Montari Industries Ltd v. Montari Overseas Ltd

R.C. Lahoti, J.

1. MONTARIa word hitherto unknown to dictionary of languages, howsoever auspiciously and artfully or innocently articulated, is destined to find its place in law reports.

2. The plaintiff M/s. Montari Industries Ltd. having its corporate office at 78, Nehru Place, New Delhi has filed this suit for issuance of permanent preventive injunction restraining the defendant M/s. Montari Overseas Ltd. from using trading or carrying on business in the name and style of M/s. Montari Overseas Ltd. A mandatory injunction is also sought for commanding the defendant to suitably change its corporate name so as to exclude therefrom the word MONTARI. An ad interim injunction in similar terms is also sought for.

3. According to the plaintiff, it was registered as Montari Industries Ltd in Punjab on 27.1.1983. Ever since then it has been carrying on its business in the name and style of its name and manufacturing an exhaustive range of articles such as chemical products, agro-chemicals, industrial chemicals, paints, inks, varnishes, bleaching preparation, article of laundry use, cosmetics, oils, insecticides, pharma-ceuticals, leather articles, tissues, bed covers, clothing, shoes, carpets, sport items, coffee, tea and a few food articles etc. In the year 1992, it has applied for registration of trade mark MONTARI with its logo and device under the Trade Mark Act. Several companies with the use of the word MONTARI in their names have been brought into existence by the plaintiff with the turnover of several crores. The names of such MONTARI group companies are:

NAMEDATE OF INCORPORATION

MONTARI LEASING & FINANCE LTD.24.6.88

MONTARI CHEMCARE INVESTMENTS LTD.24.6.88

MONTARI AGRO-CHEM INVESTMENTS LTD.29.6.88

MONTARI LEATHER LTD.1.5.92

MONTARI FINANCIAL SERVICES LTD.16.2.93

MONTARI INKS LTD.2.5.94





4. The defendant company has set up itself in Delhi and Haryana on 21.4.93. On 15.2.94 it obtained certificate of commencement of its business. On 4.7.94 land has been acquired by the defendant for setting up its factory. On 24.7.94 it applied for power connection which has not yet been sanctioned. In September 1994, the defendant has commenced construction of the factory. The completion is expected sometime between January and April, 1995. Machines are yet to be installed, though delivery thereof is expected to commence in January 1995.

5. Both the Companies have come to the share market. The plaintiff came out with the rights issue the subscription of which was to be open on 9.1.95. The defendants public issue was to open on 10.1.95. The plaintiff became aware of the defendants activities when the later came to the capital market.

6. According to the plaintiff the word MONTARI is neither a natural nor a generic word. It does not find place in dictionary. It has been coined by the plaintiff, by deriving components from Mohan (Bhai Mohan Singh) the name of Chairman of the plaintiff company and Mrs Awtar Mohan Singh, nick named as TARI, being the wife of the Chairman of the plaintiff company. It has sentimental significance for the plaintiff. It has acquired tremendous reputation and goodwill for the plaintiff company, its associated companies in the group and its products in the market. Public-at-large associate the name MONTARI with the name of the plaintiff company and the companie in its group and their products. The defendant with intent to cash upon the goodwill and reputation of the plaintiff and to pass off its name and products as that of the plaintiff, has deceptively adopted the word MONTARI in its name. The plaintiff is having export oriented business activities. Coining of the defendants name as MONTARI Overseas Ltd is likely to cause serious confusion to the public and the people dealing with the two companies and the consumers and the business community dealing in the products of the two companies.

7. The defendant has contested the plaintiffs prayer for the grant of ad interim injunction on several grounds. Instead of narrating the defences it would be more convenient to crystallise them as has been done by the learned Counsel for the defendant at the time of hearing. They are:

1. The use and adoption of the name by the companies are taken care of by statutory provisions such as Sections 20 to 22 of the Indian Companies Act and Form 1A of Company Rules. The remedy, if any, of the plaintiff lies in having resort to those provisions and by not filing this suit.

2. The plaintiff in order to succeed must show tremendous and irrefutable reputation having been acquired by the plaintiff without which the plaintiff would not succeed and the documents filed by the plaintiff do not make out such case.

3. The plaintiff knew well the fact from the very commencement of the activities of the defendant i.e. ever since 21.4.93 and hence the suit suffers from the vice of delay and acquiescence.

4. The defendant has no intention to use the goodwill of the plaintiff. This is amply borne out from the several documents brought on record by the parties. In the prospectus, the application forms and the advertisements released by the defendant company, everywhere it has been made clear that the defendant has no connection with Delhi/Punjab based MONTARI Industries Ltd. Such information was given wide publicity also by releasing news item to the press. The defendant company is entering the market in hosiery yarn business an activity in a field not occupied by the plaintiff. The name of a company cannot be monopoly of any one. The name MONTARI has been devised by the defendant company by reference to two names in the family of the founders of the company.

5. There is Securities and Exchange Board Act, 1992 whereunder functions the SEBI and the statutory authorities like the Registrar of Companies, and merchant bankers can well take care of the interests of the subscribers. The Court may not entertain a civil suit or at least would not show indulgence to the plaintiff. The prospectus issued by the defendant has been approved both by SEBI and ROC.

6. By the time the plaintiffs application has come up for biparte hearing the defendants issue stood fully subscribed while the plaintiffs issue which had opened on 9.1.95 and had remained open for 30 days is not yet fully subscribed compelling them to extend the date of closing which is a circumstance clearly indicating that the defendant company enjoys a reputation and popularity with the dealing public much more than what the plaintiff company does.

8. Before I may proceed to deal with the legal aspects relevant let the factual matrix be laid clear. The fact that the plaintiff company was founded on 27.1.1983 and it had gone in public issues on more occasions than one even prior to 9.1.95, that there are other companies founded in the group to which the plaintiff company belongs and they are all functioning and operating are well borne out by the several documents filed by the plaintiff. In fact, the documents filed by the defendant and their own prospectus and advertisements lend support to the plaintiffs contention that the plaintiff was well in occupation of capital and business fields much before

the entry of the defendant. That is why the defendant was conscious and anticipating an action of the present nature had inserted notes at several places such as the company has no connection whatsoever with Delhi/Punjab based MONTARI Industries.

9. The present suit was filed on 4.1.95. It came up for hearing on 5.1.95. The Court directed summons in the suit and notice in the application to be issued to the defendant returnable on 9.1.195. The defendant entered appearance on 9.1.95, filed a short counter post haste and application was heard on 10.1.95. As the defendants issue had opened for public in the capital market and the plaintiff had come out with the rights issue only, this Court placing reliance on the principles laid down by the Supreme Court in Morgan Stanley Mutual Fund v. Kartick Das, 1994 (4) SCC 225 [LQ/SC/1994/568] chose not to exercise its discretion in favour of granting an injunction which would have the effect of restraining the public issue. That stage has gone. Now the emphasis has shifted from public issue to the name itself.

10. The first question to be examined is whether the plaintiff has a prima facie case entitling it to ad interim injunction restraining the use of MONTARI in the defendants name.

11. In Halsburys Laws of England (4th Edn., Vol 48) the relevant law has been stated in paras 178-179 in the following words:

Neither party with a concurrent right to use a name or mark can prevent the other from continuing to use it but the vested right of property of traders in marks which they have honestly adopted and which by public use have attracted valuable goodwill must be accommodated with the interest of the public in not being deceived about the origin of goods. However, a concurrent right of use does not justify the use, whether intentionally or not, of a name or mark with attributes which increase the risk of confusion.

12. In the Law of Passing Off by Christopher Wadlow (1995 Edn), the law as to bona fide use of defendants own name has been beautifully summed up. The relevant extract therefrom is as under:

There are thus five essential elements to the defence; the defendant must be using his own full name; he must do nothing more than causes confusion with the plaintiff, he must act honestly; he must in general be a natural person; and he must not be using the name so as to describe his goods.

(p. 483)

Unlike an individual, a newly formed company has an almost infinite choice of names to adopt. Consequently, the choice of the promoters, even if made bona fide, cannot confer on the company the rights which an individual of that name might have had. One instance in which it has been said that a company can have the same rights as an individual is when the company is the assignee of subsisting goodwill transferred to it by an individual trader of that name. It has been said in South Africa that a company founded from scratch by an individual should have the same rights as the individual would have had to trade under his own name but this was in the context of holding that there were no such rights. The decision of the House of Lords in Parket Knollv. Knoll Internationalis problematical, because, although finding for the plaintiff, it did not distinguish between the rights of corporations and individuals as defendants. The corporate defendant was only distantly connected with any one called Knoll. It is suggested that the near impossibility of defining the circumstances in which the defence might be available to a corporate defendant is another reason for doubting its very existence

(p. 490)

13. Kerly on Law of Trade Marks and Trade Names (1986 Edn), states the law in these words

The name under which a business trades will almost always be a trade mark (or if the business provides services, a service mark, or both). Independently of questions of trade or service mark, however, the name of a business (a trading business or any other) will normally have attached to it a goodwill that the Courts will protect. An action for passing-off will then lie wherever the defendant companys name, or its intended name, is calculated to deceive, and so to divert business from the plaintiff, or to occasion a confusion between the two businesses. If this is not made out there is no case. The ground is not to be limited to the date of the proceedings; the Court will have regard to the way in which the business may be carried on in the future, and to its not being carried on precisely as carried on at the date of the proceedings. Where there is probability of confusion in business, an injunction will be granted even though the defendants adopted the name inno cently.

(para 16.49)

Most recent authorities upon business names concern the names of limited companies rather than of individuals or of partnerships. The relief claimed in such cases may well include an injunction that will require the defendant to take steps to change its name.

(para 16.65)

14. The trend of judicial opinion is that reputation or goodwill in business generally attaches with the trade name adopted by a house. Such reputation or goodwill would be protected by the Court. Copying of the name by a competitor is likely to cause an injury to its business. No one is entitled to commence or carry on business in such a way as to represent it to be the business of someone else or at least associated with such someone else. If a person or house uses a name which is likely to deceive and divert the business of someone else to him or is likely to cause confusion in the mind of the persons likely to deal with such competing business house, then the impugned action or intended action would be prevented by the Courts on the same principles which are applicable to ordinary cases of passing-off relating to sale of goods. Innocence of the defendant is no defence. The law applies with more rigour when the defendant is an inanimate person such as a company and when the name consists of a coined word.

15. Both the learned Counsel for the parties have cited a number of decisions at the bar. I would refer to a few of them as necessary.

15.1 The learned Counsel for the plaintiff has Sited:

(1) The North Cheshire & Manchester Brewery Co. Ltd. v. The Manchester Brewery Co. Ltd.,1899 AC 83,

(2) Ruston & Hornby Ltd. v. Samindara Engineering Co.,AIR 1970 SC 1649 [LQ/SC/1969/330] .

(3) Century Tradersv. Roshan Lal Duggar & Co., 15 (1979) DLT 269 [LQ/DelHC/1977/59] =AIR 1978 Delhi 250;

(4) M/s. K.G. Khosla Compressors Ltd. v. M/s. Khosla Extraktions Ltd. & Ors.,AIR 1986 Delhi 181.

(5) M/s. Prakash Roadlines Ltd. v. M/s. Prakash Parcel Service (P.) Ltd.,48 (1992) DLT 390 [LQ/DelHC/1992/171] = 1992 (2) Delhi Lawyers 17;

(6) Exxon Corpn. & Ors. v. Exxon Insurance Consultants International Ltd.,1981 (2) All ELR 495;

(7) East End Hosiery Mills Pvt. Ltd. v. M/s. Agarwal Textiles Mills, AIR 1971 Calcutta 3;

(8) H.P. Bulmer Ltd. & Showerings Ltd. v.J. Bollinger S.A. & Champagne Lanson Pere Et Fils, [1978] RPC 79;

(9) Baume & Coy., Ld. v. Moore (A.H.) Ld. [1958] RPC 226.

15. Learned Counsel for the defendant has cited:

(1) Singer Manufacturing Companyv. Loog,1878 (XVIII) CD 395;

(2) Hindustan Embriodery Mills Pvt. Ltd. v. K. Ravindra & Co., 76 Bombay Law Reporter 146 [LQ/BomHC/1967/133] ;

(3) K.M. Multaniv. Paramount Talkies of India, Ltd. & Ors., AIR 1942 Bombay 241;

(4) The Asiatic Government Security Life Assurance Company, Ltd. v. The New Asiatic Insurance Company, Ltd.,IX Company Cases 208;

(5) Wippermann Jr Gmbh. v. Wipperdrive Engineering, 1977 ILR Delhi 389;

(6) Thomas Bear & Sons (India) Ltd. v. Prayag Narain & Anr.,AIR 1940 Privy Council 86;

(7) A.R. Gangadhara & Co. Nirmal & Anr. v. Firm of Police Mallaih, Rajeshwar & Co. & Ors. AIR 1962 AP 510 [LQ/TelHC/1961/154] .

(8) London Rubber Co. Ltd. v. Durex Products Incorporated & Anr.,AIR 1963 SC 1882 [LQ/SC/1963/55] ;

(9) Kviraj Pandir Durga Dutt Sharmav. N.P. Laboratories, AIR 1965 SC 980 [LQ/SC/1964/275] ;

(10) Baume & Coy. Ld.v. Moore(A.H.)LD. [1958] RPC 226;

(11) H.P. Bulmer Ltd. & Showerings Ltd.v.J. Bollinger S.A. & Champagne Lanson Pere Et Fils[1978 RPC 79].

15.3 Without entering into dealing with the individual cases suffice it to observe that the view taken in the cases cited by the learned Counsel for the plaintiff is that the adoption of a corporate name by a company is liable to be tested with on the same principles as applied to an action in passing off. To sustain an action successfully proof of actual deceit is not required, likelihood of deception would suffice.

16. Special mention needs to be made of a few decisions.

16.1 In Ruston & Hornby Ltd.s case (supra) Their Lordships of the SupremeCourt have held RUSTAM bearing a deceptive resemblance with plaintiffs RUS-TON and the addition of word INDIA with the defendants trade mark Rustam was of no consequence.

16.2 In Exxon Corporations case (supra), His Lordship held the plaintiffs entitled to an injunction against the defendants using the word Exxon and/or allowing its name in a form incorporating the word Exxon to remain on the companies register because it would be unlawful and damaging to the plaintiffs.

16.3 In Toms and Moorev. Merchant Service Guilds Ltd. (25 RPC 474) The Imperial Merchant Service Guild was an unincorporated body established in 1893. In 1908 the defendant company was registered as Merchant Service Guild Ltd. Injunction was granted against the defendant.

16.4 In 65 RPC 429, the plaintiff Midland Countries Dairy Ltd, could successfully maintain a Claim for Injunction restraining defendant Midland Dairies Ltd from continuing to trade under the name Midland Dairies or other name liable to be confused with that of plaintiffs.

16.5 In 1899 AC 83, on a motion made by the Manchester Brewery Co. Ltd. who had carried on business in that name for years, the defendant was injuncted who had got itself incorporated and registered under the name. The North Cheshire and Manchester Brewery Co Ltd because the name had a tendency to deceive though there was no intention to deceive.

16.6 In Khoslas case (supra) the plaintiff was M/s. K.C. Khosla Compressors Ltd, a pre-existing company. The defendant entered the business in the name and style of M/s. Khosla Extractions Ltd. and brought a public issue under this name. It was held:

If a name which is identical with or too nearly resembles the name by which a company in existence has been previously registered it may be deemed to be undesirable. Further passing off action need not merely relate to the goods but it relates to name also.

The jurisdiction of the Central Government under Sections 20 and 22 of the Act and the jurisdiction of the Civil Court operate in two different fields. The Central Government has to act within the guidelines laid down under Section 20 of the Act, while there are no such limitations on the exercise of jurisdiction by the Civil Court.

16.7 In Prakash Road Lines Ltds case (supra) M/s. Prakash Roadlines Ltd. a pre-existing company, had sought for use of Prakash being restrained in the name of defendant company which was incorporated as M/s. Prakash Parcel Service (P.) Ltd. It was held:

Merely because a particular name is part of the name of the defendant, injunction cannot be refused in favour of the plaintiff who had been using that name much prior to the defendant and had established itself by that name in the trade.

The defendant is trying to justify the use of the word Prakash on the basis of the fact that the same is part of the name of the promoters of the defendant company who in fact is stated to be the promoter of the plaintiff company itself. However, since the plaintiff company has by the use of word Prakash in its name over a long period of time prima facie acquired a right to use the said name, the defendant cannot be permitted to carry on the same business under a similar trade name. Therefore, prima facie, I hold that the word Prakash has acquired a secondary meaning for the plaintiff in the trade on account of its use by the plaintiff over a long period of time and the use of the word Prakash in the name of the defendant is not bona fide.

17. The cases relied on by the learned Counsel for the defendants do not lay down any law contrary to the cases relied on by the learned Counsel for the plaintiff. Mainly, the view taken, in the cases cited by him, is that it is not the name but the goodwill and reputation attaching with the name which constitutes the property of the plaintiff and provides cause of action to him. Having perused the documents filed by the plaintiff there can be no denying of the fact that the plaintiff has acquired reputation and goodwill which is naturally associated with the name which it has.

18. In Singers case (supra) it was said if the plaintiffs are injured the motive does not signify.

19. The plaintiff and its group of companies have such a wide field of activities, that the use of MONTARI if allowed in its name, though they are in hosiery yarn field to begin with, is sure to be a source of confusion and likelihood of deception.

20. Though the defendant has declared in its literature that it was different from the Delhi/Punjab based MONTARI Industries but that may not be a valid defence. Not everyone reads the literature before dealing with a company. What will happen when goods bearing the name of defendants company would reach the market and fall into the hands of unwary customers The learned Counsel for the plaintiff posed a questionif the defendant may unfortunately suffer a jolt, who is going to explain and proclaim it was not this MONTARI but that MONTARI besieged by misfortune

21. The relative delay in fully subscribing of plaintiffs issue and extension of closing date has been rightly explained by plaintiffs Counsel submitting while the plaintiffs issue is in crores the defendants issue is in lakhs only. Postponement of the closing date has nothing to do with reputation or popularity.

22. The argument based on delay and acquiescence has to be rejected. On the facts set out in para 4 above, there has been no culpable delay on the part of plaintiff. As to acquiescence see M/s. Power Control Appliancesv. M/s. Sumeet Machines (P.)Ltd.,JT 1994 (2) SC 70 [LQ/SC/1994/180] . Their Lordships have held:

Acquiescence is sitting by, when another is invading the rights and spending money on it. It is a course of conduct inconsistent with the claim for exclusive rights in a trade mark, trade name, etc. It implies positive acts not merely silence or inaction such as is involved in laches

23. There has been no such silence or inaction on the part of plaintiff as may enable inference of laches being drawn.

24. Though Sections 20 to 22 of the Companies Act make provision for companies not being registered with the undesirable names and for change and rectification of the names of the companies, these provisions do not exclude the right of a person adversely affected to maintain an action in passing off. Such action is founded on civil right of the aggrieved party having been wronged. Wherever there is a wrong, there is a remedy. However, this aspect of the case need not detain me any longer inasmuch asKhoslas case (supra) of this Court is complete answer to the defendants contention that the right of the plaintiff to file civil suit or the discretion of the Court to grant ad interim injunction was in any manner eclipsed or pre-empted by Sections 20 to 22 of Companies Act.

25. I have found the plaintiff having made out a strong prima facie case for the grant of an ad interim injunction. Balance of convenience lies in favour of the plaintiff. The plaintiff is sure to suffer an irreparable injury if not protected. It may be difficult to estimate the loss which the plaintiff may suffer in the absence of ad interim relief. In spite of holding the plaintiff entitled to the grant of injunction there are two aspects associated with this relief which need be clarified and stated expressly.

25.1 Though the injunction is being granted, in the form set out in the operative part of this order, its operation shall have to be suspended for a reasonable time. Kerly in the law of Trademarks And Trade Names (ibid, para 16.65) states:

Where an injunction is granted against a limited company carrying on business under its registered name, the injunction is usually suspended for a short time to allow the company to change its name.

25.2 As already noticed, in spite of the plaintiff having approached this Court before the opening of the public issue by the defendant, the Court was not inclined to stay the issue ex parte. As the public issue has been fully subscribed, I am not inclined to restrain the allotment of shares by the defendant for three reasons. Firstly, the defendant had throughout the publicity of the issue, extending invitation of subscription to the investors, also in the application form, made it clear that the defendant had no connection with Delhi/Punjab based Montari Industries Ltd. It can be assumed that the investors filling the application forms were aware or at least made aware by the defendant of the distinction in the identity of the two companies putting the investors on enquiry. Secondly, no investors or members of the public has approached the Court complaining of any confusion or deception or its likelihood. Thirdly, the issue of the plaintiff was a rights issue. The subscription of the plaintiffs issue cannot be said to have been adversely affected by the defendants coming to the capital market. At least there is no material available on record to hold so.

25.3. It would suffice if the occurrence of mischief is restrained for future; as was done in Exxonss case (supra). It was held that the use of the word Exxon by the defendant did not infringe the copyright of the plaintiff, though it amounted to passing off. It was saidIf it continues to do so the act of so doing if not fraudulent is at least more unlawful and is clearly damaging to the plaintiff. If this is the situation, I think that a Court would be shutting its eyes to realities unless it did best that it could to prevent any such thing happening in future.

26. The plaintiffs application is allowed. It is directed that the defendant shall remain restrained during the hearing of the suit from using the word MONTARI or any other word deceptively similar with or likely to cause confusion with MONTARI as a part of its corporate name. The operation of this injunction shall remain suspended for a period of two months enabling the defendant to take steps for change in the name of the company. The plaintiff shall through its authorised representative file an undertaking within a week undertaking to compensate the defendant for such loss or damage as it might have suffered in the event of the plaintiffs suit being dismissed.