S.N Kapoor, J.— In this case, the plaintiff is sole proprietory concern of Mr. S.L Gupta. The plaintiff is running the business of imparting education in the field of fashion designing in the name of ‘SAF’ and has licence to use the “IEC” logo from IEC Limited. The plaintiff by this application seeks to restrain the defendants from using the name SAIF/Saif/School of Art, Interior and Fashion and/or any other name which is identical and/or deceptively similar to the plaintiff's name SAF/IEC SAF/ISAF/IEC School of Art & Fashion/School of Art & Fashion, either in full form or in abbreviated form thereby resulting in passing off of its business/service as that of the plaintiff or as directly or indirectly connected with that of the plaintiff.
2. According to the plaintiff's version, the sole proprietor of plaintiff concern S.L Gupta conducts courses in fashion designing, computerised fashion, art and the illustration, textile designing and fashion and textile science in the name of IEC School of Arts and Fashion (‘SAF’ for short). SAF is also engaged, as a part of its curriculum, in conducting various fashion shows with dresses designed by its own students. SAF also interacts with eminent fashion personalities and conducts workshops and seminars, shows and other interactive programmes organised by it and getting the students of the said institution absorbed in their own organisation. At present SAF has a large number of franchisees in Delhi and around and has over 15 numbers of franchisees. The plaintiff has been spending huge sum of amounts and publicity from over Rs. 4 lacs to over Rs. 11 lacs in 1994-1995 to 1996-1997. The annual turnover of the plaintiff has gone up over Rs. 13 lacs to around Rs. 45 lacs in 1996-1997. The name, mark and logo of the plaintiff have acquired sufficient distinctiveness and use of the mark SAF, IEC SAF or ISAF by it in relation to training courses related to fashion is bound to create confusion and deception in the minds of the public. The use of deceptively similar name, mark/logo would also create confusion thereby amounting to passing off such other business as that of the plaintiff or as that connected with the plaintiff. SAF also enters into franchise agreement with its franchisees. On payment of initial franchise fee and running royalty, the franchisee becomes entitled to all the technical expertise, marketing support, study material, issue of diplomas and certificates from SAF and can further use the name and logo of SAF. The plaintiff monitors the quality of teaching faculty, training, conduct of examinations etc. being given by its franchise centres'. One such franchise agreement was entered into by the defendants. Defendant No. 1, Sh. Gurcharan Goyal, conducting business under the name and style of Chandigarh School of Professional Courses, entered into a similar Franchise Agreement dated 2nd December, 1995 (hereinafter called “the agreement” for short) with the plaintiff for a period of five years. One of the terms of the agreement is that in the event of there being default in the payments, the plaintiff have the right to terminate the agreement and further “the defendant will not be entitled to carry on the business of fashion and designing courses or allied courses at the franchise premises under any name whatsoever”. The franchisee shall not run any other parallel training centre in the field of fashion and designing or allied courses directly or indirectly at any place under the name or in any manner open any additional centre for the said purpose. The defendant shall not have any right in SAF name, mark and/or logo. It also provides that disputes relating to the said agreement shall also subject to the jurisdiction of the Courts in Delhi only. The defendant, Sh. Gurcharan Goyal, failed to ractify the irregularities mentioned in the show cause notice and failed to pay the outstanding dues of: (i) Franchise fee of Rs. 75,000/-; (ii) Monthly royalty since inception; and (iii) Material cost of Rs. 4,297.25p.
3. The defendants with ulterior motives to illegally earn profits on the basis of the reputation of the plaintiff are using the mark SAIF for identical business. The brochure of the defendants is meant to mislead the public by falsely stating that their institute has started since 23rd December, 1995, without indicating that the said centre is no longer a franchisee of the plaintiff. The defendants are using deceptively similar names for the said courses in the advertisement in the newspapers as reflected in the plaintiff's brochure. A comparison thereof may be seen as under:
Plaintiff's courses
Defendant's courses
1.
Fashion Designing
Fashion Studies
2.
Textile Designing
Textile Designing
3.
Computerised Fashion Art & Illustration
Computerised Fashion Art & Illustration
4. On this basis it is contended that the defendants despite termination of the agreement wish to mislead the general public by: (i) using a deceptively similar name; (ii) by introducing identical courses; and (iii) by conducting training courses with the aid of computers like the plaintiff and (iv) by making an attempt to convince and confuse the public to the effect that they are a franchisee of the plaintiff and are still connected with the plaintiff in some manner. Enormous damage is being caused by the defendants to the reputation and goodwill of the plaintiff by making an attempt to show some direct or indirect connection with the plaintiff. After termination of the agreement the defendants are passing of their business as that of the plaintiff or as that which is connected with the plaintiff. The fact that the defendants under the name of the plaintiff in the recent past have organised fashion shows in the city of Chandigarh having advertised under the plaintiff's name ‘SAF’ would clearly leave an impression on the general public that the defendants are still connected with the plaintiff. The plaintiff is a copyright owner in the name and title “School of Art and Fashion” (SAF) alongwith logo thereof. The defendants are using the name “School of Art, Interior and Fashion” (SAIF). The defendants by using the name ‘SAIF’ similar to ‘SAF’ are passing of their business as that of the plaintiff. The defendants are in possession of course material, training, know-how and expertise of the plaintiff. They are still using the same for conducting their courses in total disregard of the provisions of the agreement at the earlier franchise premises SCO-1/108-109, Sector 8C, Chandigarh.
5. It would be better to reproduce Clauses 6 and 24 of the agreement. They read as under:
“6. That in the event of the franchisee failing to pay the balance of the lumpsum royalty as mentioned herein above or the on-going monthly royalty by the due dates to the Part No. 1 or the franchisee commits any breach of the agreement, the Party No. 1 will be entitled to terminate this agreement. Without prejudice to the above, the Party No. 1 will also be entitled to recover the balance as may be outstanding on that day besides eighteen precent interest on all payments as may be due at that time and the franchisee will not be entitled to carry on the business of fashion and designing courses or allied courses at the franchise premises under any name thereafter.
24. The Franchisee will not be entitled to change its constitution without the previous approval in writing of the Party No. 1. It is agreed by the Franchisee that while forming or modifying its constitution, the Franchisee, shall not at any time during or after the contract period keep or use any name which is in any way identical to the name or logo of IEC School of Art & Fashion. The Franchisee will not incorporate the name of its own entity in any advertising or promotional material.”(Emphasis supplied)
6. On the basis of the above clauses of the agreement, learned Counsel for the plaintiff contends that by virtue of these Clauses 6 and 24 after the termination of licence the defendants would cease to have, any right to carry on similar business at the same place by using the phonetically and deceptively similar name SAF.
7. Feeling aggrieved the plaintiff has filed a suit for permanent injunction and on this very basis the present application has been filed.
8. This application is being contested by the defendants on the ground that Delhi Courts have no territorial jurisdiction. The Copyright act and the trade mark act are not applicable, for the plaintiff has no registered trade mark and in the last one year the plaintiff has changed and altered his logo several times. Admittedly the plaintiff has used this name since 1994 with different logos and changing them periodically: Syllabus of the defendants is different from that of the plaintiff. The name, mark and logo of the plaintiff has not acquired sufficient distinctiveness. It is denied that the use of the mark ‘SAF’, ‘Saif’ and ‘SAIF’ in relation to training courses related to fashion is bound to create confusion. The defendants have never used deceptively similar name, mark or logo which will create confusion and leading to passing of their business as that of the plaintiff. Logo of the defendants is entirely different from that of the plaintiff. No assistance whatsoever was rendered by the plaintiff in running of the franchise agreement at Chandigarh. Defendant No. 1 suffered huge losses and the plaintiff terminated the franchise agreement of defendant No. 1 of its own on 10th June, 1997. However, it is now disputed that the defendants entered into franchise agreement with the plaintiff. Since the entire cause of action has arisen at Chandigarh merely a clause in the agreement will not confer any territorial jurisdiction on the Courts at Delhi. The plaintiffs are not entitled to injunction. The defendants have also issued a corrigendum in the ‘Tribune’ making it clear to the public that defendant No. 3 is distinct independent identity and has no correlation with the plaintiff.
9. I have heard learned Counsel for the plaintiff and gone through the record.
10. The first point which may be considered here is the question of jurisdiction. In this regard, it may be mentioned that in the plaint the plaintiff claims to be owner of the copyright in the name and title “School of Art and Fashion” along with logo thereof. At this stage if the plaint alone is taken then under Section 62 of the Copyright Act, this Court will have no jurisdiction to entertain the suit, irrespective of whether the cause of action arose in Delhi or not. However, it is also notable that the agreement was executed undisputedly in Delhi on 2nd December, 1995 (at page-34 of the document file) and therefore, question of territorial jurisdiction would not arise.
11. If Clauses 6 and 24 of the agreement are read together, the following restrictions appear to be there:
“1. That on termination the franchisee will not be able to carry on the business of fashion and designing courses or allied courses at the franchise premises under any name thereafter.
2. The franchisee will not be entitled to change its constitution without previous approval in writing of the party No. 1.
3. That the franchisee shall not at any time during or after the contract period keep or use any name which is in any way identical to the name or logo of IEC School of Art & Fashion.
4. The franchisee will not incorporate the name of its own entity in any advertisement or promotional material.”
12. There are different kinds of restraint clauses relating to: (a) goodwill; (b) competitive business during the term of contract, franchise/collaboration agreement in a specified area during the period of contract; (c) the partnership agreements providing for restraint of trade after dissolution of the partnership; (d) restrictions put on employees joining during the course of employment in another business; restraint of using information acquired during employment, after employment etc. The liberalisation and globalisation is likely to bring in numerous shades of such restrictions.
13. Here in this case, the contract has undisputedly come to an end. According to the plaintiff's own case, question of unreasonableness cannot be seen in view of the observations of the Supreme Court in Gujarat Bottling Co. v. Coca Cola Co., 1996 PTC (16) 89.
14. It has not been very easy for the Courts to decide where these kinds of limitations amount to restraint of trade within the meaning of Section 27 of the Contract Act. Section 27 of the Contract Act reads as under:
“Section 27: 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: 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 like business therein: Provided that such limits appear to the Court reasonable, regard being had to the nature of the business.”
15. It would be relevant here to reproduce observations of the Supreme Court in Superintendence Company Of India (P) Ltd. v. Krishan Murgai., (1981) 2 SCC 246 : AIR 1980 SC 1717 in paragraphs 28 and 29:
“28. This question whether an agreement is void under Section 27 must be decided upon the wording of that section. There is nothing in the wording of Section 27 to suggest that the principle stated therein does not apply when the restraint is for a limited period only or is confined to a particular area. Such matters of partial restriction have effect only when the facts fall within the exception to the section.
29. A contract, which has for its object a restraint of trade, is prima facie, void. Section 27 of the Contract Act is general in terms and unless a particular contract can be distinctly brought within Exception 1 there is no escape from the prohibition. We have nothing to do with the policy of such a law. All we have to do is to take the words of the Contract Act and put upon them the meaning which they appear plainly to bear. This view of the section was expressed by Sir Richard Couch, C.J in the celebrated judgment in Madhub Chunder v. Rajcoomar Doss, (1874) 14 Beng LR 76 at pp. 85-86, laying down that whether the restraint was general or partial, unqualified or qualified, if it was in the nature of a restraint of trade, it was void.”
16. In Gujarat Bottling Co. v. Coca Cola Co. (supra), Supreme Court took the view that Law in India is slightly different from English Law. “The Courts in India have only to consider the question whether the contract is or is not in restraint of trade and the Court is not required to proceed on the basis that an inquiry into reasonableness of the restraint is not envisaged by Section 27 (para 23).
17. From para 31 of Gujarat Bottling Co. v. Coca Cola Co. (supra), it appears that so long the agreement is to promote the trade and the negative stipulations under challenge seeks to achieve the said purpose by requiring the party to whole hearted apply to promoting the sale of a product (or service as in this case) during the period the agreement is in operation it is possible to uphold the same except in cases where the contract is wholly one sided, normally the doctrine of restraint of trade is not attracted in cases where the restriction is to operate during the period the contract is subsisting and it applies in respect of a restriction which operates after the termination of the contract. It has been so held in N.S Golikari v. Century Spinning Co., 1967 (2) SCR 378.
18. When a contract only ties the parties during the continuance of the contract, and the negative ties are only those which are incidental and normal to the positive commercial arrangements at which the contract aims, even though those ties exclude all dealings with others, there is no restraint of trade within the meaning of the doctrine and no question of reasonableness arises. If, however, the contract ties the trading activities of either party after its determining, it is a restraint of trade. In other words, the doctrine of restraint in trade never applies during continuance of the contract of employment (or collaboration or franchise agreement); it applies only when the contract comes to an end. “The Court, therefore, view with disfavour a restrictive covenant by an employee not to engage in a business similar to or competitive with that of the employer after termination of contract of his employment [See Superintendence Company Of India (P) Ltd. v. Krishan Murgai. (supra) Pr. 62]
19. Central Inland Water Transport Corporation Limited v. Brojo Nath Ganguly, (1986) 3 SCC 156 has also been referred to. But that relates to term of contract of employment in a Government company and public policy and does not deal with the question of restraint of trade; that relates to question of termination of service only, not to restraint of trade.
20. Hukum Chand Ice and Oil Mills, AIR 1980 Raj. 155 was also referred to by the learned Counsel. But that case related to sale of goodwill and the matter related to Section 65(3) of the Partnership Act. Sub-Section 3 of Section 65 of the Partnership Act provides an exception to Section 27 of the Contract Act and that exception is also provided for in Section 27. So, the two exceptions are complimentary to each other to cover a case of sale of the goodwill and restrictions put on the same not to carry on business within specified local limits. But none of the two exceptions cover the present case, for the defendant was neither a partner nor sold his goodwill to the sole proprietor of the plaintiff concern. So, the exception is not applicable. Since the restraint is so wide that it applies to an unlimited period in respect of wide area of the entire Chandigarh and after determination of the contract it may appear that the restrictions imposed are void under Section 27 excepting one restriction to the effect that the defendant/franchisee while forming or modifying its constitution shall not at any time during or after the contract period keep or use any name which is in any way identical to the name or logo of IEC School of Art & Fashion, for this type of restriction is in accordance with the Trade and Merchandise Marks Act.
21. Now, a question which is required to be seen is whether the trade name which is being used by the defendant is in any way deceptively identical to the name or logo of IEC School of Art and Fashion. According to Clause 3 of the agreement, all courses were to be conducted “under the name and style of ‘I SAF’ and under no other name”. The franchisee was to use the “name and logo of ‘I SAF’ as a franchisee in all their publicity and advertising material. The plaintiff in his various advertisements has used different logos, but ‘IEC School of Art and Fashion’ is mentioned prominently in all the brochures. The logo used at page 43 is different from the logo used at page 51. In 1994, it appears, the logo prominently used the word IEC without using the word SAF and an outline picture of a lady. It also does not use ‘IEC School of Art and Fashion’ around the circle; IEC is written separately above SAF while the name which the defendants are using is the ‘School of Art, Interior and Fashion’ and on the front page of the brochure letter ‘S’ is covering nearly half of the page while ‘AIF’ is written horizontally and vertically also over and above the word mentioned ‘Design School’ and not the ‘School of Art’. If we see the word ‘I SAF’, logo of the plaintiff is not being used by the defendant. The acronym/abbreviated name of ‘I SAF’ is not being used and there is no phonetic similarity between ‘I SAF’ and ‘SAF’. Therefore, it cannot be said that it is deceptively similar nor it can be said that the plaintiff is entitled to seek injunction against using the word ‘SAF’ in a different way alongwith phrase ‘a design school’ in their logo. There cannot be any monopoly over the word ‘school of art’ or ‘fashion’ for these are totally generic words and they have ben used by the defendants in different context with different colour combination, in a different way and consequently, by any stretch of imagination, it cannot be said that it is deceptively similar.
22. In so far as courses of the defendants are concerned, it may be mentioned that there cannot be any copyright in any idea, specially in the field of education though it is contended that the defendants would not have any right over the name ‘SAF’. In case it was just ‘SAF’ in the agreement and not ‘I SAF’ one might have been inclined to accept that proposition on account of the phonetic similarity and consequential confusion. But in the agreement not ‘SAF’ but ‘I SAF’ has been used. The letters ‘SAF’ have been used in the logo alongwith letters TEC in a circle surrounded by the words TEC School of Art & Fashion’. The use of training by computers is not sufficient cause to grant injunction as prayed for, for the same technology/methodology is adopted in teaching fashion technology not only in India but in various other kind of institutions in India and abroad.
23. However, in para 19 of the plaint, it is contended that the defendants are in possession of course work, training material, know-how and expertise of the plaintiff relating to instructional methodology, advertising, marketing strategies, system of evaluation and examinations, software and hardware consultancy, courseware, training of faculty, information relating to placement of students in industry, student administration, know-how of organising fashion shows, seminars, workshops and other events etc. It is alleged that the defendants are misusing the same for conducting their courses even after the termination of the franchise agreement. In terms of the agreement in order to be fair to the plaintiff the defendants have to return or must return the training and course work material and all material relating thereto immediately and in the peculiar circumstances it is desirable that the defendants must issue a specific advertisement indicating that they have no connection whatsoever with the TEC School of Art and Fashion’ or T SAF’. This appears essential in order to do substantial justice to the parties.
24. For the foregoing reasons, the defendants are directed to deliver the courseware and material which have been supplied by the plaintiff to the defendant alongwith the infringing material containing the impugned mark/name including prospectus, advertising materials, letter heads, stationary etc. (as per prayer (c) of the plaint) and issue an advertisement within a period of 15 days from today indicating that they have no connection whatsoever with the plaintiff in bold capital letters of the size comparable with the ‘SCHOOL OF ART, INTERIOR & FASHION’ used in the advertisement dated 7th July, 1997. The application is disposed of accordingly.
Application disposed of.