Hira Lal And Son (Export) Pvt. Ltd. vs Union Of India (Uoi) And Ors.
2003 Latest Caselaw 379 Del

JUDGMENT

A.K. Sikri, J.

1. The petitioner, which is a private limited company incorporated under the Indian Companies Act (for short the Act'), is aggrieved by incorporation of the respondent No. 4 company on the ground that the respondent No. 4 company is allowed to be incorporated with similar name as that of the petitioner. The name of the petitioner company is Hira Lal & Sons (Export) Pvt. Ltd. which was incorporated in the year 1973. The respondent No. 4 was allowed to be incorporated with the name of Hira Lal & Sons (I) Pvt. Ltd. in July, 2000 by the Registrar of Companies. The petitioner, in these circumstances, filed a representation under Section 22 of the Act to the Government of India against the incorporation of the respondent No. 4 company with the aforesaid name. This representation of the petitioner has been decided by impugned order dated 4th July, 2001. In this order passed by the Regional Director (NR), Kanpur it is accepted that the name of the respondent No. 4 is identical and too nearly resembles the name of the petitioner company and observations to this effect are as under:

"AND WHEREAS on the basis of comments/clarification furnished by the respondent company, the Central Government is of the opinion that M/s. Hira Lall & Son (I) Pvt. Ltd. has been inadvertently or otherwise incorporated and its name is identical and too nearly resembles to the name of the applicant company. It may cause mislending effects in the minds of general public and accordingly it has been decided that it is a fit case for issue of directions under section 22 of the Companies Act, 1956."

2. The respondent No. 2, in order to remedy the situation, gave direction in the concluding para of the impugned order to the effect that the name of the respondent No. 4 company be changed suffixing ANUPAM' so as to read 'M/s Hira Lall & Son (I) Anupam Pvt. Ltd.', as would be clear from the following observations:

"Now, therefore, in exercise of powers delegated to the undersigned under section 22 of the Companies Act, 1956 vide Notification No. GSR No. 288 (E) dated 31.5.1991, I Regional Director (NR), Department of Company Affairs, Kanpur hereby direct M/s. Hira Lall & Son (I) Pvt. Ltd. having its registered office at H-4, Masjit Moth, New Delhi-110048 to change its name by suffixing 'ANUPAM' (which is the name of the Director of respondent company) to M/s Hira Lall & Son (I) Anupam Pvt. Ltd. or any other name which reflect the object of the respondent company within a period of 3 months from the date of issue of direction."

3. Present writ petition is filed against this order and it is the contention of the petitioner that once the respondent No. 2 accepted that name of the respondent No. 4 company too nearly resembles the name of the petitioner company, the respondent No. 2 should have directed the respondent No. 4 company to change its name a direction to add suffix 'Anupam', has not solved the problem as resemblance remains so long as 'M/s Hira Lal & Sons' is allowed in the name of the respondent No. 4. Learned counsel for the petitioner submitted that as per Section 20 of the Act, a company which is identical with, or too nearly resembles the existing company, cannot be allowed to be incorporated with that name. He submitted that such similar name can be permitted only if there was no objection certificate given by the existing company, which was not given in the present case. In support of his submission, he relied upon the judgment of Calcutta High Court in the case of Kalpana Polytee India Ltd. and Ors. v. Union of India and Ors., 2001 (106) Co. Cases 558. He also referred to another judgment of the Madras High Court in the case of Kilburn Electricals and Ors. v. Regional Director, Company Law Board and Ors., (2000) 6 CLJ 351.

4. Learned counsel for the respondents 5 and 6, on the other hand, submitted that the present writ petition was liable to be dismissed as the petitioner had not come to this Court with clean hands and had suppressed material facts. He drew attention to the preliminary submissions made in the counter affidavit wherein details regarding the family history resulting into formation of M/s Hira Lal & Sons (Export) Pvt. Ltd. are given. It is stated as to how family business started with sole proprietorship and thereafter formation of partnership firm which belonged to the common family members. Same persons incorporated the petitioner company. He submitted that the respondent No. 4 incorporated as a result of family settlement between the parties after the disputes had arisen. Learned counsel also submitted that the Director of the petitioner company had given no objection on 10th September, 2000 whereby he agreed that the respondents 5 and 6 could do the business of manufacture/trading/exports of home textiles (namely made ups, home furnishing, floor coverings) by using the name of 'Hira Lal' and trade name "Hira Lal and Sons". He further submitted that in view of such family settlement use of the name "Hira Lal & Sons", when Hira Lal was the grandfather of husband of the respondent No. 5 could not be objected to by the petitioner.

5. Section 20 of the Act is in the following terms:

"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 undersirable by the Central Government within the meaning of sub-section (1)".

6. As per the aforesaid section, a company with undesirable name, shall not be registered. Sub-section (2) of Section 20 clarifies that the name which is identical with, or too nearly resembles, name bjy which a company in existence, has been previously registered, would be deemed to be undesirable by the Central Government within the meaning of sub-Section (1).

7. The question, therefore, which would arise is as to whether the name of the respondent No. 4 company is identical with or too nearly resembles the name of the petitioner company? In the impugned order dated 4th July, 2001 finding to this effect has been recorded in favor of the petitioner. However, after recording this, as noted above, directions are given to the respondent No. 4 company to change its name to 'M/s Hira Lall & Son (1) Anupam Pvt. Ltd,' The respondent No. 2, thus was of the opinion that with the change of name of the respondent No. 4 in the aforesaid manner, it would cease to be a name which 'too nearly resembles the name of the petitioner company. Learned counsel for the petitioner could not dispute this position and his only contention was that the respondent No. 4 company should not be allowed to use 'M/s Hira Lall & Sons' in its name. I do not agree with this contention. I am in agreement with the opinion of the respondent No. 2 that after the change of name of the respondent No. 4 company to M/s Hira Lall & Sons (I) Anupam Pvt. Ltd., it would not come under the mischief of Sub-section (2) of Section 20.

8. Had it been a case of outsider using M/s Hira Lal & Sons as prefix to its name, there may have been some substance in the contention of the petitioner. That is not so. The petitioner company as well as the respondent No. 4 company belong to the persons with common family roots. The Directors of the petitioner company as well as the respondent No. 4 company belong to same family and are descendants of late Shri Hira Lal. It is explained in detail in the counter affidavit filed on behalf of the respondent No. 4 as to how Shri Hira Lal Gupta, who was grandfather of the husband of the respondent No. 5, started business as a sole proprietorship concern in the year 1940 with the name M/s Hira Lall & Son, This proprietorship concern was converted into a partnership firm on 2nd January, 1952. After attaining majority Shri Ramakant Gupta, son of Shri Hari Shankar Gupta and grandson of Shri Hira Lall Gupta was inducted as partner with effect from 1st April, 1970. Thereafter Shri Umakant Gupta, son of Shri Harishankar Gupta was inducted as partner in this firm on 1st April, 1979 when he attained majority. This partnership firm consisted of Shri Hiralal Gupta, Shri Ramakant Gupta and Shri Umakant Gupta. In the year 1973 the petitioner company was incorporated as a family concern of Shri Hiralal Gupta. Shri Harishankar Gupta and Shri Umakant Gupta. Shri Hiralal Gupta died on 8th April, 1980 and present partners of this firm are Shri Ramakant Gupta, Shri Umakant Gupta and Shri Harishankar Gupta.

9. Insofar as the petitioner company is concerned, the respondent No. 5 as well as Shri Ramakant Gupta and Shri Umakant Gupta were its Directors. It appears that some disputes arose and these persons branched out. It is alleged by the respondents 4 and 5 that this was result of family settlement as per which they were permitted to incorporate the respondent No. 4 company by using the name of their grandfather Shri Hira Lal. It is in this context no objection certificate is relied upon and the relevant portion thereof reads as under:

"None of us, i.e., My branch of family which including my wife and unmarried daughters and myself have no objection to my brother, Umakant Gupta or any other person specified in foregoing para (a) from using the name of our grandfather Hira Lall and the trade name Hira Lall & Son, for his/their business activities which name is being used by both of us till date."

10. No doubt, this no objection is given on 10th September, 2000, i.e., after the incorporation of the company. However, one can infer there from that the Directors of the petitioner company had no objection and there was an oral understanding at the time of incorporation of the respondent No. 4 company for incorporating it by using the name of their grandfather Shri Hira Lall.

11. There is yet another aspect which needs to be highlighted at this stage. The petitioner company is doing the business of export of garments whereas the respondent No. 4 has been incorporated for doing the business of manufacture/trading/exports of home textiles (namely, made ups, home furnishings and floor coverings) and thus the respondent No. 4 is doing different business than that of the petitioner company.

12. Be as it may, dehors aforesaid 'no objection' it cannot be disputed that Shri Hira Lall was the grandfather of the parties and in that view of the matter, the right of the respondents 5 and 6 to use family or surname cannot be denied to them. As a sequitur, incorporation of the respondent No. 4 company with prefix M/s Hira Lall & Son cannot be treated as unauthorised. (See Kriloskar Proprietary Ltd. v. Kriloskar Dimensions P. Ltd., (1999) 96 Comp Cases 726 and Manipal Housing Finance Syndicate Ltd. v. Manipal Sotck and Share Brokers Ltd., (1999) 98 Com Cases 432).

13. The judgments cited by the petitioner, in the aforesaid background, would be of no avail. In Kalpana Polytec India Ltd. and Ors. (supra) the Calcutta High Court held that the words 'or otherwise' appearing in Section 22 have to be construed ejusdem generis. It further opined that the grounds for ordering rectification under Section 22 of the Act were different from those for an action for passing off and therefore, the consideration in the cases of passing off two names being deceptively and confusingly similar could not be made the basis of decision under Section 22 of the Act. Justice S.B. Sinha (as he then was) held so by observing as under:

"The Regional Director was a statutory authority. His jurisdiction was, therefore, confined to the four corners of section 22 of the Act. A statutory authority, as is well known, must act within the four corners of the statute or not at all. From the order dated June 30, 1997, It does not appear that he has arrived at a conclusion to the effect that the order of registration of the appellant-company in terms of the provision's of section 20 of the Companies Act read with section 34 thereof warranted revocation in terms of section 22 of the Act. The word "or otherwise" in our considered view must therefore be considered in the context of the word "inadvertence". In other words, the word "otherwise" must be read ejusdem generis. Further, the jurisdiction of a Regional Director in terms of section 22 of the Indian Companies Act and the jurisdiction of a civil court while adjudicating upon a passing off action are not the same. If the reasoning of the second respondent herein is correct, we are of the opinion that respondents Nos. 5 and 6 also could not have continued to be registered in the same name, as all the companies bear the name "Kalpana", unless a finding of fact was arrived at that respondents Nos. 4 to 6 constituted a group of companies. Furthermore, we are of the opinion that second respondent herein has committed an error apparent on the fact of the record as while passing the impugned order he has exercised the jurisdiction of a civil court in a passing off action insofar as he took into consideration various irrelevant factors as noticed hereinbefore which were not germane for exercising his jurisdiction under Section 22 of the Act. It is now a well-settled principle of law that the words "error apparent on the face of the record" include exercise of jurisdiction by an authority which he did not have upon taking into consideration irrelevant factors and/or refusing to take into consideration the relevant factors."

14. Thus this judgment, if at all, would go against the petitioner.

15. Insofar as the case of Kilburn Electricals Ltd. (supra) decided by the Madras High Court is concerned, that was a case where the court was concerned with the use of name of 'Kilburn' when the existing company, namely, Kilburn had allowed the respondents to use the name Kilburn for Kilburn Electricals Ltd. but instead of that company some more companies were incorporated. In these circumstances, question arose as to whether without any NOC other companies could be incorporated using the name Kilburn. It was decided that without no objection certificates the companies could not be incorporated. That is not the position in the instant case.

16. In view of the facts noted above, I do not find any merit in this writ petition which is dismissed with cost quantified at Rs. 5,000.