BEFORE THE HONOURABLE COURs AT ERNAKULAM

BETWEEN:

M/S AKAY FLAVOURS AND AROMATICS LIMITED

A company incorporated under the Companies Act

Having its office at Ambunad

Malaidamthuruth P.O

Aluva

Ernakulam-683561

AND

M/S ICICI BANK LIMITED

Agri business group

2nd floor,adoni towers

SA road

Kadavanthara

Cochin-6820106

The plaintiff M/S AKAY Flavours and Aromatics PVT Ltd is a company

incorporated under the companies act, having its office at Ambunad ,

Malaidamthuruth P.O, Aluva, Ernakulam-683561.and is represented by

its aged son of residing at

The address for service of all process is that of its a counsel M/S Joseph

& Kurien Advocates, Providence road cochin

M/S ICICI Bank Limited is the defendant. The address for service of all

processes on the defendants is as given above or their counsels as and

when appointed.

The plaintiff respectfully submits as follows :

The plaintiff is a registered company registered under the provisions of

the companies act 1956 with its registered office as given in the cause

title. The plaintiff has been functioning since and has been trading in

flavors and aromatics since then. The company having its major markets

abroad has a lot of exports and imports.

Since the exposure to foreign markets leads to greater exposure to foreign

exchange, the company has been regularly engaging in various means of

hedging its foreign currency exposure including derivative transactions in

forward options with its banker The State Bank of India, through its

branch at . The derivatives provided by The State Bank of

India have been sufficiently hedging the plaintiff’s foreign exchange

exposure with consideration to its paid up capital , working capital

requirements and working requirements.

The defendant a private bank governed solely by profit motives

approached the plaintiff in its office on ,and told the plaintiff about

the various derivative products the defendants intended to sell to the

plaintiff. The plaintiff extended due courtesy to the defendants and

informed them that the matter shall be communicated to the higher ups

and the developments if any shall be informed to the defendants

Thereafter an offer for forward/option/other derivative transactions to al

limit of Rs 10.0 million was extended to the plaintiff by the defendants

vide their letter dated 13-11-07 which is submitted as exhibit-1 before

this court. However the matter was communicated to the higher ups.

The matter was further discussed between the representatives of the

plaintiff and the defendants , during which the defendants driven by their

profit motive misled the plaintiff into believing that the offer made by he

defendants were suitable to hedge its foreign exchange exposure.

Derivatives , especially foreign exchange derivatives being very complex

topics requiring vast expertise to understand, the plaintiff was made to

believe the words of the defendant in a series of discussions that both the

parties had thereof. The defendants being a bank with far more

understanding and expertise in the area arguably had an upper hand in the

discussions and the plaintiff was left with no options but to believe the

defendants.

The matter was tabled before the board in its meeting on 28-12-07,

wherein solely on the basis of the false and deceiving information put

forth by the defendants the plaintiff passed a resolution to enter into

derivative transactions with the defendants among other things. The

resolution passed on the occasion has been produced before the court as

exhibit 2 .

In furtherance thereof the ISDA master agreement was entered into

between the plaintiff and the defendants on 21-12-07 , and the contract

was signed . the defendants even then had not explained to the petitioners

the ill effects of the contract or the various clauses therein, the defendants

literally exploited the plaintiff’s trust and limitations to its own gain, and

misled the plaintiff into signing the contract.

Pursuant to which, after a while the defendants kept demanding money on

various occasions citing the contract and various provisions incorporated

in it. Although the plaintiff honored some of these requests the plaintiff

was being gradually pushed into heavy losses. The defendant continued

to demand huge sums of money which the plaintiff was evidently

incapable of handling.

In fact these demands came as a surprise to the plaintiff since it was not

briefed on the probability of such demands. The defendants clearly have

engaged in miss selling of derivative products to the plaintiff.

At the outset it self the plaintiff craves to put forth before this court that

the plaintiff was not given the full information regarding the products that

were sold to it, and derivatives being very complex concepts is hard to get

a second opinion. In the circumstances its evident that the defendants

have engaged in miss-selling of derivatives to the plaintiff. And the

plaintiff was exploited or rather victimized of its limitations.

Moreover the impugned contract is in clear violation of the guidelines

issued by the RBI. The plaintiff is a unit under the medium enterprise

sector, circular no-15 issued by the RBI dated 29-10-07, enumerates in

clear terms the requisites with regards to derivative contract with medium

sector enterprise. The said circular vide its para-142 lays down as follows

“such contracts may be booked through AD category-1 banks with whom

the SMEs have credit facilities and the total forward contracts booked

should be in alignment with the credit facilities availed by them for their

foreign exchange requirements or their working capital requirements or

capital expenditure.

A mere perusal of the above lines would explain that derivative contracts

with regard to MSEs should be done only with banks with whom the

SMEs share credit relationship. In the instant case the plaintiff does not

have any credit relationship with the defendant. Thus the agreement and

the contract thereto are flagrant violation of the RBI guidelines and thus

void in law. The defendant however had not explained any of these to the

plaintiff before the contract.

Moreover the banker to the plaintiff is SBI with whom the plaintiff has

been doing derivative transactions for a long time, with whish the

plaintiff is content. The hedging provided by SBI is in consensus with the

plaintiffs requirements. Which would classify the impugned agreement

between the plaintiff and the defendant under speculative hedging which

the RBI has expressly prohibited unless sold through a recognized stock

exchange. The plaintiff was miss guided by the defendant and made to

believe that the transaction was valid in law.

The defendant kept various critical information like the possible risk that

the plaintiff may have to incur and various other demerits of the contract

at a safe distance from the plaintiff. The defendant have clearly defaulted

in the “user appropriateness and “ suitability” policy given by the RBI in

its circular titled “comprehensive guidelines on derivatives” dated 20-4-

07 . The circular in clause 8.3(g) mandates that the contract should

disclose the inherent risks in the proposed transaction in the form of a

“Risk Disclosure Statement” but the impugned contract under the heading

“Risk Disclosure Statement” gives nothing but the definitions of the

various categories of risk involved in the transaction. Not giving the

details of the risk involved in the transaction under the risk disclosure

statement is testimony to the intention of the defendant to deceive the

plaintiff.

Moreover the annexure attached to the contract signed by the authorized

signatories of both the parties clearly puts forth they forward option

contract limit as Rs 10.00 million and the minimum tenure of contracts as

60 months. This again is an outright disregard to the circulars of RBI

because the RBI vide its circular dated 20-4-07 in para 143 enumerates

thus-

“ In order to enable resident individuals to to hedge their foreign

currencies exposure arising out of actual or anticipated

remittances…………. Permitted to book forward contracts upto a limit of

of USD100,000………………….the contract may be permitted to be

booked upto tenors of one year only”

Thus for the above reason and all of the reasons stated above it is finally

submitted that the contract between the plaintiff and the defendants

is void in law and non-enforceable.

Wherefore it is respectfully prayed that this Hon’ble court may be pleased

to pass a judgment and decree in favor of the plaintiff

Declaring the derivative contract between the plaintiff and the defendant

as void and non-enforceable.