9911796707
TMI Blog2023 (2) TMI 1323X X X X Extracts X X X X X X X X Extracts X X X X ..... to bring to the notice of the court the facts and circumstances which have made the pending litigation infructuous. In Kedar Nath Agrawal (dead) Anr. v. Dhanraji Devi (dead) by LRs Anr., [ 2004 (10) TMI 631 - SUPREME COURT] the Supreme Court stated the law on taking into account subsequent events for determining whether the suit should be allowed to be continued or not, has held that in our judgment the law is well settled on the point, and it is this : the basic rule is that the rights of the parties should be determined on the basis of the date of institution of the suit or proceeding and the suit/action should be tried at all stages on the cause of action as it existed at the commencement of the suit/action. Applying the above ratio to the facts of the present case, it is evident that after the filing of the suit, the plaintiff, for and on behalf of the defendant no.6 and as a 50% Shareholder thereof, agreed to the defendant no.1, who was executing the agreements for and on behalf of his family members, to incorporate new companies/form LLP with the use of the words Hitech Audio or Hitech . It was further agreed that the parties shall be allowed to continue in the same business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the plaintiff and his parents, and the defendant no. 1 later joined the said business. 3. In the plaint, it is alleged that the defendant no. 5 has been set up by the defendants nos.2 and 3 with active support and encouragement from the first defendant, and is a competitor of the defendant no. 6. The plaintiff further asserts as under: "The prime mover in this conspiracy is the first defendant, who conceived the grand plan of looting and internally hemorrhaging a successful business entity with a highly successful business model, merely to make more monetary benefits than he was entitled to and to divert profits to himself and his immediate family members, using defendant no. 5 entity as a vehicle for the said nefarious plans. In so doing, the first defendant breached his fiduciary duties and his duties and obligations under the Companies Act and to put it more specifically, grossly violated the duties cast on him under Section 166 of the Companies Act, 2013. Defendants 2 and 3, being the son and daughter in law respectively, of the first defendant, in fact actually set up the Limited Liability Partnership which is arrayed as defendant no. 5 herein, purely with a view to diver ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the suit in favour of the plaintiff and against the defendants." 6. This Court by its order dated 10.01.2022, while issuing summons on the suit, passed the following interim order: "19. In the meanwhile, since the plaintiff is in business prior to that of defendant No. 5, hence it would be appropriate if the defendant No. 5 is directed not to use the name HI TECH as its trade name in its future bids, to be applied afresh from now onwards, till the next date of hearing. Affidavit of admission/denial of documents be also filed by the parties." 7. It is not denied that thereafter, the plaintiff and the defendant no.1 entered into an Initial Settlement of their inter se disputes and executed the "Brief Note and Record of Discussions and Understanding held between the Shareholder Directors of Hitech Audio Systems Private Limited held on 22 January 2022". It was duly recorded in the „Brief Note‟ that the same has been executed by the plaintiff and the defendant no.1 representing their own interest as also interest of their family members. The Agreement further records as under: "3. That it is understood by and between the two groups of shareholders represented by ea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Fix open up". The same is signed, apart from the plaintiff and the defendant no.1, also by the defendant no.4. 10. The plaintiff also does not deny that in terms of the above settlement, and taking benefit thereof, the plaintiff opened a new entity by the name „Hi-tech Audio and Image LLP‟ on 09.05.2022. In the new entity, the plaintiff moved the retail sales business and is selling the exclusive retail brands of the defendant no.6. 11. Finally, the plaintiff and the defendant no.1, as Shareholders of the defendant no.6, executed the "Note of the Discussions Held in the Meeting between the Two Shareholders Group of Hi-tech Audio Systems Private Limited and decision taken on 25th July, 2022" allowing each other to incorporate Companies using the words „Hi-tech Audio‟ or Hi-tech‟. They also agreed to the transfer of trade/business of defendant no.6 to each other. The Note of Discussion is relevant for the purposes of the present application, and is reproduced in full as under: "NOTE OF THE DISCUSSIONS HELD IN THE MEETING BETWEEN THE TWO SHAREHOLDERS GROUP OF HITECH AUDIO SYSTEMS PRIVATE LIMITED AND DECISION TAKEN ON 25TH JULY, 2022 PRESENT: 1. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... meeting held on Friday, 22nd April, 2022 accord no objection to the use of the word 'Hitech Audio' or 'Hitech' and/or any other word from the name or the Company, in incorporation of a new Company / LLP „______ Private Limited' or „__________ LLP' or any other Company /LLP with similar /identical name, by existing promoters /directors of the Company either by themselves or with other persons of their choice. For Hitech Audio Systems Private Limited Rajan Gupta Director DIN: Add: Date: Place: 2. REGARDING RELATED PARTY TRANSACTIONS EXECUTED IN HITECH AUDIO SYSTEMS PRIVATE LIMITED It is confirmed by the Both Shareholders Group and Directors that pursuant to the provisions of section 188 of the Companies Act, 2013, be and is hereby accord their consent and approve for all the transactions which are and /or to be carried out between the Companies and / or the companies / LLP belonging to the related parties / Directors and / or shareholders and/ or arising on account of the abovementioned understanding between 2 shareholders group. 3. TRANSFER OF BUSINESSES AND /OR BRANDS OF HI-TECH AUDIO SYSTEMS PRIVATE LIMITED: Pursuant to the understa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 15. He further submits that, in any case, the above documents of settlement shall bind only the plaintiff and the defendant no.1. They cannot enure to the benefit of the defendant nos. 2,3 and 5. It is only the defendant no.1 who has been allowed to incorporate a new company/LLP with the words „Hi Tech Audio‟ or „Hi Tech‟. The defendant no.5, in any case, cannot take away the customers of the plaintiff or the defendant no.6, or act in competition thereto. 16. I have considered the submissions made by the learned counsels for the parties. 17. It needs no reiteration that for deciding an application under Order VII Rule 11 of the CPC, only the averments in the plaint will have to be referred to; the defence made by the defendant in the suit must not be considered while deciding the merits of the application. 18. At the same time, the Supreme Court in Shipping Corporation of India Ltd. v. Machado Brothers & Ors. (2004) 11 SCC 168, has observed as under: "22. While examining this question we will have to consider whether the court can take cognizance of a subsequent event to decide whether the pending suit should be disposed of or kept alive. If so, can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tice does require, the court is bound to consider any change, either in fact or in law, which has supervened since the judgment was entered." 24. Almost similar is the view taken by this Court in the case of J.M. Biswas v. N.K. Bhattacharjee wherein this Court held: (SCC p. 71, para 10) "[T]he dispute raised in the case has lost its relevance due to passage of time and subsequent events which have taken place during the pendency of the litigation. … In the circumstances, continuing this litigation will be like flogging a dead horse. Such litigation, irrespective of the result, will neither benefit the parties in the litigation nor will serve the interest of the Union." 25. Thus it is clear that by the subsequent event if the original proceeding has become infructuous, ex debito justitiae, it will be the duty of the court to take such action as is necessary in the interest of justice, which includes disposing of infructuous litigation. For the said purpose it will be open to the parties concerned to make an application under Section 151 CPC to bring to the notice of the court the facts and circumstances which have made the pending litigation infructuous. Of course, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess, merely because the same cannot be rejected under the Order VII Rule 11." 21. Applying the above ratio to the facts of the present case, it is evident that after the filing of the suit, the plaintiff, for and on behalf of the defendant no.6 and as a 50% Shareholder thereof, agreed to the defendant no.1, who was executing the agreements for and on behalf of his family members, to incorporate new companies/form LLP with the use of the words „Hitech Audio‟ or „Hitech‟. It was further agreed that the parties shall be allowed to continue in the same business as that of the defendant no.6. Having agreed to the same, nothing further survives in the present suit. The prayer made in the suit has clearly been rendered infructuous. 22. I may herein quote the relevant pleadings from the application and the reply thereto given by the respondent, as it is evident therefrom that there is no dispute raised by the plaintiff on the settlement: Application "13. After the abovestated litigations were filed, the parties came together for discussing and resolving all issues and disputes mutually. Thereafter, on 22.01.2022, the parties reached at an initial written unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rands which are exclusively dealt with by the Defendant No. 6 Company in India. The relevant portion of the Settlement dated 22.04.2022 is reproduced hereunder: "Agreed Terms are as Below:- 1. 2 new Entities with Hitech Pre Fix open up." Copy of the said Settlement dated 22.04.2022 is attached to the present application as Document-6. 15. It is pertinent to mention that the Plaintiff had immediately acted upon the Settlement dated 22.04.2022 and within a period of less than 20 days, the Plaintiff opened a new entity by the name 'Hitech Audio and Image LLP' (hereinafter "Hitech AI") on 09.05.2022, i.e. right after signing of the Settlement dated 22.04.2022. This clearly evinces that the Plaintiff has acted upon the Settlement 22.04.2022. In the said new entity, i.e. Hitech AI, the Plaintiff has moved the retail sales business and is selling the exclusive retail brands of the Defendant No. 6 Company in the market through this new entity, and the same is evident from the invoices in respect of such retail sales from 'Hitech Audio and Image LLP'. Copy of the Master Data of 'Hitech Audio and Image LLP' procured from the website of Min ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39;. In view of the abovestated three settlement documents signed between the parties, specifically Settlement dated 22.04.2022, the Plaintiff has already started a new entity by the name Hi Tech Audio Image LLP and has been operating the same since 09.05.2022. Now that the Plaintiff has already signed and, in furtherance, acted upon the abovestated settlement agreements, the cause of action of the present Suit in any case has been rendered infructuous and does not survive and thus, ought to be rejected by this Hon'ble Court." Reply "11.-17. With reference to paragraphs 11, 12, 13, 14, 15, 16 and 17, the nonapplicant/plaintiff states and submits that the partial settlements that have been referred to in these paragraphs have nothing to do with the cause of action in the present suit and are in fact the subject matter of other litigation that is pending before the National Company Law Tribunal. The fact is that the actual culprits, that is defendants 2, 3 and 5, acting under the advice of Defendant No. 1, are the ones who have no defense whatsoever, and it is not now permissible for them to rely on any partial settlement between Defendant No. 1 and the plaintiff in order to ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
