Full Text
HIGH COURT OF DELHI
TRANSPORT CORPORATION OF INDIA LTD ..... Plaintiff
Through: Ms. Diya Kapur and Mr. Aditya Ladha, Advocates
Through: Mr. Sandeep Sethi, Sr. Advocate with Mr. Neeraj Yadav, Advocate for D-2
JUDGMENT
1. The present application has been filed by the plaintiff under Order XI Rule 1(5) under the Schedule I of the Commercial Courts Act, 2015 seeking permission to file additional documents, inter alia seeking the following reliefs: “a. Allow the present application in favour of the Plaintiff and take on record the additional documents filed by the Plaintiff. b. Pass any further order(s) as this Hon'ble Court may deem fit and proper in the present facts and circumstances of the present case.”
2. The present suit stems from a foreign exchange derivative transaction, a USD-CHF transaction dated 20th September, 2007, entered into between the parties, ostensibly swapping Rs. 15 Crores into CHF 44,43,467 for the purpose of ensuring the applicant/plaintiff herein received 2% of Rs. 15 crores, which was ostensibly an interest savings, as a result of the swap into CHF.
FACTUAL MATRIX
3. The applicant/ plaintiff herein had filed a suit seeking a declaration, a mandatory injunction, and the recovery of Rs 6,92,55,342/- in relation to a Foreign Exchange Derivative transaction involving a USD-CHF transaction on 20th September, 2007 between the plaintiff and the Yes Bank Ltd, i.e., the non-applicant/defendant No. 2.
4. The applicant/plaintiff firm is engaged in the business of multimodal transport and logistics, including supply chain solutions, periodically required term loans and working capital loan facilities from several banks. In 2006, the applicant/plaintiff firm had around Rs. 226 crores in outstanding loans on which it was paying interest between 6.50 % and 11% per annum. During the same year, the non-applicant/ defendant No. 2 convinced the applicant/plaintiff to participate into Foreign Exchange Derivative transactions that were supposed to save the applicant/plaintiff herein 2% in interest charges on its loan, but were in fact meant to generate profits for the non-applicant/defendant No. 2.
5. The non-applicant/defendant No. 2 herein convinced the applicant/ plaintiff to "notionally" convert its Rupee loan into a Swiss Franc (CHF) loan by claiming that interest rates were significantly lower in CHF and, as a result, the applicant/plaintiff would incur fewer interest expenses. Also, it is stated that there was no forex risk associated with this notional conversion, as the CHF was a very stable currency, and that any potential forex risk associated with this notional conversion was mitigated by an "option protection".
6. On 23rd October, 2006, the applicant/plaintiff approved a resolution permitting certain business officials to accept the terms and circumstances of bank offers for derivative transactions that are in the firm's best interests. On 20th September, 2007, the plaintiff entered into an interest-saving transaction with non-applicant/defendant No. 2 in which Rs. 15,00,00,000/- was ostensibly swapped for CHF 44,43,467/-, with the maturity date was set for 24th September, 2009 and the plaintiff was to receive a sum equal to 2% of Rs. 15,00,00,000/-, which was ostensibly a savings in interest due to the swap into Swiss Francs (CHF).
7. It has been stated on behalf of the applicant/plaintiff herein that the said transactions were in fact very risky and the said fact was actively concealed by the non-applicant/defendant No. 2 despite being under a fiduciary relationship with the applicant/plaintiff herein.
8. It has been stated on behalf of the applicant/plaintiff that on 26th April, 2011, the Reserve Bank of India issued a circular imposing a penalty on several banks in relation to foreign exchange derivative transactions of the same nature, as was entered into by the plaintiff company, on the grounds of contravention of various instructions issued by the Reserve Bank of India in respect of derivatives, such as failure to conduct due diligence with respect to the suitability of products, selling derivative products to unregistered entities, etc. Being aggrieved by the malafide acts of the non-applicant/defendant No. 2 herein the applicant/plaintiff filed the present suit for recovery.
9. Pursuant to the completion of pleadings, this Court vide order dated 24th August, 2015 framed the following issues. The same are reproduced hereunder: “1. Whether the USD/CHF transaction dated 20.09.2007 is voidable at the option of the plaintiff (under Section 19 and/or Section 19A of the Indian Contract Act? OPP
2. Whether defendant No.2 is liable to the plaintiff for an amount of Rs.6,92,55,342/- with interest, from the date of payment? OPP
3. Whether the Banking Licencee of defendant No.2 is liable to be cancelled by defendantNo.1? OPP
4. Whether the USD/CHF transaction dated 20.09.2007 is void under Section23 and/or Section 24 of the Indian Contract Act? OPP
5. Whether the present suit is barred by limitation? OPD
6. Whether this Court has no territorial jurisdiction to adjudicate the present suit? OPD
7. Whether there is accord and satisfaction achieved in respect of the transactions in issue or, discharge of the contract by virtue of performance of obligations undertaken therein or, by mutual agreement? OPD
8. Whether the transaction was conducted in pursuance to the ISDA agreement dated 06.-9.2007 and the deal confirmation dated 20.09.2007? GPP
9. Relief.” SUBMISSIONS
10. Learned counsel appearing on behalf of the applicant/plaintiff submitted that the present suit stems from a foreign exchange derivative transaction, a USD-CHF transaction dated 20th September, 2007, entered into between the parties, ostensibly swapping Rs 15 Crores into CHF 44,43,467 for the purpose of ensuring the petitioner herein received 2% of Rs 15 crores, which was ostensibly an interest savings, as a result of the swap into CHF.
11. It has been submitted on behalf of the applicant/plaintiff that the plaintiff filed the instant suit with all pertinent documents in its possession at the time of filing. On 29th May, 2018, the plaintiff received important RBI documentations from one Mr. Nikhil Sharma, which he had obtained through an RTI request. These records are consistent with the claims made by the plaintiff in paragraphs 26 and 30 of the plaint. It is further submitted that the aforementioned documents were not in the possession of the plaintiff and, thus, could not be presented until now despite the requisite care. The following documents are sought to be brought on record: i. Show Cause Notices (SCNs) issued by the RBI under Section 35, 35 A, 46 and 47 A of the Banking Regulations Act, 1949 on the basis of Annual Financial Inspection. ii. Reply filed by the Banks to the Show Cause Notices (SCNs) issued by the RBI. iii. Consequent penalty imposed by the RBI on the Banks.
12. It has been submitted on behalf of the plaintiff/applicant that the evidence in the suit was not commenced at the time of filing the application and no party shall suffer any disadvantage if the papers are included into the record at this point. It is further submitted that the documents mentioned above are pertinent and necessary for a just resolution of the present case. It is a well-established legal principle that the parties must be given the chance to present their evidence and argue their case before the Court.
13. Per contra, learned senior counsel appearing on behalf of the nonapplicant/defendant submitted that in addition to being meritless and an abuse of the legal process, the application filed by the plaintiff was filed dishonestly at a late stage to delay to court the proceedings. The documents which have been requested to be submitted before this Court have no bearing on the issue at hand, which is supported by the fact that the plaintiff/applicant, in its consent given before this Court and as reflected in order dated 2nd May, 2018 in O.A. No. 81 of 2017, has waived discovery of the documents which have been requested to be submitted through the aforementioned application. The order was a consent order, and the papers presently requested to be entered into the record cannot be authorised in light of the plaintiff's agreement.
14. It has also been submitted on behalf of the defendant/ nonapplicant that the applicant/ plaintiff has failed to highlight the relevance of the documents to the case at hand sought to be placed on record.
15. It is further submitted that the applicant/plaintiff has withheld from this Court the fact that it has also sought the same documents through an application for discovery of documents bearing I.A. No. 25111 of 2015. When the order dated 21st February, 2017 was passed in the abovementioned I.A. by way of challenge in Chamber Appeal bearing O.A. NO. 81 of 2017, the plaintiff renounced the prayers sought in paragraph 6(a) of the application. The document that the plaintiff now intends to submit for inclusion is contained in paragraph 6(a) of the said application.
16. It is submitted on behalf non-applicant/defendant that according to the order dated 2nd May, 2018, the plaintiff has already renounced its requests pertaining to paragraph 6(a) of the aforementioned application, through which discovery of the RBI circular dated 26th April, 2011 was sought. It is further submitted that as the plaintiff has renounced the petition for discovery of the aforementioned circular, the plaintiff by way of this application cannot seek permission to enter the same into evidence. It is said that the fact that the plaintiffs have renounced their request for the RBI circular dated 26th April, 2011 clearly suggests that it is irrelevant to the proceedings of the instant suit.
17. It is submitted on behalf of the defendant/non-applicant that the application filed by the applicant/plaintiff indicates that the requested documents were received via RTI by Mr. Nikhil Sharma. It is further submitted that the plaintiff has omitted to reveal the connection between himself and Mr. Nikhil Sharma. Mr. Nikhil Sharma is a linked party to the plaintiff. The application is absolutely silent as to what inspired Mr. Nikhil Sharma to acquire the contested papers and provide them to the plaintiff. The fact that the records were collected on 15th July, 2016, but only provided to the plaintiff two years later, on 28th May, 2018, demonstrates conclusively the plaintiff's malice. The fact that the plaintiff filed this motion at the same time as the witness list says eloquently about their behavior and bad faith.
18. It is further submitted that the RBI circular lists 19 banks and financial institutions, and the aforementioned circular dated 26th April, 2011 issued by defendant No. 1 is already part of the record. That was neither particular to the second defendant nor relevant to the plaintiff's transaction.
19. It is submitted that the same has no influence on the merits of this case, as the penalty was imposed on many institutions for distinct reasons. It is also crucial to note that sufficient due diligence was conducted to determine the plaintiff's fitness for the products, and that the plaintiff was a savvy financial market participant with derivative transactions with many institutions and was aided by seasoned specialists. Also, it is relevant to note that the derivative transaction entered into between plaintiff and defendant in 2007 was previously resolved to Plaintiff's satisfaction in 2009.
20. In view of the foregoing submissions, learned senior counsel appearing on behalf of defendant no. 2 submitted that the instant application being devoid of any merits is liable to be dismissed.
FINDINGS AND ANALYSIS
21. Heard the learned counsel for the parties and perused the record.
22. In order to adjudicate the instant application, this Court finds it appropriate to peruse the Order XI Rule 1 of the Schedule I of the Code of Civil Procedure, 1908 (For Commercial Disputes) (hereinafter as “the CPC”) which reads as follows:
1. Disclosure and discovery of documents.—(1) Plaintiff shall file a list of all documents and photocopies of all documents, in its power, possession, control or custody, pertaining to the suit, along with the plaint, including: (a) Documents referred to and relied on by the plaintiff in the plaint; (b) Documents relating to any matter in question in the proceedings, in the power, possession, control or custody of the plaintiff, as on the date of filing the plaint, irrespective of whether the same is in support of or adverse to the plaintiffs case;
(c) nothing in this rule shall apply to documents produced by plaintiffs and relevant only—
(i) for the cross-examination of the defendant's witnesses, or
(ii) in answer to any case setup by the defendant subsequent to the filing of the plaint, or
(iii) handed over to a witness merely to refresh his memory.
(2) The list of documents filed with the plaint shall specify whether the documents in the power, possession, control or custody of the plaintiff are originals, office copies or photocopies and the list shall also set out in brief, details of parties to each document, mode of execution, issuance or receipt and line of custody of each document. (3) The plaint shall contain a declaration on oath from the plaintiff that all documents in the power, possession, control or custody of the plaintiff, pertaining to the facts and circumstances of the proceedings initiated by him have been disclosed and copies thereof annexed with the plaint, and that the plaintiff does not have any other documents in its power, possession, control or custody. Explanation.—A declaration on oath under this sub-rule shall be contained in the Statement of Truth as set out in the Appendix. (4) In case of urgent filings, the plaintiff may seek leave to rely on additional documents, as part of the above declaration on oath and subject to grant of such leave by court, the plaintiff shall file such additional documents in court, within thirty days of filing the suit, along with a declaration on oath that the plaintiff has produced all documents in its power, possession, control or custody, pertaining to the facts and circumstances of the proceedings initiated by the plaintiff and that the plaintiff does not have any other documents, in its power, possession, control or custody. (5) The plaintiff shall not be allowed to rely on documents, which were in the plaintiff's power, possession, control or custody and not disclosed along with plaint or within the extended period set out above, save and except by leave of court and such leave shall be granted only upon the plaintiff establishing reasonable cause for non-disclosure along with the plaint. (6) The plaint shall set out details of documents, which the plaintiff believes to be in the power, possession, control or custody of the defendant and which the plaintiff wishes to rely upon and seek leave for production thereof by the said defendant. (7) The defendant shall file a list of all documents and photocopies of all documents, in its power, possession, control or custody, pertaining to the suit, along with the written statement or with its counter-claim if any, including— (a) the documents referred to and relied on by the defendant in the written statement; (b) the documents relating to any matter in question in the proceeding in the power, possession, control or custody of the defendant, irrespective of whether the same is in support of or adverse to the defendant's defence;
(c) nothing in this rule shall apply to documents produced by the defendants and relevant only—
(i) for the cross-examination of the plaintiff's witnesses,
(ii) in answer to any case setup by the plaintiff subsequent to the filing of the plaint, or
(iii) handed over to a witness merely to refresh his memory.
(8) The list of documents filed with the written statement or counter-claim shall specify whether the documents, in the power, possession, control or custody of the defendant, are originals, office copies or photocopies and the list shall also set out in brief, details of parties to each document being produced by the defendant, mode of execution, issuance or receipt and line of custody of each document; (9) The written statement or counter-claim shall contain a declaration on oath made by the deponent that all documents in the power, possession, control or custody of the defendant, save and except for those set out in sub-rule (7)(c)(iii) pertaining to the facts and circumstances of the proceedings initiated by the plaintiff or in the counter-claim, have been disclosed and copies thereof annexed with the written statement or counter-claim and that the defendant does not have in its power, possession, control or custody, any other documents; (10) Save and except for sub-rule (7)(c)(iii), defendant shall not be allowed to rely on documents, which were in the defendant's power, possession, control or custody and not disclosed along with the written statement or counter-claim, save and except by leave of court and such leave shall be granted only upon the defendant establishing reasonable cause for non-disclosure along with the written statement or counter-claim; (11) The written statement or counter-claim shall set out details of documents in the power, possession, control or custody of the plaintiff, which the defendant wishes to rely upon and which have not been disclosed with the plaint, and call upon the plaintiff to produce the same; (12) Duty to disclose documents, which have come to the notice of a party, shall continue till disposal of the suit. (emphasis supplied)
23. According to Order XI Rule 1(5) of the CPC, in order to be authorised to submit the additional documents on record after a passage of more than 30 days from the date of filing of the plaint, the plaintiff must show reasonable cause for failing to reveal them along with the plaint.
24. This Court finds that the present application has been filed under the commercial division of the Code of Civil Procedure, despite the same being a Civil Suit. However, filing the said application under the wrong nomenclature would not oust the jurisdiction of this Court to adjudicate upon the said application, as the same has been settled in catena of judgements by the Hon’ble Supreme Court and this Court.
25. This Court has taken into consideration the order dated 2nd May, 2018 passed by the co-ordinate bench of this Court whereby the appeal preferred by the defendant No. 2 herein was partly allowed, on consent, with respect to disclosure of the documents mentioned in paras 6 and 9 of the I.A. bearing no. 25111/2015. The relevant extract of the order dated 2nd May, 2018 is reproduced hereunder:
26. In light of the above, this Court is of the view that the present application filed by the plaintiff is an attempt to delay the proceedings and is gross misuse of process of law and therefore, liable to dismissed.
27. Accordingly, the present application being devoid of any merit is dismissed.
28. The judgment be uploaded on the website forthwith.
JUDGE MARCH 29, 2023 gs/ug