Sharma Ayurved Private Limited vs B.N. Sharma Ayurved Private Limited

Sharma Ayurved Private Limited ...... Plaintiff / Petitioner -Vs.- B.N. Sharma Ayurved Private Limited ...... Defendant / Respondent

For the plaintiff : Mr. P.C. Sen, Sr. Adv. Mr. Arup Nath Bhattacharya, Adv. Mr. Anirban Ray, Adv. Ms. Sreetama Biswas, Adv.

For the defendant : Mr. Ratnanko Banerjee, Sr. Adv. Mrs. Lapita Banerjee, Adv. Mr. Patita Paban Biswas, Adv. Mr. Kuldip Mallik, Adv. Ms. Sristi Barman Roy, Adv.

Heard On : 07.08.2014, 14.08.2014, 04.09.2014, 11.09.2014, 20.03.2014, 05.05.2015, 08.05.2015, 05.06.2015, 14.07.2015, 16.11.2015, 30.11.2015, 02.11.2016, 08.09.2017, 13.07.2018, 27.07.2018, 16.11.2018, 30.11.2018, 14.12.2018, 09.09.2019.

Date of decision : 19.11.2019 2

Arijit Banerjee, J.:

1. In this suit filed for alleged infringement of copyright in the

artistic work 'BANPHOOL' (Label) and the artistic work

'BANPHOOL OIL' (Carton), the plaintiff has filed this interlocutory

application essentially praying for an order of injunction to

restrain the defendant from producing or selling or marketing

any product using the said label and carton as portrayed in

Annexures - 'K' & 'L' to the petition. The short contention of the

plaintiff/petitioner is that it is the owner of the copyright in the

artistic work on the said label and carton. It has not permitted

the defendant to use the said label and carton for carrying on the

defendant's business of manufacture and sale of hair oil. By

manufacturing and marketing/selling its hair oil using the said

label and carton, the defendant is infringing the plaintiff's

copyright in the said label and carton.

2. The undisputed facts of the case are that, at all material

times, the Sharma Brothers carried on the family business of

manufacture and sale of Ayurvedic hair oil under the name of 3

'BANPHOOL'. This business was carried on in co-partnership,

pursuant to a partnership deed executed in 1982 by and between

the Sharma Brothers. The name of the partnership was M/s

Sharma Chemical Works. The copyright in respect of the artistic

work on the said label and carton was registered in the name of

the partnership firm. The registration number for the label was

A42227/83 and that for the carton was A41272/83. In the

registration certificate, in respect of the label, the name of the

author of the artistic work 'BANPHOOL' was shown as Shri

Biswanath Sharma, partner of Sharma Chemical Works. The

registration certificate in respect of the carton showed the name

of the author of the artistic work as Shri Kanakendu Tosh.

3. In the year 1999 the members of the Sharma family vis.

Biswanath Sharma (Biswanath), Sheo Shankar Sharma (Sheo

Shankar), Prabhu Nath Sharma (Prabhu Nath), Om Nath Sharma

(Om Nath), Mrs. Saraswati Sharma (Saraswati), Mrs. Sova

Sharma (Sova) and Saroj Kumar Sharma (Saroj) incorporated a

private limited company by the name of Sharma Ayurved Private

Limited which is the plaintiff herein. The certificate of

incorporation under the Companies Act, 1956, was issued by the 4

Registrar of Companies, West Bengal on 09 August, 1999. The

main object with which the said company was incorporated, as

stated in the objects clause of its Memorandum of Association,

was "to become vested with rights to continue the partnership

business now being carried on under the name and style of

'Sharma Chemical Works' including all its assets, rights,

interests, benefits, titles, approvals, registrations, permits,

facilities, concessions, sanctions, privileges, licences, deeds,

liabilities of the parties hereto in the partnership business and in

connection therewith." Upon incorporation of the said company,

the family business of manufacture and sale of 'Banphool hair oil'

was continued through the instrumentality of the said company

of which the promoters and share-holders were the members of

the Sharma family.

4. Disputes and differences arose between two factions of the

Sharma family regarding the business of the said company. One

set of share-holders of the company vis. Saraswati and Others

filed Company Petition No.49 of 2008 before the Company Law

Board (CLB), Kolkata Branch against the company and the other

shareholders being Biswanath and Others, under Sections 5 397/398 of the Companies Act, 1956 alleging mismanagement

and oppression. Since this was a derivative action, the company

was made a party respondent. The said proceeding was disposed

of by the CLB by an order dated 14th September, 2011. This order

is of vital importance. The directions contained in the said order

insofar as the same are relevant for the purpose of the present

proceeding, are, inter alia, to the following effect:

(i) The petitioners' group (Saraswati Group) would get the

Kolkata unit of the company (plaintiff herein) and the

respondents' group (Biswanath Group) shall get the

Delhi and Baddi Units of the company.

(ii) The valuer appointed by the CLB would value the

Units separately as also the share value of the entire

company so that the group whose share value was

more than the Unit that went to them, could be

compensated in proportion to the value of the shares

held by that group. The value of the shares of the

company was to be determined on the basis of the

Balance Sheet as on 30.09.2008.

6 (iii) The respondents' group (Biswanath Group) shall

surrender their shares in the company for cancellation

so that the petitioners' group (Saraswati Group) could

retain the company for parting with the Delhi and

Baddi units.

(iv) The petitioners' group (Saraswati Group) shall not use

the portrait or monogram of the respondent no. 2

(Biswanath Sharma) on any of their products.

(v) The respondent no.2 (Biswanath Group) was directed

to float a separate company to carry on the business

that they had been already carrying on through the

company (plaintiff).

(vi) The respondents' group would be at liberty to pursue

their business through the Delhi and Baddi units.

(vii) The Biswanath Group would not use name of the

respondent no.1 company (plaintiff herein) but would

be at liberty to float the new company by adding some

suffix or prefix to the name 'Sharma Ayurved'.

7 5. The defendant company was incorporated by the Biswanath

Group in the year 2012. It is not in dispute that the defendant

carries on the business of manufacture and sale of Ayurvedic

hair oil using the same label and carton in respect whereof the

plaintiff claims to be the copyright owner. This is what the

plaintiff which is under the management of Saraswati Group

seeks to restrain by way of the present proceeding.

6. It has been submitted on behalf of the plaintiff that all

assets and properties of the erstwhile partnership firm, including

trademarks, copyrights, trade licences, actionable claims etc.

vested with the plaintiff upon its incorporation. The plaintiff is

the owner of the copyright in respect of the artistic work on the

label and carton in question. Being the registered owner of such

copyrights which is valuable intellectual property it is the plaintiff

alone and nobody else which is entitled to use the said label and

carton. The defendant is not entitled to use the name

'BANPHOOL' on its product.

7. Learned Senior Counsel for the plaintiff has relied on

Sections 51 and 55 of the Copyright Act, 1957. Section 51

explains what amounts to infringement of a copyright. Section 55 8

provides for civil remedies for infringement of copyrights. It says,

where copyright in any work has been infringed, the owner of the

copyright shall, except as otherwise provided by the Act, be

entitled to all such remedies by way of injunction, damages,

accounts and otherwise as are or may be conferred by law for the

infringement of a right; provided that if the defendant proves that

at the date of the infringement he was not aware and had no

reasonable ground for believing that copyright subsisted in the

work, the plaintiff shall not be entitled to any remedy other than

an injunction in respect of the infringement and a decree for the

whole or part of the profits made by the defendant by the sale of

the infringing copies as the Court may in the circumstances

deem reasonable. It has been submitted that the defendant, by

using the word 'BANPHOOL' on its label and carton has infringed

the plaintiff's copyright in the artistic work 'BANPHOOL' and

therefore, the plaintiff is entitled to an order of injunction to

restrain the defendant from committing such infringement.

Relying on the decision of the Bombay High Court in N.T.

Raghunathan & Anr. - vs. - All India Reporter Ltd. AIR 1971

(Bombay) 48, it was submitted that the defendant has not only

copied the ideas of the plaintiff but also the expression of ideas 9

and the form in which they were expressed and this amounts to

infringement of copyright.

8. Learned Senior Counsel referred to Clause VIII of the

Memorandum of Association of the plaintiff company which

states that all the assets of the partnership (Sharma Chemical

Works) including the assets mentioned in Schedule 'A' to the

Memorandum shall vest in the company on its incorporation free

from all claims by the parties to the Memorandum. My attention

was drawn to the said Schedule 'A' which includes the copyrights

in respect of the label and carton in question.

9. It is was further submitted on behalf of the plaintiff that the

defendant is carrying on manufacturing activities by wrongfully

using the trade license issued in the name of the plaintiff

company. My attention was drawn to a letter dated 07 October,

2011 written on behalf of the plaintiff to the Directorate of I.S.M.

& H., Government of India complaining of the same.

10. It was then submitted that the Biswanath Group who have

promoted the defendant company and are in control thereof, had

made an application being CA No.94 of 2012 in CP No.49 of 2008 10

before the CLB wherein one of the prayers was for an order of

injunction to restrain the petitioners in the CLB proceeding from

in any manner interfering with or disturbing or causing prejudice

to the respondents/applicants in the CLB proceeding in carrying

on business in the name of 'BANPHOOL' through Delhi or Baddi

units of the company. The CLB while disposing of such

application by its order dated 14th February, 2017 did not grant

such prayer. This means that the Biswanath Group or the

defendant company which they have promoted have no right to

use the word 'BANPHOOL' in connection with their business of

manufacture and sale of Ayurvedic hair oil.

11. Learned Senior Counsel also relied on the decision of the

Hon'ble Supreme Court in the case of Ramdev Food Products

(P) Ltd. - vs. - Arvindbhai Rambhai Patel & Ors. (2006) 8 SCC

726 in which the Hon'ble Supreme Court has held, inter alia,

that ordinarily two persons are not entitled to use the same

trademark unless there exists an express license in that behalf.

Ordinarily under the law there can be only one mark, one source

and one proprietor. Nor can a person use a mark which would be

deceptively similar to a registered trademark. This decision 11

concerns interpretation of the provisions of the Trade and

Merchandise Marks Act, 1958 and the Trade Marks Act, 1999.

With great respect I have failed to appreciate the applicability of

this decision to the facts of the present case.

12. Learned Senior Counsel then relied on the decision of the

Hon'ble Supreme Court in the case of M/s Power Control

Appliances & Ors. - vs. - Sumeet Machines Pvt. Ltd. (1994) 2

SCC 448, in support of his submission that a plea of honest and

concurrent user as contemplated in Section 12(3) of the Trade

and Merchandise Marks Act, 1958, for securing concurrent

rights, is not a valid defence for the infringement of copyright.

13. Finally, Learned Senior Counsel has relied on the decision

in Bykunt Chunder Chuckerbutty - vs. - Dhunput Singh

Bahadoor Vol - 19 Weekly Reporter (Civil) 104, in support of

his contention that the later part of a judgment must be taken to

be the expression of the conclusion to which the Judge ultimately

arrived, and if there is difficulty in reconciling with it the previous

part, the same must be rejected.

12

14. Appearing for the defendant, Learned Senior Counsel

submitted that the order dated 14th September, 2011 passed by

the CLB disposing of the application under Sections 397/398 of

the Companies Act, 1956 filed by the Saraswati Group, expressly

permitted the Biswanath Group to float a new company, name

the same by adding a prefix or suffix to the name 'Sharma

Ayurved' and carry on the same business that was being carried

on by the plaintiff company. He submitted that the CLB came to

the clear conclusion that it was Biswanath Sharma who

developed and expanded the family business of manufacture and

sale of 'Banphool hair oil'. It was he and his group who were

being oppressed by the other group so it would not be proper to

direct the Biswanath Group to sell their shares in the plaintiff

company to the other group just because the Biswanath Group

was a minority. Hence, the CLB divided the properties of the

company between the two groups. The Kolkata unit was given to

the Saraswati Group. The Delhi and Baddi Units were given to

the Biswanath Group with liberty to promote a new company and

carry on the same business through such company. 13

15. It was submitted that the CLB order of 14th September,

2011 permits the defendant to carry on the same 'business' as

that of the plaintiff. The term 'business' means an activity which

is carried on with a motive of making profit and not for pleasure.

To regard an activity as business there must be a course of

dealing either actually continued or contemplated to be

continued with a profit motive. The only profit making product in

the present case is the 'Banphool hair oil'. By allowing the

Biswanath Group to continue the same business through the

instrumentality of a newly promoted company, the CLB has

allowed the Biswanath Group/the defendant herein to

manufacture and sell 'Banphool oil' as that is the only commodity

sold by the plaintiff company. By not challenging the said order

of CLB before a higher forum, the Saraswati Group/the plaintiff,

which was a party to the CLB proceeding, have accepted the

order dated 14th September, 2011 and the order has attained

finality. Learned Senior Counsel relied on the decision in Bennet

Coleman & Co. - vs. - Union of India & Ors. (1977) 47 Comp

Cas 92, in support of his submission that the power granted to

the CLB under Section 402 of the Companies Act, 1956 was very 14

wide and not limited and the CLB was well within its jurisdiction

to pass the order dated 14th September, 2011.

16. By the order dated 14th September, 2011 what was divided

by the CLB between the two groups was not only the assets of the

plaintiff company but also the business of the plaintiff company.

The plaintiff's business was only manufacture and sale of

Ayurvedic oil under the name of 'BANPHOOL'. It was submitted

that the CLB having found as a matter of fact that the plaintiff is

a family company of the Sharmas and the formula for 'Banphool

oil' was developed by Biswanath Sharma and that he was the face

of the family business, it is inconceivable that the CLB would

only divide the assets of the plaintiff and not the business. The

right of the defendant to carry on with the business of

manufacture and sale of 'Banphool oil' flows from the CLB's order

dated 14th September, 2011. The CLB has lifted the corporate veil

of the plaintiff to examine who are the parties behind the family

company and has thereafter given equitable directions for the

purpose of division of the family company. In this connection

Learned Counsel relied on the decision of the Hon'ble Supreme

Court in the case of Balwant Rai Saluja & Anr. - vs. - Air India 15

Ltd. & Ors. (2014) 9 SCC 407, where the Apex Court approved

lifting of the corporate veil when the company in question was

being used as a facade for deception at the time of the relevant

transaction.

17. The other submission of Learned Senior Counsel for the

defendant was that the present application should be dismissed

in limine on the ground of suppression of material facts as also

forum shopping. Learned Counsel drew my attention to an

application filed by the Saraswati Group which is admittedly in

control and management of the plaintiff before the CLB being CA

No.270 of 2012 in CP No.49 of 2008, under Section 634A of the

Companies Act, 1956 wherein prayers 'f' and 'i' were as follows:

"f) The respondents and/or their assigns, men, agents and servants and all those acting on their behalf be directed not to use the mark 'BANPHOOL' and the carton in the manner as described and/or shown in Annexure 'I' and 'J' hereinabove;

i) The respondents and/or their assigns, men, agents and servants and all those acting on their behalf be restrained from using packaging as shown in Annexure 'H' herein or any other packaging which is similar to packaging which is presently being used by the petitioners in Annexure 'L' herein."

16 Learned Counsel submitted that those prayers are

substantially the same as prayer 'a' of the present interlocutory

application. This amounts to forum shopping and indulging in

multiplicity of proceedings. Further, in the present petition there

is only a passing reference to CA No.270 of 2012 filed before the

CLB without disclosing the prayers made in such application.

This amounts to sharp practice and suppression of material facts

from the court. On this ground alone the present application

should be dismissed. In this connection reliance was placed on

the Supreme Court decision in the case of S.P. Chengalvaraya

Naidu - vs. - Jagannath & Ors. (1994) 1 SCC 1 wherein the

Hon'ble Supreme Court observed that a person whose case is

based on falsehood or concealment of facts relevant to the

litigation, has no right to approach the court. If he withholds vital

facts in order to gain advantage over the other side, he would be

guilty of playing fraud on the court as well as on the opposite

party. He can be summarily thrown out at any stage of the

litigation.

18. In reply Learned Senior Counsel for the plaintiff submitted

that there was no suppression of material facts on the part of the 17

plaintiff. The factum of filing of CA 270 of 2012 before the CLB

has been disclosed in the petition. The prayers have not been

mentioned as the same are not relevant for the present purpose.

Court's View

19. The short question that falls for determination is whether or

not the defendant is entitled to use the name 'BANPHOOL' on its

label and carton that it uses to market the hair oil manufactured

by it. The short argument of the plaintiff is that copyrights in the

artistic work 'BANPHOOL' (Label) and the artistic work 'Banphool

Oil' (Carton) were registered in favour of M/s Sharma Chemical

Works. Upon incorporation of the plaintiff company, the entire

business, assets, liabilities of the said partnership firm including

copyrights, trademarks, etc. was vested in the plaintiff company.

The plaintiff, therefore, became the owner of the said copyrights

and the plaintiff alone is entitled to use the said mark on its label

and carton to the exclusion of all others.

20. At first glance, the plaintiff's argument appears to be

attractive. However, the facts of the case warrant a deeper look

into the matter.

18

21. It is not in dispute that the Sharma brothers carried on the

business of manufacture and sale of Ayurvedic hair oil under the

name 'BANPHOOL' in co-partnership through a duly constituted

partnership firm called M/s Sharma Chemical Works. The

copyrights in the artistic work on the label and carton in question

were registered in the name of the partnership firm. Biswanath

was shown as the author of the artistic work 'BANPHOOL' in the

registration certificate. The plaintiff company was incorporated by

the members of the Sharma family with the object of carrying on

the same business through a private limited company. The

business, assets, liabilities of the partnership firm vested in the

plaintiff company. The members of the Sharma family including

Biswanath were the subscribers to the Memorandum of

Association of the plaintiff. In other words, they were the

promoters of the plaintiff company.

22. Disputes and differences arose between two groups of the

Sharma family. The Saraswati Group filed a company petition

under Sections 397/398 of the Companies Act, 1956 before the

CLB. Such company petition was disposed of by the CLB by an

order dated 14th September, 2011. In the said order the CLB 19

noted that the plaintiff company is a closely held family company

of the Sharmas and the company deserved to be dealt with in

that line. The CLB also observed, inter alia, as follows:

"I observed that the sensitivities of family structure are strained, though it is the company law that governs, in the case of a family company, it must be seen who is considered as head of the family, what the role is played by him, what place others given to him, are the underlying causative factors to be taken into consideration. Here it could be easily understood that R-2 is instrumental in developing this company, he himself went to Bihar, developed business, later to Delhi, and there he developed the business, whereas P-2 remained at Kolkata looking after the administrative work of the company. Even in the case of Baddi unit, if Minutes of 17-12-2007 are looked into, it appears R-2 visited Baddi several times in the initial days and did the entire spade work to get land and other works in the Government."

23. On a detailed consideration of the submissions made on

behalf of the parties, the CLB came to the conclusion that the

business in question was started by a family headed by the

second respondent before the CLB (Biswanath). The company has

been running for the last 30 years as the company of the second

respondent (Biswanath). It would not be justifiable to exclude the

second respondent who has been heading the said company for 20

such long years just because his group is in the minority. The

company deserves to be divided between the two groups.

24. The CLB further came to the conclusion that it was not the

respondents before the CLB who oppressed the petitioners but it

was the petitioners who oppressed the second respondent

(Biswanath) by moving resolutions, one after another for his

removal. Since, the second respondent (Biswanath) headed the

family business, it would not be right to direct his group to sell

their shares in the company to the other group. The Kolkata unit

of the company is under the control of the Saraswati Group and

the Delhi unit is under the control of the Biswanath Group.

25. Recording the above conclusions, the CLB divided the

business and assets of the plaintiff company in the manner

indicated above. The Saraswati Group was given the Kolkata unit

of the plaintiff company. The Biswanath Group was given the

Delhi and Baddi units. Biswanath Group was directed to float a

separate company adding prefix or suffix to the corporate name

used by the plaintiff company and was given the liberty to carry

on the same business that they had been carrying on through the 21

plaintiff company. It is important to note that neither of the

groups challenged the aforesaid CLB order before a higher forum.

26. In the aforesaid factual matrix, it is clear that the rights and

obligations of the two groups vis-a-vis each other in relation to

the family business of manufacture and sale of 'Banphool hair oil'

crystallized in the CLB order. The Saraswati Group was given

exclusive control of the plaintiff company and the right to carry

on the family business at the Kolkata unit through the

instrumentality of the plaintiff company. The Biswanath Group

was granted liberty to carry on the same family business through

a newly floated private limited company at the Delhi and Baddi

units. There was thus, an equitable division of the business and

assets of the plaintiff company between the two groups.

27. In the aforesaid factual backdrop, I am unable to accept the

plaintiff's argument that the defendant is precluded from

producing or selling or marketing the hair oil in question using

the label and carton (Copies whereof are Annexures 'K' & 'L') to

the petition). As per liberty granted by the CLB, the Biswanath

Group floated the defendant company to carry on the same family

business which would necessarily entail marketing the 22

defendant's product under the brand 'BANPHOOL'. It is the clear

finding of the CLB which remains unchallenged, that the family

business was headed and developed by Biswanath. The author of

the artistic work 'BANPHOOL' is also undisputedly Biswanath.

The CLB also found as a matter of fact that it was the Biswanath

Group which was being oppressed by the Saraswati Group.

Accordingly, the CLB in exercise of power under Section 402 of

the Companies Act, 1956 divided the business, assets and

liabilities of the plaintiff company between the two groups. In

those circumstances, it would be wholly inequitable, unjust and

unfair to restrain the Biswanath Group which is carrying on

business through the instrumentality of the defendant from using

the word 'BANPHOOL' on the label and carton used by the

defendant for marketing its hair oil.

28. Learned Counsel for the defendant has rightly submitted

that the power of CLB under Section 402 of the Companies Act,

1956 was very wide and the CLB was competent to pass the order

dated 14th September, 2011. Indeed, it has not been urged on

behalf of plaintiff that the CLB was incompetent or acted beyond

jurisdiction in passing that order.

23

29. This is a fit case where the Court should look beyond the

corporate veil of the plaintiff and do equity and justice between

the persons who are members of the same family and are

running the show. In my view, the CLB rightly pierced the

corporate veil of the plaintiff company and ordered equitable

division of the plaintiff's business and assets/liabilities between

the two groups. The rights and liabilities of the two groups - one

in control of the plaintiff and the other in control of the defendant

- in relation to the business that was being carried on by the two

groups in harmony through the instrumentality of the plaintiff

company, have been decided by a competent tribunal and such

decision has not been assailed before a higher forum. As I read

the said order of the CLB, the same clearly permits the defendant

to carry on business of manufacture and sale of Ayurvedic hair

oil under the name 'BANPHOOL'. The prayers of the petitioner in

the present application cannot be allowed.

30. Since, I have held on merits against the plaintiff, it is really

not necessary for me to go into the question of suppression of

material facts by the plaintiff as submitted on behalf of the

defendant. However, I would wish to record that the plaintiff was 24

less than candid when it approached this Court by way of the

present proceeding. It is a matter of record that the Saraswati

Group which was given control and management of the plaintiff

company by the CLB filed an application before the CLB being CA

No.270 of 2012 under Section 634A of the Companies Act, 1956,

prayers 'f' and 'i' of which have been set out above. Although in

the present petition the factum of filing such application before

the CLB has been mentioned, the prayers in such application

have not been indicated in the present petition. The said prayers

in the said CLB application are substantially the same as those

in the present petition. The plaintiff ought to have, in all fairness,

been frank and transparent and should have pointed this out to

the Court. Unfortunately this similarity of the prayers was

brought to Court's notice by the defendant. A party who seeks an

equitable relief like injunction from court has the bounden duty

of making full and frank disclosure of material facts of the case to

the Court. One who seeks equity must do equity. Suppression of

material facts is an act bordering on fraud and a party indulging

in such an act is disentitled to any relief from the Court.

However, since I am inclined to reject the plaintiff's prayer for 25

interlocutory injunction on merits, I need not base my decision

on the issue of suppression of material facts.

31. For the reasons aforestated this application fails and is

dismissed. There will be no order as to costs.

32. Urgent certified photocopy of this judgment and order, if

applied for, be given to the parties upon compliance of necessary

formalities.

(Arijit Banerjee, J.)