Case: CANARA BANK Vs. N.G. SUBBARAYA SETTY

Setty on the bank, the plaintiff bank cannot escape from the legal consequences of assignment deed obtained by them dated 8.10.2003 and it cannot be held that the assignment deed obtained, by the bank from N.G. Subbaraya Setty is unenforceable. Therefore, I answer both the issues 1 and 2 raised in O.S. 7018/2004 in the negative. (Issue No.2 in O.S. No.7018 of 2004 read as follows: Whether plaintiff proves that the deed of assignment of trademark, entered into between plaintiff and 1 st defendant is not enforceable in law?) 36. Equally, insofar as the trial Court judgment in the second suit of 2008 is concerned, the said plea was expressly raised and turned down in the following manner: …The defendant No.1 himself has produced the original Assignment Deed and in this case defendant No.1 himself has taken up the contention that said Assignment Deed is not registered as per Trade Mark Act and as such, the said document cannot be considered. There are certain procedures that within 5 days the Assignor file an affidavit to the Trade Mark Authority in respect of change of user of the Trade Mark and defendant No.1 himself has moved application by paying Rs.5,000/- D.D. for registering the document. Inspite of that, the Trade Mark Authorities have not registered the Trade Mark and as such, the learned counsel for defendant No.1 vehemently argued that the said Trade Mark Eenadu is not registered in accordance with law and as such, same cannot be considered for any of the purposes. Further, it is contended that the Assignment Deed is not registered in accordance with laws. But when the Assignment Deed has been relied upon in the earlier judgments and parties have accepted the execution of the document, then defendant No.1 cannot again contend that said Assignment Deed is not registered and cannot be considered for any of the purposes, does not hold good. It is nothing but res judicata as contended by the plaintiff in the decisions cited above. 37. The impugned judgment dated 31.7.2017 also records the aforesaid submission and turns it down stating: …Indisputably, the grounds regarding insufficiently stamped assignment deed and non-registration of the trade mark were argued by the Bank which were considered and addressed by the trial Court in O.S. No.2832/2004 and O.S. No.7018/2004. In such circumstances, raising the very same grounds in the second round of proceedings, the issue in which the matter directly and substantially has been heard and finally decided in a former suit between the same parties, litigating under the same title amounts to res judicata. Defendant No.1-Bank is precluded from raising the same objection in the present proceedings which is finally decided holding the assignment deed as legal and binding on the defendant No.1-Bank… 38. We are of the opinion that both the trial Court and the first appellate Court were entirely wrong in treating the statutory prohibition contained in Section 45(2) of the Trade Marks Act as res judicata. It is obvious that neither Court has bothered to advert to Section 45 and/or interpret the same. The second proceeding contained in O.S. No.495 of 2008 prayed for payment of a sum of Rs.17,89,915/- along with interest thereon for the period 1.4.2004 to 30.4.2007. Paragraph 8 of the plaint in the said suit reads as under: 8.The plaintiff has already filed a suit in O.S. No.2832/2004 against the 1 st defendant for the recovery of the amount payable by it under the said Assignment Deed till the end of 31.3.2004. The cause of action for the present suit claim had not arisen by then as the amount had not become payable by then i.e. for the period 1.4.2004 to 30.4.2007. 39. Clearly, therefore, the subsequent suit of 2008 raises an issue which is different from that contained in the earlier suit filed by the same party in 2004. Also, the earlier decision in the judgment dated 27.4.2013 has declared valid a transaction which is prohibited by law. A cursory reading of Section 45(2) of the Trade Marks Act makes it clear that the assignment deed, if unregistered, cannot be admitted in evidence by any Court in proof of title to the trademark by the assignment, unless the Court itself directs otherwise. It is clear, therefore, that any reliance upon the assignment deed dated 8.10.2003 by the earlier judgment cannot be sanctified by the plea of res judicata, when reliance upon the assignment deed is prohibited by law. 40. Equally, a reference to Sections 6, 8 and 46(4) of the Banking Regulation Act would also make it clear that a bank cannot use the trademark Eenadu to sell agarbathies. This would be directly interdicted by Section 8, which clearly provides that notwithstanding anything contained in Section 6 or in any contract, no banking company shall directly or indirectly deal in the selling of goods, except in connection with the realisation of security given to or held by it. Also, granting permission to third parties to use the trademark Eenadu and earn royalty upon the same would clearly be outside Section 6(1) and would be interdicted by Section 6(2) which states that no bank shall engage in any form of business other than those referred to in sub-section (1). 41. Shri Shanthakumar Mahale, however, exhorted us to read Sections 6(1)(f) and (g) as permitting the sale of goods under the trademark and/or earning royalty from a sub-assignment thereto. We are of the view that the trademark cannot be said to be property which has come into the possession of the bank in satisfaction or part satisfaction of any of the claims of the bank. We are further of the view that the trademarks are not part of any security for loans or advances that have been made to the first respondent, or connected with the same. It is thus clear that the assignment deed dated 8.10.2003 is clearly hit by Section 6(2) and Section 8 read with the penalty provision contained in Section 46(4) of the Banking Regulation Act.

Court's decision (1 = petition accepted / positive for appellant, 0 = rejected / negative): 1

Reasoning from the judgment:
1[ds]14. We may first deal with the preliminary point urged by Shri Mehta. He pressed into service the judgment in V. Rajeshwari v. T.C. Saravanabava, (2004) 1 SCC 551  for the proposition that a plea of res judicata not properly raised in the pleadings or put in issue at the stage of trial could not be permitted to be taken.A closer look at the said judgment shows that the judgment dealt with such a plea not being permitted to be raised for the first time at the stage of appeal. In the present case, though an issue as to res judicata was not struck between the parties, both parties argued the matter based upon the pleadings and the judgment contained in the two suits of2004. It is only after full arguments on both sides that the trial Court in the judgment dated 30.10.2015 accepted the respondents plea of res judicata. Even before the appellate Court, the point of res judicata was argued by both parties without adverting to the aforesaid objection. It is obvious, therefore, that this ground raised for the first time before this Court, cannot22. The conspectus of the above authorities shows that until the limitation period for filing of an appeal is over, the res remains sub judice. After the limitation period is over, the res decided by the first Court would then become judicata.23. If the period of limitation for filing an appeal has not yet expired or has just expired, the Court hearing the second proceeding can very well ask the party who has lost the first round whether he intends to appeal the aforesaid judgment. If the answer is yes, then it would be prudent to first adjourn the second proceeding and then stay the aforesaid proceedings, after the appeal has been filed, to await the outcome of the appeal in the first proceeding. If, however, a sufficiently long period has elapsed after limitation has expired, and no appeal has yet been filed in the first proceeding, the Court hearing the second proceeding would be justified in treating the first proceeding as res judicata. No hard and fast rule can be applied. The entire fact circumstance in each case must be looked at before deciding whether to proceed with the second proceeding on the basis of res judicata or to adjourn and/or stay the second proceeding to await the outcome in the first proceeding. Many factors have to be considered before exercising this discretion – for example, the fact that the appeal against the first judgment is grossly belated; or that the said appeal would, in the ordinary course, be heard after many years in the first proceeding; or, the fact that third party rights have intervened, thereby making it unlikely that delay would be condoned in the appeal in the first proceeding. As has been stated, the judicious use of the weapon of stay would, in many cases, obviate a Court of first instance in the second proceeding treating a matter as res judicata only to find that by the time the appeal has reached the hearing stage against the said judgment in the second proceeding, the res becomes sub judice again because of condonation of delay and the consequent hearing of the appeal in the first proceeding. This would result in setting aside the trial Court judgment in the second proceeding, and a de novo hearing on merits in the second proceeding commencing on remand, thereby wasting the Courts time and dragging the parties into a second round of litigation on the merits of the case.24. In the present case, a belated review petition was filed after arguments were heard and judgment reserved by the appellate Court. Would this Court have to await the outcome of the said review petition before deciding whether the judgment dated 27.4.2013 is res judicata? Obviously not. It is clear that a review petition filed long after the judgment dated 27.4.2013, with a condonation application for a delay of over four years, could not possibly be held to be anything but an abuse of the process of the Court.38. We are of the opinion that both the trial Court and the first appellate Court were entirely wrong in treating the statutory prohibition contained in Section 45(2) of the Trade Marks Act as res judicata. It is obvious that neither Court has bothered to advert to Section 45 and/or interpret the same. The second proceeding contained in O.S. No.495 of 2008 prayed for payment of a sum of Rs.17,89,915/- along with interest thereon for the period 1.4.2004 to 30.4.2007. Paragraph 8 of the plaint in the said suit reads as under:8.The plaintiff has already filed a suit in O.S. No.2832/2004 against thefor the recovery of the amount payable by it under the said Assignment Deed till the end of 31.3.2004. The cause of action for the present suit claim had not arisen by then as the amount had not become payable by then i.e. for the period39. Clearly, therefore, the subsequent suit of 2008 raises an issue which is different from that contained in the earlier suit filed by the same party in 2004. Also, the earlier decision in the judgment dated 27.4.2013 has declared valid a transaction which is prohibited by law. A cursory reading of Section 45(2) of the Trade Marks Act makes it clear that the assignment deed, if unregistered, cannot be admitted in evidence by any Court in proof of title to the trademark by the assignment, unless the Court itself directs otherwise. It is clear, therefore, that any reliance upon the assignment deed dated 8.10.2003 by the earlier judgment cannot be sanctified by the plea of res judicata, when reliance upon the assignment deed is prohibited by law40. Equally, a reference to Sections 6, 8 and 46(4) of the Banking Regulation Act would also make it clear that a bank cannot use the trademarkto sell agarbathies. This would be directly interdicted by Section 8, which clearly provides that notwithstanding anything contained in Section 6 or in any contract, no banking company shall directly or indirectly deal in the selling of goods, except in connection with the realisation of security given to or held by it. Also, granting permission to third parties to use the trademarkearn royalty upon the same would clearly be outside Section 6(1) and would be interdicted by Section 6(2) which states that no bank shall engage in any form of business other than those referred to in sub-section (1).41. Shri Shanthakumar Mahale, however, exhorted us to read Sections 6(1)(f) and (g) as permitting the sale of goods under the trademark and/or earning royalty from a sub-assignment thereto. We are of the view that the trademark cannot be said to be property which has come into the possession of the bank in satisfaction or part satisfaction of any of the claims of the bank. We are further of the view that the trademarks are not part of any security for loans or advances that have been made to the first respondent, or connected with the same. It is thus clear that the assignment deed dated 8.10.2003 is clearly hit by Section 6(2) and Section 8 read with the penalty provision contained in Section 46(4) of the Banking Regulation Act.