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2019 (9) TMI 1712 - HC - Companies LawGranting stay of operation of an order passed by the court of first instance dated April 22 2019 - grant of ad interim order of injunction restraining the defendant/opposite party from illegally suspending a Permissive User Agreement (PUA) for a limited period. Whether subject-matter of the PUA ex facie fall within the ambit of preferential transactions barred under Sections 43(2)(a) and 44(1)(b) of the IBC? HELD THAT - The NCLT has authority to examine the PUA under Sections 43 and 44 and therefore also has authority to examine and decide whether the PUA was backdated or manufactured. No other forum or court can decide such an issue - As far as the PUA not being void but at best voidable and that the same has to be terminated otherwise the rights of the petitioner under the same continues such proposition is refuted by the opposite party. It is submitted by the opposite party that the PUA itself is fabricated and as such since the existence of the same is not admitted by the opposite party an attempt to terminate the same would validate and/or acknowledge the existence of such a fabricated non-existent document. The question of termination would only arise if the existence of the document was acknowledged. Secondly by virtue of the order dated April 8 2019 the NCLT has approved the resolution plan in its totality thereby terminating the PUA and no further specific termination thereof is required in law. Upon hearing both sides it is seen that Sections 43 and 44 as well as Section 45 of the IBC are inapplicable to the present case in view of those being maintainable only at the instance of a liquidator or a resolution professional. Hence the petitioner had no scope to resort to the said provisions for the reliefs claimed in the suit - the transaction-in-question being the PUA being of the year 2014 was well beyond the look-back period as contemplated in Section 46. Mere alteration in the Memorandum and Articles of Association to include manufacturing purposes or absence of any prima facie proof of any transaction relating to the trademark having occurred during the relevant look-back period do not ipso facto invalidate the said agreement or indicate that the same was manufactured or fraudulent. The pendency of the avoidance petition itself is not a bar to the institution of the suit more so because the PUA is ex-facie of 2014 that is beyond the look-back period contemplated in Section 46 of the IBC. It is apparent that there is and was strong prima facie case in favour of the petitioner for grant of ad interim injunction in its favour. Irreparable injury - balance of convenience and inconvenience - HELD THAT - Those are obviously in favour of the petitioner in view of the conduct of the opposite party and the circumstances of the case inasmuch as the resolution plan has been approved and a direct challenge has been thrown to the validity of the suit itself thereby putting the petitioner at the peril of losing its rights on the PUA which is its only collateral security for the claim of outstanding money from the opposite party. The impugned order suffers from patent jurisdictional error and ought to be set aside - Order disposed of by setting aside the impugned order of the appellate court and reviving the order of ad interim injunction passed by the trial court with liberty to the petitioner to pray for extension/re-imposition of the trial court s order if not already extended.
Issues Involved:
1. Jurisdiction of Civil Court vs. NCLT under IBC and Companies Act. 2. Validity and enforceability of the Permissive User Agreement (PUA). 3. Applicability of Sections 43, 44, 45, 46, and 60 of the IBC. 4. Impact of the approved resolution plan on the PUA. 5. Grant of ad interim injunction by the trial court and its stay by the appellate court. Detailed Analysis: 1. Jurisdiction of Civil Court vs. NCLT under IBC and Companies Act: The appellate court's stay order was based on the premise that the civil court lacked jurisdiction due to the bar stipulated in Sections 231, 238, 63, and 60 of the IBC, as well as Section 340 of the Companies Act, 2013. The petitioner argued that the civil court was the only available remedy since there was no provision under which the petitioner could approach the NCLT for the specific reliefs sought in the suit. The court found that Sections 43 and 44, as well as Section 45 of the IBC, were inapplicable to the present case, as they are maintainable only at the instance of a liquidator or a resolution professional. 2. Validity and Enforceability of the Permissive User Agreement (PUA): The PUA, dated May 30, 2014, was entered into for securing an outstanding amount of Rs. 15,31,58,302/- by granting permission to use a family of marks for a duration of twenty-one years or until the dues were adjusted. The court found no evidence to suggest that the PUA was back-dated or fraudulent. The PUA was considered a collateral security agreement rather than a typical commercial contract, thus not attracting the bar of Sections 14 and 41 of the Specific Relief Act, 1963. 3. Applicability of Sections 43, 44, 45, 46, and 60 of the IBC: The court noted that Sections 43 and 44, as well as Section 45 of the IBC, were inapplicable because they are maintainable only by a liquidator or resolution professional. The transaction in question, being from 2014, was beyond the look-back period contemplated in Section 46. Section 60(5) of the IBC, which deals with the jurisdiction of the NCLT, was found to be inapplicable as it primarily concerns CIRP and liquidation proceedings, not situations arising in the interregnum. 4. Impact of the Approved Resolution Plan on the PUA: The resolution plan approved on April 8, 2019, included a clause that the brand "Elegant" would be used exclusively by the resolution applicant. However, Clause 23 of the resolution plan required specific reliefs to be granted separately by the resolution professional, which was not done. Therefore, the court held that the petitioner could continue exercising its rights under the PUA. 5. Grant of Ad Interim Injunction by the Trial Court and Its Stay by the Appellate Court: The trial court granted an ad interim injunction restraining the opposite party from suspending the PUA. The appellate court stayed this order, but the High Court found that the appellate court's stay order was based on a misconception of law and lacked jurisdiction. The court revived the trial court's ad interim injunction, noting a strong prima facie case in favor of the petitioner and the balance of convenience and irreparable injury being in the petitioner's favor. Conclusion: The High Court set aside the appellate court's stay order, revived the trial court's ad interim injunction, and allowed the petitioner to seek further relief from the trial court. The court emphasized the necessity of specific orders for reliefs under the resolution plan and found no jurisdictional bar for the civil court to entertain the suit.
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