2004 (7) TMI 610 - SC - Companies Law

Whether the Agreement had not been placed before the Government of India and was thus illegal and unenforceable? Held that - The fact that the 2nd Respondent-company could be incorporated with the name Baker as part of its corporate name and the fact that 40% shareholding was given to the Appellants in the 2nd Respondent Company prima facie shows that the Agreement dated 21st December 1984 was acted upon and accepted even by the 2nd Respondent. The minutes of the Board Meeting held on 3rd September 1993 also prima facie shows that even on this date the Respondents accepted this Agreement to be binding. The execution of this Agreement is not denied by the Respondents. What has been claimed is that this Agreement was not to be acted upon and/or that as this Agreement was not put before the Government of India the Agreement was illegal and unenforceable. This argument has found favour with the Division Bench. Prima fade it appears to us that this is a self defeating argument If the Agreement was not to be acted upon then there is no right in the 2nd Respondent company to use the name Baker . In spite of questions from this Court no other permission or licence to use the name Baker could be shown to us. If the Agreement is unenforceable then the entire Agreement is unenforceable. In that case the 2nd Respondent has got no right to use the name Baker . On the reasoning that this Agreement was illegal and unenforceable the interim injunction should have been confirmed. The goods being identical there was likelihood of confusion and/or deception if the Respondents were permitted to carry on using this name. In the above view the order of the Division Bench would have had to be set aside and that of the learned Single Judge restored. However we are informed that the Trial Court has fixed 16th July 2004 as the date for trial of the suit. Parties state that they will not ask for an adjournment.

Summary

Issues:
1. Interpretation of Clause 8.3 of the Agreement dated 21st December, 1984.
2. Enforceability of the Agreement before the Government of India.
3. Validity of the interim injunction granted by the learned Single Judge.
4. Justification of the Division Bench's decision to vacate the interim injunction.
5. Examination of the implications of the Agreement on the use of the name "Baker" by the 2nd Respondent Company.

Analysis:

1. The primary issue in this case revolves around the interpretation of Clause 8.3 of the Agreement dated 21st December, 1984, which governed the use of the name "Baker" by the 2nd Respondent Company. The Appellants sold their shares in the company and demanded the cessation of using the name "Baker," as per the clause's provisions.

2. The Division Bench vacated the interim injunction granted by the learned Single Judge based on the argument that the Agreement was not enforceable before the Government of India, rendering the Appellants' rights under Clause 8.3 invalid. This decision raised questions regarding the legality and enforceability of the Agreement.

3. The learned Single Judge had granted an interim injunction against the 2nd Respondent Company from using the name "Baker," citing the Appellants' trans-border reputation and potential confusion and deception in the market. The injunction aimed to protect the goodwill associated with the name.

4. The Division Bench's decision to set aside the interim injunction was based on the premise that the Agreement was not presented to the Government of India, thus deeming it unenforceable. However, the Supreme Court criticized this decision, highlighting that the Agreement's execution and acceptance by the parties indicated its validity and binding nature.

5. The Supreme Court emphasized that the 2nd Respondent Company could only use the name "Baker" if permitted under the Agreement, and the absence of alternative permissions or licenses implied a violation of the Appellants' rights. The Court noted that the Agreement's enforceability was crucial in determining the 2nd Respondent's entitlement to use the name "Baker."

In conclusion, the Supreme Court directed the Trial Court to proceed with the trial expeditiously, emphasizing that the observations made in the judgment were prima facie and should not influence the trial court's decision. The case highlighted the significance of contractual agreements in protecting intellectual property rights and preventing unfair competition in the commercial domain.