INDIA Law and Practice Contributed by: Vijayendra Pratap Singh, Asif Ahmed, Tanmay Sharma and Bhanu Jindal, AZB & Partners
has a share capital. For a company that does not have a share capital, not less than one fifth of the total members of such a company can initiate such proceedings. It should be noted that the High Court of Delhi has held that provisions under the Companies Act, including Sections 241 and 242, allowing for initiation of proceedings and the relief of freezing assets and disgorgement of property as disgorgement, are civil actions in the nature of equitable relief. The Companies Act also permits institution of a class action, where members can approach the National Company Law Tribunal to seek certain orders, such as to claim damages or to demand any other suitable action from or against the company or its directors for any fraudulent, unlawful or wrongful act or omission on their part. For a company that has a share capital, “class” is defined as not less than 100 mem - bers or not less than 5% of the total members (whichever is less), or members holding not less than 5% of the share capital of a company in the case of an unlisted company, and not less than 2% of the issued share capital in the case of a listed company. For a company without a share capital, “class” has been defined as not less than one fifth of the total members of such a company. 4. Overseas Parties in Fraud Claims 4.1 Joining Overseas Parties to Fraud Claims Fraud Under the Contract Act A suit for declaration of contract rendered void on account of fraud, or for claiming damages on account of such fraud committed by a private
party, may require the joinder of an overseas party to such a suit. Such a joinder would be governed by the provisions of the CPC. While the CPC does not create a distinction between joinders of an overseas party and a domestic party, a joinder is allowed on account of liability under the same contract (Order I Rule 6) or on account of a cause of action (Order II Rule 3). In such cases, the courts allow issuing a notice/ summons to an overseas party. However, if the overseas party fails to appear and defend its case, the courts may proceed ex parte to decide the suit. A decree passed by an Indian court against an overseas party, specifically for damages on account of fraud, may need to be enforced spe - cifically. In cases where the jurisdiction in which the decree is to be executed is a reciprocat - ing country notified under the CPC, the decree would become enforceable in the reciprocating country. However, for non-reciprocating coun - tries, a decree may only hold evidentiary value and may have to be adjudicated on merits. Arbitrability of Fraud The law in India allows fraud of a civil nature to be arbitrated between parties. Any allegation of fraud that affects the private dispute between parties is arbitrable, unless the allegation is that the arbitration agreement itself is vitiated by fraud. However, courts have held that the crimi - nal aspects of fraud, forgery or fabrication, and which hit at the very formation of the contract, can only be adjudicated by a court of law, as they are in the realm of public law. Indian law has made considerable strides in terms of joining non-signatories to an arbitra - tion, be it domestic parties or overseas parties.
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