As per case facts, the plaintiff initially filed an Arbitration Petition seeking security for pay-in obligations from the defendant, which was denied. Subsequently, the plaintiff withdrew the arbitration and filed ...
No Acts & Articles mentioned in this case
1-NMS-1488-2015-S-432-2015.docx
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
NOTICE OF MOTION NO. 1488 OF 2015
IN
COMMERCIAL SUIT NO. 126 OF 2021
NATIONAL SPOT EXCHANGE
LIMITED, a public limited company
incorporated under the provisions of
the Companies Act, 1956 and having
its registered office at FT Towers, CTS
No. 256 & 257, 4
th
Floor, Suren Road,
Chakala, Andheri (East),
Mumbai-400 093
In the matter between :
NATIONAL SPOT EXCHANGE
LIMITED, a public limited company
incorporated under the provisions of
the Companies Act, 1956 and having
its registered office at FT Towers, CTS
No. 256 & 257, 4
th
Floor, Suren Road,
Chakala, Andheri (East),
Mumbai-400 093
Versus
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rrpillai
..... Applicant
..... Plaintiff
RAJESHWARI
RAMESH
PILLAI
Digitally
signed by
RAJESHWARI
RAMESH
PILLAI
Date:
2026.03.30
14:48:57
+0530
1-NMS-1488-2015-S-432-2015.docx
1. M/S. N.K. PROTEINS LIMITED,
(Trading cum Clearing Member on the
Plaintiff's Exchange) a public limited
company incorporated under the
provisions of the Companies Act, 1956
and having its registered office at 7th
Floor, Popular House, Ashram Road,
Ahmedabad, Gujarat, India.
2. M/S. N.K INDUSTRIES LTD a
company incorporated under the
provisions of the Companies Act, 1956
having its registered office at 7th Floor
Popular House, Ashram Road,
Ahmedabad-380009 Gujarat, India.
3. M/S. N.K CORPORATION
Promoter of Defendant No.1 and a
Partnership Firm having its registered
office at 7th floor Popular House
Ashram Road Ahmedabad-380009 and
13/B, Dariyapur, Patel Society,
Usmanpura, Ahmedabad- 380 013,
Gujarat, India.
4. M/S. TIRUPATI RETAIL (INDIA)
PVT. LTD. A company incorporated
under the provisions of Companies
Act, 1956 having its office at 2nd floor,
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Popular House, Ashram Road,
Ahmedabad, Gujarat, India
5. DARSHAN BALDEVBHAI PATEL
an Indian Inhabitant, residing at 11-A,
Dariapur Patel Society, Usmanpura,
Ahmedabad-380013, Gujarat, India
Defendant Nos. 2 to 5 are Clients of
Defendant No.11
6. Mr. NIMISHBHAI KESHAVLAL
PATEL, Chairman and Managing
Director of Defendant No.1 and
Managing Director of Defendant No.2,
and Director of Defendant No. 4,
residing at 41, Ashwamegh Bunglow,
Scheme No.3, Satellite,
Ahmedabad- 380015, Gujarat, India
7. Mr. NILESH KESHAVLAL PATEL
Managing Director of Defendant No 1.
residing at 13-B, Dariapur Patel
Society, Usmanpura,
Ahmedabad 380013, Gujarat, India
8. Ms. SONALBEN N. PATEL
W/o Defendant No.6 and Partner of
Defendant No.3 (Promoter of
Defendant No.1). residing at 41,
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Ashwamegh Bungalow, Scheme No. 3,
Satellite, Ahmedabad-380015, Gujarat,
India.
9. Ms. ASHITABEN N. PATEL W/o
Defendant No.7 and Partner of
Defendant No.3 (Promoter of
Defendant No.1) Residing at 13/B,
Dariyapur, Patel Society, Usmanpura,
Ahmedabad- 380 013, Gujarat, India,
10. Ms. VENUSHREE N.PATEL d/o
Defendant No.6 and Promoter of and
Key Management Person of Defendant
No. 4, Indian Inhabitant, residing at
residing at 41, Ashwamegh Bunglow,
Scheme No.3, Satellite, Ahmedabad
380015, Gujarat, India
11. PRIYASHI N.PATEL, d/o
Defendant No.7 and Promoter of
Defendant No 1 and Key Management
Person of Defendant No. 4 of Indian
Inhabitant residing at 13-B, Dariapur
Patel Society, Usmanpura,
Ahmedabad 380013, Gujarat, India
12. KAMLESH LALBHAI PATEL,
Whole Time Director and Shareholder
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of Defendant No. 1, residing at 6,
Devansh Bungalows, Thaltej,
Ahmedabad-380054, Gujarat, India
13. JAYESH PANNALAL CHOKSI
Director of Defendant No.1 (resigned
on 16
th
August 2013), residing, at
Siddhi Priya, North South, JVPD
Scheme, Vile Parle (West),
Mumbai- 400056, Maharashtra, India
14. RAJIV M TODI, authorized
signatory of Defendant No. 1 (for
conducting trades on Plaintiff's
Exchange Trades), Residing at 31,
Chinmay Complex, Nr Renuka Hall,
Judges Bunglow Road, Ahmedabad-
380005, Gujarat, India
15. ZIRCON FINANCE AND LEASING
PVT. LTD., a company incorporated
under the Companies Act, 1956,
having its office at Siddhi Priya, North
South, JVPD Scheme, Vile Parle
(West), Mumbai-400056,
Maharashtra, India.
16. GUFIC LTD., a company
incorporated under the provisions of
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Companies Act, 1956 having its office
at Siddhi Priya, North South, JVPD
Scheme, Vile Parle (West), Mumbai,
400056, Maharashtra, India.
17. Mr. PRANAV J CHOKSI, of Indian
Inhabitant residing at Siddhi Priya,
North South, JVPD Scheme, Vile Parle
(West), Mumbai, 400056, Maharashtra,
India
18. VEDANSHRI N PATEL, D/O
defendant No. 6 Nimishbhai K Patel
residing at 41, Ashwamegh Bunglow
Scheme No. 3, Satellite, Ahmedabad-
380015, Gujarat, India
19. PRIYAM N.PATEL s/o Defendant
No.7 of Indian Inhabitant residing at
13-B, Dariapur Patel Society,
Usmanpura, Ahmedabad 380013,
Gujarat India
20. A) K V PATEL (HUF) through its
karta and manager, having its office at
13/B Dariapur Patel Society,
Usmanpura, Ahmedabad-380013.
Gujarat, India.
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20.B) Keshavlal Patel Karta & manager
of Defendant No. 20 A of Indian
Inhabitant residing at 13/B Dariapur
Patel Society, Usmanpura,
Ahmedabad 380013, Gujarat, India.
21. BALDEVBHAI R PATEL, 7/B
Sureshwari Society, B/H Naranpura
Bus Stand, Ahmedabad 380013,
Gujarat, India.
22. GOMTIBEN K PATEL, of Indian
Inhabitant residing at 7/B Sureshwari
society, Naranpura bus stand,
Ahmedabad 380013 Gujarat, India.
23. ANANT B PATEL residing at 103
Anviksha Apartment, Shantiniketan
Paril, Naranpura, Ahmedabad-380013,
Gujarat, India
24. REKHABEN A PATEL residing at
819/2 Sector-5C,Gandhinagar Gujarat,
India
25. LALBHAI S PATEL, residing at
Dewansh Bunglow, No. 6 Nr Surdhara
circle, Thaltej, Ahmedabad-380052.
Gujarat, India.
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26. TRUPTIBEN K PATEL., residing at
Dewansh Bungalow, No. 6 Nr
Surdhara circle, Thaltej, Ahmedabad
380052. Gujarat, India.
27. JASHMATIBEN K PATEL., residing
at Dewansh Bunglow, No. 6 Nr
Surdhara circle, Thaltej, Ahmedabad
380052. Gujarat, India.
28. VAISHNAVI D PATEL, residing at
11/A Dariyapur Patel Society,
Usmanpura, Ahmedabad Gujarat, India
Defendant Nos 6 to 28 are
Shareholders of Defendant No 1
29. BHARAT JAYANTILAL PATEL
residing at 30/31, Ashwavilla Bunglow,
Nr. Sindhu Bhavan, Thaltej,
Ahmedabad-380054 Gujarat, India
30. Ms. RIMA C PATEL, Director of
Defendant No 1. C/o NK Proteins, 7
th
Floor, Popular house, Ashram Road,
Ahmedabad, Gujarat, India
31. RAMAKANT C CHATURVEDI,
Indian Inhabitant residing at c/o NK
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Proteins, 7th Floor, Popular house,
Ashram Road, Ahmedabad, Gujarat,
India. [Defendant Nos 29 to 31 are
Directors of Defendant No 1]
32. SHANTI STOCK HOLDINGS PVT
LTD a company incorporated under the
Companies Act, 1956, Shareholder of
Defendant No.2, having its registered
office at 13/A Dariyapur Patel Society,
Usmanpura, Ahmedabad-380 013
33. NK OIL MILLS PVT LTD. A
company incorporated under the
Companies Act, 1956, having its
registered office at 7th Floor, Popular
house, Ashram Road, Ahmedabad,
Gujarat, India.
34. NK ROADWAYS PVT LTD. A
company incorporated under the
Companies Act, 1956, having its
registered J office at 7
th
Floor, Popular
house, Ashram Road, Ahmedabad,
Gujarat, India.
35. N.K. ESTATE DEVELOPERS PVT.
LTD. A company incorporated under
the Companies Act, 1956, having its
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registered office at 7th Floor, Popular
house, Ashram Road, Ahmedabad,
Gujarat, India Defendant Nos. 32 to 35
are Shareholders of Defendant No 2.
36. ASHWINBHAI PARSHOTTAMDAS
PATEL, whole time Director of
Defendant No.2 (Till 1st April, 2014)
and member of Audit Committee (From
12
th
November, J 2012) residing at
222/6, Patel Park, Navrangpura,
Ahmedabad-380009, Gujarat, India.
37. JAYESHKUMAR DHIRAJLAL
THAKKAR, Director of Defendant
No.2, residing at 9, Suryaja Bunglows,
Nr. Sarthi Hotel, Vastrapur,
Ahmedabad,-380054, Gujarat, India.
38. MAITRAY DASHRATHBHAI
PATEL
Director of Defendant No.2 and
Member of Audit Committee till 5
th
October, 2012, residing at 20, Devarshi
Bunglows, Drive In Road, Ahmedabad-
380052, Gujarat, India.
39. ASHOKBHAI BALDEVBHAI
PATEL., Additional Director of
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Defendant No.2 (From 13th March,
2013 to 1st April, 2014) and Member of
Audit Committee, residing at Plot no.
819/2, Sector 5/c, Gandhinagar-
382006, Gujarat, India.
40. HASMUKHΒΙΑΙ KACHARABHAI
PATEL Additional Director of
Defendant No.2 and Member of Audit
Committee, residing at A/36, Silvar
Flat, Satellite, Ahmedabad- 380015,
Gujarat, India.
Defendant Nos 36 to 40 are Directors
of Defendant No 21
41. DHARMENDRA SAKARCHAND
PATEL Director of Defendant No.4,
residing at 20, N.R. Patel Park Co-op.
Housing Soc., Nr. Vividh Bhav Society.
New Wadaj, Ahmedabad-380013,
Gujarat, India [Defedant No. 41 is
Director No. 4)
42. MANISH P KELLA Company
Secretary of NK Proteins Ltd 6, Aditya
Apartment, 20 Jaihind Society,
Rambaug, Maninagar, Ahmedabad-
380008, Gujarat, India [Defendant No.
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42 Is The Company Secretary Of
Defendant No.1]
43. M/S PARIKH AND MAJUMDAR
Statutory Auditor of Defendant No 1
and 2, B-303, GCP Business Centre,
Opp. Memnagar Fire Station,
Navrangpura,
Ahmedabad-380009 Gujarat, India
[Defendant No. 43 Is The Auditor Of
Defendant No.1 And 21 ]
44. M/S CHANDULAL M. SHAH & CO.
Statutory Auditors for Defendant No 4
Chartered Accountants, 601,
Samruddhi, Sattar Taluka Society,
Ahmedabad - 380 009 Gujarat, India
[Defendant No. 44 Is The Auditor Of
Defendant No.4] ]
45. NK Protein Singapore Pte Ltd.
having its registered office at 80,
Raffles place, 26-01 UOB Plaza,
Singapore- 048624 [Defendant No. 45
Is The Subsidiary Of Defendant No.1]
46. BHARTI STOCK HOLDING PVT.
LTD. a company incorporated under
the Companies Act, 1956, having its
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registered office at 7th Floor, Popular
house, Ashram
47. NK INFRAVENTURES PVT. LTD a
company incorporated under the
Companies Act, 1956, having its
registered office at 7
th
Floor, Popular
house, Ashram Road, Ahmedabad,
Gujarat, India
48. NK FLOUR MILLS Ltd. a company
incorporated under the Companies Act,
1956, having its registered office at
7th Floor, Popular house, Ashram
Road, Ahmedabad, Gujarat, India
49. TIRUPATI PROTEINS PVT,LTD, a
company incorporated under the
Companies Act, 1956, having its
registered office at 9th Floor, Popular
house, Ashram Road, Ahmedabad,
Gujarat, India
50. ADRENAL ADVERTISING AND
PROMOTIONS PVT LTD., a company
incorporated under the Companies Act,
1956, having its registered office at
13/B Dariyapur Patel Society,
Usmanpura, Ahmedabad-380013
13/50
..... Respondents
1-NMS-1488-2015-S-432-2015.docx
[Defendant Nos. 46 to 50 are related
parties of 1 Defendant No.4]
Mr. Ashish Kamat, Senior Advocate a/w. Mr. Vaibhav Bhure,
Mr. Shlok Parekh, Mr. Shray Mehta, Mr. Ibrahim Shaikh i/b.
Vaish Associates for the Applicant/Plaintiff.
Mr. Kevic Setalvad, Senior Advocate a/w. Mr. Jehan Lalkaka,
Mr. Vishal Maheshwari and Ms.Kamini Pansare i/b. V. M.
Legal for Defendant No. 1.
CORAM :GAURI GODSE, J.
RESERVED ON : 1
st
DECEMBER 2025
PRONOUNCED ON : 30
th
MARCH 2026
JUDGMENT :
1. The plaintiff has prayed for a decree to recover a sum
of approximately Rupees 937 crores jointly and severally
from defendants nos. 1, 3 to 41 and 45 to 50. The plaintiff
has pleaded that it is a company incorporated under the
Companies Act, 1956, and that it was a National Spot
Exchange (‘NSEL’) providing an electronic trading platform
for spot contracts in commodities on a compulsory-delivery
basis. Defendant no. 1 is a trading cum clearing member of
the plaintiff. Defendant no. 1, on behalf of itself and various
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clients, including defendant nos. 2, 3, 4 and 5, traded in
various commodities. The other defendants are described as
promoters, partners, directors, shareholders, auditors, the
company secretary and subsidiary companies.
2. This notice of motion is filed by the plaintiff seeking
directions to apply and extend to the defendants in this suit,
the order and mechanism provided under the Order dated 2
nd
September 2014 (constituting a Three Member Committee)
in Notice of Motion No. 240 of 2014 in Suit No. 173 of 2014,
including the order in terms of the minutes passed as a part
and parcel of the said order. In the alternative, the plaintiff
prays that a similar order in terms of the order dated 2
nd
September 2014 be passed in this suit.
3. The said Suit No. 173 of 2014 is a representative suit
filed by one of the investors who dealt on the plaintiff’s
platform and entered into transactions on it. The present
plaintiff is defendant no. 2 in the said suit. By order dated 2
nd
September 2014, the notice of motion filed in the said suit is
disposed of in terms of the minutes of order by constituting a
committee of three members. As directed in the said order,
the committee is expected to peruse the papers,
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comprehend the overall exercise involved and accordingly
make a report to this court of the work carried out by the
committee in terms of the minutes of order.
4. To understand the exact functioning and powers of the
committee, it is necessary to reproduce a scanned copy
below;
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Submissions on behalf of the Plaintiff:
5. The order in terms of the minutes of the order passed
in the representative suit was passed after hearing all the
necessary parties, including defendant no. 1 herein. The
plaintiff had taken out third-party notices against all the
defaulting members in the representative suit. However, at
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that time, the third-party notice could not be filed against
defendant no.1 and its clients as the plaintiff had already filed
an arbitration petition under section 9 of the Arbitration and
Conciliation Act 1996 (‘Arbitration Act’) against defendants
nos. 1 to 4 by invoking the arbitration clause under the bye-
laws of the plaintiff. The minutes of order records that, in the
larger public interest, the committee is formed as a fact-
finding authority to determine the amount payable by alleged
defaulters/third parties. While noting the committee's powers
and functions, it is stated that the committee is empowered to
issue notices to various parties, including defaulters and their
clients. Thus, all defaulters were covered, including
defendant no. 1 and its clients.
6. The committee is permitted to call upon the various
defaulting members, clients of the members, defaulters of
NSEL, or other parties, and to seek information and
documents for the purpose of determining the extent of the
liability, if any, and to propose a determination thereof by
making a report to this court for further directions. The
minutes of the order were accepted, and it was observed that
it would inure to the benefit of the plaintiff in the companion
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suits as mentioned therein. One such suit is the one filed by
NSEL against M/S PD Agro Processing Private Ltd and its
clients, who are the defaulters. Thus, the objective and intent
of the order was to cover all defaulters, irrespective of
whether any third-party notice had been filed by NSEL
against the defaulters in the representative suit. After the
committee was constituted, the committee issued notice to
defendant no. 1 to remain present before the committee.
7. The plaintiff, therefore, withdrew the arbitration petition
filed against defendants nos. 1 to 4, with liberty to take out
appropriate proceedings. Accordingly, the present suit was
filed, and a notice of motion was filed before the court for
urgent relief. This court on 2
nd
March 2015 passed an
injunctive order restraining defendant nos. 1 to 4 from
disposing of, alienating, encumbering, transferring or creating
third-party rights in respect of their movable and immovable
assets. In the appeal filed by defendant no. 1, interim relief
was granted, directing that the order accepting the minutes of
the order in the representative suit would not operate against
defendant no. 1. The plaintiff filed the present notice of
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motion seeking appropriate relief for applying the order
passed in the representative suit to defendant no. 1.
8. The Hon’ble Apex Court, on 4
th
May 2022, ordered, in a
petition filed by NSEL, the formation of a Supreme Court
committee comprising a former Chief Justice of this Court,
with a view to expeditiously executing the decrees, orders,
and awards passed against all the defaulters. The said order
also noted the role of the High Court committee in
crystallising the liability of the defaulters and in filing reports
before the court for the grant of decrees and orders. Thus,
every effort is made by this Court and the Apex Court to
consolidate the proceedings against all the defaulters in the
interest of justice to recover the dues from the defaulters.
Defendant No.1, being a defaulter, stands on the same
footing as other defaulters, and there is no reason for any
exception in applying the same mechanism that was
developed and conceived by invoking the inherent powers of
this court.
9. On 22
nd
August 2024, the appeal filed by defendant no.
1 was allowed to be withdrawn in view of the pendency of
this notice of motion by issuing directions that defendant no.
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1 shall not be entitled to raise challenge to the order passed
in the representative suit, forming the committee either on
the correctness or powers to constitute a committee and the
powers and functions of the committee in any proceeding,
including the present suit. Thus, the hearing of the present
suit was expedited with a limited scope of enquiry, whether
there are any facts or circumstances that would justify
defendant no. 1’s contention that the order passed in the
representative suit should not be applied to their case.
10. Learned senior counsel for the plaintiff relied upon the
decision of the Apex Court in Immani Appa Rao and Others
vs. Gollapalli Ramalingamurthi and Others
1
. He submits that
the Hon’ble Apex Court held that in deciding the question
where both the parties before the court are confederates in
the fraud, the approach that would be less injurious to public
interest should be adopted, and therefore it is necessary to
enquire as to which party’s success would be less injurious
to public interest. The learned senior counsel for the plaintiff
has relied upon the decisions of Apex Court in Nagindas
Ramdas vs Dalpatram Ichharam alias Brijram and Others
2
and Sangramsinh P. Gaekwad and Others vs. Shantadevi P.
1
1961 SCC Online Sc 43
2
(1974) 1 SCC 242
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Gaekwad (Dead) through LRs and Others
3
. He also relied
upon the decision of this Court in Mulji Umershi Shah vs.
Paradisia Builders Pvt. Ltd. And Others
4
11. He therefore submits that the mechanism adopted by
this court in the representative suit is in the public interest
and should be applied in the present case as well. Only
because defendant no. 1 has also alleged any fraud, the
same would not have any deterrent effect for not applying the
same mechanism in the present suit.
Submissions on behalf of Defendant No.1
12. On 5
th
June 2007, the Central Government issued a
notification under Section 27 of the Forward Contracts
(Regulation) Act 1952 (‘FCRA’), exempting all contracts of
one day duration for the sale and purchase of commodities
traded on the plaintiff's Exchange, subject to certain
conditions set out therein. On 11
th
October 2008, Defendant
No. 1's application to become a member and trade on the
plaintiff's Exchange was accepted. On 15
th
October 2008,
plaintiff's Exchange became operational. On 27
th
April 2012,
the plaintiff received a show-cause notice from the Central
3
(2005) 11 SCC 314
4
(1997(3) Mh. L. J. 532
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Government alleging a violation of the conditions of the
Notification dated 5
th
June 2007. On 12
th
July 2013, the
Central Government directed the plaintiff that no further/fresh
contracts were to be launched until further instructions from
the concerned authority, and that all existing contracts were
to be settled on their due dates.
13. On 27
th
July 2013, the plaintiff issued a Circular
amending the settlement procedure for trades w.e.f.
23.07.2013. On 31
st
July 2013, the plaintiff issued a Circular
suspending all contracts (except e-series contracts) and
merging the delivery and settlement of all pending contracts
w.e.f. same date and to defer it for a period of 15 days, and
consequently, the positions outstanding in the contracts were
to be settled by way of delivery and payment after expiry of
15 days. On 6
th
August 2013, the Central Government issued
a notification: (i) restraining the plaintiff from undertaking any
further or fresh one-day forward contracts in any commodity,
without prior approval of the Central Government.
(ii) Settlement of all outstanding one-day forward contracts at
NSEL shall be done under the supervision of FMC, and any
order or direction issued by the FMC in this regard shall be
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binding upon the plaintiff and any person, intermediary or
warehouse connected with the plaintiff.
14. On 12
th
September 2013, the plaintiff filed an
Arbitration Petition No. 27 of 2014 against defendant no. 1
under Section 9 of the Arbitration Act. The plaintiff inter alia
sought security for Rs. 964,73,81,477.62, on account of pay-
in obligations for the trades done on the plaintiff's Exchange.
On 23
rd
September, 2013, this Court rejected ad-interim relief
in the plaintiff's Section 9 petition on the grounds that the
plaintiff's ledger statements were contrary to the Notification
dated 6
th
August 2013 and Circular dated 31
st
July 2013. It
was held that, when the dispute is adjudicated, it will have to
be seen how the ledger account came to be maintained by
the plaintiff showing the aforesaid liability. The said order
was not challenged, and the Section 9 Petition was
withdrawn. The ledger statement filed in the arbitration
petition is the same as the one in the present suit, which the
plaintiff seeks to have reconciled through the committee.
Thus, filing of the present suit is an admission that the issues
require a trial.
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15. The representative suit seeks to recover Rs. 5,087.22
crores from the plaintiff herein. Defendants are not a party to
that suit. No third-party notice was issued to the defendants
herein as the plaintiff's arbitration petition was pending. On
27
th
August 2014, Minutes of Order were signed by some of
the parties in the representative suit. Defendant No. 1 was
neither a party to the said representative suit nor the said
Minutes of Order. On 22
nd
October 2014, the High Court
Committee issued a notice calling upon defendant no. 1 to
appear before the Committee; however, defendant No. 1
informed the Committee that it was not submitting to its
jurisdiction and that an appeal challenging the order passed
in the representative suit was pending.
16. The learned Division Bench granted interim protection
to defendant no. 1 in the appeal filed to challenge the order
in the representative suit by passing a common order in three
appeals. In the operative part regarding the other two
appeals, it was observed that the order shall apply to those
appellants; however, the Committee shall function in
accordance with Section 75 of the CPC whilst discharging its
functions, and the Committee shall not have any adjudicatory
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powers. These directions in the two other connected appeals
continue to operate, and have attained finality,
notwithstanding the withdrawal of the appeal by defendant
no. 1. By the prayers in the present notice of motion, the
plaintiff, by assuming that the issues in the suit have already
been decided in its favour, effectively seeks to avoid
adjudication of the present suit by seeking reference to the
Committee, which has no adjudicatory power.
17. The Hon'ble Supreme Court in 63 Moons Technologies
Ltd vs. Union of India
5
, held that the contracts launched by
the plaintiff were in contravention of the exemption conditions
granted under the FCRA, as well as the provisions of the
FCRA. The Supreme Court was considering the Notification
dated 5
th
June 2007, which forms the subject matter of the
present suit and the plaintiff's claim. Thus, it is a concluded
fact that the plaintiff floated illegal contracts. The Hon'ble
Supreme Court in State of Maharashtra vs. 63 Moons
Technologies Ltd.
6
sets out the fraud committed by the
plaintiff. The learned senior counsel for the defendant also
relied upon the decisions in B.O.I. Finance Limited vs.
5
2019 (18) SCC 401
6
2022 (9) SCC 457
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Custodian and Others
7
, and Khurshed Banoo W/o. Murtaza
Hasan (Deceased by LRS) vs. Vasant Mallikarjun
Manthalkar (Deceased by LRs)
8
.
18. The Division Bench in the appeal of defendant no. 1
held that the present Notice of Motion shall be decided on its
own merits and the enquiry would be limited to whether there
are any facts or circumstances which would justify defendant
no. 1's contentions that the Order dated 2
nd
September 2014
passed in the representative suit should not be applied to
their case. The expression "any facts or circumstances" is
wide and all-encompassing and places no limitation on the
facts and circumstances which may be considered in this
notice of motion.
19. The plaintiff has made an application for a decree on
admission. By Order dated 2
nd
March 2025, this Court has
granted ad-interim relief restraining defendant no. 1 from
alienating or creating any third-party interest in respect of
their movable and immovable assets. Hence, the interest of
the plaintiff is protected. The plaintiff seeks to avoid a trial by
referring defendant no. 1 to the Committee, as if all issues in
7
(1997) 10 SCC 488
8
AIR 2003 Bombay 52
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the suit stand decided in the plaintiff's favour. The plaintiff is
under an obligation to prove that the amounts claimed in the
suit are payable by defendant no. 1. Hence, neither the order
passed in the representative suit can apply in the present
suit, nor do facts and circumstances warrant any such similar
order.
CONSIDERATION AND CONCLUSIONS:
20. The plaintiff has alleged that the defendants entered
into fraudulent and collusive transactions and committed
massive fraud against the plaintiff and various other trading
clients, and that they wrongfully profited from the fraudulent
transactions. The plaintiff invoked the arbitration clause
under its bye-laws and filed an arbitration petition under
Section 9 of the Arbitration Act. However, after withdrawing
the said petition by seeking liberty, this suit is filed. By order
dated 2
nd
March 2015, this court granted ad-interim relief
restraining the defendants no. 1 to 4 from creating any third-
party interest or encumbering their movable and immovable
assets and defendants nos. 1, 3 to 41, 45 to 50 were directed
to file their respective affidavit of disclosure. The plaintiff has
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also applied for a decree of admission. The said notice of
motion is still pending for hearing.
21. The order dated 2
nd
September 2014, passed in the
representative suit, records the basic facts of the said suit.
As recorded in the said order, the suit has been filed as a
representative suit on behalf of the investors and traders,
claiming various amounts due and payable in respect of
trades executed on the National Spot Exchange platform. It
is the case of the plaintiff in the said suit that there were
fraudulent contracts entered into with the knowledge and/or
consent and/or collusion on the part of defendant no. 1
therein, who is the holding company of the National Spot
Exchange and one Mr Jignesh Shah, who is the chairman
and managing director of defendant no. 1 therein. NSEL is
defendant no. 2 in the said suit. Third-party notices were
taken out against various counter-parties to the said trades,
who are claimed by the NSEL as defaulters, and their clients.
Thus, in the said suit, NSEL contends that the amounts
payable under various trades by the parties have not been
received. In the representative suit, no third-party notice was
taken out against the defendants in this suit.
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22. The parties in the said representative suit had
proposed minutes of order that involved acts touching upon
the statutory functions of the competent authorities, including
the Enforcement Directorate (‘ED’) and the Forward Markets
Commission (‘FMC’). Hence, notices were issued to various
statutory authorities, including the ED and FMC. It appears
that defendant no. 1 in the present suit was also represented
and heard when the order in terms of minutes of order was
passed. It is the case of defendant no.1 herein that they had
objected and made grievances about the formation of the
committee and the terms of the minutes of the order. After
considering all the grievances, the learned Single Judge was
of the view that it was in the interests of justice to accept the
proposed minutes of the order as submitted by the parties.
Accordingly, the order dated 2
nd
September 2014 was
passed in terms of the minutes of the order.
23. The minutes of the order recorded that there were
more than 13,000 investors and 22 defaulters. In such
circumstances, it was found that, in the larger public interest,
a committee of three persons, headed by a retired high court
judge, should be formed as a fact-finding authority to
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determine the amount payable by alleged defaulters/third
parties. It was also felt that the committee should be
empowered to ascertain the various assets of the alleged
defaulters, third parties, and the amounts received directly or
indirectly from the NSEL in respect of various trades. Thus,
without prejudice to the rights and contentions of the parties,
an arrangement was agreed upon by the plaintiffs and
defendant nos. 1, 2, 3 and 5 in the said suit, during the
hearing and final disposal of the notice of motion in the said
suit.
24. Without prejudice to the aforesaid powers, the
committee is empowered to explore and negotiate mutual
settlements, record and supervise the implementation of
such a settlement as provided in the terms of the minutes of
the order. It is, however, clarified that if any assets are traced
and attached by the authorities, the same shall not be dealt
with without leave of the court. It is also clarified that before
any mutual settlement between NSEL and the alleged
defaulters/third parties and their clients is arrived at or
finalized, the FMC shall be heard, and the committee and the
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FMC shall work in coordination in working out such mutual
settlements.
25. Thus, from the reading of the order and the minutes of
the order, it appears that the committee was formed as a
fact-finding authority to determine the amount payable by
alleged defaulters/third parties. Hence, the committee was
empowered to ascertain the various assets of the alleged
defaulters/third parties and the amounts which were received
directly or indirectly from NSEL in respect of various trades.
The arrangement arrived at by the minutes of order is without
prejudice to the rights and contentions of the parties, and
with necessary safeguards for taking appropriate approval
from the court as specified in the minutes of order. Thus, the
basic intention appears to be in the public interest to reach a
settlement among NSEL, defaulting members, third parties,
and investors, and, in the event of any disagreement, to
apply to the court, with all the committee's reports made
subject to the court's approval. Thus, the said order is in the
interest of the investors in a representative suit filed by the
investor making allegations against the trading member
therein and NSEL as defendant no.2.
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26. The order appointing committee is in a representative
suit filed by investors to recover amounts from the plaintiff
herein and the trading member through whom the investors
have traded. In the present case, no aggrieved investor is a
party to the suit. The dispute is between the plaintiff and
defendant no. 1, who is the trading member. The plaintiff’s
prayer for recovery of amounts is based on allegations of
fraud and defaults by defendant no. 1. The plaintiff has
pleaded about different types of contracts, the ledgers
maintained by the plaintiff, directions issued by the
Government to stop the contracts and that all the existing
contracts be settled on the due dates. The plaintiff has
further pleaded that the plaintiff issued a circular, suspending
trading in all the contracts and merging the delivery and
settlement of all pending contracts. The plaintiff has alleged
illegal removal of commodities, failure to make payment in
funds, and falsification of the books of accounts.
27. The plaintiff has contended that it is entitled to receive
and recover the amount under the Bye-Laws and the
contracts as a facilitator of the trades which were executed
on the plaintiff's exchange. The plaintiff has referred to and
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relied upon various minutes of meetings held between the
plaintiff and defendant no. 1 for the purpose of settling
outstanding amounts. The plaintiff has alleged that, after
agreeing to the liability, defendant no. 1 addressed a letter to
the plaintiff, stating that the minutes of the meeting were
signed under duress and denying that defendant no. 1 had
ever agreed to make the payment. The plaintiff has also
relied upon an agreement dated 1
st
June 2013, alleging that
defendant no. 1 had agreed to honour the pay-in obligations
and had undertaken not to commit any default and to comply
with the rules and the bye-laws. The cheque issued towards
payment of the outstanding amounts for settlement of
accounts was dishonoured, and thus the plaintiff has
contended that proceedings under the Negotiable
Instruments Act have been initiated. The plaintiff has also
pleaded about the criminal proceedings initiated by the
economic offences wing and the action taken against the
directors of defendant no.1. The plaintiff has thus expressed
apprehension that amounts would be siphoned off before the
settlement of the accounts
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28. The plaintiff has further pleaded that in such
circumstances, the arbitration clause was invoked against
defendant no. 1 under the bye-laws. However, out of the
same transactions, the plaintiff has rights and a cause of
action against the other defendants, which are directly linked
to the transactions and to defendant no. 1. Hence, the
plaintiff has pleaded that the arbitration petition under section
9 was withdrawn with liberty to file this suit. Thus, the
plaintiff’s claim is based on the ledger accounts maintained
by the plaintiff and the allegations of fraudulent transactions
and alleged default committed by defendant no. 1. These
allegations are denied by the defendants. Defendant no. 1
has alleged that action has already been taken against the
plaintiff for violating the provisions of the FCRA. Hence, there
are allegations of fraud against the plaintiff.
29. Learned senior counsel for defendant no. 1 has relied
upon the observations of the Apex Court in the decisions
referred to above regarding the violations committed by the
plaintiff. Hence, learned senior counsel for defendant no. 1 is
right in submitting that the issues involved in the present suit
would warrant a trial, and the plaintiff would be under
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obligation to prove the allegations of fraud and is also under
obligation to lead evidence to prove the ledger accounts
maintained by the plaintiff to prove that defendant no. 1
would be liable to make the payment as alleged in the suit.
Apart from defendant no. 1, who is the trading member of the
plaintiff, allegations are also made against other defendants,
which, according to the plaintiff, were the grounds to
withdraw the arbitration petition and file this substantive suit.
30. Even before the representative suit was filed, the
plaintiff herein, i.e. NSEL, had invoked the arbitration clause
and filed a petition under Section 9 of the Arbitration Act. Ad-
interim relief in the said petition was refused. During the
pendency of the Section 9 petition, the investor of some
other trading member filed the representative suit, and the
order constituting the committee was passed. Defendant no.
1 challenged the said order, and its implementation was
stayed by the Division Bench qua defendant no. 1. In the
meantime, the plaintiff withdrew the Section 9 petition and, in
view of the liberty granted in said petition, filed the present
suit.
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31. The controversy regarding categorising the subject
transactions as ready forward transactions or otherwise, as
argued on behalf of defendant no. 1, cannot be decided at
this preliminary stage. Hence, the decision in B.O.I Finance
Ltd., where the contract between two independent parties
was the subject matter of the controversy, cannot be applied
to the present case at this stage, where the plaintiff had
provided a platform for the transactions. The controversy in
the present case regarding the alleged fraudulent
transactions requires examination in a full-fledged trial.
32. In 63 Moons Technologies Ltd., the batch of appeals
and writ petitions raised questions regarding the applicability
and construction of Section 396 of the Companies Act, 1956,
which deals with the compulsory amalgamation of companies
by a Central Government order when this becomes essential
in the public interest. In the said decision, the Apex Court has
referred to the facts that the appellant, 63 Moons
Technologies Ltd., formerly known as Financial Technologies
(India) Limited (“FTIL”) whose name was changed to 63
Moons Technologies Ltd. is a 99.99% shareholder of NSEL
and a listed company. About 45% of FTIL’s shareholding is
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held by Shri Jignesh Shah and family, and about 43% is held
by members of the Indian public. Approximately 5% of the
shareholding is held by institutional investors. FTIL is a
profitable company with a positive net worth of over INR
2500 crores and is in the business of providing software used
by brokers and exchanges for trading across the country.
FTIL has about 900 employees and a Board of Directors that
differs from the Board of Directors of its wholly owned
subsidiary, i.e., NSEL. On the other hand, NSEL was
incorporated in 2005 by Multi Commodities Exchanges
(MCX) and its nominees. NSEL provided an electronic
platform for the trading of commodities between willing
buyers and sellers through brokers representing them.
33. The Apex Court observed that NSEL had not denied
that paired commodity contracts were in operation, and,
excluding E-series contracts, at least 46% of NSEL's
turnover was made up of such paired contracts. It is also
observed that such paired contracts were financing
transactions which were distinct from sale and purchase
transactions in commodities and were, thus, in breach of
both the exemptions granted to NSEL and the FCRA. The
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observations of the Apex Court are cited here to better
understand the controversy, as defendant no. 1 has alleged
fraud against the plaintiff, and the dispute in this suit pertains
to the same controversial transactions.
34. In State of Maharashtra v. 63 Moons Technologies
Ltd., the appeal arose from a judgment of the Bombay High
Court, by which certain notifications attaching the property of
the respondent under Section 4 of the Maharashtra
Protection of Interest of Depositors (in Financial
Establishments) Act, 1999 (‘MPID Act’) were quashed. The
core of the dispute was whether NSEL is a “financial
establishment” within the meaning of Section 2(
d) of the
MPID Act. The Apex Court allowed the appeals and set aside
the impugned judgment of the Bombay High Court and the
notifications issued under Section 4 of the MPID Act,
attaching the properties of the respondent, i.e. 63 Moons
Technologies Ltd., are held valid.
35. In
Khurshed Banoo, this court disapproved the trial
Court’s approach in proceeding to decree the suit, essentially
relying on the Commissioner's report and on the assumption
that the said report had been proved. It is held that there is
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an established procedure known to the law by which the
Commissioner's report can be proved on evidence, and thus,
in the absence of any oral evidence, a court commissioner’s
report cannot be accepted.
36. In the facts and circumstances of the present case,
allegations of fraud and violation of FCRA provisions against
the plaintiff cannot be ignored. As per the order passed in the
representative suit, the committee is formed as a fact-finding
authority to determine the amount payable by the alleged
defaulters/third parties to the investors. The plaintiff chose
not to file any third-party notice in that suit against the
defendants herein. Defendant no. 1 had challenged the order
in the representative suit, and the learned Division Bench
granted liberty to defendant no. 1 to show facts and
circumstances to justify its contentions that the said order
should not apply to defendant no. 1.
37. In the decision of this court, in Mulji Umershi Shah,
while deciding the challenge to the order passed by the trial
court appointing a court receiver while rejecting the plaintiff’s
application for injunction, it is held that in suitable cases, the
court is not powerless to pass appropriate orders to meet the
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ends of justice. This court also held that such power must be
exercised sparingly and only in exceptional cases.
38. In the decision of the apex court in Immani Appa Rao, it
is held that, having regard to the fact that both the parties
before the court are confederates in the fraud, whichever
approach is adopted, one party would succeed, and the other
party would fail; thus, it is necessary to enquire as to which
party’s success would be less injurious to public interest.
After considering the various decisions on this issue, the
Apex Court in paragraph 22 referred with approval to the
judgment of Lord Mansfield, CJ, which is often quoted in
various decisions. Paragraph 22 reads as under:
“22. In judicial decisions where this question has been
considered from the judgement of Lord Mansfield, C.J. in
Holman v. Johnson [(1775) 1 Cowper, 341] is often quoted. If
we may say so with respect the said passage, very succinctly
and eloquently brings out the true principles which should
govern the decision of such cases. Said Lord Mansfield, C.J.,
“the objection that a contract is immoral or illegal as between
plaintiff and defendant sounds at all times very ill in the
mouth of the defendant. It is not for his sake, however, that
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the objection is ever allowed; but it is founded in general
principles of policy which the defendant has the advantage
of, contrary to the real justice, as, between him and the
plaintiff, by accident, if I may say so. The principle of public
policy is this: ex dolo malo non oritur actio. No court will lend
its aid to a man who founds his cause of action upon an
immoral or an illegal act. If, from the plaintiff’s own stating or
otherwise, the cause of action appears to arise ex turpi
causa or the transgression of a positive law of this country,
there the court says he has no right to be assisted. It is upon
that ground the court goes; not for the sake of the defendant,
but because they will not lend their aid to such a plaintiff.”
emphasis applied by me
39. The decisions of the Apex Court in Nagindas Ramdas
and Sangraminh Gaekwad are relied upon by the learned
senior counsel for the plaintiff on the aspect of admissions in
pleadings or judicial admissions. These legal principles are
relied upon to support his submissions that the contents of
the appeal filed by defendant no. 1 to challenge the order
passed in the representative suit would amount to judicial
admissions, and thus the arguments raised on behalf of
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defendant no. 1 are not available to object to the prayers in
this application. In my view, the reliance placed on the legal
principles in the said decisions would not apply at this stage
when deciding the prayer to apply the order passed in the
representative suit to these defendants or to pass a similar
order. It is important to note that defendant no. 1 has raised
objections to the passing of the order of formation of the
committee and the terms in the minutes of the order. The
grounds raised in the appeal filed to challenge the order in
the representative suit would not amount to any kind of
admissions for applying the order in the present case. The
learned Division Bench has granted liberty to raise
contentions and point out the facts and circumstances as to
why the order should not apply to these defendants. From
the office report on record, it appears that service of the writ
of summons on all the defendants in the present case is not
yet complete, and the suit is at the pleadings stage.
40. Learned senior counsel for the plaintiff submitted that
by invoking powers under Section 151 of the CPC, read with
Order XXVI Rule 11 and Section 75 of the CPC, this court
can either apply the order passed in the representative suit to
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these defendants or pass a similar order. I do not find any
substance in the said submissions. In the present case, the
defendants have not admitted their liability to pay. Under
Order XXVI Rule 11, the court may, in any suit in which an
examination or adjustment of the accounts is necessary,
issue a commission to such person as it deems fit, directing
him to make such examination or adjustment. Under section
75, the court is empowered to issue commissions to examine
any person, to make a local investigation or to examine or
adjust accounts. A report submitted pursuant to such an
order by the commissioner is never final and is always
subject to proof. A party is entitled to file objections to such a
commission report and also cross-examine the court
commissioner.
41. In the present case, considering the allegations of
fraud, the court must first examine the issue of fraud to
ascertain whether defendant no. 1 is liable to make any
payment. The question in the present suit is not only of the
adjustment of the accounts. No aggrieved investor is a party
to the present suit for applying public policy principles in the
public interest. Hence, no purpose would be served by
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applying the order passed in the representative suit to the
defendants herein. The legal principles in the decision of the
Apex Court in Immani Appa Rao, as discussed above, would
squarely apply to the facts of the present case. It is a well-
established legal principle that a party cannot be permitted to
use the court machinery without discharging its burden to
prove its pleadings. The prayers in this Notice of Motion are
premature. After the pleadings are complete and the issues
are framed, this court, at an appropriate stage during the
trial, may consider whether the facts and circumstances of
the case warrant the invocation of the powers under section
75, read with Order XXVI of the CPC, to appoint a court
Commissioner.
42. Hence, for the reasons recorded above, the notice of
motion is dismissed.
[GAURI GODSE, J.]
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