Ferrero Spa & Ors vs Vm Siddiq & Anr
2015 Latest Caselaw 2490 Del

$~
*      IN THE HIGH COURT OF DELHI AT NEW DELHI

+      CS(OS) 2627/2013

       FERRERO SPA & ORS                 ..... Plaintiffs
                    Through              Mr. Pravin Anand with Ms. Vaishali
                                         Mittal, Ms. D. Neha Reddy and
                                         Mr. Siddhant Chandola, Advocates

                           versus

       VM SIDDIQ & ANR                   ..... Defendants
                     Through             Ms. Priya Kumar with Ms. Tanya
                                         Tiwari, Advocates


                                    Reserved on      : 10th February, 2015
%                                   Date of Decision : 24th March, 2015

CORAM:
HON'BLE MR. JUSTICE MANMOHAN

                               JUDGMENT

MANMOHAN, J:

I.A. 579/ 2014 in C.S. (O.S.) 2627/2013

1. The present application has been filed under Section 151 of CPC read with Section 22(1) of Sick Industrial Companies (Special Provisions) Act, 1985 (for short "SICA") for stay of present suit proceedings till the time the plaintiffs obtain permission from BIFR under Section 22(1) of SICA.

2. It is pertinent to mention that the present suit has been filed, inter-alia, seeking permanent injunction restraining the defendants from manufacturing and selling confectionery products under the trademark "Tit Bits" on the

ground that such use would amount to infringement of plaintiffs‟ registered trademark, trade dress and passing off.

3. The relevant facts of the present case are that the plaintiffs are a part of the Ferraro Group. It is the plaintiffs‟ case that they first adopted and used the Mark "Tic Tac" in 1969 for fresh breath mints and introduced the same in India in 1999. The plaintiffs claim that the mark was well known as its enormous trans-border reputation preceded its introduction in India.

4. Defendants aver that they have been in the business of manufacture and sale of mouth fresheners since 1984 and were the registered proprietors of the Trademark "Tit Bits" from 1986 to 2000. Ms. Priya Kumar, learned counsel for the defendants argued that the defendants had gained considerable market ground long before the plaintiffs entered the Indian market in 1999 and therefore defendants could not in any way ride on plaintiffs‟ reputation.

5. It is the case of the defendants that some time in 1993, the net worth of defendant No. 2 became negative and the company approached the Board for Industrial and Financial Reconstruction (BIFR) for formulating a scheme for its rehabilitation. A scheme was formulated in 1996, which was subsequently declared failed. It was contended that one of the main reasons for the failure of this scheme was defendants‟ wide range of products getting trampled upon by competition. Therefore by an order-dated 21st June, 2006, the BIFR sanctioned a fresh scheme for rehabilitation, which narrowed the scope to manufacture, and sale of mouth fresheners.

6. The new scheme was funded by promoters‟ contribution, which in turn came from the sale of mouth fresheners. The said scheme is stated to be in its final stages of implementation. Ms. Priya Kumar contended that the

sale of the mouth fresheners forms the very basis of the formulation of the scheme and that the viability of the scheme was based on the sale of mouth fresheners.

7. Ms Priya Kumar submitted that the procedure as prescribed in Section 22(1) of SICA is for safeguarding the implementation of the scheme or the process of rehabilitation. Ms. Priya Kumar relied on the judgment of the Supreme Court Raheja Universal Ltd. Vs NRC Ltd & Ors [(2012) 4 SCC 148] wherein it has been held that the purpose of this provision is to avoid a situation where the assets of the company are diverted, wasted, taken away or disposed of in any manner during the relevant period.

8. Ms. Priya Kumar stated that plaintiffs‟ demand for temporary injunction qualified as an action amounting to "Distress" and, if granted, would adversely impact the implementation of the rehabilitation scheme and would amount to an act of "execution" against the defendants, as understood under Section 22(1) of the SICA. She submitted that the procedure as prescribed under Section 22(1) of the SICA made it a condition precedent to seek prior permission of the BIFR. According to her, in the event, BIFR reached the conclusion that the reliefs prayed for would not impact the scheme, the plaintiffs would get the relief prayed for and only then, the present suit including the application for temporary injunction should be considered by this Court. She pointed out that in Raheja Universal Ltd. [supra], the Supreme Court has held as under:-

"49. BIFR has been vested with wide powers and, being an expert body, is required to perform duties and functions of wide- ranged nature. If one looks into the legislative intent in relation to a sick industrial company, it is obvious that BIFR has to first make an effort to provide an opportunity to the sick industrial

company to make its net worth exceed the accumulated losses within a reasonable time, failing which BIFR has to formulate a scheme for revival of the company, even by providing financial assistance in cases wherein BIFR in its wisdom deems it necessary and finally only when both these options fail and the public interest so requires, BIFR may recommend winding up of the sick industrial company. So long as the scheme is under consideration before BIFR or it is being implemented after being sanctioned and is made operational from a given date, it is the legislative intent that such scheme should not be interjected by any other judicial process or frustrated by the impediments created by third parties and even by the management of the sick industrial company, in relation to the assets of the company.

50. In other words, the object and purpose of SICA 1985 is to ensure smooth sanctioning of the scheme and its due implementation. Both these stages i.e. pre- and post-sanctioning of the scheme by BIFR, are equally material stages where the provisions of Sections 22 and 22-A read with Section 32 of SICA 1985 would come into play. Such an approach would also be acceptable as otherwise the entire scheme under Chapter III of SICA 1985 would be frustrated. Doctrine of frustration envisages that an exercise of special jurisdiction in futility, is neither the requirement of legislature nor judicial dictum.

xxx xxx xxx

79. The expression "the like" has to be read ejusdem generis to the term "proceedings". The words "execution, distress or the like" have a definite connotation. These proceedings can have the effect of nullifying or obstructing the sanctioning or implementation of the revival scheme, as contemplated under the provisions of SICA 1985. This is what is required to be avoided for effective implementation of the scheme. The other facet of the same section is that, no suit for recovery of money, or for enforcement of any security against the industrial company, or any guarantee in respect of any loan or advance granted to the industrial company shall lie, or be proceeded with further without the consent of BIFR. In other words, a suit for recovery and/or for

the stated kind of reliefs cannot lie or be proceeded with further without the leave of BIFR. Again, the intention is to protect the properties/assets of the sick industrial company, which is the subject-matter of the scheme.

80. It is difficult to state with precision the principle that would uniformly apply to all the proceedings/suits falling under Section 22(1) of SICA 1985. Firstly, it will depend upon the facts and circumstances of a given case, it must satisfy the ingredients of Section 22(1) and fall under any of the various classes of proceedings stated thereunder. Secondly, these proceedings should have the impact of interfering with the formulation, consideration, finalisation or implementation of the scheme.

9. The plaintiffs vide affidavits dated 13th February, 2015, have given up their right to claim damages in the present suit.

10. Mr. Praveen Anand argued that the present application was a gross abuse of the process of law, filed with the sole intent to evade liabilities accruing from illegal activities carried out by the defendants behind the veil of being „sick industrial company‟. He argued that in addition to seeking to evade liabilities, the defendants, through the present application were attempting to cause inordinate delay in the present matter. He also stated that the defendants were attempting to mislead this Court by stating that the plaintiffs had filed an application seeking a temporary injunction against the defendants for use of the trademark "TIT BITS".

11. He stated that the defendants by adopting a deceptively similar shape, design and over all get up and layout, had attempted to ride upon the vast goodwill and reputation of the plaintiffs‟ product- TIT BITS, which had already spilled over into the Indian Market before its formal launch in India.

12. Mr. Anand submitted that the defendants, by their own admission, did not possess any rights in the said registrations and therefore could not exercise any rights accruing to them under the registrations. According to him, it is a well-established principle of law that any lapsed and pending registration for a trademark could not confer any rights upon the applicants.

13. He pointed out that the BIFR scheme did not dictate or extend to the design, shape, overall get up and layout of the TIT BITS mouth fresheners to be sold by the defendants.

14. Having heard the learned counsel for parties, this Court is of the opinion that Section 22(1) was enacted with the intent to insulate the sick companies only against proceedings for winding-up, execution or for recovery of money etc., and the embargo stated therein is only with reference to the dues reckoned or included in the „sanctioned scheme‟.

15. In Modern Dies v. Symphony Comforts Systems Ltd. & Anr., 124 (2005) DLT 671, this Court has held that enforcement of Intellectual Property cannot be said to be for recovery of dues or execution, distress „or the like‟ proceedings against the properties of an industrial company and that it does not affect the „business potential‟ of the defendant. The relevant portion of Modern Dies (supra) is reproduced hereinbelow:-

"13. Viewed in this legal perspective, I think, the present petition for cancellation of design under Section 51-A of „ The Designs Act, 1911‟ does not fall within the purview of Section 22 of the Act. Clearly this petition is not for recovery of any dues through any coercive process against the properties of industrial company. Therefore, in view of the decision in the case of Shree Chamundi Mopeds Ltd. (supra) such a suit (petition) cannot be said to be for recovery of dues against the respondent by execution, distress or „the like‟ proceedings against the properties of industrial company. Even if this petition/suit succeeds, result will

be that the registration of the design vide registration No.172063 will stand revoked/cancelled. This need not in any way affect the business potential of the respondent. It is important to note that in the suit (petition)the petitioner has not claimed any relief of damages/rendition of accounts etc. All that the petitioner is seeking, is the cancellation of design registration No.172063, therefore, I am of the considered view that it does not fall within the purview of Section 22 of the Act.

(emphasis supplied)

16. This Court is of the view that if the applicants‟ construction of Section 22(1) is accepted it would be unfair and would lead to a state of affairs that would enable „sick industrial companies‟ to evade liabilities for their wrongful acts. Such a construction is not only against the spirit of the law but also against the very spirit of the statute invoked. The Supreme Court, in the case of Deputy Commercial Tax Officer and Ors. Vs. Corromandal Pharmaceutical & Ors [(1997) 10 SCC 649], has categorically held that:

"2........We are sure that Section 22 was not meant to breed dishonesty nor can it be so operated as to encourage unfair practices. The ultimate prejudice to public monies should not be overlooked in the process of promoting industrial progress......."

(emphasis supplied)

17. In Special Steels Ltd. v. Jay Prestressed Products Ltd. [1991] 72 Comp Case 277(Bom) it was observed that "The words "or the like"

appearing in the context of the words preceding, namely, "execution, distress" and the words appearing subsequent thereto, namely, "against any of the properties of the industrial company or for the appointment of a receiver in respect thereof" would make the meaning clear. They are to be

understood ejusdem generis, meaning thereby such coercive proceeding as may have the effect of seizure and sale of the properties of the company, making it impossible to revive or to rehabilitate it."

18. In the opinion of this Court, if the plaintiffs‟ case that the impugned property is their intellectual property (i.e. plaintiffs‟ registered design for the TIC TAC small boxes and the plaintiffs‟ well known trade dress encompassing the overall getup and layout of the TIC TAC product packaging) is correct then the defendants cannot infringe the same. In fact, if the allegations in the plaint are correct, then the defendants‟ above- mentioned actions are in violation of the rights granted to the plaintiffs under the Trade Marks Act, 1999. The defendants cannot lay claim to any infringing marks and designs as their "Intellectual Property" and hence, any injunction granted by this Court cannot be held to be in the nature of an "execution" against the alleged intellectual property rights of the defendants.

19. This Court is of the view that if the property/design in question does not belong to the defendants, then the provision of Section 22(1) of the SICA cannot be invoked as the said Section does not protect „theft‟ and/or piracy and/or imitation. After all the BIFR Scheme cannot be used as a „shield‟ to carry out illegal/infringing activities.

20. A temporary injunction as prayed for by the plaintiffs would not affect the business interests, or the implementation of the rehabilitation scheme of the defendants in any manner. The injunction would only prevent plaintiffs‟ intellectual property rights from being infringed. The defendants, despite the injunction would still be free to promote their mouth fresheners in a manner, which does not harm the goodwill, reputation and legal rights of the plaintiffs.

21. Consequently, Section 22 of SICA is not attracted to the facts of the present case. Accordingly, present application is dismissed.

CS(OS) 2627/2013 & I.As. 20975/2013, 6618/2014 List the matter on 20th April, 2015 for hearing of pending applications.

MANMOHAN, J MARCH 24, 2015 nk/rn