The Bombay High Court has declined to extend the committee mechanism created in a representative NSEL suit to a separate recovery action, holding that disputes involving allegations of fraud, contested transactions, and liability cannot be bypassed through a fact-finding process and must be adjudicated through trial. Justice Gauri Godse has held that:
“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.”
The plaintiff, National Spot Exchange Ltd. (NSEL), sought to recover approximately ₹937 crores from trading members and associated entities, alleging fraudulent transactions and defaults arising from commodity trades on its platform. It also sought to apply a previously constituted three-member committee mechanism, created in a representative investor suit, to determine liabilities in the present proceedings.
Rejecting this approach, the Court held that the committee in the earlier suit was constituted as a fact-finding body in a representative action involving investors, whereas the present dispute was a direct adversarial claim between NSEL and its trading member, involving serious allegations on both sides.
The Court emphasised that the plaintiff’s claims were based on disputed ledger accounts, alleged fraudulent transactions, and contested contractual obligations, all of which were denied by the defendants and required evidentiary examination. It noted that even allegations of illegality and regulatory violations against NSEL itself had been raised, making a summary determination inappropriate.
Significantly, the Court held that the committee lacked adjudicatory powers and could not replace a judicial determination where complex questions of fact and law arise. It was observed that the plaintiff could not avoid a full trial by seeking to route the dispute through a mechanism designed for a different factual and legal context.
The Court agreed with the defendant’s submission that the issues involved “would warrant a trial,” reiterating that liability in such high-stakes commercial disputes must be established through proper evidence and adjudication.
Accordingly, the relief sought to extend the committee mechanism was refused.
Appearances
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.
