Supreme Court: NCLT has discretion to not admit Financial Creditor’s CIRP Application even if Corporate Debtor is in default

The Hon’ble Supreme Court (“SC”) has in its judgment dated July 12, 2022 in the matter of Vidarbha Industries Power Limited v. Axis Bank Limited [Civil Appeal No. 4633 of 2021] held that it is not mandatory for the adjudicating authority to admit an application to initiate Corporate Insolvency Resolution Process (“CIRP”) even if the existence of debt and default in payment of debt by the corporate debtor is established.

Facts
Vidarbha Industries Power Limited (“Appellant”), being the corporate debtor, is an electricity generating company within the meaning of Section 2(28) of the Electricity Act, 2003 and has set up a 600 MW coal-fired thermal power plant comprising of two units each of 300 MW capacity, within the Butibori Industrial Area in the Nagpur District in Maharashtra.

The Appellant is short of funds, for the time being on account of a pending litigation before the SC, more particularly, Civil Appeal Number 372 of 2017 preferred by the Maharashtra Electricity Regulatory Commission (“MERC”) against an order dated November 3, 2016 passed by the Appellate Tribunal for Electricity (“APTEL”), pursuant to which a sum of INR 1,730 Crores is due to the Appellant. Subject to the outcome of Civil Appeal Number 372 of 2017 pending before the SC, implementation of the order dated November 3, 2016 would enable the Appellant to clear all its outstanding liabilities.

On or about January 15, 2020, Axis Bank Limited (“Respondent”), in the capacity of financial creditor of the Appellant, preferred an Application under Section 7(2) the Insolvency and Bankruptcy Code, 2016 (“IBC”) before the National Company Law Tribunal, Mumbai (“NCLT”) seeking initiation of the CIRP against the Appellant. The Respondent had claimed a total amount to the tune of INR 533 Crores as due from the Appellant.

In view thereof, the Appellant preferred a Miscellaneous Application for seeking stay on the adjudication of CIRP admission proceedings, until the above-mentioned Civil Appeal is pending before the SC. However, by order dated January 29, 2021, the NCLT dismissed the Miscellaneous Application filed by the Appellant for seeking stay on the CIRP admission proceedings and refused to stay the CIRP initiated against the Appellant. The NCLT, inter alia, held that the objective of IBC is to decide petition seeking initiation of CIRP of a corporate debtor in a time bound manner and relied upon the landmark judgment of the SC in the matter of Swiss Ribbons Private Limited and Another v. Union of India and Others [(2019) 4 SCC 17] (“Swiss Ribbons Judgment”) to arrive at the aforesaid observation.

Aggrieved by the order dated January 29, 2021 passed by the NCLT, the Appellant preferred an appeal before the National Company Law Appellate Tribunal, New Delhi (“NCLAT”). However, the NCLAT dismissed the appeal by order dated March 2, 2021 (“Impugned Order”). The NCLAT, inter alia, observed that the Appellant has no jurisdiction in stalling the process and seeking stay of CIRP, with the hidden intent of blocking the passing of order of admission of the Application preferred by the Respondent under Section 7(2) of the IBC for seeking initiation of CIRP of the Appellant. As such, the NCLAT held that there is no merit in the appeal and no infirmity in the order dated January 29, 2021 passed by the NCLT.

Aggrieved by the Impugned Order passed by the NCLAT, the Appellant preferred an appeal before the SC.

Issue

Whether Section 7(5)(a) of IBC is a mandatory or a discretionary provision. In other words, is the expression ‘may’ to be construed as ‘shall’, having regard to the facts and circumstances of the case.

Arguments

Contentions raised by the Appellant:

The Appellant submitted that considering the facts and circumstances of the case, the Appellant is unable to realize a sum of INR 1,730 Crores in terms of the order dated November 3, 2016 passed by the APTEL due to Civil Appeal Number 372 of 2017 pending adjudication before the SC, the application preferred by the Respondent under Section 7 of the IBC should not have been admitted against the Appellant.

The Appellant further contended that the use of the word ‘may’, and not ‘shall’, in the language of Section 7(5)(a) of the IBC, confers a discretion to the NCLT to reject an application, even if there is existence of debt, for any reason that the NCLT may deem fit, for meeting the ends of justice, keeping in mind the objective of the IBC, which includes revival of the company and value maximization. It was further submitted by the Appellant that Rule 11 of the National Company Law Tribunal Rules, 2016 (“NCLT Rules”) provides inherent power to the NCLT to pass such orders as may be necessary for meeting the ends of justice or to prevent abuse of the process of the Tribunal. In view thereof, the Appellant submitted that on a conjoint reading of Section 7(5)(a) of the IBC read with Rule 11 of the NCLT Rules, it cannot be said that NCLT has no power, except to examine whether a debt exists or not and accordingly accept or reject the application under Section 7 of the IBC.

Contentions raised by the Respondent:

The Respondent submitted that the Appellant had admittedly defaulted in payment of its dues and the NCLT has rightly declined stay of proceedings initiated by the Respondent. It was further contended that Section 7(5)(a) of the IBC cast a mandatory obligation on the adjudicating authority to admit an application of the financial creditor under Section 7(2) of the IBC, once established that a corporate debtor has committed default in repayment of dues of the financial creditor. As such, there are no grounds to interfere with the concurrent findings of the NCLT and the NCLAT.

The Respondent further relied on the judgment of the SC in the matter of Innoventive Industries Limited v. ICICI Bank and Another [(2018) 1 SCC 407] to argue that the object of the IBC is resolution of the insolvency and bankruptcy in a time bound manner.

Observations of the Supreme Court

The SC observed that placing reliance upon the Swiss Ribbons Judgment, the NCLT held that the imperativeness of timely resolution of a corporate debtor, who was in the red, indicated that no other extraneous matter should come in the way of deciding petitions filed under Section 7 and Section 9 of the IBC. However, in this regard, the SC held that the viability and overall financial health of the corporate debtor are not extraneous matters.

The SC further examined the question as to whether an award of the APTEL in favour of the Appellant for a sum of INR 1,730 Crores, that is, an amount far exceeding the claim of the financial creditor, can be completely disregarded. The SC answered the aforesaid question in the negative.

The SC observed that both, the NCLT and the NCLAT proceeded on the premises that an application must be necessarily entertained under Section 7(5)(a) of the IBC, upon existence of a debt and corporate debtor found to be in default. In this regard, the SC held that the NCLAT and the NCLT erred in deciding that if the aforesaid two aspects are being satisfied, it is sufficient to trigger CIRP of the corporate debtor. In fact, the existence of a financial debt and default in payment in respect thereof only gave the financial creditor the right to apply for initiation of the CIRP. However, the adjudicating authority is supposed to apply its mind to all relevant factors including feasibility of initiation of CIRP and the overall financial health and viability of the corporate debtor under its existing management.

The SC agreed with the contention raised by the Appellant that the legislature has consciously used the word ‘may’ and not ‘shall’ in Section 7(5)(a) of the IBC. However, while arriving at the conclusion that it is discretionary upon the adjudicating authority to admit an application filed by financial creditor seeking initiation of CIRP of a corporate debtor, the SC has made it clear that in case of rejection of such application, the financial creditor will not be precluded from applying afresh for initiation of CIRP of that corporate debtor, if the dues continue to remain unpaid.

The SC also drew a comparison between the use of the word ‘may’ in Section 7(5)(a) of the IBC in the context of financial debt vis-à-vis the use of the word ‘shall’ in Section 9(5) of the IBC in the context of operational debt. In this regard, the SC observed that the legislature has consciously kept a distinction between financial creditors and operational creditors as there is an inherent difference between the business of investment and financing as in the case of financial creditors and the business of supply of goods and services as in the case of operational creditors. Further, financial debts are secured and for a longer duration in comparison to operational debts which are usually unsecured, for a shorter duration and of lesser amount. As such, the impact of non-payment of operational debts could be more serious than non-payment of financial debts.

In conclusion, the SC observed that it is not the object of the IBC to penalize solvent companies, which are temporarily defaulting in repayment of its financial debts, by initiating the CIRP of such companies. Hence, the SC held that Section 7(5)(a) of the IBC confers discretionary power on the adjudicating authority to admit an application filed by a financial creditor under Section 7 of the IBC for seeking initiation of CIRP of a corporate debtor.

Decision of the Supreme Court

The SC held that the NCLAT and the NCLT erred in holding that once the existence of debt and default in payment of debt by the corporate debtor is established, the adjudicating authority is bound to admit an application filed by a financial creditor under Section 7 of the IBC.

In view of the above, the SC was pleased to allow the appeal and set aside the order dated January 29, 2021 passed by the NCLT and the Impugned Order. Further, the SC directed the NCLT to re-consider the miscellaneous application filed by the Appellant for seeking stay on the adjudication of the CIRP admission proceedings, until the Civil Appeal Number 372 of 2017 is pending before the SC.

VA View:
This judgment can be considered as landmark in the domain of the restructuring and insolvency laws, whereby the SC has provided the much-needed clarity that the legislature has conferred upon the adjudicating authority with the discretionary power to look into the facts and circumstances pertaining to the corporate debtor and apply its mind to relevant factors including the feasibility of initiation of CIRP and overall financial health and viability of the corporate debtor under its existing management, rather than mandatorily initiating the CIRP of the corporate debtor in a mechanical manner once the existence of debt and default in payment of debt by the corporate debtor is established.

Further, the SC has also enlightened with the inherent difference between the nature of operational debt and financial debt, which throws light upon the legislative intent behind the use of the word ‘may’ in Section 7(5)(a) of the IBC in the context of financial debt vis-à-vis the use of the word ‘shall’ in Section 9(5) of the IBC in the context of operational debt.

However, the flip side of this judgement is that some corporate debtors defending an application filed by the respective financial creditors under Section 7 of the IBC may press this judgment into service, by taking a mechanical defense against the initiation of CIRP against them, wherever an award or decree is already passed in favour of corporate debtor and such award or decree is under appeal by the judgment debtor. In such a scenario, the adjudicating authority will have to cautiously ascertain the viability and pros and cons of initiating CIRP against a corporate debtor, and the same would be prone to appeals.

For any query, please write to Mr. Bomi Daruwala at [email protected]

NCLT: Material facts are to be pleaded in preferential, fraudulent or avoidable transactions

The National Company Law Tribunal, Kolkata (“NCLT”), in its order dated May 30, 2022, in the matter of Star India Private Limited v. Advance Multisystem Broadband Communications Limited (I.A. No. 841/KB/2020) combined with Shri Kuldeep Verma, Resolution Professional of Advance Multisystem Broadband Communications Limited v. IndusInd Media and Communications Limited and Others (I.A. No. 1288/KB/2020) held that a transaction cannot be alleged to be preferential, fraudulent or avoidable by the resolution professional, unless an enquiry has been conducted by the relevant experts and specific material facts have been stated as to why such transaction would be covered under Sections 45/46/47 (Avoidance of undervalued transactions and application by creditor in cases of undervalued transactions) and Section 66 (Fraudulent trading or wrongful trading) of the Insolvency and Bankruptcy Code, 2016 (“Code”).

Facts

Advance Multisystem Broadband Communications Limited (“AMBC/ Corporate Debtor”) was admitted into Corporate Insolvency Resolution Process (“CIRP”) through an order of the NCLT dated September 30, 2019. Mr. Kuldeep Verma (“Applicant”) was appointed as the resolution professional. IndusInd Media and Communications Limited (“Respondent No. 1”) invested in AMBC through a Shareholder’s Agreement dated May 18, 2012 (“SHA”) and held 59.61% of the paid up and issued share capital of AMBC. The remaining percentage of the share capital was held by the operating shareholders (local cable operators). Respondent No. 1 sold its shareholding when the business of AMBC was transferred to a competitor in an allegedly fraudulent manner.

The Applicant filed an application under Section 60(5) (which empowers NCLT to dispose of the matters related to the insolvency concerning the corporate debtor) and Section 25(2)(j) (which empowers a resolution professional to file an application for avoidance of transactions in accordance with Chapter III, if any) of the Code against the Respondent No. 1 seeking imposition of vicarious liability, piercing of corporate veil, declaring the share transfer to be preferential, undervalued, fraudulent and void ab initio, directions for forensic audit of AMBC and the Respondent No. 1, and initiation of investigation for money laundering.

Issue

Whether the sale of its shareholding by the Respondent No. 1 is a preferential, fraudulent or avoidable transaction.

Arguments

Contentions raised by the Applicant:

The Applicant submitted that AMBC had availed credit facilities from Allahabad Bank (“Bank”) vide sanction letter dated November 16, 2017 (“Letter”). The Letter mentioned a condition that the shares of AMBC cannot be transferred without the consent of the Bank. The Applicant contended that the Respondent No. 1 is a promoter and holding company of AMBC and by selling its shareholding, it has violated the terms and conditions of the Letter.

The core of Applicant’s contention was that the Respondent No. 1 has not provided any documents and has not cooperated with the Applicant while he was functioning in the capacity of a resolution professional. In addition to this, Respondent No. 1 has entered into vulnerable transactions like inter-se sale of the shares of AMBC, as preferential, undervalued and fraudulent, and that forensic audit of the so-called holding company and subsidiary company be directed to be held.

Contentions raised by the Respondent No. 1:

The Respondent No. 1 submitted that since the shares are not the property of the Corporate Debtor, therefore, there was no restriction on the sale of shares held by it in the Corporate Debtor. Consequently, the question of the transaction being preferential, undervalued or fraudulent does not arise. The Respondent No. 1 denied being the promoter of AMBC as it was never in control of the board of AMBC which could be proved from the annual returns and the SHA. The Respondent No. 1 submitted that the reason behind selling of its shares was the illegalities committed by the promoters and directors of the Corporate Debtor and that it had even filed a complaint before the Registrar of Companies against it.

The Respondent No. 1 contended that shares are separate and distinct from the assets of the company, and transfer of shares cannot be construed as transfer of assets of the company. Therefore, the selling of shares held by the Respondent No. 1 was not subject to the conditions laid down in the Letter.

Observations of the NCLT

The NCLT observed that the Applicant himself was not sure whether the impugned transactions were wrong as alleged, since he sought for a forensic audit in the prayer. The NCLT was of the view that a resolution professional can file an application under Section 25(2)(j) of the Code only after being satisfied about the particular transaction being avoidable, fraudulent or undervalued. Similarly, in terms of Section 25(2)(d), it is incumbent upon the resolution professional to seek assistance of the forensic audit if so required, to engage the services of accountants, legal or other professionals with a view to satisfy himself about the transaction being avoidable.

The NCLT relied upon the judgement of the Hon’ble Supreme Court in Anuj Jain v. Axis Bank Limited and Others [(2020) 8 SCC 401] (“Anuj Jain Case”), wherein it was held that the scheme of the Code, the parameters and the requisite enquiries as well as the consequences in relation to Sections 43, 45 and 66 of the Code are different and it is explicit in the provisions. Enquiry of an undervalued transaction is different than that of a preferential transaction and it is the responsibility of any resolution professional to fulfil the requirements set out in the applicable provisions before making an application. It was also held in the same case that “Specific material facts are required to be pleaded if a transaction is sought to be brought under the mischief sought to be remedied by Sections 45/46/47 or Section 66 of the Code. As noticed, the scope of enquiry in relation to the questions as to whether a transaction is of giving preference at a relevant time, is entirely different. Hence, it would be expected of any resolution professional to keep such requirements in view while making a motion to the Adjudicating Authority.”

The NCLT observed that the Applicant has not met the requirements set out in the Anuj Jain Case and a composite application has been made without conducting enquiry or setting out specific material facts for the transactions to be covered under Sections 45, 46, 47 and 66 of the Code. It was observed that the Applicant has vaguely asserted the facts and generalised the provisions of the Code against the Respondent No. 1.

Decision of the NCLT

The NCLT held that there was no illegal or fraudulent transaction done by the Respondent No. 1 stating that “When according to the Applicant himself there was no asset of the corporate debtor, and the company had gone into losses and was left with no debtors, the applicant should have performed his duties assigned to him in the Code instead of flogging a dead horse.”. The NCLT dismissed the composite application.

VA View:

This order of the NCLT, Kolkata is in consonance with the Code as well as the previous judgment of the Hon’ble Supreme Court in the Anuj Jain Case. The NCLT has rightly pointed out that when the resolution professional makes an application to declare a transaction as undervalued, preferential or fraudulent, he must comply with the requirements provided in the Code beforehand. It was held in the Anuj Jain case that the scope of enquiry in relation to the questions as to whether a transaction is preferential is entirely different from that of a transaction being undervalued and it would be expected of any resolution professional to keep such requirements, as provided in Sections 43 and 45 of the Code, in view while making a motion to the Adjudicating Authority.

The order reaffirms the authority of the Code and the importance of understanding the intent of the legislature. If it is required under the law that an enquiry by relevant experts has to be conducted and material facts have to be specified to cover the transactions under the relevant section, then it is the responsibility of the resolution professional to comply with the said requirements. In such cases, the resolution professional has to ensure that, in terms of procedure, the provisions of the Code and judicial precedents are being followed prior to the application being filed before the concerned Tribunal.

For any query, please write to Mr. Bomi Daruwala at [email protected]

Gujarat High Court: Proceedings under Section 9 of the Arbitration and Conciliation Act, 1996 cannot be used for enforcement of the conditions of a contract

The Gujarat High Court (“GHC”) has in its judgment dated June 10, 2022 (“Judgment”), in the matter of Kanhai Foods Limited v. A and HP Bakes [R/First Appeal No. 2638 of 2021], held that issues involving enforcement of the conditions of a contract cannot be the subject matter of an application for interim measures under Section 9 of the Arbitration and Conciliation Act, 1996 (“Act”).

Facts

Kanhai Foods Limited (“Appellant”), a registered company, was engaged in the business of production, marketing and selling of bakery products under its brand ‘KABHI B’ (“Appellant’s Brand”). The Appellant had started selling its bakery products in the year 2007 and started granting franchises to other persons in the State of Gujarat as its business started expanding. Amongst the 50 franchises granted by the Appellant, A and HP Bakes (“Respondent”) was granted franchisee for the Appellant’s Brand in the year 2015 at Pij Road, Nadiad (“Franchised Premises”). Consequently, a franchise agreement was entered into between the Appellant and the Respondent on November 1, 2017, which, inter alia, provided for an initial term of three years.

Subsequently, the franchise agreement was renewed and a fresh Franchise Agreement (“Franchise Agreement”) was entered into between the parties on November 1, 2020. As per the terms of the Franchise Agreement, the Respondent was obliged to sell only the bakery products of the Appellant’s Brand. Further, the Respondent was restrained from, directly or indirectly, conducting similar business during the term of the Franchise Agreement.

Following the execution of the Franchisee Agreement on November 1, 2020, it came to the knowledge of the Appellant that the Respondent had started selling other bakery products, particularly bakery products of the brand ‘G5’, in which partners of the Respondent were connected. Despite receiving a warning from the Appellant, the Respondent continued to store and sell the products of other bakery brands with a trade mark similar to that of the Appellant’s Brand so as to pass them off as the products of the Appellant’s Brand.

Thereafter, in the month of July 2021, the Respondent issued a notice to the Appellant seeking to terminate the Franchise Agreement. The Appellant not only rejected such termination by the Respondent but also stated that the Respondent had breached the terms of the Franchise Agreement by attempting to pass off its products as those of the Appellant.

In view of the above, the Appellant filed an application under Section 9 (Interim Measures, etc. by Court) of the Act (“Application”) before the Commercial Court, City Civil Court, Ahmedabad (“Commercial Court”) seeking interim measures, including a direction to the Respondent to handover the Franchised Premises to the Appellant and a direction restraining the Respondent from carrying out any activity at the Franchised Premises for a specified period as per the terms of the Franchise Agreement. The Appellant also sought a direction to restraint the Respondent from conducting a business similar to that envisaged in the Franchise Agreement.

The Respondent challenged the said Application by filing a reply contending that the termination of the Franchise Agreement by the Respondent was legal. The Respondent further contended that it could not be restrained from conducting its business as the same is violative of the provisions set out in Section 27 of the Indian Contract Act, 1872.

The Commercial Court by its order dated August 31, 2021 (“Impugned Order”) rejected the Application filed by the Appellant on the ground that the relief which was prayed for by the Appellant were of the nature in respect of which the Appellant could be compensated in terms of money.

Hence, the Appellant approached the GHC for setting aside the Impugned Order passed by the Commercial Court.

Issue

Whether issues involving enforcement of the conditions of a contract can be the subject matter of an application for interim measures under Section 9 of the Act.

Arguments

Contentions raised by the Appellant:

The Appellant submitted that the Franchise Agreement was for a fixed term of three (3) years and could not be prematurely terminated by either of the parties except in accordance with the terms stipulated in the Franchise Agreement. Further, the franchisor, that is, the Appellant had the sole right to terminate the Franchise Agreement provided that the five requisite conditions mentioned thereunder were satisfied.

Highlighting the provisions of Clause 5(22) of the Franchise Agreement, the Appellant submitted that it was the duty of the franchisee, that is, the Respondent to handover the Franchised Premises to the Appellant for a minimum period of three months in the event a dispute arose between the parties to the Franchise Agreement.

The Appellant referred to Section 14 (Contracts not specifically enforceable) of the Specific Relief Act, 1963, and submitted that in view of the nature of conditions incorporated in the Franchise Agreement, the contract between the parties was not determinable in nature and that only the Appellant could terminate the Franchise Agreement.

The Appellant, in order to support its submissions, placed reliance on DLF Homes Developers Limited v. Shipra Real Estate Limited and Others [2021 SCC Online Del 4902], wherein the Delhi High Court analysed the question on determinability of contracts in detail.

Contentions raised by the Respondent:

Placing reliance on ABP Network Private Limited v. Malika Malhotra [O.M.P. (I) (COMM) 292 of 2021], the Respondent debated as to what nature of contract could be said to be determinable in law. The Respondent averred that the Franchise Agreement entered into between the Appellant and the Respondent was determinable in nature and thus could be terminated by the Respondent.

With respect to the contention of the Appellant regarding the Respondent’s duty to handover the Franchised Premises, the Respondent submitted that the handover of the Franchised Premises to the Appellant had become infructuous in view of the passage of time.

Lastly, the Respondent submitted that the prayers made by the Appellant in its Application, did not fall within the purview of Section 9(ii) clauses (a) to (e) (application to Court for an interim measures of protection) of the Act.

Observations of the Gujarat High Court

The GHC observed that as per the law laid down by the Supreme Court in Arvind Constructions Company Private Limited v. Kalinga Mining Corporation [(2007) 6 SCC 798], the powers under Section 9 of the Act are to be exercised in accordance with the recognized principles that are applicable when a court exercises its powers under Order 39 of the Code of Civil Procedure, 1908, to grant interim injunction.

The GHC further observed that the establishment of prima facie case, balance of convenience and irreparable injury are all relevant considerations while passing orders granting interim measures under Section 9 of the Act. Moreover, interim injunction is an equitable remedy and cannot be granted in a case where it would amount to granting a principal relief.

Essentially, the interim reliefs granted by a court under Section 9 of the Act are intended to protect and preserve the subject matter of arbitration as well as balance the equitable rights of the parties, during the pendency of the arbitral proceedings.

The Appellant in its Application had sought a direction to restrain the Respondent from carrying out any activity at the Franchised Premises and to handover the Franchised Premises to the Appellant. The Appellant had also sought to restrain the Respondent from conducting a business similar to the business mentioned in the Franchise Agreement.

The GHC further observed that the Commercial Court had ruled that no irreparable loss would arise to the Appellant and that the Appellant could be compensated monetarily for the reliefs sought by it in its Application, if it finally succeeded in the arbitral proceedings.

Decision of the Gujarat High Court

The GHC ruled that the Commercial Court was justified in observing that the reliefs which were prayed for by the Appellant were of such nature in respect of which the Appellant could be compensated in terms of money.

The GHC held that granting the relief of directing the Respondent to handover the Franchised Premises to the Appellant and to restrain the Respondent from carrying out any activity at the Franchised Premises, were reliefs of a final nature. Moreover, the effect of granting such relief to the Appellant would bring the business of the Respondent to a complete halt.

Further, the issues involving enforcement of conditions of the Franchisee Agreement and the applications of the parties arising therefrom, should be decided and resolved in the arbitration proceedings. As such, the question of determinability of the Franchisee Agreement is also an arbitrable issue that is to be decided by the arbitrator and cannot be weighed for merits by the GHC.

Therefore, there being no grounds to interfere with the Impugned Order passed by the Commercial Court, the GHC dismissed the appeal filed by the Appellant.

VA View:

The GHC in this Judgment has rightly held that proceedings under Section 9 of the Act are not meant for enforcement of the conditions of a contract as the said conditions could be enforced only when the rights of the parties to such contract are finally adjudged or crystalized by the arbitrator. Besides, granting any relief in favour of the Appellant, directing the Respondent to handover the Franchised Premises to the Appellant and restraining the Respondent from carrying out any activity at the Franchised Premises, would tantamount to granting principal relief to the Appellant.

Affirming the Commercial Court’s decision, the GHC reiterated that the proceedings under Section 9 of the Act which are for interim measures, cannot be converted into proceedings where a party may seek the final relief indirectly.

Therefore, through this Judgment the GHC has clarified that the principal relief cannot be granted at the interim stage, and granting interim directions which are indirectly in the nature of final relief is not permissible in law.

For any query, please write to Mr. Bomi Daruwala at [email protected]