2022 (4) TMI 74 - Tri - Insolvency and Bankruptcy

Ownership of 'CONCEPT Educations' trademark retained by Corporate Debtor, invalid transfer revoked. Exclusive use emphasized.

The Tribunal confirmed that the Corporate Debtor (CD) retained ownership of the trademark 'CONCEPT Educations' and only granted the 'right to use' to ... Right to use of the trade mark CONCEPT Educations - vested in the Corporate Debtor in accordance with Section 48(a) of the Code or not - account for the benefits received by it by use of the trade mark CONCEPT Educations till date and pay such sum to the account of the Corporate Debtor - appointment of independent expert to assess evidence relating to the value of the trade mark CONCEPT Educations - HELD THAT:- There was a partnership agreement dated 01/02/2019 between the CD and the Respondent no 1 whereby they agreed to carry on a business in the name of Potential and Concept Educations. Subsequently, there is a deed of Agreement dated 08/02/2019, a week after, in which the 'right to use' of the above Trade Mark 'CONCEPT Education' for 15 years is transferred in favour of the R1 for a mere ₹ 10 Lakhs (Rupees Ten Lakhs only) Furniture, fixtures and Electronics were also transferred in favour of R1 - Further, there is a Deed of Reconstitution of Partnership dated 19/09/2019 by which the CD is ousted and the spouse of the Respondent no 2 and 3 are inducted as partners - All the three Respondents have done all the above at their own will within the look back period of one year i.e. the Application filed under IBC was admitted on 26/02/2020 and all these agreements and transfer of right to use of the Trademark started taking place from 01/02/2019 and onward. Both the R1 and R3 have agreed and given in writing that the RP has given wrong impression that Trade Mark has been sold to the Respondent No. 1. In fact, both the Respondents have confirmed that the CD has still ownership right over the Trade Mark 'CONCEPT EDUCATION' and only right to use the Trade Mark is given for 15 years to R1 against payment of ₹ 10.00 lacs and imparting education for 300 students of the CD for a year. Respondents have further submitted that it was not exclusive transfer of Trade Mark but only right to use was granted for fifteen years meaning thereby that the Resolution Applicant has full right to use and having ownership of trade mark even after the aforesaid Deed of Agreement - Return of trademark to CD is the part of the Resolution Plan. Hence the 'right to use' of the trade mark 'CONCEPT Educations' is required to be cancelled. There is no liability or any obligations from either side in relation to the use of Trademark from today but it is made clear that the matters of non-cooperation of the Suspended Management, their agreements with the Potential Coaching Institute Pvt. Ltd. for use of Trademark for ₹ 10.00 lacs for fifteen years and subsequent withdrawal from the partnership shall be heard along with other IAs filed by the RP under Sections 19, 43, and 66 of IBC 2016 - Application disposed off. Issues Involved:1. Ownership and right to use the trademark 'CONCEPT Educations.'2. Alleged undervalued transaction and its implications.3. Compliance with the Insolvency and Bankruptcy Code (IBC) and related regulations.4. Validity and impact of agreements entered into by the Corporate Debtor (CD) and Respondents.5. Resolution Professional (RP) actions and conduct of Suspended Directors.Issue-Wise Detailed Analysis:1. Ownership and Right to Use the Trademark 'CONCEPT Educations':The Corporate Debtor (CD) owned the trademark 'CONCEPT Educations,' registered on 28.09.2015. The 'right to use' this trademark was transferred to Potential Coaching Institute Pvt. Ltd. (Respondent No. 1) for 15 years for Rs. 10 lakhs on 08.02.2019. The Respondents argued that only the 'right to use' was transferred, not ownership, and the CD retained ownership. The Tribunal confirmed that the CD retained ownership and only the 'right to use' was granted, which was subsequently withdrawn to ensure the successful implementation of the Resolution Plan.2. Alleged Undervalued Transaction and Its Implications:The RP filed an application under Section 45 of the IBC, alleging that the transfer of the 'right to use' the trademark was an undervalued transaction. The transaction was made with a related party within the relevant period of two years before the insolvency commencement date, thus satisfying the criteria under Section 46. The RP argued that the transaction was not in the ordinary course of business and was significantly undervalued. The Tribunal found the transaction to be undervalued and ordered the 'right to use' to be vested back in the CD.3. Compliance with the Insolvency and Bankruptcy Code (IBC) and Related Regulations:The Respondent No. 3 argued that the RP did not follow the provisions of the IBC and related regulations, citing delays and lack of condonation applications. However, the Tribunal justified the delay due to COVID-19 restrictions and non-cooperation from the Suspended Management. The RP's actions were deemed appropriate under the circumstances.4. Validity and Impact of Agreements Entered into by the Corporate Debtor (CD) and Respondents:Several agreements were scrutinized, including the partnership agreement dated 01.02.2019, the deed of agreement dated 08.02.2019, and the deed of reconstitution of partnership dated 19.09.2019. The Tribunal observed that these agreements were executed within the look-back period and involved related parties, indicating potential ulterior motives. The Tribunal terminated these agreements, withdrawing the 'right to use' the trademark from the Respondents and vesting it back in the CD.5. Resolution Professional (RP) Actions and Conduct of Suspended Directors:The RP highlighted the non-cooperation from the Suspended Directors and the lack of necessary information. The Tribunal noted that the Suspended Directors delayed providing essential financial documents, which justified the RP's delayed actions. The Tribunal also acknowledged the RP's efforts to verify and collate information to file necessary avoidance applications.Conclusion:The Tribunal accepted the RP's application, terminated the agreements between the CD and Respondent No. 1, and vested the 'right to use' the trademark back in the CD. The Tribunal emphasized that the trademark is now exclusively for the CD's use, and Respondent No. 1 is prohibited from using it. The Tribunal also noted that issues of non-cooperation and other related matters would be heard in conjunction with other applications filed by the RP under Sections 19, 43, and 66 of the IBC, 2016.