JSA
This edition of the JSA Brief showcases JSA authored articles, updates & newsletters and achievements such as deals and events in all practice area over the preceding month (June 2024).
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JSA successfully represented Chemco Plastic Industries Private Limited[1] (“Plaintiff-Respondent”) before the Bombay High Court (“Bombay HC”), which has inter alia held that in deciding whether a plaintiff has sought urgent interim relief only to bypass the bar of compulsory pre-litigation mediation under Section 12-A of the Commercial Courts Act, 2015 (“Commercial Courts Act”), delay in seeking interim relief is not a factor.
Brief Facts
The Plaintiff-Respondent had filed a Commercial IP Suit seeking an injunction restraining M/s Chemco Plast (“Defendant-Applicant”) from infringing its registered trademark and passing off its goods as those of the Plaintiff (“Suit”). Along with the Suit, the Plaintiff also filed an interim application seeking urgent interim relief. The Defendant filed an interim application under Order VII Rule 11 of the Code of Civil Procedure, 1908 seeking rejection of the plaint on the ground that the Plaintiff had failed to comply with the mandatory provision of pre-suit mediation under Section 12-A of the Commercial Courts Act (“Interim Application”).
In support of its Interim Application, the Defendant-Applicant inter alia submitted that the: (a) Supreme Court of India (“Supreme Court”) in Patil Automation Private Limited and Ors v. Rakheja Engineers Private Limited[2] and Yamini Manohar v. TKD Keerthi[3] (“Yamini Manohar”) has held that where urgent interim relief in a commercial suit is not contemplated, Section 12-A of the Commercial Courts Act which mandates pre-institution mediation is required to be complied with; (b) plaint did not contemplate urgent interim relief; and (c) delay in approaching the court is relevant to assess whether a plaintiff has contemplated urgent interim relief. The Defendant-Applicant argued that in the present case, the Suit did not contemplate any urgent interim relief as the same was filed 8 (eight) years after the Plaintiff-Respondent became aware of the cause of action.
The Plaintiff-Respondent inter alia submitted that: (a) the question of whether urgent interim relief is contemplated has to be ascertained on the basis of the pleadings in the plaint; (b) alleged delay in approaching the court is of no relevance as that would require the court to go into the merits, which could not be done at this stage; (c) as held in Bolt Technology OU v. Ujoy Technology Private Limited and Ors[4], in cases concerning intellectual property rights (“IPR”), apart from the rights of the plaintiff, the rights of consumers/the public are relevant; and (d) the Supreme Court in Yamini Manohar laid down that the limited exercise to be undertaken by commercial courts in deciding whether a suit can be entertained without exhausting the remedy of pre-institution mediation under Section 12-A of the Commercial Courts Act is whether the plaint, documents, and facts of the case indicate a need for urgent interim relief. It was argued on behalf of the Plaintiff that in the present case, the plaint did in fact contemplate urgent interim relief.
Issue
Whether the plaint ought to be rejected as being barred for failure to comply with Section 12-A of the Commercial Courts Act?
Findings and Analysis
The Bombay HC dismissed the Interim Application and inter alia observed as follows:
Conclusion
This is the first judgment from the Bombay High Court on the interplay between seeking urgent interim relief in IPR matters and the requirement for pre-suit mediation under Section 12-A of the Commercial Courts Act.
The following JSA team represented the Plaintiff/Respondent and prepared this Prism:
Farhad Sorabjee |
Pratik Pawar |
Siddhesh Pradhan |
Meher Mistri |
For more details, please contact [email protected]
[1] Chemco Plast v. Chemco Plastic Industries Private Limited. Interim Application (L) No. 10014 of 2024.
[2] (2022) 10 SCC 1
[3] 2023 SCC OnLine SC 1382
[4] CS (Comm) No. 582 of 2022
Please click here to download the Prism as a PDF.
In the recent decision of Shri Shreans Daga v. IBM India Private Limited,[1] the Hon’ble National Company Law Tribunal (“NCLT”), Bengaluru refused to recall an order by which it had sanctioned a scheme of arrangement (“Sanction Order”) between IBM India Private Limited (“Demerged Company”) and Kyndryl Solutions Private Limited (“Resulting Company”). The NCLT held that the application for recall was liable to be dismissed at the threshold, as it had been filed under Section 230(12)[2] of the Companies Act, 2013 (“2013 Act”), which applies only in cases of takeovers and not in cases of demergers. On merits, the NCLT held that the applicants failed to prove their status as creditors of the Demerged Company entitling them to raise objections to the scheme of arrangement.
Brief Facts
The applicants were individuals who had executed a share purchase agreement (“SPA”) with the Demerged Company on October 26, 2016, for sale of their stake in another company. They claimed to be creditors of the Demerged Company to the extent of the consideration to be paid to them under the SPA. The applicants argued that the proceedings leading up to the Sanction Order stood vitiated since: (a) their names had not been disclosed in the list of creditors filed before the NCLT; and (b) statutory notice under Section 230(3) of the 2013 Act had not been issued to them. Accordingly, they filed an application under Section 230(12) of the 2013 Act read with Rule 11 of the National Company Law Tribunal Rules, 2016 (“NCLT Rules”) praying that the Sanction Order be recalled.
Pertinently, the applicants also disclosed that arbitral proceedings for seeking payment under the SPA were also pending, with the Resultant Company substituted for the Demerged Company in pursuance of the Sanction Order.
The respondents argued that the application for recall of the Sanction Order deserves to be dismissed as: (a) the applicants could not claim to be creditors of the Demerged Company since the amount claimed by them was uncrystallized and subject matter of dispute in the pending arbitration; and (b) the application had been filed under Section 230(12) of the 2013 Act, which only applied in cases of takeovers and not in cases of demergers.
Issue
The issue before the NCLT was whether Section 230(12) of the 2013 Act could be invoked for recalling the Sanction Order and if so, whether such an order of recall was warranted in the present case.
Analysis and Findings
The NCLT found merit in the contentions of the respondents and held that:
For these reasons, the NCLT dismissed the application and refused to recall the Sanction Order.
Conclusion
While refusing to recall the Sanction Order, the NCLT reasoned that (a) the application for recall was not maintainable; and (b) the applicants failed to prove their status as creditors of the Demerged Company. The second reason appears to be sound given that the amounts claimed to be owed to the applicants were pending adjudication and crystallization in arbitration.
However, so far as the first reason is concerned, the NCLT may have overlooked that the applicants had invoked not only Section 230(12) of the 2013 Act but also Rule 11 of the NCLT Rules. While it is true that the power to recall an order by which a scheme of arrangement was sanctioned is not available under Sections 230 – 232 of the 2013 Act, the inherent powers of the NCLT under Rule 11 of the NCLT Rules may be, and have been, exercised for this purpose.
For instance, the NCLT Benches at Chandigarh,[3] Jaipur[4] and Mumbai[5] have in the past exercised powers under Rule 11 of the NCLT Rules for recalling final orders by which schemes of arrangement had been sanctioned by them. Such orders of recall have also been passed by various High Courts under the erstwhile Companies Act, 1956 (“1956 Act”)[6]. In fact, the Hon’ble Delhi High Court expressly clarified that company courts in exercise of their inherent powers can recall orders sanctioning schemes of arrangement in peculiar facts.[7] Since the provisions pertaining to schemes of arrangement under the 1956 Act and the 2013 Act are in pari materia, these decisions rendered under the 1956 Act still hold precedential value for proceedings under the 2013 Act. As such, the point of maintainability deserved a deeper analysis.
In any event, in the present case, even if the applicants were able to satisfy the NCLT on the issue of maintainability by placing reliance on Rule 11 of the NCLT Rules (which they had in fact invoked), their application for recall of the Sanction Order could not have been allowed in view of their failure to prove their status as creditors.
This Prism has been prepared by:
Divyam Agarwal |
Aniket Aggarwal |
Priya Chauhan |
For more details, please contact [email protected]
[1] Order dated April 19, 2024 in IA(CA) No. 12/2022 in CP(CAA) No. 17/2021 before the NCLT Bengaluru Bench.
[2] As per this provision, an aggrieved party may apply to the NCLT in the event of any grievances with respect to takeover offers of companies other than listed companies.
[3] Reckitt Benckiser (India) Private Limited, order dated March 5, 2021, in CA No. 156/2020 in CP(CAA) No. 7/CHD/HRY/2019.
[4] Hem Multi Commodities Pvt. Ltd., order dated December 5, 2019, in IA No. 299/JPR/2019 in CP (CAA) No. 75/230-232/JPR/2018.
[5] HDFC Property Ventures Limited, order dated July 28, 2023 in IA(CA) No. 92/2023 in CP(CAA) No. 219/MB/2022.
[6] Vodafone Essar South Ltd., ILR (2013) III Delhi 1979; Capital 18 Fincap Pvt. Ltd., 2015 SCC OnLine Del 10707; Castron Technologies Limited v. Castron Mining Limited, 2013 SCC OnLine Cal 12914.
[7] Vodafone Essar South Ltd., ILR (2013) III Delhi 1979.
Sidharth Sethi was invited as a Speaker in an International Seminar on Arbitration and Mediation held at Ankara, Turkey on 1 June 2024.
In his address, Sidharth spoke about the below aspects having a bearing on effectiveness and efficiency of arbitrations.
This conference was co-organised by the Union of Chambers and Commodity Exchanges of Turkey’s Mediation and Dispute Resolution Centre (“TOBBUYUM”) and the Asia Pacific Centre for Arbitration and Mediation (“APCAM”), in association with the Ministry of Justice, Government of Turkey.
The other distinguished speakers on the panel were:
The session was moderated by Ms. Iram Majid, Advocate and Executive Director, APCAM. The attendees included various sitting and former judges of courts in Turkey, leading arbitrators and mediators, senior lawyers, and Ministers and officers from the Ministry of Justice, Turkey.
JSA successfully represented Petitioner in an important judgement wherein, the Kerala High Court held that property acquired prior to commission of the scheduled offence will not constitute “proceeds of crime”. Consequently, provisional attachment of such property under Section 5 of the Prevention of Money Laundering Act, 2002 (“PMLA”) is unjustified.
The scheduled offence was under Section 406/420/34 of the Indian Penal Code, 1860 (“IPC”). An FIR was registered on the allegations of cheating and inducing people to raise funds under the guise of fraudulent schemes. The Petitioner was not named in the FIR. On the strength of the FIR and scheduled offence therein, the Enforcement Directorate registered an ECIR and Petitioner was summoned to join the investigation. Subsequently, debit freeze orders were passed with respect to Petitioner’s bank accounts under Section 17 of the PMLA.
The Petitioner filed a writ petition challenging the debit freeze order. During pendency of the writ petition, Enforcement Directorate passed provisional attachment order under Section 5 PMLA and attached the Petitioner’s bank accounts as well as his residential property. Accordingly, an amended writ was filed challenging the provisional attachment under Section 5. It was contended that the Petitioner’s immovable property was acquired in the year 2004. However, the predicate offence is alleged to have been committed between 27.01.2021 to 14.11.2022.
Relying on the Supreme Court’s judgement of Vijay Madanlal Choudhary and Ors. v. Union of India (2022) SCC Online 929 and Pavana Dibbur v. Directorate of Enforcement (2023) SCC Online 1586, it was contended that property in question had no link with the predicate offence. Considering the rival contentions, the Hon’ble High Court held the following:
In so far as the attachment of bank accounts is concerned, the Petitioner was relegated to alternate remedy under PMLA.
Enforcement Directorate provisionally attached property of the Petitioner which has no connection with the “proceeds of crime” and was acquired much prior to commission of scheduled offence.
The JSA Team was lead by Partners – Mr. Manish Jha and Kumar Kislay and instructed by External Counsel Mr. Abhijeet Pandey.
The National Company Law Appellate Tribunal, New Delhi (“NCLAT”), vide order dated 13 May 2024, has dismissed an appeal filed by Mr. Maneesh Kumar Singh (the “Appellant”), a suspended director of Advantage Overseas Private Limited (“AOPL”). This appeal was filed against an order dated 10 November 2023, passed by the National Company Law Tribunal, Mumbai (“NCLT”). Vide the said order, the NCLT had admitted a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 (“IBC”), filed by the State Bank of India (“SBI”), thereby initiating the corporate insolvency resolution process against AOPL.
In the appeal, the Appellant’s primary arguments were two-fold. First, the Appellant contended that the NCLT incorrectly held that the date of default fell outside the period prescribed under Section 10A of the IBC. Second, the Appellant contended that the NCLT incorrectly held that the petition was filed within the period of limitation.
Re Section 10A of IBC: While affirming the NCLT’s decision, the NCLAT concluded that the date of default fell outside the period prescribed under Section 10A of the IBC and noted the following:
The NCLAT reaffirmed its findings in the case of Raghavendra Joshi v. Axis Bank Limited & Anr., 2023 SCC OnLine NCLAT 498, wherein it was held that when a default by the corporate debtor occurs prior to the period prescribed under Section 10A of the IBC and the debt is subsequently acknowledged, Section 10A cannot be invoked. Relying on Raghavendra Joshi (Supra) and considering the actions of AOPL after the default in March 2021—such as filing a DRT application, grant of undertaking, consent decree by DRT and final recall notice —the NCLAT held that the default date was correctly determined by the NCLT to be outside the period prescribed under Section 10A of the IBC.
Re issue of limitation: The NCLAT held that the date of default was 08 August 2018. AOPL submitted OTS proposals on 11 March 2020 and 05 May 2020. SBI filed the Section 7 petition on 13 March 2023, which is within three years from the submission of the OTS proposal. The OTS proposals submitted by AOPL were clearly an acknowledgement of the debt, allowing SBI to benefit from Section 18 of the Limitation Act, 1963. The NCLAT thereafter relied upon the decision of the Hon’ble Supreme Court of India in Kotak Mahindra Bank v. A. Balakrishnan, (2022) 9 SCC 186, and held that since the consent decree was passed by the DRT on 26 April 2022, the three-year period for filing the Section 7 petition would commence from that date. Consequently, the NCLAT upheld the NCLT’s finding that the Section 7 petition was not time-barred.
This case assumes importance because the NCLAT has reaffirmed two crucial points: (i) Section 10A of the IBC cannot be invoked when the default occurred before the period prescribed under this provision, and when the debt was subsequently acknowledged by the corporate debtor; and (ii) the limitation period for filing a petition under Section 7 of the IBC is extended if the debt has been acknowledged by the corporate debtor in its balance sheet or in a settlement proposal sent to the financial creditor.
Our Disputes Team Comprised Partner – Varghese Thomas, Divyam Agarwal and Fatema Kachwalla, Principal Associate – Pallavi Kumar, Senior Associate – Ahsan Allana, Associate – Mayank Ratnaparkhe.
By an order dated May 21, 2024 (“Order”, the Hon’ble Maharashtra Electricity Regulatory Commission (“MERC”) in Case No. 244/AD/2022 held that T.P Kirnali Limited was impacted due to increase in rate of goods and services tax (“GST”) and basic customs duty (“BCD”) and is accordingly entitled for a total compensation of INR 15,48,00,000 (Indian Rupees fifteen crore forty-eight lakh) along with carrying cost.
In order to meet Solar Renewable Purchase Obligation requirement, Maharashtra State Electricity Distribution Company Limited (“MSEDCL”) issued a request for selection for procurement of 500 MW (five hundred megawatt) of solar power from Intra-State Grid Connected Solar Plant (Phase-V), on a long-term basis, under a competitive bidding process. Tata Power Renewable Energy Ltd. (“TPREL”) was selected for supplying 100 MW (one hundred megawatt) solar power at the tariff of INR 2.90/kWh (Indian Rupees two paise ninety per kilowatt hour). Accordingly, TPREL set up T.P. Kirnali Limited (“Kirnali”) as a wholly owned special purpose vehicle for supplying power to MSEDCL. A power purchase agreement (“PPA”) was executed between Kirnali and MSEDCL on September 16, 2020.
For setting up the project, 2 (two) separate contracts (viz. Supply Contract and Civil Works/ Service Contract) were executed between Kirnali and Tata Power Solar Systems Ltd. (“TPSSL”). At the time of the submission of the bid, the taxes payable were as follows:
MERC has held the following:
MERC in a progressive Order rightly followed the settled jurisprudence on Change in Law compensation by granting relief for impact on account of increase in GST and BCD. It disregarded extraneous submissions of MSEDCL to restrict compensation due to the developer. Kirnali’s undertaking dated September 9, 2021, was also rightly not held against its claim of Change in Law, since such undertaking only came in context of specific MNRE office memorandums. The undertakings required by these office memorandums have later been clarified to not be in context of Change in Law. In a progressive measure, MSEDCL has been afforded the opportunity at the outset to elect between lumpsum payment or a staggered payout should MSEDCL choose to save on carrying cost.
The JSA team was represented by:
|
Kunal Kaul |
Samikrith Rao |
The prism is prepared by:
|
Abhishek Munot |
Kunal Kaul |
Samikrith Rao |
For more details, please contact [email protected]
[1] para 16-16.11 @ Pg. 16-21
[2] Para 20.3 @ Pg. 23
[3] Para 19-19.5 @ Pgs. 21-22
[4] Para 22.5 @ Pg. 26
[5] Para 23-24 @ Pgs. 26-27
Please click here to download the Prism as a PDF.
By an office memorandum dated June 3, 2024, the Ministry of Finance, Government of India has issued guidelines to government entities and agencies including central public sector enterprises (“CPSEs”), public sector banks (“PSBs”), and government companies in contracts for domestic procurement (“Guidelines”). These Guidelines have been issued inter alia in the context of the enactment of the Mediation Act, 2023 (“Act”), the government’s experience of arbitration in respect of contracts where the government is a party, the peculiarities of the government as a litigant, the expenses involved in arbitrations, and routine challenges to arbitral awards.
The Guidelines issued by the government are below:
This Prism has been prepared by:
|
Farhad Sorabjee |
Siddhesh Pradhan |
Meher Mistri |
For more details, please contact [email protected]
Please click here to download the Prism as a PDF.
In a recent iteration, the Supreme Court of India (“Supreme Court”) in the case of Purni Devi and Another v. Babu Ram and Another[1] has held that in terms of Section 14 of the Limitation Act, 1963 (“Limitation Act”) the time period during which a plaintiff has pursued a matter diligently and in good faith against the same party before a wrong forum should be excluded when computing the limitation period before the court of competent jurisdiction.
A suit for possession of property was decreed in favour of the predecessors in interest of Purni Devi (hereinafter referred to as the “Plaintiff”) by which Babu Ram and another (hereinafter referred to as the “Defendants”) were directed to deliver vacant and peaceful possession of property to the Plaintiff. The first and second appeals filed by the Defendants came to be dismissed in November 2000, resulting in the decree attaining finality.
In December 2000, the predecessor of the Plaintiff filed an application for execution of the decree before the Ld. Tehsildar (Settlement), which came to be rejected in January 2005 since it had not been filed before the court with appropriate jurisdiction. The Plaintiff filed a fresh application for execution of the decree before the Ld. Munsiff in October 2005 (“Application”), which was dismissed on account of being barred by limitation under the J&K Limitation Act. The revision application filed by the Plaintiff before the J&K HC was dismissed and the order of the Ld. Munsiff came to be affirmed for the reason that the Application was barred by limitation (“Impugned Order”). Being aggrieved by the Impugned Order, the Plaintiff filed an appeal before the Supreme Court.
Whether the period spent by the Plaintiff in diligently pursuing the execution petition before the Ld. Tehsildar would be excluded for the purposes of computing the period of limitation?
The Supreme Court allowed the appeal and set aside the Impugned Order while inter alia observing as follows:
While parties must be diligent in pursuing matters before an appropriate forum, the findings in this judgment assist parties that may have pursued proceedings before an incorrect forum in good faith. It reiterates that such proceedings would not be barred by limitation.
This Prism has been prepared by:
|
Siddhesh Pradhan |
Meher Mistri |
For more details, please contact [email protected]
[1] 2024 SCC OnLine SC 482
[2] (2008) 7 SCC 169
By an Order dated 21.05.2024, Hon’ble Maharashtra Electricity Regulatory Commission (“MERC”) held that T.P Kirnali Limited was impacted due to increase in rate of Goods and Services Tax and Basic Customs Duty and is accordingly entitled for a total compensation of Rs. 15.48 Crores along with Carrying Cost. MERC has further held that:
MERC in a progressive Order rightly followed settled jurisprudence on Change in Law compensation by granting relief for impact on account of increase in GST and BCD. It disregarded extraneous submissions of MSEDCL to restrict compensation due to the developer. T.P. Kirnali’s undertaking dated 09.09.2021 to not claim increase in project cost or upward revision of tariff for period of extension of Scheduled Commercial Operation Date, was also rightly not held against its claim of Change in Law, since such undertaking only came in context of specific MNRE Office Memorandums. The undertakings required by these Office Memorandums have later been clarified to not be in context of Change in Law. In a progressive measure, MSEDCL has been afforded the opportunity at the outset to elect between lumpsum payment or a staggered payout should MSEDCL choose to save on carrying cost.
T.P. Kirnali Limited was advised and represented by JSA team consisting of Partner – Kunal Kaul and Senior Associate Samikrith Rao. The matter was argued by Mr. Kunal Kaul.
Our Disputes Team Comprised Partner – Kunal Kaul, Senior Associate – Samikrith Rao
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