2023 (3) TMI 897 - SC - Insolvency and Bankruptcy

Modification/alternation of the approved Resolution Plan by the CoC - Resolution Plan was approved with majority of 81.39% voting rights of CoC which is in compliance of Section 30(2) and 30(4) of the IBC - ownership of the Corporate Debtor declared over the trademark after the approval of the Resolution Plan by the CoC - is this action of modification of Resolution Plan is permissible or not? HELD THAT - It may be relevant to note that the Resolution Plan and particularly Clause 11.12 which has been referred, it is confined to the perpetual exclusive right to use the brands i.e. Deccan Chronicle and Andhra Bhoomi , etc. by the Corporate Debtor without any financial implications for the purpose of running its business and it was approved by the adjudicating authority under its order dated 3rd June, 2019, but since it was made subject to the result of pending I.A. No.155 of 2018, the adjudicating authority had approved so far as the exclusive rights of the Corporate Debtor to use trademarks namely Deccan Chronicle and Andhra Bhoomi under its order dated 14th August, 2019, but at the same time, a further declaration was made in para 38 holding that trademarks Deccan Chronicle and Andhra Bhoomi belong to the Corporate Debtor, which indeed does not reconcile with the Resolution Plan approved by the CoC and later by the adjudicating authority under its order dated 3rd June, 2019. The NCLAT, after taking into consideration the material available on record and Clause 11.12 of the Resolution Plan, in para 16 of the order of the adjudicating authority (NCLT) returned a finding that the ownership of the Corporate Debtor declared over the trademark after the approval of the Resolution Plan by the CoC, would amount to modification/alteration of the approved Resolution Plan by CoC which is impermissible in law and is not in terms of Section 60(5) of IBC. It clearly indicates that what was approved by the CoC with 81.39% of its voting is to the effect that the Corporate Debtor has a perpetual exclusive right to use the brands, namely, Deccan Chronicle and Andhra Bhoomi and it nowhere indicates regarding the right of ownership over the trademarks/brands, Deccan Chronicle and Andhra Bhoomi of the Corporate Debtor. But the adjudicating authority while adjudicating application I.A. No.155 of 2018, apart from upholding the exclusive right to use the trademarks, Deccan Chronicle and Andhra Bhoomi , made a further declaration that trademarks belong to Corporate Debtor/DCHL under its order dated 14th August, 2019, which, was a modification/alteration in the approved Resolution Plan which indisputably is impermissible in law. In terms of the approved Resolution Plan, it was the perpetual exclusive right to use the brands, namely, Deccan Chronicle and Andhra Bhoomi , by the Corporate Debtor which were available to SRA i.e. the appellant herein and once it has been approved by the adjudicating authority, certainly the right to exclusive use of the trademarks belonging to the Corporate Debtor, on being approved by the adjudicating authority, is always available to the SRA i.e. the appellant, but not the ownership rights of the trademarks of the Corporate Debtor. Appeal dismissed.

Summary

Issues Involved:
1. Approval and conditional approval of the Resolution Plan.
2. Ownership and exclusive right to use trademarks.
3. Jurisdiction and authority of the NCLT and NCLAT.
4. Permissibility of modification/alteration of the approved Resolution Plan.

Summary:

1. Approval and Conditional Approval of the Resolution Plan:
The successful resolution applicant (SRA) of Deccan Chronicle Holdings Ltd. (DCHL) had its Resolution Plan approved by the Committee of Creditors (CoC) with 81.39% voting share. The National Company Law Tribunal (NCLT) conditionally approved the plan on June 3, 2019, subject to the outcome of I.A. No.155 of 2018 regarding the ownership of trademarks. The NCLT later decided the application on August 14, 2019, affirming the Corporate Debtor's exclusive right to use the trademarks "Deccan Chronicle" and "Andhra Bhoomi."

2. Ownership and Exclusive Right to Use Trademarks:
The core issue was whether the Corporate Debtor had ownership or merely the exclusive right to use the trademarks. The NCLT, while disposing of I.A. No.155 of 2018, declared that the trademarks "Deccan Chronicle" and "Andhra Bhoomi" belonged to the Corporate Debtor, a decision which was challenged before the National Company Law Appellate Tribunal (NCLAT). The NCLAT held that such a declaration amounted to a modification/alteration of the approved Resolution Plan, which is impermissible in law.

3. Jurisdiction and Authority of the NCLT and NCLAT:
The NCLAT concluded that the NCLT's declaration of ownership rights over the trademarks transgressed its jurisdiction. The NCLAT emphasized that any modification or alteration of the Resolution Plan after its approval by the CoC is not permissible under the law. The Supreme Court upheld this view, stating that the NCLT's declaration of ownership was beyond its jurisdiction and amounted to an impermissible alteration of the Resolution Plan.

4. Permissibility of Modification/Alteration of the Approved Resolution Plan:
The Supreme Court reaffirmed that once a Resolution Plan is approved by the CoC, any modifications or alterations are impermissible. The Court cited the case of Ebix Singapore Private Limited vs. Committee of Creditors of Educomp Solutions Limited & Another (2022) 2 SCC 401, which held that the residual powers of the adjudicating authority under IBC cannot be exercised to create procedural remedies with substantive outcomes on the insolvency process. The Court concluded that the NCLT's declaration of ownership over the trademarks was a modification of the approved Resolution Plan, which is impermissible.

Conclusion:
The Supreme Court dismissed the appeal, upholding the NCLAT's decision that the NCLT's declaration of ownership over the trademarks "Deccan Chronicle" and "Andhra Bhoomi" was an impermissible modification of the approved Resolution Plan. The Court emphasized that the Resolution Plan provided only for the perpetual exclusive right to use the trademarks, not ownership rights.