2014 (4) TMI 1273 - HC - Companies Law

Maintainability of suit - whether the suit can be referred to arbitration or not - HELD THAT - The Defendant No. 1 has defaulted in performing its obligations in respect of its trading on the Plaintiff Exchange. Detailed material has been produced with the Plaint inter alia Ledger accounts and Clearing Bank Statement of Defendant No. 1 wherein the transactions are reflected - 1st Defendant has clearly admitted its liability to the Plaintiff for a sum of Rs. 693 crores by its letter dated 1st August 2013 at Exhibit Y to the Plaint and also agreed unconditionally to make payment by installments in 20 weeks. Some amounts were paid but in view of subsequent defaults the Plaintiff addressed a notice dated 28th August 2013 at Ex Z to the Plaint declaring Defendant No. 1 as a defaulter. The Plaint and the documents produced therewith show that criminal proceedings have been initiated against Defendant 1 and some of its directors. The EOW and ED have both initiated action in the course of which some arrests have also been made. Exhibits BB and CC are press reports which mention that the ED has attached properties of Defendant 1 and investigation has revealed that large amounts were siphoned off to invest in the real estate project of Defendant No 20. The Plaintiff has made out a strong case for being entitled at this stage to limited adinterim relief interalia in view of the averments made in the Plaint including the statements in paragraph 9, 10 18 to 21 thereof and material placed on the record - It is not necessary to consider this question at this ad interim stage. As and when any application under section 8 of the Arbitration Conciliation Act 1996 is made by any party the same will be considered on its own merits. S.O. to 21st April 2014 for consideration of further ad interim relief/s.

Summary

Issues: Recovery of dues from multiple defendants, ad interim relief sought by the plaintiff, maintainability of the suit due to arbitration agreement.

Recovery of Dues:
The Plaintiff sought to recover a substantial amount of money from Defendant Nos. 1 to 16 and Defendant No. 20. The claim arose from transactions conducted on the Plaintiff's trading platform by Defendant No. 1 on behalf of itself and its related entities. Defendant No. 1 admitted liability of Rs. 693 crores, while Defendant No. 20 admitted to owing Rs. 29.20 crores to the Plaintiff. The Plaintiff presented evidence, including ledger accounts and bank statements, to support the claim. The court found that Defendant No. 1 had defaulted on its obligations, leading to the Plaintiff declaring it a defaulter.

Ad Interim Relief:
The Plaintiff sought ad interim relief to protect its claim, including directing Defendant No. 20 to deposit Rs. 29.20 crores in court. The court, after reviewing the material presented, granted ad interim relief in favor of the Plaintiff. The relief included injunctions against disposing of properties by certain defendants and disclosure of assets by Defendant Nos. 1 to 16 and 20. The court emphasized the necessity of granting protective relief to prevent prejudice to the Plaintiff's rights.

Maintainability of the Suit:
The Defendants raised the issue of the suit's maintainability due to an arbitration agreement between the Plaintiff and Defendant No. 1. The Plaintiff argued that other defendants, who were necessary parties to the suit, were not part of the arbitration agreement. Citing legal precedent, the Plaintiff contended that the suit should not be referred to arbitration. The court decided not to address this issue at the ad interim stage, leaving it open for consideration when relevant applications are made under the Arbitration & Conciliation Act, 1996.

Conclusion:
The court granted ad interim relief in favor of the Plaintiff, acknowledging the strong case made by the Plaintiff for such relief. The order included injunctions against disposing of properties, disclosure of assets by defendants, and a direction for Defendant No. 20 to deposit a specified amount in court. The court emphasized the importance of protecting the Plaintiff's rights and preventing prejudice. The issue of maintainability due to the arbitration agreement was deferred for future consideration based on relevant applications.