2012 (12) TMI 680 - HC - Companies Law

Territorial jurisdiction of court - Whether the plaintiffs who themselves have invoked the jurisdiction of Israel court can re-agitate or re- ventilate their grievance before the Indian Courts, that too in the circumstances when they failed to succeed in securing a favourable order from the highest court of another sovereign state - Held that - The plaintiffs cannot be allowed to continue two parallel remedies whether before two courts of the same country or the two courts of different counties and grant of any favourable relief to the plaintiffs will amount to overreaching the order passed by the Hon ble Supreme Court of Israel which has already declined to grant interim relief as has been claimed by the plaintiffs in the present suit. Any indulgence by this court will result in causing serious interference with the process of justice of the foreign court. In fact passing of any order by this court can be in serious conflict with the orders passed by the Israel courts and such a situation would be in clear transgression of the principle of comity of courts and will result in creating anomalies and irreconcilable situation because of the continuation of two parallel proceedings before two competent courts of jurisdiction of two sovereign states. The case of the plaintiffs is a case of shifting stands as they have taken conflicting stands taken before this court and before the Israel court and thus the plea of the plaintiffs to lift the corporate veil of the defendant companies to unmask the core company which created the web of subsidiary companies for the purposes of tax evasion and also for the purpose of playing with the legitimate rights of their creditors including the plaintiffs, with whom they had entered into the First Consultancy Agreement dated 1.8.2005 and Share Entitlement Agreement dated 17.10.2006, cannot be appreciated as the only judicial forum which was available to the plaintiffs to raise such a plea was the Israel court where for the reasons best known to them they not only failed to implead defendants Nos. 3 to 5 but also failed to raise any such plea in that regard. Suppression of Facts - Held that - The only disclosure made by the plaintiffs with regard to the order passed by Hon ble Supreme Court of Israel is that plea of defendants was also accepted by the appellate court in Israel and it was observed by the said court that such an order cannot be passed by the Israel courts, more so when the foreign companies were not parties to the present suit. Counsel for the defendants however took a stand that these very plaintiffs themselves filed a copy of the said judgment before the District Court Israel on 26.10.2011 along with the application for return of the bank guarantee deposited and therefore they cannot take a plea that copy of the judgment of the Supreme Court was not available to them or they could not get the same translated into English language for such a long period of over two months. The question thus arises is that whether such half - hearted disclosure by the plaintiffs can be considered as fair and honest disclosure or whether it will amount to suppression of material facts. It is a settled legal position that the litigant who approaches the court is bound to disclose all material facts and produce all the documents which are relevant to the litigation and if he withholds a vital document in order to gain advantage then he would be guilty of playing fraud on the court as well as on the opposite party. Forum Shopping - The practise of choosing a particular forum by the plaintiffs for redressal of his grievances i.e choosing a place to sue which is convenient to him or a court which has an umbilical connection with the cause of action, etc is undeniably an unfettered right. This graphically described practice of forum hunting or forum shopping indubitably leads not only to the multiplicity of proceedings but also of the abuse of the process of the court. The courts have to discourage such practice with a heavy hand. The present suit filed by the plaintiffs is not only a classic case of forum shopping but also a case clearly impinging upon the well-established principle of comity of courts. The plaintiffs are also guilty of suppressing material facts from this court as discussed above. In the ultimate analysis, this court is not inclined to threadbare discuss the various other issues raised and also the judgments cited in support thereof by both the parties and hereby dismiss the present suit in the exercise of inherent powers vested in the court under Section 151, CPC so as to prevent the abuse of the process of the court and to secure the ends of justice.

Issues Involved:
1. Suppression of facts and approaching the court with unclean hands.
2. Lack of territorial jurisdiction of the court.
3. Suit barred by limitation.
4. Suit not maintainable based on the principle of comity of courts.
5. Forum shopping.
6. No cause of action in favor of the plaintiffs to file the present suit before this court.

Detailed Analysis:

1. Suppression of Facts and Approaching the Court with Unclean Hands:
The defendants argued that the plaintiffs suppressed vital facts, including not disclosing the Supreme Court of Israel's order, which would have influenced the court's decision to grant an ex-parte interim order. The plaintiffs contended they did not have the translated copy of the judgment at the time of filing the suit and disclosed the pendency of the case in Israel. The court found that the plaintiffs' disclosure was inadequate and amounted to suppression, as they did not transparently declare the adverse order from the Supreme Court of Israel.

2. Lack of Territorial Jurisdiction:
The defendants claimed that the court lacked territorial jurisdiction as the core agreements were executed in Israel, involving parties domiciled there, and the business in question was managed by foreign entities. The plaintiffs argued that the business and assets in India were under threat, justifying the jurisdiction of the Indian court. The court concluded that the plaintiffs' claim of jurisdiction based on the affidavit dated 27.1.2011 was not sufficient to establish a new cause of action within India's jurisdiction.

3. Suit Barred by Limitation:
The defendants argued that the suit was barred by limitation, as the cause of action arose in November 2006, and the suit was filed beyond the three-year limitation period. The plaintiffs contended that their rights were ongoing and not yet transferred, creating a continuing cause of action. The court did not find the plaintiffs' argument persuasive, noting that the refusal to transfer shares in April 2007 marked the accrual of the cause of action, making the suit time-barred.

4. Suit Not Maintainable Based on the Principle of Comity of Courts:
The defendants emphasized the principle of comity of courts, arguing that the Indian court should not interfere with proceedings pending before the Israel court, especially since the plaintiffs had already sought similar reliefs there. The plaintiffs argued that the suit in India was necessary to protect their rights due to the defendants' contradictory stands in Israel. The court held that maintaining the suit in India would undermine the judicial process of the Israel court, violating the principle of comity of courts.

5. Forum Shopping:
The defendants accused the plaintiffs of forum shopping, filing the suit in India after failing to secure favorable orders in Israel. The plaintiffs countered that the suit was filed out of necessity to protect their rights in India. The court found that the plaintiffs engaged in forum shopping, attempting to get a favorable order from the Indian court after an unfavorable ruling from the Supreme Court of Israel.

6. No Cause of Action:
The defendants argued that there was no cause of action for the plaintiffs to file the suit in India, as the issues were already adjudicated in Israel. The plaintiffs contended that the sequence of events and the defendants' actions justified their claim. The court concluded that the affidavit dated 27.1.2011 did not constitute a new cause of action, as it was already considered by the Israel court.

Conclusion:
The court dismissed the suit, finding it to be a case of forum shopping and suppression of material facts. The plaintiffs were deemed to have abused the process of the court by seeking to re-litigate the same issues in India after failing to obtain favorable orders in Israel. The dismissal was ordered to prevent the abuse of the court's process and to uphold the principle of comity of courts.

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