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IN THE HIGH COURT OF JUDICATURE AT BOMBAY

ORDINARY ORIGINAL CIVIL JURISDICTION
NOTICE OF MOTION LOD.NO.2632 OF 2014
IN
SUIT NO. 1097 OF 2014

National Spot Exchange Limited .. Applicant/ plaintiffs

In the matter between:

National Spot Exchange Limited .. Plaintiffs

Versus

Mohan India Pvt. Ltd. & Ors. .. Defendants

Mr.Virag Tulzapurkar, Senior Advocate with Chirag Kamdar with Amit Naik
i/b. Naik & Naik for plaintiffs in both notices of motions

Mr.D.D.Madon, Senior Advocate with Mr.Manoj Singh, Vijay Singh, Vinay

Bhanushali and Arvind Thaphiyal for defendant Nos. 1 to 17.

WITH

NOTICE OF MOTION LOD.NO.2633 OF 2014

IN
SUIT LOD.NO.1098 OF 2014

National Spot Exchange Limited .. Applicant/plaintiffs

In the matter between:

National Spot Exchange Limited .. Plaintiffs

Versus

Tavishi Enterprises Pvt. Ltd. and Ors. .. Defendants

Mr.Virag Tulzapurkar, Senior Advocate with Chirag Kamdar with Amit Naik
i/b. Naik & Naik for plaintiffs in both notices of motions

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Mr.D.D.Madon, Senior Advocate with Mr.Manoj Singh, Vijay Singh, Vinay

Bhanushali and Arvind Thaphiyal for defendant Nos. 1 to 10.

CORAM : R.D.DHANUKA, J.
DATE : 1st December 2014.

P.C.

1] Both these notices of motions have been placed on

board for ad-interim reliefs in two different suits filed by the plaintiffs,

inter alia, praying for recovery of Rs.690,82,00,000/- and

Rs.347,01,24,357.12 with interest and for other reliefs. Some of the

relevant facts for the purpose of deciding the ad-interim application

in both the aforesaid notices of motions are as under:-

NOTICE OF MOTION LOD.NO.2632 OF 2014

The plaintiffs are carrying out business as spot exchange for

electronic trading platform for spot contracts in commodities since

October 2008, pursuant to a Government notification dated 5 th June

2007, issued by the Ministry of Consumer Affairs, Food and Public

Distribution, Government of India. The defendant No.1 is a trading

cum clearing member of the plaintiffs' exchange.

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2] It is the case of the plaintiffs that the defendant No.1 was

trading in spot contracts of sugar on various dates. In spite of the

goods sold, the defendant No.1 did not deliver the goods and inspite

of goods purchased by the defendant No.1, it is alleged that the

defendant No.1 did not make payment in respect of such purchases.

3] It is also the case of the plaintiffs that on 1 st August 2013, the

defendant No.1 confirmed that they were liable to pay to the

plaintiffs, against their settlement and obligation, a sum of Rs.625

Crores subject to final accounts and agreed to pay a minimum

amount of 5% of their dues, every week on Friday commencing from

the next week of addressing the said letter and agreed to settle their

outstanding dues within a period of next twenty weeks. The

defendant No.1 also enclosed the post dated cheques in

accordance with the said payments due.

4] The plaintiffs by their letter/notice dated 28 th August 2013,

addressed to the first defendant, placed on record that the

defendant No.1 had failed to make payment of scheduled amount in

accordance with their obligation within the prescribed time and

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declared the defendant No.1 as defaulter in accordance with the

Rules and by-laws of the exchange. Since the defendant No.1 was

disagreeing on the amounts owned to the plaintiffs, the parties

initiated Arbitration process under the Arbitration Act.

5] The plaintiffs filed a petition under section 9 of the Arbitration

and Conciliation Act, 1996 (for short Act) being Arbitration Petition

Lod.No.1525 of 2013 against the defendant No.1 and several

others. By an order dated 23rd September 2013 passed by this

Court, ad-interim reliefs as prayed by the plaintiffs came to be

rejected. The plaintiffs thereafter, sought liberty to withdraw this

arbitration petition on the subsequent date, with liberty to file a suit.

This Court allowed plaintiffs to withdraw the said arbitration petition

with liberty as prayed.

6] Some time in the year 2013, M/s.Tarun Amarchand HUF and

another filed a Writ Petition Lod.No.2340 of 2013 against the

Forward Markets Commission (for short Commission) and others.

Mr.Ketan Shah also filed a separate petition No.2539 of 2013 in this

Court. The plaintiff herein was one of the party respondents to both

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these petitions. Both the petitions were heard by the Division Bench

of this Court on 7th October 2013. The plaintiffs through their

learned Counsel made a statement that except with prior permission

of the Commission, the plaintiffs herein would not make any

payment and/or settle the dues in any manner in respect of

contracts other than the E-series contracts. The said statement was

accepted by the Division Bench of this Court and an order was

passed in accordance with the said statement. At this juncture, it is

appropriate to mention that the dispute which is the subject matter of

these two suits are not arising out of e-series contracts.

7] The plaintiffs and defendant No.1, thereafter, entered into a

settlement agreement on 30th October 2013. In addition to the

defendant No.1 M/s.Tavishi Enterprises Pvt.Ltd. (defendant No.1 in

Suit Lod.No.1098 of 2014) one M/s.Vrinda Commodities Pvt. Ltd.,

were also parties to the said settlement agreement. In addition to

these three parties, some of the defendants were also parties to

the said settlement agreement. It is recorded in the said agreement

that the defendant No.1 and few others had been declared as

defaulter vide circular dated 28 th August 2013. The plaintiffs had

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claimed that the amounts owed to it by defendant No.1 as on 31 st

August 2013 was at Rs.922 Crores. In the said agreement, it was

however, agreed that the defendant No.1 unequivocally owned to

the plaintiffs the settlement amount, out of which it shall pay Rs.736

Crores in 13 Tranches as per payment schedule provided therein to

the plaintiffs. In the said agreement the defendant Nos. 3, 4, 13 and

14 were joined as guarantors. On or about 10 th December 2013, the

plaintiffs entered into an agreement with defendant No.18. Under

the said agreement, the defendant No.18 agreed to pay the total

amount of Rs.42.77 crores together invested by

M/s.P.D.Agroprocessing Pvt. Ltd., M/s.Mohan India Pvt.Ltd. and

M/s.Swastic Overseas Corporation to the plaintiffs.

8] It is the case of the plaintiffs that after the said order came to

be passed by the Division Bench, the plaintiffs and defendant No.1

and others had entered into the said settlement agreement. Before

entering into the settlement agreement, the plaintiffs had passed a

resolution that the said settlement agreement was subject to the

approval of Forward Markets Commission. The said agreement was

also made subject to the permission of the Commission. In Clause

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2.5.2 of the said agreement, the parties have referred to the order

passed by the Division Bench in Writ Petition Lod.No.2340 of 2013.

9] It is the case of the plaintiffs that the plaintiffs, thereafter

applied for permission of the Commission by addressing various

letters. The Commission by its letter dated 11 th April 2014 conveyed

that the waiver of Rs.151 Crores proposed by the plaintiffs was

involving the affected investors and, therefore, the Commission

could not allow waiver of Rs.151 Crores to a defaulting member,

without any bonafide reasons and thus, the said proposal could not

be approved by the Commission.

10] The plaintiffs, therefore, filed this suit, inter alia, praying for

various reliefs.

NOTICE OF MOTION LOD.NO.2633 OF 2013

The defendant No.1 is a trading cum clearing member on the

plaintiffs' exchange and has carried out various transactions. The

plaintiffs and defendant No.1 and others entered into a settlement

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agreement on 30th October 2013 jointly with the defendant No.1 in

Suit Lod.No.1097 of 2014. According to the plaintiffs, the

defendants in this suit are liable to pay to the plaintiffs a sum of

Rs.347,02,21,357.12 with interest.

11] Mr.Tulzapurkar, learned Senior Counsel appearing for the

plaintiffs in both the motions, invited my attention to the various

averments made in the plaint and the documents annexed and

would submit that the defendant No.1 has siphoned off the monies.

The defendant No.1 has failed to supply the goods which were sold

by the defendant No.1 and have not paid the amounts in spite of

various purchases made on the exchange of the plaintiffs. My

attention is also invited to the order passed by this Court

(S.C.Gupte, J) in Notice of Motion No.240 of 2014 in Suit No.173 of

2014, filed by the Modern India Limited and Ors. Vs. Financial

Technologies (India) Ltd. and Ors. with other connected matters.

12] By the said order, this Court has appointed a Committee of

three members for investigation and examination of accounts and

render assistance to the court in facilitating mutual settlement

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between the parties. In the said order, it was made clear that, if any

settlement was actually arrived at between the National Spot

Exchange Ltd. and the alleged defaulters under any other

proceedings, the committee was not expected to distant that

settlement but in fact record, supervise any settlement that may

have been already arrived at. Those proceedings are pending

before this Court.

13] It is submitted by the learned Senior Counsel that since all the

parties who are parties to these suits were not parties to the

Arbitration Agreement entered into between the plaintiffs and

defendant No.1 and the relevant claim in these proceedings could

not have been granted in the arbitration proceedings, the plaintiffs

had obtained leave from this court to withdraw the said proceedings

with liberty to file these suits. It is submitted that these suits are

thus maintainable.

14] It is submitted by the learned Senior Counsel that since the

defendant No.1 has admitted the liability in the letter dated 1 st

August 2013 to the extent of Rs.625 Crores and in the settlement

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agreement to the extent of Rs.922 Crores and have agreed to pay

the said amount along with other parties to the settlement

agreement a sum of Rs.736 crores, the defendants not being in a

position to pay any amounts to the plaintiffs, this court at this stage

should grant injunction in respect of the properties described at

Exh.CC in the plaint and the defendant No.1 to 10 and 13 to 17 and

18 shall be directed to disclose on affidavit their moveable and

immovable assets/ properties. It is submitted that various

proceedings are pending in different courts in respect of the alleged

involvement of defendant No.1 in both the suits, including

proceedings under the provisions of Money Laundering Act. It is

submitted that since the Commission has refused to grant sanction,

the settlement agreement arrived at between the parties cannot be

implemented. Mr.Tulzapurkar further submits that since the

defendants may create third party rights in respect of the properties

described in Exh.CC, which properties are the properties of the

defendant No.1 and other defendants to the knowledge of the

plaintiffs, the properties are liable to be protected so as to secure

the admitted claim of the plaintiffs. Similar submissions are made

also in the Notice of Motion No.2633 of 2014.

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15] Mr. Tulzapurkar learned Senior Counsel further invited my

attention to various averments made in the plaint to show that the

plaintiffs have made out a case for attachment before judgement at

this stage.

16] Mr.Madon, learned Senior Counsel appearing for the

defendant Nos. 1 to 17 in Notice of Motion Lod.No.2622 of 2014 and

for defendant Nos. 1 to 10 in Notice of Motion Lod.No.2633 of 2014

on the other hand submitted that the suits as filed by the plaintiffs

are not maintainable. It is submitted by the learned Senior Counsel

that the settlement agreement in both the matters were arrived at

under section 73 of the Arbitration and Conciliation Act, 1996 (for

short the Arbitration Act). It is submitted that the settlement

agreement shall have the same status and effect as if arbitral award

on agreed terms on the substance of the dispute rendered by the

Arbitral Tribunal under section 30 of the Arbitration Act. The

learned Senior Counsel submits that the said arbitral award is

enforceable under section 36 of the Arbitration Act.

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17] It is submitted by the learned Senior Counsel that the

settlement agreement entered into between the parties is still valid,

subsisting and binding between the parties. If the plaintiffs wanted

to enforce the said settlement agreement, which has become

executable award, the plaintiffs could have only filed application for

execution of the said award and not separate suits as filed by the

plaintiffs. The learned Senior Counsel invited my attention to the

order passed by the Division Bench of this Court in Writ Petition

Lod.No.23540 of 2013 and also the letter/ order dated 11 th April 2014

of the Commission, addressed to the plaintiffs herein. It is submitted

that the Commission in the said letter has made it clear that the

order passed by the Division Bench in the petition did not provide for

any condition to obtain any sanction from the Commission before

entering into any settlement agreement. It is submitted that thus,

there is no embargo on the execution of the settlement agreement

entered into between the plaintiffs and defendant No.1 in both the

matters, which are executable under section 30 read with section 36

of the Arbitration Act. It is submitted that since none of the suits are

maintainable, no interim reliefs can be considered by this Court.

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18] Mr.Madon also invited my attention to the order passed by this

Court on 23rd September 2013 in Arbitration Petition Lod.No.1525 of

2013 which was filed by the plaintiffs herein against the defendant

No.1 in both the suits under section 9 of the Arbitration Act. It is

submitted that since this Court had refused to grant any ad-interim

reliefs in the arbitration petition filed by the plaintiffs, having found

that no case was made out for grant of injunction, the plaintiffs

cannot be granted any ad-interim reliefs in these notices of motions.

19] My attention was also invited by Mr. Madon to the order

passed by MPID Court on 5 th September 2013. It is submitted that

the plaintiffs themselves have applied for permission of the MPID

court for obtaining permission for sale of the two properties.

Mr.Madon also relied upon the reply filed by the plaintiffs before this

court in writ petition stating that the defendants had agreed to

provide adequate tangible collateral in the form of immovable

property described in the settlement agreement. It is submitted that

since even according to the plaintiffs, the two properties in respect

of which the defendant No.1 has already handed over the title deeds

to the plaintiffs to sell those properties in accordance with law, the

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plaintiffs cannot seek attachment before judgement in respect of the

other properties of the defendants as described in Exh.CC of the

plaint.

20] The learned Senior Counsel further submits that it is not the

case of the plaintiffs in the plaint that the defendant No.1 to 17 are

making any attempt to sell any of their properties with intention to

delay the execution proceedings in the event of the plaintiffs

succeeding in the suit. The learned Senior Counsel placed reliance

upon Order XXXVIII Rule 5 (2) of the Code of Civil Procedure, 1908

and submits that in the notice of motion while seeking a relief by

way of an attachment before judgement, the plaintiffs have to

specify the valuation of the properties and have to indicate as to why

such properties are not sufficient to secure the claim of the plaintiffs'

properties, which the plaintiffs have failed in this case. It is

submitted that since, according to the plaintiffs, the two properties

referred to in the affidavit in reply filed by the plaintiffs in the

connected proceedings, were adequate, the plaintiffs cannot seek

relief by way of attachment before judgement in respect of the other

properties of the defendant No.1.

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21] Mr.Tulzapurkar, learned Senior Counsel appearing for plaintiffs

in rejoinder invited my attention to the order passed by this Court in

Arbitration Petition No.23 of 2014 and 27 of 2014 passed on 8 th

October 2014 allowing the plaintiffs to withdraw those petitions with

liberty to file appropriate proceedings. By the said order it was

clarified that if any such proceedings are filed, it will be open for the

parties to raise all contentions and the same would be decided on its

own merits.

22] Mr.Tulzapurkar submits that it is not the case of the plaintiffs

that the settlement agreement in both the matters are illegal In view

of the rejection of permission by the Commission. My attention is

also invited to the averments made in the plaint in support of this

submissions. It is submitted that it is also the case of the plaintiffs

that the settlement agreements are valid, subsisting and binding. It

is, however, the case of the plaintiffs that the settlement agreement

is not effective for want of permission from the Commission. The

learned Senior Counsel invited my attention once again to the order

passed by the Division Bench of this Court in Writ Petition (Lod)

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No.2340 of 2013 and submitted that the Division Bench has not only

accepted the statement made by the plaintiffs before this Court but

has passed order in terms of the statements made by the plaintiffs.

23] It is submitted that after the said order came to be passed by

the Division Bench of this Court, the plaintiffs and the defendant

No.1 and other parties agreed to enter into the settlement

agreement. My attention is also invited to some recitals of the

settlement agreement which referred to the proceedings in Writ

Petition Lod.No.2340 of 2013 and several other proceedings and

also clause 2.5.2 of the settlement agreement. My attention is

invited to clause 7.6 of the agreement in support of the submissions

that the parties have agreed that the settlement agreement was

subject to the approval of various authorities, including the

Commission and this Court. It is submitted by the learned Senior

Counsel that the defendant No.1 and other defendants being party

to the said settlement agreement, which is admittedly entered into

subject to the permission being granted by the Commission, cannot

be allowed to raise such a plea. It is submitted that this settlement

agreement which cannot be acted upon at this stage, cannot be

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executed under section 36 of the Arbitration Act and thus these suits

are maintainable.

24] Mr.Tulzapurkar, learned Senior Counsel submits that, insofar

as the order passed by this Court on 23 rd September 2013 in

Arbitration Petition Lod.No.1525 of 2013 is concerned, when the

said order was passed the parties had not entered into the

settlement agreement. He submitted that in any event, the said

order is ad-interim order and that view was tentative.

25] Mr.Tulzapurkar submits that in the settlement agreement the

defendant No.1 and other parties have admitted the liability of about

Rs.922 Crores as on 31st August 2013. It is submitted that the

defendants have to now pay much more than the said amount to the

plaintiffs. Since the said settlement agreement cannot be acted

upon, the two properties which are referred in the affidavit filed

before the MPID court are not sufficient to secure the claim of the

plaintiffs. It is submitted that in any event, the said two properties

were offered by the plaintiffs to secure the claim of Rs.771 Crores

and not Rs.992 Crores.

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26] Insofar as the order passed by MPID Court is concerned, the

learned Senior Counsel submits that the observations of the said

court are not binding on this Court. Insofar as interpretation of the

Commission in letter dated 11th April 2014, in respect of the order

passed in the Writ Petition is concerned, it is submitted that the said

interpretation of the order passed by the High Court by the

Commission, is contrary to the order passed by the Division Bench

of this Court. On the plain reading of the order passed by the

Division Bench of this Court, it is clear that the permission of the

Commission was required to be obtained. It is submitted that in any

event, the Commission by the said letter/ order dated 11 th April 2014

has rejected the application of the plaintiffs for permission.

27] Insofar as the submission of Mr.Madon, learned Senior

Counsel that the suit is not maintainable and, therefore, no interim

relief can be considered by this Court is concerned, a perusal of the

order passed by the Division Bench in Writ Petition Lod.No.2340 of

2013, clearly indicates that this court has not only accepted the

statement made by the plaintiffs herein that except with the prior

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approval and in accordance with the permission of the Commission,

the plaintiffs would not make any payment and/or settle the dues in

any manner in respect of the contracts other than E-series

contracts, but has passed the said order in terms of the said

settlement. A perusal of the settlement agreement also clearly

indicates that all the parties thereto have clearly agreed that the said

settlement agreement was subject to the approval of various

authorities, including the Commission. In my view, the defendant

No.1 thus cannot raise a plea that the permission of the Commission

was not a condition precedent for enforcement of the settlement

agreement or that the suit itself is not maintainable on the ground

that the said settlement agreement is an executable award under

section 36 of the Arbitration Act.

28] In my prima facie view, the suits filed by the plaintiffs are thus

maintainable and the interim reliefs, as prayed in the notices of

motion can be considered by this Court on their own merits.

29] Insofar as the submission of Mr.Madon, learned Senior

Counsel for defendants that the ad-interim relief has been rejected

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by this court by an order dated 23 rd September 2013, in Arbitration

Petition Lod.No.1525 of 2013 is concerned, it is clear that when the

said order was passed by this Court, the plaintiffs and the defendant

No.1 had not entered into the settlement agreement. In the

settlement agreement, the defendant No.1 and the other defendants

have admitted the liabilities to the extent of Rs.922 Crores. In my

view, though, the settlement agreement cannot be implemented as

on today, the admission of liability made therein by the defendant

No.1 and others can be relied upon by the plaintiffs in the suit and

for the purpose of seeking interim reliefs. There is thus, no merit in

this submission of Mr. Madon, learned Senior Counsel appearing for

defendant Ns. 1 to 17.

30] Insofar as the submission of Mr. Madon that the Commission

in its letter dated 11th April 2014 made it clear that there was no

order passed by the High Court directing the plaintiffs herein to

obtain any approval of the Commission and thus even if the said

permission is rejected, it is not fatal to the execution of the

settlement agreement is concerned, in my view, the order passed by

the Division Bench of this court in the writ petition is very clear. The

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observations made by the Commission in the said letter/ order dated

11th April 2014 interpreting the order passed by the Division Bench of

this Court, is erroneous and is not binding on me. Be that as it may,

by the said order/ letter, the Commission has rejected the said

application of the plaintiffs for approval as contemplated by the order

passed by the Division Bench.

31] A perusal of the order dated 2 nd December 2013 passed by the

Sessions court under MPID Act indicates that various amounts of

the defendant No.1 has been seized by the Income Tax Authority.

Economic Offences Wing (EOW) Mumbai has initiated investigation

and account in Axis bank, Delhi has been sealed by the EOW. The

EOW Mumbai has sealed two godownd at Delhi. Insofar as

observation/ finding of sessions court that settlement agreement is

binding is concerned, the said order is without considerating the

order passed by High Court in Writ petition.

32] Insofar as the submission of Mr.Madon that in respect of two

of the properties of defendant No.1, title deeds have already been

handed over to the plaintiffs and the properties are sufficient to

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secure the claim of the plaintiffs is concerned, I am inclined to

accept the submission of Mr.Tulzapurkar, learned Senior Counsel

appearing for plaintiffs that the said two properties were offered by

the defendant no.1 so as to secure the settled amount and not the

actual amount, alleged to be due and payable and admitted by the

defendant No.1 in the correspondence as well as settlement

agreement, which is much more than the valuation of these two

properties. In any event, the said settlement agreement cannot be

implemented as on today. The order dated 5 th August 2014 passed

by the MPID court indicates that EOW has secured those two

properties at Bikaner and Delhi.

33] In my view, since, the defendant no.1 and some of the other

defendants are already parties to various proceedings, including

under the provisions of the Money Laundering Act and which

proceedings are pending and since I am of the prima facie view that

the defendant No.1 and the other defendants have committed

default in making payment of the admitted amount to the plantiffs, a

case is made out for grant of ad-interim injunction in respect of the

properties described in Exh.CC to the plaint in Notice of Motion

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Lod.No.2632 of 2014 and described in Exh.KK in Notice of Motion

Lod.No.2633 of 2014.

34] In my prima facie view, the plaintiffs have good chances of

succeeding in the suit. If the ad-interim reliefs as prayed at this

stage are not granted, the plaintiffs would not be able to recover the

decretal amount even if the plaintiffs succeed, from any of the

defendants. The defendant No.18 is not appearing today, though

served. The plaintiffs, in the circumstances, are entitled to apply for

disclosure of the assets of the defendants, even at this stage to take

appropriate steps to secure the huge claim made by the plaintiffs

against the defendants. The defendant Nos. 1 to 17 have not come

before this court with details of any other assets, which would be

available to the plaintiffs for execution, if the plaintiffs succeed in the

suit. The defendants have not denied the liabilities admitted in the

settlement agreement but are heavily relying upon the said

settlement agreement.

35] In my prima facie view therefore, a case is thus made out for grant

of ad-interim injunction.

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In Notice of Motion Lod.No.2632 of 2014

(a) There shall be ad-interim relief in terms of prayer clauses (f), (h)

and (i) of the notice of motion till the final disposal of the notice of motion.

It is made clear that, if the defendant Nos.1 to 10 and 13 to 17 jointly

and/or severally furnish bank guarantee in favour of Prothonotary &

Senior Master, High court, Bombay in the sum of Rs.690,82,00,000/-

along with interest at the rate of 18% p.a. from the date of filing of the suit

till the bank guarantee is furnished and if furnished within four weeks from

today, ad-interim order granted by this court in terms of prayer clause (f)

to stand vacated. Such bank guarantee shall be initially for a period of 5

years and shall be renewed thereafter after obtaining further orders from

this court.

(b) Affidavit in reply alongwith affidavit of disclosure shall be filed within

four weeks from today. Rejoinder if any, shall be filed within two weeks

from the date of service of affidavit in reply.

(c) Place the motion on board for final hearing in due course.

NOTICE OF MOTION NO.2633 OF 2014

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(a) There shall be ad-interim reliefs in terms of prayer clauses (g) and

(h). It is made clear that, if the defendant Nos.1 to 4 and 6 to 10 jointly

and/or severally furnish bank guarantee in favour of Prothonotary &

Senior Master, High court, Bombay in the sum of Rs.347,02,21,357/-

along with interest at the rate of 18% p.a. from the date of filing of the suit

till the bank guarantee is furnished and if furnished within four weeks from

today, ad-interim order granted by this court in terms of prayer clause (g)

to stand vacated. Such bank guarantee shall be initially for a period of 5

years and shall be renewed thereafter after obtaining further orders from

this court.

(b) Affidavit in reply alongwith affidavit of disclosure shall be filed within

four weeks from today. Rejoinder if any, shall be filed within two weeks

from the date of service of affidavit in reply.

(c) Place the motion on board for final hearing in due course.

( R.D.DHANUKA, J.)

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