Beluga Shipping GmbH v Suzlon Energy Ltd

PENAL NOTICE (FREEZING ORDER) TO: BIP HOLDINGS LIMITED (BC# 1419807) IF YOU: (A) REFUSE OR NEGLECT TO DO ANY ACT WITHIN THE TIME SPECIFIED IN THIS ORDER FOR THE DOING OF THE ACT; OR (B) DISOBEY THE ORDER BY DOING AN ACT WHICH THE ORDER REQUIRES YOU TO ABSTAIN FROM DOING, YOU WILL BE LIABLE TO IMPRISONMENT, SEQUESTRATION OF PROPERTY OR OTHER PUNISHMENT. ANY OTHER PERSON WHO KNOWS OF THIS ORDER AND DOES ANYTHING WHICH HELPS OR PERMITS YOU TO BREACH THE TERMS OF THIS ORDER MAY BE SIMILARLY PUNISHED. TO: BIP HOLDINGS LIMITED (BC# 1419807) This is a 'freezing order' made against you on 6 November 2009 by Justice Rares at a hearing without notice to you after the Court was given the undertakings set out in Schedule A to this order and after the Court read the affidavits listed in Schedule B to this order. THE COURT ORDERS: INTRODUCTION 1. (a) The application for this order is made returnable immediately. (b) The time for service of the application, supporting affidavits and notice of motion is abridged and service is to be effected by 13 November 2009. 2. Subject to the next paragraph, this order has effect up to and including 20 November 2009 ('the Return Date'). On the Return Date at 9.30 am there will be a further hearing in respect of this order before Justice Rares. 3. Anyone served with or notified of this order, including you, may apply to the Court at any time to vary or discharge this order or so much of it as affects the person served or notified. 4. In this order:

(a) the 'Suzlon Parties' means the First to Sixth Second Cross Claimants;

(b) 'you', where there is more than one of you, includes all of you and includes you if you are a corporation;

(c) 'third party' means a person other than you and the Suzlon Parties;

(d) 'unencumbered value' means value free of mortgages, charges, liens or other encumbrances. 5. (a) If you are ordered to do something, you must do it by yourself or through directors, officers, partners, employees, agents or others acting on your behalf or on your instructions. (b) If you are ordered not to do something, you must not do it yourself or through directors, officers, partners, employees, agents or others acting on your behalf or on your instructions or with your encouragement or in any other way. FREEZING OF ASSETS 6. (a) You must not remove from Australia or in any way dispose of, deal with or diminish the value of any of your assets in Australia ('Australian assets') up to the unencumbered value of AUD$2,500,000.00 ('the Relevant Amount'). (b) If the unencumbered value of your Australian assets exceeds the Relevant Amount, you may remove any of those assets from Australia or dispose of or deal with them or diminish their value, so long as the total unencumbered value of your Australian assets still exceeds the Relevant Amount. (c) If the unencumbered value of your Australian assets is less than the Relevant Amount, and you have assets outside Australia ('ex-Australian assets'): (i) You must not dispose of, deal with or diminish the value of any of your Australian assets and ex-Australian assets up to the unencumbered value of your Australian and ex-Australian assets of the Relevant Amount; and (ii) You may dispose of, deal with or diminish the value of any of your ex-Australian assets, so long as the unencumbered value of your Australian assets and ex-Australian assets still exceeds the Relevant Amount. 7. For the purposes of this order: (1) your assets include: a. all your assets, whether or not they are in your name and whether they are solely or co-owned; b. any asset which you have the power, directly or indirectly, to dispose of or deal with as if it were your own (you are to be regarded as having such power if a third party holds or controls the asset in accordance with your direct or indirect instructions). (2) The value of your assets is the value of the interest you have individually in your assets. EXCEPTIONS TO THIS ORDER 8. This order does not prohibit you from: (a) paying up to US $1,000.00 or its foreign or Australian currency equivalent a week on your ordinary business expenses; (b) paying your reasonable legal expenses; (c) dealing with or disposing of any of your assets in the ordinary and proper course of your business, including paying business expenses bona fide and properly incurred; and (d) in relation to matters not falling within (a), (b) or (c), dealing with or disposing of any of your assets in discharging obligations bona fide and properly incurred under a contract entered into before this order was made, provided that before doing so you give the Suzlon Parties, if possible, at least two working days written notice of the particulars of the obligation. 9. You and the Suzlon Parties may agree in writing that the exceptions in the preceding paragraph are to be varied. In that case the Suzlon Parties or you must as soon as practicable file with the Court and serve on the other a minute of a proposed consent order recording the variation signed by or on behalf of the Suzlon Parties and you, and the Court may order that the exceptions are varied accordingly. 10. (a) This order will cease to have effect if you: (i) pay the sum of $2,500,000.00 into Court; or (ii) pay that sum into a joint bank account in the name of your solicitor and the solicitor for the Suzlon Parties as agreed in writing between them; or (iii) provide security in that sum by a method agreed in writing with the Suzlon Parties to be held subject to the order of the Court. (b) Any such payment and any such security will not provide the Suzlon Parties with any priority over your other creditors in the event of your insolvency. (c) If this order ceases to have effect pursuant (a), you must as soon as practicable file with the Court and serve on the Suzlon Parties notice of that fact. COSTS 11. The costs of this application are reserved to the judge hearing the application on the Return Date. PERSONS OTHER THAN THE APPLICANT AND RESPONDENT 12. Set off by banks This order does not prevent any bank from exercising any right of set off it has in respect of any facility which it gave you before it was notified of this order. 13. Bank withdrawals by the respondent No bank need inquire as to the application or proposed application of any money withdrawn by you if the withdrawal appears to be permitted by this order. 14. Persons outside Australia (a) Except as provided in subparagraph (b) below, the terms of this order do not affect or concern anyone outside Australia. (b) The terms of this order will affect the following persons outside Australia: (i) you and your directors, officers, employees and agents (except banks and financial institutions); (ii) any person (including a bank or financial institution) who: (1) is subject to the jurisdiction of this Court; and (2) has been given written notice of this order, or has actual knowledge of the substance of the order and of its requirements; and (3) is able to prevent or impede acts or omissions outside Australia which constitute or assist in a disobedience of the terms of this order; and (iii) any other person (including a bank of financial institution), only to the extent that this order is declared enforceable by or is enforced by a court in a country or state that has jurisdiction over that person or over any of that person's assets. 15. Assets located outside Australia Nothing in this order shall, in respect of assets located outside Australia, prevent any third party from complying or acting in conformity with what it reasonably believes to be its bona fide and properly incurred legal obligations, whether contractual or pursuant to a court order or otherwise, under the law of the country or state in which those assets are situated or under the proper law of any contract between a third party and you, provided that in the case of any future order of a court of that country or state made on your or the third party's application, reasonable written notice of the making of the application is given to the Suzlon Parties.

SCHEDULE A UNDERTAKINGS GIVEN TO THE COURT BY THE APPLICANT (1) The Suzlon Parties undertakes to submit to such order (if any) as the Court may consider to be just for the payment of compensation (to be assessed by the Court or as it may direct) to any person (whether or not a party) affected by the operation of the order. (2) As soon as practicable, the Suzlon Parties will file and serve upon the respondent copies of:

(b) the application for this order for hearing on the return date;

(c) the following material in so far as it was relied on by the Suzlon Parties at the hearing when the order was made:

(iv) any other document that was provided to the Court.

(d) a transcript, or, if none is available, a note, of any exclusively oral allegation of fact that was made and of any exclusively oral submission that was put, to the Court;

(e) the originating process, or, if none was filed, any draft originating process produced to the Court. (3) As soon as practicable, the Suzlon Parties will cause anyone notified of this order to be given a copy of it. (4) The Suzlon Parties will pay the reasonable costs of anyone other than the respondent which have been incurred as a result of this order, including the costs of finding out whether that person holds any of the respondent's assets. (5) If this order ceases to have effect the Suzlon Parties will promptly take all reasonable steps to inform in writing anyone to who has been notified of this order, or who it has reasonable grounds for supposing may act upon this order, that it has ceased to have effect. (6) The Suzlon Parties will not, without leave of the Court, use any information obtained as a result of this order for the purpose of any civil or criminal proceedings, either in or outside Australia, other than this proceeding. (7) The Suzlon Parties will not, without leave of the Court, seek to enforce this order in any country outside Australia or seek in any country outside Australia an order of a similar nature or an order conferring a charge or other security against the respondent or the respondent's assets.

SCHEDULE B AFFIDAVITS RELIED ON: Name of Deponent of Affidavit Date affidavit made (1) Siddharth Jhawar 3 November 2009 (2) Siddarth Jhawar 22 July 2009 (3) Kirikant Vagadia 22 July 2009 (4) Tulsi Tanti 22 July 2009 (5) Inder Paul Singh Malhotra 13 March 2009 (6) Jacob Gerritt Cornelius Den Hartog 12 December 2008 (7) Pisal Kamlesh Madhukar Pisal 22 October 2009 (22 September 2009) (8) Joseph Alan Hurley 6 November 2009

NAME AND ADDRESS OF APPLICANT'S LEGAL REPRESENTATIVES The Second Cross Claimants' legal representatives are: HWL Ebsworth Lawyers Level 14, 264-278 George Street Sydney NSW 2000 DX 129 Sydney Tel: +61 2 93348765 Fax: +61 1300 369 656 Ref: JAH:AJB:169200 Contact Solicitor: Joseph Hurley Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using eSearch on the Court's website. IN THE FEDERAL COURT OF AUSTRALIA

general division NSD 1670 of 2008

BETWEEN: BELUGA SHIPPING GMBH & CO. KS "BELUGA FANTASTIC"

REASONS FOR JUDGMENT (REVISED FROM THE TRANSCRIPT) 1 This is yet a further application to add another participant alleged to be involved in the maritime frauds, which the Suzlon parties, who are the second cross-claimants in these proceedings, claim to have had perpetrated on them. In my judgment, Beluga Shipping GmbH v Suzlon Energy Limited [2009] FCA 1020, I identified the shadowy role that a company variously described as "BIP" and "BIP Holding Limited" or "BIP Holdings" appeared to have had in part of the matters then relied on by the Suzlon parties: see Beluga [2009] FCA 1020 at [7]-[9], [20]. 2 The Suzlon parties have today filed in court a second cross application and a further amended statement of second cross claim, joining BIP Holdings Limited, a British Virgin Island Company that was incorporated on 18 July 2007. The reason for this joinder is set out in the affidavit of Siddharth Jhawar, affirmed on 3 November 2009. He noted that Mr Vagadia's affidavit, on which I relied in my earlier judgment, had shown that a total of USD1,800,000 had been transferred by MIT from payments it had received from one or more of the Suzlon companies. 3 I detailed in my earlier judgment how the first USD1,000,000 payment occurred. Mr Vagadia's affidavit disclosed that subsequently, in late October and early November 2007, MIT received from Suzlon companies a further sum of about USD1,200,000. On 12 November 2007, MIT paid USD800,000 to an entity it described as "BIP Holding, Zurich". On 13 December 2007, the chief executive officer of MIT, Mr Patricot, sent an email to Mr Bangad identifying significant currency movements of many millions of dollars through MITs accounts, including the two payments to "BIP Holding Ltd, Zurich". 4 On the day Mr Patricot sent the email, as he noted, MIT had received another USD966,000 from a Suzlon company, notwithstanding that one of MIT's officers apparently had told Mr Bangad that MIT was not satisfied about the way in which these monies were being paid to it and MIT was being required to disburse them. Mr Patricot's email said that MIT was "…missing vouchers and we didn't want to receive any more funds". At the end of the email, he demanded that the Suzlon parties provide original authorities supporting the basis on which the payments had been made to MIT and it had been required to disburse them. He noted that this was an internal audit requirement for the company. He also required original letters from, among others, "BIP Holding, Zurich", for each payment it had received and the reason for that payment and from Suzlon giving instructions for each payment. He required each letter to be dated on the day of the receipt of the funds. After demanding that these documents be received, at the latest, by 21 December 2007, Mr Patricot concluded by stating to Mr Bangad: "I am ready to travel to Zurich to visit BIP Holdings if it is necessary, but all that I require is absolutely imperative." 5 Mr Jhawar said in his affidavit that on about 1 November 2009, he was re-reading my earlier judgment and noticed a reference to the British Virgin Islands. He said that it had not been thought necessary to do a company search there earlier in order to trace where the entity, BIP, whatever its true name was, might be located. After reading that reference, he reviewed the second affidavit affirmed by Captain Malhotra on 13 March 2009. Then he noticed that the email set out in part in Beluga [2009] FCA 1020 at [8], apparently sent by Mr Bangad, had referred to "a BVI company as a shareholder". Later in the email, Mr Bangad said "we would later bring BIP, as shareholder of the company, by which time the transactions would havs [sic] started, which will make the transfer easier". 6 After re-reading this material, Mr Jhawar formed a suspicion for the first time that BIP might be incorporated in the British Virgin Islands. He gave instructions later on 1 November to the Suzlon parties' Australian solicitors to make a company search, and received the results of that search on 3 November. It disclosed that a company was incorporated in the British Virgin Islands under the name, BIP Holdings Limited. 7 Mr Jhawar referred to a purported letter of instruction dated 1 October 2007 from Suzlon Energy Limited, the first cross-claimant, requiring MIT to make the payment of the initial USD1,000,00 to BIP to a specified Credit Suisse bank account in Zurich, Switzerland. Mr Jhawar expressed the belief that BIP unlawfully received the whole of the USD1,800,000 into the Credit Suisse account in Zurich. 8 I am satisfied that the material in respect of BIP Holdings Ltd now relied on by the Suzlon parties raises a sufficient prima facie case of BIP's involvement in the maritime and other frauds allegedly perpetrated by Mr Sridhar and Mr Bangad, for the reasons that I gave in Beluga Shipping GmbH v Suzlon Energy Ltd [2009] FCA 1020, and Beluga Shipping GmbH & Co KS "Beluga Fantastic" v Headway Shipping Ltd (No 2) (2008) 251 ALR 620. The Suzlon parties seek a freezing order in respect of the sum of AUD2,500,000, on the basis that in the nearly two years since the US currency sums were expended, they will have attracted interest and, at the moment, have a reasonable equivalence to the sum sought. 9 I am satisfied that there is a sufficient prima facie case for that relief. In addition it appears likely that the company, BIP, was incorporated in the British Virgin Islands by or on the instructions of Mr Sridhar and/or Mr Bangad in July 2007. And by 25 September 2007, they intended that BIP would be operated in the way I have described, probably under the direction of Captain Anil Gupta. 10 Both Mr Sridhar and Mr Bangad remain in magisterial custody, facing criminal charges in India for the alleged fraud. There is a possibility that Mr Sridhar and Mr Bangad may be released from that magisterial custody later today, when a part heard bail application resumes in the Indian courts. 11 Given the nature and sophistication of the alleged fraudulent activities, I am satisfied that it is reasonable, in the circumstances, to make a freezing order in the terms sought having regard to the matters to which I have been referred today and the matters I considered and found in Beluga [2009] FCA 1020. 12 There is one difficulty, perhaps occasioned by the urgency which the present application has involved. That is, that the material provided for the purposes of satisfying the requirements of O 8 r 3, does not disclose whether the proposed method of service of BIP, by leaving documents at its registered office, is affected by any convention referred to in O 8 r 3(3)(c)(i). I am, however, satisfied that if a convention does not apply, then, prima facie, the documents may be served by leaving them at the registered office of the company as disclosed in the search report and letter dated 3 November 2009 of Harney Westwood & Riegels solicitors in the British Virgin Islands. I am satisfied that this is an appropriate case in which to grant leave to serve BIP in the British Virgin Islands with the second further amended second cross-claim, because the Court clearly has jurisdiction in the proceedings, and they are of a kind referred to in item 18 in the table in O 8 r 2. This is because BIP will be properly joined as a party to these proceedings which have been duly commenced here: see also Beluga (No 2) 251 ALR at 629 [37]-[38]. It may also be that the Court has jurisdiction in the proceedings to order service out of the jurisdiction under the Admiralty Act 1988 (Cth), but I do not need to decide this. 13 I am satisfied that, having regard to the urgency of the proceedings at the present time and the lack of present information as to whether any convention applies to service there, the proposed method of service will sufficiently bring to the notice of BIP the existence of the claims against it and the orders that the Court is making, for the purposes of the law of the British Virgin Islands. In the event that, through oversight, a convention does apply to service in that jurisdiction, I will grant leave to the Suzlon parties to seek to confirm any irregular method of service, preserving all the rights of BIP to challenge that application as may be appropriate. 14 Once again, for the purposes of giving these reasons, I have formed no final view on any of the allegations but have simply acted on the basis of the evidence before me, recognising that once BIP appears, it may well be able to challenge or draw to my attention matters that would demonstrate that it ought not to have had the orders made against it. I certify that the preceding fourteen (14) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Rares.

Associate: Dated: 18 November 2009 Counsel for the First, Second, Third, Fourth, Fifth and Sixth Second Cross Claimants AW Street SC

Solicitor for the First, Second, Third, Fourth, Fifth and Sixth Second Cross Claimants HWL Ebsworth