Bombay High Court
B.P. Comtrade Pvt.Ltd vs Sapna Bhavik Shah on 20 December, 2019
Author: G. S. Patel
Bench: G.S. Patel
911-CARBPL1514-19-CORRECTED.DOC
Atul
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
COMM ARBITRATION PETITION (L) NO. 1514 OF 2019
BP Comtrade Pvt Ltd ...Petitioner
Versus
Sapna Bhavik Shah ...Respondents
Mr Sharan Jagtiani, with Ish Jain, & Priyal Jain, i/b Kiran Jain &
Co., for the Petitioner.
Ms Gyanika Kochar, i/b Y and A Legal, for the Respondents.
CORAM: G.S. PATEL, J.
DATED: 20th December 2019 PC:-
1. The facts in this Section 9 Petition are straight forward. The Petitioner is a member of the National Commodity & Derivatives Exchange Limited ("NCDEX") and the Multi Commodity Exchange of India Limited ("MCX"). The Respondent is an individual trading in NCDEX.
2. According to the Petitioner, it owed an amount of Rs 5,77,26,934.14 by the Respondent. The document under which arbitration is invoked is the Client Registration Form, a copy of which is at Exhibit "A" to the Petition. This Member-Constituent Agreement contains an arbitration clause (clause 22 at page 43) and this makes reference to the Exchange Rules, Bye-laws and Page 1 of 7 20th December 2019 ::: Uploaded on - 21/12/2019 ::: Downloaded on - 22/12/2019 00:54:31 ::: 911-CARBPL1514-19-CORRECTED.DOC Regulations of the Exchanges which have an arbitration provision. About this there is no dispute. I say this because after the Petitioners invoked arbitration, there was a reply letter dated 12th December 2019 from the Respondent or her associated entity. Under the relevant Regulations there is a prior process of mediation or conciliation mandated. That is an implicit acceptance of existence of an arbitration agreement.
3. Briefly stated, there were transactions between 23rd August 2019 and 3rd October 2019 in the account of and on instructions from the Respondent. The Petitioner executed trades on instructions received through electronic contract notes. The Respondent was informed of the ledger balances and of the trades having been executed. The Respondent took an open position on 3,410 of Castor Seeds Commodity. Changes in the market conditions made that margin insufcient and, therefore, the Petitioner on 26th September 2019 made a margin call of Rs. 1,28,36,692/- and called on the Respondent to deposit this amount. This has never been done. The Petitioner on 1st October 2019 made another margin call of Rs. 1,67,47,939/- (Exhibit E at page 62) and called on the Respondent to deposit this amount. This has never been done.
4. The National Commodities Clearing Limited issued a Circular on 1st October 2019. This is what is known as a 'Tear Up Circular'. It enables brokers such as the Petitioner to regularize their positions even allowing for the fact that some of their clients may have committed defaults. The Petitioner informed the Respondent Page 2 of 7 20th December 2019 ::: Uploaded on - 21/12/2019 ::: Downloaded on - 22/12/2019 00:54:31 ::: 911-CARBPL1514-19-CORRECTED.DOC that since she had failed to fulfl the margin or the mark-to-market loss obligations despite several reminders, the Petitioner was proceeding to take the Tear Up opportunity, including paying all compensation, penalty and margin or M2M loss. It is thus that the Petitioner has arrived at a claim for Rs. 5,50,94,377.31 as of 10th October 2019. The total dues are Rs. 5,77,26,934.14. This includes the interest component separately charged by the Petitioner.
5. The principal claim is for amounts that Petitioner had to pay since the Respondents failed to regularize their position. Even in the response to the invocation notice there is no dispute about this indebtedness and this liability. There certainly can be no dispute about the trades having been triggered or initiated by the Respondents. If that be so, I see no reason why pending an arbitration there ought not to be a prayer for disclosure and corresponding injunction in terms of prayer clauses (b)(i) and (b)
(iii), which read thus:
"(b)(i) Order and direct the Respondents to disclose on oath and/or on afdavit, all the movable and immovable properties owned by the Respondents and value thereof, including the bank accounts of the Respondents;
(iii) Order and direct that the Respondents its employees, servants and/or agents or any person claiming through its and on its behalf be restrained by a temporary injunction from in any manner dealing with, selling, transferring, disposing of, or alienating or encumbering or mortgaging or hypothecating or charging or parting with possession of or transferring, or inducting anyone else into Page 3 of 7 20th December 2019 ::: Uploaded on - 21/12/2019 ::: Downloaded on - 22/12/2019 00:54:31 ::: 911-CARBPL1514-19-CORRECTED.DOC or creating any third party right, title or interest or license in favour of anyone else in respect of all properties including the properties that will be disclosed by the Respondents on oath, in any manner whatsoever."
6. Mr Jagtiani on instructions states that the Respondent trades through other persons and entities. The assets of those persons and entities are also required to be disclosed. Particulars of the present Respondent and connected persons or entities are:
Name of the entity Particulars of Bank Account N and N Comtrade Pvt HDFC Bank Account No. Ltd 00062 34000 2160 Sapna Bhavik Shah Nutan Nagarik Sahakari Bank A/c. No. 008138230004441 008111500004626 Bhavik Kiritkumar Shah Nutan Nagarik Sahakari Bank A/c. No. 008138230004058 Alternate Bank Accounts:
Sapna Bhavik Shah HDFC Bank Account No.
02991330002938
N and N Comtrade Pvt 1) IDBI Bank Account No.
Ltd 118010200000183
2) Punjab National Bank Account
No. 50200004295769
Names of connected persons/entities
1. Integrated Industrials Fintech Consultants Pvt Ltd
2. Manjeet Cotton Pvt Ltd
3. Starchem Polytrade Pvt Ltd
7. N and N Comtrade and Bhavik Shah are respondents in connected Petitions in which separate orders are made today. It does Page 4 of 7 20th December 2019 ::: Uploaded on - 21/12/2019 ::: Downloaded on - 22/12/2019 00:54:31 ::: 911-CARBPL1514-19-CORRECTED.DOC not matter in which proceeding these disclosures are made, so long as they are made and they cover at a minimum the accounts listed above.
8. I will require a complete disclosure in the following terms of the Respondent's movable and immovable assets, including the personal assets of the present Respondent.
(a) Immovable properties: The disclosure will be of all immovable properties wherever situated, whether in India or overseas with complete details sufcient to identify the properties. If any of these are in any way encumbered, full particulars of such encumbrance/s and the amounts yet due as secured by those properties will also be disclosed.
(b) Movable Assets
(i) Non-financial: The Respondent will also
disclose all non-fnancial movable assets of the acquisition or replacement value of more than Rs. 50,000/- including all particulars as described above.
(ii) Financial assets: The Respondent will also disclose all investments and demat accounts with full particulars, including all holdings and encumbrances.
(iii) Bank accounts: All bank accounts with account numbers, bank names, branches, account types and holding patterns are to be Page 5 of 7 20th December 2019 ::: Uploaded on - 21/12/2019 ::: Downloaded on - 22/12/2019 00:54:31 ::: 911-CARBPL1514-19-CORRECTED.DOC disclosed. Bank statements for the last one year are required for all accounts.
(iv) Bank Lockers: contents of all safety deposit vaults and bank lockers will be disclosed.
(c) Tax and Financial Returns: Copies of all tax and fnancial returns for the last three years are to be disclosed.
(d) Disclosures to be on Afdavit:
(i) All disclosures must be on a properly sworn
afdavit.
(ii) The afdavit is to be afrmed before a court
ofcer.
(iii) The afdavit is to be serially paginated.
9. In the facts and circumstances of the case, and since I see no plausible defence, and since there is a more than sufcient prima facie case made out, I will have to make provision for the eventuality that the disclosure is either delayed or not made at all. Should that happen there will immediately be an order against the Respondent in terms of prayer clause (a)(v) which reads thus:
"(a)(v) Order and direct the Respondents to deposit monies or give security in this Hon'ble Court to secure the Petitioner's claim of Rs. 5,77,26,934.14 (Rupees Five Crore Seventy Seven Lakhs Twenty Six Thousand Nine Hindred Thirty Four and Fourteen Paisa Only) due and payable along with interest @ 24% p.a. thereon till the date of payment and/or realization thereof."Page 6 of 7
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10. The Respondent is put to notice that that the same order in terms of prayer (a)(v) may be made if it is found that the disclosure, though fled, is inadequate or not in conformity with the foregoing directions. Therefore the disclosure as is required must be complete and compliant in all respects. It will not, for instance, be open to the Respondent to say that a disclosure that just mentions a particular property but gives no further particular details is adequate.
11. Afdavit in Reply including disclosure is to be fled and served on or before 21st January 2020. Afdavit in Rejoinder is to be fled and served on or before 28th January 2020.
12. List the matter on 4th February 2020.
(G. S. PATEL, J) Page 7 of 7 20th December 2019 ::: Uploaded on - 21/12/2019 ::: Downloaded on - 22/12/2019 00:54:31 :::