A single Bench of Justice Amit Bansal allowed the interlocutory applications instituted by the plaintiffs by refuting the contentions of the defendants on account of being meritless.
The Interlocutory application in the present case was preferred by the plaintiffs under Order XXXIX Rules 1 and 2 of the Code of Civil Procedure, 1908. And another one was preferred under Section 151 of the CPC, seeking a direction to be given to the defendants for disclosure of assets of the defendant’s number first to fifth. Also, Interlocutory applications were instituted by the defendants under Order VII Rule 10 and 11 of the CPC and the application instituted by the fifth defendant company under Order VII Rule 10,11 of the CPC.
Facts in brief for adjudicating upon the aforesaid applications were that the fifth defendant had voyage chartered the Vessel from the second plaintiff through a Voyage Charterparty dated May 8, 2020.
Thereafter on June 6, 2020 the fifth defendant ordered the vessel to proceed to Fujairah, UAE and deliver the Cargo to Vitol Bahrain E.C. as receivers, when originally, the Cargo was to be delivered to the port of Rotterdam. In pursuance of the same, letter of indemnity was issued on June 9, 2020 on behalf of the fifth defendant , in favor of the plaintiffs, in terms of which the defendant no. five, company agreed to indemnify the plaintiffs in respect of any liability, loss, damage, or expense caused by arrest or detention or threatened arrest of the Vessel.
On the basis of the aforesaid LoI, the Vessel berthed at the VTTI terminal, UAE and commenced discharge on 10th June, 2020. The Vessel completed discharge the following day i.e., on 11th June, 2020. Thereafter, the defendant no. 5 company did not pay Natixis and misappropriated the proceeds of the sale. Natixis was, therefore, left holding the bill of lading and the plaintiffs were exposed to a claim by Natixis.
Consequently, on August 17, 2020, the plaintiffs, through their solicitors, sent a letter to the fifth defendant calling upon them to pay sum of USD 11,099,611/- directly to Natixis so as to prevent the arrest of the Vessel. However, the defendant no. five company neither paid the aforesaid amount to Natixis nor replied to the aforesaid notice.
Thereafter, the plaintiffs filed proceedings before the High Court of Justice, Commercial Court against the fifth defendant on August 21, 2020, seeking a declaration confirming the defendant no. five company’s liability to provide security in terms of the LoI and seeking a mandatory injunction, requiring the defendant no. five, company to provide security so as to prevent the arrest of the Vessel.
Subsequently, through order dated August 25, 2020, the English Court, directed the defendant no. five, the company to notify Natixis by August 26, 2020 as to the form, wording and amount in which the security would be furnished by the fifth defendant.
Thus, the entire transaction involving the purchase and on-sale of Cargo by the defendant no. five, company and procurement of trade finance from Natixis was a fraudulent act and the victim of the aforesaid fraud were the plaintiffs, who had to secure Natixis to the tune of USD 14,908,056/-.
Thereafter, the defendants no. one to four have left UAE, from where they were operating the company of the fifth defendant and were stated to be presently in New Delhi.
In view of the same, the plaintiffs filed the present suit against the defendants for lifting the corporate veil of the fifth defendant and for holding the defendants first, second, third and fourth collectively reliable and / or severally liable in their personal capacity for the admitted liability of the fifth defendant.
The Court after hearing the submissions of the rival parties, dealt with the question of territorial jurisdiction. With respect of the same, the Court observed that the plaintiff’s placed on record the website of the fifth defendant company, which clearly showed that the defendant has an office placed in New Delhi. It was further observed that defendants were time and again taking inconsistent stand with respect to their current residence, however Court stated that it was certain of the fact that defendants, second, third and fourth were in India. Thus, the Court submitted that present matters were well within the jurisdictional limits.
Next, the Court examined the issue of lifting the corporate veil. In reference to the same, the Court relied on the Supreme Court case of Delhi Development Authority Vs. Skipper Constructions wherein the Court observed that where a corporate character is employed for committing illegality or for defrauding others, the Court would ignore the corporate character and will look at the reality behind the corporate veil to do justice between the parties.
Thus, the Court was of the view that it was undisputed fact that the defendants, first, second , third and fourth were the only shareholders and directors of the fifth defendant’s company. It was further observed that documents placed on record, including the judgments of the English Court, the defendant no. five’s company was indulged in fraudulent activities causing loss to the plaintiffs. Therefore, on merits, the defendants have failed to set up any case.
The entire defence of the defendants is based on objections with regard to the territorial jurisdiction and enforceability of the judgments of the English Court. This leads this Court to a conclusion that the defendants do not have anything to say on the merits of the case, the Court stated.
Further on the contention of the defendant that lifting/piercing of a corporate veil cannot by itself be a cause of action for filing of the present suit and, as otherwise, no cause of action has been pleaded against the defendants, first second, third and fourth. With respect to same, the Cour placed reliance on the judgment dated June 9, 2016 of the Court of Appeals, State of Michigan titled Edward Gallagher and Joan Gallagher Vs. Kathleen Persha which was also a case where piercing of the corporate veil was sought on account of fraud or misrepresentation. The Court of Appeals in this case reversed the Trial Court’s order and held that nothing prevents the plaintiffs from filing a suit against the shareholders/directors of a company, in respect of which corporate veil is sought to be lifted.
Thus, in light of the above observations, the Court opined that defendants, first, second, third and fourth were the shareholders and directors of the company of the fifth defendant. And by relying on the Delhi Development Authority Vs. Skipper Construction, the Court stated that the present case was such wherein the corporate veil should be lifted.
Hence, the Court directed the defendants, first second, third and fourth to disclose the details of their assets on oath. Accordingly the applications filed by the plaintiffs were allowed and the applications filed by the defendants were dismissed.
Case name: OCM SINGAPORE NJORD HOLDINGS HARDARDA PTE LTD. &ANR Vs. PERIT GOEL & ORS
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