2013 (4) TMI 207 - HC - Companies Law

Rectification of name of company - Sections 20 and 21 & 22 of the Companies Act, 1956 - Company is registered by an identical name or a name that closely resembles the name of a previously registered company - Held that - Thus, even assuming that the subsequent company is, through inadvertence or otherwise, registered by a name which is identical with or to nearly resembles a name by which a company in existence has been previously registered, it does not follow as a matter of course that it should be directed by the Central Government to change it s name. This is clear from the use of the words if the Central Government so directs in section 22(1)(b). The word if indicates that it does not follow as a rule that merely because a company is, through inadvertence or otherwise, registered by a name which is identical with or to nearly resembles the name by which a company in existence has been previously registered, it is bound to be ordered to change it s name. The Central Government must satisfy itself that the name by which the subsequent company registered through inadvertence or otherwise is undesirable. Suffice it to state that merely because the name of a company subsequently registered is identical with or too nearly resembles the name of a company which has already been registered, albeit, through inadvertence or otherwise, it does not follow that an order for rectification is bound to be passed. Matter remanded back to ROC for fresh order after considering the relevant facts in an application under section 22.

Issues Involved:
1. Legality of the order directing the petitioner to change its name.
2. Interpretation and application of Sections 20 and 22 of the Companies Act, 1956.
3. Validity of the name "VOV COSMETIC" in light of prior registration by respondent No. 4.
4. Discretion of the Central Government in directing a company to change its name.
5. Impact of incorrect statements made during the registration process.

Detailed Analysis:

Legality of the Order Directing the Petitioner to Change Its Name:
The petitioners challenged an order dated 27th July, 2012, by the Regional Director under Section 22 of the Companies Act, 1956, directing the petitioner No.1 to change its name within three months by deleting the words "VOV COSMETIC". The petitioners argued that this order was unjustified and sought its quashing.

Interpretation and Application of Sections 20 and 22 of the Companies Act, 1956:
Sections 20 and 22 of the Companies Act, 1956, were pivotal in this case. Section 20(1) states that no company shall be registered by a name which, in the opinion of the Central Government, is undesirable. Section 22(1) provides for the rectification of a company's name if it is identical with or too nearly resembles the name of an existing company. The court emphasized that Section 20 does not bar the registration of a company by a name identical with or too nearly resembling an existing company's name. It was noted that the term "may be deemed to be undesirable" in Section 20(2) indicates a presumption rather than a mandate, providing the Central Government with discretion.

Validity of the Name "VOV COSMETIC" in Light of Prior Registration by Respondent No. 4:
Respondent No. 4, VOV Cosmetic Private Limited, was incorporated on 5th May, 2011, prior to the incorporation of petitioner No.1 on 15th September, 2011. Respondent No. 4 applied under Section 22 to rectify the first petitioner's name to avoid resemblance. The court acknowledged that the names of petitioner No.1 and respondent No.4 were not merely deceptively similar but virtually identical.

Discretion of the Central Government in Directing a Company to Change Its Name:
The court held that Section 22 confers discretion upon the Central Government to direct a name change. It clarified that merely because a company is registered by a name identical with or resembling an existing company's name, it does not automatically warrant a name change. The Central Government must determine if the name is undesirable, considering the facts and circumstances of each case.

Impact of Incorrect Statements Made During the Registration Process:
The Regional Director observed that petitioner No.1 was incorporated based on an incorrect statement in its Chartered Accountant's certificate, claiming ownership of the registered trademark "VOV" since December 2002. This incorrect statement was admitted by the petitioners. However, the impugned order did not base its decision on this incorrect statement but solely on the similarity of the names. The court noted that the incorrect statement could be a relevant factor but was not the basis of the order.

Conclusion:
The court quashed the impugned order and directed the Registrar of Companies to pass a fresh order after considering all relevant facts and affording the parties an opportunity to be heard. The court emphasized that an order for rectification is not automatic and must be based on a thorough consideration of the circumstances. The rule was made absolute in terms of prayer (a), with no order as to costs.

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