Case: Haldiram Bhujiawala and Another Vs. Anand Kumar Deepak Kumar and Another

1. This appeal has been preferred by the two defendants, M/s. Haldiram Bhujiawala and Shri Ashok Kumar against the judgment of the Delhi High Court in FAO 365 of 1999 dated 30.11.1999. By that order the High Court summarily dismissed the appellants appeal against the order of the learned Single Judge dated 2.11.1999 in IA 5996/99 in Suit No. 635/92. The IA was filed under Order 7, Rule 11, CPC by the appellants for rejection of the plaint filed by two plaintiffs, Anand Kumar Deepak Kumar trading as Haldiram Bhujiwala and Shiv Kishan Agarwal on the ground that the Ist plaintiff was a partnership not registered with the Registrar of Firms on the date of suit i.e. on 10.12.1991 and that the subsequent registration of the firm on 29.5.1992 would not cure the initial defect2. The suit was filed by the plaintiff, (1) for permanent injunction restraining the, their partners, servants etc. from infringing thetrademarkNo.285062 and from using thee HALDIRAM BHUJIAWALA or any identical name/mark deceptively similar thereto; (2) for damages in a sum of Rs.6 Lakhs, and (3) for destruction of the material etc3. As we are dealing with a matter arising under Order 7, Rule 11, CPC, it will be necessary to refer to the plaint allegations. One Ganga Ram Haldiram, carried on business in the name Haldiram Bhujia Wala, since 1941. In 1965, he constituted a partnership with his two sons.Moolchand, Shiva Krishan and hisw Kamla Devi, (wife of another son R.L. Aggarwal) to carry on business under the same name. In December, 1972 the said firm applied for registration before the Registrar of Trade Marks for registration of the name Haldiram Bhujia Wala Chanda Bishan Bhujiawala, Bikaner. The Registrar of Trade Marks granted registration with the No. 285062. On 16.11.1974, the partnership was dissolved and under the terms of the dissolution deed the above trade mark fell exclusively to the share of Mool Chand, son of Ganga Bishan and father of plaintiffs, for the whole country (except West Bengal). Thus Shri Mool Chand became sole proprietor of thetrademarkin the said area while Smt. Kamla Devi was given ownership of thetrademarkrights for West Bengal. It is stated that Sri Lala Ganga Bishan Haldi Ram executed his last Will dated 3.4.1979 and also reiterated the rights conferred by the dissolution deed on the respective parties. Ganga Bishan died in 1980. His Will was later acted upon. Later, the testators son, Shri Mool Chand too died in 1985 leaving behind his four sons, Shiv Kishan, Shiv Ratan, Manohar Lal and Madhusoodan. All of them got their names recorded ast proprietors. The latter three formed a partnership in 1983 and were running a shop in Chandni Chowk, New Delhi selling various goods under the abovesaid trade mark of Haldiram Bhujia Wala. In the meantime, on 10.10.1977, Mool Chands brother Sri R.L. Aggarwal (husband of Kamla Devi) and his son Prabhu Shankar, Calcutta applied for registration in this very name at Calcutta claiming to be full owners of the said trade mark without disclosing the dissolution deed dated 16.11.1974. When the Registrar objected on 14.4.1978, they replied on 18.7.1978 that they alone were trading in this name in Calcutta. The defendants have no right to use the said trade mark beyond Calcutta. The plaintiffs registered trade mark was, in the usual course, renewed on 29.12.1986 till 28.12.1993. The plaintiffs have also acquired a right on account of prior adoption and long user. The Ist plaintiff firm, consisting of three sons of Moolchand and the 2nd plaintiff (the fourth sons of Moolchand) are joint owners of the trade mark (except in West Bengal). The Ist defendant firm is a newly constituted firm intending to start its business and has been formed by Ashok Kumar, son of Kamla Devi. The 2nd defendant is Ashok Kumar himself in his individual capacity. They have no right to use this trade mark outside West Bengal. The plaintiffs came to know of the violation of trade mark by defendants 1 and 2 in December, 1991 when defendants opened a shop at Arya Samaj Road, Karol Bagh , New Delhi. The cause of action for the suit is the fact that defendants acted:"in violation of the common law and contractual rights of the plaintiff"On these grounds, defendants are to be restrained by permanent injunction from using the trade mark and a sum of Rs. 6 Lakhs is payable as damages4. The defendants, as already stated, have filed the application under Order 7 Rule 11, CPC pleading Section 69(2) of the Partnership Act, 1932 as a bar to maintainability of the suit. The learned single Judge dismissed the application after referring to M/s Virendra Dresses, Delhi v. M/s Varinder Garments: 1982 PTC 233, 1982 AIR(Delhi) 482 and to M/s. Bestochem Formalities v. M/s Dinesh Ayurvedic Agencies and Ors., RFA (OS) 17/99 dated 12.7.1999 rendered by Division Bench of the Delhi High Court on the ground that the right to injunct the defendants in respect of the plaintiffs Trade Mark was based on principles applicable to a passing off action and the said right was a common law right and did not arise under any contract. The learned Judge also relied upon a judgment of this Court in M/s. Raptakos Brett & Co. Ltd. v. Ganesh Property, 1998 SC 1187. The application under Order 7, Rule 11, CPC was dismissed by an order dated 2.11.1999. This order was confirmed by a Division Bench of the Delhi High Court on 30.11.1999, as already stated.

Court's reasoning:
8. The question whether Section 69(2) is a bar to a suit filed by an unregistered firm even if a statutory right is being enforced or even if only a Common Law right is being enforced come up directly for consideration in this Court in M/s Raptokas Brett Co. Ltd. v. Ganesh Property, (supra)It appears to us that in that case the reference to the lease in the plaint was obviously treated as a historical fact. That case is, therefore, directly in point. Following the said judgment, it must be held in the present case too that a suit is not barred by Section 69(2) if a statutory right or a common law right is being enforced9. The next question is as to the nature of the right that is being enforced in this suit. It is well settled that a passing off action is a common law action based on tort(vide) Bengal Waterproof Ltd. v. Bombay Waterproof of Manufacturing Company and Anr., 1996 SC 1881: 1996 SC 1881 (SC) Therefore, in our opinion, a suit for perpetual injunction to restrain the defendant not tof the defendants good as those of plaintiffs by using the plaintiffs trade mark and for damages is an action at common law and is not barred by Section 69(2). The decision in M/s Virendra Dresses Delhi v. M/s Varinder Garments (supra), and the decision of the Division Bench of the Delhi High Court in M/s Bestochem Formulation v. M/s Dinesh Ayurvedic Agencies and Ors., (supra) stated that section 69(2) does not apply to af action as the suit is based on tort and not on contract. In our opinion, the above decisions were correctly decided10. Likewise, if the reliefs of permanent injunction or damages are being claimed on the basis of a registered trade mark and its infringement, the suit is to be treated as one based on a statutory right under the Trade Marks Act and is, in our view, not barred by Section 69(2)12. Question however arises as to what is the scope of the words "enforcing a right arising under the contract" used in Section 69(2)?Learned Senior Counsel for the appellants repeatedly drew our attention to the allegation in the plaint at various places that it was only under the deed of dissolution dated 16.11.1974 that Moolchandthe father of the partners of the Ist plaintiff firm and the 2nde proprietor of the trade mark for the whole of India (execpt West Bengal). That right developed on the plaintiffs on the death of Moolchand. Therefore, it was contended that the Ist plaintiff firm was definitely seeking to enforce a right "arising from a contract", namely, the contract of dissolution dated 16.11.1974. It was argued that the Ist plaintiff could not claim any injunction or damages unless reliance was placed on the said contract and hence the suit was barred by Section 69(2)13. For the purpose of deciding this point, it is necessary to go into the question as to what the Legislature meant when it used the words arising from a contract in Section 69(2)14. In our view, it will be useful in the context to refer to the Report of the Special Committee) which examined the Draft Bill and made recommendations to the Legislature15. Before going into the above Report of the Special Committee which preceded the Partnership Act, 1932, it will be necessary to refer to the case in Commissioner of Income Tax, AP v. Jayalakshmi Rice and Oil Mills Contractor Co., 1971 SC 109, where this Court refused to refer to this very Report for construing Section 59 of the Partnership Act. But, in our view, that decision is no longer good law as it was clearly dissented on this aspect in the judgment of the Constitution Bench in R.S. Nayak v. A.R. Antulay, 1984 SC 338. In number of later judgments, this Court has referred to the Reports of similar Committees or Commissions(Vide G.P. Singhs Interpretation of Statutes, 7th Ed, 1999 pp.. In the latest case in Hyderabad Industries Ltd. v. Union of India, 1995 (5) SCC 15(para15), notes on clauses were relied upon by the Constitution Bench for understanding the legislative intent. The English Law has changed completely after Pepper v. Hart, 1993 (1) All(WR) 42(HL) in favour of admissibility of such material. A restricted view was no doubt expressed in P.V. Narasimharao v. State, in 1998 SC 690 that such Reports can be looked into for the purpose of knowing the historical basis or mischief sought to be remedied, but not for construing the provision unless there is ambiguity. Even going by this restricted view, we find that there is considerable ambiguity in Section 69(2) (unlike the English Statute of 1916 and 1985) as to what is meant by the words arising out of a contract inasmuch as the provision does not say whether the contract in Section 69(2) is one entered into by the firm with the defendant or with somebody else who is not a defendant, nor to whether it is a contract entered into with the defendant in business or unconnected with business. Hence, in our view, it is permissible to lock into the Report even for purpose of construing Section 69(2)It will be noticed that the above extract refers to the English precedent which is partly not followed and which is partly followed. We shall be referring to the said English precedent shortly but before we do so, we have also to refer to paras 18 and 19 of the said Report19. The above Report and provisions of the English Acts, in our view, make it clear that the purpose behind Section 69(2) was to impose a disability on the unregistered firm or its partners to enforce rights arising out of contracts entered into by the plaintiff firm with thirdt in the course of the firms business transactions20. In Raptokos Brett and Co. (supra), it was clarified that the contractual rights which are sought to be enforced by the plaintiff firm and which are barred under Section 69(2) are "rights arising out of the contract" and that it must be a contract entered into by the firm with the third party defendants. Majmudar, J., stated (at p. 191) as follows:"A mere look at the aforesaid provision shows that the suit filed by an unregistered firm against a third party for enforcement of any right arising from a contract with such a third party would be barred...." *21. From the above passage it is firstly clear that contract must be a contract by the plaintiff firm not with anybody else but with the third party defendant22. The further and additional but equally important aspect which has to be made clear is thatthe contract by the unregistered firm referred to in Section 69(2) must not only be one entered into by the firm with the third23. It will also be seen that the present defendants who are sued by them are third parties to the 1st plaintiff firm. Section 2(d) of the Act, defines third parties as persons who are not partners of the firm. The defendants in the present case are also third parties to the contract of dissolution dated 16.11.1974. Their mother, Kamla Devi was no doubt a party to the contract of dissolution. The defendants are only claiming a right said to have accrued to their mother under the said contract dated 16.11.1974 and then to the defendants. In fact, the said contract of dissolution is not a contract to which even the present 1st plaintiff firm or its partners or the 2nd plaintiff were parties. Their father Moolchand was a party and his right to the trade mark devolved in plaintiffs. The real crux of the question is that the Legislature when it used the words "arising out of a contract" in Section 69(2), it is referring to a contract entered into in course of business transactions by the unregistered plaintiff firm with itss and the idea is to protect those in commerce who deal with such a partnership firm in business. Such third parties who deal with the partners ought to be enabled to know what the names of the partners of the firm are before they deal with them in business24. Further Section 69(2) is not attracted to any and every contract referred to in the plaint as the source of title to an asset owned by the firm. If the pliant referred to such a contract it could only be as a historical fact. For example, if the plaint filed by the unregistered firm refers to the source of the firms title to a motor car and states that the plaintiff has purchased and received a Motor Car from a foreign buyer under a contract and that the defendant had unauthorisedly removed it from the plaintiff firms possessionit is clear that the relief for possession against defendant in the suit does not arise from any contract with defendant entered into in the course of plaintiff firms business with defendants but is based on the alleged unauthorised removal of the vehicle from the plaintiff firms custody by the defendant. In such a situation, the fact that the unregistered firm has purchased the vehicle from somebody else under a contract has absolutely no bearing on the right of the firm to sue the defendant for possession of the vehicle. Such a suit would be maintainable and Section 69(2) would not be a bar, even if the firm is unregistered on the date of suit. The position in the present case is not different25. In fact, the Act has not prescribed that the transactions or contracts entered into by an firm with a third party are bad in law if the firm is an unregistered firm. On the other hand, if the firm is not registered on date of suit and the suit is to enforce a right arising out of a contract with the thirdt in the course of its business, then it will be open to the plaintiff to seek withdrawal of the plaint with leave and file a fresh suit after registration of the firm subject of course to the law of limitation and subject to the provisions of the Limitation Act. This is so even if the suit is dismissed for a formal defect. Section 14 of the Limitation Act will be available inasmuch as the suit has failed because the defect ofn falls within the words "other cause of like nature" in Section 14 of the Limitation Act, 1963. (See Surajmal Dagduramji Shop v. M/s. Srikishan Ram Kishan, 1973 AIR(Bom) 313)