Hindustan Lever Ltd. v. Bombay Soda Factory

K.S Hegde, J.:— The appellants were the plaintiffs in Original Suit No. 4 of 1957 on the file of the learned District Judge, Bellary. They sought injunctions-restraining the defendants from infringing their trade mark detailed in the plaint and from passing off their goods as those of the plaintiffs. They also sued for damages for infringement of their rights. Their suit was dismissed on the preliminary ground that the plaintiffs were not entitled to the trade mark on the date of the suit and hence the suit was not maintainable. The trial Court did not go into the merits of the case and-therefore, the only question for decision is whether the Court below was right in holding that the suit is not maintainable.

2. In order to appreciate the riyal contentions advanced at the hearing, it is necessary to set out the history of the right claimed in the suit. Lever Brothers (India) Limited, has beers, a leading soap manufacturing firm in India for the last several years. One of the soap's manufactured by that Company is the “Sunlight” soap. That soap is packed in a waxed paper wrapper carrying a three colour label with, a distinctive panelling ink and colour arrangement. The said Company had registered its distinctive label of the “Sunlight” soap under the Trade Marks Act, 1940. On 8-10-1956, the Hindustan Vanaspathi Manufacturing Co., Private Limited, William Gassage and Sons (India) Private Limited and Joseph Crosfield and Sons (India) Private Limited, merged in Lever Brothers (India) Private Limited as seen from Ex. P-63, the Order of the High Court of Judicature at Bombay. Thereafter, Lever Brothers (India) Private Limited was converted into a “Public Company” on 27-10-1956, as could be gathered from Ex. P-18. Immediately, thereafter the Company changed its name to Hindustan Lever Limited. This change in the name was also effected on 27-10-1956. The present suit was filed on 18-2-1957. On 22-4-1957, Lever Brothers (India) Limited applied to the Registrar of Trade Marks, Bombay, under S. 47 of the Trade Marks Act, 1940, to enter the change in the name of the registered proprietor of the trade mark referred to above. The change prayed for was effected on 2-8-1957, as could be seen from Ex. P-24. In other words, the change in the name of the registered proprietor of the suit trade mark was effected during the pendency of the suit. The trial Court came to the conclusion that Lever Brothers (India) Limited is a different legal entity from Lever Brothers (India) Private Limited; hence, when the right of the Lever Brothers (India) Private Limited was transmitted to the Lever Brothers (India) Limited on 22-7-1956, the registered proprietor, i.e Lever Brothers (India) Private Limited should have applied to the Registrar under S. 35 of the Trade Marks Act for a change in the name of the registered proprietor; that not having been done. Lever Brothers (India) Limited did not become the owners of the trade mark in question; consequently the plaintiffs did not become the owners of that trade mark; at any rate the plaintiffs were not the owners of the trade mark on the date of the suit. In that view, it dismissed the plaintiffs’ suit as not being maintainable.

3. Quite clearly, the Court below has taken an erroneous view of the law. When a “Private Company” is converted into a “Public Company”, there is no change in the legal personality of the Company in question. “Private Company” is defined in section 3(iii) of the Indian Companies Act, 1956, as follows:

“‘Private Company’ means a company which, by its articles,

(a) restricts the right to transfer its shares, if any;

(b) limits the number of its members to fifty not including

(i) persons who are in the employment of the company, and

(ii) persons who, having been formerly in the employment of the company, were members of the company while in that employment and have continued to be members after the employment ceased; and

(c) prohibits any invitation to the public to subscribe for any share in, or debentures of, the company:

Provided that where two or more persons hold one or more shares in a company jointly, they shall, for the purposes of this definition, be treated as a single member.”

Section 44 of that Act provides for the conversion of a, “Private Company” into a “Public Company”. This is what section 44(1) says:

“If a company, being a private company alters its articles in such a manner that they no longer include the provisions which, under clause (iii) of sub-section (1) of S. 3, are required to be included in the articles of a company in order to constitute it a private company, ‘the company’:

(a) shall, as on the date of the alteration cease to be a private company; and

(b) shall, within a period of fourteen days after the said date, file with the Registrar either a prospectus or a statement in lieu of prospectus, as specified in subsection (2) …….”

(Underlining (her in ‘ ‘) is mine).

“Public Company” is defined in section 3(iv) as meaning a Company which is not a private company. From this it is seen that when a “Private Company” is converted into a “Public Company” there is only an alteration in the articles of association of the Company. When a Company's articles are altered, that company does not cease to exist nor does a new company spring into existence. In other words, the alteration in the articles of a “Company” does not affect the legal personality of that “Company”. This position appears to be obvious.

4. Sub-sections (1) and (2) of S. 3r of the Indian Companies Act, say:

“(1) Subject to the provisions of this Act and to the conditions contained in its memorandum, a company may, by special resolution, alter its articles:

(2) Any alteration so made shall, subject to the provisions of this Act, be as valid as if originally contained in the articles and be subject in like manner to alteration by special resolution.”

5. Sub-section (2) of section 31 makes it clear that even when the Articles of a Company are altered, the company continues to be the same. Now we may notice Section 38 of the Companies Act. It reads:

“Notwithstanding anything in the memorandum or articles of a company, no member of the company shall be bound by an alteration made in the memorandum or articles after the date on which he became a member, if and so far as the alteration requires him to take or subscribe for more shares than the number held by him at the date on which the alteration is made, or in anyway increases his liability as at that date, to contribute to the share capital of, or otherwise to pay money to, the company:

Provided that this section shall not apply— (a) in any case where the members agree in writing either before or after a particular alteration is made, to be bound by the alteration.’“ The exception engrafted by this section is a clear indication of the fact that generally speaking alterations of the articles of a company bind the share-holders of the company and that the provision noticed above is an exception to the general rule

6. Our attention has not been invited to any provision in the Companies Act on the basis of which it is even possible to urge that when a “Private Company” alters its articles in the manner provided in Section 44 and converts itself into a “Public Company”, the original company roust be deemed to be wound up and a new company constituted. No decision of any Court either of this Country or outside has been brought to our notice in support of the view taken by the - trial Court. Our conclusion finds support from the judgment of a Bench of the Patna High Court In Re, Radiant Chemical Co. Ltd., Monghyr, AIR 1943 Pat 278. This is what Harries, C. J. who spoke for the Bench observed therein:

“In my view, however, the learned Judge was wrong in holding that a public company could not be converted into a private company except by winding up and reconstitution. It is in my judgment, now well established that such a conversion can take place if suitable amendments are made to the articles of association, and it is to be observed that amendments to the articles of association do not require the confirmation of this Court.”

These observations apply with full force even to a converse case — conversion of a private company to a public company.

7. We have no hesitation in holding that the conversion of Lever Brothers (India) Private Limited into a Public company did not effect any change in the legal personality of the company. Hence there was no need to apply under Section 35 of the Trade Marks Act. On the other hand when a change in the name of the registered proprietor is required the authorities of the company need only apply under Section 47 of the Trade Marks Act. What Section 47 says is:

“47(I)(b). The Registrar, may on application made in the prescribed manner by the registered proprietor, enter any change in the name address or description of the person who is registered as proprietor of a trade mark.”

8. As seen earlier, an application under S. 47 had been made and the change in the name of the registered proprietor of the suit trade mark had been duly effected.

9. The view of the Court below that as the necessary change in the name of the Registered Proprietor had not been effected by the time the suit was instituted, the same should fail, is wrong. Registration of the name of the Proprietor does not confer title on him. It is merely an evidence of his title. The plaintiffs were the owners of the trade mark in question at all times. The alteration in the name of Registered Proprietor became necessary in view of the change in the name of the Company. But that change in the name did not affect the title. Merely because the trade mark in question did not stand registered in the name of the plaintiffs on the date of the suit, the plaintiffs could not have been non-suited. A somewhat similar question came up for consideration before a Bench of the Madras High Court in T.I Muhammad Zumoon Sahib v. Fathimunnissa, AIR 1960 Mad 80. Speaking for ‘the Bench, Rajamannar, C. J. observed thus:

“Mr. Srinivasa Aiyar vehemently. contended that it is only the order of the Registrar under Section 35 which confers a right on the heirs of the original registered proprietor to bring an action for infringement of the trade mark. He only relied on the provisions of Sections 21 and 35 in support of his argument, and was unable to cite any authority. There is nothing in S. 21 or Section 35 of the Act which supports this argument. Section 21 confers on the proprietor in whose name the trade mark is registered the exclusive right to the use of the trade mark. That exclusive right is capable of assignment and on the death of the registered proprietor the right would devolve under the rules of personal law applicable to the party.

10. Such person or persons on whom the right has devolved would be entitled to the same right which the original registered proprietor had for the use of the registered trade mark. It is true that Section 35 prescribes a procedure for the assignee or the representative to have registration of his title. The fallacy in the argument of Mr. Srinivasa Aiyar, learned Counsel for the appellant, is that it is this registration by the Registrar under Section 35(1) of the Act that confers title on the representative. The registration is expressly stated in Section 35 to be “on proof of title”. The title already exists in the legal representative and on proof of such title to his satisfaction, the Registrar registers him as the proprietor of the trade mark.

11. In any event the entire discussion is academic, because before the judgment was delivered in the case the plaintiffs filed into Court an order of the Registrar under Section 35(1) recognising their title. Mr. Srinivasa Aiyar urged that the plaint should have been amended because the registration under Section 35 really gave a fresh pause of action to the plaintiffs. It is again based on a fallacy. The cause of action is the infringement of the trade mark. The order of the Registrar under Section 35 by itself does not give a cause of action. All that it gives is a recognition of the title which already inheres in the legal representatives of the deceased proprietor.”

12. The above observations hold good even as regards an alteration of a name under Section 47. Similar is the view taken by the English Courts. North, J. in Ihlee v. Henshaw, 3 RPC 15 observed:

‘I think what was contemplated by the Act was that there should be a registration from time to time when an assignment takes place. I do not think there is anything in the terms of the Act making any such registration of an assignment a condition precedent on the part of the assignee to suing.”

13. The same view was reiterated by Lord Murray in Blighly Industries Association Ltd. v. The Scottish Home Industries Association, Ltd. 44 RPC 269. It is unnecessary to refer to more cases on the point.

14. Sri Khambata, the learned Counsel for the appellants next urged that the Civil Court has no jurisdiction to go behind the registration and once a person is registered as a registered proprietor by the Registrar, the same should be taken as a conclusive proof of the right claimed; any one who wants to question the legality or regularity of the registration has to take appropriate action under the provisions of the Trade Marks Act. In support of that contention, he relied on the decision of a Bench of the Madras High Court in Sona Ana Pana Balraj v. S.P. Vadivel Nadar and Sons, AIR 1963 Mad 12. Therein it was held that in the context of Section 23 and Section 24 of the Trade Marks Act, it is clear that the validity of a registered trade mark cannot be canvassed in a suit for injunction restraining the infringement of a trade mark; the person aggrieved must adopt, in such a case, the special procedure provided in Section 46 read with Section 72 of the Act for modification or cancellation of the registered trade mark. In view of our earlier conclusion, it is unnecessary for us to consider the correctness of the view above expressed.

15. Under any circumstance, the trial Court should not have dismissed the action for the alleged passing off. The contention of Sri Venugopalachari, the learned Counsel for the respondents that when Hindustan Vanaspathi Manufacturing Co. Private Limited and two other Companies merged in Lever Brothers (India) Private Ltd., on 8-10-1956, a new Company came into existence, has no basis in law. The true effect of the merger is that the merging Companies lost their identity and they became one with the company in which they merged. The legal personality of Lever Brothers (India) Private Limited Continued to be the same though there might have been a change in its assets and liability position, as a consequence of the merger.

16. For the reasons mentioned above, we allow the appeal, set aside the order of the Court below and remand the case to the trial Court for deciding the other issues in the suit.

17. In this Court, the respondent shall pay the costs of the appellants.

EH/GMJ/D.V.C

Appeal allowed.