Delhi High Court Dismisses Contempt Petitions as Time-Barred Due to Limitation Bar: Failure to Honor Settlement Agreement Does Not Constitute a Continuing Wrong, Rules Court

Court’s Decision:

The Delhi High Court dismissed the contempt petitions filed by the petitioner for being barred by limitation under Section 20 of the Contempt of Courts Act, 1971. The court ruled that the respondents’ failure to deposit the title deeds and pay the agreed settlement amount within the stipulated period did not constitute a “continuing wrong” and hence, could not be considered for contempt proceedings beyond the limitation period. The court emphasized that the wrong was complete in 2016 when the respondents failed to comply with the terms of the settlement agreement.

Facts:

1. The petitioner, M/s Nimbit Buildcon Private Limited, entered into a Memorandum of Understanding (MOU) on 27.05.2013 with the respondents, who are signatories to the MOU, for settling a debt amount of ₹36.5 crores.
2. The debt was owed by M/s Kent Properties Private Limited and its directors, who are family members.
3. As per the MOU, the respondents undertook to pay a total amount of ₹116 crores, inclusive of interest, within three years, failing which certain properties were to be auctioned to realize the debt.
4. The respondents allegedly secured bail in the FIR No. 131/12, registered with the Economic Offences Wing (EOW), based on the undertakings given in the MOU. However, they did not comply with the repayment or the deposit of title documents as stipulated.
5. The petitioner claimed that despite repeated assurances, the respondents failed to honor their commitments, which led to the filing of the present contempt petitions in 2019.

Issues:

1. Whether the contempt petitions filed in 2019 were barred by limitation under Section 20 of the Contempt of Courts Act.
2. Whether the respondents’ failure to comply with the MOU constituted a “continuing wrong” that would extend the limitation period.

Petitioner’s Arguments:

1. The petitioner argued that the respondents’ non-compliance with the MOU amounted to a “continuing wrong” and therefore, the contempt petitions were not barred by limitation.
2. It was further contended that the respondents repeatedly sought adjournments in criminal proceedings on the pretext of settlement, which continued until July 2018. Therefore, the limitation period should commence from the last date of non-compliance.

Respondent’s Arguments:

1. The respondents argued that the petitions were barred by limitation since the breach of the MOU was complete when the three-year period expired on 27.05.2016.
2. They submitted that the contempt jurisdiction cannot be invoked as a substitute for execution proceedings, and the failure to pay the settlement amount did not amount to an “undertaking given to the Court” but rather a private agreement between the parties.
3. They also pointed out that the petitioner did not approach the court within the prescribed period, thereby forfeiting the right to seek contempt action.

Analysis of the Law:

1. The court examined the relevant provisions under Sections 20 and 23 of the Contempt of Courts Act, 1971.
2. It relied on various judgments of the Supreme Court, including Rama Narang vs. Ramesh Narang and Balkrishna Savalram Pujari v. Shree Dnyaneshwar Maharaj Sansthan, to interpret what constitutes a “continuing wrong.”
3. The court highlighted that a continuing wrong arises only when the wrong itself continues on a day-to-day basis. Mere failure to fulfill a contractual obligation within a stipulated period does not extend the limitation period unless a fresh cause of action is created each day.

Precedent Analysis:

1. Rama Narang vs. Ramesh Narang: The court relied on this precedent to clarify that for a wrong to be considered “continuing,” it must create a new cause of action de die in diem (on a day-to-day basis).
2. Balkrishna Savalram Pujari v. Shree Dnyaneshwar Maharaj Sansthan: The court reiterated that if a wrongful act is complete at a particular time, the fact that its effect continues does not render it a continuing wrong.
3. S. Tirupathi Rao vs. M. Lingamaiah: This recent Supreme Court judgment was relied upon to emphasize that stale claims of contempt camouflaged as a “continuing wrong” should not be entertained.

Court’s Reasoning:

1. The court noted that the respondents’ failure to deposit the title documents and pay the agreed settlement amount as per the MOU was a completed act of breach when the three-year period expired on 27.05.2016.
2. It held that merely because the effect of non-payment continued, it did not extend the limitation period. Thus, the petitions filed in May 2019 were time-barred.
3. The court rejected the petitioner’s argument that the respondents’ continuous requests for adjournments constituted a “continuing wrong,” stating that adjournments in the criminal proceedings did not create a fresh cause of action for contempt.

Conclusion:

The court dismissed the contempt petitions for being barred by limitation. It ruled that the petitioner cannot be allowed to invoke contempt jurisdiction as a substitute for execution proceedings. However, it left the petitioner free to pursue appropriate civil remedies for enforcement of the terms of the MOU.

Implications:

This decision underscores the importance of timely initiation of contempt proceedings and clarifies that the concept of a “continuing wrong” cannot be invoked merely because the effect of the breach persists. It also highlights the need for parties to approach the court within the statutory period to avoid forfeiture of their rights.

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