Bombay High Court
Encore Natural Polymers Pvt. Ltd vs Anand Rathi Commodities Ltd on 10 June, 2025
Author: Abhay Ahuja
Bench: Abhay Ahuja
2025:BHC-OS:9625
2.COMSS-808-2017.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
IN ITS COMMERCIAL DIVISION
COMMERCIAL SUMMARY SUIT NO.808 OF 2017
ENCORE NATURAL POLYMERS PVT. LTD. )...PLAINTIFF
V/s.
ANAND RATHI COMMODITIES LTD. )...DEFENDANT
Mr.Shyam Kapadia, Ms.Spenta Havewala i/by. Dastur Kalambi &
Associates, Advocate for the Plaintiff.
Mr.Rahul Narichania, Senior Advocate a/w. Mr.Siddhanth Chhabria
a/w. Mr.Vaibhav Singh and Ms.Radhika Indapurkar i/by Shardul
Amarchand Mangaldas & Co., Advocate for the Defendant.
CORAM : ABHAY AHUJA, J.
RESERVED ON : 11th DECEMBER 2023
PRONOUNCED ON : 10th JUNE 2025
JUDGMENT :
1. The Plaintiff is a company registered under the Companies Act,
1956, engaged in the business of manufacturing and marketing of
natural polymers and also trading its commodities.
2. The Defendant is a company registered under the provisions of
the Companies Act, 1956, engaged in the business of broking on
various exchanges including the National Spot Exchange Limited
(“NSEL”).
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3. The present Commercial Summary Suit is filed by the Plaintiff as
the Defendant has failed to return a sum of Rs.1,45,79,032/- which was
paid by the Plaintiff to the Defendant for purchasing a certain quantity
of White Refined Sugar M Grade (“subject trade”) on the NSEL. It is
the case of the Plaintiff that despite receipt of the payments, the
Defendant did not carry out the trades in the name of the Plaintiff as
instructed by the Plaintiff.
4. The background facts of the case are as under:-
4.1. On July 15, 2013, the Plaintiff instructed the Defendant to
purchase certain lots of White Refined Sugar M Grade for a sum of Rs.
1,45,63,473 and to sell the same commodities (previously purchased)
for a total sum of Rs. 1,47,94,679/- on the same day.
4.2. On July 16, 2013, the Plaintiff received the digitally signed
Contract Notes for purchase and sell of the subject trade. The Purchase
Contract was bearing Contract Note No. 0012335 (NSEL Contract No.
SM30AMBL2) and the Sale Contract was bearing Contract Note No.
0012334 (NSEL Contract No. SM30AMBL25) which at the top of the
page stated that the same were issued by the Defendant acting as an
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agent for the Plaintiff and also that the trade was carried out on
account of Encore Natural Polymers Private Limited (“HCE009”) i.e. the
Plaintiff and included amongst other trades, the subject trade.
4.3. On 17th July 2013 the Plaintiff made the payment of
Rs.1,45,79,032/- towards the ‘Buy Trade’ of commodities vide RTGS,
the receipt of which is admitted by the Defendant. However, the
Plaintiff did not receive any Delivery Allocation Report (“DAR”) for the
subject trade in that regard inspite of following up the issue vide its
emails.
4.4. On July 19, 2013, physical copies of the signed Sale/Purchase
Contracts were sent to the Plaintiff by the Defendant by courier, but it
did not include the subject trade though the digitally signed contract
notes included the subject trade. Although the Defendant provided the
Plaintiff with the DARs for the other trades carried out on 15 th July
2013, but it failed to provide the DAR for the subject trade which was
purportedly carried out on 15 th July 2013 and no explanation was given
as to why the DAR for the subject trade had not been made available.
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4.5. On July 30, 2013 before the ‘sell trade’ part of the subject trade
constituted by the sale and purchase transactions could be settled, all
trades on NSEL were suspended by Government Authorities.
4.6. On April 23, 2014 at the request of the Economic Offences Wing
(“EOW”), the Plaintiff attended a meeting with Chetan Dalal
Investigation & Management Services. At this meeting the Plaintiff was
for the first time informed that the subject trade of 15 th July 2013 was
never executed on behalf of Plaintiff. On the contrary, it appeared to be
that it was executed by the Defendant on behalf of another one of its
clients viz. Sujana Sunidhi. The representative of the Defendant present
at this meeting assured the Plaintiff that trades were made on behalf of
Plaintiff’s account and promised he would clear that confusion.
4.7. On May 6, 2014, the Defendant supplied “duplicates” of the Sale
Contract and Purchase Contract in respect of the subject trade. These
were unsigned and unlike the signed physical contracts previously
shared, for the first time included the subject trade.
4.8. On May 28, 2014, the Plaintiff addressed a letter to the
Defendant expressing its astonishment at the information shared by the
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EOW which suggested that the subject trade were not carried out by
the Defendant on Plaintiff’s behalf.
4.9 On June 23, 2014 the Plaintiff addressed letter to the Defendant
requesting an immediate repayment of the said sum of Rs. 1.45 Crores.
Thereafter on August 08, 2014 on account of contradictory positions,
the Plaintiff addressed a letter to the Commissioner of Forward Market
Commission (FMC) requesting it to intervene in the matter.
4.10. On August 25, 2014 the Defendant sent reply to the Plaintiff
contending that trades were made on behalf of Sujana Sunidhi but the
mistake was subsequently modified on the very same day after trading
hours as the online platform of NSEL was not available after trading
hours, the Unique Client Code (“UCC”) for the said trades of White
Refined Sugar M Grade was modified outside the online platform of
NSEL for operational purpose.
4.11. On September 29, 2014, NSEL wrote to Plaintiff confirming that
the subject trade stood in the name of Sujana Sunidi and not in the
name of the Plaintiff. NSEL also enclosed therewith the “Exchange
Trade Report” of the subject trade. It was only after receiving this
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communication from NSEL, that the Plaintiff came to know with
certainty that the subject trade stood in the name of Sujana Sunidhi.
4.12. On November 5, 2014, the Plaintiff issued a statutory notice to
the Defendant under the provisions of the Companies Act, 1956 calling
upon the Defendant to repay the sum of Rs. 1.45 crores paid by the
Plaintiff and also filed Company Petition No.192 of 2016 on October
21, 2015 for winding up of the Defendant Company (“Winding Up
Petition”).
4.13. On November 24, 2014 the Defendant replied to the Statutory
Notice stating that the client code was an inadvertent error on the part
of the Defendant’s employee and the same was modified outside the
online platform of NSEL for operational purpose.
4.14. On March 16, 2015 the Plaintiff responded to the Defendant’s
letter seeking repayment of the money at earliest along with 18%
interest per annum from 17th July 2013 till payment/realization. On
April 1, 2015 the Defendant responded to the Plaintiff’s letter
reiterating its position adopted by it in its reply to the statutory notice.
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4.15. On June 1, 2015 the Plaintiff informed the High Level Committee
constituted by this Court vide its Order dated 2 nd September 2014 in
Modern India Ltd. and Others vs. Financial Technologies (India)
Limited and Others1 (“Modern Suit“) regarding their total dues from
NSEL amounting to Rs. 25.42 Crores and it was specifically clarified
that the said claimed amount did not include the monies under the
subject trade, since the subject trade had not been executed on behalf
of the Plaintiff and that the Plaintiff reserved its right to claim the
amount pertaining to the subject trade from NSEL.
4.16. On August 5, 2015 NSEL made an application to the High Level
Committee pointing out that various brokers had indulged in illegal
trading and client code modifications and requested the Committee to
investigate and prepare a report regarding such practices by trading
members.
5. In this factual background, the present Summary Suit was filed
by the Plaintiff on 18 th September 2017 seeking for an order and decree
against the Defendant to pay to the Plaintiff a sum of Rs. 2,55,43,262.9
together with interest at 18% p.a., as per the particulars of claim.
1
Suit No. 173 of 2014
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6. In the Winding Up Petition a conditional order dated 27 th
September 2017 of deposit was passed by which the Defendant was
directed to deposit a sum of Rs.1,45,79,032/- with the Prothonotary
and Senior Master of this Court within a period of eight weeks against
which an appeal was filed by the Defendant being Appeal No.19 of
2018 which was dismissed vide order dated 10 th October 2018 against
the dismissal of which the Defendant filed Special Leave Petition (C)
No.30795 of 2018 which also came to be dismissed on 26 th November
2018, and accordingly, as per order dated 27 th September 2017,
Defendant deposited the amount of Rs.1,45,79,032/- with the
Prothonotary and Senior Master by an instrument dated 22 nd November
2018. The deposited amount has been invested and lies to to the credit
of this Suit.
7. By Order dated December 14, 2018, the Summons for Judgment
was disposed off, as the Plaintiff’s claim was secured by the deposited
amount. The Defendant was directed to file Written Statement,
accordingly the Defendant has by Written Statement filed on January
18, 2019 denied its liability and has contended that the Defendant
cannot be held liable as an intermediary for the liability of NSEL, that
there is no privity of contract between the Defendant and Plaintiff in
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respect of the Sugar Trade as no consideration has flowed from the
underlying commodity from the Plaintiff to the Defendant.
8. The Defendant has contended that the Suit is barred by
limitation, as there is no mention in the plaint that till the letter dated
September 29, 2014 from the NSEL, the Plaintiff was unaware that the
trades were in the name of Sujana Sunidhi as the Plaintiff had lodged
its formal claim on June 23, 2014 demanding payment from the
Defendant. The Defendant has contended that the subject trade stood
in the name of Sujana Sunidhi on April 23, 2014 and thus from this
date, Plaintiff had constructive knowledge that the subject trade was
not carried out in its name and therefore the date of alleged knowledge
of the Plaintiff is not at all relevant. Also, no exemption of period of
limitation has been pleaded by the Plaintiff as per the provisions of
Order VII Rule 6 of the Code of Civil Procedure, 1908 (CPC) which
states that where the Suit is instituted after the expiration of the period
prescribed by the law of limitation, the plaint should contain the
ground upon which exemption from such law is claimed.
9. The Defendant raised further objection to the maintainability of
the Suit, by contending that, the subject matter of this Suit is already
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pending adjudication in the Modern Suit and Plaintiff has not obtained
any leave to prosecute the Defendant in separate proceedings. The
Defendant has contended that as the Plaintiff has reserved its right to
claim performance from NSEL for the Sugar Trade, therefore the
Plaintiff is estopped from claiming restitution for the Buy Trade of the
Sugar Trade from the Defendant.
10. The Defendant has contended that against the total outstanding
amount of Rs. 27,87,49,835 as has been claimed by the Plaintiff, pro
rata payment of Rs. 1,83,93,358/- at the time of filing of the Written
Statement has been credited by the Defendant in the Plaintiff’s account
as and when it has received the same from NSEL. As the Plaintiff has
duly acknowledged and admitted the receipt of the said amounts and
appropriated the same as part payments towards the outstanding
amounts receivable from the NSEL which includes the sale leg of the
subject trade, the Plaintiff cannot claim the amounts as prayed for in
the present suit.
11. That the Plaintiff’s claim of interest at 18% amounting to
Rs.1,09,64,230.90 from July 17, 2013 till the date of filing of the Suit is
exorbitant, unconscionable, unrealistic and far from the prevailing rate
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of interest and also not in accordance with Section 3 of the Interest Act,
1978 as no notice had been given by the Plaintiff for interest prior to
the filing of the Suit and therefore the Plaintiff is not entitled to any
interest prior to the filing of the Suit.
12. This Court framed the following issues on January 25, 2019 :
(1) Whether the suit is barred by limitation? (2) Whether the suit is maintainable in light of Suit No.173 of 2014
filed by one Modern India Ltd under Order I Rule VIII of the Code of
Civil Procedure 1908?
(3) Whether the Plaintiff is estopped from claiming the suit amount
in light of their having received any monies from the Defendant?
(4) Whether the Plaintiff is entitled to make a claim for refund in
respect of the purchase leg of the which forms part of a paired contract
in relation to Contract No. 12334 (“Sugar Trade”)?
(5) Whether the Plaintiff is entitled to seek refund for the purchase
leg of the paired contract despite the unconditional acceptance of part
payments for the sale leg on 47 occasions since 21st August 2013?
(6) Whether the Plaintiff is entitled to make a claim against the
Defendant for refund of the purchase consideration of the Sugar Trade
despite having reserved its right to claim the sale consideration of the
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Sugar Trade from NSEL before the High Court Committee by this
Hon’ble Court in Suit No. 173 of 2014?
(7) Whether the Defendant proves that it is not liable to Plaintiff
because the Defendants is an intermediary on the NSEL platform?
(8) Whether the Plaintiff proves that there is privity of contract
between the Plaintiff and the Defendant in relation to the underlying
contract (Paired Contract) conducted by the Defendant for and on
behalf of the Plaintiff on the platform of NSEL?
(9) Whether the Plaintiff proves that it suffered losses on account of
the error committed in the punching of the client code made by the
dealer of the Defendant?
(10) Whether Plaintiff proves that the Defendant has committed fraud
and or made any false representation or siphoned off the money paid
by the Plaintiff to the Defendant towards the paired contract?
(11) Whether the Defendant proves that it carried out the Sugar Trade
paired contract on NSEL platform for and on behalf of the Plaintiff?
(12) Whether the Plaintiff proves that it is entitled to a sum of
Rs.2,55,43,262.9/- as per the particulars of claim (Exhibit “T”)?
(13) Whether the Plaintiff is entitled to any further interest on the
principal sum of Rs.1,45,79,032/- from the date of filing of the suit
until payment and/or realization and, if so, at what rate?
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(14) What order and what decree?
(15) What order as to costs under Section 35 of the Code of Civil
Procedure 1908 as amended by the Commercial Courts Act?
13. Plaintiff has examined Mr. Ilesh Parikh (PW1), and Mr. Sudhir
Merchant (PW2), Chairman and Managing Director (CMD) and the
Chief Executive Officer (CEO) of the Plaintiff. Evidence of Defendant
was closed on March 2, 2023, as the Defendant submitted before this
Court that the Defendant’s Witness is not available to give evidence.
14. I have heard the learned Counsel and Senior Counsel at length
on September 27, 2023, October 16, 2023, October 23, 2023 and on
October 31, 2023. On November 6, 2023, a request was made by Mr.
Rahul Narichania, learned Senior Counsel, on behalf of the Defendant
to mark certain documents as exhibits which were initially marked for
identification by the learned Commissioner pursuant to cross-
examination of Plaintiff’s witness no.1, subject to orders passed by this
Court in order to read those documents in evidence. The following
documents were accordingly marked as exhibits:-
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(a) Original Letter dated May 28, 2014 addressed by the Plaintiff to
Ms. Sonam Bhagat, Assistant Vice President (Wealth Management)
Exhibit P1/24
(b) Colour Photocopy of the letter dated June 23, 2014 addressed by
the Plaintiff to the Defendant. Exhibit P1/25
(c) Original Letter dated November 5, 2014 addressed by the
Plaintiff to the Defendant together with annexures attached thereto.
Exhibit P1/26
(d) Original office copy of the letter dated June 23, 2014 addressed
by the Plaintiff to the Defendant. Exhibit P1/27
(e) Original Letter dated March 20, 2014 addressed by the Plaintiff
to the Defendant. Exhibit P/28
(f) Photocopy of Claim Form filed by the Plaintiff with the Secretary
Legal High Court Committee. Exhibit P1/29
15. Further, Mr. Narichania, Learned Senior Counsel had also drawn
attention of this Court to the Commissioner’s report dated December
19, 2022, with respect to the recording of cross-examination of PW2,
submitting that the Plaintiff’s witness No.2 was called upon to produce
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original office copy of Plaintiff’s letter dated August 8, 2014, addressed
to the Forward Markets Commission which the witness did and the
same was marked as C-7 for identification and the same would need to
be marked as Exhibit to be read in evidence. The Office Copy of the
Plaintiff’s Letter dated August 8, 2014 addressed to Forward Markets
Commission was marked as Exhibit P2/9.
16. The matter was listed for continued hearing on November 7,
2023 after which the arguments continued on November 9, 2023,
November 29, 2023, December 4, 2023 and were concluded on
December 11, 2023. The learned Counsel were granted liberty to file
written submissions within a period of two weeks. On December 21,
2023, the matter was mentioned and some more time was sought to
file written submissions and the time to file written submissions was
extended till January 8, 2024. Accordingly, the Plaintiff and the
Defendant filed their written submissions on January 8, 2024.
17. Mr. Shyam Kapadia, learned Counsel for the Plaintiff and Mr.
Rahul Narichania, learned Senior Counsel for the Defendant have
canvassed extensive submissions on the issues framed.
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18. I propose to consider the Issues Nos.1, 2 and 3 together as they
are concerned with the maintainability of the Suit along with Issues
No.5 and 10. I will consider the Issues Nos. 4, 6, 8, and 9 together
which will eventually answer Issue Nos. 7 and 11 to 15.
19. However, before proceeding further, it would be first necessary to
deal with the point raised by the Defendant regarding the NSEL Letter
dated September 29, 2014 (Exhibit P2/8) as the Defendant has urged
this Court not to rely on the document as the same is not proved in
accordance with the law.
20. Mr. Rahul Narichania, learned Senior Counsel for the Defendant
has submitted that the Plaintiff has not proved NSEL’s letter dated
September 29, 2014 which is a third-party document. That, though the
document was marked in evidence, merely marking of a document
does not mean that the document stands proved as the document needs
to be proved thereafter by the party who relies on it which can be done
by calling the author of the document. Reliance is placed on the
decision in the case of Om Prakash Berlia and Another vs. Unit Trust of
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India and Others2 and further on the decision in the case of Sait
Tarajee Khimchand and Others vs. Yelamarti Satyam alias Satteyya and
Others3 wherein the Hon’ble Supreme Court has held that mere
marking of an exhibit does not dispense with the proof of the
document.
21. Mr. Narichania has also relied upon the judgments in Narbada
Devi Gupta vs. Birendra Kumar Jaiswal and Another 4, Zenna Sorabji
and Others vs. Mirabelle Hotel Co. (Pvt.) Ltd. and Others5, Walter
D’Souza of Mumbai vs. Anita D’Souza and Others 6 and Sociedade De
Fomento Industrial Ltd. vs. Sita Shripad Narvekar and Others7
submitting that the Plaintiff’s contention that NSEL’s letter dated
September 29, 2014 was marked without objection from the Defendant
and therefore can be read in evidence was incorrect and misconceived
and therefore the proposition canvassed by the Plaintiff that merely
because the NSEL’s letter dated September 29, 2014 was marked in
evidence by this Court, it stands proved or it is the ‘gospel truth’ is
incorrect.
2
AIR 1983 Bom 1
3
(1972) 4 Supreme Court Cases 562
4
(2003) 8 Supreme Court Cases 745
5
AIR 1981 Bom 446
6
(2015) 2 AIR Bom R 446
7
(2016) (2) Mh.L.J.958
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22. In addition to the objection that the NSEL letter dated
September 29, 2014 is not proved as per law, the Defendant has also
raised objection as to the mode of proof of the document. It is the
contention of the Defendant that a Trade-Report is enclosed with the
NSEL Letter dated September 29, 2014 which was allegedly a print out
of an electronic record which has to be proved in accordance with
provisions of Section 65B of the Indian Evidence Act, 1872 and which
65B certificate the Plaintiff has failed to provide from the NSEL. In
support, the Defendant has relied upon the decision of the Hon’ble
Supreme Court in the case of Arjun Panditrao Khotkar vs. Kailash
Kushanrao Gorantyal and Others 8 submitting that as NSEL’s letter dated
September 29, 2014 including the Trade Report has not been proved,
the same ought not to be considered or looked into.
23. Mr. Shyam Kapadia, learned Counsel for the Plaintiff has
objected to the contentions of the Defendant, submitting that the same
have been raised for the first time during the final hearing, and the
same cannot be raised since the NSEL Letter has been annexed by the
Defendant itself in its Written Statement at Exhibit E-1, page 162 of the
Written Statement. Mr. Kapadia has contended that when the NSEL
8
(2020) 7 Supreme Court Cases 1
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letter was referred to, there was no denial of the contents of the said
letter. Therefore, it is an ingenious argument belatedly adopted by the
Defendant.
24. Mr. Kapadia further submitted that, by Order dated October 4,
2022 (paragraph 11 of the order) this Court had marked the NSEL
letter after consideration of the evidence. Pertinently, the document
marked in the previous paragraph in the same order was marked
‘subject to proof of contents’ so it cannot be contended that the NSEL
letter was not assessed as to the correctness of its contents.
25. This Court has vide order dated October 4, 2022, marked the
said letter dated September 29, 2014 as Exhibit P-2/8, without the
same being marked subject to the proof of its contents, as this Court
has in case of certain other documents. The Court has noted in the said
Order that the document is denied by the Defendant, but the same is
marked as Exhibit P-2/8 in view of the averments in paragraph 7 of the
affidavit in lieu of examination-in-chief of PW2 which states as under:
“7. On 29th September 2014, the NSEL addressed a letter
to me in my capacity as the CMD and CEO of the Plaintiff,
confirming that all trades pertaining to the commodity
symbol SM30AMBL2 and SM30AMB25 i.e. the Subject
Trades, belong to the client code of one Sujana Sudini,avk 19/64
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and not the Plaintiff. The said letter was also copied to
Mr. Arun Kumar, Deputy Director, Forward Marks
Commission (“FMC”). I received this letter on 06th
October 2014. I tender in evidence the letter dated
29th September 2014 at Serial No. 4 of the Plaintiff’s
Compilation of Document.”
26. The document in question therefore has been duly exhibited and
has not been marked “subject to proof of contents ” by the Court. In the
absence of such qualification, the document must be treated as having
been admitted into evidence without reservation, and is therefore
capable of being read into evidence and relied upon. The objection as
to the mode of proof is wholly unsustainable, as the same has to be
taken when the evidence is tendered and that once the document has
been admitted in evidence and marked as an exhibit, the objection that
it should not have been admitted in evidence or that the mode adopted
for proving the document is irregular cannot be allowed to be raised at
any stage subsequent to the marking of the document as an exhibit.
The above aspect has been made clear by the law laid down by the
Hon’ble Supreme Court in the case RVE Venkatachala Gounder v.
Arulmigu Viswesraswami & VP Temple9 which has been reiterated by a
Full Bench of this Court in Hemendra Ghia v. Subodh Mody10 where it
has been held that once the document has been admitted in evidence
9
(2003) 8 SCC 752
10
2008 (6) MhLJ 886
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and marked as an Exhibit, the objection that it should not have been
admitted in evidence or that the mode adopted for proving the
document is irregular cannot be allowed to be raised at any stage
subsequent to the marking of the document as an Exhibit.
27. Further, the objection of the Defendant as to the contents of the
documents and the document not being proved also does not hold any
water as the Defendant has in the Written Statement at Exhibit E1 Page
162 annexed a photocopy of Exhibit P2/8. The handwritten
endorsement on Exhibit P2/8 “recd on 6/10/14 10.30 am” is also seen
on the document annexed at Exhibit E1 Page 162 of the Written
Statement. Therefore, the further objections of the Defendant with
respect to this Document are rejected.
28. Therefore, the reliance of the Defendant on Om Prakash Berlia
and Another vs. Unit Trust of India and Others (supra), Narbada Devi
Gupta vs. Birendra Kumar Jaiswal and Another (supra), Zenna Sorabji
and Others vs. Mirabelle Hotel Co. (Pvt.) Ltd. and Others (supra) and
Sociedade De Fomento Industrial Ltd. vs. Sita Shripad Narvekar and
Others (supra) is therefore completely misplaced and the same are
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inapplicable to the facts of this case as the Defendant has itself annexed
the said document to their Written Statement.
29. The Plaintiff has also relied on the Orders passed by this Court in
the Winding Up Petition and the averments in the Winding up Petition.
It is the submission of the Plaintiff, that Order passed in the Winding
Up Petition ought to be considered for the details of the fraud
perpetrated by the Defendant.
RE: ISSUE NO.1, 2, 3, 5 and 10:
30. The Defendant has specifically pleaded that the Suit is barred by
limitation. The Defendant had submitted that the Plaintiff has admitted
in the plaint that it learnt that the subject trade stood in the name of
Sujana Sunidhi on April 23, 2014 and thus from the said date the
Plaintiff had constructive knowledge that the subject trade were not
carried out in its name and therefore the date of actual knowledge of
Plaintiff by the NSEL letter dated September 29, 2014 was not at all
relevant. That, in the letter dated May 28, 2014, the Plaintiff has itself
stated that the subject trade stood in the name of Sujana Sunidhi and
not in the name of the Plaintiff. The Plaintiff has averred in paragraph
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14 of the plaint that the cause of action arose on September 29, 2014,
although on April 23, 2014 (Exhibit P-2/7) when PW2 at the request of
one Mr. Aravind Wadankar, Senior Inspector, Economic Offense Wing
(EOW), Mumbai Police attended a meeting with Chetan Dalal,
Investigation and Management Services, Forensic Accountants and
Advisors at the EOW, the Plaintiff was informed by Mr. Chetan Dalal
that the subject trade being the ‘buy trade’ and ‘sell trade’ both dated
July 15, 2013 were not executed by the Defendant in the name and
account of the Plaintiff and purportedly in the name of Sujana Sunidhi
who appears to be another client of the Defendant, but the said
information was confirmed only by NSEL letter dated September 29,
2014.
31. The Exhibit P1/24 includes the Minutes of Meeting of the
Meeting held on April 23, 2014. The Minutes mention that, Mr. Sudhir
Merchant PW2 was present for the meeting. When asked in the
meeting whether he was aware that the trade of White Refined Sugar
M Grade (SM30AMBL25) executed under digital contract number
0012335 dated July 15, 2013, stands in the name of Sujana Sunidhi
and not the Plaintiff, he has answered that he was not aware of such
incident and at no time the Defendant informed them about such
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incident. Therefore, it cannot be that any date prior to this meeting, the
Plaintiff was aware of such incident. This also lends credence to the
fact that it is only by the NSEL Letter dated September 29, 2014 that
the Plaintiff had confirmed knowledge that the subject trade was not
executed in the name of the Plaintiff.
32. Also the contention of the Defendant that as the Plaintiff has
pleaded that “sell trade had a delivery cycle of T+25 (i.e. settlement
and payment in respect thereof would be made in 25 days after the
transaction date) and thus, if the trade was carried out in the name of
the Plaintiff, the cause of action would be 15 th July 2013 + 25 days =
09th August 2013 and if the trade was not carried out in the name of
the Plaintiff then refund became payable immediately on 18 th July 2013
as alleged by the Defendant would not be tenable as the above dates
pertain to a period prior to the meeting.
33. It is pertinent to note that representative of Defendant was
present in the meeting and assured the Plaintiff that they will provide
signed contract note and delivery allocation letter to Mr. Sudhir
Merchant PW2. Therefore, on this date viz. on April 23, 2014, the
Defendant has not admitted that the subject trade was not in the name
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of the Plaintiff but has in fact assured the Plaintiff that they will provide
signed contract note and delivery allocation letter. The Plaintiff has in
their pleadings and evidence stated that they have relied on this
assurance. The Defendant has not denied the meeting, nor the minutes
of the meeting have been denied. Therefore, as of the date of meeting,
the cause of action did not arise basis the Defendant’s assurance.
34. On May 6, 2014 the Defendant had purportedly supplied
unsigned duplicates of the Purchase Contract and Sale Contract in
respect of the subject trade. The signed Sale Contract for July 15, 2013
did not include the subject trade, whereas the unsigned duplicate
Contract sent on May 06, 2014, included the subject trade. The
Defendant has not denied this in its Written Statement. And therefore,
it cannot be said that as on May 6, 2014 the Plaintiff had knowledge
that the subject trade stood in the name of Sujana Sunidhi and not in
the name of the Plaintiff.
35. The Written Statement states that by letter dated June 23, 2014
(Exhibit P2/3) the Plaintiff requested the Defendant’s cooperation in
suitably correcting the trade so that payment could be recovered from
Sujana Sunidhi and that therefore, ” the Plaintiff is estopped from
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claiming that trades were not executed for on behalf of Plaintiff “.
Whereas in the cross-examination of PW1, the Defendant has stated
that this letter was for demand of payment by the Plaintiff. A perusal
of Exhibit P2/3 reveals that the Plaintiff has clearly recorded to the
Defendant that although a confirmation dated 15 th July 2013 was sent
with respect to White Refined Sugar M Grade and payment of
Rs.1,45,80,695/- was made vide RTGS on 17 th July 2013, however, the
contract note received did not show the trades pertaining to the said
commodity and that it has come out in public recording the scam going
on in NSEL and the investigation by EOW had commenced and that the
Plaintiff had learnt that the subject trade / contract in the records of
NSEL was in the name of Sujana Sunidhi and a duplicate contract wa
issued on 15th July 2013 and that, therefore, since the NSEL records did
not show the contract of the Plaintiff at all, a request of
Rs.1,45,80,695/- against Contract no.12335 dated 15 th July 2013 along
with interest at the rate of 18% was made. It is clearly recorded in the
said letter that the Plaintiff had proceeded on the basis that the trade
and the contract was in their account and since it was not so, no goods
has been received, a request for refund of Rs.1,45,80,695/- was made.
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36. As there was no reply from the Defendant to the letters of the
Plaintiff, on August 08, 2014, the Plaintiff addressed letter to Forward
Markets Commission (FMC) pointing out the information made
available to it by EOW and sought their intervention.(Exhibit P2/9).
37. In response to letter dated May 28, 2014 and June 23, 2014 the
Defendant addressed a letter dated 25th August 2014 (Exhibit P1/7). In
the said letter in paragraph no.3 the Defendant stated that:-
“3. As stated in your above referred letter/s, we
reiterate and confirm that the trade was executed in
White Refined Sugar M Grade having Contract
Specification No. SM30AMBL2 on your behalf.
However, the dealer while executing trades on your
behalf, wrongly punched client code of Sujana Sunidhi
and realised his mistake on the very same day after
trading hours. As the online platform of NSEL was not
available after trading hours, the UCC for the said
trades of White Refined Sugar M Grade was modified
outside the online platform of NSEL for operational
purpose. You may please note that an updated contract
note bearing no. 0012335 for your buy trades was
issued to you on July 16, 2013 and accordingly, you
made payment for the same. It would not be out of
place to mention here that since a valid contract not
has been issued, you are bound by the terms and
conditions of the said contract note and byelaws of the
NSEL.”
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38. Therefore, as can be seen, the Defendant all along assured the
Plaintiff that the statement made by Mr. Chetan Dalal in the EOW
meeting was incorrect and that it had in fact executed the trade in the
name of the Plaintiff. In the correspondence after the EOW meeting by
the Defendant the physical Contract Notes were issued. In the letter
dated 25th August 2014 the Defendant has explained that they have
corrected the mistake of their employee, therefore, on the basis of those
assurances, the Plaintiff was obviously not certain of what the position
actually was. In response to Exhibit P2/9 the Plaintiff received the
letter at Exhibit P2/8 from the NSEL, on whose exchange the trade was
actually carried out, which confirmed that, even as on that date, the
subject trade did not stand in the Plaintiff’s name. It was only upon
receipt of the letter dated 29th September 2014 from the NSEL it was
confirmed that the subject trade did not stand in the name of the
Plaintiff and that was when the Plaintiff had final conclusive and
incontrovertible proof that the subject trade, despite false and
misleading assurances of the Defendant, did not stand in the name of
the Plaintiff.
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39. Mr. Kapadia, learned Counsel for the Plaintiff has relied on
Section 17 of the Limitation Act, 1963, (Limitation Act) and in
particular Section 17 (1) (a) and (d) and submits that it is from the
date of the NSEL letter viz. 29th September 2014 that the Plaintiff
became aware that fraud and fraudulent story concocted by the
Defendant only arose to hide its illegal practices. Section 17 of the
Limitation Act reads thus :
“Section 17. Effect of fraud or mistake:
1. Where, in the case of any suit or application for which a
period of limitation is prescribed by this Act –
(a) The suit or application is based upon the fraud of the
defendant or respondent or his agent; or
(b) …
(c) ….
(d) Where any document necessary to establish the right of the
plaintiff or applicant has been fraudulently concealed from
him, the period of limitation shall not begin to run until the
plaintiff or applicant has discovered the fraud or mistake or
could, with reasonable diligence, have discovered it; or in
the case of a concealed document, until the plaintiff or the
applicant first had the means of producing the concealed
document or compelling its production.”
(emphasis supplied)
40. Therefore, before proceeding to give a conclusive finding on
the Issue No.1, it would be pertinent to examine whether or not
there has been any fraud / false representation by the Defendant.
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It is pertinent to note the inconsistencies on the part of the Defendant
in their Written Statement. In the Written Statement the Defendant
claims that Defendant’s employee committed a punching error while
entering the UCC of the Plaintiff and the UCC of one Sujana Sunidhi
was entered and that this mistake was corrected on the very same day
but after trading hours. The Defendant had also stated that they have
not made any misrepresentation to Plaintiff because Sujana Sunidhi has
not filed any claim in respect of the subject trade and that the same
was sufficient proof of fact that the trades were in fact carried out for
and on behalf of Plaintiff. Therefore, even at the time when the
Defendant had filed the Written Statement the Defendant had
contended that subject trade was carried out in the name of the
Plaintiff, yet in the same breath the Defendant also alleged that Plaintiff
first came to know on April 23, 2014 that the subject trade stood in the
name of Sujana Sunidhi and not in the name of the Plaintiff, or in the
alternative on August 25, 2014 and not vide NSEL’s letter dated
September 29, 2014.
41. This Court has looked at the document at Exhibit (P1/7) which is
the letter dated August 25, 2014 addressed by the Defendant, where
the Defendant has categorically stated that they have corrected the
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mistake of their employee, and that the subject trade stood in the name
of the Plaintiff. It, therefore, does not lie in the mouth of the Defendant
to say that the Plaintiff was aware that the subject trade did not stand
in their name when they have themselves assured the Plaintiff by this
Letter that it did stand in their name.
42. It is also being contended on behalf of the Defendant that the
Plaintiff did not require, nor should have sought any confirmation from
NSEL. In my view, this contention cannot further the defence of the
Defendant, as the Defendant had on August 25, 2014 assured the
Plaintiff that they had corrected the mistake and that the subject trade
stood in the name of the Plaintiff. Even if the Plaintiff had prior to this
letter stated in their correspondence about the trade not being in their
name, this letter of the Defendant does cloud the certainty that Plaintiff
had, and it is only when they had received the letter at Exhibit P2/8,
that the Plaintiff became conclusively aware that even though by letter
of Defendant at Exhibit P1/7 the Defendant has contended that the
mistake had been rectified, the same does not reflect in the records of
NSEL.
43. It is also pertinent to note that, Defendant has in the Written
Statement paragraph 4 contended that Defendant vide its letter dated
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April 4, 2014, April 26, 2014 and April 30, 2014 requested NSEL to
issue revised allocation letter, however NSEL vide its reply dated April
29, 2014, refused to consider the request citing technical reasons. The
Plaintiff has submitted that they were not aware of such
correspondence between the Defendant and NSEL. The Defendant has
craved leave to rely and refer on the letters but has not led evidence
nor brought this on record before this Court. There is nothing on record
to show that post the NSEL Letter dated September 29, 2014, the
transaction stands in the name of the Plaintiff and not in the name of
Sujana Sunidhi or has been corrected as claimed by the Defendant.
44. In this context, it is pertinent to refer to paragraphs 19, 20 and
21 of the order dated 27th September 2017 in Company Petition No.192
of 2016 of this Court (Coram : A.K. Menon, J., as His Lordship then
was) (Exhibit P-1/2) from which the aforesaid is clearly borne out. An
objection is sought to be raised on behalf of the Defendant that this
order and the finding therein cannot be relied upon. I am afraid, such
objection is only stated to be rejected, in as much as, even if evidence
has not been led on the same, this Court is taking judicial notice of the
same. Moreover, the said document has also been marked as Exhibit P-
1/2.
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45. The above events have been confirmed by the witnesses of the
Plaintiff during cross-examination and have maintained in their
answers that though demands were raised prior to the letter received
from NSEL the Plaintiff was misled to rely on the Defendant’s assurance
regarding the subject trade being in their name. On the other hand, the
Defendant even despite having knowledge that the transaction was not
carried out in the name of the Plaintiff kept assuring the Plaintiff
otherwise. Therefore, there has been an active and willful concealment
on the part of the Defendant about the true facts of the subject trade
and thus fraud played by the Defendant is established.
46. It is the contention of the Defendant, that the Plaintiff has not
pleaded or proved fraud. On the contrary, from a bare perusal of the
plaint in paragraphs 3, 4(n),(o),(t),(u), 8, 10 and 14 it emerges that
the Plaintiff has in the plaint laid out threadbare the detailed
particulars of the fraud committed and has sequentially set out the
manner in which it was discovered by the Plaintiff. In my view, there is
substantial pleading and evidence on record which show the
concealment of facts by the Defendant with an intention to mislead and
defraud the Plaintiff and therefore the contention of the Defendant that
fraud is not pleaded nor proved is only stated to be rejected.
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47. ‘Knowledge’ under Section 18 of the Limitation Act (which is pari
materia to Section 17 of the Limitation Act) would mean ‘real
knowledge’ meaning thereby such disclosure that would inform the
mind of the fraud, the Defendant has actively done all that it could to
keep back / suppress the information that the subject trade stood in
another client’s name and was not in the name of the Plaintiff, even
though it was aware of the fact that NSEL had refused to issue the
allocation letter as far back as on April 29, 2014.
48. Reliance is placed on the decision in the case of Saranpal Kaur
Anand vs. Praduman Singh Chandhok and Others 11 wherein the
Hon’ble Supreme Court has held that the provisions of Section 17(1)
embody fundamental principles of justice and equity viz. that a party
should not be penalized for failing to adopt legal proceedings when the
facts or the documents have been willfully concealed from him and also
that a party who had acted fraudulently should not be given the benefit
of limitation running in its favour by virtue of such fraud and that
vague clues or hints may not matter as to discovery or knowledge of
fraud. The reliance of the Defendant upon the decisions in the cases of
Bhat Nagarkar Developers vs. Dilip Dhondiba Gaikwad 12 and K.S.Nanji
11
(2022) 8 SCC 401
12
2018 (2) Mh.L.J. 673
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& Company vs. Jatashankar Dossa and Others13 contending that the
burden was upon the Plaintiff to show that the Suit is not barred by law
of limitation even if the Defendant does not plead limitation as a
defence does not stand as the Plaintiff has clearly discharged the
burden by proving that the cause of action arose on September 29,
2014 when the NSEL by the letter of the said date confirmed that the
subject trade did not stand in the name of the Plaintiff and that the
assurances and representations made by the Defendant were false. In
my view, the Plaintiff has made out a clear case of active and wilfull
concealment of facts which became apparent to the Plaintiff only by the
NSEL letter of September 29, 2014. In my view, there has been clearly
a case of fraud and false representation played on the Plaintiff.
Therefore, the cause of action arose on September 29, 2014 on receipt
of the letter from the NSEL confirming that the subject trade did not
stand in the name of the Plaintiff. Thereafter the Suit was filed by the
Plaintiff on 18th September 2017 which is well within three years as per
Section 17 of the Limitation Act, 1963 from the discovery that
assurances of the Defendant that the transaction stood in the name of
the Plaintiff is false.
13
AIR 1961 SC1474
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49. The aforesaid elucidation clearly reveals that it was only
pursuant to the NSEL letter dated 29 th September 2014 that the
Plaintiff conclusively had knowledge that the subject trade did not
stand in the name of the Plaintiff but in the name of the Sujana
Sunidhi. I have, therefore, no hesitation in agreeing with the learned
Counsel for the Plaintiff that it is only on 29th September 2014 that it
became clear to the Plaintiff that story concocted by the Defendant was
patently false and that the Defendant had all along misrepresented and
misled the Plaintiff that the subject trade was done in the name of the
Plaintiff. All the contrary positions clearly stood falsified by the NSEL
letter dated 29th September 2014 which clearly states that the subject
trade continue to be reflected in the NSEL’s record as those belonging to
Sujana Sunidhi. Therefore, in view of Section 17(1)(d), the Suit
having been filed on 18th September 2017, the same being within the
period of three years is within time and not barred by limitation.
50. Accordingly, the Issue no.10 is answered in the Affirmative. The
Plaintiff does prove that the Defendant has committed fraud and made
false representation.
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51. Consequently, the Issue No.1 is held in favour of the Plaintiff and
answered in the Negative.
52. As the Suit is not barred by limitation, I now proceed to deal with
the other issues.
53. The Defendant has contended that the subject trade was part of
representative Suit Modern India Ltd. and Others vs. Financial
Technologies (India) Limited and Other (Supra) being Suit No.173 of
2014 filed before this Court and therefore, in light of the same, this
Suit is not maintainable and has also raised the issue that as the
Plaintiff has received monies from the Defendant, the Plaintiff is
estopped from claiming the Suit amount.
54. The Plaintiff in the present Suit has claimed the principal amount
of Rs.1,45,79,032/-. In paragraph 4(t) of the plaint it is claimed that its
net amount outstanding from NSEL was approximately Rs.25.42 crores,
which did not include the monies under the subject trade. Also in the
Claim form / Notification dated 1 st June 2015 submitted by the Plaintiff
before the High Level Committee constituted in the case of Modern
India Ltd. and Others vs. Financial Technologies (India) Limited and
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Others (Supra) the Plaintiff has inserted a Note at the bottom reserving
its right to make a separate claim which reads as under :
“Note : The above mentioned net amount receivable by us
does not include the sum of Rs.1,47,77,170/- paid by us to
M/s. Anand Rathi Commodities Ltd. for Purchase Contract
No. 12335 (SM30AMBL2) and Sales Contract No. 12334
(SM30AMBL25) since, as per NSEL’s records the said
contracts do not stand in our name but in the name of one
M/s.Sujana Sunidhi. M/s.Anand Rathi Commodities Ltd. has
fraudulently and wrongfully entered into the above trades on
behalf of M/s. Sujana Sunidhi and under the pretence of
executing the above trades in our name, received a sum of Rs.
1,47,77,170/- from us. In the circumstances, Encore Natural
Polymers Pvt. Ltd. hereby reserves its right to claim the said
amount of Rs.1,47,77,170/- from NSEL. Enclosed
communication received from M/s. Anand Rathi Commodities
Pvt. Ltd., NSEL & EOW regarding same.”
(emphasis supplied)
55. There is no dispute that the subject trade is included in the
Modern Suit as every trade on the NSEL is included in the Modern Suit
which is a representative Suit under Order 1 Rule 8 of the CPC.
Therefore, the central question for determination in the present Suit
would be whether the subject trade was executed for the Plaintiff and is
therefore owned by the Plaintiff or for some other client of the
Defendant and therefore not owned by the Plaintiff. Therefore, as the
subject trade was never carried out on behalf of the Plaintiff and did
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not stand in the name of the Plaintiff, the Defendant was required to
return the monies paid to it and the owner of the subject trade would
accordingly be paid out in accordance with the Modern India Suit
mechanism. It is to be noted that until the NSEL letter dated September
29, 2014, the Plaintiff was under the bona fide belief that the subject
trade stood in its name and even after the meeting with the EOW on
April 23, 2014, the Defendant repeatedly kept assuring the Plaintiff
that the subject trade was carried out for it and even issued physical
contract notes which included the subject trade.
56. Also, NSEL made payments directly to the Defendant and other
brokers and the Defendant then apportioned those payments to its
clients like the Plaintiff. There was no direct payment from the NSEL to
the Plaintiff. Therefore, though admittedly since the filing of the Suit,
the Plaintiff received pro-rata payments of a total amount of Rs.2.02
crores from the NSEL through the Defendant which obviously is on the
basis that pro-rata payments were related to trades done through the
NSEL platform, the acceptance of receipt of pro-rata payments in
respect of the subject trade cannot operate against the Plaintiff as it
was entirely at the behest of the Defendant and without the
knowledge/instructions of the Plaintiff and that too at a time when the
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Plaintiff believed that the subject trade was executed on its behalf
without any trade-wise break-up being provided.
57. The Defendant’s dishonesty is established from the fact that
despite never having provided a trade-wise break-up for the 45
occasions prior to filing of the Suit, for the first time on November 1,
2018 (Exhibit P-1/11) that is after filing of the Suit on September 18,
2017, the Defendant provided a trade-wise break-up of the pro-rata
payments. The Plaintiff had noticed the subject trade’s presence in the
trade break-up provided for the first time and protested the same vide
its letter dated November 12, 2018 (Exhibit P-1/12/p.50/PW-1 COD)
and December 21, 2018 (Exhibit P-1/13/p.85/PW-1 COD) refusing to
accept any payment towards the subject trade and making it clear that
it would only accept the said amount towards the outstanding on its
other trades which were legitimately made on its behalf and for which
it was patiently waiting in line for payment under the High Court
mandated mechanism.
58. The fact that the subject trade is part of the Modern Suit is
irrelevant in as much as, the subject trade did not belong to the
Plaintiff and that the owner of the subject trade would be bound by the
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orders passed in the Modern Suit. The fact that the Defendant chose to
make payments pro-rata for the subject trade to the Plaintiff at a time
when the Plaintiff believed the representations that the subject trade
stood in its name and accepted them, do not change the fact that the
subject trade does not stand in the name of the Plaintiff and as the
Defendant has not executed the subject trade for the Plaintiff while
having admittedly received payment to do so. Also, the Defendant did
not choose to lead evidence in the matter. This by itself draws an
adverse inference on the defense taken by the Defendant.
59. On behalf of the Defendant it has been submitted that having
reserved its right to claim monies towards the subject trade from the
NSEL, by admittedly receiving pro-rata payments towards the subject
trade from the NSEL through the Defendant, the Plaintiff is now
estopped from claiming payment under the Suit, as that would amount
to unjust enrichment.
60. In the case of Kalpraj Dharamshi & Anr. vs. Kotak Investment
Advisors Limited and Anr14 the Hon’ble Supreme Court has held that for
establishing waiver, it will have to be established that a party expressly
14
(2021) 10 SCC 401
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or by its conduct acted in a manner which is consistent with the
continuance of its rights. For constituting acquiescence or waiver it
must be established that though a party knows the material facts and is
conscious of his legal rights in a given manner, but fails to assert its
rights at the earliest possible opportunity, it creates an effective bar of
waiver against him. Waiver is an intentional relinquishment of a right
and involves conscious abandonment of an existing legal right,
advantage, benefit, claim or privilege.
61. In Municipal Corporation of Greater Bombay vs. Dr. Hakimwadi
Tenants Association and Another 15 the Hon’ble Supreme Court observed
that in order to constitute waiver, there must be voluntary and
intentional relinquishment of a right. The essence of a waiver is an
estoppel and where there is no estoppel, there is no waiver. Estoppel
and waiver are questions of conduct and must necessarily be
determined on the facts of each case.
62. Further, the Plaintiff has relied on Motilal Padampat Sugar Mills
Co. Ltd. vs. State of Uttar Pradesh 16 where the Hon’ble Supreme Court
has held that there could be no estoppel against the Plaintiff since the
15
1988 (Supp) SCC 55
16
(1979) 2 SCC 409
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doctrine of estoppel by representation is applicable only to
representations as to some state of facts alleged to be at the time
actually in existence and not to promises of the future which, if binding
at all, must be binding only as contracts. Considering the fact that
the Plaintiff had categorically in the claim made before the High Level
Committee reserved its right to make the claim with respect to the
subject trade, in my view this Suit is maintainable. Further, in view of
the law discussed above, the question of waiver by the Plaintiff or
estoppel against the Plaintiff would not arise as the Plaintiff had
already reserved its right as above. The Plaintiff is also entitled,
therefore, by way of a Suit to seek a refund for the purchase leg of the
paid contract.
63. In view of the above discussion, Issues No. 1 to 3, 5 and 10 are
accordingly answered as follows:-
Sr. Issue Answer
No.
1. Whether the suit is barred by limitation? Negative
2. Whether the suit is maintainable in light of Affirmative
Suit No. 173 of 2014 filed by one Modern
India Ltd under Order I Rule VIII of the
Code of Civil Procedure 1908?
3. Whether the Plaintiff is estopped from Negative
claiming the suit amount in light of their
having received any monies from the
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Defendant?
5. Whether the Plaintiff is entitled to seek Affirmative
refund for the purchase leg of the paired
contract despite the unconditional
acceptance of part payments for the sale leg
on 47 occasions since 21st August 2013
10. Whether Plaintiff proves that the Defendant Affirmative
has committed fraud and or made any false
representation or siphoned off the money
paid by the Plaintiff to the Defendant
towards the paired contract?
RE: ISSUES NOS. 4,6, 8 AND 9:
64. It is evident that on July 15, 2013, on the instructions of the
Plaintiff, the Defendant purchased a certain quantity of White Refined
Sugar M Grade on the NSEL through a Contract Note No. 0012335
(NSEL Contract No. SM30AMBL2) (Exhibit P-1/2) for a total sum of
Rs.1,45,63,473.06/- and on the same day i.e. 15 th July 2013, pursuant
to instructions of the Plaintiff, the Defendant sold the same
commodities under Contract Note No. 0012334 (NSEL Contract No.
SM30AMBL25) (Exhibit P-1/20) for a total sum of Rs. 1,47,94,679/-.
That, on the next day i.e. on July 16, 2013, at 4.51 p.m., the Defendant
emailed the Plaintiff with the digitally signed Contract Notes (Exhibit P-
1/2 and Exhibit P-1/20) for both the above transactions done on behalf
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of the Plaintiff which at the top of the page clearly stated that the same
were issued by the Defendant acting as an agent for the Plaintiff and
also that the trade was carried out on account of “Encore Natural
Polymers Private Limited (“HCE009”) i.e. the Plaintiff and included
amongst other trades, the subject trade which was replied to by the
Defendant on the same day at 7.25 p.m. with details of the trade
“done” under Client Code “HCE009” i.e. the Plaintiff’s code in the name
of “Encore Natural Polymers Private Ltd.” for an amount of
Rs.1,45,79,032/- and the confirmation attached to the email also
disclosed that the trade was carried out under Client Code “HCE009”.
On the settlement date of the ‘Buy Trade’ i.e. on 17 th July 2013, the
Plaintiff made the payment of Rs.1,45,79,032/- towards the ‘Buy Trade’
of commodities vide RTGS whereupon the Defendant was obligated to
hand over the Delivery Allocation Report / Letter (DAR) issued by
NSEL, which corresponds to a document of title in as much as it would
prove the allocation / earmarking of the subject trade in the name of
the Plaintiff which includes the details of the end client and a
confirmation from NSEL, the original warehouse receipts were in
NSEL’s custody. The Defendant by its email dated 16 th July 2013
provided the Plaintiff with the DARs (Exhibit P-1/18) for the other
trades carried out on 15th July 2013, but it failed to provide the DAR for
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the subject trade which was also carried out on 15 th July 2013 and no
explanation was given as to why the DAR for the subject trade had not
been made available. Therefore, the Plaintiff by its email dated 11 th
December 2013 (Exhibit P-1/18) called upon the Defendant to send the
DAR for the outstanding contracts, which included the subject trade,
however, received no response to the said email as also to the emails
dated 23rd April 2014 sent at 11.48 a.m. (Exhibit P-1/14), 23rd April
2014 sent at 12.15 p.m. (Exhibit P-1/15), 7th March 2017 (Exhibit P-
1/16) and 8th May 2017 (Exhibit P-1/17) sent later following up on the
issue. PW2 in his answer to question no. 52 has volunteered that in the
meeting with the EOW the Defendant mentioned that they will send to
the Plaintiff, the original signed copy of the contract and the DAR
which has not been received by the Plaintiff till today. It is an admitted
position that till date, no DAR for the subject trade has been handed
over by the Defendant to the Plaintiff.
65. Though it has been pleaded by the Defendant that it did in fact
carry out the trade for the Plaintiff, the Defendant has not produced the
DAR in respect of the subject trade. Therefore, adverse inference ought
to be drawn against the Defendant’s conduct and the only conclusion
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that can be arrived at for non-production is that it does not have the
DAR for the subject trade in the Plaintiff’s name because, as confirmed
by NSEL, the trade was never carried out for the Plaintiff.
66. On July 19, 2013 the physically signed Purchase Contract
(Exhibit P-1/3) and Sale Contract (Exhibit P-1/3) for trade carried out
on July 15, 2013 was sent by the Defendant to the Plaintiff but it did
not include the subject trade for which there was no explanation as to
why the digitally signed contract notes sent contemporaneously
included trades in three commodities (i.e. including the subject trade)
whereas the physically-signed contract notes, having the same number
and for the same day, included trades for only two commodities i.e.
excluding the subject trade.
67. It is an admitted position that on July 30, 2013, before the ‘sell
trade’ part of the subject trade could be settled, all trades on the NSEL
exchange were suspended by the Government of India by a Circular of
NSEL on account of the widely reported NSEL scam. Believing that the
subject trade stood in its name, the Plaintiff awaited information /
payouts in respect of the subject trade in accordance with the NSEL
payment mechanism under order of this Court /FMC/NSEL.
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68. On August 25, 2014 (Exhibit P-1/7) Defendant admitted that the
subject trade was made on behalf of Sujana Sunidhi, contending that it
was a mistake and was subsequently modified on the very same day
after trading hours but as the online platform of NSEL was not
available after trading hours, the UCC for the said trades of White
Refined Sugar M Grade was modified outside the online platform of
NSEL for operational purpose. However, no evidence has been led
proving the above factual assertion by the Defendant to establish it’s
case.
69. That, letter from NSEL dated 29th September 2014 forms the
conclusive proof on whose name the subject trade was done and the
Defendant has concocted digitally signed contract notes and/or
unsigned physical contract notes to receive money from the Plaintiff
without performing its counter-obligation of carrying out the trade on
its behalf. The contention in the written statement that the client codes
were modified by the Defendant at a later stage is also falsified by the
fact that, even on September 29, 2014, the subject trade continued to
reflect in NSEL’s records as those belonging to Sujana Sunidhi. No
explanation is given as to how the trades continued to be shown in the
name of Sujana Sunidhi when the mistake was rectified.
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70. As can be seen from the above, it is not in dispute that Plaintiff
had paid a sum of Rs.1,45,79,032/- to the Defendant in respect of the
‘buy trade’ in the subject trade which was not carried out by the
Defendant in the name of the Plaintiff as admitted by the Defendant in
(i) paragraph 4(q) of the written statement. It is also clear that the
subject trade was not carried out by the Defendant in the name of the
Plaintiff as has also been admitted by the Defendant in its reply to the
Plaintiff on 24th November 2014 resting its entire defence as stated in
paragraph 4(r) of the written statement on the fact that the client code
entered was an inadvertent error further contending that the ARCL
dealer while punching in the Plaintiff’s buy trade for White Refined
Sugar M Grade having Contract Specification No.SM30AMBL2
committed an error and realized his mistake on the very same day after
trading hours. That, as the online platform of NSEL was not available
after trading hours, the UCC for the said trades of White Refined Sugar
M Grade was modified outside the online platform of NSEL for
operational purposes. The Defendant has all throughout admitted the
receipt of Rs.1,45,79,032/- and also admitted that it had originally
executed the subject trade in the name of Sujana Sunidhi, however, no
explanation was given as to how the trades continued to be shown in
the name of Sujana Sunidhi if the mistake was purportedly rectified.
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This defence of the Defendant appears to be ex-facie false as while in
paragraph 4(r) of the written statement the Defendant claims that the
alleged modification took place after trading hours while in paragraph
4(q) of the written statement, the Defendant relies upon its own ARCL
Trade log which reflects that the “Buy Trade was carried out between
12.03 p.m. to 12.04 p.m. and the subsequent modification of the Client
Code at 1.12 p.m. to 1.13 p.m. i.e. within the trading hours. The fact
that admittedly the sale transaction of the subject trade took place on
the same day at 5.57 p.m. indicates that the trading/market hours were
at least till then. Therefore, if the alleged modification took place at
1.12 p.m. to 1.13 p.m. as per the ARCL Trade Log, then the same was
done during the trading hours and not after the trading hours. Also,
this too is false because as the the NSEL Circular dated 8 th July 2011
(Exhibit P-1/8) which the Defendant itself relies upon in support of its
contention that client modification is permitted by the NSEL (para
4(r)/p.119 of Written Statement) , it is stated that modification is
permitted during trading hours. Therefore, had the modification taken
place during the trading hours, the same would have reflected in NSEL’s
records and consequently, a DAR for the subject trade would have been
issued in the name of the Plaintiff. It is, therefore, clear that the case of
‘client code modification’ is an afterthought and despite being given an
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opportunity to prove the modification in the trial, the Defendant has
completely failed to do so.
71. It is not disputed that DARs are issued by NSEL for the trades
carried out on its platform can be seen from the fact that DARs for all
the other trades carried out on 15 th July 2013 except the subject trade
were provided by the Defendant to the Plaintiff, however, no DAR was
provided for the subject trade. Also, as stated in paragraph 4 of the
written statement, though the Defendant vide its letters dated 4 th April
2014, 26th April 2014 and 30th April 2014 requested NSEL to issue
revised allocation letter, NSEL vide its reply dated 29 th April 2014
refused to consider the request stating that trades were already settled
as per settlement schedule and invoices for the same is already received
and that such modification cannot be done. Though the Plaintiff by
several emails dated 23rd April 2014, 23rd April 2014, 7th March 2017
and 8th May 2017 requested the Defendant to provide the DAR, at no
point did the Defendant inform the Plaintiff that it did not have the
DAR in the name of the Plaintiff or that it was seeking revised copies
from NSEL as the DAR stood in the name of Sujana Sunidhi. Also,
there would be no question of asking NSEL for a revised allocation
letter if the DAR was in the Plaintiff’s name which would have been the
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case if the modification was done as per the NSEL circular. As no DAR
was provided to the Plaintiff it is clear that the subject trade was never
carried out on behalf of the Plaintiff despite the Plaintiff’s payment
made on the basis of the Defendant’s representation.
72. It is the contention of the Defendant that there is no privity of
contract between the Plaintiff and the Defendant in respect of the
subject trade, as no consideration is alleged to have flowed from the
Plaintiff to the Defendant in connection with the underlying
commodity. There is no substance in this contention and the same is
hereby rejected, as it is an admitted position that the Defendant was
acting as agent of the Plaintiff. It is also evident that the Plaintiff has, in
fact, paid the amount to the Defendant, yet the Defendant has failed to
effect the purchase in the name of the Plaintiff. The Defendant cannot
thereby be absolved of liability, particularly since the sale is not in the
name of the Plaintiff. Consequently, there clearly exists a privity of
contract between the Plaintiff and the Defendant. And as the
Defendant’s obligations under the transaction remain unfulfilled, the
Plaintiff is entitled to receive the refund of the amount paid.
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73. In Bostock vs. Jardine & Another17it has been held that though a
contract was made, it was not the contract which the Plaintiff therein
authorized the Defendant therein to make and therefore, as the
Plaintiff had paid the money on the faith that a contract had been
entered into, which turns out never to have existed, he was entitled to
have the money returned. It also held that if no such contract ever
existed as the Defendant was authorized by the Plaintiff to make, or if
it was not available, there has been a total failure of consideration and
the Plaintiff was entitled to recover back the money he has paid.
74. The facts in Bostock vs. Jardine & Another (supra) are similar to
the facts of the present case as in the present case, the Plaintiff had
authorized the Defendant to transact the subject trade on behalf of the
Plaintiff whereas the Defendant executed the subject trade in the name
of Sujana Sunidhi resulting in total failure of consideration and as such
the Plaintiff is rightly entitled to refund of Rs.1,45,79,032/- paid by it
to the Defendant.
75. In S. Shanmuganathan vs. The Authorized Officer, Indian
Overseas Bank18 the Petitioner, pursuant to being declared as a
17
English Reports- Exchequer Division/1865 Eng R 407
18
2017 SCC Online Mad 1549
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successful bidder in an auction, made payment of the sale
consideration to the bank. The payment was made on the basis that the
property was unencumbered. However, the bank, who was well aware
of the pending litigation with respect to the secured asset, failed to
disclose the same to the Petitioner in the auction notice that was issued.
The Petitioner filed a Writ Petition seeking for refund of the sale
consideration, which was resisted by the bank on the ground that the
sale certificate was already issued and therefore, the sale subsisted and
could not be cancelled. In these circumstances, the Hon’ble Madras
High Court held that the material available on record is sufficient to
arrive at a conclusion that the bank, for reasons best known to it,
withheld information with regard to the litigation with a view to sell
the secured asset somehow or the other. The bank instead of admitting
its mistake in not disclosing the encumbrances, and litigation, dragged
the Petitioner from pillar to post and finally prompted him to approach
the Court. In view thereof, the bank was held liable to refund the sale
consideration to the Petitioner, who failed to give possession of the
property to the Petitioner for over 9 years.
76. Similarly, in the facts of the present case, the Defendant withheld
the information that it had not conducted the subject trade in the name
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of the Plaintiff and that the DAR did not stand in the Plaintiff’s name
despite the Defendant having sought for a “revised’ DAR from NSEL for
the Plaintiff. Despite repeated follow ups from the Plaintiff, the
Defendant withheld, the communications vide letters dated 04 April,
2014, 26 April 2014 and 30 April 2014 it had with NSEL, requesting
NSEL to issue revised allocation letter. NSEL refused to accede to this
request by its response letter dated 29 April, 2014. This entire
correspondence was not disclosed to the Plaintiff nor has it been
brought on record by the Defendant. The Defendant has contended that
as NSEL’s operations were shut down from about 31 st July 2013, the
DAR could not be furnished and the Defendant cannot be blamed or
held responsible for reasons beyond its control. This defence of the
Defendant cannot be countenanced in as much as the NSEL letter dated
29 April 2014 has categorically stated that the subject trade stands in
the name of Sujana Sunidhi. As the Defendant has failed to produce on
record the DAR in the name of the Plaintiff, adverse inference ought to
be drawn against the Defendant. And therefore, in light of the
Defendant’s failure to carry out the subject trade in the name of the
Plaintiff, the Plaintiff is entitled to refund of the monies paid by it to
the Defendant.
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77. In Ram Nagina Singh vs. Governor-General in Council 19 the
Plaintiff supplied bricks under 3 permits issued by the Chief Engineer,
Eastern Command. The Plaintiff also entered into an agreement with
the company to whom the bricks were to be supplied. These bricks
were delivered to the company. There was no dispute about the
quantity of bricks supplied. The company thereafter, insisted on paying
lower rates than those mentioned in the permits. Accordingly, the bills
were not paid. The Plaintiff filed a suit against the Chief Engineer,
Eastern Command for recovery of the price of bricks supplied. The
defense taken by the Defendant was that since the bricks were supplied
to the company, he did not enjoy any benefit therefrom, and was
therefore, not bound to make compensation. The Court held that the
Agreement under which the bricks were supplied is void for reason of
not complying with certain statutory requirements qua government
contracts. As a result, the agreement under which the bricks were
supplied was held to be void and not binding on the Defendant. While
applying the principles of Section 65 of the Indian Contract Act, the
Court held that the said section applies to a case where an agreement is
entered into between the parties under which benefit is received by one
party and, after the benefit is so received, the agreement is declared
19
1949 SCC Online Cal 90
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void. It is then that the party who has received the advantage is
compelled to restore the advantage so received. Accordingly, the
Plaintiff therein was entitled to recover compensation from the
Defendant.
78. Similarly, in the facts of the present case, the benefit received by
the Defendant, viz. the amount of Rs. 1,45,79,032/- paid by the
Plaintiff to the Defendant, ought to be restored / refunded to the
Plaintiff, in light of the facts and circumstances of the present Suit,
especially, since the Defendant has failed to discharge his burden of
proving that the subject trade was carried out in the name of the
Plaintiff.
79. In Satgur Prasad and Mahant Har Narain Das 20 the Plaintiff
therein had filed a suit for declaration against the Defendant therein
that the agreement entered into between the Plaintiff and Defendant be
declared void on the ground that the same was obtained by fraud and
undue influence. Both, the Single Judge and the Appeal Bench, found
that the agreement was procured by fraud and undue influence and
that the Defendants were in a fiduciary relation to the Plaintiff and had
20
1932 SCC Online PC 2
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taken advantage of that relation to procure the deed. In the Cross
Appeals filed, it was finally held that such an agreement was hit by
Section 65 of the Indian Contract Act which provides that when a
contract becomes void, and this covers cases of voidable contracts
which had been avoided, any person who has received any advantage
under such contract is bound to restore it to the person from whom he
received it or make compensation therefore. The doctrine of restitutio
in integrum states that a party exercising his option to rescind is
entitled to be restored as far as possible to his former position. Fraud,
renders any transaction voidable at the election of the party defrauded;
and if, when it is avoided, nothing has occurred to alter the position of
affairs, the rights and remedies of the parties are the same as if it had
been void from the beginning. Accordingly, the parties therein were put
back in the position which they occupied prior to the agreement.
80. Applying the aforesaid ratio to the facts of the present case, the
Defendant ought to be directed to refund the monies to the Plaintiff,
along with interest, such that the Plaintiff can be put back in the
position it was prior to making the payment of Rs. 1,45,79,032/- to the
Defendant.
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81. The Defendant has willfully defrauded the Plaintiff, and despite
being fully aware of the same, continued to mislead the Plaintiff that
the subject trade stood in the Plaintiff’s name. It is on the strength of
these repeated false representations that the Plaintiff was misled into
believing that the transaction was secure. As a direct consequence of
the Defendant’s fraudulent and misleading conduct, the Plaintiff has
suffered loss and prejudice.
82. In view of the above discussion, the submissions made on behalf
of the Defendant with respect to issues no. 4, 6, 8 and 9 cannot be
sustained.
83. Accordingly, on the basis of the above reasoning, the Issues no. 4,
6, 8 and 9 are answered in favour of the Plaintiff in the Affirmative as
under :
Sr. Issue Answer
No.
4. Whether the Plaintiff is entitled to make Affirmative
a claim for refund in respect of the
purchase leg of the which forms part of a
paired contract in relation to Contract
No. 12334 (“Sugar Trade”)
6. Whether the Plaintiff is entitled to make Affirmative
a claim against the Defendant for refund
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of the purchase consideration of the
Sugar Trade despite having reserved its
right to claim the sale consideration of
the Sugar Trade from NSEL before the
High Court Committee by this Hon’ble
Court in Suit No. 173 of 2014?
8. Whether the Plaintiff proves that there is Affirmative
privity of contract between the Plaintiff
and the Defendant in relation to the
underlying contract (Paired Contract)
conducted by the Defendant for and on
behalf of the Plaintiff on the platform of
NSEL?
9. Whether the Plaintiff proves that it Affirmative
suffered losses on account of the error
committed in the punching of the client
code made by the dealer of the
Defendant?
RE: ISSUE NOS. 7 AND 11
84. The burden of proof in a Suit is on the Plaintiff, the Plaintiff in
the present case has proved its case, and therefore, Issues No.4,5,6,8,9
and 10 being answered in the affirmative, Issues Nos.7 and 11 are
answered in the negative as follows :
Issue Issue Answer
No
7. Whether the Defendant proves that it is Negative
not liable to Plaintiff because the
Defendant is an intermediary on the
NSEL platform?
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11. Whether the Defendant proves that it Negative
carried out the Sugar Trade paired
contract on NSEL Platform for and on
behalf of the Plaintiff?
RE: ISSUES NO.12, 13, 14 and 15 :
85. It is evident that the Defendant was instructed to carry out the
subject trade for the Plaintiff for which the Plaintiff made payment to
the Defendant. There is no material on record to show that the subject
trade was in fact carried out in the name of the Plaintiff, despite the
Defendant’s repeated assertions that the subject trade stood in the
name of the Plaintiff. By its letter dated September 29, 2014, the NSEL
– the contractual counter party to the subject trade has conclusively
confirmed that the subject trade did not stand in the name of the
Plaintiff, but in the name of Sujana Sunidhi.
86. In view of the findings of issues no. 4,6, 8, 10, the Plaintiff has
proved its entitlement and is entitled to seek repayment of the sum of
Rs.1,45,79,032/- from the Defendant, since admittedly a sum of
Rs.2.02 crores has been received by the Plaintiff from the NSEL through
the Defendant and some of which also would pertain to the subject
trade, the repayment would be subject to the adjustment of the
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amounts already received towards the subject trade.
87. In Trojan and Company vs. RM.N.N.Nagappa Chettiar 21 the
Hon’ble Supreme Court held that it is well settled that interest is
allowed by a court of equity in the case of money obtained or retained
by fraud, the agent must also pay interest in all cases of fraud and on
all bribes and secret profits received by him during his agency.
88. Applying the aforesaid ratio to the facts of the present case, the
Defendant, as an agent of the Plaintiff, fraudulently misrepresented to
the Plaintiff that the subject trade stood in the name of the Plaintiff. It
was only vide NSEL letter 29 September 2014 that the Plaintiff
conclusively established that the subject trade was not in the name of
the Plaintiff. The suit arises out of a commercial transaction and
therefore, interest can exceed 6% as is provided for in the proviso to
Section 34(1) of the CPC. Therefore, in my view the Plaintiff is entitled
to interest on the money paid to the Defendant, i.e. on Rs.
1,45,79,032/- along with further interest as more particularly stated in
the Particulars of Claim at Exhibit “T”.
89. Ergo, the other contentions raised on behalf of the Defendant are
21
(1953) 1 SCC 456
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hereby rejected.
90. In view of the above discussion, the Issues No. 12, to 15 are
answered as under:-
Issue Nos. Issue Answer
12 Whether the Plaintiff proves that it is Affirmative
entitled to a sum of Rs.2,55,43,262.9/- as
per the particulars of claim (Exhibit "T")?
13 Whether the Plaintiff is entitled to any Affirmative
further interest on the principal sum of
Rs.1,45,79,032/- from the date of filing of
the suit until payment and/or realization
and, if so, at what rate?
14 What order and what decree? Suit is
decreed.
15 What order as to costs under Section 35 of Costs as
the Code of Civil Procedure 1908 as awarded.
amended by the Commercial Courts Act?
91. Accordingly, the following order is passed:-
ORDER
(i) Subject to the adjustment of the amounts already received
towards the subject trade under the claim made before the High Level
Committee, Plaintiff’s Suit is decreed in terms of prayer clause (a)
which reads thus :
“That this Hon’ble Court be pleased to order and decree the
Defendant to pay to the Plaintiff a sum of Rs.2,55,43,262.9/-
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Exhibit T, together with interest on the principal sum of
Rs.1,45,79,032/- at the rate of 18% per annum or any other
rate as this Hon’ble Court may deem fit and proper from the
date of the filing of the Suit till payment and/or realization.”
(ii) Considering that the Commercial Suit has been decreed, in view of
the Section 35 of the Code of Civil Procedure, 1908 as amended by
Commercial Courts Act, 2015, as applicable to commercial disputes, this
Court also awards costs in the matter, to be worked out by the Taxing
Master of this Court.
(iii) Accordingly, Decree be drawn up expeditiously.
(ABHAY AHUJA, J.)
92. After the judgment is pronounced, Mr.Siddhanth Chhabria learned
Counsel for the Defendant seeks stay in the matter.
93. Mr.Kapadia, learned Counsel for the Plaintiff, vehemently opposes
the request for stay. Mr.Kapadia further submits that since the monies are
lying in this Court, an appropriate application for execution will have to
be made.
94. Having heard the learned Counsel and having considered their
submissions, this Court is not inclined to grant stay in the matter. The
request for stay is accordingly rejected.
(ABHAY AHUJA, J.)
ARTI avk 64/64
VILAS
KHATATE
Digitally signed
by ARTI VILAS
KHATATE
Date:
2025.06.29
19:50:15 +0530
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