Auction For ‘Fortis’ Says Delhi High Court

On October 29, 2024, the Delhi High Court (“DHC”) addressed an application from Daiichi Sankyo Company Limited, the decree-holder, to initiate the sale of the “Fortis” trademark to recover substantial dues owed by the judgment debtors. This application was submitted under Order XXI Rule 66, alongside Section 151 of the Code of Civil Procedure (“CPC”), and arose within the context of a confirmed arbitral award.

Issue Raised

1. Whether the Court should authorize the auction of the Fortis trademark as a means of fulfilling the debt owed to Daiichi Sankyo, and if so, whether it was necessary to mandate an additional independent valuation prior to the auction?

Rules Applicable

Order XXI Rule 66 of the CPC provides a procedure for public auctions of judgment debtors’ assets and mandates that the “value of the property as stated by the decree-holder” and “the value of the property as stated by the judgment debtor” be included in the sale proclamation.

Arguments and Analysis

In support of the sale, counsel for the decree-holder argued that additional independent valuation was not legally required and would cause further delay in recovering the substantial debt. The arguments were based on the following cases – Kailasam v. T.K. Muthusamy (1990) SCC OnLine Mad 596, P. Bahuleyan v. Moossa E.P. 2005 SCC OnLine Ker 482, B. Susila and another v. Saraswathi Ammal and others 1968 SCC OnLine Mad 226 and Kuppammal v. Devendra Iyer, 1957 SCC OnLine Mad 34. They also contended that an open auction would secure an optimal price for the trademark, given the competitive nature of bidding. Notably, Fortis Healthcare and Fortis Hospitals withdrew any previous objections, clearing the way procedurally for the sale.

However, judgment debtors Nos. 19 and 22 argued for the appointment of an auditor to assess the trademark’s value before any auction, suggesting that this would ensure the asset’s sale at a fair price. The DHC, however, rejected this contention, concluding that independent valuation was unnecessary and potentially counterproductive. It noted that valuations on record already varied significantly due to the subjective nature of appraising intangible assets, particularly trademarks, and held that the auction process itself would inherently determine a fair market value.

Conclusion

The DHC authorized the public auction of the Fortis trademark, directing the Joint Registrar (Judicial) to carry out the sale under Order XXI Rule 66 of the CPC. Both parties were permitted to submit their respective valuations of the asset, which would be included in the proclamation as required. Further, the DHC provided a series of specific instructions to ensure the auction’s efficiency and transparency, and scheduled a follow-up for January 17, 2025, to review the outcome of the auction process. This ruling allowed the parties for a prompt execution of the judgment debt while adhering to procedural safeguards which could secure an equitable outcome for all.