Prashant Properties Limited v. Sps Steels Rolling Mills Ltd

When a company owes money and cannot pay, what can a creditor accept as security? Cash is the obvious answer, but what about something far more valuable — the right to use a trademark? This case explores a fascinating intersection of intellectual property, insolvency law, and contract enforcement, where a family of marks became the currency of debt settlement, and one party fought all the way to the High Court to protect that arrangement.

Prashant Properties Limited, acting as an operational creditor, found itself in a commercial relationship with SPS Steels Rolling Mills Ltd. To secure an outstanding debt owed to it, Prashant Properties entered into a Permissive User Agreement (PUA) with SPS Steels. Under this arrangement, Prashant Properties was granted the right to use a family of marks belonging to SPS Steels, effectively treating the brand itself as a form of collateral security. The relationship, however, soured when SPS Steels moved to suspend the PUA. Faced with the potential loss of its permitted use of the marks, Prashant Properties approached the trial court, which granted an ad interim injunction restraining SPS Steels from suspending the agreement. SPS Steels then appealed, and the appellate court stayed the trial court's injunction, holding that civil courts lacked jurisdiction to entertain the matter given the framework of the Insolvency and Bankruptcy Code (IBC) and the Companies Act.

Prashant Properties argued that the suit before the civil court was fundamentally about the enforcement of a collateral security arrangement — specifically, the Permissive User Agreement governing the use of trademarks. The relief sought was a declaration and perpetual injunction to protect its right to use the marks under the PUA, which was independent of any monetary recovery. On the other side, SPS Steels and the appellate court leaned on the jurisdictional boundaries created by the IBC and the Companies Act, suggesting that the dispute should be routed through specialized tribunals rather than ordinary civil courts. The core legal friction was this: Can a civil court entertain a suit for declaratory and injunctive relief tied to a collateral security agreement, when a money claim arising from the same underlying transaction is pending before the National Company Law Tribunal (NCLT)?

The High Court stepped in and set aside the appellate court's stay order, delivering a favorable outcome for Prashant Properties. The Court found that the suit was maintainable in the civil court because it was rooted in a collateral security agreement — the PUA — and the relief sought (declaration and perpetual injunction regarding the use of the trademark family) was independent of the primary declaratory relief. In essence, the Court drew a clear distinction between a money claim that might properly belong before the NCLT and a suit seeking to protect and enforce rights under a security arrangement, which could be adjudicated by the civil court. By restoring the trial court's ad interim injunction, the High Court reaffirmed that the nature of the relief sought, not merely the existence of a related financial dispute, determines where jurisdiction lies.

For founders, startups, and IP professionals, this case offers a critical lesson: when structuring creative security arrangements — such as using trademarks or brand assets as collateral through permissive user agreements — it is essential to recognize that different types of relief may travel to different forums. A monetary claim tied to an underlying debt may fall under the NCLT's jurisdiction, but a suit seeking to declare and protect your right to use a mark under a collateral security agreement can independently be maintained before a civil court. The key is ensuring that the relief you seek is genuinely independent of the primary monetary dispute. Draft your PUAs and collateral security agreements with this jurisdictional clarity in mind, and you will preserve your ability to enforce your IP rights even when insolvency proceedings loom in the background.