SBI CARDS AND PAYMENT SERVICES PRIVATE LIMITED vs KONY INC. & ORS.

2024-04-26 Information

$~83

* IN THE HIGH COURT OF DELHI AT NEW DELHI

Date of Decision: 26th April, 2024

+ O.M.P.(I)(COMM.)-127/2024

SBI CARDS AND PAYMENT SERVICES

PRIVATE LIMITED ….. Petitioner

Through: Mr. Rajeev Nayar, Sr. Adv. with
Neeraj Sharma, Ms. Arpita Roy
Chowdhury, Ms. Archana Lakhotia,
Mr. Adhish Rajvanshi, Ms. Prachi
Jain, Mr. Agniwesh Singh & Mr.
Bikram Bhattacharya, Advs. (M:
9958182805)

versus

KONY INC. & ORS. ….. Respondents

Through: None.

CORAM:

JUSTICE PRATHIBA M. SINGH

Prathiba M. Singh, J. (Oral)

1. This hearing has been done through hybrid mode.

I.A. 9375/2024 (for exemption)

2. This is an application seeking exemption from filing
originals/certified/cleared/typed or translated copies of documents, left side
margins, electronic documents, etc. Original documents shall be
produced/filed at the time of Admission/Denial, if sought, strictly as per the
Commercial Courts Act and the DHC (Original Side) Rules, 2018.

3. Exemption is allowed, subject to all just exceptions.

4. Accordingly, the application is disposed of.

O.M.P.(I)(COMM.) 127/2024

5. The present petition under Section 9 of the Arbitration and

Conciliation Act, 1996, and has been taken up upon urgent mentioning in
the morning and has been listed before the Court post-lunch. In the present
petition, the Petitioner is seeking interim measures to ensure access to and
operation of certain licensed software as also to prevent the Respondents
from disrupting the utilisation of software licenses from Respondent No. 1.

6. The petition has been filed by the SBI Cards and Payment Services
Pvt. Ltd. against the four entities who are stated to be connected to each
other. The four parties which have been arrayed as Respondents and the
relationship between the entities is set out below in the following table:

Respondent No.

Respondent Name

Relationship Between the Parties

Respondent No. 1

Kony, INC.

Developer and licensor of Software
solutions used by the Petitioner

Respondent No. 2

Temenos India Pvt. Ltd.

Subsidiary and agent of Respondent No. 1

Respondent No. 3

Bahwan Cybertek LLC

Exclusive strategic partner and agent of
Respondent No. 1 for specified regions

Respondent No. 4

Bahwan Cybertek Pvt.
Ltd.

Subsidiary of Respondent No. 3 and agent
of Respondent No. 1

7. The case of the Petitioner is that it is a publicly listed company on the
Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE)
with the State Bank of India (SBI) as its single largest shareholder of the
Petitioner. The Petitioner claims to be the largest and only pure-play credit
card issuer in India, which is a listed company. The Petitioner offers credit
cards for crores of customers across the country and also provides various
value-added products and services. The Petitioner claims to be have issued
more than 18 million (1.8 crores), which have been issued by it, as of

December, 2023. The credit card services of the Petitioner are also enabled
through the SBIC Mobile App, which has various self-service features.

8. The Petitioner, sometime in 2014 availed of IT services from the
Respondent No.1 – Kony, INC. which has developed the platform called the
Mobile Application Development Platform (MADP), which enables the
Petitioner to develop client facing applications that work on mobiles and
similar devices, for B2C users. For the said purpose, an agreement was
executed between the parties including a license agreement dated 25th April,
2014. In terms of the said agreement, the Respondent No.1 gave to the
Petitioner a license for use of the software, which is called Kony MADP
consisting of two major components namely Kony Visualizer and Kony
Mobile Fabric. As per paragraph 9 of the petition, Kony Visualizer is an
integrated development environment (IDE) that serves as the front-end for
Respondent No.1s API framework, enabling developers to develop mobile
apps for a wide range of devices and operating systems. Further, it has been
stated that Kony Mobile Fabric is a Mobile Backend as a Service (MBaaS)
platform that supports developers in building native and web apps for
mobile devices, offering backend integration for the applications built.

9. The said license agreement dated 25th April, 2014 was initially,
executed between the parties as per which the Petitioner obtained license for
the use of the said operating system in terms Clause 2.1. The said clause
outlines the licensing and authorised use of Konys technology solutions by
the Petitioner, allowing the Petitioner to enable SBI Cards or its Service
Providers to develop mobile banking applications for B2C needs across
various devices and operating systems. The Petitioner was also permitted to
undertake sub-licensing, transfer or permit the use of the license granted to

SBI Cards to any of its parent entity or any divested entity, as per the
provisions of the agreement. An important clause in this agreement is
Section 3, which contains the term of the license. The said clause is set out
below:

SECTION 3- TERM OF LICENSE

The term of the license(s) granted under this agreement
shall commence on the Order Effective Date and
continue for thirty-six (36) months (“Initial Term”),
unless terminated earlier as provided in this
Agreement.

Termination for Material Breach. If either party
materially breaches in the performance of any of its
duties or obligations set forth in this License
Agreement and such breach is not cured within thirty
(30) days after written notice of the same is given by
the non-breaching party specifying the default, then the
non-breaching party may by giving written notice
thereof to the breaching party, terminate this License
Agreement as of a dote specified in the notice of
termination.

Further, SBI Card may terminate this Agreement if (1)
SBI Card determines that any of the representations or
warranties Kony have made in relation to this
Agreement are materially untrue; and (2) If Kony
enters, will enter or threaten to enter into bankruptcy,
liquidation or any other type of insolvency or if Kony
cease to conduct business to properly give effect to this
Agreement. In the event of termination for a material
breach by Kony, SBI CARD shall. in addition to any
other remedies available to it pursuant to this License
Agreement or by low or in equity, receive a refund of
pro-rated license fee, any pre-paid Annual Software
Maintenance Fees and Annual Technical Support Fees
pro-rated to reflect the period following termination
for which such prepayment has been made.

Survival. Upon any termination of this License
Agreement pursuant to this section or otherwise, the
provisions and those rights and obligations, which by
their nature are intended to survive termination, shall
survive the termination of this License Agreement.

Transition Period and Support, Upon payment of the
license fees as agreed by the parties, SBI CARD may
elect by notice to Kony to continue to Use the
Licensed Program for a transition period to be
specified by SBI CARD in its notice up to a maximum
of twelve (12) months (the Transition Period) only
for the purpose of transition by SBI CARD from Kony’s
License Program to SBI CARD’s or a third party
system, provided that SBI CARD fully complies with
this License Agreement during the Transition Period.
Any services which parties agree to be performed by
Kany during such Transition Period will be performed
at an agreed additional cost. It is agreed by the Parties
that SBI CARD shall retain and continue to use all the
copies of the Licensed Materials, software,
documentation and Confidential Information in its
possession or control during the Transition Period.

10. The agreement also consists of an arbitration clause 17 of the said
license agreement. It is the submission of Mr. Rajeev Nayar, ld. Senior
Counsel appearing for the Petitioner that the initial period of license was
from 2014 to 2017 and the same was renewed from 2017 till 2020 and
thereafter, for a further three years period till 2023. Thus, till June, 2023
there was a proper license executed, which existed between the Petitioner
and the Respondent No.1. Ld. Sr. Counsel further submits that prior to the
expiry of the agreement in 2023, negotiations had commenced between the
parties for renewal of the agreement. The said correspondence has been
placed on record, by the Petitioner, to show how a commercial proposal was,

in fact, given by the Respondent No.1 as on 3rd April, 2023 for the renewal
in the following terms.

11. After further correspondence between the parties, the above
commercial proposal was modified as under:

12. It is the submission of ld. Sr. Counsel that this contract was agreed
upon between the parties as the final commercial proposal for a 3-year
further renewal. Ld. Senior Counsel also submits that only the payments
were to be made. A draft master service agreement was also sent by the
Respondent No. 4, however the same was not yet executed. During this
period, the Petitioner was also informed of the fact that the Respondent No.1
had entered into a strategic sales delivery partnership with the Respondent

No.4 – Bahwan Cybertek Pvt. Ltd. in India. The correspondence thereafter
ensued and surprisingly, in the later correspondence sometime in October,
2023, the entire commercial proposal was changed and the proposal, which
was given by the Respondents, is as
under:

13. On this proposal, there was no consensus between the parties as the
Petitioner had already, according to the ld. Senior Counsel, concluded a
contract in terms of the earlier proposal and only the final agreement was to
be executed. The new commercial was way steeper as compared to the
agreed commercial proposal in May 2023. It is submitted that on 19th April,
2024, the Respondent No.1 has now been served a cease-and-desist notice,
in effect, terminating the license agreement. It is submitted that the

termination of the license would have a damaging impact on the Petitioner
as also its subscribers and customers.

14. The Court has heard ld. Sr. Counsel for the Petitioner and perused the
record. Affidavit of service dated 26th April, 2024 has been placed on record
by the Petitioner, however, there is no appearance on behalf of the
Respondents.

15. A perusal of the Arbitration clause in the license agreement would
show that the seat and venue of the arbitration, in case there are any disputes
between the parties, is in New Delhi. A Sole Arbitrator is to be mutually
agreed between the parties. In the absence of consensus, a three-member
Tribunal is to be appointed. Section 17 of the license agreement reads as
under:

SECTION 17- GOVERNING LAW AND
DISPUTES

17.1 All disputes or differences whatsoever arising
between the parties out of or in connection with this
contract or in discharge of any obligation arising out
of the Contract (whether during the progress of work
or after completion of such work and whether before or
after the termination of this contract, abandonment or
breach of this contract). shall be settled amicably. If,
however. the parties are not able to solve them
amicably, either party (SBI Card or Kony) has to give
written notice to other party clearly setting out there in
specific issues relating to dispute(s) and/or
difference(s) and shall be referred to a sole arbitrator
mutually agreed upon and the award made in
pursuance thereof shall be binding on the parties. In
the absence of consensus about the single arbitrator,
the dispute may be referred to an Arbitral Tribunal
consisting of three Arbitrators: one to be nominated by
each party and the said arbitrators shall nominate a

presiding arbitrator, before commencing the
arbitration proceedings. The arbitration. proceedings
shall be conducted in accordance with the provisions
contained in the (Indian) Arbitration & Conciliation
Act, 1996. The venue of Arbitration shall be at New
Delhi (India) and language for all proceedings under
the arbitration shall be in English. The award
pronounced under Arbitration clause or any other
dispute that may arise between the Parties in relation
to or in connection with this Agreement shall be
subject to the exclusive jurisdiction of the appropriate
courts of Delhi.

17.2 Kony shall continue work under the Contract
during the arbitration proceedings unless otherwise
directed by SBI Card or unless the matter is such that
the work cannot possibly be continued until the
decision of the arbitrator is obtained.

16. Advance copy of the petition has been served upon all the email
addresses including upon the officials, who were corresponding with the
Petitioner. The emails have been placed on record. However, there is no
appearance on behalf of the Respondents.

17. The nature of services, which the Petitioner is providing, is credit card
services to more than 1.8 crore people in the country. As on today, the
operation of any credit card would require the requisite IT software and
developer licenses to be in place and any apprehension that such the
software, developer or IDE license could be disrupted, would result in
enormous risks to the customers of the Petitioners.

18. 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.

19. A perusal of relevant portions of clause 3 & 17.2 of the license
agreement would show that even if there is a termination or arbitration
proceedings between the parties, the transition period of 12 months has to be
given and if Arbitration proceedings commence, then the work of
Respondent No.1 and other entities connected to it under the contract and
license agreement has to continue. The relevant portions from the said two
clauses are extracted below:

SECTION 3- TERM OF LICENSE

Kany during such Transition Period will be performed
at an agreed additional cost. It is agreed by the Parties
that SBI CARD shall retain and continue to use all the
copies of the Licensed Materials, software,
documentation and Confidential Information in its
possession or control during the Transition Period.

SECTION 17- GOVERNING LAW AND
DISPUTES

These two clauses of the license agreement would show that the parties fully
appreciated the critical nature of services and the effect any disruption of
services would have on the Petitioner as also its customers.

20. In view of the overall circumstances of the present case, the Petitioner
has made out a prima facie case for grant of ex-parte ad-interim injunction.
Accordingly, till the next date of hearing, the Respondent Nos.1 to 4 and
anyone else acting for and on their behalf shall stand restrained from taking
any action or steps, which would result in the disruption in the credit card
services through use of the licensed software, which are annexed as
Annexure A to the license agreement dated 25th April, 2014. The
programmes, which have been licensed by the Respondents are contained in
Annexure A to the agreement at page 76 of the paper book. It shall be
ensured that no disruption is caused to the services, which are being
provided in order to ensure that the large members of the public are not
inconvenienced in any manner. The Respondents shall also stand restrained
from taking any steps or change any credentials including passwords or the

software versions etc., which may result in disruption of the Petitioners
services, or cause disruption to the services of the users of the platform of
the Petitioner.

21. The above order is subject to the condition that the Petitioner will
deposit the sum of Rs.55 lakhs with the Registrar General of this Court
within one week.

22. Compliance of Order XXXIX Rule 3 CPC be made within 48 hours.

23. List on 22nd May, 2024.

24. Order dasti.

PRATHIBA M. SINGH

JUDGE

APRIL 26, 2024/dk/am