Supreme Court directs Mittal Group to fulfill obligations in land dispute case: Ashish Seth vs. Sumit Mittal (24 April 2020)

Date of the Judgment: 24 April 2020
Citation: Not Available
Judges: Ashok Bhushan, J., M. R. Shah, J.
Can a party to a settlement agreement, which has become a court order, selectively comply with terms that benefit them while ignoring their obligations? The Supreme Court of India recently addressed this question in a contempt case arising from a land dispute. The Court found that one party, the Mittal Group, had not fulfilled its obligations under a settlement agreement that was made an order of the Court. The bench, comprising Justices Ashok Bhushan and M.R. Shah, directed the Mittal Group to comply with the terms of the agreement within two months, or face contempt proceedings.

Case Background

The case involves a dispute between two groups, the Seth Group and the Mittal Group, who were partners in a joint venture company called Triveni Ferrous Infrastructure Private Limited (TFIPL). TFIPL acquired land in Faridabad, Haryana, with the intention of developing it. The two groups later agreed to develop the land separately. The Seth Group was given development rights for 14.8 acres of land in Sector 89, while the Mittal Group retained the rest.

Disputes arose between the two groups regarding payment of liabilities, leading to various litigations, including Writ Petition (Criminal) No. 5/2015 and Writ Petition (Criminal) No. 11/2015 in the Supreme Court of India. The matter was referred to mediation, and a Memorandum of Settlement (MOS) was executed on May 4, 2015, between the Seth Group, Mittal Group, and TFIPL. This MOS was made part of the Supreme Court order on May 5, 2015, disposing of the writ petitions.

The MOS outlined reciprocal obligations for both groups. The Seth Group was required to make certain payments, secure bank guarantees, and transfer shares, while the Mittal Group and TFIPL were required to issue board resolutions, grant a power of attorney, facilitate bifurcation of licenses, and renew licenses.

Timeline

Course of Proceedings

The Seth Group filed Contempt Petition (C) No. 34/2016, alleging that the Mittal Group had failed to comply with their obligations under the MOS and the Supreme Court order. The Mittal Group also filed two separate contempt petitions, Contempt Petition (C) No. 257/2016 and Contempt Petition (C) No. 889/2017, against the Seth Group, alleging non-compliance with the MOS.

Legal Framework

The core of the legal framework in this case is the Memorandum of Settlement (MOS) dated May 4, 2015, which was made part of the Supreme Court order dated May 5, 2015. The MOS outlined the specific obligations of each party, including financial commitments, license renewals, and transfer of rights.

Clause 12 of the MOS states:

It is hereby confirmed that other than the payment of the EDC amount required to be made under Clause 1.2.1 and under Clause 3.8 above, Seth Group shall not be liable for any other EDC payment under License Nos. 34, 35 and 36 of 2007 either on renewal and/or upon bifurcation of License Nos. 34, 35 and 36 of 2007, except to the extent of Rs.25,27,92,000/- together with interest accrued thereon from 24.03.2015, imposed by DTCP, Haryana. It is further clarified that the liability to pay EDC of Seth Group in a sum of Rs.25,27,92,000/- against the total EDC liability of Rs.59.05 crores as on 24.03.2015, shall not be varied subject, however, to the condition that in the event of the total liability, which has been assessed at Rs.59.05 crores as on 23.04.2015, being revised from Rs.59.05 crores, to any higher amount as on 24.03.2015, on account of revised calculation or similar reason. In such eventuality, the Seth Group will bear the proportionate increase in regard to the amount in excess of Rs.59.05 crores.

Clauses 17, 18, and 19 of the MOS deal with the renewal of licenses:

17. Mittal Group shall apply for renewal of license by 23.06.2015 subject to compliance of clause 1.2 (to the extent of providing Bank Guarantee), 1.3 & 1.4 by the Seth Group. The Seth Group have provided documents/undertakings with respect to the lands falling to share of the Seth Group under Agreement dated 15.06.2007, i.e. (i) Status of construction/allotment of EWS Flats, and (ii) Service Plan status, its drawing, estimates and its approval from HUDA, Chandigarh annexed as Annexure-16, to enable Mittal Group to apply for renewal of license. Seth Group does not have any further document in this regard, however, it is clarified that in case any indemnity, undertaking, letter and/or similar document is required to be executed after filing of the application for renewal of license, pertaining to the lands falling in the share of Seth Group under Agreement dated 15.06.2007, Seth Group shall do the needful at the earliest if so requested by Mittal Group.

18. On application made for renewal of license in terms of clause 17, Mittal Group will secure renewal of license within 90 days. All administrative and miscellaneous charges, compounding fee, penalties and other charges levied and payable by PAL, ORS and Heritage for renewal of license shall be paid by the Mittal Group. All such charges in respect of FIPL agreement shall be exclusively paid/borne by Seth Group by similarly paying to TFIPL immediately on being demanded.

19. Seth Group shall pay a sum of Rs.25,00,000/- (Twenty Five Lacs only) to Mittal Group for hiring/engaging consultancy services for renewal of License Nos. 34, 35 & 36 of 2007 in favour of TFIPL at the time of filing of the application for renewal of license by the Mittal Group.

Clauses 36, 37, and 38 specify the consequences of breach of the MOS:

36. In the event of any default by Seth Group of their obligations and warranties, the Mittal Group and TFIPL will be entitled to initiate legal proceeding for enforcing performance of the obligations/warranties given by Seth Group, including initiation of contempt proceedings against the Seth Group in accordance with law.

37. In case there is a default in payment as agreed in Clause Nos. 1.1, 1.3 & 1.4 of furnishing of all requisite Bank Guarantees as required in terms of clause 1.2 by the Seth Group, the Mittal Group and TFIPL will also be entitled to approach the Hon’ble Supreme Court for revival of the complaints/FIRs stated at serial Nos. (b) & (c) of the list of cases mentioned in the preamble above. Provided however, on Mittal Group and TFIPL obtaining performance of the obligations, the revised criminal proceedings and contempt proceedings, if any, shall be terminated.

38. In the event of any default by Mittal Group of their obligations and warranties, the Seth Group will be entitled to initiate legal proceeding for enforcing performance of the obligations/warranties given by the Mittal Group, including initiation of contempt proceedings against the Mittal Group in accordance with law.

Arguments

The Seth Group argued that they had fulfilled their obligations under the MOS, including making a payment of Rs. 9.40 crores towards their share of the External Development Charges (EDC) liability and providing a bank guarantee of Rs. 6.65 crores. They contended that the Mittal Group had failed to fulfill their obligations, specifically:

• Not passing board resolutions to allow the Seth Group to avail benefits under the EDC relief policy.
• Not issuing a General Power of Attorney (GPA) to the Seth Group to enable them to apply for occupancy and completion certificates.
• Not taking steps to bifurcate the licenses for the land, which would allow the Seth Group to develop their portion of the land separately.
• Not renewing the licenses for the entire land.

The Seth Group submitted that these failures were deliberate and willful, preventing them from completing their project and handing over possession to flat owners. They also argued that the Mittal Group’s non-compliance had rendered the entire settlement ineffective. The Seth Group sought directions from the Court to compel the Mittal Group to fulfill their obligations.

The Mittal Group, on the other hand, argued that they had not committed any breach of the MOS. They contended that the Seth Group had defaulted in their payments and that the issues raised by the Seth Group had been addressed by the Real Estate Regulatory Authority (RERA), Haryana. The Mittal Group claimed that they had issued a board resolution and were ready to execute the GPA, but the Seth Group did not come forward to register it. They also stated that they had applied for renewal of the license but were unable to get it renewed due to the Seth Group’s failure to pay their share of the EDC.

The Mittal Group further argued that they were not obligated to pay the entire EDC liability and that the liability should be borne by TIDCO, another entity involved in the land development. They also claimed that the Seth Group was trying to avoid their obligations and that the contempt petition was a ploy to cover up their own failures.

The innovativeness of the argument from the Seth Group was that they highlighted how the Mittal Group’s non-compliance was not just a breach of contract but also a violation of a court order, thereby attracting contempt proceedings. The Mittal Group’s argument tried to shift the blame by highlighting the Seth Group’s alleged defaults and the RERA order, but it failed to address their own specific obligations under the MOS.

Issues Framed by the Supreme Court

The Supreme Court did not explicitly frame issues in a separate section. However, the primary issue before the Court was whether the Mittal Group had deliberately and willfully failed to comply with the terms of the Memorandum of Settlement (MOS) dated 04.05.2015, which was made part of the court order dated 05.05.2015, thereby warranting action under the Contempt of Courts Act.

The sub-issues that the court dealt with were:
✓ Whether the Mittal Group had failed to fulfill its obligations regarding the payment of the External Development Charges (EDC).
✓ Whether the Mittal Group had failed to issue the General Power of Attorney (GPA) to the Seth Group.
✓ Whether the Mittal Group had failed to take steps to bifurcate the licenses for the land.
✓ Whether the Mittal Group had failed to renew the licenses for the entire land.

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues:

Authorities

The judgment does not explicitly mention any cases or books that were relied upon by the court. The primary authority in this case is the Memorandum of Settlement (MOS) dated 04.05.2015 itself, which was made part of the Supreme Court order dated 05.05.2015. The court’s decision is based on the interpretation and application of the terms of the MOS.

The legal provisions considered by the court were the clauses of the MOS, specifically:

• Clause 12: Regarding the EDC liability of the Seth Group.
• Clauses 17, 18, and 19: Regarding the renewal of licenses.
• Clauses 36, 37, and 38: Regarding the consequences of breach of the MOS.

The court considered the obligations of the parties as detailed in the MOS and the order of the Supreme Court, and held that the Mittal Group had failed to comply with those obligations.

Judgment

The Supreme Court held that the Mittal Group had deliberately and willfully failed to fulfill its obligations under the MOS and the order of the Court. The Court found that the Seth Group had largely complied with their obligations, except for the full payment of Rs. 25.27 crores towards the EDC liability, which was contingent on the Mittal Group fulfilling their obligations.

The Court directed the Mittal Group to:

• Pay the entire EDC liability of TFIPL, with interest, excluding the share of the EDC liability that the Seth Group had undertaken to pay as per Clause 1.2 of the MOS.
• Renew the licenses for the land (Nos. 34, 35, and 36 of 2007).
• Execute a General Power of Attorney (GPA) in favor of the Seth Group.
• Pass a Board Resolution for availing benefits under the EDC Relief Policy.
• Issue a No Objection Certificate (NOC) without any conditions to the Seth Group.

The Court also directed the Department of Town and Country Planning (DTCP) to bifurcate the Seth Group’s portion of the land in accordance with law and policy. The Court observed that the parties could avail the benefit of the applicable EDC Relief Policy.

The Court gave the Mittal Group two months to comply with these directions, failing which, the Court would proceed to pass appropriate orders under the Contempt of Courts Act. The contempt petitions filed by the Mittal Group against the Seth Group were dismissed.

How each authority was viewed by the Court?

The primary authority in this case was the Memorandum of Settlement (MOS) dated 04.05.2015, which the Court treated as a binding agreement and an order of the Court. The Court emphasized that all parties were bound to comply with its terms. The Court interpreted the clauses of the MOS to determine the obligations of each party and concluded that the Mittal Group had failed to fulfill its obligations.

What weighed in the mind of the Court?

The Court’s decision was heavily influenced by the fact that the Memorandum of Settlement (MOS) was not just a contract between the parties but had also become an order of the Supreme Court. The Court emphasized that all parties were bound to comply with the terms of the settlement in its true spirit. The Court was particularly concerned that the Mittal Group had not only failed to fulfill their obligations but had also tried to shift the blame and avoid their responsibilities.

The Court noted that the entire object and purpose of entering into the settlement was to resolve all the disputes between the parties. Therefore, it was the duty of the Court to ensure that the settlement was given effect to in its letter and spirit. The Court also observed that one party could not be permitted to selectively comply with the terms of the settlement that benefited them while ignoring their obligations.

The Court’s decision was also influenced by the fact that the non-compliance by the Mittal Group had prevented the Seth Group from completing their project and handing over possession to flat owners. The Court recognized that the Mittal Group’s actions had rendered the entire settlement ineffective and had led to the parting of huge sums of money by the Seth Group without having the desired effect.

“Fact:Law” Ratio

The Court’s reasoning was based on a combination of factual findings (the Mittal Group’s non-compliance) and legal principles (the binding nature of a court order and the obligations arising from a settlement agreement).

Logical Reasoning

The Court considered the Mittal Group’s arguments that they were not liable for the entire EDC and that the Seth Group had also defaulted. However, the Court rejected these arguments, finding that the Mittal Group had failed to fulfill their specific obligations under the MOS, which was a court order. The Court also noted that the Seth Group’s failure to make the full payment of Rs. 25.27 crores was contingent on the Mittal Group fulfilling their obligations.

The decision was reached by interpreting the terms of the MOS and applying them to the facts of the case. The Court emphasized the binding nature of the settlement and the need for all parties to comply with their obligations.

The Court’s decision was unanimous, with both Justices Ashok Bhushan and M.R. Shah concurring in the judgment. There were no dissenting opinions.

The Court’s decision has significant implications for future cases involving settlement agreements that are made part of court orders. It reinforces the principle that such agreements are binding on all parties and that non-compliance can lead to contempt proceedings. The decision also highlights the importance of fulfilling all obligations under a settlement agreement, not just those that are beneficial to one party.

The judgment did not introduce any new doctrines or legal principles but reaffirmed the existing legal framework regarding the binding nature of court orders and the consequences of non-compliance.

Key Takeaways

• Settlement agreements that are made part of a court order are binding on all parties.
• Non-compliance with the terms of such agreements can lead to contempt proceedings.
• Parties must fulfill all their obligations under a settlement agreement, not just those that are beneficial to them.
• Courts will will ensure that settlement agreements are given effect to in their letter and spirit.
• Parties cannot selectively comply with the terms of a settlement agreement.
• The Court’s decision emphasized that the settlement was not merely a contract between the parties but also an order of the Court, and therefore, it had to be enforced.
• The Court’s decision was aimed at ensuring that the Seth Group was able to complete their project and hand over possession to the flat owners, and that the Mittal Group could not unjustly benefit from their non-compliance.