M/S Shree Ganesha Enterprises vs Sandeep Gullah
2012 Latest Caselaw 250 Del

*             HIGH COURT OF DELHI : NEW DELHI

%                                       Order pronounced on: 13.01.2012

+             IA No.17230/2011 & IA No.17646/2011 in
              CS (OS) No.2683/2011


M/S SHREE GANESHA ENTERPRISES               ..... Plaintiff
               Through Mr. S.K.Bansal, Adv.


                                   Versus

SANDEEP GULLAH                                              ..... Defendant
                        Through    Ms. Prathiba M. Singh, Adv. with
                                   Mr. Jaspreet Singh, Adv.

CORAM:
HON'BLE MR. JUSTICE MANMOHAN SINGH

MANMOHAN SINGH, J.

1. By this order, I propose to decide the applications filed by the

parties, i.e. application bearing I.A. No.17230/2011 filed by the plaintiff

under Order XXXIX, Rules 1 & 2 read with Section 151 of CPC seeking an

ad-interim injunction restraining the defendant from using, advertising or

dealing in the impugned trade mark and trade name CITY BANQUETS or

any other trade mark which is deceptively similar or identical to the trade

mark and trade name CITY BANQUET and CITY PALACE

BANQUETS, and another application bearing I.A. No.17646 of 2011 filed

by the defendant under Order XXXIX, Rule 4 read with Section 151 of CPC

for vacation/immediate suspension of the ex-parte ad-interim order dated

01.11.2011.

CASE OF THE PLAINTIFF

2. It is stated that the plaintiff-firm which is engaged in the business

of catering and food outlets and banquets hall (herein after referred to as the

said business and services) was initially constituted vide partnership deed

dated 03.08.2009 between Shri Shyam Sunder Suri, the Managing Partner of

the plaintiff firm and Shri Sandeep Gullah, the defendant herein. Thereafter,

upon the retirement of the defendant, the plaintiff firm was reconstituted vide

Re-Constitution Deed dated 10.07.2011.

3. It is averred by the plaintiff that since its constitution on

03.08.2009, the plaintiff adopted the trade mark/trade name CITY

BANQUET and started using the same in the course of its said business and

services. The defendant, upon his retirement, assigned all his rights, title,

interest in good will and other assets of the business in the favour of the

re-constituted firm by way of the Re-Constitution Deed dated 10.07.2011.

Further, it is stated by the plaintiff that it has filed for registration of its CITY

formative trade mark, the details of which are given in para 6 of the

application.

4. The plaintiff, also claims copyright in the artwork of the

plaintiff's said trade mark and trade name CITY BANQUET. It is sated that

the same is an original artistic work within the meaning of Section 2(c) of the

Indian Copyright Act, 1957 and the plaintiff is its owner. The said trade

mark and copyright is one of the most valuable assets of the plaintiff.

5. The grievance of the plaintiff against the defendant is that after

taking retirement from the plaintiff firm on 10.07.2011, defendant has started

the same business and services as that of the plaintiff firm in the vicinity of

the plaintiff at 36, Rama Road, Industrial Area, New Delhi and has adopted

an identical/deceptively similar trademark and trade name CITY

BANQUETS in relation to his business and services. It is stated by the

plaintiff that the defendant has no right to use the impugned trade mark after

assigning the same in favour of the reconstituted plaintiff firm.

6. It is further stated that the plaintiff first came to know about the

use of the impugned trade mark and trade name in the 2nd week of October,

2011 when the defendant served a legal notice dated 03.10.2011, upon the

plaintiff claiming his rights over the impugned trade mark and trade name. In

the said notice, it was also stated that the defendant is the proprietor of the

trade mark and trade name CITY BANQUET and that his application for

registration of the said trade mark is in the final process of registration. The

defendant even filed an application bearing No.1851182 in class 42 for

registration of the said trade mark CITY BANQUET label on 17.08.2009.

According to the plaintiff, it has filed a fresh application for registration of

the trade mark CITY BANQUET label and is also taking steps for opposing

the application of the defendant for registration of the impugned trade mark.

7. The plaintiff avers that the use of the impugned trade mark and

trade name by the defendant is in violation of the plaintiff's proprietary

rights in the said trade mark and trade name thereby-

(a) Passing off and enabling others to pass of his business and

services as that of the plaintiff;

(b) Infringing the copyright involved in the artwork of the

plaintiff's trade mark and trade name CITY BANQUET;

(c) Diluting the said trade mark and trade name of the plaintiff.

8. The suit and the interim application being I.A. No.17230/2011

were listed before the court 02.11.2011 and after hearing the counsel for the

plaintiff the court passed the order restraining the defendant form from using,

soliciting, displaying, advertising and dealing in the impugned trademark and

trade name CITY BANQUETS in relation to his business and services of

catering and running food outlets and banquet halls and from doing anything

which may amount to cause confusion and deception. Before hearing, the

plaintiff also filed a large number of original additional documents in order to

establish its case.

9. Upon service, the defendant filed an application being I.A.

No.17646/2011 under Order XXXIX, Rule 4 whereby the defendant is

seeking vacation/suspension of the ex-parte ad-interim order granted on

02.11.2011. It is stated by the defendant that the said ex-parte order dated

02.11.2011 is liable to be vacated as the plaintiff has concealed some

material facts from this court. As per the defendant, compliance of Order

XXXIX, Rule 3 CPC in terms of the order dated 02.11.2011, which is

mandatory in nature, has not been done and copies of the additional

documents filed by the plaintiff have not been served upon the defendant.

10. Further, it stated by the defendant that he is running CITY

BANQUET which has been booked by many of its customers during the

wedding season, therefore, an injunction order at this time serve as a

disastrous blow to the defendant and to all those families who have booked

defendant's banquet hall. Thus, the order dated 02.11.2011 should be

suspended. It is also stated that the defendant is the first user and the

registered proprietor of the mark CITY BANQUET in Class 16 vide trade

mark registration No. 1073467. The plaintiff was only a permissive user of

the mark CITY BANQUET which is the sole property of the defendant.

The defendant is also the copyright owner of the in the label/logo "CITY"

and "CITY BANQUET".

11. As per the defendant, it adopted the trade mark and logo "CITY

BANQUET" and "CB" respectively in the year 1992 and since then, he has

been using it in respect of his business activities. Vide a relinquishment deed

dated 01.04.2005, 4 out of 7 partners (excluding the defendant) in the

partnership firm named Rajinder & Co. wherein the defendant is a partner

released their entire share in the said partnership firm in favour of the

remaining 4 partners including their rights in the trade mark "CITY

BANQUET". Thereafter, the said trade mark continued to be exclusively

used by the said partnership firm. The said firm continued to carry on its

business under the trade mark "CITY BANQUET" irrespective of the

changes in its constitution and as per the last partnership deed dated

27.02.2008 with respect to the abovementioned firm, only the defendant and

his wife remain as partners in the said firm, therefore, all rights in the trade

mark "CITY BANQUET" vest with them.

12. It is averred by the defendant that vide partnership deed dated

03.08.2009, the defendant entered into a partnership with Shri Shyam Sunder

Suri to form another partnership firm M/s Shree Ganesha Enterprises i.e. the

plaintiff herein. Thereafter, the defendant permitted the plaintiff firm to use

of the name "CITY BANQUET" but, did not assign any of its rights in the

trade mark to the plaintiff firm. On 02.07.2011, after the Revocation

Agreement was executed between the plaintiff and the defendant the

permission of the defendant to use the trade mark "CITY BANQUET" was

also revoked by him. Therefore, when the defendant came to know that the

plaintiff has started a food outlet at the same place with an

identical/deceptively similar mark CITY PALACE, the defendant issued the

legal notice dated 03.10.2011 which was replied by the plaintiff on

20.10.2011 stating that the defendant has no right in the said trade mark.

13. As per the defendant, the plaintiff has intentionally concealed the

material facts form this court in order to obtain the ex-parte interim order

dated 02.11.2011. The plaintiff has also not filed any document on record to

establish that rights in the trade mark "CITY BANQUET" have been

assigned to it. The plaintiff has illegally applied for registration of the

various versions of the mark "CITY BANQUET" in Class 43 by

application No.2225808 on 27.10.2011 after the legal notice dated

03.10.2011 of the defendant. According to the defendant, the present suit has

been filed as a counter blast to the legal notice dated 03.10.2011.

14. The plaintiff has filed the reply to the application under Order 39

Rule 4 read with Section 151 of CPC along with the affidavit. In the

affidavit, the plaintiff has specifically denied his signature on the Certificate

of Permissive Use dated 17.03.2011 and on the Revocation Agreement/lease

deed. As per the plaintiff, the said documents are forged and fabricated and

the same have been prepared by the defendant with the ulterior motive to

base his claim. The defendant was directed to produce the originals by order

dated 11.11.2011. However, the originals were not produced by the

defendant rather, after hearing of interim application the learned counsel

appearing on behalf of the defendant has fairly conceded that the Certificate

of permissive use as well as the Revocation Agreement of City Banquet may

not be considered at this stage in the absence of original documents.

15. In the reply, it is also stated by the plaintiff that it is clear from

the lease deed dated 11.08.2009 that the right to use the trademark "CITY

BANQUET" got vested in the new constituted plaintiff firm. It is further

stated that a bare perusal of the Reconstitution deed dated 10.07.2011

shows, that upon his retirement, the defendant assigned all his rights, title,

interest in the goodwill and other assets, benefits and advantage of the

business in favour of the reconstituted plaintiff firm. On 17.08.2009 the

defendant, without the knowledge of the other partner filed application for

registration of the trademark CITY BANQUET in class 42 in his personal

name claiming user since 01.04.1995.

16. It is also stated by the plaintiff that the contention of the

defendant that one partnership firm, M/s Rajinder and Co. of which he was

one of the partners, were running the banquet hall at 17-A, North West

Avenue, Punjabi Bagh, New Delhi under the trademark CITY BANQUET

and logo CB and that it was continued by him and his wife vide partnership

deed dated 27.02.2008, is wrong, as admittedly there was no business by the

said firm after 2007, hence, the continuation of the partnership of M/s

Rajinder and Co. by the defendant and his wife remained only on papers. It

is also stated that the defendant has no right in the trade mark and trade

name CITY BANQUET since the defendant, upon his retirement, has

assigned all his rights, title, interest in the goodwill and other assets of the

business in favour of the reconstituted plaintiff firm through the Re-

constitution Deed dated 10.07.2011.

17. The following are the admitted facts between the parties :

(a) The partnership deed dated 03.08.2009 between the plaintiff and defendant;

(b) The said partnership was running business of catering and food outlets and banquets hall under the trade mark/trade name/Copyright CITY BANQUET.

(c) The retirement of defendant from the said firm by virtue of re-constituted firm

(d) At the retirement, the defendant assigned all rights, title and goodwill and assets of the business in favour of the plaintiff.

18. There are sufficient documents produced on record by the

plaintiff pertaining to the abovementioned admitted facts. The plaintiff has

submitted that the defendant might be a former partner in the firm

M/s. Rajinder and Company who may have been using the name CITY

BANQUET and the logo CB and as per documents but the fact remains

which is admitted that the defendant has invested the name CITY

BANQUET in the partnership dated 3.8.2009 between the plaintiff and

defendant. The defendant has not denied the factum of his retirement from

the said partnership business except the arguments were addressed that his

retirement from the said firm and assigning the will and other assets etc. in

favour of the plaintiff was subject to the balance sheet belonging to the

continuing parties. The relevant clauses 7 to 9 of the Re-constitution deed

dated 10.7.2011 are reproduced here below :

"7. That the continuing parties hereby take over the goodwill of the firm i.e. they shall be at liberty to carry on the business under the name and style of M/s. Shree Ganesha Enterprises. The continuing parties shall be at liberty to take any other partners in the said business and the retiring party shall have no objection whatsoever.

8. That the goodwill and other assets etc. as per the balance sheet shall belong to the continuing parties and the retiring party shall have no interest whatsoever in the said business from the date of retirement.

9. That w.e.f. 10th July, 2011 the retiring party shall not be entitled to any privilege and rights of a partner in the business of the firm which shall be continued by the continuing parties."

Ms. Pratibha M. Singh, learned counsel appearing on behalf of

defendant submitted that the entire consideration against the goodwill on the

date of retirement was not received by the defendant. She orally admitted

that the defendant has received the part amount from the plaintiff in cash.

On the other hand, Mr. Bansal, learned counsel appearing on behalf of

plaintiff has informed that in terms of clause 8 of the deed the entire amount

was paid to the defendant. He further argued that once the defendant has

been retired from the firm, no arguments of this nature are available to the

defendant who can file the separate proceeding in this regard.

19. It becomes necessary to discuss in law as to what is nature of the

partnership property and what happens when the firm is dissolved/

reconstituted.

The Indian Partnership Act, 1932 provides for a mechanism for

dealing in property which has been the subject matter of partnership firm

upon dissolution of the firm. In this context, the relevant section of the

Partnership Act, 1932 relating to the same is reproduced herein after:-

"Section 46:

46. Right of partners to have business wound up after dissolution. On the dissolution of a firm every partner or his representative is entitled, as against all the other partners or their representatives, to have the property of the firm applied in payment of the debts and liabilities of the firm, and to have the surplus distributed among the partners or their representatives according to their rights."

20. From a bare reading of the above section 46, it becomes clear

that the assets /properties belonging to the partnership vests in the firm as the

section uses the expression "property of the firm" and not in the individuals

and upon dissolution.

21. In this context, the observations of Supreme Court in the case of

Commissioner of Income Tax, Madhya Pradesh Vs. Dewas Cine

Corporation; AIR 1968 SC 676 are worth noting wherein the court

observed thus:

"Under the Partnership Act, 1932, property which is brought into the partnership by the partners when it is formed or which may be acquired in the course of the business becomes the property of the partnership and a partner is, subject to any special agreement between the partners, entitled upon dissolution to a share in the money representing the value of the property. When the two partners brought in the theatres of their respective ownership into the partnership, the theatres must be deemed to have become the property of the partnership. Under s. 46 of the Partnership Act, 1932, on the dissolution of-the firm every partner or his representative is entitled, as against all the other partners or their representatives, to have the property of the firm applied in payment of the debts and liabilities of the firm, and to have the surplus distributed among the partners or their representatives according to their rights. Section 48 of the Partnership Act provides for the mode of settlement of accounts between the partners. It prescribes the sequence in which the various outgoing are to be applied and. the residue remaining is to be divided between the partners. The distribution of surplus is for the purpose of adjustment of the rights of the partners in the assets of the partnership; it does not amount to transfer of assets.

On dissolution of the partnership, each theatre must be deemed to be returned to the original owner, in satisfaction partially or wholly of his claim to a share in the residue of the assets after discharging the debts and other obligations. But thereby the theaters were not in law sold by the partnership to the individual

partners in consideration of their respective share in the residue." (Emphasis Supplied)

22. One thing immediately becomes clear from the reading of

aforesaid observation of the apex court which is that once the property being

in ownership of the partners is brought into the partnership, it becomes the

property of the firm.

23. Section 14 of the Indian Partnership Act, 1932 expressly

stipulates that the property of the firm will include the goodwill of the

business. Section 53 provides the right of the partner to restrain another

partner from carrying on business in the firm until the affairs of the firm had

been completely wound up. That section reads as follows:-

"53. Right to restrain from use of firm-name or firm- property.

After a firm is dissolved, every partner or his representative may, in the absence of a contract between the partners to the contrary, restrain any other partner or his representative from carrying on a similar business in the firm-name or from using any of the property of the firm for his own benefit, until the affairs of the firm have been completely wound up:

Provided that where any partner or his representative has brought the goodwill of the firm, nothing in this section shall affect his right to use the firm-name."

24. Section 55 provides for the disposal of the goodwill. It reads as

follows:-

"55. Sale of goodwill after dissolution.

(1) In setting the accounts of a firm after dissolution, the goodwill shall, subject to contract between the partners, be included in the assets, and it may be sold either separately or along wit other property of the firm.

Rights of buyer and seller of goodwill.

(2) Where the goodwill of a firm is sold after dissolution, a partner may carry on a business competing wit that of the buyer and he may advertise such business, but, subject to agreement between him and the buyer, he may not--

(a) use the firm-name.

(b) represent himself as carrying on the business of the firm, or

(c) solicit the custom of persons who were dealing with the firm before its dissolution.

Agreements in restraint of trade.

(3) Any partner may upon the sale of the goodwill of a firm, make an agreement with the buyer that such partner will not carry on any business similar to that of the firm within a specified period or within specified local limits, and, notwithstanding anything contained in Section 27 of the Indian Contract Act, 1872 such agreement shall be valid if the restrictions are reasonable."

It is clear from the above provisions that the goodwill of a firm and the dissolution does not exist upon dissolution and survives. It may be sold either separately and alongwith other property of the firm. The proprietary right, title and interest of the partnership firm in its trade mark and name is one of the parts of the goodwill.

(1) If the firm is dissolved, and there is no agreement, either express or implied, to the contrary, the goodwill must be sold for the benefit of all the partners, if any of them insist on such sale:

(2) So far as it possible, having regard to the right of ever partner to carry on business himself, the court will, on dissolution, interfere to protect and preserve the goodwill until it can be sold;

(3) If a partner has himself obtained the benefit of the goodwill, he can be compelled to account for its value, i.e. for what it would have sold, on the footing of his being himself at liberty to compete in business with the purchaser."

25. In the case of Spalding & Bros. Vs. A.W. Gamage Ltd.; (1915)

32 R.P.C. 273, Lord Parker observed that there is also no dispute that in

partnership the trade marks is always considered to be an integral part of the

goodwill of the business. Lindley on the Law of Partnership, Four tenth

Edition, says thus:-

"Goodwill in connection with trade marks The use of partnership trade marks is another very important element in the goodwill of the business. Such marks, as assets of the firm, are saleable on a dissolution like any other asset.

26. In view of the settled law on the point raised by the parties, I am

of the view that there is no force in the submission of the learned counsel

appearing on behalf of the defendant that the defendant is entitled to take the

benefit of his earlier prior user right in the previous business, he carried out

being a partner under the Partnership Act, 1932. As per settled law, once

the property/mark is invested in the partnership business, the same becomes

the asset of the joint business. In the present case, undisputedly the

defendant has brought the said name in the partnership business between

them which was a joint business of the plaintiff and the defendant, therefore,

the said name "CITY BANQUETS" became an asset of the partnership

business. The defendant was only entitled to his shares of profits from time

to time and after the dissolution of the partnership or his retirement from the

partnership of the value of his share.

27. As appeared from Clauses 7 to 9 of the Reconstitution Deed

dated 10.07.2011, the defendant has assigned the goodwill and other assets

in favour of the continuing partners.

28. One of the other grievances of the defendant during the course of

the hearing of the interim application is that the entire consideration of the

goodwill has not been received by the defendant. The learned counsel for

the plaintiff has denied the said submission by stating that the entire

consideration was received by the defendant.

29. The said submission of the defendant, prima facie is without any

force as admittedly after retirement from the business, the defendant issued

the legal notice dated 03.10.2011 to the plaintiff asking him not to use the

trade mark "CITY PALACE". It was the best opportunity for the

defendant to raise all his grievances. It is pertinent to mention here that even

in the said notice, the defendant has not mentioned about the partnership

business or his retirement from the said firm, though at that time all

opportunities were available with him. In order to demolish the case of the

plaintiff, the defendant placed two photocopies of documents; one Certificate

of Permissive Use dated 17.03.2011 and the second Revocation Agreement,

in order to impress the Court that the partnership business was carried out by

the parties and his retirement under permissive user by the defendant who

revoke the same. However, the said move of the defendant was not

successful, as the defendant was not able to produce the originals when

asked by the court, a mere statement was made that those may not be

considered while deciding these applications in the absence of originals.

30. From the above said facts and reasons, it is clear that the plaintiff

has been able to make out a strong case for the grant of interim injunction

and balance of convenience also lies in favour of the plaintiff and against the

defendant. In case the interim injunction already granted will not continue,

the plaintiff will suffer an irreparable loss and injury, as the defendant started

his business from the same area and under the same name. Hence, the

plaintiff's application bearing I.A. No.17230/2011 is allowed and the ex-

parte interim order granted on 02.11.2011 is confirmed, to the effect that till

the final decision of the suit, the defendant is restrained from using,

soliciting, displaying, advertising and dealing in the impugned trademark and

trade name CITY BANQUETS in relation to his business and services of

catering and running food outlets and banquet halls and from doing anything

which may amount to cause confusion and deception.

31. I am also of the considered view that the defendant has failed to

make out any ground to vacate the interim injunction. Hence, the application

of the defendant being IA No.17646/2011 is dismissed, with cost of

Rs.10,000/- which shall be deposited by the defendant with the Delhi High

Court Advocates' Welfare Fund.

CS (OS) No.2683/2011

32. The defendant is granted two weeks' further time to file the

written statement with an advance copy to the learned counsel for the

plaintiff who may file the replication within three weeks thereafter.

33. List the matter before the Joint Registrar on 09.02.2012 for

admission/denial of the documents. Thereafter, the same shall be listed

before the Court on 22.02.2012 for framing of issues and directions for trial.

MANMOHAN SINGH, J.

JANUARY            13, 2012