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TMI Blog2011 (8) TMI 1282X X X X Extracts X X X X X X X X Extracts X X X X ..... he members of the Ahuja family. Defendant No.4 is the wife of defendant No.3. The plaintiff and defendant No.5 are their sons. Defendant No.6 is the wife of defendant No.5. Defendant Nos.3, 5 and 6 are the partners of the second defendant firm - Marvel Fragrances Company. The plaintiff, defendant No.3 and defendant No.5 hold approximately 26.83%, 46.11% and 27.01% of the issued, subscribed and paid up equity capital of the first defendant. 4. I will, for the purpose of this Notice of Motion, ignore the allegations as to which of the parties are responsible for the decline in the performance of the first defendant. The marks in question are identical. It is reasonable to presume that the mark is valuable and has acquired a reputation and goodwill sufficient, absent anything else, to maintain successfully an action for passing off. The parties must in any event be deemed to have admitted the same - the plaintiff by bringing the action to protect the mark and the defendants by resisting it and insisting on being entitled to use it pursuant to a family arrangement I will refer to. It is, therefore, not necessary to refer to the sales figures and the promotional expenses incurred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nging the action, but on behalf of the company. This is axiomatic for the shareholders bringing the action have no proprietary right or interest in the trademarks of the company in their personal capacity and, therefore, cannot seek reliefs for or on their behalf personally. 8. The question then is whether a derivative action is maintainable to restrain the infringement of a company's trademark and to challenge a tort of passing off on behalf of the company. 9. It is unnecessary for the purpose of deciding this question to discuss at length the ingredients of goodwill or the nature of a proprietor's right in respect of a trademark, registered or not. It is sufficient to note that a proprietor of a trademark has a valuable right therein entitling him to the protection thereof by bringing an action for infringement or passing off. Goodwill is a species of personal property capable of being sold or charged or of being bequeathed by will. Goodwill in a mark, in any event, is an asset and the proprietor of the mark has a right therein. The purpose of a claim in passing off is to the protect goodwill from damage to it. Intellectual property rights are no less important or v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tainable by a shareholder who holds less than ten per cent of the equity shares of the company, there is no warrant for coming to the conclusion that a shareholder holding more than ten per cent of the equity shares of the company cannot maintain a derivative action and must be relegated to filing a petition under sections 397, 398. The submission is founded on the erroneous basis that a party holding less than ten per cent of the equity shares is absolutely barred from filing a petition under sections 397, 398. In view of section 399(4) of the Companies Act, 1956, even such a shareholder is entitled to file a petition under sections 397 and 398 with the permission of the Central Government. 15. This brings me to the merits of the case. 16. It is necessary to note only a few facts. The first defendant was incorporated on 15th June, 1992 in the name of Bam Synthetics Private Limited. It was taken over by the Ahuja family on or about 15th December, 1995, which changed its name to the present name. On 24th March, 2004, the first defendant applied for registration of the trade mark Marvel claiming user from 15th June, 1992 under class 3. The application was abandoned or reje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of the trade mark Marvel and Mysore respectively. The plaintiff was to hand over the shares in defendant No.1 to defendant No.5 and defendant No.5 would be entitled to start and carry on business under the trade name Marvel . In consideration thereof, the plaintiff would receive ownership and exclusive control of the business entities carrying on business under the trade name Mysore as well as other assets. This settlement was acted upon by the plaintiff and defendant Nos.3 and 5. 19. There are several factors which establish prima facie the family settlement pleaded by the defendants. I will refer to only a few of them. 20. There are two family firms - Mysore Fine Agarbatti Factory (Bombay) and Mysore Fine Agarbatti Factory (Kandla). I will, for convenience, refer to them as Mysore Fine Bombay and Mysore Fine Kandla. The family settlement was acted upon, inter-alia, by transferring the interests in the firms to the plaintiff and/or his son. This was done in the following manner. 21. Prior to 15th February, 2008, defendant No.3 and the plaintiff had a 70% and 30% share respectively in Mysore Fine Bombay. Pursuant to the family arrangement, defendant No.3 tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing partners as per the family settlement between them have agreed to retire from the said partnership w.e.f. 1st DAY OF APRIL, 2008 leaving the continuing partners to continue the same business as partners of the said firm. [emphasis supplied] The plaintiff, defendant No.5 and defendant No.6 were the retiring partners. The plaintiff has offered no explanation for the reference to the family settlement in this deed. 25(A) A partnership deed dated 23rd July, 2008 was executed which recorded that the plaintiff, defendant No.5 and defendant No.6 retired. The defendants contend that the same was pursuant to the family settlement. Defendant No.4 (wife of defendant No.3 and the mother of the plaintiff and defendant No.5) was admitted as a partner. Under this deed the plaintiff's son Sanjay and defendant Nos.3 and 4 had a 35%, 50% and 15% share respectively in the firm. 26. The partnership deed and the conduct of the parties, however, establishes the defendants case regarding the family settlement and their contention that defendant Nos.3 and 4 continued in the firm Mysore Scents Company only to ensure the repayment of the amounts due to them by the firm Mysore Scents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts of the firm. Most important they were not entitled to the goodwill. The provision disentitling the defendant Nos.3 and 4 to the goodwill itself establishes the value of the goodwill. If it had no value, the plaintiff and/or his son would not have insisted upon such a provision. Equally important and, in financial terms probably even more important, is the fact that the assets were not to be revalued. Anybody familiar with accounting would immediately understand the significance, relevance and need for such a provision. The book value would obviously be far less than the market value of the assets. It must be remembered that this firm was constituted many years ago. 27. Thus, the intention to transfer all the assets of the firm Mysore Scents Company to the plaintiff and/or his son without any consideration and, in any event, at a relatively negligible consideration is clear. 28. The firm admittedly has valuable assets, including immovable properties. When the family settlement was arrived at, the turnover was almost ₹ 7.00 crores. That, today, under the plaintiff's and/or his son's management, it may have reduced to about ₹ 1.50 crores is another matt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncluded an agreement between the parties to permit the exclusive use of the word Marvel by defendant No.5 and not by the plaintiff or his son Sanjay and the use of the word Mysore by the plaintiff and/or his son and not by the defendants. The defendants' case, therefore rests on surer footing than mere acquiescence or waiver on the plaintiff's part. It rests on the surer footing of the plaintiff's agreement to permit the defendants to use the mark for valuable consideration which he received, has appropriated and enjoyed during this period. To permit him now to challenge the defendants' right to use the mark would be a travesty of justice. 32. Defendant No.3 stated that an office premises at Noida belonging to defendant No.1 was given to the plaintiff at its face value/original purchase value of ₹ 25,00,000/-. The plaintiff thereby benefitted by about ₹ 75,00,000/-. In the rejoinder, the plaintiff states that Mysore Scents acquired the property. The plaintiff further stated that he has retired from Mysore Scents. That, however, makes no difference. As stated above, for all practical purposes, all the assets of Mysore Scents Company have in effe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e separation. 37. By another e-mail also dated 29th September, 2008, addressed on behalf of Mysore Scents, the plaintiff informed another customer as follows :- We would like to take the opportunity to introduce to you our new firm - Mysore Scents Company, one of the leading manufacturers and exporters of Home Fragrances in India. Until April 3008, Mysore Scents Company was a part of Marvel Group, however the constitution of the said firm has changed ever since and Mysore Scents is now run by Mr.M.D. Ahuja, Founder Chairman of Marvel Group and me Mr. Sanjay Ahuja. The second paragraph quoted above again suggests that Mysore Scents Company is now not a part of the Marvel Group. 38. The customer, by its reply enquired what the change meant for it stating that they had in the past dealt with defendant No.5. By an e-mail dated 30th September, 2008, the plaintiff stated, inter-alia, as follows :- Until April 3008, Mysore Scents Company was a part of Marvel Group, however the constitution of the said firm has changed ever since and Mysore Scents is now run by Mr.M.D. Ahuja, Founder Chairman of Marvel Group and me Mr. Sanjay Ahuja. Further, we wish to inform yo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that anybody dealing with the first defendant would do so at their own risk. The attempt obviously was to affect the functioning of the first defendant. 42. It is important to note that the brochure/website of Mysore Scents Company uses the prominent logo/device which has been created for the first defendant. There is no explanation why the plaintiff has not filed any proceedings against Mysore Scents Company for infringement of the mark/logo. This does not indicate a concern for the company. 43. The contention that the defendants' action is not bona fide as defendant No.2 was constituted on 30th May, 2007 i.e. prior to the family settlement is of no relevance. The family settlement may well have been entered into on 30th July, 2008. It can hardly be suggested that the disputes started, the negotiations ensued and the family settlement was arrived at all in a single day. In all probability, these disputes were going on for some time and the broad parameters thereof were settled or were likely to be settled. It is not unnatural that in anticipation thereof, parties took steps, including the formation of the second defendant. 44. In the circumstances, the Notice of Motio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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