Trademark cannot be assigned to bank

The Supreme Court has ruled that a trademark cannot be assigned to a bank by a borrower who has defaulted on the loan. Such a transaction is against the Trade Marks Act and the Banking Regulation Act, the court stated in its judgment, Canara Bank vs N G Subbaraya Setty. In this case, Setty took a loan from the bank with his son as guarantor. There was default in repayment. When the bank moved the debt recovery tribunal, Setty assigned the trade mark, Eenadu, in incense sticks (agarbathies), in a deed to the bank. Later, the bank cancelled the agreement. This led to litigation. The Karnataka High Court approved the assignment but on appeal by the bank, the Supreme Court ruled that the assignment was against both trade mark and banking laws. The judgment said: “The trademark cannot be said to be property which has come into possession of the bank in satisfaction of any of the claims of the bank. Trademarks are not part of any security for loans or advances.” The court also stated that the assignment was against Sections 6 and 8 of the Banking Regulation Act. A bank cannot use a trademark to sell agarbathies. It cannot step outside its banking business. It can sell goods only to realise the security held by it. It cannot allow third parties to use the trademark and get a royalty. The court noted that the bank manager who accepted the assignment of the trademark was dismissed and prosecuted.