Settlement-based relocation compensation does not extend to an unreasonably larger premises in another city.

The petitioner was a tenant in property bearing No. ER/Shop No. 32, Khasra No. 1609, Naraina, Delhi, where she operated a nursery school. The parties settled their disputes through a Settlement Agreement dated 9 September 2024, pursuant to which RFA 382/2024 was disposed of by order dated 11 September 2024.

The premises measured 219.5 square yards, and the rent had increased from ₹50,000 per month to ₹63,500 per month. Under the settlement, the respondents agreed to compensate the petitioner for relocation and re-establishment of the nursery school, including reasonable relocation costs and the difference in rent between the old and new premises for three years, as the petitioner was vacating the premises before expiry of the lease.

The petitioner vacated the premises on 30 April 2025 and paid ₹1,50,000 towards maintenance charges. She thereafter established a school in Mohali, Punjab, in premises measuring 1,022 square yards, paying rent of ₹3,25,000 per month.

Alleging breach of Clause 7 of the Settlement Agreement, she initiated contempt proceedings seeking compensation for relocation, re-establishment, and the rent differential. During the proceedings, it was conceded that the Mohali premises had been taken on rent from the petitioner’s brother-in-law.

Whether the respondents wilfully breached the undertaking recorded in the order dated 11 September 2024 by failing to compensate the petitioner for relocation and re-establishment of her school and for the rent paid at the Mohali premises.

Whether the Settlement Agreement could be interpreted as obligating the respondents to bear the cost of a school established by the petitioner in substantially larger premises at Mohali, Punjab, at rent substantially higher than that of the original Delhi premises.

The Court applied the principle that contempt jurisdiction requires proof of a wilful breach of a clear undertaking or obligation recorded in a court order.

It interpreted the Settlement Agreement according to the intention and scope of the parties’ recorded bargain, holding that an agreement to compensate for relocation and re-establishment cannot reasonably be construed as granting the petitioner unrestricted liberty to establish a school anywhere in India and impose unlimited or disproportionate financial liability on the respondents.

No specific statutory provision or judicial precedent was cited in the judgment.

The Court found that the Settlement Agreement concerned the relocation of the nursery school formerly operated in Delhi and the associated reasonable costs.

Although the petitioner produced bank statements indicating payment of rent for the Mohali premises, the Court held that those payments did not establish a compensable obligation under the settlement because the new premises were located in another State, measured 1,022 square yards as opposed to 219.5 square yards, and carried rent of ₹3,25,000 per month as opposed to the earlier rent of ₹63,500 per month.

The Court considered it unreasonable to interpret the settlement as requiring the respondents to finance a school approximately five times larger and rent approximately five times higher than the original Delhi establishment. Accordingly, the alleged non-payment did not amount to wilful contempt.

The contempt petition was dismissed for lack of merit, and all pending applications were disposed of.