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TMI Blog2019 (9) TMI 1712X X X X Extracts X X X X X X X X Extracts X X X X ..... e from the opposite party to the petitioner, by granting permission to the petitioner to use a family of marks (trade marks) to the petitioner. Such grant of non-exclusive licence for the said family of marks in all forms, in respect of the goods corresponding to the said mark, was for a duration of twenty-one years from the date of signing and execution of the PUA, or adjustment of the amount equivalent to their dues, whichever was earlier. There was a clause in the said agreement for extension/renewal with the express consent/assent from either party thereto on or immediately before the expiry of the agreement. 3. Clause 5 of the PUA provided that royalty of Rs. 75 per ton of production would be adjusted for using the family of marks on half yearly basis. 4. Parallely, there was a Corporate Insolvency Resolution Proceeding in respect of the opposite party-company, initiated by a resolution applicant, being one Shakambhari Ispat & Power Limited (SIPL). In such proceeding, an order was passed on April 8, 2019, approving the said resolution plan and disposing of certain connected applications. 5. The petitioner, on the other hand, instituted Title Suit No. 563 of 2019 against the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e should move the NCLT because the use of brand name arose from giving Rs. 15 crores and odd to the company. 10. Learned senior counsel for the petitioner submits that there was no remedy available to the petitioner within the limited context of the suit, apart from approaching a civil court, since there was no provision under which the petitioner could approach the NCLT, which was the Adjudicating Authority under the IBC. 11. Placing reliance on Sections 43 and 44 of the IBC, which relate to cases of preferential transactions, as well as Sections 45 and 46 of the IBC, which deal with undervalued transactions, it was for the resolution professional or liquidator, as the case may be, to approach the Adjudicating Authority, and not for an operational creditor like the present petitioner. 12. It is further argued that although Section 60 of the IBC lays down the jurisdiction of the Adjudicating Authority and sub-section (5) thereof provides that the NCLT shall have jurisdiction to entertain or dispose of applications by or against the Corporate Debtor, claims made by or against the Corporate Debtors and any question of priorities or any question of law or facts arising out of or in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng matters under the IBC. 20. Learned senior counsel argues that the judgment of Swiss Ribbons Pvt. Ltd. & anr. vs. Union of India & Ors. reported at (2019) 4 SCC 17, applied the principle that the NCLT, as Adjudicating Authority, was permitted to exercise inherent power only to entertain applications for withdrawal or settlement and did not broaden such power beyond that. 21. It is argued on behalf of the petitioner that mere approval of the resolution plan under Section 31 of the IBC by the resolution professional, without separately granting prayer (f) made in the application for approval, in terms of Clause 23, sub-clause (xvii) of the resolution plan, did not affect the past transactions of the opposite party, that is, the erstwhile Corporate Debtor, with the petitioner. It is argued that Clause 23 of the resolution plan specifically provided that for implementation of the resolution plan, the NCLT may be requested and prayed to pass all necessary orders for effective and smooth implementation of the resolution plan including the following, which included clause (xvii), which provided for any contract entered into or obligations/encumbrance/licences entered into by the erstw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laces reliance on Commissioner of Wealth Tax, Gujarat-III, Ahmedabad vs. Ellis Bridge Gymkhana reported at (1998) 1 SCC 384 (para-9), to elucidate how cognate statutes are interpreted, in support of the proposition that, read in conjunction, the relevant provisions of the Companies Act and the IBC would show that the law provides that certain category of documents are void while others are voidable, including the documents such as the present PUA, and for avoiding the latter category, specific orders have to be obtained. 27. Next placing reliance on a judgment reported at AIR 1945 PC 54 [Ramchandra Jivaji Kanago & anr. vs. Laxman Shrinivas Naik & Anr.], voidable transactions, it is argued, cannot be unilaterally set aside by a party to it but only be avoided by a decree or order of court. 28. It is argued that Section 66 of the IBC is applicable only to fraudulent/wrongful trading during the Corporate Insolvency Resolution Process (CIRP)(hereinafter referred to as the "CIRP"), or during a subsequent liquidation process, if at all initiated, that too not regarding past transactions. 29. Even if Section 66 of the IBC applied to past transactions, unlike Sections 44, 48 and 51, IBC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elief Act, 1963 bar injunctions to prevent breach of contracts, performance of which cannot be specifically enforced, including contracts which in their very nature are determinable. 34. Learned senior counsel for the opposite party cites two judgments for the proposition that no injunction in respect of such contracts, in their very nature determinable, could be granted: (i) (1991) 1 SCC 533 [Indian Oil Corporation Ltd. vs. Amritsar Gas Service and Ors.; and (ii) 2017(4) CHN (Cal) 293 [Sikaria Divinity Private Limited vs. State of West Bengal]. 35. The injunction order dated April 22, 2019 contains no reasons/justification for passing ex parte ad interim injunction, as per the opposite party. The trial court, as such, did not resort to the well-settled principles, as laid down in the following judgments: (i) (1993) 3 SCC 161 [Shiv Kumar Chadha vs. Municipal Corporation of Delhi and others; (ii) (1994) 4 SCC 225 [Morgan Stanley Mutual Fund vs. Kartick Das]. 36. Learned senior counsel next argues that the entire allegation in the plaint of the suit-in-question constantly refers to the NCLT proceedings and orders passed therein. It is also pleaded that, since there is no r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spiration Clothes & U and another], it is argued that the court itself may suo motu take cognizance of an arbitration agreement and act upon the same and it was not necessary for the parties to apply under Section 5 or Section 8 of the Arbitration and Conciliation Act, 1996, for the suit to be relegated to arbitration. Therefore, the trial court acted without jurisdiction in proceeding with the suit and granting injunction therein. 43. The existence of the arbitration agreement was pointed out to the appellate court and it was argued that, without prejudice to the contentions that the agreement itself was fabricated, the opposite party never waived the arbitration clause. On such premise also, the appellate court stayed operation of the ad interim order of injunction dated April 22, 2019. 44. Learned senior counsel for the opposite party then goes on to place relevant clauses of the resolution plan. The said plan comprises two parts, being the principal plan (pages - 58 to 90 of the stay petition) and the financial annexures (pages - 92 to 125 of the stay petition). 45. At page - 90 of the main plan, it was specifically provided that the SPS (the opposite party) was an old plant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tely, in view of the resolution plan being approved as a whole. 49. Moreover, the resolution plan itself provides that the brand "Elegant" would belong exclusively to the resolution applicant and the use of the brand by anyone else would be declared null and void, which provision was deemed to be accepted by approval of the resolution plan itself. 50. It is further argued on behalf of the opposite party that the petitioner was wrong in its argument that there was no provision in the IBC to decide the validity of the PUA. Learned senior counsel for the opposite party argues that, apart from Section 61, Section 60(5) of the IBC as well as the inherent powers of the NCLT, under Rule 11 of the NCLT Rules, provide sufficient remedy for such a challenge by the petitioner. 51. It is submitted on behalf of the opposite party that the petitioner relied on two judgments, being as follows: (i) Lokhandwala Kataria Construction Private Limited vs. Nisus Finance and Investment Managers LLP reported at MANU/SC/1220/2017; and (ii) P. Purushothaman vs. Union Bank of India and Ors. reported at MANU/ND/9116/2019 (Chennai). 52. Learned senior counsel for the opposite party submits that Lokhand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore also has authority to examine and decide whether the PUA was backdated or manufactured. No other forum or court can decide such an issue. 60. Section 60(5) of the IBC, it is argued, is applicable, contrary to the argument of the petitioner. 61. 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. 62. 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. 63. CA 937 of 2018, which is the application of the resolution professional specifically seeking termination of the PUA, according to the opposit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... UA as a collateral security for the outstanding dues from the opposite party to the petitioner. 69. As far as Section 60(5) of the IBC is concerned, the same has to be read in context. Adopting a proper and impartial perspective, sub-section (5) of Section 60 has to be read in the light of the previous sub-sections (1) to (4), which restrict the powers of the NCLT, acting as an Adjudicating Authority under the IBC, to CIRP and liquidation proceedings, if any, only and not to any situations arising in the interregnum. The present suit was filed at a juncture when the resolution plan was approved and no liquidation proceedings have been initiated till date. The entire scope of Sections 43 to 51 of the IBC contemplate a scenario prior to the adoption of a resolution plan or upon initiation of a subsequent liquidation proceeding, and do not have any direct applicability to the juncture when the suit was filed. 70. Moreover, Section 60 of the IBC basically deals with jurisdiction and powers of the NCLT as an Adjudicating Authority and the source of the right to file applications, as contemplated in Sections 43 to 51, are those sections themselves, which provide substantive rights to f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he same cannot now be resorted to for debarring the petitioner from filing the suit. 74. 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. 75. On a different aspect, the reliefs claimed in the suit may be dependent on the claim made by the petitioner for the dues before the NCLT, but the two operate in different fields. The reliefs sought in the suit could not be asked for before the NCLT, while the money claim of the operational creditor had to be adjudicated upon by the NCLT and rightly prayed for before that forum by the petitioner. 76. The PUA itself, in particular, Clause 4 thereof, shows that the same was entered into for a period of 21 years and/or adjustment of the amount equivalent to the dues, whichever was earlier, thereby demolishing the extensive argument of the opposite party as to the PUA being a commercial contract, by its very nature terminable, attracting the bar of Sections 14 and 41 of the Specific Relief Act, 1963. This was not a case of a usual commercial contract but was a collateral security agre ..... X X X X Extracts X X X X X X X X Extracts X X X X
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