Ideal Jawa Owner Of 'Yezdi', Stoppage Of Business Doesn't Affect Rights In Trademarks: Karnataka High Court In Case Against Classic Legends

A single judge bench of Justice S R Krishna Kumar has accordingly restrained Boman Irani and Classic Legends Pvt. Ltd, or any person claiming through or under from using the yesteryears famous motorbike brand mark "Yezdi" or any other mark containing the word "Yezdi" as a word or a device whether independently or in conjunction with other words including all domain names which use the word / mark "Yezdi.

Further the bench held that Irani who established Classic Legends with Mahindra & Mahindra for reviving the brand could not have obtained registration of the marks "Yezdi" during the process of winding up of the company. The conduct in obtaining registration of the marks is in bad faith and amounts to misappropriation of the assets of the Company.

Accordingly it has held that all trademark, registration certificates issued by Registrar of Trademarks, Mumbai, Delhi and Ahmedabad in favour of Irani are null and void.

It has also directed Irani and Classic Legends to pay Rs 10 lakh as costs to the Official Liquidator each, which shall be utilised towards the costs and distribution to be made in the process of winding up of the Company.

Further, Boman Irani and Classic Legends Pvt Ltd are liable to account and pay to the Company for all gains made from the use of the trademarks of the Company. They shall provide the Official Liquidator with all details of the sales and earnings from the use of the mark "Yezdi" in any form whatsoever. The Official Liquidator shall appoint a reputed firm of Chartered Accountant to determine the benefit that has accrued to Mr. Boman Irani and Classic Legends Pvt Ltd from the use of the trademarks of the Company.

The court partly allowed the application filed by the official liquidator and permitted it "to sell all trademarks and such other associated rights in and over the trademarks with all goodwill associated with the mark by public auction."

Case Details

The company ideal Jawa (India) Ltd came to be incorporated on 22.09.1960. On 09.10.1969, registration of the mark 'Yezdi' was granted in favour of the company. The use was claimed since 01.01.1969. On 25.07.1991, a company petition was filed for winding up of the Company. The company was wound up on 17.08.2001 and the Official Liquidator was appointed to take over the Company and oversee the winding up process.

On 01.08.1998, a website called www.yezdi.com was registered by Mr. Irani, The Trademark Registry removed the Yezdi mark on 05.10.2007. On 17.06.2013, 14.09.2013, 01.01.2014 and 02.07.2014, Irani filed applications for registration of certain marks both word and device of "Yezdi" before the TM Offices at Delhi, Mumbai and Ahmedabad, which came to be allowed.

The main question before the court was of ownership of the mark and if the company continues to exercise ownership rights can any other person appropriate the said marks to himself by the process of registration of the mark with the Trademark registry.

Findings

Firstly, the bench noted that as on the date of winding up order, there was no other person who had made a claim to the trademark. All registrations for the marks "Yezdi" also stood in the name of the Company.

The court upfront rejected the argument of Irani that his father (Rustom Irani) adopted the trademark and after his demise the same devolved on him as legal heir. It was also claimed that Rustom Irani allowed the Company to use the mark as it was family controlled, though the manufacturing stopped, the goodwill and reputation which the brand created for itself has continued to vest in him. Thus the use of the word "Yezdi" was permitted by his father Rustom Irani and that the reputation and goodwill of the mark continues even as of date, the court was told.

The bench said: "There is no material on the basis of which, it can be established that the use by the Company of the mark "Yezdi" was simply permissive and was revokable at any point in time by Mr. Rustom Irani or Mr. Irani."

Further, it said: "This is not a case where registration was granted in favour of Mr. Rustom Irani and he in turn granted registered user rights or granted a license to the Company to use the mark. When Mr. Rustom Irani never did claim any individual rights in and over the trademark for Mr. Irani to make a claim that upon winding up, he has acquired rights over the same cannot be countenanced."

Noting that popularity of the brand can hardly be rejected, the court said: "That the goodwill established by the mark continues to date is very clear from the various fan pages available online. That people have continued to maintain the bikes and ride it even now shows that the goodwill continues even as of date." 

The bench said: "Mr. Rustom Irani decided to name the Company as "Ideal Jawa" and determined that the bikes manufactured by the Company would be called "Yezdi" and as a shareholder, promoter and director ensured that the Company registered the trademarks in its name and the Company exercised all rights in and over the mark; when the company is wound up, the same Mr. Rustom Irani cannot make a claim in and over the said mark. The mark indubitably belongs to the Company and continues with the company even after winding up. If Mr. Rustom Irani cannot (rather could not) make a claim over the mark, for Mr. Irani to make a claim on the basis that he is a heir of Mr. Rustom Irani is impossible to accept."

Holding that it is clearly established that cessation of business does not automatically result in destroying the goodwill or the property in a trademark. The bench adopted a commonsensical approach; in trademark law, to determine reputation and goodwill from the point of view of a common man.

Following which it observed: "It is apparent that it is only such goodwill which has resulted in Mr. Irani to establish Classic Legends with Mahindra & Mahindra. The entire approach has been to take advantage of this great legacy to do business. Such legacy makes it easy to start and create a new bike with an old name. That is goodwill. That goodwill certainly rests with the Company. Such goodwill lasts even where the trademark registration ceases to exist."

Relying on the judgment of the Bombay High Court in the case of R.R. Oomerbhoy Pvt. Ltd. Mumbai v. Court Receiver, High Court, Bombay & Ors.- 2003 (5) Mh. L.J. 372, the bench said, "If the arguments of Mr. Irani and Classic Legends is accepted, then the day the Company goes into winding up and stops business and consequently use of the mark, the mark becomes available for all and the Company loses its right over the mark."

It added "If that were to happen, then every Company in winding up would never be able to monetize its marks. Such an interpretation not only runs contrary to law but also logic. A simple commonsensical approach in this case will lead to the only conclusion possible, that is that the mark retains a goodwill and reputation in the minds of the general public, which is capable of being monetized by the Official Liquidator for the benefit of the creditors, workmen and shareholders. It is also this very commonsensical approach that led Mr. Irani to seek to appropriate the mark to himself so that the same can be utilised to further his own business interests by establishing Classic Legends and resorting to manufacture of motorcycles using the name "Yezdi"."

Further it held: "I am satisfied that even if one can argue that the trademarks may have ceased to exist on the trademark register insofar as the Company is concerned, the goodwill and the rights over the marks continue. After all, trademark and the rights in the mark is a matter of common law and registration simply recognises pre-existing rights."

The court also noted that prior to removal of a mark from the register of marks, the Registrar had not issued notice to the Official Liquidator. No person made an application for removal of the mark on account of non-use. The removal occurred only owing to failure to pay the necessary fee for renewal.

It then held: "The petition for winding up was filed in the year 1991. The Company ceased business in the year 1996 during the process of winding up. The winding up process actually started in the year 2001. However, in terms of the Companies Act, the date of presentation of the petition for winding up is the relevant date to determine the assets and properties of the Company and to notice if any disposition has in fact occurred of the properties of the Company. The stoppage of business in the year 1996 (even if true) does not affect the rights of the Company in and over the trademarks."

It added: "There is no abandonment as of that date. There is no abandonment prior to winding up which starts from 1991. There is no abandonment for reasons already stated after the date of passing of the order of winding up. Statutory abandonment as an argument cannot be countenanced."

The court also accepted the argument made by Ideal Jawa employees association that once the property becomes custodia legis, no person can deal with the properties of the Company in liquidation.

It held: "The assets of the Company including the trademarks are custodia legis, any disposition of the property of the company would be void. In terms of Section 536(2) (Companies Act), any disposition of the property of the company from the date of filing of the petition of winding up would be void unless the Court orders otherwise."

Further it clarified that: "The determination of the assets of the Company is within the province of the Company Court. Once the Company Court has found that the trademarks are the asset of the Company, any person who is seeking to deal with the said assets are subject to the jurisdiction of the Company Court."

Noting that the disposition of property of the Company can be adjudged only by the Company Court under Section 536, the court said this power cannot be exercised by the Trademark Registry. The court rejected the contention of Irani that the provisions of the Trademarks Act override the provisions of the Companies Act and that the Company Court cannot exercise jurisdiction.

Accordingly it held: "The Company has not lost rights in and over the mark "Yezdi" since there is no abandonment of the marks."

Case Title: THE Official Liquidator of M/s Ideal Jawa (India) Limited (In Liquidation) v. Registrar of Trade Marks & Others.

Case No: C.A. No. 71/2018.

Citation: 2022 LiveLaw (Kar) 520

Date of Order: 16TH DAY OF DECEMBER, 2022

Appearance: Senior Advocate Aditya Sondhi for K.S. MAHADEVAN, Advocate for applicants.

M.B. NARGUND, Senior Counsel (ASG) For Hemanth R Rao, Advocate FOR R-1 TO R-3. Udaya Holla, Senior Counsel For Sanjay Nair, Advocate FOR R-4.

Senior Counsel Mr. Dhyan Chinnappa briefed by Poornachandra B.Pattar, Partner, Spectrum Legal, Adit Shah, Manish, and Ms.Vishaka Nikkam for Ideal Jawa Employees Association.

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