FEDERAL COURT OF AUSTRALIA Suzlon Energy Ltd v Bangad (No 6) [2013] FCA 759 Citation: Suzlon Energy Ltd v Bangad (No 6) [2013] FCA 759 Parties: SUZLON ENERGY LTD AND OTHERS NAMED IN THE SCHEDULE v SANJEEV BANGAD AND OTHERS NAMED IN THE SCHEDULE File number: NSD 1670 of 2008 Judge: RARES J Date of judgment: 18 July 2013 Cases cited: Beluga Shipping GmbH & Co v Suzlon Energy Limited (No 5) (2011) 278 ALR 56 referred to Suzlon Energy Ltd v Bangad (No 5) [2012] FCA 150 referred to Date of hearing: 18 July 2013 Place: Sydney Division: GENERAL DIVISION Category: No catchwords Number of paragraphs: 22 Counsel for the Second Cross-Claimant: Mr J A Hogan-Doran Solicitor for the Second Cross-Claimant: HWL Ebsworth Lawyers Counsel for the Seventh Second Cross-Defendant: Ms K Morgan Solicitor for the Seventh Second Cross-Defendant: Norton White IN THE FEDERAL COURT OF AUSTRALIA IN ADMIRALTY NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1670 of 2008 SECOND CROSS CLAIM BETWEEN: SUZLON ENERGY LTD AND OTHERS NAMED IN THE SCHEDULE First Cross-Claimant AND: SANJEEV BANGAD AND OTHERS NAMED IN THE SCHEDULE Third Cross-Defendant JUDGE: RARES J DATE OF ORDER: 18 JULY 2013 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The interlocutory application filed on 24 May 2013 be dismissed. 2. That the seventh second cross defendant pay the costs of the interlocutory application filed on 24 May 2013. 3. The matter stand over for directions on 2 August 2013, at 9:30 am. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA in admiralty NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1670 of 2008 SECOND CROSS CLAIM BETWEEN: SUZLON ENERGY LTD AND OTHERS NAMED IN THE SCHEDULE First Cross-Claimant AND: SANJEEV BANGAD AND OTHERS NAMED IN THE SCHEDULE Third Cross-Defendant JUDGE: RARES J DATE: 18 JULY 2013 PLACE: SYDNEY REASONS FOR JUDGMENT (REVISED FROM THE TRANSCRIPT) 1 In Suzlon Energy Ltd v Bangad (No 5) [2012] FCA 1505 I granted a conditional stay to the seventh second cross-defendant, Rajogopalan Sridhar, on his application. I imposed a series of conditions on that stay for the reasons that I elaborated, particularly at [15]–[22] of my earlier judgment. Those conditions required Mr Sridhar to bring about the appearance of companies that are also second cross-respondents in these proceedings, SS Oceanwind Shipping Pte Limited (SS Oceanwind), Bluewind Enterprises (UK) Limited (Bluewind), Sunshine Trade Services Limited (STS), BIP Holdings Limited (BIP) and Manning Limited (Manning), and to cause them and other entities with which Mr Sridhar appeared to be associated, or over which he appeared to have control (Rodney Marsh and Blue Ocean Consultants FZE), to pay money they held in Swiss bank accounts into this Court, as security for any orders that might be made in these proceedings or proceedings which the Suzlon parties, who are the second cross-claimants, might bring in India based on the subject matter of these proceedings. 2 I noted that Mr Sridhar had sought that those conditional orders be made subject to his being able to apply to vacate any particular part of them to the extent he was not able to arrange for their satisfaction. I refused that application, but observed ([2012] FCA 1505 at [24]): "If Mr Sridhar does not bring that about, he will not have the benefit of the stay because the interests of all of the parties will not be served by a bifurcation of the proceedings so that they can only proceed in part here, and in part in India. On the other hand, Mr Sridhar will not be precluded from bringing a subsequent interlocutory application to vary the orders and conditions of the stay, but he will then carry an onus to establish that any such variation is appropriate." Background 3 As a result of his non-compliance with the conditions, on 24 May 2013, Mr Sridhar brought an interlocutory application to vacate those conditions. He supported that application by two affidavits in which he deposed to his unsuccessful efforts to bring about compliance by the various companies. Mr Sridhar remarked on difficulties he had had in instructing his lawyers in relation to these proceedings because he had been extremely busy, so he said, assisting with ongoing investigations, including, but not limited to, him being examined by the Swiss prosecution authorities in respect of the Swiss prosecution against him for alleged money laundering and assisting Indian authorities in respect of allegations he had made against senior officers of the Suzlon parties. 4 Mr Sridhar said that he had not been able to meet the conditions set out in the orders of 28 November 2012 because he had no involvement, influence or control over any of SS Oceanwind, Bluewind, STS, BIP or Manning. He also said that he had not been able to provide copies of bank statements for any of the accounts of those companies, Blue Ocean or Rodney Marsh because he did not hold the most recent bank statements for any of their accounts. However, he did not provide any copies of any bank statements for any of those accounts, whether they were the latest or not. 5 In his affidavit of 22 May 2013, he referred to what he asserted in earlier evidence was his past relationship with each of the companies, having accepted that he had been involved previously with them in some capacity. He said that he was no longer involved with any of the companies. He then said that although he and Mr Bangad were equal and sole shareholders and directors of SS Oceanwind and BIP, he was not able to bring about compliance with the conditions by either of those companies. He said that SS Oceanwind had been "closed down around 2008/09." He asserted that SS Oceanwind had been deregistered over four years ago and was no longer trading and that he tried to obtain records confirming its deregistration from the Accounting and Corporate Regulatory Authority of Singapore, but had been unsuccessful. Mr Sridhar also said that he had not been able to obtain any documents for BIP as that company was registered in the British Virgin Islands and he could not obtain any company searches online. He said that a bank account referred to in evidence, held by BIP at Credit Suisse in Zurich, had been closed in around October 2010. 6 He acknowledged that he had been a director of Bluewind until 5 September 2008 and said that he understood that its current sole director and secretary was Mr Ahn. I described some of Mr Ahn's alleged connection with the relevant events in Beluga Shipping GmbH & Co v Suzlon Energy Limited (No 5) (2011) 278 ALR 56 at 60-61 [15]-[20], 63-64 [34]-[40], 68-69 [58]. Mr Sridhar said that he had been "instructed by Mr [Ahn]" to close Bluewind's Merrill Lynch bank account in or around September 2009. However, Mr Sridhar did not provide any explanation as to how Mr Ahn gave him instructions, what his relationship with Mr Ahn was or what happened to the money in the bank account and why Mr Ahn needed to instruct him when Mr Ahn was Bluewind's sole director. 7 Mr Sridhar said that he had been a director of STS from 2004 to 2006 till he resigned around May 2006. He annexed a copy of his letter of resignation and of the minutes of the company's annual meeting. He noted that STS held a bank account with Merrill Lynch in Switzerland. He said that in September 2009 he had been "instructed by Mr [Ahn]" to close that account which he did. He said that the bank account with LB Swiss had been operated by Mr Ahn since December 2008. He said that STS had been "annulled on 28 July 2011", which he understood to mean that it had been deregistered and was no longer operating. He annexed an extract for STS dated 13 May 2013 from International Registries Incorporated that suggested that STS had been "annulled" in the Marshall Islands on that day. 8 Mr Sridhar also accepted that he had been a bank signatory for Manning with a limited power of attorney for managing its investments only. He claimed that he had no other role within Manning and never held any official position or shares in it. He claimed that in September 2012 he had been told by a "Ms Edwina" of Manning's Guernsey's office that Manning had appointed its own lawyers in relation to these proceedings brought by the Suzlon parties and that Manning had instructed Clayton Utz solicitors, in Sydney to represent its interests. He claimed he had no involvement in the appointment of Clayton Utz and had never given instructions to them or been consulted by them as to their representation of Manning. Again, he left unstated any explanation as to what he had done with Manning's bank accounts, whether and to what extent his capacity as a signatory of its accounts subsisted or had not subsisted and what his exact role was. 9 He then asserted that despite the difficulties to which he had referred, he had made efforts to comply with the conditions in the order of 28 November 2012 by sending letters on 12 December 2012 to each of STS, BIP, Bluewind and Manning, which he thought were then in existence, seeking their co-operation in submitting to the Court's jurisdiction and fulfilling the conditions of the stay. He said that he had not received a reply to any of the letters he sent to those companies. 10 This was hardly a satisfactory explanation, at least in relation to BIP, given that Mr Sridhar accepted that he was a director and 50% shareholder in BIP, with Mr Bangad holding the other half. 11 The evidence that established a prima facie case of connection between Mr Sridhar and the other companies suggested that he exercised considerable power over them. Even in the case of BIP, he offered no explanation as to why Mr Bangad did not join with him in securing its compliance. It is hardly usual for a person to simply write a letter to a company in which he holds 50% of the shares, and is one of its two directors, and then to say that did not get a response without giving any explanation for that. Nor did he explain why he had not attempted to re-register SS Oceanwind, when he was aware of the conditions and retained his ownership interest in that company. 12 Mr Sridhar also said that on 4 April 2013, he had a further telephone call with "Ms Edwina". He inquired whether she would cause Manning to submit in these proceedings, to which she responded that it would not take any part. He asserted that on 5 April 2013 he tried to telephone Mr Ahn's office in respect of STS and Bluewind and that his call was answered by a "Mr Kim", whom he believed to be a colleague of Mr Ahn. He claimed that Mr Kim told him that those companies did not wish to take any part in the proceedings and not to contact them again. 13 Mr Sridhar asserted that due to the fact that he had no standing, influence or involvement in relation to any of the five companies, he had not been able to satisfy the conditions in the orders of 28 November 2012. 14 In his subsequent affidavit of 13 July 2013, Mr Sridhar said that in around September 2009 he had closed Bluewind's Merrill Lynch account on Mr Ahn's instructions and also that he had closed down STS's Merrill Lynch account. He said that although he had not been a director of STS after his resignation in May 2006, he continued to operate its Merrill Lynch account "for investment purposes only, solely as a representative of [STS] based on their instructions to me". He asserted that it was in that capacity he closed that bank account. He asserted that between his resignation as a director of STS and when he closed the account, he had never withdrawn any funds for himself. 15 All of his evidence left quite mysterious exactly what Mr Sridhar's role or connection was and why he was involved with all of those companies during the time he remained a senior executive of the Suzlon companies. He had given an earlier explanation that he was permitted to act on his own account which I discussed in my reasons for granting the conditional stay: Suzlon (No 5) [2012] FCA 1505 at [13]-[14]. 16 The Suzlon companies opposed the present application. Suzlon Energy Limited's senior manager of corporate finance, Siddharth Jhawar, said in his affidavit of 13 June 2013, that to the best of his knowledge, Mr Sridhar had been indicted by the Swiss public prosecutor for money laundering as well as carrying out activities meant to hinder the identification of the origin, discovery or confiscation of criminal funds in concert with Mr Bangad at Geneva and Zurich between 2004 and 2009 by using offshore companies and a number of banking relationships including bank accounts held by STS, Bluewind, Manning, BIP, Blue Ocean Consultants FZE and Rodney Marsh, one or more of LB Private Bank, Merrill Lynch and Credit Suisse in Switzerland. Mr Jhawar also said that Mr Bangad had been indicted for money laundering and related offences in Switzerland as well and that both Mr Sridhar and Mr Bangad had appeared at Pune in India for the purposes of giving evidence in the Swiss criminal proceedings conducted before the Swiss public prosecutor in early March 2013. Mr Jhawar asserted that during those hearings, which he attended, Mr Sridhar stated that he was the beneficial owner of all of the bank accounts referred to in the conditions for the stay. Consideration 17 During the course of argument I indicated to counsel for Mr Sridhar that I had difficulty in accepting that his evidence established sufficiently his inability to comply with the conditions that I had imposed. Mr Sridhar had made an important admission, for the purposes only of dealing with his stay application last year. He admitted that the evidence served by the Suzlon parties in that application was sufficient to establish a prima facie case as pleaded in their third further amended second cross-claim dated 1 February 2011 to justify service out of Australia pursuant to r 10.43(4)(c) of the Federal Court Rules 2011 (Cth), but that he denied the allegations alleged against him by the Suzlon parties. I proceeded on the basis of that limited admission to deal with the stay application but I also had the benefit of the evidence that had been before me on that occasion, a considerable deal of which I had already traversed in ordering service out of the jurisdiction when joining each of the five companies and Mr Sridhar as recited in Suzlon (No 5) [2012] FCA 1505 at [10]. 18 As I indicated in those reasons, the purpose of imposing the conditions was to ensure that injustice between the parties in the proceedings would be avoided: [2012] FCA 1505 at [20], [25]-[26]. The factual premise for the imposition of the conditions was that I was sufficiently satisfied by the evidence and his admissions (for the purpose of that application) that Mr Sridhar exercised a sufficient degree of control over the relevant companies and bank accounts to be in a position to cause the conditions to be fulfilled. 19 While I might have been satisfied, if the only question had been in relation to the deregistration of or annulment of SS Oceanwind and STS that events had moved on beyond Mr Sridhar's control, I am left with the overall impression that Mr Sridhar has not sought to give any, but a very perfunctory, explanation of why he is unable to cause any of the conditions to be satisfied. So much is demonstrated, by Mr Sridhar's letter to BIP without any explanation as to why he had not even spoken to Mr Bangad to get it to comply with the conditions. BIP was capable of complying readily had Mr Sridhar wished it to do so. There is no evidence as to Mr Bangad's attitude. Nor has Mr Sridhar given any explanation as to what has happened to the very considerable amounts of money in the Swiss bank accounts, so far as he might exercise control over them. 20 In their written submissions, the Suzlon companies pointed to evidence given by Mr Sridhar in the proceedings before the Swiss public prosecutor in Pune in March 2013 as supporting Mr Jhawar's evidence. Those submissions observed that by 2011 the Swiss authorities had frozen about USD18 million in Swiss bank accounts in the names of BIP, Blue Ocean Consultants and Manning with Credit Suisse, an account of Manning with Merrill Lynch and an account of STS with LB Swiss. The Suzlon parties also pointed out that Mr Sridhar had taken no steps to seek to have the moneys held in the frozen accounts paid into this Court pursuant to the conditions of the stay. In the orders imposing the stay, there was a notation that while Mr Sridhar would have an onus of satisfying whatever authorities needed to be satisfied, including those in Switzerland and India, to arrange for the funds to be paid into this Court, the Suzlon parties would also co-operate with any authorities necessary to facilitate compliance with that order. 21 I appreciate that Mr Sridhar may be in a difficult position in that he disputes the allegations of criminality against him as well as the allegations made against him by the Suzlon parties in these proceedings. However, I remain completely unsatisfied that Mr Sridhar has given a sufficient explanation to the Court about how or why he is unable to comply with any of the conditions. Indeed, his explanation so far as it concerns BIP is so inadequate that it causes me to doubt whether he has made a serious attempt at compliance, given his and Mr Bangad's sole ownership and directorships of that company. Mr Sridhar's efforts to do anything did not go beyond writing a letter to, effectively, himself and Mr Bangad which he said was unanswered. Conclusion 22 For these reasons I am of opinion that the interlocutory application filed on 24 May 2013 must be dismissed on the basis that Mr Sridhar has not established any satisfactory explanation for a variation of the conditions in the orders of 28 November 2012. I certify that the preceding twenty-two (22) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Rares. Associate: Dated: 1 August 2013 SCHEDULE SECOND CROSS CLAIM NSD 1670 of 2008 BETWEEN: SUZLON ENERGY LTD First Second Cross Claimant SUZLON ENERGY AUSTRALIA PTY LTD Second Second Cross Claimant SUZLON INFRASTRUCTURE LIMITED (NOW KNOWN AS SYNEFRA ENGINEERING & CONSTRUCTION LTD) Third SecondCross Claimant SUZLON WIND ENERGY CORPORATION, USA Fourth Second Cross Claimant SUZLON STRUCTURES LTD Fifth Second Cross Claimant SE SHIPPING PTE LIMITED Sixth Second Cross Claimant AND: SANJEEV BANGAD Third Second Cross Defendant SS OCEANWIND PTE LIMITED Fifth Second Cross Defendant GENUS SHIPPING SERVICES PVT LIMITED Sixth Second Cross Defendant RAJAGOPALAN SRIDHAR Seventh Second Cross Defendant BLUEWIND ENTERPRISES (UK) LTD Eighth Second Cross Defendant SUNSHINE TRADE SERVICES LIMITED Ninth Second Cross Defendant S RAAM KUMAR Tenth Second Cross Defendant BIP HOLDINGS LIMITED (BC# 1419807) Eleventh Second Cross Defendant MANNING LIMITED (BAHAMAS COMPANY NO 15633) Twelfth Second Cross Defendant FRANKFURTER BANKGESELLSCHAFT (SCHWEIZ) AG (A SWISS COMPANY) Thirteenth Second Cross Defendant MERRILL LYNCH BANK (SUISSE) SA (A SWISS COMPANY) Fourteenth Second Cross Defendant CREDIT SUISSE AG (A SWISS COMPANY) Fifteenth Second Cross Defendant