10 七月 2020

Civil Court’s jurisdiction barred in copyright suit arising from insolvency resolution plan – NCLT to adjudicate

In an interesting case of intersection of insolvency and copyright laws, the Delhi High Court has held that the suit for alleged infringement of copyrights, arising out of and/or is in relation to the insolvency resolution plan of a corporate debtor must be adjudicated by the NCLT and that the proceedings in the Civil Court are barred. The suit was dismissed as not maintainable before the High Court in view of Sections 230 and 231 read with Section 60(5) of the Insolvency and Bankruptcy Code, 2016.

The dispute in the present case was between the copyright holder (plaintiff) and the company (defendant) which had acquired the corporate debtor to whom the engineering drawings covered by the copyrights were supplied under a conditional and limited license for use.

The plaintiff had plead that even by the process of resolution of the corporate debtor, the defendant could not have acquired the license/proprietary rights in the drawings and data which belong to the plaintiff. The defendant however plead that it retained the right to use the drawings because as per the contract between the copyright holder and the corporate debtor, the copyright holder on termination of the contract due to insolvency of the debtor, subject to payments, was required to deliver all drawings prepared by it. It further plead that it received the drawings as per the resolution plan of the corporate debtor which used the term ‘entitled or accustomed to’ and thus ensured continuity of all benefits in favour of the corporate debtor to continue with the defendant.

It may be noted that the Court in its Judgement dated 26-06-2020 in the case GE Power India Ltd. v. NHPC Limited, though held that the dispute falls within the ambit of Section 60(5) of IBC, as the same arises out of and/or is in relation to the insolvency resolution plan, it noted the plaintiff’s contention that in the absence of an assignment or a license in writing by the plaintiff, the defendant (company which acquired the corporate debtor to whom the licence for use was given by the plaintiff) did not automatically have a right on the assets of the plaintiff which were not even the assets of the corporate debtor. The Court however found the suit not maintainable because of the absence of the necessary parties i.e. the corporate debtor.

Territorial jurisdiction

The High Court however rejected the defendant’s plea of lack of territorial jurisdiction. It observed that though neither the plaintiff nor the defendant may be residing or working for gain in Delhi, since the copies of the plaintiff’s purported work were put on the web portal and circulated to the public including the public in Delhi, it would give rise to cause of action at Delhi. It observed that in a suit alleging infringement of the copyright, the cause of action would arise in the forum state where the infringement of the copyright in terms of the Copyright Act would take place.

Supreme Court’s decision in the case of Oil & Natural Gas Commission v. Utpal Kumar Basu, was distinguished by the Court while it held that cause of action was uploading the drawings on the computer systems at Delhi and disclosure of the drawings of the plaintiff to the public, issuing copies thereof, and which all amounts to infringement of the plaintiff’s copyright giving rise to cause of action under Section 20 of the Copyright Act.

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