2024 (1) TMI 1166 - AT - IBC

NCLAT reverses exclusion of trademark rights from corporate debtor's assets under Sections 43 and 45

The NCLAT Principal Bench set aside an order excluding trademark rights from corporate debtor's assets. The tribunal held that declaring a transaction as ... Undervalued/Preferential/wrongful transaction - exclusion of rights in the Trade Mark “Gloster' from the assets of the corporate Debtor - it is argued that the dispute is in regard to the title over the registered trademark for which the jurisdiction vests with the District Court in terms of Section 134 of the Act, 1999 and the Adjudicating Authority cannot take a decision under Section 60(5) of the Code - HELD THAT:- It is 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 [2020 (2) TMI 1259 - 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 law and thus reversed. The present appeal is hereby allowed and the impugned order is set aside. Issues Involved:1. Jurisdiction of the Adjudicating Authority under Section 60(5) of the Insolvency and Bankruptcy Code, 2016.2. Validity of the supplemental trademark agreement dated 15.07.2008.3. Ownership and assignment of the trademark 'Gloster.'4. Determination of preferential and undervalued transactions under Sections 43 and 45 of the Insolvency and Bankruptcy Code, 2016.Summary:1. Jurisdiction of the Adjudicating Authority:The Appellant argued that the Adjudicating Authority lacked jurisdiction to adjudicate the title of the trademark under Section 134(1)(b) of the Trademark Act, 1999, asserting that such matters should be decided by a District Court. However, the Tribunal held that Section 60(5) of the Insolvency and Bankruptcy Code (IBC) provides the Adjudicating Authority with jurisdiction to entertain or dispose of any claim by or against the corporate debtor, including questions of law or facts arising out of or in relation to the insolvency resolution or liquidation proceedings. The Tribunal cited the Supreme Court's decision in Gujarat Urja Vikas Nigam Limited Vs. Amit Gupta & Ors., emphasizing that the NCLT has jurisdiction over matters related to insolvency, provided there is a nexus with the insolvency of the corporate debtor. Thus, the Tribunal concluded that it had jurisdiction to decide the matter.2. Validity of the Supplemental Trademark Agreement:The Adjudicating Authority had previously held the supplemental trademark agreement dated 15.07.2008 as invalid, citing the prohibition order dated 10.09.2001 by the BIFR. However, the Tribunal referred to the Supreme Court's decision in Thomson Press (India) Limited Vs. Nanak Builders & Investors Pvt. Ltd. & Ors., which held that a transfer pendente lite is not void ab initio but remains subject to the rights eventually determined by the court. The Tribunal found that the assignment was contingent upon the vacation of the BIFR order, which was lifted with the repeal of SICA on 01.12.2016. Therefore, the Tribunal held that the assignment became effective from the date of the supplemental trademark agreement, making the Appellant the assignee of the trademark.3. Ownership and Assignment of the Trademark:The Appellant argued that it became the owner of the trademark with the execution of the supplemental trademark agreement dated 15.07.2008, relying on Sections 37 and 38 of the Trademark Act, 1999. The Tribunal referred to various judicial decisions, including Sun Pharmaceuticals Industries Ltd. Vs. Cipla Ltd., which established that assignment of a trademark is complete upon execution of the assignment deed, and registration is merely a procedural formality. The Tribunal concluded that the title in the trademark vested with the Appellant upon execution of the supplemental trademark agreement, subject to the condition that it would become effective after the BIFR order was vacated.4. Preferential and Undervalued Transactions:The Adjudicating Authority had held that the transaction was an undervalued transaction under Section 45(2)(b) and a preferential transaction under Section 43(2)(a) of the IBC. The Tribunal noted that no application was filed by the RP for avoidance of such transactions, and the Adjudicating Authority had acted suo motu. Citing the Supreme Court's decision in Anuj Jain Interim Resolution Professional for Jaypee Infratech Limited Vs. Axis Bank Limited, the Tribunal emphasized that specific material facts must be pleaded to bring a transaction under Sections 43, 45, or 66 of the IBC. The Tribunal found that the forensic audit report had found no preferential, undervalued, fraudulent, or wrongful trading transactions. Therefore, the Tribunal held that the Adjudicating Authority's finding was not in accordance with the law and reversed it.Conclusion:The appeal was allowed, and the impugned order was set aside. No costs were awarded.