American Dry Fruit Stores vs Adf Foods Limited
2005 Latest Caselaw 576 Bom

JUDGMENT

Karnik D.G., J.

1. This motion is taken out by the plaintiffs for the appointment of a Receiver and for an order of injunction restraining the defendants from in any manner using the registered trademarks belonging to the plaintiff No. 1 firm and from using any other deceptively similar marks so as to pass off the first defendants' goods as of the goods of the first plaintiff.

BASIC FACTS

2. The plaintiff No. 1 is a registered partnership firm and plaintiff Nos. 2 and 3 and defendant Nos. 2 and 3 are the four partners of plaintiff No. 1 firm. The plaintiffs claim that the plaintiff No. 1 is the proprietor of the suit brand names and the trade marks (hereinafter referred to as "the suit trade marks") which are the subject matter of the suit. The defendant No. 1 is a public limited company which was promoted by the plaintiff Nos. 2 and 3 and the defendant Nos. 2 and 3. By a memorandum of understanding dated 6th February, 1992, the first plaintiff and its partners granted a licence to the first defendant to use the suit trade marks for a period of five years. It appears that the agreement was renewed from time to time and by the last agreement dated 6th February 2003, the first plaintiff renewed the licence granted to the first defendant to use the suit trademarks for a further period of two years. According to the plaintiffs, the agreement of licence came to an end on February 6, 2005 by efflux of time. In or about December 2004, the first defendant sent to the first plaintiff a draft agreement to be executed by the partners of first plaintiff for sale and assignment of the suit trademarks to the first defendant. The plaintiffs however declined to assign the suit trade marks and the first plaintiff continues to be the owner of the suit trademarks. It appears that the disputes have arisen between partners of the first plaintiff firm, the plaintiff Nos. 2 and 3 being on one side and the defendant Nos. 2 and 3 on the other. It further appears that with the knowledge and consent of the defendant Nos. 2 and 3 who are the directors and/or promoters of the first defendant, the defendant No. 1 company has continued the use the suit trademarks though the licence granted to it has come to an end by 6th February, 2005. The first plaintiff along with its two of its partners viz. the plaintiff Nos. 2 and 3 have filed this suit against the defendants for the relief of injunction, wherein the present motion is taken out for the interim reliefs,

PRELIMINARY OBJECTION

3. The defendants have appeared and raised preliminary objection to the maintainability of the suit in the present form. Learned Counsel for the defendants submits that the first plaintiff being a partnership firm is not a person in the eye of law. The firm name is only a compendious name for all the partners of a firm. When a suit is filed in the name of a firm, it only means that the suit is filed by all the partners. Though Order 30, Rule 1(2) of the Code of Civil Procedure allows one of the partners to sign and verify the pleadings, but that is only a procedural aspect regarding signing of the pleadings when a suit is instituted in the firm name. The suit must be deemed to be instituted by all the partners. Therefore, submits the learned Counsel, that only some of the partners cannot file a suit in the name of the firm without the consent of all the partners though such consent may be express or implied. In the present case, the defendant Nos. 2 and 3 who are the partners of the plaintiff firm have not given the consent to the plaintiff Nos. 2 and 3 to file the suit in the name of plaintiff No. 1 firm and in fact they have opposed the filing of the suit and therefore, the suit filed in the name of plaintiff No. 1 firm is not maintainable. Learned Counsel for the defendants further submits that assuming that a suit could be filed by some of the partners in the name of the firm without the consent, express or implied, of all the partners, in any event suit is not maintainable in the present form. The firm name being only a compendious name for all the partners, the first plaintiff denotes all partners including the defendant Nos. 2 and 3. The plaintiff No. 1 means and represents all the partners including defendant Nos. 2 and 3. The defendant Nos. 2 and 3 would therefore be both plaintiffs (being a part of plaintiff No. 1) as well as defendants and a suit cannot be filed by joining the same person or persons as plaintiff/s as well as defendant/s even in different capacities. Learned Counsel for the defendants refers to and relies upon the decision of a Division Bench of this Court in Rustomji Aspandyarji Sethna and Anr. v. Sheth Purshotamdas Chaturdas and Ors. reported in I.L.R. 25 Bom. 606 : 3 Bom. L.R. 227 and of a Single Judge in Chandulal Damodardas v. Keshavlal Kuberdas Amin reported in 38 Bom.L.R. 486.

4. Per Contra, the learned Counsel for the plaintiff submits that the suit is properly framed. It was necessary to join the plaintiff No. 1 as a party to the suit and there is nothing wrong in instituting the suit in the name of the plaintiff no. 1 firm. Under Order 30, Rule 1 of the Code of Civil Procedure, any two or more partners of a partnership firm are entitled to file a suit in the name of the firm and therefore the plaintiff Nos. 2 and 3 were entitled to file a suit in the name of the first plaintiff firm even without the consent of the defendant Nos. 2 and 3, Learned Counsel further submits that defendant Nos. 2 and 3 have joined hands with the defendant no. 1 and in a situation where one or more of the partners join hands with the defendants the remaining partners would be entitled to me the suit in the name of the firm without the consent of the others. Otherwise, submits the learned Counsel, one or more of the partners of a firm would fraudulently defeat the claim of other partners by joining the hands with a defendant against whom the firm has claim. It is to avoid such a consequence that Order 30 of the Code of Civil Procedure is enacted permitting two or more of the partners to sue in the firm name. In law and in equity one or more partners of a firm are permitted to file a suit in the name firm name by joining the remaining partner or partners, who are opposed to filing of a suit, as party-defendants. Learned Counsel for the plaintiff relies on a decision of Calcutta High Court in Bhadreshwar Coal Supply Co. v. Satish Chandra Nandi & Co. reported in 40 C.W.N. 824 and a decision of this Court in Ranchhoddas Khimji & Co. v. Karamsey Jethalal & Co. reported in A.I.R. 1953 Bom. 402.

NATURE OF A SUIT BY OR AGAINST A FIRM

5. Section 4 of the Indian Partnership Act 1932 defines the partnership thus:

(4) Definition of Partnership -

Partnership" is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting of all.

"Partner", "Firm" and "Firm-name" -

Persons who have entered into partnership with one another are called individually "partners" and collectively "a firm", and the name under which their business is carried on called the firm-name.

It is clear from Section 4 of the Partnership Act that a firm unlike a corporation, is not a person in the eye if law and the "firm name" is merely a compendious description of all the partners collectively.

6. Merchants and Lawyers have different notions respecting the nature of a firm. Commercial men and accountants are apt to look upon a firm in the light in which lawyers look upon a corporation i.e. as a body distinct from the partners composing it, and having rights and obligations distinct from those of its partners. Hence, in keeping partnership accounts, the firm is made a debtor to the firm for what he brings into the common stock of the firm, and each partner is made debtor of the firm for all that he takes out of that stock. In the mercantile view, the partners are not indebted each other in respect of the partnership transactions; but they are either debtors or creditors of the firm. But this is not the legal notion of a firm. A firm is not recognised by lawyers as distinct from the members composing it. The law, ignoring the firm, looks to the partners composing it; what is called a property of the firm is the property of the partners collectively and what are called the debts and liability of the firm are the debts and liabilities of the partners. See Malabar Fisheries Co. v. Commissioner of Income Tax

7. As a firm is not a person in the eye of law but for the provisions of Order 30 of the Code of Civil Procedure, the partners of a firm would not be entitled to file a suit in the name of the firm. Purushotam & Co. v. Manilal & Sons is a case on the point. In that case, a suit was filed in the name of Manilal & Sons, by a partnership firm which was carrying on business at Singapore. Being a foreign firm, the provisions of Order 30 of the Code of Civil Procedure are not applicable and a learned Single Judge of the Calcutta High Court held that the firm was not entitled to file the suit in the firm name. On Second Appeal, the Supreme Court held that since the firm was not a legal entity and the privilege of suing in the name of the firm was permissible only to those persons who as partners were doing business in India. Such privilege was not extended to the persons doing business as partners outside India, and in their case, they would have to sue in their individual names. The Supreme Court, however, confirmed the order of the Division Bench allowing the amendment of the plaint striking off the name of the plaintiff firm and substituting in its place the names of the five partners.

8. Reference may also be made to the decision of the Supreme Court in Her Highness Maharani Mandalsa Devi v. M. Ramnarain Pvt. Ltd. and Ors. In that case, a suit was filed against a firm M/s. Jagatsons International Corporation in which Maharaja of Sirmur was a partner. A decree was passed against the firm which directed the firm to pay the decretal amount in instalments. The firm having committed a default in payment of the instalments, an application was made under Order 21, Rule 50 of the Code of Civil Procedure for leave to execute the decree against the partners including Maharaja of Sirmur, which was objected to on the ground that the decree was a nullity; the suit against a firm, in law, was a suit against all partners and in the absence of the requisite consent under Section 86 read with 87-B of the Code of Civil Procedure, the suit was not competent against the Maharaja of Sirmur who was the ruler of a former Indian State. Upholding the objection to the execution of a decree against the Maharaja of Sirmur, the Supreme Court held that a firm's name is only a convenient manner of denoting all those persons who compose the firm and when a firm is sued in the name of the firm in truth, all partners are sued individually, as if their names have been set out in the plaint. From the decision of the Supreme Court it is clear that when a partnership firm is sued in the name of the firm, it is in fact a suit against all the partners, the firm name being only a convenient way of denoting compendious of all the partners. Sub-rule (2) of Rule 50 of Order 21 of the Code of Civil Procedure is only a procedural requirement of obtaining leave of the Court for executing a decree passed in the name of the firm against its partner/s. The basis of liability of the partners, where a decree is passed against a firm, arises of the legal position that the firm is merely convenient way of describing compendious of all partners.

9. In view of the aforesaid decisions of the Supreme Court referred to above, it is clear beyond doubt that a firm is not a person in the eye of law. But for the provisions of Order 30 of the Code of Civil Procedure, a firm would riot be entitled to file a suit in the firm name. Order 30 of the Code of Civil Procedure only grants a privilege to the partners of an Indian firm to sue in the firm name. However, when a suit is filed in the name of a firm, in law and in fact it is a suit filed by all the partners, the firm name being only a compendious description of all the partners of the firm. Order 30, Rule 2(1) of the Code of Civil Procedure Code requires the plaintiff firm, on an application by the defendant, to declare the names and places of residences of all the persons constituting the firm. Order 30, Rule 2(3) of the Code provides that when the names of the partners are so declared the suit shall proceed in the same manner, and the same consequences in all respects shall follow, as if the partners named were the plaintiffs in the suit. In my view, declaring the names of the partners is merely a formality which is required to be compelled with under Order 30, Rule 2(1) of the Code of Civil Procedure when an application for that purpose is made by a defendant. Even if no such application is made by a defendant, a suit filed in the name of a firm means the suit filed by all partners of the firm.

MAINTAINABILITY OF THE SUIT IN THE FIRM NAME AGAINST THE PARTNERS:

10. From the discussion aforesaid, it is clear that when a suit is filed in the firm name, it is a suit is filed by all partners of the firm. Applying this principle to the case at hand, it is clear that the first plaintiff in the suit means all of its partners viz. the plaintiff Nos. 2, the plaintiff No. 3 and defendant Nos. 2 and 3. The firm name of first plaintiff is merely a compendious name denoting all its partners.

11. Relying on the decision of a Division Bench of this Court in Rustomji Aspandyarji Sethna and Anr. v. Sheth Purshotamdas Chaturdas and Ors. reported in 3 Bom.L.R. 227 : I.L.R. Bom. 606, learned Counsel for the defendant submits that the suit by the first plaintiff firm is not maintainable because two of the defendants viz. the defendant Nos. 2 and 3 are also the plaintiffs - being part of the first plaintiff. This submission is based on a rule of procedure, often disregarded in this country, that the same individual, even in different capacities, cannot be both the plaintiff and the defendant to one and the same action. This rule, at times can result in inequitable consequences. The Courts of Equity have therefore surrounded the difficulty arising out of this rule in case of suits by a partnership firm against its partner or by a firm against another firm in which one partner is common, by treating such suits as suits for accounts between the partners and adjusting the debts due and liabilities of the partners by appropriate inter se accounts. Decision of this Court in Chandulal Damodardas v. Keshavlal Kuberdas Amin reported in 38 Bom.L.R. 486 is illustrative of this. In the said case following the earlier decision of the Division Bench in Rustomji v. Sheth Purshottamdas (supra) the Court held:

Defendant No. 1 is a partner of the plaintiff firm and he is being sued by the plaintiff firm not as a formal defendant but as a contesting defendant, and he himself has contested the legality of the suit upon this ground. In Rustomji v. Sheth Purshotamdas, reference was made to the rule that the same individual, even if he has two capacities, cannot be both a plaintiff and a defendant in the same action, and it was held that where an individual was a common partner in two houses of trade, no action could be brought by one firm against the other firm upon any transaction which was between them while such individual was a common partner. So far as it goes, this statement appears to be unequivocal. But their Lordships stated that the rule was subject to an exception in equity in certain cases where it might be possible to ascertain the rights and liabilities of a member of a firm when all the parties were before the Court; and they said that although the Courts of Equity in England strictly observed the rule that a man cannot be both plaintiff and defendant, they did not allow it to stand in the way of their doing justice between the parties, and, provided all interested persons were before the Court either as plaintiffs or as defendants, they adjusted and determined their rights.

In the very case, repelling the contention that as Order 30, Rule 9 of the Code of Civil Procedure permits a suit to be filed by a the partnership firm against its partner, the Court observed as under:

I do not think that it can be said that Rule 9 gives the plaintiff firm a right to bring the present suit and that under the existing law they have any remedy at all. Reliance is placed upon a passage occurring at pg.339 of the 10th Edition of "Lindley on Partnership" which is this: "Again, there appears to be no reason why an action should not now be maintained for the recovery of a debt due from one partner to the firm; nor why, if two firms have a common partner, an action should not be maintained by one firm against the other." And further on it is said that in all cases in which such actions will lie, the firm or firms may sue or be sued in their firm name. But the learned author was referring only to suits for money, and nothing is said as to the form of the decree that would issue in such a case; and it may well be that the Courts in the circumstances of each particular case would fall back upon their power to declare the plaintiff or the defendant entitled to a credit in the accounts of the firm. In my opinion the suit is bad on this ground, and I therefore allow the appeal and direct that the suit be dismissed.

In my view, the exception carved by the Courts of Equity and recognised in Rule 9 of Order 30 of the Code of Civil Procedure, permitting a suit by a firm against another firm wherein one individual is a common partner or a suit by a partnership firm against its own partner, is certainly applicable in suits for recovery of money. It is not necessary in this case to decide whether this principle can be applied to some other classes of cases also. In my view, however, the principle cannot be applied in a suit which is filed for enforcing a statutory right against the infringement of a trademark. Learned Counsel for the parties state that a trademark is never registered in the name of the firm, but when the trade mark is owned by a firm, in a sense that partners regard it to be the property in the trademark to be the property of the firm, then the Registrar of Trademarks allows registration of the mark in the joint names of the partners and after their name only adds a description "carrying on business in partnership". This is in consonance with the provisions of Section 24 of the Trade Marks Act, 1999 which reads as under:

24(1) Save as provides in Sub-section (2), nothing in this Act shall authorise the registration of two or more persons who use a trade mark independently, or propose so to use it, as joint proprietors thereof.

(2) Where the relations between two or more persons interested in a trade mark are such that no one of them is entitled as between himself and the other or others of them to use it except-

(a) on behalf of both or all of them; or

(b) in relation to an article or service with which both or all of them are connected in the course of trade, those persons may be registered as joint proprietors of the trade mark, and this Act shall have effect in relation to any rights to the use of the trade mark vested in those persons as if those rights had been vested in a single person.

13. In the present case also, I notice that the suit trademarks are not registered in the name of the firm but they are registered in the joint names of partners and below that their names, in some cases, there is an endorsement: "carrying on business in partnership". The right to use the suit trademarks vests jointly in all the joint holders. The right being a joint right, some of the partners of the firm cannot in the name of a firm sue the remaining partners. Such a suit would not be a suit for mutual adjustments of liabilities of the partners, falling within the exception allowed by Courts of Equity as mentioned above. In my view, the suit in the name of first plaintiff firm against the defendant Nos. 2 and 3 being its own partners is not maintainable, as it would be a suit wherein the same individuals are both the plaintiffs and the defendants.

Powers of the Court to add or delete parties.

14. Every suit, which may have a technical defect need not be dismissed on the ground of the technical defect, especially when the defect which is curable, and is brought to the notice of the Court at the threshold and soon after the institution of the suit. Order 1, Rule 9 of the Code of Civil Procedure provides that no suit shall be defeated by reason of misjoinder or non-joinder of the parties, except in case of non joinder of a necessary party. In every suit the Court is required to deal with the matter in controversy so far as regards the rights and interests of the parties actually before it. Order 1, Rule 10 of the Code of Civil Procedure provides that where a suit has been instituted in the name of a wrong person as plaintiff or where it is doubtful whether it has been instituted in the name of the right plaintiff, the Court may at any stage of the suit, if satisfied that a suit has been instituted through a bonafide mistake, order any other person to be substituted or added as a plaintiff upon such terms as the Court think fit. Sub-rule (2) of Rule 10 of Order 1 permits a Court to order that the name of any party improperly joined, whether as plaintiff or defendant, be struck out.

15. As I have already held that plaintiff No. 1 includes the defendant Nos. 2 and 3, the plaintiffs are given an option either to delete the name of the first plaintiff or to delete the names of the defendant Nos. 2 and 3 from the plaint so as to cure the defect of the same persons being the plaintiffs and the defendants also. The plaintiffs are also permitted to carry out consequential amendments in the body of the plaint. The plaintiffs to carry out the necessary amendment within a period of four weeks failing which the suit shall stand dismissed as not maintainable.