2025 (8) TMI 261 - HC - IBC

Petition to Quash Plaint Dismissed; Trustee Not Necessary Party Under Order 10 Rule 2 CPC

The HC dismissed the petition seeking to quash the plaint against the petitioner, appointed as Chapter-11 Trustee for U.S. Debtor Companies. The court ... Prayer to dismiss the Commercial Suit, pending on the files of the Commercial Court, Ernakulam - petitioner is a necessary party to the suit or not - petitioner appointed as a Chapter-11 Trustee for the U.S. Debtor Companies by the United States Bankruptcy Court - HELD THAT:- The plaintiff was required to file the suit to establish his right over the products in the Commercial Court. Therefore, if at all, the petitioner is not a necessary party; he can approach the Commercial Court for filing the necessary application for maintaining the suit against the petitioner, for framing of a preliminary issue. It is also submitted that the petitioner has already filed a written statement in the Commercial Court, and an interlocutory application is also pending before the Commercial Court. Therefore, this Court cannot give any findings on the merits of the case, as it will affect the case of the plaintiff before the trial Court. Therefore, if at all the petitioner wants any relief, he has to approach the trial Court/Commercial Court, for raising the issues regarding maintainability and filing application under Order 10 Rule 2 of CPC for striking out the 2nd defendant, if he is not a necessary and proper party to the suit. Therefore, this court cannot exercise the power under Article 227 of the Constitution of India for quashing the plaint against the petitioner/2nd defendant herein. Though this court disposed of the earlier petition directing the Commercial Court to dispose of the I.A. within time bounds, by the time the process of sale was stayed, but subsequently the Hon'ble Apex set aside the order of this court, and the earlier original petition filed by the plaintiff has been withdrawn. The relief sought by the petitioner for quashing the plaint cannot be granted - the petition filed by the petitioner/2nd defendant is hereby dismissed. 1. ISSUES PRESENTED and CONSIDERED 1. Whether the plaint in the Commercial Suit No. 118 of 2024 filed by the respondents against the petitioner/2nd defendant is liable to be quashed under Article 227 of the Constitution of India on the grounds of maintainability and abuse of process of court. 2. Whether the petitioner/2nd defendant, appointed as Chapter-11 Trustee by the United States Bankruptcy Court for three U.S. Debtor Companies, is a necessary party to the suit filed in the Commercial Court, Ernakulam. 3. Whether the suit filed by the respondents amounts to contempt or interference with the orders and jurisdiction of the United States Bankruptcy Court, Delaware. 4. Whether the High Court can exercise jurisdiction under Article 227 of the Constitution of India to quash a plaint involving disputed facts and foreign insolvency proceedings. 5. Whether the Commercial Court is the appropriate forum to adjudicate the rights and disputes concerning the intellectual property, domain access, and business operations related to the products of the U.S. Debtor Companies and the Indian entities involved. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Maintainability of the Suit and Quashing of the Plaint under Article 227 of the Constitution of India - Legal Framework and Precedents: The Court referred to the settled principle that the High Court's power under Article 227 is supervisory and cannot be exercised to decide disputed questions of fact or to substitute the trial court's jurisdiction. Reliance was placed on Supreme Court precedents holding that quashing of plaint is not warranted where substantial questions of fact are involved and the suit is otherwise maintainable. The Court also noted that Article 227 cannot be used to interfere with ongoing proceedings unless there is a manifest lack of jurisdiction or abuse of process. - Court's Reasoning: The Court observed that the suit involves complex disputes relating to ownership, rights over intellectual property, domain access, and alleged unauthorized alienation of products. These issues require detailed evidence and trial. The petitioner's contention that the plaint should be quashed at this stage was rejected as the Court is not a forum to decide such factual disputes prematurely. - Key Findings: The Court found that the plaint discloses a cause of action and the suit is maintainable before the Commercial Court. The petitioner has filed a written statement and interlocutory applications before the trial court, indicating the suit is being contested on merits. - Conclusion: The petition for quashing the plaint under Article 227 is not maintainable and is dismissed. Issue 2: Whether the Petitioner/2nd Defendant is a Necessary Party to the Suit - Legal Framework: A party is necessary if the suit cannot be effectively adjudicated without their presence. The petitioner argued that as Trustee of foreign companies under U.S. Bankruptcy proceedings, he has no contractual or direct relationship with the respondents or the 1st defendant Indian company, and hence is not a necessary party. - Court's Interpretation: The Court noted that the petitioner is appointed as Trustee for the U.S. Debtor Companies whose assets and business operations are intertwined with the dispute. The petitioner's alleged actions affect the rights and interests of the respondents and the 1st defendant. Therefore, the petitioner is a proper party to the suit. - Application of Law to Facts: The petitioner's role as Trustee includes managing and supervising the business and reorganization of the U.S. companies, which are involved in the dispute. The respondents claim that the petitioner's interference has caused loss and denial of access to domains and payment platforms. These facts establish the petitioner's connection to the subject matter. - Conclusion: The petitioner is a necessary and proper party to the suit; the remedy to challenge his inclusion lies before the trial court by appropriate applications rather than by quashing the plaint. Issue 3: Alleged Contempt of U.S. Bankruptcy Court Orders and Jurisdictional Conflict - Legal Framework: The petitioner contended that the suit filed by respondents is an abuse of process intended to interfere with and violate the orders of the Delaware Bankruptcy Court, amounting to contempt and jurisdictional conflict. - Court's Reasoning: The Court acknowledged that the petitioner was appointed Trustee by the U.S. Bankruptcy Court and that the respondents had participated in those proceedings. However, the Court observed that the existence of foreign insolvency proceedings does not oust the jurisdiction of Indian courts over disputes involving Indian entities and contracts. - Treatment of Competing Arguments: The respondents argued that the petitioner is not Trustee of the Indian company and that their suit is to protect their rights over products and intellectual property legitimately owned by them. The Court found that these contentions raise factual disputes that require trial and cannot be decided at the quashing stage. - Conclusion: The Court declined to interfere on grounds of alleged contempt or conflict with foreign court orders at this stage, leaving the matter to be adjudicated by the trial court. Issue 4: Jurisdiction of the High Court under Article 227 in Relation to Foreign Insolvency Proceedings - Legal Framework: The Court referred to precedents that foreign insolvency orders do not automatically bar Indian courts from exercising jurisdiction over disputes involving Indian companies or contracts. The High Court's supervisory jurisdiction under Article 227 cannot be exercised to quash a plaint merely because foreign proceedings exist. - Court's Interpretation: The Court held that the existence of U.S. Bankruptcy proceedings and the petitioner's appointment as Trustee therein do not preclude the respondents from seeking relief in Indian courts. The High Court cannot substitute the trial court's function of deciding disputed facts or jurisdictional issues at the threshold. - Conclusion: The High Court will not quash the plaint on the basis of foreign insolvency proceedings or alleged conflict with foreign court orders. Issue 5: Appropriateness of the Commercial Court as Forum for Adjudication - Legal Framework: The suit involves commercial disputes relating to intellectual property, domain rights, contractual relationships, and alleged wrongful alienation of products. Such disputes fall within the jurisdiction of the Commercial Court under the Commercial Courts Act, 2015. - Court's Reasoning: The Court observed that the respondents have claimed commercial rights and alleged wrongful acts affecting their business conducted through Indian entities and platforms. The Commercial Court is the appropriate forum to try such disputes. - Application of Law to Facts: The petitioner's challenge to the maintainability or inclusion as a party should be raised before the trial court by appropriate procedural applications. The High Court will not interfere at the preliminary stage by quashing the plaint. - Conclusion: The Commercial Court is the proper forum to adjudicate the suit; the High Court declines to quash the plaint on forum or maintainability grounds.