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2015 Supreme(Bom) 2643
BOMBAY HIGH COURT
S.J. Kathawalla, J.
In Re: Sankaran Balasubramanian And Others In the Matter Between National Spot Exchange Limited And P.D. Agro Processors Pvt. Ltd. And Ors.
Notice of Motion Nos. 765 and 1388 of 2014 in Suit No. 781 of 2014
Decided on : 23-09-2015
Important Points
Subject
Civil Law - Fraud and Misrepresentation
Headnote
(B) Legal Standards for Pleading - Requirements of material facts and particulars in case of misrepresentation or fraud must be adhered to - General allegations may not be sufficient without specifics. (Paras 10-11)
(C) Nominee Directors - Their role must be clearly stated in allegations for liability to arise - Mere status as nominee does not exonerate them from accountability in cases of fraud. (Paras 24-26)
for the Appellant : B.B. Saraf, Chirag Kamdar, Abhishek Kale, Amit Naik and Anuja Jhunjunuwala instructed by Naik Naik and Co.
| Table of Content |
|---|
| 1. introduction to parties and background of the case. (Para 1 , 2 , 4 , 5 , 6) |
| 2. both defendants contest the plaint's allegations. (Para 3 , 8) |
| 3. plaintiff's requirement for specifying fraud is reinforced. (Para 9 , 12) |
| 4. legal standards for establishing cause of action outlined. (Para 10 , 11) |
| 5. court's analysis on fraud and involvement of director stated. (Para 13 , 19 , 21 , 22) |
| 6. defendants' challenge against fraud allegations considered. (Para 15 , 18) |
| 7. ratio established regarding rejection of plaint and fraud. (Para 17 , 23 , 25) |
| 8. discussion on liability of nominee directors in fraud cases. (Para 26 , 27 , 28) |
| 9. conclusion and dismissal of the motions. (Para 29) |
JUDGMENT
S.J. Kathawalla, J.
Notice of Motion No. 765 of 2014 is filed by the Applicant -- Mr. Sankaran Balasubramanian, original Defendant No. 15 in Suit No. 781 of 2014 and Notice of Motion No. 1388 of 2014 is filed by Gopal Srinivasan, Original Defendant No. 14 in Suit No. 781 of 2014.
2. Notice of Motion No. 765 of 2014 is filed by the Applicant -- Mr. Sankaran Balasubramanian, original Defendant No. 15 in Suit No. 781 of 2014 and Notice of Motion No. 1388 of 2014 is filed by Gopal Srinivasan, Original Defendant No. 14 in Suit No. 781 of 2014. Both the above Notices of Motion are filed by the above named Applicants who are party Defendant Nos. 14 and 15 to the captioned Suit, under Order 7 Rule 11 and Order 1 Rule 10 of the Code of Civil Procedure, 1908 ("CPC") for rejection of the Plaint qua them and/or deleting their names from the cause title.
3. Both the above Notices of Motion have been heard together. Mr. R.A. Kapadia, Senior Advocate, has advanced submissions on behalf of the Applicant -- Defendant No. 14 and Dr. V.V. Tulzapurkar, Senior Advocate, has advanced submissions on behalf of the Applicant -- Defendant No. 15. The submissions advanced by both the Learned Senior Advocates in support of the respective Applicants are more or less the same save and except that Dr. Tulzapurkar, has on behalf of the Applicant -- Mr. Sankaran Balasubramanian (Defendant No. 15) made an additional submission that the plaint is barred under the provisions of the International Finance Corporation (Status, Immunities and Privileges) Act, 1958 on account of the immunity available to employees of the Corporation in respect of acts performed in the official capacity. In view thereof, both the Notice of Motions are disposed of by this common order.
4. Following are the parties to the above suit:
5. (a) Plaintiff - National Spot Exchange Ltd., is a spot exchange which provides an electronic trading platform for spot contract in commodities.
(b) Defendant No. 1 - P. D. Agro Processors Pvt. Ltd., is a Trading-cum-Clearing Member of the Plaintiff Exchange.
(c) Defendant Nos. 2, 3 and 4 are Dulisons Cereals, Dulisons Foods and Dunar Food Limited respectively. They are related entities of Defendant No. 1 and are also clients of Defendant No. 1. It is the Plaintiff's case that Defendant No. 1 for itself and also on behalf of Defendant Nos. 2 to 4 has executed alleged trades on the Plaintiff Exchange. Defendant Nos. 2 to 4 are largely controlled by the same management and/or promoters. According to the Plaintiff, Defendant Nos. 1 to 4 in collusion with the erstwhile Managing Director of the Plaintiff and some of the managerial staff, have orchestrated and played a fraud on the Plaintiff and the counter parties to the outstanding trades by seeking to represent to and assure them that the commodities sold thereunder had been duly deposited in the warehouses designated by the Plaintiff, which representations were false to their own knowledge.
(d) Defendant No. 5 - Mr. Surender Gupta was the Director of Defendant No. 1 and Managing Director of Defendant No. 4 at the relevant time.
(e) Defendant Nos. 6 to 8 are Deepak Sharma, Raju Sharma and Abhimanyu Veer Arti respectively. They are the Additional Directors of Defendant No. 1.
(f) Defendant Nos. 9 to 11 are Sheetal Gupta, Ranjeev
