CGMP Pharmapalan Pvt. Ltd. Vs. Regional Director, Ministry of
Corporate Affairs and Anr.
Sumalya Goswami
(Sem V) B.A. LLB., Hidayatullah
National Law University, Raipur (C.G.)
ABSTRACT:
In this case,
NNE Pharmapalan (P) Ltd., filed a representation
before Regional Director under section 22 seeking a direction that
petitioner-company incorporated on a later date with name CGMP Pharmapalan (P.) Ltd. should change its name. Regional
Director concluded that use by petitioner of word “Pharmaplan”
in its name would have a misleading effect in mind of general public and as
such, it was a fit case for issue of direction under sec 22(1)(b) and directed
petitioner to delete word “Pharmaplan” from its
existing name and change its name to some other name. The Delhi High Court held
that since name of both companies structurally and phonetically too nearly
resembled each other, Regional Director was right in directing petitioner to
change its name.
It
was held that no error have been committed that Petitioner's name too nearly
resembles name of Respondent No. 2. Prominent part of both names of the companies
are coined word. When compared as a whole, it was apparent that two names
structurally and phonetically too nearly resemble each other. Court is unable
to find anything perverse in conclusion arrived at by Respondent No. 1.
Petition was dismissed.
On 16.07.2011 in
the High Court of Delhi, Justice S. Muralidhar gave
judgement to the case of CGMP Pharmapalan (P.) Ltd. Vs. Regional
Director of Corporate Affairs. This case has its own significant value
because it will remain a precedent on cases concerning name of the company
incorporated. This case involves of section 20 and 22 of The Companies Act,
1956 dealing with provisions with respect to names of companies. This case
deals with the conflict that occurred between two companies with almost similar
names.
In this case, NNE Pharmapalan (P) Ltdd., filed a representation before Regional Director
under section 22 seeking a direction that petitioner-company incorporated on a
later date with name CGMP Pharmapalan (P.) Ltd.
should change its name. Regional Director concluded that use by petitioner of
word “Pharmaplan” in its name would have a misleading
effect in mind of general public and as such, it was a fit case for issue of
direction under sec 22(1)(b) and directed petitioner to delete word “Pharmaplan” from its existing name and change its name to
some other name. The Delhi High Court held that since name of both companies
structurally and phonetically too nearly resembled each other, Regional
Director was right in directing petitioner to change its name. It was held that no error have been committed
that Petitioner's name too nearly resembles name of Respondent No. 2.
Prominent part of both names of the companies are
coined word. When compared as a whole, it was apparent that two names
structurally and phonetically too nearly resemble each other. Court is unable
to find anything perverse in conclusion arrived at by Respondent No. 1.
Petition was dismissed.
RESEARCH METHODOLOGY
The
methodology adopted in this project work is mainly descriptive. The present
project work is on the topic CGMP Pharmapalan Pvt.
Ltd. vs. Regional Director, Ministry of Corporate Affairs and Anr. Mostly the project is based on primary sources of
data.
Facts
of the case
The
Petitioner was aggrieved by an order dated 21st April 2010 passed by the Regional
Director (NR), Ministry of Corporate Affairs, Government of India, Respondent
No. 1 herein allowing the representation filed by Respondent No. 2 NNE Pharmaplan India Private Limited under Section 22 of the Companies Act 1956 ('Act') and directing
the Petitioner under Section 22(1)(b) of the Act to delete the word
"PHARMAPLAN" from its existing name and change its name to some other
name within three months from the date of the said order.
Respondent
No. 2 NNE Pharmaplan India Private Limited was
incorporated initially on 30th December 1997 under the name Pharmaplan
(India) Limited. On 27th June 2008, the name of the Respondent No. 2 was
changed to NNE Pharmaplan India Limited. On 6th July
2009, the Petitioner was incorporated as a private limited company with the
name cGMP Pharmaplan
Private Limited.
On
17th July 2009, the Respondent No. 2 filed a Civil Suit No. 1307 of 2009 in the
High Court of Delhi seeking, inter alia, an injunction to restrain the
Petitioner herein (Defendant No. 1 in the above suit) from passing-off the name
of the Respondent No. 2 Company as its own. Simultaneously the Respondent No. 2
also filed a representation before the Regional Director on 27th July 2009
under 22 of the Act seeking a direction that the Petitioner should change its
name.
In
the impugned order dated 21st April 2010, the Respondent No. 1 observed that
the holding company as well as group companies of NNE Pharmaplan
India Private Limited already held registration in respect of the trade marks
"PHARMAPLAN' and "NNE Pharmaplan' and filed
application for the registration of these marks world over. It was concluded
that the use by the Petitioner of the word "PHARMAPLAN' in its name would
have a misleading effect in the mind of the general public and as such it was a
fit case for issue of direction under Section 22(1)(b) of the Act. A direction was
accordingly issued to the Petitioner to delete the word "PHARMAPLAN' from
its name and change its name to some other name within three months from the
date of the order. Pursuant to the notice issued in this petition on 12th May
2010, the Respondent No. 2 had filed a reply to which a rejoinder has been
filed by the Petitioner
JUDGEMENT
It
was first submitted by Mr. Bharuka, counsel for the
petitioner. He refers to para 28 of the guidelines
issued by the Department of Company Affairs (DCA) which states that where
except for the first word, all other words of the proposed name are
"similar to those of an existing company", then the first word should
be considered to be sufficient to distinguish it from the name of the existing
company. In other words, he submits that the prefix "cGMP'
was sufficient to distinguish the name of the Petitioner from that of the
Respondent No. 2.
The
Court finds no error having been committed by the Respondent No. 1 in coming to
the conclusion that the Petitioner's name, i.e., 'CGMP Pharmaplan
Private Limited' too nearly resembles the name of the Respondent No. 2 i.e. NNE
Pharmaplan India Limited. The prominent part of both
names is the coined word "PHARMAPLAN'. The two names are to be compared as
a whole. When so compared, the name of the Petitioner too nearly resembles the
name of the Respondent No. 2. In terms of para 28 of
the Guidelines, if the dissimilar portions of the names are removed i.e. NNE
and CGMP, then the remaining portion is the identical word 'PHARMAPLAN'. The
word 'PHARMAPLAN' being a coined word is indeed the prominent and distinctive
part of the names of both the Petitioner and Respondent No. 2. When compared as
a whole, it would be apparent that the two names structurally and phonetically
too nearly resemble each other.
The
Court was unable to find anything perverse in the conclusion arrived at by the
Respondent No. 1. Respondent No. 2 had indeed made out a case under Section 22(1)(b) of the Act for a direction to the
Petitioner to change its name by removing the word 'PHARMAPLAN', within a
period of three months.
The
petition and the pending applications of the petitioner were dismissed by the High
Court of Delhi.
Provisions
with Respect to the Dispute
In part II of the Companies Act, 1956 which
speaks of incorporation of company and matters incidental thereto, there
are provisions with respect to names of
corporations. This above case falls under section 20, 22 and 22(1)(b) of
the Companies Act.
Section
20: Companies not to be registered with undesirable names.
(1)
No company shall be registered by a name which, in the opinion of the Central
Government, is undesirable.
(a) in the opinion
of the Central Government, is identical with, or too nearly resembles, the name
by which a company in existence has been previously registered, whether under
this Act or any previous companies law, the first-mentioned company,
(b) shall, if the Central
Government so directs within twelve months of its first registration or registration
by its new name, as the case may be, or within twelve months of the
commencement of this Act, whichever is later, by ordinary resolution and with
the previous approval of the Central Government signified in writing change its
name or new name within a period of three months from the date of the direction
or such longer period as the Central Government may think fit to allow:
These above two provisions of the Companies Act were
the main crux of the matter. Section 20 says that in first place, no company
can be registered with a name which, in the opinion of the Central Government,
is undesirable. The name of the company should not be identical with or should
not too nearly resemble, the name of another registered company, for such a
name should be declared undesirable by the Central Government. Moreover the
other company can also apply for an injunction to restrain the newcomer from
having an identical name.
In Society of
Motor Manufacturers and Traders Ltd v Motor
Manufacturers and Traders Mutual Insurance Co Ltd., the Court
held that “under the Companies Act, a company by registering its name gains a
monopoly of the use of that name since no other company can be registered under
a name identical with it or so nearly resembling it as to be calculated to
deceive”.
The name of a company is a part of its business
reputation and that would definitely be injured if a new company could adopt an
allied name. The resemblance between the two names must be such as to be
“calculated to deceive” when it suggests that the corporation adopting it is in
some way connected or associated with the existing corporation in the case
referred to above the plaintiff society was incorporated in 1902 under the name
:the Society of Motor Manufacturers and Traders Ltd. In 1924 the defendant
society was incorporated under the name : Motor Manufacturers and Traders
Mutual Insurance Ltd. The plaintiff company brought an action to restrain the
use of this name. It was held that the defendant company’s name could not be
regarded as one “calculated to deceive”.
The name ‘MRJ contractors Ltd’ was held to be as
nearly similar to ‘MPJ Construction Ltd’ as it was possible to be.
Change by Ordinary Resolution
In
the provisions of sections 20 and 22 of the Companies Act, 1956 the Central
Government has been empowered the authority to pass an order regarding disputes
of change in name of companies.
If through inadvertence or
otherwise, a company has been registered with a name which is identical with or
too closely resembles the name of an existing company, the company may change
its name by passing an ordinary resolution and by obtaining the approval of the
Central Government in writing.
As to whether Regional Director
has the authority to pass an order under section 22, the court held “yes”—Kalpana Polytec India
Ltd. V. Union of India.
The rectification of the name
must also be carried out if the Central Government so directs within a period
of 12 months from the date of registration of the company. The direction of
Central Government is required to be complied with within a period of three
months from the date thereof. Any default in complying with the direction of
the Central Government renders the company and its officers in default liable
for punishment with fine which may extend to Rs. 1,000 for every day during
which the default continues.
In Sidhi Constructions (India)(P.)Ltd. V. Registrar of Companies, the Andhra Pradesh High Court held that
where a company is registered by a name identical with the name of a company
registered earlier, the petition for change of name should be made within 12
months. A petition made later should be barred by limitation under section 22
of the Companies Act,1956.
Again in MCRLogistics (P.) Ltd. V. Regional
Director, it was held that where Central Government has formed an opinion
that names of two companies are identical or name of one company resembles
registered name of another company, it can issue directions in terms of section
22(1)(b) to subsequently registered company within 12 months of its first
registration or registration by a new name and once that period lapses,
Government loses its authority to issue such a direction. However in Sen and Pandit
Electronics (P.) Ltd. VS. Union of India, it was held that time
period covered by the order of injunction is liable to be excluded while
computing the period of 12 months as laid down in section 22 (1)(b).
Similarly in this case NNE Pharmaplan (P.) Ltd. filed a representation before Regional
Director under section 22 seeking a direction that petitioner-company
incorporated on a later date with a name CGMP Pharmaplan
(P.) Ltd. should change its name. Regional Director concluded that use by
petitioner of word “Pharmaplan” in its name would
have a misleading effect in mind of general public and as such, it was a fit
case for issue of direction under sec 22(1)(b) and directed petitioner to
delete the word ‘Pharmaplan’ from its existing name
and change its name to some other name. The Delhi High Court held that since
name of both companies structurally and phonetically too nearly resembled each
other, Regional director was right in directing petitioner to change its name.
CONCLUSION:
The name of a company is a part of its business
reputation and that would definitely be injured if a new company could adopt an
allied name. This is what happened in this case. The name of both the companies
in this case resemble each other companies structurally and phonetically too early. The regional
director as well as the High Court have come to the right conclusion. The
provisions in the sections 20 and 22 of the act speaks in favour
of the respondent as regarding the names of the two companies. By the above
cases it can be complied that the petitioner had default in registering its
name and it ought to change its name to another which was again directed both
by the Central Government and the Delhi High Court. The petitioner’s name would
have a misleading effect in mind of general public and as such, it was a fit
case for issue of direction under sec 22(1)(b). This case remains an important
precedent in matters of cases regarding dispute with names. Since the name of a
company is also part of its business reputation, if a new company could adopt
an allied name, the previous company is injured. Thus the petition in this case
is dismissed.
BIBLIOGRAPHY:
BOOKS REFERRED
·
Avtar Singh, Company Law, 15th edn.,
Eastern Book Company
·
A.K. Majumdar,
Company Law and Practise, 17th Edn, Taxmann
CASES REFERRED
·
Society of Motor Manufacturers and Traders Ltd
v Motor
Manufacturers and Traders Mutual Insurance Co Ltd.[1925] 1 Ch 675: 133 LT
330
·
Archer Structures Ltd v. Griffiths.(2004) 1 BCLC 201 (CH D)
·
Kalpana Polytec India Ltd. V. Union of India.
[1998] 16 SCL (Cal.)
·
Sidhi Constructions (India)(P.)Ltd. V. Registrar of Companies [1997] 24 CLA 207
·
MCR Logistics (P.) Ltd. V. Regional Director [2009] 93 SCL
101/151 Comp. Cas. 446 (Bombay)
·
Sen and Pandit Electronics (P.) Ltd. VS. Union of India [2004] 49 SCL 618 (Cal.)
Received on 31.10.2012
Modified on 10.11.2012
Accepted on 19.11.2012
© A&V Publication all right reserved
Research J. Humanities and
Social Sciences. 3(4): October-December, 2012, 493-496