of Rs.10 lakh simultaneously with the execution of such second agreement and upon Anand undertaking to pay the defendant a minimum guaranteed amount of Rs.2.5 lakh “monthly and every month according to English Calendar month commencing from the commencement of the said Joint Venture Business” subject to as specified in such agreement. The relevant clauses of the agreement have been extracted and speak more eloquently as to the transaction between the defendant and Anand than any inference that is attempted to be drawn therefrom. It is significant that a copy of such second agreement of June 15, 2010 was made over to the special officer in course of his visit on December 24, 2010. Nothing more is said of the special officer’s report pertaining to his visit to the suit premises on December 24, 2010. Whatever may be the impression that the Court may have, in a constitutional democracy that thrives on the rule of law, judicial discipline mandates that orders are founded on facts and reason and scarcely on any suspicion or impression. The special officer’s report following his visit on December 24, 2010 has not been referred to for a specific reason, though nothing therein can be so telling of the defendant’s conduct than what is contained in the second agreement of June 15, 2010. The special officer’s report following his visit on December 24, 2010 has not been referred to for a specific reason, though nothing therein can be so telling of the defendant’s conduct than what is contained in the second agreement of June 15, 2010. Following the Court enquiring of counsel then representing the defendant and the alleged contemnors on March 14, 2011 as to the convenience of the individual alleged contemnors to be present in Court to plead their case on possible sentencing, it was submitted that the matters be kept for March 21, 2011. In the cause list of March 21, 2011, there suddenly appeared an application by the defendant for challenging some report of the special officer. Directions have been issued for filing affidavits in such application. Since such application is to be considered at a later date, no part of the special officer’s report following his visit on December 24, 2011 has been based for the order that is proposed to be made either on the plaintiffs’ application or on the contempt petition. It must also be recorded with a note of regret that counsel appearing on March 21, 2011 for the defendant and the alleged contemnors attempted to make submission on the merits of either matter despite being reminded that submission on both matters was over but orders had not been made to afford the alleged contemnors an opportunity to submit on the sentence that should be passed. No submission has been made on such score and further argument on the merits of the two matters has not been permitted on March 21, 2011. It may also be recorded that long prior to the affidavits on behalf of the alleged contemnors in CC No. 213 of 2010 being filed, the special officer’s report following his visit of December 24, 2010 had been taken on record and copies thereof circulated. On behalf of the defendant and the alleged contemnors it has been submitted that in the copy of the second agreement of June 15, 2010 being made over to the special officer in course of his visit on December 24, 2010, it was evident that the defendant and persons associated with it had nothing to hide and that the transaction reflected in such agreement amounted to the defendant carrying on business at the suit premises; which was well within the parameters of the subsisting orders. It has been asserted on behalf of the defendant and the alleged contemnors that the order subsisting in the suit did not place any embargo on the defendant to associate with any other person or entity in course of the defendant carrying on business from the suit premises. The defendant and the alleged contemnors say that Anand is now a shareholder in the defendant and the entity by the name of Capital Electronics has been described in the municipal corporation trade licence as a unit of the defendant with its directors being Sharmistha Chaudhuri and Subir Majumdar. A copy of the document has been relied upon. The primary question that falls for consideration in the plaintiffs’ application is as to whether the discovery of the material prior to the final hearing therein but which is not reflected in the petition relating thereto would entitle the plaintiffs to any orders. The issue is as to whether the plaintiffs should be left free to carry a subsequent application to Court even if the alleged contemnors are found to have wilfully disobeyed a subsisting order or deliberately acted in breach of an undertaking given to Court. Such question has to be resolved before proceeding any further. For good or bad, the order dated September 16, 2003 has attained a level of interlocutory finality that, because of passage of time and subsequent orders being founded thereon, may not be dislodged by the defendant without citing exceptional circumstances. There is an undertaking contained in the order dated May 2, 2008 furnished on behalf of the defendant that the order dated September 16, 2003 would be strictly adhered to. Though such order was made in previous contempt proceedings and, strictly speaking, not in the suit, it cannot be said that such undertaking would have no impact on the subsequent conduct of the defendant especially if the grievance of the beneficiary of the order dated September 16, 2003 is that the defendant has acted in derogation thereof. A distinction needs to be drawn between conduct amounting to acting in derogation of a subsisting order and conduct amounting to contempt of such order. In the one case, it is immaterial as to whether the acts complained of are in wilful or deliberate disobedience of the subsisting order; for, an act in derogation of the order will still be void. In the one case, it is immaterial as to whether the acts complained of are in wilful or deliberate disobedience of the subsisting order; for, an act in derogation of the order will still be void. In the other case something more than a mere violation has to be established; the acts complained of have to be found to be in wilful disobedience of the order for the Court to proceed to deal with the contemnors. The question posed above is, at the end of the day, one that the Court has to be mindful of to avoid any harsh consequence to visit the party who has allegedly violated the subsisting order. Affidavits have been exchanged in the contempt proceedings before the final hearing of the plaintiffs’ interlocutory application has been taken up. If natural justice – that which requires a party to be afforded an opportunity to meet the case made against it – is the only rationale to the question posed, once the Court is satisfied that the defendant is not taken by surprise and has availed of a chance to defend itself, there may not be any irregularity, far less illegality, in considering the other material available at the final hearing of an interlocutory application. If, for instance, only a contempt petition is filed and a pending interlocutory application is decided partly on the basis of the contempt petition before any response of the alleged contemnors is received, it may be entirely different. But that is not the case here. The second agreement of June 15, 2010 is, stripped of the deliberate attempt to camouflage it, an arrangement under which the defendant has allowed another to use a part of the suit premises against an upfront premium and an assured monthly payment. In the defendant’s attempt to sugar-coat the transaction, there is an implicit acknowledgement of what the defendant was permitted to do and what it was not. There can be no doubt that the defendant and persons in control thereof, including the manager and managing director, were conscious of the purport and extent of the subsisting orders. In there being the two agreements on the same day, with the second undeniably overriding the first, there was – as the Hindi proverb goes – a set of teeth for the elephant to chew with and a tusk for display. In there being the two agreements on the same day, with the second undeniably overriding the first, there was – as the Hindi proverb goes – a set of teeth for the elephant to chew with and a tusk for display. For the present purpose, the plaintiffs’ suggestion that due to the suddenness of the special officer’s visit to the showroom on a busy afternoon, the agreement that recorded the real transaction slipped out in place of the second agreement that was meant to be handed over, is disregarded. But the fact that there were two agreements executed on the same day and only one of them has been produced – or has accidentally come to the fore – and the other has been held back, is more than enough to suggest that one of the documents reflects the apparent transaction and the other the real one. There was unmistakable mischief in the documents being devised the way they have been and the arrangement bears the trade mark signs of a Professor Moriarty at work. Much thought and scheming of a trained legal mind is evident; the kind that can design a fraudulent transaction by preying on the “benefit of doubt” rule. The second agreement of June 15, 2010 is an undiluted attempt to pull the wool over the Court’s eyes and cock a snook at it. Even while weighing the balance of convenience between the parties, the Court cannot allow itself to be toyed with it. The consideration now is no longer as to whether the facts as they have unfolded, without reference to previous orders, would warrant any injunction being made on the defendant. The more pertinent assessment is as to whether the defendant has inducted any person other than those specifically named in the order dated September 16, 2003 and whether it has acted in breach of the undertaking furnished to Court on May 2, 2008. Shorn of the niceties and the other distractions that the second agreement of June 15, 2010 carries, the defendant and those responsible for it are found to have unabashedly acted in derogation of the subsisting interlocutory orders and in breach of the undertaking furnished in the previous contempt proceedings which would render the transaction reflected in the second agreement of June 15, 2010 void. The consequence is that the business carried on at the suit premises under the name of Capital Electronics has to be immediately stopped and the ground floor sealed with liberty to the defendant to subsequently apply for specific leave to carry on business only directly and without any further subterfuge. The special officer is now appointed receiver over the suit premises and is directed to proceed at his earliest convenience upon receipt of an authenticated copy of this order to seal the ground floor at the suit premises. The special receiver will return the deposit of Rs. 5 lakh and the accretion thereto after deducting therefrom his initial remuneration of 3000 GM and making over a further amount of 3000 GM to the plaintiffs. GA No. 2301 of 2010 is disposed of with the receiver’s initial remuneration and the further amount to be paid to the plaintiffs reflecting the costs awarded against the defendant. Needless to say, that the present prima facie view should have no more impact at the trial than any other interlocutory order would. Urgent certified photocopies of this judgment, if applied for, be supplied to the parties subject to compliance with all requisite formalities. Later : The defendant seeks a stay of the operation of the order which is declined on account of its despicable conduct.