Newsletter ARBITRATION AND CONCILIATION ACT, 1996 OCTOBER, 2022 WHETHER APPOINTMENT OF ARBITRATOR CAN BE REFUSED ON THE GROUND THAT ARBITRATION PROCEEDINGS WERE ALREADY PENDING BETWEEN THE PARTIES AND AN AWARD WAS ALSO PASSED? Recently, the Hon’ble Supreme Court in the case titled ‘VGP Marine Kingdom Pvt Ltd versus Kay Ellen Arnold’, observed that appointment of an arbitrator cannot be refused on the ground that arbitration proceedings were already pending between the parties. The Hon’ble Court noted that in the instant case, the arbitration was being invoked on the basis of a Share Subscription and Shareholders Agreement which was an independent agreement and on the basis of facts  of the case the Hon’ble Court did not find the dispute to be non-arbitrable. Accordingly, the application filed by the Appellant under Section 11(6) of the Arbitration and Conciliation Act, 1996 that was dismissed by the Hon’ble High Court was allowed by the Hon’ble Supreme Court of India. The Hon’ble Supreme Court, in this regard, heavily relied on the Judgment titled ‘Vidya Drolia and Ors. vs. Durga Trading Corporation, (2021) 2 SCC 1’ passed by the Hon’ble Supreme Court of India wherein the bench had observed that unless on the facet of facts it is found that the dispute is not arbitrable and if it requires further consideration, the dispute with respect to the arbitrability is the domain of the arbitrator and hence, the same should be left to the arbitrator to decide. Read More... WHETHER INVALID APPOINTMENT OF AN ARBITRATOR WOULD RENDER THE ENITRE ARBITRATION CLUASE INVALID? Recently, a single judge bench of Delhi High Court comprising of Hon’ble Justice Anup Jairam Bhambhani observed that if existence of the arbitration agreement is not disputed by either party, then invalidity of the procedure of appointment of arbitrator does not invalidate the arbitration agreement itself. In view of the consistent view laid down by the Hon’ble Supreme Court in cases titled ‘Perkins Eastman DPC & Anr. v. HCC (India) Ltd., (2019) SCC Online SC 1517’ and ‘TRF Ltd. v. EnergoEngg Projects Ltd., (2017) 8 SCC 377’, the Hon’ble Delhi High Court held that the procedure of appointment of an arbitrator is distinct and separable from the agreement to refer a dispute to arbitration, even if both are contained in the same arbitration clause. Hence, the bench held that the clause wherein the procedure of appointment of arbitrator is laid down that has become invalid now must be severed from the remaining arbitration clause. Read More... WHETHER A BORROWER BEING A FINANCIAL INSTITUTION CAN INVOKE SECTION 11 OF THE SARFAESI ACT i.e. ARBITRAL MECHANISM IN A DISPUTE WITH THE LENDER? Recently, a single bench comprising of Hon'ble Mr. Justice Anup Jairam Bhambhani of the Delhi High Court in the case titled “Bell Finvest India Limited & Ors vs. AU Small Finance Bank Limited” held that the remedy of arbitration provided in Section 11 of the SARFAESI Act cannot override the special remedies stipulated under the set of special laws, viz. the SARFAESI Act and the RDB Act. In the present case, the petitioner filed an Application under Section 11 of the Arbitration & Conciliation (A&C) Act, 1996, seeking appointment of an Arbitrator in the dispute arising from the Rupee Facility Agreement with the Respondent i.e., Bank. The court while adjudicating upon the said dispute placed reliance on the judgment passed in “Vidya Drolia vs. Durga Trading Corpn.” wherein it was held that implied legislative intention to exclude arbitration can be seen if it appears that the statute creates a special right or a liability and provides for determination of the right and liability to be dealt with by the specified courts or the tribunals specially constituted in that behalf and further lays down that all questions about the said right and liability shall be determined by the court or tribunals so empowered and vested with exclusive jurisdiction. The court further placed reliance on the judgment passed in “M/s. Transcore vs. Union of India & Anr.”, by the Hon’ble Supreme Court wherein it was clarified that the arbitral mechanism contemplated under Section 11 of the SARFAESI Act is applicable to financial institutions for their inter-se disputes but not to a dispute with a borrower, even if the borrower is a financial institution. Thus, the court while rejecting the Petitioner’s Application under Section 11 of A&C Act held that the petitioner being a financial institution dons the hat of a Borrower in the present lis between the parties within the meaning of Section 2(1)(f) of the SARFAESI Act. As such, the present matter will be adjudicated under the provisions of the SARFAESI Act and the RDB Act. Read More... WHETHER AN INTERLOCUTORY ORDER PASSED BY AN ARBITRAL TRIBUNAL IS AMENABLE TO CHALLENGE UNDER ARTICLE 227 OF THE CONSTITUTION OF INDIA? Recently, a single judge bench of the Delhi High Court comprising of Hon’ble Justice C. Hari Shankar in the case titled “Future Coupons Private Limited & Ors. vs. Amazon.Com Nv Investment Holdings Llc & Anr.” held that interlocutory orders passed by the Arbitral Tribunal are not amenable to challenge under Article 227 unless want of good faith is pleaded, or the party is otherwise remediless. In the present case, the Petitioner filed an Application under Article 227 of the Constitution of India, inter-alia, challenging an Interlocutory Order passed by the Arbitral Tribunal, wherein the Tribunal allowed the addendum application of Amazon/Respondent filed under Singapore International Arbitration Centre, 2016 Rules praying for “repudiatory breaches” as the order of injunction passed by the learned Emergency Arbitrator had been breached. While dismissing the petition being non-maintainable, the Hon’ble Court placed reliance on the judgment passed in ‘S.B.P. & Co. v. Patel Engineering Ltd.’ rendered by a bench of seven Hon’ble Judges of the Supreme Court wherein it was observed that under Section 34 of Arbitration and Conciliation (A&C) Act 1996, the aggrieved party has an avenue for ventilating his grievances against the award including any in-between orders that might have been passed by the arbitral tribunal acting under Section 16 of the A&C Act and the object of minimizing judicial intervention while the matter is in the process of being arbitrated upon, will certainly be defeated if the High Court could be approached under Article 227 of the Constitution of India or under Article 226 of the Constitution of India against every order made by the arbitral tribunal. The bench thus held that it is necessary to indicate that once the arbitration has commenced in the arbitral tribunal, parties have to wait until the award is pronounced unless, of course, a right of appeal is available to them under Section 37 of the A&C Act even at an earlier stage. The Hon’ble court further placed reliance on the judgment passed in ‘Bhaven Constructions v. Executive Engineer, Sardar Sarovar Narmada Nigam Ltd’ wherein the above stated position was clarified by restricting the amenability to challenge under Article 227 of the Constitution of India, or interlocutory arbitral orders, to cases where, either, want of good faith is pleaded, or the party is otherwise remediless. Read More... INSOLVENCY AND BANKRUPTCY CODE, 2016 WHETHER INTERIM MORATORIUM UNDER SECTION 96 OF THE IB CODE, 2016 IN RESPECT OF ONE OF THE GUARANTORS CAN IPSO FACTO APPLY AGAINST A CO-GUARANTOR? Recently, the Hon’ble High Court of Delhi in the case titled ‘Axis Trustee Services Ltd. vs. Brij Bhushan Singal & Anr.’ observed that merely because an interim moratorium under Section 96 of the IB Code, 2016 is operable in respect of one of the co-guarantors does not mean that it would be applicable to the co-guarantor(s). The court examined Sections 96(1) and 96(1)(a) of the IB Code, 2016 and determined that "all the debts" used in this section must refer to all debts of a specific debtor and that language used in Section 96(1) of the IB Code, 2016 shall not be used to broaden the scope of this provision to include all co-guarantors within the scope of the interim moratorium. Read More... WHETHER THE PROVIDENT FUNDS CAN BE CONSIDERED AS THE ASSETS OF THE CORPORATE DEBTOR AND REQUIRED TO BE PAID IN FULL? Recently Hon’ble National Company Law Appellate Tribunal (‘NCLAT’)in the case titled ‘Assam Tea Employees Provident Fund Organization Vs. Mr. Madhur Agarwal RP of Hail Tea Ltd’, observed that provident fund dues are not the assets of the Corporate Debtor and they have to be paid in full. In the present case, the Appellant submitted its claim in Form-B, pursuant to admission of Corporate Insolvency Resolution Petition against the Corporate Debtor for an amount of Rs. 2 Crores (Approx.) which was admitted in entirety by the Resolution Professional. However, the resolution plan that was approved by the Ld. Adjudicating Authority only proposed a payment of Rs. 1 Crores (approx.) to the Appellant. Being aggrieved by the order whereby the Ld. Adjudicating Authority approved the resolution plan, the Appellant preferred an appeal before the Hon’ble NCLAT. In this regard, the Hon’ble NCLAT placed reliance on the Judgment titled ‘Regional P.F. Commissioner Vs Ashish Chhawchharia, Resolution Professional for Jet Airways (India) Ltd. & Anr.’ to hold that the provident fund dues are not the assets of the Corporate Debtor and they have to be disbursed in full. Read More... WHETHER MORATORIUM ISSUED UNDER THE  IB CODE, 2016 CREATE AN EMBARGO ON ATTACHMENT OF A TAINTED PROPERTY OF CORPORATE DEBTOR UNDER SECTION 5 & 8 OF PREVENTION OF MONEY LAUNDERING ACT? Recently a single judge bench of the Delhi High Court comprising of Hon’ble Justice Yashwant Varma in the case titled ‘Rajiv Chakraborty Resolution Professional of EIEL v Directorate of Enforcement’, observed that in no way provisions of the Prevention of Money Laundering Act, 2002 (‘PMLA, 2002’) are subordinate to Section 14 of the IB Code, 2016. Thus, moratorium under the IB Code, 2016 does not prevent the authorities under the PMLA, 2002 from exercising the powers conferred upon them under Sections 5 and 8 of the PMLA, 2002 notwithstanding the pendency of the Corporate Insolvency Resolution Process. The Hon’ble Court further added that attachment under PMLA is not concerned with the recovery or enforcement of a debt. The bench further observed that the purpose of attachment is take the custody of tainted properties that are found to represent proceeds of crime pursuant to the adjudicatory process which is undertaken under Sections 5 and 8 of the PMLA, 2002 to seize the property and bring it into the constructive possession of a Court or in the possession of the authorities under the PMLA, 2002. Read More... WHETHER AN ERROR IN THE GST NUMBER REFLECTED ON THE INVOICES RAISED BY THE OPERATIONAL CREDITOR CAN RENDER THE PETITION FILED UNDER SECTION 9 OF THE IB CODE AGAINST THE CORPORATE DEBTOR AS NON-MAINTAINABLE? Recently, the principal bench of National Company Law Appellate Tribunal, comprising of Hon’ble Justice Ashok Bhushan, Dr. Alok Srivastava and Mr. Barun Mitra, Technical members in the case titled ‘Verender Singh v. DVS Infrastructure Pvt. Ltd. & Anr.’  held that merely because GST number is wrongly mentioned in the invoices will not make the demand under the IB Code, 2016 invalid especially when there is no dispute between the parties regarding the supply of the goods, invoices raised and quality of goods. In the present case, the GST number that reflected in the invoices was the GST number which was registered by the Corporate Debtor. However, the Corporate Debtor surrendered the said number. On the said facts, the Bench observed that merely because the Corporate Debtor was claiming GST input credit from another GST number cannot be a ground to state that the Operational Creditor has failed to prove his debt and default. Read More... INTELLECTUAL PROPERTY RIGHTS WHETHER THE DEFENDANT’S TRADEMARK ‘MAKE TRUE TRIP’ IS DECEPTIVELY SIMILAR TO PLAINTIFF’S ALREADY REGISTERED TRADEMARK ‘MAKE MY TRIP’? Recently, a single bench comprising of Hon’ble Justice Jyoti Singh of the Delhi High Court in the case titled “MAKEMYTRIP (India) Pvt. Ltd. vs. MAKE TRUE TRIP (OPC) Pvt. Ltd. & Anr.” held that an identical color scheme layout and arrangement is a ground for trademark infringement as it amounts to deceptive similarity. In the present case, the plaintiff company acquired knowledge of the Defendants Application for “proposed to be used” of the trademark name “Make true trip”, which is deceptively similar to the plaintiff’s already registered trademark “Make my trip”. Additionally, the Defendants have tried to come as close as possible to the Plaintiff’s mark which is evident from the fact that Defendants have slavishly copied the concept of combination of two colors, as adopted by the Plaintiff. Thus, the Hon’ble Court was pleased to pass an order restraining the Defendants from using a deceptively similar trademark to that of Plaintiff’s, as doing so would amount to infringement of the Plaintiff’s registered trademarks as well as passing. Read More... WHETHER THE COUNTERFEITING OF FOOD PACKAGING IS CONTRARY IN LAW? Recently, a single bench comprising of Hon’ble Justice Pratibha M. Singh of Delhi High Court in the case titled “LT Foods Limited vs. Saraswati Trading Company” held that the counterfeiting of someone else packaging to misrepresent the quality of the food is completely contrary in law. In the present case, Plaintiff filed a suit for permanent injunction and damages for infringement of plaintiff registered mark “DAWAT/DAAWAT” against the Defendants i.e., Saraswati Trading Company. Accordingly, an ex parte ad interim injunction was passed and a Local Commissioner was appointed to visit the premises of the Defendants. Thereafter, from the perusal of the report submitted by the Local Commissioner, it was found out that the Defendant is using a counterfeit packaging which is identical to the Plaintiff’s packaging to sell Jawaphool Rice portraying the same to be Basmati Rice. Since, no one appeared for the Defendants and no Written Statement was filed, the Hon’ble High Court while placing reliance on the judgment passed in ‘M L Brother LLP v. Mahesh Kumar Bhrualal Tanna, CS(COMM) 126/2022’, wherein it was held that Order 26 Rule 10(2) of the Code of Civil Procedure 1908 stipulates that the report of the Commissioner and the evidence taken by the Commissioner shall be considered as evidence in the suit and shall form part of the record. In view of the above stated facts and legal position, the Hon’ble Court decreed the suit in favour of the Plaintiff with damages to the tune of Rs. 20,00,000/- and Cost of Rs. 5,00,000/-. Read More... WHETHER THE DEFENDANT’S USING OF MARK ‘BROWNIE CHIP FRAPPUCCINO’ IS DECEPTIVELY SIMILAR TO PLAINTIFF’S ALREADY REGISTERED TRADEMARK ‘FRAPPUCCINO’? Recently, a single judge bench of the Delhi High Court comprising of Hon’ble Justice Navin Chawla in the case titled “Starbucks Corporation vs. LOL Café & Anr.” passed a summary judgment while placing reliance on the judgment passed by this Court in ‘Su-Kam Power Systems Ltd. v. Kunwer Sachdev and Another, 2019 SCC OnLine Del 10764’, wherein it was held that Rule 3 of Order XIIIA, CPC, as applicable to commercial disputes, empowers the Court to grant a summary judgement against the defendant where the Court considers that the defendant has no real prospects of successfully defending the claim and there is no other compelling reason why the claim should not be disposed of before recording of oral evidence. In the present case, the plaintiff filed a suit inter-alia praying for a decree of permanent injunction restraining the Defendants from using an identical mark i.e., “BROWNIE Chip FRAPPUCCINO” to that of plaintiff’s registered trademark “FRAPPUCCINO”.  Thus, the Hon’ble court was pleased to decreed the suit in favour of the plaintiff and as such, reliance was also placed on the judgment passed in “Starbucks Corporation v. Jail Cafe and Anr.; 2019 SCC OnLine 12301” and “Starbucks Corporation v. Teaquila A Fashion Cafe & Anr., 2022 SCC OnLine Del 1381” wherein similar circumstances suits were filed by the plaintiff for the protection of its mark ‘FRAPPUCCINO’ and have been decreed by this Court and damages have also been awarded to the plaintiff. Read More... Miscellaneous WHETHER A BORROWER HAS A RIGHT TO INITIATE PROCEEDINGS BEFORE A CIVIL COURT AGAINST THE BANK OR FINANCIAL INSTITUTION, WHICH SEEKS TO RECOVER A LOAN AMOUNT AGAINST IT? Recently, the Hon'ble Supreme Court in the case titled ‘Bank of Rajasthan Ltd. vs. VCK Shares & Stock Broking Services Ltd.’ held that the borrower can file a separate suit or proceeding before a civil court or other appropriate forum in respect of his claim against the bank and pursue the same. In the present case, the bench was hearing an Appeal wherein the borrower had filed a separate suit before a civil court in respect of his claim against the bank rather than filing a counter-claim under Section 19 of the Recovery of Debt and Bankruptcy Act (RDB), 1993. The bench while adjudicating on the aforesaid Appeal observed that, the Bank against whom the counter-claim by the Borrower has been made, has the option to apply to the Debt Recovery Tribunal to exclude the counter-claim of the borrower while considering its application. The borrower will then have to approach the civil court in respect of such excluded counter claim as the Tribunal does not have jurisdiction to try any independent claim against a bank/financial institution. Thus, the bench held that making a counter claim in the Bank’s application before the Tribunal is not the only remedy available to a borrower, but merely an option available to the borrower. Further, the court held, on a plain reading of the Section 17 of the RDB Act, that it bars the jurisdiction of the Civil Court only in respect of applications filed by the bank or financial institution. The bench further held that it would not be appropriate for the Civil Court to transfer a suit to a DRT under Section 151 of the Code when the DRT is a creature of a statute and that statute does not provide for such eventuality and the plaint filed by a borrower can be returned only under the provisions of Order VII Rule 10 of the Code for the reasons specified therein. In the absence of such reasons, Section 151 of the Code cannot be utilised as a residuary power to achieve the transfer. The bench also held that it is not open to a defendant, who may have taken recourse to the Civil Court, to seek a stay on the decision of the DRT awaiting the verdict of his suit before the Civil Court as it is a matter of his choice. The suit would take its own course while a petition before the DRT would take its own course. WHETHER A BORROWER HAS A LEGAL RIGHT TO INITIATE PROCEEDINGS BEFORE A CIVIL COURT AGAINST THE BANK OR FINANCIAL INSTITUTION, WHICH SEEKS TO RECOVER A LOAN AMOUNT AGAINST IT? Recently, a single judge bench of Supreme Court comprising of Hon’ble Justice Sanjay Kishan Kaul in the case titled ‘Bank of Rajasthan Ltd. vs. VCK Shares & Stock Broking Services Ltd.’ held that the borrower can file a separate suit or proceeding before a civil court or other appropriate forum in respect of his claim against the bank and pursue the same. In the present case, the bench was hearing an Appeal wherein the borrower had filed a separate suit before a civil court in respect of his claim against the bank rather than filing a counter-claim under Section 19 of the Recovery of Debt and Bankruptcy Act (RDB), 1993. The bench while adjudicating on the aforesaid Appeal observed that, the Bank in whose application the counter-claim by the Borrower is made, has the option to apply to the Debt Recovery Tribunal to exclude the counter-claim of the borrower while considering its application. The borrower will then have to approach the civil court in respect of such excluded counter claim as the Tribunal does not have jurisdiction to try any independent claim against a bank/financial institution. Thus, the bench held that making a counter claim in the Bank’s application before the Tribunal is not the only remedy, but an option available to the borrower. Further, on a plain reading of the Section 17 of the RDB Act, it was concluded that it bars the jurisdiction of the Civil Court only in respect of applications filed by the bank or financial institution. The bench further held that it would not be appropriate for the Civil Court to transfer a suit to a DRT under Section 151 of the Code when the DRT is a creature of a statute and that statute does not provide for such eventuality and the plaint can be returned only under the provisions of Order VII Rule 10 of the Code for the reasons specified therein. In the absence of such reasons, Section 151 of the Code cannot be utilised as a residuary power to achieve the transfer. The bench also held that it is not open to a defendant, who may have taken recourse to the Civil Court, to seek a stay on the decision of the DRT awaiting the verdict of his suit before the Civil Court as it is a matter of his choice. The suit would take its own course while a petition before the DRT would take its own course. Read More... WHETHER A PLAINT CAN BE RETURNED AT ANY STAGE OF THE SUIT IF THE COURT LACKS TERRITORIAL JURISDICTION? Recent, a single bench comprising of Hon’ble Justice Navin Chawla of Delhi High Court in the case titled “Vivek Purwar and Anr. vs. Hari Ram and Sons.” observed that it is trite law that the plaint can be returned at any stage of the suit if the Court finds that in the given facts, the Court has no territorial jurisdiction. In the present case, the cross-appeals have been filed against the order of the Ld. Trial Court wherein the Ld. Trial Court while adjudicating on the issues framed held that it lacked territorial jurisdiction to entertain the present suit, but since evidence had already been led in the suit, the judgment was pronounced on other issues. The judgment being in favour of the plaintiff on issues other than territorial jurisdiction, the suit was decreed in favour of the plaintiff. Thus, it was held by the Hon’ble High Court that in view of the lack of territorial jurisdiction of the Court, finding of the Ld. Trial Court on the other issues is set aside and shall not be binding on the parties. Read More... WHETHER A PROCEEDING INITIATED UNDER SARFAESI ACT, 2002 WOULD ACT AS AN EMBARGO TO THE ARBITRATION PROCEEDINGS? Recently, a single judge bench of the Delhi High Court comprising of Hon’ble Justice V. Kameswar Rao in the case titled ‘Hero Fincorp. Limited Vs. Techno Trexim (I) Pvt. Ltd. & Ors.’ held that the action under Section 17 of the SARFAESI Act would not bar the initiation of arbitration proceedings. In the present case, the petitioner filed an Application under Section 11(5) of the Arbitration and Conciliation Act, 1996, however, the Respondent challenged the said Application on the ground that the remedy in the present case is available under the SARFAESI Act and the Civil Court is barred in relation to matters in which the Debt Recovery Tribunal (‘DRT’) has jurisdiction. Thus, the court while rejecting the submission made by the Respondent held that the petitioner is a Non-Banking Financial Company and thus does not get covered under the RDB Act. The court further observed that even if the Petitioner intends to take action under Section 17 of the SARFAESI Act, 2002 by filing a petition before DRT that would still not preclude the initiation of arbitration proceedings by the petitioner in accordance with law. Read More... 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