Salman Khan Settles Dispute with Jerai Fitness, Withdraws Insolvency Appeal

Salman Khan Settles Dispute with Jerai Fitness, Withdraws Insolvency Appeal

Introduction

Actor Salman Khan has withdrawn his insolvency appeal against gym equipment manufacturer Jerai Fitness Limited before the National Company Law Appellate Tribunal (NCLAT), following a settlement between the parties.

Factual Background

Khan's fitness brand Being Strong had entered into a trademark licence arrangement with Jerai Fitness, allowing the company to manufacture and sell gym equipment under Khan's trademark. The agreement obligated Jerai to pay a minimum guarantee of ₹3 crore annually or 3% of net sales.

Procedural Background

Khan alleged that Jerai defaulted on payments and approached the NCLT Mumbai Bench, seeking initiation of the Corporate Insolvency Resolution Process (CIRP) against Jerai Fitness. The NCLT dismissed Khan's petition, holding that the dispute was subject to a genuine pre-existing dispute regarding Khan's performance under the agreement.

Issues

1. Insolvency Claim: Whether Jerai Fitness had defaulted on payments to Salman Khan.

2. Pre-existing Dispute: Whether the dispute regarding Khan's performance under the agreement affected the insolvency claim.

Contentions of the Parties

Salman Khan's Contention: Jerai Fitness defaulted on invoices amounting to ₹7.24 crore, including a one-time settlement payment and royalties.

Jerai Fitness's Contention: Khan failed to discharge his obligations under the agreement, including providing timely approvals and branding support.

Reasoning and Analysis

The bench of Chairperson Justice Ashok Bhushan and Technical Member Arun Baroka held that the right to receive payment under the agreement accrued only when the user was enabled to use the trademark. The Tribunal concluded that the petition fell in the domain of recovery proceedings rather than resolution under the Insolvency and Bankruptcy Code (IBC).

Decision

The parties placed the consent terms on record, and the matter stood withdrawn before the NCLAT.

Implications

The settlement highlights the importance of clear contractual obligations and dispute resolution mechanisms in business agreements.

In this case the appellant was represented by Varun Kalra, Parag Khandhar, Tapan Radkar and Shaham Ulla, Advocates from DSK Legal.

Meanwhile the respondent was represented by Himanshu Satija, Prerna Wagh, Prangana Baraua, Pranav Saigal, Harshit Khanduja, Harsh Saxena and Anshul Rao, Advocates.