L.K.S Gold Palace And Others v. L.K.S Gold House P. Ltd.

R. Balasubramanian, J.:— This is an application taken out by the defendants in the suit to reject the plaint. The suit is filed seeking an order of injunction restraining the defendants, etc., from infringing the copyright in the registered artistic work of the plaintiff's logo “L.K.S” by distributing, printing or causing to be printed, the impugned artistic logo of the defendants, namely, “L.K.S/GP” and for other reliefs. The plaint proceeds on the basis that the copyright referred to above belongs to the plaintiff, which is a private limited company as on date; prior to that, the predecessors in interest of the directors of the plaintiff-company started the business with the said copyright way back in the year 1925; it was last used by a partnership firm started by the managing director of the plaintiff-company in the name of “L.K.S Gold House” in the year 1987 at T. Nagar; in the year 2001, the partnership firm was converted into a private limited company under the provisions of the Companies Act and therefore the proprietary rights in the trade mark, namely, “L.K.S Gold House” and its logo stand vested with the plaintiff. Written statement is yet to be filed. Rejection of the plaint is asked for on the following grounds:

“The said copyright has been registered in the name of ‘L.K.S Gold House’, which is a partnership firm; the suit is filed by a private limited company, which is a separate legal entity; therefore it is not entitled to agitate any legal rights that accrued to the partnership firm namely, ‘L.K.S Gold House’ or its partners; there is no valid assignment of the said copyright by the partnership firm in favour of the plaintiff-private limited company; there is no such assignment deed on record; section 19 of the Copyright Act states that a copyright has to be assigned by a document in writing and therefore, in the absence of such an assignment in writing, the plaintiff cannot maintain the suit, as there is no cause of action.”

2. Arguments have been advanced by Mr. S.A Rajan, learned counsel for the plaintiff stating that, as the partnership firm owning the copyright had been converted into a private limited company and the said firm having been taken over as a going concern by the private company, no transfer of the copyright is involved.

3. He relies upon Part IX of the Companies Act consisting of sections 565 to 581 to contend that there is a statutory vesting in favour of the company of all the assets of the partnership firm and therefore section 19 of the Copyright Act is not attracted. Mrs. Nalini Chidambaram learned senior counsel appearing for the defendants would submit that from the materials available on record, it cannot be said that the plaintiff's company is a joint stock company, in which event alone, the provisions contained in Part IX of the Companies Act would apply.

4. In the light of the arguments advanced, I applied my mind to the materials available on record. The partnership firm of “L.K.S Gold House” was reconstituted by a document dated April 1, 1999. Eight partners constituted the said reconstituted firm. The certificate of incorporation of the plaintiff-company shows that it was incorporated in the year 2001. The partners' capital account produced in the paper book shows that the capital account of each of the partner mentioned in the deed had been transferred to “L.K.S Gold House Pvt. Ltd.” (plaintiff company) by an entry dated July 11, 2001. The memorandum of association of the company shows that its object was to acquire and take over, as a going concern, the partnership firm referred to earlier along with its assets and liabilities on such terms and conditions as may be mutually agreed upon. It also provides that the liability of the members is limited and that the share capital of the company is Rs. 1 crore and 50 lakhs divided into 15 lakhs equity shares of Rs. 10 each. From a perusal of the memorandum of association, it is seen that seven out of the eight partners have each been allotted 10,000 shares each, except one partner by name A.S Sulaiman, who was allotted 20,000 shares. The articles of association shows that the minimum paid up capital of the company shall be Rs. 1 lakh or such higher amount as may be prescribed. It also shows that no invitation shall be issued to the public to subscribe for any shares in or debentures of the company. It also reiterates the share capital of the company as referred to earlier and the directors of the company are the family members alone. Therefore it is clear that this private limited company is limited only to its members and not to outsiders.

5. There is no dispute that under Part IX of the Companies Act, a partnership firm can be registered as a company. A joint stock company is defined under section 566 of the Act. Among the features of a joint stock company, it should have permanent paid up or nominal share capital; the said share capital must be a fixed amount; it should be divided into shares of fixed amount and it should have been formed on the principle of having the company only for its members, whether a shareholder or a stock holder and no one else. The features noted in the memorandum and articles of association of this company earlier in this order definitely bring the plaintiff-company into a joint stock company. It cannot be disputed that when the plaintiff-company was incorporated, all the requirements of law as found in Part IX of the Companies Act have been complied with. Merely because, in the future, the company is permitted to raise the share capital, especially when invitation to public stands ruled out, would not, in my opinion, alter the character of the company from joint stock company into any other company. Inasmuch as, the plaintiff company has come to be incorporated under Part IX of the Companies Act, after complying with all the requirements in regard thereto and registered as such there is a statutory vesting under section 575 of the Act of all the assets of the erstwhile partnership company into the private limited company registered under this Act. This means, no transfer is involved. In other words, there is neither a transferor nor a transferee, the presence of both alone would mean that there is a transfer. In Vania Silk Mills (P) Ltd. v. Commissioner Of Income-Tax, Ahmedabad, [1991] 191 ITR 647 (SC), it was held that for the purpose of transfer, the existence of transferor and transferee at the same time is an essential condition. In CGT (Central), Kanpur v. Motor Sales (RF), Lucknow, [1990] 186 ITR 419, 420, 421 (All), it was held that “the partners of the firm, who became shareholders of the company, were allotted shares of the face value of Rs. 8 lakhs… and in view of the fact that the entire assets of the firm were taken over by the company as a going concern, the shares allotted would encompass all the assets of the company”. In Vali Pattabhirama Rao v. Sri Ramanuja Ginning and Rice Factory (P.) Ltd., AIR 1984 AP 176; [1986] 60 Comp Cas 568, it was held that once a partnership was converted into a registered company, the property of partnership vests in the company on registration and that no separate conveyance is necessary. Therefore, on the settled position in law as referred to above, I hold that no transfer of the copyright, which was originally with the firm, in favour of the company is involved. Therefore, there is no question of any written assignment deed under section 19 of the Copyright Act. Consequently, I find that the ground put forward to reject the plaint, falls to the ground and this application is accordingly dismissed. No costs.