LAW FOR ALL

Tuesday, April 19, 2016

This case, in our view, is a classic example of the abuse of the judicial process by unscrupulous litigants with money power, all in the name of legal rights by resorting to half-truths, misleading representations and suppression of facts. Each and every party is guilty of one or the other of the above-mentioned misconducts. It can be demonstrated (by a more elaborate explanation but we believe the facts narrated so far would be sufficient to indicate) but we do not wish to waste any more time in these matters.This case should also serve as proof of the abuse of the discretionary Jurisdiction of this Court under Article 136 by the rich and powerful in the name of a ‘fight for justice’ at each and every interlocutory step of a suit. Enormous amount of judicial time of this Court and two High Courts was spent on this litigation. Most of it is avoidable and could have been well spent on more deserving cases.=This Court in Ramrameshwari Devi & Others v. Nirmala Devi & Others, (2011) 8 SCC 249 observed at para 54; “54. While imposing costs we have to take into consideration pragmatic realities and be realistic as to what the defendants or the respondents had to actually incur in contesting the litigation before different courts. We have to also broadly take into consideration the prevalent fee structure of the lawyers and other miscellaneous expenses which have to be incurred towards drafting and filing of the counter-affidavit, miscellaneous charges towards typing, photocopying, court fee, etc.” We therefore, deem it appropriate to impose exemplary costs quantified at Rs.25,00,000.00 (Rupees Twenty Five Lakhs only) to be paid by each of the three parties i.e. GGL, MGG and RUIAS. The said amount is to be paid to National Legal Services Authority as compensation for the loss of judicial time of this country and the same may be utilized by the National Legal Services Authority to fund poor litigants to pursue their claims before this Court in deserving cases.

Reportable

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

SPECIAL LEAVE PETITION (CIVIL) NOS. 33429-33434 OF 2010

Messer Holdings Ltd. … Petitioner

Versus

Shyam Madanmohan Ruia & Others … Respondents

WITH

SPECIAL LEAVE PETITION (CIVIL) NOS. 23088-23090 OF 2012

J U D G M E N T

Chelameswar, J.

1. Messer Griesham GmbH, a German Company (hereinafter referred to as
“MGG”) entered into a Share Purchase and Cooperation Agreement (hereinafter
referred to as AGREEMENT-1) with the shareholders of an Indian company
called Goyal Gases Ltd. (hereinafter referred to as “GGL”) on 12.5.1995.
By virtue of the said agreement, MGG purchased 30% of equity shares of GGL.
Subsequently, MGG increased its shareholding in GGL to 49%. Clause 9 of
the AGREEMENT-1 reads:

“ 9. NON-COMPETITION CLAUSE

GGL and all Goyal Group companies will cooperate in the Indian market with
right to first refusal basis/with MGG and will not for the duration of this
cooperation support in any way directly or indirectly - the activities of
MGG’s competitors with regard to gas business. MGG will give written
information to GGL about every business opportunity it plans to take in the
Indian market in regard to industrial gases and related business and GGL
may decide if it wants to participate in it (right of first refusal). In
case GGL does not within a period of two months after receiving MGG’s
notice declare in writing that it is willing and able to participate in the
planned business, MGG is free to proceed with this business on its own.
However, MGG will give due consideration to the interest of GGL being its
group company. Such new business which MGG undertakes should be business
of gas supply of few major dedicated customers only and not to general
market supply.”

2. In a company known as BOMBAY OXYGEN CORPORATION LIMITED (hereinafter
referred to as the ‘BOCL’) majority shares were collectively held by a
group of persons known as RUIAS (we understand that they belong to one
family). On 23.6.1997, MGG entered into another Share Purchase Agreement
(hereinafter referred to as AGREEMENT -II) with RUIAS. By the said
agreement MGG agreed (i) to purchase 45001 shares of BOCL from RUIAS, and
(ii) also to acquire another 30000 shares of BOCL from the open market
which would make MGG the majority shareholder of BOCL (creating a
controlling interest). Clause 6.1 of AGREEMENT-II reads;

“6.1 Right of First Refusal:

With effect from the date this Agreement becomes effective, neither party
shall sell any shares in the Company held or acquired by it without first,
offering the Shares to the other party. The offer shall be in writing and
shall set out in the price and other terms and conditions. If the offeree
does not agree to purchase the Shares so offered the offerer shall be free
to sell the Shares to any person (other than a competitor of the offeree),
but at the same price and on the same terms as offered to the offeree.
This right of first refusal does not apply to any sale of shares by the
purchaser to a company of the Hoechst Group. In a company directly or
indirectly controlled by or under direct or indirect common control with
the Hoechst Group. For the purposes of this definition “control” means
ownership, directly or indirectly or more than 50 percent of the issued and
outstanding voting stock or ownership interest of the Company.”

3. Pursuant to the AGREEMENT-II, MGG made a public announcement on
27.6.1997 disclosing its intention to acquire 30000 shares of BOCL from
public as required under Chapter-III of the Securities and Exchange Board
of India (Substantial Acquisition of Shares and Takeovers) Regulations,
1997 (hereinafter referred to as the ‘REGULATIONS 1997) framed in exercise
of the powers conferred by Section 30 of the Securities and Exchange Board
of India Act, 1992 (hereinafter referred to as the “SEBI Act”)

4. GGL protested (in writing) against the attempt of MGG to
independently acquire shares of BOCL saying that it would amount to breach
of Clause 9 of the AGREEMENT-I. Some correspondence took place between both
the Companies in this regard. Eventually, both the Companies entered into
AGREEMENT-III on 8.11.1997 whereunder it was agreed that out of 75001
shares of BOCL to be acquired by MGG under AGREEMENT-II, 50000 shares will
be acquired in the name of GGL and only 25001 will be acquired in the name
of MGG.

5. RUIAS came to know of the AGREEMENT-III. By their letter dated
5.5.1998 they informed MGG that they were not agreeable for the proposal of
MGG and GGL jointly purchasing the shares of the BOCL. In view of the said
development, MGG informed GGL on 7.5.1998 that MGG was terminating
AGREEMENT-III. Thereafter, MGG proceeded to acquire 75001 shares of the
BOCL on its own and paid an amount of Rs.13.5 crores to the RUIAS towards
the value of 45001 shares.

SUIT-I IN THE HIGH COURT OF DELHI by GGL etc.

6. On 26.8.1998, GGL filed a Civil Suit No.1810/98 (hereinafter referred
to as “SUIT-I”) in the High Court of Delhi against MGG for the enforcement
of Clause 9.1 of AGREEMENT-I and for other reliefs:

Cancel the letter of offer dated 6.8.1998 made by the defendant for 20%
equity shares of Bombay Oxygen Corporation Ltd. and/or

Cancel the share purchase agreement dated 23.6.1997 whereby the defendant
has sought to purchase 30% +1 equity shares of Bombay Oxygen Corporation
Ltd. and/or

A decree of permanent injunction restraining the defendant from taking any
steps in pursuance of the letter of offer dated 6.8.1998 for 20% equity
shares of Bombay Oxygen Corporation Ltd. and the share purchase agreement
dated 23.6.1997 for purchase of 30%+1 equity shares of Bombay Oxygen
Corporation Ltd. in violation of the non-competition clause of the
agreement dated 12.5.1995 and/or

A decree of permanent injunction restraining the defendant from acquiring
any shares in Bombay Oxygen Corporation Ltd. on its own and without the
participation of plaintiff.

On 14.9.1998, GGL filed two applications seeking certain interim orders.
I.A. No.7248 of 1998 in the SUIT-I invoking Order 39 Rule 1&2 of the Code
of Civil Procedure, 1908 (hereinafter referred to as “CPC”) and OMP No. 205
of 1998 invoking Section 9 of the Arbitration & Conciliation Act, 1996
(hereinafter referred to as “A&C Act”). Interestingly the relief sought in
both the applications is substantially the same i.e., interim order
restraining the MGG from acquiring the shares of BOCL on its own. The
learned trial Judge dismissed both the applications by two separate orders
dated 22.9.1998. GGL carried the matter in intra court appeals.

7. By the appellate order dated 23.10.1998, a Division Bench of the
Delhi High Court restrained[1] MGG from acquiring the shares of the BOCL.

8. Aggrieved by the same, MGG moved this Court in Civil Appeal Nos. 728
and 729 of 1999. This Court by an interim order dated 18.12.1998 ordered
as follows:-

“Meanwhile, it will be open to the Petitioner – M/s.. Griesheim GMBH to
make payment for purchasing 10,000 (sic 30,000) shares from the public and
also to take delivery of these shares but they shall not take further steps
for the purpose of getting their names registered as shareholders in
respect of these shares.

Respondent No. 1 Goyal MG Gases Ltd is directed to nominate its Arbitrator
within a period of two weeks from today and take appropriate steps to pay
the full fees and it shall also file its claims statement within one week
thereafter.”

9. By a final order dated 8.2.1999, the said appeals were disposed:-

“Earlier by our order dated 18.12.98, we had permitted the appellant to
make payment to the shareholders. The payment having been made now custody
of those shares is with the appellant. Bombay oxygen wants to borrow
money from a bank and the appellant wants to be a guarantor on the strength
of those shares and for that reason it wants an order of this court
permitting it to do so.

We are told that two Arbitrators have already been appointed and the third
Arbitrator will be appointed within a short time. After considering the
rival submissions, we think it proper to pass the following order:

It will be open to Messer Griesheim Gmbh/the appellant to part with those
shares and keep them in custody of the concerned bank for the purpose of
entering into such a financial arrangement. It is, however, made clear
that so far as the question of registration and ownership of shares is
concerned that will have to be decided by the Arbitrators. It will be
open to the parties to approach the Arbitrators for obtaining interim
relief in that behalf.

Since the erstwhile owners of the shares have been paid their dues, they
have ceased to be owners of those shares and the beneficial interest in
them now vests in Messer Griesheim Gmbh or in Messer Griecheim Gmbh and
Goyal HG gases Limited jointly if the Arbitrators so decide. We direct
that all the disputes between the parties including the right to represent
on the board of Bombay Oxygen will now have to be decided by the
Arbitrators. If any necessity arises to approach this court, it will be
open to the parties to do so. Till any order to the contrary is passed by
the Arbitrators, our order dated 22.1.99 will continue to operate.

The appeals are disposed of accordingly.”

10. The petitioner (hereinafter referred to as ‘MHL’) in SLP(C) Nos.33429-
33434 of 2010 on hand is a company incorporated in British Virgin Islands
on 20.01.2000 by MGG and another company known as Morgan Trade and Commerce
which is a 100% owned subsidiary of GGL. The authorised share capital of
MHL is 10,000,000 DM (currency of Federal Republic of Germany) divided into
10,000,000 shares. It has two Directors, one representing MGG and the
other Morgan Trade and Commerce. Interesting feature of MHL is that the
shares of this company are bearer shares. It is an admitted case of all
the parties that the law of British Virgin Islands permits it.

11. MGG and GGL entered into a settlement[2] of their dispute (evidenced
by two documents dated 17.02.2000 and 13.3.2000) pursuant to which MGG
filed two applications (I.A.s 17 & 18 of 2000) in Civil Appeals No.728-729
of 1999, which had already been disposed of on 8.2.1999, praying that:

“(a) permit the said 75001 shares to be transferred and registered in the
name of Messer Holdings Ltd. and permit complete rights attached to these
shares to be enjoyed by Messer Holdings Ltd. pending registration of
transfer of shares and permit nominees to be appointed as Directors on the
Board of Bombay Oxygen Corporation Ltd. in accordance with law;

(b) direct that period from 23rd October, 1998 to date of order passed in
this application will be excluded in computing the period prescribed under
Section 108(1A) of the Companies Act, 1956 for the validity of the transfer
deeds.

(c) Pass such further order/orders as this Hon’ble Court may deem fit and
proper in the facts and circumstances of the present case.”

However, when the said I.As were taken up by this Court on 20th April,
2000, this Court ordered:

“Learned counsel for the applicant and respondent Nos.1 and 2 state that
dispute which was sought to be referred to the Arbitrator has been settled
between them. In view of this they want to move appropriate application to
withdraw from the arbitration proceedings. They seek time for the purpose.
List the matter on 5.5.2000.”

The only inference we can draw is that the prayers in I.As 17 & 18 of 2000
were not pressed[3].

12. Interestingly, after seeking this Court’s permission to withdraw from
the arbitration proceedings initiated earlier, MGG and GGL filed a joint
application before the arbitral tribunal on 9.8.2000 requesting the
arbitral tribunal to pass a consent award. On such an application, the ICC
Arbitral Tribunal passed a consent award on 21.9.2000, the operative
portion of which reads as follows:

“NOW THEREFORE the tribunal hereby makes the following award by consent of
the parties in terms of the Joint Application set out in Annexure “I”
hereto, which shall form part of this Award:

1(a) The 75001 shares of Bombay Oxygen Corporation Limited (BOCL)
purchased by the Respondent at a price of Rs.22.5 crores shall be held and
registered in the name of Messer Holdings Ltd. (MHL); however, for
technical and procedural reasons the shares will first be registered in the
name of the respondent and immediately thereafter the said shares will be
registered in the name of MHL as mentioned in para 2 of the Joint
Application. Complete rights attached to the 75001 shares of BOCL qua the
BOCL as well as transferos (transfer – sic) of the shares to the Respondent
(even pending registration in the name of the Respondent and/or in the name
of MHL) will be henceforth exercised by the Respondent through MHL who will
act for and on behalf of the Respondent. MHL will be authorised by Messer
Griesheim Gmbh (MCG) to delegate all or any of its powers mentioned above,
including the rights but not limited to attending general meetings of share
holders of BOCL and to vote therein and deciding and appointing nominees to
be appointed as directors on the board of BOCL.”

13. Pursuant to the consent award, sometime in the month of May 2000 MGG
handed over the shares certificate of 75001 shares of BOCL to MHL alongwith
duly filled transfer forms[4] and a power of attorney.

We are given to understand that the SUIT-I is eventually withdrawn by GGL.
It is necessary to mention here that by that time RUIAS had already filed
(on 28.4.1999) a suit inter alia against both MGG and GGL in the High Court
of Bombay.

SUIT- II IN THE HIGH COURT OF BOMBAY BY RUIAS ETC.

14. On 28.4.1999, RUIAS filed a Suit No.2499/1999 before Bombay High
Court (hereinafter referred to as SUIT-II) in substance seeking enforcement
of clause 6.1 of the AGREEMENT-II.

“(a)1(i) that it be declared that the negative covenant contained in Clause
6.1 of the agreement dated 23rd June 1997 being Ex. ‘B’ hereto is binding
on the Defendants;

(a)1(ii)(b) that the Defendants by themselves their agents and servants be
restrained by a perpetual order and injunction of this Hon’ble Court from

(i) committing breach of clause 6.1 of the Agreement dated 23rd June,
1997 being Ex. ‘B’ hereto;

transferring or selling or alienating the legal and/or beneficial interest
in the shares of Defendant No. 2 including those mentioned in Ex. ‘A’
hereto without first offering the same to the Plaintiffs in terms of Clause
6.1 of the Share Purchase Agreement dated 23rd June 1997, being Ex. ‘B’
hereto.

obtaining any award, decree order from any forum or court in violation of
clause 6.1 of the Share Purchase Agreement dated 23rd June 1997 being Ex.
‘B’ hereto.

making any claim before the Arbitrators or any court which if granted will
amount to a breach or violation of the provisions of Clause 6.1 of the said
Share Purchase Agreement dated 23rd June 1997, being Ex. ‘B’ hereto;

procuring any breach of the provisions of clause 6.1 of the said Share
Purchase Agreement dated 23rd June, 1997 being Ex. ‘B’ hereto;”

In the said Suit, RUIAS filed an application (Notice of Motion No.1804 of
1999) praying that MGG and GGL be restrained from committing breach of
Clause 6.1 of AGREEMENT-II. By an interim order dated 6.5.1999, MGG and
GGL were injuncted from committing breach of Clause 6.1 of AGREEMENT-II.
MGG filed an affidavit in the said application undertaking that it would
not breach Clause 6.1 of AGREEMENT-II. By an order dated 29.2.2000, Bombay
High Court disposed of the said application recording the undertaking filed
by MGG with a further direction that MGG and GGL “not to implement or
enforce any award made by the arbitrators without obtaining the leave of”
Bombay High Court:-

“The parties have agreed that for disposing of this motion in the following
terms, no reasons are necessary to be recorded.

1. Defendant No.1 stated that defendant No.1 is willing to and shall
abide by clause 6.1 of the agreement dated 23rd June 1997. Statement
accepted. In view of the statement made by defendant No.1, the following
interim order is passed against defendant No.1.

Interim Order in terms of prayer (a)(i).[5]

2. Defendant No.1 and 3 shall not act pursuant to implement or enforce
any award made by the arbitrators without first obtaining the leave of the
court and the court will consider the agreement between the plaintiffs and
defendant No.1.

3. The aforesaid order is made without prejudice to the rights, claims
and contentions of the parties.

4. The Notice of Motion is accordingly disposed off. It is clarified
that the parties are at liberty to adopt appropriate proceedings to enforce
their respective rights.

5. Parties to not (note - sic) on a copy of this order duly
authenticated by the associate of the Court.”

15. By a letter dated 31st May 2000, RUIAS intimated MGG and reiterated
on 1st June 2000, that AGREEMENT-II was terminated. Because according to
RUIAS establishment of MHL and the transfer of 75001 shares of BOCL to MHL
tantamounted to breach of clause 6.1 of AGREEMENT-II.

16. After obtaining the consent award on 21.9.2000, MGG filed an
application (Notice of Motion No.2933/2000) before the Bombay High Court in
SUIT-II seeking leave of the Court to implement and enforce the consent
award.

SUIT- III IN THE HIGH COURT OF BOMBAY

17. On 5.2.2001, RUIAS filed second Suit bearing No.509 of 2001
(hereinafter referred to as “SUIT- III”) before the Bombay High Court
praying:

“a) for a declaration that the Share Purchase Agreement dated 23rd June
1997 is liable to be rescinded;

b) for an order of this Hon’ble Court directing the said Share Purchase
Agreement dated 23rd June 1997 be rescinded;

c) that in the alternative to prayers (a) and (b) above, for a
declaration that the Share Purchase Agreement dated 23rd June 1997 was
voidable and has been validly avoided by the Plaintiffs;

d) that in the alternative to prayers (a), (b) and (c) above, for a
declaration that the Share Purchase Agreement dated 23rd June 1997 was
terminable by the Plaintiffs and has been validly terminated by the
Plaintiffs.

e) that in the alternative to prayers (a), (b), (c) and (d) above, for a
mandatory order and direction by this Hon’ble Court directing the 1st
Defendant to offer the said 75,001 shares to the Plaintiffs in accordance
with the procedure prescribed in Clause 6.1 of the Share Purchase Agreement
dated 23rd June 1997.

f) for a declaration that the acquisition of the said 30,000 shares
pursuant to the Public offer is illegal, unlawful, null and void and of no
legal effect whatsoever;

g) for a declaration that the said Agreement dated 17th February 2000
and the said Consent Award dated 21st September 2000 are not binding on the
Plaintiffs and/or Defendant No.2 and/or that the same are illegal, null and
void.

h) for a permanent injunction restraining the defendant No.1,3 and 4
from

(i) acting in pursuance of the Share Purchase Agreement dated 23rd
June 1997;

(ii) exercising any rights in respect of the said 75,001 shares (in
particular voting rights in connection therewith) and/or from receiving any
dividends, rights in respect of the same;

(iii) exercising any rights including its beneficial ownership
in, to, upon or in respect of the said 75,001 shares.

i) that the Defendants be restrained by permanent order and injunction
of this Hon’ble Court from transferring and/or registering and/or taking
any steps to transfer and/or register the said 75,001 shares in the name of
any person or persons, firm or body corporate including 1st and/or 3rd
and/or 4th Defendants without the consent of the Plaintiffs;

j) that the 1st defendant be ordered and decreed to deliver/return to
the respective plaintiffs the said 45,001 shares together with all
accretions thereto from 23rd June 1997 on such terms as this Hon’ble Court
directs;

k) for the purpose aforesaid the 1st defendant be ordered and decreed to
do and perform all acts, deeds, matters and things and to execute all
documents, deeds and writings in furtherance thereof.

18. In the said suit, RUIAS filed an application (Notice of Motion No.
392 of 2001) in substance seeking an injunction against MGG and GGL along
with MHL either from transferring the 75001 shares of BOCL in favour of MHL
or from exercising rights as beneficial owners of the said shares. In the
said suit, MHL filed an application (Notice of Motion No.534 of 2002) on
21.2.2002 seeking appointment of an administrator and receiver for the
administration of the assets of BOCL on the ground that RUIAS are causing
substantial damage to the assets of BOCL.

19. SUIT-II was amended from time to time on three occasions pursuant to
the orders of the Bombay High Court dated 22.02.2000, 04.10.2002 and
08.06.2011.

The prayer in SUIT-II after such Amendments;

“Rider-I(a)

(a) (i) For a declaration that the acquisition of the said 30,000 shares
pursuant to the public offer is illegal, null and void ab-initio and of no
legal effect whatsoever.

(ii) For a permanent order and injunction restraining the defendants from
exercising any rights in respect of the said 30,000 shares including and in
particular voting rights.

(b) (i) for a declaration that the said agreement dated 23rd June, 1997
(Exhibit –B hereto) stands validly terminated and/or avoided.

Rider-N Prayer (b)(ii)(a)

“(b)(ii)(a) that it be declared that Defendant Nos. 3 to 5 have no right,
title or interest of any nature whatsoever in respect of the 75001 shares
of Defendant No. 2”

Rider – O prayer (b)(ii)(b):

“(b)(ii)(b), that in the alternative to prayer (b)(ii) this Hon’ble Court
be pleased to order and direct the Defendant Nos. 1 and 3 to 5 to deliver
to the respective Plaintiffs 45001 shares of Defendant No. 2 as also to
return to the respective members of the public the 35000 shares;

(ii) that the 1st defendant Nos. 1, 3, 4 and 5 be ordered and
decreed to deliver/return to the respective plaintiffs the said 45,001
75,001 shares together with all accretions thereto from 23rd June, 1997 on
such terms as this Hon’ble Court directs.

(iii) for the purpose aforesaid the Ist defendant Nos. 1, 3, 4 and 5
be ordered and decreed to do and perform all acts, deeds, matters and
things and to execute all documents, deeds and writings in furtherance
thereof.

Rider-P prayer (b)(iii)(a)

“(b)(iii)(a), that in the event of the Defendant Nos. 1 and 3 to 5 failing
to deliver to the Plaintiffs the said 75001 shares of Defendant No. 2 the
same be cancelled and Defendant No. 2 be ordered and directed to issue
duplicate shares in the name of the Plaintiffs”

(iv) for a permanent order and injunction restraining the defendants from
transferring and/or registering and/or taking any steps to transfer and/or
register the said 75,001 shares in the name of any person or persons, firm
or body corporate including the 1st and/or 3rd and/or 4th defendants
without the consent of the plaintiffs.

(v) for a permanent order and injunction restraining defendant nos. 1, 3
and/or 4 and 5 from exercising any rights, including as beneficial owner,
in, to, upon, or in respect of the said 75,001 shares.

a(1)(i) In the alternative and in the event of prayer (b) not being
granted that it be declared that the negative covenant contained in Clause
6.1 of the agreement dated 23rd June 1977 being Ex. ‘B’ hereto is binding
on the Defendants;

(a)1(ii)(b) that the Defendants by themselves their agents and servants be
restrained by a perpetual order and injunction of this Hon’ble Court from.

committing breach of clause 6.1 of the Agreement dated 23rd June, 1977
being Exh. ‘B’ hereto;

transferring or selling or alienating the legal and/or beneficial interest
in the shares of Defendant No. 2 including those mentioned in Ex. ‘A’
hereto without first offering the same to the Plaintiffs in terms of Clause
6.1 of the Share Purchase Agreement dated 23rd June 1997, being Exh. ‘B’
hereto.

obtaining any award, decree order from any forum or court in violation of
clause 6.1 of the Share Purchase Agreement dated 23rd June, 1997 being Ex.
‘B’ hereto.

making any claim before the Arbitrators or any court which if granted will
amount to a breach or violation of the provisions of Clause 6.1. of the
said Share Purchase Agreement dated 23rd June 1997, being Ex. ‘B’ hereto;

procuring any breach of the provisions of clause 6.1 of the said share
Purchase Agreement dated 23rd June, 1977 being Ex. ‘B’ hereto;”

Rider-C

(b1)(a) In the alternative and in the event of prayer (b) not being granted
and In the event of it being held that the said agreement is void defendant
Nos. 1, 4 and 5 be ordered and decreed to deliver/return to the respective
Plaintiffs the said 45001 shares together with all accretions thereto from
23rd June 1977 on such terms of this Hon’ble Court may direct.

(b) For the purpose aforesaid defendant Nos. 1, 4 and 5 be ordered and
decreed to do and perform all acts, deeds, matters and things and to
execute all documents, deeds and writings in furtherance thereof.”

20. It appears that on 5.12.2002, RUIAS and MGG entered into a settlement
(evidenced by an agreement in writing) of the disputes between them by
allegedly rescinding the AGREEMENT-II. According to MHL, the terms of
settlement were not made known to either MHL or GGL for a long time. The
information regarding the agreement dated 5.12.2002 initially came to the
knowledge of MHL (allegedly) from the website of Security Exchange
Commission of United States.

The relevant portion of the settlement reads as under:-

“6. In the circumstances, “MGG” and the “Ruias” have agreed to fully and
finally settle all their disputes and differences by rescinding the “Ruia
Agreement” on the terms and conditions set forth in this Agreement.
However, “MGG” is not in a position to return to the “Ruias” the share
certificates and other relevant documents for the 45,001 shares of “BOCL”
(which is the subject matter of the “Ruia Agreement”) as they are not in
“MGG’s possession. “MGG” has no knowledge of the current whereabouts of
the said share certificates and other documents pertaining to the 45,001
shares and is not in a position to secure return/delivery of the same.

7. As “MGG” is no longer interested in acquiring any shares in “BOCL”,
as a further part of the settlement, it is hereby agreed that “MGG” hereby
sell/reverts/transfers/divests in favour of the “Ruias” all its right,
title and interest in the remaining 30,000 shares in “BOCL” which “MGG” had
acquired from the public, but which has also not been registered in the
name of “MGG” in the records of “BOCL”. However, “MGG” has no knowledge
of the current whereabouts of the share certificates and other documents /
pertaining to the 30,000 shares and is not in a position to secure
return/delivery of the same.

8. In consideration for the foregoing, “Ruias” agree to pay “MGG” a sum
of US $ 154,642 in respect of the 75,001 shares of “BOCL”, without any
other or further obligation whatsoever on the part of “MGG” to the “Ruias”
except as provided in this Agreement. The “Ruias” shall also not have any
further obligation to “MGG” except as provided in this Agreement.

****** ***** ****** ******

10. The parties agree that “MGG” do hereby fully and irrevocably
revert/sell, transfer and assign all its beneficial right, title and
interest in or in relation to the said 75001 shares in favour of “Ruias”
and shall, at the cost and expense of “Ruias”, execute and continue to
execute such instruments, documents, authorities etc., as may be necessary
or expedient in connection therewith and shall refrain from doing anything
inconsistent with the foregoing or the rights reverted/assigned/transferred
as above on and from the date of execution hereof. To this end and
purpose, an irrevocable Power of Attorney duly executed as per draft
enclosed herewith as Annexure I shall be put in escrow with Ms. Lira
Goswami, Advocate. Ms. Lira Goswami shall hand over the Power of Attorney
to the “Ruias” in accordance with written escrow instructions agreed to by
“Ruias” and MGG”.

11(a) The parties confirm and acknowledge that as the foregoing 45,001
shares of “BOCL” have not been registered in the name of “MGG” in the
records of “BOCL”, the said shares continue to be registered in the names
of the “Ruias”. Consequently, the rescission of the “Ruia Agreement” does
not involve any transfer from “MGG” to the “Ruias” in the books of “BOCL”
as the “Ruias” continue to be the registered shareholders. Nevertheless,
if any permission, approval or notification is required under Indian law
for implementing this Agreement, including without limitation, the
permission of the “RBI” for making the payment of US $ 154,642, the “Ruias”
shall be solely responsible and liable for obtaining all such necessary
approvals or permissions or for making the necessary filings/notifications,
at the sole cost and expense of the “Ruias”.

Similarly, the parties confirm and acknowledge that the foregoing 30,000
shares of “BOCL” have also not been registered in the name of “MGG” and
continue to be in the name of the Indian public shareholders.
Consequently, “Ruias” will be solely responsible for doing all acts, deeds
and things that may be necessary for effecting the transfer of these shares
from the currently registered shareholders to the “Ruias” at the sole cost
and expense of the “Ruias”.

****** ****** ****** ******

15. On execution of this Agreement, “Ruias” agree:

(a) not to prosecute the following proceedings pending in the Bombay High
Court and in Supreme Court of India against “MGG” or its affiliates or its
directors, officers or employees (excluding “MHL” and Goyal MG Gases Ltd.
but including directors nominated by “MGG” on the Board of “MHL” and/or
Goyal MG Gases Ltd.):

Civil Suit No. 2499 of 1999 titled Shyam Madan Mohan Ruia & Ors. Vs. Messer
Griesheim GmbH & Ors.

Civil Suit No. 509 of 2001 titled Shyam Madan Mohan Ruia & Ors. Vs.
Messer Griesheim GmbH & Ors.”

In spite of the said agreement, (the existence of which is not in dispute
now). RUIAS not only continued with SUITS II and III, but also amended
the Suit-II on 08.06.2011.

21. On 4.2.2008, BOCL executed a Development Agreement in favour of
another company known as HDIL granting development rights in respect of
three pieces of immovable properties admeasuring 15317.77 sq. mtrs.,
3513.70 sq. mtrs. and 47762.20 sq. mtrs. of land situated at Kurla Taluk of
Maharashtra allegedly owned by BOCL.

22. The next day BOCL informed the Bombay Stock Exchange about the above-
mentioned development agreement. On 26.3.2008, HDIL mortgaged the above-
mentioned property in favour of the Union Bank of India for securing a term
loan of 230 crores.

23. On 8.4.2008 MHL filed a Notice of Motion No. 1418 of 2008 in Appeal
No. 855 of 2003[6] seeking an injunction against the parties to the above-
mentioned Development Agreement along with various other reliefs (the
details of which are not necessary for the present).

24. By an order dated 30th April, 2008, a Division Bench of the Bombay
High Court while adjourning the hearing of the said Notice of Motion
recorded the undertakings on behalf of the HDIL that it will not claim any
equity whatsoever in the event of MHL’s success in the above-mentioned
Notice of Motion and demolish the construction, if any, made during the
pendency of the proceeding by the HDIL. It was also stated by them that
the property which was the subject matter of the Development Agreement had
already been mortgaged in favour of the Union Bank of India, however,
undertook not to create any 3rd party rights in the said property.

25. Aggrieved by the said order, MHL filed SLP No. 12734 of 2008 in this
Court on 8.5.2008. By an Order dated 16.5.2008, this Court, while issuing
notice on the said SLP granted an order of status quo regarding the nature,
title, etc. of the property in dispute. By an Order dated 23.6.2008, the
said SLP was disposed of directing that the status quo order granted
earlier on 16.5.2008 shall continue during the pendency of the Notice of
Motions and appeals before the High Court of Bombay.

SUIT-IV

26. On 23.4.2008, MHL filed Suit No.2410 of 2008 (hereinafter SUIT-IV)
against BOCL, RUIAS, HDIL etc. seeking various reliefs including a
declaration of ownership of 75001 shares of BOCL etc.

“q) That this Hon’ble Court be pleased to declare that the Plaintiff is
the beneficial owner of the suit shares being 75001 shares in the 1st
Defendant company, more particularly described in the schedule annexed as
Exhibit A hereto and is entitled to legal ownership thereof;

r) That the Defendant Nos.1 to 10 be directed by a mandatory order and
injunction of this Hon’ble Court to carry out all acts, deeds and things
and extend all cooperation necessary to secure registration of the suit
shares aggregating to 75001 shares in the 1st Defendant Company, more
particularly described in Exhibit A hereto in the name of the Plaintiff;

s) That this Hon’ble Court be pleased to declare that the purported
reversion/transfer of the suit shares being 75001 shares in the 1st
Defendant Company, more particularly described in the schedule annexed as
Exhibit A hereto by Defendant No.10 to Defendant nos.2 to 9 under the
purported Agreement dated 5th December, 2002 is illegal, null and void and
of no legal effect;

t) That this Hon’ble Court may be pleased to direct Defendant Nos.2 to 9
and 10 to deliver up the that the said Agreement dated 05.12.2002 at Ex: CC
for cancellation and this Hon’ble Court be pleased to cancel the same;

u) That this Hon’ble Court be pleased to issue an Order and injunction
restraining Defendant Nos.2 to 10 from exercising any rights whatsoever in
respect of the 75001 suit shares (more particularly described in the
schedule annexed as Exhibit A hereto) as also from representing to the
public at large that they are owners of the suit shares or have any
beneficial interest therein;

v) That this Hon’ble Court be pleased to declare that the purported
Development Agreement dated 4.2.2008 (Exhibit MM hereto) and both the
powers of attorney dated 05.02.2008 (Exhibit NN & OO thereto) and any other
documents or acts in pursuance thereof are illegal, null and void and of no
legal effect;

w) That this Hon’ble Court be pleased to direct the Defendants Nos.1 to
10 and 12 to deliver up the Development Agreement dated 04.02.2008 (Exhibit
MM hereto) along with the powers of attorney dated 05.02.2008 (Exhibit NN &
OO hereto) are illegal, null and void and of no legal effect; for
cancellation and this Hon’ble Court be pleased to cancel the same;

x) That this Hon’ble Court be pleased to declare that the purported
mortgage Deed dated 23.3.2008 at Exhibit XX hereto said to have been
created by Defendant No.12 in favour of Defendant No.13 is illegal, null
and void and of no legal effect;

y) That this Hon’ble Court be pleased to direct Defendant Nos.1 to 10,
12 and 13 to deliver up the said deed of mortgage dated 23.3.2008 at
Exhibit XX hereto or cancellation and this Hon’ble Court be pleased to
cancel the same;

z) That this Hon’ble Court be pleased to Order and decree Defendant
nos.2 to 10 to jointly and severally pay to the Plaintiff,
damages/compensation in the sum of Rs.500 crores as per the Particulars of
Claim annexed herewith as Exhibit ZZ along with interest thereon at the
rate of 18% per annum from the date of the suit till payment and/or
realisation;”

We understand that none of the defendants have filed their written
statements and no issues are framed so far.

27. It is in the background of the above-mentioned litigation these SLPs
are to be examined.

SLP(C) Nos. 33429-33434 of 2010 is filed by MHL with prayers:

“a) Grant special leave to appeal under Article 136 of the Constitution
of India against the impugned Final Judgment and Order dated 1.9.2010
passed by the Hon’ble High Court of Judicature at Bombay in Appeal No. 855
of 2003 in Notice of Motion No. 534 of 2002 in Suit No. 509 of 2001 with
Notice of Motion No. 1308 of 2005, Notice of Motion No. 3956 of 2005,
Notice of Motion No .4118 of 2007, Notice of Motion No. 1973 of 2008,
Notice of Motion No. 1418 of 2008; and

Pass such other order or orders as this Hon’ble Court may deem just and
proper in the facts and circumstances of the case.”

SLP(C) Nos.23088-23090 of 2012 is filed by GGL with prayers:

“a) grant Special Leave to Appeal against the impugned order dated
01.09.2010 passed by the Hon’ble High Court of Bombay in Appeal Nos. 840 of
2003, 841 of 2003 and 857 of 2003, whereby the Hon’ble High Court was
pleased to dismiss the appeals filed by the Petitioner Company and uphold
the order dated 26.03.2003 passed by the Ld. Single Judge in Notice of
Motion Nos. 3230 of 2000, 1231 of 2003 in Suit No. 2499 of 1999 and 392 of
2001 in Suit No. 509 of 2001; and

pass such other and further orders as this Hon’ble Court may deem just and
proper in the facts and circumstances of the present case.”

Both the sets of SLPs are filed aggrieved by the common order of a
Division Bench of Bombay High Court dated 01.09.2010 in Civil Appeals No.
855/2003, 840/2003, 841/2003 and 857/2003.

28. Civil Appeal 855/2003 was filed by MHL and the other three appeals
were filed by GGL. All the four appeals alongwith the various Notice of
Motions were dismissed with costs[7].

29. The subject matter of appeal No.855/203 is the order of the Single
Judge in Notice of Motion 534/2002 in SUIT-III. In the said Appeal, five
Notice of Motions were filed. They are 1308/2005, 3956/2005, 4118/2007,
1973/2008 and 1418/2008 seeking various reliefs.

30. The subject matter of appeals no.840, 841 and 857 of 2003 is order
dated 26.03.2003 of the Single Judge in Notice of Motion Nos.3230/2000 &
1231/2003 in SUIT-II and Notice of Motion No.392/2001 in Suit III. Both
the abovementioned Suits were filed by RUIAS.

31. SUIT-I is admittedly withdrawn, therefore, any order passed during
the pendency of the said suit by any court (including this Court) in any
proceeding arising out of the said suit automatically lapses with the
withdrawal of the suit. A logical consequence flowing from such lapsing
of the orders is that any act or omission of any party to the said suit,
either in pursuance of or in obedience to such interlocutory orders would
be without any legal efficacy.

32. SUITS II and III filed by the RUIAS are pending as of today. The
substance[8] of SUIT-II is that RUIAS do not want MGG to transfer any of
the shares of BOCL acquired by MGG pursuant to AGREMEENT-II in favour of
either GGL or MHL or any other person without first offering them to RUIAS.
Such a transfer in the opinion of RUIAS would be in violation of Clause 6.1
of the AGREEMENT-II.

Coming to SUIT-III, RUIAS want to wriggle out of the AGREEMENT-II and
therefore, the various alternative prayers! in substance seeking to nullify
the acquisition of 75001 shares by MGG under AGREEMENT-II[9]. They also
rely upon the events subsequent to 23.06.1997 - transactions between GGL
and MGG etc. and seek various prayers which are already noticed[10].
Having filed SUIT-III, RUIAS once again amended the SUIT-II enlarging the
scope of the Suit. Whether such amendments are legally tenable or not is a
question to be examined from the point of view of the principles governing
the law on the question of joinder of causes of action etc. Apart from
that the continuance of the SUIT-II and SUIT-III simultaneously raises too
many questions regarding their maintainability.

However, in our view, such questions need not be examined because RUIAS and
MGG entered into an agreement dated 05.12.2002 the gist of which is noticed
earlier at para 20 (supra). By the said agreement, RUIAS also agreed not
to prosecute SUITS-II and III insofar as the suits pertain to “MGG or its
affiliates….” etc.

“(a) not to prosecute the following proceedings pending in the Bombay High
Court and in Supreme Court of India against “MGG” or its affiliates or its
directors, officers or employees (excluding “MHL” and Goyal MG Gases Ltd.
but including directors nominated by “MGG” on the Board of “MHL” and/or
Goyal MG Gases Ltd.);

Civil Suit No.2499 of 1999 titled Shyam Madan Mohan Ruia & Ors. v. Messer
Griesheim GmbH & Ors.

Civil Suit No.509 of 2001 titled Shyam Madan Mohan Ruia & Ors. v. Messer
Griesheim GmbH & Ors.”

As a matter of fact, during the course of hearing of these SLPs also, both
RUIAS and MGG supported the case of each other in opposing these SLPs filed
by MHL and GGL.

33. As a consequence of the settlement dated 5.12.2002, RUIAS claim title
in 75001 shares of BOCL through MGG. We have already noticed, the said
75001 shares were initially acquired by MGG from RUIAS and the public under
AGREEMENT-II. But, so far the names of RUIAS are not entered in the
registers of BOCL as the holders of the share because of the various
interim orders mentioned earlier.

34. However, GGL and MHL dispute the title of MGG to the said 75001
shares. According to GGL and MHL, by the settlement dated 5.12.2002 MGG
had itself lost its title over the said shares as it had already
transferred its title in the said shares in favour of MHL pursuant to the
consent award dated 21.9.2000.

35. The existence of title in MGG in the said 75001 shares cannot be
disputed by either GGL or MHL, at least, till the date of the consent
award, i.e. 21.9.2000 because GGL and MHL’s claim for title over the said
shares flows from MGG’s prior title and the subsequent alleged transfer
pursuant to the consent award. In such a case, because of MGG’s purported
transfer of the title in the 75001 shares to RUIAS under the settlement
dated 5.12.2002, RUIAS should normally be entitled to have their names
entered into the records of BOCL as holders of the said shares by following
appropriate procedure. If either GGL or MHL is objecting to the right of
MGG to effect the said transfer in favour of RUIAS, they must establish a
superior title (to MGG) in the said shares. It goes without saying that it
can be done only in some legal action initiated by either GGL or MHL or
both jointly. But they cannot seek a declaration of their title in the
SUITS-II and III filed by the RUIAS. In a bid to establish their title MHL
filed SUIT-IV[11]. The right of MHL, if any, will have to be decided in
the said Suit. Until the said suit is decided, we do not see any ground in
law on which either GGL or MHL can object to the transfer of the shares in
favour of RUIAS pursuant to the settlement dated 5.12.2002.

36. What exactly is the procedure which RUIAS are required to follow to
effectuate the transfer of shares pursuant to the settlement dated
5.12.2002 is for RUIAS to explore. Because during the long pendency of the
instant litigation there is a considerable change in the law regarding the
procedure governing the transfer of shares in companies by virtue of
amendments in the Companies Act, 1956 and the advent of the Depositories
Act, 1996 etc. We make this observation because the 75001 shares acquired
by MGG pursuant to AGREEMENT-II could not be registered in the name of
MGG[12] because of the various interim orders passed by various courts at
different stages in SUITS-I, II and III. SUIT-I was withdrawn by the
plaintiff (GGL). In view of the subsequent settlement dated 5.12.2002
between MGG and RUIAS, no dispute survives between MGG and RUIAS.
Therefore, SUITS-II and III are required to be dismissed as without any
cause of action insofar as MGG and its officers etc., neither MHL nor GGL
can compel RUIAS to prosecute those suits.

37. Then we are left with the questions of continuance of SUITS II and
III against the other defendants (GGl & MHL etc.) and the prayers regarding
the physical custody of the shares[13]. As already noticed from the
settlement dated 5.12.2002, MGG and RUIAS are uncertain about the
whereabouts and custody of 75001 shares! of BOCL which were initially
acquired by MGG[14]. RUIAS having entered into settlement dated 5.12.2002
knowing fully well that MGG was not going to give custody of the above-
mentioned 75001 shares, purported to purchase the said shares and agreed
not to prosecute the SUITS-II and III against MGG. In such a case,
continuing the suits either against GGL or MHL or its agents etc. only for
the custody of the shares, in our opinion, is without any cause of action
on the part of the RUIAS. The prayers in SUIT-II and III in this regard
are:

(ii) that the 1st defendant Nos. 1, 3, 4 and 5 be ordered and decreed to
deliver/return to the respective plaintiffs the said 45,001 75,001 shares
together with all accretions thereto from 23rd June, 1997 on such terms as
this Hon’ble Court directs.
-
SUIT- II

j) that the 1st defendant be ordered and decreed to deliver/return to
the respective plaintiffs the said 45,001 shares together with all
accretions thereto from 23rd June 1997 on such terms as this Hon’ble Court
directs.

- SUIT-III

i.e. for a declaration in favour of RUIAS that they are entitled to the
recovery of 75001 shares jointly against MGG, GGL and MHL etc. RUIAS
having agreed not to prosecute the suits against MGG cannot continue the
suits against other defendants in the suits whose claim (if any) rests on
the right and title of MGG.

The continuance of the SUITS-II and III, in our opinion, is, therefore,
wholly without any cause of action and an abuse of the judicial
process.[15] They are, therefore, required to be dismissed and accordingly
dismissed. Consequently, all the interim orders passed by the various
Courts (including this Court) earlier in proceedings arising out of the
said two suits lapse. We also declare that all interim orders passed by
any Court in any proceeding arising out of SUIT-I also lapsed in view of
the withdrawal of the suit by GGL.

Therefore, these SLPs filed by MHL and GGL purportedly aggrieved by the
impugned orders passed in the various applications filed in the two suits
filed by RUIAS become infructuous. Therefore, the said SLPs arising
therefrom are dismissed.

38. The consequent factual position would be:

(i) the legal rights acquired (whatever they are) by MGG in 45001 shares
of BOCL purchased from RUIAS pursuant to AGREEMENT-II should revert back to
RUIAS unless it is found that the purported transfer of 45001 shares by MGG
pursuant to the consent award dated 21.09.2000 in favour of MHL created any
right or interest in favour of MHL. Such a claim of MHL can only be
examined in SUIT-IV filed by MHL.

(ii) Another 30000 shares were acquired by MGG from the public pursuant to
AGREEMENT-II MGG purported to transfer them by virtue of the settlement
dated 05.12.2002 in favour of RUIAS. If either GGL or MHL has any claim
over those shares, such a claim must be made and established by them in
accordance with law, but not in the suits filed by RUIAS. In order to
establish such a claim, MHL already filed SUIT-IV to which both GGL and MGG
are parties apart from Goyals and others.

39. However, in the absence of any legally established title as on today to
the abovementioned shares in any party other than MGG[16], whether RUIAS
would be entitled pursuant to the settlement dated 05.12.2002 to have their
names entered into the registers of the BOCL as holders of the said shares
is a matter for RUIAS to explore[17]. However, such an entitlement if any
should be subject to the result of the SUIT-IV.

40. We make it clear that we are not deciding by this order, the
existence or otherwise of any right or its enforceability in the 75001
shares of BOCL in favour of either MHL or GGL. It is open to them to
establish their right in SUIT-IV. The defendants in the SUIT-IV are at
liberty to raise every defence available in law and fact to them.

41. A great deal of effort was made both by RUIAS and MGG to convince the
court that in view of the protracted litigation between the parties this
court should examine all the questions of rights, title and interest in
these shares between the various parties as if this were the court of first
instance trying these various suits.

42. The examination of various questions raised by the petitioners in
these SLPs, in our opinion, is wholly uncalled for in the abovementioned
factual background.

43. The net effect of all the litigation is this. For the last 18 years,
the litigation is going on. Considerable judicial time of this country is
spent on this litigation. The conduct of none of the parties to this
litigation is wholesome. The instant SLPs arise out of various
interlocutory proceedings. Arguments were advanced on either side for a
period of about 18 working days as if this Court were a Court of Original
Jurisdiction trying the various above-mentioned suits. The fact remains
that in none of the suits even issues have been framed so far. The
learned counsel appearing for the parties very vehemently urged that there
should be a finality to the litigation and therefore this Court should
examine every question of fact and law thrown up by the enormous
litigation. We believe that it is only the parties who are to be blamed
for the state of affairs. This case, in our view, is a classic example of
the abuse of the judicial process by unscrupulous litigants with money
power, all in the name of legal rights by resorting to half-truths,
misleading representations and suppression of facts. Each and every party
is guilty of one or the other of the above-mentioned misconducts. It can
be demonstrated (by a more elaborate explanation but we believe the facts
narrated so far would be sufficient to indicate) but we do not wish to
waste any more time in these matters.

44. This case should also serve as proof of the abuse of the
discretionary Jurisdiction of this Court under Article 136 by the rich and
powerful in the name of a ‘fight for justice’ at each and every
interlocutory step of a suit. Enormous amount of judicial time of this
Court and two High Courts was spent on this litigation. Most of it is
avoidable and could have been well spent on more deserving cases.

This Court in Ramrameshwari Devi & Others v. Nirmala Devi & Others, (2011)
8 SCC 249 observed at para 54;

“54. While imposing costs we have to take into consideration pragmatic
realities and be realistic as to what the defendants or the respondents had
to actually incur in contesting the litigation before different courts.
We have to also broadly take into consideration the prevalent fee structure
of the lawyers and other miscellaneous expenses which have to be incurred
towards drafting and filing of the counter-affidavit, miscellaneous charges
towards typing, photocopying, court fee, etc.”

45. We therefore, deem it appropriate to impose exemplary costs
quantified at Rs.25,00,000.00 (Rupees Twenty Five Lakhs only) to be paid by
each of the three parties i.e. GGL, MGG and RUIAS. The said amount is to
be paid to National Legal Services Authority as compensation for the loss
of judicial time of this country and the same may be utilized by the
National Legal Services Authority to fund poor litigants to pursue their
claims before this Court in deserving cases.

….………….……………….J.
(J.
Chelameswar)

…….……….……………….J.
(Abhay Manohar Sapre)
New Delhi;
April 19, 2016
-----------------------
[1] For the aforesaid reasons, we allow both the appeals and restrain
Messer from taking any steps to acquire shares of BOCL in pursuance of
Share Purchase Agreement dated 23rd June, 1997, till the decision of the
arbitration proceedings and the suit. In the facts and circumstances of
the case parties are left to bear their own costs. [FAO (OS) No.251 of
1998 and FAO (OS) No.250 of 1998]

[2] It is stated in the IAs No.17-18 of 2000 regarding the settlement
as follows:-

Para 7. The original dispute between the appellant and the respondent
No.1 was regarding the acquisition of shares in Bombay Oxygen Corporation
Ltd. and the control thereof. The appellant and the respondents have since
settled their dispute. Under the settlement, the parties have agreed that
the 75001 shares (of Bombay Oxygen Corporation Ltd.) purchased at a price
of Rs.22.5 crores shall now be registered in the name of a new company
Messer Holdings Ltd., referred to herein below.

Para 8. Pursuant to the settlement the appellant and the respondent
No.1 (through its subsidiary) have incorporated a joint venture company
outside India being Messer Holdings Ltd. In fact, this compromise was
contemplated by the parties during the hearing of the above civil appeals
but could not be materialized before the disposal of the civil appeals. It
is in the name of Messer Holdings Ltd. that the parties propose to register
the 75001 shares.

[3] The whole process is strange. GGL simultaneously pursued the
remedies (Suit-I and an arbitration proceeding) for the resolution of the
dispute with MGG when the parties to the suit settled their dispute by
mutual agreement, there is no need to approach this Court by filing
interlocutory applications in appeals which had already been disposed off.
More particularly, when those appeals arose out of interlocutory
proceedings (i) in a pending suit, and (ii) a proceeding under Section 9 of
the A & C Act, 1996 which empowers the “civil court” to pass appropriate
orders as an interim measure for protecting the interests of parties to a
dispute which the parties had agreed to get resolved by an arbitration.
If really the dispute between the parties is settled, nothing prevented the
plaintiff (GGL) from either withdrawing the suit or praying for a decree in
terms of the settlement between the parties, or in the alternative, praying
the arbitrators to pass an award in terms of the settlement between the
parties, because under the A&C Act, 1996 an award is as efficacious as a
decree of a civil court. But the parties i.e, MGG and GGL desired “to
withdraw from arbitration proceedings”.

[4] As required under the law as it was on that date

[5] Prayer (a) - That pending the hearing and final disposal of the
suit defendant Nos.1, 3 and 4 be restrained by an ordr of injunction of
this Hon’ble Court from:

(i) committing breach of clause 6.1 of the agreement dated 23rd June,
1997 being Ex.”B” to the plaint.

[6] Appeal No. 855 of 2003 on the file of the Bombay High Court was
filed by MHL aggrieved by an order dismissing N.M. no .534 of 2002 in Suit-
II filed by MHL seeking the appointment of an administrator to BOCL and
Receiver for the assets of the said Company.

[7] All the four Appeals being Appeal Nos.855/2003, 840/2003, 841/2003
and Appeal No.857/2003 are dismissed with costs.

Notice of Motion Nos. 1308/2005, 3956/2005, 4118/2007, 1973/2008,
1418/2008, 29/2006, 3112/2003, 3113/2002 and Notice of Motion No.3115/2003
in the respective Appeals are also disposed of with the above observations.

[8] RUIAS amended the said suits from time to time we find it a little
difficult to understand the legality and the purpose of the SUIT-II and its
amendment subsequent to the filing of the SUIT-III We do not wish to
examine those questions as such enquiry would be purposeless at this stage
in view of the subsequent developments.

[9] Prayers (a) to (f) of Suit-III (See para 17 supra)

[10] Prayer (g) to (k) of Suit III (See para 17 supra)

[11] See prayer (q) in SUIT IV (extracted at para 26 supra)

[12] See para 7 and 11(a) of the settlement dated 5.12.2002 extracted at
para 20 supra

[13] There is no whisper in the plaints of either Suit II or III, of MGG
having had obtained the custody of the share certificates either from RUIAS
(of 45001 shares) or from the public (of 30000 shares).

[14] See paras 6 and 7 of the settlement dated 5.12.2002 extracted at
para 20 supra.

[15] See K.K. Modi v. K.N. Modi & Others, (1998) 3 SCC 573

Para 42- “Under Order 6 Rule 16, the court may, at any stage of the
proceeding, order to be struck out, inter alia, any matter in any pleading
which is otherwise an abuse of the process of the court. Mulla in his
treatise on the Code of Civil Procedure, (15th Edn., Vol. II, p. 1179, note
7) has stated that power under clause (c) of Order 6 Rule 16 of the Code is
confined to cases where the abuse of the process of the court is manifest
from the pleadings; and that this power is unlike the power under Section
151 whereunder courts have inherent power to strike out pleadings or to
stay or dismiss proceedings which are an abuse of their process. In the
present case the High Court has held the suit to be an abuse of the process
of the court on the basis of what is stated in the plaint.”

Para 43- “The Supreme Court Practice 1995 published by Sweet &
Maxwell in paragraphs 18/19/33 (p. 344) explains the phrase “abuse of the
process of the court” thus:

“This term connotes that the process of the court must be used bona
fide and properly and must not be abused. The court will prevent improper
use of its machinery and will in a proper case, summarily prevent its
machinery from being used as a means of vexation and oppression in the
process of litigation. … The categories of conduct rendering a claim
frivolous, vexatious or an abuse of process are not closed but depend on
all the relevant circumstances. And for this purpose considerations of
public policy and the interests of justice may be very material.” ”

Para 44- “One of the examples cited as an abuse of the process of the
court is relitigation. It is an abuse of the process of the court and
contrary to justice and public policy for a party to relitigate the same
issue which has already been tried and decided earlier against him. The
reagitation may or may not be barred as res judicata. But if the same issue
is sought to be reagitated, it also amounts to an abuse of the process of
the court. A proceeding being filed for a collateral purpose, or a spurious
claim being made in litigation may also in a given set of facts amount to
an abuse of the process of the court. Frivolous or vexatious proceedings
may also amount to an abuse of the process of the court especially where
the proceedings are absolutely groundless. The court then has the power to
stop such proceedings summarily and prevent the time of the public and the
court from being wasted. Undoubtedly, it is a matter of the court's
discretion whether such proceedings should be stopped or not; and this
discretion has to be exercised with circumspection. It is a jurisdiction
which should be sparingly exercised, and exercised only in special cases.
The court should also be satisfied that there is no chance of the suit
succeeding.”

[16] Even MGG’s claim was that they had only a beneficial interest in the
said shares, as the shares were never registered in the name of MGG.

[17] There is no prayer in the Suits II and III seeking the declaration
of title of RUIAS based on the settlement dated 05.12.2002 - for that
matter, there is no whisper about the said settlement!

construction of the terms of a Contract is primarily for an Arbitrator or Arbitral Tribunal to decide and unless the Arbitrator or Arbitral Tribunal construes the contract in such a way that no fair minded or reasonable person could do, no interference by Court is called for.

Non-Reportable

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.2529 of 2016
(Arising out of SLP (Civil) No.9223 of 2014)

National Highways Authority of India ….Appellant

Versus

M/S JSC Centrodorstroy …. Respondent

WITH

CIVIL APPEAL NO. 2530 of 2016
(Arising out of SLP (Civil) No.9494 of 2014)

J U D G M E N T

Uday U. Lalit, J.

1. These appeals by special leave arise out of common judgment and order
dated 20.12.2013 passed by the High Court of Delhi at New Delhi in FAO (OS)
588 of 2013 and in FAO (OS) 590 of 2013. The questions raised in these
appeals being identical, the appeals are dealt with by this common judgment
and for the sake of convenience, the facts leading to the filing of FAO
(OS) 588 of 2013 are dealt with in detail.

2. Contract No.TNHP/2, Construction Package II-C for a contract
price of Rs.295.53 crores for executing the work of 4-laning and
strengthening of the existing 2 lanes sections between km 38 to km 115 on
National Highway-2 in Uttar Pradesh was awarded to the Respondent on
12.03.2001.

3. Clause 14.3 of “Instruction to Bidder” was as under:-
“All duties, taxes and other levies payable by the Contractor under the
contract, or for any other cause, as of the date 28 days prior to the
deadline for submission of bids, shall be included in the rates and prices
and the total Bid Price submitted by the bidder.”

The parties adopted FIDIC form of conditions of contract with some
changes which are called Conditions of Particular Application (“COPA”, for
short). Clauses in COPA in the present case are identical to those dealt
with by this Court in National Highways Authority of India Versus ITD
Cementation India Ltd.[1]. Clause 70.8 dealing with effect of “Subsequent
Legislation” was as under:-

“Clause 70.8: Subsequent Legislation
If, after the date 28 days prior to the closing date for submission of bids
for the Contract there are changes to any National or State Statute,
Ordinance, Decree or other Law or any regulation or by-law of any local or
other duly constituted authority or the introduction of any such State
Statute, Ordinance, Decree, Law, regulation or by-law in India or States of
India which causes additional or reduced cost to the Contractor, other than
under the preceding Sub-Clauses of this clauses in the execution of the
contract, such additional or reduced cost shall, after due consultation
with the Employer and the Contractor, be determined by the Engineer and
shall be added to or deducted from the Contract Price and the Engineer
shall notify the Contractor accordingly with a copy to the Employer.
Notwithstanding the foregoing, such additional or reduced cost shall not be
separately paid or credited if the same shall already have been taken into
account in the indexing of any inputs to the Price Adjustment Formulae in
accordance with the provisions of Sub-Clauses 70.1 to 70.7 of this Clause.”

4. Disputes having arisen between the parties, the matter was referred
to the Arbitral Tribunal. Two claims were raised by the respondent
namely:

“(i) Dispute No. 1
Compensation for additional cost on account of increase in Service Tax on
the Insurance Premium under the Insurance Policy for the Project.

(ii) Dispute No. 2
Compensation for additional cost on account of Service Tax on the Bank
Guarantee charges.”

5. It was submitted by the respondent-claimant that in terms of Clause
21.1 of General Conditions of contract, for the works awarded under the
contract, an insurance policy was required to be taken w.e.f. 1.4.2001
initially for a period to 13.09.2006 which was later extended to
30.09.2009. It was submitted that General Insurance
Policies including insurance for works were subject to levy of service
tax which would be collected by the Insurance Company along with premium
chargeable. There being revisions in the rate of service tax from 5% to
10.30%, over a period of time, according to the claimant service tax paid
in excess of 5% was reimbursible by the appellant under Clause 70.8 of
COPA. Similarly, in terms of the Clause 10.1 of COPA, the respondent-
claimant was required to furnish Bank Guarantee for due execution of the
contract by way of performance security. Service tax in relation to the
Bank Guarantee as collected by the Bank had risen from 5% to 10.30% during
the course of the contract and as such according to the respondent-claimant
it was entitled to be reimbursed by virtue of Clause 70.8 of COPA. The
Arbitral Tribunal by its unanimous award dated 28.2.2013 accepted the
aforesaid claims and directed that the respondent-claimant shall be paid
following sums in relation to dispute No.1:-

“6.1 The Claimant shall be paid by the Respondent an amount of Rs.
11,34,877/- on account of Service Tax paid by him at rates in excess of 5%
of the premium paid.

6.2 The Claimant shall also be paid by the Respondent a sum of Rs.
11,22,811 towards interest on the above amount for period upto the date of
this award i.e. 28.02.2013.

6.3 Post award interest shall be payable in addition, on the principal sum
awarded of Rs. 11,34,877/- at the rate of 12% per annum from 01.03.2013 to
the actual date of payment of amounts under pars 6.1 & 6.2 above. No post
award interest shall however be payable in case the above sums are payable
within 90 days of the date of award.”

Similarly the Arbitral Tribunal awarded to the respondent-claimant
following sums under dispute No. 2:-
“10.1 The Claimant shall be paid by the Respondent an amount of Rs.
63,58,368/- on account of additional cost incurred on the Bank Guarantees
furnished to the Respondent in terms of the Contract.

10.2 The Claimant shall also be paid by the Respondent a sum of Rs.
43,84,987/- towards interest on the above amount for period upto the date
of this award i.e. 28.02.2013.

10.3 Post award interest shall be payable in addition on the awarded sum of
Rs. 63,58,368/- at the rate of 12% per annum (simple) from the date of
award to the actual date of payment of the said sum. No post award interest
may, however, be paid in case the sums awarded under 10.1 and 10.2 above
are paid within 90 days of the date of the award.”

6. The award passed by the Arbitral Tribunal proceeds on the ground that
the additional costs as a result of revision in service tax which the
respondent-claimant was required to bear, were covered under Clause 70.8 of
COPA. It was observed that service tax was not an input to the indices used
in Prices Adjustment Formulae in Clause 70.3. It concluded as under:-

“The claim in question is for reimbursement of additional costs resulting
from change in Central Law which came into effect after the base date as
defined in Sub-Clause 70.8. In terms of the Sub-clause, such costs are not
payable separately if the same have already been taken into account in
indexing of the inputs in Price Adjustment Formulae under Sub-clause 70.3.
The Claimant has placed on record a letter dated 24.01.2008 from the
Economic Advisor, Ministry of Commerce and Industry, confirming that
Service Tax was not an input into indexing of Whole Sale Price Indices,
used in India.”

7. The award passed by the Arbitral Tribunal was challenged by the
appellant by filing OMP No.623 of 2013 under Section 34 of the Arbitration
and Conciliation Act, 1966 before the High Court of Delhi. By order dated
21.10.2013 Single Judge of the High Court dismissed said petition. In an
appeal arising therefrom i.e. in FAO(OS)588 of 2013, the Division Bench of
the High Court by its judgment and order dated 20.12.2013, which is
presently under challenge, affirmed the view taken by Single Judge and
dismissed the appeal.

8. The facts leading to the present appeal arising out of FAO(AS)590 of
2013 are more or less identical. In that matter identical claims were
raised on two counts but arising out of a different contract by the very
same claimant. The Arbitral Tribunal granted Rs.8,84,969/- in respect of
dispute no. 1 with interest @ 12% per annum under identical two heads as
found in the earlier case. Similarly, in respect of dispute no.2, the
Arbitral Tribunal awarded Rs.42,35,385/- with interest @ 12% per annum.

9. In NHAI v. ITD Cementation India Ltd.(Supra) impact of Clauses 70.1
to 70.7 on one hand and 70.8 of COPA was considered and the view taken by
the Arbitral Tribunal as affirmed by the High Court was accepted. In that
case impact as a result of increase in the rates of royalty and issue
whether the Arbitral Tribunal was right in observing that the case was
covered under Clause 70.8 of COPA were considered by this court. The view
taken by the Arbitral Tribunal was found to be consistent with the terms of
the contract and challenge at the instance of National Highways Authorities
of India was negated.

10. The fact that there had been revision in the rates of service tax
from time to time was not disputed by the appellant. Ms. Indu Malhotra,
learned Senior Counsel appearing for the appellants in both the matters,
however, submitted that only those claims which were constructional inputs
alone would be eligible to be covered under Clause 70 of COPA. In her
submission, the service tax on bank guarantee could have been avoided by
the claimant, if the bank guarantee was replaced by tendering cash and
that the facility of bank guarantee was optional and at the discretion of
the claimant. Similarly, money advances were given for the benefit of the
claimant and any cost associated with such benefit would not come within
the scope of Clause 70.8. Mr. Biswajit Das, learned Advocate appearing
for the respondent-claimant in both the appeals however, submitted that
the bank guarantees were required to be given under the contract itself and
such requirement was stipulated by the appellant primarily to reduce its
financial risk and to bind the claimant for its performance or
protecting the money advanced to the respondents. In his submission,
furnishing a performance bank guarantee @ 10% of the contract price was a
mandatory condition of the contract under Clauses 10.1 and 10.2 of COPA.
Though at some stage the option of performance bond was mentioned in COPA,
such option was withdrawn making performance security to be compulsorily in
the form of an unconditional bank guarantee. Such requirement being
directly referable to essential conditions and arising out of the terms of
the Contract, according to him the matter was definitely within the ambit
of Clause 70.8 of COPA.

11. Having considered rival submissions, we are of the view that the
assessment made by the Arbitral Tribunal in the instant case as affirmed by
the High Court was definitely within its jurisdiction. It has
consistently been laid down by this Court that construction of the terms
of a Contract is primarily for an Arbitrator or Arbitral Tribunal to
decide and unless the Arbitrator or Arbitral Tribunal construes the
contract in such a way that no fair minded or reasonable person could do,
no interference by Court is called for. Viewed thus, we do not see any
reason or justification to interfere in the matter. The view that the
increase in rates of service tax in respect of bank guarantee and insurance
premium is directly relatable to terms of the contract and performance
under the Contract is certainly a possible view.

12. In the circumstances, we do not find any merit in the present
appeals. Both the appeals are dismissed without any order as to costs.

…………………………….J
(Dipak Misra )

…………………………….J
(Uday Umesh Lalit)

New Delhi
April 18, 2016
-----------------------
[1]
[2] 2015(6) SCR 107

Essentiality Certificate- In this context, we may profitably refer to the decision in D.Y. Patil Medical College v. Medical Council of India & Anr.[2] wherein the controversy had arisen due to rejection of the application of the institution on the ground that Essentiality Certificate was not filed along with the application form. The Court dwelled upon the principles stated in Educare Charitable Trust v. Union of India & Anr.[3], Royal Medical Trust (supra) and various other decisions and, after anaylsing the scheme of the Act, has held:- “It is apparent from the aforesaid decision and the regulations that the application at the first instance is required to be complete and incomplete applications are liable to be rejected. Thereafter, there has to be an inspection and other stages of decision-making process.” - The application for grant of approval was filed with the Essentiality Certificate which was a conditional one and, therefore, a defective one. It was not an Essentiality Certificate in law. In such a situation, the High Court could not have directed for consideration of the application for the purpose of the inspection. Such a direction, we are disposed to think, runs counter to the law laid down in Educare Charitable Trust (supra) and Royal Medical Trust (supra). We may further proceed to state that on the date of the application, the Essentiality Certificate was not in order. The Schedule prescribed by the MCI, which had been approved by this Court, is binding on all concerned. MCI cannot transgress it. The High Court could not have gone beyond the same and issued any direction for conducting an inspection for the academic year 2016-17. Therefore, the directions issued by the learned single Judge and the affirmation thereof by the Division Bench are wholly unsustainable.Consequently, the appeal is allowed and the judgments and orders passed by the High Court are set aside. It will be open to the Trust to submit a fresh application for the next academic year in consonance with the provisions of the Regulations of the MCI and as per the time Schedule; and in that event, it will be considered appropriately.

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.3964 OF 2016
(Arising out of S.L.P.(C) NO.5326 OF 2016)

Medical Council of India ... Appellant(s)
Versus
V.N. Public Health & Educational ... Respondent(s)
Trust & Ors

J U D G M E N T

Dipak Misra, J.

Leave granted.
2. The first respondent, V.N. Public Health & Educational Trust (for
short, “the Trust”), vide letter dated 30.08.2015 submitted an application
for establishment of a new medical college from the academic year 2016-17
to the competent authority of the Central Government and the said
application dated 30.08.2015 was forwarded by the Government of India to
the appellant, Medical Council of India (MCI) vide letter dated 23.09.2015.
After initial scrutiny of the application, MCI noticed that the
Essentiality Certificate issued by the Government of Kerala in favour of
the Trust was not valid as the same was not in accordance with the format
prescribed by the Establishment of the Medical College Regulations, 1999
(for short, “the Regulations”) of the MCI. Regard being had to the nature
of the Essentiality Certificate and the decision of this Court in Royal
Medical Trust (Registered) and another v. Union of India & another[1], the
MCI decided to recommend to the Central Government to disapprove the
application submitted by the Trust for establishment of a new medical
college commencing from the academic year 2016-17. The Government of India
vide its letter dated 04.11.2015 called upon the Trust to appear before the
Committee on 16.11.2015 to explain its stand. As the said respondent failed
to appear before the concerned Committee on the date fixed, the matter was
decided ex parte.
3. As the factual score would depict, the Trust being aggrieved by the
issuance of an invalid certificate by the State of Kerala and disapproval
of its scheme for establishment of a new medical college from the academic
year 2016-17 approached the High Court of Kerala at Ernakulam in Writ
Petition (C) No. 35705 of 2015. The learned single Judge vide order dated
25.11.2015 issued the following directions:-

“In the light of Ext.P1 renewal application and the renewed Essentiality
Certificate, this court is of the view that petitioner’s application for
establishment of new Medical College shall not be rejected on account of
any deficiency existed in the renewed certificate. In the meanwhile, there
shall be a direction to the third respondent to pass appropriate orders on
Ext.P6 within ten days. Post after two weeks.”

4. Thereafter the learned single Judge took note of the fresh
Essentiality Certificate and the following directions were issued as per
the order dated 16.12.2015:-

“The petitioner is an educational agency. They applied for establishment
of a medical college. The original Essentiality Certificate issued by the
State Government suffered from defects as it was not in the required
format. Based on the interim order, the petitioner’s application for
Essentiality Certificate kept pending before the Central Government and the
State Government was directed to consider the application for fresh revised
Essentiality certificate. Now it is submitted that the petitioner has
obtained a fresh Essentiality Certificate and it has been submitted before
the first respondent. Therefore the first respondent shall consider the
application and take a decision after hearing the petitioner and do the
needful in accordance with the law.”

5. Dissatisfied with the aforesaid order, the appellant preferred Writ
Appeal No. 96 of 2016. It was contended before the Division Bench that
pursuant to the order passed by the learned single Judge, the Central
Government on 23.12.2015 had asked the MCI to review the recommendation but
the said direction was not possible to be adhered to on account of the time
schedule fixed pertaining to such matters. It was also urged that the
letter of intent had to be issued by the Central Government on or before
15.01.2016 and sufficient time was not available for taking further steps
in the matter. Additionally, it was argued that as per the time schedule,
MCI was required to give the recommendation to the Central Government for
issue of letter of intent by 15.12.2015. The Division Bench, after noting
the submissions, passed the following order:-

“5. Though it is argued by the learned counsel for the appellant that the
time schedule could not be changed, still the Central Government has
sufficient power to extend the time schedule to a certain extent and when
the Central Government had requested the MCI to consider the application in
terms of the letter dated 23.12.2015, we do not think that this Court
should interfere in the matter at this stage of the proceedings.

6. As far as the judgment is concerned, the learned Single Judge had only
directed the Central Government to consider the application of the
petitioner and take a decision after hearing them. That process has
already been completed and Annexure A2 dated 23.12.2015 has been issued by
the Central Government.”

Being of this view, it declined to interfere with the order passed by
the learned single Judge and dismissed the appeal.
6. We have heard Mr. Vikas Singh, learned senior counsel along with Mr.
Gaurav Sharma, learned counsel for the appellant, Ms. Pinky Anand, learned
Additional Solicitor General along with Mr. B. Krishna Prasad, learned
counsel for respondent No. 2 and Mr. Huzefa Ahmadi, learned senior counsel
along with Mr. Ranjiv Ranjan Dwivedi, learned counsel for respondent No. 1
and Mr. M.T. George, learned counsel for respondent No. 3.
7. The focal issue that arises for consideration is whether the learned
single Judge was justified in directing the MCI to take into consideration
the revised Essentiality Certificate submitted by the Trust after 30th of
September, 2015, and whether the Trust had submitted a proper and requisite
Essentiality Certificate along with the application on 30th of August,
2015. As is demonstrable, the Trust had submitted an incomplete
application on 30th of August, 2015 which was forwarded by the Central
Government to the MCI vide communication dated 23.09.2015. Be it stated
that the MCI had noticed that the Essentiality Certificate was on record by
the time the application was forwarded to it. The MCI on scrutiny found
that the Essentiality Certificate was not in accordance with the format
prescribed by the Regulations and accordingly did not recommend for the
approval of the college.
8. Mr. Singh, learned senior counsel for the appellant, has drawn our
attention to the renewed Essentiality Certificate granted by the Government
of Kerala on 31.08.2015. The relevant part of the said Certificate reads
as follows:-

“The Managing Trustee-Secretary, V.N. Public Health & Educational Trust,
NRT Nagar, Theni, Tamil Nadu State has applied for establishment of a
Medical College at Walayar in Palakkad District. On careful consideration
of the proposal, the Government of Kerala has decided to issue an
Essentiality Certificate to the applicant for the establishment of a
Medical College with 150 seats.

It is certified that:

(a) The applicant owns and manages 300 bedded hospital at Palakkad
District.

(b) It is desirable to establish a Medical College in the public
interest.

(c) Establishment of a Medical College at Palakkad District by V.N.
Public Health & Educational Trust is feasible.

(d) The Essentiality Certificate is issued on condition that all
clinical materials as per Medical Council of India norms will be made
available in the hospital within the stipulated time as fixed by the
Medical Council of India.

(e) The Management will share 50% of the total MBBS seats with
Government to fill students from the list prepared by the Commissioner for
Entrance Examinations, Kerala.

It is further certified that in case the applicant fails to create
infrastructure for the Medical College as per Medical Council of India
norms and fresh admissions are stopped by the Central Government, the State
Government shall take over the responsibility of the students already
admitted in the College with the permission of the Central Government.”
[Emphasis added)

9. The pertinent part of the communication dated 19.10.2015 made by the
MCI to the competent authority of the Central Government is as follows:-

“It is to inform you that on perusal of the application/documents submitted
by the applicant, it is noted that as per the Essentiality Certificate
dated 31/08/2015 issued by the Government of Kerala “The Essentiality
Certificate is issued on condition that all clinical materials as per
Medical Council of India norms will be made available in the hospital
within the stipulated time as fixed by the Medical Council of India.”
However, prescribed proforma for Essentiality Certificate states that “(d)
Adequate clinical materials as per the Medical Council of India norms is
available.”

In view of the above, it is clear that at the time of issuance of
Essentiality Certificate, the applicant does not fulfill the mandatory
qualifying criteria of the availability of the “Adequate clinical material
as per the Medical Council of India norms.” Accordingly, the applicant does
not meet the mandatory criteria prescribed under the regulations.

In this regard, it is further to inform you that the Hon’ble Supreme Court
vide its judgment dated 20/08/2015 in W.P. (C) No. 705/2015-Royal Medical
Trust (Regd.) and Another Vs. Union of India and Anrs. has passed the
following Order:-
“… (A) Initial assessment of the application at the first level should
comprise of checking necessary requirements such as essentiality
certificate, consent of affiliation and physical features like land and
hospital requirement. If an applicant fails to fulfill these requirements,
the application on the face of it, would be incomplete and be rejected.
Those who fulfill the basic requirements would be considered at the next
stage…”

In view of the above, the Council Office has decided to return the
application for establishment of new medical college at Wayalar, Kerala
(Palakkad Institute of Medical Sciences, Palakkad, Kerala) by V.N. Public
Health & Education Trust, Tamilnadu to the Central Govt. recommending
disapproval of the scheme u/s 10A of the IMC Act, 1956 for the academic
year 2016-17, as the applicant fails to fulfill necessary requirement of
availability of the adequate clinical material as per the Medical Council
of India norms.”

10. On a perusal of the Essentiality Certificate dated 31.08.2015, it is
obvious that it is a conditional certificate. The said fact has been
reiterated by the appellant-MCI vide its communication dated 19.10.2015. A
conditional certificate cannot be regarded as the requisite Certificate
inasmuch as the conditions which are essential to the certificate are
required to be fulfilled. On the basis of such a certificate, the MCI was
not expected to approve the application submitted by an educational
institution. It had clearly communicated that the prescribed format
stipulates that adequate clinical material as per the MCI norms “is
available”. Thus, the availability has to be in praesenti but not to be a
condition to be satisfied at a later stage. That is not the postulate in
the Regulations. In Royal Medical Trust (supra), a three-Judge Bench
referring to Section 10-A of the Indian Medical Council Act, 1956 (for
brevity, “the Act’) has ruled that:-

“Section 10-A contemplates submission of a scheme to the Central Government
in the prescribed form, which scheme is then to be referred by the Central
Government to MCI for its appropriate recommendations. The scheme is to be
considered having regard to the features referred to in sub-section (7) and
is then placed before the Central Government along with the recommendations
of MCI. In exercise of powers conferred by Section 10-A read with Section
33 of the Act, MCI with the previous sanction of the Central Government has
made “Establishment of the Medical College Regulations, 1999” (hereinafter
referred to as “the Regulations”) which were published in the Gazette of
India on 28-8-1999. Para 3 of the Regulations lays down that no person
shall establish a medical college except after obtaining prior permission
of the Central Government by submitting a scheme. The Regulations then deal
with the scheme in extenso. Clauses 1 and 2 of the scheme deal with
“eligibility criteria” and “qualifying criteria”, respectively. Clause 3
then sets out certain requirement in parts (i), (ii) and (iii) concerning
various details about the status of the applicant in terms of the
eligibility criteria, name and address of the medical college including
various facets of the infrastructure and planning and the details of the
existing hospital including availability of various facilities and
capacities as also upgradation and expansion programme.”

After so stating, the Court referred to para 7 of the Regulations
which deals with the report of the MCI, and para 8 that deals with grant of
permission by the Central Government. Reference has also been made to the
schedule for receipt of applications for establishment of new medical
colleges and increase of admission capacity in an existing medical college
and processing of the applications by the Central Government and the
Medical Council of India. Thereafter, Court has proceeded to observe:-

“MCI and the Central Government have been vested with monitoring powers
under Section 10-A and the Regulations. It is expected of these authorities
to discharge their functions well within the statutory confines as well as
in conformity with the Schedule to the Regulations. If there is inaction on
their part or non-observance of the time schedule, it is bound to have
adverse effect on all concerned. …”

11. After so stating, the three-Judge Bench has directed the schedule
must ideally take care of:-

“(A) Initial assessment of the application at the first level should
comprise of checking necessary requirements such as essentiality
certificate, consent for affiliation and physical features like land and
hospital requirement. If an applicant fails to fulfil these requirements,
the application on the face of it, would be incomplete and be rejected.
Those who fulfil the basic requirements would be considered at the next
stage.

(B) Inspection should then be conducted by the Inspectors of MCI. By very
nature such inspection must have an element of surprise. Therefore
sufficient time of about three to four months ought to be given to MCI to
cause inspection at any time and such inspection should normally be
undertaken latest by January. Surprise inspection would ensure that the
required facilities and infrastructure are always in place and not borrowed
or put in temporarily.

(C) Intimation of the result or outcome of the inspection would then be
communicated. If the infrastructure and facilities are in order, the
medical college concerned should be given requisite permission/renewal.
However, if there are any deficiencies or shortcomings, MCI must, after
pointing out the deficiencies, grant to the college concerned sufficient
time to report compliance.

(D) If compliance is reported and the applicant states that the
deficiencies stand removed, MCI must cause compliance verification. It is
possible that such compliance could be accepted even without actual
physical verification but that assessment be left entirely to the
discretion of MCI and the Central Government. In cases where actual
physical verification is required, MCI and the Central Government must
cause such verification before the deadline.

(E) The result of such verification if positive in favour of the medical
college concerned, the applicant ought to be given requisite
permission/renewal. But if the deficiencies still persist or had not been
removed, the applicant will stand disentitled so far as that academic year
is concerned.”

12. Mr. Singh, learned senior counsel appearing for the appellant has
drawn our attention to the order dated January 18, 2016 passed in I.A. Nos.
7 & 8 in Writ Petition (Civil) No. 76 of 2015 titled Ashish Ranjan & Ors.
v. Union of India & Ors. wherein the Court had taken note of notification
issued by the MCI with the previous sanction of the Central Government.
The notification has prescribed the time schedule for receipt of
applications for establishment of new medical colleges/renewal of
permission and processing of the applications by the Central Government and
the Medical Council of India. The schedule in this regard reads as follows:-

|“S. |Stage of processing |Last date |
|No. | | |
|1 |Receipt of applications by the |Between 15th June to |
| |Central Government |7th July (both days |
| | |inclusive) of any year |
|2 |Forwarding application by the |By 15th July |
| |Central Government to Medical | |
| |Council of India | |
|3 |Technical Scrutiny, assessment and |By 15th December |
| |Recommendations for Letter of | |
| |Permission by the Medical Council | |
| |of India | |
|4 |Receipt of reply/compliance from |Two months from receipt|
| |the applicant by the Central |of recommendation from |
| |Government and for personal hearing|MCI but not beyond 31st|
| |thereto, if any, and forwarding of |January. |
| |compliance by the Central | |
| |Government to the Medical Council | |
| |of India | |
|5 |Final recommendations for the |By 30th April |
| |Letter of Permission by the Medical| |
| |Council of India | |
|6 |Issue of Letter of Permission by |By 31st May |
| |the Central Government | |

Note 1. In case of renewal of permission, the applicants shall submit the
application to the Medical Council of India by 15th July.

xxx xxx xxx

In exercise of the powers conferred by Section 33 of the Indian Medical
Council Act, 1956(102) of 1956, the Medical Council of India with the
previous sanction of the Central Government, hereby makes the following
Regulations to further amend the “Opening of a New or Higher Course of
Study or Training (including Postgraduate Course of Study or Training) and
increase of Admission Capacity in any Course of Study or Training
(Including a Postgraduate Course of Study or Training) Regulations 2000”,
namely:-

(i) These Regulations may be called the “Opening of a New or Higher Course
of Study or Training (Including Postgraduate Course of Study or Training)
and increase of Admission Capacity in any Course of Study or Training
(including Postgraduate Course of Study or Training (Amendment) Regulations
2015.

(ii) They shall come into force from the date of their publication in the
Official Gazette.”

13. The two-Judge Bench, after reproducing the entire notification which
deals with various situations, has given the stamp of approval to the said
Schedule.
14. In this context, we may profitably refer to the decision in D.Y.
Patil Medical College v. Medical Council of India & Anr.[2] wherein the
controversy had arisen due to rejection of the application of the
institution on the ground that Essentiality Certificate was not filed along
with the application form. The Court dwelled upon the principles stated in
Educare Charitable Trust v. Union of India & Anr.[3], Royal Medical Trust
(supra) and various other decisions and, after anaylsing the scheme of the
Act, has held:-
“It is apparent from the aforesaid decision and the regulations that the
application at the first instance is required to be complete and incomplete
applications are liable to be rejected. Thereafter, there has to be an
inspection and other stages of decision-making process.”

15. The impugned order passed by the High Court is to be tested and
adjudged on the anvil of the aforesaid authorities. The application for
grant of approval was filed with the Essentiality Certificate which was a
conditional one and, therefore, a defective one. It was not an Essentiality
Certificate in law. In such a situation, the High Court could not have
directed for consideration of the application for the purpose of the
inspection. Such a direction, we are disposed to think, runs counter to the
law laid down in Educare Charitable Trust (supra) and Royal Medical Trust
(supra). We may further proceed to state that on the date of the
application, the Essentiality Certificate was not in order. The Schedule
prescribed by the MCI, which had been approved by this Court, is binding on
all concerned. MCI cannot transgress it. The High Court could not have
gone beyond the same and issued any direction for conducting an inspection
for the academic year 2016-17. Therefore, the directions issued by the
learned single Judge and the affirmation thereof by the Division Bench are
wholly unsustainable.
16. Consequently, the appeal is allowed and the judgments and orders
passed by the High Court are set aside. It will be open to the Trust to
submit a fresh application for the next academic year in consonance with
the provisions of the Regulations of the MCI and as per the time Schedule;
and in that event, it will be considered appropriately. In the facts and
circumstances of the case, there shall be no order as to costs.

...............................J.
[Dipak Misra]

...............................J.
[Shiva Kirti Singh]
New Delhi
April 18, 2016
-----------------------
[1]

[2] (2015) 10 SCC 19
[3]

[4] 2015 (10) SCC 51
[5]

[6] AIR 2014 SC 902 : (2013) 16 SCC 474

LAW FOR ALL

LawforAll

advocatemmmohan

Just for legal information but not form as legal opinion

Tuesday, April 19, 2016

construction of the terms of a Contract is primarily for an Arbitrator or Arbitral Tribunal to decide and unless the Arbitrator or Arbitral Tribunal construes the contract in such a way that no fair minded or reasonable person could do, no interference by Court is called for.