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Case Number

Notice of Motion No. 2405 of 2002 in Suit No. 4847 of 1995

Advocates

For Plaintiff: H.J Thakker instructed by Solomon and Co.
For Defendant Nos. 1 and 10: Sanjay Jain with Deepa Mani instructed by S.K Srivastava

Judges

D.G Karnik, J.

Acts

provisions of Order 39 Rule 11 (Maharashtra Amendment)
Order 39 Rule 11 of the Code of Civil Procedure.
Order 11 Rule 21 of the Code of Civil Procedure
provisions of Order 39 Rule 11
Order 11 Rule 21

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Smart Summary

Structured Summary of the Provided Opinion

Factual and Procedural Background

This motion was brought by the plaintiff seeking (a) an order striking off the defences of defendant Nos. 1 to 5 and defendant No. 10 for persistent breaches of Court orders (in particular the Division Bench order dated 2 April 1997) and of an undertaking executed by defendant No. 10 in her capacity as Director of defendant No. 1 (annexed as Exhibit‑G), and (b) detention of defendant Nos. 1 and 10 in civil prison for wilful disobedience.

The hearing recorded attendance by counsel for the plaintiff and for defendant Nos. 1 and 10; defendant Nos. 2 to 9 were not represented. Defendant Nos. 1 and 10 opposed the motion.

The Division Bench order dated 2 April 1997 (quoted in the opinion) required, among other things, that the appellant/defendant deposit Rs. 58,00,000 with the Receiver on or before 20 May 1997, pay Rs. 3,00,000 per month on or before the 10th of each month as royalty, execute an agency agreement, pay municipal taxes and other outgoings (through the Receiver), and that the Director of the company file an undertaking. Defendant No. 10 filed an undertaking repeating those commitments.

The opinion records that the defendant company did not pay the Rs. 58,00,000 by the specified date nor the monthly royalty payments; counsel for defendant Nos. 1 and 10 admitted breach of the Division Bench order and the undertaking.

Legal Issues Presented

Whether the defence of defendant Nos. 1 to 5 and defendant No. 10 should be struck off for breach of the Division Bench order dated 2 April 1997 and the undertaking given by defendant No. 10.
Whether defendant Nos. 1 and 10 should be detained in civil prison for wilfully disobeying the order and breaching the undertaking.
How Order 39 Rule 11 of the Code of Civil Procedure (Maharashtra Amendment) is to be interpreted and applied (i.e., whether its provisions are mandatory or directory) and what standard the Court should apply before striking out a defence for non‑compliance — specifically whether the conduct must be obstinate, contumacious or wilful in disregard of the Court's order.

Arguments of the Parties

Plaintiff's Arguments

The defendants (Nos. 1 to 5 and 10) have persistently breached the Court's orders, including the Division Bench order dated 2 April 1997, and the written undertaking given by defendant No. 10; accordingly their defences should be struck off.
The conduct of defendant Nos. 1 and 10 is contumacious and obnoxious, and prior observations of the Division Bench (including attempts by a director to interfere with the administration of justice) demonstrate reprehensible behaviour supporting the strike off and further punitive measures.
The plaintiff relied on prior Division Bench observations recorded in an order dated 29 October 2001 (Notice of Motion No. 2239 of 2000 in Appeal No. 324 of 1997) that described attempts by a director to interfere with a judge and other unfair conduct, to show the defendants' behaviour justified striking out the defence.

Defendant(s)' Arguments

The mere breach of a Court order or an undertaking would not by itself justify striking off the defence under Order 39 Rule 11 of the Code of Civil Procedure; the provision is directory rather than mandatory.
Reliance was placed on a Division Bench decision (Ramavatar Surajmal Modi v. Mulchand Surajmal Modi, 2004 (2) Mah.L.J. 1) holding that provisions of Order 39 Rule 11 (Maharashtra Amendment) are directory and that the Court should consider multiple factors before striking out a defence.
Reference was also made to Supreme Court authority on analogous provisions (Babbar Sewing Machine Company v. Trilok Nath Mahajan, (1978) 4 SCC 188 : AIR 1978 SC 1436 concerning Order 11 Rule 21) which indicates that dismissal or striking out should follow only where there is an obstinate or wilful attempt to disregard Court orders.
Defendants contended there were mitigating circumstances: the defendant company had handed over possession of the suit premises to the Receiver on 24 October 2001 and, on that basis, further penalty (such as striking off the defence) should not be imposed.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Ramavatar Surajmal Modi v. Mulchand Surajmal Modi, 2004 (2) Mah.L.J. 1 (Division Bench of this Court)	Interpreting Order 39 Rule 11 (Maharashtra Amendment) as directory rather than mandatory; enumerated factors to be considered before striking out defence for breach of order/undertaking.	The Court relied on this authority to accept that striking a defence is not automatic upon proof of breach and that the Court must apply a standard (considering factors) before striking out a defence.
Babbar Sewing Machine Company v. Trilok Nath Mahajan, (1978) 4 SCC 188 : AIR 1978 SC 1436	Discussing Order 11 Rule 21 — Court may dismiss suit or strike out defence for non‑compliance, but such a step should not be taken unless there has been obstinate or wilful disregard of the order.	The Court invoked the principle that striking out a defence should be confined to cases where the conduct is obstinate, contumacious or amounts to wilful disregard of court orders, applying that standard to the present facts.
Suresh Chandra Poddar v. Dhani Ram, (2002) 1 SCC 766 : AIR 2002 SC 439	Contempt jurisdiction and penal consequences: contempt powers should be used sparingly; object is to maintain the majesty of the Courts, not to punish every breach of order or undertaking.	The Court relied on this precedent in declining to impose detention in civil prison on defendant No. 10, finding that striking off the defence was an adequate remedy and that penal detention was not necessary.

Court's Reasoning and Analysis

The Court's analysis proceeded in the following steps (as stated in the opinion):

The basic facts were established and not disputed: the Division Bench order of 2 April 1997 and the corresponding undertaking required deposit of Rs. 58,00,000 by 20 May 1997 and monthly royalty payments of Rs. 3,00,000 by the 10th of each month; the defendant company did not make those payments and thus breached the order and the undertaking. Counsel for defendant Nos. 1 and 10 admitted the breach.
The Court considered the legal test for striking out a defence where there has been breach of a Court order or an undertaking. It noted authorities holding that provisions allowing striking out (Order 39 Rule 11 as amended in Maharashtra; analogous Order 11 Rule 21) are not to be applied mechanically and that the power should normally be exercised only where the conduct is obstinate, contumacious or amounts to a wilful attempt to disregard the Court's order.
Applying that standard, the Court examined the defendants' conduct in the present case. It considered prior orders and observations (including a Division Bench order dated 29 October 2001) that described attempts by a director to interfere with the administration of justice and other reprehensible behaviour. The Court reviewed the chronology and found that attempts were repeatedly made by defendant Nos. 1 and 10 to retain possession of the premises without payment from 1997 until October 2001, and that they gave up possession only when confronted by imminent forcible action by the Receiver.
On that factual matrix the Court concluded that the breach was not merely inadvertent or technical but amounted to wilful default and contumacious conduct — described as reprehensible and an attempt to play "hide and seek" with the Court — and thus met the high threshold required for striking out a defence.
However, with respect to the prayer for civil imprisonment of defendant No. 10, the Court applied the principle from Suresh Chandra Poddar that contempt and penal jurisdiction should be used sparingly. The Court concluded that striking off the defence would be a sufficient and proportionate sanction, and that further penal detention in civil prison was unnecessary.
Accordingly, the Court exercised its discretion to partly allow the plaintiff's motion by striking off the defences of defendant Nos. 1 to 5 and defendant No. 10, ordered the suit to be listed for ex parte hearing, granted liberty to the plaintiff to pursue separate proceedings for reliefs in prayer clause (d), and stayed operation of the order for three weeks at the request of counsel for defendant Nos. 1 and 10.

Holding and Implications

Holding:

The motion is partly allowed: the defence of defendant Nos. 1 to 5 and defendant No. 10 is struck off.

Implications and direct effects:

The suit is to be listed for ex parte hearing before the appropriate Bench (i.e., the plaintiff may seek adjudication in the absence of struck defendants' defences).
The plaintiff is granted liberty to initiate separate proceedings in respect of the reliefs mentioned in prayer clause (d) of the motion.
The Court declined to impose detention in civil prison on defendant No. 10, holding that striking off the defence was a sufficient penalty; the Court relied upon the principle that contempt jurisdiction is to be exercised sparingly.
Operation of the order is stayed for a period of three weeks at the defendants' request.
The opinion applies existing authorities on the appropriate threshold for striking a defence (i.e., proof of obstinate, contumacious or wilful disregard) but does not purport to establish a new legal precedent beyond applying those authorities to the facts of this case.

Notice of motion partly allowed.

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Feroze Homi Duggan v. Benzer Interiors Pvt. Ltd.

1. Heard the learned counsel for the plaintiff and defendant Nos. 1 and 10. None present for the defendant Nos. 2 to 9.

2. This motion is taken out by the plaintiff with a prayer that the defence of the defendant Nos. 1 to 5 and 10 to the suit be struck off on the ground that they have committed persistent breaches of the orders of this Court mentioned in prayer clause (a) of the motion and in particular the order of the Division Bench of this Court dated 2nd April, 1997 passed in Appeal Lodging No. 270 of 1997 and of the undertaking given by the defendant No. 10 in the capacity as a Director of the defendant No. 1, a copy of which is annexed at Exhibit-G to the affidavit in support of the motion. In addition, an order is also sought for detention of the defendant Nos. 1 and 10 in civil prison for wilfully disobeying the aforesaid orders and committing a breach of the undertaking mentioned above. The defendant Nos. 1 and 10 oppose the motion.

3. Since breach of the order dated 2nd April, 1997 is alleged it would be useful to quote below the order which reads thus:

1. Heard the learned Counsel for the parties. At their request the matter is taken up for final hearing.

2. It is agreed by the Appellant as under:—

i) That the appellant would pay royalty at the rate of Rs. 3.00 lakhs to the Court Receiver for the use and occupation of the suit premises. That the royalty of Rs. 3.00 lakhs will be paid regularly every month on or before 10th of each month.

ii) That the appellant would execute agency agreement with the Receiver within a period of 15 days from today.

iii) The appellants would file an undertaking before this Court to the effect that the remaining royalty amount of Rs. 58.00 lakhs for the period upto 31st March, 1997 would be paid on or before 20th May, 1997.

However, it is clarified that this payment or royalty to the Receiver would be without prejudice to the rights and contentions of the appellant that the appellant is tenant of the disputed premises.

iv) That the appellant would pay the Municipal taxes and other outgoings in respect of the disputed premises on the due dates.

v) That the payment of future Municipal Taxes and other outgoings would be made through the Court Receiver.

vi) That the Director of the appellant Company would file necessary undertaking before this Court on or before 5th April, 1997.

vii) If there is any default in payment of the royalty amount for a period of two months then it would be open to the Receiver to take possession of the property in question.

3. Affidavit filed by the Authorised Signatory of the appellant is kept on record. It is agreed that this Affidavit be treated as an undertaking.

4. Order in terms of the aforesaid statements. The Appeal is partly allowed to the aforesaid extent. The Notice of Motion taken out before the learned Single Judge would not survive and accordingly it stands disposed of. (Underlining supplied)

In pursuance of this order the defendant No. 10, in the capacity as a Director of defendant No. 1, filed an undertaking in the Court which reads thus:

1. Mrs. Sandhya P. Vakil, the Director of M/s Benzer Interiors Private Limited, appellant abovenamed state on solemn affirmation as under: — 1. I hereby annex the uncertified copy of Order dated 2-4-1997 passed by Hon'ble Appellate Bench presided by Hon'ble Chief Justice His Lordship Justice Shri M.B Shah and His Lordship Justice Shri Rebello and it is marked as “Exhibit-A”.

2. Pursuant to the said order dated 2-4-1997, on behalf of the appellant Company, I hereby give Undertaking as follows:—

a) Appellant shall pay the sum of Rs. 58 lakhs on or before 20th May, 1997 to the Court Receiver High Court, Bombay.

b) Appellant would pay Rs. 3,00,000/- per month to the Court Receiver High Court Bombay, for use and occupation of suit premises on or before 10th day of each month regularly.

c) Appellant would pay Municipal taxes and other outgoings in respect of the disputed premises through Court Receiver High Court, Bombay.

3. This Undertaking is given without prejudice to the rights and contentions of the appellant that the appellant is tenant of disputed premises.

Solemnly affirmed at Bombay this day of April, 1997

For Benzer Interiors Pvt. Ltd.

Mrs. Sandhya P. Vakil

Director

4. By the order dated 2nd April, 1997, which was passed by consent of the parties, the defendant No. 1 was required to deposit with the receiver the sum of Rs. 58,00,000/- on or before 20th May, 1997 and further to deposit Rs. 3,00,000/- p.m on or before 10th day of each month and also to pay municipal taxes and other outgoings. The defendant No. 1 did not pay the sum of Rs. 58,00,000/- on or before 20th May, 1997 nor did it pay Rs. 3,00,000/- per month as ordered by the Court and undertaken by it in the undertaking.

5. Learned counsel for the defendant Nos. 1 and 10 admits that the defendant No. 1 committed a breach of the order of Division Bench dated 2nd April, 1997 as also the undertaking mentioned above by not depositing Rs. 58,00,000/- within the time specified and also by not depositing the monthly instalments of royalty.

6. Learned counsel for the defendant however submits that mere breach of an order of the Court or breach of an undertaking to the Court would not by itself be a ground for striking out of the defence under Order 39 Rule 11 of the Code of Civil Procedure. He submits that provisions of Order 39 Rule 11 are directory and not mandatory and relies upon the decision of a Division Bench of this Court rendered in Ramavatar Surajmal Modi v. Mulchand Surajmal Modi, reported in 2004 (2) Mah.L.J 1. Therein, this Court has held that the provisions of Order 39 Rule 11 (Maharashtra Amendment) are directory and not mandatory. This Court has further held that since the provisions are directory, it would not be obligatory for the Court to strike out the defence in each and every case where there has been a breach of an order of the Court or breach of an undertaking given to the Court by the defendant. The Division Bench has enumerated the factors which need to be looked at by the Court while considering whether the defence of the defendant be struck of when the defendant is proved to have committed a breach of an order of the Court and/or an undertaking given to the Court. A reference may also be made to the decision of the Supreme Court reported in Babbar Sewing Machine Company v. Trilok Nath Mahajan, (1978) 4 SCC 188 : AIR 1978 SC 1436, wherein the Supreme Court has considered Order 11 Rule 21 of the Code of Civil Procedure which also permits the Court to dismiss a suit or strike out the defence for non compliance of the order for discovery. Therein, the Supreme Court held that an obstinate for striking out of the defence under Order 11 Rule 21 should not be made unless there has been on obstinate or wilful attempt to disregard the order of the Court. In my view, even where the breach of an order of the Court or breach of an undertaking is proved to have been committed by the defendant, the Court may strike out the defence of the defendant only if it is satisfied that the conduct of the defendant is obstinate and contumacious or amounts to wilful attempt to disregard the order of the Court.

7. Learned counsel for the plaintiff submits that the conduct of the defendant in the present case is not only contumacious but has even been obnoxious. He refers to and relies upon the observations made by the Division Bench of this Court in its order dated 29th October, 2001 in Notice of Motion No. 2239 of 2000 in Appeal No. 324 of 1997 arising out of this very suit. Therein, this Court observed:—

“At the outset we may observe that the respondent No. 8 - one of the directors of the appellants who had filed undertaking before this Court in the month of April, 1997 sought to interfere with the administration of justice by contacting one of us (Nishita Mhatre, J.) which was indeed very disturbing and amounted to contempt of the Court. We initially thought of initiating action of contempt against respondent No. 8 for having attempted to pollute the stream of justice but then on second thought persuaded ourselves that our expression of displeasure and our stern warning must have necessary effect on respondent No. 8 and she would not make any such attempt in future. (The appellant No. 1 and respondent No. 8 therein are respectively defendant Nos. 1 and 10 in this suit)” (underlining supplied)

The Division Bench also noted the other conduct of the defendant No. 10 herein, in the proceedings and observed in paragraph No. 4 of this order.

“A litigant cannot be permitted to play the game of hide and seek with the Court. If the argument of the learned senior counsel on behalf of appellants is accepted it would amount to giving premium to a litigant who was not honest with the Court in disclosing material facts in the affidavits and when it suited such litigant to permit him to somersault.” (underlining supplied)

8. The learned counsel for the defendants while admitting the past obnoxious conduct of the defendants 1 and 10 submits that there are mitigating circumstances. According to him, the defendant No. 1 having voluntarily handed over possession of the suit premises to the receiver on 24th October, 2001 should not be visited with further penalty of striking of the defence. I am afraid the possession was not handed over to the receiver voluntarily. Several attempts were made by the defendant No. 1 to hold on to the possession without payment of the royalty. Records of the Proceeding are full of the Notices of Motions and Appeals, which show the attempts were made by the defendant Nos. 1 and 10 at every stage to retain the possession of the suit premises without payment of the royalty and the charges which they themselves had agreed to pay before the Division Bench on 2nd April, 1997 and they had given a written undertaking to the Court to that effect. They wilfully committed default in payment from 1997 till October, 2001 and only when it became impossible for them to further continue the possession and the receiver was about to take possession by use of force that they surrendered the possession. The defendant Nos. 1 and 10 have committed wilful breach of the order of the Division Bench and the undertaking given by them. The conduct of the defendant Nos. 1 and 10 has been reprehensible as noted by the Division Bench in its order dated 29th April, 2001. Even otherwise, the defendant Nos. 1 and 10 have wilfully committed a breach of the order of this Court and undertaking given to this Court without any justifiable reason. In the circumstances, I am inclined to strike off their defence.

9. As regards prayer for detaining the defendant No. 10 in civil prison, I am of the view that ends of justice would be served by only striking out of the defence. The defendant No. 10 should not be imposed with a further penalty of detention in the civil prison. As laid down by the Supreme Court in the case of Suresh Chandra Poddar v. Dhani Ram, reported in (2002) 1 SCC 766 : AIR 2002 SC 439, the contempt jurisdiction is to be used sparingly. The object of the contempt jurisdiction is to maintain the majesty of the Courts and not necessarily to punish every breach of the order of the Court or every breach of an undertaking given to the Court. No doubt, the conduct of the defendant Nos. 1 and 10 is contumacious. However, in my view, striking out of the defence is a sufficient penalty to the defendants for breach of the order of the Court and the breach of the undertaking and it is not necessary to exercise the penal jurisdiction to order detention of defendant No. 10 in civil prison.

10. For these reasons, motion is partly allowed and the defence of the defendant Nos. 1 to 5 and defendant No. 10 is struck off. Let the suit be listed for ex parte hearing before the appropriate Bench.

11. The plaintiff is granted liberty to take out separate proceedings in respect of the reliefs mentioned in prayer clause (d).

12. At the request of the learned counsel for the defendant Nos. 1 and 10, operation of this order is stayed for a period of three weeks.

Notice of motion partly allowed.

Feroze Homi Duggan v. Benzer Interiors Pvt. Ltd.

Structured Summary of the Provided Opinion

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Plaintiff's Arguments

Defendant(s)' Arguments

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

Feroze Homi Duggan v. Benzer Interiors Pvt. Ltd.

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