Madras High Court
Ishta Capital Private Limited vs / on 6 September, 2021
Author: G.Jayachandran
Bench: G.Jayachandran
C.S.(Comm.Div).No.484 of 2018
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Reserved on : 02.09.2021 Pronounced on : 06.09.2021
Coram:
THE HONOURABLE DR. JUSTICE G.JAYACHANDRAN
C.S.(Comm.Div).No.484 of 2018
ISHTA CAPITAL PRIVATE LIMITED
Having Admin Office at
No.40, Eldams Road, Teynampet,
Chennai – 600 018.
Rep. by its Director,
Mr.Arun Jayatharan ... Plaintiff
/versus/
Mr.ARVIND RAGHUNATHAN
Proprietor/Chief Executive Officer,
M/s.Aravandrud Capital,
Raheja Towers, Level – 9, East Wing,
M.G.Road, Bangalore,
Karnataka – 560 001. ... Defendant
Prayer:- This Suit is filed under Order IV Rule 1 of the Madras High Court
Original Side Rules read with Order VII Rule 1 of C.P.C read with Sections
2(1)(c)(x) & 2(1)(c)(xviii) of the Commercial Courts, Commercial Division and
Commercial Appellate Division of High Courts Act, 2015.
a). Directing the defendant to pay a sum of Rs.4,50,14,000/- (Rupees Four
Crores Fifty Lakhs Fourteen Thousand only) together with pendent lite interest at
12 % per annum on the commitment fee security deposit of Rs.3,17,00,000/-
(Rupees Three Crores Seventeen Lakhs only), from the date of presentation of
1/11
https://www.mhc.tn.gov.in/judis/
C.S.(Comm.Div).No.484 of 2018
plaint till actual realisation.
b). Costs of the suit.
For Plaintiff : Mr.R.Palaniandavan
For Defendant : set exparte
JUDGMENT
(Case has been heard through Video Conferencing) This Suit is filed for recovery of money arising out of breach of agreement between the plaintiff and the defendant.
2. According to the plaintiff, on 27.06.2015, he entered into a “Mandate for Arranging Loan against Medium Term Notes (MTN), Bank Guarantees (BG) and Standby Letter of Credit (SBLC)” with the defendant for USD 50 Million. As per the terms of the arrangement, the plaintiff transferred Commitment Fees Security Deposit of Rs.3,17,00,000/- to the defendant, which is equivalent to USD 5,00,000. The defendant, acknowledge the receipt of the said money and advised the plaintiff to incorporate a Company at Mauritius. Accordingly, the plaintiff incorporated M/s.Ishta Capital LLC, Mauritius, certified as Global Business License (GBL), Category-I, entity by the Financial Services 2/11 https://www.mhc.tn.gov.in/judis/ C.S.(Comm.Div).No.484 of 2018 Commission of Republic of Mauritius. The plaintiff, applied to State Bank of Mauritius for availing credit facilities based on the assurance of the defendant. Whereas, the State Bank of Mauritius, informed that they can provide assistance only upto USD 10 Million and that to against the Security of an irrevocable, unconditional Bank Guarantee. The defendant could not manage to obtain a concrete loan offer proposal from the State Bank of Mauritius. On 07.04.2016, the State Bank of Mauritius, issued an indicate Term Sheet quoting terms/conditions. Those terms and conditions were contrary to the Mandate agreed upon. Therefore, the plaintiff sought for return of the commitment fees security deposit from the defendant. However, the defendant refused to return the commitment fees security deposit stating that they have blocked USD 50 Million SBLC with Citibank, Chennai, using the commitment fees security deposit. Therefore, after exchange of notice, the present suit is filed for recovery of money.
3. The defendant was served summons on 11.02.2021, they have not entered appearance through Counsel since they did not file the written statement within the limitation prescribed, this Court recording the forfeiture of right to file written statement, set exparte. The plaintiff was directed to appear before Master 3/11 https://www.mhc.tn.gov.in/judis/ C.S.(Comm.Div).No.484 of 2018 – IV for recording evidence. Accordingly, Mr.Arun Jayatharan, (P.W.1), the Director of the plaintiff's Company with authorisation of the Board had filed proof affidavit in lieu of Chief examination and had marked 9 Exhibits.
4. The Learned Counsel appearing for the plaintiff referring these exhibits would submit that the plaintiff and the defendant entered into a Mandate for Arranging Loan against MTN/BG/SBLC on 27.06.2015. As per clause 2 of the Mandate, it was agreed by the parties that 8% of the face value of Medium Term loan will be paid by M/s.Ishta Capital upon the successful completion of the transaction from the Company incorporated in Mauritius. Whereas, the defendant had not completed the transaction but had collected the commitment fees of Rs.3,17,00,000/-, which the defendant is liable to return as per clause 3(b) which deals with Termination. Except actual expenses incurred, the defendant is liable to return the balance commitment fees. Having agreed under the Mandate to return the commitment fees in case of termination without successful completion of the transaction, the defendant denying the liability on the ground that failure of transaction was due to the plaintiff which is not factually correct.
5. Referring the e-mails exchange (Ex.P.3) series and exchange of 4/11 https://www.mhc.tn.gov.in/judis/ C.S.(Comm.Div).No.484 of 2018 legal notice (Ex.P.4 to Ex.P.7), the Learned Counsel for the plaintiff would submit that, the receipt of Rs.3,17,00,000/- not denied by the defendant. The reason attributed for withholding the money by the defendant is contrary to the terms of the agreement (Ex.P.2). Therefore, the defendant is liable to pay the suit claim which include the Principal amount as well as the interest at the rate of 12% p.a.
6. The exchange of e-mails between the plaintiff and the defendant is indicates that the defendant is referring inadequate security for the loan amount as the reason for not successfully completing the transaction. However, in Ex.P.2, the Mandate for arranging loan against Medium Term Note/Bank Guarantee/Standby Letter of Credit, only say that, the plaintiff has appointed the defendant to make necessary arrangement to secure the Medium Term note to an extent of USD 50 Million, for which, the plaintiff has agreed to pay 8% of the face value as fees to the defendant and also agreed to pay commitment fees security deposit of USD 5,00,000. No reference about furnishing security for the loan is mentioned.
7. The Plaintiff, in terms of the mandate had given a cheque for the 5/11 https://www.mhc.tn.gov.in/judis/ C.S.(Comm.Div).No.484 of 2018 said amount on the date of entering into the Mandate. It was agreed by both the parties that, if the investor fails to provide loan, the Mandate will get terminated and cancelled. The defendant will refund the commitment fees less actual expenses. In case, if the plaintiff – M/s.Ishta Capital Private Limited, fails to pay the security deposit as agreed or drop the transaction, then, the commitment fees will be non-refundable.
8. The e-mails between the parties indicates that the investor was not ready to advance loan and even if so, the promised advance was only 10 Million USD and even that proposal could not be fructify due to other conditions imposed by the investor. One of the e-mail in Ex.P.3 series dated 07.04.2016, is purported to have been sent by State Bank of Mauritius (SBM) to the plaintiff. This communication indicates that State Bank of Mauritius has put up the loan proposal of the plaintiff for approval to the Higher Authorities. This letter communication which is purported to have been sent by State Bank of Mauritius indicates that a sum of 10 Million USD is proposed to be lend to M/s.Ishta Capital LLC, subject to approval of the higher authorities and on compliance of terms and conditions namely Irrevocable, unconditional and on demand bank Guarantee for an amount 6/11 https://www.mhc.tn.gov.in/judis/ C.S.(Comm.Div).No.484 of 2018 of USD 10 Million issued by an A rated European Bank and the said Bank Guarantee will be valid for one month after the maturity date of the loan. The loan tenure is fixed as 36 months and the processing fees is fixed as 0.75% payable upfront. In this communication, the Borrowing Company is mentioned as JV/SPV Company to be set up for the purpose of ECB in India. The facility purpose is mentioned as ECB for capital expenditures for the expansion of the Sarvana Stores Chain in Chennai. The plaintiff not been convinced with the unsigned letter of State Bank of Mauritius had written to the defendant that the change in the terms from equity investment to ECB and loan amount to SPV (Special Purpose Vehicle) and not to M/s.Ishta Capital Mauritius and adding corporate guarantee of Saravana Stores all were without the consent or knowledge of the plaintiff.
9. On deep scrutiny of the letter communications and the tenure of the defendant's e-mail clearly show that the plaintiff has fall into the honey trap laid by the defendant and had parted away a sum of Rs.3,17,00,000/-. No substantial services has been rendered by the defendant. To the legal notice (Ex.P.4 & Ex.P.5) issued by the plaintiff, the defendant has initially issued a preliminary reply 7/11 https://www.mhc.tn.gov.in/judis/ C.S.(Comm.Div).No.484 of 2018 (Ex.P.6) and final reply (Ex.P.7) emphasizing the clause 3 of the Mandate which says the fees is not refundable if the termination is due to plaintiff's failure.
10. It is contended by the defendant in the reply notice (Ex.P.7) that the plaintiff was cause for the drop of transaction and the plaintiff failed to provide collateral security for the proposal made by State Bank of Mauritius/investor, which was needed for sanctioning of fund. However, the defendant had not placed any document to show that there was a loan proposal dated 07.04.2016 from State Bank of Mauritius and the same was emanated with the consent and knowledge of the plaintiff.
11. The plaintiff, before filing the suit under Commercial Courts Act, had tried to explore the possibility of settlement through Mediation and the same was failed. Whereas, in the suit, the defendant had conveniently remained absent in spite of receipt of the suit summons. In the said circumstances, having admitted the receipt of Rs.3,17,00,000/-, from the plaintiff, the defendant has not placed any proof that the proposal under the Mandate (Ex.P.2) was dropped at the instance of the plaintiff. Hence, the plaintiff is entitled for recovery of Rs.3,17,00,000/- paid 8/11 https://www.mhc.tn.gov.in/judis/ C.S.(Comm.Div).No.484 of 2018 to the defendant.
12. As far as interest is concerned, there is no agreement regarding the interest and therefore, the plaintiff shall be entitled for interest on the principal only from the date of instituting the suit till the realisation of the money at the rate of 12% p.a. Accordingly, the Suit is Partly Allowed. With costs.
06.09.2021
Index : Yes/No.
Internet : Yes/No.
List of Witness examined on the side of the Plaintiff:-
Mr.Arun Jayatharan (PW.1) List of Witness examined on the side of the Defendant :-
Nil List of the Exhibits marked on the side of the Plaintiff:-
Sl.Nos. Exhibits Dated Description of documents
1. Ex.P.1 17.03.2018 Original Board Resolution
2. Ex.P.2 27.06.2015 Original Mandate for Arranging Loan against MTN/BG/SBLC.
3. Ex.P.3 --- (Series) are the Printout of the Emails exchanged between the Plaintiff and the Defending dated-June 2015-July 2016. (Ex.P3 (Series) are the Printout of the Emails for which Certificate under section 65B Indian Evidence Act, 1872.)
4. Ex.P.4 10.08.2016 Office copy of Legal Notice issued on behalf of the 9/11 https://www.mhc.tn.gov.in/judis/ C.S.(Comm.Div).No.484 of 2018 Plaintiff.
5. Ex.P.5 19.08.2016 The Office copy of Corrigendum issued on behalf of the Plaintiff.
6. Ex.P.6 22.08.2016 Photo copy of Preliminary Reply Notice issued on behalf of the Defendant.
7. Ex.P.7 09.09.2016 Photo copy of Reply Notice issued on behalf of the Defendant.
8. Ex.P.8 27.10.2016 Office Copy of Arbitration Notice issued on behalf of the Plaintiff.
9. Ex.P.9 03.11.2016 The Photocopy of Reply to Arbitration Notice issued on behalf of the Defendant.10/11
https://www.mhc.tn.gov.in/judis/ C.S.(Comm.Div).No.484 of 2018 Dr.G.Jayachandran,J.
bsm Pre-delivery judgment in C.S.(Comm.Div).No.484 of 2018 06.09.2021 11/11 https://www.mhc.tn.gov.in/judis/