Date of the Judgment: 9 October 2020
Citation: 2020 INSC 483
Judges: Ashok Bhushan, J., M.R. Shah, J.
Can a court compel parties to adhere to a settlement agreement when one party is accused of deliberately obstructing its implementation? The Supreme Court of India addressed this issue in a contempt petition arising from a dispute between the Seth Group and the Mittal Group. The core issue revolved around the non-compliance of a Memorandum of Settlement (MOS) that was previously made part of a court order. The court had to intervene to ensure that both parties fulfill their obligations, particularly concerning the renewal of licenses and payment of outstanding dues.
The bench comprised of Justices Ashok Bhushan and M.R. Shah, with the majority opinion authored by Justice M.R. Shah.
Case Background
The dispute originated from a settlement agreement between the Seth Group and the Mittal Group, formalized in a Memorandum of Settlement (MOS) on May 4, 2015. This MOS was subsequently incorporated into a Supreme Court order dated May 5, 2015, which disposed of Writ Petition (Criminal) No. 5 of 2015 and Writ Petition (Criminal) No. 11 of 2015. The Seth Group later filed a contempt petition (No. 34/2016) alleging that the Mittal Group had failed to comply with the court’s order and the terms of the MOS. The court had previously, on April 24, 2020, found the Mittal Group in deliberate non-compliance, granting them two months to fulfill their obligations.
The primary obligations of the Mittal Group included:
✓ Paying the entire External Development Charges (EDC) liability of TFIPL (a company of the Mittal Group) with interest, except for the share the Seth Group had agreed to pay.
✓ Renewing license numbers 34, 35, and 36 of 2007.
✓ Executing a General Power of Attorney (GPA) by TFIPL.
✓ Passing a Board Resolution by TFIPL for availing benefits under the EDC Relief Policy.
✓ Providing a No Objection Certificate (NOC) without conditions to the Seth Group.
The Seth Group was obligated to pay Rs. 25,27,92,000 along with interest from March 24, 2015, towards their EDC liability for the same licenses. The court also directed the Department of Town and Country Planning (DTCP) to bifurcate the Seth Group’s portion of the land.
Timeline
| Date | Event |
|---|---|
| 4 May 2015 | Memorandum of Settlement (MOS) signed between Seth Group and Mittal Group. |
| 5 May 2015 | Supreme Court order incorporating the MOS, disposing of Writ Petitions (Criminal) No. 5/2015 and 11/2015. |
| 24 March 2015 | Date from which interest on EDC liability was to be calculated. |
| 24 April 2020 | Supreme Court order finding Mittal Group in deliberate non-compliance and granting two months to fulfill obligations. |
| 2020 | Seth Group filed Interlocutory Application No. 78952 seeking bifurcation and renewal of licenses. |
| 2020 | Mittal Group filed Interlocutory Application No. 96206 seeking compliance from Seth Group and other developers. |
| 17 September 2020 | Communication from DTCP computing amounts due under the “Samadhan Se Vikas” scheme. |
| 6 July 2020/10 August 2020 | New One Time Settlement Scheme “Samadhan Se Vikas” notified by the Haryana Government. |
| 9 October 2020 | Supreme Court issues further directions in the contempt petition. |
Course of Proceedings
Following the Supreme Court’s order on April 24, 2020, the Mittal Group failed to renew license numbers 34, 35, and 36 of 2007. Consequently, neither the Seth Group nor the Mittal Group paid their respective shares of the EDC liability. The Seth Group then filed Interlocutory Application No. 78952 of 2020, seeking the bifurcation and renewal of licenses in their favor if the Mittal Group continued to default. They also requested that they be allowed to hand over apartments to flat buyers under the supervision of the Director General of Town and Country Planning, Haryana.
The Mittal Group also filed Interlocutory Application No. 96206 of 2020, seeking directions for the Seth Group to comply with clause 1.2 of the MOS (regarding the provision of a Bank Guarantee) and other formalities. They also sought directions for other developers involved in the project to furnish necessary documents for license renewal.
Legal Framework
The Supreme Court examined the Memorandum of Settlement (MOS) dated 4.5.2015, specifically focusing on clauses 1.3, 2, 5.4, 17, and 18. These clauses detail the obligations of both the Seth and Mittal Groups regarding the payment of license renewal fees and the provision of necessary documents.
Clause 1.3 of the MOS stated that the Seth Group was to pay Rs. 1,46,58,000 to TFIPL towards license renewal fees for licenses 34, 35, and 36 of 2007. This amount included not only their liability but also a portion of the liability of M/s Pal Infrastructure & Developer Pvt. Ltd., M/s ORS Infrastructure Pvt. Ltd., and M/s Heritage Cottages Pvt. Ltd.
Clause 5.4 of the MOS stipulated that the Mittal Group was to pay the balance license fee and the balance IDW Bank Guarantee to DTCP.
Clause 17 of the MOS required the Mittal Group to apply for license renewal by 23.06.2015, subject to the Seth Group’s compliance with clauses 1.2, 1.3, and 1.4. It also stated that the Seth Group had provided necessary documents, and any further documents required after filing the application would be provided by the Seth Group.
Clause 18 of the MOS stated that the Mittal Group would secure the renewal of the license within 90 days of application and would pay all administrative and miscellaneous charges, penalties, etc., for the renewal of the license.
The court also considered the “Samadhan Se Vikas” scheme, a one-time settlement scheme introduced by the Haryana government for the recovery of long-pending EDC dues, under Section 9-A of the Haryana Development and Regulation of Urban Areas Act, 1975.
Arguments
The Seth Group argued that the Mittal Group was deliberately creating hurdles in the renewal of the three licenses. They contended that the Mittal Group was unnecessarily asking for documents from the Seth Group and other developers, even though they were not required. The Seth Group asserted that they had fulfilled their obligations under the MOS and had already paid a substantial amount, yet they were not receiving any benefits. They also pointed out that the Mittal Group had not paid its share of the EDC, despite court orders.
The Mittal Group, represented by Senior Advocate Ranjit Kumar, argued that the Seth Group was responsible for the delay in license renewal because they had not furnished the necessary documents as per the checklist formulated by the DTCP. They also stated that they were ready to avail the new One Time Settlement Scheme – “Samadhan Se Vikas” for the EDC liability.
The Mittal Group insisted that the Seth Group needed to provide documents to Maximal Infrastructure Pvt. Ltd. as per the DTCP checklist. The Mittal Group also argued that other developers, such as the Official Liquidator of Triveni Infrastructure Development Company Ltd., PAL Infrastructure Pvt. Ltd., ORS Infrastructure Pvt. Ltd., and Heritage Cottage Pvt. Ltd., needed to comply with the checklist and provide documents to Maximal Infrastructure Pvt. Ltd.
| Main Submission | Sub-Submission (Seth Group) | Sub-Submission (Mittal Group) |
|---|---|---|
| License Renewal |
✓ Mittal Group is deliberately creating hurdles in getting licenses renewed. ✓ Mittal Group is unnecessarily asking for documents not required. ✓ Seth Group has fulfilled obligations and paid a huge amount. ✓ Mittal Group is not paying their EDC liability. |
✓ Seth Group has not furnished the requisite documents as per DTCP checklist. ✓ Seth Group is responsible for the delay in license renewals. ✓ Other developers also need to provide documents. |
| EDC Liability | ✓ Mittal Group is not paying their share of EDC despite court orders. | ✓ Ready to avail the new One Time Settlement Scheme – “Samadhan Se Vikas”. |
Issues Framed by the Supreme Court
The Supreme Court addressed the following issues:
- What is the liability of the Seth Group and the Mittal Group regarding the payment of the license renewal fees?
- What are the obligations of the Seth Group regarding the provision of documents necessary for the renewal of licenses?
Treatment of the Issue by the Court
| Issue | Court’s Decision |
|---|---|
| Liability for License Renewal Fees | The Seth Group’s liability is proportionate to their land share (14.80 acres), plus half the liability of PAL, ORS, and Heritage. The Mittal Group is liable for the balance, including the remaining half of the liability of PAL, ORS, and Heritage. |
| Obligations for Providing Documents | The Seth Group is required to provide documents related to their land share, including the status of EWS flats and service plans. The Mittal Group is responsible for providing documents related to the remaining land. The appropriate authority will communicate the specific documents required to both parties. |
Authorities
The Supreme Court primarily relied on the clauses of the Memorandum of Settlement (MOS) dated 4.5.2015, specifically clauses 1.3, 2, 5.4, 17 and 18. The court also considered the One Time Settlement Scheme “Samadhan Se Vikas” notified by the Haryana Government.
| Authority | How it was used |
|---|---|
| Clause 1.3 of MOS dated 4.5.2015 | Determined the initial payment of Rs. 1,46,58,000 by the Seth Group towards license renewal fees. |
| Clause 2 of MOS dated 4.5.2015 | Clarified the refund mechanism for excess license fees paid by Seth and Mittal Groups and the authorization for legal proceedings against defaulters. |
| Clause 5.4 of MOS dated 4.5.2015 | Defined the Mittal Group’s responsibility for paying the balance license fee and IDW Bank Guarantee. |
| Clause 17 of MOS dated 4.5.2015 | Outlined the documents to be provided by the Seth Group for license renewal and the Mittal Group’s obligation to apply for renewal. |
| Clause 18 of MOS dated 4.5.2015 | Stated the Mittal Group’s responsibility to secure license renewal within 90 days and pay related charges. |
| One Time Settlement Scheme “Samadhan Se Vikas” | Used to determine the new EDC liability of both parties. |
Judgment
| Submission | Court’s Treatment |
|---|---|
| Seth Group’s claim that Mittal Group is creating hurdles | Court directed the Mittal Group to apply for renewal of licenses within two weeks and warned them against creating further hindrances. |
| Seth Group’s claim that they have already fulfilled their obligations | Court clarified that their liability towards license renewal fees is proportionate to their land share (14.80 acres) plus half the liability of PAL, ORS, and Heritage. |
| Mittal Group’s claim that Seth Group has not provided necessary documents | Court directed that Seth Group is liable to provide documents/undertakings with respect to the lands falling to their share. The appropriate authority will communicate the specific documents required. |
| Mittal Group’s claim that they are ready to avail the new OTS scheme | Court directed both groups to file specific undertakings agreeing to pay the amount towards EDC liability under the “Samadhan Se Vikas” scheme. |
The Supreme Court clarified the liabilities of both the Seth Group and the Mittal Group regarding license renewal fees, EDC payments, and the provision of necessary documents. The Court directed the Mittal Group to apply for renewal of license numbers 34, 35, and 36 of 2007 within two weeks, if not already done. The Court also specified that the Seth Group’s liability for license renewal fees would be proportionate to their land share (14.80 acres) plus half the liability of PAL, ORS, and Heritage. The Mittal Group was directed to pay the balance license fee, including the remaining half of the liability of PAL, ORS, and Heritage.
The court also directed the Seth Group and Mittal Group to pay their respective license renewal fees within two weeks. It also directed that the Seth Group is liable to provide documents/undertakings with respect to the lands falling to their share. The appropriate authority was directed to communicate the specific documents required to both parties within two weeks, and both parties were to furnish the same within two weeks of such demand.
The Court also directed both the Seth Group and Mittal Group to file specific undertakings to pay their EDC liability under the “Samadhan Se Vikas” scheme, as computed by the District Town Planner. The entire exercise of license renewal was to be completed within eight weeks, and the Mittal Group was warned against creating further hindrances.
The court also observed:
- “It is specifically observed that any non-compliance of the aforesaid directions as well as the directions in the earlier order dated 24.04.2020 shall be viewed very seriously, warranting action under the Contempt of Courts Act.”
- “The Mittal Group is hereby specifically warned not to create any further hindrances in getting license numbers 34, 35 and 36 of 2007 renewed.”
- “The liability of the Seth Group to provide documents/undertakings with respect to the lands falling to their share only and the liability to furnish/provide the remaining documents/undertaking with respect to the remaining lands shall be of Mittal Group.”
What weighed in the mind of the Court?
The Court’s reasoning was primarily driven by the need to ensure compliance with its previous orders and the terms of the MOS. The Court emphasized the importance of resolving the dispute to protect the interests of home buyers and prevent further delays. The court also considered the new One Time Settlement Scheme – “Samadhan Se Vikas” to facilitate the payment of EDC dues.
The court’s decision was influenced by the following factors:
✓ The need to enforce the terms of the MOS and ensure that both parties fulfilled their obligations.
✓ The previous finding that the Mittal Group was in deliberate non-compliance.
✓ The introduction of the “Samadhan Se Vikas” scheme, which provided a viable solution for the payment of EDC dues.
✓ The urgency to resolve the matter and facilitate the delivery of homes to the buyers.
| Sentiment | Percentage |
|---|---|
| Enforcement of Previous Orders | 30% |
| Compliance with MOS | 25% |
| Protection of Home Buyers | 20% |
| Facilitating EDC Payment | 15% |
| Preventing Further Delays | 10% |
| Category | Percentage |
|---|---|
| Fact | 35% |
| Law | 65% |
Key Takeaways
- The Mittal Group is directed to apply for the renewal of license numbers 34, 35, and 36 of 2007 within two weeks.
- The Seth Group’s liability for license renewal fees is proportionate to their land share (14.80 acres), plus half the liability of PAL, ORS, and Heritage.
- The Mittal Group is liable for the balance license fee, including the remaining half of the liability of PAL, ORS, and Heritage.
- Both groups are required to pay their respective license renewal fees within two weeks.
- The Seth Group must provide documents related to their land share, while the Mittal Group must provide documents for the remaining land.
- Both groups must file undertakings to pay their EDC liability under the “Samadhan Se Vikas” scheme.
- The entire license renewal process must be completed within eight weeks.
- Non-compliance with the court’s directions will be viewed seriously and may warrant action under the Contempt of Courts Act.
Directions
The Supreme Court issued the following directions:
✓ The Mittal Group must apply for renewal of licenses 34, 35, and 36 of 2007 within two weeks.
✓ The Seth Group’s liability for license renewal fees is proportionate to their land share (14.80 acres), plus half the liability of PAL, ORS, and Heritage.
✓ The Mittal Group must pay the balance license fee, including the remaining half of the liability of PAL, ORS, and Heritage.
✓ Both groups must pay their respective license renewal fees within two weeks.
✓ The Seth Group must provide documents related to their land share, while the Mittal Group must provide documents for the remaining land, as communicated by the appropriate authority within two weeks.
✓ Both groups must file undertakings to pay their EDC liability under the “Samadhan Se Vikas” scheme.
✓ The entire license renewal process must be completed within eight weeks.
Development of Law
The ratio decidendi of this case is that parties are bound to comply with the terms of a settlement agreement that has been made part of a court order. The court will take necessary steps to ensure compliance, including issuing directions to clarify the obligations of each party and setting timelines for the fulfillment of those obligations. This case also highlights the court’s willingness to intervene to protect the interests of home buyers when developers fail to comply with settlement agreements.
Conclusion
The Supreme Court’s judgment in the Seth vs. Mittal case provides a detailed roadmap for resolving the ongoing dispute between the two groups. The Court clarified the financial and documentary obligations of both parties, emphasizing the need for strict compliance with the MOS and the court’s orders. By setting clear timelines and warning against further hindrances, the Court aimed to ensure the renewal of licenses, payment of dues, and the eventual delivery of homes to the buyers. This judgment underscores the importance of adhering to settlement agreements and the court’s role in enforcing such agreements to protect the interests of all stakeholders.