Delhi High Court
Coldsmiths Retail Services ... vs Nirulas Corner House Private ... on 4 April, 2022
IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment delivered on: 04.04.2022
+ O.M.P.(I) (COMM.) 302/2021
COLDSMITHS RETAIL SERVICES
PRIVATE LIMITED ..... Petitioner
versus
NIRULAS CORNER HOUSE PRIVATE
LIMITED & ORS. ..... Respondents
Advocates who appeared in this case:
For the Petitioner : Mr Nakul Dewan, Senior Advocate with
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.
AND
+ O.M.P.(I) (COMM.) 314/2021
NIRULAS CORNER HOUSE PRIVATE
LIMITED ..... Petitioner
versus
COLDSMITHS RETAIL SERVICES PRIVATE
LIMITED ..... Respondent
Advocates who appeared in this case:
For the Petitioner : Mr Mudit Sharma, Ms Nandini
Sharma and Mr Ajay Pratap Singh,
Advocates.
For the Respondent : Mr Nakul Dewan, Senior Advocate with
Signature Not Verified
Digitally Signed
By:Dushyant Rawal O.M.P.(I) (COMM.) 302/2021 & O.M.P.(I) (COMM.) 314/2021 Page 1 of 24
Signing Date:04.04.2022
Mr Dhirendra Negi, Mr Sidharth Sethi,
Mr Rohan Naik and Mr Avinash Das,
Advocates.
CORAM
HON'BLE MR JUSTICE VIBHU BAKHRU
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.
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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;
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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/marks set out in Schedule-5 of the
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Business Transfer Agreement dated 21 December
2017;
iii. restrain the Respondent, their directors, partners,
principal officers, servants, agents and representatives
etc from directly or indirectly alienating and/or
creating third party rights of any nature and/or
granting any license of the trademarks and marks set
out in Schedule-5 of the Business Transfer Agreement
dated 21 December 2017 and Schedule-1 of the Deed
of Assignment dated 04 January 2018;
iv. restrain the Respondent, their directors, partners,
principal officers, servants, agents and representatives
etc from directly or indirectly alienating and/or
creating third party rights of any nature on the Assets
set out in Schedule-2, Schedule-3, Schedule-5,
Schedule-6 and Schedule-7 of the Business Transfer
Agreement dated 21 December 2017;
v. restrain the Respondent from changing and/or
registering any change in the Capital Structure of the
Respondent Company;
vi. direct the Respondent to file Affidavit of its Assets
giving true and correct disclosure of the Assets held
by it, its promoters and its subsidiary companies;
vii. pass ex-parte and ad interim reliefs in terms of prayer
(i) to (vi) above; and
viii Pass such other or further orders as this Hon'ble Court
may deem fit and proper in the facts and
circumstances of the present case."
8. Coldsmiths claims that the Termination Notice is illegal as there
was no default on its part to comply with the payment obligations. The
consideration for the Business Transfer Agreement was agreed as ₹25
crores and out of the said consideration, Coldsmiths paid an amount of
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₹23.5 crores. It claims that the balance consideration of ₹1.5 crores
(Additional Consideration) was payable after Nirulas changed its
corporate name. Since Nirulas has not done so, the liability to pay the
Additional Consideration had not arisen.
9. Nirulas disputes the same. It claims that the Additional
Consideration was due and payable by Coldsmiths and it had requested
for extending the time period for making the payment, which was
accepted by Nirulas. However, Coldsmiths had failed and neglected to
pay the same even during the extended period. Nirulas claims that it had
retained its corporate name solely for the purpose that the factory and
other licenses under which Coldsmiths was carrying on the part of the
Transferred Business, was in its name. Coldsmiths had leased its
manufacturing unit in terms of a Rent Agreement dated 30.04.2018,
which required the said license to be maintained. In addition, it is
contended on its behalf that once Coldsmiths had sought a concession
seeking extension of time, which was granted, the Business Transfer
Agreement stood novated to that extent and such payment was not
contingent upon Nirulas changing its corporate name prior to receiving
the same.
10. As stated above, Nirulas has issued the notice purportedly under
Clause 3.4 of the Business Transfer Agreement. Coldsmiths claims that
it ignores Clause 3.3 of the Business Transfer Agreement.
11. Before proceeding further, it would be relevant to refer to Clause
3 of the Business Transfer Agreement. The same is reproduced below:
Signature Not Verified
Digitally Signed
Signing Date:04.04.2022
"3. CONSIDERATION
3.1 The Purchaser shall pay the Consideration to
the Seller, including payment of such part of
the Consideration on behalf of the Seller to
Deutsche Bank Limited for foreclosing the DB
Loans as specified in the DB Letter, for the
Transferred Business and as fee towards the
non-compete obligations of the Covenantors
in Clause 14 of this Agreement, on the Closing
Date.
3.2 The Purchaser shall pay the Initial Additional
Consideration to the Seller on the Initial
Payment Date and the Balance Additional
Consideration on the Balance Payment Date.
3.3 Notwithstanding anything stated hereinabove,
the Parties agree that in the event of any
default by the Seller in performing its
obligations and duties under the Transaction
Documents, the Purchaser shall not have any
obligation to pay the Additional Consideration
or any part thereof to the Seller and the Seller
shall have no right to claim the Additional
Consideration or any part thereof.
3.4 In case the Covenantors have failed to pay the
Purchaser in respect of an Indemnity Claim
within the time specified in Clause 12 of this
Agreement or any indemnity claim under any
other Transaction Documents, then the
Additional Consideration shall be adjusted to
the extent of such indemnity claim and the
Seller shall have no right to claim such amount
of the Additional Consideration. Save as
otherwise provided in this Agreement, in case
the Purchaser commits any default in the
payment of the Additional Consideration, the
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Seller shall have the right, by way of notice in
writing, to terminate this Agreement. In case
of termination of the Agreement by the Seller
in such a case, the Seller shall not be required
to refund or repay to the Purchaser the
Consideration or any part thereof received by
it from the Purchaser."
12. It is contended on behalf of Coldsmiths that Nirulas had defaulted
in performing its obligations as it had not changed its corporate name;
and therefore, in terms of Clause 3.3 of the Business Transfer
Agreement, Coldsmiths had no obligation to pay the 'Additional
Consideration'. Coldsmiths also relies on Clause 7.5.1 of the Business
Transfer Agreement and, on the strength of the said clause, contends
that the obligation to pay the Additional Consideration was contingent
upon Nirulas complying with the 'Post Closing Actions' as set out in
Schedule 10 to the Business Transfer Agreement.
13. Clause 7.5 of the Business Transfer Agreement and Schedule 10
to the Business Transfer Agreement are relevant and set out below:
"7.5 Additional Consideration
7.5.1 Subject to the terms of Clause 3.2, Clause 3.3
and Clause 3.4 of this Agreement, and subject
to fulfillment of the post - Closing Actions (as
applicable) set out in Schedule 10 to the
satisfaction of the Purchaser, the Purchaser
shall pay the Initial Additional Consideration
to the Seller on the Initial Payment Date and
the Balance Additional Consideration on the
Balance Payment Date.
xxxx xxxx xxxx
Signature Not Verified
Digitally Signed
Signing Date:04.04.2022
"SCHEDULE 10
POST CLOSING ACTIONS
1. The Seller shall change its corporate name on or
before 31st March, 2019 such that it does not use
the word 'Nirulas', or any word or combination of
words which are identical or confusingly similar
or closely resembling the word 'Nirulas', and
cease using any of the Trademarks in its
brochures, stationery etc., in accordance with the
terms and conditions set out in the License
Agreement."
14. Undeniably, Nirulas was obliged to change its corporate name.
As noticed above, it is Nirulas case that it was always ready and willing
to do so but had refrained from taking any steps in this regard, since the
necessary licenses were in its name and Coldsmiths would be unable to
carry out the manufacturing activity at the premises leased by it from
Nirulas, if Nirulas changed its corporate name.
15. It is also contended that Coldsmiths had sought for extension of
time to pay the Additional Consideration and the same was accepted,
however, it had failed to pay the said amount even during the extended
period. This was not subject to prior compliance of the Post Closing
Actions (as set out in Schedule 10 to the Business Transfer Agreement)
and therefore, Coldsmiths had defaulted in complying with its payment
obligations, which entitled Nirulas to terminate the Business Transfer
Agreement.
16. The learned counsel for the parties have relied upon certain
emails exchanged between the parties, in support of their respective
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contentions. It is relevant to refer to the said exchange of e-mails.
17. On 04.10.2020, Mr. Amit Chadha of Coldsmiths sent the
following email to Mr. Sumant Bhargava of Nirulas: -
"From: Amit chadha <[email protected]>
Date: 4 October 2020 at 11:48:30 AM IST
To: [email protected], [email protected]
Subject: Extension of name change until 30th dec
Hi Sumant,
As discussed we have already initiated the process but
are waiting for renewal of factory licence operated by
you. As both fire and pollution licences are in name of
Nchpl which may be required for renewal of factory
license we may have to wait for the process till 30th
dec2020. So we would request you to extend the name
change till 30 th dec.
Thanx and regards
Amit Chadha
Sent from my iPhone"
18. By a subsequent email, Mr Amit Chadha also sought
confirmation for proceeding for renewal of the license. The same was
confirmed by Mr Sumant Bhargava on the same day. Thereafter, on
18.12.2020, Mr Amit Chadha sent another email seeking waiver of the
stipulation to change the corporate name of Nirulas until the factory is
operational. The said email is set out below:
Signature Not Verified
Digitally Signed
Signing Date:04.04.2022
On Fri, Dec 18, 2020 at 12:45 PM Amit Chadha
<[email protected]> wrote:
Hi sumant,
We would like to request a waiver for name change of our
company until the factory is operational as you are aware
that all licensee both of (pollution and fire) are in name of
nchpl. If the name is changed we may have to fresh apply
both our licenses which may not be possible as due to use
of steam boiler and generator are not allowed in Delhi and
NCR fresh notice by NGT. Please advice the same.
Thanx and regards
Amit chadha"
19. In response to the aforesaid email, Mr Sumant Bhargava of
Coldsmiths sent an email extending the period to 31.03.2021, in order
to effect change in the corporate name. The said e-mail reads as under:
"From: Sumant Bhargava <[email protected]>
Date: Thu, 31 Dec, 2020, 6:23 pm
Subject: Re: FW: Extension of name change until 30th
dec 2020
To: Amit Chadha <[email protected]>
Cc: Sumant Bhargava <[email protected]>,
<[email protected]>, Biresh Kumar
<[email protected]>
Dear Amit, as discussed, we will extend the timeline to
effect the name change to March 31 2021
Regards
Sumant"
20. It is contended on behalf of Nirulas that Coldsmiths did not
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secure the requisite license under its name and therefore, Nirulas was
constrained to defer taking steps for changing its corporate name. In this
regard, Nirulas had sent an email dated 24.03.2021, which is set out
below:
"From: Amit Chadha [mailto:[email protected]]
Sent: Wednesday, March 24, 2021 7:01 PM
To: '[email protected]'
Subject: extention of name change
Hi sumant,
As per your mail we were suppose to change our Name
before 31.03.2021. As discussed all the Licenses are in our
name i.e. "Nirulas Corner House Pvt. Ltd." name change
will also lead to expire of all license (fire, factory license
and pollution) and it will be difficult to run the factory in
our premises without these Licenses.
So we here by suggest to continue with the same Name un
till you are running your factory in Our Premises and can
be changed before vacating of the factory
To save any legal and administrative complications.
Thanx and regards
Amit chadha"
21. It does not appear that Coldsmiths responded to the said e-mail.
In any view, the response to the said email, if any, has not been placed
on record. However, it is contended on behalf of Nirulas that there was
no objection raised by Coldsmiths for Nirulas to continue retaining its
corporate name since the necessary licenses were in the name of Nirulas
and Coldsmiths had not secured the fire, factory license and pollution
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license in its name.
22. Nirulas also relied on a subsequent email dated 24.06.2021,
which reads as under:
"From: Amit Chadha [mailto:[email protected]]
Sent: Thursday, June 24, 2021 1:07 PM
To: '[email protected]'
Cc: '[email protected]'
Subject: RE: extention of name change
Hi Sumant,
In continuation to our previous mail, we wish to change
our companies name (ie NCHPL) to new name which
would lead to expire or cancellation of existing licenses
with immediate effect which are been used by you for the
operation of factory.
We are still waiting for your new licenses with drawings
to be submitted to fire dept with approval from Noida
authority please confirm us with the date when can we
receive them so that we can file our new name with ROC.
Thanx and regards
Amit chadha"
23. Admittedly, there is no communication issued by Coldsmiths
calling upon Nirulas to change its corporate name or issuing any notice
alleging default on the part of Nirulas to comply with its obligations
under Schedule 10 to the Business Transfer Agreement. There is no
document on record, which even remotely suggests that Coldsmiths had
raised any objection or alleged any breach of the obligations on the part
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of Nirulas, at the material time.
24. The email dated 24.06.2021 sent by Nirulas clearly suggests that
Nirulas was ready and willing to change its corporate name.
25. It is also contended of behalf of Nirulas that it does not carry on
business similar to that as transferred to Coldsmiths. It was continuing
to operate a hotel under the name "Nirulas Hotel", which was
permissible. It is also contended that the premises leased by Nirulas to
Coldsmiths from where Coldsmiths was carrying on certain activities
as a part of the Transferred Business, was the part of the same building
from where Nirulas was running a hotel in the name of Nirulas Hotel.
Thus, Nirulas had no further use of retaining its corporate name and the
necessary steps to change the corporate name was deferred only for
facilitating Coldsmiths to uninterruptedly carry out its activities from
the premises leased to it.
26. It does, prima facie, appear from the email dated 24.06.2021 that
Nirulas was waiting for Coldsmiths to obtain a license in order to
proceed further with changing its corporate name.
27. Whilst, the parties had exchanged emails regarding change of the
corporate name of Nirulas, the parties were also simultaneously in
discussions regarding Coldsmiths obligations to pay the Additional
Consideration.
28. On 04.10.2020, Mr Sumant Bhargava of Coldsmiths had sent an
email to Mr. Amit Chadha of Nirulas requesting that the time for
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making the balance payment be extended till 30.06.2021. It is relevant
to refer to the said email. The same reads as under:
"From: Sumant Bhargava [mailto:[email protected]]
Sent: Sunday, October 04, 2020 11:51 AM
To: Amit chadha; [email protected]
Subject: Request to defer Balance Additional
Consideration
Dear Mr Chadha and Amit
Trust this email finds you and your family well.
The last 6 months have witnessed unprecedented
times and while the economic environment has
started to improve since the world's strictest
lockdown in March this year, the uncertainty around
business revival remains. Given the uncertainty and
measure of the lockdowns and the continued threat
from COVID19, we don't have visibility of how and
when the economy will respond in the immediate and
recent future. Companies across industries are
experiencing and responding to varying degrees of
financial challenges; from airline to hospitality to
retail and financial services, all sectors are
witnessing not only difficult times but are unsure of
their business in the near future and have undertaken
drastic measures to stay in business.
We, as a company, with cooperation from partners
like you have continued our business through the
lockdowns and this pandemic, but the losses incurred
in the first quarter have had a lasting effect on our
business and the company. We have also taken
drastic and some tough decisions like layoffs, salary
cuts and shutting down of our stores.
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Signing Date:04.04.2022
Given the softness and unpredictability of revenues,
and further to our recent discussions, we do not have
a choice but to request to you to please defer till June
30, 2021, the 'Balance Additional Consideration'
payable on the 'Balance Payment Date' as mentioned
in the Business Transfer Agreement dated December
21, 2017 signed between us.
Looking forward to your cooperation in this regard
Regards
Sumant"
29. It is important to note that by a separate email of the said date,
Amit Chadha of Nirulas had informed Mr Sumant Bhargava of
Coldsmiths that Nirulas had initiated the process but was awaiting
renewal of the factory license operated by Coldsmiths and thus,
requested for extending the time for changing the name till 30.12.2020.
The said email was sent at 11:48 AM and the email sent by Mr Sumant
Bhargava requesting for modifying the Balance Payment Date to
30.06.2021 was sent at 11:51 AM. It is material to note that the email
requesting for extending the Balance Payment Date has no mention of
the obligations on the part of Nirulas to change its corporate name. A
plain reading of the said email dated 04.10.2020 sent by Mr Sumant
Bhargava to Mr Amit Chadha indicates that Coldsmiths had requested
for extension of time due to financial constraints resulting from the
outbreak of Covid-19.
30. It is apparent that there were certain discussions between the
parties and on 23.11.2020, Mr Sumant Bhargava of Coldsmiths sent an
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email confirming that it would pay a sum of ₹1 crore on or before
31.03.2021 and ₹1.5 crores on or before 30.06.2021. The said email
reads as under:
"From: Sumant Bhargava [mailto:[email protected]]
Sent: Monday, November 23, 2020 6:16 PM
To: Amit chadha; [email protected]
Cc: Meeta Makhan; Sumant Bhargava
Subject: Re: Request to defer Balance Additional Consideration
Dear Amit
As discussed and shared with you, we would defer the
payment as follows:
Rs 100,00,000 (One Crore) of the Balance Additional
Consideration to be paid on or before March 31, 2021
Rs 150,00,000 (One Crore Fifty Lakhs) of the Balance
Additional Consideration on or before June 30, 2021
Request you to please confirm the above
Thank you once again for your cooperation
Regards
Sumant"
31. On 18.12.2020, Mr Amit Chadha of Nirulas sent an email stating
that Nirulas was also in urgent need of funds and requested that the
amount of ₹1 crore be released on or before 31.01.2021 and the
remaining ₹1.5 crores be released on or before 30.06.2021.
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Signing Date:04.04.2022
32. None of these two emails make any mention that such payments
were conditional upon change of the corporate name.
33. On 31.12.2020, the parties entered into a letter agreement
(hereafter 'the Letter Agreement'). The Letter Agreement reads as
under:
"December 31, 2020
Mr. Amit Chadha
Nirulas Corner House Private Limited
10185C Arya Samaj Road New Delhi 110005
Karol Bagh
New Delhi 110005
Ref: Business Transfer Agreement dated December
21, 2017
Dear Amit
This is with reference to the Business Transfer Agreement
dated December 21, 2017 and the Balance Additional
Consideration payable therein. As discussed and mutually
agreed, the Balance Additional Consideration of Rs
2,50,00,000 (Rupees Two Crore Fifty Lakhs Only) which
is due to be paid to Nirulas Corner House Private Limited
on January 4th, 2021 shall now be paid as under:
Rs 1,00,00,000 (Rupees One Crore Only) to be paid on
January 30th, 2021
Rs 1,50,00,000 (Rupees One Crore Fifty Lakhs Only) to
be paid on June 30th, 2021
Please sign this letter as a confirmation of your acceptance
of the above.
Signature Not Verified
Digitally Signed
Signing Date:04.04.2022
Thanking you for your cooperation
For Coldsmiths Retail For Nirulas
Services Private Corner House
Limited Private Limited
Sumant Bhargava Amit Chadha"
34. Coldsmiths paid a sum of ₹1 crore to Nirulas on 30.01.2021
without any reservation that Nirulas had not changed its corporate
name. However, it failed to make the balance payment of ₹1.5 crores.
Indisputably, Nirulas was pursuing Coldsmiths for the payment of the
balance amount. On 30.06.2021, one Mr Abhishek G. Poddar of
Coldsmiths sent an email to Mr Amit Chadha of Nirulas in regard to the
outstanding payments under the Business Transfer Agreement. The said
email is set out below:
"From: Abhishek G Poddar
[mailto:[email protected]]
Sent: Wednesday, June 30, 2021 1:48 PM
To: 'Amit Chadha'
Cc: [email protected]; Ashish Agarwal
Subject: Delhi meeting
Dear Amit,
Hope you are doing well.
As per your discussions with Sanjiv, we writing to you
to confirm that we are available for a meeting in Delhi to
discuss all points.
As you are aware there has been a change in guard in the
Company, given the second wave impact, etc. we will
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need to discuss the quick resolution of outstanding
payments under BTA and other points. Please let us
know any date convenient to you after 9th July.
Many thanks.
Stay safe and best regards,
Abhishek"
35. The above e-mail did not mention any issue regarding change in
the corporate name or that Coldsmiths was withholding the balance
payment awaiting change in the corporate name.
36. Prima facie, the contention advanced on behalf of Nirulas that
there was no dispute or controversy regarding change in the corporate
name, appears merited. There is extensive correspondence exchanged
between the parties regarding deferment of payment of the balance
consideration. The parties had also entered into the Letter Agreement
extending the time for making the payment of ₹1 crore to 30.01.2021
and the remaining ₹1.5 crore of the Balance Additional Consideration
to 30.06.2021. As noted above, the first tranche of ₹1 crore was paid
without reservation or any protest in regard to Nirulas not having
changed its corporate name. There is no correspondence on record that
suggests that Coldsmiths was concerned regarding non-change of the
corporate name by Nirulas. The emails sent by Nirulas clearly indicate
that it was willing to change its corporate name but that would adversely
affect Coldsmiths carrying on its activity from the leased premises. As
late as on 24.06.2021, Nirulas had informed Coldsmiths that it was "still
waiting for your new licenses with drawings to be submitted to fire dept
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with approval from Noida".
37. There is no communication from Coldsmiths calling upon
Nirulas to change its corporate name, notwithstanding the issue
regarding the licenses, which was flagged by Nirulas. There is no
communication on record expressing any concern regarding delay on
the part of Nirulas to change its corporate name.
38. It is also relevant to note that the email dated 30.06.2021 sent by
Coldsmiths also does not mention that it had withheld making the
payments on account of failure on the part of Nirulas from changing its
corporate name. On the contrary, it only refers to the impact of the
second wave and the change in guard in the company. It appears that it
merely wanted to discuss the issue of further payments, in view of the
impact of the second wave and the surge in cases on account of Covid-
39. Mr Dewan, learned senior counsel appearing for Coldsmiths,
contended that Coldsmiths had not given its right under the Business
Transfer Agreement and the emails exchanged between the parties
regarding change in the corporate name, exchanged almost
simultaneously with the emails regarding deferment of payment, also
establishes the same. He earnestly contended that Nirulas had sought a
waiver for changing its corporate name, but Coldsmiths had not
accepted the same. It had merely extended the time for Nirulas to do so
till 31.03.2021. He submitted that there was thus, no obligation on the
part of Coldsmiths to make any further payments under the Business
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Transfer Agreement.
40. He also contended that Nirulas has failed to make out any prima
facie case for seeking any interim relief. Coldsmiths had paid a
substantial consideration of ₹23.5 crores out of a total consideration of
₹25 crores (being 94% of the sale consideration). It had also deposited
the balance ₹1.5 crores with the Registry of this Court, in terms of the
order dated 16.09.2021 passed by this Court in OMP(I) 314/2021. Thus,
the petition filed by Nirulas is liable to be rejected.
41. Mr Sharma, learned counsel appearing for Nirulas, had
countered the aforesaid submissions. He submitted that Coldsmiths had
been repeatedly seeking extension of time for making the payment.
Further, it had defaulted in making the payment for ₹1.5 crores by
30.06.2021 and, once again, wanted to renegotiate the terms of the said
payment as is evident from the email dated 30.06.2021.
42. The contentions advanced by Mr Dewan, are unpersuasive. This
Court is unable to accept that the Termination Notice is, ex facie, illegal.
It appears that the issue regarding the change of corporate name is an
afterthought and was raised for the first time in the letter dated
16.08.2021 issued by Coldsmiths, through its advocates. Prima facie,
the 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 the emails sent by Nirulas at the material time.
There is no communication controverting the said reasoning.
Signature Not Verified
Digitally Signed
Signing Date:04.04.2022
43. Prima facie, the contention that the Business Transfer Agreement
was novated by the Letter Agreement and the payment of Additional
Consideration was not contingent upon Nirulas changing its corporate
name, is merited. A plain reading of the Letter Agreement clearly
indicates that Coldsmiths had agreed that the amount of ₹2.5 crores
would be paid in the manner as stated therein, without referring to any
other conditions. Undeniably, Nirulas was obliged to change its
corporate name. However, it does not appear that the said obligation
was retained as a pre-condition for making the payment of the balance
consideration. There is good reason for the same as it is apparent that
the change in the corporate name had been held up on account of delay
in securing the requisite licenses for Coldsmiths to carry out the
manufacturing activities in its own name. The fact that Coldsmiths had
made a payment of ₹1 crore on 30.01.2021, without any reservation in
this regard, also supports this view.
44. The disputes between the parties are required to be adjudicated
by the Arbitral Tribunal. Considering that Coldsmiths has paid
substantial portion of the consideration, this 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. However, it is necessary to ensure that the subject matter
of the disputes is preserved.
45. In this view, Coldsmiths is restrained from selling, transferring,
encumbering or in any manner alienating any of the assets including the
Intellectual Property Rights acquired by it pursuant to the Business
Signature Not Verified
Digitally Signed
Signing Date:04.04.2022
Transfer Agreement and the Deed of Assignment, till the conclusion of
the arbitral proceedings.
46. Accordingly, OMP(I)(COMM.) 314/2021 is partly allowed in the
aforesaid terms.
47. For the reasons stated above, this Court is unable to accede to any
of the reliefs sought by Coldsmiths in its petition. Accordingly,
OMP(I)(COMM.) 302/2021, is dismissed.
VIBHU BAKHRU, J
APRIL 04, 2022
RK/pkv
Signature Not Verified
Digitally Signed
Signing Date:04.04.2022
