Corporate officers are personally liable for fraudulent misrepresentation despite non-impleadment of the company.

The respondent-plaintiff deposited an aggregate amount of ₹21,00,000 in connection with a proposed road-construction project represented by the defendants as being undertaken through Green Lake Power Development Private Limited (“Green Lake Company”).

The appellant was the Company’s Engineer-in-Charge and the respondent no. 2 was its Chairman.

The plaintiff relied on a letter of acceptance dated 1 December 2016, work order and agreement dated 3 December 2016, all connected with the proposed project.

However, the Implementation Agreement between Green Lake Company and the Energy and Power Department, Government of Sikkim, for the 22 MW Rechu Hydroelectric Power Project had already been terminated on 4 September 2012.

The plaintiff alleged that the defendants suppressed this fact and fraudulently induced him to make the payments.

The appellant contended that he was merely an employee, that the money had been deposited into the Company’s account, and that Green Lake Company was a necessary party.

He also challenged the undertaking dated 27 August 2019 as having been obtained through coercion.

The Commercial Court decreed the suit against both defendants for ₹21,00,000 with interest at 9% per annum from 24 February 2022 until realisation.

The appellant preferred the present appeal under Section 13(1-A) of the Commercial Courts Act, 2015; respondent no. 2 did not appeal.

Whether the appellant could be held personally liable for repayment despite contending that he acted only as an employee or officer of Green Lake Company and that the disputed amount was deposited into the Company’s account.

Whether Green Lake Company was a necessary party to the plaintiff’s claim for recovery of money allegedly obtained through the defendants’ personal fraudulent misrepresentation.

Whether the defendants fraudulently misrepresented the existence and viability of the project despite the prior termination of the Implementation Agreement, thereby inducing the plaintiff to part with ₹21,00,000.

Whether the Commercial Court’s judgment and decree required appellate interference.

The appeal was governed by Section 13(1-A) of the Commercial Courts Act, 2015.

The Court applied the principle that a party alleging misrepresentation or fraud bears the burden of proving it, at least on a preponderance of probabilities.

It further applied the rule that corporate officers cannot rely on the corporate character of their acts where they personally participate in fraudulent misrepresentation or inducement causing loss to a third party; acts beyond ordinary corporate duties may attract personal liability.

The maxim qui facit per alium facit per se—one who acts through another acts himself—was applied to the defendants’ coordinated conduct.

The Court also held that a personal claim against the individuals for fraudulent inducement is distinct from a claim for recovery against the company, and therefore the company’s non-impleadment does not defeat the suit where personal fraud has been proved.

The Court found that the termination of the Implementation Agreement in 2012 was established through the evidence of the Superintendent Engineer and Sub-Divisional Magistrate, while the defendants did not dispute the authenticity of the letter of acceptance, work order and agreement issued in 2016.

The appellant was not a passive employee: he was the Engineer-in-Charge, signed the letter of acceptance, was involved in the project’s day-to-day functioning, and admitted that he and respondent no. 2 were the only personnel representing Green Lake Company.

The Court considered it significant that the appellant facilitated the plaintiff’s payment, did not question the issuance of the work order despite the project’s non-execution, and later paid ₹1,00,000 and undertook to refund the balance.

These circumstances demonstrated that both defendants knew, or were recklessly indifferent to, the project’s non-existence or prior termination, yet induced the plaintiff to deposit money into the Company’s account.

Since the suit sought a personal decree against the defendants for their fraudulent conduct—not recovery from Green Lake Company—the Company was not a necessary party.

The fact that the money was deposited into Green Lake Company’s account did not absolve the defendants, nor did the Company’s non-impleadment render the suit defective.

The appeal was dismissed, and the Commercial Court’s judgment and decree dated 18 December 2024 directing the defendants to pay ₹21,00,000 with interest at 9% per annum from 24 February 2022 until complete realisation were upheld.