Ex. No. 87/2004 Page 1 of 26 *IN THE HIGH COURT OF DELHI AT NEW DELHI + Ex. No. 87/2004 % Date of decision: 11th May, 2009 NOVARTIS A.G. ….…Decree Holder Through: Mr. P.V. Kapur, Sr. Advocate with Ms. Binny Kalra, Mr. Varun Menon, Advocates. Versus WANDER PVT. LTD. ....... Judgment Debtor Through: Dr. A.M. Singhvi & A.K. Nigam, Sr. Advocates with Mr. Sudhanshu Batra & Mr. Bhuvan Gugnani, Advocates. CORAM :- HON’BLE MR. JUSTICE RAJIV SAHAI ENDLAW 1. Whether reporters of Local papers may be allowed to see the judgment? Yes 2. To be referred to the reporter or not? Yes 3. Whether the judgment should be reported in the Digest? Yes RAJIV SAHAI ENDLAW, J. 1. Execution is sought of a compromise decree dated 28th August, 2002 in CS(OS) No.372/2002. 2. The decree holder had instituted the suit inter-alia for the relief of permanent injunction restraining the judgment debtor from using the word WANDER or any other word deceptively similar thereto as part of its name and trading style and/or from using the trademarks TRIAMINIC, TRIOMINIC, TRIATUSSIC or WANDER or any other mark deceptively similar to the said marks in relation to goods being marketed or manufactured by the judgment debtor. The relief of accounts of profits made by judgment debtor by use of trading style Wander Pvt Ltd and decree for amount so found due was also claimed. Ex. No. 87/2004 Page 2 of 26 3. The compromise application under Order 23 Rule 3 of the CPC was filed by the parties even before the judgment debtor filed the written statement. It was inter-alia stated in the said application:- (A) That the plaintiff and defendant had settled the dispute subject matter of the suit and other related disputes by agreeing to enter into the distributorship and marketing agreement on the terms & conditions recorded in the compromise application. (B) That the defendant agreed and declared that it be restrained from using WANDER and other trademarks with respect to which the suit had been filed. It was thus prayed that the decree of injunction in terms of prayer (a) & (b) be passed against the defendant. (C) The parties further agreed that the decree in terms of prayer clause (a) i.e. with respect to WANDER shall not come into operation until 1st August, 2004. (D) Clause 4 of the compromise application as under:- “ The Defendant agrees and undertakes to this Hon‟ble Court that well before 1st August, 2004 it shall take the necessary steps for amending its corporate name and/or trading style so as to delete therefrom the word Wander and substitute in its place the word having no confusing similarity with the word „WANDER‟. The Defendant shall supply to the Plaintiff proof of steps taken to have the Company name changed as soon as such steps are taken and in any event not later than 1st August, 2004.” (E) The defendant also agreed and undertook to the court to withdraw from the market/destroy the unsold stocks etc., to destroy the labels, wrappers, cartons bearing the infringing trademark, not to challenge the plaintiff‟s Ex. No. 87/2004 Page 3 of 26 rights in the said trademark, to withdraw the rectification applications for cancellation of the registration of the plaintiff‟s trademark, to withdraw the applications for registration of the said marks, to withdraw the suit filed by the defendant against the plaintiff and certain other parties, to transfer the tenancy rights in a premises at Mumbai, to make certain other payments to the plaintiff under the prior agreements between the parties, to assign and transfer to the plaintiff certain other trademarks etc. (F) The defendant also agreed that during the term of distribution and marketing agreement to be separately entered into between the Novartis Consumer Health India Private Limited (not a party to the suit) and the defendant and copy of which was filed as Annexure „A‟ to the said application, not to engage in manufacture or sale of any pharmaceutical preparation which was earlier manufactured or sold by Novartis Consumer Health India Private Limited or its affiliates or any other pharmaceutical preparation having the same composition and competing in the same theurapeutic classes as TRIAMINIC. (G) It was further agreed that the said distribution and marketing agreement shall come into force only after obligations as mentioned in certain other paragraphs of the application had been acted and performed by the defendant to the satisfaction of the plaintiff and its affiliates. The said clauses inter-alia included clause with Ex. No. 87/2004 Page 4 of 26 respect to the defendant suffering the decree for injunction as well as clause 4 set out herein above. (H) Clause 15 of the said agreement is as under:- “The Defendant agrees and undertakes to this Hon‟ble Court that upon Defendant‟s failure to fulfill any of its obligation hereunder or upon its failure to comply either with the terms and conditions hereinunder contained or with the conditions enumerated in the Distributorship and Marketing agreement for any reason whatsoever, it shall forthwith pay by way of damages to the Plaintiff a sum of Rs.50,000,000/- (Rupees Five Crores only) with interest @ of 18% per annum to be calculated from the date of default till the date of the payment and shall submit to the Decree of this Hon‟ble Court. The defendant agrees and undertakes not to dispute correctness of this amount to be paid to the Plaintiff as aforesaid. It is further agreed and declared the Defendants liability to pay the aforesaid amount to the Plaintiff is not derogatory to and shall not in anyway affect the rights and remedies which the Plaintiff otherwise has against the Defendants and is also without prejudice to the Plaintiff‟s right of action and to seek other appropriate rights and remedies against the Defendant.” (I) The defendant under clause 8 (vi) of the compromise application also agreed to give an unconditional and irrevocable guarantee of the Bank of India, to cover due and timely performance of obligations on the part of the defendant contained in the compromise application, as also thus contained in the distributorship and marketing agreement to be executed on 1st October, 2002, if the conditions of the compromise application were to be fulfilled by the defendant. The said guarantee was to be for the sum of Rs.32,10,000/-. 4. This court finding the compromise to be lawful allowed the same to be taken on record and passed a decree in terms of the compromise application which was ordered to form part of the decree. Ex. No. 87/2004 Page 5 of 26 5. On the request of the counsels for the parties during the hearing of the execution, I have after reserving the orders called for the suit file and perused the same. I have noticed that though the compromise application at several places as aforesaid states that “the defendant agrees and undertakes”, this court neither accepted any undertaking of the defendant nor ordered the defendant or any of its official to be bound by the same. 6. The record reveals that the defendant filed I.A. No.4839/2004 in the suit for extension of time of 1st August, 2004 (Supra). It was stated therein that in true letter and spirit of the compromise, the defendant commenced taking all necessary steps for amending its corporate name with a view to delete the word “WANDER” therefrom, as envisaged in the compromise; that the defendant on 2ndFebraury, 2004 had initiated merging process with its group company M/s Pearl Organics Ltd and for change of name of merged entity to M/s Wanbury Ltd; that the said process required an order of the High Court of Bombay, furnishing of information to the Bombay Stock Exchange and approvals/actions of certain other authorities and which was taking time; that the defendant had approached M/s Novartis Consumer Health India Pvt Ltd, being representative of plaintiff on 9th July, 2004 to allow defendant to use the old name for another three months after 1st August, 2004; that the representative of plaintiff had agreed to extension of one month and to filing joint application in court; however the plaintiff had till last day of July not sent the signed compromise application; the defendant was as such unilaterally seeking extension of effective date of order dated 28th August, 2002 restraining defendant from using “WANDER”, from 1st August, 2004 to 30th September, 2004. Ex. No. 87/2004 Page 6 of 26 7. The said application came up before the court first on 4th August, 2004 when notice was ordered to be issued to the plaintiff for 27th August, 2004. It was also ordered “in the meanwhile the judgment dated 28th August, 2002 is stayed”. However it appears that on the same day the matter was subsequently unilaterally mentioned by the counsel for the plaintiff, explaining the reasons for earlier non-appearance inspite of advance copy. On the request of the counsel for the plaintiff, the matter was adjourned to the next date and it was further ordered “till tomorrow the above order passed in the morning shall not be given effect to”. 8. On the next date or any subsequent date no further interim order was made. The plaintiff opposed the application. The application was finally dismissed on 5th October, 2004 on the ground that without consent of plaintiff, the court has no jurisdiction to extend the time. The defendant preferred FAO (OS) No.223/2004 against the said order and which is still pending consideration. Vide order dated 29th November, 2004 in the said FAO(OS), the following interim order was made “impugned order is stayed till the next date of hearing”. 9. The plaintiff preferred SLP Civil No.25981/2004 to the Apex court against order dated 29th November, 2004 (Supra). The Apex court on 4th January, 2005 dismissed the said Special Leave Petition observing that the impugned order dated 29th November, 2004 was only an interlocutory order and that both parties had agreed that they will argue the appeal on the date fixed next in the same without seeking adjournment. Ex. No. 87/2004 Page 7 of 26 10. The plaintiff instituted this execution on 25th August, 2004 stating that the sum of Rs.5 crore along with interest at 18% per annum from 1st August, 2004 was due under clause 15 of the compromise decree. The decree is sought to be executed by directing the Bank of India to immediately pay Rs.32,10,000/- to the decree holder being the sum guaranteed under clause 8 (vi) of the compromise decree and by directing the bank to pay the sum of Rs.5 crore in terms of clause 15 aforesaid of the compromise application. It is further pleaded that Mr Rayana is the principal officer of the judgment debtor and the decree is personally binding on him. His arrest and detention in civil prison is sought for willfully disobeying the order of permanent injunction which came into force on 1st August, 2004, by continuing to use the word WANDER as part of its corporate name and trading style. 11. The present execution was being taken up for consideration along with IA No. 4839/2004 in the suit and thereafter also was adjourned from time to time. The order dated 17th August, 2006 in the execution shows that while it was the contention of the judgment debtor that owing to the order aforesaid in appeal, the execution stood stayed, the decree holder contended otherwise. The same issue was raised on 28th January, 2009 also. Finding that the order impugned in the appeal was the order of rejection of the application for extension of the time which was agreed to be till 1st August , 2004 only and thus the order of the appellate court of stay of the said order could not mean a stay of the present execution and further feeling that since the Division Bench was seized of the matter, it was appropriate to give an opportunity to the judgment debtor to seek a clarification from the Division Bench, the matter Ex. No. 87/2004 Page 8 of 26 was adjourned to 13th March, 2009. On 13th March, 2009 the matter was adjourned to 24th April, 2009. 12. On 24th April the senior counsel for the decree holder contended that though the judgment debtor had applied to the Division Bench in accordance with the order dated 29th January, 2009 but the said application was not pursued resulting in the same being posted for hearing along with appeal on 6th August, 2009. It was contended by the decree holder that the judgment debtor having been given an opportunity to seek clarification and having failed to do so, there was no occasion for further deferring the execution which had already been pending for five years. The senior counsels for the judgment debtor of course contended that the order aforesaid of the Division Bench tantamounted to the stay of execution and it was contended that there could be no other meaning of the interim order of the Division Bench and the said interim order has to be interpreted meaningfully and purposively. 13. Finding the execution had remained pending for long, an option was given to the judgment debtor to either give undertaking to this court to pay the decretal amount in the event of the appeal being dismissed and subject to any further orders of the Apex court or to proceed with the execution. 14. The senior counsels for the judgment debtor contended that besides the plea of the execution having been stayed by the Division Bench, they had other objections also to the execution (to which reply has been filed) and as such they were not in a position to give an undertaking and which will tantamount to their giving up the other objections to the decree. Ex. No. 87/2004 Page 9 of 26 15. Finding that even if the order aforesaid of the Division Bench is to be construed as a stay of the execution and further feeling that at least the other objections of the judgment debtor to the execution be adjudicated so that in the event of the appeal being dismissed time thereafter is not wasted thereon, counsels were heard. 16. The senior counsels for the judgment debtor have contended that the only reason for the decree holder claiming Rs.5 crores from the judgment debtor as set out in the execution is the failure of the judgment debtor to continue using the word WANDER as part of its corporate name and trading style beyond 1st August, 2004. It was contended that under clause 4 (Supra) of the compromise application, the judgment debtor had only agreed to, before 1st August, 2004 take the necessary steps for amending the corporate name and style so as to delete therefrom the word WANDER. It is the case of the judgment debtor that the judgment debtor had never agreed or undertaken to ensure that the name will be so changed on or before 1st August, 2004. It is further contended that the judgment debtor had in fact taken the requisite steps for having the name changed, as set out in para 6 hereinabove; that the High Court of Bombay had in fact allowed the merger on 12th August, 2004. Mohammed Gazi Vs. State of M.P. (2000) 4 SCC 342 was cited to contend that none should suffer due to act of court. It was stated that delay, if any, in change of name was for the reason of the order being pronounced on the application of the judgment debtor for amalgamation resulting in change of name, on 12th August, 2004. It was further contended that the affiliate of the decree holder had in terms of the compromise application entered into the distributorship agreement with the judgment debtor and which was to be entered Ex. No. 87/2004 Page 10 of 26 into only after the decree holder satisfying itself of the judgment debtor having performed its obligations under the compromise application. It is the case of the judgment debtor that the execution of the said distributorship agreement tantamounts to waiver by the decree holder of the right, if any, to claim Rs.5 crores under clause 15 of the compromise application. It was further contended that the order of the court on a petition for amalgamation relates back to the date of presentation thereof and in the present case also, the amalgamation resulting in change of name though pursuant to order dated 12th August, 2004 related back to the date of presentation of the petition i.e. February, 2004. It is also contended that the decree holder had earlier agreed to extension but on last date did not sign the application for extension. It is further the contention that the decree holder has illegally terminated the Distributorship and Marketing Agreement also and for which claims have been made before Bombay High Court and are pending. 17. The senior counsel for the decree holder has on the contrary contended that the provision of relating back of the order on an application for amalgamation cannot be read so as to defeat the rights of the decree holder under the compromise decree. It is contended that if the same is permissible, every order of injunction in trademark matters shall be defeated by averring that amalgamation resulting in change on trade name had been applied and as and when granted, will relate back to the date of presentation of the petition. The senior counsel for the decree holder has also relied upon clause 2 of the compromise application as per which the injunction against the defendant from using the word WANDER as part of its trade name/trading style was to come into operation w.e.f. 1st August, 2004. It is contended that clause 4 has to derive its Ex. No. 87/2004 Page 11 of 26 meaning from clause 2 and clause 4 cannot be read as meaning that the obligation was only to apply for change of name and not to have the change affected by that date. It is further contended that clause 4 read alone also conveys that the change of name was to be effective from 1st August, 2004. It is stated that change of name under the Companies Act requires only a special resolution to be passed by the Board of Directors of the judgment debtor and the judgment debtor from the decree in 2002 slept over till February, 2004 and cannot escape liability under clause 15 of the compromise application. In response to the execution of the distribution and marketing agreement, it is contended that the argument of the judgment debtor is contradictory; as per clause 2 of the compromise application, subject to satisfaction whereof also the distributorship and marketing agreement was to be entered into, the change of name was to come into effect w.e.f. 1st August, 2004; the distributorship agreement was admittedly entered into prior thereto. The same could thus not be in satisfaction of or waiver of the rights of the decree holder to have the change of name affected latest by 1st August, 2004. It is further contended that the judgment debtor also understood the compromise to be so, as evident from IA.No.4839/2004 (supra) and the correspondence prior thereto. 18. The counsels for the judgment debtor in rejoinder have submitted that the name having been changed shortly after 1st August, 2004, it not being the case that the same was delayed indefinitely, the decree holder could not be permitted to illegally enrich itself. It was also contended that the judgment debtor was entitled to concession for the time during which the decree holder had represented that it was willing to extension of time and if such time is deducted, there is no delay. Ex. No. 87/2004 Page 12 of 26 19. I had during the hearing put to the counsels for the parties whether the decree such as under execution was at all executable, if the parties were found to have arrived at a fresh agreement. The senior counsel for the decree holder in response contended that though the parties had entered into a fresh distributorship and marketing agreement but the sum of Rs.5 crores provided in clause 15 of the compromise application was in terms of the claim of the decree holder for damages. However a perusal of the plaint in the suit file shows that the decree holder had in para 17 thereof stated that it estimated that it will be entitled to a sum in excess of Rs 5 lacs after the defendant had rendered accounts and there is no claims as such for damages of 5 crores. 20. The compromise application in the very preamble thereof states that the parties had settled the disputes subject matter of the suit and other related disputes by agreeing to enter into a distributorship and marketing agreement. A further perusal of the compromise application shows that though the judgment debtor agreed to suffer a decree for permanent injunction but the said decree for permanent injunction was to come into operation after nearly two years from the date of the compromise i.e., w.e.f. 1st August, 2004. The draft distributorship and marketing agreement was annexed to the compromise application. 21. The judgment debtor, besides agreeing to suffer a decree for permanent injunction as aforesaid, agreed to do several other things as enumerated in the compromise application. Clause 4 deals with the change of name. It imposes an obligation on the judgment debtor only to take steps for amending its corporate name and to Ex. No. 87/2004 Page 13 of 26 supply to the decree holder proof of having taken such steps. Though the date mentioned in clause 4 also is of 1st August, 2004, i.e., the date on which permanent injunction prohibiting the judgment debtor from using WANDER as part of its corporate name was to come into force but clause 4 conspicuously does not provide that the judgment debtor will before the said date of 1st August, 2004 ensure change of its name. That however does not compel me to interpret clause 4 as meaning that the judgment debtor was not only to take steps but also ensure change of name. That would be doing violation to the language used by parties. Had the intention of the parties been that the judgment debtor shall ensure change of name latest by 1st August 2004, nothing prevented the parties from expressly providing so. It is also significant that while with respect to the various matters, the steps to be taken by the judgment debtor and the time therefor is expressly provided, the decree holder did not insist upon the judgment debtor to undertake effecting change of name before 1st August, 2004. 22. I do not find any inconsistency in clauses 2 and 4 and the two can be read harmoniously. The principle of interpretation of deeds also is to first explore harmonious interpretation, before doing violation to literal language used or giving precedence to clause appearing first, over that appearing later. Under Clause 2, the decree for permanent injunction and by which the judgment debtor would stand prohibited from using WANDER as part of its corporate name was to come into force on 1st August, 2004. Coming into force of such decree was not dependent upon the judgment debtor taking steps for change. The central pillar of the compromise appears to be the agreement of the parties to enter into Distributorship cum Marketing Agreement. The said agreement, under clause 11 was Ex. No. 87/2004 Page 14 of 26 agreed to be executed after the decree holder had satisfied itself that the judgment debtor had performed its obligations under the specified clauses of compromise application. Clause 4 regarding change of name is one of such clauses. That appears to be the purpose of clause 4, i.e., to assure the decree holder before its affiliate enters into the Distributorship cum Marketing Agreement with the judgment debtor, that the judgment debtor intended to abide by the decree for permanent injunction which in any case would come into force on 1st August, 2004. Clause 2 was also included in the clauses specified