TMI Blog2019 (10) TMI 1546X X X X Extracts X X X X X X X X Extracts X X X X ..... ons and summary judgment under Order XXXVII of CPC. This Court is of the opinion that there will be 'no real prospect of successfully defending the claim' when the Court is able to reach a fair and just determination on the merits of the application for summary judgment. This will be the case when the process allows the court to make the necessary finding of fact, apply the law to the facts, and the same is a proportionate, more expeditious and less expensive means to achieve a fair and just result. It is settled law that where a mark is unregistered, as it was at that stage, ownership of the proprietor is not in the trade mark, but in the goodwill associated with the business where the trade mark is used. Since the inverter business was never carried out by the partnership, no goodwill was generated in favour of defendant no. 1 for the inverter business. Consequently, any licence under the TMLA could have been a licence in respect of the goodwill associated with the cable TV business only, since that was admittedly the business conducted by the partnership - based on the admissions of defendant no. 1 and applicable law, it can safely be said that the TMLA does not co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Deed of Assignment dated 16th March, 2006 are baseless and inconsequential - urther the Deed of Assignment is void for breach of fiduciary duty. In fact, the said Deed had been executed by the defendant no. 1 both as assignor and assignee and it purports to transfer the substratum of plaintiff's business to its director defendant no. 1 for nominal consideration of Rs. 5,000/- by an alleged recordal twelve years later and that too after commencement of corporate insolvency resolution process! The admissions of defendant no. 1 in documents and pleadings prevent him from taking factual positions to the contrary and leading evidence to the contrary. Further from the pleadings and material on record, it is apparent that the defendants have no real prospect of defending the allegations made by the plaintiff and there is no compelling reason for trial. Application disposed off. - CS (COMM) 1155/2018, I.As. 13597/2018 and 14309/2018 - - - Dated:- 30-10-2019 - Manmohan, J. For Appellant: Amit Sibal, Senior Advocate, Anuj Berry, Abhey J.V., Saksham Dhingra, Vinay Tripathi, Malak Bhatt, Apoorva Murali and Surabhi Bhandari, Advocates For Respondents: Rajeev Virmani ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t No. 1 had relied upon a brand valuation report dated 03rd March, 2015 undertaken by Ernst Young wherein the plaintiff had been identified as the owner of the Su-Kam Marks, when he submitted his bid for the plaintiff company during the ongoing insolvency proceedings. 5. Learned senior counsel for the plaintiff stated that the defendant no. 1, by his representations/acts/admissions, had intentionally caused others, including the plaintiff, to believe that the plaintiff was the rightful owner of the 'Su-Kam' marks in Class 9 of the Trade Marks Act, 1999 and was now estopped from denying the said truth or pleading to the contrary. In support of his submission, he relied on the Supreme Court judgment in Jai Narain Parasrampuria (Dead) and Others Vs. Pushpa Devi Saraf and Others, MANU/SC/8451/2006MANU/SC/8451/2006 : (2006) 7 SCC 756 wherein it has been held as under:- 32. It may be true that no issue as regards title between Sarafs and the said S.N. Verma having been framed in OS No. 267 of 1980, the principle of res judicata is not applicable. In the said proceedings, however, Sarafs as also the said S.N. Verma being parties, there cannot be any doubt or dispute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isrepresentations and had taken contradictory stands on various occasions. He pointed out the following instances which according to him disentitled the defendant no. 1 from seeking a trial in the suit:- a. Based on the undertaking given personally by the defendant no. 1, on 03rd October, 2018, this Court passed an order that the defendant no. 1 would not assert any rights in the trademark Su-Kam in Class 9 of the Trade Marks Act, 1999. The said undertaking was given by the defendant no. 1, without disclosing to this Court the order of attachment of the Su-Kam trademarks dated 27th September, 2018, passed by the Arbitral Tribunal in the arbitration proceedings initiated by the Reliance India Power Fund at Mumbai despite being well aware of the said order. The said order was passed by the Arbitral Tribunal on the basis of a misrepresentation made by the defendant no. 1 that the Su-Kam trademarks were under his ownership and name. b. Though the defendant no. 1 had claimed that the plaintiff was its licencee, yet the defendant no. 1 had relied on the Deed of Assignment dated 16th March, 2006 to claim that the Su-Kam mark stood assigned to him. The execution of the Deed of Assign ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the stamp of the appellants and signed under a paragraph which states that they had joined in the indemnity. The appellants had also set out in their application for leave to defend that the documents submitted to the negotiating Bank were not negotiated as there were discrepancies in those documents. To this averment there was no reply or denial by the 1st respondent. The appellants have made serious allegations of fraud and collusion. They had stated that such a document did not exist in their records. This was not a defence which could be characterised, at this stage, as sham or illusory or practically moonshine. These triable issues should not have been summarily rejected by the trial court and/or the High Court. 10. He stated that the plaintiff had no reasonable prospect of succeeding in its claim as the defendant no. 1 had started using the SU-KAM Mark as its proprietor in 1986. He stated that the defendant no. 1 had coined and adopted the trademark Su-Kam in the year 1986 and was the proprietor of the trade mark Su-Kam in all classes, except for Class 9, under the Trade Marks Act, 1999. 11. He pointed out that the defendant no. 1, in partnership with his father, ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his submission, he relied on Sun Pharmaceuticals Industries Limited vs. Cipla Limited, MANU/DE/1527/2008MANU/DE/1527/2008 : 2009 (108) DRJ 207, wherein it has been held as under:- 8. I, however, find that not only in the aforesaid two cases, recently also another Single Judge of this Court in Astrazeneca UK Ltd. and Anr. v. Orchid Chemicals and Pharmaceuticals Ltd., MANU/DE/8684/2006MANU/DE/8684/2006 : 2006 (32) PTC 733 [Del.] Delhi has also taken the same view and held that the rights in the trademark come on the basis of assignment deeds and the plaintiffs cannot be denied the rights in the trade mark which they have got on the basis of the assignment deeds in their favour on the ground that in the records of the Registrar of Trade Marks, the trade mark is still shown in the name of the assignor. xxx xxx xxx 12. It follows that the assignee immediately on assignment i.e., by writing acquires title to the registered trade mark. Registration under Section 45(1) is on proof of title . Thus title exists in assignee even before registration under Section 45(1). 15. Learned senior counsel for the defendant no. 1 submitted that prior to the amendment of the Trad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the question of estoppel in the present suit did not arise as the plaintiff had acknowledged the defendant no. 1 to be the proprietor of the trademark Su-Kam in the BT Agreement. He contended that the plaintiff was all along aware of the true facts regarding the defendant no. 1's ownership of the Su-Kam marks and there could be no estoppel where truth is known to both parties. In support of his contention, he relied on Mohori Bibee and Another vs. Dharmodas Ghose, MANU/PR/0049/1903MANU/PR/0049/1903 : 7 CWN 441, wherein it has been held as under:- 9. The Courts below seem to have decided that this section does not apply to infants; but their Lordships do not think it necessary to deal with that question now. They consider it clear that the section does not apply to a case like the present, where the statement relied upon is made to a person who knows the real facts and is not misled by the untrue statement. There can be no estoppel where the truth of the matter is known to both parties, and their Lordships hold, in accordance with English authorities, that a false representation, made to a person who knows it to be false, is not such a fraud as to take away the privileg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. I am advised that even otherwise the reliance by the Defendant No. 1 on the Deed of Assignment dated March 16, 2006 in his defence ought to be rejected in view of the fact that the said Deed is invalid and that the Defendant No. 1 cannot rely upon the same on the grounds that the Deed of Assignment has been executed by him in breach of his fiduciary duty under law; the holding out by him that the Plaintiff is the sole owner and registered proprietor of the SU-KAM Marks and the consequent estoppel under law; and his failure to act upon the Deed of Assignment for a period of 12 years from the execution thereof I am advised that the said defence can be rejected by this Hon'ble Court on the said basis without it having to pass an order of declaration. Further, I say that insofar as the Trade Mark License Agreement dated July 7, 1995 is concerned, the Plaintiff is seeking a limited relief that the same is not and never was applicable to it. I am advised that such an Order is not based on allegations of fraud and fabrication and can be granted by this Hon'ble Court without trial. I also state that the Plaintiff is entitled to other reliefs as prayed for in prayers (c), (d), (e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is able to show that the defendant has no real prospect of successfully defending the claim, then unless the defendant shows that there is a compelling reason to lead oral evidence, summary judgment must be granted in favour of the plaintiff. He submitted that the onus on the defendant for summary judgment is lower than the judgment on admission. He further submitted that judgment on admission is discretionary, whereas summary judgment must be granted where the Court finds that either plaintiff or defendant has no real prospect of succeeding or there is no compelling reason to lead oral evidence. He stated that discretion in grant of summary judgment lies in moulding the relief only. 24. Learned senior counsel for the plaintiff further submitted that the test for summary judgment is not whether the defence is a sham or moonshine-which is the test for leave to defend in a summary suit. He submitted that the standard in a summary judgment should be lower than that of a summary suit because there the Court has to decide whether to allow a defence at all; whereas, in a summary judgment the defence is on record as both the parties are duty bound to state on oath that they have discl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to give rise to a short point of law or construction and, if the court is satisfied that it has before it all the evidence necessary for the proper determination of the question and that the parties have had an adequate opportunity to address it in argument, it should grasp the nettle and decide it. The reason is quite simple: if the respondent's case is bad in law, he will in truth have no real prospect of succeeding on his claim or successfully defending the claim against him, as the case may be. Similarly, if the applicant's case is bad in law, the sooner that is determined, the better. If it is possible to show by evidence that although material in the form of documents or oral evidence that would put the documents in another light is not currently before the court, such material is likely to exist and can be expected to be available at trial, it would be wrong to give summary judgment because there would be a real, as opposed to a fanciful, prospect of success. However, it is not enough simply to argue that the case should be allowed to go to trial because something may turn up which would have a bearing on the question of construction: ICI Chemicals Polymers Ltd. v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in trade marks. This is, in fact, the object underlying all trade mark laws. A trade mark is meant to distinguish the goods made by one person from those made by another. A trade mark, therefore, cannot exist in vacuo. It can only exist in connection with the goods in relation to which it is used or intended to be used. Its object is to indicate a connection in the course of trade between the goods and some person having the right to use the mark either with or without any indication of the identity of that person. Clause (v) of Section 2(1) which defines the expression trade mark makes this abundantly clear. Trade marks became important after the Industrial Revolution as distinguishing goods made by one person from those made by another; and soon the need was felt to protect traders against those who were unauthorisedly using their marks and accordingly registration of trade marks was introduced in England by the Trade Marks Registration Act, 1875, which was soon replaced by more detailed and advanced legislation. When a person gets his trade mark registered, he acquires valuable rights by reason of such registration. Registration of his trade mark gives him the exclusive right ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ossibly of using them in respect of a few articles. The inconvenience it occasions, the cost it occasions, is very large, and beyond that I cannot help seeing that it would lead in some cases to absolute oppression, and to persons using the position they have obtained as registered owners of trade marks (which are not really bona fide trade marks) for the purpose of trafficking in them and using them as a weapon to obtain money from subsequent persons who may want to use bona fide trade marks in respect of some classes in respect of which they find those bogus trade marks registered. (emphasis supplied) The judgment of Romer, J., in Batt case [(1898) 2 Ch D 432, 436: 15 RPC 262, 266] was confirmed by the Court of Appeal [(1898) 2 Ch D 432, 439 and 442] and by the House of Lords sub nominee John Batt Co. v. Dunnett. 38. To get a trade mark registered without any intention to use it in relation to any goods but merely to make money out of it by selling to others the right to use it would be trafficking in that trade mark. In American Greetings Corp's Application, Re [(1983) 2 All ER 609, 619] Dillon, L.J., said in the Court of Appeal: Trafficking in a trad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t that at the time of execution of the alleged TMLA, the licence was not for use of the SU-KAM trademark for the inverter business but in respect of Cable TVs and related goods and services. 30. Learned senior counsel for plaintiff contended, in any event, that when the BT Agreement was executed, the mark Su-Kam was unregistered and only ownership of the goodwill in the existing business of defendant no. 1 or goods which used the Su-Kam mark, under licence from defendant no. 1, could have been transferred under the BT Agreement. He emphasised that the only business which the erstwhile partnership was engaged in, at that time, was the business of Cable TV and that the defendant no. 1 did not own any goodwill in the trade mark Su-Kam in relation to the inverter business. He therefore contended that the statement in the BT Agreement could, at the most, refer to ownership of the trade mark Su-Kam in relation to the Cable TV business. 31. Learned senior counsel for plaintiff stated that the terms of BT Agreement stipulated that the Su-Kam would remain the property of defendant no. 1 and royalty in respect of the same would be decided between the plaintiff and defendant no. 1. He s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chedule to the Limitation Act, 1963 stipulated that the limitation for obtaining a declaration stating that the document is invalid is limited to three years from when the right to sue accrued . 36. According to learned senior counsel for defendant no. 1, in the present case the right to sue would accrue from the date the Deed of Assignment was entered i.e. 16th March, 2006. Hence, he submitted that the relief claimed by the plaintiff with regard to the declaration of invalidity of the Deed of Assignment was barred by limitation. 37. He lastly submitted that plaintiff's arguments with regard to lack of quorum and interested directors were irrelevant and should not be examined by this Court as it was not mandatory for the Board of Directors to approve/sanction the Deed of Assignment. 38. In reply, Mr. Amit Sibal, learned senior counsel for the plaintiff submitted that the right to sue accrued in favour of plaintiff only in 2018 when defendant no. 1 denied plaintiff's title to the SU-KAM marks in Class 9 of the Trade Marks Act, 1999 and claimed ownership before the Interim Resolution Professional. This according to him resulted in the general public being deterred f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uccessfully defending the claim, as the case may be; and (b) there is no other compelling reason why the claim should not be disposed of before recording of oral evidence. (emphasis supplied) 42. Consequently, the new Rule, applicable to commercial disputes, demonstrates that trial is no longer the default procedure/norm. 43. Rule 24.2 of Civil Procedure Rules in England is identical to Rule 3 of Order XIIIA of CPC. It refers to the words 'no real prospect' of being successful or succeeding. Rule 24.2 of Civil Procedure Rules in England is reproduced hereinbelow:- 24.2 The court may give summary judgment against a claimant or defendant on the whole of a claim or on a particular issue if- (a) it considers that (i) that claimant has no real prospect of succeeding on the claim or issue; or (ii) that defendant has no real prospect of successfully defending the claim or issue;' and (b) there is no other reason why the case or issue should be disposed of at a trial. (emphasis supplied) 44. While deciding the test for summary judgment under Rule 24.2, House of Lords in Three Rivers District Council and Others vs. Governor a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e which it is alleged discloses no reasonable grounds for bringing or defending the claim. In Monsanto plc v. Tilly The Times, 30 November 1999; Court of Appeal (Civil Division) Transcript No 1924 of 1999; Stuart Smith LJ said that rule 24.2 gives somewhat wider scope for dismissing an action or defence. In Taylor v. Midland Bank Trust Co. Ltd. 21 July 1999 he said that, particularly in the light of the CPR, the court should look to see what will happen at the trial and that, if the case is so weak that it had no reasonable prospect of success, it should be stopped before great expense is incurred. [92] The overriding objective of the CPR is to enable the court to deal with cases justly: rule 1.1. To adopt the language of article 6(1) of the European Convention for the Protection of Human Rights and Fundamental Freedoms with which this aim is consistent, the court must ensure that there is a fair trial. It must seek to give effect to the overriding objective when it exercises any power given to it by the Rules or interprets any rule: rule 1.2. While the difference between the two tests is elusive, in many cases the practical effect will be the same. In more difficult and complex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was that the appellant, through that company, had transferred more than US $10 million to an offshore bank following which he claimed that the money had been stolen. That money had initially been transferred to the appellant's company, by the respondents therein, in respect of an investment opportunity. 46. The Trial Court as well as the Court of Appeal considered Rule 20 of the Ontario Rules of Civil Procedure (RCP) and the appropriate standard of review in granting a summary judgment. Rule 20 of RCP reads as: ....(1) The court shall grant a summary judgment if, (a) the court is satisfied that there is no genuine issue requiring a trial with respect to a claim or defence; or (b) the parties agree to have all or part of the claim determined by a summary judgment and the court is satisfied that it is appropriate to grant summary judgment. (2.1) In determining under clause (2)(a) whether there is a genuine issue requiring a trial, the court shall consider the evidence submitted by the parties..... . It is pertinent to mention that the amendments to the RCP in December 2008 changed the test from a genuine issue for trial to whether there is a genuine issue requiring trial . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or Peebles' conduct. xxx xxx xxx [19] The Court of Appeal concluded that, given its factual complexity and voluminous record, the Mauldin Group's action was the type of action for which a trial is generally required. There were numerous witnesses, various theories of liability against multiple defendants, serious credibility issues, and an absence of reliable documentary evidence. Moreover, since Hryniak and Peebles had cross claimed against each other and a trial would nonetheless be required against the other defendants, summary judgment would not serve the values of better access to justice, proportionality, and cost savings. [20] Despite concluding that this case was not an appropriate candidate for summary judgment, the Court of Appeal was satisfied that the record supported the finding that Hryniak had committed the tort of civil fraud against the Mauldin Group, and therefore dismissed Hryniak's appeal. [21] In determining the general principles to be followed with respect to summary judgment, I will begin with the values underlying timely, affordable and fair access to justice. Next, I will turn to the role of summary judgment motions generally and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the purpose, unless it is in the interest of justice for such powers to be exercised only at a trial: 1. Weighing the evidence. 2. Evaluating the credibility of a deponent. 3. Drawing any reasonable inference from the evidence. (2.2) [Oral Evidence (Mini-Trial)] A judge may, for the purposes of exercising any of the powers set out in sub-rule (2.1), order that oral evidence be presented by one or more parties, with or without time limits on its presentation. [43] The Ontario amendments changed the test for summary judgment from asking whether the case presents a genuine issue for trial to asking whether there is a genuine issue requiring a trial . The new rule, with its enhanced fact-finding powers, demonstrates that a trial is not the default procedure. Further, it eliminated the presumption of substantial indemnity costs against a party that brought an unsuccessful motion for summary judgment, in order to avoid deterring the use of the procedure. XXX XXX XXX [49] There will be no genuine issue requiring a trial when the judge is able to reach a fair and just determination on the merits on a motion for summary judgment. This will be the case when the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idence and jurisprudence. The British Columbia Supreme Court has itself granted judgment on summary trial in cases of the manufacture, importation, distribution, sale and offer for sale of counterfeit goods, even in cases with multiple defendants, a complex fact pattern, numerous investigations and affidavits, and relatively large damage awards, thereby confirming the appropriateness of doing so. See Louis Vuitton Malletier S.A. et al. v. 486353 B.C. Ltd. et al, 2008 BCSC 799, [2008] B.C.W.L.D. 5075 at paragraphs 42-48. (emphasis supplied) B. Abbey International Finance Ltd. V. Point Ireland Helicopters Ltd. Anr. (supra):- 15. But is it open to a plaintiff to seek summary judgment in respect of the un-liquidated claims? 16. I am satisfied that the answer to that question is in affirmative. I come to that conclusion by reference to both the inherent jurisdiction of the court and the specific rules which apply to cases transferred to the Commercial List. 17. I can see no reason in either law or logic why a defendant who has no defence to a liquidated claim may be subject to an application for summary judgment, but, not be so in the case of an action seeking unliquid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no real prospect of successfully defending the claim' when the Court is able to reach a fair and just determination on the merits of the application for summary judgment. This will be the case when the process allows the court to make the necessary finding of fact, apply the law to the facts, and the same is a proportionate, more expeditious and less expensive means to achieve a fair and just result. AS THE PLAINTIFF HAS GIVEN UP ITS PRAYERS BASED ON FRAUD, THE SUBMISSION THAT SUCH RELIEFS CANNOT BE GRANTED WITHOUT A TRIAL IS OTIOSE. 53. In view of the plaintiff having given up its claims and prayers based on fraud and fabrication by filing an affidavit dated 02nd May, 2019, the submission of defendant no. 1 that such reliefs cannot be granted without a trial does not survive. SINCE THE PLAINTIFF IS THE EXCLUSIVE REGISTERED PROPRIETOR OF THE MARKS SU-KAM IN CLASS 9, THE DEFENDANT NO. 1'S SUBMISSIONS WITH REGARD TO EARLIER TMLA OR BT AGREEMENT AND/OR SUBSEQUENT DEED OF ASSIGNMENT ARE BASELESS AND INCONSEQUENTIAL. 54. In the present case, plaintiff is the registered proprietor of the mark SU-KAM with respect to inverters which falls within the scope of Class 9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... WAS NON TRANSFERABLE IN NATURE AND THERE IS NO PLEADING THAT THE ERSTWHILE PARTNERSHIPS WERE ENGAGED IN INVERTER BUSINESS, ANY LICENCE UNDER THE TMLA COULD HAVE BEEN IN RESPECT OF THE GOODWILL ASSOCIATED WITH THE CABLE TV BUSINESS ONLY. 59. Dehors the aforesaid fundamental reasoning, this Court finds that Clause 1 of the TMLA, states that the licence granted was non transferable in nature. Clause 1 of the TMLA is reproduced hereinbelow:- 1. The LICENSOR hereby grants to the LICENSEE in accordance with the terms and conditions of this agreement and for the consideration herein mentioned, a non-exclusive, non-transferable, royalty free, revocable license to use the licensed Trademark on or in association with the Licensed Products. (emphasis supplied) 60. It is the defendant no. 1 's case that the partnership firm, to which the licence was granted, ceased to exist and the business was transferred to the plaintiff. Consequently, the use of the SU-KAM marks by plaintiff is not derived from, or under any authority of defendant no. 1. 61. Further, proceeding on the basis that TMLA is authentic, this Court is of the view that it did not apply to the plaintiff and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctively, the contrary averment/recital in BT Agreement dated 16th September, 1999, is of no legal consequence. THE DEED OF ASSIGNMENT IS VOID FOR BREACH OF FIDUCIARY DUTY AND ON ACCOUNT OF LACK OF QUORUM AS THE VOTES OF DEFENDANT NO. 1 AND HIS WIFE WOULD HAVE TO BE DISREGARDED FOR BEING INTERESTED DIRECTORS. 67. In the opinion of this Court, the Deed of Assignment is void for breach of fiduciary duty, as it had been executed by defendant no. 1, both as assignor and assignee and it purports to transfer the substratum of plaintiff's business to its Director (defendant no. 1) for nominal consideration of Rs. 5,000/- by an alleged recordal twelve years later and that too after commencement of Corporate Insolvency Resolution Process! 68. The Deed of Assignment is further invalid because it contains statements that the plaintiff-company is the licencee of the defendant no. 1, which is falsified by agreement itself, which is for assignment. If the assertion with respect to licence was true, the Deed/Agreement would be for rectification and not for assignment by an owner! 69. The Deed of Assignment is also invalid because it portrays as if the plaintiff had authorised it vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the said agreement it was also stated that any dispute or difference arising in regard to any of the terms contained in the agreement, shall be settled in accordance with the provisions of the Arbitration Act. The application under Section 20 of the Arbitration Act was filed in November, 1973. It may be noted that application for winding up of M/s. Globe Motors Ltd. was moved in March, 1968. Globe motors was having one of its industrial units manufacturing steel under the name of Globe Steels. The agreement purports to appoint the respondents as distributors for the sale and marketing 1/6th of the company's steel products. Objection was taken by the Official Liquidator on various grounds. Broadly the grounds raised were--(i) whether the application filed under Section 20, of the Arbitration Act was barred by limitation; (ii) whether the agreement dated 1-6-1967 was valid and the next question related to whether the agreement was vitiated on the grounds of fraud and being against the interest of the company. The learned single Judge found all the pleas against the appellant and in favour of the respondents, and has, therefore, directed the matter to be referred to the arbitr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ofits for which, in my view, they are liable to account to the company. The courts in Scotland have treated directors as standing in a fiduciary relationship towards their company and, applying to the equitable principle have made them accountable for profits accruing to them in the course and by reason of their directorship. It will be sufficient to refer to Huntington Copper Go. v. Henderson, in which the Lord President cites with approval the following passage from the judgment of the Lord Ordinary: 'Whenever it can be shown that the trustee has so arranged matters as to obtain an advantage whether in money or money's worth to himself personally through the execution of his trust, he will not be permitted to retain, but be compelled to make it over to his constituent.' (P. 389 A supra). 8. Thus it cannot be disputed that the fiduciary duties of directors are basically the same as those of other trustees and they are expected to display the utmost good faith towards the company whether their dealings are with the company or on behalf of the company. They should not use the company's money or other property or information or other matters in their possessio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess of the company even though no specific act of dishonesty is proved against him personally. He cannot shut his eyes to what must be obvious to everyone who examines the affairs of the company even superficially. If he does 50 he could be held liable for dereliction of duties undertaken by him and compelled to make good the losses incurred by the company due to his neglect even if he is not shown to be guilty of participating in the commission of fraud (emphasis supplied). It is enough if his negligence is of such a character as to enable frauds to be committed and losses thereby incurred by the company . (Vide Official Liquidator v. PA. Tendolkar, MANU/SC/0005/1973MANU/SC/0005/1973 : (1973) 43 Company Gases 382 at 384. 10. A derivative action can be brought against directors who are in control of the company to compel such directors to account to the company for profits made by appropriating for themselves a business opportunity which the company would otherwise have enjoyed. (Vide Penington's Company Law 4th Edition, page 596). 11. Gower in Company Law 3rd Edition page 526 has noticed that because of the trustee like position of the directors a contract between the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such that there could be no other conclusion than that the same was arrived at because of the peculiar position, which the respondent as Director, enjoyed in the company. xxx xxx xxx 19. It will thus be seen that out of 13 directors who attended the Board meeting on 15-6-1967, 6 of them were interested in three agreements which were approved by the Board on that day. Technically we may accept what is recorded in the minutes of the Board that the Directors had disclosed their interest in the agreement which was being approved and also did not take part in the discussion or voted on the resolution. Though therefore, there may not be any technical objection to these resolutions yet we cannot overlook the patent incongruity of accepting that unbiased mind was brought to bear on the merits of these agreements when almost half of the Board was interested in one or the other agreement. 'In such a case the criticism that this was nothing but mutual backslapping to enrich themselves does not sound improbable. As Gower on Company Law in commenting on such kind of disclosures says--'in marked contrast with the basic equitable principle, the disclosure required is not to the gene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d business arrangement normally expected of an ordinary business man, it might have been still possible to uphold the agreement. But the terms incorporated in the agreement leave no manner of doubt that the only interest that was kept in view was the personal benefit and profit of these directors and that too at great cost and to the gross detriment of the interest of the company. xxx xxx xxx 24. We cannot but hold the terms of the agreement dated 1-6-1967 as approved by the Board were anything but to the detriment of the company. This was an arrangement which was made simply to siphon of Rs. 1 lakh and 20 thousand per annum as a minimum fee to the Directors without doing a single patch of work for the benefit of the company. This the directors were able to do because of their close association and control over the Board of Directors. This was not a case in which only one of the directors was favoured by such arrangement. Six of the directors out of 13 who attended the meeting were the beneficiaries of the arrangement which was also agreed to by the 7th member who was the chairman of the company. This was a case of such blatant unfairness against the company that as the Supre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It was held that any person not complying with the mandatory provision cannot take benefit despite such non-compliance. The relevant portion of the said judgment is reproduced hereinbelow:- 17. Section 45 as it existed at the time of Sun Pharmaceuticals Industries Limited supra as under: 45. Registration of assignments and transmissions - (1) Where a person becomes entitled by assignment or transmission to a registered trade mark, he shall apply in the prescribed manner to the Registrar to register his title, and the Registrar shall, on receipt of the application and on proof of title to his satisfaction, register him as the proprietor of the trade mark in respect of the goods or services in respect of which the assignment or transmission has effect, and shall cause particulars of the assignment or transmission to be entered on the register: Provided that where the validity of an assignment or transmission is in dispute between the parties, the Registrar may refuse to register the assignment or transmission until the rights of the parties have been determined by a competent court. (2) Except for the purpose of an application before the Registrar under sub-section (1) or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rest in or under the registered trade mark. 20. There are certain other differences in Section 45 pre and post the amendment thereof w.e.f. 8th July, 2013. While under the sub-section 45(2) as it stood prior to the amendment w.e.f. 8th July, 2013, a document or instrument in respect of which no entry had been made in the register in accordance with the sub-section (1) was to be not admitted in evidence by any Court in proof of title to the trade mark by a assignment or transmission unless the Court otherwise directed, in the amended Section 45 such impediment on the Court has been removed. The amended Section 45 also grants liberty to the Registrar, Trade Marks to require the applicant to furnish evidence or further evidence in proof of title if entertains any doubt. It follows that while the prohibition contained on admission into evidence of a deed of assignment if not entered in the register has been removed, power has been given to the Registrar to ask applicant to furnish evidence or further evidence in proof of title under the deed of assignment or transmission of a registered trade mark. 21. The said changes in Section 45 however do not call for a change in the view ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustries Limited (supra) application for recordal was filed in 2000 for a 1998 assignment and delay in recordal was by the trade marks registry, whereas in the present case the application for recordal is made after more than twelve years, after commencement of Corporate Insolvency Resolution Process, on 18th July, 2018. DEFENDANT NO. 1 IS ESTOPPED FROM LEADING EVIDENCE OF HIS TITLE TO THE SU-KAM MARKS IN RESPECT OF CLASS 9, IN VIEW OF HIS REPRESENTATIONS THAT THE PLAINTIFF IS THE EXCLUSIVE OWNER. 75. This Court is also of the opinion that defendant no. 1 is estopped from leading evidence of his title to the SU-KAM marks in respect of Class 9, in view of his representations to the plaintiff and the world at large that the plaintiff is the exclusive owner, on which plaintiff had relied by expanding its business and by spending money on advertisements and promoting its business under the impugned mark. 76. In fact, just seven days before the Deed of Assignment plaintiff applied for registration of mark (i.e. on 09th March, 2006) and just fifteen days after, defendant no. 1 held out to plaintiff and Reliance India Power Fund (i.e. on 31st March, 2006) that the company was the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d his bid for the plaintiff company during the ongoing insolvency proceedings, he had relied upon a brand valuation report dated 03rd March, 2015 undertaken by Ernst and Young which identified plaintiff-company to be the owner of the SU-KAM marks. 81. The Supreme Court in B.L. Sreedhar Ors. Vs. K.M. Munireddy Ors., MANU/SC/1101/2002MANU/SC/1101/2002 : (2003) 2 SCC 355 has held that if a man either by words or by his conduct intimates that he consents to an act, he cannot question the legality of the act to the prejudice of those who have so given faith to his words or to the fair inference to be drawn from his conduct. The relevant portion of B.L. Sreedhar (supra) is reproduced hereinbelow:- 13. Estoppel is a rule of evidence and the general rule is enacted in Section 115 of the Indian Evidence Act, 1872 (in short the Evidence Act ) which lays down that when one person has by his declaration, act or omission caused or permitted another person to believe a thing to be true and to act upon that belief, neither he nor his representative shall be allowed in any suit or proceeding between himself and such person or his representative to deny the truth of that thing. (See Sun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts. Estoppel is based on the maxim allegans contraria non est audiendus (a party is not to be heard to allege the contrary) and is that species of presumption juries et de jure (absolute or conclusive or irrebuttable presumption), where the fact presumed is taken to be true, not as against all the world, but against a particular party, and that only by reason of some act done, it is in truth a kind of argumentum ad hominem. xxx xxx xxx 18. Though estoppel is described as a mere rule of evidence, it may have the effect of creating substantive rights as against the person estopped. An estoppel, which enables a party as against another party to claim a right of property which in fact he does not possess is described as estoppel by negligence or by conduct or by representation or by holding out ostensible authority. 19. Estoppel, then, may itself be the foundation of a right as against the person estopped, and indeed, if it were not so, it is difficult to see what protection the principle of estoppel can afford to the person by whom it may be invoked or what disability it can create in the person against whom it operates in cases affecting rights. Where rights are involved, e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... offer any opposition to it, although it could not have been lawfully done without his consent, and he thereby induces others to do that which they otherwise might have abstained from, he cannot question the legality of the act he had sanctioned to the prejudice of those who have so given faith to his words or to the fair inference to be drawn from his conduct. (emphasis supplied) 82. Consequently, defendant no. 1 is estopped from contending that he is the owner of SU-KAM marks in respect of Class 9 of the Trade Marks Act, 1999. BETWEEN 16TH MARCH, 2006 (I.E. DATE OF EXECUTION OF DEED OF ASSIGNMENT) AND 09TH JULY 2018 (I.E. WHEN THE DEFENDANT NO. 1 SUBMITTED THE DEED OF ASSIGNMENT TO THE INTERIM RESOLUTION PROFESSIONAL), THERE WAS NO ASSERTION BY DEFENDANT NO. 1 THA T PLAINTIFF IS NOT THE OWNER OF THE SU-KAM MARK IN CLASS 9. ACCORDINGLY, THE PRESENT SUIT IS WITHIN LIMITATION. 83. Article 58 of the Limitation Act, 1963, states that the limitation period for obtaining any other declaration is three years, when the right to sue first accrues . 84. The Apex Court in Khatri Hotels Private Limited Anr. vs. Union of India Anr., MANU/SC/1054/2011MANU/SC/1054/2011 : (201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose in favour of the plaintiff only on 09th July, 2018 when defendant no. 1 for the first time denied plaintiff's title to the SU-KAM mark in Class 9 and claimed its ownership before the Interim Resolution Professional. The said cause of action again arose in favour of the plaintiff on 18th July, 2018 when defendant no. 1 relying upon the alleged Deed of Assignment applied for recordal of assignment with the Trade Mark Registry. 89. Accordingly, the present suit is within limitation. CONCLUSION 90. To reiterate, the intent behind incorporating the summary judgment procedure in the Commercial Court Act, 2015 is to ensure disposal of commercial disputes in a time-bound manner. In fact, the applicability of Order XIIIA, CPC to commercial disputes, demonstrates that the trial is no longer the default procedure/norm. 91. Rule 3 of Order XIIIA, CPC, as applicable to commercial disputes, empowers the Court to grant a summary judgment against the defendant where the Court considers that the defendant has no real prospects of successfully defending the claim and there is no other compelling reason why the claim should not be disposed of before recording of oral evidence. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntial. 95. Further the Deed of Assignment is void for breach of fiduciary duty. In fact, the said Deed had been executed by the defendant no. 1 both as assignor and assignee and it purports to transfer the substratum of plaintiff's business to its director defendant no. 1 for nominal consideration of Rs. 5,000/- by an alleged recordal twelve years later and that too after commencement of corporate insolvency resolution process! 96. In view of judgment of a Coordinate Bench of this Court in Ramaiah Life Style Cafe (supra) as the Deed of Assignment has not been registered/recorded, the defendant no. 1 cannot rely upon the same. 97. The said deed is also invalid on account of lack of quorum under section 287 of the Company Act, 1956 as the votes of two out of three directors namely, defendant no. 1 and his wife would have to be disregarded for being beneficiaries/interested directors by virtue of section 300 of the Companies Act, 1956. In Globe Motors Ltd. (supra), a Division Bench of this Court has held that a director cannot be permitted to take advantage of his own breach of fiduciary duty to divest the company of its substratal asset. 98. The defendant no. 1 is a ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
