The Division Bench (DB) of the Karnataka High Court recently delivered a significant ruling in a batch of appeals filed by the Appellant, Mr. Boman Irani and Classic Legends, challenging a common judgment of the Single Judge concerning the assets of Ideal Jawa (India) Ltd., a company under liquidation, and more specifically, the ownership and control of the iconic ‘YEZDI’ trademark. The Single Judge allowed the application of Official Liquidator to cancel the registrations. This note discusses the background of the dispute, contentions raised by the parties and the ruling of the DB.

Background of the case

1. Parties Involved:
   1. The dispute centres around a) Classic Legends Private Limited, b) Tide Water Oil Co. (India) Ltd., c) the Official Liquidator of Ideal Jawa (India) Limited (in liquidation), d) Ideal Jawa (India) Employee’s Association, and e) Mr. Boman R. Irani.
   2. Ideal Jawa was a renowned motorcycle manufacturer in India, producing bikes under the brand name “YEZDI.” The brand “YEZDI” was originally licensed to Ideal Jawa by Mr. Rustom S. Irani, the founder and principal shareholder.
   3. Ideal Jawa ceased production in 1996 and entered liquidation following winding-up petitions by creditors.
2. Trademark Issues:
   1. The core of the dispute is the ownership and rights over the “YEZDI” trademark.
   2. Ideal Jawa was a renowned motorcycle manufacturer in India, producing bikes under the brand name “YEZDI.” The brand “YEZDI” was originally licensed to Ideal Jawa by Mr. Rustom S. Irani, the founder and principal shareholder.
   3. After Ideal Jawa stopped operations, the trademark registrations lapsed due to non-renewal and non-use. And company went into liquidation following winding up petition by creditors.
   4. Mr. Boman R. Irani, son of the founder and a former director, began using the “YEZDI” brand independently, including operating the website www.yezdi.com, and later registered the trademark, in his own name.
   5. The dispute arose when Official Liquidator (OL) sought to sell the Ideal Jawa’s intangible assets, including trademarks.
   6. At the same time, The Employees’ Association sought to restrain Mr. Boman R. Irani from using the “YEZDI” mark and to have the trademark registrations in his name declared null and void.
   7. Mr. Boman R. Irani and Classic Legends (a company he co-founded with Mahindra & Mahindra) challenged the orders that declared Ideal Jawa as the owner of the “YEZDI” trademark and voided his registrations.

Key Facts:

1. The “YEZDI” trademark was not listed as an asset during the liquidation process and was not valued or sold with the company’s other assets.
2. Public tender for the sale of all movable and immovable assets of Ideal Jawa, did not mention YEZDI trademarks.
3. In 2003, the Court approved the sale of Ideal Jawa’s assets, and in 2004, confirmed their transfer to the purchaser. The Official Liquidator (OL) did not take action to renew or protect the trademark for over 15 years. Renewal notices were issued to the company’s trademark agent, but neither Ideal Jawa nor the OL took steps to renew the marks.
4. By 2013-14, the YEZDI registrations had fully lapsed after nearly 15 years of non-use.
5. Mr. Boman R. Irani registered the “YEZDI” trademark in his own name after the original registrations lapsed and began using it for new business ventures.
6. The Single Judge of the Karnataka High Court ruled in favour of the Official Liquidator and Employees’ Association, declaring Ideal Jawa as the owner of the trademark and cancelling the registrations in Mr. Boman R. Irani’s name.

Reasons to cancel YEZDI Registrations (by the Single Judge)

Ownership by Ideal Jawa (India) Limited:

The Single Judge found that the YEZDI trademarks were originally registered and used by Ideal Jawa (India) Limited. The Court held that the goodwill and rights in the trademarks continued to vest with the company, even after it ceased operations and entered liquidation.

Custodia Legis During Liquidation:

Upon the winding up of the company, all its assets including intangible assets like trademarks, were deemed to be under the custody of the Court (custodia legis). The Judge reasoned that any disposition of such assets, including trademarks, without the Court’s permission was void.

Failure to Disclose and Protect Assets:

The Court found that Boman R. Irani, as a former director, failed to disclose the existence of the YEZDI trademarks as assets in the statement of affairs during liquidation. This omission was considered a breach of fiduciary duty and statutory obligations under the Companies Act.

Bad Faith and Unauthorized Registration:

The Court concluded that Boman R. Irani obtained registration of the YEZDI trademarks in his own name with mala fide intent, without leave of the Court and while the company was in liquidation. This was viewed as an attempt to misappropriate company assets for personal benefit.

Jurisdiction of the Company Court:

The Single Judge held that the Company Court had broad powers under Section 446 of the Companies Act to deal with all matters relating to the assets of a company in liquidation, including the validity and ownership of trademarks. The Judge exercised this jurisdiction to declare the registrations in Boman R. Irani’s name null and void and ordered their transfer to the company through the Official Liquidator.

Appeal

This decision to cancel the YEZDI registrations was appealed by Classic Legends and Boman R. Irani, leading to the present judgment. The Court ruled in favour of Boman R. Irani and Classic Legends Private Limited holding that:

1. Ideal Jawa abandoned the trademark YEZDI on account of its non-use since 1996 and its non-renewal for 15 years.
2. The official Liquidator (OL) did not take timely action to renew or protect the trademark, nor did the OL list the trademark as an asset during liquidation.
3. The Court held that the OL’s inaction led to the abandonment of the trademark, and the removal of the mark from the register. Mr Irani could not be faulted if the OL failed to act within the statutory period.
4. As the trademark was abandoned and not renewed, it entered the public domain. The Court reasoned that any third party, including Mr. Boman R. Irani (a former director and shareholder), could apply for and register the mark, provided the process followed the law.
5. The applications by Mr. Boman R. Irani for registration were published for public objection, and there was no evidence of bad faith or violation of the Companies Act or Trademarks Act in his registration.
6. The Court emphasized that goodwill in a trademark is tied to the ongoing business. Since Ideal Jawa ceased operations in 1996 and there was no intention to resume business, the goodwill associated with “YEZDI” could not survive independently.
7. The Court found no evidence that Mr. Boman R. Irani acted with mala fide intent or violated statutory duties when registering the “YEZDI” trademark after its abandonment by the company.
8. The omission of the trademark from the statement of affairs was not considered mala fide, as the OL and valuers also did not treat it as an asset.
9. The Court analysed the powers of the Company Court under Section 446 of the Companies Act, 1956, and concluded that while the Company Court has broad powers in liquidation, it cannot indefinitely preserve rights in assets (like trademarks) that have been abandoned and not renewed.
10. The Court also noted that the Trademarks Act is a special statute governing trademark registration, renewal, and rectification, and its procedures must be followed for any challenge or restoration of rights.

Comment

The Division Bench’s ruling provides clarity on the treatment of intellectual property in corporate insolvency and reinforces the principle that trademarks are dynamic commercial assets whose survival depends on timely renewal, active use, and vigilant protection.