Status as on- 29/07/2021
Brief Facts of the Case
- GE Power Limited (previously known as Alstom India Ltd, “Plaintiff”) entered into a contract with Lanco Infratech Limited (LIL) for the design, manufacture, testing, delivery, and commissioning of facilities such as a turbine, generator, main inlet valve, governing system, excitation system, and control system for the Teesta VI hydroelectric project.
- Lanco Teesta Hydropower Limited was also awarded the Teesta VI project (LTHPL). Alstom and LIL, reached an agreement regarding the supply of engineering drawings that were copyrighted.
- The Teesta VI project was acquired by NHPC limited (“Defendant”) following the liquidation of LIL. On February 11, 2020, the Defendant notified Plaintiff of its intention to offer a Single Vendor Tender for the Teesta VI Project. Furthermore, the Plaintiff’s bid was rejected because the price quoted by the Plaintiff was higher than the tender check documents. Following that, on May 5, 2020, the Defendant issued an open tender for Teesta VI, in which it disclosed to third parties the copyrighted and confidential drawings.
- As a result, the current lawsuit has been filed, alleging infringement of copyright.
Held
- The Court first noted that because there was no written assignment or license in favour of the Defendant, it did not have ipso facto right to the Plaintiff’s assets. Furthermore, the assets did not belong to LIL under Section 36 (4) of the Code.
- Although Section 36 (3) (d) of the Code requires the inclusion of intellectual properties as intangible assets, Section 36 (4) clarifies those assets obtained through a contractual relationship that limits the scope of assets to use only (and not transfer) cannot be included in the liquidation estate assets.
- The Court reviewed Sections 60, 63, 231 and 238 of the Code and determined that Section 63, read together with Section 231, created a bar on the Civil Court’s jurisdiction over any dispute over which the NCLT/NCLAT had jurisdiction under the Code. As a result, the adjudicating authority is the sole competent authority for Code-related disputes.
- The Court ultimately decided that the copyright dispute was covered by Section 60 (5) of the Code because it arose from and is related to the insolvency resolution plan. The Court clarified that –
“Clause (c) sub-Section (5) of Section 60 IBC vests the jurisdiction in NCLT to entertain and dispose of any question of priorities or any question of law or fact, arising out of or in relation to the insolvency resolution for liquidation proceedings. Therefore, the jurisdiction vested in NCLT while dealing with a resolution plan is of wide ambit and any question of law or fact in relation to the insolvency resolution has to be determined by the NCLT.”
- The Court relied on the decisions in Liberty House Group vs. State Bank of India & Ors., 2019 (258) DLT 52 and Swiss Ribbons Pvt Ltd vs Union of India, 2019 SCC Online SC 73 to conclude that the Code provides for a competent adjudicating authority, effectively removing the Civil Court’s jurisdiction.
- As a result, any question of law or fact pertaining to insolvency resolution or liquidation proceedings, as well as contracts creating or transferring intellectual property rights, would be decided solely by the NCLT or NCLAT.
Impact of the Case
The Hon’ble High Court, in keeping with the law laid down by the Hon’ble Supreme Court in various landmark judgments, and having regard to the facts and circumstances of the present case, is of the opinion that, if the Copyright dispute arises out of or in relation to insolvency proceedings, NCLT is the proper jurisdictional court to decide on the matter, but the civil court lacks the jurisdiction to do so. Furthermore, the learned judge dismissed the petition by citing Sections 230, 231 and 60(5) of the Insolvency and Bankruptcy Code.
According to the Bankruptcy Law Reforms Committee Report, it is critical that the jurisdiction of any civil court or authority be specifically barred where the NCLT has jurisdiction in order to ensure the sanctity of the liquidation or bankruptcy process. Despite a brief discussion of the case’s prima facie merits, the Court herein dismissed the suit on the grounds of maintainability. It is critical that the Code’s tribunals’ jurisdiction be upheld, regardless of whether a dispute arose after the completion of the liquidation proceeding and whether the dispute relates to special legislation, such as the Copyright Act, where civil courts have been granted exclusive jurisdiction.
Conclusion
The logic behind all of this is that by bringing all litigation that may have a monetary impact on the economic value of a corporate debtor’s assets under the jurisdiction of the NCLT, the liquidation or bankruptcy process will be streamlined and efficient. Furthermore, due to the absence of LIL and LTHPL as parties in the suit, the alleged transmission of copyright was vague and unclear. The High Court also stated that when dealing with an insolvency resolution or liquidation proceedings of a corporate debtor or corporate person, any question of law or fact concerning the insolvency resolution, containing such contracts creating or transferring such Intellectual Property Rights, had to be decided by the NCLT or National Company Law Appellate Tribunal (NCLAT). The Court also held that it lacks jurisdiction to hear the current suit because the dispute falls within the ambit of Section 60(5) of the IBC, as it arises out of and/or is related to the insolvency resolution plan and thus must be adjudicated exclusively by the NCLT, and that the proceedings in the Civil Court with respect to the same are barred.
Source-
GE POWER INDIA LTD. V. NHPC LIMITED
(Delhi High Court Judgement Dated 26th June, 2020 in CS (COMM) 140/2020)
Disclaimer – The above article is based on interpretation of the related judicial pronouncement and related laws which may differ person to person. The readers are expected to take expert opinion before placing reliance on it. For more information, please reach us at support@centrik.in or call us at 8383011629
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