National Company Law Appellate Tribunal
Koinonia Coffee Pvt. Ltd vs Vijay Kumar V Iyer Rp Of Future Retail ... on 22 November, 2023
1
NATIONAL COMPANY LAW APPELLATE TRIBUNAL. PRINCIPAL BENCH,
NEW DELHI
Company Appeal (AT) (Ins) No. 572 of 2023
&
I.A. No. 2718 of 2023
IN THE MATTER OF:
Koinonia Coffee Pvt. Ltd. ...Appellant
Versus
Vijay Kumar Iyer
RP of Future Retail Ltd. ...Respondent
Present:
For Appellant : Mr. Gautam Narayan, Ms. Aakashi Lodha, Advocates
For Respondent : Mr. Ritin Rai, Sr. Adv. with Mr. Ashim Sood, Ms. Pallavi
Pratap, Mr. Mridul Yadav, Ms. Petrushka Deas, Ms.
Muskan Jain, Ms. Gunjan Mathur, Ms. Ekansh Gupta,
Advocates for R2
Mr. Krishnendu Datta, Sr. Adv. Ms. Charu Bansal, Ms.
Mohana & Mr. Vasu Manchanda, Adv. for RP
Mr. Pinaki Misra, Sr. Adv. with Mr. Tarun Sharma, Mr.
Sabyaschi Banerjee, Advocates in I.A. No. 2718 of 2023
With
Company Appeal (AT) (Ins) No. 660 of 2023
IN THE MATTER OF:
TNSI Retail Pvt. Ltd. ...Appellant
Versus
Koinonia Coffee Pvt. Ltd. & Anr.
...Respondents
Present:
For Appellant : Mr. Ritin Rai, Sr. Adv. with Mr. Ashim Sood, Ms. Pallavi
Pratap, Mr. Mridul Yadav, Ms. Petrushka Deas, Ms.
Muskan Jain, Ms. Gunjan Mathur, Ms. Ekansh Gupta,
Advocates
For Respondent : Mr. Gautam Narayan, Ms. Aakashi Lodha, Adv.
Mr. Krishnendu Datta, Ms. Charu, Ms. Mohana, Mr.
Vasu Manchanda, Advocates for RP
With
Company Appeal (AT) (Ins) No. 674 of 2023
Company Appeal (AT) (Ins) Nos. 572, 660 & 674 of 2023, Contempt Petition No. 27 of 2023 and I.A. No. 2718 of 2023
2
IN THE MATTER OF:
Vijay Kumar Iyer ...Appellant
Versus
Koinonia Coffee Pvt. Ltd. & Ors.
...Respondents
Present:
For Appellant : Mr. Krishnendu Datta, Ms. Charu, Ms. Mohana, Mr.
Vasu Manchanda, Advocates for RP
For Respondent : Mr. Gautam Narayan, Ms. Aakashi Lodha, Adv.
Mr. Ritin Rai, Sr. Adv. with Mr. Ashim Sood, Ms. Pallavi
Pratap, Mr. Mridul Yadav, Ms. Petrushka Deas, Ms.
Muskan Jain, Ms. Gunjan Mathur, Ms. Ekansh Gupta,
Advocates
With
Contempt Case (AT) No. 27 of 2023
in
Comp. App. (AT) (Ins) No. 572 of 2023
IN THE MATTER OF:
Koinonia Cofee Pvt. Ltd. ...Appellant
Versus
Vijay Kumar V Iyer RP of Future retail Ltd. & Ors.
...Respondents
Present:
For Appellant : Mr. Gautam Narayan, Ms. Aakashi Lodha, Advocates
For Respondent : Mr. Krishnendu Datta, Sr. Adv. Ms. Charu Bansal, Ms.
Mohana N. & Mr. Vasu Manchanda, Adv. for RP
Mr. Pinaki Misra, Sr. Adv. with Mr. Tarun Sharma, Mr.
Sabyaschi Banerjee, Advocates
Mr. Ritin Rai, Sr. Adv. with Mr. Ashim Sood, Petrushka
D., Pallavi Pratap, Mridul Yadav, Gunjan Mathur,
Muskan Jain, Ekansh Gupta, Advocates
JUDGMENT
Per: Justice Rakesh Kumar Jain:
This order shall dispose of three appeals arising out of the order dated 28.04.2023, passed by the Adjudicating Authority (National Company Law Tribunal, Mumbai Bench, Court No. II), bearing CA (AT) (Ins) No. 572 of Company Appeal (AT) (Ins) Nos. 572, 660 & 674 of 2023, Contempt Petition No. 27 of 2023 and I.A. No. 2718 of 2023 3 2023 titled as 'Koinonia Coffee Pvt. Ltd.' Vs. Vijay Kumar V Iyer, RP of Future Retail Limited & Ors.' (First Appeal), CA (AT) (Ins) No. 660 of 2023 titled as 'TNSI Retail Pvt. Ltd. Vs. Koinonia Coffee Pvt. Ltd. & Anr.' (Second Appeal), CA (AT) (Ins) No. 674 of 2023 titled as 'Vijay Kumar V. Iyer Vs. Koinonia Coffee Pvt. Ltd. & Ors.' (Third Appeal), one Intervention Application i.e. I.A. No. 2718 of 2023 and a Contempt Petition (AT) No. 27 of 2023 in CA (AT) (Ins) No. 572 of 2023 filed for the alleged violation of the order dated 31.05.2023 passed by this Tribunal in CA (AT) (Ins) No. 572 of 2023.
2. Bank of India filed an application i.e. C.P. (IB) No. 572/(MB)/2022 under Section 7 of the Insolvency and Bankruptcy Code, 2016 (in short 'Code') against the Future Retail Ltd. (in short 'FRL') (Corporate Debtor). FRL was admitted into Corporate Insolvency Resolution Process (in short 'CIRP') vide order dated 20.07.2022, moratorium was declared and Vijay Kumar V Iyer was appointed as Resolution Professional (in short 'RP').
3. FRL established a High-End Supermarket in the name of 'Foodhall' and has seven stores of Foodhall across Mumbai, Delhi and Bangalore. Koinonia Coffee Pvt. Ltd. (in short 'KCPL') has been operating coffee shops in five of the Foodhall stores under the Shop-In-Shop Agreements executed at various times. KCPL filed an application i.e. I.A. No. 3439 of 2022 in CP (IB) No. 527/(MB)/2022 seeking following directions: -
"(i)Take custody of the Foodhall business of the Corporate Debtor and to operate the same as a going concern;
(ii) initiate investigation into the affairs of Foodhall and submit a report with respect to the legality of the affairs of Foodhall;
Company Appeal (AT) (Ins) Nos. 572, 660 & 674 of 2023, Contempt Petition No. 27 of 2023 and I.A. No. 2718 of 2023 4
(iii)Restrain the employees of the Corporate Debtor and the Respondent No.2 from interfering in or dealing with the property of the Corporate Debtor and for direction against the RP for a payment of the outstanding sum due to the Applicant by treating it as a part of the Corporate Insolvency Resolution Process (CIRP) costs,"
4. I.A. No. 3439 of 2022 filed by KCPL was disposed of by the Adjudicating Authority vide its impugned order dated 28.04.2023 with the following observations and findings: -
"9. We have heard the Counsels appearing for the parties at great length. On perusal of the instant Application and the documents on record, it is seen that the primary issue for consideration before us is whether the BSA is valid and legal. In this regard, we observe that the RP is cognisant of the contentious nature of the BSA and other transactions related to it and has already initiated the Transaction Review Audit of various transactions to ascertain whether any transactions fall under the ambit of preferential, undervalued, extortionate, fraudulent or wrongful trading under the provisions of the Code. We recognise the fact that though the Applicant has filed this Application at a premature stage i.e. prior to the completion of the Transaction Audit, the apprehensions of the Applicants are legitimate.
10.In view of the foregoing, the RP is directed to take all necessary steps to secure that portion of the revenue generated by the Foodhall business that is owed to the Applicant in a separate escrow account until the completion of the Transaction Review Audit and the submission of its final Report to the RP. In case the RP finds any transaction falling under the ambit of preferential, undervalued, extortionate, fraudulent or wrongful trading after perusal of the final Transaction Audit Report, the RP is duty bound to file an appropriate application before this Tribunal under relevant provisions of the Code.
11. With the above observations, I.A. No. 3439 of 2022 is disposed of in the above terms."
Company Appeal (AT) (Ins) Nos. 572, 660 & 674 of 2023, Contempt Petition No. 27 of 2023 and I.A. No. 2718 of 2023 5
5. Aggrieved against the impugned order dated 28.04.2023, the first appeal has been filed in which the Appellant (KCPL) filed an I.A. No. 2284 of 2023 for an interim order which was allowed by this Tribunal vide order dated 31.05.2023 in which the facts of this case have been given in detail, therefore, the said order is reproduced as under:-
"1. This Appeal is directed against the order dated 28.04.2023 passed by the 'National Company Law Tribunal, Mumbai Bench' (hereinafter referred as to 'The Adjudicating Authority') by which an application bearing IA No. 3439 of 2022 filed by the Appellant in which following prayers were made, namely, (i) take custody of the Foodhall business of the Corporate Debtor and to operate the same as a going concern; (ii) initiate investigation into the affairs of Foodhall and submit a report with respect to the legality of the affairs of Foodhall; (iii) Restrain the employees of the Corporate Debtor and the Respondent No.2 from interfering in or dealing with the property of the Corporate Debtor and for direction against the RP for a payment of the outstanding sum due to the Applicant by treating it as a part of the Corporate Insolvency Resolution Process (CIRP) costs, has been dismissed on the ground that though the primary issue for consideration is as to whether the 'Business Service Agreement' (BSA) is valid and legal for which the Resolution Professional is cognizant and has initiated the Transaction Review Audit of various transaction to ascertain, whether any transaction fall under the ambit of preferential, undervalued, extortionate, fraudulent or wrongful trading under the provision of the Code, the Application is found to have been filed at a premature stage i.e. prior to the completion of the Transaction Audit.
2. In the present appeal, the Appellant has made various prayers including prayer clause (g) "pending the hearing and disposal of the present appeal, pass an order restraining the Respondent No.2/TNSI from shutting down any of the seven Foodhall stores".
3. During the pendency of this appeal, the Appellant placed before us a letter dated 16.05.2023 purported to have been served by Respondent No.2 by which the Appellant has been informed that the Foodhall store at Chanakya, New Delhi and Two Horizon Gurugram have to be vacated by it on the expiry of term of Lease Company Appeal (AT) (Ins) Nos. 572, 660 & 674 of 2023, Contempt Petition No. 27 of 2023 and I.A. No. 2718 of 2023 6 Deed/Leave and License Agreement. The said letter dated 16.05.2023, triggered the prayer of the Appellant, for grant of stay. Letter dated 16.05.2023 is reproduced as under:
Company Appeal (AT) (Ins) Nos. 572, 660 & 674 of 2023, Contempt Petition No. 27 of 2023 and I.A. No. 2718 of 2023 7
4. In order to appreciate the controversy between the parties, some brief facts are required to be noticed. The Appellant entered into a 'Shop-in-Shop Agreement' dated 30.11.2021 (First Agreement) with Future Retail Limited (FRL). The Agreement provided a Lock-in Period of three years from the Date of Execution. The relationship was on the basis of revenue sharing as per which 73.5% was the share of the Appellant and 26.5% was to be shared by the FRL. The Appellant was granted space of shop in five Foodhall, three located in Mumbai and two in the NCR. The details of said five foodhall stores are as under:
Sl. No. City Address
1. Mumbai 1.Foodhall@linking Road- Plot No. 106, Linking road, Santacruz West, Mumbai - 400054;
2.Foodhall@vama-VAMA Department Store, Pedder Road, Cumballa Hill, Mumbai - 400026;
and 3.Foodhall@Palladium- Level 3, Company Appeal (AT) (Ins) Nos. 572, 660 & 674 of 2023, Contempt Petition No. 27 of 2023 and I.A. No. 2718 of 2023 8 Palladium Mall, High Street Phoenix, S B Marg, Lower Parel (W) Mumbai - 400 013
2. New Delhi 1.Foodhall@MKT- Lower Ground Floor, The Chanakya Intersection of Satya Marg & African Avenue, Chankyapuri, New Delhi - 110021
2.Foodhall@Two Horizon - 1C & 1D Ground Floor, Two Horizon Center, Sector 43, Gold Course Road, DLF Phase 5, Gurugram Haryana 122 002
5. During the concurrency of the First Agreement, the Appellant entered into an another Agreement on 19.03.2022 (for short 'The Second Agreement') with FRL in which it was stipulated that the agreement would be effective from the date of execution and shall continue for a period of 55 months unless terminated earlier under the agreement. It was also agreed between the parties that they shall not have the right to terminate the Agreement before a period of 31 months from the date of execution (lock-in period). According to the Appellant the Lock-in period is to expire on 19.10.2024, counted from the date of execution of Second Agreement dated 19.03.2022. Clause 15 of the Agreement further provides that "Neither this Agreement nor any part of it is assignable, transferable, sub-licensable, sub-contractable or conveyable by FRL, either by operation of law or otherwise, without the express, prior, written consent of the Company signed by an authorized representative of the Company. The Company reserves the right to refuse such consent in its sole and absolute discretion. Further, on the receipt of notice from FRL to seek consent of the Company to assign this Agreement, the Company shall have the right but not the obligation to terminate this Agreement with immediate effect."
6. However, the revenue share remained the same at all the five locations in which the Appellant was having his Shop in the Foodhall. While this Agreement between the Appellant and FRL was going on, the Bank of India filed an application bearing CP(IB) No. 527 (MB) 2022 on 14.04.2022 under Section 7 of the Code, before the Adjudicating Authority, against the Corporate Debtor, to initiate CIRP and on the same day i.e 14.04.2022, the BSA was entered into between the FRL and Respondent No.2 as Company Appeal (AT) (Ins) Nos. 572, 660 & 674 of 2023, Contempt Petition No. 27 of 2023 and I.A. No. 2718 of 2023 9 per which Respondent No.2 was appointed as the franchise for the store premises and given license to run the business under the brand name 'Foodhall'. In consideration, the FRL was held entitled to license fee @ 1% of the net sales and Respondent No.2 was made liable to pay license fee for using company assets @4% of the net sales. It is pertinent to mention that the Application filed under Section 7 was ultimately admitted on 20.07.2022 and Vijay Kumar V.Iyer was appointed as IRP who was later on appointed as RP as well.
7. The Appellant stated to have received an email from Respondent No.2 by which they were informed that Respondent No.2 has entered into an Agreement with Corporate Debtor on 14.04.2022 in respect of Foodhall business and there is no legal sanctity of the arrangement between the Corporate Debtor and the Appellant. Since Respondent No.2 stopped making payments to the Appellant, the Appellant sent email that the action of TNSI is contrary to the Second Agreement and also questioned the conduct of TNSI accepting the invoices raised by the Appellant in terms of the second agreement.
8. It is the case of the Appellant that it sent an email to the RP asking to clear an outstanding amount of Rs. 48,67,897/- to which there was no response by him, thereafter, the Appellant sent a reminder also but ultimately when he did not receive any reply from the RP, filed an application bearing IA No. 3439 of 2022 for the prayers which have already been mentioned in the beginning of this order.
9. While the said application was pending, the Appellant filed a Commercial Suit bearing Commercial Suit (L) No. 33922 of 2022 and also filed an application bearing Interim Application (L) No. 33926 of 2022 dated 21.10.2022 before the Hon'ble High Court of Bombay against TNSI for injunction to restrain it from interfering in its possession as well as in operation of the business. In the said case, the Hon'ble Bombay High Court, after taking the replies and hearing the parties, passed a detailed order on 07.12.2022.
The operative part of the said order read as under:
"12. I have heard Mr. Kamat, learned Advocate appearing on behalf of Applicant/Plaintiff and Mr. Sharma, the learned Advocate appearing on behalf of the Respondent/Defendant. I have also perused the papers and proceedings. The entire dispute Company Appeal (AT) (Ins) Nos. 572, 660 & 674 of 2023, Contempt Petition No. 27 of 2023 and I.A. No. 2718 of 2023 10 revolves around the SIS Agreement entered into between the Plaintiff and FRL. At the outset, I must clarify that the Plaintiff has not accepted that by virtue of the BSA [entered into between the Defendant and FRL], the Defendant, for all intent and purposes, steps into the shoes of FRL. However, for the sake of argument, and for the time being, I will assume that whatever rights FRL had under the SIS Agreement, now vest with the Defendant. The SIS Agreement was entered into on 30th November 2021. Clause 8.1 of the Agreement states that the total term/period of the Agreement is for 5 years, unless terminated earlier as set out in the Agreement. Clause 8.2 is termination for Insolvency and Clause 8.3 is termination for Default. What is important to note is that Clause 8.3 gives the right only to the Plaintiff to terminate the Agreement, if any breach is committed by FRL, and which is not cured despite notice being given in that behalf. Then comes Clause 8.4. Clause 8.4 contemplates that neither party shall have the right to terminate this Agreement for a period of three years from the execution date. In other words, this was a Lock-in Period, which period ends on 29th November 2024. Clause 8.5 categorically records that subject to Clause 8.4, either party shall have the right to terminate this Agreement, without cause, at any time, by giving 90 days prior written notice to the other party. In other words, after the Lock-in Period is over, either party can terminate the Agreement by giving 90 days prior written notice. What is also important is that Clause 15 of this Agreement stipulates that neither the SIS Agreement nor any part of, is assignable, transferable, sub-licensable, sub-contractable, or conveyable by FRL, either by operation of law or otherwise, without the express prior written consent of the Plaintiff. When one reads all these clauses together, prima facie, I am of the opinion that upto 29th November 2024 [the Lock-in Period], FRL has absolutely no right to terminate the SIS Agreement. This is clear when one reads Clauses 8.1 to 8.5 referred to by me above. If FRL cannot terminate the SIS Agreement during the Lock-in Period, then the Defendant, who is only an operator of the FOODHALL Malls, can get no higher right.
13. I am not impressed with the argument canvassed by Mr. Sharma, the learned Advocate appearing on behalf of the Defendant, that the Defendant could terminate the SIS Agreement because the Plaintiff is only a contractor. Even if I was to assume that the Plaintiff is only a contractor, the same would make little difference. Admittedly there is an Agreement between FRL and the Plaintiff which cannot be terminated by FRL for the Company Appeal (AT) (Ins) Nos. 572, 660 & 674 of 2023, Contempt Petition No. 27 of 2023 and I.A. No. 2718 of 2023 11 first 3 years (the Lock-in Period). Once this is the contractual arrangement arrived at between the parties, it makes little difference to the status to the Plaintiff.
14. The argument of Mr. Sharma that the Defendant is not answerable to the Plaintiff because the Plaintiff has not migrated as mentioned above, also holds no substance. Prima facie, the Defendant cannot claim any higher rights than those of FRL under the SIS Agreement. This is more so when takes into consideration that admittedly the Defendant is a 100% subsidiary of FRL. Even the contention of the Defendant that it is a direct lessee/licensee of the premises [in which the FOODHALLs are situated], would make no difference for granting adinterim relief. The Defendant may be the lessee/licensee, but that does not give a right to the Defendant to give a complete go-bye to the SIS Agreement entered into by the Plaintiff with FRL, and by ignoring the terms thereof.
15. For the aforesaid reasons, I am of the view that a strong prima facie a case is made out for grant of adinterim relief. In these circumstances, there shall be adinterim relief in terms of prayer clause (a), except the square bracketed portion and which is in bold and italics, "a) Pending the hearing and final disposal of the present Suit, this Hon'ble Court may be pleased to grant an interim order of temporary injunction restraining the Respondent (and its agents, representatives, and officers) from in any manner interfering with the Applicant's [possession and] operation of the 5 Coffee Shops located in 5 different locations described in greater detail in the Schedule to the Plaint (Ex.A) including but not limited to restraining the Respondent from: (iv) Interfering with the Applicant (and its employees, officers) access, ingress, and egress to the Coffee Shops; (v) Interfering with the Applicant (and its employees, officers) from serving its customers and providing them with products; (vi) Stopping supply of water, electricity and other necessary amenities being supplied to the Coffee Shops of the Applicant.
16. It is needless to clarify that neither party shall do any acts which will in anyway obstruct the operation of the FOODHALLs or the Coffee Shops."
10. The order in the application bearing IA No. 3439 of 2022 was reserved by the Adjudicating Authority on 22.02.2023. While it was still pending before the Adjudicating Authority in the form of having been reserved, the Appellant received a letter from TNSI Company Appeal (AT) (Ins) Nos. 572, 660 & 674 of 2023, Contempt Petition No. 27 of 2023 and I.A. No. 2718 of 2023 12 dated 16.03.2022 informing that Licensor/Respondent No.5 therein, is seeking to terminate the Leave and License Agreement dated 05.09.2022 which was purportedly executed between TNSI and Respondent No.5 w.e.f. 30.04.2023. The Appellant having panicked, wrote to the RP in this regard, but since he did not receive any response, thereafter, filed another application bearing IA No. 1165 of 2023 before the Adjudicating Authority for the purpose of pronouncement of the order in the application bearing IA No. 3439 of 2022. The argument on the said application was again heard and reserved for orders. The Appellant received another letter of termination in regard to the Foodhall store at Palladium Mall on 13.04.2023.
11. Since on the one hand, the Appellant was being threatened for its dispossession from the Foodhall store and on the other hand the Application filed by it was not being decided in one way or the other by of the Adjudicating Authority, therefore, the Appellant filed an appeal bearing CA(AT) (Ins) No. 495 of 2023 before this Tribunal for a direction to the Adjudicating Authority to at least pronounce the order. The said appeal was dismissed on 21.04.2023. However, direction was issued to the Adjudicating Authority to pronounce the order at an early date. It is needless to mention that in the said appeal, there was also a prayer for grant of stay till order is pronounced by the Adjudicating Authority but the said prayer was not acceded to.
12. Be that as it may, after the order was passed on 21.04.2023, the Adjudicating Authority decided the application and passed the impugned order on 28.04.2023 which led to the filing of the present Appeal and while the present appeal was pending and ordered to be heard along with two other appeals which have been filed both by the RP and Respondent No.2, the Appellant received a threat again for the closure of operation in other two stores located in NCR, details of which have already been mentioned in the 4th Paragraph of this order. As a result, the Appellant has prayed in this appeal that before hearing the main appeal and decided the same on merits in one way or other, its operation in the Foodhall Store may not be interfered with.
13. In this regard, Counsel for Appellant has basically challenged the BSA, inter alia, on the ground that the said agreement is only a ploy to avoid the application of the provisions of the Code insofar as the asset of the Corporate Debtor are concerned and Company Appeal (AT) (Ins) Nos. 572, 660 & 674 of 2023, Contempt Petition No. 27 of 2023 and I.A. No. 2718 of 2023 13 also to siphon off the revenue generated from the operation of Foodhall otherwise, there was no occasion for execution of BSA on the same day when the application was filed by the Financial Creditor i.e. Bank of India for the purpose of initiation of insolvency proceeding against the Corporate Debtor (FRL).
14. He also submitted that the BSA does not inspire confidence because nobody has been named to have represented the FRL in the said Agreement and even the signatures of the person who has signed is not traceable. He has further submitted that though in the Agreement it has been mentioned "in the presence of" but this Agreement has not been witnessed by any witness.
15. It is submitted that after the execution of BSA, the Respondent no.2 who came into existence because of that Agreement, entered into a Leave and License Agreement on 05.09.2022 with the Lessor but the commencement of the License was shown w.e.f 01.05.2022. It is submitted that since the CIRP was initiated in the month of July, 2022 itself, therefore, Agreement dated 05.09.2022 appears to have been created for the purposes of saving the Lessor from the rigours of Section 14(1)(d) of the Code otherwise, the Agreement which was earlier executed between the Lessor and FRL is not produced on record.
16. It is further submitted that even if it is presumed, for the sake of argument that BSA is a genuine document, it could not be even executed in view of the bar created in the Second Agreement with regard to Assignment. It is also submitted that in the BSA, there is no authority given for the purpose of executing the Leave and License Agreement because it has given the authority only to operate the Foodhall.
17. Counsel for Respondent No.2 has submitted that the Appellant is one of the 20 Vendors in the Foodhall and generating a miniscule revenue of an amount of Rs. 169.21 lakh as against the total revenue generated of Rs. 8797.75 lakh. It is also submitted that after the BSA was executed on 14.04.2022, the CEO of the Corporate Debtor addressed an email to the Appellant dated 26.04.2022 conveying that the Vendor Codes would be migrated.
18. It is further submitted that the CEO of the Corporate Debtor addressed another email dated 04.07.2022 to the Appellant Company Appeal (AT) (Ins) Nos. 572, 660 & 674 of 2023, Contempt Petition No. 27 of 2023 and I.A. No. 2718 of 2023 14 revising the revenue model of the Appellant up to 90%. It is further argued by Counsel for Respondent No.2 that the Appellant had the knowledge of BSA and was not taken by surprise because he was asked that there would be an exchange of draft of the proposed Agreement with the Appellant. It is submitted that the contention of the Appellant that the BSA is only an eyewash and has been created between the FRL and its 100% subsidiary is not correct. He has then submitted that the Appellant had earlier tried to obtain injunction from the Hon'ble Bombay High Court but it was not given injunction insofar as possession is concerned. Thereafter, he tried to obtain injunction in the appeal bearing CA(AT) (Ins) No. 495 of 2023 filed before this Tribunal but no injunction was granted. It is thus submitted that the Appellant has tried it again for the purpose of obtaining injunction. In this regard, he has relied upon a decision of the Hon'ble Supreme Court in the case of Union of India Vs. CIPLA Limited & Ors. (2017) 5 SCC 262 and referred to para 148 & 155 which are reproduced below:
"148. A classic example of forum shopping is when a litigant approaches one Court for relief but does not get the desired relief and then approaches another Court for the same relief. This occurred in Rajiv Bhatia v. Govt. of NCT of Delhi and others. The respondent-mother of a young child had filed a petition for a writ of habeas corpus in the Rajasthan High Court and apparently did not get the required relief from that Court. She then filed a petition in the Delhi High Court also for a writ of habeas corpus and obtained the necessary relief. Notwithstanding this, this Court did not interfere with the order passed by the Delhi High Court for the reason that this Court ascertained the views of the child and found that she did not want to even talk to her adoptive parents and therefore the custody of the child granted by the Delhi High Court to the respondent-mother was not interfered with. The decision of this Court is on its own facts, even though it is a classic case of forum shopping.
155. The decisions referred to clearly lay down the principle that the Court is required to adopt a functional test vis-à-vis the litigation and the litigant. What has to be seen is whether there any functional similarity in the proceedings between one Court and another or whether there is some sort of subterfuge on the part of a litigant. It is this functional test that will determine whether a litigant is indulging in forum shopping or not."
Company Appeal (AT) (Ins) Nos. 572, 660 & 674 of 2023, Contempt Petition No. 27 of 2023 and I.A. No. 2718 of 2023 15
19. It is also submitted that the Appellant is not entitled to an injunction because he has not come to the Court with clean hands and in this regard relied upon a decision of the Hon'ble Supreme Court in Seema Arshad Zaheer & Ors. Vs. Municipal Corp. of Greater Mumbai & Ors. (2006) 5 SCC 282 and relied upon para 30 which is reproduced below:
"30. The discretion of the court is exercised to grant a temporary injunction only when the following requirements are made out by the plaintiff : (i) existence of a prima facie case as pleaded, necessitating protection of plaintiff's rights by issue of a temporary injunction; (ii) when the need for protection of plaintiff's rights is compared with or weighed against the need for protection of defendant's rights or likely infringement of defendant's rights, the balance of convenience tilting in favour of plaintiff; and (iii) clear possibility of irreparable injury being caused to plaintiff if the temporary injunction is not granted. In addition, temporary injunction being an equitable relief, the discretion to grant such relief will be exercised only when the plaintiff's conduct is free from blame and he approaches the court with clean hands."
20. Counsel for Respondent No.2 has then argued that if the main contract breaks down due to any reasons then the secondary contract would follow. This argument has been raised on the ground that once the Lessor has terminated the lease, there is no question of Appellant being retained as a Vendor in the Foodhall. In this regard, he has relied upon a decision of the Hon'ble Delhi High in Smt. Sharda majahan Vs. Maple Leaf Trading International P. Ltd. (2007) 139 Comp Cas 718 and has referred to para 30 which is reproduced as under:
"30.The facts of the present case show that Section 56 of the Contract Act is applicable. The petitioner had entered into contract in 1999 with the respondent. Immediately, thereafter in 1999 itself after raids by the Enforcement Directorate and criminal prosecution initiated against the Directors, the respondent company's, accounts were frozen and the money lying in the bank accounts was seized. The contract envisaged recruiting and duplication of new members by existing members like the petitioner, which was impossible because of search, seizure and commercial activities of the respondent company coming to a stand still. Neither was it possible for the respondent company to comply with the terms of the contract and enroll new members. It was practically impossible for the respondent Company Appeal (AT) (Ins) Nos. 572, 660 & 674 of 2023, Contempt Petition No. 27 of 2023 and I.A. No. 2718 of 2023 16 company to comply with their obligations in view of the action taken by the Enforcement Directorate and freezing of accounts. The respondent company has not been able to carry on business for last nearly eight years. In fact the respondent company admitted frustration of contract in the advertisements informing the investors like the petitioner that they shall be repaid the entire amount deposited/paid by them though with a rider that repayment will be made after accounts are de-sealed. It is clear from the judgments referred above that for Section 56 of the Contract Act to apply, it is irrelevant whether the intervening circumstances making the contract impossible of performance had not occurred due to default of any of the parties. Therefore, even if it is presumed that the respondent company was not responsible for the seizure of bank accounts and the injunction orders passed, doctrine of frustration of contract is still applicable. The delay and laches also results in frustration of contracts and therefore the above contract has ceased to be binding. The contract stands frustrated."
21. Insofar as Respondent No.1/ RP is concerned, it is submitted that the application bearing IA No. 3463 of 2022 and IA No.420 of 2023 have been filed by him under Section 19 of the Code. IA No. 3463 of 2022 is filed in respect of SAP which has been disposed of on 16.05.2023 but the other application i.e. IA No. 420 of 2023 is filed with regard to the information to be adduced from the Auditor and Chartered Accountant of the Corporate Debtor is pending. It is further submitted that he has already received the first report of the transaction audit report on 21.03.2023 and on the basis thereof, eight Applications have been filed regarding preferential transaction and one application has been filed in regard to undervalued transaction. The said applications are pending before the Adjudicating Authority.
22. It is further submitted that he has also received second report from the Financial Auditor on 22.05.2023 and after the queries raised by him, the transaction auditor has submitted the revised report on 29.05.2023 which includes the report regarding the genuineness of BSA as well. He has submitted that at present the RP is examining the said report because as per the provisions of the Code, RP has to first form an opinion himself to find out as to whether there exist material for avoidance transaction etc., and once he forms an opinion then he would bring it to the notice of Company Appeal (AT) (Ins) Nos. 572, 660 & 674 of 2023, Contempt Petition No. 27 of 2023 and I.A. No. 2718 of 2023 17 the Adjudicating Authority by way of an appropriate application which shall take some time.
23. We have heard counsel for parties and perused the record with their able assistance.
24. From the facts of the case narrated hereinabove, one thing is clear that the Appellant has two subsisting Agreements in his favour i.e. first Agreement and Second Agreement on the basis of which he has been occupying the space in Foodhall as a Vendor. It appears that the problem started in this case, when the Bank of India filed an application under Section 7 of the Code against FRL on 14.04.2022 for initiation of CIRP. At present, we are not making any observations or recording any findings in respect of the genuineness of the BSA which came into being on the same date i.e 14.04.2022 with all alleged shortcomings attached to it which have been highlighted by the Appellant but the fact of the matter is that because of BSA, a new entity came into picture, namely, Respondent no.2 as an 'Operator' on behalf of the FRL.
25. Apropos, the Leave and License Agreement also came into being on 05.09.2022 that too w.e.f. 01.05.2022 in which it is clearly provided that "contractual term" shall mean a period of 24 months to be reckoned from the License Commencement Date". Though, we are referring to the Leave and License Agreement dated 05.09.2022, Counsel for Respondent No.2 has pointed out that it was pertaining to the properties situated at Linking Road, Bandra and Palladium whereas the Appellant has asked for injunction in the two properties situated in the NCR.
26. In this regard, counsel for Appellant has submitted that he cannot produce the said Leave and License Agreement of the Lessor of the property in the NCR because it is not in his possession being not a party in those Agreements because those Agreements must have been executed by the said Lessor with Respondent No.2, therefore, Respondent no.2 may place those documents on record. However, keeping in view of the fact that the operation of the Appellant was even protected by Hon'ble Bombay High Court while discussing not only the First & Second Agreement but also BSA and was of a strong prima facie opinion that it was a fit case for injunction, therefore, we are also of the considered opinion that at this stage, when we have to decide the main appeal and other related matters in which various issues Company Appeal (AT) (Ins) Nos. 572, 660 & 674 of 2023, Contempt Petition No. 27 of 2023 and I.A. No. 2718 of 2023 18 are involved, it would be just and expedient that the operation of the Appellant in the Mall situated in NCR, namely, (i) Foodhall@MKT (ii) Foodhall@Two Horizon be protected till the next date of hearing.
27. Consequently, the prayer made by the Appellant for an ad interim order in this regard, is hereby allowed. It is ordered that till the next of hearing, the Respondent No.2 shall maintain status quo with regard to the operation in respect of the area on which the vendor is in operation in (i) Foodhall@MKT (ii) Foodhall@Two Horizon.
28. With these observations and directions, the present application is hereby disposed of. No order as to costs."
6. The aforesaid order dated 31.05.2023 was challenged in appeal before the Hon'ble Apex Court by TNSI Retail Pvt. Ltd. (Appellant in second appeal). Civil Appeal No. 4874 of 2023 was dismissed by the Hon'ble Supreme Court vide its order dated 11.08.2023 and the said order read as under:-
"Learned Senior Advocate appearing on behalf of the appellant - TNSI Retail Private Limited seeks permission to withdraw the present appeal and states that the appellant - TNSI Retail Private Limited will raise all pleas and contentions as available in law before the National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi, as the matter is listed before the NCLAT on 16.08.2023.
Recording the aforesaid, the present appeal is dismissed. Pending application(s), if any, shall stand disposed of."
7. Second appeal has been filed by TNSI Retail Pvt. Ltd. against KCPL & the RP of the Corporate Debtor against the same impugned order dated 28.04.2023 alleging that it is aggrieved against the observation of the Company Appeal (AT) (Ins) Nos. 572, 660 & 674 of 2023, Contempt Petition No. 27 of 2023 and I.A. No. 2718 of 2023 19 Adjudicating Authority recorded in Para 9 of the impugned order that "the apprehensions of the applicants are legitimate".
8. Third appeal is filed by the RP of the Corporate Debtor against KCPL, TNSI Retail Pvt. Ltd. and two CEOs of FRL (Corporate Debtor). This appeal has also been filed against the same impugned order but being aggrieved against the finding recorded in Para 10 of the impugned order by the Adjudicating Authority where a direction has been given to the Appellant in this appeal to take all necessary steps to secure that portion of the revenue generated by the Foodhall business that is owed to the Applicant in a separate escrow account until the completion of the Transaction Review Audit.
9. The Intervention Application i.e. I.A. No. 2718 of 2023 has been filed by Riveria Commercial Developments Ltd. for recalling/vacation of the order dated 31.05.2023 which is alleged to have been passed without affording them hearing.
10. The Contempt Petition has been filed by KCPL against as many as ten Respondents, invoking Section 425 of the Companies Act, 2013 r/w Section 10 to 12 of the Contempt of Courts Act, 1971 and Rule 11 and 31 of the NCLAT Rules, 2016 for the alleged violation of the order dated 31.05.2023 and with a further direction to restore the foodhall store @ Chanakya Mkt and @ Horizon, Gurgaon to the status as on 31.05.2023.
11. Counsels have made submissions for and against in regard to their respective appeals, application and contempt petition, but during the course of hearing, it was brought to our notice by Counsel for the RP that the controversy started on account of filing of I.A. No. 3439 of 2022 by KCPL Company Appeal (AT) (Ins) Nos. 572, 660 & 674 of 2023, Contempt Petition No. 27 of 2023 and I.A. No. 2718 of 2023 20 was held to be pre-mature by the Adjudicating Authority vide its impugned order wherein it has been held that "the primary issue for consideration before us is whether the BSA is valid and legal. In this regard, we observe that the RP cognisant of the contentious nature of the BSA and other transactions related to it and has already initiated the Transaction Review Audit of various transactions to ascertain whether any transactions fall under the ambit of preferential, undervalued, extortionate, fraudulent or wrongful trading under the provisions of the Code. We recognise the fact that though the Applicant has filed this Application at a premature stage i.e. prior to the completion of the Transaction Audit" and has further observed that "In case the RP finds any transaction falling under the ambit of preferential, undervalued, extortionate, fraudulent or wrongful trading after perusal of the final Transaction Audit Report, the RP is duty bound to file an appropriate application before this Tribunal under relevant provisions of the Code." After obtaining the transaction audit report, the RP has filed I.A. No. 3457 of 2023 under Section 45 of the Code for avoidance of undervalued transaction in which notice has been issued and date has been fixed and also an application under Section 66 of the Code on 14.08.2023 for fraudulent or wrongful trading which has not been assigned any application number so far and notice has also not been issued. It is submitted that it would be just and expedient to dispose of all the matters pending before this Tribunal with an appropriate direction to the Adjudicating Authority seisen of matter to decide the applications filed by the RP both under Section 45 and 66 of the Code within a time prescribed by this Appellate Tribunal because the application filed by KCPL which is the root cause of the Company Appeal (AT) (Ins) Nos. 572, 660 & 674 of 2023, Contempt Petition No. 27 of 2023 and I.A. No. 2718 of 2023 21 aforesaid litigation pending in this Tribunal was disposed of only on the ground that it has been found to be premature because the transaction review audit report was not available at that time and a direction was given to the RP that he shall file appropriate applications in terms of the report of the transaction review audit which has now exactly been done.
12. Although, Counsel for the Appellant in the first appeal has insisted that the issues regarding the validity of BSA etc. etc. may be decided in this appeal as it is submitted that the Respondent has failed to answer as to why BSA came into being on 14.04.2022 when the application under Section 7 of the Code was filed on the same day and how the leave and license agreement has been entered into by TNSI with Salman Khan on 05.09.2022 without there being any provision in the BSA and why the said leave and license agreement, executed on 05.09.2022, has been made operative from 01.05.2022 i.e. before the order of admission of the application Section 7 of the Code on 20.07.2022.
13. We appreciate the argument and the concern shown by Counsel for the Appellant in the first appeal but all these aspects shall have to be gone into by the Adjudicating Authority while dealing with the application filed under Section 45 and 66 of the Code by the RP and the Adjudicating Authority shall also appreciate the transaction review audit report as well.
14. Counsel for the Appellant in the first appeal has then submitted that if this appeal is being disposed of then at least the order dated 31.05.2023 by which the protection has been granted may be allowed to continue till the application filed under Section 45 and 66 of the Code by the RP is decided by the Adjudicating Authority.
Company Appeal (AT) (Ins) Nos. 572, 660 & 674 of 2023, Contempt Petition No. 27 of 2023 and I.A. No. 2718 of 2023 22
15. While defending the impugned order in the first appeal, Counsels for the Respondents submitted that the application of the Appellant has not been dismissed on merits but it has been found to have been filed at a premature stage i.e prior to the completion of the transaction audit and further a direction has been given to the RP that after the receipt of transaction review audit, in case, the RP finds that any transaction fall within the ambit of preferential, undervalued, extortionate, fraudulent or wrongful trading then it will be brought to the notice of the Adjudicating Authority by way of an application which exactly has been done by the RP by filing of two applications under Section 45 and 66 of the Code, therefore, nothing survives in this appeal.
16. We have heard Counsel for the parties in respect of the first appeal and take into consideration the entire facts and circumstances prevailing at the time when the application was filed and at the time the order was passed that when the application was filed a serious question was raised about the legality and validity of BSA and the Adjudicating Authority was of the view that RP has already initiated transaction review audit of various transactions, therefore, the application was premature at that stage but the apprehension of the applicant therein was found legitimate and necessary directions were given to the RP in Para 10 of the impugned order.
17. In view of the aforesaid facts and circumstances, the present appeal is therefore disposed of. Since, the order dated 31.05.2023 by which the interim protection was granted to KCPL (Appellant) has been upheld by the Hon'ble Supreme Court because the civil appeal filed against the order dated 31.05.2023 has been dismissed, therefore, it is directed that this order of Company Appeal (AT) (Ins) Nos. 572, 660 & 674 of 2023, Contempt Petition No. 27 of 2023 and I.A. No. 2718 of 2023 23 stay dated 31.05.2023 shall continue till the decision of the applications filed under Section 45 and 66 of the Code by the RP. The Adjudicating Authority is further directed to make all efforts to decide as early as possible the applications filed under Section 45 and 66 of the Code by the RP to the earliest but not later than 3 months from the date of passing of this order.
18. As far as the second appeal is concerned, this has been filed by TNSI Retail Pvt. Ltd. on being aggrieved against the observation of the Adjudicating Authority recorded in the impugned order that "the apprehensions of the Applicants are legitimate" is concerned, we do not find much substance in this appeal because after the receipt of transaction review audit, prima facie it is evident that there are issues involved which have been brought to the notice of the Adjudicating Authority by the RP by filing of the applications under Section 45 and 66 of the Code, therefore, this appeal is found to be without merit and the same is hereby dismissed.
19. As regards the third appeal, the grievance of the RP is that he has been directed to take all necessary steps to secure that portion of the revenue generated by the Foodhall business that is owed to the Applicant in a separate escrow account until the completion of the transaction review audit.
20. Counsel for the RP has submitted that he is the RP of the Corporate Debtor whereas Foodhall business is in the hands of TNSI which is a third party (separate entity).
21. We do not agree with this argument of Counsel for the Appellant because TNSI is a 100% subsidiary of FRL, therefore, the board can be Company Appeal (AT) (Ins) Nos. 572, 660 & 674 of 2023, Contempt Petition No. 27 of 2023 and I.A. No. 2718 of 2023 24 changed by the RP or he can take it over and follow the direction issued in Para 10 of the impugned order.
22. In this view of the matter, we do not agree with the contention of the Appellant as well in this appeal and the same is hereby dismissed.
23. In so far as the contempt petition is concerned, since the appeal is being disposed of as the entire matter is again under consideration by the Adjudicating Authority by virtue of applications filed under Section 45 and 66 of the Code by the RP, we do not find any substance in the present petition as well and the same is hereby dismissed.
24. In so far as I.A. No. 2718 of 2023 is concerned, the Applicant has submitted that the Appellant is only having a space admeasuring 350 sq. ft. out of the area admeasuring 14140 sq. ft. being shop no. LG-01, situated in the basement-01 of the Chanakya, Yashwant Place Community Centre, Chanakyapuri, New Delhi. The Appellant executed the agreement with Future Retial Ltd. The Applicant is the developer of the entire multiplex under the concession agreement executed with New Delhi Municipal Council (NDMC) and for the purpose of its operation and management. The Applicant had to pay a huge monthly concession fee of Rs. 1,46,06,748/- to the NDMC. This concession agreement of the Applicant with the NDMC is on PPP basis, the essence thereof is that the Applicant will pay the said concession fee upon earning/operating from the said multiplex. It is further submitted that though the Respondent No. 2/other vendors, who were operating from the said shop no. LG-01, Basement-01, the Chanakya, Yashwant Place Community Centre, Chanakyapuri, New Delhi have removed their stocks, articles, belongings, personnel therefrom but it is only the Company Appeal (AT) (Ins) Nos. 572, 660 & 674 of 2023, Contempt Petition No. 27 of 2023 and I.A. No. 2718 of 2023 25 Appellant herein whose goods are laying in the said space as a result of which the Applicant is not in a position to lease out the entire area admeasuring 14140 sq. ft. to any other party. It is also submitted that out of the area admeasuring 14140 sq. ft., the Applicant is generating revenue almost 50 % of the said monthly concession fee which is to be paid to NDMC. Therefore, it is argued that except for the area in possession of the Appellant, stay in regard to the rest of the area, may be vacated.
25. Keeping in view the aforesaid facts and circumstances, it is hereby ordered that the stay regarding the Appellant shall operate in respect of the area in its possession in the aforesaid Mall.
26. with these observations, all the matters are hereby disposed of as indicated above. The parties are directed to appear before the Adjudicating Authority, seized of the matter, on 11th December, 2023.
The Registry is directed to send the copy of this order to the concerned Adjudicating Authority.
[Justice Rakesh Kumar Jain] Member (Judicial) [Naresh Salecha] Member (Technical) New Delhi 22nd November, 2023 Sheetal Company Appeal (AT) (Ins) Nos. 572, 660 & 674 of 2023, Contempt Petition No. 27 of 2023 and I.A. No. 2718 of 2023