Case Note & Summary
The dispute arose from a public auction of a plot of land by the Delhi Development Authority (DDA) in October 1980. Skipper Construction Company (P) Ltd. submitted the highest bid of Rs.9.82 crores, and under the auction conditions, 25% was payable immediately and the balance within ninety days. Skipper paid the initial deposit but failed to pay the balance, obtaining seven extensions from January 1981 to April 1982. After further default, DDA initiated cancellation proceedings, but Skipper obtained a stay from court on May 29, 1992. In January 1983, DDA constituted a committee which allowed commencement of construction on the plot without delivering possession, with the condition that ownership would remain with DDA until full payment and DDA could re-enter upon default. A revised agreement was executed only in 1987. Skipper began selling space in the proposed building even before permission and continued after permission. It defaulted on instalments and provided defective bank guarantees. In 1989, Skipper filed a writ petition seeking mandamus to sanction building plans or permit construction at its risk. The Delhi High Court on March 19, 1990 permitted construction subject to deposits; on December 21, 1990, the High Court directed Skipper to pay Rs.8,12,88,798 within thirty days and stop construction from January 9, 1991, failing which the licence would stand determined and DDA could re-enter. Skipper failed and approached the Supreme Court, which on January 29, 1991, passed an interim order requiring deposits of Rs.2.5 crores within one month and another Rs.2.5 crores before April 8, 1991, and expressly prohibited Skipper from inducting any person or creating third-party rights. Despite this, Skipper issued advertisements and collected substantial amounts. The Supreme Court dismissed the SLP on January 25, 1993, and DDA re-entered the plot on February 10, 1993, forfeiting amounts paid. Skipper then filed Suit No.770 of 1993 in the Delhi High Court seeking injunction against DDA and declaration that re-entry was illegal, and obtained interim stay of re-auction. DDA approached the Supreme Court via SLP (C) No.21000 of 1993. The Supreme Court initiated suo motu contempt proceedings against Tejwant Singh and Surinder Kaur, directors of Skipper, asking why they filed suit for the same subject matter already adjudicated and why they created third-party interests in defiance of the January 29, 1991 order. The Court found them guilty of contempt, invoking Article 129 read with Article 142, sentenced Tejwant Singh to six months simple imprisonment and fine of Rs.50,000, Surinder Kaur to one month simple imprisonment and fine of Rs.50,000, with default imprisonment, and attached all properties and bank accounts of the contemnors, directors, wives, sons, and unmarried daughters. On the contemnors' request, the sentence was deferred subject to furnishing a bank guarantee of Rs.11 crores by March 31, 1995 and depositing Rs.11 crores by November 30, 1995, among other conditions. The contemnors deposited only Rs.2 crores, failed to furnish the bank guarantee, and were committed to prison, serving their sentences. Meanwhile, DDA sold the plot with construction to M/s. Banganga Investments for Rs.70 crores with Supreme Court permission. The Court then addressed the claims of hundreds of purchasers defrauded by Skipper, distinguishing between those who paid before and after January 29, 1991. The Court directed DDA to set apart Rs.16 crores from the sale proceeds for pre-January 29, 1991 purchasers. Justice R.S. Lahoti, acting as one-man Commission, submitted a report dated February 2, 1996, finding that Rs.13,27,37,561.59 was paid by more than seven hundred persons. The Court directed that for the time being only principal amounts be paid to those purchasers, with balance and interest kept apart considering post-January 29, 1991 purchasers. The judgment reaffirmed the enforceability of public auction conditions, the validity of re-entry on default, the court's contempt jurisdiction under Articles 129 and 142, and the court's equitable power to reimburse victims of fraud from sale proceeds.
Headnote
A) Contempt of Court - Wilful Disobedience of Court Orders - Violation of Supreme Court's prohibitory order and filing suit despite adjudication - Article 129 read with Article 142, Constitution of India - Directors issued advertisements and sold space after order dated January 29, 1991 prohibiting induction of persons; also filed Suit No.770 of 1993 for same subject matter already adjudicated; Court invoked suo motu contempt, found guilty, sentenced imprisonment and fine, attached properties - Held that willful defiance of court orders constitutes contempt and warrants punitive and compensatory measures (Paras 1-20) B) Contract and Tender - Auction of Land by Public Authority - Default in payment and cancellation of bid - Delhi Development Authority auctioned plot, Skipper highest bidder at Rs.9.82 crores, failed to pay balance despite seven extensions; committee recommended allowing construction with land ownership remaining with DDA; revised agreement executed in 1987; Skipper defaulted on instalments and bank guarantees; High Court allowed DDA re-entry; Supreme Court upheld - Held that public authority entitled to enforce contract terms including re-entry upon default (Paras 1-20) C) Civil Procedure - Stay Orders and Interim Relief - Misuse of court process - Grant of stay of cancellation on May 29, 1992 despite lack of jurisdiction in ordinary sale/purchase case; Skipper continued to delay and sell space; Court criticized unjustified stay orders - Held that courts should not grant stay in ordinary property transactions where purchaser has defaulted, as it enables fraud (Paras 1-20) D) Restitution and Remedial Jurisdiction - Protection of Defrauded Purchasers - Reimbursement from sale proceeds - Court directed DDA to set apart Rs.16 crores from Rs.70 crores sale proceeds for purchasers before January 29, 1991; Justice Lahoti Commission determined Rs.13,27,37,561.59 paid by over 700 persons; Court directed payment of principal only, balance kept for later purchasers - Held that court can devise equitable distribution of attached and sale proceeds to compensate victims of fraud (Paras 1-20)
Issue of Consideration
Whether the directors of Skipper Construction committed contempt by violating Supreme Court orders dated January 29, 1991 and by filing suit; whether Delhi Development Authority was entitled to re-enter and forfeit amounts; and how to reimburse purchasers defrauded by the builder.
Final Decision
The Supreme Court found Tejwant Singh and Surinder Kaur guilty of contempt under Article 129 read with Article 142, sentenced them to simple imprisonment and fine, attached their properties and bank accounts, then deferred sentence subject to conditions of furnishing bank guarantee of Rs.11 crores by March 31, 1995 and depositing Rs.11 crores by November 30, 1995. The contemnors failed to comply, were committed to prison, and served their sentences. DDA sold the plot with construction to M/s. Banganga Investments for Rs.70 crores. The Court directed DDA to set apart Rs.16 crores for purchasers who paid before January 29, 1991, and after the Lahoti Commission report showing Rs.13,27,37,561.59 paid by over 700 persons, directed payment of principal only for the time being, with balance and interest kept apart considering post-January 29, 1991 purchasers.
Law Points
- Contempt jurisdiction under Article 129 and Article 142
- willful disobedience as contempt
- re-entry clause on default
- public auction conditions enforceable
- court's power to attach properties and impose conditional sentence
- reimbursement to defrauded purchasers from sale proceeds
- protection of third-party purchasers
- prohibition on creating third-party rights without title
