IN FMAT 9 OF 2023 - CALCT HC- Trademark Registry cannot register a deed of assignment of trademark vis-a-vis proprietary rights presented after 5 years of being executed: Calcutta High Court terming the same to be non-est and nullity
Justice I.P. Mukerji and Justice Biswaroop Chowdhury [23-06-2023]

Read more: Poulami Mukherjee v. Duckbill Drugs Private Limited

Simran Singh

New Delhi, June 26, 2023:  The Calcutta High Court while dismissing an appeal and vacating the interim order dated 24-01-2023 expressed its greatest displeasure observing that a deliberate attempt was made by the appellant to divest Duckbill Drugs Pvt. Ltd. of its principal assets, i.e., the trademarks by misappropriating them and backdating a deed of assignment to 2017 and eventually filing it with the trademark registry five years later.

The Division Bench comprising of Justice I.P. Mukerji and Justice Biswaroop Chowdhury stated that the Trademark Registry had no power under Section 42 of the Trade Marks Act, 1999  to register the assignment which was presented after 5 years. The Trade Marks Act required notification of the deed of assignment of the 2017 by the assignee within the stipulated period of 6 months which might be extended by the Registrar by 3 months only, and if no such notification was made, the said deed of assignment would not have any effect. Thus, the Bench held that the Trademark Registry could not have registered the purported assignment on 14-06-2022.

The Bench further stated that the involvement of the Trademark Registry in this fraud also needed to be investigated. “Therefore, in my considered opinion, prima facie, the purported assignment appears to be non-est and a nullity.”

The Bench went on to state that “We are extremely suspicious about the authenticity of the deed of assignment for several reasons. Being allegedly executed in 2017 it did not come to light when the corporate insolvency resolution process was started on 17th December, 2019, or on 13th April, 2021 when the liquidation proceedings were commenced. On 12th February, 2022 the father-in-law of Poulami, Swapan Kumar Mukherjee quietly handed over the possession and assets of the company to the Liquidator without informing him that on 18th January, 2022 he had filed the application with the Registrar to record the assignment of the seven trademarks of the company purportedly made on 3rd April, 2017.”

In the matter at hand, an interim judgement was passed by the Court below, in an interlocutory application in a suit filed by Poulami Mukherjee against Duckbill alleging infringement of 7 trademarks over which she had proprietary rights acquired through a deed of assignment executed in her favour by Duckbill, the registered owner of those marks.

The order of liquidation of Duckbill was passed by the National Company Law Tribunal dated 13-04-2021 and the liquidator had proposed to sell the assets of the company. The most valuable assets of the company were 7 out of its 14 trademarks i.e.

1. Laxit
2. Laxit Laxative Oral Emulsion (label)
3.  Healzyme
4. Catalyd
5. Laxit plus label
6.  Brofentol plus label
7.  Cyaptin with calcium (label).

On 29-06-2021 the Liquidator had asked the Trademarks Registry to maintain status quo of the 7 trademarks. The assets which were handed over to the Liquidator on 12-02-2022 were to be sold by e-auction as stated in the Liquidator’s notice of sale dated 23-04-2022 on the reserve price of rupees 5 crores. On 09-05-2022, the Liquidator held an auction for this purpose under Section 35 (1)(f) of the Insolvency and Bankruptcy Code (IBC). It was averred that under Section 45 of IBC, any transaction before 2 years of commencement of the Insolvency could not be normally considered by the Court or Adjudicating Authority as a fraudulent preference.

An extraordinary situation had been created by the production of a deed of assignment dated 03-04-2017 under which 7 trademarks were purportedly assigned by Duckbill to Poulami for a consideration of Rs.7,000/-, a letter dated 04-042017, by Poulami to Duckbill that she had became the owner of 7 trademarks; a form dated 18-01-2022 by Poulami to the Registrar of Trademarks for recording this assignment in his records and a document issued by the Trademarks Registry showing that the assignment was registered on 14-06-2022 was presented. On 09-11-2022 the Liquidator had asked the Registrar of Trade Marks to reverse the said transfer.

The case of Duckbill was that a colossal fraud had been practised on them by Poulami as those 7 Trademarks were all along the assets of the company and were included in its assets proposed to be sold by e-auction by the Liquidator. The deed of assignment dated 03-04-2017, was a fabricated document, so backdated that the assignment would appear to have been effected prior to 2 years of commencement of Insolvency on 17-12-2019.

On 14-11-2022, Paul brothers filed a writ application in the Court asking inter alia for a writ of mandamus for cancellation of deed of assignment of the 7 trademarks in favour of Poulami and for its restoration in favour of Duckbill. At the ad-interim stage on 06-04-2023, a single judge hearing the writ took note of the order dated 24-01-2023, restraining Duckbill from using the marks. She ruled, on appreciation of the prima facie case that Poulami be also restrained from using the marks. An appeal was preferred by Poulami from this order before a Division Bench, which while admitting the appeal on 20-04-2023 ruled that the ad-interim order passed by the Single Judge without inviting affidavits had the effect of finally allowing the writ application. The said order of the Single Judge dated 06-04-2023 was stayed and directions were made for hearing of the appeal. The net result of this was that the writ application and the appeal were pending before the respective courts.

On 28-11-2022 Paul Brothers filed an application on the Section 60(5) of IBC before the NCLT claiming that the assignment and transfer of the 7 trademarks by the deed of assignment dated 03-04-2017 was preferential, fraudulent and undervalued and that Duckbill was entitled to commercially exploit the trademarks.

The Bench was of the view that the application had been made by Duckbill to set aside the said order wherein the Court had recorded the filing of an affidavit of service and non-appearance of Duckbill. The Court disagreed with the contention that the representation made by appellant had been duly served to Duckbill. “Records were placed before the court to show that Duckbill received service of the papers in the evening of the day when the order was passed. We have also checked all the records. The contention of Duckbill appears to be true.” While hearing the application to vacate the judgment dated 24-01-2023, the Court was of the view that there was sufficient cause which had prevented Duckbill from attending Court when the appeal was heard on 24-01-2023. Thus the order dated 24-01-2023 was set aside.

The Bench further went on to navigate through the dispute between the parties and sated that the same was primarily concerned with the proprietorship of 7 trademarks than their infringement. The Court was of the view that the prima facie finding of the judge in the impugned judgment was palpably erroneous to the point of being perverse. “No learned judge on the basis of the deed of assignment of 3rd April, 2017 lodged some five years later on 18th January, 2022 and purportedly registered on 14th June, 2022 would have come to the prima facie conclusion that it was valid, under Section 42 of the Trade Marks Act, 1999. However, the learned Judge came to this finding.

The Bench was of the view that there was every reason to believe that, as a statutory functionary the Liquidator had acted regularly in the usual course of his duties and found 14 registered trademarks in the name of the company. “He found nothing in the records to suggest that out of those trademarks, seven had been transferred in 2017.”

“As rightly pointed out by Mr. Mitra all fourteen marks were valid on the alleged date of execution of the deed of assignment whereas in 2022 only seven trademarks were valid. Furthermore, two of the marks were registered only in 2018. Then why only seven trademarks were allegedly assigned in 2017? Why would the application for recording of the assignment of the seven trademarks be made on 18th January, 2022 about 5 years after it was purportedly assigned on 3rd April, 2017?” the Court pondered upon such questions.

The Bench stated that what was most significant was that these marks were assigned by the father-in-law on behalf of the company to his daughter-in-law for only Rs.7,000/- whereas about rupees 5 crores had been paid by Duckbill to purchase these marks. The Court navigated through Chapter V of the Trade Mark Act which dealt with the assignment or transmission of the trademarks. Section 42 provided that if an assignment of trademark was made otherwise that in connection with the goodwill of the business in which the mark had been used, the assignment would only take effect if within 6 months or an extended time of 3 months as the Registrar allowed such assignment was notified to the Registrar for the purpose of advertising it.

The Bench stated that the purported deed of assignment dated 03-04- 2017 was sought to be lodged with the Registrar on 18-01-2022 for registering the assignment. This application to record this assignment was made by filling up a form RM-P issued by the Trademark registry. This form provided for an application for post registration changes in a trademark. “In the garb of making this application Poulami Mukherjee tried to record with the registry that Duckbill had assigned the seven trademarks to her (see page 168 of the application CAN 2 of 2023) and managed to get the assignment registered on 14th June, 2022.”

The Bench was of the view that Section 28 of the Trade Mark Act was only prima facie proof of validity. “It is absolutely plain that prima facie there was gross irregularity involved in the alleged assignment and in the registration thereof. From the prima facie findings arrived at by me there is every reason to believe that the deed of assignment was backdated.”

The Court was of the view that it was stated that under Chapter V of the Trade Marks Act that the right of assignment and transmission was vested in the registered proprietor. In case of these 7 marks, the registered proprietor was Duckbill, the custodian of whose assets was the liquidator, thus, the real proprietor was the liquidator.

“First of all, on 18th January, 2022 the earlier management of the company could not act by presenting the purported 2017 deed of assignment for recording the assignment with the Registrar without the concurrence of the liquidator. The earlier management could not have in January, 2022 brought to life an assignment which was a dead letter. Furthermore, it could not do any act which would deprive the company of its valuable assets.”

The Bench observed that “The dating of the alleged deed of assignment that is 3rd April, 2017 raises eyebrows for another reason. It was more than two years before the commencement of insolvency proceeding on 17th December, 2019 so as to take it out of scanner and scrutiny under the 2005 Insolvency and Bankruptcy Code, 2016, as a fraudulent preference. In those circumstances, the ultimate order passed by the learned trial Judge at the ad interim stage that he was not minded to pass an interim order of injunction was justified, though it should have been for the reasons given above. Whether our interim order in appeal was obtained by suppression of material facts is redundant because we are ultimately setting aside our interim order on substantive grounds. It is true that if this suppression was not made the interim order may not have been passed at all.”