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2022 Supreme(Del) 671
IN THE HIGH COURT OF DELHI AT NEW DELHI
VIBHU BAKHRU, J.
Coldsmiths Retail Services Private Limited – Appellant
Versus
Nirulas Corner House Private Limited & Ors. – Respondents
O.M.P.(I) (COMM.) 302, 314 of 2021
Decided on : 04-04-2022
For the Appellant :Mr Nakul Dewan, Mr Dhirendra Negi, Mr Sidharth Sethi, Mr Rohan Naik and Mr Avinash Das, Advocates.
For the Respondents:Mr Mudit Sharma, Ms Nandini Sharma and Mr Ajay Pratap Singh, Advocates.
Point of Law: Court does not consider it apposite to accede to the interim prayers for interdicting Coldsmiths from carrying on the Transferred Business or for using the Trademarks assigned to it.
Headnote:
Arbitration and Conciliation Act, 1996 - Section 9 - Deed of Assignment - Termination Notice - Illegal Notice - Nirulas and Coldsmiths also entered into Deed of Assignment - Nirulas issued a Termination Notice under Clause 3.4 of Business Transfer Agreement - In terms of said notice, it terminated Business Transfer Agreement as well as Deed of Assignment on ground that Coldsmiths had failed to comply with its payment obligations under Business Transfer Agreement - Termination Notice is central to disputes between parties - Coldsmiths claim that Termination Notice is illegal.
Finding of the Court :
Court is unable to accept that Termination Notice is, ex facie, illegal - It appears that issue regarding change of corporate name is an afterthought and was raised for first time in letter issued by Coldsmiths, through its advocates - Prima facie, contention that Nirulas had deferred changing its corporate name in order to sustain its licenses (fire, pollution and factory license) under which Coldsmiths was carrying on its activities, is merited - This was clearly brought out in emails sent by Nirulas at material time - There is no communication controverting said reasoning - There is good reason for same as it is apparent that change in corporate name had been held up on account of delay in securing requisite licenses for Coldsmiths to carry out manufacturing activities in its own name - Fact that Coldsmiths had made a payment of 1 crore without any reservation in this regard, also supports this view - Disputes between parties are required to be adjudicated by Arbitral Tribunal - Considering that Coldsmiths has paid substantial portion of consideration, this Court does not consider it apposite to accede to interim prayers for interdicting Coldsmiths from carrying on Transferred Business or for using Trademarks assigned to it - However, it is necessary to ensure that subject matter of disputes is preserved - In this view, Coldsmiths is restrained from selling, transferring, encumbering or in any manner alienating any of assets including Intellectual Property Rights acquired by it pursuant to Business Transfer Agreement and Deed of Assignment, till conclusion of arbitral proceedings.
Result: Petition dismissed.
JUDGMENT :
VIBHU BAKHRU, J
1. These are petitions filed under Section 9 of the Arbitration and Conciliation Act, 1996 (hereafter ‘the A&C Act’) seeking interim measures of protection.
2. The disputes between the parties arise in relation with the Business Transfer Agreement dated 21.12.2017 (hereafter the ‘Business Transfer Agreement’); Deed of Assignment dated 04.01.2018 (hereafter the ‘Deed of Assignment’); and, other Agreements (hereafter collectively referred to as ‘Transaction Documents’).
3. The Business Transfer Agreement was executed between Coldsmiths Retail Services Private Limited (hereafter ‘Coldsmiths’), Nirulas Corner House Private Limited (hereafter ‘Nirulas’) and certain individuals/entities mentioned in Schedule I to the Business Transfer Agreement (referred to as “Promoters” in the Business Transfer Agreement). In terms of the Business Transfer Agreement, Nirulas transferred certain business (referred to as “Transferred Business” in the Business Transfer Agreement) including all assets and liabilities relating thereto, to Coldsmiths.
4. Nirulas and Coldsmiths also entered into the Deed of Assignment, whereby Nirulas assigned its Intellectual Property Rights related to the business transferred by it to Coldsmiths in terms of the Business Transfer Agreement. The same included Trademarks as set out in Schedule I to the Deed of Assignment. However, Nirulas retained certain businesses including a Hotel operated under the Trademark “Nirula’s Hotel” and Coldsmiths entered into a Trademark License Agreement dated 03.01.2018 with Nirulas for licensing the said Trademark.
5. Nirulas issued a notice dated 23.07.2021 (hereafter the ‘Termination Notice’) under Clause 3.4 of the Business Transfer Agreement. In terms of the said notice, it terminated the Business Transfer Agreement as well as the Deed of Assignment on the ground that Coldsmiths had failed to comply with its payment obligations under the Business Transfer Agreement.
6. The Termination Notice is central to the disputes between the parties. Coldsmiths claim that the Termination Notice is illegal. It has, accordingly, filed the above-captioned application, inter alia, praying as under:
“a) stay the operation of the Termination Notice dated 23 July 2021 issued by the Respondent No. 1;
b) restrain the Respondents from acting in any manner pursuant to or in furtherance of the Termination Notice dated 23 July 2021;
c) restrain the Respondents from claiming or holding out as the owner of the intellectual property assigned to the Petitioner under the Deed of Assignment;
d) restrain the Respondents from diminishing the value or affecting in any manner the mark "Nirulas" which it has been permitted to use under the Trademark Licence Agreement dated 4 January 2018;
e) direct the Respondents to forthwith company with the requirement under the Licence Agreement and attribute ownership to the Petitioner pertaining to the Licensed Mark;
f). Pass ex-parte and ad-interim reliefs in terms of prayers (a) to (e) above; and
(g) Pass such other or further orders as this Hon’ble Court may deem fit in the facts and circumstances of the case”
7. Nirulas, on the other hand, contends that after termination of the Business Transfer Agreement, it is entitled to the Business/Assets transferred under the Business Transfer Agreement and/or Deed of Assignment. Nirulas has filed a petition, inter alia, praying as under:
“i. restrain the Respondent, their directors, partners, principal officers, servants, agents and representatives etc from directly or indirectly making use of Trademarks/marks set out in Schedule-5 of the Business Transfer Agreement dated 21 December 2017;
ii. restrain the Respondent, their directors, partners, principal officers, servants, agents and representatives etc from directly or indirectly offering, advertising and/or in any manner portraying to be associated with the Trademarks/
