Important Point—Application under Order 7 Rule 11 read with Order 1 Rule 10 (2) can be moved at any stage of suit.

G.S. KULKARNI, J.

1. These appeals arise from a common order dated 23 September 2015 passed by the learned Single Judge rejecting the Notice of Motions taken out by the Appellants (Defendant Nos. 14 and 15 in the suit), under Order 7 Rule 11 read with Order 1 Rule 10(2) of the Code of Civil Procedure, seeking rejection of the plaint, qua the appellants for want of a cause of action. Respondent No. 1 is the original plaintiff.

2. To appreciate the case of the appellants it would be necessary to consider the plaintiffs/ Respondent No. 1 case as contained in the plaint. For the sake of convenience, in considering the plaint, we refer to the parties as arrayed in the plaint.

Plaintiff's case in the plaint:

3. The Plaintiff's suit is inter alia for the recovery of the amount aggregating to Rs. 680,239,7,706.55 to be jointly and/or severally ordered and decreed to be paid by defendant Nos. 1 to 16 alongwith interest at 18% p.a. as per particulars of claim annexed as Exhibit ‘U’ to the plaint and for a further relief that defendant No. 20 be ordered and decreed to pay to the plaintiff a sum of Rs. 29.20 crores along with interest at 18% p.a. from the due date of payment and/or realization thereof as per prime zone agreement dated 10 February 2013.

4. As seen from the averments made in the Plaint, the Plaintiff is a company incorporated under the Indian Companies Act, 1956 which carries on business as a “Spot Exchange” providing for an electronic trading platform in spot contracts in commodities on delivery basis. The Plaintiff commenced its business operations from October, 2008. The Defendant No. 1 is a trading cum-clearing member of the Plaintiff and is inter alia trading in various commodities including paddy, for itself and on behalf of its clients. Defendant Nos. 2 and 3 are proprietary firms and are related entities of Defendant No. 1 being largely controlled by the same management and/or proprietors. Defendant No. 4 is a company incorporated under the Indian Companies Act, 1956 and is a client of defendant No. 1 and is also stated to be largely controlled by defendant No. 1. Defendant No. 5 was Director of defendant No. 1 at the relevant time when transactions/defaults had taken place and was also a Managing Director of Defendant No. 4. Defendant Nos. 6 to 8 are additional Directors of Defendant No. 1. Defendant Nos. 9 to 11 are the shareholders of defendant No. 1 who were stated to be responsible for the day-to-day affairs and conduct of defendant No. 1. Defendant Nos. 12 and 13 are stated to be whole-time Directors of Defendant No. 4. Defendant Nos. 14 and 15 (Appellants herein) are the nominee Directors of defendant No. 4. Defendant No. 16 is the Company Secretary of defendant No. 4 and Defendant No. 17 is the Auditor of defendant No. 1 and Defendant No. 18 was the Auditor of defendant No. 4 at the relevant time who resigned on 21 October 2013. Defendant No. 19 was also a Auditor of Defendant No. 4 appointed in place of defendant No. 18 from 21 October 2013. Defendant No. 20 is a company incorporated under the Companies Act and is engaged in the business of real estate/development of properties of which defendant No. 10 is a Director.

5. It is the case of the Plaintiff that there were defaults committed on the plaintiff's exchange by Defendant No. 1 and the same have occurred with the active participation, knowledge and connivance between the defendants. Plaintiff state that defendant Nos. 5 to 16 (which includes appellants) have utilized the corporate structure and identity of defendant Nos. 1 to 4 for their own personal gains and are the real beneficiaries of the defaults that have occurred on the exchange platform.

6. The plaintiffs states that on 10 June 2013 defendant No. 1 executed an Agreement (at Mumbai) with the plaintiff's exchange setting out the terms and conditions, representations, warranties, covenants agreed between them interalia protecting rights of the plaintiff's exchange and other members of th