1995 (12) TMI 268 - HC - Companies Law

Summary

Issues Involved:
1. Injunction against the use of the word 'MONTARI' in the corporate name.
2. Applicability of Sections 20 and 22 of the Companies Act, 1956.
3. Bona fides of the appellant in adopting the corporate name.
4. Likelihood of confusion or deception among the public.
5. Protection of reputation and goodwill of the respondent.

Detailed Analysis:

Injunction Against the Use of the Word 'MONTARI' in the Corporate Name:
The appellant was injuncted from using the word 'MONTARI' or any deceptively similar word as part of its corporate name. The respondent, Montari Industries Ltd., claimed that the appellant's use of 'MONTARI' was likely to cause confusion and mislead the public into believing that the appellant was associated with the respondent. The learned single Judge granted the injunction, noting that reputation or goodwill in business generally attaches to the trade name adopted by a house, and such reputation or goodwill should be protected by the court.

Applicability of Sections 20 and 22 of the Companies Act, 1956:
The appellant argued that the respondent should have sought rectification of the appellant's name under Sections 20 and 22 of the Companies Act, 1956, which deal with the registration of companies with names similar to existing companies. However, the court held that the common law remedy available to an aggrieved party is not superseded by these sections. The court emphasized that both remedies operate in different fields: the Central Government under Section 22 cannot grant an injunction, whereas a civil court can pass an order restraining the use of a name that is being passed off as that of another company.

Bona Fides of the Appellant in Adopting the Corporate Name:
The appellant contended that its adoption of the name 'MONTARI' was bona fide and not intended to mislead the public. However, the court found this explanation unconvincing, noting discrepancies in the appellant's justification for the name. The court concluded that the appellant's adoption of the name was not innocent and was likely intended to mislead the public into believing an association with the respondent.

Likelihood of Confusion or Deception Among the Public:
The court emphasized that the real test is whether an ordinary person or the public at large is likely to be deceived. The court found that the use of 'MONTARI' by the appellant was likely to cause confusion, as the respondent had established a significant reputation and goodwill under that name. The court cited several precedents where injunctions were granted to prevent the use of similar trade names that could mislead the public.

Protection of Reputation and Goodwill of the Respondent:
The court highlighted that a company has a right to protect its reputation and goodwill. The use of a similar name by a competitor can injure the reputation and business of the original company. The court noted that the appellant's use of 'MONTARI' could lead the public to mistakenly infer a connection between the two companies, thereby harming the respondent's reputation and goodwill.

Conclusion:
The court dismissed the appeal, upholding the injunction against the appellant from using the word 'MONTARI' in its corporate name. The court found that the respondent had made a prima facie case for the grant of ad interim injunction, and the appellant's use of the name was likely to cause confusion and injure the respondent's reputation and goodwill. The court emphasized that the legislative intent of Sections 20 and 22 of the Companies Act, 1956, supports the granting of injunctive relief in such cases.