2010 (2) TMI 1283 - HC - Companies Law

Court sets aside certificate of incorporation for Accura Electrodes India Pvt Ltd, directs name change reconsideration.

The court allowed the writ petition, setting aside the certificate of incorporation issued to Accura Electrodes India Private Limited. The court directed ... Use of Partnership firm name after discontinuing as partners - writ of certiorarified mandamus to quash the certificate of incorporation issued by the third respondent for registration of similar name -Memorandum of agreement for non-compete and usage of trade mark registration was entered into between the petitioner and his wife as parties of the first part, the partnership firm as party of the second part and the fourth respondent as party of the third party - claim of the petitioner is that the fourth respondent has no right to use the name of 'Accura Weldrods' which according to the petitioner is the trade mark of the partnership firm and an application of the registration of the mark is pending before the trademark registry - Correctness of the impugned certificate of incorporation on the ground that the official respondents have a legal obligation to hold that the company cannot be registered in the said name, as within the meaning of Section 20 of the Companies Act, the name too nearly resembles the trademark of the writ petitioner that on coming to know about the incorporation of the 7th respondent company, the petitioner had and issued a legal notice to the second respondent, the firm represented by the petitioner as Managing Partner issued a legal notice to effect the change of name of the company - ensure that the change of name is not registered with an undesirable name - whether third respondent ought not to have decided the application of change of name without hearing the aggrieved parties? - HELD THAT:- Application for change of name has to be considered in the light of Section 20 and the procedure to be adopted is given in the guidelines issued by the department of company affairs, which has spelt out detailed guidelines to be followed. This Court has come to a conclusion that there has been violation of principles of natural justice and the decision making process which ultimately culminated in the impugned certificate of incorporation is erroneous and the proper and necessary parties were not afforded an opportunity by the third respondent and that there is no record to show that while effecting the change of name and granting approval u/s 20 of the Act that the third respondent had considered the aspects as to whether the change of name is 'undesirable' within the scope of Section 20(2) (ii) of the Companies Act. In view of the same, I am inclined to interfere in the impugned certificate of incorporation. For reasons recorded, the petitioner is entitled to succeed and accordingly, the writ petition is allowed, the impugned certificate of incorporation is set aside and the matter is remanded back for fresh consideration of the third respondent on merits and in accordance with law, after issuing notice to the partners of the firm M/s.Accura Weldrods, the seventh respondent as well as the respondents four and five, Directors of the seventh respondent company, which was formally incorporated under the name and style of the sixth respondent company. The third respondent shall issue notice to the parties above mentioned within a period of four weeks from the date of receipt of a copy of this order and thereafter consider the objections placed by all the parties and decide the application for change of name submitted by the erstwhile sixth respondent company u/s 21 and in doing so the third respondent shall also decide as to whether the proposed change of name is not undesirable u/s 20(2) (ii) of the Companies Act 1956 and pass orders on merits and in accordance with law within a period of four weeks from the date of the objections submitted by the parties. Issues Involved:1. Validity of the certificate of incorporation issued to Accura Electrodes India Private Limited.2. Compliance with Section 20 and Section 21 of the Companies Act.3. Alleged violation of principles of natural justice.4. Proper and necessary parties to the writ petition.5. Whether the term 'Accura' is a generic name.Detailed Analysis:1. Validity of the Certificate of Incorporation:The petitioner sought a writ of certiorarified mandamus to quash the certificate of incorporation dated 24.10.2008 issued by the third respondent for Accura Electrodes India Private Limited. The petitioner argued that the name 'Accura Weldrods India Private Limited' closely resembled the trademark of the petitioner's firm, violating Section 20 of the Companies Act. The court found that the third respondent did not follow the proper procedure and did not consider whether the name was undesirable under Section 20(2) of the Companies Act, thus setting aside the certificate of incorporation.2. Compliance with Section 20 and Section 21 of the Companies Act:The petitioner contended that the official respondents had a legal obligation under Section 20 of the Companies Act to ensure that the name of the company did not too closely resemble a registered trademark or a name already in use. The court agreed that the third respondent failed to follow the guidelines and procedures outlined in Section 20 and Section 21 of the Companies Act when approving the name change from Accura Weldrods India Private Limited to Accura Electrodes India Private Limited.3. Alleged Violation of Principles of Natural Justice:The petitioner argued that the respondents did not provide an opportunity to present their case before changing the company's name. The court concurred, noting that the third respondent should have issued notices to the petitioner and other relevant parties before approving the name change. The failure to do so constituted a violation of the principles of natural justice.4. Proper and Necessary Parties to the Writ Petition:The court addressed the necessity of including Accura Weldrods India Private Limited and Accura Electrodes India Private Limited as respondents. The court ruled that both companies were necessary and proper parties to the writ petition to ensure a binding adjudication. The court ordered the impleadment of these companies as respondents 6 and 7.5. Whether the Term 'Accura' is a Generic Name:The respondents argued that 'Accura' was a generic name, and several companies used it. The court did not adjudicate on this issue, stating that it was not necessary for the present case. The primary focus was on whether the change of name was undesirable under Section 20(2) of the Companies Act and whether the proper procedure was followed.Conclusion:The court allowed the writ petition, set aside the impugned certificate of incorporation, and remanded the matter back to the third respondent for fresh consideration. The third respondent was directed to issue notices to all relevant parties and decide the application for change of name in accordance with Section 20 and Section 21 of the Companies Act. The court emphasized the need for compliance with statutory procedures and the principles of natural justice.