Karnataka High Court
Kirloskar Aaf Limited vs M/S American Air Filters on 26 August, 2021
Bench: Chief Justice, Suraj Govindaraj
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 26TH DAY OF AUGUST, 2021
PRESENT
THE HON'BLE MR. ABHAY S. OKA, CHIEF JUSTICE
AND
THE HON'BLE MR. JUSTICE SURAJ GOVINDARAJ
REGULAR FIRST APPEAL NO. 1 OF 2015
BETWEEN:
KIRLOSKAR AAF LIMITED
A COMPANY DULY INCORPORATED AND EXISTING
UNDER THE COMPANIES ACT, 1956,
HAVING ITS REGISTERED OFFICE AT PLOT NO.143/C4
BOMMASANDRA INDUSTRIAL AREA
BANGALORE - 562 158
REPRESENTED BY ITS VICE PRESIDENT
MR. V.T. JAIRAJ
.... APPELLANT
(BY SHRI DHANANJAY JOSHI, ADVOCATE)
AND:
1. M/S. AMERICAN AIR FILTERS COMPANY INC
A COMPANY DULY INCORPORATED AND EXISTING
UNDER THE GENERAL CORPORATION OF LAW OF
STATE OF DELAWARE, UNITED STATES OF AMERICA,
HAVING ITS OFFICE AT 10300,
ORMSBY PARK PALACE, SUITE 600,
LOUISVILLE, KENTUCKY 402236169
UNITED STATES OF AMERICA,
THROUGH ITS CONSTITUTED ATTORNEY
MR. YASHPAL CHAUHAN
2. M/S. AAF - McQUAY INC.
PREVIOUSLY KNOWN AS
'SNYDER GENERAL CORPORATION'
A COMPANY DULY INCORPORATED AND EXISTING
UNDER THE GENERAL CORPORATION OF LAW OF
STATE OF DELAWARE, UNITED STATES OF AMERICA
HAVING ITS PRINCIPAL OFFICE (AS PER THE
2
CERTIFICATE OF INCORPORATION)
AT 10300, ORMSBY PARK PLACE,
SUITE 600, LOUISVILLE KENTUCKY 402236169
UNITED STATES OF AMERICA,
THROUGH ITS CONSTITUTED ATTORNEY
MR. YASHPAL CHAUHAN
3. M/S. MYSORE KIRLOSKAR LIMITED,
(IN LIQUIDATION)
A COMPANY DULY INCORPORATED AND
EXISTING UNDER INDIAN COMPANIES ACT 1956
AND HAVING ITS REGISTERED OFFICE AT
PO YANTRAPUR, HARIHAR - 577602
KARNATAKA
REPRESENTED BY ITS
OFFICIAL LIQUIDATOR
.... RESPONDENTS
(BY SHRI G.L. VISHWANATH, ADVOCATE)
This Regular First Appeal filed under Section 96 read
with Order 41 of CPC, against the judgment and decree dated
19.09.2014 passed in O.S.No.1051/2006 on the file of XVIII
Additional City Civil and Sessions Judge, Bengaluru City,
(CCH-10) partly decreeing the suit for permanent and
mandatory injunction and damages.
This Regular First Appeal having been heard and
reserved for judgment, coming on for pronouncement of
judgment, this day, the Chief Justice delivered the following:
JUDGMENT
The appellant is the original first defendant. The appellant has taken an exception to the Judgment and Decree dated 19th September, 2014 passed by the learned XVIII Additional City Civil and Sessions Judge (CCH-10), Bengaluru in a suit being O.S.No.1051/2006 filed by the first and second respondents for permanent injunction, mandatory injunction 3 and damages. For the sake of convenience, we are hereinafter referring the parties with reference to their status before the trial Court as Plaintiffs or Defendants.
PLEADINGS:
2. According to the case of the Plaintiffs, they are the companies incorporated under the laws of the State of Delaware, United States of America. The first and second Defendants are the companies registered under the Companies Act, 1956. The first Defendant was earlier known as the Kirloskar Snyder General Limited. The case of the Plaintiffs is that the Trade Mark "AAF" was originally owned by the first Plaintiff. It is stated that the said Trade Mark 'AAF' has been registered in the name of the first Plaintiff on 8th January, 1952 with the United States Patent and Trade Mark office and the registration of the Trade Mark of "AAF" was renewed from time to time. On 27th February, 2002, it was renewed for a period of ten years. It is pleaded in the plaint that the first Plaintiff had allowed the second Plaintiff to deal with the Trade Mark 'AAF'. According to the case of the Plaintiffs, the Trade Mark 'AAF' was registered by the first Plaintiff under the provisions of the Trade Marks Act, 1958 and 4 said registration is under class 7 as well as class 11. It is pleaded that the registration was renewed from time to time and it was renewed for a period of ten years from 17th May, 2004. On the basis of Form No.33 filed by the first Plaintiff, the name of the second Plaintiff was entered as the registered Proprietor of the said Trade Mark 'AAF' by the Trade Mark Registry.
3. It is pleaded that Trade Mark and trade name of the Plaintiffs namely 'AAF' is the exclusive and sole preserve of the Plaintiffs and it carries a trans-border reputation. It is pleaded in the plaint that it has all the characteristics of an 'intellectual property' relating to the goods and services of the Plaintiffs. It is stated that the letters 'AAF' represent the goods and services of the Plaintiffs.
4. On 17th March, 1992, a Joint Venture Agreement (for short, 'JVA') was entered into by and between the second Plaintiff and the second Defendant. According to the case of the Plaintiffs, the said JVA resulted into creation of a Joint Venture Company by the name Kirloskar Snyder General Limited. The name of Kirloskar Snyder General Limited was subsequently changed to 'Kirloskar AAF Limited' (first 5 Defendant). On 1st September, 1992, a Licence and Technology Assistance Agreement (for short, 'the Licence Agreement-1992') was executed by and between the first Defendant and the second Plaintiff. Under the said Licence Agreement-1992, the first defendant was granted only a limited licence to use the registered Trade Mark of the Plaintiffs during the subsistence of the said Licence Agreement. It is alleged that the Licence Agreement-1992 was renewed by the parties to the suit by entering into a fresh 'Licence and Technology Assistance Agreement' of 8th July, 1997 (for short, 'the Licence Agreement-1997'). The Plaintiffs have relied upon the clauses 8.01 to 8.07 of the Licence Agreement-1997.
5. The JVA and the Licence Agreement-1997 were mutually agreed to be terminated and accordingly, a Termination Agreement was executed on 12th February, 2002 (for short, 'the Termination Agreement'). The second Plaintiff and both the Defendants were parties to the said Termination Agreement. In the plaint, clause-3 of the said Termination Agreement was relied upon which provides that the first Defendant shall delete the letters 'AAF' from its corporate name and shall stop using the letters 'AAF' from its corporate 6 name or trade name in any manner. The Termination Agreement specifically provided that JVA, Licence Agreement-
1992 and Licence Agreement-1997 shall stand terminated.
6. It is the case of the Plaintiffs that apart from the Licence Agreement-1992 and the Licence Agreement-1997, the Plaintiffs have not conferred any right of whatsoever nature on the Defendants to use its trade name or corporate name. It is alleged that after execution of the Termination Agreement, the Plaintiffs have not given any right whatsoever to use their trade mark, trade name or corporate name to the Defendants. It is alleged that the Trade Mark, trade name and corporate name of the Plaintiffs remain its exclusive property and is not liable for any unauthorized use.
7. It is pointed out in the plaint that after the execution of the Termination Agreement, from time to time, the Plaintiffs called upon the Defendants to cease and desist from continuing the use of the Trade Mark and the letters 'AAF' in the corporate name of the first Defendant. It is pleaded that the solicitors of the Plaintiffs had drafted necessary applications required to be made with the Registrar of the Companies for effecting the change of the name of the first Defendant 7 Company. However, the Defendants did not heed to the advice of the Plaintiffs. The first Defendant continued with the infringement and unauthorized use of the registered Trade Mark and trade name of the Plaintiffs. A legal notice dated 10th September, 2005 was served by the Plaintiffs to the Defendants by which, period of twenty-one days was granted to the Defendants for taking necessary action. The Defendants were called upon to stop any further unauthorized use of the registered Trade Mark and trade name of the Plaintiffs.
8. According to case of the Plaintiffs, from the year 1925, they are continuously and exclusively using the Trade Mark 'AAF' worldwide for the purposes of their business and they have created transnational reputation and goodwill surpassing territorial and geographical limits. It is, therefore, alleged that infringement of the registered Trade Mark by the Defendants caused irreparable injury to the business and the reputation of the Plaintiffs across the world. It is pointed out that the business of the first Defendant is related to and/or cognate to the Plaintiffs' goods and services. By virtue of the use of the said Trade Mark and trade name by the first Defendant, an impression is sought to be created in the minds of the public 8 that the goods and services of the first Defendant are that of the Plaintiffs. It is urged that after the execution of the Termination Agreement, the use of word 'AAF' in the corporate name of the first Defendant becomes dishonest and it is likely to create deception and confusion in the mind of the consumers.
9. Therefore, the suit was filed by the Plaintiffs seeking permanent injunction restraining the first Defendant from infringing the Trade Mark 'AAF' registered in the name of the second Plaintiff. A perpetual injunction was also claimed restraining the first Defendant from using the corporate name, trade name and registered Trade Mark 'AAF' belonging to the Plaintiffs. A mandatory injunction was also prayed for directing the first Defendant to effect necessary change of its name with the Registrar of Companies, Karnataka and such other statutory authorities thereby deleting the letters 'AAF' from its corporate name by amending its certificate of incorporation. A prayer for imposing exemplary damages on the Defendants on daily basis for the unauthorized use of Trade Mark and trade name of the Plaintiffs was also made.
9
10. The first Defendant filed written statement. It is contended that the Articles of Association and the Memorandum of Association are the basis for running a company and the companies are bound to follow and be governed by the sections, articles and clauses incorporated in the Articles and the Memorandum. It is submitted that unless and until the said Articles of Association and the Memorandum of Association are amended in accordance with law, the first Defendant cannot take any initiative to change the name of the company. It is pleaded that the second Plaintiff still holds 50% of the total equity shares of the first Defendant and remains responsible and in control of the actions of the first Defendant. It is submitted that it is for the second Plaintiff to take appropriate steps to bring about the amendments to the Memorandum and the Articles of Association providing for changing the name of the first Defendant. It is specifically urged that the first Defendant company cannot be bound by any agreement entered into by its shareholders such as the Termination Agreement. It is submitted that a company has to be governed according to its Articles and Memorandum of Association and only because an agreement is entered into by the shareholders of the company, it cannot be asked to be 10 governed by or to follow the terms of the Termination Agreement.
11. It is urged in the written statement that in view of Section-21 of the Companies Act, 1956, if a company wants to change its corporate name, it can be done only by passing a special resolution. It is submitted that as the second Plaintiff itself is in-charge of the working of the first Defendant Company as it is holding 50% of its equity shares, the second Plaintiff itself is required to take necessary steps to change the name of the first Defendant company. The first Defendant submitted that the Termination Agreement has never been given effect, inasmuch as, admittedly, the Articles of Association of the first Defendant company have till date not been amended by the shareholders of the first Defendant company. The first Defendant relied on various clauses of the Licence Agreement-1997 and submitted that the right of the Plaintiffs in respect of the Trade Mark is restricted only to the licensed products. It is urged that except one or two minor items, the first Defendant Company does not manufacture any of the items, licensed products as set out in the annexure to the Licence and Technical Assistance Agreement-1997. It is 11 pointed out in the written statement that second Defendant Company has been wound up in terms of the order dated 1st April, 2004 passed by the High Court of Karnataka in Company Petition No.166 of 2001. Therefore, the second Defendant has ceased to be a corporate entity. Hence, it was pleaded that unless and until a leave as per Section 446(1) of the Companies Act, 1956 was obtained, the suit cannot be proceeded against the second Defendant. Various other factual contentions were raised in the written statement. ISSUES:
12. The learned trial Judge framed the following issues:
1. Whether the Plaintiffs prove that the Defendants have infringed their registered Trade Mark 'AAF' by adopting a similar or deceptively similar Trade Mark in respect of similar goods and services?
2. Whether the Plaintiffs prove that the Defendants have infringed their registered Trade Mark 'AAF' by incorporating the said Trade Mark as the corporate name of the Defendant No.1?
3. Whether the defendant No.1 proves that it is entitled to use the Trade Mark 'AAF' in terms of joint venture agreement entered by it with defendant No.2 Company?12
4. Whether the Plaintiffs are entitled for the relief of permanent injunction claimed in the suit?
5. Whether the Plaintiffs are entitled for the relief of mandatory injunction claimed in the suit?
6. Whether the Plaintiffs are entitled for the damages claimed in the suit?
7. Whether the Defendant No.1 proves that this Court has no territorial jurisdiction to entertain the suit?
(This issue is deleted as per order dt:
30.02.2012).
13. The learned trial Judge answered the issue Nos.1, 2, 4, 5 and 6 in the affirmative. However, he answered the issue No.3 in the negative. The operative part of the impugned Judgment reads thus:
"O R D E R The suit filed by the Plaintiffs is partly decreed with costs. The Defendant No. 1 is hereby restrained from infringing the Trade Mark "AAF"
registered in the name of Plaintiff No.2 under Class-7 and Class-11 with the Trade Mark registry Mumbai vide Trade Mark Nos.208995 and 208997 and from using in their corporate name, the trade name and registered Trade Mark "AAF" belonging to the Plaintiffs by way permanent injunction. 13 Further it is decreed directing the defendant No.1 to effect necessary change of its name with the Registrar of Companies, Karnataka and other such statutory authorities thereby deleting/omitting the words "AAF" from the corporate name of the defendant No. 1 by making consequential amendment to its certificate of incorporation No.08-13320 dated: 7/7/1992;
Further it is ordered and decreed that the defendant No.1 shall pay to the plaintiffs a sum of Rs.2,500/- per day from the date of decree for the unauthorized use of Trade Mark and trade name of plaintiffs."
SUBMISSIONS OF THE PARTIES:
14. Now we come to the submissions made by the learned counsel for the respective parties. Shri Dhananjay Joshi, the learned counsel appearing for the first Defendant-appellant has taken the Court through the facts of the case. He pointed out that the second Plaintiff still has 50% shareholding in the first defendant Company and even after the execution of Termination Agreement, the shareholders have not taken any steps to amend its Articles of Association or the Memorandum of Association for effecting the change of the name of the first Defendant Company. He submitted that under the License 14 Agreement-1992, two separate and distinct rights have been conferred on the first Defendant. The second Plaintiff has granted a licence to the first Defendant to use its technology to manufacture and sell air filtration equipments and also use its Trade Marks for carrying marketing and selling its air filtration equipments. He pointed out that the first Defendant, under its Articles of Association, was entitled to use the second Plaintiff's name in its own name, so long as the second Plaintiff held at least 15% of shareholding in the first Defendant Company. He submitted that the right to use the trade name is not a contractual right which could be taken away by modifying or terminating the contract. He submitted that the first Defendant Company was not even in existence when JVA was signed by and between first Plaintiff and the Mysore Kirloskar Limited.
He pointed out that by the Termination Agreement, the second Plaintiff revoked the licence made available to the second Defendant under which, the first Defendant was entitled to do certain acts. However, by virtue of the Termination Agreement, the second Plaintiff did not give up or transfer its shareholding in the first Defendant Company and the share holding of the second Plaintiff continues to be at 50% of the totally issued and paid up equity capital of the first Defendant Company. 15
15. He submitted that even after the Termination Agreement, neither the second Plaintiff nor Mysore Kiloskar Limited took any steps to amend its Memorandum of Association and the Articles of Association for effecting the change of name of the first Defendant Company. Moreover, he submitted that the Termination Agreement cannot override the Articles of Association of the first Defendant Company. He placed reliance upon a decision of the Apex Court in the case of V.B. Rangaraj -vs- V.B. Gopalakrishnan and others1. He also relied upon a decision of the Bombay High Court in the case of IL & FS Trust Company Limited and another -vs- Birla Perucchini Limited and others2. He also relied upon another decision of the Apex Court in the case of Vodafone International Holdings BV vs Union of India and another3. He submitted that if an agreement is entered into by the shareholders is contrary or inconsistent with the Articles of Association of the company, the provisions contained in the Articles of Association will govern the company and not the provisions made in the shareholders' agreement. He relied upon a decision of the Delhi High Court in the case of 1 (1992) 1 SCC 160 2 (2004) 121 Comp. Cases 335 3 (2012) 6 SCC 613 16 World Phone India Private Limited and others -vs- WPI Group Inc. USA4. He submitted that any agreement entered into amongst the shareholders is not binding to the extent repugnant to the Articles of Association of the company.
16. The learned counsel submitted that the mandatory injunction granted by the trial Court is completely contrary to the provisions of the Companies Act, 2013.
17. The learned counsel submitted that the order of the trial Court directing the payment of compensation of Rs.2500/- per day by the first Defendant to the Plaintiffs was completely illegal, as there was no evidence whatsoever adduced to show that the second Plaintiff's Trade Mark was used by the first Defendant for the sale of any products after the execution of the Termination Agreement. He submitted that in any event, there is no evidence adduced to support the prayer for grant of compensation. The learned counsel appearing for the first Defendant would, therefore, submit that the impugned Judgment and Decree is liable to be set aside.
18. We have heard Sri. G.L. Vishwanath, the learned counsel appearing for the original Plaintiffs. He invited our 4 (2013) 178 Comp. Cases 173 17 attention to the Termination Agreement which provides that the first Defendant Company is bound to change its corporate name for removing the reference to 'AAF' within ninety days from the date of the said Termination Agreement. He pointed out that till the date of institution of the suit, the first Defendant never made any effort to remove reference to 'AAF' in its corporate name. He submitted that there is no dispute about the termination of the License Agreements and JVA, as can be seen from the evidence of D.W.1 Sri. V.T. Jairaj, the Vice President of the first Defendant Company. He pointed out that D.W.1 accepted in his evidence that the Trade Mark 'AAF' has been registered in the name of the second Plaintiff and that the right given to the first Defendant to use the said Trade Mark and trade name has been withdrawn by virtue of the Termination Agreement. He also pointed out that during the pendency of this appeal, the impugned Judgment and Decree has not been stayed by this Court.
19. The learned counsel appearing for the Plaintiffs submitted that the dispute in the suit was in the context of an unauthorized use of Trade Mark in the corporate name of the first Defendant even though the permission to use the same 18 has been expressly withdrawn by virtue of the Termination Agreement. He submitted that the dispute cannot be characterized as the one between the first Defendant and its shareholders. He pointed out that articles 190 (1) and 191 (1) of Articles of Association of the first Defendant acknowledges that 'AAF' is the registered trade mark of the second Plaintiff which is being used by the first Defendant solely with the permission of the Plaintiffs. He submitted that the Licence Agreements were executed by the second Plaintiffs only in order to grant a licence to the first Defendant to use the said Trade Mark in its corporate name. Therefore, after the permission to do so was expressly withdrawn, the continuation of use of the Trade Mark by the first Defendant is unauthorized and it amounts to infringement. He invited our attention to various clauses in the Licence Agreements. He relied on the provisions of Sections 28 and 29 of the Trade Marks Act, 1999. He submitted that the right to use Trade Mark of the second Plaintiff conferred upon the first Defendant is traceable only to the Licence Agreements and not to the Articles of Association or JVA. He submitted that once the licence granted to the first defendant is revoked, the first Defendant must cease to use the said Trade Mark 'AAF' or the trade name of the second Plaintiff 19 in its corporate name and if such use continues, it would amount to infringement of the Trade Mark of the second Plaintiff and also the rights of the proprietor under Section 135 of the Trade Marks Act, 1999. He submitted that the share holding of the second Defendant in the first Defendant Company is independent of the permission given to the first Defendant Company to use the second Plaintiff's Trade Mark. He relied upon the Article 190 (1) of the Articles of Association and urged that it categorically records that the Trade Mark 'AAF' is a valuable asset of the Plaintiffs and that the same is being used by the first Defendant with the permission of the Plaintiffs. He submitted that this permission was granted under the Licence Agreements. He submitted that right to use the Trade Mark 'AAF' is co-terminus with the permission granted under the Licence Agreements and, therefore, on termination of the Licence Agreements, the first Defendant cannot fall back on Article 190 of the Articles of Association. He would, therefore, submit that the first Defendant cannot rely upon its Articles of Association to continue the use of Trade Mark 'AAF' of the Plaintiffs even after the revocation of the permission to use the said Trade Mark. He submitted that the Articles of Association are only to regulate the internal management of the 20 first Defendant Company. He submitted that Intellectual Property Rights has no relevance to the share capital or with the management of the first Defendant company. He submitted that a clause relating to the Intellectual Property Right in the Articles of Association of the first Defendant is in terms of relevant clause contained in JVA. He submitted that the Articles of Association do not have an overriding effect over the contract between the parties. He urged that the decisions relied upon by the first Defendant were not at all applicable to the facts of the present case. He submitted that first Defendant Company is trying to do indirectly what it cannot do directly by continuing to use the Trade Mark of the Plaintiffs. The learned counsel would, therefore, submit that no interference is called for in this appeal.
20. The learned counsel appearing for the first Defendant- appellant, by way of rejoinder, submitted that the entitlement of the first Defendant to use the letters 'AAF' in its corporate name is traceable to the Articles of Association which existed prior to the Licence Agreements. He submitted that the first Defendant Company was entitled to use the letters 'AAF' in its corporate name even prior to the execution of the License 21 Agreements. He relied on a decision of the Apex Court in the case of Electronics Corporation of India Ltd and others - vs- Secretary Revenue Department, Government of Andhra Pradesh and others5.
ISSUES ARISING FOR DETERMINATION:
21. In view of the submissions made by the learned counsel appearing for the parties, broadly, the following main points for determination arise for consideration in this appeal:
i) Whether the first Defendant is entitled to continue the use of trade mark 'AAF' in its corporate name notwithstanding the execution of the Termination Agreement?
ii) Whether the entitlement of the first Defendant to use trade mark or trade name or mark is 'AAF' is based on the Licence Agreements or the relevant Articles contained in the Articles of Association?
iii) Whether, in the facts of the case, a direction issued to first Defendant to pay a sum of Rs.2,500/- per day from the date of decree to the Plaintiffs for the unauthorized use of Trade Mark and trade name of plaintiffs was justified in the facts of the case?5
(1994) SCC 458.22
CONSIDERATION OF SUBMISSIONS:
22. We have carefully perused the pleadings as well as evidence on record. We have considered the submissions of the learned counsel for the parties. We have also carefully perused the decisions relied upon by the parties. As the points
(i) and (ii) are inter connected, we have dealt with the same together. The Plaintiffs examined Sri. Yashpal Chauhan who, apart from producing the power of attorney executed in his favour by the Plaintiffs, produced and proved in his evidence the trade mark certificates as exhibit P3 and P4, JVA as exhibit P6, the License and Technical Assistance Agreement dated 8th July, 1997 as exhibit P8 and the Termination Agreement dated 12th February, 2002 as exhibit P9. The first Defendant examined Sri. V.T. Jairaj, its Vice President as DW.1 and produced and proved in his evidence, a copy of Memorandum and Articles of Association as exhibit D1 and four invoices cum delivery challans issued to the first Defendant by the first Plaintiff as exhibits D3 to D6.
23. The issues involved in this appeal will have to be decided solely on the basis of the documents about which, 23 there is no dispute between the parties. Firstly, we must refer to JVA dated 17th March, 1992 (Ex. P6). As stated earlier, JVA has been executed by and between the second Defendant (described therein as the Mysore Kirloskar Ltd) and the second Plaintiff (described therein as Snyder General Corporation). Under the said JVA, the parties agreed to form the first Defendant company (described therein as 'Kirloskar Snyder General Ltd.'). It must be noted here that a draft of the terms and conditions of the Licence Agreement proposed to be executed between the company to be formed and the second Plaintiff was also annexed as Annexure-A to the said JVA. Clause 10.01 under Article-X in JVA is relating to corporate identity. Sub-clauses (A) and (B) of clause 10.01 are relevant, which read thus:
"10.01: Snyder General Corporate Name, Trade Marks and Trade names.
A. Kirloskar acknowledges that the corporate name Snyder General, a valuable asset of Snyder General, is being used in the Company's name with the permission of Snyder General. Kirloskar agrees that the said name, or any name similar thereto, shall be used in the Company's name only so long as Snyder General and/or its Affiliates own 24 at least fifteen percent (15%) of the total issued equity shares of the Company. In the event that the shareholding of Snyder General and/or its Affiliates is reduced for any reason whatsoever, to less than fifteen percent (15%) of the total issued equity shares of the Company, Kirloskar shall, immediately upon request of Snyder General, take all necessary steps, including the exercise of its own voting rights in respect of the equity shares of the Company owned by it, to cause the Company to change its corporate name so as to exclude there from the name Snyder General or any name similar thereto.
B. Kirloskar agrees not to adopt, use or register as a Trade Mark or a trade name in India or elsewhere, whether during the term of this Agreement or at any time after its termination, any word or symbol which in the opinion of Snyder General is similar to the corporate name Snyder General or any Trade Marks or trade names of Snyder General or its Affiliates."
(emphasis added)
24. It must be noted here that clause 10.01 records that the corporate name 'Snyder General Corporation' is being used in the name of the company to be incorporated with the permission of the second Plaintiff. At this stage, it is also 25 necessary to make a reference to the Licence Agreement-1992 which was valid initially for a period of five years. The relevant clauses in the said agreement are 8.01, 8.02, 8.03, 8.04, 8.05 and 8.06 which read thus:
"8.01 Trade Marks. During the term of this Agreement, Licensee shall affix, display or otherwise use one or more of the Trade Marks on each of the Licensed Products manufactured or assembled by licensee as well as such packaging, wrapping, advertisements and other materials related thereto. Licensee shall be permitted, with the prior written consent of the Licensor in each case, to mark such Licensed Products, during the term of this Agreement, with an additional indication. The lettering, size and shape of such additional markings shall be subject to the prior written approval of Licensor in each case.
8.02 Patent Identification. Licensee shall also attach a nameplate to each Licensed Product indicating letters patent, if any, applicable thereto. In addition to the Trade Marks, Licensee shall indicate on each of the Licensed Products manufactured or assembled by the Licensee, in compliance with Licensor's instructions, that such Licensed Products 26 were manufactured or assembled by Licensee, under the license of Licensor.
8.03 Termination of Use of Licensor's Markings. Licensor reserves the right withdraw any reference to Snyder General Corporation, its Trade Marks and its letters patent if at any time the quality of the Licensed Product does not conform to Licensor's standards.
8.04 Restrictions on Use of Licensor's Name. Except for the name "Snyder General", Licensee shall not use Licensor's corporate name, or any of Licensor's Trade Marks or trade names or parts thereof, in connection with the business name and title of Licensee or as part of any other Trade Marks, trade name, symbol or device whether affixed or not to said Licensed Products and shall not include in its business name the Licensor's corporate name, or any other of Licensor's Trade Marks or trade names or parts thereof, except as may be specifically agreed in writing by an officer of Licensor.
8.05 Registration of Licensor's Trade Marks and Trade names. Licensee shall not apply for or obtain registration, in India or in any other country, of any of Licensor's Trade Marks or trade names, except as requested in writing by Licensor. Licensee will not oppose or in any way contest the validity or the right of Licensor to obtain registration in India or in any 27 other country of any of Licensor's Trade Marks or trade names, and shall comply with any reasonable request by Licensor, but without being required to incur any expense in so doing, to assist Licensor to obtain registration of any Licensor's trade marks in India.
8.06 Use of Markings Upon Termination of Agreement. Any consent or designation of any marking and any permission that may be granted hereunder by Licensor to Licensee to apply Licensor's corporate name, or any of Licensor's Trade Marks or trade names to the Licensed Products terminates with the end of this Agreement or with the earlier cessation of royalty payments. Upon such termination, Licensee shall cease all use of such corporate name, Trade Marks or trade names in connection with its business; shall remove from its business name and title any referenced to Licensor's corporate name, Trade Marks or trade names or parts thereof which have been incorporated therein; and, if required, shall file notice of such change with the appropriate authorities in India. Further, after such termination, the Licensee shall not use any corporate name, Trade Marks or trade names in connection with its business, which are similar to any of Licensor's corporate name, Trade Marks or trade names or parts thereof.28
8.07 Licensee Rights. Licensee shall not make any claim that its use of any of Licensor's corporate name, Trade Marks or trade names or parts thereof gives or shall have given Licensee any rights to such corporate name, Trade Marks, trade names, or parts thereof."
(emphasis added)
25. Clause-8.01 confers a license on the first Defendant (described therein as licensee) permitting it to fix, display and use one or more Trade Marks on each of the licensed products manufactured or assembled by the first Defendant. It is specifically provided that the licensee shall be permitted with the prior written consent of the licensor (the second Plaintiff) which was at the relevant time known as 'Snyder General Corporation' in each case, to mark such licensed products, during the subsistence of the agreement with an additional indication. Clause-8.06 clearly provides that any consent or any permission that may be granted by the second Plaintiff to the first Defendant to apply the second Plaintiff's corporate name or any of the second Plaintiff's Trade Marks or trade name to the licensed products will stand terminated with the end of the said agreement and upon such termination, the 29 licensee (first Defendant) shall cease all use of such corporate name, Trade Marks or trade names. Most importantly, it provides that upon such termination, the first Defendant shall remove from its business and title, any references to the second Plaintiff's corporate name, Trade Marks or trade names or parts thereof. Clause-8.06 further reiterates that upon such termination, the licensee (first Defendant) shall not use any corporate name, Trade Marks or trade name in connection with its business which are similar to the corporate name, Trade Marks or trade names or parts thereof of the second Plaintiff.
26. Now we may refer to the subsequent License Agreement-1997 (Ex. P8) entered into by and between the second Plaintiff (described therein as 'AAF-McQuay INC') and the first Defendant (described therein as Kirloskar AAF Limited). The said subsequent agreement was executed as a consequence of the expiry of initial five years period of the earlier License Agreement-1992. The terms and conditions of the same are more or less identical to the Licence Agreement- 1992.
27. Now we come to the Termination Agreement dated 12th February, 2002 (Ex. P9) to which, both the Defendants and the 30 second Plaintiffs are the parties. Clauses 1.1, 1.2, 1.3, 1.4 of Clause-1 and clause-3 which are relevant for consideration read thus:
"1. Release of rights and Obligations 1.1 The Parties agree that the Joint Venture Agreement and the License Agreements are hereby terminated with immediate effect. Each party hereby releases and discharges any claim or potential claim it may have against the other or its related party pursuant to the Joint Venture Agreement and the License Agreements.
1.2 The Parties further acknowledge that by execution of this Agreement, the Joint Venture Agreement and the License Agreements shall be hereby terminated, and all rights under or in connection with these Agreements extinguished.
1.3 In particular, but without prejudice to the generality of the foregoing, the licence to use technology, Trade Marks and trade name provided to the KAAF under the Licence and Technical Assistance Agreement will be terminated and any technical information including documents, materials or equipment provided under the Joint Venture 31 Agreement and Licence Agreements shall be returned to AAF-McQuay.
1.4 This Agreement is made in full and final settlement of all claims and proceedings past, present or future between any or all of the Parties of whatsoever nature and whenever or however arising under or in connection with the Joint Venture Agreement and License Agreements."
(emphasis added) "3. Parties further agree that within 90 days of signing of this agreement KAAF shall delete the words AAF from their corporate name and shall cease using AAF McQuay corporate name or trade name in any manner."
(emphasis added)
28. In the recitals of the Termination Agreement (Ex.P.9), there is a categorical reference not only to JVA (Ex.P.6) but also to both Licence Agreements of 1992 and 1997. Thus, the Termination Agreement (Ex.P.9) has been executed by the parties to it only for the purposes of the termination of the JVA as well as both the Licence Agreements-1992 and 1997. On careful perusal of the contents of the said Termination Agreement (Ex. P9), it is apparent that the first Defendant and the second Plaintiff have executed the same in their capacity 32 as the parties to the Licence Agreements. The second Defendant is a party to the Termination Agreement as it is created on the basis of the JVA and in its capacity as the licensee under both the Licence Agreements. Both the Licence Agreements were executed by the second Plaintiff not in its capacity as the shareholder of the first Defendant. The second Plaintiff has executed the same in its capacity as the registered proprietor of the Trade Mark 'AAF'.
29. It is in this context, some part of the oral evidence of the first Defendant-appellant will be relevant for our consideration. Sri. V.T. Jairaj (DW.1) examined on behalf of the first Defendant was extensively cross-examined by the Advocate for the Plaintiffs. In his cross-examination, DW.1 accepted the correctness of the Licence and Technical Assistance Agreement dated 8th July, 1997 (Ex.P.8) and JVA dated 17th March, 1992 (Ex. P6). He also admitted that both the Licence and Technical Assistance Agreements and JVAs were terminated as per the Termination Agreement dated 12th February, 2002 (Ex. P9). He accepted that in pursuance of the Termination Agreement, both the Defendants have passed resolutions dated 15th December, 2001 (Ex.P.10) and those 33 resolutions were passed for execution of the Termination Agreement which was a tripartite agreement.
30. Sri. V.T. Jairaj (DW.1) also accepted in his cross- examination that subsequent to execution of the Termination Agreement, there was no representation of the second Plaintiff on the board of directors of the first Defendant Company. He also admitted that the trade mark 'AAF' has been registered in the name of second Plaintiff Company under classes 7 and 11 of the Trade Marks Act. What is important to note here is admissions of the said witness in paragraph-7 of his cross- examination which read thus:
"The 1st defendant company never called for Annual General Body Meeting for the purpose of changing its name subsequent to Termination Agreement. The 1st defendant company has not taken any steps pursuant to the Termination Agreement Ex. P9 to comply with the requirements contained in the said Agreement. It is correct in the Director's Report of D1 company from 2002 onwards it has been specifically mentioned the cancellation of joint venture agreement and license agreement."
(emphasis added) 34
31. As stated earlier, the Termination Agreement was executed as long back on 12th February, 2002. But till 18th February, 2013 when cross-examination of DW.1 was recorded, not even an attempt was made to convene an Extra- ordinary General Meeting or place the above matter as an agenda in its Annual General Meeting for the purposes of changing the corporate name of the first Defendant on the basis of the Termination Agreement. At this stage, it is necessary to note that an interlocutory application being IA- 2/2017 has been filed by the first Defendant-appellant under Rule-27 of Order XLI of the Code of Civil Procedure, 1908 seeking permission to produce additional documents. In the said interlocutory application, for the first time, a case is sought to be made out that the first Defendant-appellant had tried to convene an Annual General Meeting in the year 2006 and in 2008 and that the second Plaintiff has refused to participate in said meeting. Surprisingly, an affidavit in support of the said application (IA-2/2017) has been filed by Sri. V.T. Jairaj who has been examined on behalf of the first Defendant as DW.1. He wants this Court to believe that nearly three years after the suit filed in the year 2006 was decreed on 19th September, 2014, while making a search, certain documents relating to 35 calling of Annual General Meeting of the first Defendant Company in the years 2006 and 2008 for change of corporate name of the said company were found. At this juncture, it is necessary to note here that such a contention was never raised either during the pendency of the suit before the trial Court or in the affidavit of DW.1 filed before the trial Court in lieu of his examination-in-chief. As noted earlier, as late as on 18th February, 2013 when V.T. Jairaj (DW.1) was cross-examined, he has categorically admitted in his cross-examination that the first Defendant Company never called its Annual General Meeting for the purposes of change of its corporate name consequent to the Termination Agreement. Therefore, this Court is of the considered view that the averments made in the said interlocutory application (IA-2/2017) are an afterthought and therefore, cannot be accepted. Hence, the application has no merit.
32. At this stage, we may refer to the Articles of Associations of the first Defendant Company. Article-190 is very relevant for our consideration which reads thus:
"190 (1) The Corporate name Snyder General, a valuable asset of Snyder General, 36 is being used in the Company's name with the permission of Snyder General. The said name, or any name similar thereto, shall be used in the company's name only so long as Snyder General and/or its Affiliates own at least fifteen percent (15%) of the total issued Equity Shares of the Company. In the event that the shareholding of Snyder-General and/or its affiliates is reduced for any reasons whatsoever, to less than fifteen percent (15%) of the total issued Equity Shares of the Company, the Company, shall, immediately upon request of Snyder General, take all necessary steps to change its Corporate name so as to exclude there from the same Snyder General or any name similar thereto.
(2) The Company shall not adopt, use or register as a Trade Mark or Trade name in India or elsewhere, any word or symbol which in the opinion of Snyder General is similar to the Corporate name Snyder General or any Trade Marks of trade names of Snyder General or its affiliates after the name Snyder General to be excluded from its Corporate name."
(emphasis added) Clause (1) of Article 190 refers to a permission being granted by the second Plaintiff to the first Defendant to use its 37 corporate name. Thus, it is clearly recorded that the use of the corporate name of the second Plaintiff by the first Defendant was a permissive user as the permission was granted by the second Plaintiff. Admittedly, under the Licence Agreements of the year 1992 and 1997, the said permission was granted by the second Plaintiff to the first Defendant. As narrated earlier, the Licence Agreements provide for granting permission to the first Defendant to use the trade mark 'AAF' and the corporate name of the second Plaintiff. The said Licence Agreements could have always been terminated, inasmuch as, the same clearly provide for the consequences of cancellation of licence. It provides that upon such termination, the licensee shall cease all use of such corporate names, Trade Marks or trade names of the second Plaintiff in connection with its business and the licensee (first Defendant) is required to remove from its business name and title, any reference to the licensor's (second Plaintiff's) corporate name, Trade Marks or trade names or parts thereof. Apart from clauses in both the Licence Agreements permitting withdrawal of the permission so granted to use the name of the second Plaintiff, Trade Marks or trade names or parts thereof, there is a specific clause in the Articles of Association i.e., clause (1) of Article 190 which provides that 38 if the share holding of the second Plaintiff or its affiliates in the first Defendant is reduced to less than 15% of the totally issued Equity Shares of the first Defendant, immediately upon request of the second Plaintiff (Snyder General), the first defendant shall take necessary steps to change its corporate name so as to exclude therefrom the name of the second Plaintiff. This stipulation under clause (1) of Article 190 of the Articles of Association of the first defendant does not take away the right of the Plaintiffs under both the Licence Agreements to revoke the licence and permission granted to the first Defendant. In fact the first part of clause (1) of Article 190 itself records that the corporate name of the second Plaintiff is being used in the name of the first Defendant with the permission of the second Plaintiff. Clause (1) of Article 190 does not grant a perpetual licence to the first defendant to use the Trade Mark and trade name of the second Plaintiff till the share holding of the second Plaintiff reduces less than 15%. Even if the shareholding of the second plaintiff continues to be more than 15%, the right of the second plaintiff to cancel and revoke the permissions granted under the Licence Agreements of the year 1992 and 1997 existed independently of the Articles of Association. The meaning of clause (1) of Article 190 is that even during the 39 subsistence of the Licence Agreements, if the share holding of the second Plaintiff in the first Defendant company was to be reduced to less than 15%, the first Defendant would have been under an obligation on the request being made by the second Plaintiff to take all necessary steps to change its corporate name so as to exclude the letters 'AAF' from the corporate name of the first Defendant. Clause (1) of Article 190 does not take away the right of the second Plaintiff to terminate or revoke both the Licence Agreements.
33. In view of the specific clauses in the Termination Agreement and especially clause 1.2 thereof, all rights of the first Defendant under or in connection with the License Agreements stand extinguished. Clause.1.3 thereof makes it clear that the license to use technology, Trade Marks and trade name granted to the first Defendant under the Licence Agreements shall stand terminated. Apart from that, there is a specific clause being clause (3) under which, the first Defendant had agreed to delete the letters 'AAF' from its corporate name within 90 days. As such, the first Defendant is bound by the clauses contained in the said Termination Agreement.
40
34. As stated earlier, the Licence Agreements and the Termination Agreement have not been executed by the second Plaintiffs in its capacity as a shareholder of the first Defendant. The said Licence Agreements have been executed by the second Plaintiff in favour of the first Defendant in its capacity as the proprietor and owner of the trade mark 'AAF'. Upon the execution of the Termination Agreement and in particular, clause (3) thereof, the requirement of removing the letters 'AAF' from the corporate name of the first Defendant became a legal obligation on the part of the said Defendant. The first Defendant has admittedly not taken any positive steps to delete the letters 'AAF' from its corporate name till this date.
35. The main contention urged on behalf of the first Defendant as regards not taking any steps to delete the letters 'AAF' from its corporate name is that it is for the shareholders of the first Defendant to take a decision about the change of its corporate name and the company cannot impose its own decision on the shareholders. Another argument is that without the support of the shareholders, the compliance with the condition of removing the letters 'AAF' from the corporate name of the first Defendant cannot be made. The impugned 41 judgment and Decree has been passed by the trial Court in terms of the legal obligation of the first Defendant to remove the letters 'AAF' from its trade name. In view of the discussion made earlier, these grounds cannot be accepted in view of stipulations contained in clause 8.01 to 8.06 of the Licence Agreements and clauses 1.1 to 1.4 and (3) of the Termination Agreement.
36. An argument was also canvassed that it will be impossible to execute the impugned Decree directing to change the name of the first Defendant by deleting the letters 'AAF' from its existing name. At this stage, we cannot go into the question whether the decree is executable or not. We are concerned only with the rights, liabilities and legal obligations of the parties. Therefore, the first Defendant, from the date of execution of the Termination Agreement, was not entitled to continue the use of the Trade Mark 'AAF' in its corporate name. As discussed earlier, the entitlement of the first Defendant to use the letters 'AAF' as a mark and in its corporate name is based on the Licence Agreements and not on the basis of the clauses contained in the Articles of Association of the first Defendant company which cannot override the terms of the 42 Licence Agreements. In view of the Termination Agreement, the second Defendant ceases to be a permitted user of the Trade Marks of the second Plaintiff. Therefore, subsequent use of the trade mark by the second Defendant will amount to infringement of trade mark of the second Plaintiff as provided in section 29 of the Trade Marks Act, 1999. Therefore, the Plaintiffs are entitled to injunction as provided in Section 135 of the Trade Marks Act, 1999. Hence, the first two points for consideration will have to be answered against the first Defendant-appellant.
37. Now we come to the direction issued by the trial Court to the first Defendant-appellant to pay a sum of Rs.2,500/- per day from the date of the Decree for the unauthorized use of Trade Mark and trade name of plaintiffs. On this issue, firstly we find that there is no material in the evidence of PW.1 who has been the only witness examined on behalf of the Plaintiffs to substantiate this claim. No reasons have been assigned by the trial Court for directing the defendants to pay a sum of Rs.2,500/- per day and the said finding is not supported by any documentary evidence. Therefore, this Court is of the considered view that only the said part of the impugned Decree 43 will have to be set aside. However, the other part of the impugned Judgment and Decree passed by the learned trial Judge will have to be confirmed. Accordingly, the appeal succeeds in part and we pass the following:
ORDER
i) The impugned Judgment and decree dated 19th September, 2014 passed by the XVIII Additional City Civil and Sessions Judge, Bengaluru city (CCH-10) in O.S. No. 1051/2006 is hereby set aside only insofar as it relates to the direction to the first Defendant to pay a sum of Rs.2,500/- per day from the date of the Decree for the unauthorized use of Trade Mark and trade name of plaintiffs is concerned;
ii) However, the rest of the Decree is not disturbed and the same stands confirmed;
iii) The appeal is partly allowed in the above terms;
iv) There shall be no order as to the costs;44
v) All the pending interlocutory applications do not survive for consideration and the same shall stand disposed of.
Sd/-
CHIEF JUSTICE Sd/-
JUDGE Vr