The Single Bench of the Delhi High Court in the case of OCM Singapore Njord Holdings Hardrada Pte Ltd. & Anr. vs Prerit Goel & Ors. consisting of Justice Amit Bansal observed that in a suit for payment of money, before settlement of issues, the defendant may be required to disclose his assets on oath, to the extent that he is being made liable in a suit. It was also observed that the court may further, at any stage, in appropriate cases during the pendency of suit, using powers u/s 151 CPC, demand security to ensure satisfaction of any decree.
Facts
The plaintiff no. 1 is the registered owner of the vessel “Torm Hardrada” (“Vessel”). The plaintiff no. 2 is the disponent owner of the Vessel. The defendant no. 5 (Gulf Petrochem FZC) is a Company incorporated under the laws of the United Arab Emirates (UAE). The defendants no. 1 to 4 are or were at the material time, the key managerial personnel of defendant no. 5.
The defendant no. 5 had voyage chartered the Vessel from the plaintiff no. 2 via a Voyage Charterparty. Under the same, the Vessel loaded Jet Aviation Fuel (“Cargo”) and a bill of lading was issued by the master of the Vessel which was consigned to the order of Natixis, France, a French bank for delivery at Rotterdam. The defendant no. 5 ordered the Vessel to deliver the Cargo to Vitol Bahrain E.C. instead. In this regard, a Letter of Indemnity (“LoI”) was issued in terms of which the defendant no. 5 agreed to indemnify the plaintiffs in respect of any damage or expense caused by arrest or detention or threatened arrest of the Vessel. Although the defendant no. 5 company received payment from the buyers, the defendant no. 5 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.
Procedural History
The plaintiff no. 2 received a legal notice on behalf of the Natixis demanding the delivery of the Cargo to Natixis, or in the alternative, damages in the sum of USD 11,099,611/-, expressly reserving Natixis’ right to arrest the Vessel. The plaintiffs sent a letter to defendant no. 5 calling upon them to pay the sum directly to Natixis to prevent the arrest of the Vessel. However, defendant no. 5 neither paid the aforesaid amount nor replied to the notice. The plaintiffs filed proceedings before the High Court of Justice (“English Court”) against defendant no. 5 to provide security in terms of the LoI and seeking a mandatory injunction to provide security to prevent the arrest of the Vessel. The English Court directed defendant no. 5 to notify Natixis as to the amount of security to be furnished by it. The Independent Chief Restructuring Officer (CRO) of defendant no. 5 sent a communication to the solicitors of the plaintiffs as well as Natixis, informing about the defendant no. 5’s financial inability. The English Court extended the deadline. Then defendant no. 5 filed for discharge of the order due to its financial inability, which was dismissed. The plaintiffs had to furnish security in favour of Natixis towards the principal claim amount (value of the subject Cargo) plus interest and costs as well as to get the concerned Letter of Undertaking issued.
The aforesaid fraud was perpetrated by the defendants no. 1 to 4, who have defrauded many more companies globally in a similar manner by not honouring the LoIs. So, the plaintiffs filed the present suit against the defendants for piercing the corporate veil of defendant no. 5 and holding defendants no. 1 to 4 jointly and/or severally liable in their personal capacity for the admitted liability of defendant no. 5, and consequently, the payment of the principal amount due and payable to the plaintiffs, plus costs and interest.
Contentions Made
Petitioner: The fraud is writ large in the entire transaction. It is a fit case for piercing of the corporate veil of defendant no. 5 and proceeding against the defendants no. 1 to 4. Defendant no. 5 is nothing but an extension of the defendants no. 1 to 4. Even though defendant no. 5 has been impleaded as a proper and necessary party, no relief has been sought against it. The defendants no. 1 to 4 along with defendant no. 5 are residing/working for gain in Delhi and, therefore, fall within the jurisdiction of this Court. Even if it is held that defendant no. 5 does not have a presence in Delhi, the present suit is maintainable against the defendants no. 1 to 4. Reliance was placed on Delhi Development Authority v. Skipper Construction Co. (P) Ltd. and Anr., and Balwant Rai Saluja and Anr. v. Air India Limited and Anr.
Respondent: This Court does not have the territorial jurisdiction to entertain the present suit. It has wrongly been stated on behalf of the plaintiffs that no relief has been sought against defendant no. 5. Since defendant no. 5 is based in UAE, the corporate veil can be lifted only in the competent Courts of the aforesaid jurisdiction. The lifting of the corporate veil cannot be a stand-alone cause of action to file the present suit. The liability of the plaintiffs has not crystalized yet and, therefore, the present suit is premature.
For defendants 1 to 4, it was submitted that they do not reside or work for gain in Delhi. This Court does not have jurisdiction. No ingredients for lifting of the corporate veil have been made out in the present case. Reliance was placed on Mitsui OSK Lines Ltd. (Japan) Vs. Orient Ship Agency Pvt. Ltd. U/s 13 of the CPC, no reliance can be placed on the judgments of the English Court. No finding of fraud has been given against defendant no. 5 by the English Court.
Observations of the Court
Dealing with the issue of territorial jurisdiction, the Bench relied on certain precedents and observed that the plaintiffs have placed on record the registered Sale Deed in respect of property situated in the revenue estate of New Delhi executed in favour of the defendant no. 1, and 4. So, the existence of Sale Deed and the property tax receipts of the financial year 2019-20 suggested that the defendants no. 1 and 4 were residing at the aforesaid property, which is within the territorial jurisdiction of this Court.
It was observed regarding the findings of the English Court that u/s 13 and 14 of CPC, the said judgment was held to be conclusive in respect of the issues decided by it. It was further observed that one of the pleas taken on behalf of the defendants is that the plaintiffs should have filed for execution of the English Court’s judgment u/s 44A of CPC. But there were no assets left with defendant no. 5 to execute the decree and its case was that it does not have the financial capacity to furnish the security. Further, as per the averments made, all the aforesaid assets have been siphoned off by the defendants no. 1 to 4.
Applying the principles laid down by the Supreme Court in Skipper Constructions (supra) and Balwant Rai Saluja (supra), the present case was deemed fit for piercing of the corporate veil as the corporate character of defendant no. 5 was used by the defendants no. 1 to 4 to defraud the plaintiffs.
Judgment
The defendants no. 1 to 4 were directed to disclose the details of their assets on oath. Irreparable harm and injury was to be caused to the plaintiffs, if the defendants were to dispose off their assets, so the plaintiffs were granted interim injunction.
Case: OCM Singapore Njord Holdings Hardrada Pte Ltd. & Anr. vs Prerit Goel & Ors.
Citation: CS(COMM)-54/2021
Bench: Justice Amit Bansal
Decided on: 06th May 2022
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