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TMI Blog2024 (1) TMI 1166X X X X Extracts X X X X X X X X Extracts X X X X ..... sions of the Companies Act 1956. It was incorporated by the Modi family (50% equity) and the Rathi family (50%equity). It was incorporated to take over the assets of Sputnik Cables Private Limited, which was a sick company at that time and had plant located about 35 KMs' from Secunderabad. It was incorporated to manufacture cables and commenced its business operations since 1995. However, with the induction of Bangur Group as an investor with equity participation Crest Cables Pvt. Ltd. was changed to Gloster Cables Limited in the year 2004. The shareholding pattern now was S K Bangur Group 35.91%, Modi Family 35.91% Rathi Family 28.18%. 2. Fort Gloster Industries Limited (Corporate Debtor) is Respondent No. 1. It was incorporated in the year 1890 as a public limited company and was in the business of manufacturing of power cables. Respondent No. 1 is the owner of the trademark viz "GLOSTER" bearing Trademark Registration No' 690772 in class 9 (hereinafter referred as the 'Trademark') 3 Gloster Limited (Respondent No. 2) was incorporated on 02.01.1923 and is in the business of Jute Products. Bijay Murmuria, is the Resolution Professional (Respondent No. 3) of Responden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o-creditors and the BÍFR, therefore, the deeds executed prior to the execution of the assignment deed dated 20.09.2017 has no legal effect. Secondly, claim made by the Appellant on the basis of the assignment deed dated 20.09.2017 is in violation of Section 43 and 46 of the Code and thirdly, the registration of trade mark in the name of the Appellant is invalid in view of Section 14 of the Code because the CIRP was initiated on 09.08.2018 and the registration certificate was issued on 27.09.2018. All three objections have been maintained by the Adjudicating Authority holding that all deeds executed between Respondent No. 1 and the Appellant were void and illegal, the transaction relied upon by the Appellant is undervalued transaction and is hit by Section 45(2)(b) of the Code and that the registration having been done after the imposition of moratorium is hit by Section 14 of the Code. Aggrieved by the impugned order dated 27.09.2019, the present Appeal has been filed under Section 61 of the Code by the Appellant. 8. While narrating the facts of the case, Counsel for the Appellant has submitted that a technical collaboration agreement was entered into between the Appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deed of hypothecation on 31.01.2008 and hypothecated the trademark in favour of the Appellant by way of first and exclusive charge. The Corporate Debtor entered into a supplemental trademark agreement dated 15.07.2008 with the Appellant whereby it assigned the trade mark in favour of the Appellant against the consideration of Rs. 10 lakh and it was provided therein that the assignment shall automatically become effective without any further act or deed upon vacation/discharge of the BIFR order dated 10.09.2001. It is also alleged that during the period 2008 to 2010 the parties before the BIFR, including all financial institutions and bank, were fully aware about the status of transfer of the exclusive rights and exclusive usage of the trade mark in favour of the Appellant which is treated to have been disclosed by Allahabad Bank (now being Pegasus Asset Reconstruction Company) about the fact that the Corporate Debtor had made over all its rights to use trade mark in favour of the Appellant in terms of the agreements dated 29.07.2004 and 15.07.2008 and a sum of Rs. 3 Crores was additionally paid as an upfront to the Corporate Debtor. It is further alleged that vide 8th schedule of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been assigned and/or transferred to GCL is bad in law. RA understands that the said trademark is the lawful property of the CD'. It is alleged that in the aforesaid facts and circumstances, the Appellant filed CA No. 713/2019 under Section 60(5) on 30.05.2019 seeking clarification that the trademark should not be included as an asset of the Corporate Debtor which was contested by all three parties and the Adjudicating Authority has dismissed the application holding that the trademark is an asset of the Corporate Debtor and hence, the present appeal. 10. After narrating the aforesaid facts, Counsel for the Appellant has challenged the impugned order, inter alia, on the ground that the Adjudicating Authority had no jurisdiction to adjudicate upon the title of the property/asset (trademark) in view of Section 134(1)(b) of the Trademark Act, 1999 (in short 'Act, 1999') as a suit would only lie before the District Court. 11. It is submitted that determination of the title/ownership of the trademark is not within the jurisdiction of the Adjudicating Authority under the Code. In this regard, reliance has been placed upon the judgments of the Hon'ble Supreme Court rendered in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in pending litigation. It is next argued that the Appellant has become the owner of the trademark on the date when the trademark was assigned vide supplemental trademark agreement dated 15.07.2008 and in this regard, he has referred to Section 37 and 38 of the Act, 1999 as per which the person registered as proprietor of a trademark has the power to assign the trademark and further contended that as per Section 38 of the Act, 1999 a registered trademark is assignable and transmissible whether with or without the goodwill of the business concerned. In support of his contention that the right title and interest in the registered trademark, assigned to the Appellant on 12.07.2008 was created, reference has been made to the decisions rendered in the case of Sun Pharmaceuticals Industries Ltd. Vs. Cipla Ltd., MANU/DE/1527/2008, Skol Breweries Ltd. Vs. Som Distilleries and Breweries ltd. & Ors. MANU/MH/1194/2009 and Cinni Foundations Vs. Rajkumar Shah & Sons & Anr. ILR (2010) 1 Delhi 754. It is further submitted that the Adjudicating Authority has committed an error in dismissing the application on the ground that the registration of the trademark in the name of the Appellant was invali ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded that the Corporate Debtor was receiving royalty and licence fee from the Appellant and the Appellant was mentioned as a related party of the Corporate Debtor but there was no assignment agreement during the financial year 2017-18. It is submitted that the intangible asset belonged to the Corporate Debtor and there was no indication that any third party rights have been created. He has further submitted that he had received the record of the proceedings happened before the BIFR much less the order dated 10.09.2001 as per which the prohibition was imposed regarding the transfer of any fixed or current assets of the Company without the consent of the secured creditor and BIFR and as such the supplemental trademark agreement dated 15.07.2008, which is the basis of the case set up by the Appellant that the registered trademark was assigned to it, has been executed during the period of prohibition order passed by the BIFR and cannot be looked into. It is further submitted that in so far as the issue of jurisdiction raised by the Appellant is concerned, the Appellant itself subjected it to the jurisdiction of the Adjudicating Authority by filing the application under Section 60(5) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rporate Debtor or not. It is submitted that it is within the domain of the Adjudicating Authority under Section 60(5)(b)(c) of the Code which provides for decision any claim by or against the Corporate Debtor or any question or fact arising out of the CIRP. It is further submitted that Section 18(f)(iv) of the Code clearly covers intellectual property and in fact mandates that an IRP/RP should take custody of all such assets reflected in the Corporate Debtor's balance sheet or with any other registry. It is also submitted that the deed of assignment dated 20.09.2017 is not a valid document and no assignment trademark could have happened thereunder. It is submitted that the stamp duty of Rs. 8000 only paid on 24.08.2018, the application for change of name was filed on 25.08.2018 and change of registration was on 17.09.2018, all after the date of CIRP on 09.08.2018 which is in violation of Section 14 of the Code which provides a complete shield for all assets of the Corporate Debtor. It is also argued that there is some element of fraud in this case also because the attorney depenning & depenning had acted for both the corporate debtor and the Appellant and issued no objection for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to try the suit. (2) For the purpose of clauses (a) and (b) of sub-section (1), a "District Court having jurisdiction" shall, notwithstanding anything contained in the Code of Civil Procedure, 1908 (5 of 1908) or any other law for the time being in force, include a District Court within the local limits of whose jurisdiction, at the time of the institution of the suit or other proceeding, the person instituting the suit or proceeding, or, where there are more than one such persons any of them, actually and voluntarily resides or carries on business or personally works for gain. Explanation.--For the purposes of sub-section (2), "person" includes the registered proprietor and the registered user. Section 60. Adjudicating Authority for corporate persons. (1) The Adjudicating Authority, in relation to insolvency resolution and liquidation for corporate persons including corporate debtors and personal guarantors thereof shall be the National Company Law Tribunal having territorial jurisdiction over the place where the registered office of the corporate person is located. (2) Without prejudice to sub-section (1) and notwithstanding anything to the contrary contained in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orporate debtor or corporate person under this Code. Section 238 of the Code creates an overriding effect which provides that he provisions of this Code shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law. In the present case, the provisions of Section 60(5)(c) of the Code would apply for the purpose of jurisdiction of the Adjudicating Authority to entertain or dispose of any question of law or facts, arising out of or in relation to the insolvency resolution or liquidation proceedings of the corporate debtor or corporate person because in the present case, the insolvency resolution is in question, as the resolution plan, approved by the CoC has been filed by the RP and in these proceedings a question has been raised about one of the assets of the Corporate Debtor i.e. the registered trademark which is an intangible assets. In this regard, observation made by the Hon'ble Supreme Court in the case of Gujarat Urja (Supra) is required to be referred to which read as under:- "71. The institutional framework under the IBC contemplated the establishment of a s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eedings. It was held by the Hon'ble Supreme Court that the NCLT has the jurisdiction to adjudicate disputes, which arise solely from or which relate to the insolvency of the corporate debtor but it has also been held that while doing so, the Tribunal may not usurp the legitimate jurisdiction of other courts, tribunals and fora when the dispute is one which does not arise solely from or relate to the insolvency of the corporate debtor and nexus with the insolvency of the corporate debtor must exist. It is pertinent to mention that the facts of the case of Gujarat Urja (Supra) are altogether different from the facts of the present case because in that case PPA was terminated solely on the ground of insolvency since the event of default contemplated under Article 9.2.1(e) was the commencement of insolvency proceedings against the corporate debtor. In the absence of the insolvency of the corporate debtor, there would be no ground to terminate the PPA. The termination is not on a ground independent of the insolvency, therefore, the dispute in that case solely arising out of and relates to the insolvency of the corporate debtor and it was thus held that the RP can approach the NCLT for a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lic law, they cannot through the RP, take a bypass and go before NCLT for the enforcement of such a right" However, facts of the present case are altogether different from the aforesaid case. In so far as the decision in the case of Tata Consultancy Service Limited (Supra) is concerned, the Hon'ble Supreme Court has reiterated that the RP can approach the NCLT for adjudication of disputes which relate to the insolvency resolution process, but when the dispute arises dehors the insolvency of the corporate debtor, the RP must approach the relevant competent authority. Similar view has been expressed by this Court in the case of Sicom Ltd. (Supra). 20. Thus, in view of the aforesaid discussion, we are of the considered opinion that the Adjudicating Authority had the jurisdiction which was though not challenged before it by the Appellant when it itself had filed the application for seeking a declaration/clarification as to whether the trademark is the property of the Corporate Debtor or the Appellant but still in view of Section 60(5)(c), we are of the opinion that if a question of law or fact arising out or in relation to the insolvency resolution then the Adjudicating Authority shal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e condition was lifted and the Appellant became assignee of the trademark w.e.f. the date when the supplemental trademark agreement dated 15.07.2008 was executed, therefore, the finding recorded by the Adjudicating Authority in this regard that because there was a stay by the BIFR and agreement was executed during that period is null and void is not in accordance with law. 22. The next submission of the Appellant that the Appellant became the owner of the trademark with its assignment to it by the registered assignor of the Corporate Debtor by executing the supplemental trademark agreement dated 15.07.2008 is concerned, reliance has been placed by the Appellant upon the Sections 37 and 38 of the Act, 1999, which are reproduced as under:- "37. Power of registered proprietor to assign and give receipts The person for the time being entered in the register as proprietor of a trade mark shall, subject to the provisions of this Act and to any rights appearing from the register to be vested in any other person, have power to assign the trade mark, and to give effectual receipts for any consideration for such assignment. 38. Assignability and transmissibility of registered trade ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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). 13. The next question which arises is, if title in registered trade mark vests in assignee, after assignment and before registration, who is entitled to exercise rights under Section 28 as registered proprietor. If the interpretation canvassed by defendant herein is to be adopted it will amount to allowing a person who is divested by assignment of title to registered trade mark to nevertheless continue exercising such rights; it would play havoc with assignability and trading in trade marks, expressly permitted under the Act. If the person in whom title has vested by assignment, is held to be not entitled to exercise such rights owing to non registration, the same result will follow, besides giving a premium to third parties. In that situation, in the interregnum there will be none to enforce rights in the registered trade mark. "Registered proprietor" in Section 28, rather than adopting a pedantic interpretation has to be interpreted as including a pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... FR is vacated or discharged. 27. The next submission of the Appellant is that the Adjudicating Authority has committed an error in holding that the transaction relied upon by the Appellant is undervalued transaction and is hit by Section 45(2)(b) and that it is also against the provisions of Section 43(2)(a) being a preferential transaction as it has been done within a period of two years preceding of commencement of CIRP and has referred to Section 43, 45 and 46 of the Code which are reproduced as under:- "Section 43 : Preferential transactions and relevant time. *43. (1) Where the liquidator or the resolution professional, as the case may be, is of the opinion that the corporate debtor has at a relevant time given a preference in such transactions and in such manner as laid down in sub-section (2) to any persons as referred to in sub-section (4), he shall apply to the Adjudicating Authority for avoidance of preferential transactions and for, one or more of the orders referred to in section 44. (2) A corporate debtor shall be deemed to have given a preference, if- (a) there is a transfer of property or an interest thereof of the corporate debtor for the benefit of a credi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ] determines that certain transactions were made during the relevant period under section 46, which were undervalued, he shall make an application to the Adjudicating Authority to declare such transactions as void and reverse the effect of such transaction in accordance with this Chapter. (2) A transaction shall be considered undervalued where the corporate debtor- (a) makes a gift to a person; or (b) enters into a transaction with a person which involves the transfer of one or more assets by the corporate debtor for a consideration the value of which is significantly less than the value of the consideration provided by the corporate debtor, and such transaction has not taken place in the ordinary course of business of the corporate debtor. Section 46. Relevant period for avoidable transactions. (1) In an application for avoiding a transaction at undervalue, the liquidator or the resolution professional, as the case may be, shall demonstrate that- (i) such transaction was made with any person within the period of one year preceding the insolvency commencement date; or (ii) such transaction was made with a related party within the period of two years preceding the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 of the Code. The consequences of undervaluation are contained in Sections 48 and 49. Per Section 49, if the undervalued transaction is referable to sub-section (2) of Section 45, the Adjudicating Authority may look at the intent to examine if such undervaluation was to defraud the creditors. On the other hand, the provisions of Section 66 related to fraudulent trading and wrongful trading entail the liabilities on the persons 105 responsible therefor. We are not elaborating on all these aspects for being not necessary as the transactions in question are already held preferential and hence, the order for their avoidance is required to be approved; but it appears expedient to observe that the arena and scope of the requisite enquiries, to find if the transaction is undervalued or is intended to defraud the creditors or had been of wrongful/fraudulent trading are entirely different. Specific material facts are required to be pleaded if a transaction is sought to be brought under the mischief sought to be remedied by Sections 45/46/47 or Section 66 of the Code. As noticed, the scope of enquiry in relation to the questions as to whether a transaction is of giving preference at a relev ..... X X X X Extracts X X X X X X X X Extracts X X X X
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