Legal Discourse on Trademark Rights in the ‘SHAKTI BHOG’ Controversy Amid Corporate Insolvency Proceedings

Legal Discourse on Trademark Rights in the 'SHAKTI BHOG' Controversy Amid Corporate Insolvency Proceedings

Amid the ongoing criminal proceedings alleging fraud and money laundering against officers of the Shakti Bhog companies and of creditor bank employees, insolvency proceedings are underway and have been for some time. A dispute concerning ownership of intellectual property rights in a valuable trade mark is part of the insolvency process.

In Shakti Bhog Foods Ltd and Anr [SBFL] v Kumar Food Industries Ltd and Ors [KFIL], the Delhi High Court made a significant interim ruling. The dispute concerned the alleged infringement of the well-known Shakti Bhog trade mark. SBFL is a leading food manufacturer and distribution company in the flour and rice sector. The company sought a permanent injunction, claiming infringement of the trade mark, passing off and damages. KFIL counterclaimed, asserting ownership of the ‘SHAKTI BHOG’ mark. The ruling dealt with the complexities of trademark law and ownership disputes at a time when insolvency proceedings were ongoing.

Kewal Krishan Kumar, defendant 10, established a sole proprietorship in 1975 using the mark Shakti Bhog. In the early 1990s, the defendant incorporated SBFL and KFIL. In 2017, he resigned from KFIL, which was then run by his son and other directors. SBFL was aggrieved by the continued use of the mark, its labelling and packaging by KFIL and its contract manufacturers, defendants two to nine.

SBFL has been in the insolvency process for some time. In 2015, a petition was filed to wind up SBFL’s business, receiving court approval in 2018. In 2018, another creditor filed a case with the National Company Law Tribunal (NCLT), resulting in an order in September 2023. The plaintiff asserted that a committee of creditors (CoC) was negotiating a corporate insolvency resolution process (CIRP) under the Insolvency and Bankruptcy Code, 2016 (IBC) for SBFL’s business. SBFL argued that the Shakti Bhog trade mark was an asset of the company and should be included in the CIRP.

KFIL claimed to own the Shakti Bhog trade mark through a deed of assignment dated 30 December 2017. SBFL argued on several grounds that the document was a forgery. Stamp duty of over INR4 million (USD48.2 thousand) had not been paid, defendant 10, the person purportedly signing the document, was suspended as a director of SBFL at the time, the financial records of KFIL conflicted with the contents of the deed and no intangible assets were recorded in KFIL’s balance sheet. A previous court case had shown that Kumar Food Industries Ltd. had been using SBFL’s licences and trade names when manufacturing and selling products under the trade mark. SBFL argued that these discrepancies raised significant doubts concerning the authenticity of the assignment deed and KFIL’s claim to the trade mark.

SBFL further contended that KFIL had not applied to the Controller General of Patents, Designs and Trade Marks (CGPDTM) to transfer the trade mark, and its renewals were managed by SBFL. The packaging of KFIL products indicated the use of the trade mark under a license from SBFL. In responding to a cease-and-desist notice from SBFL in January 2023, KFIL did not raise the purported deed of assignment as a defence. SBFL submitted that the mark did not belong to KFIL, which was making an unwarranted claim to SBFL’s intellectual property.

The court found that many trade marks had been registered in favour of SBFL. KFIL, in asserting the assignment of the mark ‘SHAKTI BHOG’ had not produced a stamped deed of assignment, of which there was no record other than an unstamped copy submitted to the court. To prevent prejudice, the court ordered that the CoC could consider the mark as an asset of SBFL and could proceed to valuation. However, the CoC could make no final decision and would have to await the court’s order. The court restrained KFIL from transferring any right, title or interest in the mark until further order. The defendants should grant no new licenses for ‘Shakti Bhog’ branded products and the CGPDTM should not register assignments or licences for the mark without court approval. Contract manufacturers other than the defendants could apply if they already had licenses for the mark. The case was adjourned for further hearing.

The court was obviously anxious not to impede the IBC process while safeguarding the interests of the registered owner of a trade mark against a dubious claimant.

 

Authors: Manisha Singh and Lisha Chauhan

First Published By: Lexology here