By this petition petitioner has invoked the contempt jurisdiction of this Court on the ground that the respondents (hereinafter referred to as respondent) despite entering into an agreement with the petitioner and filing an affidavit in the Court that it shall abide by the agreement did not make the payment in terms of the agreement and hence committed breach of the undertaking given to the Court and committed contempt of Court.

2. Brief facts relevant for the purpose of deciding this petition are that the respondent issued three cheques dated 31st July 2003, 31st August, 2003 and 30th September 2003 to the petitioner in discharge of its liability against purchase of material. These cheques got bounced and cases under Section 138 of Negotiable Instruments Act were filed against the respondent. During pendency of one of the complaints under Section 138, respondent entered into a settlement/agreement dated 27.4.2004 for payments of dues. In the statement, it was agreed that the respondent owed a sum of Rs.82, 30,751/- towards the petitioner company. This amount was agreed to be paid in installments and first installment was to be paid on 5.5.2004. An undertaking of Chairman/Managing Director was to be filed to comply with the agreement. The schedule of installments was given in the agreement itself starting from 5.5.2004 to 5.7.2005. After entering into this agreement respondent moved a petition under Section 391(1) of the Companies Act, 1956 before High Court at Shimla expressing its inability to pay its debt and wanted the High Court to issue notice to all creditors so that a scheme could be prepared. The Shimla High Court vide order dated 28.6.2004 entertained the petition and passed interim directions and also issued an injunction order that till the reply was filed and respondent was heard further proceedings in all cases, a list of which was attached with the petition as annexure 1A, 2A, 3A, 4A and 5A, will remain stayed.

3. The facts reveal that the respondent did not follow the schedule of payment as agreed in the agreement dated 27.4.2004 although some amount was paid in accordance with the agreement. The contention of petitioner is that the respondent on the one hand made statement before Court at Delhi and on the other hand moved a petition before Shimla High Court and obtained an injunction against all the proceedings. It is also submitted that the stay would not be operative as far as giving of undertaking by respondent before the Court at Delhi was concerned and defiance of undertaking was deliberate. On the other hand, it is submitted by the Counsel for the respondent that no case for contempt was made out. The respondent even at the time of entering into settlement with the petitioner had made it clear that the respondent was under financial difficulty. The respondent invited attention of the Court to Article 2.1 of the agreement which reads as under: 2.1 Morepen has represented to the Company that Morepen intends to repay the entire Admitted Debt but owing to certain financial difficulties would like to repay the Admitted Debt in installments as per the schedule (“Payment Schedule”) attached hereto as Schedule-1.

4. The respondent further stated that the agreement itself provided that in case of non compliance of the agreement the respondent would indemnify the petitioner against any or all expenses or costs which petitioner may have incurred in enforcing the terms of agreement or recovery of admitted dues. It is stated that at the time of agreement itself it was envisaged that if the financial difficulties of the respondent became insurmountable and the respondent was not in a position to pay the agreement could be enforced and the additional expenses incurred by the petitioner would become liability of the respondent. It is submitted that due to these financial difficulties the respondent had to approach Shimla High Court which was the High Court for the respondent and notice was i