Delhi High Court Grants Interim Protection U/S 9 Of Arbitration And Conciliation Act To SBI Cards To Avoid Any Disruption In Card Services

The Delhi High Court single bench of Justice Prathiba M. Singh granted ex-parte ad-interim injunction to SBI Cards under Section 9 of the Arbitration and Conciliation Act, 1996 to ensure access to and operation of certain licensed software. The bench directed the Respondents from taking any action or steps, which would result in the disruption in the credit card services of SBI Cards. through the use of the licensed software. The bench held that: “Interim protection measures are crucial in the present case as the same involve a critical and sensitive aspect of providing financial services. Disruptions in software licensing or operational access could significantly impact the development and functionality of mobile banking applications that underpin credit card services. Given the sensitive nature of these services, any interruption could pose risks to customer data, transaction processing, and overall service continuity. This, in turn, could lead to financial losses for the parties involved and erode consumer trust. Therefore, the interim protection measures are essential to maintain the smooth operation of credit card-related software, ensuring uninterrupted service delivery, customer satisfaction, and compliance with financial regulations.” Brief Facts: SBI Cards and Payment Services Pvt. Ltd approached the Delhi High Court (“High Court”) seeking interim measures to ensure access to and uninterrupted operation of certain licensed software, as well as to prevent disruption by the Respondents in utilizing software licenses from Kony Inc.. The petition involves four entities allegedly interconnected, namely Respondent No. 1, Respondent No. 2 (Temenos India Pvt. Ltd.), Respondent No. 3 (Bahwan Cybertek LLC), and Respondent No. 4 (Bahwan Cybertek Pvt. Ltd.). SBI Cards availed IT services from Kony Inc., in 2014, under an agreement granting a license for the use of Kony's Mobile Application Development Platform (MADP). This agreement encompassed Kony Visualizer and Kony Mobile Fabric, enabling the SBI Cards to develop mobile applications for B2C users across various devices and operating systems. The initial agreement, dated April 25, 2014, granted the SBI Card a license for Kony's technology solutions, outlining authorized usage and permitting sublicensing or transfer. Notably, Section 3 of the agreement delineated the license term. An arbitration clause (Clause 17) was also included. The license was renewed successively until June 2023. There were negotiations for renewal commenced before the agreement's expiry, including a commercial proposal for a further three-year renewal, from Kony. However, subsequent correspondence, notably in October 2023, revealed a significant alteration in the proposed terms, leading to contention between the parties. Observations by the High Court: The High Court noted that disputes between the parties were to be resolved through arbitration with the seat and venue set in New Delhi. It was specified that initially, a sole arbitrator was to be mutually agreed upon by both parties and in the absence of consensus, a three-member tribunal would be appointed. Section 17 of the license agreement outlined the governing law and dispute resolution process, emphasizing the necessity for amicable resolution followed by arbitration if disputes could not be settled mutually. The High Court noted that SBI Cards' services involved card services which are provided to a significant number of individuals. The High Court recognized that any disruption to the IT software or developer licenses required for these services could pose substantial risks to the customers and the operational continuity of its services. Given the critical nature of the services provided by SBI Cards and the potential risks associated with disruptions in software licensing or operational access, the High Court held it appropriate to grant interim protection. It acknowledged that interruptions could impact customer data security, transaction processing, and overall service continuity, leading to financial losses and erosion of consumer trust. Therefore, the High Court held that interim protection measures were essential to ensure uninterrupted service delivery, customer satisfaction, and compliance with financial regulations. Considering the circumstances, the High Court held that SBI Cards established a prima facie case for the grant of an ex-parte ad-interim injunction. As such, the Respondents were restrained from taking any actions that could disrupt credit card services facilitated by the licensed software specified in the agreement. Additionally, the Respondents were prohibited from making any changes that could disrupt the SBI Cards' services or inconvenience users of the platform. However, the High Court directed SBI Cards deposit the sum of Rs.55 lakhs with the Registrar General of the High Court within one week. Case ...

Delhi High Court Grants Interim Protection U/S 9 Of Arbitration And Conciliation Act To SBI Cards To Avoid Any Disruption In Card Services

Rajesh Kumar

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