The National Company Law Appellate Tribunal (NCLAT) has upheld an order by the National Company Law Tribunal (NCLT) in November 2023 that set aside the ‘fraudulent’ transfer of the Smaaash brand by founder Shripal Morakhia. “The order dated 22 November 2023 continues to be operative”, said a bench led by justices Ashok Bhushan and Arun Baroka.
The November order by the Mumbai bench of the NCLT revoked the transfer of the ‘Smaaash’ brand’s ownership, deeming Morakhia’s act “fraudulent” and directing that the brand be returned to the bankrupt Smaaash Entertainment Pvt Ltd (SEPL).
The tribunal’s order came after Bhrugesh Amin, the resolution professional of Smaaash, filed a petition to annul, rescind, cancel the back-dated deed agreement signed between Smaaash and Fun Gateway in April 2022.
In his plea before the NCLT, Amin asked the tribunal to restrain Morakhia from transferring the ‘Smaaash’ trademark to privately owned Fun Gateway Arena Pvt Ltd after it was found that the brand was transferred through a back-dated deed of assignment signed in 2022. He also asked that Fun Gateway be restrained from using or dealing with any brand content of Smaaash, including the company’s trademarks.
The NCLT said in its order that Morakhia and his associate firms colluded to syphon off critical and valuable assets of the company, including the brand content and the Smaaash trademarks through the 2022 assignment agreement.
“This fraudulent action of the erstwhile management of the company had denuded the value of the company and is likely to substantially reduce the financial proposal offered by the prospective bidders/resolution applicants towards the acquisition of the insolvent firm under a resolution plan”, the bench said.
It added, “Since fraud vitiates everything, this tribunal is pleased to direct Fun Gateway to return all the benefits earned by it on account of usage of the brand content.”
Fun Gateway then moved the appeals court, challenging the November order. However, it later withdrew the appeal, which led the NCLAT to dismiss the matter.
