Shrivats Rathi & Anr. v. Anil Rathi & Ors.

2. Rajesh Rathi (S/o Late Mr. C.R. Rathi

3. Gaurav Rathi (S/o Mr. Rajesh Rathi)

4. Lila Devi Rathi

1. Deepak Rathi (S/o Late Mr. Harikishan Rathi)

2. Dhananjay Rathi (S/o Mr. Deepak Rathi)

3. Kshitij Rathi (S/o Mr. Deepak Rathi)

4. Rekha Rathi GROUP C[1]

1. P.C Rathi, S/o Late Mr. G.D. Rathi, (Deceased)

2. Raj Kumar Rathi (S/o Mr. P.C. Rathi)

3. Pradeep Rathi (S/o Mr. P.C Rathi) GROUP C[2]

1. Arun Kumar Rathi (S/o Late Mr. G.D. Rathi) GROUP C[3]

1. Anil Rathi (S/o Late Mr. G.D. Rathi)

8. The trademark bearing number 309435 obtained by M/s.K.L. Rathi Steels Ltd. was assigned to Rathi Foundation through Assignment Deed dated 29th June, 1995. The senior-most trustee of each group and subgroup i.e. A, B, C[1], C[2] and C[3], were granted power to issue licenses to use the trademark subject to certain conditions in the Trust Deed read with the MOU under information to the Rathi Foundation. The Licensees were also required to file with the Rathi Foundation, acceptance of all terms and conditions of the Trust Deed.

9. The present dispute has commenced as a result of the appellant No.1 allegedly granting licenses to outsiders without adherence to the terms of the Trust Deed and the MOU. It may be mentioned here that the appellant no.1 is the son of the respondent No.6 who, being the head of the sub-group C-2, has the right to issue two licenses to two entities in which the family had a majority interest. However it is alleged that the appellant No.1 who had no right whatsoever, either under the Trust Deed or the MOU, during the lifetime of the respondent No.6, illegally issued eight licences to entities which were not connected to the family. The respondent No.1, being a Lifetime Trustee of the Rathi Foundation, instituted the two suits seeking an injunction against the defendants in the suits from using the registered trademark of the Foundation in infringement thereof and to restrain the appellants herein from wrongly issuing any further licences against the terms of the MOU and Trust Deed. Pending trial, he sought interim injunction which was granted.

SUBMISSIONS IN APPEAL

10. The focus of the arguments of Sh. Virmani and Sh. Sindhwani, senior counsel and Sh. Tanmay Mehta, Advocate, as advanced on behalf of the appellants, was that the respondent No.1 had himself sought the registration of the trademark “RATHI” by filing a number of applications, claiming use of “RATHI” “as a surname” and could not have taken a contrary stand to oppose a similar claim by the appellant No.1. Relying upon S.P. Chengalvaraya Naidu v. Jagannath & Ors. AIR 1994 SC 853, it was also urged that having come to the conclusion that the respondent No.1 as plaintiff had willfully suppressed facts relating to such attempt to obtain registration, the learned Single Judge ought not to have granted the injunction as the respondent No.1 had not come to the court with clean hands and had no equities in his favour. The locus standi of the respondent No.1 to file the suit was also questioned since all the trustees had not passed a Resolution in his favour and as the plaint was actually signed by a Power of Attorney.

11. The case put forth by the learned senior counsel for the appellants is that the appellant No.1 was a lineal male descendant of late G.D. Rathi and like all family members, had the right to use the family name as a trademark under Section 35 of the Trademarks Act, 1999. The learned senior counsel has relied upon the judgements in S.K. Sachdeva v. Shri Educare Ltd., 2016 SCC OnLine Del 473 and Shri Ram Education Trust v. SRF Foundation, 2016 SCC OnLine Del 472 to put forth his argument that goodwill in the registered mark "RATHI" of the Foundation is not exhaustive of the goodwill and entitlement in Rathi family name. It was submitted that the trademark “RATHI” had been in existence since 1942 and that goodwill had remained with the family and when M/s. K.L. Rathi Steels Ltd. registered the said trademark in its name in 1975, it created goodwill from that date which was transferred to the Foundation but it did not include all of the goodwill generated in the family name and which several other family members continued to use despite such registration. It was also argued that the subsequent registration in the name of M/s. G.D. Rathi Steels Ltd. was improper and the very fact of it getting another trademark registered in its name reflected the fact that “RATHI” was not an exclusive trademark. Finally, it was argued that the appellant No.1 was not a party to the MOU and therefore none of its terms were binding upon him. It was suggested that the entire game plan of the respondent No.1 was to monopolize the issuance of licenses for the use of the trademark “RATHI” in the hands of the trustees, including himself.

12. Sh. Sandeep Sethi, senior counsel appearing on behalf of the respondent No.1 submitted that the suit had been filed as a trustee on behalf of the trust and as per the express authority given in para 11.[3] of the Trust Deed, in order to protect the interest of the trust in the registered trademark. All allegations of concealment were against the respondent No.1 Sh. Anil Rathi as a person and there were no allegations against the Trust. In any case, the consequences of the mistake of the lawyer cannot be visited upon the respondent No.1 as observed by the Delhi High Court in Insecticides (India) Limited vs. Parijat Industries (India) Pvt. Ltd. 2018 SCC OnLine Del 9748 and there could be no estoppel against him even if it was to be believed that he had himself sought to register the name “RATHI” on the plea that it was also his surname though it was argued that what was sought to be registered was “EUROTHERM by RATHI”.

13. It was pointed out by Sh.Sudhir Chandra, senior counsel that the very purpose of the MOU was to protect the standard and quality of RATHI TORS which had gained high acceptability as a brand signifying high quality, so much so that per metric tonne RATHI TORS sold at a rate that was higher than for other brands by more than INR 2000/- and that it was because of the large margin that outsiders desired to use the trademark “RATHI” for their TORS. In order to have control over the quality of products manufactured by various rolling mills, the MOU provided that no rolling mill without a 51% holding in the company of the family member would be allowed to use the trademark “RATHI” for their products. According to the learned senior counsel, the appellant No.1 was trafficking in the trademark to all and sundry for profit without caring for the quality or the fair name of the family. Sh. Sethi also contended that for 25 years, the MOU and the Trust Deed had played out well with no one having any problems till the appellant No.1 began indulging in dilution of the trademark.

DISCUSSION

14. It is well settled that there are limitations on the powers of the appellate court while dealing with an appeal arising out of a discretionary order. The appellate court will not reassess the material on which the court of first instance has decided to grant or refuse an interim protection. As held by the Supreme Court in Wander Limited and Anr. Vs. Antox India P Ltd. 1990 Suppl. SCC 727, the appellate court would normally not be justified in interfering with the exercise of discretion particularly on the ground that if it had considered the matter at the trial stage, it would have come to a contrary conclusion. Only where the discretion has been shown to have been exercised arbitrarily or capriciously or perversely or where the court had ignored the settled principles of law regulating grant or refusal of interim relief in the form of an injunction will the appellate court be justified in interfering with the decision.

15. Interim relief of injunction is granted at a time when all facts have yet to be proved in trial. At the same time, the court will consider whether the party seeking such injunction pending trial has a “prima facie case” in its favour. If no prima facie case exists, in other words, the party seeking the interim injunction discloses no right in its favour, no interim injunction will be granted as it would not be justified. However, even where a party discloses a prima facie case, interim relief will not automatically follow. The party would have to establish that the absence of such relief would cause it “irreparable injury and damage” which would not be compensated by money and that the “balance of convenience” lies in its favour. The existence of all these three conditions alone will justify the grant of interim injunction. Reference in this regard can be made to Dalpat Kumar vs. Prahlad Singh, (1992) 1 SCC 719, as follows: -

16. The observations made in Dorab Cawasji Warden v. Coomi Sorab Warden, (1990) 2 SCC 117 may be profitably reproduced here-

17. In this background, it may be seen whether any interference in the impugned judgment is called for or not. We may determine this on the basis of the arguments advanced.

18. There is no strength in the arguments advanced on behalf of the appellants that the appellants are not bound by the MOU or the Trust Deed because they were not a party thereto. The Rathi family chart filed by the respondent No.1 reflects the fact that except for P.R. Rathi and K.K. Rathi, sons of Late G.D. Rathi, all other family groups are parties to the MOU as also the formation of the Trust. From the family chart, these two persons are connected to the Rathi Research Centre which is the second foundation created by the family and to which the registered trademark in favour of M/s. G.D. Rathi Steels Ltd. was assigned. The MOU includes all male lineal descendants of the parties who are signatories to the MOU. In other words, the appellant No.1 being the lineal male descendant of respondent No.6, who has signed the MOU, is also governed by the terms and conditions of the MOU as well as the Trust Deed. Merely because he did not sign the document would not result in his being excluded from such terms as such an interpretation would undo the very intent of the elders of the family when they had entered into the arrangement encapsulated in the MOU and cemented by the Trust Deed.

19. The claim that other family members have carried out business under the trademark “RATHI” for the steel TORS and common metal products even after the creation of the Trusts and assignment of the trademark to them, would be a matter of evidence as rightly observed in the impugned judgment.

20. The facts as noticed hereinbefore would also give us a reason why M/s. K.L. Rathi Steels Ltd. and subsequently M/s. G.D. Rathi Steels had obtained separate registrations for the trademark “RATHI” in their names. The original company RSRM was formed and run by two brothers and the son of a deceased brother. When the split took place, it was between G.D. Rathi and K.L. Rathi groups of companies, with the nephew H.K. Rathi choosing to go with K.L. Rathi. But what is more important is that after functioning separately from 1975/1980, all of them thought it appropriate to take concrete steps to preserve the quality of the products being manufactured and sold in the family name of “RATHI” by the various constituents of the family through their independent units/companies. Their idea was obviously to preserve the brand value and ensure that the expansion of the family and the business does not result in a fall in quality and thus the disappearance of the goodwill that the name “RATHI” had acquired over a long period of time. Each branch of the family, through the eldest member was authorized to grant licenses to their individual units, either existing or to be formed, subject to conditions noticed in the impugned judgement and therefore not required to be reproduced herein.

21. The courts generally give effect to such family arrangements unless there was no bonafides or there was fraud and undue influence which facts require to be proved during trial. Apart from the fact that no such plea has been taken in the present case, it has also to be noticed that this arrangement has worked well from 1995 till now when the appellant No.1 has sought to assert a right independent of the MOU and the Trust Deed by claiming a right under Section 35 of the Trademarks Act, 1999. It is in connection with this plea that the appellant No.1 highlighted the pleas taken by the respondent No.1 while seeking registration of certain trademarks including the name of “RATHI” by claiming it as a family name/surname. However it is for the appellant No.1 to independently establish his bonafide in using the name “RATHI” irrespective of what plea the respondent No.1 had taken before the registration authorities in respect of some other trademarks. The appellant No.1 is clearly seeking to enforce rights outside the MOU and the Trust Deed by claiming a vested right in a name the goodwill of which was not created by him but created by his predecessors since 1942 and specifically for TORS since

1968. The name “RATHI” in respect of TORS evokes a certain brand quality and this has been established not by a proprietor, being the grandfather of appellant No.1, but by all members of the family over a period of time, including his grand uncles.

22. The learned Single Judge was right, in concluding that on the basis of the MOU and the Trust Deed, the respondent No.1 had disclosed a prima facie case whereas the appellant No.1 had not disclosed any right to issue licenses for use of the trademark “RATHI” by outsiders. In view of the goodwill and brand value of the trademark “RATHI”, the injury caused by the widespread unregulated and unlawful use of this trademark, which admittedly had been registered in the name of M/s. K.L. Rathi Steels Ltd. and which was thereafter duly assigned to the Rathi Foundation, would be irreparable as it would be a loss to the family represented by the Rathi Foundation through the respondent No.1. The balance of convenience lies in favour of the Rathi family and the Rathi Foundation and not with the appellant No.1.

23. The contention that the respondent No.1 was not authorized to file the suits by other trustees also has no force since the Trust Deed itself authorizes each Trustee to initiate legal action against any other Trustee/family member if they were found violating the terms of the Trust. It is a specious plea that without a hundred percent unanimity amongst the Trustees no legal action can be initiated, because if a Trustee is found violating the terms of the MOU/Trust Deed, he would not be agreeable to a Resolution against him and in absence of such absolute unanimity, the terms of the Trust Deed would not be enforceable. Therefore, placing such an interpretation on the terms of the MOU/Trust Deed before the filing of suits cannot be accepted.

24. The impugned judgment does record an observation that the respondent No.1 had not made full disclosure. But that need not result in a deprivation of relief to the Trust which is seeking to protect interest of all family members in the trademark “RATHI” against unauthorized usage. The respondent No.1 has not sought an injunction against the appellants and other respondents to this appeal in his personal capacity after violating terms and claiming a privilege over other violators. He is in a representative capacity and the acts of one Trustee cannot predicate the rights that can be enforced by the Trust.

25. We therefore find no reason to interfere with the reasoning and the conclusions in the impugned judgement as no perversity or illegality has been disclosed or is evident.

26. Appeals dismissed. ASHA MENON, J. RAJIV SAHAI ENDLAW, J. JANUARY 04, 2021 manjeet