Rajan Gupta v. Pradeep Kumar Gupta & Ors.

Delhi High Court · 28 Feb 2023 · 2023:DHC:1408

Navin Chawla

CS(COMM) 16/2022

2023:DHC:1408

civil appeal_dismissed Significant

AI Summary

The Delhi High Court dismissed the suit as infructuous under its inherent powers due to subsequent settlement agreements allowing both parties to use the disputed trade name and continue business separately.

Full Text

Neutral Citation Number: 2023/DHC/001408

CS(COMM) 16/2022
HIGH COURT OF DELHI

Reserved on: 08.02.2023

Date of Decision: 28.02.2023

CS(COMM) 16/2022 & I.As. 374/2022, 375/2022, 1411/2022, 14714/2022, 19888/2022, 20195/2022
RAJAN GUPTA ..... Plaintiff
Through: Mr.Mandeep Singh Vinaik, Ms.Anjali Sharma, Ms.Ragini
Vinaik, Ms.Thanglunkim, Advs.

VERSUS

PRADEEP KUMAR GUPTA & ORS. ..... Defendants
Through: Mr.Manav Gupta, Mr.Sahil Garg, Advs. for D-2, 3 & 5.
Mr.Ujjal Banerjee, Ms.Sabhya Jain, Mr.Akash Khurana, Advs. for D-1&4.

CORAM:

HON'BLE MR. JUSTICE NAVIN CHAWLA

IA 16612/2022

JUDGMENT

1. This application has been filed by the defendant no.1 praying for rejection of the plaint under Order VII Rule 11 of the Code of Civil Procedure, 1908 (hereinafter referred to as the CPC), contending therein that in view of the Initial Settlement dated 22.01.2022; Settlement dated 22.04.2022; and the Minutes of Meeting dated 30.07.2022, executed between the parties and placed reliance on by the plaintiff himself in I.A. No.14714/2022, the present suit has been rendered infructuous and the plaint is liable to be rejected.

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 under: “The prime mover in this conspiracy is the first defendant, who conceived the grand plan of looting and internally hemorrhaging a successful business entity with a highly successful business model, merely to make more monetary benefits than he was entitled to and to divert profits to himself and his immediate family members, using defendant no. 5 entity as a vehicle for the said nefarious plans. In so doing, the first defendant breached his fiduciary duties and his duties and obligations under the Companies Act and to put it more specifically, grossly violated the duties cast on him under Section 166 of the Companies Act, 2013. Defendants 2 and 3, being the son and daughter in law respectively, of the first defendant, in fact actually set up the Limited Liability Partnership which is arrayed as defendant NO. 5 herein, purely with a view to diverting the business and profitability of the sixth defendant company into the same. They consciously and intentionally set up the said entity with an idea of illegally using the goodwill and the fair name of defendant no. 6, which has been established over decades of hard work of premium quality. By adopting a deceptively similar name like HI TECH, which has become synonymous with the excellent quality and high value goods and services that have been provided by defendant no. 6 to its customers in the past, they continue to unfairly and unlawfully cash in on the same. Besides using the name and goodwill and besides making a brazen attempt at passing off their entity as something connected with and promoted by defendant no. 6, the first defendant, in league and conspiracy with defendant no. 4, has been diverting the business and assets of defendant no. 6 blatantly and brazenly to the benefit of defendant no. 5 and to the detriment of defendant no. 6. They are thereby causing serious prejudice to the interest of the shareholders of the sixth defendant. In fact, besides using their position as directors of the sixth defendant, defendants no.1 and 4 have been blatantly and openly giving orders to the employees on the payroll of the sixth defendant to perform tasks for and to illegally work for defendant no.5, all the while drawing wages and benefits from defendant no. 6.”

4. Though various allegations of mis-management and operation have been stated in the plaint, for the relief that is sought in the plaint, 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 appropriate if the defendant No.5 is directed not to use the name HI TECH as its trade name in its future bids, to be applied afresh from now onwards, till the next date of hearing. Affidavit of admission/denial of documents be also filed by the parties.”

7. It is not denied that thereafter, the plaintiff and the defendant no.1 entered into an Initial Settlement of their inter se disputes and executed the “Brief Note and Record of Discussions and Understanding held between the Shareholder Directors of Hitech Audio Systems Private Limited held on 22 January 2022”. It was duly recorded in the „Brief Note‟ that the same has been executed by the plaintiff and the defendant no.1 representing their own interest as also interest of their family members. The Agreement further records as under:

“3. That it is understood by and between the two groups of shareholders represented by each of the signatories of this note that they shall be at liberty to and / or shall incorporate one legal entity each to be given names and nomenclature of their respective choices or to

use any existing legal entity upon execution of the final Shareholder Agreement. The question as to whether the name and goodwill of Hi Tech is permitted to be used by each of these entities in some manner or in the some other manner shall be left open to discussion between both parties, and both agree that in the event of the new entities being permitted to use the name and / or goodwill of the Old Company, Hi Tech, they shall be equitable in approach.

4. It is also the admitted position by both the signatories herein that HITECH has been in the business of providing audio-visual and sound solutions for over three decades and has accumulated goodwill as well as satisfaction of prequalification norms for the purpose of bidding for large contracts that comes with antiquity and long standing expertise and experience and both the signatories after consulting the shareholders of their group hove arrived at an agreement herein that both the new entities i.e. one to be promoted by RG and the other to be promoted by PKG and / or their respective family members and other associates, shall be entitled to do and perform the some nature of business in which HI TECH is engaged without any objection from the signatories of this agreement as well as the shareholders to whom they are representing.

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-tech Audio and Image LLP‟ on 09.05.2022. In the new entity, the plaintiff moved the retail sales business and is selling the exclusive retail brands of the defendant no.6.

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11. Finally, the plaintiff and the defendant no.1, as Shareholders of the defendant no.6, executed the “Note of the Discussions Held in the Meeting between the Two Shareholders Group of Hi-tech Audio Systems Private Limited and decision taken on 25th July, 2022” allowing each other to incorporate Companies using the words „Hi-tech Audio‟ or Hi-tech‟. They also agreed to the transfer of trade/business of defendant no.6 to each other. The Note of Discussion is relevant for the purposes of the present application, and is reproduced in full as under: “NOTE OF THE DISCUSSIONS HELD IN THE MEETING BETWEEN THE TWO SHAREHOLDERS GROUP OF HITECH AUDIO SYSTEMS PRIVATE LIMITED AND DECISION TAKEN ON 25TH JULY, 2022 PRESENT:

1. Mr. Rajan Gupta - Director

2. Mr. Pradeep Kumar Gupta - Director

3. Mr. Nitin Gupta - Director

4. Mr. Ankit Gupta, Head Finance &

5. Mr. Nirdosh Agarwal, Head (Sales) - PRO

6. Mr. Shaurya Gupta, son of Shri Rajan Gupta, Sales- PRO

1. ISSUANCE OF NOC FOR INCORPORATION OF A COMPANY / LLP ENTITY WITH THE NAME OF 'HI-TECH' / 'HITECH AUDIO' BY TWO SHAREHOLDERS GROUP PURSUANT TO MOU DATED 22.01.2022 AND 22.04.2022: Mr. Pradeep Kumar Gupta representing 50% shareholder of the Hitech Audio Systems Private Limited shall issue the following NOC Letter to Mr. Rajan Gupta in favour of 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, Pradeep Kumar 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 objection to the use of the word ‘Hitech Audio’ or ‘Hitech’ and/or any other word from the name or the Company, in incorporation of a new Company / LLP „______ 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 objection to the use of the word ‘Hitech Audio’ or ‘Hitech’ and/or any other word from the name or the Company, in incorporation of a new Company / LLP „______ 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 Rajan Gupta Director DIN: Add: Date: Place:

2. REGARDING RELATED PARTY TRANSACTIONS EXECUTED IN HITECH AUDIO SYSTEMS PRIVATE LIMITED It is confirmed by the Both Shareholders Group and Directors that pursuant to the provisions of section 188 of the Companies Act, 2013, be and is hereby accord their consent and approve for all the transactions which are and /or to be carried out between the Companies and / or the companies / LLP belonging to the related parties / Directors and / or shareholders and/ or arising on account of the abovementioned understanding between 2 shareholders group.

3. TRANSFER OF BUSINESSES AND /OR BRANDS OF HI-TECH AUDIO

SYSTEMS PRIVATE LIMITED: Pursuant to the understanding arrived between the two shareholders group, both the Directors representing their set of shareholders in Hitech Audio Systems Private Limited reiterate the following:

A. Mr. Rajan Gupta entitled to transfer all the brands with whom the Hitech Audio Systems Private Limited is doing business, such as RCF, Digico, ETC, MA Lighting, Lacoustics and other brands in his existing /proposed LLP/Company.

B. Mr.Pradeep Kumar Gupta entitled to transfer all the ongoing projects including their obligations in their existing company/LLP. “

12. A reading of the above would show that the plaintiff, as representing 50% of the shareholders of the defendant no.6, and in whose representative capacity the present suit has been filed, agreed to issue a No Objection Certificate /letter to the defendant no.1 to facilitate the opening of a new company/LLP with the use of the word „Hitech Audio‟ or „Hitech‟ in the name thereof.

13. The learned counsel for the defendant nos.[1] to 5, placing reliance on the above said documents executed between the plaintiff and the defendant no.1, submits that in terms of these documents/settlements, 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. Hemant Vithal, Kamat & Ors. (2021) 9 SCC 99.

15. He further submits that, in any case, the above documents of settlement shall bind only the plaintiff and the defendant no.1. They cannot enure to the benefit of the defendant nos. 2,[3] and 5. It is only the defendant no.1 who has been allowed to incorporate a new company/LLP with the words „Hi Tech Audio‟ or „Hi Tech‟. The defendant no.5, in any case, cannot take away the customers of the plaintiff or the defendant no.6, or act in competition thereto.

16. I have considered the submissions made by the learned counsels for the parties.

17. It needs no reiteration that for deciding an application under Order VII Rule 11 of the CPC, only the averments in the plaint will have to be referred to; the defence made by the defendant in the suit must not be considered while deciding the merits of the application.

18. At the same time, the Supreme Court in Shipping Corporation of India Ltd. v. Machado Brothers & Ors. (2004) 11 SCC 168, has observed as under:

“22. While examining this question we will

have to consider whether the court can take

cognizance of a subsequent event to decide

whether the pending suit should be disposed of

or kept alive. If so, can a defendant make an

application under Section 151 CPC for

dismissing the pending suit on the ground the

said suit has lost its cause of action. This

Court in the case of Pasupuleti Venkateswarlu

v. Motor & General Traders (SCC at pp. 772- 73, para 4) has held thus: “4. We feel the submissions devoid of substance. First about the jurisdiction and propriety vis-à-vis circumstances which come into being subsequent to the commencement of the proceedings. It is basic to our processual jurisprudence that the right to relief must be judged to exist as on the date a suitor institutes the legal proceeding. Equally clear is the principle that procedure is the handmaid and

not the mistress of the judicial process. If a fact, arising after the lis has come to court and has a fundamental impact on the right to relief or the manner of moulding it, is brought diligently to the notice of the tribunal, it cannot blink at it or be blind to events which stultify or render inept the decretal remedy. Equity justifies bending the rules of procedure, where no specific provision or fair play is violated, with a view to promote substantial 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 such deposition of the case as justice requires. And in determining what justice does require, the court is bound to consider any change, either in fact or in law, which has supervened since the judgment was entered.”

24. Almost similar is the view taken by this Court in the case of J.M. Biswas v. N.K. Bhattacharjee wherein this Court held: (SCC p. 71, para 10) “[T]he dispute raised in the case has lost its relevance due to passage of time and subsequent events which have taken place during the pendency of the litigation. … In the circumstances, continuing this litigation will be like flogging a dead horse. Such litigation, irrespective of the result, will neither benefit the parties in the litigation nor will serve the interest of the Union.”

25. Thus it is clear that by the subsequent event if the original proceeding has become infructuous, ex debito justitiae, it will be the duty of the court to take such action as is necessary in the interest of justice, which includes disposing of infructuous litigation. For the said purpose it will be open to the parties concerned to make an application under Section 151 CPC to bring to the notice of the court the facts and circumstances which have made the pending litigation infructuous. Of course, when such an application is made, the court will enquire into the alleged facts and circumstances to find out whether the pending litigation has in fact become infructuous or not.”

19. In Kedar Nath Agrawal (dead) & Anr. v. Dhanraji Devi (dead) by LRs & Anr., (2004) 8 SCC 76, the Supreme Court stated the law on taking into account subsequent events for determining whether the suit should be allowed to be continued or not, as under:

“16. In our opinion, by not taking into account the subsequent event, the High Court has committed an error of law and also an error of jurisdiction. In our judgment the law is well settled on the point, and it is this : the basic rule is that the rights of the parties should be determined on the basis of the date of institution of the suit or proceeding and the suit/action should be tried at all stages on the cause of action as it existed at the commencement of the suit/action. This, however, does not mean that events happening after institution of a suit /proceeding, cannot

be considered at all. It is the power and duty of the court to consider changed circumstances. 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, I am of the view that the Court cannot be helpless and be forced to continue a vexatious suit, which is an abuse of its process, merely because the same cannot be rejected under the Order VII Rule 11.”

21. Applying the above ratio to the facts of the present case, it is evident that after the filing of the suit, the plaintiff, for and on behalf of the defendant no.6 and as a 50% Shareholder thereof, agreed to the defendant no.1, who was executing the agreements for and on behalf of his family members, to incorporate new companies/form LLP with the use of the words „Hitech Audio‟ or „Hitech‟. It was further agreed that the parties shall be allowed to continue in the same business as that of the defendant no.6. Having agreed to the same, nothing further survives in the present suit. The prayer made in the suit has clearly been rendered infructuous.

22. I may herein quote the relevant pleadings from the application and the reply thereto given by the respondent, as it is evident therefrom that there is no dispute raised by the plaintiff on the settlement: Application

“13. After the abovestated litigations were filed, the parties came together for discussing and resolving all issues and disputes mutually. Thereafter, on 22.01.2022, the parties reached at an initial written understanding titled as, "Brief Note and Record of Discussions and Understanding held between the Shareholder Directors of Hitech Audio Systems Private Limited held on 22 January 2022" (hereinafter referred as "Initial Settlement dt. 22.01.2022"). This initial understanding or Initial Settlement dt. 22.01.2022 provided for a framework to the parties to recognise the division of the business and moratorimn on legal proceedings to enable the parties to arrive at a final settlement. The relevant portion of the Initial Settlement dt. 22.01.2022 is reproduced hereunder: “It is being recorded that RG and PKG who are representing their own interest and the interest of their family members as shareholders in Hi Tech Audio Systems Private Limited [HITECH], and both of them are duly authorised by and / or represent the interest of their respective family members and Shareholders and are also duly authorised to bind down their respective family members and fellow shareholders

in HI TECH. The witnesses of this note are the persons who were present in the 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 the RG Group agreed to take the retail business of the Defendant No.6 Company including the right to deal with the exclusive brands which are exclusively dealt with by the Defendant No.6 Company in India. The relevant portion of the Settlement dated 22.04.2022 is reproduced hereunder: "Agreed Terms are as Below:-

1. 2 new Entities with Hitech Pre Fix open up. " Copy of the said Settlement dated 22.04.2022 is attached to the present application as Document-6.

15. It is pertinent to mention that the Plaintiff had immediately acted upon the Settlement dated 22.04.2022 and within a period of less than 20 days, the Plaintiff opened a new entity by the name 'Hitech Audio and Image LLP' (hereinafter "Hitech AI") on 09.05.2022, i.e. right after signing of the Settlement dated 22.04.2022. This clearly evinces that the Plaintiff has acted upon the Settlement 22.04.2022. In the said new entity, i.e. Hitech AI, the Plaintiff has moved the retail sales business and is selling the exclusive retail brands of the Defendant No.6 Company in the market through this new entity, and the same is evident from the invoices in respect of such retail sales from 'Hitech Audio and Image LLP'. Copy of the Master Data of 'Hitech Audio and Image LLP' procured from the website of Ministry of Corporate Affairs is attached to the present application as Document-7.

16. Thereafter, another Meeting was held on 30 July 2022 between the parties and a note/minutes of meeting, namely, "Note of the Discussions held in the Meeting between the Two Shareholders Group of Hi-Tech Audio Systems Private Limited and decision taken on 25th July 2022", was signed by all parties herein on 30.07.2022 (hereinafter referred as "MOM dated 30.07.2022"). Herein, it was agreed that both, the Plaintiff and Defendant No. 1, shall provide No-Objection Certificate in respect of freedom of usage of the term 'Hitech' in their respective entities. The relevant portion of the MOM dated 30.07.2022 is reproduced hereunder: xxxxxx Further, it was also reiterated between the parties that the Plaintiff will be entitled to transfer all brands working with the Defendant No.6 Company into his own company/LLP, and that the Defendant No. l will be entitled to transfer the ongoing projects in the Defendant 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. Hence, the parties herein have already reconciled and settled all issues between them, including the present issue before this Hon'ble Court, i.e. with respect to the usage of the term 'Hi-Tech'. In view of the abovestated three settlement documents signed between the parties, specifically Settlement dated 22.04.2022, the Plaintiff has already started a new entity by the name Hi Tech Audio Image LLP and has been operating the same since 09.05.2022. Now that the Plaintiff has already signed and, in furtherance, acted upon the abovestated settlement agreements, the cause of action of the present Suit in any case has been rendered infructuous and does not survive and thus, ought to be rejected by this Hon'ble Court.” Reply “11.-17. With reference to paragraphs 11, 12, 13, 14, 15, 16 and 17, the nonapplicant/plaintiff states and submits that the partial settlements that have been referred to in these paragraphs have nothing to do with the cause of action in the present suit and are in fact the subject matter of other litigation that is pending before the National Company Law Tribunal. The fact is that the actual culprits, that is defendants 2, 3 and 5, acting under the advice of Defendant No.1, are the ones who have no defense whatsoever, and it is not now permissible for them to rely on any partial settlement between Defendant No.1 and the plaintiff in order to create a defense where none exists. In fact, the application under reply is a crass example of how a defense is sought to be inserted on the record when the same is not permissible anymore in view of the law as interpreted by the Apex Court. Defendants 2, 3 and 5 being the actual culprits in close league with Defendant No. 1, are seeking to rely upon extraneous documents to set up a defense, but the same is not permissible in law.

18. With reference to paragraph 18, it is relevant to state that defendants 2, 3 and 5 are not party to any settlement whatsoever with the plaintiff and are not signatories to the same. As such any settlement between other parties cannot be relied upon as a defense in the present suit.

19. With reference to paragraph 19 the nonapplicant/plaintiff states that the cause of action is alive and the suit deserves to be decreed as it stands and it is not permissible for the applicant to now seek to insert any such defense. There has been no settlement between the actual contestants in the present suit and the same is a false averment.”

23. The submission of the learned counsel for the plaintiff that the settlement cannot enure to the benefit of the defendant nos.2, 3 or 5 does not impress me. As noted hereinabove, the defendant no.1 was being sued as a primary person/conspirator violating the fiduciary capacity as a Shareholder and Director of the defendant no.6. It was alleged that the defendant nos.2, 3 and 5 are only the front for such violation. The Settlement Agreements have been executed by the defendant no.1 for and on behalf of his family members. The defendant nos.2, 3 and 5 have asserted that they shall remain bound by the terms of the Settlements. It is, therefore, not open to the plaintiff any more to contend that the said Settlement cannot enure to the benefit of the defendant nos. 2, 3 or 5.

24. In view of the above, while the present suit cannot be rejected under Order VII Rule 11 of the CPC, this Court under Section 151 of the CPC has ample power to dismiss the suit as having been rendered infructuous due to the subsequent events, that is, the Settlement Agreements referred to hereinabove.

25. Accordingly, the present application is allowed. The present suit is dismissed as having been rendered infructuous in view of the Initial Settlement dated 22.01.2022; Settlement dated 22.04.2022; and the Minutes of Meeting dated 30.07.2022.

26. All pending applications are also disposed of in view of the above order.

NAVIN CHAWLA, J. FEBRUARY 28, 2023 RN/KP

Rajan Gupta v. Pradeep Kumar Gupta & Ors.

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