Court Denies Application, Grants Interim Relief in Complex Corporate Liability Case

The court dismissed the applications to reject the plaint or delete parties, finding distinct causes of action and deeming all defendants necessary for relief sought. Interim relief was granted against certain defendants to prevent asset alienation and secure the suit claim, with varying security provisions based on defendants' roles and liabilities. Promoters were held responsible for mismanagement, key managerial personnel for negligence, credit rating agencies for failure in obligations, auditors for lack of reasonable care, and the debenture trustee for negligence in protecting debenture holders' interests.

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Issues Involved:
1. Rejection of plaint or striking off parties.
2. Applications for interim injunction and provision of security.
3. Liability of various defendants including promoters, key managerial personnel, credit rating agencies (CRAs), auditors, and the debenture trustee.

Issue-wise
Detailed Analysis:

1. Rejection of plaint or striking off parties:
The defendants argued that the present suit is barred under Order II Rule 2 CPC as it arises from the same cause of action as the suit filed in Bombay High Court. They also contended that DHFL, the issuer of the NCDs, was not joined as a party, and that certain defendants should be deleted as they were not involved during the issuance of the prospectus. The plaintiff countered that the present suit is distinct, seeking compensation for misstatements and negligence, unlike the Bombay suit which was for debt recovery. The Division Bench of this Court had previously ruled that the causes of action are distinct and DHFL is not a necessary party. The applications to reject the plaint or delete parties were dismissed as the causes of action were found to be distinct, and all defendants were deemed necessary parties for the relief sought.

2. Applications for interim injunction and provision of security:
The plaintiff sought interim relief to prevent the defendants from alienating assets and to secure the suit claim. The defendants argued that no debt was due, and hence, no security should be provided. The Court held that interim relief could be granted in an action for damages if justified. Given the significant loss incurred by the plaintiff due to DHFL's default, the Court found a strong prima facie case for interim relief. The Court ordered that the interim injunction would continue against the first to eighth and eleventh defendants until they provide security for the principal suit claim in specified proportions. The order of interim injunction against the ninth and tenth defendants was vacated.

3. Liability of various defendants:
- Promoters (First to Third Defendants): The Court found them responsible for the mismanagement of DHFL and the statements made in the financial statements and prospectus. Given their involvement in criminal proceedings and asset attachment, the interim injunction would continue unless they provide full security for the suit claim.

- Key Managerial Personnel (Fourth and Fifth Defendants): These defendants, as CEO and CFO, were responsible for compliance certificates and financial statements. The Court concluded that they were negligent and failed to fulfill their statutory obligations. The interim injunction would continue until they provide security to the extent of 15% of the suit claim each.

- Credit Rating Agencies (Sixth and Seventh Defendants): The CRAs were found to have failed in their statutory and common law obligations to monitor and review the ratings accurately. The Court held them prima facie liable, and the interim injunction would continue until they provide security to the extent of 10% of the suit claim each.

- Auditors (Eighth to Tenth Defendants): The eighth defendant, being the statutory auditor during the issuance of the prospectus, was found prima facie liable for failing to exercise reasonable care. The interim injunction would continue until they provide security to the extent of 10% of the suit claim. The ninth and tenth defendants were not held liable as they had resigned before the issuance of the prospectus, and the interim injunction against them was vacated.

- Debenture Trustee (Eleventh Defendant): The Debenture Trustee was found negligent in protecting the interests of the debenture holders. The interim injunction would continue until they provide security to the extent of 10% of the suit claim.

Conclusion:
The applications to reject the plaint or delete parties were dismissed. The interim injunction against the first to eighth and eleventh defendants would continue until they provide security for the suit claim in specified proportions. The interim injunction against the ninth and tenth defendants was vacated.

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