National Peroxide Limited v. Vipul Trivedi and Others

Judgment

1. Heard Mr. Moorjani, learned Advocate for Plaintiff, Mr. Banerjee, learned Advocate for Defendant No.1, Mr. Pandit, learned Advocate for Defendant No.2, Mr. Upadhyay, learned Advocate for Defendant Nos.3 and 4, Mr. Naik, learned Advocate for Defendant No.5, Mr. Dhond, learned Senior Advocate for Defendant Nos.6, 7 and 9, Mr. Totala, learned Advocate for Defendant No.8, Ms. Rathod, learned Advocate for Defendant No.15, Ms. Vichare, learned Advocate for Defendant Nos.14, 16 and 17, Ms. Sharma, learned Advocate for Defendant Nos. 18 and 19. None appears for Defendant Nos.10 to 13.

2. Plaintiff - Company instituted the Suit seeking damages and compensation from Defendant Nos.1 to 19 on account of alleged fraudulent acts, gross negligence and dereliction of duties on their part.

3. The present Application is preferred for restoration of Suit No.75 of 2021, which came to be dismissed by the learned Prothonotary and Senior Master on 25.02.2025 for non-compliance of Rule 87 of the Bombay High Court Original Side Rules, 1980. For the sake of convenience, the parties are hereinafter referred to as “Plaintiff” and “Defendants”.

4. During the course of hearing of the present Restoration Application, Plaintiff – Company filed Interim Application (L) No.5609 2 of 2026 seeking amendment to the Restoration Application so as to incorporate a specific prayer for condonation of delay of 34 days in filing the Restoration Application as there was a delay in filing the same. Both the Applications are taken up for hearing by Court. However all Defendants acting in unison have opposed the same and resisted the grant of any reliefs sought therein. Condonation of delay of 34 days is between the Applicant – Plaintiff – Company and the submission made by Advocates for all Defendants to permit them to file reply to the issue of delay of 34 days stands rejected. Application No.5160 of 2025 is argued vehemently by almost all Defendants seeking its rejection.

5. The brief facts necessary for adjudication of both the Applications are as under:-

5.1. Plaintiff – Company is a Public Limited Company incorpo- rated in the year 1954 under the provisions of the Companies Act,

1913. Plaintiff – Company instituted Suit No.75 of 2021 seeking dam- ages to the tune of Rs.37,02,97,961/- against Defendant Nos.1 to 19 on account of losses caused to Plaintiff – Company and sought dam- ages of Rs. 320 crores due to their fraudulent acts, gross negligence and breach of duties owed to the Company. According to Plaintiff - Company the said loss is prima facie evident from the Forensic Audit 3 Report dated 10.02.2018 prepared by M/s. Price Waterhouse Coopers (“PWC Report”).

5.2.

Defendant Nos.1 to 5 are the erstwhile employees of Plaintiff – Company (for short “erstwhile employees”). It is the case of Plaintiff - Company that during the course of their employment, the erstwhile employees committed acts of fraud, misconduct and dereliction of duty, resulting in substantial financial loss to the Plaintiff.

5.3. Defendant No.6 is a Chartered Accountants Firm which was appointed as the Statutory Auditor of Plaintiff - Company for the period of Financial Year 2008–2009 up to Financial Year 2016–2017. Defendant Nos.7 to 9 are the Partners of Defendant No.6, jointly and severally responsible for conducting and supervising the statutory audit of the accounts of Plaintiff - Company during the said period. Defendant Nos.6 to 9 are collectively referred to as the “Statutory Auditors”.

5.4. Defendant Nos.10, 12, 14, 16 and 18 were appointed as the Internal Auditors of Plaintiff - Company during the said period. Defendant Nos.11, 13, 15, 17 and 19 are the Partners and/or Authorised Signatories of Defendant Nos.10, 12, 14, 16 and 18 respectively and in charge of and responsible for conducting the Internal Audit of Plaintiff - Company during the relevant period. 4

5.5. It is Plaintiff – Company’s case that the Statutory Auditors and Internal Auditors failed to discharge their professional obligations with due care, caution and diligence and that their acts and omissions read in conjunction with the fraudulent conduct of the erstwhile employees resulted in substantial financial loss to Plaintiff as quantified in the Suit and reflected in the PWC Report.

5.6. Upon the alleged fraud having come to light, Plaintiff – Company filed the Suit on 01.20.2020. By order dated 08.02.2021 it was recorded that Defendant No.12 had not conducted the Internal Audit of Plaintiff – Company for the said period and accordingly, Defendant No.12 came to be deleted as a party to the said Suit.

5.7. Pursuant to above, by orders dated 10.10.2024 and

23.01.2025, the learned Prothonotary and Senior Master directed Plaintiff – Company to effect service of Writ of Summons upon Defendants, noting that failing which the Suit would stand dismissed under Rule 87 of the Bombay High Court Original Side Rules, 1980. The said orders specifically recorded that non-compliance would entail dismissal of the Suit.

5.8. On 25.02.2025, as none appeared on behalf of Plaintiff – Company and compliance was not reported, the learned Prothonotary and Senior Master dismissed Suit No.75 of 2021 for non-prosecution under Rule 87 of the Bombay High Court Original Side Rules, 1980. 5

5.9. It is the case of Plaintiff – Company that it remained unaware of passing of the order dated 25.02.2025 dismissing the Suit. It is Plaintiff – Company’s case that non-compliance with the directions regarding service and absence on the relevant date (25.02.2025) was due to inadvertence and an administrative lapse on the part of the clerk of its erstwhile Advocates who failed to inform. An Affidavit dated 12.02.2026 of the concerned clerk has been placed on record explaining the circumstances leading to such default and stating that the omission was neither deliberate nor intentional.

5.10. It is Plaintiff – Company’s case that it became aware of dismissal of the Suit only in April 2025. Upon gaining knowledge of the said order, immediate steps were taken to file the Restoration Application seeking to set aside of order dated 25.02.2025 for restoration of Suit No.75 of 2021 to file.

5.11. It is Plaintiff – Company’s case that there occured delay of 34 days in filing the Restoration Application and the said delay is bona fide, marginal and sufficiently explained having occurred on account of lack of knowledge of the dismissal order coupled with the inadvertence on the part of the erstwhile Advocates’ clerk and the delay is stated to be neither wilful nor deliberate.

5.12. Since the Restoration Application as originally filed did not contain a specific prayer for condonation of delay and indeed there 6 was delay, Plaintiff - Company preferred Interim Application (L) No.5609 of 2026 seeking leave to amend the Restoration Application so as to incorporate an express prayer for condonation of delay of 34 days in filing the Restoration Application.

5.13. In the aforesaid circumstances, Plaintiff – Company seeks (i) amendment of the Restoration Application to include the prayer for condonation of delay, (ii) condonation of delay of 34 days in filing the Restoration Application, (iii) setting aside of the order dated

25.02.2025 passed by the learned Prothonotary and Senior Master dismissing the Suit under Rule 87 and (iv) restoration of Suit No.75 of 2021 to file, so that the disputes between the parties involving substantial monetary claims may be adjudicated on merits.

6. Mr. Moorjani, learned Advocate appearing on behalf of Plaintiff – Company would submit that Plaintiff – Company instituted the captioned Suit and preferred Interim Application No.190 of 2022 seeking interim reliefs which was contested by Defendants which was dismissed by Order dated 08.02.2021. He would submit that the Applicant thereafter preferred Appeal (L) No.6622 of 2021, which is pending before this Court and various orders have been passed therein with pleadings having been exchanged. He would submit that this conduct clearly demonstrated that Plaintiff – Company has been diligently prosecuting its claims and pursuing remedies in accordance 7 with law.

6.1. On the merits of the Application he would submit that by Orders dated 10.10.2024 and 23.01.2025, the learned Prothonotary and Senior Master directed service of Writ of Summons upon Defendants, stating that failing which the Suit would stand dismissed under Rule 87 of the Bombay High Court Original Side Rules, 1980. He would submit that due to inadvertence in the office of the erstwhile Advocates, the cause list was not checked and none appeared on behalf of the Plaintiff – Company, resulting in non-compliance of the said directions. He would submit that consequently, on 25.02.2025, the Suit came to be dismissed for non-prosecution. He would submit that lapse was administrative and unintentional, as explained in the Affidavit dated 12.02.2026 of the concerned clerk placed on record.

6.2. He would submit that Plaintiff – Society had no knowledge of the dismissal until April 2025, when the clerk of the erstwhile Advocates, whereas while addressing office objections in Appeal (L) No.6622 of 2021, he discovered that the Suit had been dismissed. He would submit that immediately on gaining such knowledge, Plaintiff - Society filed the present Restoration Application seeking quashing and setting aside of the dismissal Order and restoration of the Suit, along with liberty to lodge and issue the Writ of Summons within six weeks from restoration. 8

6.3. He would further submit that there was a delay of 34 days in filing the Restoration Application from the date of dismissal, which occurred solely due to lack of knowledge of the dismissal Order. He would submit that since no specific prayer for condonation had been incorporated in the original Application, Plaintiff – Company filed Interim Application (L) No.5609 of 2026 seeking amendment to include a prayer for condonation of delay. He would submit that the proposed amendment is procedural and pre-trial in nature and does not introduce a new case and is necessary for complete and effectual adjudication of the Restoration Application.

6.4. He would submit that Plaintiff – Company has established sufficient cause for restoration and condonation of delay, particularly as the default arose from inadvertence in the erstwhile Advocates’ office and not from any lack of diligence on the part of Plaintiff – Company. He would submit that it is well settled that a litigant ought not to suffer for such lapses and that procedural requirements ought to be construed liberally to advance substantial justice. He would submit that no prejudice would be caused to Defendants if the Suit is restored, whereas grave and irreparable prejudice would be caused to Plaintiff – Company if denied an opportunity to prosecute its substantial claims on merits. He would therefore urge the Court to 9 allow the amendment coupled with the delay of 34 days be condoned, and the Suit be restored in the interest of justice.

6.5. In support of his submissions he has referred to and relied upon the following citations and decisions of the Courts:- (i) Collector Land Acquisition, Anantnag and Another Vs. Mst. Katji and Others.1 ; (ii) Maharashtra State Rd. Transport Corporation Vs. Metro Ortem Limited.2 ; (iii) Esha Bhattacharjee Vs. Managing Committee of Raghunathpur Nafar Academy and Others .3; (iv) Hariba Tatyaba More and Others Vs. Dada Ekhatnath More and Others.4; and (v) Sesh Nath Singh and Another Vs. Baidyabati Sheoraphuli Co- operative Bank Limited and Another.5

7. PER CONTRA, Mr. Banerjee, learned Advocate appearing for Defendant No.1 would vehemently oppose the Application and draw my attention to the Affidavit-in-Reply dated 02.09.2025 filed by Mr. Nipul S. Trivedi - Defendant No.1 and contend that Plaintiff - Company has approached this Court belatedly and without sufficient cause, thereby disentitling itself from any discretionary or equitable relief.

7.1. He would submit that all allegations and contentions are devoid of merits and hence Plaintiff – Company is put to strict proof thereof. He would submit that the Application suffers from gross 1 2 3 4 5