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K.G. Khosla Compressors Ltd. Vs. Khosla Extrakting Ltd. and ors. - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtDelhi High Court
Decided On
Case NumberInterim Application Nos. 631 and 2112 of 1985
Judge
Reported inAIR1986Delhi181; ILR1985Delhi416
ActsCompanies Act, 1956 - Sections 22
AppellantK.G. Khosla Compressors Ltd.
RespondentKhosla Extrakting Ltd. and ors.
Advocates: A.B. Divan,; Ved Vyas,; Bishambar Lal,;
Cases ReferredNorth Cheshire & Manchester Brewery Company Limited v. The Manchester Brewery Company Ltd.
Excerpt:
companies act, 1956 - section 55 read with section 20--the jurisdiction of the civil court is independent of and separate from that of the central government--section 20--a person is not entitled as of right to have a company registered in a name which happened to be his own name.; the plaintiff filed the present application against the defendants on the basis of a 'passing off' action, praying that the defendants be restrained from using, trading or carrying on business under the name and style of m/s. khosla extraktions ltd. & from making public issue under that name. the plaintiffs case was that it was a well-known company which came into existence as far back as 1945 and had now grown into a dynamic group of companies known in the capital market as the 'khosla group of.....d.p. wadhwa, j.(1) the plaintiff, a public limited company, has filed this suit praying for a decree of permanent injunction restraining the defendants from using, trading or carrying on business under the name and style of m/s khosla extraktions limited and or making public issue under this name. there are three defendants. defendant no. 1 is, of extraktions ltd. and others. course, m/s khosla extraktions ltd. defendants nos. 2 and are stated to be the' promoters and directors of defendant no. 1. defendant no. 2 naresh chandra bansal and defendant no. 3 is s. k. khosla. with this suit the plaintiff filed an application under order 39, rules i and 2 of the code of civil procedure, praying that during the pendency of the suit, the defendants be similarly restrained from using, trading and.....
Judgment:

D.P. Wadhwa, J.

(1) The plaintiff, a public limited company, has filed this suit praying for a decree of permanent injunction restraining the defendants from using, trading or carrying on business under the name and style of M/s Khosla Extraktions Limited and or making public issue under this name. There are three defendants. Defendant No. 1 is, of Extraktions Ltd. and Others. course, M/s Khosla Extraktions Ltd. Defendants Nos. 2 and are stated to be the' promoters and Directors of defendant No. 1. Defendant No. 2 Naresh Chandra Bansal and defendant No. 3 is S. K. Khosla. With this suit the plaintiff filed an application under Order 39, Rules I and 2 of the Code of Civil Procedure, praying that during the pendency of the suit, the defendants be similarly restrained from using, trading and carrying on business and from entering the capital market and making public issue under the name M/s Khosla Extraktions Ltd.

(2) The pleadings in, the case are complete. Considerable arguments were addressed by both the parties, on the application which I am now to decide.

(3) The case of the plaintiff is that it is a pioneer in the field of air compressors industry in India and is a company of rational and international repute and standard. It came into existence in 1945 and in time grew into a dynamic group of diversified companies and this group is now registered under the Monopolies and Restrictive Trade Practices Act. Four companies are named in the plaint which are stated to be registered under the Mrtp Act and are known in the capital market as 'Khosia Group of Companies'. The names of these companies are : 1. K. G. Khosla Compressors Ltd 2. Kho F.L 3 Khosia Indair Limited. 4. Prashant Khosla Pneumatics Ltd.' It is stated that the value of gross assets of this group is around Rs. 38 crores. Gross profits are stated to be over Rs. 2.69 crores and profits after tax are over Rs. I crore. Branches of the plaintiff are stated to be located all over the important cities in India. It is then stated that the plaintiff is the only comply with the word 'KHOSLA' in its name and by this name it is quoted in the stock exchanges in. India. The Khosla shares are very active and popular in the capital market and' presently shares of the plaintiff of the face value of Rs. 10 are quoted at around Rs. 50. It is stated that whenever the word Khosla is used in the capital market it invariably is attributed to the plaintiff. The aforesaid four companies are known in the capital market as 'Khosia Group' or 'Khosla Group of Companies' and the name and family of 'Khosla' have become identified with the outstanding financial results and returns. It is then stated that the Khosla family connected with these companies is settled in New Delhi. K. G. Khosla, who is the Chairman of three of the aforesaid companies, and his family are settled in Delhi for needy six decades. Then it is stated that K. G. Khosla is well-known in business circles and had been holding various positions in, various organisations. It is further stated' that the word Khosla is also the registered trade mark of the plaintiff and is used on the products of the plaintiff and the word Khosla is also the logo of the plaintiff and is frequently used in the advertisements, pamphlets and publications of the plaintiff. It is registered under the Copyright Act as well as an artistic word and the plaintiff has copyright over it.

(4) The plaintiff then states that defendants Nos. 2 and 3 were its former employees. Defendant No. 3 left the service of the plaintiff in 1983 and defendant No. 2 in 1984. In December 1983, they both formed a company under the name New Delhi Equipment Leading Company Ltd.' which was registered under the Companies Act, 1956 (for short 'the Act'), but they failed to establish the business of this company as they could not sell the shares of this company to the general public. Then, with a view to play fraud and deception on the investing public and encash the name, reputation and goodwill of the plaintiff these two defendants formed defendant No. 1 company under the name M/s Khosla Extraktions Ltd.' and got it registered with the Registrar of Companies on 27-7-1984. The registration of defendant No. I in this name was stated to be in contravention and in violation of the provisions of S-20 of the Act. It is stated that defendants Nos. 2 and 3 have no industrial base or have no .business acumen. It is started that defendant No. 1 has been formed using the word 'Khosla' primarily with the intention to sell and encash from the name. and reputation of the plaintiff in the capial market. It is stated that there were three promoters of defendant No. I and' except for defendant No. 3 who was having the surname 'Khosla', the other promoters were having different surnames. It is, thereforee, alleged that there is no justification whatsoever to use the word 'Khosla' in the name of defendant No. 1 and that this was done only for the purpose of causing deception. I may note at this stage that in the written statement of the defendants, it has been stated that defendant No. 3 is the Chairman of M/s New Delhi Equipment Leasing Co. Ltd. and of Modern Photo Labs. Pvt. Ltd.

(5) The plaintiff then claims that in September 1984, certain. advertisements and statements appeared in several newspapers which came to its knowledge which announced that defendant No. 1 was to enter capital market. The plaintiff was flooded with inquiries from the members of the public under the belief that defendant No. 1 was one of the group companies of the plaintiff. It also came to the knowledge! of the plaintiff that defendant No. 1 was making somewhat devious, slanted, suggestive and self-serving use of the name Khosla'. To illustrate, the plaintiff referred to a pamphlet published by defendant No. I which stated that defendant No. I had been promoter by the 'well-known 'Khos1a Group of New Delhi' '. Along with the plaint the plaintiff also filed some of these pamphlets) advertisements. In the advertisement of defendant No. 1 appearing in the Economic Times of 20-10-1984, it is mentioned that defendant No. I 'is a public Limited Company promoted by the famous Khosla Family of New DELHI'. Similarly, in the issues of Statesman dated 7-11-1984 and the Indian Express dated 20-10-1984 this statement also finds mention. Then in the commercial page of Hindustan Times dated 27-3-1985 where the shares of the plaintiff are quoted, it merely says 'Khosla 46.50'. In the news item of Financial Express of 21-9-1984 about defendant No. 1 it is mentioned that it is 'promoted by the Khosia group'. It is also mentioned therein that defendant No. I plans to enter the capital market very soon. The Logo Khosla has also been used in these advertisements. The plaintiff states that these suggestions in the advertisements were made to the general public with oblique motive by associating defendant No. 1 with the plaintiff group of companies. The plaintiff elemis that deliberate misrepresentation is being made by defendant No. I and confusion is caused in the public mind. If defendant No. I is allowed to use the word 'Khosla' in its name, which name of defendant No.1 closely resembles the name of the plaintiff and is intended to be exploited and is being exploited by defendant No. 1 in the capital market, the plaintiff will suffer an irreparable loss and the name of -the plaintiff will come into disrepute. The plaintiff complained to the Central Government and represented to the Regional Director, Company. Law Board, Kanpur, under S. 22 of the Act to issue suitable directions to defendant No. 1 so that .misrepresentation and confusion in the mind of the general public is avoided and the defendants do not trade and carry on business any more on the goodwill and reputation of the plaintiff. The Regional Director issued such direction requiring defendant No. 1 to change its name by an ordinary resolution with the. previous approval of the Central Government. However, defendants Nos. 1 and 2 filed a writ petition in the High Court of Delhi challenging the aforesaid order dated 1-2-1985 of the Regional Director, it being W.P. No. 605185. After certain preliminary hearings, the Regional Director decided to withdraw the order of 1-2-1985 saying that the matter would be considered afresh if required. It was stated that this was so done on technical grounds as the file of the Regional Director did not show that there was any application of mind before issue of the show cause notice under S. 22 of the Act. It is then complained that the Regional Director is not taking any action on the complaint of the plaintiff. Lastly it is again asserted in the plaint that by use of the word 'Khosla' in the name of defendant No. 1 a great deal of irreparable loss and injury has been caused to the good name, reputation and goodwill of the plaintiff and that the plaintiff has suffered huge losses and damages. It is stated that unless injunction is granted, the plaintiff and its other associates sister concerns would by very adversely affected' in the capital market and in case of failure of defendant No. 1, the shareholders would come to grief and would think: that one of the companies connected with the plaintiff has failed. It is stated that no amount of damages would ever compensate the plaintiff for the loss that might accrue to it on that account or otherwise.

(6) The defendants in their joint written, statement state that the name of defendant No. 1 was approved under S. 20 of Act on 16-7-1981. A copy of the application form for availability of the name, however, shows that it was applied for in the name of 'Khosla Extraktions Pvt. Ltd.'. On 2-6-1984, the name of defendant No. 1 was again allotted and defendant No. 1 was incorporated on 23-7-1984. From the affidavit dated 28-5-1985 filed by the plaintiff it appears that on this date it was again 'Khosla Extraktions (Private) Ltd.' which was registered and within a fortnight thereafter it was converted into a public limited company. In the reply affidavit filed by defendant No. 1, I do not find any denial of this averment of the plaintiff. The averment in the written statement, thereforee, that defendant No. 1 was incorporated on 23-7-1984 is not wholly correct. Then, the educational qualifications of defendant No. 3 are given in the written statement and it is stated that the late father on defendant No. 3 was a respectable businessman of Delhi and Haryana having his rubber mineral grinding factories at Gurgaon, a district of Haryana, and that he had also oil mills, cotton ginning mills in Amritsar district. The late father of defendant No. 3 was born at Jhansi and thereforee it is stated that in the memory of his late father defendant No. 3 has put up this plant in district Jhansi to process edible oil according to latest solvent technology in India and abroad. It is stated that defendant No. 3, his family members and his affiliated companies have contributed about Rs. 20 lacs in the promotion of defendant No. 1 and in these circumstances the continuation of the name Khosla Extraktions Ltd. in the memory of his late father with location at Jhansi is sentimentally very important for defendant No. 3 and his family members. It is stated that the present suit has been filed because of the grudge that K.G. Khosla, Chairman and Managing Director of the plaintiff, had against defendant No. 3.

(7) The defendants also took a preliminary objection that the plaintiff once having approached the Regional Director under S. 22 of the Act could not file this suit as the present proceedings will be barred by the doctrine of election. Reference is also made to W.P. No. 605185 filed in this court wherein counsel for the Union of India had made statement that the Government had decided to withdraw the notice and directions issued to defendant No. 1 under S. 22 of the Act. It was stated that there is no cause of action to file the present suit as defendant No. 1 is duly registered under the Act and cannot be restrained in any way. It is stated that the validity and correctness of registration accorded to defendant No. 1 by the Central Government under the Act was subject-matter of dispute before this court in the aforesaid Writ petition and that the suit on the same subject was not maintainable. In passing, it is also mentioned that this court has no jurisdiction to entertain and decide the present suit. It is stated that by filing this suit the plaintiff's effort is to harass the defendants and' create troubles in implementation of their project. The defendants also filed a list of companies which had been registered with the name 'Khosla'. Some of these were registered even prior to the registration of the plaintiff but all these, however, are private limited companies. The defendants did not accept the contention of the plaintiff that the word 'Khosla' refers only to the name of the plaintiff company. It was stated that rather the shares of the plaintiff company were quoted as 'K.G. Khosia' in stock exchanges and to prove this point, the defendants also filed certain pages of newspapers containing commercial news. The contentions of the plaintiff in the plaint were generally denied. The' defendants submitted that they had spent huge money in purchasing various equipments in the name of defendant No. 1 and also entered into agreements for installation of the plant. In the subsequent advertisements the defendants also inserted the following words, 'the company belongs to S. K. Khosla Group of Companies and has nothing to do with K. G. Khosla Group of Companies'. The defendants then said that after taking permission from the Controller of Capital Issue they have to enter the capital market and for that purpose various underwriting agreements have already been entered into with various parties and that any order restraining the defendant No. 1 from using the word 'Khosla' would cause a great deal of lose and damage and rather an irreparable loss to defendant No. 1. The defendants also referred to another writ petition filed by the plaintiff in the Allahabad High Court. This writ petition appears to have been filed by the plaintiff against the order of the Central Government by which directions issued to defendant No. 1 under S. 22 of the Act were sought to be withdrawn. An order dated 23-5-1985 passed in this writ petition was brought to my notice, and this is as under : 'Mr. Dhavan has brought to our notice an advertisement published in the Times of India dated 22nd March, 1985 issued by Khosla Extraktions Limited. The Crucial Words there are : 'The Company belongs to S. K. Khosla Group of Companies and has nothing to do with K. G. Khosla Group of Companies.' We direct respondent No. 3 to make similar insertions in all subsequent public issue advertisements made by it.'

(8) After the plaintiff became aware of defendant No. 1, it made representation on 6-12-1984 to the Regional Director for issuing suitable directions to defendant No. 1 under S. 22 of the Act. The Regional Director issued a show cause notice on 13-12-1984 to defendant No. 1 calling upon it to explain as to why direction under S. 22 of the Act for change of its name be not issued. After the reply of defendant No. 1 was submitted, the Regional Director by his order dated 1-2-1985 issued directions to defendant No. 1 to change its name by an ordinary' resolution with the previous approval of the Central Government. As noted above, the validity of this order was challenged in this court in W.P. No. 605185. On a statement being made on 29-3-1985 that the Central Government had decided to withdraw the show cause notice dated 13-12-84 as well as directions dated 1-2-1985, the writ petition was disposed of as having become infructuous. It was stated by the Central Government Standing Counsel that the matter would be considered afresh, if so required. Thereafter, the present suit was filed by the plaintiff on 15-4-1985.

(9) Mr. Anil Dewan, Sr. Advocate, who appeared for the plaintiff, submitted that it was a clear case of deceit and passing off. He submitted that he had no remedy under the Act and that it was only the civil court which had jurisdiction in the matter inasmuch as he had also come to the court on the basis of passing off action. He submitted that the writ petition in this court and that pending in the Allahabad High Court are in no way impediment in the exercise of jurisdiction by this court. He referred to two decisions, one of this court and the other of the Gujarat High Court, which I will detail subsequently. Mr. Dewan referred to, in detail, the contentions raised by the plaintiff in the plaint. He submitted that the use of the words 'Khosla Group of Companies' by the defendants was a misnomer and these words were deliberately coined to confuse the public and to cash on the name of the plaintiff. He submitted that the defenses raised by the defendants were sham. How could defendant No. 3 describe himself as the principal promotor he asked, and submitted that this was not the terminology used anywhere in the Act. Mr. Dewan also submitted that the list of the companies which the defendants filed in this court wherein the word 'Khosla' has been used are all private limited companies and they never entered the capital market. Referring to a letter dated 19-11-1984 written by the plaintiff to defendant No. 1 wherein the plaintiff had asked defendant No. I for its requirement of air compressors for the proposed project of defendant No. 1, Mr, Dewan submitted that this was a letter written by a junior executive of the plaintiff to push up the sales of -the air compressors of the plaintiff and no advantage could be taken by the defendants of this letter. He submitted that before this date the plaintiff had already raised objection to the user of the name of defendant No. 1. The contention of Mr. Dewan appears to me to be correct, though it has been said by the defendants that as defendant No. 1 did not place any orders for air compressors with the plaintiff, the present suit was filed. I do not find any basis for this contention of the defendants.

(10) Mr. G. L. Sanghi, Sr. Adv., on the other hand submitted that once having elected the forum under S. 22 of the Act and having filed the representation before the Central Government, the jurisdiction of this court could not be invoked. He referred to a decision of the Supreme Court in the Premier Automobile Ltd. v. K. S. Wadke & Ors. : (1975)IILLJ445SC which was under the Industrial Disputes Act and drew my attention to the following observations in the judgment : 'It would thus be seen that through the intervention of the appropriate government, of course not directly. a very extensive machinery has been provided for settlement and adjudication of industrial disputes.' But since an individual aggrieved cannot approach the Tribunal or the Labour Court directly for the redress of his grievance without the intervention of the government, it is legitimate! to take the view that the remedy provided under the Act is not such as to completely oust the jurisdiction of the Civil Court for trial of industrial disputes. If the dispute is not an industrial dispute within the meaning of Section 2(k) or within the meaning of Section 2A of the Act. it is obvious that there; is no provision for adjudication of such disputes under the Act. Civil Courts will be the proper forum. But where the industrial dispute is for the purpose of enforcing any right, obligation or liability under the general law or the common law and not a right, obligation or liability created under the Act, then alternative forums arc there giving an elevation to the suitor to choose his remedy of either moving the machinery under the Act or to approach the Civil Court. It is plain that he cannot have both. He has to choose the one or the other. But we shall presently show that the Civil Court will have no jurisdiction to try and adjudicate upon an industrial dispute if it concerned enforcement of certain right or liability created only under the Act. In' that event Civil Court will have no jurisdiction even to grant a decree of injunction to prevent the threatened injury on. account of the alleged breach of contract if the contract is one which is recognised by and enforceable under the Act alone.' II. Mr. Sanghi then submitted that the suit was not prima fade maintainable and he referred to the provisions of S. 34 of the Trade and Merchandise Marks Act, 1958. This section is as under : ' 'Nothing in this Act shall entitle the proprietor or a registered user of a registered trade mark to interfere with any bona fide use by a person of his own name or that of his place of business, or of the name, or of the name of the place of business, of any of his predecessors in business, or the use by any person of any bona fide description of the character or quality of his goods.' He, thereforee, submitted that the defendants could not be restrained from using their own name. Mr. Sanghi also submitted that provisions of Ss. 20 and 22 of the Act might contemplate an application by a third party objecting to the name to be allotted to a company but he said, this could be done only at the initial stage and once the name was allotted different considerations would arise for revoking it. He, in fact, said that S. 22 of the Act would not be even applicable. Frankly, I have not been able to appreciate this argument of Mr. Sanghi Though, he also said that S. 22(2) of the Act prescribes punishment in case of default by a company and every officer of the company who does not comply with the directions of the Central Govt. requiring the company to change its name under sub-s.(1) of S. 22 of the Act. Then Mr. Sanghi, in detail, dwelt upon the qualifications and experience of defendant No. 3 and also the fact that it was because of sentimental reason for respect for his father that defendant No. 3 wanted the name of the company as Khosla Extraktions Ltd. He submitted that there was no dispute that the goods which are to be manufactured by defendant No. I are different from the goods which are being presently marketed by the plaintiff. He again stressed that no restraint could be placed on the name in which a person would carry on his business if the name of the business happened to be that of the person carrying it. Mr. Sanghi stressed his various pleas raised in the written statement. He submitted that defendant No. I had completed all the formalities and reached an advance stage of public issue. He submitted that the letters which have been filed by the plaintiff purporting to raise queries regarding defendant No. I could not be genuine and were rather inspired. I may note that during the hearing of this case. an affidavit was filed by defendant No. 1 which was sworn by A.K Gurnani who claims to be the Assistant Secretary of defendant No. 1. He states that he is acquainted with the fact of the case and then goes on to state that the Khosla family is the sole promoter family of defendant No. 1 and that forefathers of S. K. Khoslia, promotor of defendant No. 1, had been in business, trade and industry from time immemorial while the company was only an employee in a Chemical factory. Gurnani father of the Chairman and Managing Director of the plaintiff further states that it is wrong that Khosla Family of defendant No. 1 does not have a strong base in Delhi and in point of fact Khosla Family owns for several decades large properties at New . Delhi and that father of S. K. Khosla had business interest in Delhi apart from manufacturing units at Gurgaon and Amritsar, and then it is stated that in fact the sale, purchase and trading operations of the concerns of Khosla Family of the defendant company continue to be done in Delhi. I do not know how Gurnani can depose to these facts and others mentioned in the affidavit, and in the verification he says that the facts mentioned in the affidavit are true to his knowledge and 'based on information received to be believed and no part of it is false and nothing material has been concealed there from'. I do not know what value can be attached to such an affidavit. It gives no particulars and does not state as to how the knowledge Was derived by Gurnani who is an Assistant Secretary and must have joined the defendant company only after it was incorporated. In fact, there are two affidavits filed by Gurnani, one dated 20-5-1985 and the other 5-6-1985, and since it has not been shown how Gurnani derived the knowledge as to which he has deposed in these affidavits, I cannot attach any value to either of these affidavits. Mr. Sanghi submitted that if injunction is granted at this stage, areat deal of harm will be done to defendant No. 1. He, thereforee, submitted that defendant No. 1 will abide by any condition that the court might impose to clear any doubt that might exist in the mind of anyone that defendant No. 1 is in any way connected with the plaintiff. He submitted that steps have already been taken in this direction and in the advertisements of defendant No. I now appearing in newspapers it has been specifically mentioned that defendant No. I is one of the 'S. K. Khosla Group of Companies and has nothing to do -with the K. G. Khosla Group of Companies'. Mr. Sanghi also submitted that defendant. No. I will not use the logo Khosla on its goods.

(11) Mr. Veda Vyasa,S'r. Advocate, appearing for the plaintiff, in his reply, referred to a decision in American Cyanamid Co. v. Ethicon Ltd. (1975) 1 All Er 504 wherein it was observed that 'The grant of interlocutory injunctions for infringement of patents was governed by the same principles as those in other actions. There was no rule of law that the court was precluded from considering whether, on a balance of convenience, an interlocutory injunction should be granted unless the plaintiff succeeded in establishing a prima facie case or a probability that he would be successful at the trial of the action. All that was necessary was that the Court should be satisfied that the claim was not frivolous or vexatious, i.e. that there was a serious question to be tried.' He, thereforee, submitted that it was not at all necessary for the plaintiff to show existence of a prima facie case when in fact, according to the learned counsel, the plaintiff had a strong prima facie case. Mr. Veda Vyasa also referred to the background of defendant No. 3. He also referred to a writ petition No, 1030181 filed by defendant No. 3 against the Food Corporation of India challenging his termination of services by the Food Corporation of India. It appears that defendant No. 3 was in the employment of the Food Corporation of India since 4-10-73. His services were terminated by letter dated 19-3-1981. Reference was made to the counter affidavit filed by the Food (corporation of India in that writ petition to show that defendant No. 3 had no scruples. Without informing the Food Corporation of India and while in service, the defendant No. 3 took up employment in Zambia from where he was deported as certain criminal charges were labelled against him. In this counter-affidavit reference was also made to the personal life of defendant No. 3 but that would not be relevant for the purpose of this case.

(12) Mr. Veda Vyasa contended that defendant No. 3 had no background of any business an he was always in service and that the words 'famous Khosla family of New Delhi' were mere misnomer and that these words were coined to deceive and cheat. He also referred to the various provisions of the Act, viz., Ss. 17, 18, 19, 56 and 149A and submitted that there could not be any urgency in the matter and that the statement made at the Bar by defendant No. I that defendant No. I was going for public issue on 27-6-1985 could not be true. He submitted even the statement in lieu of prospectus has not So far been filed by defendant No. 1 and change of objects of defendant No. I has not so far been approved by the Company Law Board. He also submitted that various illegalities have been committed while converting Khosla Extraktions Pvt. Ltd. into a public limited company and that it was a fraud on the statute. However, lam not much concerned with this aspect of the case except to note that it would take about 9 months for change of objects of defendant No. 1 which have not so far been done. In fact, Mr. R. K. Sanghi could not seriously dispute this proposition. Mr. Veda Vyasa also contended that there could not be applicability of the doctrine of election in the present case. He submitted that the plaintiff had no remedy under the Act and that the very fact that the Central Govt. chose to withdraw the directions would show that remedy under S. 22 of the Act was not an effective remedy. He submitted that certain guidelines have been laid down under S. 20 of the Act and the Central Govt. would perhaps not go outside these guidelines but he added that on that very basis directions were issued to defendant No. I to change its name but these directions were subsequently withdrawn as would appear from the statement made by the Central Govt. Standing Counsel in the writ petition filed in the Delhi High Court. Mr. Veda Vyasa also submitted that in case the change of name of defendant No. 1 is directed S. 23 of the Act protects all the rights or obligations of defendant No. I or any other agreement that it might have entered earlier to the change of name.

(13) Before proceeding further, it will be appropriate to set out Ss. 20 and 22 of the Act : 'S. 20. Companies not to be registered with undesirable names.

(1)No company shall be registered by a name which, in the opinion of the Central Government, is undesirable.

(2)Without prejudice to the generality of the foregoing power, a name which is identical with, or too nearly resembles, the name by which a company in existence has been previously registered, may be deemed to be undesirable by the Central Government within the meaning of sub-section (1)S. 22 Rectification of name of company. (1) If, through inadvertence, or otherwise, a company on its first registration or on its registration by a new name, is registered by a name which, in the opinion of the Central Government, is identical with, or too nearly resembles, the name by which a company in existence has been previously registered, whether under this Act or any previous companies law, the first mentioned company

(A)may, by ordinary resolution and with the previous approval of the Central Government in writing, change its name or new name; and

(B)shall, if the Central Government so directs within twelve months of its first registration or registration by its new name. as the case may be, or within twelve months of the commencement of this Act. whichever is later, by ordinary resolution an' write the previous approval of the Central Government signified in writing, change its name or new name within a period of three months from the date of the direction or such longer period as the Central Government may think fit to allow.

(2)If a company makes default in complying with any ' direction given under clause (b) of sub-section (1), the company, and every officer who is in default, shall be punishable with fine which may extend to one hundred rupees turn everyday during which the default continues.' I may now refer at this stage to some of the decisions cited at the Bar.

(14) In Exxon Corpn. and others v. Exxon Insurance Consultants International Ltd., 1981 (2) All Eng .L.R 495 (Ch. D.) (3) the plaintiff, a Company which deal in petroleum and similar products by a word 'EXXON' for its name and used it as a part of corporate names of itself and also for its associated companies. The defendant-company which had no connection with the plaintiff adopted the word 'EXXON' as part of its corporate name. The plaintiff sought an injunction to restrain the defendant from passing on its goods as the plaintiff's goods by using the word 'EXXON'. It was held that 'the plaintiffs were entitled to an injunction and ancillary relief restraining passing off by the defendant by its continued use of the word 'EXXON', and they were also entitled to an injunction against the defendant restraining it from allowing its name in a form in corporating the word 'EXXON' to remain on the companies' register, because it would be unlawful and damaging to the plaintiffs to allow the name to remain on the register. Graham. J. observed as under : 'It will be seen from the statement of claim that the plaintiffs make two claims for relief and say that they have two independent rights of action against the defendants. The first is passing off, and as to this the statement of claim alleges, inter alia, that the use by the defendants of 'Exxon' is bound to lead to passing off and in particular to suggest that the defendant-company has some connection with, or is a subsidiary of, the plaintiffs and in particular the parent corporation. This I think must be so: and I have already indicated in argument, and 1 now confirm, that the plaintiffs are, in my judgment. entitled to an injunction and ancillary relief to restrain such passing off by continued use by the defendants of the word Exxon.'

(15) The facts in the case Sturtevant Engineering Co. Ltd. v.Sturtevant Mill Co. of U.S.A. Ltd., (1936)3 All Eng. Rep 137 (Ch. D) (4) may be taken from the. head note of the Report. 'An English Company, the Sturtivant Engineering Company Ltd (herein referred to as the plaintiff company), had turn a number of years carried on business in England as manufacturers of and dealers in general engineering machinery. An American Company, the Sturtivant Mill Co., carried on a similar business in America and was the sole owner of certain patents which were protected in both America and England. The American Company desired to introduce their patented machinery into England, and for that purpose entered into an agreement with the plaintiff company whereby the latter was granted full licenses to have the sole use of the American Companies' inventions in Europe. Under this agreement the plaintiff-company for 22 years manufactured and dealt with machinery which would otherwise have been protected in favor of the American Company. When the agreement was determined in 1963, the patents had expired and the plaintiff-company continued to manufacture the machinery. The plaintiff-company had acquired a-considerable goodwill in England, and in England -the name of Sturtivant as used in the trade was always applied to the plaintiff-company. In 1935. a company was incorporated in England with the name Sturtivant. Mill Co of U.S.A. Limited. which had wide powers to deal in machinery of all kinds The American Company held virtually all the shares in this new Company. The plaintiff-company brought an action against this new Company asking for an.injunction restraining the new Company from using its registered name .or any other name in which the .word Sturtivant formed part: It. was found as a fact that the use of 'the word 'Sturtivant by the defendant-company would lead to confusion which would result in damage to the plaintiff-company.'

(16) One of the contentions thus raised was that on the principle that any person is entitled to trade under his own name, the defendant-company, being controlled by the American Company, was entitled to use the name Sturtivent. It was held that the principle that any person may trade in his own name did not, in the circumstances of this case entitle the defendant- company to use the name Sturtivant. Relevant discussion can be found at page 147 of the Report and thus as under : 'Then it is said the defendant-company is entitled to use the word Sturtivant because it is the name of real people in America who in America have acquired a goodwill for their goods in America. Whether the American Company has or has not, I must look at this case not on-the footing upon which Mr. Stone invited me to look at it, that goodwill is something that exists as the same thing all over the world, but on the footing of the goodwill which the plaintiff-company has acquired in this country which is something which is confined to this country, and I cannot treat the American goodwill of the American Company as being part of the goodwill of the English Company formed in England. The plaintiff-company is entitled to protection for its goodwill and I cannot entitled to refuse that protection because the American Company has acquired a similar kind of goodwill in America. It is said that a man is entitled to trade under his own name although by so doing he may cause damage and confusion to an already existing Company, and prima fade the law of this country does not prevent his doing it. Further, if a man so trading liked to turn his business into a limited Company, he is entitled prima facie to use as part of the name of the Company the name he has been using, and here it is said I ought to treat this as being on that footing, the English Company being entitled to use the word Sturtivant because it is closely connected with the American Company which, holding the larger number of shares in the English Company, controls it. That seems to me not to be a sound contention. So far as this country is concerned there never has been any engineering business of this load carried on under the name Sturtivant and there is no question of carrying on some existing business under the form of a limited Company which has been carried on by a private persons. So far as this country is concerned, I am bound to treat the plaintiff-company as if the American Company did not exist and had no sort of connection with the English Company. In my judgment the plaintiff-Company is entitled to relief and that cannot, in my judgment, be affected by the fact that there is in America a Company which has carried on for several years under the title Sturtivant. This is a new business so far as this country is concerned. There is an ample Explanationn of the desire of the defendant-company to use the word Sturtivant and it is a perfectly reasonable desire on their part. It is not suggested that they have deliberately chosen it to get some improper benefit Nevertheless. the position in law, as it 'appears to me. is that judgment must be on precisely the same lines as though the defendant-company was a new company incorporated in this country for the first time having no connection with any other business in this country. I must disregard the fact that there is a business carried on under the name of .Sturtivant in some other part of the world. I must confine my judgment to the business in this country The plaintiff company had acquired property in this country and the defendant-company would injure that properly and the plaintiff-company is entitled to 'the relief it seeks.'

(17) is Bhandari Homoeopathic Laboratories v. L. R. Bhandari (Homoeopaths) Pvt. Ltd. and others, 1976 Tax L.R 1382 one R. K. Bhandari retired from the partnership business of L.R. Bhandari and Sons and there was a clear condition that the retiring partner would not be entitled to carry on business in the firm's name. The cause of action for filing the suit arid application for injunction arose because a private limited company under the name of the defendant had been set up by R: K. Bharidari, the retiring partner. It was stated that this Was done with a view to nullify the affect of the dissolution deed. Kapur, J. held as under : 'It is settled law, that a registered company can be restrained being registered with a name similar to that of another registered company. There is considerable case law. showing that a company can also be restrained from being registered in the name of an unregistered firm. There is also case law to indicate. that if the Company has already been registered, it can be restrained from carrying on business in the registered name. The principles on which an injunction is issued by the Court have been set out in Buckley on the Companies Act thirteenth Addition. at page 48 'The jurisdiction in these cases rests either upon fraud or upon property; not that there is property in the name. but that the use of a name closely resembling that in which another carries on business is calculated to deceive or cause confusion between the two businesses and to affect property by diverting customers to the person taking, the name, or by affecting the credit or goodwill of the person whose name is taken (a), where this is not the case there is; no jurisdiction (b).'

(18) It was also held that if the defendant-company had been got registered by stranger, the common Jaw right to get on injunction to restrain the deception to the public resulting from such registration would exist. Though in this case it was also observed that the right to claim the injunction was enhanced by the fact that the first defendant wanted to carry on exactly the same or' similar business as that of one of the plaintiffs.

(19) In Nestle's Products Ltd. and others v. M/s. Milk made Corporation and another, : AIR1974Delhi40 , the defendants dealt in biscuits and toffees which were not produced by the plaintiffs and the wrappers were printed with the words Milk made Corporation. It was held that action for passing off could not be supported by the plaintiff who sold condensed milk under the trade mark 'Milk made' in tins or cans having different size, type and shape. The principal question for consideration in this case was whether the plaintiff had a prima facie case. It was observed that this aspect of the matter had to be considered from the point of view whether in relation to biscuits and toffees the latter would come within the ambit of registered trade mark in favor of the plaintiffs as contended by them and whether the goods manufactured by the defendants were totally different from the goods in respect of which registration was granted to the plaintiffs. The Court held that which considering whether the trade mark had been infringed the nature and kind of the goods in respect of which the plaintiffs' trade marks were adopted by the defendants must be considered and that the registration in the plaintiff's favor of the trade mark by itself sufficient to support action for infringement. After examining the facts of the case and law on the subject the Court held that the plaintiff did not make out a prima facie case for grant of the injunction It would, thus, appear that the question which has been raised before me was not raised in terms in this judgment. And, moreover, the Court was considering an application of the plaintiff under Order 30 Rules 1 & 2 and Section 151 of the Code of Civil Procedure. Reference was made by Prof. Veda Vyasa, learned counsel for the plaintiff to a decision of the Allahabad High Court in Bata India Ltd. v. M/s. Pyare Lal & Co. and others. This was a suit filed by Bata India Ltd. against the defendants restraining them from using the mark 'Bata foam' or otherwise associated the name 'Bata' in any manner or form in advertisements etc. and further restraining them from passing off or enabling others to pass off mattresses, sofas, cushions and other articles as and for the plaintiffs-companies' goods and from selling or offering for sale articles associating them with the name of 'Bata' the Court restrained the defendants from using the name Bata. This was also of an interim application of the plaintiff.

(20) In the Dunlop Pneumatic Tyre Co. Ltd. v. The Dunlop Lubricant Co., it was found that the plaintiff-company and their predecessor in title used the name 'Dunlop' in connection with the goods of their manufacture. Such goods consisted of Pneumatic tyres for cycles and other accessories such as pumps, inflators etc. The name Dunlop had become identified with the goods of the plaintiff. One Joseph Peter Font started business as the Dunlop Lubricant Co. with the defendant to deal in oils and lubricants for cycle and other cycle accessories and in the same class of accessories as the plaintiffs Company. The word 'Dunlop' was prominently used on all the goods of the defendant. The plaintiff, thereforee, brought an action to restrain the defendant from so trading. It was held that there was evidence that Font was using the word ''Dunlep' because it suggested the plaintiff-company and that the plaintiff was entitled to an injunction. This is how Romer. J. observed. 'It appears to me that the plaintiffs are entitled to say that the word (Dunlop) ought not to be allowed to be used under those circumstances with those object by the defendant; that it would injure them in their business very considerably if it is net stopped. They themselves are sellers of cycle accessories, thought as a matter of fact up to the present time they have not sold burning oil or lubricants. But they may do so and in the meantime it appears to me that they are entitled to come into Court and say that a name substantially identical with theirs ought not to be used by the defendant in the way in which he is using it. I, thereforee, think the Plaintiffs are entitled to some relief.'

(21) Simatul Chemical Industries Pvt. Ltd. v. Cibatul Ltd. : AIR1978Guj216 was a case where Cibatul Ltd. filed a suit against the other company (Simatul Chemical Industries Pvt. Ltd.) on the ground that the name under which Simatul was doing business was so deceptively similar to the name of the Cibatul that the public at large and the consumers were likely to be deceived into believing that they were dealing with the same Company or Companies having some connection or association with each other and that in order to protect Cibatulfrom its goodwill being invaded and in order to prevent confusion among the public at large and consumers, it was necessary to restrain Simatul from carrying on business under that name or under any such similar name or style. It appeared that both these companies were manufacturing goods of similar nature. Two questions were raised before the Court: (1) whether the name 'Cibatul' which forms a part of the same of the plaintiff company and the name 'Simatul' which forms a part of the name of the defendant company are so similar that confusion is likely to be created amongst those who are dealing with the plaintiff company and the public at large ' and the consumers; (2) Whether the plaintiff company has a legal right to prevent the defendant company from carrying on its business in the present name in case the Court comes to the conclusion that the two fancy names are deceptively similar. Both these questions were answered in favor of Cibatul. The Court held that where the name of the Company commencing production subsequently would deceptively be similar to that of an existing Company, the latter is entitled to restrain the former by injunction from carrying on its business with such a deceptively similar name.

(22) 'THE Court took note of the following argument of the plaintiff company : 'It is the case of the respondent-plaintiff that this has been done fraudulently and purposefully with a deliberate view to secure unethical and undue advantage of the goodwill earned by the similar name used by it in respect of its well known products and that it was done by way of invasion of the plaintiff-company's proprietory right in its goodwill. It is complained that this was done with a view to create an impression amongst the trade and the persons dealing with the defendant-Company that they were dealing with the plaintiff-company'.

(23) In Wright, Layman & Umney Ltd. v. Wright (1949) 66 Rpc 149 (CA)(8), it was observed that if a man used his own name and used it honestly and fairly, and was doing nothing more he could not be restrained, even if confusion results. It was, however, observed that once he over-stepped the line and confusion resulted or was calculated to result,.the fact that he was using something.approaching his name would be of no justification. In this case the plaintiff who had a reputation under the name 'Wrights' in certain goods filed an injunction against the defendant W.F.T. Wright trading as Wrights Chemical Company and who had caused his goods to be passed off as . the plaintiffs by using the name of 'Wrights' in relation to them. It was found that this the defendant did without any dishonesty. At the trial the defendant was restrained from. using the name wrights or Wrights on his goods without sufficiently distinguishing them from the plaintiffs, but an injunction to restrain him from trading under a name containing Writ or Wrights was refused us unnecessary. The plaintiff appealed against the refusal against the second injunction while the defendant crossed appeal asking for further limitation of the first injunction so as to restrain only the distinction of the goods as 'Wrights'. The Court of Appeal granted the second injunction but- did not limit the first injunction. It, thereforee, allowed the appeal and dismissed the cross appeal.

(24) Joseph Rodgers & Sons Ltd. v. W.N. Rodgers & Co. 1924 (41 RPC) 277was .a case in which the. plaintiff, Cutlery Manufacturers, commenced an .action against the defendant for an injunction restraining them from crying on a cutlery business under a name of W. N. Rodgers & Company or any name of which the word 'Rodgers' or selling or offering for sale any cutlery under the name W. N. Rodgers & Company or any name of which the word 'Rodgers' formed a part. The plaintiffs alleged that they had their predecessors in title had for over 200 years carried on business under the name and style of which the word 'Rodgers' formed a part and that the word 'Rodgers' in the cutlery trade had become identified with them and with their goods. The defendants commenced business as manufacturers of cutlery about the end of 1921. while the action was initiated in October, 1922. When the business of defendant commenced it was a partnership firm of 'which only one of the defendants was having the name Wilfred New- bound Rodgers. Romer, J. observed that there are two propositions : (i) No man is entitled to carry on his business in such a way as to represent that it is the business of another, or is in any way connected with the business of another; and (ii') No man is entitled so to describe or mark his goods as to represent that the goods are the goods of another. It was observed that to the first proposition there was an exception : a man, in my opinion, is entitled to carry on his business in his own name so long as he does not do any thing more than that to cause confusion .with the business of another, and so long as he does it honestly. To the second rule it was observed that there was no exception at all; that is that a man is not entitled so to describe his goods as to lead to the believe that they are the goods of somebody else. Romer, J. also referred to the following observation of Lord Justice Cotton in the well known case of Turten v. Turten 1889. Lr 42 Cd 128 where it was said 'In my opinion, the Court cannot stop a man from carrying on his business in his own name, although it may be the name of a better -known manufacturer, when he docs nothing at all in any way to try and represent that he is that better- known and successful manufacturer.'

(25) The following observation of Romer, J. to my mind will also be relevant : - 'The exception to the first rule is, however, an exception made in the interests of honest trading; again, it is an exception which only authorises the use by a man of his own name; it is not an exception which, even in an honest case, entitles a man to use something that is not his own name; that is to say, it does not entitle him to use his name in combination with something else such as the words '& Comany'. I do not pause to consider the question which, I think, was dealt with by Lord Justice Sterling (then Mr. Justice Sterling) in another case, as to how far the exception enables a business to be carried on under a man's name with the addition of the word 'Limited'; that is. perhaps, a more difficult question.'

(26) In Turton v. Turton referred to above the plaintiffs had for many years carried on the business of steel manufacturers . under the name of Themas Turton & Sons. The defendant John Turton had for many years carried on a similar business in the same town, at first as John Turton, than as John Turton and Company. In 1888 he took his. two sons into partnership and carried on the same business as John Turton and Sons, There was no evidence that the defendants imitated the trade marks or labels of the plaintiffs or otherwise attempted to deceive the public. It was held : 'That although there was probability that the public would be occasionally misled by the similarity of the names the plaintiffs were not entitled to am injunction restraining the defendants from the use of the name John Turton & Sons.'

(27) In Elora Industries v. Banarsi Dass Goala : AIR1980Delhi254 the respondents were the registered proprietor of Trade Mark 'Elora' in respect of watches, time pieces, clocks and their parts and sold these clocks, but intended to introduce time pieces. The defendants-appellants manufactured time pieces with their distinction mark 'Gargan' but their business name was Elora Industries used conspicuously by them in advertisements etc. as part of their business name. It was held that : 'On facts that it was a case of passing off and also of infringement of registered trade mark of plaintiffs. The use of the word 'Elora' by the defendants was indicative of a warm intimacy with the plaintiffs. The registered trade marl: 'Elora' lurked and lingered in the minds of the customers minded to obtain goods of that mark.The word appeals to the ear than eye. There was a real and tangible risk of damage, the field of activity being common. The wrongful appropriation of trade reputation was an injury to plaintiffs. That injury and the acknowledged intention to continue to inflict it was sample justification for the injunction.'

(28) In the North Cheshire & Manchester Brewery Company Limited v. The Manchester Brewery Company Ltd. 1899(AC) 83(12) as would appear from the head note. The Manchester Brewery Company Limited, had carried on business under that name for years. The appellants bought an old business called 'The North Cheshire Brewery Company Limited', and then (without intending to deceive) got themselves incorporated and registered under the name, 'The North Cheshire and Manchester Brewery Company, Limited'; it was held that upon the evidence that as a matter of fact the name of the appellant company was calculated to deceive and that the appellants must, thereforee, be restrained by injunction in the usual way.

(29) In this case also both the Companies were dealing in the same type of goods.

(30) It is not disputed and may it could not be disputed that civil court has jurisdiction in the suit. If any authority is needed reference may be made to a decision of this court in Bhandari Homeopathic Laboratories (supra). The Central Government has certainly no power to grant any injunction as prayed for in the present suit though a person disobeying the directions issued under sub-s. (1) of S. 22 of the Act might entail punishment. But, then in the present suit the plaintiff has also based its cause of action on passing off of the name of defendant No. I as that of the plaintiff. I would rather say that the jurisdiction of the Central Government under Ss. 20 and 22 of the Act and the jurisdiction of the civil court operate in two different fields. Further the Central Government has to act within the guidelines laid down under S. 20 of the Act, while there are no such limitations on the exercise of jurisdiction by the civil court.

(31) I cannot accept the argument of Mr. Sanghi that a person is entitled to carry on his business in his own name and that there could not be any restraint on that. That is in fact too general a proposition. Even 8.34 of the Trade and Merchandise Marks Act referred to by Mr. Sanghi protects a person of the bona fide use of his own name. However, this is not the case before me and I would say no more on this submission of Mr. Sanghi. The point that is at issue is if a person is entitled as of right to have a company registered in a name which happened to be his own name. I would say he has no such right. The right to incorporate a company in a particular name is a statutory right. S. 20 of the Act prescribes that no company shall be registered by a name. which in the opinion of the Central Government is undesirable. Sub-s. (2) of S. 20 says that 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 underisable. I cannot read into S. 20 of the Act that whenever a person applies for registration of a company in his name or in the name of his family members if must be registered. This is not the law and could not be the law.

(32) I am also of the opinion that passing off action need not merely relate to the goods as contended by Mr. Sanghi There Is ample authority for that.

(33) Prima facie I am quite satisfied when reference is made to 'Khosla' in business circles it is referred to the plaintiff and the words 'Khosla Group of Companies' again refer to the companies of the group of the plaintiff. Further if there is any 'famous Khosla Family of New Delhi' reference would again be understood to be to that of K. G. Khosla, Chairman and Managing Director of the plaintiff. Nothing has been brought on record to show that defendant No. I belongs or could belong to 'famous Khosia Family of New Delhi'. No particulars of the business or other manufacturing activity carried on by .the father of defendant No. 3 are mentioned anywhere. There are only vague averments. Then the averments made in the written statements certainly do not make defendant No. 1 as having been promoted by the 'famous Khosla Family of New Delhi' as advertisements published by defendant No. 1 would show. Similarly, the statement that defendant No. 1 is promoted by the Khosia Group would also not be Correct. It is on record that earlier two companies were started -of which defendant No. 3 is the Chairman and Managing Director. None of these companies has the word 'Khosla' in its name. If defendant No. 3 was so sentimental about the name of his father he could have got the company incorporated in the name of his father and not as 'Khosla Extractions Ltd.' which might be taken as the company belonging to the plaintiff group. Defendant No. 3 could have the name of the company in his own name as well. No importance can be attached to the statement of the defendants that they had in mind to start a company for extraction and reference to letter dated 1-2-1980 of a German firm to Swatantar K. Khosla, brother of defendant No. 3, is misiplaced. In fact, that may or may not be so. During this tin-: defendant No. 3 was in employment of Food Corporation of India and for some time an employee of the plaintiff. To start a factory to have an interest in extraction plants is a different thing than starting the company in a particular name- To me there appears to be no reason why the name of defendant No. I should be as it is except that the name was deliberately used to cash on the goodwill and reputation of the plaintiff. Mr. Sanghi gave an offer that he will have an advertisement published that defendant No. 1 'belongs to S. K. Khosla Group of Companies and has nothing to do with K. O. Khosla Group of Companies.' He said, he was already doing so and referred to the order of the Allahabad High Court, which has been noted by me above. I think, this type of offer cannot improve the matter and rather it will cause worse type of confusion in the mind of the public. For one thing there is nothing on the record to show that there is any group known as 'S. K. Khosla Group of Companies' in the business circles. To my mind, serious questions are to be tried in the present suit. Prima facie, the suit is maintainable. There is also a prime fade case. Defendant No. I is threatening to go for public Issue of capital to which the plaintiff objcts. I think, the apprehension of the plaintiff is well-founded. There is a third unseen party in the present case which is the investing public. The public is bound to be misled by the name of defendant No. 1 as the company belonging to the plaintiff group of companies. The defendants cannot be permitted to cash on the name of the plaintiff. If ultimately defendant No. 1 fails it will rebound on the plaintiff and its group causing misery to the shareholders of the plaintiff and its group of companies. All this will bring these companies into disrepute. There would certainly be no measure of damages that the plaintiff might suffer. The balance of convenience is obviously in favor of the plaintiff.

(34) I would, thereforee, allow the application, to the extent that I would restrain the defendants from entering the capital market and making the public issue under the name of M/s Khosla Extractions Ltd. The plaintiff will be entitled to costs. Counsel's fee Rs. 1000/


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