R.D. Dhanuka, J.@mdashBy these two petitions filed under Section 34 of the Arbitration and Conciliation Act, 1996 (for short "the said Arbitration Act), the petitioners have impugned part of the arbitral award dated 17th April 2012 passed by the learned arbitrator which is adverse against the respective petitioners. By consent of the parties, both the petitions were heard together and are being disposed of by a common judgment. The petitioners in Arbitration Petition No. 939 of 2012 were the original claimants in the arbitral proceedings whereas the respondents were the original respondents in the arbitral proceedings. For the sake of brevity, the original claimants are described as ''the claimants'' and the original respondents are described as ''the respondents'' in this judgment as they were described as such in the arbitral proceedings. Some of the relevant facts for the purpose of deciding these two petitions are as under:
2. The claimant no. 1-Mrs. Veena Nalin Merchant is a widow of Mr. Nalin Khimjee Merchant and claims to be the sole legatee of the said Mr. Nalin Khimjee Merchant under a Will dated 1st December 2005. The claimant no. 2-Ms. Gayatri Nalin Merchant is a daughter of the said Mr. Nalin Khimjee Merchant and the claimant no. 1. The respondent no. 1 is a registered partnership firm (hereinafter referred to as ''the said firm'') which is carrying on the business of manufacture and trade of asafoetida i.e. hing. The respondent nos. 2 to 6 are the partners of the respondent no. 1. The respondent no. 1 has been trading in hing under the trademarks "LG" and "LG Engine." According to the claimants, the said trademarks were registered with the Registrar of Trademarks as early in the year 1949. Those trademarks were registered in the name of Mrs. Jevabai Khimjee. Those trademarks including other trade marks using the words "LG" and "LG Engine" were used by the respondent no. 1 from time to time in its trade of hing.
3. On or about 21st November 1942, a partnership firm, as per the Deed of Partnership dated 21st November 1943, came to be constituted in the name of Messrs. Laljee Godhoo and Co. The respondent no. 1 was originally founded as a Partnership firm in or around the year 1900. It is the case of the claimants that under the said Deed of Partnership, the right to use and ownership of the name, title, goodwill, trademark etc. of the said firm vested in one Jevabai Khimjee who was the mother of late Mr. Nalin Khimjee Merchant and late Mr. Ajit Khimjee Merchant. The said Jevabai Khimjee died some time in the year 1983. It is the case of the claimants that by her last Will and Testament dated 10th February 1982, the said Jevabai Khimjee bequeathed her entire right, title and interest in the name, title, goodwill, trademarks, etc. of the said firm equally to her sons Mr. Nalin Khimjee Merchant and Mr. Ajit Khimjee Merchant (husband of respondent no. 2 and father of respondent no. 3). It is the case of the claimants that Mr. Nalin Khimjee Merchant and Mr. Ajit Khimjee Merchant each became entitled to 50% share in name, title, goodwill, trademarks etc. of the said firm. It is also the case of the claimants that the equal half share of Mr. Nalin Khimjee Merchant and Mr. Ajit Khimjee Merchant was agreed to and confirmed by the two brothers and other partners in the Deeds of Partnership executed subsequent to the death of Jevabai Khimjee.
4. Various Deeds of Partnership were executed in the name of the said firm between 1929 and 2003. It is the case of the claimants that in the Partnership Deeds executed between 7th October 1929 to 17th February 1937, it was provided that when the said firm was dissolved due to any reason, then Jevabai wife of Khimjee Laljee shall only have right to use the name of the said firm. However, in the Partnership Deed executed on 10th June 1938, the said clause was modified.
5. Mrs. Jevabai Khimjee retired from the said partnership firm with effect from 29th January 1982. It is the case of the claimants that on her retirement from the said partnership firm, the partnership as it then existed was discontinued and a new partnership came into existence and thus on her retirement, she became exclusively and absolutely entitled to use an ownership of the said assets.
6. It is the case of the claimants that by a document dated 10th March 1983, the said Jevabai assigned her right, title and interest in the said assets to Mrs. Kokilaben Ajitsingh Bhimani, Mr. Ajitsingh Khimjee Merchant, Mr. Nalin K. Merchant and Mr. Ajitsingh Karsandas Bhimani in their capacity as trustees of a private trust i.e. Laljee Godhoo Family Trust for valuable consideration. In the said document, Mrs. Jaya V. Merchant, Mrs. Vimati A. Merchant, Mrs. Bhanu N. Negandhi, Mrs. Aruna N. Bhatia, Mrs. Jyoti A. Merchant and Mrs. Veena N. Merchant were the sole beneficiaries of the said trust. It is the case of the claimants that on such assignment, all right, title and interest in the said assets vested in the said trustees who held the said assets for the benefit of the aforesaid persons. By an agreement dated 10th March 1983 executed between the said trustees on the one hand and the said firm on the other hand, the trustees permitted the firm to use the said assets on payment of royalty in accordance with the terms and conditions recorded in the said agreement.
7. By a Deed of Revocation of Trust dated 31st March 2003, the said trust was revoked and the ownership of the assets of the trust was transferred to the beneficiaries i.e. Mrs. Veena N. Merchant and Mr. Bimal A. Merchant. It is the case of the claimants that on 31st March 2003, Mrs. Veena N. Merchant/claimant no. 1 herein and Mr. Bimal A. Merchant jointly became absolutely entitled to all right, title and interest in the said assets each entitled to 50% share therein.
8. By a document dated 17th April 2003, Mr. Bimal A. Merchant and claimant no. 1 herein assigned all their joint right, title and interest in the said assets to Mr. Nalin Merchant and Mrs. Jyoti Merchant for consideration of Rs. 15 lacs. It is the case of claimants that during the period between 1982 and 2003, the said assets did not belong to any of the partners of the partnership firm or to the said firm. It belonged to the said trust.
9. On 14th June 2003 a Deed of Partnership came to be entered into. Under the said Deed of Partnership, Mr. Nalin Khimjee Merchant, Mr. Bimal Ajitsingh Merchant, Mrs. Jyoti Ajitsingh Merchant, Mr. Aroon Umakant Vahalia, Mr. Pallav Kumudchandra Bhatt and Mr. Karna Aroon Vahalia became the partners of the said firm. The said reconstituted partnership firm commenced on 21st April 2003 and the duration thereof was ''At Will.'' Mr. Nalin Merchant was a partner in the said firm. He was entitled to 34% shares in the profits or losses including loss of capital and assets of the partnership. Mrs. Jyoti A. Merchant was entitled to 16% shares. Clauses 6, 17, 18 and 19 of the said Partnership Deed which are relevant for the purpose of deciding these proceedings are extracted as under:
"6. IT IS HEREBY EXPRESSLY AGREED AND DECLARED by and between the parties hereto that the ownership of the rights in the following assets of the partnership namely the name, goodwill, trademarks, labels etc. of Messrs. Laljee Godhoo and Co., shall solely exclusively and absolutely belong to the said Nalin and the said Jyoti, the parties of the First and Third Part. It is hereby further expressly agreed and declared that during the subsistence of the partnership or on determination of partnership for any reason whatsoever, the aforesaid assets viz., name, goodwill, trademarks, labels etc. shall not be taken into account or in consideration when making up the accounts of the partnership. These assets shall not be considered as assets of the partnership.
17. The death or retirement or adjudication as insolvent of any partner shall not dissolve the partnership and the remaining partners shall be entitled to continue the said business and may continue the same. The heirs and legal representatives of the such deceased partner shall have merely the right to receive the amount if any which and the share in profits, if any, upto the date of his/her demise, unless the other remaining partners shall agree to the heirs and legal representatives being taken up as partner(s) in the partnership in the place of such dying partner and on such terms and conditions as may be mutually agreed between the partners and the heirs and legal representatives.
18. Upon the determination of the partnership for any reason whatsoever a full and general account shall be taken of the assets (excluding the assets which are mentioned in clause 6 hereof) credits, debts and liabilities of the partnership and of the transactions and dealings thereof and with all convenient dispatch such assets and credits shall, if necessary, be valued or be sold, realised and got in and the proceeds applied in paying and discharging such debts and liabilities and expenses of and incidental to the partnership and the winding up of the partnership affairs and subject thereto in paying each partner any unpaid profits which may be due to him/her and his/her share of the capital and interest and the balance (if any) of such proceeds shall be divided between the partners in proportion to their respective shares in the partnership as mentioned in clause 5 (five) above and freed from all uses and the partners respectively shall execute do or concur in all necessary or proper instruments acts matters and things for effecting or facilitating the sale realising and getting in of the partnership assets and credits and due application and division of the proceeds thereof and for their mutual release or indemnity or otherwise and it is agreed that such account shall be made up and payment shall be made within two months from the date of the dissolution.
19. Upon the retirement or removal of any partner from the partnership a full and general account shall be taken of the assets, credits, debts and liabilities of the partnership (but excluding the assets which belong to the said Nalin and Jyoti jointly and which are mentioned in clause 6 (six) above) and of the transactions and the dealings thereof and with all convenient dispatch the valuations of such assets as are belonging to the partnership, and credits and debts and liabilities shall be made till the time of the retirement or removal of such partner and also of the expenses of and incidental to the partnership and the retirement and thereupon such retiring or removed partner shall be paid his/her share of the profits, remuneration and interest on capital, if any, ascertained as aforesaid and which may be due to him and the retiring or removed partner shall execute do or concur in all necessary or proper instruments, acts, matters and things for effecting or facilitating the valuations of the assets and liabilities and the making up of any account and for the mutual release or indemnify or otherwise and it is hereby specifically agreed that such account shall be made up and such payment shall be made to such retiring or removed partner in any case within 6 months from the date of retirement or removal."
10. On or about 1st November 2009, Mr. Nalin Merchant expired. It is the case of the claimants that the said Mr. Nalin Merchant had executed his last Will and Testament dated 1st November 2005. It is the case of the claimants that after the death of Mr. Nalin Merchant, the respondent nos. 2 to 6 approached the claimants with a Partnership Deed purportedly seeking to act upon the desire of Mr. Nalin Merchant that the claimants should be joined as a partner in the said firm. It is the case of the claimants that the respondent nos. 2 to 6 agreed to admit the claimant no. 1 as a ''sleeping partner'' in the said firm. It was further set out in the said documents that the said assets shall solely and exclusively and absolutely belong to the claimant no. 1 and the respondent no. 2. The said Partnership Deed was signed by the respondent nos. 2 to 6. It is the case of the claimants that the claimant no. 1, however, did not execute the said Partnership Deed.
11. According to the claimants, in or about February 2010, the claimant no. 1 came to the conclusion that she was not being offered partnership on fair or equal terms by the respondents. The claimants by their advocate''s letter dated 22nd November 2010, invoked the arbitration clause contained in the said Partnership Deed.
12. On 9th June 2011, the claimants filed a Statement of Claim before the learned arbitrator inter alia praying for declaration that the claimant no. 1 was entitled to 50% share in the right, title and interest in the name, goodwill, trademarks and labels of Messrs. Laljee Godhoo and Co.-the said firm and for other reliefs. The claimants also prayed for an order against the respondents to render true and faithful account of the profits after the date of death of Mr. Nalin Merchant by the use of names, goodwill, trademarks and labels of the said firm and for an order to pay to the claimant no. 1 50% of such profit along with interest @18% p.a. The respondents opposed the said claim filed by the claimants. The parties led oral evidence before the learned arbitrator.
13. On 17th April 2012, the learned arbitrator rendered an award whereby it was declared that the claimant no. 1 was entitled to 50% in the said assets and that the respondents were not the proprietors of the trademarks. The learned arbitrator, however, held that the respondent firm and the continuing partners have a right to use the goodwill, trademarks and labels during the continuance of the said firm, however, on payment of some royalty to the claimant no. 1 for use of her 50% share. It is held by the learned arbitrator that the amount of royalty payable will have to be worked out by the Chartered Accountant. The learned arbitrator refused to grant injunction in favour of the claimants and against the respondents from manufacturing, selling, offering for sale, advertising or dealing in any goods under the trademarks or trade name or labels described therein.
14. By a separate order dated 13th June 2012, the learned arbitrator on the application filed by the claimants under Section 33 of the Arbitration Act for correction and interpretation of the impugned award corrected the impugned award to the limited extent by clarifying that the respondents had agreed to a suggestion made by the tribunal to buy over 50% of the shares of the claimant no. 1 in the said assets.
15. In so far as the claimants are concerned, they have filed the Arbitration Petition No. 939 of 2012 inter alia praying for setting aside the impugned portion of the said award i.e. paragraphs 22 to 27 and 33(b). The claimants have impugned the portion of the award by which the learned arbitrator has ordered that the continuing partners have a right to use the goodwill, trademarks and labels during the continuance of the said firm and has further ordered payment of royalty to the claimant no. 1 for use of her 50% share in the trademarks and directing that the said royalty was worked out by the Chartered Accountant. The claimants have also impugned the portion of the award by which the learned arbitrator refused to grant prayer for injunction in terms of prayer clause (c) of the statement of claim.
16. In so far as the respondents are concerned, the respondents have filed Arbitration Petition No. 791 of 2012 inter alia impugning the declaration made by the learned arbitrator in paragraph 33(a) of the interim award that the claimant no. 1 was entitled to 50% share in the goodwill, trademarks, trade names and labels and/or the continuing partners were not proprietors of the trademarks. The respondents have also impugned the direction of the learned arbitrator for payment of royalty to the claimant no. 1 for use of her 50% share and that also to be worked out by the Chartered Accountant in paragraph 33(b) of the impugned award. The respondents have also impugned the declaration rendered by the learned arbitrator that the claimant no. 1 was entitled to the share of deceased Mr. Nalin Merchant in the said firm and such share should be worked out on the basis of market value of assets of the said firm. The learned arbitrator has directed the respondents jointly and severally to render true accounts on the basis of willful default from the accounting year in which Mr. Nalin Merchant died i.e. from 1st April 2009 till date and has directed to pay a sum of Rs. 3,76,70,305/- to the claimant no. 1. The respondents have also impugned the direction issued by the learned arbitrator in paragraph 33 (d) of the interim award that the accounts must also be taken of profit, if any, earned from the use of the share of deceased Mr. Nalin Merchant and on such ascertainment, the claimant no. 1 to elect to receive 34% share in the profits or interest @6% p.a. on the amount of her share. It is not in dispute that the respondents have already paid a sum of Rs. 3,76,70,305/- to the claimant no. 1 pursuant to the said award.
17. I have heard the learned senior counsel appearing for the parties at length and I have given my anxious consideration to the rival submissions made by the learned senior counsel. Both the parties have also filed their written arguments after conclusion of the oral submissions advanced before this Court.
18. Dr. Tulzapurkar, learned senior counsel for the claimants submits that on one hand the learned arbitrator has held that continuing partners or the firm were not the owners of the trademarks and on the other hand has held that the continuing partners were entitled to use the trademarks not as the owner but as a lessees and has also held that the owners of the trademarks were not entitled to prevent the continuing partners from using the trademarks during the subsistence of the partnership firm i.e. respondent No. 1. He submits that the learned arbitrator has also held that the continuing partners are liable to pay royalty for use of the trademarks as licensees which licence fee shall be determined by the Chartered Accountant who can be appointed by the learned arbitrator. He submits that the findings of the learned arbitrator and the directions issued are totally inconsistent with each other.
19. Learned senior counsel submits that once the learned arbitrator has come to the conclusion that the continuing partners or the said firm were not the owners of the trademarks, then unless the owners of the premises would give consent to the use of the trademarks by the continuing partners, it would amount to violation of the rights of the owners of the trademarks if there is any use of such trademarks by continuing partners. He submits that the impugned award to this effect is contrary to the provisions of sections 28 and 29 of the Trademarks Act, 1999.
20. Learned senior counsel for the claimants submits that the legal heirs of Nalin Merchant alone are entitled to use the trademarks and in absence of any valid licence granted by them to the continuing partners or to the firm, the use of the such trademarks by the continuing partners of the firm and the firm would amount to infringement of the trademarks.
21. Learned senior counsel for the claimants submits that though registration certificates of the trademarks shows that the partners of the said firm are the registered proprietors, it is an admitted position that those partners do not have any title to the registered trademarks. He strongly relied upon various provisions of the partnership deed and would submit that the trademarks never belong to the partners or the said firm but it belonged only to Mrs. Jeevabai. He submits that the said Jeevabai had assigned the registered trademarks by a Deed of Assignment in favour of the trust being Laljee Godhoo Family Trust. After revocation of the said trust, the said trademarks stood assigned to the beneficiaries viz. Veena Merchant and Vimal Merchant. The beneficiaries have assigned the said trademarks by a Deed of Assignment dated 17th April, 2003 to Jyoti Merchant, respondent no. 2 herein and Nalin Merchant for valuable consideration. He submits that upon the death of Nalin Merchant, his share in the trademarks devolved on Veena Merchant, claimant no. 1 herein.
22. Learned senior counsel submits that the certificate of registration does not create title but at the most would be only a proof or evidence of title. Even if the assignee of the registered trademarks is not shown as the subsequent proprietor, such assignee acquires the title of such assignment. He submits that the parties have to simpliciter make an application for showing the name of Mrs. Veena Merchant and respondent No. 2 as the subsequent proprietors of the said registered trademarks. In support of the aforesaid submissions, learned senior counsel placed reliance on the judgments of the Madras High Court in the cases of
23. It is submitted by learned senior counsel that claimant no. 1 and respondent no. 2 are the owners of the trademarks and they have not granted any licence to continuing partners or the said firm to use such trademarks. The use of such trademarks without the consent of the owners by the continuing partners or the said firm amounts to infringement of the trademarks. The learned arbitrator could not have refused to grant injunction from the use of the trademarks by the respondents and the same is contrary to law and also contrary to the findings rendered by the learned arbitrator himself.
24. Learned senior counsel submits that the award of the learned arbitrator granting licence in favour of the respondents would destroy the trademarks property. The license of the trademarks is prohibited. He submits that the use of the trademarks by a third party who has no connection with the unwilling proprietor, such trademarks ceases to be a distinctive property.
25. It is submitted by learned senior counsel that since there was no licence in favour of the said firm created by Nalin Merchant, in absence of such licence there was infringement of the trademarks. The claimants could not have been directed to permit the respondents to use the trademarks without the wish of the claimants.
26. Learned senior counsel submits that since the owners have acquired the title in the trademarks, merely because their names were not registered, their rights as the owners were not affected. The learned arbitrator has though declared the ownership of the claimants of the trademarks, has further directed to create a licence which direction is contradictory and would amount to infringement of the trademarks.
27. Learned senior counsel for the claimants submits that the declaration rendered by the learned arbitrator that there was a licence between the owners and the continuing partners of respondent no. 1 is based on no material in existence. The said finding is based on no evidence. He submits that Mrs. Veena Merchant, claimant no. 1, who is held to be 50% owner of the trademarks has not granted any licence in favour of the respondents and in fact had objected to use of the trademarks by the respondents. He submits that unless all the owners of the trademarks agreed to grant the licence and that also after following the requirements of law, a valid licence cannot be granted.
28. Learned senior counsel submits that even if there was no objection to the use of the trademarks by a third party by one of the owners of the trademarks, it could not in law and did not in fact result into the valid licence to use the trademarks. He submits that it was not even the case of the respondents that there was any licence granted by the owners in favour of the respondents to use the trademarks. It was the case of the respondents that the said trademarks belong to respondent no. 1 firm and the continuing partners. The declaration rendered by the learned arbitrator is thus contrary to even the submission of the respondents.
29. Learned senior counsel submits that the learned arbitrator could not have directed the Chartered Accountant to decide the terms of the licence and to ascertain the royalty payable by the respondents to the claimants, which is totally illegal. He submits that after 1963, in none of the partnership deed there was a provision for giving any right to respondent no. 1 firm to use the trademarks. There is no concept of perpetual licence in the trademark law. He submits that none of the partnership deed shows any licence alleged to have been created in favour of the respondents by the owners. Even if any licence was created by the erstwhile owner, on the death of the owner/licensor, the licence came to an end. No fresh licence was created by the said Mrs. Veena Merchant in favour of the respondents.
30. Learned senior counsel submits that since one of the co-owner is unwilling to grant licence, the learned arbitrator could not have given any direction to such a co-owner to grant licence in favour of the respondents. He submits that even if the trademark is used without any stoppage and used continuously, that would not create any licence in favour of the respondent or would not create any rights of any nature whatsoever. There cannot be any estoppel against any of the heirs of Nalin Merchant even if respondent no. 1 has been using the trademarks and goodwill for last 60 years.
31. Learned senior counsel for the claimants submits that if there is no trade connection between the owners and the proprietors of the trademarks, it would amount to trafficking in trademark. It would be construed as if the claimants were dealers in the trademark, which is not permissible. Learned senior counsel placed reliance on the definition of "mark" under section 2(m) and the definition of trademark under section 2(i)(zb)(ii). He also placed reliance on the definition of "proper use" under section 2(1)(r)(i)(a).
32. Learned senior counsel for the claimants relied upon Rule 80 of the Trademark Rules, 2002 which provides for application for registration as a registered user of a registered trademark and would submit that even under the said provision, the precise ownership between the registered proprietor and the proposed registered user has to be shown in the application for registration as the registered user. Reliance is also placed on Rules 81 and 82 of the Trade Mark Rules, 2002. He submits that the registered user has to be in respect of the registered trademark, whereas the common licence can be in respect of the registered as well as unregistered trademark. Reliance is also placed by learned senior counsel on the judgment of the Supreme Court in the case of
33. Learned senior counsel submits that even if there would have been an agreement entered into by the claimants granting licence, if the licensors were not willing to enforce such licence, no suit for specific performance to grant a licence could be filed by the respondents. Only the suit for damages could have been filed. In case of trademark connection in trade is required to be maintained whereas exploitation of patent by the licensor does not require any control by the owner. Further in the case of copyright, exploitation is permitted and no connection or control is required. Nothing further is required to be done by the owner in case of patent and copyright to sustain the validity of such licence. Reliance is also placed on the judgment of Chancery Division in the case of Powell v. Head reported in 1879, Vol. XII 686 and the relevant paragraphs at page 689.
34. Learned senior counsel for the claimants placed reliance on clause 6 of the Partnership Deed and would submit that the learned arbitrator has rightly rendered a fining of fact on the interpretation of the said clause which provided that the ownership of the rights in the goodwill, trademarks, trade names, labels etc. of Laljee Godhoo and Co. was solely, exclusively and absolutely belonging to Nalin Merchant and Mrs. Jyoti Merchant. No interference is permissible with such finding of fact rendered by the learned arbitrator.
35. Learned senior counsel then submits that any of the assets of the partnership can be allotted to one or two partners. In support of this submission, learned senior counsel placed reliance on Halsbury''s Laws of England, fourth edition, Volume 35, paragraph 111 and also Lindley and Banks on Partnership, 17th edition, paragraph 18.43 at page 520. He also placed reliance on the commentary on ST Desai''s on partnership 7th edition (2009), page 124 and 134. Reliance is placed on the judgment of the
36. Insofar as the direction of the learned arbitrator to take up the accounts of respondent no. 1 firm for determining the share of the heirs of Nalin Merchant is concerned, it is submitted by learned senior counsel that the said direction is rightly issued by the learned arbitrator in paragraphs 28 to 32 of the impugned award. It was not the case of the continuing partners that the share of the legal heirs of Nalin Merchant was ascertained or that any ascertainment accounts was accepted by the heirs of Nalin Merchant. Reliance is placed on clause 17 of the Deed of Partnership and it is submitted that under the said provision the heirs and legal representatives of the deceased partner have right to receive the amount if any, which may be standing his or her accounts with the partnership and share in profit if any, up to the date of demise of such a partner.
37. He submits that under clauses 16 and 19 of the Partnership Deed dated 14th June, 2003, the heirs of the said Nalin Merchant were entitled to have general and proper accounts taken and all assets valued and only after the accounts were drawn and the assets were valued at the market value the share of the deceased partner standing to his credit can be determined. Learned senior counsel for the claimants submits that the entries in the trademark register do not determine inter-se arrangement between the parties. The partners amongst themselves can agree that the particular asset was belonging to the individual partner. The ownership and licence are two different things and the licensee can never claim to be the owner of a trademark.
38. He submits that the respondent no. 1 firm had continued paying the royalty to the trustees at the relevant time who were owners of the said trademark. He submits that continuing partners are estopped from contending that the continuing partners became the owners of the trademarks. Learned senior counsel submits that the entries were made in the trademark registers showing the names of all the partners trading in the name of the firm as the owners to ensure that the validity of the trademarks did not become vulnerable and was not jeopardized by the absence of any written agreement of licence. A firm being an unincorporated body cannot be the owner of a trademark and cannot be shown as owner or proprietor in the trade mark register. It is submitted that the fact that only two partners were the owners and that the firm used trademarks only as a licensee is not negatived in the entries in the register which showed by the partners trading in the name of the partners as firm.
39. Learned senior counsel for the claimants submits that the owners cannot be forced by any order, decree or award to continue to allow the firm or any other persons to use the trademark if they were not willing to do so.
40. Insofar as the direction of the learned arbitrator regarding the accounts are concerned, it is submitted by learned senior counsel that any accounts accepted by Nalin Merchant during his life time could not bind his legal heirs. He submits that date of death of Nalin Merchant was 1st November, 2009 and thus the balance sheet as on 31st March, 2009 was not signed by Nalin Merchant admittedly. He submits that the valuation therefore was required to be taken as on 1st November, 2009 since his share was required to be ascertained on the date of his death. He submits that there can be accretion to the assets between 1st April, 2009 and 1st November, 2009 resulting in increase in valuation of the assets during that period. It is submitted that the learned arbitrator has thus rightly directed that fresh valuation should be made as on the date of death of the said deceased.
41. Per Contra, Mr. Sancheti, learned senior counsel for the respondents invited my attention to the documents forming part of compilation and would submit that the entries in the trade mark register from inception i.e. since 1949 onwards show that the name of all the partners of the firm had been entered into as proprietors of the trademarks. He submits that each time a fresh Deed of Partnership was entered into, fresh entry was made in the trade mark register to record the names of the proprietors of the trade marks being the then partners of the firm. He placed reliance on section 2(v) of the Trade Marks Act, 1999 which defines the term "registered proprietor", the definition of the trade mark under section 2(zb), section 6 of the said Act, section 17 and would submit that under those provisions referred to aforesaid, by virtue of the entries in the trade mark register, the respondents herein are registered proprietors and have been exclusively using the trademarks in relation to the goods with which they were connected in the course of trade.
42. He submits that the respondents herein being registered as such for exclusive right to use the trademarks, there was no question of licence or permissible user under the said Act granted to the respondents by the claimants or their predecessor. Reliance is also placed on section 6(4) of the Trade Marks Act. It is submitted that the said provisions makes it clear that no notice of any trust, express or implied or constructive, shall be entered in the register and no such notice shall be receivable by the Registrar.
43. Learned senior counsel for the respondents placed reliance on clause 17 of the Partnership Deed and would submit that upon the death or retirement or adjudication of any partnership as an insolvent, the firm is not dissolved and the remaining partners are entitled to continue the business. He submits that the learned arbitrator has accordingly held that so long as the firm''s right to use the goodwill, trademarks, trade names and labels the same could be allowed to be taken away by a person who is not a partner. He submits that the parties had thus agreed under the said clause 17 of the Partnership Deed that the trademarks shall be used jointly during the continuance of the firm for the purpose of the business of the firm and accordingly entries were made in the trademark registry as joint proprietors. In support of this proposition, learned senior counsel placed reliance on section 24 of the Trade Marks Act which provides for jointly owned trademarks.
44. Reliance is also placed on section 28 of the said Act and it is submitted that when the parties intend to use the trademarks jointly and on behalf of all of them in relation to an article with which all of them were connected, only and only then such persons may be registered as joint proprietors. The said Act does not permit registration as joint proprietors where the intention is to use the trademark independently or stop the others from using it. He submits that the parties had agreed as regards the world at large and had agreed that the trademarks shall be jointly owned during the subsistence of the partnership and the partners who are registered proprietors shall be jointly entitled to use it. It was agreed that the trademarks and related assets shall not be taken into consideration while preparing the general accounts. He submits that it was agreed by and between the parties that only upon determination of the firm Nalin Merchant and Ms. Jyoti Merchant could claim rights as regards the trademarks. Such provisions were made only for accounting purposes and not as to determine the right of the partners to use the trademarks.
45. Learned senior counsel for the respondents submits that when the persons are registered as joint proprietors, the exclusive right to use the same shall not be deemed to have been acquired by any one of those persons as against any other of those and each has the same rights as against other persons.
46. Learned senior counsel for the respondents placed reliance on sections 37 to 40 of the Trade Marks Act which provide for assignment and transmission of registered trademarks. Section 38 provides that the registered trademarks shall be assignable whether with or without goodwill of the business concerned and in respect either of all the goods or services in respect of which the trademark is registered. Certain restrictions are provided under section 40 on the assignment or transmission where multiple exclusive rights in a trademark would be created. He submits that the trademark being an incorporeal property not being movable or immovable property, has no existence independent of the said Act and can only be dealt with/transmitted strictly in accordance with the provisions of law. He placed reliance on section 2(zc) of the said Act which defines the term "transmission". He submits that the registration or transmission as joint proprietor is not permissible unless its intention to use it on behalf of all. Learned senior counsel submits that section 40 prohibits transmission and assignment which would result in creation of rights in more than one person and result in multiple exclusive user of the said trademark.
47. Learned senior counsel submits that in accordance with clause 17 of the said Partnership Deed, respondent no. 1 firm had offered claimant no. 1 to join the partnership as a sleeping partner of the firm considering her age of 75 years with 34% share in the profit and loss in the firm, which was the share of late Nalin Merchant in the said firm and had also forwarded the draft Deed of Partnership, however, the claimant no. 1 declined the said offer and refused to become the partner of the firm.
48. Learned senior counsel submits that if the transmission is permitted then it would result in the trademark becoming vulnerable and would make it entirely unusable and worthless which would clearly fall within the mischief of section 40 of the Trade Marks Act. Mr. Sancheti, learned senior counsel for the respondents placed reliance on the judgment of the Supreme Court in the case of
49. Mr. Sancheti also placed reliance on the following judgments/commentary:-
i)
ii)
iii) Law of Trade Marks and Passing Off by Eastern Law House;
iv)
v)
vi)
vii)
viii)
ix) Deluxe Road Lines vs. P.K. Palani Chetty, reported in Madras High Court page 262;
x)
xi)
xii)
xiii)
50. Mr. Sancheti submits that since the continuing partners are registered proprietors, no licence is required to use the trademarks, and the same can be used by them in continuance of the said firm. He submits that the respondents have also impugned direction of the learned arbitrator directing the respondents herein to pay some royalty to claimant no. 1 for the use of use 50% share to be worked out by the Chartered Accountant. Since both the parties have impugned that part of the award, he submits that the said direction deserves to be set aside.
51. Insofar as the direction of the learned arbitrator that the valuation of the assets has to be done on the basis of the market value is concerned, he submits that the said direction is contrary to the established rule of commercial practice and accountancy and to the express term of clause 17 of the Partnership Deed which suggested that the claimants were only entitled to the amounts standing at the foot of the capital account of Nalin Merchant and share in profits upto the date of his death i.e. 1st November, 2009. The respondents have already paid a sum of Rs. 3,76,70,305/- to claimant no. 1 which was actually the amount due at the foot of the account of the said Nalin Merchant as on the date of his death i.e. 1st November, 2009.
52. Learned senior counsel submits that under clause 18 of the Partnership Deed, it was provided that on the determination of the partnership, a full and general account shall be taken of the existing assets mentioned in clause 6 and if necessary, the same shall be valued or to be sold, realized and applied in paying and discharging the tax and liabilities of the firm. Reliance is also placed on clause 19 of the Partnership Deed which provided that full and general accounts were to be taken only in the event of the retirement or removal of the partner and not otherwise.
53. Learned senior counsel submits that the position of the legal heir of the deceased partner cannot be equated with all the out going/retiring partner under clause 19 and in holding that the assets were to be valued at the market value under clause 17. The findings of the learned arbitrator to this effect are contrary to the express term of the Partnership Deed.
54. Learned senior counsel for the respondents submits that respondent no. 1 firm had not followed the practice as appearing from the books of account and profit and loss accounts of the firm for the last several years, including last 3 to 4 years for valuing the assets on the market value at the end of each financial year but had followed the practice of valuation of the assets at the book value. He submits that the finding of the learned arbitrator that under clause 16 of the Partnership Deed, a fresh valuation of the assets is to be done by market value is patently illegal and perverse.
55. Learned senior counsel submits that there was no warrant for revaluation of the assets under clause 16 of the Partnership Deed as of 1st November, 2009 as clause 16 only concerned the annual accounts. He submits that the learned arbitrator has issued a direction to render the accounts on willful default basis from 1st November, 2009 which direction is totally perverse and illegal.
56. Learned senior counsel placed reliance on the oral evidence of Mr. Chandrahas Dayal, the witness examined by the claimants and in particular reply to question no. 172, who admitted that in the given business if the business was being liquidated, the market value of the assets is relevant. He deposed that it was necessary that for the liquidated value, the market value of all the assets would be relevant. Learned senior counsel submits that the said witness of the claimants was offered inspection of books of accounts of respondent no. 1 firm for last 3 to 4 years, including the details of the valuation of the immovable properties as disclosed in the balance sheet on a year to year basis which demonstrated that no valuation of the assets was done on the basis of the market value at the end of each financial year. The witness of the claimants admitted in the cross-examination and more particularly in questions 48 to 63 and 130 that there was no valuation at the market price or there was no revaluation of the assets in the books of accounts of the firm from the financial years 2005-2006, 2006-2007, 2007-2008 and 2008-2009.
57. Mr. Sancheti placed reliance on various judgments of the Supreme Court in support of the submission that during the continuance of the firm, assets of the firm are to be valued at cost or market value whichever is lower. However in taking accounts for the purpose of dissolution, the assets would be valued on a real basis and not at cost or at their other value appearing in the books. He submits that the direction of the learned arbitrator for valuation of the assets on the basis of the market value is contrary to the settled law, commercial practice, settled accountancy practice and also contrary to the terms of the contract.
58. Insofar as the direction of the learned arbitrator that the accounts shall be rendered on the basis of willful default is concerned, learned senior counsel submits that the respondents had already furnished the complete accounts of the firm including its audited accounts, profit and loss account and the balance sheet to the auditors/Chartered Accountant nominated by the claimants. The claimants had led evidence of Mr. Chandrahas Dayal, a Chartered Accountant who admitted during his evidence having received all the accounts as also the documents/information and/or explanation sought by them. The respondents herein through their advocate''s letter dated 17th March, 2010 had forwarded the balance sheet and the profits and loss account of the firm as on 31st March, 2009, the accounts of the firm for the year 2008-2009, the details of the capital account of Nalin Merchant as of 2008-2009 and from 1st April, 2009 to 30th October, 2009 etc.
59. He submits that the claimants were further informed by the respondents through their advocate that there was no change in the accounts that were verified by the claimants and their auditors Mr. Shenal Shah. He submits that the complete inspection of all the accounts and said related document was also given to the claimants even after the commencement of the arbitration proceedings. The claimants have never raised any objection to the correctness of the books of account, nor led any evidence to prove that there was any willful default on the part of the respondents. He submits that the learned arbitrator has completely overlooked these aspects and without giving any finding or rendering the reasons came to the perverse conclusion that the accounts be rendered on the basis of willful default without any evidence being led in that regard by the claimants. In support of this submission, learned senior counsel placed reliance on several judgments referred to aforesaid.
60. Learned senior counsel submits that the learned arbitrator has attempted to adjudicate the rights between the parties based on his concept and understanding of equity contrary to the terms of clause 17 of the Partnership Deed. The learned arbitrator has acted beyond the terms of the contract between the parties. In support of this submission, learned senior counsel placed reliance on the judgment of the Supreme Court in the case of State of Rajasthan vs. Navbharat Construction (supra) and in particular paragraph 27 and the judgment of the Supreme Court in the case of State of Tripura vs. Sabitri Salt Suppliers (supra) and in particular paragraph 12 thereof.
61. Learned senior counsel submits that the direction of the learned arbitrator that the accounts must be taken of the profits if any earned from the use of the share of the deceased Nalin Merchant and on such ascertainment, the claimant no. 1 could elect to receive 34% share in the profits or in the alternate 6% interest on the amount of her share is contrary to clause 17 of the Partnership Deed which provided that the legal heirs of the deceased partner were entitled only to the share in profits upto the date of death. He submits that claimant no. 1 has been already paid the amount of Rs. 3,76,07,305/- by respondent no. 1 firm being the amount standing to the capital account of late Nalin Merchant as on the date of his death.
62. Learned senior counsel submits that the learned arbitrator has acted contrary to the express term of the contract and more particularly clauses 16 to 19 of the Partnership Deed. The learned arbitrator could not have directed the respondents to pay the claimants only on the basis of the market value of the assets without considering the liabilities of the said firm on the date of the death of Nalin Merchant. The award shows non-application of mind on the part of the learned arbitrator on this issue. He submits that no accounts were required to be made prior to 31st March, 2009. All the accounts upto the said period were accepted by the said Nalin Merchant during his life time. He submits that the question as to whether upto 31st March, 2009 the accounts were signed by Nalin Merchant or not could not be reopened. The learned arbitrator has not given any direction or finding that the accounts upto 31st March, 2009 also should be reopened. The claimants have not challenged that part of the award in the arbitration petition filed by the claimants.
63. Learned senior counsel submits that the claimants could claim the share in the profit only upto the date of death of Nalin Merchant after adjusting the liabilities of the said firm upto the said date. He submits that no share of husband of claimant no. 1 in the said firm was utilized by the said firm. The rights of the claimants were crystallised on the date of death of the said Nalin Merchant. It is submitted in the alternate that no capital account was utilized by the firm and thus there was no question of the share in the profit for the period subsequent to the date of this death.
64. Mr. Sancheti placed reliance on sections 42 and 48 of the Partnership Act, 1932 and would submit that though there was no dissolution upon the death of Nalin Merchant and though the parties had agreed under clause 17 of the Partnership Deed that there would be no dissolution upon the death of any of the partner, the learned arbitrator has treated such situation akin to dissolution of the firm and issued the directions for valuation of the assets on the market value which is contrary to the contract entered into between the parties. Learned senior counsel for the respondents submits that even if section 48 has to be applied, it has to be applied in toto, and not any particular part thereof.
65. In rejoinder, Dr. Tulzapurkar, learned senior counsel for the claimants submits that registration certificate issued by the authorities under the provisions of the Trade Marks Act is not title by itself. The partnership firm cannot be the owner of the trademark as the partnership firm is not a legal entity. Reliance is once again placed on the provisions of the Partnership Act. It is submitted that upon the demise of Nalin Merchant, the trademark and goodwill was not to be taken into account and was not to be treated as the assets of the said firm.
66. Insofar as the issue of valuation is concerned, learned senior counsel submits that all the accounts were to be signed by all the partners. The accounts of the said firm were to be taken upto the date of demise of Nalin Merchant. The claimants would be entitled to profit at the rate of 34% on the balance amount payable from the date of death of Nalin Merchant till such payment is made to the claimants. Said 34% in the profit is required to be paid in view of the respondents using the share of the claimants proportionately in the business of the said firm. Dr. Tulzapurkar distinguished the judgments relied upon by Mr. Sancheti, learned senior counsel for the respondents. He submits that the claimants have disputed the accounts of respondent no. 1 as on 31st October, 2009. He submits that after the demise of the husband of claimant no. 1-Nalin Merchant, respondent no. 1 has shown huge loss in the account of the said firm with a view to deprive the claimants of their legitimate share in the said firm. The learned arbitrator has thus rightly issued a direction for having the valuation on the basis of the market value. Dr. Tulzapurkar fairly submits that the learned arbitrator should have also provided for ascertainment of liabilities of the said firm before issuing any direction to the said firm to pay the claimants according to the market value of the assets and the question of wilful default at this stage did not arise.
67. Mr. Sancheti submits that the submission of the claimants that the award as made by the learned arbitrator can be modified in view of the submission now made by the claimants that the claimants would be entitled to payment on the basis of valuation of assets minus liabilities itself is sufficient to set aside the award. He submits that the new submission of the claims that no willful default applies at this stage is also contrary to their prayers made in the statement of claim.
REASONS AND CONCLUSIONS:-
68. The claimants have impugned the portion i.e. paragraphs 22 to 27 and in paragraph 33(b) of the impugned award in Arbitration Petition No. 939 of 2012 i.e. Issue No. III and view of the learned arbitrator that the respondent no. 1-firm and the continuing partners had a right to use the goodwill, trademarks, trade names and labels during the continuance of the said firm. The claimants have also challenged the award in so far as the learned arbitrator had directed that the amount of royalty payable by the respondents to the claimants will have to be worked out by the Chartered Accountant. The claimants have also impugned the award in so far as the learned arbitrator has refused to grant injunction against the respondents thereby refusing to restrain the respondents from manufacturing, selling, offering for sale, advertising or directly or indirectly dealing in any goods under the trademarks or trade names or labels or any other trademarks, trade names similar to the said trademarks or trade names or labels, so as to cause confusion or deception or to pass off or enable others to pass off.
69. In so far as the respondents herein are concerned, the respondents have impugned the portion of the award dated 17th April 2012 in so far as the learned arbitrator had declared that the claimant no. 1 was entitled to 50% shares in the goodwill, trademarks, trade names and labels and holding that the respondent no. 1-firm and/or continuing partners were not proprietors of the trademarks. The respondents have also challenged the portion of paragraph 33 (b) of the award in which the learned arbitrator had held that the respondents shall pay some royalty to the claimant no. 1 for use of her 50% share. The amount of royalty payable shall be worked out by the Chartered Accountant. The respondents have also impugned the declaration rendered by the learned arbitrator that the claimant no. 1 was entitled to share of deceased Mr. Nalin Merchant in the respondent no. 1-firm which share shall be worked out on the basis of the market value of assets of the firm and that the respondents jointly and severally shall render true and correct accounts on the basis of willful default from the accounting year in which Mr. Nalin Merchant died i.e. from 1st April 2009 till date and for payment of the amount due to the claimants. The respondents have impugned the portion of the directions issued in paragraph 33(d) of the award in which the learned arbitrator had given an option to the claimant no. 1 to elect to receive 34% share in the profits or 6% p.a. interest on the amount of her share.
70. In the impugned award, the learned arbitrator has dealt with issue nos. I and II together as to whether Mr. Nalin Merchant had 50% shares in the goodwill, trademarks, trade names and labels and as to whether the respondents are/were the proprietors of the trademarks listed in Annexure A to the statement of claim. I shall deal with the impugned award in so far as the issue nos. I and II is concerned.
71. It is not in dispute that Mr. Nalin Merchant was a partner in the respondent no. 1-firm and was having 34% shares in the said firm. The learned arbitrator has rendered finding that inspite of prior registration and the fact that the trademarks stood in the name of the firm, the partners had by their agreement considered the trademarks to belong only to Mr. Nalin Merchant and the respondent no. 2. The learned arbitrator has also considered the Draft Deed (Ex-GG) which was forwarded by the respondents to the claimant no. 1. It is held by the learned arbitrator that the respondent no. 1-firm had paid royalty and that the trademarks were allowed to be purchased by Mr. Nalin Merchant and the respondent no. 2 completely belies the case now sought to be made up by the respondents. It is held that goodwill, trademarks, trade names and labels did not belong to the respondent no. 1-firm but to Mr. Nalin Merchant and after his demise, to the claimant no. 1 and the respondent no. 2 who have 50% shares each.
72. A perusal of the record indicates that it was the case of the claimants before the learned arbitrator that under the Deed of Partnership dated 21st November 1943, the right to use and ownership of the name, title, goodwill, trademark etc. of the said firm vested in one Jevabai Khimjee who was the mother of late Mr. Nalin Khimjee Merchant and late Mr. Ajit Khimjee Merchant. The said Jevabai Khimjee died some time in the year 1983. By her last Will and Testament dated 10th February 1982, the said Jevabai Khimjee had alleged to have bequeathed her entire right, title and interest in the name, title, goodwill, trademarks, etc. of the said firm equally to her sons Mr. Nalin Khimjee Merchant and Mr. Ajit Khimjee Merchant. It was the case of the claimants that Mr. Nalin Khimjee Merchant and Mr. Ajit Khimjee Merchant each became entitled to 50% share in name, title, goodwill, trademarks etc. of the respondent no. 1-firm.
73. In the Partnership Deeds executed between 7th October 1929 to 17th February 1937, it was provided that when the said firm was dissolved due to any reason, then Jevabai wife of Khimjee Laljee shall only have right to use the name of the said firm. Mrs. Jevabai Khimjee retired from the said partnership firm with effect from 29th January 1982. On her retirement from the said partnership firm, the partnership as it then existed was discontinued and a new partnership came into existence. It was the case of the claimants that the said Mrs. Jevabai Khimjee became exclusively and absolutely entitled to use and ownership of the said assets. By a document dated 10th March 1983, the said Jevabai assigned her right, title and interest in the said assets to Mrs. Kokilaben Ajitsingh Bhimani, Mr. Ajitsingh Khimjee Merchant, Mr. Nalin K. Merchant and Mr. Ajitsingh Karsandas Bhimani in their capacity as trustees of a private trust i.e. Laljee Godhoo Family Trust for valuable consideration.
74. By an agreement dated 10th March 1983 executed between the said trustees on the one hand and the said firm on the other hand, the trustees permitted the firm to use the said assets on payment of royalty on the terms and conditions set out therein. On 31st March 2003, the said trust was revoked and the ownership of the assets of the trust was transferred to the beneficiaries i.e. Mrs. Veena N. Merchant and Mr. Bimal A. Merchant who absolutely became entitled to 50% share in the right, title and interest in the said assets. It is the case of the claimants that by a document dated 17th April 2003, Mr. Bimal A. Merchant and claimant no. 1 herein assigned all their joint right, title and interest in the said assets to Mr. Nalin Merchant and Mrs. Jyoti Merchant for consideration of Rs. 15 lacs. It is the case of claimants that during the period between 1982 and 2003, the said assets did not belong to any of the partners of the partnership firm or to the respondent no. 1-firm but belong to the said trust.
75. It was the case of the claimants that under clause 6 of the Partnership Deed dated 14th June 2003, it was specifically provided that during the subsistence of the partnership or on determination of partnership for any reason whatsoever, the aforesaid assets viz., name, goodwill, trademarks, labels etc. shall not be taken into account or in consideration when making up the accounts of the partnership. These assets shall not be considered as assets of the partnership. It was thus contended by the learned senior counsel for the claimants that by virtue of provision of the said Partnership Deed, on demise of the said Mr. Nalin Merchant, the claimant no. 1 became entitled to his 50% share in the said assets i.e. in the goodwill, trademarks, trade names and labels. It was urged by the learned senior counsel for the claimants that the claimant no. 1 being 50% owner thereof cannot be forced to permit the respondents to use the said goodwill, trademarks, trade names and labels etc. either on license or otherwise. It was urged by the learned senior counsel that since the claimant no. 1 is having 50% share in those assets, the learned arbitrator could not have directed the claimant no. 1 to create any license in respect thereof in favour of the respondents on payment of royalty or otherwise.
76. It was also urged by the learned senior counsel for the claimants that even if the respondents were registered as proprietors of the trademarks under the provisions of the Trade Marks Act, 1999 or any other provisions of law, that would not create any title in favour of the respondents in the trademarks. It was urged by the learned senior counsel that the learned arbitrator could not have refused to grant injunction in favour of the claimants and restraining the respondents from carrying on any business by use of goodwill, trademarks, trade names and labels etc. without consent of the claimants.
77. On the other hand, it was urged by the learned senior counsel for the respondents that since 1949 onwards, the entries in the trademark register would show that the name of all the partners had been entered into as proprietors of the trademarks. As and when a fresh Deed of Partnership was entered into, a fresh entry was made in the trademark register to record the proprietors of the trademarks being the then partners of the firm. It is the case of the respondents that the respondents were thus registered as proprietors within the meaning of Section 2(v) of the Trade Marks Act, 1999. The respondents have placed reliance on the definition of "registered proprietor" under Section 2(v) and the definition of the trade mark under section 2(zb), Section 6 and section 17 of the said Act. Reliance is also placed on Sections 24, 28 and 37 to 40 of the Trade Marks Act, 1999.
78. It is the case of the respondents that since partners had registered as joint proprietors, the exclusive right to use the same shall not be deemed to have been acquired by any one of those persons as against any other of those persons and each one has the same rights as against other persons. It is also the case of the respondents that the trademark being an incorporeal property, not being a movable or immovable property, has no existence independent of the Trade Marks Act, 1999 and could only be dealt with/transmitted strictly under the provisions of law. To appreciate the rival submissions made by the learned senior counsel for both the parties, it would be relevant to refer to some of the relevant provisions of the Trade Marks Act, 1999 and the Rules framed thereunder.
79. A perusal of the record produced before the arbitral tribunal which was high lighted by the respondents before this Court clearly indicates that since 1949 onwards, the document of registration of trademarks clearly shows that the name of all the partners of the respondent no. 1-firm had been entered into as the proprietors of the trademarks. A fresh entry was made in the trademark registry as and when fresh Deed of Partnership recording any change in the constitution of the respondent no. 1-firm was recorded between the parties. According to such Deed of Partnership, fresh entries were recorded in the trademark registry to record the proprietors of the trademarks, being the then partners of the firm. The said practice was continued for all trademarks of the Respondent No. 1 firm irrespective of the fact that the said trademark was assigned by one party to another for devolution of entries for some period of time.
80. Section 2(v) of the Trade Marks Act, 1999 defines the term "registered proprietor" as under:
"2(v) registered proprietor" in relation to a trade mark, means the person for the time being entered in the register as propriety of the trade marks."
Section 2(zb) of the Trade Marks Act, 1999 defines the term "trade mark" as under:
"(zb) "trade mark" means a mark capable of being represented graphically and which is capable of distinguishing the goods or services of one person from those of others and may include shape of goods, their packaging and combination of colours: and--
(i) in relation to Chapter XII (other than section 107), a registered trade mark or a mark used in relation to goods or services for the purpose of indicating or so as to indicate a connection in the course of trade between the goods or services, as the case may be, and some person having the right as proprietor to use the mark: and
(ii) in relation to other provision of this Act, a mark used or proposed to be used in relation to goods or services for the purpose of indicating or so to indicate a connection in the course of trade between the goods or services as the case may be, and some person having the right, either as proprietor or by way of permitted user, to use the mark whether with or without any indication of the identity of that person, and includes a certification trade mark or collective mark."
Section 6 of the Trade Marks Act, 1999 provides for the Register of Trademarks as under:
"1. ....
2......
3......
4. No notice of any trust, express or implied or constructive, shall be entered in the register and no such notice shall be receivable by the Registrar.
5. ..."
Section 17(1)(vii) of the said Act provides for effect of the registration of part of a mark as under:
"(1) When a trade mark consists of several matters, its registration shall confer on the proprietor exclusive right to the use of the trade mark taken as a whole.
(vii) A perusal of the aforesaid provisions demonstrate that by virtue of the entries in the trademark register, the Petitioners are the registered proprietors and hence been exclusively using the trademarks in relation to goods with which they are trademarks in relation to goods with which they are connected in the course of trade. The Petitioners being registered as such have exclusive right to the use of the trademarks and there is no question whatsoever of any license or permitted user under the said Act. It is further clear from section 6(4) of the said Act that there shall not be entered into the Register, any notice of a trust, express or implied or constructive."
Section 24 of the Trade Marks Act, 1999 provides for jointly owned trademarks which reads as under:
"24. (1) Save as provided in sub-section (2), nothing in this Act shall authorise the registration of two or more persons who use a trade mark independently, or propose to use it, as joint proprietors there of.
(2) Where the relations between two or more persons interested in a trademark are such that no one of them is entitled as between himself and the other or others of them to use it except---
(a) on behalf of both or all of them; or
(b) in relation to an article or service with which both or all of them are connected in the course of trade.
those persons may be registered as joint proprietors of the trade mark, and this act shall have effect in relation to any right to the use of the trade mark vested in those persons as if those rights had been vested in a single person."
Section 28 of the Trade Marks Act, 1999 provides for rights conferred by registration. It provides as under:
"28 (1) Subject to the other provisions of this Act, the registration of a trade mark shall, if valid, give to the registered proprietor of the trade mark the exclusive right to the use of the trade mark in relation to the goods or services in respect of which the trade mark is registered and to obtain relief in respect of infringement of trade mark in the manner provided by this Act.
(2) The exclusive right to the use of a trade mark given under sub-section (1) shall be subject to any conditions and limitations to which the registration is subject.
(3) Where two or more persons are registered proprietors of trademarks, which are identical with or nearly resemble each other, the exclusive right to the use of any of those trade marks shall not (except so far as their respective rights are subject to any conditions or limitations entered on the register) be deemed to have been acquired by any one of those persons as against any other of those persons merely by registration of the trade marks but each of those persons has otherwise the same rights as against other persons (not being registered users using by way of permitted use) as he would have if he were the sole registered proprietor."
Sections 37 to 39 of the Trade Marks Act, 1999 provide for assignment and transmission of registered trademarks.
37. The person for the time being entered in the register as proprietor of a trade mark shall, subject to the provisions of this Act and to any rights appearing from the register to be vested in any other person, have power to assign the trade mark, and to give effectual receipts for any consideration for such assignment
38. Notwithstanding any thing in another law to the contrary a registered trade mark shall, subject to the provisions of this Chapter, be assignable and transmissible, whether with or without the goodwill of the business concerned and in respect either of all the goods or services in respect of which the trade mark is registered or of some only of those goods or services.
39. An unregistered trade mark may be assigned or transmitted with or without the goodwill of the business concerned."
Section 40(1) of the Trade Marks Act, 1999 provides for restriction on assignment or transmission where multiple exclusive rights would be created which reads thus:
"(1) Notwithstanding anything in section 38 and 39, a trade mark shall not be assignable or transmissible in a case in which as a result of the assignment or transmission there would in the circumstances subsist, whether under this Act or any other law, exclusive rights in more than one of the persons concerned to the use, in relation to----
(a) same goods or services:
(b) same description of goods or services
(c) goods or services or description of goods or services which are associated with each other.
of trade marks nearly resembling each other or of identical trade mark, if having regard to the similarity of the goods and services and to the similarity of the trade marks, the use of the trade marks in exercise of those rights would be likely to deceive or cause confusion:
Provided that an assignment or transmission shall not be deemed to be invalid under this sub-section if the exclusive rights subsisting as a result thereof in the persons concerned respectively are, having regard to limitation imposed thereon, such as not to be exercisable by two or more of those persons in relation to goods to be sold, or otherwise traded in, within India otherwise than for export therefrom or in relation to goods to be exported to the same market outside India or in relation to services for use at any place in India or any place outside India in relation to services available for acceptance in India.
(2) ......"
81. A conjoint reading of Section 2(v) Section 2(zb), Section 6 and Section 17 of the Trade Marks Act, 1999 makes it clear that the registered trademarks indicates a connection in the course of trade between the goods and services, as the case may be, and some person having the right as proprietor to use the mark. Under Section 17 of the said Act, it is clearly provided that when a trademark consists of several matters, its registration shall confer on the proprietor exclusive right to the use of the trademark taken as a whole.
82. It is not in dispute that the partners of Respondent No. 1 firm and the said firm had been using the trademarks for last more than 60 years. The learned arbitrator has also given a finding to that effect in the impugned award. The said Mr. Nalin Merchant who claimed 50% share in the trademarks was admittedly a partner of the Respondent No. 1 firm. Even after the demise of the said Mr. Nalin Merchant, the Respondent No. 2 continued to be a partner of the Respondent No. 1 firm and did not raise any objection in the firm and other partners of the Respondent No. 1 firm using the said trademarks. It is thus clear beyond reasonable doubt that the said trademark in relation to the goods or services was used in a connection with and in the course of trade between the goods or services and the registered proprietors of the trademarks.
83. A perusal of Section 6(4) of the Trade Marks Act, 1999 clearly provides that there shall not be entered in the register any notice of a trust, express or implied or constructive. A perusal of Section 24 of the said Act makes it clear that the said provision does not permit registration as joint proprietors where the intention was to use the trademarks independently or stop the other persons from using it. When a party intends to use a trademark jointly and on behalf of all of them and in relation to an article with which all of them are connected, only and only then such person can be registered as joint proprietor. In my view, the fact that the Respondents have been registered as registered proprietors under the provisions of the Trade Marks Act, 1999 for last several decades, it clearly indicates that all of them were connected in the course of the trade jointly and only after satisfying the said condition, the Authority had registered them as registered proprietors of the trademarks.
84. In my view, since the Respondents were registered as proprietors of the trademarks, it gave them exclusive right to the use the trademarks in relation to the goods or services in respect of which the trademark was registered, and the Claimant No. 1 who claims 50% ownership in the said trademarks who is not a registered proprietor of the said trademarks cannot stop the registered proprietors of the said trademarks from using it.
85. A perusal of Section 28 of the said Act makes it clear that if several persons are registered as joint proprietors, the exclusive right to use the said trademarks shall not be deemed to have been acquired by any one of those persons as against any other of those and each has the same right as against other persons. In my view, even the Respondents inter se cannot claim any exclusive right against each other in the said trademarks in view of the Respondents having been registered as joint proprietors of the said trademarks. In my view, claim of the Claimant No. 1 that the trademarks were owned individually by Mr. Nalin Merchant and Ms. Jyoti Merchant to the exclusion of the other registered proprietors is contrary to Sections 24 and 28 of the Trade Marks Act, 1999.
86. A conjoint reading of Sections 24, 28, 37 to 40 of the said Act makes it clear that the registration or transmission as joint proprietors cannot be permitted unless the parties had intended to use the trademark on behalf of all. Section 40 of the said Act prohibits assignment or transmission which would result in creation of rights in more than one person and result in multiple exclusive users of the same trademark. In my view, if such a transmission is permitted as canvassed by the learned senior counsel for the Claimants, it would result in the trademark becoming vulnerable and making it entirely unusable and worthless. Thus, in my view, if the Claimant No. 1 is declared as owner of the trademarks and the Respondents who are admittedly the registered proprietors of the said trademarks are restrained from using it in connection with the trade, the same would be contrary to Sections 6, 17, 24, 28, 37 to 40 of the Trade Marks Act, 1999.
87. In so far as the reliance placed on the Clause 6 of the Partnership Deed by the Claimant no. 1 in support of her claim of 50% ownership in the trademark is concerned, in my view, the finding of the learned arbitrator that the Claimant No. 1 is the owner of the trademarks to the extent of 50% is contrary to the provisions of the Trade Marks Act, 1999 under which the Respondents had been admittedly registered as registered proprietors of such trademarks. The learned arbitrator, in my view, thus though rightly refused to grant any injunction against the Respondents as prayed, he has completely overlooked the provisions of the Trade Marks Act, 1999 while rendering a finding that the Claimant No. 1 was 50% owner of the said trademarks and thus the award is in conflict with the public policy. In my view, till the firm was dissolved, the claimant no. 1 could not make any claim of ownership in the trade mark.
88. A perusal of the award indicates that the learned arbitrator has also placed heavy reliance on the Draft Deed of Partnership which was signed by the Respondents in which the Respondents had proposed that after the death of the said Mr. Nalin Merchant, the goodwill, trademarks, trade names and labels would personally belonged to Claimant No. 1 and the Respondent No. 2. The said Draft Deed of Partnership was admittedly not executed and/or signed by the Claimant No. 1. In my view, no reliance thus could be placed on the said unexecuted document relied by the claimants before the learned arbitrator. Be that as it may, till the Respondents continue to be the registered proprietors of the trademarks, no ownership in respect of the said trademarks contrary to such registration of the Respondents as registered proprietors of the trademarks could be granted by the learned arbitrator which would have the effect of destroying of such trademarks.
89. The Supreme Court in the case of M/s. Power Control Appliances and Others (supra) has held that there can be only one mark, one source and one proprietor and cannot have two origins. It is held by the Supreme Court in the said decision that the joint proprietors must use the trademarks jointly for the benefit of all and it cannot be used in rivalry and in competition with each other. Paragraphs 41 and 42 of the decision of the Supreme Court in the case of M/s. Power Control Appliances and Others v. Sumeet Machines Pvt. Ltd. (supra) read thus:
"41. It is a settled principle of law relating to trade mark that there can be only one mark, one source and one proprietor. It cannot have two origins. Where, therefore, the first defendant-respondent has proclaimed himself as a rival of the plaintiffs and as joint owner it is impermissible in law. Even then. the joint proprietors must use the trade mark jointly for the benefit of all. It cannot be used in rivalry and in competition with each other.
42. The plea of quasi-partnership was never urged in the pleading. As regards copyright there is no plea of assignment. The High Court had failed to note the plea of honest and concurrent user as stated in Section 12(3) of 1958 Act for securing the concurrent registration is not a valid defence for the infringement of copyright. For all these reasons we are unable to support the judgments of the High Court under appeal. We reiterate that on the material on record as is available at present the denial of injunction, once the infringement of trade mark, copyright and design is established, cannot be supported. Pending suit, there will be an injunction in favour of the appellants (the plaintiffs). All the civil appeals will stand allowed. No cost."
90. The Madras High Court in the case of B.S. Ramappa and Another v. V.B. Monappa and Another (supra) has held that there cannot be an honest concurrent use by two separate persons of the same trademark. Paragraphs 12, 24, and 31 to 33 of the said judgment of the Madras High Court read thus:
"12. Thereupon the father on 18th February, 1960 executed a rectification deed (pages 7 to 9 of the typed set in. L.P.A. No. 76 of 1964) stating that under the deed of 8th February, 1953 he had also conveyed to the younger son the three trade marks, one of them being the Taj Double Bavta Mark, and that he had not given the trade mark to anybody else.
24. The second important point made by the learned Counsel is that on the same reasoning indicated above, it has to be held that the adoption of the mark by Monoppa with only a slight variation from 17th January, 1950 could not be said to be really honest. The learned Counsel emphasises that for the use to be honest within the meaning of Section 12 (3) of the Act it is not enough if Monappa believed that he had a right to use it and that it is necessary that in law the belief must be sustainable. The law would not however sustain such a belief because the adoption of the mark virtually resembling the old mark was prohibited by Section 39 of the Act and when it was prohibited by law, the law would not allow the usurper to say that the use of the mark was honest. The learned Counsel submits that even apart from law it should be obvious that this is the position even to a layman.
31. We have thus arrived at the conclusion that as a matter of construction, there was no assignment of the trade mark to Monappa in the deed of 17th January, 1950 and in any case the assignment would be totally invalid in view of Sections 31 and 32 of Act V of 1940. This was the conclusion reached by the Registrar and I affirm it.
32. I now turn to the argument of Sri V. Rajagopalachari which I have already indicated in full. I agree with him that even in order to entitle to registration under Section 12 (3) on the ground of honest concurrent user or other special circumstances it was necessary for Monappa to establish that he was the proprietor of the trade mark sought to be registered. This contention is fully supported by the wording of Section 12 (3) and Section 18 and the principles underlying the trade mark law and the authorities cited by learned Counsel. To hold otherwise would mean that if Monappa had no right to use the trade mark, he could claim the right of registration on the alleged ground of honest and concurrent use, a position which it is impossible to accept. It seems to me, however, that both the aspects of the argument of Sri Rajagopalachari, that Monappa could not claim to be the proprietor and that the use was not honest, resolve themselves in the last resort only to one criterion, namely, that Monappa, in view of the prohibition contained in Sections 31 and 32 of the Act of 1940 could not claim to have honestly adopted any mark which would virtually be a replica of the mark of the founder. Since the point is important and seems to arise for the first time I shall endeavour to elaborate this to some extent.
33. Suppose for the sake of argument that Monappa in the first place, without making any alteration whatever, had begun to use the trade mark of the founder from 17th January, 1950. It is obvious that in such a case the user would not be honest at all. Even if he claimed that right as a matter of construction of the deed of 17th January, 1950 that claim would be invalid in view of Sections 31 and 32 of the Act of 1940. Hence he could not be considered to be the proprietor of the mark for purposes of Section 12 (3) or Section 18 of the Act of 1958 (the corresponding sections were Section 10 (2) and 14 of the Act of 1940). Obviously the different provisions of Act V of 1940 would have to be construed in harmony. In other words Section 10 (2) and Section 14 of Act V of 1940 should be construed so as to harmonise with Sections 31 and 32 of that Act and similarly Sections 12 (3) and 18 of the Act of 1958 should be construed so as to be in harmony with Sections 39 and 40 of that Act. If under the latter set of provisions the Court could not recognise a partial assignment the Registrar and the Court would not recognise Monappa as the proprietor of the trade mark. Evidently Monappa and his legal adviser were conscious of this and that was why Monappa sought to vary the original mark of the founder by adding the word '' Monappa''s, on the top and transposing the numeral '' 1596 '' from the bottom of the shield to a place inside the shield. The idea of Monappa in making this variation was to contend that this variation sufficiently distinguished his mark from the original mark of the founder, so as to avoid the bar of Sections 31 and 32 of Act V of 1940. If really the Court could say that the variation sufficiently distinguished the mark of Monappa from the founder''s mark, the Court would be justified in saying that the use of the new trade mark of Monappa would not be likely to deceive or cause confusion and therefore the bar of Sections 31 and 32 would not apply and Monappa could legitimately be described as the inventor of the new mark and could be considered as the proprietor of the new mark for the purposes of Sections 10 (2) and 14 of Act V of 1940 (the corresponding provisions in the Act of 1958 being Sections 12 (3) and 18). Further in such a case the Court could also say that the use of the new mark substantially different from the old mark, could be considered as honest within the meaning of Section 10 (2) of Act V of 1940 and Section 12 (3) of Act XLIII of 1958."
In my view, the aforesaid two judgments clearly apply to the facts of this case. I am respectfully bound by the judgment of the Supreme Court in the case of M/s. Power Control Appliances and Others (supra). I am in agreement with the views expressed by the Madras High Court in the case of B.S. Ramappa and Another (supra).
91. In so far as the judgments of the Madras High Court in the case of T.I. Muhammad Zumoon Sahib v. Fathimunnissa (supra), Hindustan Lever Ltd. V. Bombay Soda Factory (supra), and Skol Breweries Ltd. V. Som Distilleries and Breweries Ltd. (supra) relied upon by Mr. Sancheti, learned senior counsel for the Claimants are concerned, in those judgments, the Courts have dealt with the case of potential joint proprietorship of trademark or dispute amongst the registered proprietors of a trademark. The facts in the aforesaid three judgments relied upon by the learned senior counsel for the Claimants are totally different and clearly distinguishable in the facts of this case. In this case, the Claimant No. 1 has claimed joint ownership to the extent of 50% contrary to Sections 24 and 28 of the Trade Marks Act, 1999 and to the exclusion of other registered proprietors which is in the teeth of Sections 24 and 28 of the Trade Mark Act, 1999.
92. In so far as the judgment of the Supreme Court in the case of Cycle Corporation of India Ltd. V. T.I. Raleigh Industries Private Ltd. (supra) is concerned, it is held by the Supreme Court that to get the trademark registered without any intention to use it in relation to any goods but to make money out of it by selling it to others, the right to use it as a commodity would be trafficking in that trade mark and it is required to be prevented and prohibited. It is also held that there must be real trade connection between the proprietor of the trade and licensee of the goods. It is not in dispute that the Respondents had offered to the Claimant No. 1 34% shares in the Partnership after demise of Mr. Nalin Merchant and by virtue of which the Claimant No. 1 also could have jointly use the said trademark after her name would have been registered as the registered proprietor along with others. The Claimant No. 1 did not agree with the said decision.
93. It is clear that the Respondent No. 2 who continues to be a Partner of the Respondent No. 1 firm has no objection if all the Respondents are allowed to continue to use the said trademarks. In my view, a person who claims some shares in the trademarks and is not registered as registered proprietor under the provisions of the Trade Marks Act, 1999, cannot be allowed to raise any claim contrary to the claim of registered proprietors which would breach the rights of the registered proprietors under the said Act. There cannot be rival claims claiming exclusive rights in the trademarks when such trademarks are registered in the name of various persons jointly with an intention to use of such trademark jointly by all of such proprietors and not by claiming by any individual rights therein. In my view, the judgment of the Supreme Court in the case of Cycle Corporation of India Limited (Supra) thus would assist the Respondents and not the Claimants. Paragraph 11 of the said judgment reads thus:
" 11. The High Court recorded a finding and it is not disputed across the bar, that the appellant had entered into an agreement with Sen Raleigh which was a permitted user and used the trade mark till November 1, 1976 and thereafter by registered user agreement dated December 20, 1976 used trade mark for a period of 5 years. It is not in dispute that till date of filing of the application, the appellant used the trade mark in passing off the bicycles under the trade mark of the respondent. The question, therefore, is: whether the appellant must be deemed to be bona fide user of the trade mark, though there was no agreement nor was it registered as permitted user under Section 48(1)? on admitted position and in the facts and circumstances, we are of the view that the appellant was a ago user of the trade mark of the respondent in passing off the bicycles under the trade mark of the respondent who, admittedly, is a registered proprietor. It is true, as held by this Court, that to get a trade mark registered without any intention to use it in relation to any goods but merely to make money out of it by selling it to others, the right to use it as a commodity would be trafficking in that trade mark. It requires to be prevented and prohibited. The Court would not lend assistance to such registered proprietors of the trade mark. There must be real trade connection between the proprietor of the trade and licensee of the goods and the intention to use the trade mark must exist at the date of the application for registration of trade mark and such intention must be genuine and bona fide and continue to subsist in order to disprove the charge of trafficking in trade mark. It is a question of fact in every case. The question is: whether the trade connection exists to dispel the charge of trafficking in the trade mark? This question was considered by this Court in
94. In so far as the judgment of the Supreme Court in the case of Gujarat Bottling Company v. Coco Cola Company (supra) is concerned, it is held by the Supreme Court that it is permissible for the registered proprietor of a trademark to permit a person to use his registered trademark. Such licensing of trademark is governed by common law and is permissible however on certain safeguards. In my view, the Claimant No. 1 who did not become a partner of the Respondent No. 1 firm cannot be permitted to use such registered trademark independently at the same time when the same is being used by the registered proprietors which would create a confusion or deception amongst the public. The said decision of the Supreme Court assists the Respondents and not the Claimants. Paragraph 11 of the said judgment of the Supreme Court in the case of Gujarat Bottling Company (Supra) reads thus:
"11. Apart from the said provisions relating to registered users, it is permissible for the registered proprietor of a trade mark to permit a person to use his registered trade mark. Such licensing of trade mark is governed by common law and is permissible provided (i) the licensing does not result in causing confusion or deception among the public; (ii) it does not destroy the distinctiveness of the trade mark, that is to say, the trade mark, before the public eye, continues to distinguish the goods connected with the proprietor of the mark from those connected with others; and (iii) a connection in the course of trade consistent with the definition of trade mark continues to exist between the goods and the proprietor of the mark. (See: P. Narayanan--Law of Trade Marks and Passing-Off, 4th Edn., paragraph 20.16, p. 335.) It would thus appear that use of a registered trade mark can be permitted to a registered user in accordance with provisions of the Act and for that purpose the registered proprietor has to enter into an agreement with the proposed registered user. The use of the trade mark can also be permitted dehors the provisions of the Act by grant of licence by the registered as registered to the proposed user.
Under Section 53 a registered user does not have the right of assignment or transmission of the right to use the trade mark. Further provisions relating to registered user are contained in Chapter V (Rules 82 to 93) of the Trade and Merchandise Marks Rules, 1959 (hereinafter referred to as "the Rules." Rules 83 provides the particulars which are required to be stated in the agreement between the registered proprietor and the proposed registered user with respect to the permitted use of the trade mark. The said particulars include "the particulars specified in sub-clauses (a) to (d) to clause (ii) of sub-section (1) of Section 49" and a provision about ''means for bringing the permitted use to an end when the relationship between the parties or the control by the registered proprietor over the permitted user ceases."
95. In so far as the judgment of the Supreme Court in the case of Arjun Kanoji Tankar vs. Shantaram Kanoji Tankar (supra) and the judgment of Nagpur High Court in the case of Jamnadas vs. Ramadhar and Ors. (supra) relied upon by Dr. Tulzapurkar is concerned, in my view, Mr. Sancheti, learned senior counsel for the Respondents is right in his submission that in the context of joint ownership of the trademarks under the provisions of the Trade Marks Act, 1999 even an agreement amongst the partners would not prevail over express provision of the Trade Marks Act, 1999 and there can not be a recommendation and joint ownership in the teeth of the provisions of Section 40. Trade mark being incorporeal property not being movable or immovable property has no existence independent of the provisions of the Trade Marks Act, 1999. In my view, in case of any inconsistency between the provisions of the Trade Marks Act, 1999 and the agreement between the parties, provisions of the Trade Marks Act would prevail. In my view, agreement between the parties cannot be dehors the provisions of the Trade Marks Act, 1999. The aforesaid two judgments relied upon by Dr. Tulzapurkar does not assist the case of the Claimants and are clearly distinguishable.
96. In my view, the finding of the learned arbitrator that the trade marks do not belong to the Respondent No. 1 firm but do belong to Mr. Nalin Merchant and Respondent No. 2 and they have 50% share each in the trademarks, is perverse and contrary to the provisions of the Trade Marks Act, 1999.
97. I shall now deal with the Issue No. III i.e. "Whether the name, goodwill or trademarks and labels are to be valued only upon determination/closure of the Respondent No. 1 firm, as alleged in paragraph 7 of the written statement." A perusal of the award indicates that the learned arbitrator has rendered a finding that for the last over 60 years, the firm has used the goodwill, trademarks, trade names and labels without any break. The claimants were thus now estopped from saying the firm could not use such assets. It is held that even after Mr. Nalin Merchant and the Respondent No. 2 purchased the goodwill, trademarks, trade names and labels for the sum of Rs. 15 lacs, the firm continued to use those assets, now without payment of any royalty. The learned arbitrator has also considered the fact that the Respondent No. 2 who had 50% owner did not raise any objection that the Respondent No. 1 firm could not use those assets. It is held by the learned arbitrator that so long the firm has the right to use the goodwill, trademarks, trade names and labels, the same could not be allowed to be taken away by a person who was not a partner and, therefore, the goodwill, trademarks, trade names and labels could only be valued at the time of dissolution of the firm. Though the learned arbitrator rendered finding that the claimants could not be allowed to take away the right of the firm to use the goodwill, trademarks, trade names and labels, the learned arbitrator also rendered finding that the said users to the extent of 50% share of the Claimant No. 1 could not use without any payment or compensating her for it. The learned arbitrator accordingly directed that the royalty amount shall be determined by the Chartered Accountant.
98. As far as the issue No. III is concerned, it is a common ground that both the parties have challenged this part of the award. The Claimants have challenged this part of the award on the ground that the Claimant No. 1 being the owner to the extent of 50%, the Claimant No. 1 could not be directed by the learned arbitrator to permit license in favour of the Respondents though the Claimants did not wish to grant any license/permission in favour of the Respondents. On the other hand, the Respondents have challenged this part of the award contending that the Respondents being the registered proprietors of the trademarks were as a matter of right, entitled to use such trademarks under the provisions of the Trade Marks Act, 1999 and did not require any license from the Claimants or otherwise. Both the parties have also challenge the direction of the learned arbitrator to determine the royalty by a Chartered Accountant.
99. In my view, since the Respondents are the registered proprietors of the trademarks under the provisions of the Trade Marks Act, 1999 and by virtue of such registration are exclusively entitled to use of the said trademarks jointly, no license is required by the Respondents to use such trademarks which is permitted under the said Act. In so far as the claim of the Claimants to the extent of 50% ownership in the goodwill, trademarks, trade names and labels is concerned, the said claim would arise only at the stage of determination of the firm and value thereof can be ascertained only at that stage. Be that as it may, as it is a common ground that the learned arbitrator could not have passed any order for creation of any license in favour of the Respondents on payment of royalty by the Chartered Accountant or otherwise, I am inclined to set aside that part of the award on that ground also. In my view, whether the Claimant No. 1 was the owner or not of the trade mark, the learned arbitrator could not have passed an order for creation of license in favour of the Respondents or could not have left in any event the issue of determination of the royalty payable, if any, by virtue of such license in favour of the Respondents by a Chartered Accountant. This part of the award even otherwise, in my view is contrary to the provisions of the Trade Marks Act, 1999, perverse and shows patent illegality.
100. In so far as the Issue No. IV i.e. "Whether on Nalin Merchant''s demise his 34 % share in the firm, includes share in the assets of the firm and if so, whether for the purpose of ascertaining the amount payable to the estate of Nalin Merchant towards his 34 % share, the market value of the net assets of the firm is required to be ascertained, as alleged in paragraph 47 of the statement of claim" is concerned, the learned arbitrator has referred to Clauses 16, 17 and 19 of the Partnership Deed and has held that the market value of the assets of the firm will have to be ascertained and 34% shares of Mr. Nalin Merchant in the firm would be at the market value. The learned arbitrator in the impugned award accordingly has declared that the Claimant No. 1 is entitled to share of the deceased Mr. Nalin Merchant in the Respondent No. 1 firm which shall be worked out on the market value of the assets. The learned arbitrator has directed the Respondents jointly and severally to render true accounts on the basis of willful default for the accounting year in which Mr. Nalin Merchant died i.e. from 1st April 2009 till date and to pay the balance amount after deducting a sum of Rs. 3,76,70,305/-, if any, found due to the Claimant No. 1. The learned arbitrator has also given an option to the Claimant No. 1 to elect to receive 34% share in the profits or 6% p.a. interest on the amount of her share.
101. It is not in dispute that on the date of death of Mr. Nalin Merchant who was having 34% share in the firm and even thereafter, the Deed of Partnership dated 14th June 2003 continues to be in existence. Under Clause 6 of the said Partnership Deed, it was agreed that during the subsistence of the partnership or on determination of partnership for any reason whatsoever, the aforesaid assets viz., name, goodwill, trademarks, labels etc. shall not be taken into account or in consideration when making up the accounts of the partnership. These assets shall not be considered as assets of the partnership. Under Clause 17 of the said Partnership Deed, it was provided that the death or retirement or adjudication as insolvent of any partner shall not dissolve the partnership and the remaining partners shall be entitled to continue the said business and may continue the same. The heirs and legal representatives of the such deceased partner shall have merely the right to receive the amount if any which and the share in profits, if any, upto the date of his/her demise, unless the other remaining partners shall agree to the heirs and legal representatives being taken up as partner(s) in the partnership in the place of such deceased partner.
102. Clause 18 of the said Partnership Deed provides that upon the determination of the partnership for any reason whatsoever a full and general account shall be taken of the assets (excluding the assets which are mentioned in clause 6 hereof) credits, debts and liabilities of the partnership and of the transactions and dealings thereof. Clause 19 of the Partnership Deed provides that upon the retirement or removal of any partner from the partnership a full and general account shall be taken of the assets, credits, debts and liabilities of the partnership but excluding the assets in Clause 6. It is not in dispute that the Respondents had offered partnership to the Claimant No. 1 in place of her deceased husband and offered 34% share in the firm but the Claimant No. 1 did not accept the said proposal.
103. It is not in dispute that the Respondent No. 1 firm would not be dissolved even in case of demise of any partner and it would continue. The said Mr. Nalin Merchant had not retired from the said partnership but he expired. In my view, the claim of the Claimants thus would be governed by clause 17 of the Partnership Deed and the Claimants being the heirs and legal representatives of the said deceased Mr. Nalin Merchant shall have merely the right to receive the amount, if any, which and the share in profit, if any, upto the date of demise of the said Mr. Nalin Merchant. It is not in dispute that the amount of Rs. 3,76,70,305/- which was due and payable according to the Respondents to the estate of late Shri Nalin Merchant as of date of his death has already been paid by the Respondents to the Claimants. According to the Respondents, the said amount was actually due at the foot of the account of the said Mr. Nalin Merchant on the date of his death i.e. 1st April 2009. Even if clause 6 is considered as not contrary to the provisions of the Trade Marks Act, 1999, even according to the said clause, during the subsistence of the firm name, goodwill, trademarks, labels etc. of the firm shall not be taken into account or consideration when accounts of the firm are made up. It is not in dispute that the firm subsists and is not determined. Clause 6 has to be read with clause 17, 18 and 19.
104. A perusal of the award further indicates that the learned arbitrator has directed the Respondents to work out the share of the said deceased on the basis of the market value of the assets of the firm on the death of Mr. Nalin Merchant. A perusal of the Clauses 18 and 19 of the Partnership Deed indicates that the firm was under an obligation to prepare a full and general account of the assets only upon determination of the partnership or upon retirement or upon removal of any partners from the Partnership and as the case may be and not when any existing partner had expired. A perusal of the award indicates that the learned arbitrator has issued such direction based on the equity and overlooking the Partnership Deed which was an agreement between all the partners which was not only binding upon the said Mr. Nalin Merchant during his lifetime but also upon his legal heirs upon his demise including the provisions regarding the valuation of the assets of the deceased partner in the firm. The learned arbitrator, in my view, has applied the provisions of Clauses 18 and 19 while issuing such direction of valuing the assets of the firm at the market value which were not applicable in case of demise of a partner and where the firm is allowed to continue the business. In my view, this part of the award is contrary to the agreement entered into between the parties and shows patent illegality and is in conflict with the public policy.
105. The learned arbitrator while issuing a direction that the assets of the Respondent No. 1 firm has to be valued at the market value from the date of death of Mr. Nalin Merchant, did not give any direction to determine the liability of the Respondent No. 1 firm also on the date of his death to arrive at the net amount payable to the claimants. In my view, the learned arbitrator could not have applied only part of Section 48 of the Partnership Act event if the same could be applied. Dr. Tulzapurkar, learned senior counsel for the Claimants fairly conceded that the learned arbitrator could not have directed to take the valuation only of the assets for the purpose of determination of the share of the said Mr. Nalin Merchant at the time of his death but even the liability of the firm coming to his share ought to have been ascertained by the learned arbitrator in the impugned award.
106. In so far as the direction of the learned arbitrator to make up the account of the firm on the willful default basis is concerned, Dr. Tulzapurkar, learned senior counsel for the Claimants fairly conceded that even such direction issued by the learned arbitrator was not required at this stage. Be that as it may, the learned arbitrator has already rejected the evidence of Mr. Chandrahas Dayal who was examined as the witness by the Claimants on the issue of valuation of the assets, who had admitted that for the liquidation value, the market value of all assets would be relevant. The learned arbitrator has held that the valuation suggested by Mr. Chandrahas Dayal could not be accepted as the witness did not appear to be an unbiased professional. The witness examined by the Claimants himself has admitted that the valuation was not correct and that the claimants themselves considered that extraneous. The deposition of the said witness was unsatisfactory.
107. It was the case of the Respondents before the learned arbitrator on this issue that the Chartered Accountant appointed by the Claimants was offered inspection of books of account for last 3-4 years including details of the valuation of the immovable properties as disclosed in the balance sheet on a year to year basis. The said witness also admitted in his cross-examination that there was no valuation at the market price and/or there was no re-valuation of the assets in the books of accounts of the Respondent No. 1 firm for the Financial Years 2005-2006, 2006-2007, 2007-2008. In my view, the learned arbitrator has totally overlooked this crucial part of the evidence and has issued a direction contrary thereto that the valuation of the assets shall be taken on the basis of the market value at the date of death of Mr. Nalin Merchant.
108. It was also the case of the Respondents that the said Mr. Nalin Merchant had already accepted the account of the Respondent No. 1 firm as on 31st March 2009. The learned arbitrator has also accepted the accounts of the firm as on 31st March 2009 and did not give any direction that the accounts or valuation of the assets of the firm prior to 31st March 2009 shall be re-opened.
109. In my view, the direction of the learned arbitrator to take the valuation of the assets on the basis of market value is contrary to the Clause 17 of the Partnership Deed. Under Clause 17 of the Partnership Deed, the partnership firm has to carry on business even in case of demise of any partner. The legal heirs and representatives of deceased partner are entitled to receive the amount, if any, which and the share in profits, if any, upto the date of demise of such partner, unless the other remaining partners shall agree to the heirs and legal representatives being taken up as partners. Admittedly, the claimant no. 1 has refused to become a partner though offered by the respondents. In my view, the valuation of the assets of the partnership firm on the basis of market value or general account of the firm could be taken only upon the determination of the partnership or in case of retirement or removal of any partner and not when a partner expired.
110. In so far as the account for the period between 1st April 2009 till the date of death of said Mr. Nalin Merchant is concerned, It is the case of the respondents that the respondents have ascertained the true and correct amount payable to the estate of deceased of the said partner as on the date of his death and his share was not used by the partnership firm or witness of the firm. On the other hand, it was the case of the claimants that after demise of the said Mr. Nalin Merchant, the respondents were deliberately showing the losses in the account of the suit firm and the same was not acceptable to the claimants. In my view, in this situation, the learned arbitrator ought to have given a positive finding as to whether the accounts already made up by the respondent no. 1-firm as on the date of death of the said Mr. Nalin Merchant was true and correct, whether any part of the share of the said deceased partner was continued to be used by the partnership firm in carrying on business after the death of deceased partner. The learned arbitrator, however, has not rendered any such finding on this issue. In my view, Dr. Tulzapurkar, learned senior counsel for the claimants is right in his submission that the accounts of the suit firm with effect from 1st April 2009 till date of the death of the said deceased Mr. Nalin Merchant are to be made up for the purpose of ascertaining the fact as to whether the amount of Rs. 3,76,30,305/- paid by the respondents to the claimant no. 1 is proper or not.
111. In my view, since both the parties have agreed that the learned arbitrator could not have given direction to make up the accounts on the basis of willful default, the said part of the impugned award is set aside. Since this Court has taken a view that the learned arbitrator could not have directed the respondents to make up the accounts on the basis of the market value of the assets and since it is a common ground that the learned arbitrator ought to have also considered the liabilities of the suit firm as on the date of death of the said deceased Mr. Nalin Merchant, that part of the award is also set aside.
112. In my view, on conjoint reading of clauses 6, 17, 18 and 19 of the Partnership Deed, the claimants would have been entitled to valuation of the goodwill, trademarks, trade names and labels on market value basis and would be entitled to 50% share therein only when the respondent no. 1-firm would be dissolved and not prior thereto.
113. In so far as the direction of the learned arbitrator giving an option to the claimant no. 1 either to elect to receive 34% share in the profit or 6% p.a. interest is contrary to clause 17 of the Partnership Deed and is accordingly set aside.
114. I, therefore, pass the following order:-
a) Declaration of the learned arbitrator that the respondent no. 1-firm and/or the continuing partners are not the registered proprietors under the provisions of the Trade Marks Act, 1999 is set aside;
b) Claimant no. 1 is not entitled to 50% share in the goodwill, trademarks, trade names and labels and value thereof till the respondent no. 1-firm is dissolved;
c) Direction of the learned arbitrator that the respondents shall pay the royalty to the claimant no. 1 and that such royalty shall be worked out by the Chartered Accountant is set aside;
d) Direction of the learned arbitrator refusing to grant an order/injunction as prayed in prayer clause (c) of the statement of claim filed by the claimants is upheld;
e) Declaration of the learned arbitrator that share of deceased Mr. Nalin Merchant in the respondent no. 1-firm to be worked out on the basis of the market value of the assets of the suit firm is set aside;
f) Direction of the learned arbitrator that the respondents jointly and severally shall render true accounts on the basis of willful default from the accounting year in which Mr. Nalin Merchant died i.e. 1st April 2009 till date is set aside;
g) The claimants would be entitled to determination of the accounts of the respondent no. 1-firm from 1st April 2009 till date of the death of the deceased Mr. Nalin Merchant. Respondents shall be entitled to get the credit of the amount already paid to the claimants. To this extent, the impugned award is modified.
h) Direction of the learned arbitrator to give an option to the claimant no. 1 to elect to receive 34 % share in the profit or 6% p.a. interest is set aside;
i) Arbitration Petition Nos. 939 of 2012 and 791 of 2012 are disposed of in aforesaid terms. There shall be no order as to costs.
