Supreme Court of India imposes Exemplary Costs for dragging Litigation for 18 years - Messer Holdings Ltd. v. Shyam Madanmohan Ruia & Others

Messer Holdings Ltd. v. ShyamMadanmohan Ruia & Others

Special Leave Petition (Civil) Nos. 33429-33434 of 2010

Introduction

The case that is going to be discussed is a landmark judgment in the sense that it provides an example as to how the rich and powerful can abuse the judicial process of our country. I will try to be as brief as possible while stating the facts as they are not of much relevance apart from their utility of explaining the abuse and manipulation of the legal proceedings by various parties.

Brief Facts

There are three companies involved in the present case, MGG, GGL and BOCL. The BOCL is owned by the famous business house of Ruias. MGG is a German Company which entered into a Share Purchase Agreement with GGL (Agreement-I) in 1995. It was agreed by both the parties that:

“……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…”

Subsequently, MGG entered into another Share Purchase Agreement (Agreement-II) with BOCL in 1997 wherein it was agreed upon that:

“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……”

When GGL acquired knowledge about the agreement between MGG and BOCL, it objected by saying that it was a violation of the agreement between MGG and GGL (read the abovementioned reproduced clauses of the agreement). Eventually, MGG and GGL entered into another agreement (Agreement-III) in 1997 itself wherein 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.

Ruias came to know of this and stated that such terms were not agreeable to them. In view of this, MGG informed GGL that it was terminating Agreement-III.

Observations by the Court and Opinion

Subsequently, a number of Civil Suits were filed by all the parties and few more agreements were entered into. The Arbitration also took place. Some of the unresolved issued were brought before the Supreme Court and interim reliefs were obtained. The main bone of contention were the shares of BOCL. None of the parties obeyed the dictum of the Courts in spirit or the terms of agreement. The Court in Para 41 of the Order observed that:

“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.”

The Court further said that the litigation is going on for past 18 years and considerable judicial time of this country has been spent on this litigation. The Court also commented on the conduct of the parties. It said that this case 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 is interesting to note that arguments were advanced on either side for a period of a whopping 18 working days. The Supreme Court said that it felt like as if it were a Court of Original Jurisdiction trying the various suits.

The Hon’ble Court dismissed all the SLPs and declared the Suits that were filed by the parties as lapsed except one which would decide the fate of this litigation. Finally, the Court imposed a cost of ₹25,00,000 on each of the parties i.e. MGG, GGL and Ruias.

It is refreshing to see that the courts are adopting such strict approach towards unscrupulous litigants. Recently, in another case titled as M/s Sciemed Overseas Inc.v.  BOC India Limited & Ors. imposed costs of ₹10 Lakhs on filing of a False Affidavit. It is important to punish such parties who abuse the process of the Court. The instant matter would serve as proof of the abuse of the extraordinary powers of the Supreme Court under Article 136 of the Constitution by the rich and powerful in the name of justice at each and every interlocutory step of a suit.