2019 (10) TMI 1546 - HC - Insolvency and Bankruptcy

Plaintiff wins ownership of 'Su-Kam' trademarks in summary judgment. Deed of Assignment deemed invalid.

Su-Kam Power Systems Ltd. Versus Kunwer Sachdev and Ors.

The court granted summary judgment in favor of the plaintiff in a case involving ownership and use of 'Su-Kam' trademarks. The court found the plaintiff ... Decree of estoppel - Suit for declaration, permanent injunction, damages and incidental relief - rightful owner of the 'Su-Kam' marks in Class 9 of the Trade Marks Act, 1999 or not - fabricated Deed of Assignment - accrual of right to sue - in the present case the application for recordal is made after more than twelve years, after commencement of Corporate Insolvency Resolution Process - time limitation - HELD THAT:- This Court is of the view that when a summary judgment application allows the Court to find the necessary facts and resolve the dispute, proceeding to trial would generally not be proportionate, timely or cost effective. It bears reiteration that the standard for fairness is not whether the procedure is as exhaustive as a trial, but whether it gives the Court the confidence that it can find the necessary facts and apply the relevant legal principles so as to resolve the dispute. In fact, the legislative intent behind introducing summary judgment under Order XIIIA of CPC is to provide a remedy independent, separate and distinct from judgment on admissions 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 cover the inverter business and never was and is not applicable to the plaintiff. Consequently, no purpose will be served by leading oral evidence on whether the TMLA covers the inverter business. The 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 - right to sue accrues when there is a clear or unequivocal threat proceeding from the defendant which invades or jeopardises the plaintiff's rights. In the present case 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 or representation by defendant no. 1 that plaintiff is not the owner of the SU-KAM mark in Class 9 - On the contrary renewal of the SU-KAM trade marks in Class 9 on 05th October, 2008 and 09th March, 2016, when the defendant no. 1 was in exclusive control and management of the plaintiff company, proves beyond doubt that the defendant no. 1 did not even rely upon the alleged Deed of Assignment dated 16th March, 2006. The right to sue in the present case arose 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 - the present suit is within limitation. In the present case, the plaintiff is the exclusive registered proprietor of the trademarks SU-KAM with respect to inverters which fall within Class 9 in view of the registration certificates dated 22nd June, 2005 and 05th February, 2011 in favour of the plaintiff having come into effect on 05th October, 1998 and 09th March, 2006 respectively and which were renewed on 05th October, 2008 and 09th March, 2016 - when admittedly defendant no. 1 was in control and management of the plaintiff-company. Consequently, the defendant no. 1's contentions and submissions with regard to earlier adoption or licensing by way of TMLA dated 07th July, 1995 or BT Agreement dated 16th September, 1999 and/or subsequent transfer by way 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. Issues Involved:1. Application for summary judgment under Order XIIIA of CPC.2. Ownership and use of the 'Su-Kam' trademarks.3. Estoppel and misrepresentation by the defendant.4. Validity and impact of the Deed of Assignment.5. Limitation period for filing the suit.6. Fiduciary duty and breach by the defendant.7. Applicability of the Trade Marks Act, 1999 and the Companies Act, 1956.Detailed Analysis:1. Application for Summary Judgment:The plaintiff filed an application under Order XIIIA of CPC for a summary judgment, arguing that the defendant had no real prospect of defending the claim. The court emphasized the purpose of the Commercial Courts Act, 2015, which aims to improve efficiency and reduce delays in commercial disputes. It noted that Order XIIIA allows the court to decide claims without oral evidence if the defendant has no real prospect of successfully defending the claim and there is no compelling reason for a trial.2. Ownership and Use of 'Su-Kam' Trademarks:The plaintiff claimed ownership of the 'Su-Kam' trademarks in Class 9 of the Trade Marks Act, 1999. The court found that the plaintiff was the exclusive registered proprietor of the 'Su-Kam' marks for inverters, which had been continuously used and renewed under the plaintiff's name. The defendant's argument that the trademarks were initially applied for in his name was dismissed as the defendant was in management of the plaintiff company and had not challenged the registrations.3. Estoppel and Misrepresentation by the Defendant:The court held that the defendant was estopped from claiming ownership of the 'Su-Kam' trademarks in Class 9 due to his previous representations and admissions that the plaintiff was the rightful owner. These representations included applications for registration, renewal of trademarks, and statements made to third parties, including a Share Subscription Agreement with Reliance India Power Fund and a brand valuation report by Ernst & Young.4. Validity and Impact of the Deed of Assignment:The Deed of Assignment dated 16th March 2006, which purported to transfer the 'Su-Kam' trademarks to the defendant, was found invalid. The court ruled that the deed was void for breach of fiduciary duty as it was executed by the defendant both as assignor and assignee, and for lack of quorum in the board meeting that approved it. Additionally, the deed was not registered as required under the Trade Marks Act, 1999, making it ineffective.5. Limitation Period for Filing the Suit:The defendant argued that the suit was barred by limitation. However, the court held that the right to sue accrued only when the defendant first denied the plaintiff's ownership of the trademarks on 9th July 2018. Therefore, the suit filed within three years of this date was within the limitation period.6. Fiduciary Duty and Breach by the Defendant:The court found that the defendant breached his fiduciary duty by executing the Deed of Assignment, which transferred the plaintiff's business substratum to himself for nominal consideration. The court cited the principle that directors cannot take advantage of their own breach of fiduciary duty to divest the company of its assets.7. Applicability of Trade Marks Act, 1999 and Companies Act, 1956:The court applied the provisions of the Trade Marks Act, 1999, particularly Section 45, which mandates the registration of assignments, and the Companies Act, 1956, specifically Section 300, which disallows interested directors from participating in board decisions where they have a personal interest. The court held that the Deed of Assignment was invalid due to non-compliance with these statutory requirements.Conclusion:The court decreed the suit in favor of the plaintiff, granting the reliefs sought in prayers (a) to (f) of the amended prayer clause, and directed the registry to prepare the decree sheet accordingly. All pending applications were disposed of.