TaxTMI 
TaxTMI 
2023 (2) TMI 1323
X X X X Extracts X X X X
X X X X Extracts X X X X
....cted. 2. The plaintiff has filed the present suit contending therein that he represents, along with other of his family members, 50% of the total paid up and subscribed share capital of the defendant no.6. He is also one of the Directors of the defendant no. 6. The defendant no. 1, who is the first cousin of the plaintiff, along with the defendant no. 2 and other family members of the defendant no. 1, owns and controls the remaining 50% of the shareholding of the defendant no. 6. It is alleged that the defendant no. 2 is the son of the first defendant, while the defendant no. 3 is the wife of the defendant no. 2. Defendant no. 4 is also related to the first defendant. Though he has no personal shareholding in the defendant no. 6, he is an employee and a Director of the defendant no. 6. It is further alleged that the defendant no. 6 was started by the plaintiff and his parents, and the defendant no. 1 later joined the said business. 3. In the plaint, it is alleged that the defendant no. 5 has been set up by the defendants nos.2 and 3 with active support and encouragement from the first defendant, and is a competitor of the defendant no. 6. The plaintiff further asserts as unde....
X X X X Extracts X X X X
X X X X Extracts X X X X
....aint, the same may not be relevant. These, in fact, would be matters within the exclusive jurisdiction of the learned National Company Law Tribunal (NCLT) and not for this Court to adjudicate on. 5. The plaintiff has prayed for the following reliefs in the Suit: "It is therefore, most respectfully prayed that this Hon'ble Court may be pleased to pass a Decree of Perpetual Injunction against the defendants I to 5 and in favour of the plaintiff restraining the said defendants from in any way, using or misutilising the name Hi TECH and from passing off their goods and services as that of defendant no. 6 and from any business and clientele of defendant no.6 being diverted to defendant no. 5 and from the assets and personnel of the sixth defendant being used or utilised for the business of the defendant no. 5. This Hon‟ble Court may be pleased to award costs of the suit in favour of the plaintiff and against the defendants." 6. This Court by its order dated 10.01.2022, while issuing summons on the suit, passed the following interim order: "19. In the meanwhile, since the plaintiff is in business prior to that of defendant No. 5, hence it would be appro....
X X X X Extracts X X X X
X X X X Extracts X X X X
....esenting. 5. However, it is an admitted position by RG and PKG that the current activities including orders in hand, incomplete and / or in-progress projects and deliveries that are currently underway and contracts that have been awarded to this company, shall continue to be performed by HITECH till a point of time the HITECH perform its all existing business obligations and also until when neither of the signatories of this consent note strictly on the basis of mutual consent, ceases to perceive any utility in continuing the said business." 8. The above „Brief Note‟ records the broad understanding of the settlement between the parties. It may not in itself be binding on the parties and /or be sufficient to hold that the present suit has been rendered infructuous thereby. 9. By a subsequent settlement dated 22.04.2022, however, it is clearly recorded that "2 new Entities with Hitech Pre Fix open up". The same is signed, apart from the plaintiff and the defendant no.1, also by the defendant no.4. 10. The plaintiff also does not deny that in terms of the above settlement, and taking benefit thereof, the plaintiff opened a new entity by the name „Hi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....quo;______ Private Limited' or „__________ LLP‟ or any other Company /LLP with similar /identical name, by existing promoters /directors of the Company either by themselves or with other persons of their choice. For Hitech Audio Systems Private Limited Pradeep Kumar Gupta Director DIN: Add: Date: Place: Mr.Rajan Gupta representing 50% shareholder of the Hitech Audio Systems Private Limited shall issue the following NOC Letter to Mr. Pradeep Kumar Gupta in favour of the Registrar of Companies, Delhi to facilitate the opening of new company / LLP: To, The Registrar of Companies Central Registration Centre Ministry of Company Affairs Manesar, Haryana Sub: No objection Certificate to use the name of the Company for incorporating a new Company /LLP. Dear Sir/Madam, I, Rajan Gupta, Director of Hitech Audio Systems Private Limited (hereinafter referred as "Company"), on behalf of the Board of Directors of the Company, pursuant to the resolution passed at its meeting held on Friday, 22nd April, 2022 accord no objecti....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the relief that is claimed in the present suit has been rendered infructuous and the present suit is, therefore, liable to be dismissed. In support, he places reliance on the judgment of this Court in Vidur Impex and Traders Pvt. Ltd. & Ors. v. Pradeep Kumar Khanna & Ors. 241 (2017) Delhi Law Times 481, to submit that even if the plaint cannot be rejected under Order VII Rule 11 of the CPC, the said provision is not a complete reservoir of power under which a frivolous suit may be nipped in the bud. He submits that the continuation of a suit, which has become infructuous by the disappearance of the cause of action, interest of justice would require that such suit should be disposed of as having become infructuous, and for this purpose, Section 151 of the CPC can be invoked by the Court. 14. On the other hand, the learned counsel for the plaintiff submits that for the purposes of an application under Order VII Rule 11 of the CPC, it is only the averments in the plaint that can be seen by the Court. The documents that have been filed later by the plaintiff cannot be looked into. In support, he places reliance on the judgment of the Supreme Court in Srihari Hanumandas Totala v. He....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tial justice - subject, of course, to the absence of other disentitling factors or just circumstances. Nor can we contemplate any limitation on this power to take note of updated facts to confine it to the trial court. If the litigation pends, the power exists, absent other special circumstances repelling resort to that course in law or justice. Rulings on this point are legion, even as situations for applications of this equitable rule are myriad. We affirm the proposition that for making the right or remedy claimed by the party just and meaningful as also legally and factually in accord with the current realities, the court can, and in many cases must, take cautious cognizance of events and developments subsequent to the institution of the proceeding provided the rules of fairness to both sides are scrupulously obeyed. 23. In the very same case, this Court quoted with approval a judgment of the Supreme Court of the United States in Patterson v. State of Alabama, wherein it was laid down thus: (US p. 607) "We have frequently held that in the exercise of our appellate jurisdiction we have power not only to correct error in the judgment under review but to make suc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....umstances. A Court of law may take into account subsequent events inter alia in the following circumstances: (i) the relief claimed originally has by reason of subsequent change of circumstances become inappropriate ; or (ii) it is necessary to take notice of subsequent events in order to shorten litigation; or (iii) it is necessary to do so in order to do complete justice between the parties." 20. In Vidur Impex (supra), a learned Single Judge of this Court, while considering whether the provisions of Order VII Rule 11 of the CPC are exhaustive of the circumstances under which a suit may be dismissed prior to trial, observed as under: "55. From the aforegoing, it is clear that the Apex Court has also accepted that Order VII Rule 11 is not exhaustive and frivolous suits may be dismissed as nipped in the bud by relying upon Section 151 of the Code. 56. Therefore, both this Court and the Rajasthan High Court have categorically held that Order VII Rule 11 is not the complete reservoir of power under which a frivolous suit may be nipped in the bud. The view has been accepted by the Supreme Court in Machdado Brother (supra). Even otherwise....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... said meeting and participated in the discussions to attempt a solution to resolve the dispute between two shareholder directors who are jointly conducting the business of HI-TECH since incorporation." Copy of the said Initial Settlement dated 22.01.2022 is attached to the present application as Document-5. 14. In furtherance to the said Initial Settlement dt. 22.01.2022, the parties, on 22.04.2022, signed another written document in respect of settlement (hereinafter referred as "Settlement dated 22.04.2022") wherein the terms of the settlement as agreed between the parties were noted and signed by the Plaintiff and the Defendant No. 1 being the representatives of 100% shareholders and also by all the Directors of the Defendant No. 6 Company. Under the said Settlement dated 22.04.2022, the parties agreed that 2 (two) separate entities with the name 'Hitech' would be opened and they would be operated by the PKG Group and the RG Group separately. In terms of the Settlement dated 22.04.2022, the PKG Group executed the existing projects/orders by their existing group entity, i.e. HAVI Design India LLP (hereinafter referred as "HAVI LLP"), whereas th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ant No. 6 Company in his existing company/LLP. Copy of the said Minutes of Meeting dated 30.07.2022 is attached to the present application as Document-8. 17. It is thus evident that the Plaintiff has taken the benefit of transfer of exclusive brands that were earlier exclusively dealt with by the Defendant No. 6 Company until 22.04.2022. The Plaintiff, upon setting up his own business in terms of the Settlement dated 22.04.2022 and reaping the benefits of exclusive retail brands and sales, is now doing his best to avoid the implementation of his part of obligations under the Initial Settlement dated 22.01.2022, Settlement dated 22.04.2022 and MOM dated 30.07.2022. 18. It is submitted that as per law, a family settlement agreement /arrangement between family members is regarded as the most solemn document enforceable by the courts of law and as such, the written and signed family settlement arrived at hereinabove, contained a mechanism to divide the business of the Defendant No. 6 Company. In the Settlement dated 22.04.2022, there were certain terms which were listed out and it was agreed that the parties would abide by the said terms. 19. H....