Hassad Food Company Q.S.C. v. Bank Of India

* IN THE HIGH COURT OF DELHI AT NEW DELHI

% Reserved on: 5^thSeptember, 2019 Decided on: 15^thOctober, 2019 + I.A. 3250/2019 in CS(COMM) 9/2018

HASSAD FOOD COMPANY Q.S.C. & ANR ..... Plaintiffs Represented by: Mr. Jayant Mehta, Mr. Samar Singh Kachwaha, Ms. Smiti Verma, Mr.

Aayush Marwah, Advs.

versus

BANK OF INDIA & ORS ..... Defendants Represented by: Mr. Adhish Rajvanshi, Ms. Shreyuss Shanbarjoshi, Ms. Kamna, Mr. V.

Seshagiri, Advs. for D-1,3,5&6.

Mr. Priya Mohan Roy, Adv. for

D-4/ Allahabad Bank.

Ms. Jagriti Ahuja, Adv. for

D-7/HSBC

Mr. B.L. Wali, Adv. for

D-8/ Kotak Mahindra Bank.

Ms. Usha Singh, Ms. Nidhi Saini,

Advs. for D-9.

Mr. Saumyen Das, Adv. for

D-10/ DBS Bank.

CORAM:

HON'BLE MS. JUSTICE MUKTA GUPTA

MUKTA GUPTA, J.

I.A. 3250/2019 (u/S 151 CPC for filing additional documents by P.)

1. By this application under Section 151 CPC plaintiffs seek leave to place on record additional documents.

2. Plaintiffs have filed the present suit, inter alia, seeking a decree declaring that the invocation of the Corporate Guarantee dated 16^thMay, 2013 issued by plaintiff No.1 herein by the BOI consortium members is

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vitiated by fraud and/or misrepresentation under Sections 17, 18, 142 & 143 of the Contracts Act and is therefore invalid in law entitling the plaintiffs to seek consequential relief including a money decree in favour of the plaintiff No.1 and against the defendant No.1 for a sum of ₹1,43,22,00,000/-; against defendant No.2 for a sum of ₹30,07,00,000/-; against defendant No.3 for a sum of ₹40,06,82,247/-; against defendant No.4 & 12 jointly and severally for a sum of ₹91,11,00,000/-; against defendant No.5 for a sum of ₹13,12,00,000/-; against defendant No.6 for a sum US$ 1,434,957.59; against defendant No.7 for a sum US$5,806,272.73; against defendant No.8 & 10 jointly and severally for a sum of ₹35,93,00,000/-, declaring the purported action of the defendants under the deed of Guarantee dated 16^th May, 2013 seeking balance dues as null and void etc.

3. Case of the plaintiffs is that the plaintiffs are companies 100% owned and controlled by Government of Qatar entity called the 'Qatar Investment Authority' and the plaintiff No.2 invested on 28^thMarch, 2013 about US$

120.34 millions in Indian company called Bush Foods Overseas Pvt. Ltd. (in short Bush Foods) and acquired 69.5% shareholding in the said company from its promoters and Standard Chartered Private Equity Limited (in short SCPE) a private equity investor. Bush Foods had availed large working capital loans from a 9 member consortium of banks led by defendant No.1 Bank of India (in short BOI consortium). As per the lending agreement between the banks and Bush Foods, NOC was required from the BOI consortium bank members to consent to the share transfer transaction. Pursuant to the NOC given by the banks on the condition that the plaintiff No.1 furnishes a Corporate Guarantee, guaranteeing 70% of the working capital loans availed by Bush Foods which was approximately ₹650 crores,

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the plaintiff No.2 invested the money and plaintiff No.1 also furnished a Corporate Guarantee dated 16^thMay, 2013 in favour of BOI consortium members to the extent of 70% of ₹650 crores loan facility availed by Bush Foods. On papers as projected by the bank, Bush Foods was supposed to be a financially healthy, profit making company with annual gross revenue of ₹1,267 crores with a rice and paddy inventory allegedly worth ₹1,000 crores (against hypothecation of which the Banks had extended very large loans to the company). The plaintiffs became victim of serious fraud and cheating including that of the Banks when it realized that Bush Foods was nearly a bankrupt company and its turnover and inventory was a total fabrication and the company was indulging in circular paper transactions to bloat its turnover and profits, and against bogus inventories kept on borrowing large sums. In extending the loans, bogus book keeping and fabrication of records, the complicity of the banks was writ large. Since Bush Foods was in reality a sick company, it was unable to meet its debt obligation towards the banks and the banks therefore invoked the Corporate Guarantee given by the plaintiff at the various points of time. The banks made no effort to proceed for recovery from the alleged inventory of Bush Foods which was shown to be in excess of ₹1,000 crores, being the principal security and encashed the Corporate Guarantee of the plaintiff No.1. Thus, the plaintiffs not only lost their investments but also the corporate guarantees amounting to a net loss of ₹1,300 crores approximately by investing in an Indian Company due to an egregious fraud. Despite the forgery and fabrication by Bush Foods, no Police complaint was lodged by the banks and thus the plaintiff was finally constrained to file a complaint before the Economic Offences Wing of the Delhi Police wherein during investigation it was

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revealed that the stocks and inventories produced were forged and fabricated. Having engaged independent professional agency, plaintiffs have been able to unearth a vast number of e-mails between the BOI consortium members, defendant No.8 and Bush Foods which would show that Bush Foods was financially in dire straits and was constantly being reprimanded by the State Bank for failing to meet its loan obligations. Penal interest was levied or threatened to be levied and NPA threats were also being extended by the banks just prior to the transaction whereby the plaintiff No.2 was induced to invest in the Bush Foods and plaintiff No.1 to execute a Corporate Guarantee. Plaintiffs' inquiry also revealed that the banks were aware of and privy to the fact that Bush Foods was using the borrowed cash for circular loans but all these facts were concealed from the plaintiffs.

4. Plaintiffs along with the suit filed the documents as also filed I.A. 107/2018 under Section 151 CPC by which plaintiffs had sought exemption from filing original documents and typed and marginated copies of the documents produced. The plaintiffs also undertook to file copies of the original documents at a later stage if directed. IA 107/2018 was allowed vide order dated 4^thJanuary, 2018 exempting the plaintiffs from filing original documents till further orders.

5. Summons in the suit were issued to the defendants. In the course of the proceedings the defendants were served and the defendants filed their written statements as also the applications for exemption from filing admission/denial affidavits. Finally on 27^thMarch, 2019 the learned Joint Registrar noted that the plaintiffs had filed replications to the written statements of all the defendants and affidavit of admission/denial of

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documents along with separate applications for condonation of delay in filing replications. The suit was thus listed for completion of pleadings on 12^thApril, 2019. On 27^thMarch, 2019 the present application being I.A. 3250/2019 filed by the plaintiffs to place on record additional documents came up for hearing. In the application, the plaintiffs claim that they filed voluminous documents with the plaint, however considering the extent of fraud and volume of documents, some of the documents which are essential and substantial like the monthly investment statements sent by Bush Foods to the banks, the attachments with the emails have been inadvertently left out. Along with I.A. 3250/2019 plaintiffs also filed I.A. 3251/2019 under Section 151 CPC seeking exemption from filing original documents and typed and marginated copies of dim documents to which no reply was filed despite notice and the application was allowed subject to just objections on 12^thApril, 2019.

6. By this application the plaintiffs seek to place the following documents on record to further substantiate their claim against the defendants.

"(i) Monthly inventory statements submitted by Bush Foods to the banks, from April, 2011 - October 2013, marked and annexed herewith as A-1(Colly). It is submitted that some inventory statements pertaining to some of the Defendant Banks had already been filed with the plaint and are on record. It has now been realized, that due to an administrative oversight, some of the inventory statements were not filed earlier and are sought to be placed on record by way of the present application.

(ii) E-mail dated 25^th June, 2015 from GPW to the plaintiffs, along with relevant portions of the attached spreadsheet, and other attachments, giving details of relevant correspondence between Bush Foods and the Defendant Banks, thereto marked and annexed herewith as A-2. It is submitted that GPW's

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detailed report dated 25^th June, 2015 referred to in the same email has already been filed with the plaint and is presently on record, however, due to an administrative oversight the covering e-mail dated 25^th June, 2015 from GPW to the plaintiffs, along with the attached spreadsheet was not filed and is now sought to be placed on record, along with its attachments.

(iii) E-mail dated 26^th June, 2015 from GPW to the plaintiffs, marked and annexed herewith as A-3. Along with plaint, the attachments from the said e-mail dated 26^th June, 2015 were attached, however, due to an administrative oversight, the e- mail dated 26^th June, 2015 was not filed, and is now sought to be placed on record.

(iv) E-mail dated 14^th July, 2015 from GPW to the plaintiffs, marked and annexed herewith as A-4. Along with the plaint, the attachments from the said e-mail dated 14^th July, 2015 was not filed and it now sought to be placed on record.

(v) Documentary evidence (SWIFT statements) to prove payments made to defendant No.1, 2, 3, 4, 5, 6, 7 & 8 are marked and annexed herewith as A-5 (Colly). In its written statement some defendants have put the plaintiffs to strict proof regarding the said payment, and hence documentary proof in this regard is being filed. These were not filed earlier due to administrative oversight and are now being sought to be put to record.

(vi) Copy of Orders dated 8^th August, 2016 and 31^st August, 2016 of Court of ACMM, Saket in FIR No. 136/2014 are marked and annexed as A-6(Colly). It is submitted that due to an administrative oversight, these were not filed and are now being sought to be put on record.

(vii) Copy of Minutes of meeting of Board of Directors of Bush Foods Overseas Private Limited held on 4^th July, 2013 is marked and annexed as A-7. It is submitted that due to an administrative oversight, this document was not filed and is now being sought to be put on record. "

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7. Case of the plaintiffs is that these documents could not be filed earlier at the time of institution of the present suit due to an administrative oversight on the part of the plaintiffs, given the large volume of documents filed at that point of time. Plaintiffs on realizing the omission have preferred the present application at the earliest. It is also claimed that the documents being sought to be placed on record by way of this application are closely related to the documents already on record and no new case is being sought to be set up and the present documents are being filed to bring completeness and context to the facts and documents already on record. The application also notes that the pleadings are yet to be completed and issues have not been settled by this Court. Even till date when this application was heard, the replications of the plaintiffs have not been taken on record and issues had not been settled by the Court. Learned counsel for the plaintiffs relies upon the decision of the Division Bench of the Gujarat High Court according to which under the Commercial Courts Act even if Order VII Rule 14(3) CPC was not applicable, however Order XI Rule 1(5) of CPC being applicable the plaintiffs can be permitted to rely upon the documents not disclosed along with the plaint with the leave of the Court subject to compliance of the conditions mentioned under Order XI Rule 1(5) as applicable to the Commercial Suits.

8. Learned counsel for the plaintiffs also relies upon the decision of this Court in I.A. 269/2019 in CS(COMM) 519/2017 dated 24^thJanuary, 2019 titled as 'M/s Fankaar Interiors Pvt. Ltd. Vs. M/s Shreem Spa & Resorts Ltd.'; 2017 SCC Online Del 10039 'M/s. Sadhu Forging Limited Vs. M/s. Continental Engines Ltd.' and 2019 SCC Online Del 9656 'Tullio Glusi Spa Vs. House of Trims Pvt. Ltd.'

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9. Learned counsel for the plaintiffs submits that to the averments of the plaintiffs that monthly inventories of the Bush Foods were given to the banks, the reply in the written statements is a bald denial which is no denial in the eyes of law, as held by this Court in Tullio Glusi Spa (supra). The plaintiffs having filed these documents at the time of filing replication are entitled to have these documents placed on record.

10. Learned counsel for the defendant No.1, 2, 3, 5 & 6 relying upon the decision of this Court in I.A. 9/2019 in CS(COMM) 1215/2016 titled as 'Nitin Gupta vs. Texmaco Infrastructure and Holdign Limited' decided on 29^thApril, 2019 contends that in the application it is stated that the documents were left due to oversight and inadvertence which are not the grounds permissible even under Order XI Rule 1 & 5 CPC for filing of additional documents. Learned counsel for the defendant No.7 referring to Delhi High Court (Original Side) Rules Chapter VII Rule 14 submits that no documents can be filed after completion of pleadings. Learned counsel for the defendant No.9 referring to the decision of this Court in FAO(OS) 502/2009 titled as 'Lt. Col. S.D. Surie vs. Paramount Enterprises & Ors.' decided on 19^thSeptember, 2011 contends that an application under Section

151 CPC is not maintainable for filing additional documents.

11. Rebutting the arguments of learned counsel for the defendants, learned counsel for the plaintiffs submits that as per Order XI Rule 1 sub- Rule (c) CPC the plaintiffs can use these documents for cross-examination of the defendants' witnesses by taking them for surprise, however by filing it in advance the plaintiffs are giving the defendants opportunity to look into the documents before they are cross-examined on this aspect, hence the filing of these documents cannot be denied to the plaintiffs. Order XI Rule 1

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sub-Rule (5) CPC is a standalone provision and if the plaintiff is able to demonstrate that the documents are relevant for the purposes of cross- examination of the defendant's witnesses, they would be required to be confronted with the same and taken on record. In the decision of Nitin Gupta (supra) relied upon by learned counsel for the defendants No.1, 2, 3, 5 & 6 this Court disallowed the documents on the ground that the plaintiff therein had actually pleaded a case contrary to what emerged from the additional documents sought to be filed and for the reason that the plaintiff therein was changing its case, this Court disallowed the filing of the additional documents.

12. The relevant extract from Order XI Rule 1 of the Commercial Courts Act, 2015 as amended and applicable to commercial suits reads as under:-

"DISCLOSURE, DISCOVERY AND INSPECTION OF

DOCUMENTS IN SUITS BEFORE THE COMMERCIAL

DIVISION OF A HIGH COURT OR A COMMERCIAL

COURT

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 plaintiff's case;

(c) nothing in this Rule shall apply to documents produced by plaintiffs and relevant only--

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(i) for the cross-examination of the defendant's witnesses, or

(ii) in answer to any case set up 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.

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(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."

xxx xxx xxx

12. Duty to disclose documents, which have come to the notice of a party, shall continue till disposal of the suit.

13. Perusal of Order XI as noted above reveals that the plaintiff is bound to file all documents in its power, possession, control or custody with the plaint and in case of urgent filing of a suit if some additional documents are to be filed under sub-rule (1) of Rule 1 of Order XI, the plaintiff may seek leave of the Court to rely on additional documents which additional documents are required to be filed within 30 days of filing of the suit. Under sub-rule (5) of Rule 1 of Order XI, 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 the plaint or within the extended period save and except by leave of the Court which leave can be granted only if the plaintiff establishes reasonable cause for non-disclosure along with the plaint. The language used in the sub-rule (5) is that the plaintiff is required to show "a reasonable cause" and not a "sufficient cause" as is ordinarily provided in other provisions.

14. While dealing with Order XIII Rule 2 CPC wherein the words used are: "unless good cause is shown", the Supreme Court in the decision reported as (2002) 1 SCC 535 Madanlal vs. Shyamlal, noted the distinction

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between "good cause" and "sufficient cause" and held that "good cause"

requires a lower degree of proof as compared to "sufficient cause" and thus the power under Order XIII Rule 2 CPC should be exercised liberally. Sub- Rule (5) of Rule 1 of Order XI of the Commercial Courts Act, 2015 uses the phrase "reasonable cause" which would require even a lower degree of proof as compared to "good cause".

15. Thus it is to be seen in the present case whether the plaintiff who is required to file voluminous documents inadvertently misses out certain documents which are in line with the documents already filed and further the case of the plaintiffs and does not set up of a contrary case, would be a reasonable cause permitting the plaintiffs to file additional documents at this stage when pleadings are not complete as yet for the reason the replications of the plaintiffs have not been taken on record as yet. The plaintiffs along with suit has filed more than 2000 documents, the nature of the suit is commercial wherein the plaintiff No.1 furnished corporate guarantee and plaintiff No.2 invested money with Bush Foods pursuant to the representations of the BOI consortium who are the defendants. By these additional documents, the plaintiffs want to further demonstrate the conduct of the defendant banks which would show correspondence between Bush Foods and defendant Banks and that to the knowledge of the defendant banks the financial condition of Bush Foods was not healthy and the said facts were concealed from the plaintiffs rather representations were made that Bush Foods have assets justifying the investment inducing plaintiff No.1 which was made to execute a corporate guarantee and plaintiff No.2 to invest the money. The plaintiffs have thus made out a case of egregious fraud against the defendant banks.

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16. The additional documents sought to be filed, as mentioned at serial No.(ii), (iii) and (iv) are the attachments with the e-mails which e-mails have already been filed, and inadvertently the attachments were not filed. Documents sought to be filed, as mentioned at serial No.(i) are the monthly inventory statements most of which have already been filed, however with regard to some of the defendant banks the same were not inadvertently filed. Documents sought to be filed, as mentioned at serial No.(v) are the SWIFT statements regarding the payments made and the same are required to be filed as the defendant banks have put the plaintiffs to strict proof regarding the payments. The documents sought to be filed, as mentioned at serial No.(vi) are the orders by the Court of learned ACMM in FIR No.136/2014 registered against Bush Foods and others. The documents sought to be filed, as mentioned at serial No.(vii) are the copy of the minutes of meeting of the Board of Directors of Bush Foods Overseas Private Limited held on 4^thJuly,

2013.

17. Learned counsel for the defendants have relied upon the decision of this Court in Nitin Gupta (supra) to contend that the additional documents cannot be permitted to be filed in a commercial suit. The two main reasons why a co-ordinate Bench of this Court declined to permit additional documents to be filed were, firstly that the issues had been settled, and secondly, that the additional documents sought to be filed by the plaintiff therein pleaded a case contrary to what had been pleaded in the plaint.

18. In the pleas taken in the present application the defendants neither dispute the relevancy of the documents nor that the documents sought to be filed do not relate to them and the only objection taken is that the plaintiffs cannot be allowed to file the documents at the belated stage. As noted above

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in the present suit the pleadings are not complete as yet as the replications are yet to be taken on record and hence it cannot be said that the plaintiffs have filed the present application so belatedly that it cannot be allowed. Further the plaintiffs have very fairly taken the plea of administrative oversight which can occur when the number of documents is voluminous. Thus the plaintiffs have made out a reasonable cause for not filing the documents with the plaint.

19. There is yet another fact which needs consideration. Most of the documents now sought to be filed by the plaintiffs relate to the defendant banks which even the defendant banks were required to disclose on affidavit along with their written statements. However, without giving the complete disclosure of the facts and the documents, the defendants have put the plaintiffs to strict proof of the same. By the present application, the plaintiffs are neither setting up a new case nor withdrawing any admission. In similar situation, a Single Bench of this Court in M/s. Fankaar's case (supra) has permitted additional documents to be placed on record. Consequently, the application is allowed. The plaintiffs are permitted to place additional documents on record subject to payment of costs in sum of ₹10,000/- to be deposited with the Delhi High Court Legal Services Committee within two weeks.

20. Application is disposed of.

(MUKTA GUPTA)

JUDGE

OCTOBER 15, 2019

'ga'

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