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 under Order XI Rule 11 of the Code of Civil Procedure, 1908 has been filed on behalf of the applicant/plaintiff seeking the following reliefs: “a. Allow the present application in favour of the Plaintiff and direct the Defendant No. 2 to sufficiently answer the interrogatories No. 3 and 7, in compliance with the Order dated 24.08.2017; b. Direct the Defendant No. 2 to answer the interrogatory no. 6, in compliance with the Order dated 24.08.2017;
(c) 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 petitioner 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. It has been submitted on behalf of the plaintiff/applicant that the USD-CHF transaction, which was entered into on 20th September, 2007, between the plaintiff and defendant No. 2 and swapped Rs. 15 crores into CHF 44,43,467, is the subject matter of the current lawsuit, which was brought to ensure that the plaintiff received 2% of the Rs 15 crores, which was ostensibly an interest saving scheme. The plaintiff claimed that the transaction with defendant No. 2 was unlawful and against public policy, in addition to having been influenced by fraud/deceit, undue influence, and misrepresentation through the defendant No. 2's representatives. It is further submitted that the defendant No. 2 purposefully misled the plaintiff about the real nature of the aforementioned sophisticated exchange transaction despite being fully aware of the risks involved. Moreover, it is submitted that the transaction was unlawful and in violation of RBI regulations given the nature of the plaintiffs' business, that the risks were out of proportion to the nature of the plaintiffs' business, and that the transaction was thus inappropriate for the plaintiffs.
11. It has been submitted on behalf of the applicant/plaintiff that in the suit's defence, the defendant No. 2 claimed that M/s Eforexindia's Chief Executive and Managing Director, Mr. Soumya Dutta had given the plaintiff advice on the nature of the transaction and its potential ramifications. The plaintiff claimed that while purportedly counselling the plaintiff on the aforementioned transaction, Mr. Soumya Dutta and M/s Eforexindia were actually working as agents of the defendant No. 2 and were conspiring with the defendant No. 2.
12. It has been submitted on behalf of the applicant/plaintiff that vide their application bearing I.A. No. 11635/ 2016, the plaintiff attempted to serve the defendant No. 2 with a number of interrogatories in an effort to shed light on the relationship between the defendant No. 2 and Mr. Soumya Dutta/M/s Eforexindia. The Ld. Joint Registrar dismissed the aforementioned application, I.A. No. 11635/2016 vide order dated 25th October, 2016. It is further submitted that being aggrieved by the order dated 25th October, 2016 the plaintiff preferred a Chamber Appeal bearing no. 32/2017 whereby it was held that one point of contention is whether Mr. Soumya Dutta and Eforexindia were working as the plaintiff's or defendant No. 2's agents.
13. It has been submitted on behalf of the applicant/plaintiff that the plaintiff wants defendant No. 2 to acknowledge, that it had dealings with Mr. Soumya Dutta and M/s Eforexindia, that they had facilitated or acted as a broker in a number of transactions for and on behalf of defendant NO. 2, and that they had also engaged into agreements.
14. It is submitted on behalf of the applicant/plaintiff that in pursuance to the findings with respect to interrogatories being relevant in order to adjudicate the issues framed in the instant suit, this Court vide order dated 24th August, 2017 overruled the overturned the order passed by the Ld. Joint Registrar and directed the defendant No. 2 to answer the interrogatories within four weeks.
15. It has been submitted on behalf of the plaintiff/applicant that the defendant No. 2 filed its affidavit dated 25th September, 2017 in response to the administered interrogatories. It is further submitted that the defendant No. 2 was expected to provide adequate answers to the questions. The defendant No. 2 has, however, inadequately responded to interrogatories Nos. 3 and 7, claiming that "Yes Bank has never directly involved Mr. Soumya Dutta/M/s Eforexindia" and that "there was no direct agreement" with Mr. Soumya Dutta/M/s Eforexindia, when the question was not whether or not a direct agreement existed between the said parties. It is claimed that in accordance with the order issued by this Court on 24th August, 2017, the defendant No. 2 was required to disclose its connection to Mr. Soumya Dutta and M/s Eforexindia.
16. It has been submitted on behalf of the plaintiff/applicant that the defendant No. 2 has unilaterally claimed that the served interrogatory NO. 6 was a "fishing and roving expedition," despite the fact that this Court has found conclusively that all of the interrogatories were relevant and that the defendant No. 2 was accordingly ordered to respond to them. The defendant No. 2's objection to interrogatory No. 6 is unwarranted and illegal since it makes no attempt to demonstrate how the interrogatory in question has no bearing on the subject at hand or is scandalous. It is argued that the plaintiff is attempting to prove its own case with regard to the pleaded facts by requesting a specific response to the administered interrogatory, or an admission. According to the argument, defendant NO. 2 was required to comply with the court's order and, in the absence of a subsequent appeal, could not have opted to ignore and violate the court's order dated 24th August, 2017 by refusing to respond to the issued interrogatory.
17. It has been submitted on behalf of the applicant/plaintiff that it is a well-established legal principle that when a party fails to respond to or responds insufficiently to the permitted interrogatories, it may be forced to respond or to respond further either by affidavit or by viva voce examination. Furthermore, it is established law that the Court must decide whether or not the response to an interrogatory is sufficient before proceeding with the case.
18. Per Contra, learned senior counsel appearing on behalf of the nonapplicant/defendant No. 2 submitted that the plaintiff is purposefully delaying the commencement of the trial in this case, and the current application is nothing more than another arrow in his quiver to postpone the testimony. The said fact is clear from the nature of the prayers requested in the application. It is further submitted that the defendant NO. 2 fully and comprehensively responded to the questions. Even a cursory reading of paragraph 6 of the application makes it quite evident that the response of defendant no. 2 was sufficient and not a bit evasive.
19. It has been submitted on behalf of the non-applicant/defendant NO. 2 that by filing these motions, the plaintiff is essentially seeking to crossexamine itself while also making every effort to call a witness to testify in support of its allegations.
20. It has been submitted on behalf of the non-applicant/defendant NO. 2 that the risks involved in the alleged transaction between the parties were duly acknowledged between the parties. It is further submitted that the plaintiff has concealed the facts pertaining to the transaction alongwith the risks involved that were in complete knowledge of the plaintiff and the relevant is mentioned in the term sheet dated 20th September, 2007 which was duly signed by the plaintiff.
21. It has been submitted on behalf of the non-applicant/defendant NO. 2 that there have been several discussions between the parties and the plaintiff has been regularly informed of the situation. It is further submitted that the plaintiff has portrayed itself as a skilled financial market participant who understands the terms, circumstances and risks circumscribing the transactions and was willingly participating into the transaction through properly signed paperwork.
22. It has been submitted on behalf of the non-applicant/defendant NO. 2 that the plaintiff has unambiguously acknowledged that it was a knowledgeable participant in the financial market and understood the deal conditions in deal confirmations dated 20th September, 2007 and 22nd May, 2009, respectively. It is further submitted that the plaintiff further acknowledged that it was operating on its own behalf and that it had independently decided to join the transaction. The determination of whether the transaction was appropriate for the plaintiff was reached using both its own judgement and guidance from its adviser.
23. It has been submitted on behalf of the non-applicant/ defendant NO. 2 that board resolution dated 23rd October, 2006 validates the fact that the plaintiff had at numerous occasions had entered into similar transactions as the authorisation to enter into options, swaps etc. was with respect to banks in general and not specifically for the defendant No.2, with whom ISDA was executed in September, 2007. It is further submitted that the plaintiff indicated in its affidavit that it had transactions with ICICI Bank on 8th May, 2006, with reference numbers FG29061, OP53378 and PP53379, and with HDFC Bank on 5th March, 2007, with reference number CCY Opt. 4333.
24. It has been submitted on behalf of the non-applicant/defendant NO. 2 that Mr. Soumya Dutta of M/s Eforexindia, who is regarded as a pioneer and specialist in the field of derivative transactions, apprised the plaintiff with respect to the derivate transactions. However, the plaintiff claimed in its replication to the written statement that the defendant No. 2 were working together with Mr. Soumya Dutta to deceive the plaintiff into entering the said derivative transaction while concealing the fact that the plaintiff had been advised by Mr. Soumya Dutta of M/s Eforexindia. It is further submitted that the plaintiff ought to have impleaded Mr. Soumya Dutta of M/s Eforexindia as a party in the current suit.
25. It has been submitted on behalf of the non-applicant/defendant NO. 2 that the plaintiff's dubious actions, including concealment of fact that he received legal counsel from Mr. Soumya Dutta and failing to include him in the instant suit, clearly demonstrate the frivolous character of the current application and a misuse of the legal system by the applicant.
FINDINGS AND ANALYSIS
26. Heard the learned counsel for the parties and perused the record.
27. The relevant provision i.e., Order XI Rule 11 of the Code of Civil Procedure, 1908 in order to adjudicate the instant application is reproduced hereunder:
28. The perusal of the affidavit filed on behalf of defendant No. 2 in compliance of order dated 9th November, 2016 makes it evidently clear that the authorised representative of the defendant No. 2 have categorically replied to the interrogatories furnished by the plaintiff.
29. This Court is further of the view that interrogatories assist minimise the dispute between the parties and, as a result, decrease the length of the trial, thus courts must be lenient and not be hyper technical in authorising their use. It has also been established that after receiving the interrogatories, the party must respond to them on affidavit. In the affidavit, the party may submit objections on the grounds that the interrogatories are scandalous or irrelevant to the case's objectives. At that point, the Courts must decide as to which questions of the interrogatories, the party should be required to respond.
30. Therefore, scrutiny of the affidavit submitted in compliance of the order dated 9th November, 2016 makes it clear that the defendant No. 2 has duly replied to the interrogatories and there is no need for further answer/replies.
31. In view of the foregoing discussions, the instant application is dismissed being devoid of any merit.
32. The judgment be uploaded on the website forthwith.
JUDGE MARCH 29, 2023 gs/ug