Beardsell Polymers Pvt. Ltd. Vs Beardsell Limited

Memorandum of Grounds of Original Side Appeal under Order XXXVI Rule 1 of the Original Side Rules read with Section 13 of the Commercial Courts Act, 2015 against the Judgment and Decree dated 05.04.2022 passed in C.S.No.828 of 2016 and allow the appeal with costs.

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For Appellants: Mr.R.Sathish Kumar For Respondent: Mr.Arun C. Mohan

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JUDGMENT

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P.Velmurugan J.

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This intra-Court appeal is directed against the judgment and decree

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passed by the learned single Judge in C.S.No.828 of 2016 dated 05.04.2022.

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The appellants are the Defendants in the suit. The respondent-Plaintiff filed the above suit seeking for the following reliefs:-

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(a) Perpetual injunction restraining the defendants by themselves, their directors, assigns, servants, agents, distributors, stockists, dealers, legal heirs, representatives or any person/entity claiming through or under them from using, advertising, offering for sale, offering service, hosting website etc thereby passing off or enabling others to pass off or cause or assist others to pass off the Defendants' goods/services as and for the Plaintiff's goods/services by use of the trademark/corporate name ‘Beardsell’ or any other mark similar to that of the Plaintiff's trademark/corporate name in any

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manner whatsoever;

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(b) Surrender and destruction upon oath of all name boards, sign boards, bill books, visiting cards, pamphlets, brochures, any advertising materials, products, packaging materials, cartons, labels, blocks, dyes, plates, moulds and other materials bearing the impugned mark/corporate name 'Beardsell' or any other mark identical or deceptively similar to that of the plaintiff's corporate name 'Beardsell' which is in possession, power and custody of the Defendants;

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(c) A preliminary decree be passed in favour of the Plaintiff to render true and faithful accounts of profits earned by the Defendants by establishing unauthorised companies under the name ‘Beardsell’ and a final decree be passed in favour of the Plaintiff for the amount of profits, thus found to have been made by the Defendants after the latter have rendered accounts;

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(d) The Defendants be ordered to pay a sum of Rs.1,00,000/- as liquidated damages for committing acts of passing off and for the costs of the suit.

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The respondent would state that it is a company engaged in the business of manufacture of different industrial products such as pre-fabricated structures, manufacture and distribution of expanded polystyrene (EPS, which is more commonly known as thermocol), packaging and insulation, customized defence solutions, export of industrial equipment, etc. In 1969, the respondent states that it honestly conceived, coined and adopted its corporate name 'Mettur Beardsell Ltd'. The corporate name of the respondent was changed to Beardsell

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Limited in September 1983. The respondent asserts that the name Beardsell is a coined word which refers exclusively to the respondent. According to the respondent, the said corporate name/trademark has attained both reputation and goodwill for the quality of the goods sold by the respondent by use over a considerable period of time. The sales turn over of the respondent for the financial years 2005-2006 to 2015-2016 are set out to emphasise the goodwill and reputation of the respondent. Until the year 2003, the respondent states that it had leased out its on-going EPS business to M/s.Calcutta Insulation Private Limited. In 2003, the respondent decided to sell the said business to Mr.B.D.Mohta, the fourth appellant herein and entered into a Memorandum of Understanding (MoU) dated 29.04.2003 in such regard. As per Clause 14 of the MoU, the respondent was required to issue a no objection certificate to enable Mr.B.D.Mohta to undertake the transferred business in the name of a new company. Pursuant thereto, a no objection certificate was issued by the respondent on 02.05.2003 to the Registrar of Companies, Kolkata, thereby permitting the fourth appellant to use one of the following names: (a) Beardsell (E) Private Limited; (b) Beardsell (East) Private Limited; and (c) Beardsell Eastern Private Limited. Based on the said no objection certificate, the third appellant was incorporated under the name and style of Beardsell Eastern Private Limited. The respondent asserts that it permitted only the third appellant to carry on business by using the mark/corporate name Beardsell. However, it

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is stated that in the month of July 2014, the respondent was shocked to discover that the second appellant was incorporated under the name and style of Beardsell Equipment Private Limited. Shortly thereafter, the respondent issued a letter dated 07.07.2014 calling upon the appellants to stop using the mark Beardsell. By reply dated 09.12.2014, the appellants confirmed the incorporation of the second appellant as a sister concern of the third appellant. Thereafter, upon further investigation, in or about September 2015, the respondent reliably gathered that the first appellant was incorporated under the name and style of Beardsell Polymers Private Limited. The respondent asserts that the first and second appellants have unlawfully appropriated the trademark/corporate name of the respondent and that the said appellants are carrying on a similar line of business. Therefore, members of the public are likely to be deceived into believing that the products and services offered by the appellants originate from the respondent. Therefore, the respondent sought for the aforesaid reliefs.

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The appellants filed a written statement stating that the respondent sold

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its entire EPS business, including goodwill to the fourth appellant. The appellants further state that the respondent was fully aware about the incorporation of the first appellant at least eight years prior to the filing of the suit. The appellants assert that there were oral discussions between the

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respondent and the representative of the first appellant and that the respondent agreed not to object to the continuation of the first appellant under the name and style of Beardsell. According to the appellants, the respondent does not have the right to claim exclusivity over the trade name Beardsell after having sold its business in its entirety. The appellants rely upon a no objection certificate issued by the respondent on 20.08.2015 to the Directorate of Boilers, Kolkata for transferring a boiler commissioned by the respondent to any company nominated or proposed by the fourth appellant. According to the appellants, this is a clear acknowledgment that the respondent had no objection to the use of the corporate name by any person/entity nominated by the fourth appellant. The appellants further state that the respondent does not have a market presence in East India because the respondent transferred its Eastern India business to the fourth appellant. Moreover, it is stated that in the absence of a market presence in East India, there is no likelihood of deception of consumers of the products marketed by the appellants in East India. The appellants also deny that Beardsell is a coined word. Instead, it is stated that the late Mr.W.A.Beardsell founded Mettur Beardsell Limited in the year 1936. The appellants refute the contention that the respondent has acquired significant reputation and goodwill. The appellants also deny that the third appellant is only a permitted user of the mark Beardsell. The appellants further state that they have been in business for several years and have acquired significant reputation and goodwill. For all

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these reasons, the appellants sought for dismissal of the suit.

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The learned single Judge, based on the above pleadings, framed the

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following issues for consideration:-

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(1) Whether the 4th appellant is entitled to incorporate 3rd appellant

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entity alone under MOU dated 29.04.2003 or whether MOU gives 4th appellant

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right to incorporate other entities including appellants 1 and 2 also?

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(2) Whether incorporation of the two entities, i.e., Appellants 1 and 2 by

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4th appellant under MOU dated 29.04.2003 tantamounts to passing off?

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(3) Whether the complaint of passing off made by respondent is hit by

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acquiescence?

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(4) What other reliefs parties are entitled to?

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In order to prove the case of the respondent/plaintiff, one Mr.M.S.Rangarajan, its Manager-cum Legal and Administration, was examined as P.W.1 and 11 documents were exhibited as Ex.P1 to Ex.P11. On the side of

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the appellants/defendants, one Mr.Ajay Kumar Mohta was examined as D.W.1 and 5 documents were exhibited as Ex.D1 to Ex.D5.

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The learned single Judge, after hearing the parties and appreciating the

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oral and documentary evidence, decreed the suit on the following terms:

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(i) Except the 3^rd appellant/3^rd defendant, all the other appellants/defendants are perpetually restrained from passing off their goods and services as that of the respondent/plaintiff by carrying on business under the corporate name Beardsell or any other name deceptively similar thereto and from manufacturing or marketing goods or providing services bearing the mark Beardsell or any mark deceptively similar thereto.

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(ii) The above injunction shall come into force as regards the 1^st appellant/1^st defendant 120 days after the date of receipt of a copy of the decree.

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(iii) Except the 3^rd appellant/3^rd defendant, all the appellants/defendants shall hand over for destruction all infringing materials bearing the mark Beardsell to the respondent/plaintiff on the expiry of the said 120 days.

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(iv) The appellants/defendants shall pay costs assessed in a sum of Rs.2,00,000/- to the respondent/plaintiff. The said sum shall include court fees, lawyer's fees and other expenses.

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Challenging the said judgment and decree, the appellants/defendants are before this Court.

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The learned counsel appearing on behalf of the appellants, assailing the impugned judgment and decree, has raised the following grounds:-

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(i) The learned Judge failed to consider the true scope, meaning and purport of the Memorandum of Understanding dated 29.04.2003 executed between Beardsell Limited and M/s.B.D.Mohta.

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(ii) The learned Judge ought to have seen that the respondent did not seek a prayer for infringement of trademark BEARDSELL, as they were aware that there was an assignment of the trademark to the 3^rd appellant and his successors.

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(iii) The learned Judge failed to consider that the respondent has transferred and/or assigned the purchaser the said business of EPS marketing as a going concern along with goodwill together with all connections of the said business.

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(iv) The learned Judge ought to have considered the scope of the assignment of the business as a going concern along with goodwill by the respondent in favour of M/s.B.D.Mohta by virtue of the Memorandum of Understanding dated 29.04.2003.

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(v) The learned Judge ought to have considered that there is no restriction on both the parties for using and/or assigning and/or transferring the mark BEARDSELL in favour of third party.

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(vi) The learned Judge ought to have considered that the respondent had given 'No Objection' in favour of M/s.B.D.Mohta to use the mark BEARDSELL as a part of the corporate name/trademark and hence, M/s.B.D.Mohta had right, title and interest in the mark BEARDSELL without any limitations and/or restrictions.

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(vii) The learned Judge ought to have seen that the right over the use of the trademark BEARDSELL given to M/s.B.D.Mohta is unequivocal, as the agreement had only a restraint for a period of 5 years as regards the products contained in the agreement.

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(viii) The learned Judge ought to have considered that vide letter dated 2^nd May, 2003, the respondent had given ‘No Objection’ to the Registrar of Companies for the use of the word BEARDSELL by M/s.B.D.Mohta by virtue of the assignment through the Memorandum of

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Understanding dated 29.04.2003.

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(ix) The learned Judge ought to have considered the Board Resolution dated June, 2003 of the respondent, whereby the respondent resolved that the board has no objection for the incorporation of the new company and its use of the mark BEARDSELL.

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(x) The learned Judge ought to have considered that if a particular property is transferred as a going concern, it is now well settled proposition of law that it passes its title also along with its goodwill.

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(xi) The learned Judge ought to have considered that by virtue of the Memorandum of Understanding, M/s.B.D.Mohta and thereafter all the appellants have right to use the mark BEARDSELL and the respondent has no right to resist the appellants for the purpose of doing EPS business and/or any other business in any manner whatsoever. Further, the perpetual injunction against the 4th appellant, Mr.B.D.Mohta is against the very terms and tenor of the agreement dated 29.4.2003.

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(xii) The learned Judge ought to have considered that the parties have decided to use the mark "BEARDSELL" jointly and therefore, without any specific negative covenant, the respondent has no legal right to restrain the appellants from using the mark BEARDSELL in any manner whatsoever.

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(xiii) The learned Judge erred in holding that as per the Memorandum of Understanding, the parties intended to facilitate the incorporation of one limited company for the purpose of carrying on the EPS business acquired by M/s.B.D. Mohta.

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(xiv) The learned Judge erred in holding that the scope of the MoU limited to the transfer of EPS business in the Eastern region without appreciating the fact that there is only a time limit restriction regarding territory and even thereafter the agreement regarding use of the name

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would be valid.

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(xv) The learned Judge erred in holding that the corporate name was not assigned or transferred under the MoU in favour of M/s.B.D.Mohta.

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(xvi) The learned Judge erred in holding that transfer of goodwill under the MoU cannot be construed as including an assignment or transfer of ownership, whether sole or joint ownership, of the corporate name/trade mark BEARDSELL.

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(xvii) The learned Judge erred in holding that the plaintiff agreed to permit one new company to carry on the acquired business including by using the corporate name/trade mark.

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(xviii) The learned Judge erred in passing the impugned judgment and decree by rewriting or reincorporating the clauses which were not in existence in the Memorandum of Understanding.

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(xix) The learned Judge erred in holding that the incorporation of the two entities namely, Beardsell Polymers Pvt. Ltd. and Beardsell Equipments Pvt. Ltd. tantamount to passing off.

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(xx) The learned Judge erred in not appreciating that the Beardsell Eastern Pvt. Ltd., has sister concerns, namely, Beardsell Polymers Pvt. Ltd., and Beardsell Equipments Pvt. Ltd., incorporated in the year 2008 and there were no restrictions/limitations on the part of Beardsell Eastern Pvt. Ltd. to use the mark BEARDSELL only in connection with one company and none others.

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(xxi) The learned Judge failed to appreciate that the respondent was aware regarding the incorporation of Beardsell Polymers Pvt. Ltd., and Beardsell Equipments Pvt. Ltd., and hence, waived, acquiesced and/or estopped from raising such point after more than eight years.

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(xxii) The learned Judge accepted that there were laches on the part

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of the respondent in initiating action, but erred in holding that there was no acquiescence.

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To substantiate the plea of acquiescence, the learned counsel for the appellants has relied upon a judgment of the Hon’ble Supreme Court in the case of M/s Power Control Appliances and others v. Sumeet Machines Pvt.Ltd., (1994) 2 SCC 448.

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The learned counsel appearing on behalf of the respondent, refuting the grounds raised by the appellants, would submit that the reasoned judgment and decree passed by the learned Judge require no interference, as the learned Judge has appreciated the oral and documentary evidence and granted the reliefs in favour of the respondent. The learned counsel for respondent also placed a typedset of case laws, more particularly, defending the plea of acquiescence by citing the judgment of the Hon’ble Supreme Court in the case of M/s Power Control Appliances and others v. Sumeet Machines Pvt.Ltd., (1994) 2 SCC 448 ; defending the plea of delay and laches do not amount to acquiescence by citing the judgment of the Hon’ble Supreme Court in the case of Ramdev Food Products (P) Ltd., v. Arvindhbhai Rambhai Patel and others, (2006) 8 SCC 726; defending the plea that the trade mark and goodwill are two distinct separate concepts by citing the judgment of a Division Bench of the Karnataka High Court while considering an Income Tax Appeal in the case of The

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Commissioner of Income Tax and others v. Associated Electronics & Electrical Industries (Bangalore) Pvt.Ltd., MANU/KA/4226/2015 .

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We have carefully considered the rival contentions and perused the materials available on record.

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The case of the appellants is that the respondent, being engaged in the EPS business under the name and style of Beardsell Limited, agreed to sell the same to the 4^th appellant and there was a Memorandum of Understanding entered into between the respondent and the 4^th appellant in this regard. As per the MoU, since the respondent was operating in the entire State of West Bengal and Southern U.P., Assam, Bihar, Jharkhand, Chattisgarh, Northern Orissa and North Eastern States, the respondent would not operate the EPS business in these areas or compete with the 4^th appellant in these areas for a minimum period of 5 years from the date of the MoU. The respondent would issue a no objection certificate to the 4^th appellant in order to facilitate the conduct of the business acquired under the MoU through a new company. Accordingly, the 4^th appellant incorporated the 3^rd appellant company and subsequently the 1^st and 2^nd appellant companies were also incorporated as sister concerns to run the business. Though the trademark/corporate name Beardsell is used in the formation of the companies, they are not similar entities and the respondent also

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gave no objection to run the business and accordingly, as per the MoU, the 4^th appellant incorporated the 3^rd appellant and therefore became entitled to establish the other two companies also like that of the 3^rd appellant and that the respondent also had the knowledge about the establishment of the 1^st appellant company even in the year 2008 itself, even though they came to know about the establishment of the 2^nd appellant company in the year 2014. Though the respondent sent a letter to the Registrar of Companies protesting the registration of the 1^st and 2^nd appellant companies, they did not pursue any further action and allowed the appellants to run them. Later on, the respondent chose to file the suit, which is hit by delay and laches and also guilty of acquiescence. Though the learned single Judge accepted the plea that the suit was hit by delay and laches, however held that it would not amount to acquiescence. When the respondent was aware of the establishment of the 1^st and 2^nd appellant companies even in the year 2008 and 2014 respectively, till 2016, they did not pursue any further action, since the respondent sold the EPS business pertaining to East India region in favour of the 4^th appellant and more so, when the restriction was only for a period of 5 years, the appellants are entitled to establish and run the companies in other areas by using the corporate name Beardsell, which are the sister concerns. The learned single Judge has also appreciated the fact that the respondent had the knowledge about the establishment of the 1^st and 2^nd appellant companies and though they sent a letter

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to the Registrar of Companies, they did not pursue any further action against the appellants.

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The specific case of the respondent is that the respondent is the exclusive owner of the trademark ‘Beardsell’ and in 1969, they conceived, coined and adopted the corporate name ‘Mettur Beardsell Limited’. Subsequently, in 1983, they changed the name to ‘Beardsell Limited’. In the year 2003, the respondent entered into a MoU with the 4^th appellant pertaining to the sale of the EPS business with the trademark Beardsell covering the East India region and allowed the 4^th appellant to incorporate a new company and accordingly, the 4^th appellant established the 3^rd appellant company to run the business in the said area. But, however, the respondent did not allow to establish any other company and the MoU itself clearly shows that the vendor would issue a no objection certificate immediately after signing of the agreement to facilitate changing the operations covered under the agreement in a new company. It is the specific responsibility of the purchaser to get the new company formed. Therefore, as per the said MoU, the 4^th appellant established the 3^rd appellant company and the respondent also issued a no objection certificate to run the business in the name of the 3^rd appellant. However, the respondent came to know that in the year 2008, the 4^th appellant incorporated the 1^st appellant company and later came to know in the year 2014 that the 4^th

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appellant incorporated the 2^nd appellant company, which is against the clauses mentioned in the MoU, as if the respondent had sold the entire business with the trademark and goodwill. When the 4^th appellant was permitted to establish and run the new company in the particular area and the respondent would not operate in the said area for a period of 5 years, the appellants should not exceed their limits. Likewise, before expiry of 5 years, the respondent also should not exceed their limits. But the claim of the appellants is that they can establish any number of companies they like and run the business, as the restriction was only for a period of 5 years. According to the respondent, the MoU itself clearly shows that the 4^th appellant has been restricted to run the business in the limited area and cannot traverse beyond that area and cannot also establish more than one company. Even clause 14 of the MoU is very clear that the 4^th appellant was permitted to establish a new company and in pursuance of which, the 4^th appellant established the 3^rd appellant company and the 4^th appellant does not have any right to establish the 1^st and 2^nd appellant companies. The learned single Judge rightly interpreted the MoU and also the documents produced by the parties and decided the issues in favour of the respondent and decreed the suit with specific terms. So far as the relief of damages and rendition of accounts, the learned Judge has disallowed the claims considering the delay and laches and also rightly held that the same would not amount to acquiescence, as there is no specific material to show that the respondent allowed the 4^th

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appellant to establish the 1^st and 2^nd appellant companies.

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The respondent has not chosen to file any cross appeal against the disallowed portions.

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From the narration of facts, it is seen that the case purely rests on the MoU dated 29.04.2003, which was marked as Ex.P4 and also the no objection certificate dated 02.05.2023 marked as Ex.P5. From the pleadings as well as oral and documentary evidence, it is seen that admittedly the respondent is the owner of the trademark Beardsell and in the year 2003, the respondent entered into a MoU with the 4^th appellant pertaining to the running of the EPS marketing business to the limited area concerning the East India region. The 4^th appellant also established the 3^rd appellant company and carried on the business for a period of 5 years in the particular area and the respondent also would not interfere with the business in that area for a period of 5 years. It is also borne out of records that contrary to the MoU, the 4^th appellant established the 1^st appellant company in the year 2007 and the respondent came to know of the same in the year 2008 and also established the 2^nd appellant company in the year 2014. Therefore, the respondent submitted an application before the Registrar of Companies for removal of the names and subsequently, they filed the suit in the year 2016 inter alia for perpetual injunction restraining the appellants from

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passing off their goods and services as that of the respondent under the corporate name Beardsell or any other name deceptively similar thereto, which came to be decreed in part by disallowing the relief of damages and rendition of

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accounts. Though the appellants claim that they are entitled to establish the 1^st and 2^nd appellant companies apart from the 3^rd appellant after a period of 5 years, as the respondent has no legal right to prevent the 4^th appellant from establishing the said companies, as they are different entities doing different services with the trademark Beardsell, the language employed in clause 14 only refers to a new company and in pursuance of which, the 4^th appellant also established the 3^rd appellant company. However, the 4^th appellant does not have any right or authority to establish the 1^st and 2^nd appellant companies. The learned single Judge has rightly interpreted the MoU. Further the MoU has to be read by the Court as to the intention of the parties. The Court cannot interpret on its own. When clause 14 of the MoU clearly reveals the intention of the parties, the contention of the learned counsel for the appellants that the 4^th appellant is entitled to establish any number of companies, is not acceptable, as the 4^th appellant cannot go beyond the terms of the MoU. The learned single Judge has rightly interpreted the MoU as intended by the parties. So far as the acquiescence is concerned, as discussed earlier, soon after knowing the fact that the 4^th appellant has established the 1^st and 2^nd appellant companies apart from the 3^rd appellant company, the respondent has objected to the said incorporation

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before the Registrar of Companies and later filed the suit. Though the appellants would contend that in spite of sending the letter of objection in the year 2008, the respondent has not pursued any further action till the filing of the suit in the year 2016, the further communications would show that the respondent has objected and not allowed the 4^th appellant to run the 1^st and 2^nd appellant companies. As rightly observed by the learned single Judge, though there is a delay in filing the suit and also laches attributed on the part of the respondent, however, that would not amount to acquiescence. Acquiescence has to be proved in the manner known to law. A reading of Ex.P4 and Ex.P5 would clearly show that nowhere the MoU has given the right to the 4^th appellant to establish any number of companies, more so, when the language/word employed in the MoU is only singular i.e, a new company. Accordingly, the 4^th appellant also established the 3^rd appellant company and the respondent also has no objection so far as the 4^th appellant running the business in the name of the 3^rd appellant and their objection is only to the establishment of the 1^st and 2^nd appellant companies. Though the respondent came to know about the same in the year 2008, did not choose to file the suit preventing the same. Therefore, the learned single Judge rightly disallowed the claim for liquidated damages and also for rendition of accounts, but, however, rightly restrained all other appellants, except the 3^rd appellant, from passing off their goods and services as that of the respondent by carrying on business under the corporate name

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Beardsell or any other name deceptively similar thereto and from manufacturing or marketing goods or providing services bearing the mark Beardsell or any mark deceptively similar thereto; that the injunction shall come into force as regards the 1^st appellant 120 days after the date of receipt of a copy of the decree; that all the appellants, except the 3^rd appellant, shall hand over for destruction all infringing materials bearing the mark Beardsell to the respondent on the expiry of the said 120 days; that the appellants shall pay costs assessed in a sum of Rs.2,00,000/- to the respondent inclusive of court fees, lawyer’s fees and other expenses.

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From a reading of the entire materials, this Court does not find any reason to interfere with the judgment and decree passed by the learned single Judge. Accordingly, finding no merits whatsoever on any of the grounds raised by the appellants, this original side appeal is dismissed. Consequently, the connected CMP is closed. There shall be no order as to costs in this appeal.

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(P.VELMURUGAN J.) (K.GOVINDARAJAN THILAKAVADI J.) 01-06-2026

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Index:Yes/No Speaking/Non-speaking order Internet:Yes Neutral Citation:Yes/No

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