Ruling Of Karnataka High Court Deciding The Conundrum Of “Yezdi” Trademark Ownership

8th February, 2023 - 6:05 am Categories: Trademark 0 Comments

Introduction

The term “Yezdi” has earned a lot of goodwill as pioneers of an indomitable symbol of the motorcycle industry since the 1960’s. Through various incidental graphs of globalization and commercialization the “Yezdi” trademark has pounced around with its ownership status.  Initially belonging to the Ideal Jawa (India) Ltd, this is currently under liquidation and then was allegedly registered with the Classic Legends Pvt. Ltd in pursuance of Mr. Boman R Rani. This contention has sought with some clarity in the recent ruling of the Karnataka High Court.

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The company Ideal Jawa India Ltd. was incorporated in 1960 This was a licensed operation between Jawa Motorcycles along with Rustom and Farrokh Irani. The company’s registration for the mark “Yezdi” was awarded on October 9, 1969. When the Iranis’ licence partnership with Jawa terminated in the early 1970s, they did not renew it and started manufacturing motorcycles under the new brand, “Yezdi”.  The corporation was wound up on August 17, 2001, and the Official Liquidator (OL) was appointed to oversee the dissolution process. The Company discontinued operations in 1996 as a result of its dissolution. Mr. Boman Rustom Irani, son of Mr. Rustom Irani, registered the website www.yezdi.com in 1998.  In pursuance of the above described conditions, the Trademark Registry withdrew the “Yezdi” mark in 2007. Subsequently, in 2013 and 2014, Mr. Irani approached the Trademark Offices in Ahmedabad, Delhi and Mumbai for registration of a number of “Yezdi” marks, which were accepted and granted. The corporation in liquidation was unable to settle its obligations until 2015. In an effort to revitalize the brand name ‘Yezdi,’ Anupam Thareja and Anand Mahindra founded Classic Legends Pvt. Ltd. alongside Boman Rustom Irani in 2015. Mahindra Group was the dominant stakeholder with a 60 percent interest, while Irani held the remaining 40 percent. The current application was filed in 2018 by the OL against the Registrar of Trademarks of New Delhi, Mumbai and Gujarat along with Mr. Boman Irani which was later joined by the Ideal Jawa Employees Association in 2020.[1]

Issues Before The Court 

The primary dispute centered on who owned the trademark “Yezdi.” The secondary considerations were, firstly, whether or not the mark might be appropriated by a third party if the Company was in liquidation, and, secondly, the validity of trademark registration certificates provided to Mr. Irani by the Registrar of Trademarks.

Contention Of The Parties

The petitioner (OL) pleaded that even when the company became non-operational, it lawfully would retain the ownership of “Yezdi” mark as it was a part of the company’s asset and it was necessary that the OL should settle all the debts and dues before obtaining any ownership. The later joined “Ideal Jawa employees association” presented the argument that none of the assets of the company could be dealt with once it becomes “custodia legis (in the custody of the law/Court)”. Further it was claimed that the as the Registrar removed the trademark without first informing the OL was against the mandate as described in the Section 25(3) of the  “Trade Marks Act, 1999”. Whereas the defendant Mr. Boman Irani contended that the mark was not the asset of the company and vests in him as he is the legal heir of Mr. Rustom Irani who envisioned the mark, hence it was inherited by him. Mr. Irani also claimed that as his father allowed the usage of the mark by the company because the reputation and goodwill associated with the mark and the brand continued to confer in him, as the mark was family controlled even though the manufacturing stopped.  He further argued that as per Section 45, non-renewal and non-usage of the mark leads to abandonment of the company’s right to use the mark which allows anyone to claim the mark. In addition to this Mr. Irani stated that the Company court cannot exercise its jurisdiction in the present case because the “Trademarks Act, 1999” overrides the Companies Act, 1956.

Observation Of The Court

The Hon’ble court initially noted that on the day when the winding up was orders all the registrations for the mark “Yezdi” stood in the name of Ideal Jawa , so there was no other who claimed the trademark. This solidifies the courts intent that company’s assets such as the marks become ‘custodia legis’ until the dues are unfurnished. The same was inferred from the Supreme Court ruling “M/s Meghal Homes Pvt. Ltd., v. Shree Niwas Girni KK Samithi & Ors”[2].

The court then asserted that cessation of business doesn’t negate the ownership rights, goodwill and reputation of any company over their trademarks, thus according to Section 536(2) of the Companies Act, 1956 any sale or transfer of any asset renders it void.  Relying on the case of “R.R. Oomerbhoy Pvt. Ltd. Mumbai v. Court Receiver High Court Bombay & Ors “.[3], the court on defendant Mr. Irani’s contention elucidated that termination of business and it going to the process of winding up would make the mark available for anyone’s use will stop  the company in winding up be able to “monetize” its marks.

The court relied on a modest reasonable methodology that the ‘Yezdi’ trademark still retains its goodwill and reputation in the mind of common people which is evident from its popularity on various fan pages available online. This goodwill is proficient in being monetized by the OL to clear the dues of the shareholders, creditors and other working entities of the company in liquidation. This also presents a viable motive of registering the “Yezi” trademark by Mr. Irani which can be efficiently used to amplify his business operations and profit as it still retains its reputation and goodwill as a brand which has monumental legacy which makes it simple to latch on it to create new motorcycles with the same previous brand name. It is evident that Mr. Irani’s decision to build Classic Legends with Mahindra & Mahindra is a result of this goodwill. Thus the bench inferred that registrations of the trademarks by Mr. Irani amounted to misappropriation and were in bad faith.

The court then clarified the contention of the Company court’s jurisdiction by explaining that the Company Court can determine the asset, and after determining that the trademark is an asset of the company, any person who intends to deal with these assets will be subject to the Company Court’s jurisdiction. The court said that the Trademark Registry cant exercise the power of Company court to adjudge disposition of property. [4]

In furtherance of the case “Thapsons Pvt Ltd v. Ashoka Food Industrie”s [5], the court decided that the removal of trademark occered only because of non-payment of the renewal fee which does not render a reasonable ground to the registrant to claim trademark ownership, therefore the registratios of the marks allowed by Registrar of Trademarks to Mr. Irani are null and void to all extent.

Finally when dealing with abandonment of marks , the court relying on “Hardie Trading Ltd. v. Addison Paints and Chemicals” [6]in which court stated “an intention to abandon must mean intent not to resume “ and Section 25(3)[7] , wherein removal of the trademark without informing OL was against the provision,  appropriately rejected statutory abandonment posing as a special circumstance that prevented the Company from renewing the mark.

Decision Of The Court

The Hon’ble court decided that the “Yezdi” trademark was owned by Ideal Jawa Ltd and does not belong to Mr. Boman Irani or the Classic Legends Pvt. Ltd. The court further stated that the custody of the mark shall stay with Ideal Jawa as it is still under the process of liquidation and restrained others from using the mark “Yezdi”. The court laid emphasis on non-usage of the mark “Yezdi” (word or a device), whether “independently or in conjunction with other words”.  The court also endorsed the official liquidator to sell the culmination of all the rights and goodwill associated with the trademark through public auction. The court whilst declaring the registered trademarks by the Registrar to Mr. Irani null and void, ordered the Registration Authority  to transfer all the registration to Ideal Jawa through the OL. Further the court directed M.Irani and Classic Legends to render all the sales and earnings to the OL and stay liable to pay Ideal Jawa all the gains profited from and benefits accrued using the mark “Yezdi” which will be determined by an OL appointed Charted Accountant.

In addition, the court ordered Irani and Classic Legends to pay Rs 10,00,00/-  to the Official Liquidator to cover costs and distributions incurred during the Company’s liquidation.

Conclusion

This decision serves as an essential reminder that vigilance must be used when dealing with trademarks, especially during the dissolution or winding-up process of a corporation, and is a growth and progress that nips the position of trademark ownership in the conundrum of corporate liquidation.  Subsequently, Classic Legends Pvt Ltd instantly issued an official statement in response to this ruling stating that they would file an appeal and that motorcycle production and sales will continue in the meantime.  The most notable inference of this order is that goodwill, reputation and value of the mark shall still vest with the company irrespective of its registration, non-usage and it becomes an important factor whilst deciphering ownership of the trademark. Although the concept of persistence goodwill fumbles when there is prolonged non-operational business. The Court further supported the assertion by citing “Fedders Lloyd v. Fedders Corporation”[8], which held that external conditions outside the trademark owner’s control do not result in loss of distinctiveness due to non-use. The rulings of the court seems to be in consonance with law and it will be interesting to see the grounds of appeal the company will take as they have claimed that the order is held in abeyance.

Author: Anushka Singh, 5^th Year student of BBA-LLB (Hons.), School of Law, Sharda University, Greater Noida,  in case of any queries please contact/write back to us via email to chhavi@khuranaandkhurana.com or at Khurana & Khurana, Advocates and IP Attorney.

The judgement can be accessed here at

https://www.livelaw.in/pdf_upload/karnataka-hc-order-450912.pdf

Or

https://images.assettype.com/barandbench/2022-12/5da40afb-b69e-42bf-b0c8-f25c9f2dde5b/The_Official_Liquidator_of_Ideal_Jawa__India__Ltd_vs_Registrar_of_Trademarks___Ors_.pdf

REFERENCES

1 Order of Karnataka High Court Official liquidator of M/S Ideal Jawa (India) Limited (in liquidation) v. Registrar of Trade Marks & Others [c.A. No. 71/2018] https://www.livelaw.in/pdf_upload/karnataka-hc-order-450912.pdf

2 Appeal (Civil) 3179-3181 of 2005

3 2003 (5) Mh. L.J. 372

4 Section 536 of Companies Act, 1956

5 (1991) SCC Online Del 2015

6 (2003) 11 SCC 92

7 Id. 5

8  119 (2005) DLT 410

[1] Order of Karnataka High Court Official liquidator of M/S Ideal Jawa (India) Limited (in liquidation) v. Registrar of Trade Marks & Others [c.A. No. 71/2018] https://www.livelaw.in/pdf_upload/karnataka-hc-order-450912.pdf

[2] Appeal (Civil) 3179-3181 of 2005

[3] 2003 (5) Mh. L.J. 372

[4] Section 536 of Companies Act, 1956

[5] (1991) SCC Online Del 2015

[6] (2003) 11 SCC 92

[7] Id.4

[8] 119 (2005) DLT 410