Civil injunction over collateral security arrangement upheld despite insolvency proceedings and determinable contract objections

A civil suit seeking interim protection over rights under a Permissive User Agreement was held not barred merely because related insolvency proceedings and a resolution plan existed, since the relief sought was distinct from the insolvency money claim and the avoidance provisions were inapplicable to the applicant. The court also held that the agreement functioned as a collateral security arrangement with a continuing cause of action until the underlying dues were adjusted, so the bar on injunctions for determinable contracts did not apply. On that basis, the ad interim injunction was restored and the appellate stay was set aside.

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Issues: (i) Whether the civil court's ad interim injunction in respect of the Permissive User Agreement was barred by the Insolvency and Bankruptcy Code, 2016 and related insolvency proceedings. (ii) Whether the injunction was otherwise hit by the Specific Relief Act, 1963 as a contract of a determinable nature.

Issue (i): Whether the civil court's ad interim injunction in respect of the Permissive User Agreement was barred by the Insolvency and Bankruptcy Code, 2016 and related insolvency proceedings.

Analysis: The reliefs in the suit were held to lie in a different field from the money claim before the insolvency forum. The provisions dealing with preferential and undervalued transactions were held inapplicable to the petitioner, since they are to be invoked by the resolution professional or liquidator and the agreement was outside the relevant look-back period. The approval of the resolution plan was not treated as a complete answer to the petitioner's civil claim, and the appellate court's blanket assumption of civil court bar under the insolvency regime was found erroneous.

Conclusion: The civil suit and the injunction were held maintainable, and the appellate stay was held to suffer from jurisdictional error.

Issue (ii): Whether the injunction was otherwise hit by the Specific Relief Act, 1963 as a contract of a determinable nature.

Analysis: The agreement was treated not as an ordinary commercial contract but as a collateral security arrangement with a fixed tenure linked to satisfaction of the underlying dues. In that setting, the court found that the petitioner had a continuing cause of action until the debt was adjusted, and the usual bar against injunctions in respect of determinable contracts did not defeat the claim for interim protection. The court also found strong prima facie case, balance of convenience, and irreparable injury in favour of the petitioner.

Conclusion: The injunction was held sustainable and the interim stay granted by the appellate court was set aside.

Final Conclusion: The revisional court restored the trial court's ad interim injunction and rejected the appellate court's view that the suit was barred or that interim protection could not be granted.

Ratio Decidendi: A civil suit seeking protection of contractual rights ancillary to an insolvency-related money claim is not barred merely because a resolution plan has been approved, where the statutory avoidance provisions are inapplicable to the applicant and the agreement is treated as a collateral security arrangement rather than a purely determinable commercial contract.

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