Prashant Properties Limited vs Sps Steels Rolling Mills Ltd

The present application under Article 227 of the Constitution of India is

preferred against an order passed by the appellate court, granting stay of

operation of an order passed by the court of first instance, dated April 22, 2019,

whereby the trial court granted ad interim order of injunction restraining the

defendant/opposite party from illegally suspending a Permissive User

Agreement (hereinafter referred to as "the PUA") dated May 30, 2014, for a

limited period.

2. The petitioner, being an operational creditor, entered into the PUA on May 30,

2014 with the opposite party, for the purpose of securing an outstanding amount

of Rs.15,31,58,302/‐ (approximately), due 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 3

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. Parallelly, 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

opposite party, praying inter alia for a decree of declaration that the PUA dated

May 30, 2014 was valid and subsisting, for a decree of perpetual injunction

restraining the defendant and/or its men and agents from suspending the

Permissive User Agreement dated May 30, 2014 and for ancillary reliefs. In such

suit, the petitioner moved an application for injunction in consonance with the 4

permanent injunction prayer in the suit and the trial court, by an order dated

April 22, 2019, granted ad interim injunction restraining the defendant/opposite

party from illegally suspending the PUA dated May 30, 2014.

6. The opposite party preferred against the said ad interim injunction a

miscellaneous appeal bearing Miscellaneous Appeal No. 145 of 2019 in which,

vide Order No. 10 dated July 2, 2019, the District Judge‐in‐charge at Alipore

passed an order staying the ad interim order of injunction of the trial court till

disposal of the miscellaneous appeal.

7. Being thus aggrieved, the petitioner has preferred the instant revisional

application against the said stay order.

8. Learned senior counsel appearing for the petitioner argues that the entire

premise of the impugned order was erroneous in law and without jurisdiction.

The appellate court proceeding on the premise that the civil court had no

jurisdiction to pass any injunction order as per the bar stipulated in Sections 231,

238, 63 and 60 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred

to as "the IBC") as well as Section 340 of the Companies Act, 2013, which

specifically barred the jurisdiction of civil courts, according to the appellate

court, in matters to be decided by the National Company Law Tribunal

(hereinafter referred to as "the NCLT").

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9. It was further observed in the impugned order that the agreement‐in‐question

conferred a right to use the brand name as mentioned therein in lieu of money of

Rs. 15 crores and odd and it should also be noted that the matter was before the

NCLT for payment of money to the debtor who gave money to the company and

at the time of deciding the said petition, the defendant/opposite party purchased

the said company after giving money. It was inferred that after payment of

money which was directed by NCLT, the opposite party would have no liability

to pay any money to the other creditors. It was found in the impugned order that

any creditor having grievance 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 6

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 relation

to the insolvency resolution or liquidation proceedings of the Corporate Debtor,

after the approval of the Resolution Plan, there was no scope for interference by

the NCLT.

13. As such, it is argued that the suit was the only remedy available to the petitioner.

14. Learned senior counsel for the petitioner further argues that the claim made by

the petitioner before the NCLT was, rather, within the ambit of Section 60(5) of

the IBC, claiming the amount still due from the opposite party, after adjustment

of the amount which had been taken care of in view of the right of user granted

by the PUA till date. It is argued that the said money claim before the NCLT and

the declaration and injunction sought before the civil court operated in related,

but different, fields.

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15. It is argued that although the fate of the suit was consequential upon the result of

the money claim before the NCLT, the latter did not debar the filing of the suit.

Rather, the suit was framed in such a manner that the civil court had the option

to declare the Permissive User Agreement to be valid and subsisting, only up to

the satisfaction of the entire claim, in lieu of which the said agreement was

entered into. The perpetual injunction sought for was independent and

irrespective of any NCLT proceeding but was in aid of the primary declaratory

relief sought in the suit.

16. Learned senior counsel, placing reliance on the provisions of the PUA, reiterated

the aforesaid arguments.

17. It is submitted that the NCLT cannot decide the issues raised in the suit.

Moreover, after the resolution professional approved the resolution plan under

Section 31, sub‐sections (1) and (2) of the IBC, Section 60(5) could not be invoked

against the opposite party, being the erstwhile Corporate Debtor.

18. It is further argued that NCLT, acting as Adjudicating Authority under Section

60 of the IBC, does not enjoy inherent powers under Section 151 of the Code of

Civil Procedure.

19. It is further argued that although Rule 11 of the NCLT Rules, 2016 and Rule 11 of

the NCLAT Rules, 2016 vest the tribunal and the appellate tribunal respectively 8

with inherent powers, such powers were not specifically adopted for use by the

NCLT while acting as Adjudicating Authority under the IBC. In the absence of

such extension of Rule 11 to the provisions of the IBC, the said power could not

be invoked while deciding 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 9

entered into by the erstwhile members of the Board of Directors of the Corporate

Debtor for dilution of the Corporate Debtor's rights and interests in the brand

'Elegant' shall stand annulled forthwith. The caption of Clause 23 was

'Reliefs/Concessions/Grants sought from the Hon'ble NCLT'.

22. As such, it is argued that in the absence of the NCLT having specifically granted

prayer (f), for implementation of such clauses, there was no bar to the petitioner

continuing to exercise its right under the PUA, more so since the dues towards

the petitioner were not yet cleared off.

23. It is next argued that CA(IB) 937 of 2018, filed by the resolution professional for

avoidance of certain transactions (not the PUA) under Sections 43 to 51, read

with Section 25J of the IBC, is still pending. The said application does not cover

the PUA at all. Rather, a separate prayer made in respect of the PUA, apparently

under Section 66 of the IBC, not for avoidance but for "appropriate directions"

was made without any specific averments that the PUA is back‐dated, fraudulent

and without any specific particulars as to the said document being a

manufactured one.

24. Moreover, the PUA was executed as long back as in the year 2014, which is

beyond the look‐back period contemplated in Sections 43(4) and 46(1) of the IBC.

No case has been made out by the opposite party or by the resolution 10

professional, before any forum, as to the PUA being back‐dated or fraudulent. As

such, the PUA, having been executed beyond the look‐back period, could not be

affected by any of the proceedings pending or decided before the NCLT at all.

25. It is further argued on behalf of the petitioner that, unlike void transactions as

contemplated under Sections 329, 330 and 334 of the Companies Act, which

render void certain transactions even in case the companies are wound up under

the Companies Act, 2013, the transactions falling with the purview of Sections 43

and 45 of the IBC are only voidable and specific orders have to be obtained

rendering such agreements void.

26. Relying on a judgment reported at AIR 2018 SC 5601 [B.K. Educational Services

Private Limited vs. Parag Gupta and Associates] (para‐7), learned senior counsel

argues that the Companies Act, 2013, particularly pertaining to the winding up

provisions thereof, comprise a statute cognate with the IBC. Learned senior

counsel for the petitioner places 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 11

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 (under which the NCLT, as Adjudicating Authority, can avoid past

transactions), under Section 66, the NCLT cannot avoid past transactions, even if

fraudulent, but under Section 66(2) can only direct the Director/partner of the

Corporate Debtor, and not other parties to the transaction, to make contribution

to assets of the Corporate Debtor. As such, even if Section 66, IBC could arguably

apply at all to past transactions, it would not then be subject to the restriction as

to look‐back period. Palpably with such reason in mind, the said section might 12

have been sought to be applied to the PUA‐in‐question, despite not being

otherwise applicable at all to the same.

30. Lodging a claim by the petitioner with the resolution professional, as an

operational creditor, for the money claim, was consistent with the PUA terms

because, even as per the PUA, the outstanding debts on the date of PUA were

Rs.15,31,58,302/‐, to be recovered by the petitioner by adjustment of royalty at the

rate of Rs. 75 per ton of product manufactured, using the trademarks (family of

marks) of the opposite party. Clauses 3 to 5 of the PUA are referred to in this

context.

31. Such dues, after adjustment of royalty as on December 22, 2017, the date when

the application under Section 7 of the IBC was admitted against the opposite

party by the NCLT, was Rs. 15,15,58,302/‐. Such dues had to be included with the

dues of other creditors in accordance with Section 18(1) of the IBC and the

Insolvency Resolution Regulations, 2016 (Regulations 7, 12 to 14). As and when

further adjustment of royalty in terms of clauses 4 and 5 of the PUA would occur,

the amount outstanding to the petitioner would automatically get reduced, but

till the entire amount due to the petitioner was adjusted against the royalty, the

petitioner would continue to be a creditor of the opposite party and the PUA

would continue to be operative.

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32. Since the PUA, as admitted by the petitioner, would come to an end on

adjustment of the entire dues, a corollary to it is that the claim made under

Section 7 of the IBC, if allowed and the money repaid to the petitioner earlier

than adjustment under the PUA, even then the PUA comes to end, terminating

the cause of action for the suit and injunction.

33. On the other hand, learned senior counsel for the opposite party argues that

Section 14(d) read with Section 41(e) of the Specific Relief 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, 14

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 restraint order from the NCLT,

there is no bar to the petitioner exercising its rights under the PUA. As such, it is

evident from the plaint, in particular paragraph nos. 9, 10, 11, 20 and 24 thereof,

that the suit is entirely dependent on, and revolves around, the NCLT

proceedings. Thus, the jurisdiction of the civil court is barred under Sections 63

and 231 of the IBC as well as under Section 430 of the Companies Act, 2013.

37. It is further argued that the PUA dated May 30, 2014 is an unregistered and

back‐dated document, intended to show transfer of the valuable trademark of the

opposite party to the petitioner, which is but an alter‐ego of the previous Board

of Directors of the defendant/opposite party. Learned senior counsel for the

opposite party seeks to establish kinship between the respective Directors of the

petitioner and the erstwhile Directors of the opposite party and alleges a 15

collusion between the two at the relevant juncture in entering into such an

agreement.

38. It is further argued that there was an arbitration clause, being clause 19 of the

PUA, which precluded the civil court from taking up the matter at all. The PUA

itself exhibits that it is inextricably linked to the petitioner's money claim against

the opposite party, for which an application is already pending before the

resolution professional.

39. It is further argued that even apart from the nexus between the erstwhile Board

of Directors of the opposite party and that of the petitioner, the petitioner was a

real estate company, without any manufacturing activity till August 27, 2018,

although the PUA was entered into in the year 2014. Only on August 27, 2018,

the petitioner‐company amended its Memorandum and Articles of Association

to include manufacturing activities. Therefore, there could not have been an

assignment of trademarks concerning manufacture of TMT Bars in 2014 in favour

of the petitioner.

40. Moreover, the PUA is a commercial contract which, by its very nature, is

terminable, even if there was no termination clause.

41. Learned senior counsel cites two judgments for this proposition: 16

(i) 1994 (28) DRJ 482 [M/s Unikol Bottlers Ltd. vs. M/s Dhillon Kool

Drinks];

(ii) 2006 (88) DRJ 545 [Thomas Cook (India) Ltd. vs. Hotel Imperial

& others]

42. By placing reliance on the judgment reported at (2006) 1 SCC 417 [Ardy

International (P) Ltd. and another vs. Inspiration 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).

17

45. At page - 90 of the main plan, it was specifically provided that the SPS (the

opposite party) was an old plant but the brand "Elegant" has good recall in the

market and therefore, good value. Therefore, the brand "Elegant" would be used

exclusively by the resolution applicant, that is, Shakambhari Ispat & Power

Limited (SIPL), prohibiting other companies/manufacturers from using it. So, it

was provided, a request was necessary for arrangement to ensure use by anyone

else of the brand name, null and void. Therefore, the said clause shows that the

brand name "Elegant" was to be used by the resolution applicant and its use by

anyone else would be null and void. It is argued that clause 23(xvii) a part of the

financial annexures of the plan, was an integral part of the plan. As such, the

approval of the resolution plan itself operates as approval of all the clauses

therein, including clause 23 as mentioned above.

46. The resolution plan, after its approval under Section 31(1) of the IBC, shall be

binding of the Corporate Debtor (opposite party), its employees, members,

creditors, guarantors and other stakeholders involved in the resolution plan,

including the petitioner. The revival plan of the company in accordance with the

approved resolution plan would also come into force with immediate effect,

according to the order dated April 8, 2019, approving the resolution plan. The

other connected applications were also disposed of accordingly. As such, the 18

resolution plan was approved in its totality, thereby terminating/nullifying the

PUA‐in‐question.

47. It was further argued that Section 61 of the IBC provided that notwithstanding

anything in the Companies Act, 2013, any person aggrieved by an order of the

Adjudicating Authority under that Part of the IBC may prefer an appeal to the

NCLAT. Therefore, the relief of the petitioner lay not in the suit but in a

challenge under Section 61 against the order dated April 8, 2019, accepting the

resolution plan.

48. Learned senior counsel for the opposite party, while refuting the petitioner's

arguments, as regards clause 23 of the resolution plan not being granted by the

NCLT, submits that none of the 18 prayers envisaged in clause 23 were granted

individually by the NCLT. The order dated April 8, 2019 provides for approval

of the resolution plan as a whole, which was approved by the CoC with 100 per

cent voting share. As such, there was no requirement to individually allow such

18 prayers under clause 23 of the plan separately, 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 19

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 Lokhandwala (supra)

has only six paragraphs but no ratio decidendi as such. Moreover, at the juncture

when the said judgment was delivered, the IBC had no provision for settlement

of a matter subsequent to admission of the petition. Only in such circumstances, 20

the Supreme Court held that inherent power could not be invoked in the absence

of a substantial/specific power to settle a matter subsequent to the admission.

53. As far as Purushothaman (supra) is concerned, it was only held that there was no

inherent power available when there is a power of review specifically conferred

by the statute.

54. As such, it is argued, neither of the cases is applicable since, in any event, the

power to adjudicate upon the validity of the PUA is specifically conferred on the

NCLT under Sections 43 to 51 of the IBC.

55. In the present case, it is argued, the transactions which are the 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, and consequentially the NCLT has

power to examine the PUA and decide on its validity not only under Sections 43

and 44 of the IBC but also under the inherent power under Rule 11 of the NCLT

Rules.

56. As far as Swiss Ribbons (supra) is concerned, Lokhandwala (supra) was considered

by the Supreme Court and it was held that Rule 11 and inherent power of NCLT

was applicable to IBC cases.

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57. As regards the argument advanced by the petitioner relating to the look‐back

period contemplated in Section 46, it is argued that the PUA is an unregistered

document and the persons in management and control of the petitioner are

closely related to the ex‐Directors of the opposite party. Till August 27, 2019, the

Memorandum and Articles of Association of the petitioner did not contemplate

any manufacturing activity and consequentially a trademark to manufacture

TMT bars could not have been transferred to the petitioner in 2014.

58. Accordingly, the PUA was fraudulent and manufactured. That apart, no paper

was produced to show any transaction on the basis of the PUA having actually

taken place since 2014 onwards. Therefore, the plaint or the documents do not

show any transaction relating to the trademark having taken place prior to two

years from the date of approval, that is, April 8, 2019.

59. 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 back‐

dated 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, 22

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 opposite party, is

still pending in the NCLT, which invalidates the institution of the suit as well.

64. 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.

65. Moreover, 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 23

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.

66. It is well‐settled that allegations of fraud have to be pleaded specifically, in

particular and proved beyond doubt. In the present case, there is no pleading as

to the PUA being back‐dated or any particular pleading as to the same being

manufactured. The arguments from the bar as to the alleged kinship between the

Board of Directors of the petitioner and the erstwhile Board of Directors of the

opposite party carries no meaning in the absence of evidence on that score,

which can very well be adduced in the suit as well.

67. Moreover, mere kinship between the members of the said two Boards of

Directors cannot be a determinant of there being a false play in the transaction‐

in‐question. In fact, if the opposite party, with such a 'compliant' Board of

Directors, could enter into the PUA with the petitioners at the relevant juncture,

then the opposite party cannot subsequently resile from the said PUA on the

ground of such alleged compliance, having never ever taken such point before, 24

but rather having taken advantage of the PUA to wriggle out of its outstanding

dues.

68. The PUA, on the face of it, does not confer any undue advantage on the

petitioner at all or reek of any preferential transaction or any fraudulent

transaction. Rather, the PUA was a face‐saver for the opposite party, in order to

protect the opposite party from the imminent danger of facing a money suit or

money claim by warding off such a possibility by entering into the PUA 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 25

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 file complaints, that too by the liquidator or

resolution professional. Hence, there was no scope for the petitioner to approach

the NCLT for the reliefs sought in the suit.

71. It is seen from the resolution plan itself that the rights given to the resolution

applicant as regards exclusive powers to use the trademarks, while nullifying the

use thereof by others, was subject to clause 23 thereof, which was also

chronologically subsequent to such "power" conferred on the resolution

applicant. Even the clause which provided that the brand "Elegant" would be

used exclusively by the resolution applicant, that is, Shakambhari Ispat & Power

Limited (SIPL), prohibiting other companies/manufacturers from using it, had a

rider that a request was necessary for arrangement to ensure use by anyone else

of the brand name, null and void. Which contemplation of 'request' was

followed‐up by Clause 23 of the Plan.

26

72. Clause 23 specifically envisages that the reliefs contemplated therein were to be

separately claimed before the resolution professional for the purpose of

implementation of the resolution plan, thereby vindicating the stand, that unless

those reliefs were granted specifically by the resolution professional while

approving the plan, those could not be implemented directly. The explicit power

conferred on the resolution applicant was of course, subject to the prayers under

clause 23, including clause (xvii), being granted by the resolution professional.

The last sentence of the resolution plan clarifies that the grant of

Reliefs/Concessions/Grants was not a pre‐condition to the implementation of a

payment under the resolution plan. As such, those reliefs were independent of

the other disbursements contemplated in the resolution plan and not an integral

part thereof, making it all the more necessary for those reliefs to be granted

separately by the resolution professional, which was not done in the present case.

The specific prayer in the application for approval, for an order approving and

directing grant of concession etc., in terms of Clause 23, having not been granted

specifically, it has to be deemed as a refusal of such grant, thereby permitting the

petitioner to continue with the rights conferred on it under the PUA.

73. Since the temporary suspension application regarding the brand‐in‐question was

disposed of on approval of the resolution plan, the same cannot now be resorted

to for debarring the petitioner from filing the suit.

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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 agreement, having a specific tenure. In the event the claim for money

made by the petitioner before the NCLT is allowed, partially or fully, the relief

granted in the suit can be moulded directly in proportion with the dues

remaining, if any, left unpaid after the grant of such money claim. However, till

the money claim is allowed and adjudicated upon, the cause of action of the suit 28

retains its validity and continues, lending validity to the maintainability of the

suit.

77. In such circumstances, 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.

78. As regards the question of irreparable injury and balance of convenience and

inconvenience, 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.

79. That apart, the appellate court virtually allowed the appeal itself at the interim

stage by granting a stay of the operation of the impugned order of the trial court,

without recording any special exigency for doing so. Rather, the perceived bar to

a civil court, as recorded in the impugned order of the appellate court, was a

palpable misconception of law in view of the discussions above. On such ground,

apart from otherwise on merits, the appellate court acted patently without

jurisdiction in granting the stay at a premature stage, prior to hearing of the

miscellaneous appeal itself.

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80. In such view of the matter, the impugned order suffers from patent jurisdictional

error and ought to be set aside.

81. Accordingly, C.O. No. 2205 of 2019 is 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.

82. There will be no order as to costs.

83. C.A.N. No.6305 of 2019 is also disposed of accordingly.

84. Before parting with the matter, this court would like to express its appreciation

to both sides for ably assisting the court, in particular by filing succinct written

notes on arguments.

85. Urgent certified website copies of this order, if applied for, be made available to

the parties upon compliance with the requisite formalities.

( Sabyasachi Bhattacharyya, J. ) 30