Abuse of judicial process by unscrupulous litigants with money power - Supreme Court imposes Costs of Rs. 25 lakhs on each of litigants
MESSER Griesham GmbH, a German Company ("MGG") entered into a Share Purchase and Cooperation Agreement with the shareholders of an Indian company called Goyal Gases Ltd. ("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%.
In a company known as BOMBAY OXYGEN CORPORATION LIMITED (‘BOCL') majority shares were collectively held by a group of persons known as RUIAS (they belong to one family). On 23.6.1997, MGG entered into another Share Purchase Agreement 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).
Messer Holdings Ltd (‘MHL') 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.
(A bearer share is an equity security that is wholly owned by whoever holds the physical stock certificate. The issuing firm neither registers the owner of the stock, nor does it track transfers of ownership. The company disperses dividends to bearer shares when a physical coupon is presented to the firm.)
This is not a Panama story - I am simply reporting a Supreme Court judgement pronounced on Tuesday.
These inter-corporate dealings invariably led into litigation culminating in the Supreme Court, but the Supreme Court was not really impressed with this kind of litigation and imposed cost on all the three litigants at Rs. 25 lakhs on each of them. The Supreme Court observed,
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 examination of various questions raised by the petitioners in these SLPs, in our opinion, is wholly uncalled for in the abovementioned factual background.
Legal Corner Icon — the image was hosted by the publisher and was not captured.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.
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.
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 .
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