2019 (12) TMI 290 - HC - Companies Law

Use of brand name by the two companies managed by the separate group of family members - partition by the CLB after family dispute - Prayer for an order of injunction to restrain the defendant from producing or selling or marketing any product using the said label and carton - short contention of the plaintiff/petitioner is that it is the owner of the copyright in the artistic work on the said label and carton. It has not permitted the defendant to use the said label and carton for carrying on the defendant s business of manufacture and sale of hair oil - whether or not the defendant is entitled to use the name BANPHOOL on its label and carton that it uses to market the hair oil manufactured by it? HELD THAT - It is not in dispute that the Sharma brothers carried on the business of manufacture and sale of Ayurvedic hair oil under the name BANPHOOL in co-partnership through a duly constituted partnership firm called M/s Sharma Chemical Works. The copyrights in the artistic work on the label and carton in question were registered in the name of the partnership firm. Biswanath was shown as the author of the artistic work BANPHOOL in the registration certificate. The plaintiff company was incorporated by the members of the Sharma family with the object of carrying on the same business through a private limited company. The business, assets, liabilities of the partnership firm vested in the plaintiff company. The members of the Sharma family including Biswanath were the subscribers to the Memorandum of Association of the plaintiff. In other words, they were the promoters of the plaintiff company. The CLB divided the business and assets of the plaintiff company in the manner indicated above. The Saraswati Group was given the Kolkata unit of the plaintiff company. The Biswanath Group was given the Delhi and Baddi units. Biswanath Group was directed to float a separate company adding prefix or suffix to the corporate name used by the plaintiff company and was given the liberty to carry on the same business that they had been carrying on through the plaintiff company. It is important to note that neither of the groups challenged the aforesaid CLB order before a higher forum. It is clear that the rights and obligations of the two groups vis-a-vis each other in relation to the family business of manufacture and sale of Banphool hair oil crystallized in the CLB order. The Saraswati Group was given exclusive control of the plaintiff company and the right to carry on the family business at the Kolkata unit through the instrumentality of the plaintiff company. The Biswanath Group was granted liberty to carry on the same family business through a newly floated private limited company at the Delhi and Baddi units. There was thus, an equitable division of the business and assets of the plaintiff company between the two groups - Application dismissed.

Summary

Issues Involved:
1. Alleged infringement of copyright in the artistic work 'BANPHOOL' (Label) and 'BANPHOOL OIL' (Carton).
2. Entitlement to use the name 'BANPHOOL' on the label and carton for marketing hair oil.
3. Division of business and assets of the plaintiff company between two factions of the Sharma family.
4. Suppression of material facts and forum shopping by the plaintiff.

Detailed Analysis:

1. Alleged Infringement of Copyright:
The plaintiff claimed ownership of the copyright in the artistic works 'BANPHOOL' (Label) and 'BANPHOOL OIL' (Carton) and sought an injunction to prevent the defendant from using these works. The plaintiff argued that the defendant’s use of these works constituted an infringement of their copyright under Sections 51 and 55 of the Copyright Act, 1957. The plaintiff relied on the decision in N.T. Raghunathan & Anr. vs. All India Reporter Ltd. and other case laws to support their claim.

2. Entitlement to Use the Name 'BANPHOOL':
The defendant argued that the order dated 14th September 2011 by the Company Law Board (CLB) allowed them to carry on the same business as the plaintiff, which included using the name 'BANPHOOL'. The CLB order divided the business and assets of the plaintiff company between the two factions of the Sharma family, giving the Biswanath Group (defendant) the right to carry on the same business through a new company. The court found that the CLB order, which was not challenged, allowed the defendant to use the name 'BANPHOOL' for their business.

3. Division of Business and Assets:
The CLB order was crucial in this case. It divided the business and assets of the plaintiff company between the Saraswati Group and the Biswanath Group. The Saraswati Group received the Kolkata unit, while the Biswanath Group received the Delhi and Baddi units. The CLB explicitly permitted the Biswanath Group to float a new company and carry on the same business. The court noted that this division was equitable and that the Biswanath Group was entitled to use the name 'BANPHOOL' as part of their business operations.

4. Suppression of Material Facts and Forum Shopping:
The defendant accused the plaintiff of suppressing material facts and engaging in forum shopping. The plaintiff had filed an application before the CLB with prayers similar to those in the present petition but did not disclose the prayers in the current petition. The court found that the plaintiff was less than candid and failed to make a full and frank disclosure, which is essential for seeking equitable relief. However, since the court rejected the plaintiff’s application on merits, it did not base its decision solely on the issue of suppression of material facts.

Court’s View:
The court concluded that the defendant was entitled to use the name 'BANPHOOL' on its label and carton for marketing hair oil. The court emphasized that the CLB order, which was not challenged by either party, allowed the Biswanath Group to carry on the same business, including the use of the name 'BANPHOOL'. The court found that it would be inequitable to restrain the defendant from using the name 'BANPHOOL', given the CLB's findings and the equitable division of the business and assets.

Conclusion:
The plaintiff’s application for an injunction was dismissed. The court held that the defendant was entitled to use the name 'BANPHOOL' for their business operations as per the CLB order. The court also noted the plaintiff’s lack of candor but based its decision on the merits of the case. There was no order as to costs, and urgent certified photocopies of the judgment were to be provided upon compliance with necessary formalities.