Suresh Dhanuka Vs.
Sunita Mohapatra
Civil Appeal
Nos.10434-10435 of 2011 (Arising out of SLP(C) Nos.3391-3392 of 2011)
J U D G M E N T
ALTAMAS KABIR, J.
1.
Leave
granted.
2.
These
appeals arising out of SLP(C) Nos.3391-3392 of 2011, are directed against the
judgment and order dated 27th October, 2008, passed by the Orissa High Court in
ARBA No.17 of 2008 and the order dated 28th September, 2010, passed on the
Review Application No.21 of 2008.
3.
The
Appellant herein, Suresh Dhanuka, filed an application before the learned District
Judge, Khurda, being ARB (P) No.576 of 2007, under Section 9 of the Arbitration
and Conciliation Act, 1996, hereinafter referred to as the "1996
Act".
4.
The
facts leading to the filing of the said application reveal that on 1st April, 1999,
Suresh Dhanuka, the Appellant herein, and Sunita Mahapatra, the Respondent herein,
entered into an Agreement, whereby they agreed to jointly carry on business in
the name and style of "Abhilasha". Sunita Mahapatra was carrying on business
in the name and style of "M/s. Nature Probiocare Inc.", as the sole proprietress
thereof. The said Agreement was for a period of five years from 1st April, 1999
to 31st March, 2004, which was subsequently extended till 31st March, 2009. On 4th
October, 1999, the Respondent herein applied to the Registrar of Trade Marks, Kolkata,
in Form No.TM-1 under the Trade and Merchandise Marks Act, 1958, for
registration of the Trade Mark "Naturoma Herbal", under Application
No.879695.
5.
During
the first five-year period of the original Agreement dated 1st April, 1999, the
Respondent, Sunita Mahapatra, executed a Deed of Assignment on 1st October,
2000, assigning 50% of her right, title and interest in the said Trade Mark "Naturoma
Herbal", with proportional goodwill of the business concerned in the goods
in respect of which the Mark was permanently used, interalia, on the following
terms and conditions, namely,
a. All goods manufactured
by the Respondent under the said Trade Mark would be marketed solely by the
Appellant herein;
b. On the termination of
the Joint Venture, neither the assignor nor the assignee would be entitled to use
or register the Mark in its own name or jointly with some other party;
c. The existing goodwill
and further goodwill would vest in the owner and the assignee. Soon thereafter,
on 28th February, 2001, M/s. S. Majumdar & Co., the authorized Trade Mark agent
of the Respondent, filed an application in Form No.TM-16, along with the Deed of
Assignment, with the Trade Mark authorities, together with the fee of Rs.20/- for
recording the name of the Appellant as the Joint Proprietor of the Trade Mark.
The application for
registration of the Trade Mark was advertised in the Trade Mark Journal on 13th
November, 2003. While the same was pending, the Agreement dated 1st April, 1999,
was extended by mutual consent till 31st March, 2009. It appears that during the
period 2003-2007, the sale of the product increased from Rs.19,99,808/- to
Rs.1,88,70,143/-. Meanwhile, the Agreement dated 1st April, 1999, was extended by
mutual consent till 31st March, 2009, as indicated hereinbefore.
6.
It
appears that on 19th July, 2004, one Food Ingredients Specialties S.A. filed an
opposition No.KOL-167256 to the Trade Mark application of the Respondent wherein
a joint reply was filed, which was affirmed by both the parties. It is alleged that,
thereafter, in 2006, the Appellant and his son floated a company by the name of
"Naturoma Herbal (P) Ltd.".
It is the case of the
Appellant that the Appellant and his son floated the company with the name of "Naturoma
Herbal (P) Ltd.". According to the Appellant, his son floated the company
with the consent of the Respondent, who, subsequently, declined to participate in
the management thereof.
On 31st August, 2006,
the Appellant resigned from the company despite the fact that the company had not
started manufacturing activities until then, as was certified by the Chartered
Accountant. On 21st August, 2007, the Respondent herein filed a Suit, being CS No.26
of 2007, before the District Judge at Khurda, under Sections 134 and 135 of the
Trade Marks Act, 1999.
The learned District Judge,
by an ex-parte order dated 29th August, 2007, restrained the Appellant and the company
from selling, distributing, manufacturing and marketing any of the products in the
name of "Naturoma" or "Naturoma Herbal". At this stage, on 4th
September, 2007, the Respondent filed an application under Section 9 of the 1996
Act, also before the District Judge at Khurda.
7.
On
12th September, 2007, the Appellant came to learn from the market that in breach
of the Agreements entered into by the parties, the Respondent was approaching the
Dealers and Distributors of the Appellant to take direct supplies from the Respondent
on a higher discount. This led to the filing of the application under Section 9
of the 1996 Act by the Appellant before the District Judge, Alipore, Kolkata.
Thereafter, on 25th September,
2007, the Respondent cancelled the Agreement dated 1st April, 1999 and also
revoked the Deed of Assignment dated 1st October, 2000. The Appellant's
application under Section 9 of the 1996 Act was dismissed on 26th November,
2007, on account of the earlier application filed under Section 9 of the above Act,
by the Respondent before the District Judge at Khurda.
Thereafter, on 19th December,
2007, the Appellant filed a fresh application under Section 9 of the 1996 Act, before
the learned District Judge, Khurda. On 27th December, 2007, the learned District
Judge passed an interim order restraining the Respondent from selling the products
in question by herself or by any other person, save and except through the Appellant.
The said interim order was made absolute on 22nd May, 2008.
8.
On
1st July, 2008, a corrigendum was made by the Trade Mark Registrar in the Trade
Mark Journal, showing the Appellant as the joint proprietor of the Trade Mark
"Naturoma Herbal".
9.
The
Respondent herein preferred an appeal before the Orissa High Court on 8th July,
2008, which was heard on 18th September, 2008 and judgment was reserved. While the
matter was pending, the Respondent filed a letter with the Trade Mark Authority
at Mumbai on 25th September, 2008, praying for cancellation of the order
allowing the request of the Appellant in January, 2001, resulting in issuance of
the Corrigendum in the Trade Mark Journal on 16th September, 2008.
As would appear from the
materials on record, the Assistant Registrar of Trade Marks, Mumbai, cancelled
the Corrigendum dated 1st July, 2008 on 26th September, 2008, without notice to
the Appellant and such cancellation was published in the Trade Mark Journal on
29th September, 2008. On 30th September, 2008, the Respondent filed an affidavit
to bring on record the said cancellation of the Corrigendum and, though, the same
was relied upon by the High Court in its judgment dated 27th October, 2008, the
Appellant was not given an opportunity to deal with the same.
The High Court, by its
aforesaid judgment, allowed the appeal filed by the Respondent. The Review
Application filed by the Appellant on 28th January, 2009, against the judgment
and order dated 27th October, 2008, was ultimately rejected by the High Court
on 28th September, 2010, resulting in the filing of the Special Leave Petitions
on 7th January, 2011, in which notice was issued and a limited interim order
was made.
10.
Appearing
for the Appellant, Mr. P.K. Ghosh, learned Senior Advocate, submitted that since
the Respondent's establishment was basically a production unit and did not possess
any experience and/or expertise in the field of marketing, promotion,
distribution and management of its manufactured goods, she entered into an Agreement
with the Appellant to market and distribute her products for a period of 5
years from 1st April, 1999, as indicated hereinbefore.
The same was extended
for a further period of 5 years on 1st April, 2004 by mutual consent. Mr. Ghosh
submitted that the Appellant incurred huge promotional expenses between 1999 and
2007 assessed at about Rs.72 lakhs and it was only after such promotional schemes
that there was a substantial increase in the sale of the product with the Trade
Mark "Naturoma Herbal". Mr. Ghosh submitted that the sales figures from
the accounting year 2003-04 to the accounting year 2006-07 showed an increase
of almost 1 crore 60 lakhs rupees.
11.
Mr.
Ghosh submitted that the Respondent even went so far as to sell its goods by using
the Trade Mark "Naturoma Herbal" and deleting the name "Abhilasha"
from the packaging of the products. Mr. Ghosh contended that suppressing all the
above facts, the opposite party filed a suit, being C.S. No.26 of 2007, under Sections
134 and 135 of the Trade Marks Act, 1999, before the District Judge, Khurda, inter
alia, praying for an order of injunction to restrain the Appellant from using the
Mark "Naturoma Herbal" and obtained an ex-parte order of injunction to
the above effect.
12.
Having
obtained an interim order in the aforesaid suit, the Respondent terminated the Agreement
dated 1st April, 1999, and also revoked the Deed of Assignment dated 1st October,
2000, unilaterally. The Appellant thereupon moved the learned District Judge,
Alipore, by way of an application under Section 9 of the 1996 Act, but the same
had to be dropped on account of lack of jurisdiction.
The Appellant, thereafter,
filed another application under Section 9 of the above Act, being ARBP No.576 of
2007, before the Court of District Judge, Khurda, in which initially on 22nd December,
2007, an interim protection was given directing the Respondent not to sell, market,
distribute, advertise its products under the Trade Mark "Naturoma
Herbal", by herself or through any other person save and except the
Appellant herein. The said order was subsequently confirmed on 22nd May, 2008.
13.
Mr.
Ghosh submitted that the Respondent had no authority to terminate the Agreement
dated 1st April, 1999, on the ground that the same had been misused by the Appellant.
Learned counsel submitted that even if it be accepted that the Appellant was a
Director of the Naturoma Herbals Pvt. Ltd., between June, 2005, to August, 2006,
then there was no substance in the applications made against the Appellant as the
said Company had not conducted any business within that period and, in any event,
its product was sold under different designs containing the word
"SAFFIRE" in bold and prominent fonts.
14.
Mr.
Ghosh submitted that the Respondent did not also have any right to revoke the Deed
of Assignment whereby 50% of the right, title and interest in the Trade Mark "Natural
Herbal" had been assigned to the Appellant to be held by him absolutely and
forever. Mr. Ghosh urged that the Deed of Assignment did not contain any clause
for revocation of the right and ownership of the Trade Mark to the extent of 50%
and such revocation was made with the intention to defraud the Appellant and to
grab the market created by him.
15.
Mr.
Ghosh reiterated the conditions contained in the Deed of Assignment dated 1st October,
2000, whereby 50% of the right, title and interest in the Trade Mark
"Naturoma Herbal" with proportional goodwill of the business concerned
in the said goods in respect of which the Mark was used, stood assigned to the
Appellant absolutely and forever.
Mr. Ghosh submitted
that it was not within the powers of the Respondent to terminate the Deed of Assignment,
even if the joint venture for marketing of the goods manufactured by the
Respondent under the name of "Abhilasha", was discontinued. Mr. Ghosh
reiterated that all goods manufactured by the Respondent under the aforesaid
Trade Mark would have to be marketed solely by the Appellant and on termination
of the joint venture, neither the assignor nor the assignee would be entitled to
use or register (emphasis added) the Mark on its own name or jointly with some other
party.
Mr. Ghosh contended that
the said condition amounted to a negative covenant which could be enforced
under Section 42 of the Specific Relief Act, 1963. Learned counsel urged that while
Section 41 of the aforesaid Act indicates the circumstances in which an injunction
cannot be granted to prevent the breach of a contract, the performance of which
could not specifically be enforced, Section 42, on the other hand, specifically
provides that notwithstanding anything contained in Clause (e) of Section 41,
where a contract comprises an affirmative agreement to do a certain act,
coupled with a negative agreement, express or implied, not to do a certain act,
the Court while not being in a position to compel specific performance of the affirmative
agreement, would not be precluded from granting an injunction to perform the negative
covenant, if the plaintiff had not failed to perform the contract so far as it
was binding on him.
Mr. Ghosh urged that
in the instant case, the conditions in the Deed of Assignment made it very clear
that except for the Appellant, no other person would be entitled to market, sell,
distribute and advertise the goods manufactured by the manufacturer under the Trade
Mark "Naturoma Herbal". It was further stipulated that if the joint venture
agreement was to be terminated at any point of time, neither the assignor nor
the assignee would be entitled to use or register the Mark in its own name or in
the name of some other party.
16.
It
was submitted by Mr. Ghosh that the corrigendum which had been published by the
Registrar of Trade Marks in the Trade Mark Journal on 1st July, 2008, showing the
Appellant as the joint proprietor of the Trade Mark "Naturoma Herbal"
was cancelled on 25th September, 2008, on the basis of a letter written by the Respondent
to the Trade Mark Authority at Mumbai, seeking cancellation of the order, without
any opportunity being given to the Appellant who had been shown as the joint proprietor
of the Trade Mark in question.
Mr. Ghosh submitted that
what is more interesting is the fact that such letter seeking cancellation of the
order by which the name of the Appellant was shown as the Joint Proprietor of the
Trade Mark was written at a time when the Respondent's appeal against the order
of the Registrar of the Trade Marks was pending before the Orissa High Court.
In fact, after the
hearing of the appeal was concluded and judgment was reserved, the Respondent filed
an affidavit before the High Court to bring on record the cancellation of the corrigendum
published on 1st July, 2008 and, although, the same was relied upon by the High
Court, no opportunity was given to the Appellant to deal with the said document
or to make any submissions in respect thereof. Mr. Ghosh submitted that the appeal
was ultimately allowed by the High Court on the basis of documents submitted on
behalf of the Respondent after the judgment had been reserved in the appeal.
17.
Mr.
Ghosh also submitted that the review application filed by the Appellant on the ground
that the affidavit filed by the Respondent was taken on record without any
opportunity to the Appellant to meet the same, was also rejected on 20th September,
2010, on the basis of an order of the Registrar of Trade Marks which was not on
record at the time when the hearing of the appeal was concluded and judgment was
reserved.
Mr. Ghosh submitted
that the manner in which the entire proceedings had been conducted clearly indicates
that the High Court had not applied its judicial mind in allowing the appeal
filed by the Respondent against the orders passed on the Appellant's application
under Section 9 of the Arbitration and Conciliation Act, 1996, before the
District Judge at Khurda.
18.
Mr.
Ghosh lastly contended that on the application made by the Respondent to the Registrar
of Trade Marks for registration of the Trade Mark "Naturoma", certain
objections had been filed in her counter statement. In such objection, it had
been clearly indicated that with a view to effectively market the products under
the Trade Mark "Naturoma", the Respondent joined hands with the
Appellant by a Deed of Assignment dated 1st October, 2000, whereby she had transferred
50% of her right, title and interest in favour of the Appellant and pursuant to
such assignment, the Trade Mark application was now jointly held by Nature Pro Biocare
Inc. and Abhilasha.
Mr. Ghosh submitted
that the Respondent had at all times in no uncertain terms reiterated the
assignment effected in favour of the Appellant with regard to the Trade Mark and
the goodwill of the Company. Learned counsel submitted that having done so, there
was no reason for the Registrar of Trade Marks to cancel the corrigendum by which
the name of the Appellant had been brought on the Trade Mark Journal as joint owner
of the Trade Mark "Naturoma Herbal" and that too not by any order of cancellation,
but merely by a notification which was issued without any foundation, since the
judgment in the appeal preferred by the Respondent had not yet been delivered.
Mr. Ghosh submitted that
the order of the High Court and that of the Registrar of Trade Marks canceling the
corrigendum issued by the Registrar of Trade Marks in favour of the Appellant,
were liable to be set aside.
19.
On
behalf of the Respondent, Mr. Shambhu Prasad Singh, learned Senior Advocate, submitted
that since the arbitral proceeding was at its last stages and the Appellant could
be adequately compensated in terms of money, the prayer for injunction made on behalf
of the Appellant was liable to be rejected.
20.
Apart
from the above, Mr. Singh submitted that although a Deed of Assignment had been
executed on 1st October, 2010, the same had never been acted upon, but the
Appellant sought to take shelter under Clause 19 of the said Deed after having acted
contrary thereto by forming a Company in the name of "Naturoma Herbals
Private Limited" and applying for registration of the Respondent's Trade Mark
"Naturoma" in his newly-formed Company's name. Referring to the Certificate
of Incorporation and Memorandum of Association of the said Company,
Mr. Singh pointed out
that the name of the Appellant was shown in the Subscribers' List at Serial No.1
holding 5000 shares, while his son, Rahul Dhanuka, was shown to be holding the
remaining 5000 shares.
21.
On
the question of grant of injunction to implement a negative covenant, as envisaged
in Section 42 of the Specific Relief Act, 1963, Mr. Singh urged that the
covenant contained in the Deed of Assignment, which had not been acted upon, was
contrary to the provisions of Section 27 of the Indian Contract Act, 1872, and was,
therefore, void.
22.
Mr.
Singh submitted that prior to the Agreement entered into between the parties on
1st April, 1999, regarding marketing and distribution of the goods manufactured
by the Respondent, the Respondent had obtained Drug Licence on 2nd May, 1997, and
Sales Tax Licence on 13th September, 1997, for marketing and selling "Naturoma
Herbals". Mr. Singh urged that even eight years after the Assignment Deed
was signed by the parties, the Respondent's name continued to be shown in the Trade
Mark Journal as the proprietor of the aforesaid Trade Mark. Learned counsel submitted
that as per the prayer of the Respondent in the application before the
District Judge, Khurda,
under Section 9 of the Arbitration and Conciliation Act, 1996, the Court had
initially passed an interim order dated 29th August, 2007, whereby the Appellant
and others were restrained from selling, distributing, manufacturing and
marketing any product in the name of "Naturoma Herbals" or
"Naturoma" or in any other name similar or identical to the said name.
The said ad-interim order was made absolute on 25th January, 2008, till the
disposal of the suit. The appeal preferred from the said order was dismissed by
the High Court. The review petition filed thereafter was also dismissed.
23.
Mr.
Singh then submitted that in addition to the aforesaid proceeding before the
District Judge, Khurda, the Appellant had also filed an application before the
learned Arbitrator under Section 17 of the Arbitration and Conciliation Act, 1996,
for the self-same reliefs.
24.
On
the question of enforcement of a negative covenant, Mr. Singh submitted that
even in such a case, the balance of convenience and inconvenience would have to
be taken into consideration. In this regard, reference was made to the decision
of this Court in (i) Gujarat Bottling Co. Ltd. vs. Coca Cola Company [(1995) 5 SCC
545], (ii) Percept D'Mark (India) (P) Ltd. vs. Zaheer Khan [(2006) 4 SCC 227]
and (iii)K.T. Plantation Ltd. vs. State of Karnataka [(2007) 7 SCC 125].
25.
Mr.
Singh urged that the impugned decision of the High Court was without any illegality
or irregularity and no interference was called for therewith.
26.
In
a short reply, Mr. Pradip Ghosh submitted that in the instant case there was no
violation of Section 27 of the Indian Contract Act, 1872, as the injunction
sought for was not on trade or business but in respect of use of the Trade
Mark.
27.
From
the submissions made on behalf of the respective parties and the materials on record,
it is clear that the Respondent who was a manufacturer of herbal products entered
into an Agreement with the Appellant resulting in the formation of a Joint
Venture Company under the name and style of "Abhilasha". The said Agreement
was initially for a period of 5 years from 1st April, 1999, and, thereafter,
extended till 31st March, 2009. There is also no dispute that a Deed of
Assignment was executed by the Respondent in favour of the Appellant on 1st
October, 2010, assigning 50% of the right, title and interest in the Trade Mark
"Naturoma Herbal" registered in the name of the Respondent, with
proportional goodwill of the business concerned in the goods in respect of
which the Mark is permanently used, on certain conditions which have been extracted
hereinbefore.
It is also on record
that an application was filed with the Trade Mark authorities for bringing on record
the name of the Appellant as the Joint Proprietor of the Trade Mark and objections
filed thereto were jointly resisted by the Appellant and the Respondent, accepting
the fact that the Appellant was the owner of 50% of the Trade Mark and all rights,
title and interest accrued therefrom. However, in 2006, it came to light that
the Appellant had floated a Company by the name of "Naturoma Herbals (P) Ltd."
and it had also applied for registration of the Trade Mark in the name of that Company.
It is at that stage that
the Respondent filed a Suit on 21st August, 2007, under Sections 134 and 135 of
the Trade Marks Act, 1999, being C.S. No.26 of 2007, in which an ex-parte interim
order was passed on 29th August, 2007, restraining the Appellant and the Company
from selling, distributing, manufacturing and marketing any of the products in the
name of "Naturoma" or "Naturoma Herbal". The said ad- interim
order was made absolute on 25th January, 2008, till the disposal of the suit.
28.
Thereafter,
on 25th September, 2007, the Respondent cancelled the Agreement dated 1st April,
1999 and also revoked the Deed of Assignment dated 1st October, 2000.
Immediately thereafter, on 19th December, 2007, the Appellant filed a fresh application
under Section 9 of the Arbitration and Conciliation Act, 1996, before the
District Judge, Khurda, who on 27th December, 2007, passed an ad-interim order restraining
the Respondent from selling her products by herself or by any other person, save
and except through the Appellant. The said interim order was made absolute on
22nd May, 2008.
29.
At
this point of time, there were two apparently conflicting orders in existence; one
by the District Judge, Khurda, in the Suit filed by the Respondent restraining the
Appellant from selling, distributing, manufacturing or marketing any of the products
in the name of "Naturoma" or "Naturoma Herbal", and on the
other the District Judge passed an order under Section 9 of the Arbitration and
Conciliation Act, 1996, restraining the Respondent from selling her products by
herself or by any other person, save and except through the Appellant.
30.
The
corrigendum by which the Trade Mark Registrar had on 1st July, 2008, altered
the entries in the Trade Mark Journal, showing the Appellant as the Joint
Proprietor of the Trade Mark "Naturoma Herbal", was cancelled on 26th
September, 2008, without notice to the Appellant. After the interim order passed
on 27th December, 2007, on the application filed by the Appellant under Section
9 of the Arbitration and Conciliation Act, 1996, and the same was made absolute
on 22nd May, 2008, the Respondent preferred an appeal before the Orissa High Court
on 8th July, 2008, being Arb. A. No.17 of 2008.
The same was heard on
18th September, 2008, and judgment was reserved. After reserving judgment, the High
Court allowed the Respondent to file an affidavit to bring on record subsequent
events which did not form part of the records, without giving the Appellant an
opportunity of dealing with the same. What is also relevant is the fact that the
said affidavit was relied upon by the High Court while allowing the Appeal filed
by the Respondent herein. The questions which, therefore, arise for
determination are :
i.
Whether
the High Court was justified in interfering with the order passed by the District
Judge, Khurda in Arb.(P) No.576 of 2007, on account whereof pending arbitration,
the Respondent was restrained from marketing the products manufactured by her under
the Trade Mark "Naturoma Herbal" or "Naturoma" by herself or
through anyone, except through the Appellant?
ii.
Whether,
pending arbitration proceedings, an order could have been passed by which the right
acquired by the Appellant under the Deed of Assignment of 50% of the right, title
and interest in the Trade Mark "Naturoma Herbal", could have been suspended
and he could have been restrained from objecting to the use of the said Mark by
the Respondent?
iii.
Whether
the High Court was justified in relying upon an affidavit filed on behalf of the
Respondent after hearing had been concluded and judgment had been reserved in the
appeal, without giving the Appellant an opportunity of dealing with the same?
iv.
Whether
the invocation of Section 42 of the Specific Relief Act, 1963, to enforce the negative
covenant contained in the Deed of Assignment, was contrary to the provisions of
Section 27 of the Indian Contract Act, 1872 and was, therefore, void?
31.
As
far as the first two questions are concerned, the terms of the Deed of Assignment
clearly indicate that the Respondent had of her own volition parted with 50% of
her right, title and interest in the Trade Mark "Naturoma Herbal" with
proportional goodwill of the business concerning the goods in respect of which the
Mark was used, absolutely and forever, from the date of the Deed, namely, 1st October,
2000.
It is no doubt true that
on behalf of the Respondent it has been claimed that the Deed of Assignment had
never been acted upon and that, in any event, the same had been revoked on 25th
September, 2007, when the Agreement dated 1st April, 1999, was cancelled. However,
in view of the provisions of the Deed of Assignment, it is yet to be adjudicated
upon and decided as to whether by virtue of the revocation of the Deed of Assignment
by the Respondent, the Appellant was no longer entitled to the benefits of the Trade
Mark which had been transferred to him to the extent of 50% absolutely and
forever.
In such
circumstances, the order passed by the District Judge, Khurda, in ARBP No.576 of
2007, restraining the Respondent from marketing her products through any person,
other than the Appellant, was more apposite in the facts of the case, as the rights
of both the parties stood protected till such time as a final decision could be
taken in arbitral proceedings, which, in effect, is the object and intention of
Section 9 of the Arbitration and Conciliation Act, 1996.
32.
As
far as the third question is concerned, it was inappropriate on the part of the
High Court to allow the Respondent to file an affidavit, on which reliance was placed,
after the hearing had been concluded and judgment had been reserved, without giving
the Appellant an opportunity of dealing with the same. However innocuous the additional
affidavit may have been, once the hearing was concluded and judgment was
reserved, it would have been prudent on the part of the High Court to have given
an opportunity to the Appellant to deal with the same before allowing it to be taken
on record.
It has been submitted
that the additional affidavit which was filed on behalf of the Respondent after
the judgment had been reserved by the Appeal Court, only sought to bring on record
the proceedings whereby the corrigendum which had been issued by the Trade Mark
Registrar on 1st July, 2008, showing the Appellant as the Joint Proprietor of the
Trade Mark "Naturoma Herbal", had been subsequently cancelled on 26th
September, 2008. Since what was produced was a record of the official proceedings,
the Appellant could not have been prejudiced since he himself had knowledge of
the same.
33.
Coming
to the last question, as to whether the invocation of Section 42 of the Specific
Relief Act, 1963, to enforce the negative covenant contained in the Deed of Assignment,
was contrary to the provisions of Section 27 of the Indian Contract Act, 1872,
or not, we are inclined to accept Mr. Ghosh's submissions that the injunction sought
for by the Appellant was not to restrain the Respondent from carrying on trade or
business, but from using the Trade Mark which was the subject matter of dispute.
Accordingly, the provisions
of Section 27 of the Indian Contract Act, 1872, would not be attracted to the facts
in this case. For the sake of reference, Section 27 of the above Act is
reproduced hereinbelow :- 27. Agreement in restraint of trade, void.- Every
agreement by which any one is restrained from exercising a lawful profession, trade
or business of any kind, is to that extent void.
Exception 1.- Saving
of agreement not to carry on business of which goodwill is sold.- One who sells
the goodwill of a business may agree with the buyer to refrain from carrying on
a similar business, within specified local limits, so long as the buyer, or any
person deriving title to the goodwill from him, carries on a like business therein,
provided that such limits appear to the Court reasonable, regard being had to
the nature of the business." It is obvious that what is declared to be void
by virtue of Section 27 is any Agreement to restrain any person from exercising
his right to carry on a profession or trade or business and any restraint
thereupon by an Agreement would be void.
34.
As
will be seen from the materials on record, the Appellant did not ask for any injunction
against the Respondent from carrying on any trade or business, but he objected to
the use by the Respondent of the Trade Mark, in which he had acquired a 50% interest,
while selling her products.
35.
The
conditions in the Deed of Assignment clearly stipulate that all the goods manufactured
by the Respondent under the Trade Mark "Naturoma" would be marketed solely
by the Appellant. It was also submitted that the said Trade Mark would be used only
in relation to goods connected in the course of trade with both the parties.
One of the other conditions
of the Deed of Assignment was that both the parties would be entitled to assign
their respective shares in the Trade Mark subject to prior written consent of the
other party, which presupposes that the parties were the absolute owners of their
respective shares in the Trade Mark and even on termination of the joint
venture, as has been done in the instant case, neither of the parties would be
entitled to use or register the Mark in their own names or jointly with some other
party.
36.
Accordingly,
having regard to the arbitration clause, which is Condition No.10 of the terms and
conditions of the Deed of Assignment, the interim order passed on the application
under Section 9 of the Arbitration and Conciliation Act, 1996, filed by the
Appellant in keeping with the terms and conditions agreed upon between the parties,
was justified and within the jurisdiction of the District Judge, Khurda.
As we have mentioned hereinbefore,
the interim order passed by the learned District Judge, Khurda, restraining the
Respondent from selling her products by herself or by any other person, save
and except through the Appellant, was apposite to the circumstances. The said order
took into consideration the interests of both the parties flowing from the Agreement
and the Deed of Assignment, pending decision by an Arbitral Tribunal.
The cause of action for
the suit filed by the Respondent before the District Judge, Khurda was the incorporation
of a Company by the Appellant with his son under the name and style of "Naturoma
Herbals (P) Ltd." and the subsequent application made before the Registrar
of Trade Marks to register "Naturoma Herbal" in the name of the said
Company.
It is in that context
that the interim order was passed restraining the Appellant from distributing, manufacturing
or marketing any of the products in the name of "Naturoma" or Trade Mark
"Naturoma Herbal". The said order of injunction did not permit the
Respondent to manufacture and market the goods under the said Trade Mark in
violation of the provisions of the Deed of Assignment referred to hereinabove.
37.
The
learned Single Judge of the High Court, while referring to some of the provisions
of the Agreement between the parties, apparently overlooked the provisions relating
to the use of the Trade Mark contained in the Deed of Assignment. Although,
reference was made to Clause 19 of the Agreement, the High Court failed to notice
that the same was not contained in the Deed of Assignment, whereby 50% of the
right, title and interest of the Respondent in the Trade Mark "Naturoma Herbal"
was assigned in favour of the Appellant absolutely and forever.
As has been
emphasized hereinbefore, even upon termination of the joint venture under the Agreement
between the parties, neither the Appellant nor the Respondent would be entitled
to use or register the Mark in their own names or jointly with some other party.
In fact, the relevant terms and conditions of the Deed of Assignment had been extracted
by the learned Single Judge in the impugned judgment, but the same appear to have
been lost sight of while considering the terms and conditions of the Agreement executed
between the parties.
38.
In
our view, this is not a case where money can be an adequate compensation, since
the Appellant has apparently acquired a 50% interest in the Trade Mark in
question, together with the goodwill of the business in relation to the products
in which the Trade Mark is used.
39.
We
are, therefore, of the view that the High Court erred in reversing the order passed
by the District Judge in ARBP No.576 of 2007 filed by the Appellant, under which
the status-quo would have been maintained till the dispute was settled in
arbitration.
40.
We,
accordingly, allow the Appeals, set aside the impugned judgment and order of
the learned Single Judge of the High Court impugned in the Appeals and restore
that of the District Judge, Khurda in ARBP No.576 of 2007.
41.
However,
before parting with the matter, we have to refer to the order passed by us on 28th
January, 2011, whereby the Respondent had been allowed to continue with the running
of the business, but she was directed to maintain a separate account in respect
of the transaction and to place the same before us at the time of hearing of
the matter.
Such account does not
appear to have been filed, but since we are disposing of the matter by restoring
the order of the District Judge, Khurda, in ARBP No.576 of 2007, we further direct
the Respondent, as and when arbitral proceedings may be taken, to furnish such
account upto this day before the learned Arbitrator so that the claims of the parties
can be fully decided by the learned Arbitrator.
42.
Having
regard to the facts of the case, the parties will bear their own costs in these
appeals all throughout.
............................................................J.
(ALTAMAS KABIR)
............................................................J.
(SURINDER SINGH NIJJAR)
............................................................J.
(GYAN SUDHA MISRA)
New
Delhi
Dated:
02.12.2011
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