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TMI Blog2007 (4) TMI 786X X X X Extracts X X X X X X X X Extracts X X X X ..... clause of the Memorandum of Association with the stipulation that till the disposal of the petition it shall not commence any business other than automotive parts and electrical accessories as indicated in para 5 of its application CA 365 of 2006. 3. The facts giving rise to the appeal are as follows: That the appellant is a company organized and existing under the laws of Austria having its registered office at Sonnenuhrgasse 4, A-1060, Vienna, Austria. It is engaged in the manufacture of Circular Weaving Machines and machinery for plastic processing, packaging and textile industries for last 167 years. M/s Lohia Engineering Works, a firm incorporated having its registered office at 73-A, Fazal Ganj, Kanpur, India entered into a contract dated December 14 th, 1980 with Maschinenfabrik Starlinger Co., the company incorporated under the laws of Austria (now the appellant) to form a new company by the name of Lohia Starlinger Ltd., the respondent or any other company mutually agreed upon for undertaking the manufacture of the machinery for production of PP/ HDPE Woven fabrics, described in the agreement as follows: I. CIRCULAR WEAVING MACHINE, TYPE HD4 with necessary accessories lik ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd shall render to STARLINGER an account of the machines sold and delivered or exported by them every six (6) months. STARLINGER shall have the right to examine and verify such records by an authorised representative of STARLINGER or any independent chartered accountant. 27. That New Company can market their products as Licensee of STARLINGER. 28. The New Company shall be free to export their products to all countries except Brazil and Austria where STARLINGER have already got necessary arrangements. However, in order not to have a clash of interest, it is agreed that the New Company will route all their exports through the worldwide sales organization of STARLINGER. 31. All disputes, differences and disagreements arising in connection with this Agreement shall be settled mutually as far as possible, failing which the same will be rendered to the International Chamber of Commerce, Zurich and finally settled under the Rules of the said Arbitration court of the Chamber shall be final and binding on the parties thereto. 5. A supplementary agreement dated 13.4.1982 was entered into between the parties by which it was agreed that payment of royalty/ lumpsum payment made by Lohia Starlin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvest its shares, STACO will have the right of first refusal but this right will not be applicable to transfer between members of the Lohia family themselves. The payment of price was to be worked out in the same manner in which the shares of STACO were to be valued in case of offer of sale to LSL. Cost of shares were to be worked out by adding simple interest at the rate of 10% from the date of payment by STACO to LSL deducting sum total of outstanding paid of LSL in Austrian Shilling. The agreement further provided voting rights held by STACO to be exercised by Mr. F.X. Huemer or his immediate family members and in the event they ceased to be in the management, the LSL shares held by STACO shall be deemed to have been offered for sale to Lohia family in accordance with the agreement. The agreement was subject to arbitration in English language with applicable Indian laws in accordance with the rules of arbitration of International Chambers of Commerce, Paris. 7. A separate contract dated 30.6.1992 was executed for manufacture of 'Circular Weaving Machine', which were described in the agreement as under: I. Circular Weaving Machine, type HD4 with necessary accessories like ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e notices to be also faxed and e-mailed to the petitioner at its fax numbers -43- 2674-80024 and the e-mail address [email protected]. Pending final decision on the petition, the petitioner seeks issue of the following ad-interim ex-parte orders: (a) to direct the Company Respondents to give sufficient notice of all the shareholders meeting in the timely fashion to the petitioner; (b) to direct the appointment of nominee of the Petitioner on the Board of Directors of the Company till the disposal of the Petition; (c) to direct the Company to permit appointment of an alternate director of nominee of the Petitioner, if allowed to be appointed under (b) above; (d) any other order or direction or any such other relief in the nature thereof as this Hon'ble Bench may deem just fit and proper in the facts and circumstances of the case as may render justice may also be granted. 11. The parties exchanges pleadings in CLB. The respondent company filed its reply on 25.11.2005 and thereafter filed the Original Suit No. 788 of 2006 in the Court of Civil Judge (SD) Kanpur Nagar, Raj Kumar Lohia and Anr. v. Lohia Starlinger Ltd. and Ors. impleading Starlinger Co. Ges. m.b.H. as defendant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transfer of shares in favour of the Plaintiff No. 2 in respect of STACO Shares, the details whereof is given in the Annexure 'A' of the Plaint. (f) Grant such other and further reliefs as may be required by the nature and circumstances of the case, and (g) Costs of the suit. 12. The cause of action to file the suit is stated to have arisen (para 44 of the plaint) to the plaintiff firstly on 5th August, 2005, when the defendant No. 2 filed the Company Petition No. 62 of 2005 before the Company Law Board and thereby sought to repudiate the contract for sale and transfer of STACO shares by the defendant No. 2 to plaintiff No. 2 and then on 1st December, 2005, when the legal notice of the plaintiff demanding specific performance of the contract was served on defendant No. 2 and then again on 17.1.2006, when a reply notice dated 17.1.2006 was given purportedly to deny the concluded valid and binding contract between the plaintiffs and defendant No. 2 for the sale of STACO shares. 13. During the pendency of the company petition in CLB, the respondents issued notices to convene an AGM on 30.9.2006 for amending the objects clause, for manufacturing automotive parts and accessories ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ever, declined to amicably settle the matter and to end the oppression and mismanagement. Having regard to breakdown of relationship, lack of confidence between each other, and the exclusion of the petitioner from participating in the affairs of the company, coupled with the fact that company wanted to start business in an area in which the petitioner is not involved to continue to use the word 'Starlinger' as part of its corporate name, illegally implying the trade connection between petitioner and the said products, it would be just and fair that the respondents be directed to buy out the shares of the petitioner at a price determined by the Board and further to direct the respondent No. l to omit the word 'Starlinger' from its corporate name since the joint venture between the parties had come to an end. 16. The application for amendment in the pleading is still pending and is likely to come up before CLB on the next date. 17. In the meantime as the special resolution was passed in AGM on 30.9.2006 and that the appellant apprehended commencement of new business by the respondents to be detrimental to the interest of the petitioner and to damage its reputation and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds', in the name of 'Starlinger', it also amounts to misleading the public/ consumer and at the same time damaging the reputation/ goodwill of the appellant. The manufacture of automotive parts and accessories was not the objective for which the new company was initially set up. The essence of the agreement between the parties was to manufacture machinery described in the agreement and use of name 'Starlinger' as part of corporate name, which has come to an end. The CLB has failed to exercise its jurisdiction in protecting the intellectual property rights of the appellant. As a minority shareholder under an agreement, which basically transferred the technical knowhow with certain conditions, the interest of the minority shareholder is intricately mixed with the protection of its intellectual property rights. 19. Shri P.V. Kapoor has relied upon the judgment in Pearson Education Inc. v. Prentice Hall India (P) Ltd. and Ors. 2005 VII AD (Delhi) 693 in which the Court held: However, wisdom of CLB's remarks was questioned by the learned Counsel for the petitioner, and rightly so, by submitting that under the garb that it would be against the interest of the comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stions raised in the ground of appeal are questions of fact and not questions of law to be considered by the Court. Further he submits that the appellant had clearly held out in para 6.31 of the company petition that the misuse of trade mark was already under judicial scrutiny of the Kanpur Court for reference to arbitration, and thus the same could not be agitated and made subject matter of the petition. The prayers made in the company petition have not been amended so far, and thus the issue with regard to use of the trade name 'Starlinger' could not be raised and considered by the CLB. He further submits that the appellants have not produced the resolution of Board of Directors authorising Ms. Manjula Chawla to represent the company registered in Austria. Without prejudice to these preliminary objections he submits that on merits the objects clause has been amended in the AGM, which was not attended by the appellant company and that the issue in the present case is not the use of trade name but the name of the company under a contract between the parties. He submits that although it was not necessary to amend the objects clause as objects given in the Memorandum of Assoc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case do not pose any difficulty particularly for the reason that the Managing Director has neither placed on record anything to justify issue of further share capital nor has it been shown that proper procedure was followed in allotting the additional share capital. Conclusion is inevitable that neither was the allotment of additional shares in favour of Ramanujam bona fide nor was it in the interest of the company nor was a proper and legal procedure followed to make the allotment. The motive for the allotment was mala fide, the only motive being to gain control of the company. Therefore, in our view, the entire allotment of shares to Ramanujam has to be set aside. 25. The facts and circumstances prima facie demonstrate that both the groups, in which the appellant has 34.67% shares and is in minority, cannot continue as partner in the joint venture. The reliefs claimed in the company petition, are sought to be amended after the subsequent events in which the uncalled for injunction was obtained from the Civil Court at Kanpur restraining the appellant to participate and vote in the AGM for amendment of object clause, which caused serious prejudice to it. The aggrieved minority ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dge acted well within its jurisdiction in granting an interim injunction that the respondent company shall not use the name 'Baker' as part of their corporate name or in any other manner. The injunction was granted keeping in mind the well established principles, which governed the grant of injunction in an action of passing off and in which the appellant's transporter's reputation and goodwill was likely to be affected. The Supreme Court upheld the reasoning given by the single Judge that the use of name by the respondents is likely to cause confusion and dispassion and that the appellant will suffer damage, if the interim relief was not granted. 29. In Chaneshwar Nath Tewari v. Ghanshyam Dhar Misra AIR 1940 All 185 the Court followed the observation of Woodroffe J. in the decision of Calcutta High Court in 1933 Cal 927 which held, For my part I am always slow to believe that the Court's powers are unequal to its desire; to order that which it believes to be just. 30. The powers under Section 402 of the Companies Act, 1956 are without prejudice to the generality of the powers of the Company Law Board under Sections 397 or 398 and may provide for directions to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in manufacture and sale of specified machinery, but also made an attempt to take away the trade name and the goodwill acquired by minority shareholder globally, would visit them with Consequences, which may not only affect the grant of damages in a passing off action, but will also prejudice the others to seek such ventures in India. The use of corporate name even if it was not a registered mark at the time of agreement, having no legal right of property in the name, may not be an infringement of the trade mark, it may however, be a contractual right granted by joint venture agreement, which is to be withdrawn as soon as the agreement is terminated by an efflux of time or falls apart. 33. In Dawnay Day and Co. Ltd. and Anr. v. Cantor Fitzgerald the International Court of Appeal (Civil Division) recognised the rights to use the name by joint venture agreement to be substantive rights created by the contract. The contract may not have contained all the classes and the points on which the parties to the agreement may have been reached in the course of negotiation. The implied condition that DDCL will continue to be part of Dawny Day group was seeded in under the agreement. 34. The pri ..... X X X X Extracts X X X X X X X X Extracts X X X X
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