TMI Blog1991 (4) TMI 314X X X X Extracts X X X X X X X X Extracts X X X X ..... ng respondent in both the original petitions is Sudarsan Trading Co. (STC), Calicut 1. The short facts are as follows: The trade mark in question was registered under No. 2763 in Part A of the register as of the date July 29, 1942, in class 19 in respect of bricks and tiles, roofing tiles, ceiling tiles, ventilators, skylights, all being made from clay and/or fireclay materials in the name of Madura Co. Ltd., trading as Feroke Tile Works, Calicut, South India. Pursuant to a request in form TM-24, dated May 16, 1969, and order thereon dated June 28, 1969, STC, the first respondent was registered as subsequent-proprietor of this mark, as from April 23, 1967, by virtue of the deed of assignment, dated August 23, 1968. In the certificate dated April 23, 1976, issued by the senior examiner of trade marks, Trade Marks Registry, Bombay, it is mentioned that the registration of the aforesaid trade mark which has been renewed from time to time will remain in force for a period of seven years from July 29, 1985, and may be renewed at the expiration of that period and of each succeeding period of seven years. As stated above, the trade mark was registered under No. 2763 in Part A of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tyle of Feroke Tile Works to Eastern Clay Works Ltd. by a deed executed in this behalf, that Eastern Clay Works Ltd. has taken out an application before the District Court for impleading the first respondent as the second plaintiff and that the first respondent has permitted Eastern Clay Works Ltd. to use the respondent's trade mark by a deed executed between STC and Eastern Clay Works Ltd. From the point of time Eastern Clay Works Ltd. was permitted to use the respondent's trade mark, the first respondent-STC has always and at all times exercised proper control and supervision with regard to the standard and quality, specifications and. the like concerning the tiles manufactured in the said Feroke Tile Works. Besides, the tiles manufactured by the said Eastern Clay Works Ltd. have always borne the name and style of Feroke Tile Works, which is nothing but one of the manufacturing divisions of the respondent company. In other words, the respondent states that the use of the mark by Eastern Clay Works Ltd., is in effect use of the mark by the respondent-STC itself. So much so, that the standard and quality in respect of the tiles manufactured in the tile factory bearing the name Fero ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Feroke Tile Works together with machinery, buildings, etc., and that the said arrangement admittedly continues even as on date. According to learned counsel, there is no reservation for any supervision or control by STC Limited in any form whatsoever notwithstanding the fact that oral evidence had been let in by a, person stationed at Madras, that there is some sort of supervision in view of the written agreements and the said evidence cannot be taken note of at all. Learned counsel further submits that the said evidence is exactly contrary to the written agreement and in the presence of the written agreements, exhibits D-4 to D-6, under sections 91 and 92 of the Evidence Act, no evidence could be let in to vary the terms of the written agreement and, consequently, either in law or on facts any such oral evidence can be let in or considered by this court. It was further contended that the use of the trade mark as well as the name, Feroke Tile Works, had been assigned in favour of Eastern Clay Works Ltd. and that the same had not been registered as per the Act. No control or supervision is proved. Either in the advertisement, exhibit D-14 or in the catalogues (exhibits D-1 and D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 969] 39 Comp Cas 212; AIR 1969 Mad 359, a Division Bench of this court held as follows (headnote of AIR): "The Companies Act contains provisions which enable a company to purchase shares in another company and thus become a controlling company. Merely because a company purchases almost the entirety of the shares in another company, it will not serve as a means of putting an end to the corporate character of the other company or the controlling company acquiring the ownership of the controlled company, so as to treat them as one entity for purpose of rights and liabilities. The share capital of such companies is governed and controlled by the provisions of the Companies Act and its enhancement or reduction can only be in accordance with such provisions. It is well-settled that an incorporated company is a legal person and it cannot be equated to its shareholders. The position continues to be the same even if the number of the shareholders is reduced to one by accident or otherwise. The act of the company cannot, therefore, be regarded as that of any of its shareholders and vice versa. It is true that occasionally the corporate veil of a company is pierced through in order to find ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... part of the applicant for registration and that there has been no bona fide use of the trade mark. Section 46(1)( a ) of the Act is not applicable to this case because this is neither pleaded nor substantiated. Section 46(1)( b ) of the Act is applicable in this case as pleaded by the petitioners in paragraph 7( c ) of the petition. The petitioner has stated that the first respondent has not been using the mark registered by them and on the ground of non-user the registration is liable to be cancelled in terms of section 46 of the Act. Accordingly, the issues narrow down to section 46(1)( b ) of the Act. The five-year non-user period under the provisions of section 46(1)( b ) of the Act is required to be continuous. A break in continuity of non-user would defeat the provisions. In this context, it is useful to refer to paragraph 932 of Narayanan's Trade Marks and Passing-Off, third edition, which reads thus: Isolated instances of use : "The non-use required to be proved to bring the case under section 46(1)( b ) must be continuous non-use during the relevant period. Thus, it would appear that even isolated instances of use of the mark would be sufficient to defeat the appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nies, Kerala, pursuant to section 23, sub-clause (1) of the Companies Act, 1956. The Registrar of Companies, Kerala State, has also issued a certificate of incorporation No. 2497 of 1973, certifying that Sudarsan Clay Products Ltd. has been incorporated under the Companies Act, 1956, and that the company is a limited company. The certificate was issued on April 5, 1973. Clause 62( a ) of the memorandum and articles of association provides for the appointment of the board of directors. It says that the number of directors shall not be less than three nor exceed fifteen and only the nominees of the board of directors of Sudarsan Trading Co. Ltd. shall be eligible to be the directors of the company so long as this company is a subsidiary of that company. Clause 62( b ) of the memorandum and articles of association relates to the first directors of the company, who have been nominated by the board of directors of Sudarsan Trading Co. Ltd. They are: 1.Mr. V.P. Balaram, 2.Mr. P. Shanmugam, 3.Mr. T.P. Ravindran, 4.Mr. K.P. Balan, 5.Mr. C. T. Varkey. In my opinion, this satisfied the provisions of section 4(1)( a ) of the Companies Act. As already stated, Sudarsan Clay Produ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... although trading separately had been branches of a single company or firm the head office of which controlled the branches in the same way as the applicants control their associated companies there is, I think, no doubt that a trade mark could properly be held by the company or firm as a whole and I think that treating the question as a practical one I ought not to say that the form or constitution of the Radiation group of companies is such as to prevent the applicants from holding a trade mark which indicates the connection of the whole group of companies with the goods to which it is applied. The mark 'Radiation' in this case becomes in effect the house mark of the whole group, in addition to which each associated company (or branch) may properly use its own individual mark". (1970) RPC 339 GE Trade Mark-Salmon,L.J. at page 372: The American company retained quality control over its products and I think that there was, therefore, a sufficient connection in the course of trade between these products and the American company to satisfy section 68 of the Act of 1938 ... I agree with Graham J. and Cross L.J.'s dictum in British Petroleum Co. Ltd. v. European Petroleum Di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therwise) will protect the mark from attack on the ground of non-user but it is essential both that the user maintains the connection of the registered proprietor with the goods and that the use of the mark does not become otherwise deceptive. Conversely, registration of a registered user will not save the mark if there ceases to be the relevant connection in the course of the trade with the proprietor or the mark otherwise becomes deceptive". I had occasion to deal with a similar case in K. R. Jadayappa Mudaliar v. K. B. Venkatachalam [1990] 2 LW 720; [1990] 2 MLJ 423, where, citing Graham J. in G. E. Trade Mark [1969] RPC 418 (Ch D), I held as under (at pages 431-32 of MLJ): "The development of the sciences and the application of technology in industry, the growth of great manufacturing and holding companies with a large number of subsidiaries, the exchange of technical know- how not only between companies in this country but on an international scale and, not the least important, the very great changes which have been and are still being made in the presentation, packaging and methods of marketing goods, have all had their effects on the use and significance of trade ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade marks was Act 5 of 1940, which adopted in section 2(1)(1) of the Act, the wording of the U. K. Act, 1938, reading as follows: "'trade mark' means a mark used or proposed to be used in relation to goods for the purpose of indicating or so as to indicate a connection in the course of trade between the goods and some person having the right, either as proprietor or as registered user, to use the mark whether with or without any indication of the identity of that person". The successor Act in India of 1958 (the present Act) also adopts a similar wording in section 2(1)( v )( ii ) as follows: "'trade mark' means in relation to the other provisions of this Act a mark used or proposed to be used in relation to goods for the purpose of indicating or so as to indicate a connection in the course of trade between the goods and some person having the right either as proprietor or as registered user to use the mark whether with or without any indication of the identity of that person and includes a certification trade mark registered as such under the provisions of Chapter VIII". Thus, under the present definition of a trade mark under our Act of 1958, the question of ( i )Wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tances in which the reputation behind goods was that of a merchant and not of the actual maker, and in recent times the concept of a trade mark has had a wider scope than that. The 1905 Act listed the various forms for trade connection that it recognised manufacture, selection, certification, dealing and since it can hardly be supposed that the present wording is narrower in scope, decisions under that Act admitting marks are still of value. Such a list, however, hardly accords with the flexibility of organisation that is now customary. It has been said that: "There is nothing in the Trade Marks Act, which requires a proprietor of a registered trade mark to refrain from introducing modifications or variations in the goods to which he applies his mark or in the manner in which they reach the market. if he should find it convenient to transfer manufacture from one locality to another or procure his supplies from sub-contractors, or arrange for assembly of completed articles by some one of his choice, in lieu of doing it himself, these and a vast number of other possible changes in procedure are his sole concern. His mark only becomes vulnerable in this connection if he permits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rough which they are marked. In such cases, registration as a service mark may be easier to secure; but in view of the possible objection that such marketing of the goods is not, in relation to a service mark, use as a service mark, it could well be sound practice to insist upon a trade mark registration too. It is also beneficial to refer to certain passages in Dr. S. Venkates-waran on Trade Marks, 1963 edition, pages 37 and 309, which read as follows: " Connection in the course of trade. -- The expression "connection in the course of trade" covers a wide range, e.g., manufacturer, importer, or vendor as wholesaler, middleman or retailer or a person who selects or handles commercially the goods in any other way. The nature of the connection in the course of trade is left undefined in the Act so as to include all categories, except certification, and provide for raw trading relationships as new business methods are evolved. As the goods pass on their way to the market through successive trade hands in the course of trade they may receive a succession of trade marks each indicative of the particular person's trade connection with the goods, may apply for registration of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oncerning the tiles manufactured in the said Feroke Tile Works. Besides, the tiles manufactured by the said Eastern Clay Works Ltd. have always borne the name 'Feroke Tile Works', which is nothing but (admittedly) one of the manufacturing divisions of the respondent-company. In other words, the respondent has clearly proved and established by inviting my attention to the provisions of the Companies Act and also the provisions of the Trade and Merchandise Act that the use of the trade mark by Eastern Clay Works Ltd., is in effect use of the mark by the first respondent STC itself. The respondent further proved that the use of the mark by Eastern Clay Works Ltd. is the use under the direct control and supervision of the first respondent company itself. That apart, the tiles manufactured in the tile factory bearing the name, Feroke Tile Works have always been maintained in accordance with the directions of the respondent company and under the immediate supervision of the respondent company. As a matter of fact, it was demonstrated before me that all tiles manufactured in Feroke Tile Works at all times since the respondent company became the owner of umbrella trade mark have always i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... astern Clay Works Ltd. as manufacturer. Exhibit D-5 clearly refers to the carrying on of the business by the first respondent with 'Feroke Tile Works', Calicut. Exhibit D-5 also refers to the decision taken at the general meeting of the company held on May 20, 1969, authorising the lease of the business (Feroke Tile Works). Clause 6 of exhibit D-5 hire agreement refers to the raw materials, stores and spare parts, etc., as the assets of the owner, (STC) and states that the manufacturer (Eastern Clay Works Ltd.) shall remain the custodian of the said assets. The owner (STC) has also retained its right to inspect the stock of raw materials, stores and spare parts, etc., handed over to the manufacturer at any time during working hours. It also provided for taking action against the manufacturer for any loss or damage, if any, noticed by the owner on the said assets and liabilities of the manufacturer to make good such damage or loss to the owner. I should not fail to refer to one of the very important clauses incorporated in exhibit D-5 hire agreement, which reads as follows: "The owner shall be at liberty at any time, to terminate the contract during the period of hire, without ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 'Feroke Tile Works'. ( v )Even in the bills of lading project, it is specifically stated that the tiles were manufactured by Feroke Tile Works. In short, Eastern Clay Works Ltd. is merely performing the ministerial work of operating the machinery, etc., while the trade mark is used to indicate a connection in the course of trade between Feroke Tile Works (which is an alias of STC) and the goods. Thus, in my opinion, the use of the mark can legitimately be said to be the use of STC, therefore, in my view the charge of "non-user" of the mark by STC under section 46(1)( b ) of the Act is not tenable and acceptable to this court. The following alternative propositions made by learned counsel for the first respondent also merit consideration: (1)Eastern Clay Works Ltd. is a subsidiary of STC; (2)The relationship of holding and subsidiary companies brings in the inherent aspect of 'control'. Besides, as stated above, agreements, exhibits D-4 to D-6 spell out total control by STC. Additionally, STC has also posted an engineer (as deposed by DW-1 in his evidence) for super vising quality, etc.; (3)Courts have held that use of a mark by a subsidiary company can fairly be s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the trade mark "umbrella" in the year 1967 itself and that from 1967 onwards up to now Feroke Tile Works is still owned by STC Ltd. continuously. It has been brought out from the evidence that Feroke Tile Works has no separate legal entity, but a wholly owned subsidiary of Sudarsan Trading Company. Further, on facts it is seen that the inherent nature of relationship between STC and Eastern Clay Works Ltd. is in the position of holding and subsidiary companies. Therefore, the control by the holding company over the subsidiary company is inherent. STC has also retained its power of direct control and supervision by reason of the inherent relationship. The control by the holding company on the subsidiary company can also be seen in the agreements entered into between both parties under exhibits D-4 to D-6. Trade mark agreement has got to be read in conjunction with the statutory relationship between the parties as holding company and subsidary company and against these documents, control by STC first respondent over Eastern Clay Works Ltd. will be seen to be absolute. STC can also terminate the agreement without assigning any reason. Thus considering the submissions made by learn ..... X X X X Extracts X X X X X X X X Extracts X X X X
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