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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 ..... nuj Jain [ 2020 (2) TMI 1700 - SUPREME COURT ] the Hon ble Supreme Court has also held that 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. It further said that it is expected of any resolution professional to keep such requirements in view while making a motion to the Adjudicating Authoritybut in any case the action could not have been taken under Section 43 and 45 without there being an application moved by the RP. In the present case, the CoC was apprised in its 5th meeting that the forensic audit report found no preferential, undervalued, fraudulent or wrongful trading transactions nor it has found any related party preferential or fraudulent transaction whatsoever, therefore, only on the basis that the trademark was hypothecated for a bigger amount and has been assigned for lesser amount would not be a criteria for the purpose of declaring it to be undervalued transaction without there being sufficient material before the Adjudicating Authority to pass such an order, therefore, the finding recorded in this regard is not in accordance with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nted as the Interim Resolution Professional (In short IRP ) but lateron he was replaced by the present IRP (Respondent No. 3) on 04.12.2018. 5. Respondent No. 3 (RP) filed an application under Section 30(6) of the Code seeking approval of the resolution plan of the Corporate Debtor submitted by Respondent No. 2, duly approved by the CoC by vote share of 73.21% of the members of the CoC. 6. While this application was pending, the Appellant filed an application CA (IB) 713/KB/2019 before the Adjudicating Authority (National Company Law Tribunal, Kolkata Bench, Kolkata in which the following prayers have been made:- a) To pass an order thereby allowing the present Applicant to intervene in the present proceeding; b) To pass an order thereby directing that any Resolution Plan if approved by this Hon'ble Adjudicating Authority shall exclude the rights in the Trade Mark Gloster from the assets of the corporate Debtor, including, exclusion of the Trade Mark Gloster from the Corporate name of the Corporate Debtor since the said Trade Mark Gloster is not a property/asset of the Corporate Debtor; c) To pass an order clarifying that, in approving the CIRP, no p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . During the subsistence of the agreement dated 02.05.1995, the Corporate Debtor fell Sick and was referred under Sick Industrial Companies Act, 1985 (SICA) whereinafter Board of Industrial and Financial Reconstruction (BIFR) directed the Corporate Debtor, vide its order dated 10.09.2001, not to dispose off any fixed or current assets of the Corporate Debtor without the consent of the secured creditors and the BIFR. Since, the technical collaboration agreement dated 02.05.1995 was for 8 years and had expired by efflux of time, therefore, another technical collaboration agreement dated 02.05.2003 was entered into between the parties by which Corporate Debtor granted the Appellant the right to use the trade mark for a further period of five years against the payment of 1% royalty. It is alleged that the Corporate Debtor suspended its business since 09.12.2003 and thus there was no sale/turnover since 2003-04. It is further alleged that the Corporate Debtor held a shareholding of 16.7% in the Appellant Company but exited the Appellant Company in March, 2004 and on 20.07.2004 the name of the Appellant was changed from Crest Cables Pvt. Ltd. to Gloster Cables Limited. It is further alle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2003 to the NCLT under the Code within 180 days from 01.12.2016but none of the creditors of the Corporate Debtor applied for initiation of proceedings against the Corporate Debtor within the period of 180 days which expired on 29.05.2017. It is further submitted that supplemental trademark dated 15.07.2008 executed between the Corporate Debtor and the Appellant, pursuant to the repeal of SICA w.e.f. 01.12.2016, the trademark would automatically get assigned to the Appellant without any further act to be performed but still the Appellant entered into a deed of hypothecation on 20.09.2017 with the Corporate Debtor for the purpose of recording assignment of trademark. It was categorically mentioned in the said agreement that the assignor to execute the present Deed in order to enable the recordal of the assignment with goodwill of the Trademark'GLOSTER' before the Trade Mark Registry, which request has been accepted by the Assignor'. It is further submitted that on 09.08.2018 CIRP was initiated, IRP was appointed and moratorium was imposed. The Appellant made an application to the Registrar of Trademark on 25.08.2018 for recording the assignment of the registered trademar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Ltd., 2021 SCC Online SC 1113 and Sicom Ltd. Anr. Vs. Kitply Industries Ltd. Ors. CA (AT) (Ins) No. 849 of 2021 decided on 10.04.2023. It is submitted that though the application has been filed by the Appellant itself under Section 60(5) of the Code but keeping in view of the fact that the jurisdiction vests with the District Court to decide the question regarding title of the trademark under the Act, 1999, therefore, the Adjudicating Authority has committed an error in declaring that the trademark is the property of the Corporate Debtor. It is further submitted that the Appellant became the owner of the trademark with the supplemental trademark agreement dated 15.07.2008 when it was assigned to it by the owner (assignor). At that time, the order of prohibition issued by the BIFR was in operation, therefore, it was made clear that the assignment shall become effective without any further act or deed until after the order dated 10.09.2001 passed by the BIFR, is vacated and/or discharged or in the event FGIL/Corporate Debtor is wound up . It is submitted that the order dated 10.09.2001 became non-operative with the coming into force of SICA Special Provision Repeal Act, 2016 w. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0.09.2017. In this regard, it is submitted by Counsel for the Appellant that the assignment of the trademark took place on 15.07.2008 with the supplemental trademark agreement as it is permissible under Section 37 and 38 of the Act, 1999 whereas the registration of the trademark was a procedural formality in view of Section 45 of the Act, 1999. It is further submitted that though it has been noticed by the Adjudicating Authority that the RP did not form any opinion that the Corporate Debtor has given any preference transaction during the relevant period to invoke Section 43 of the Code and that there has been no examination/determination by the RP that the transaction in question was undervalued during the relevant period to invoke Section 45 of the Code. Admittedly, no application was filed by the RP under Section 43, 44, 45 and 46 but it has been held by the Adjudicating Authority that the procedural compliance is directory and the Adjudicating Authority has the jurisdiction to pass suo motu order in respect of the aforesaid provisions of the Act. It is further submitted that the Adjudicating Authority has further held that the Appellant has sought the declaration about the trade ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was required to be registered which is a mandatory requirement under Section 45(1) of the Act, 1999 and since the registration of the assigned trademark has been done only in September, 2018 without the information of the RP and in violation of Section 14 of the code, therefore, the registration was obtained fraudulently. 13. Counsel appearing on behalf of Respondent No. 2 has also reiterated the stand taken by the RP. It is further submitted that Section 18(f)(iv) of the Code clearly provides that the IRP shall take control and custody of any asset over which the CD has ownership rights as recorded in the balance sheet of the Corporate Debtor or any other registry, including intangible assets such as intellectual property rights. It is argued that on the commencement of the CIRP date, in the Corporate Debtor s balance sheet the trademark is shown as the asset of the Corporate Debtor and the Appellant had paid the license fee for using the same, meaning thereby, the Appellant was merely a licensee and not the owner. It is further submitted that even the trademark registry reflected that the Corporate Debtor is the owner of the said trademark as on CIRP commencement date. He h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant has argued that his whole case is based upon the supplemental trademark agreement dated 15.07.2008, the validity of which has not been challenged by Respondents before the Adjudicating Authority and no finding has been recorded in this regard except that the agreement was executed during the subsistence of the order of stay of the BIFR. It is further submitted that even if the agreement was stated to be insufficiently stamped yet it is a curable defect and the proper stamped duty has been paid. It is also reiterated that in the 5th CoC meeting, the CoC was apprised that the forensic audit report found no preferential, undervalued, fraudulent or wrongful trading transactions. In the forensic audit report, no related party preferential or fraudulent transaction whatsoever was found, therefore, the RP had rightly not filed the application under Section 43, 45, 49, 50 and 66 of the Code but the Adjudicating Authority has committed an error in suo motu passing the order and declaring the transaction between the parties being hit by Section 43 and 44 of the Code. 16. We have heard Counsel for the parties and perused the record with their able assistance. 17. In so far as th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 [liquidation or bankruptcy of a corporate guarantor or personal guarantor, as the case may be, of such corporate debtor] shall be filed before such National Company Law Tribunal. (3) An insolvency resolution process or 2 [liquidation or bankruptcy proceeding of a corporate guarantor or personal guarantor, as the case may be, of the corporate debtor] pending in any court or tribunal shall stand transferred to the Adjudicating Authority dealing with insolvency resolution process or liquidation proceeding of such corporate debtor. (4) The National Company Law Tribunal shall be vested with all the powers of the Debt Recovery Tribunal as contemplated under Part III of this Code for the purpose of sub-section (2). (5) Notwithstanding anything to the contrary contained in any other law for the time being in force, the National Company Law Tribunal shall have jurisdiction to entertain or dispose of (a) any application or proceeding by or against the corporate debtor or corporate person; (b) any claim made by or against the corporate debtor or corporate person, including claims by or against any of its subsidiaries situated in India; and (c) any questi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... insolvency, the corporate debtor would have to file and/or defend multiple proceedings in different fora. These proceedings may cause undue delay in the insolvency resolution process due to multiple proceedings in trial courts and courts of appeal. A delay in completion of the insolvency proceedings would diminish the value of the debtor s assets and hamper the prospects of a successful reorganization or liquidation. For the success of an insolvency regime, it is necessary that insolvency proceedings are dealt with in a timely, effective and efficient manner. Pursuing this theme in Innoventive (supra) this court observed that ―one of the important objectives of the Code is to bring the insolvency law in India under a single unified umbrella with the object of speeding up of the insolvency process . The principle was reiterated in Arcelor Mittal (supra) where this court held that ―the non-obstante Clause in Section 60(5) is designed for a different purpose: to ensure that the NCLT alone has jurisdiction when it comes to applications and proceedings by or against a corporate debtor covered by the Code, making it clear that no other forum has jurisdiction to entertain or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ebtor which is in CIRP and as per Section 60(5)(c) of the Code the question of fact as to whether the asset of the Corporate Debtor is the property of the Appellant on account of the agreement dated 15.07.2008 or is the property of the Corporate Debtor in CIRP is a question relating to the insolvency resolution. In so far as the decision rendered in the case of Embassy Property Developments Pvt. Ltd. (Supra) is concerned, it was a case where the corporate debtor was holding a mining lease granted by the Government of Karnataka which was to expire on 25.05.2018. A notice for premature termination of the lease was issued on 09.08.2017, on the allegation of violation of statutory rules and the terms and conditions of the lease deed, no order of termination had been passed till the date of initiation of the CIRP. The IRP therein addressed a letter dated 14.03.2018 to the Chairman of the monitoring committee as well as the director of mines and geology informing them of the commencement of CIRP. He also wrote a letter dated 21.04.2018 to the director for seeking the benefit of deemed extension of the lease beyond 25.05.2018 upto 31.03.2020 in terms of Section 8-A (6) of the mines and mi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lication is concerned, is rejected. 21. As regards the validity of the supplemental trademark agreement dated 15.07.2008 is concerned, the Adjudicating Authority has held that it was executed between the Corporate Debtor and the Appellant when the order of prohibition dated 10.09.2001 passed by the BIFR was in operation in which it directed that the company/promoters were directed under Section 22A of the Act not to dispose of any fixed or current assets of the company without any consent of the secured creditor and BIFR . The Adjudicating Authority has held that even if the proceedings of the BIFR were abated with the coming into force of the Code in 01.12.2016, the interim orders passed shall remain effective and relied upon a decision of the Hon ble Supreme Court in the case of Jehal Tanti Ors. (Supra), however, in the case of Thomson Press (India) Limited (Supra) the Hon ble Supreme Court has held that there is, therefore, little room for any doubt that the transfer of the suit property pendete lite is not void ab initio and that the purchaser of any such property takes the bargain subject to the rights of the plaintiff in the pending suit. Although the above decisions do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... smissible, whether with or without the goodwill of the business concerned and in respect either of all the goods or services in respect of which the trade mark is registered or of some only of those goods or services. 23. The Appellant has relied upon a decision in the case of Sun Pharmaceuticals (Supra) in which the Hon ble Delhi High Court has held as under:- 11. I also find that under Section 2(1)(w) a registered trade mark is a trade mark which is on the Register and is in force. Registered trade mark is thus different from registered proprietor. Assignment under Section 2(b) is an assignment in writing by act of parties concerned. Assignment does not require registration. The Register of Trade Mark under Section 6 is to contain trade marks with the name etc of proprietor. Section 37 empowers the person entered in the Register as proprietor of trade make to assign the same. Section 38 makes the trade mark a tradeable property/commodity subject to restrictions in Sections 40 to 44. Thus registered trade mark is different from proprietor thereof. Thereafter, Section 45(1) provides where a person becomes entitled by assignment ....to a registered trade mark, he shall ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the Madras High Court was the inaction of the plaintiff therein to have applied to the Registrar. In the present case, however, the plaintiff had applied for registration as far back as in the year 2000. There is nothing to show that the plaintiff is in any way to blame for the Registrar having not decided either way on the application of the plaintiff. In the circumstances the maxim actus cureaeneminemgravabit - an act of court shall prejudice no man and lex non cogitadimpossibilia - the law does not compel a man to do that which he cannot possibly perform, would also become applicable. The plaintiff cannot be made to suffer for the actions of the Registrar. It has been held in A.P. Electricity Regulatory Commission v R.V. K. Energy Pvt Ltd JT 2008 (7) SC 138:Manu/SC 2615/2008 that these principles apply to quasi judicial bodies as well. It is also significant that the registration, if affected shall date back to the date of the application. 24. In the case of Skol Breweries limited (Supra) the Hon ble Bombay High Court has held that the registration granted by the Registrar under Section 45 is proof of title to the trademark of the assignee or the person who acquires ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the corporate debtor; and (b) the transfer under clause (a) has the effect of putting such creditor or a surety or a guarantor in a beneficial position than it would have been in the event of a distribution of assets being made in accordance with section 53. (3) For the purposes of sub-section (2), a preference shall not include the following transfer (a) transfer made in the ordinary course of the business or financial affairs of the corporate debtor or the transferee; (b) any transfer creating a security interest in property acquired by the corporate debtor to the extent that (i) such security interest secures new value and was given at the time of or after the signing of a security agreement that contains a description of such property as security interest and was used by corporate debtor to acquire such property; and (ii) such transfer was registered with an information utility on or before thirty days after the corporate debtor receives possession of such property: Provided that any transfer made in pursuance of the order of a court shall not, preclude such transfer to be deemed as giving of preference by the corporate debtor. Ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity may require an independent expert to assess evidence relating to the value of the transactions mentioned in this section 28. It is submitted that it is an admitted case that no application has been filed by the RP for obtaining an order of the Adjudicating Authority under Section 43 and 45 and the order has been passed by the Adjudicating Authority suo motu. It is submitted that as per Section 43(1) the liquidator or the resolution professional, as the case may be, has to form an 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) and then 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. Similarly, it is submitted that for the purpose of avoidance of undervalued transaction, it is for the liquidator or the RP to examine the transaction of the corporate debtor and determine that the transactions made during the relevant period under Section 46 were undervalued and then he shall make an application to the Adjudicating Authority to de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expected of any resolution professional to keep such requirements in view while making a motion to the Adjudicating Authority. 29. We have found that the legislature has used the different language in Section 43 and 45 of the Code because in Section 43, the RP or the liquidator has to form an opinion whereas in Section 45 the RP or the liquidator has to examine and then determine that the transaction in question were undervalued during the relevant period. In the case of Anuj Jain (Supra) the Hon ble Supreme Court has also held that 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. It further said that it is expected of any resolution professional to keep such requirements in view while making a motion to the Adjudicating Authoritybut in any case the action could not have been taken under Section 43 and 45 without there being an application moved by the RP. In the present case, the CoC was apprised in its 5th meeting that the forensic audit report found no preferential, undervalued, fraudulent or wrongful trading transactions nor it has found any re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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