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trademarks= grant of injunction against use of the trade name “MORGARDSHAMMAR” and the trademarks “MORGARDSHAMMAR LABEL” and “MH ARROW DEVICE” or any other mark identical or deceptively similar to the trademarks/ CS (OS) No. 863/2010 Page 69 of 69 trade name “MORGARDSHAMMAR LABEL” and “MH ARROW DEVICE” and “MORGARDSHAMMAR” of the plaintiff= Defendant No. 1 has to blame itself for the revocation of the license. Till the time defendant No.1 maintained the share holding of the plaintiff above 25%, plaintiff has permitted the defendant No. 1 to use the trade mark/trade name. It is only when defendant No. 1 reduced the share holding of the plaintiff in defendant No. 1 to less than 25%, plaintiff has exercised its option of revoking the license.

Rolling mill for cold rolling metal sheet like...

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CS (OS) No. 863/2010 Page 1 of 69

IN THE HIGH COURT OF DELHI AT NEW DELHI
+ CS(OS) 863/2010
*
Reserved on: 5th September, 2011
Decided on: 2nd January, 2012
MORGARDSHAMMAR AB ……….PLAINITFF
Through: Mr. Suhail Dutt, Sr. Adv.
with Mr. Abhixit Singh, Mr.
A. Singh Gyani and Mr. Qazi
Riaz Masood, Advs.
Versus
MORGARDSHAMMAR
INDIA PVT. LTD & ANR. .……….DEFENDANTS
Through: Mr. Rajive Sawhney, Sr.
Adv. with Mr. Deepak
Khurana and Ms. Aditi
Sharma, Advs.
Coram:
HON’BLE MR. JUSTICE A.K. PATHAK
A.K. PATHAK, J.
1. Plaintiff has filed the present suit for permanent injunction
against the defendants for restraining the infringement of plaintiff‟s
trademark and trade name, passing off, delivery up of the infringing
material and rendition of accounts.
2. Plaintiff‟s case, as set out in plaint is that the plaintiff is a
company registered in Sweden. It is engaged in the business of
CS (OS) No. 863/2010 Page 2 of 69
manufacturing, designing, fabricating and delivering revamps of all
sorts of rolling mills including guide system, equipments and spare
parts of the rolling mills. The plaintiff was formerly known as
PREMIARAKTOREN 689 AKTIEBOLAG and NYA
MORGARDSHAMMAR AKTIEBOLAG. Plaintiff has extensive
business worldwide and has proprietary rights in the trade name
“MORGARDSHAMMAR” and trademarks
“MORGARDSHAMMAR (LABEL)” and “MH ARROW
DEVICE”. Several companies have been incorporated by the
plaintiff in USA and other parts of the world with the said trade
name “MORGARDSHAMMAR”.
3. Centro MORGARDSHAMMAR AKTIEBOLAG
(hereinafter referred to as “Volvo”) had applied for and obtained
registration in India in respect of trademark “MH
MORGARDSHAMMAR (LABEL)” bearing no.393277 in Class 7
with respect to rolling mills machinery, parts thereof and fittings.
Volvo was also the proprietor and owner of the trademark “MH
ARROW DEVICE” with respect to rolling mills machinery, parts
thereof and fittings.
4. Pursuant to a Collaboration Agreement and a Shareholders
Agreement, both dated 3rd July, 1982, between S.K.Gupta &
CS (OS) No. 863/2010 Page 3 of 69
Associates and Volvo and between Modi Group and Volvo
respectively, defendant No.1 (a joint venture company of Volvo and
Modi Group) was incorporated in India in the year 1983, for the
purpose of designing, planning, fabricating, constructing,
manufacturing, sub-contracting, providing, supplying, installing,
commissioning, working, operating, purchase import, exporting,
selling and dealing in all kinds of rolling mills including guide
systems equipments, spare parts for rolling mills and accessories
thereof, acting as consulting engineers, supplier of process knowhow
and technology in hot and cold rolling of ferrous and nonferrous
metals. The technical knowhow was provided to the
defendant No.1 by Volvo. 60% shareholding was held by the Modi
Group; whereas 40% shareholding was held by Volvo in the
defendant No.1. The defendant Nos.2 to 8 are Directors of
defendant No.1 Company.
5. Volvo, vide a non-exclusive Trade Mark License/Registered
User Agreement(hereinafter referred to as “TMLA” for short) dated
September 10, 1984, permitted the defendant No.1 to use its
aforementioned trademarks/trade name i.e., “MH
MORGARDSHAMMAR” (LABEL), “MH ARROW DEVICE”
and “MORGARDSHAMMAR” on the terms and conditions as
CS (OS) No. 863/2010 Page 4 of 69
stipulated in the said Agreement. Defendant No.1 had been using
the aforesaid trademarks/trade name for the purposes of its business
on the basis of permissive rights given under the said TMLA and
the Name License Agreement dated 19th April, 1983 (hereinafter
referred to as “NLA” for short). In terms of Clause 15(a) of the
TMLA, the right of permissive user of aforesaid trademarks/trade
name was to come to an end upon the shareholding of Volvo in the
defendant No.1 Company becoming lower than 25%. The said
Clause 15(a) reads as under:
“15. This agreement shall take effect from the
date of signing hereof and shall be without
limit of period subject to termination as
hereinafter provided:
(a) By the proprietors giving to the Users
notice in writing of its intention to terminate
this Agreement forthwith upon the equity
participation of the Proprietors with the User
being reduced to less than twenty-five percent
of the paid up equity share capital of the
Users”.
6. Clause 15 (a) was also incorporated in the Articles of
Association of defendant No.1 in Article 219.
7. Vide Asset Purchase Agreement dated June 16, 1987
(hereinafter referred to as “APA” for short), Volvo transferred its
assets, business trademarks, patents etc. to the plaintiff along with
CS (OS) No. 863/2010 Page 5 of 69
an option to buy from Volvo the 80,000 equity shares held by
Volvo in the defendant No.1. Vide Agreement dated 22nd
December, 1993, the said 80,000 equity shares held by Volvo in
defendant No.1 were formally transferred by Volvo to plaintiff.
However, defendant No.1 refused to effect the transfer of shares,
thus, Volvo filed a petition bearing no. 40/111/95-CLB before the
Company Law Board, Northern Region Bench, New Delhi (“CLB”,
for short), against the defendant seeking registration of the transfer
of 80,000 equity shares held by Volvo in favour of plaintiff and the
delivery of share certificates to the plaintiff, who was impleaded as
2nd respondent in the said petition. Defendant No.1 was fully aware
about the APA and the transfer of the trademarks etc. by Volvo to
the plaintiff in the said petition. Defendant No.1 opposed the said
petition, however, vide judgment dated 16th June, 1998, said
petition was allowed. Thereafter, 80,000 equity shares held by
Volvo in defendant No.1 were transferred and registered in the
name of the plaintiff in the records of defendant No.1. The
Directors of Volvo on board of defendant No.1 resigned after the
execution of APA and transfer of shares.
8. Plaintiff applied for change of name of the proprietor/owner
in respect of the trademark No.393277. As required by Trade Mark
CS (OS) No. 863/2010 Page 6 of 69
Authorities, a Confirmatory Deed of Assignment (hereinafter
referred to as “CDA” for short) dated August 13, 2008 was
executed between Volvo and plaintiff and subsequently, on
September 23, 2008, plaintiff‟s name was recorded as a
proprietor/owner of the said trade mark by the Trade Mark Registry.
Plaintiff permitted the defendant No.1 to continue to use the
aforesaid trademarks/trade name on the assumption that it had
stepped into the shoes of Volvo with regard to its 40 %
shareholding.
9. In November-December 2009, plaintiff came to know that
without the plaintiff‟s knowledge, resolution to amend the Articles
of Association of defendant No.1 had been passed and Article 219
had been deleted from its Articles of Association. On January 25th
2008, the defendant No.1, in connivance and collusion with
majority shareholders of the Modi Group and the defendant Nos. 2
to 8, allotted 7,50,000 equity shares of the defendant No.1 to
defendant No.2, thereby increasing equity shareholding of the Modi
Group which resulted in reducing the percentage of shareholding of
the plaintiff in the defendant No.1 from 40% to 8%. As plaintiff‟s
equity shareholding in the defendant No.1 had been reduced below
25%, as per Clause 15 (a) of the TMLA, the defendant No.1 was
CS (OS) No. 863/2010 Page 7 of 69
liable to cease and desist from using the trademarks and trade name
“MH MORGARDSHAMMAR (LABEL)”, “MH ARROW
DEVICE” and “MORGADSHAMMAR”.
10. Accordingly, plaintiff served cease and desist notice dated
March 15, 2010 upon defendant No.1 calling upon it to discontinue
the use of aforesaid trademarks/trade name “MH
MORGARDSHAMMAR (LABEL)”, “MH ARROW DEVICE”
and “MORGADSHAMMAR” for the purpose of business within 21
days of receipt of notice. However, despite the receipt of notice,
defendant No.1 continued to use the registered trademarks “MH
MORGARDSHAMMAR”, “MH ARROW DEVICE” and the
corporate name “MORGARDSHAMMAR”. The defendant No.1,
in its reply dated 9th April, 2010, has taken a stand that TMLA was
in perpetuity; plaintiff had no concern with the said agreement; and
no notice of assignment had been given to the defendant No.1.
11. In the written statement, defendant No.1 has taken certain
preliminary objections besides replying on merits. It is alleged that
the plaint did not disclose any cause of action, thus, was liable to be
dismissed; there was no privity of contract between the plaintiff and
defendant No. 1, as a third party, namely, Volvo alone had a right to
terminate the agreement which was entered into between Volvo and
CS (OS) No. 863/2010 Page 8 of 69
defendant No.1. Since, Volvo never exercised those rights, Volvo
has waived, surrendered and abandoned its rights to terminate the
TMLA. Defendant No.1 has denied that Volvo had sold its
trademarks to the plaintiff. Upon the alleged transfer of 80,000
equity shares held by Volvo in defendant No.1 in favor of plaintiff
in 1993, Volvo ceased to hold any shares in the defendant No.1 and
since it chose not to exercise its rights to terminate the said
agreement with the defendant No.1, it rather had abandoned,
released, waived and relinquished its rights to and in favor of the
defendant No.1. There has been no assignment by Volvo of its
rights under the TMLA dated 10.09.1984 executed in favor of the
defendant No.1. The assignment of rights could have been only
with the consent and acceptance given by defendant No.1. As no
such consent/acceptance had either been sought from or given by
the defendant No.1, the plaintiff is a stranger to the contract
between the defendant No.1 and Volvo.
12. It is also the case of defendant No.1 that the suit is barred by
limitation. The cause of action, if any, arose when Volvo allegedly
transferred its shares in defendant No.1 to the plaintiff way back in
the year 1993. Upon the said transfer, Volvo ceased to hold any
shares in the defendant No.1 and at that stage rights under the
CS (OS) No. 863/2010 Page 9 of 69
TMLA could have been exercised, which, however, were not
exercised. In any case, the same could have been exercised within
three years from the date of transfer of shares by Volvo to plaintiff.
It was further alleged that the notice of Annual General Meeting of
shareholders, which was held on 27th September, 2007, was issued
to all the shareholders on 24th August, 2007. However, plaintiff did
not attend the said meeting. Subsequently, 7, 50,000 shares were
allotted in favor of defendant No.2 in the meeting of Board of
Directors of defendant No.1, held on 25th January, 2008. That
apart, notice of Extra Ordinary General Meeting held on 20th
March, 2006, whereby resolution to delete Article 219 from the
Articles of Association was passed, had also been given on 20th
February, 2006. The case of defendant No.1, as set out in the
written statement, is that the trademarks in dispute are its property
and the said trademarks are associated with the name, reputation
and goodwill of the defendant No.1. It has been using these
trademarks from the period much prior to the alleged purchase of
shares and other assets by the plaintiff. Assignment of trademarks
as stipulated in the APA was subject to defendant No.1‟s consent,
however, no notice of the alleged CDA dated 13th August, 2008 was
given to the defendant No.1. Receipt of legal notice dated 15th
CS (OS) No. 863/2010 Page 10 of 69
March 2010 has been admitted by the defendant No.1, however, its
contents have been denied. It has been denied that plaintiff is
proprietor/owner of the trademarks/ trade name
“MORGARDSHAMMAR (LABEL)”, “MH ARROW DEVICE”
and “MORGARDSHAMMAR”. It is categorically alleged that the,
plaintiff has no right to demand from the defendants to cease and
desist the use of aforesaid trademarks/ trade name.
13. In the replication, plaintiff has denied the contents of the
written statement and reiterated the averments made in the plaint.
14. On the pleadings of the parties following issues were framed
on 2nd December, 2010:
“1. Whether the civil suit filed by the
plaintiff does not disclose any cause of
action and is liable to be dismissed under
Order 7 Rule 11 of the CPC, as alleged by
the defendants? (OPD)
2. Whether the suit is barred by
limitation as alleged by the defendants?
(OPD)
3. Whether the plaintiff has exclusive
rights and is the proprietor of trade mark?
„MH MORGARDSHAMMAR‟ (label) and
„MH ARROW DEVICE‟, trade name /
corporate name „MORGARDSHAMMAR‟
and is entitled under Trade Mark
Agreement/ Registered User Agreement or
under law to restrain the defendants from
using the said trademarks and trade name?
(OPP)
CS (OS) No. 863/2010 Page 11 of 69
4. Whether the assignment by VOLVO
to the plaintiff of the trademarks and trade
name, which is the subject matter of the suit,
was subject to prior consent of defendant
No. 1? (OPP)
5. Whether the plaintiff is entitled to
relief(s), as prayed for? (OPP)
6. Relief.”
15. In FAO (OS) No. 666/2010, vide order dated 22nd November,
2010, parties agreed that the affidavits in evidence, along with
documents, be filed by both the parties and that the witnesses need
not be cross-examined. It was also agreed between the parties that
the documents filed by the respective parties may be read in
evidence, in terms of the affidavits filed by the parties. It appears
that the parties agreed to this course as entire case is based on the
documentary evidence and not on ocular evidence.
16. Plaintiff filed affidavit of Lars Fors, who had been working
with the plaintiff right from 1987 onwards. Initially he worked as
General Manager (Finance & Administration) from 1989 to 2000
and thereafter Managing Director from 2000-2003. In his affidavit,
he reiterated the averments made in the plaint which have already
been narrated hereinabove. Collaboration Agreement and the
Shareholders Agreement both dated 3rd June, 1982 executed
CS (OS) No. 863/2010 Page 12 of 69
between S.K. Gupta & Associates and Volvo and Modi Group have
been exhibited as Ex.PW1/1 and Ex.PW1/2 respectively.
Supplementary Collaboration Agreement dated 18th August, 1982
has been exhibited as Ex.PW1/3. Trade Mark License/Registered
User Agreement dated 10th September, 1984 executed between
Volvo and defendant No.1 has been proved as Ex.PW1/4. Name
License Agreement dated 19th April, 1983 executed between Volvo
and defendant No. 1 has been proved as Ex.PW1/5. Asset Purchase
Agreement executed between Volvo and plaintiff has been
exhibited as Ex.PW1/6. Annual Report of defendant No. 1 has been
proved as Ex. PW1/7. Share Purchase Agreement dated 22nd
December, 1993 executed between Volvo and plaintiff in respect of
shareholding of Volvo in defendant No. 1, i.e. 80,000 shares, has
been exhibited as Ex. PW1/8. Judgment dated 16th June, 1998,
passed by Company Law Board, in a petition filed by Volvo
thereby directing the defendant No. 1 to register 80,000 equity
shares of Volvo in favour of the plaintiff, has been exhibited as
Ex.PW1/9. Confirmatory Deed of Assignment dated 13th August,
2008 executed between Volvo and plaintiff has been exhibited as
Ex.PW1/10. Certification of Trademark Registry certifying the
ownership of plaintiff in respect of registered trademark number
CS (OS) No. 863/2010 Page 13 of 69
393277 namely “Morgardshammar” (Label) has been exhibited as
Ex.PW1/11. “Morgardshammar” (Label) has been exhibited as
Ex.PW1/12. Copy of Minutes of Meeting of Board of Directors of
defendant No.1 dated 31st July, 1998 has been exhibited as
Ex.PW1/13. In the said meeting the Minutes of Board Meeting
dated 26th October, 1998 were approved and the same have also
been annexed with Ex.PW1/13. Legal notice dated 15th March,
2010 whereby plaintiff revoked the TMLA and called upon the
defendant No. 1 to stop using the trademarks/trade name within 21
days of the receipt of the notice has been exhibited as Ex.PW1/14.
Reply dated 9th April, 2010 of defendant No. 1 has been exhibited
as Ex.PW1/15.
17. Defendant No. 1 has filed affidavit of its authorized
signatory, namely, Brajeshwar Dayal Garg. Certain documents
have been filed along with the affidavit and given exhibit marks as
PW1/1 to PW1/12. It may be noted that these documents are of the
defendant and ought to have been marked as DW1/1 to D1/12.
Accordingly, these exhibits shall be read as DW1/1 to DW1/12
instead of PW1/1 to PW1/12. Letters dated 8th March, 1999, 16th
March, 1999 and 18th May, 1999 received by defendant No. 1 from
the nominee directors of Volvo on the Board of defendant No.1
CS (OS) No. 863/2010 Page 14 of 69
have been exhibited as Ex. DW1/1 to DW1/3 respectively. Certified
copy of notice dated 20th February, 2006 with regard to convening
the Extraordinary General Meeting (EGM) has been exhibited as
Ex.DW1/4. Postal receipt in respect of service of notice on the
plaintiff has been exhibited as DW1/5. Form No. 23 submitted with
the Registrar of Companies (ROC) by defendant No.1 pursuant to
the said meeting has been exhibited as Ex.DW1/6. Certified copy
of Minutes of Annual General Meeting (AGM) of shareholders of
defendant No. 1 dated 27th September, 2007 has been proved as Ex.
DW1/7. Certified copy of Annual Report for the financial year
2006-07 has been proved as Ex. DW1/8. Certified copy of Form
20B filed with ROC in respect of filing of Annual Return for the
financial year 2006-07 has been exhibited as Ex. DW1/9. Certified
copy of Form 23 in respect of meeting dated 27th September, 2007
has been exhibited as Ex.DW1/10. Certified copy of Board
Resolution dated 25th January, 2008 has been exhibited as Ex.DW
1/11. Certified copy of Form-2 filed with the ROC has been
exhibited as Ex.DW1/12. In his affidavit, witness of defendant
No.1 has supported the averments made in the written statement.
18. It may be noted here that in its written arguments, defendant
No.1 has mentioned that during the hearing of final arguments, it
CS (OS) No. 863/2010 Page 15 of 69
has filed an application under Section 47 and 57 of the Act for
removal/rectification of the trademark registration No.393277 in
Clause 7 for mark “MH MORGARDSHAMMAR” device, before
the Intellectual Property Appellant Board, Chennai. However, no
application under Section 124 of the Act was filed inasmuch as, no
argument was advanced before the conclusion of hearing about the
effect of this event. Accordingly, no cognizance of this fact can be
taken at this stage when only judgment is to be pronounced.
19. I have heard Mr. Sohail Dutt learned senior counsel for the
plaintiff and Mr. Rajive Sawhney learned senior counsel for the
defendants and have perused the entire material on record and my
issue-wise findings are as under : –
Issue Nos. 1, 3 and 4
20. These issues require common discussions and are decided
together.
21. It emerges from the record that the defendant No. 1 was set
up in India as a Joint Venture of Volvo and Modi Group. Initially,
a Collaboration Agreement was entered into between Volvo and
S.K. Gupta & Associates as one of the promoters of defendant
No.1. On the same day, Shareholders Agreement was also executed
CS (OS) No. 863/2010 Page 16 of 69
between Volvo and Modi Group. As per the Shareholders
Agreement, Modi Group was to have 60% shareholding; whereas
Volvo was to retain 40% of the shareholding in defendant No.1.
Defendant No. 1 was set up for fabrication, construction,
manufacturing and supply of rolling mills guide system equipments;
spare parts for the said system as well as spare parts for rolling
mills. Volvo was having enriched experience of several years in the
designing, fabrication, construction and manufacturing of rolling
mills guide system, spare parts for rolling mills and accessories
thereof. Volvo was to provide knowhow and technology for the
designing, fabrication, construction and manufacturing of such
equipments to the defendant No.1, after its incorporation. Volvo
also agreed to allow the defendant No. 1 to use its Intellectual
Property for marketing the products manufactured by defendant
No.1 as also its corporate name. Relevant is Clause 18 of the
Collaboration Agreement in this regard, which reads as under:-
“18. PRODUCT AND CORPORATE
NAME
18.1 Subject to the approval of the relevant
Government authority in India, if required,
the said Equipment manufactured by the new
Company shall be sold under the name “MH
Morgardshammar India” or any other name
indicated by MH and approved by the new
Company. MH and the new Company shall
CS (OS) No. 863/2010 Page 17 of 69
jointly make an application to the Registrar
of Trade Marks under the Indian Trade and
Merchandise Marks Act 1958 for the
appointment of the new Company as
exclusive registered users of the trade mark
“MH Morgardshammar India”, the
registration of which is being applied for by
MH in India, in respect of Roller Guides and
spare parts for Rollar Guides as provided in
Part I and Part II respectively of Annexure A
hereto.
18.2 The use by the new Company of the
name and trade mark set out in para 18.1 and
the right to use the work “Morgardshammar in
its corporate name as per Clause 3 above is
conditional upon the said Equipment being
manufactured by the new Company strictly in
accordance with the specifications laid down,
directions given, know-how, Drawings and
information supplied and technical advice
tendered by MH and of quality set out in
Clause 13 hereof. In the event that the said
Equipment should not any longer comply with
the said requirements MH and the new
Company shall first make joint efforts to
rectify any drawbacks on agreed terms
between MH and the new Company. If,
however, within a period of Ten (10) months
such rectification is not possible, then MH
may terminate the right of the new Company
to use the said corporate name and trade mark
with immediate effect without any right to
compensation to the new Company. Provided
MH shall be entitled to purchase the inventory
of finished goods and/or goods in progress of
the said Equipment at the time of termination
at the cost price of the new Company meaning
CS (OS) No. 863/2010 Page 18 of 69
the ex-factory price less profit. If MH should
not exercise the said option to purchase within
Three (3) months after the termination, the
new company shall be allowed to sell the
inventory under the said trade mark within a
period of one year. In such a case MH shall
be entitled to receive the amount of royalty
stipulated in Clause 1J hereof to the extent of
Fifty percent (50%) thereof.
18.3 MH may stipulate the conditions it
deems fit for the use of the
“Morgardshammar” name in the new
Company‟s activities. The use of the symbol,
logo and trade mark in plain letters and/or
distinctive style on the stationary, in sales
leaflets and other sales promotion material
and on the products of the new Company shall
be subject to prior approval in writing by MH.
18.4 The right of the new Company to use
the word “Morgardshammar” in its corporate
name or to use the trade name and trade mark,
referred to in para 18.1 or the logo, symbol or
design of MH or any other trade mark, trade
name, corporate name, symbol, logo or design
identical with or resembling those used by or
registered for MH shall, without any right to
compensation to the new Company, terminate
on the equity participation of MH with the
new Company being reduced to less than 25%
of the paid- up equity share capital of the new
Company upon written request being made by
MH at any time thereafter to the new
Company, or if this Agreement is terminated
in accordance with para 21.2 or 21.3. All
registrations which the new Company may
CS (OS) No. 863/2010 Page 19 of 69
have obtained with or without the consent of
MH shall be transferred to MH without any
right to compensation to the new Company.
Subject to the provisions of Clause 18.2
hereof, the new company shall have the right
to use such trade name or trade mark on the
said Equipment already manufactured or
which is in the course of manufacture on the
date of such termination.
18.5 Should the right to use the word
“Morgardshammar” in its corporate name
terminate as provided in para 18.2 or 18.4
above, the new company shall take all
necessary steps to make clear to all concerned
that the new Company has no business
connection with MH and shall forthwith adopt
a new corporate name excluding the word
“Morgardshammar”.
18.6 All units of the said Equipment
manufactured by the new Company in
accordance with this Agreement shall display
in a conspicuous manner by means of name
plates or otherwise that they are manufactured
under a license from MH and the text and the
place thereof shall be subject to prior approval
in writing by MH.”
22. Clause 21.1 of the Collaboration Agreement provided that the
agreement shall remain valid for a period of five years from the date
of commencement of commercial production provided such
commencement of commercial production is not delayed beyond
the period of three years from the date of the agreement i.e. for a
CS (OS) No. 863/2010 Page 20 of 69
maximum period of eight years from the date of agreement. Clause
31.2 provided that clause 18, amongst certain other clauses, shall
survive the expiration or termination of the agreement.
23. Clause 1.1 of the Share Holders Agreement provided that
Memorandum and Articles of Association of the company shall as
far as possible incorporate the terms of the agreement. It further
provided that after incorporation of the company, issue of share
holding between Volvo and Modi Group would be 40% and 60%
respectively. Clause 5.1 provided that in the event Volvo or any of
the Indian Shareholders decides to dispose of wholly or partly of its
beneficial ownership or any shares owned by it, the other party shall
have first right to refusal. Relevant Clauses 5.1 and 5.7 read as
under:-
“5.1. In the event that MH or any of the
Indian Shareholders decides to dispose
wholly or partly of its/his beneficial
ownership or any shares owned by it/him, the
Indian Shareholders pro rata to the number of
shares already held by each of them in the
company (in the case of MH wishing to sell)
and MH or its appointee (in the case of any
of the Indian Shareholders wishing to sell)
shall have the right of first refusal at a fair
value to be mutually agreed between seller
and buyer and, failing such agreement, to be
conclusively determined by the Auditors of
CS (OS) No. 863/2010 Page 21 of 69
the Company acting as experts and not as
arbitrators whose decision shall be final and
binding on the parties. In case the Company
has joint Auditors and such joint auditors do
not agree upon a common price they shall
refer the matter to a third auditor who shall
conclusively determine such price. In case
the joint Auditors do not agree to the
appointment of the third auditor, the name of
such third auditor shall be determined by the
Institute of Chartered Accountants in India.
Such price shall, however, be subject to the
approval (if required) of the Government of
India and the Central bank of Sweden.
5.7 If pursuant to this Agreement a transfer
of shares in the Company is made to a person
who is not a party hereto, the Transferor shall
on the sale thereof secure that the proposed
Transferee agrees to be bound by the terms of
this Agreement and shall procure that the
Transferee enters into a legally binding
Agreement containing the terms hereof.”
24. Clause 8.1 further, inter alia, provided that so long as Volvo
holds not less than 25% of the paid up share capital of the company
by itself or along with SWEDFUND or a similar Swedish body
referred to in Clause 1.8, the agreement shall remain in force
subject to, however, “Force Majeure”.
25. It appears that commercial production of defendant No.1
commenced sometime in the year 1984. Admittedly, TMLA was
CS (OS) No. 863/2010 Page 22 of 69
executed by Volvo in favour of defendant No.1 on 10th September,
1984 whereby defendant No.1 was permitted to use trademarks as
mentioned in the Schedule A to the agreement which reads as
under:-
SCHEDULE „A‟
Sl.
No.
Trade Mark Registra
tion/Reg
istration
Applicat
ion No.
Class Specificatio
n of goods
1. MH Arrow
Device
MORGARDS
HAMMAR
378015 7 Rolling Mill
Machinery
and
Equipment
2. MH Arrow
Device
MORGARDS
HAMMAR
India
393277 7 Rolling Mill
Machinery
and
Equipment
and parts and
Accessories
therefor.
26. It has specifically been mentioned in the TMLA that the
license and permission granted was without assigning any
proprietary right in favour of defendant No.1 over the aforesaid
CS (OS) No. 863/2010 Page 23 of 69
trademarks. The relevant clauses of TMLA in this regard are
reproduced herein under:-
“1.(b) Sole license and permission to use the
trade mark bearing no.393277 on or in
relation to the Roller Guides and parts and
accessories thereof to be assembled and/or
manufactured and marketed by or for the
Users under the strict supervision and
control of the Proprietors as hereinafter
mentioned in this Agreement;
(c) non-exclusive license and permission to
use the trade mark No.393277 in relation to
the Rolling Mill machinery and equipment
and parties and accessories therefor except
the Roller Guides and parts and accessories
therefor (for which a sole license and
permission is given to the Users as
mentioned in sub-Clause (b) above) also to
be assembled and/or manufactured and
marketed by or for the Users under the Strict
supervision and control of the Proprietors as
hereinafter mentioned in this Agreement.
The licenses and permissions granted under
this clause shall extent to and is for goods to
be manufactured and marketed in India by
the Users as well as for goods to be exported
by the Users from India to all countries
except Sweden, Finland, West Germany,
United Kingdom, Spain, U.S.A., Canada,
Brazil and Japan.
5. The Users recognize the ownership of
the said trade marks by the Proprietors and
the Users do not acquire by this Agreement
CS (OS) No. 863/2010 Page 24 of 69
any right, title or interest whatsoever in the
said trademarks other than in respect of the
rights of user explicitly provided for in this
Agreement and any additional goodwill
accruing to the said trade marks by the Users
use of them shall belong to the Proprietors
without any right to any compensation
whatsoever;
9. No royalty or other payment is made
or shall be made by the Users to the
Proprietors in respect of the permitted use of
the said trade marks. The use hereby
permitted of the said trade marks by the
Users is without any consideration, direct or
indirect;
10. Nothing herein contained or implied
shall give the Users any right now or
hereafter to acquire the said trade marks
whether for valuable consideration or
otherwise.
11. The Users shall not assign or transfer,
in any manner in whole or in part, their
rights or/obligations under this Agreement
to any other party without the previous
written consent of the Proprietors;
15. This Agreement shall take effect from
the date of signing hereof and shall be
without limit of period subject to
termination as hereinafter provided:
(a) By the Proprietors giving to the Users
notice in writing of its intention to terminate
this Agreement forthwith upon the equity
participation of the Proprietors with the
Users being reduced to less than twenty-five
CS (OS) No. 863/2010 Page 25 of 69
per cent of the paid up equity share capital
of the Users.
(b) In the event of any breach or default
by the Users in observance or performance
of any of the terms and conditions of this
Agreement on the Proprietors giving to the
Users a minimum of three months notice in
writing of such termination, provided always
that if the Users shall effectively remedy the
breach or default upon which such notice is
based, within the period of the notice, such
notice shall not become effective and this
Agreement shall remain in full force;
(c) Forthwith upon the bankruptcy or
insolvency of the Users or upon the
appointment of a Receiver of the Users.
16. In all instances the termination shall
be without any right to compensation to the
users and the Users agree that in the event of
termination of this Agreement for any
reason whatsoever the Users have no right to
claim any compensation from the
Proprietors for publicity work, advertising or
other activity with regard to the said trade
marks.
17. Upon termination for any reason
whatsoever the Users shall forthwith stop
using the said trade marks and shall transfer
to the Proprietors all registrations of the said
trade marks or any other trade mark
confusable therewith which the Users may
have obtained with or without the consent of
this Proprietors without any right to
compensation to the users. The Proprietors
CS (OS) No. 863/2010 Page 26 of 69
or their designee shall have the right to
purchase the inventory of finished goods
and/or goods in process at the time of
termination at the cost price of the Users
meaning the ex-factory price less profit. If
the Proprietors should not exercise said
option to purchase within Three (3) months
after the termination, the Users shall be
entitled to sell the inventory under the said
trade mark within a period of one year
thereafter.”
(emphasis supplied)
27. Perusal of TMLA, some of the clauses whereof have been
quoted hereinabove, clearly indicates that Volvo was proprietor,
manufacturer and dealer of the goods shown in Schedule A, i.e.
rolling mills machinery, equipment, parts and accessories thereof, in
respect of the trademark “MH Morgardshammar” and it had
permitted the use of the said trademark by the defendant No.1
during the continuance of TMLA without assigning any proprietary
rights in favour of defendant No.1. Defendant No. 1 had unfettered
right to use the trademark only, without any limit of period, subject
to however, termination in the circumstances as stipulated in clause
15 of TMLA which provided that in case equity participation of the
proprietors i.e. Volvo is reduced to less than 25% of the paid up
equity share capital, TMLA shall be open for termination. TMLA
could have also been terminated by the proprietors in the event of
CS (OS) No. 863/2010 Page 27 of 69
any breach or default by defendant No.1 in observance or
performance of any of the terms and condition of the TMLA.
Continuous use of the trademarks by the defendant No.1 will not
vest any proprietary rights in favour of defendant No.1. Prior to
execution of TMLA, Volvo had also executed a NLA on 19th April,
1983 in favour of defendant No.1, whereby it permitted the
defendant No.1 to use the word “Morgardshammar” as a part of its
corporate name, trading style as also to use its logo in connection
with the activities within the main objects clause of Memorandum
of Association of defendant No.1. NLA also contained a
termination clause. Relevant clauses in this regard read as under:-
“6. Notwithstanding anything contained
in this Agreement MH SWEDEN shall be
entitled to terminate this Agreement
forthwith upon the happening of any or all
of the following events:
(a) Upon MH SWEDEN and/or its
nominees, parent, subsidiary or associate
companies or bodies corporate or assigns or
any company or body corporate in or with
which MH SWEDEN is merged or
amalgamated and the parent, subsidiary or
associate company or body corporate of any
such company or body corporate with which
MH SWEDEN is merged or amalgamated
ceasing to hold atleast 25% of the issued,
CS (OS) No. 863/2010 Page 28 of 69
subscribed and paid-up equity share capital
or MH INDIA;
(b)xxxxxxxxxxxxxxxxxxx
(c)xxxxxxxxxxxxxxxxxxx
(d)xxxxxxxxxxxxxxxxxxx
(e)xxxxxxxxxxxxxxxxxxx
(f)xxxxxxxxxxxxxxxxxxx
(g)xxxxxxxxxxxxxxxxxxx
(i)xxxxxxxxxxxxxxxxxxx
(j)xxxxxxxxxxxxxxxxxxx
8. With a view to effectuate the
provisions of this Agreement, MH India
have inserted and shall continue to retain the
following provision of their Articles of
Association:
(1) Upon Morgardshammar ceasing to
hold atleast 25% of the issued and paid-up
equity share capital of the Company, or 25%
of the total voting power of the shareholders
for the time being of the Company, for any
reason whatsoever, Morgardshammar shall
be entitled, at any time thereafter by a
written notice to the Company, to call upon
the Company to discontinue the use of the
word “Morgardshammar” in any form or
manner as a part of its corporate or trade
name or trading and operating style and the
use of the “Morgardshammar” Logo and to
change its name in such manner as to delete
the word “Morgardshammar” appearing in
the name of the Company. The Company
CS (OS) No. 863/2010 Page 29 of 69
shall from the date of receipt of such notice
immediately discontinue the use of the
“Morgardshammar” logo in any form or
manner, and take such steps as may be
necessary to adopt a new logo. Such logo
which the Company may adopt shall not
consist or the word “Morgardshammar” or
any abbreviation thereof or coined therefrom
or any name or expression in any language,
alphabet or script similar, phonetically or in
sound, appearance, meaning or otherwise
howsoever, to the name or word
“Morgardshammar”.
(2) Within thirty days from the date of
receipt of such notice, the Company shall
take all such steps as may be necessary to
convene a General Meeting of shareholders
for the purposes of passing of such
resolution, the Company shall also do all
acts, deeds and things as may be necessary
to effectuate such change of name. Such
name which the Company may adopt shall
not consist of the word “Morgardshammar”
or any abbreviation thereof, or coined
therefrom, or any word, name or expression
in any language, alphabet or script similar
phonetically in sound, appearance, meaning
or otherwise howsoever to the name or word
“Morgardshammar”.
9. Upon termination of this Agreement,
MH India shall forthwith discontinue the use
of MH Sweden‟s logo or corporate logo in
any form or manner as a part of MH india‟s
logo, trading style or trade name.
CS (OS) No. 863/2010 Page 30 of 69
10. Upon termination of this Agreement,
MH India shall forthwith and not later than
120 days from the date of such termination:
(a) discontinue the use of the name
“MORGARDSHAMMAR” in any form or
manner as a part of its corporate name,
trading style or trade name and change its
corporate name, trading style or trade name
in such manner as to delete therefrom the
name “MORGARDSHAMMAR” and
(b) take all such steps as may be
necessary or desirable for the purpose of
changing the name or style as aforesaid and
discontinuing the use of the name or word
“MORGARDSHAMMAR” as a part of its
trading style or operating style or trade name
and further that any new corporate name,
trade name or trading style or symbol which
MH INDIA may adopt, shall not consist of
any word, name, expression or device in any
language, script or alphabet similar or
deceptively similar in sound and appearance
to the name “MORGARDSHAMMAR” or
any word or words which is in abbreviation
thereof or coined therefrom or any word,
name, expression or device or in any
language alphabet or script similar
phonetically or in sound appearance or
meaning or otherwise howsoever, to the
name or word “MORGARDSHAMMAR”.
All members and shareholders of MH
INDIA shall be deemed to have undertaken
to exercise their rights as members and
especially their voting rights in such manner
so as to enable MH INDIA to comply with
CS (OS) No. 863/2010 Page 31 of 69
or implement, the provisions hereof and
shall be deemed to have joined MH INDIA
on this basis.”
28. A perusal of NLA also depicts that defendant No.1 was
permitted to use the word “Morgardshammar” as part of its
corporate name, trading name and style, subject to condition
stipulated therein, more particularly, till the time Volvo retains 25%
share holding in defendant No.1. Defendant No.1 was further under
obligation to stop using the word “Morgardshammar” and the logo
on termination of the agreement in any other event as provided
under the said agreement.
29. Vide APA dated 1st July, 1987, Volvo sold the plaintiff its
land, building, machinery, equipments, intellectual property rights,
common name, technology etc. Relevant clauses in respect of
intellectual property rights, company name, license and agreements
read as under:-
“4. Intellectual Property Rights,
Company name- Seller hereby sells to
Buyer all its patents, registered designs,
trademarks, copyrights and other intellectual
property rights including but not limited to
those which have been specified in the
attached Appendix 3.
Seller warrants that Seller has the sole and
exclusive right, except as disclosed in
CS (OS) No. 863/2010 Page 32 of 69
Appendix 3 and in Appendix 7, to these
rights and that all intellectual property rights
in the widest sense of this expression have
been transferred to Buyer without any
limitation. Seller further warrants that there
are no claims or disputes relating to the
validity, ownership or in any other respect
regarding the intellectual property rights
now sold and that all fees, costs etc which
are necessary to keep such rights in force
have been paid. Seller is not aware of any
infringements of the intellectual property
rights sold.
Seller undertakes to co-operate with Buyer
in order to have all these intellectual
property rights legally and validly assigned
to Buyer immediately after the Effective
Date and to execute all such formal
documents which may be necessary for such
assignment.
Seller undertakes to eliminate immediately
after the Effective date the names Centro
and Morgardhshammar from its company
name and from the name of any subsidiary
of Seller or from any other entity within the
Volvo Group of companies and shall not use
any of these names as a company name,
trade mark or similar except as disclosed in
Appendix 3. The names of such
subsidiaries, the shares of which Buyer has
an option to acquire according to 8 below,
shall not be changed unless Buyer does not
make use of the option. In the event that
Buyer does not make use of the option with
regard to the Spanish or Brazilian company
CS (OS) No. 863/2010 Page 33 of 69
then the Centro and Morgardshammar
names shall also be eliminated from their
company names and shall not be used as a
trade mark or similarly by these companies.
Seller also agrees that Buyer uses the names
Centro and Morgardshammar in its company
name, as a trade mark or otherwise.
Seller has informed Buyer that as long as
Seller owns more than 25% of the share
capital of Morgardshammar India Private
Ltd. that company is allowed to have
Morgardshammar as part of its company
name. If Buyer does not make use of its
option to buy Seller‟s shares of
Morgardshammar Private Ltd. Seller shall
arrange so that the name of this company
will be changed during 1988.
10. Licenses and similar agreements
In the attached summaries Appendix 7 all
licenses granted Seller have been listed.
Seller is not liable for any in-accuracies in
such summaries. Seller warrants that all
these license agreements are valid in
accordance with their terms, that no other
licenses exist which are of any significance
for the activity transferred, and that Seller
has fulfilled all its obligations under such
license agreements until this date. Seller is
not aware of any breaches by the Licensors
under such agreements except as disclosed
in Appendix 7.
Seller and Buyer shall co-operate with each
other in order to have these agreements
transferred to Buyer.
CS (OS) No. 863/2010 Page 34 of 69
Seller shall use its best efforts to have the
following three important licenses assigned
to Buyer and shall in any case be responsible
to arrange that Buyer will be in the position
as from the Effective Date on to continue
Seller‟s production of the products for which
these licenses may be necessary:
Licensor Date of
License
Agreement
Product
Rexnord, USA From before
1940 and
renewed
successively
Symon‟s
cone
crushers
Sumitomo
Electric
Industries
(SEI) Japan
August 11,
1972
Cooling of
hot rolled
wire
Centre de
Recherches
Metallurgiques
(CRM
Beligum)
September
24, 1974
Cooling of
hot rolled
wire
The licenses granted by Seller to Nya
Stavanger Staal A/S, Norway, to
Morgardshammar India Private Ltd. and to
ISPL Pvt. Ltd., Bombay, India, and the
agreement with WL-produkter AB, Sweden
shall be assigned to Buyer on the Effective
Date provided that the licensees and WLproducter
AB accept such assignments.”
CS (OS) No. 863/2010 Page 35 of 69
30. Later on, vide Share Purchase Agreement dated 22nd
December, 1993 plaintiff purchased 40% share holding of Volvo
i.e. 80,000 equity shares of defendant No.1. Later on, Volvo also
executed a CDA of trademark with goodwill on 13th August, 2000
in favour of the plaintiff. It was specifically mentioned therein that
from 16th June, 1987 the Assignor (Volvo Group) and the Assignee
(plaintiff) entered into an Asset Purchase Agreement, wherein the
Assignee, with effect from 1st July, 1987 purchased the Assignor‟s
assets including land and buildings, machinery, equipment,
inventory, intellectual property rights (including the Indian Trade
Mark bearing registration No. 393277 and the good will attached to
the said Trade Mark), and technology related to the activities
necessary to run the Assignor‟s business for a consideration as
defined under the APA. It was stipulated that in accordance with
mutual consent and pursuant to the APA dated 16th June, 1987,
Assignor has assigned the trade mark “MH
MORGARDSHAMMAR” (Indian Registration no. 393277) to the
Assignee for USD 10 (Ten dollars only).
31. However, shares were not registered in the name of the
plaintiff. Accordingly, Volvo filed a petition being CP No. 40/111
of 1995 before the CLB. This petition was vehemently opposed by
CS (OS) No. 863/2010 Page 36 of 69
the defendant No.1. Main contention of the defendant No.1 before
CLB was that Volvo group of Sweden, to which the petitioner
belonged, had sold some of the assets to a company belonging to
another group, namely, Danieli Group of Italy (plaintiff herein).
Volvo had also sold the name “Morgardshammar” to the Danieli
Group, which name is now assumed by the plaintiff. This fact was
not disclosed to the defendant No.1. No intimation was given to the
defendant No.1 about the change of name or about the purported
transfer in the year 1987. In 1989, when the nominee director of
Volvo wrote a letter regarding the transfer, the board of directors of
defendant No.1 resolved that there would be no objection subject to
the necessary legal formalities. In September, 1993, the formalities
to be complied with for issue of duplicate share certificates were
also communicated to Volvo. In July, 1994 a request was received
to transfer the shares to the plaintiff. It is at that stage, defendant
No. 1 came to know that the transfer of shares has taken place from
Volvo group to Danieli Group. Transfer was opposed on the
ground that the agreement entered into between Volvo and plaintiff
was in violation of the Shareholders Agreement and the
Collaboration Agreement. As per the Shareholders Agreement
between Volvo and Modi Group, the right to acquire the shares at
CS (OS) No. 863/2010 Page 37 of 69
the first instance vested with the Indian share holders i.e. Modi
Group. It was further contended that without the consent of Modi
Group shares could not have been transferred in favour of the
plaintiff. However, despite opposition by the defendant No.1, CLB
directed the defendant No.1 to rectify the register by changing the
name of existing holder and issue duplicate certificates and
thereafter, register the transfer of shares of defendant No.1 in the
name of plaintiff. Paras 36 and 37 of the order passed by the CLB
read as under:-
“36. Coming to the facts of the case, it is an
admitted position that the petitionercompany
has entered into certain contracts
in 1987 and 1988 for the transfer of their
business and also certain assets including the
impugned shares to the second respondentcompany.
It is also clear from the records
that these transfers were within the
knowledge of the first respondent-company.
The case of the first respondent-company is
that it was under a misapprehension based
on information furnished by the petitionercompany
that the transfer is within the same
group. Incidentally the original name of the
petitioner-company, viz.; the
Morgardshammar AB is assumed by the
second respondent-company. We have to
now proceed to analyze the facts on two
presumptions, namely, (a) that the first
respondent-company was really misled to
CS (OS) No. 863/2010 Page 38 of 69
believe that the transfer is within the same
group and (b) that the first respondentcompany
was fully aware that the transfers
are outside the group. We have already
dealt in detail with the various
correspondence between the second
respondent and the first respondent to show
that the first respondent-company was
actually aware that the transfer is to another
group. In fact the correspondence refers to
the coming in of the Danieli group to India
as a major shareholder of the first
respondent company instead of the Volvo
group which is the original shareholding
group. In fact the Danieli group also
expressed a desire to increase their
percentage of holding in the first respondent
company. It is further evident that there had
been meetings between the executives of the
first respondent and the second respondent
companies. A careful study of the copies of
correspondence from pages 35 to 51 of the
counter reply shows clearly that the first
respondent-company was aware that the
shares have been transferred to the Danieli
group. The crucial letters in January and
February, 1993, indicate the real issue which
appears to be the controlling interest in the
first respondent-company and the threat of
the Danieli group to choose another
alternative by starting a Danieli company.
Thereafter a Danieli company has come to
be established. This appears to be the rub
when the first respondent-company started
adopting a hostile attitude. As such the
objections are unrelated to the transfer of
shares. In the circumstances it is difficult
CS (OS) No. 863/2010 Page 39 of 69
for us to accept that the first respondentcompany
was not aware that the transfer is
to a different group.
37. Even the contention that the transfer
is outside the Volvo group and hence cannot
be allowed was also considered by us. If the
transfer from an existing group to another
group is not to be allowed such a provision
should be contained in the articles of
association of the company. The first
respondent-company being a public
company, its articles do not contain any
restrictive clause with regard to the transfer
of the shares even though it does incorporate
some of the covenants of the shareholders
agreement with regard to the composition of
the board, use of brand name, etc. We are in
agreement with Dada that so long as there is
no restrictive stipulation in the articles of
association, the board of directors of the
company cannot enforce the contents of a
private agreement between two
shareholders. On this the case law is
unambiguous and, therefore, the petition has
to be granted. Even the restrictive
stipulation contained in the shareholders‟
agreement does not bar a transfer of the
shares but only prescribes two conditions;
namely, that (a) before transferring to any
other persons, the shares shall be offered to
the other party to the agreement; (b) it is the
burden of a transferring party to ensure that
the transferee is bound by the shareholders‟
agreement. The petitioners have complied
with the first part by offering the shares to
the other party to the agreement which,
CS (OS) No. 863/2010 Page 40 of 69
however, has not been accepted. As regards
the second stipulation, it is for the other
party to enforce the provisions of the
shareholders‟ agreement through appropriate
proceedings. The company, however, has
no prerogative to stop or stall the transfer on
this score since it is not a party to the
agreement.”
(emphasis supplied)
32. It may be noted that the plaintiff was respondent No.2 and
defendant no.1 was respondent No.1, before the CLB.
33. This order of CLB was not challenged further by the
defendant No.1 and has become final. Rather, defendant No.1 has
accepted and complied with this order. Following Board
Resolution was passed on 31st July, 1998 by defendant No.1
regarding transfer of shares:-
“Resolved that the transfer of 80000 equity
shares bearing distinctive numbers from
60001 to 100000 and from 160001 to
200000 standing in the name of Volvo
Lastvagnat Komponenter AB be made in
favour of Morgardshammar AB being the
successor of the original shareholder namely
Centro Morgardshammar AB and that
necessary endorsement be made on the share
certificates
Further resolved that on transfer of the said
shares Morgardshammar AB being the
successor of Centro Morgardshammar AB
CS (OS) No. 863/2010 Page 41 of 69
shall be bound by all those
agreements/restrictions as applicable to
Centro Morgarshammar AB”
(emphasis supplied)
34. Subsequently, in the Board Meeting dated 26th October, 1998
defendant No. 1 confirmed the Minutes of Meeting dated 31st July,
1998 in the following manner :-
“The Chairman informed the Board that
minutes of meeting held on 31st July, 1998
as finalized by him were signed on 21st
August, 1998. A draft of the minutes were
also circulated to all the Directors and were
confirmed by them all.
Mr.D B Engineer, Nominee of
Morgardshammar AB however stated that
he wish certain modifications to be recorded
in the minutes. In this connection he also
drew attention to his letter dated 16th
October, 1998. The Directors noted that Mr
Engineer had also approved the draft
minutes and had countersigned the same and
sent a copy to the company. The directors
unanimously disagreed with Mr Engineer‟s
contention at Para 2 of Page no.2 of
aforementioned letter and confirmed that Mr
Engineer had himself confirmed that
Morgardshammar AB is the successor of the
original share holder namely Centro
Morgardshammar AB. The Chairman and
other directors accepting the statement of Mr
Engineer had agreed to accept the transfer of
shares and in these circumstances, it was
CS (OS) No. 863/2010 Page 42 of 69
agreed not to further challenge the decision
of Company Law Board.
The Directors were unanimously of the view
that minutes as recorded were true and no
changes are required to be made and took
due note of the fact that Mr Engineer have
also confirmed the minutes in writing.”
35. Lars Fors (PW1), witness of the plaintiff, in his affidavit has
deposed that plaintiff permitted the defendant No.1 to use the
aforesaid trademarks/trade name of the plaintiff on the basis of the
TMLA and NLA executed between the Volvo and defendant No.1.
In the month of December, 2009 plaintiff through its advocates
conducted the search of the records of Registrar Of Companies,
Delhi (ROC), in respect of defendant No. 1 and came to know that
defendant No. 1, without the knowledge of the plaintiff and without
any notice, had allotted its 7,50,000 equity shares to defendant
No.2- Mr. U.K. Modi, thereby increasing shareholding of Modi
Group and reducing the shareholding of plaintiff from 40% to 8%.
As shareholding of plaintiff was reduced from 40% to 8%, plaintiff
got the right to call upon the defendant No. 1 to discontinue using
trademarks/trade name as per the TMLA. Accordingly, legal notice
dated 15th March, 2010 revoking the TMLA was issued whereby
defendant No. 1 was called upon to stop using the trade marks/trade
name within 21 days of the receipt of the notice.
CS (OS) No. 863/2010 Page 43 of 69
36. Brajeshwar Dayal Garg (DW1), witness of the defendant No.
1 has not disputed the fact that shareholding of the plaintiff has
been reduced to less than 25%. Allotment of 7,50,000 equity shares
of defendant No. 1 to defendant No. 2- Mr.U.K. Modi has also not
been disputed. It is alleged that in the Annual General Meeting
dated 27th September, 2007 of the defendant No.1, decision was
taken to allot 7,50,000 equity shares to Mr.U.K. Modi. Notice of
the said Annual General Meeting was issued to all the share
holders. Despite notice plaintiff did not chose to attend the
meeting. Later on, 7,50,000 equity shares were allotted to defendant
No.2 in the meeting of Board of Directors of defendant No. 1 held
on 25th January, 2008, pursuant whereof requisite Form – 2 was
filed with the ROC. Form – 23 was also filed with the ROC in
relation to the meeting dated 27th September, 2007. Defendant No.
1 had taken all the actions in accordance with the applicable
provisions of law. Plaintiff‟s witness has denied that plaintiff had
received any notice of the Annual General Meeting. It is alleged
that UPC of the purported meeting appears to be a fabricated
document.
37. From the material placed on record it is established that
Volvo was proprietor of trademark “MORGARDSHAMMAR” in
CS (OS) No. 863/2010 Page 44 of 69
respect of Rolling mills Guide System Equipment, as well as spare
parts for rolling mills, accessories thereof etc. Volvo was also
doing business under the trade name/corporate name
Morgardshammar AB, which company was registered under the
laws of Sweden. Volvo and Modi Group decided to establish a
joint venture in India for fabrication, construction, manufacture and
supply of the equipments relating to rolling mill guide system and
its spare parts thereof. Accordingly, Collaboration Agreement was
entered into between Volvo and one of the promoters of defendant
No.1, Mr. S.K. Gupta. Plaintiff was to provide technical knowhow,
its trade name and trademarks. Shareholders Agreement was also
executed simultaneously with the Collaboration Agreement. As
per these agreements, plaintiff was to own 40% shareholding in the
joint venture; whereas Modi Group was to retain 60% share
holding. Defendant No. 1 was incorporated and production
commenced. TMLA was executed by Volvo on 10th September,
1984 whereby defendant No. 1 was permitted to use the trade
marks/trade name without a limit of period, subject to the
termination by Volvo in case its shareholding being reduced to less
than 25% of the paid up capital share of defendant No.1. Vide NLA
dated 9th April, 1983 defendant No. 1 was permitted to use the name
CS (OS) No. 863/2010 Page 45 of 69
“MORGARDSHAMMAR” as part of its corporate name/trade
name and trading style and also to use the
“MORGARDSHAMMAR” logo. NLA was also subject to the
termination in case paid up capital of Volvo being reduced to less
than 25%. Defendant No. 1 was permitted to use the trade mark,
logo and corporate name. Volvo had not sold/assigned the trade
mark and the corporate name to defendant No.1 vesting the
propriety rights in favour of defendant No. 1 in respect of the trade
mark/logo/trade name in defendant No.1. Defendant No. 1 was
simply “permissive user” as regards the said trade mark/logo/trade
name. Volvo sold its land, building, assets, intellectual properties
rights and company name to the plaintiff against consideration vide
APA dated 1st July, 1987. Option was also given to the plaintiff to
buy 40% share holding of Volvo in defendant No. 1. It was
stipulated in the APA that in case the option is not exercised by the
plaintiff, Volvo will take steps for changing the name of company
during the year 1998. Volvo had sold all its patent, registered
design, trade mark/copy right and other intellectual property rights
including the one specified in Appendix 3 attached with the APA.
The plaintiff exercised its option to buy 40% share holding of
Volvo in the year 1993. After selling the shares to the plaintiff
CS (OS) No. 863/2010 Page 46 of 69
Volvo requested the defendant No.1 to effect the transfer of shares
held by Volvo in defendant No.1 in favour of the plaintiff.
However, this request was objected to by the defendant No.1,
consequently, Volvo approached CLB and filed a petition seeking
appropriate directions. Despite opposition of defendant No. 1,
Volvo succeeded in its petition and defendant No. 1 was mandated
to register the transfer of shares in the name of plaintiff. After
purchasing the assets, intellectual property rights etc. as also the
shares, plaintiff stepped into the shoes of Volvo for all practical
purposes. Having sold all its assets in respect of rolling mills unit,
Volvo was divested of its rights or any of the assets and properties
including intellectual property rights, having transferred the same in
favour of the plaintiff. Thus, the plaintiff became successor in
interest of Volvo for all practical purposes and this fact has even
been accepted by the defendant No. 1 in its Board Resolution(s)
which have been reproduced hereinabove, inasmuch as, defendant
No. 1 had made it known to the plaintiff that it was bound by all the
agreements entered between it and Volvo. Subsequently, based on
the above documents of transfer executed by Volvo in favour of the
plaintiff, including CDA dated August 18, 2008, Trade Mark
Registry has registered the plaintiff as owner/proprietor in respect
CS (OS) No. 863/2010 Page 47 of 69
of trade mark “MH MORGARDSHAMMAR” in respect of rolling
mill machinery, parts and fittings thereof under Class 7. Having
purchased the trademarks as aforesaid, plaintiff had become
proprietor of the said marks. Plaintiff permitted the defendant No. 1
to continue to use its trade marks, in terms of TMLA since it had
stepped into the shoes of Volvo, inasmuch as, in the TMLA itself it
was mentioned that defendant No. 1 had unfettered right to use the
trade mark only, till its termination on the conditions as stipulated
in clause 15 of the TMLA. Defendant No. 1 has admittedly reduced
the shareholding of plaintiff, who had succeeded Volvo, to less than
25%, thus, plaintiff became legally entitled to terminate the license,
in terms of TMLA, which it did by issuing a notice immediately on
becoming aware of the fact that its shareholding has been reduced
to less than 25%. After the license was terminated by the plaintiff,
being proprietor of the trade mark “MH MORGARDSHAMMAR”,
defendant No.1 has no right to continue to use the same and such
use tantamounts to infringement of the trade mark of the plaintiff.
38. Learned senior counsel for the defendants has contended that
plaintiff did not become the successor in interest of Volvo by virtue
of APA since the same was in violation to the three agreements
entered into between the Volvo and defendant No.1, namely,
CS (OS) No. 863/2010 Page 48 of 69
Collaboration Agreement, Shareholders Agreement and TMLA
which have to be read in harmony with each other, inasmuch as,
said agreements were personal contracts and rights and obligations
therein cannot be assigned without the consent of defendant No.1.
Plaintiff was not a party to any of the said agreements executed
between Volvo and defendant No.1. Rights and obligations flowing
from the said agreements could not be transferred by the Volvo in
favour of the plaintiff without prior consent of the defendant No.1.
For becoming party to these agreements and for stepping into the
shoes of Volvo, it was necessary for Volvo to assign its rights and
obligations under the said agreements to the plaintiff, which was not
done. Thus, plaintiff was totally stranger to the aforesaid three
agreements and cannot enforce the rights flowing therefrom. It is
not the case of the plaintiff that Volvo had assigned three
agreements which it had entered with the defendant No.1 in favour
of the plaintiff, thus, only purchase and assignment of the trademark
by the plaintiff from Volvo will not affect the rights of the
defendant No.1 flowing from the three agreements i.e.
Collaboration Agreement, Shareholders Agreement and TMLA.
The rights and obligations of Volvo, plaintiff and defendant No. 1
have to be determined from the admitted four agreements i.e.
CS (OS) No. 863/2010 Page 49 of 69
aforesaid three agreements entered into between Volvo and
defendant No. 1 and fourth being APA executed between Volvo and
plaintiff. Plaintiff was not a party to the three agreements entered
into between Volvo and defendant No. 1, thus, there was no privity
of contract between the plaintiff and defendant No.1 in relation to
these three agreements. Similarly, defendant No. 1 was not a party
to APA and there is no privity of contract between plaintiff and
defendant No.1 in relation to the said APA. Thus, it is contended
that plaintiff had no right to terminate the TMLA nor any cause of
action has arisen in its favour to file the present suit against the
defendants for infringement of the trademarks etc. Reliance has
been placed on Sethi Construction Company vs. Chairman &
Managing Director, NTPC & Anr. 2002 (65) DRJ 732 and Indu
Kakkar v. Haryana State Industrial Development Corporation
Ltd. & Anr. AIR 1999 SC 296 to support the argument that there is
no privity of contract between the plaintiff and defendant No.1.
Defendants have also relied on S. Chattanatha Karayalar vs. The
Central Bank of India Ltd. & Ors. AIR 1965 SC 1856 in respect of
the contention that three agreements i.e. Collaboration Agreement,
Shareholders Agreement and TMLA relate to one transaction and
being contemporaneous documents, same have to be read together.
CS (OS) No. 863/2010 Page 50 of 69
It is contended that in view of Clause 15 of the Shareholders
Agreement which provides “this Agreement and all rights and
obligations hereunder are personal as to the parties hereto and none
of the parties hereto shall assign or attempt to assign any such rights
or obligations without first obtaining written consent of all the other
parties”, the rights and obligations flowing from the said
agreement, being personal to the parties to the agreement, could not
have been assigned by the Volvo in favour of the plaintiff without
the consent of defendant No.1. Reliance has been placed on
Khardah Co. Ltd. Vs. Raymon & Co. (India) (P) Ltd AIR 1962 SC
181. It has been further contended that the plaintiff could not have
terminated the license even if its shareholding was reduced to less
than 25 %. It is the Volvo alone who could have enforced the rights
flowing from the aforesaid three agreements, which it failed to do.
Volvo alone could have terminated the license under the aforesaid
agreement(s), only after its shareholding was reduced to less than
25%, inasmuch as, such right could have been exercised by Volvo
immediately upon its share holding going below 25%. This right
arose in favour of Volvo on 26th December, 1993 when it sold its
shareholding in defendant No.1 to the plaintiff. At that stage Volvo
could have exercised the right to terminate the license in terms of
CS (OS) No. 863/2010 Page 51 of 69
Collaboration Agreement, Shareholders Agreement and TMLA,
which right Volvo did not exercise. Even the plaintiff did not
exercise its right under the APA to call upon Volvo to terminate any
of the three agreements signed between Volvo and defendant No.1.
Thus, according to learned senior counsel for the defendants, suit is
without any cause of action. It has been further contended that
perusal of APA makes it clear that assets including intellectual
property rights were sold by Volvo to the plaintiff, subject to rights
of defendant No.1 to use the trademark in terms of TMLA and a
reference in this regard has been made in sub para 2 of Clause 4 of
the APA wherein it has been mentioned that Volvo had no
exclusive right on the trademarks as those rights had been licensed
to defendant No.1 in India and without limit of period. By placing
reliance on Clause 10 (sub para 4) which states that “The licenses
granted by Seller to Nya Stavanger Staal A/S. Norway, to
Morgardshammar India Private Limited and to ISPL Pvt. Ltd.,
Bombay, India, and the agreement with WL-produckter AB,
Sweden shall be assigned to Buyer on the Effective Date provided
that the licensees and WL-produckter AB accept such assignments”,
it is contended that it was Volvo‟s obligation to assign the rights
under the licenses granted to the plaintiff from the effective date i.e.
CS (OS) No. 863/2010 Page 52 of 69
1st July, 1987, subject to the condition that the licensee (defendant
No.1) accepts such assignment. As per the learned senior counsel,
defendant‟s consent was not obtained, inasmuch as, same has not
been pleaded in the plaint, thus, plaintiff did not step into the shoes
of Volvo with regard to the agreements executed between Volvo
and defendant No.1.
39. The arguments advanced by the learned senior counsel for
the defendants appear to be attractive at the first blush but have no
force. Sufficient material has come on record in this case that the
plaintiff is successor in interest of Volvo and had stepped into the
shoes of Volvo after acquiring assets including trademarks by virtue
of APA and subsequently by purchasing 40% shareholding of
Volvo in the defendant No.1 which, in fact, has not only been
acknowledged by the defendant No. 1 but has also been accepted in
categorical terms in its Board Resolutions. Defendant No. 1 cannot
be permitted to feign ignorance about the sale of its entire assets by
Volvo to plaintiff vide APA including intellectual property rights as
also the shareholding of Volvo in defendant No.1. A categorical
finding in this regard has been returned by the CLB and which
finding has not been assailed by the defendant No.1 in any higher
forum, inasmuch as, has been accepted by registering the transfer of
CS (OS) No. 863/2010 Page 53 of 69
shares in the name of plaintiff. Tacit consent of defendant No.1 with
regard to the transactions between Volvo and plaintiff can be
deduced from the judgment of CLB, inasmuch as, defendant No. 1
was offered to buy 40% shareholding of Volvo, which offer was
declined by it and which fact has been mentioned in the judgment
of CLB. Even after coming to know about the transactions between
Volvo and the plaintiff, defendant No.1 did not challenge the same
before any forum, instead, has accepted the plaintiff as successor in
interest of Volvo, which is evident from the Board Resolution dated
31st July, 1998 of defendant No.1. It has been specifically
mentioned in the Board Resolution that “Morgardshammar AB”
(plaintiff) being the successor in interest of “Centro
Morgardshammar AB” (Volvo) shall be bound by all those
agreements, restrictions as applicable to “Centro Morgardshammar
AB”. Defendants cannot be now permitted to take a somersault to
contend that the plaintiff is not the successor in interest of Volvo or
it has not stepped into the shoes of Volvo. On the one hand, by
accepting the plaintiff as successor in interest of Volvo defendant
No.1 has derived benefit of continuous use of the trademarks/trade
name “MORGARDSHAMMAR” for all these years, in spite of the
fact that plaintiff having purchased assets of Volvo in respect of
CS (OS) No. 863/2010 Page 54 of 69
rolling mills unit including intellectual property rights, became
proprietor of the trademarks and had a right to revoke the license of
„permissive user‟ in favour of defendant No.1. Plaintiff‟s witness
has categorically deposed that plaintiff had permitted the defendant
No. 1 to use the trademarks/logo on the assumption that it had
stepped into the shoes of Volvo as for all practical purposes. This
fact is further fortified from the action of the plaintiff as it permitted
the use of trademarks by the defendant No.1 and has initiated legal
action of infringement only after its shareholding in defendant No. 1
had gone down below 25% and not prior thereto. This itself
strengthens the plea of the plaintiff that it permitted the defendant
No. 1 to continue to use the trademark/logo in terms of TMLA since
it had stepped into the shoes of Volvo for all practical purposes.
Having accepted the plaintiff as successor in interest of Volvo and
availed the benefit thereunder, defendant No.1 cannot be permitted
to take a shifting stand at this stage to contend that plaintiff had not
stepped into the shoes of Volvo in respect of TMLA and it is the
Volvo alone which could have terminated the TMLA on reduction
of its shareholding to less than 25%. Even otherwise, Volvo being
the proprietor/owner of the trademarks, had unfettered right to sell,
transfer, or assign the same and for which purpose no consent of
CS (OS) No. 863/2010 Page 55 of 69
defendant No.1 was required, inasmuch as there was no such
stipulation in the TMLA that prior consent of the defendant No.1,
who was merely a permissive user, was required to be taken by
Volvo before selling, transmitting and assigning the said trademark
to any third party.
40. Judgments relied upon by the defendant No. 1 are in the
context of different facts and are not applicable to the facts of the
present case. In Sethi Construction (supra), works contract for the
construction of a school building was awarded by NTPC to M/s.
Gangotri Enterprises Limited(GEL). Arbitration agreement was also
between NTPC and GEL. Since GEL failed to complete the work
on time, the said work was assigned to Sethi Construction. Disputes
arose between Sethi Construction and NTPC regarding payment of
work, pursuant whereof, Sethi Construction filed application for
appointment of an arbitrator in terms of Clause 56 of General
Conditions of Contract between GEL and NTPC. Court dismissed
the application holding that NTPC was not concerned with the
underlying contract/ agreement between GEL and Sethi
Construction and there was no privity of contract between Sethi
Construction and NTPC. It was observed that “An assignment is in
the nature of a transfer by one to another of his interest or rights is
CS (OS) No. 863/2010 Page 56 of 69
one’s property and vests in the latter the former’s interests, rights
and remedies in respect of the subject matter. In such a case, the
latter by virtue of the assignment in his favor will be in position to
enjoy the rights of the former in his own name. Obviously, the
factum of an assignment or for that matter a transfer of the contract
has to be gathered from a specific document in this behalf or at least
from contemporaneous action/contract on the part of the parties.”
In Indu Kakkar vs. Haryana State Industrial Development
Corporation Ltd. (supra), a plot of land was allotted to M/s York
Printers by Haryana State Industrial Development Corporation
Limited (HSIDC). Possession was given and Deed of Conveyance
was also executed in favour of M/s York Printers in the year 1977.
M/s York Printers failed to raise industrial unit on the said plot,
thus, plot was resumed by HSIDC in 1984. M/s York Printers
challenged this resumption. During the pendency of the suit, the
said plot was sold by M/s York Printers to Ms. Indu Kakkar
(petitioner). She was impleaded as second plaintiff in the suit. Suit
was decreed in favour of M/s York Printers and Indu Kakkar.
Appellate Court reversed the decree and dismissed the suit on the
ground that Indu Kakkar has no locus standi as the sale in her
favour was hit by Section 52 of the Transfer of Property Act. In
CS (OS) No. 863/2010 Page 57 of 69
second appeal, High Court observed that Indu Kakkar has no locus
standi to question the validity of resumption. There was no privity
of contract between Indu Kakkar and HSIDC. Matter reached upto
the Supreme Court wherein order of the High Court was upheld. It
was observed that a party to a contract cannot transfer his liabilities
under the contract without the consent of the other party. Where a
contract involves mutual rights and obligations as assignee of a
right cannot enforce that right without fulfilling the co-relative
obligations. The agreement was entered into between the
Corporation and the allottee (M/s York Printers). HSIDC and M/s
York Printers as a sequel to the request made by the allottee to give
him an industrial plot for the purpose of setting up an industry.
HSIDC reciprocated to the request on being satisfied that M/s York
Printers was able to carry out the obligations so as to accomplish
the purpose of allotment. If the allottee evacuates from the scene
after inducting someone else into the plot without consent of the
HSIDC it is not legally permissible for the inductee to compel the
HSIDC to recognize him as the allottee.
41. In the instant case, Volvo had sold its assets including land,
building and intellectual property rights which fact was within the
knowledge of defendant No.1 as is evident from the order of the
CS (OS) No. 863/2010 Page 58 of 69
CLB, inasmuch as, plaintiff even purchased the shareholding of
Volvo in defendant No.1. Defendant No.1 recognized such transfer
by registering the transfer of shares in favour of the plaintiff,
inasmuch as, has passed Board Resolution that plaintiff, being
successor in interest of Volvo, shall be bound by the agreement
executed between the promoters of defendant No.1 and Volvo.
Such transfer was not only accepted but defendant No. 1 made it
clear that plaintiff shall remain bound by the terms of the
agreements including the TMLA.
42. Section 2 (v) of the Trade Marks Act, 1999 (hereinafter
referred to as „the Act‟) envisages that a registered proprietor, in
relation to a trade mark, means the person for the time being entered
in the register as proprietor of the trade mark. Supreme Court in
American Home Products Corporation vs. Mac Laboratories Pvt.
Ltd. Air 1986 SC 137 has observed that when a person gets his
trademark registered, he acquires valuable rights by reason of such
registration. It was observed that registration of a trademark gives
him the exclusive right to the use of that trademark in connection
with goods in respect of which it is registered, and if there is any
invasion of this right by any other person using the mark, which is
same or deceptively similar to his trademark, he can protect his
CS (OS) No. 863/2010 Page 59 of 69
trademark by an action for infringement in which he can obtain an
injunction, damages or an account of profits made by the other
person.
43. Section 45 of the Act enables a person, who has become
entitled by assignment or transmission to a registered trade mark, to
apply with the Registrar to register his title, and on receipt of such
application, registrar shall register him as the proprietor of the trade
mark in respect of the goods or services in respect of which the
assignment or transmission has effect. In this case plaintiff
has already been registered as a proprietor in the record of the Trade
Mark Registry in respect of the trade mark in question, thus, has
become registered proprietor thereof. Defendant No.1 being
permissive user does not acquire any proprietary rights in the trade
mark in issue, even a registered user of a trade mark does not
acquire proprietary right in a trade mark which he has been
permitted to use by the registered proprietor. Section 48 (2) of the
Act envisages that the permitted use of a trade mark shall be
deemed to be used by the proprietor thereof, and shall be deemed
not to be used by a person other than the proprietor. Thus, merely
because defendant No.1 has been using the trade mark for a long
time will not vest any proprietary right in the defendant No.1. Once
CS (OS) No. 863/2010 Page 60 of 69
the registered proprietor revokes the license, permissive user has to
stop using the same. In Marie Stops Int. vs. Parivar Seva
Sansthan, 2010(43) PTC 141 (DEL), in the context of Section 48
(2) of the Act it has been held that use of a mark by a permissive
user is deemed to be the owner‟s use.
44. After the license has been terminated by the plaintiff, who is
a registered proprietor of the trade mark in respect of trade mark in
issue, defendant No.1 has no right to continue to use the same and
such use tantamounts to infringement within the meaning of Section
29 of the Act. Defendant No.1 cannot even use the trade mark as
its trade name or name of its business concern or part of the name
of its business concern in view of sub-Section 5 of the Section 29 of
the Act which provides that a registered trade mark is infringed by a
person if he uses such registered trade mark, as his trade name or
part of his trade name, or name of his business concern or part of
the name, of his business concern dealing in goods or services in
respect of which the trade mark is registered. That apart, the Name
License Agreement also stands revoked since the shareholding of
plaintiff‟s has been reduced to less than 25% and defendant No.1,
thus, has lost the right to use the said trade mark/trade name as its
corporate name.
CS (OS) No. 863/2010 Page 61 of 69
45. In Fedders North American vs. Show Line & Others
2006(32) PTC 573 (DEL), it has been held that after termination of
the agreement dated 21st May, 1956, plaintiff had given right to
defendant No.18 to use the trade mark “Fedders” for a period of
five years, by virtue of the agreement dated 11th October, 1963. It
was held that after this period came to an end in the year 1968, use
of trade mark “Fedders” by defendant No.18 from 1968 onwards
was not in line with the rights available to the plaintiff as a
registered proprietor of trademark “Fedders”. In Velcro Industries
B.V. & Anr. vs. Velcro India Ltd., 1993(1) Arb.LR 465, the facts
involved were more or less similar to the present case. In the said
case, Velcro Industries (plaintiff) had entered into collaboration
agreement with the Indian Directors and pursuant thereof Velcro
India Ltd. (Defendant) came in existence. Defendant was granted
trademark license vide a License Agreement which was renewed
and subsequently, defendant was permitted to use the word
“Velcro” as part of its trade name. Renewed agreement also
expired on 30th September, 1986, thereafter plaintiff called upon
defendant to stop using the mark of the plaintiff which was not
complied with. Accordingly, plaintiff approached the Bombay
High Court wherein defendant was restrained from using the mark
CS (OS) No. 863/2010 Page 62 of 69
“Velcro” as their trade name in India. It was held that after the
license expired, defendants had no right to use the same as that of
their corporate name/trade name.
46. For the forgoing reasons, issue Nos.1, 3 and 4 are decided in
favour of the plaintiff and against the defendants.
Issue No. 2
47. Onus to prove this issue was on the defendant, however, it
has failed to point out as to in what manner suit is barred by
limitation. Plaintiff had purchased the assets of Volvo including
intellectual property rights vide APA dated 16th June, 1987.
Subsequently, in the year 1993 plaintiff has purchased 40% share
holding of Volvo in the defendant No.1. Defendant No.1 declined
to register transfer of shares in the name of plaintiff, thus, forcing
the Volvo to approach CLB. Ultimately, 40% share holding of
Volvo in the defendant No. 1 was transferred in favour of the
plaintiff, by the defendant No.1, only in the year 1998. Defendant
No. 1, in its Board meeting, which took place in the year 1998,
recognized the plaintiff as successor in interest of Volvo. Plaintiff
CS (OS) No. 863/2010 Page 63 of 69
permitted the defendant No.1 to continue to use the trade
marks/trade name till 15th March, 2010 on which date, it revoked
the TMLA, by giving a legal notice, upon share holding of the
plaintiff being reduced to 8 % from 40%. Only thereafter, cause of
action arose in favour of the plaintiff to file the suit for
infringement. The suit has been filed in the year 2010, thus, by no
stretch of imagination it can be said to be barred by limitation. 40%
share holding of the plaintiff was admittedly reduced in the year
2008. Even if it is presumed that this fact was within the
knowledge of the plaintiff and right to terminate the license accrued
in its favour in 2008 itself, then also the suit cannot be said to be
barred by limitation.
48. Even if the matter is viewed from another angle then also it
cannot be said to be barred by limitation. Law of limitation per se
does not apply to the action of infringement or passing of. In
Bengal Waterproof Limited versus Bombay Waterproof
Manufacturing Company and Another (1997) 1 SCC 99, Supreme
Court has held that an action for passing off is a common law
remedy being an action in substance of deceit under the Law of
Torts. Wherever and whenever fresh deceitful act is committed the
person deceived would naturally have a fresh cause of action in his
CS (OS) No. 863/2010 Page 64 of 69
favour. Thus, every time when a person passes off his goods as
those of another he commits the act of such deceit. Similarly,
whenever and wherever a person commits breach of a registered
trade mark of another he commits a recurring act of breach of
infringement of such trade mark giving a recurring and fresh cause
of action at each time of such infringement to the party aggrieved.
49. Learned Senior counsel for the defendant No.1 has contended
that the plaintiff has acquiesced in the defendant‟s use of the
trademarks and trade name for a period of more than 21 years.
During this period of 21 years, the plaintiff knowingly promoted
and encouraged the defendant to use the trademarks, invest in the
development and promotion of its business and to hold out to the
world at large, that the defendant company has the right and
goodwill in the said trademarks. Defendants have relied on
Khoday India Limited vs. Scotch Whisky Association &Ors. AIR
2008 SC 2737.
50. In M/s Power Control Appliances and others vs. Sumeet
Research and Holdings, (1994) 2 SCC 448, Supreme Court has
held that acquiescence is sitting by, when another is invading the
rights and spending money on it. It is a course of conduct
inconsistent with the claim for exclusive rights in a trade mark,
CS (OS) No. 863/2010 Page 65 of 69
trade name etc. It implies positive acts; not merely silence or
inaction such as is involved in laches. In Ramdev Food Products
(P) Ltd. vs. Arvindbhai Rambhai Patel and others, (2006) 8 SCC
726, Supreme Court has held that Acquiescence is a facet of delay.
The principle of acquiescence would apply where: (i) sitting by or
allowing another to invade the rights and spending money on it; (ii)
it is a course of conduct inconsistent with the claim for exclusive
rights for trade mark, trade name, etc.
51. I do not find any force in this contention of learned senior
counsel that the plaintiff had acquiesced in the defendants use of
trademarks/ trade name for a period of more than twenty one years
after the plaintiff acquired the ownership of trademarks/ trade name.
Plaintiff has made a categorical averment that after purchasing the
assets of Volvo including the intellectual property rights, it
permitted the defendant No.1 to use its trademarks/trade name till
such time the plaintiff‟s share holding in the defendant No. 1 did
not fall below 25%. It is, thus, clear that the continuous use of
trademark by defendant No. 1 was with the permission of plaintiff
and till the time plaintiff‟s equity participation in the defendant
No.1 remained above 25%. The moment plaintiff came to know
that defendant No. 1 had reduced the share holding of the plaintiff
CS (OS) No. 863/2010 Page 66 of 69
to 8%, it revoked the license vide notice dated 15th March, 2010.
Accordingly, use of the trademarks/trade name of the plaintiff by
the defendant No. 1 was with the permission of the plaintiff and the
defendant No.1 was not a hostile user. It is not the case of the
defendants that after acquiring the propriety rights in the
trademarks/trade name from the Volvo, plaintiff objected to the use
thereof by the defendant No. 1 and thereafter remained mum for an
unusually long period and has brought this action after about two
decades, thus, has acquiesced in the use of trademarks/ trade name
by the defendant No.1. Share holding of the plaintiff in the
defendant No. 1 has been reduced by the defendant No.1 to 8% in
the year 2008 and within a reasonable period there from, plaintiff
has exercised its right of revoking the license, by issuing legal
notice dated 15th March, 2010 and called upon the defendant No. 1
to desist from using the trademarks/trade name or corporate name
of the plaintiff, even if it is assumed that plaintiff was aware of
reduction of its share holding in the year 2008 itself. Thus, it
cannot be said that the plaintiff has acquiesced the defendant in
using the trademark /trade name for an unusually long period of 21
years.
CS (OS) No. 863/2010 Page 67 of 69
52. Khoday‟s case (supra) is of no help to the defendants being
rendered in the context of different facts. In the said case,
respondents came to know of the Khoday Ltd. using “Peter Scot”
mark for its whisky on 20th September, 1974. However, no action
was taken till 21st April, 1986, when an application for rectification
of the trademark was filed. During this period respondents took
action against several other persons all over the world whoever was
found using words Highland Chief, Scotch Terrier, Glenfiddich,
Rare Blend etc. In this context, Supreme Court has held that in the
peculiar facts and circumstances of the case the action of the
respondents was barred under the principles of acquiescence and/or
waiver. In this case, after acquiring intellectual property rights in
respect of trademarks/trade name from Volvo, plaintiff permitted
the defendant No.1 to use the same till the time its share holding
was not reduced below 25%. Prompt steps have been taken by the
plaintiff to revoke the license on coming to know about the factum
of reduction of share holding, as also, the suit has been filed within
a reasonable period of time.
53. Learned senior counsel for the defendant has further
contended that defendant No. 1 has invested large sums of money in
setting up its business; has established a market in respect of
CS (OS) No. 863/2010 Page 68 of 69
products/goods manufactured/marketed and sold under the trade
mark of the plaintiff during the last twenty one years, thus, plaintiff
is estopped from challenging the use of trademarks by the defendant
No.1. I do find any force in this argument either. Defendant No. 1
has to blame itself for the revocation of the license. Till the time
defendant No.1 maintained the share holding of the plaintiff above
25%, plaintiff has permitted the defendant No. 1 to use the trade
mark/trade name. It is only when defendant No. 1 reduced the
share holding of the plaintiff in defendant No. 1 to less than 25%,
plaintiff has exercised its option of revoking the license.
54. For the foregoing discussions, issue no. 2 is also decided
against the defendant no.1 and in favour of the plaintiff.
Issue No. 5
55. During the course of arguments, the learned senior counsel
for the plaintiff did not press for the relief of rendition of accounts,
delivery of infringing material and damages and confined his prayer
to grant of injunction against use of the trade name
“MORGARDSHAMMAR” and the trademarks
“MORGARDSHAMMAR LABEL” and “MH ARROW DEVICE”
or any other mark identical or deceptively similar to the trademarks/
CS (OS) No. 863/2010 Page 69 of 69
trade name “MORGARDSHAMMAR LABEL” and “MH ARROW
DEVICE” and “MORGARDSHAMMAR” of the plaintiff.
56. In view of the findings returned on Issue Nos.1 to 4, plaintiff
is entitled for a decree of permanent injunction against use of its
trademarks/ trade name by the defendants, thus, the suit of the
plaintiff is decreed in terms of prayers (a) and (b) of the plaint.
Plaintiff shall also be entitled to cost. Decree sheet be drawn
accordingly.
A.K. PATHAK,J.
JANUARY 02, 2012
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