Rectification of Company Name if it similar to Registered Trademark

Companies Act, 1956: Section 22

It is possible that by inadvertence or otherwise, that the Registrar may have permitted a company to have its name similar to/identical with an existing company. The main object of s. 22 of the 1956 Act was to empower the Central government to direct such a company to change its name. A registered trade mark owner could seek rectification of the name of a company which was similar to the trade mark within, 5 years of incorporation of that company. In case, when the Central Government ordered rectification of the name of a company due to similarity in the name with a trade mark, the time for the company to change its name was 3 months. Penalty for default in complying with the provisions of this section was one thousand rupees for every day during which the default continued.

rectification

Section 22 of the 1956 Act was amended by the Trade Marks Act, 1999, which increased the power of the Central Government to order rectification of name where it constituted an infringement of a registered trade mark. The new provision was that the proprietor of the registered trade mark might make an application to the Central Government for an order for rectification of name because it was identical with or too nearly resembled the applicant’s registered trade mark. Such application was, however, to be made within five years from the date on which the registration of the company with offensive name came to the notice of the registered trademark owner. An application filed after the expiry of this period was not to be entertained. The Companies (Amendment) Act, 2000, enhanced the penalty amount from one hundred rupees to one thousand rupees and accordingly sub-section (2) of section 22 of the 1956 Act was amended.

Companies Act, 2013: Section 16

Section 16 of the 2013 Act corresponds to s. 22 of the 1956 Act and empowers the Central Government to direct a company to change its name if the company has been registered with a name that is identical with or similar to the name of an existing company, Under the 1956 Act, a registered trade mark owner could seek rectification of the name of a company which was similar to the trade mark within 5 years of incorporation of that company. The 2013 Act reduces the period to three years. In case, similarity in its have been increased from 3 months to 6 months. Penalty for default in complying with the provisions of s. 16 of the 2013 Act has been the same in case of the company which is one thousand rupees per day during the period of default. However, now as per s. 16(3) of the 2013 Act, every officer of the company who is a party to default will be imposed with a fine which shall not be less than five thousand rupees but may extend to one lakh rupees. So now there is double fine -one for company and the other for the officer in default.

Delegation of powers to R.D and ROC

The Central Government has issued two circulars SO 1352 and 1353 dated 21-05-2014 which delegated some powers to Regional Directors (RDs) and the Registrar of Companies (ROCs). The powers of the Central Government in s. 16 of the 2013 Act have been delegated to the Regional Directors.

Changes made by Trade Marks Act, 1999

Section 22 of the 1956 Act was amended by s. 158 of the Trade Marks Act, 1999. The amendment had enhanced the power of the Central Government to order rectification of name where it constitutes an infringement of a registered trade mark. The new provision is that the proprietor of the registered trade mark may make an application to the Central Government for an order for rectification of name because it is identical with or too nearly resembles the applicant’s registered trade mark. Such application must be made within five years from the date on which the registration of the company with offensive name comes to the notice of the registered trade mark owner. An application filed after the expiry of this period was not entertained. The time-limit for exercise of discretionary power of the Central Government for rectification of name is 12 months. This is prescribed in essence for invoking the power Central Government under s. 22. The Central Government does not have jurisdiction to give any direction after 12 months of registration of the company. As to what constitutes infringement of registered trade mark, see s. 29 of the Trade Marks Act, 1999.

Compulsory rectification of name on Central Government’s direction

Section 22 of the 1956 Act changed the procedure as regards rectification of name of a company and also confers power on the Central Government to compel a change of name, penalizing default in compliance with its direction.

Where the company challenges the directions of the Central Government, the court would have to be convinced not merely that the name was misleading but also that harm might result if it were not changed. The form of harm to the public which was identified in the case was that people would be likely to pay more for the services of members of the Association because of the word ‘Certified’ in its name, which was said to give a misleading impression of the level of qualification required of members.

From the wording of s. 22 of the 1956 Act, it appears that the Central Government can compel a company to change its name only if the name is identical with or too nearly resembles that of an existing company but not on ground on which registration could have been refused in the first instance under s. 4(2) of the 1956 Act.

 In an English case, the Diabetic Society was required to change its corporate name to something that did not impinge upon the goodwill of The British Diabetic Association. There was sufficient similarity between these two names to necessitate a change, even though there was no intention to mislead the public. Further the power must be exercised within twelve months of registration of a new company or changed name of an existing company. After twelve months the Central Government cannot exercise the powers and ordinary procedure for alteration of name would have to be followed. The aggrieved company may resort to civil proceedings to compel change of the name.

A company was registered at Madras with the word “Kilburn” as a part of its name for which permission was granted by a Calcutta based company. The Madras Company floated two other companies in Madras and got them registered with the word “Kilburn” as part of name. It was found as a fact that the permission given by the Calcutta Company did not extend to the two new companies. An order issued to such companies to change their names was held to be justified. A similar rectification order passed in Kalpana Polytech India Ltd v. Union of India, (1998) 16 SCL 207 (Cal) was held to be justified. The word “Kalpana” was already part of the petitioner company’s name and the respondent company was prevented from using it as a part of its name. It was further held that the court could not in a writ petition go into the question of evidence and interferes with the order. The decision in Kalpana case was reversed on appeal by the Divisional bench in Kalpana Polytec India Ltd. v. UOI, (2001) 106 Com Cases 558 decision of the Regional Director as upheld by the single Judge was in the nature of  prevention of passing off. The Regional Director is not competent to consider the intricacies and technicalities of a passing off action. The word “or otherwise” should be construed ejusdem generis with the preceding word “inadvertence”. Hence, if a name has been registered with a state of mind akin to inadvertence only then the power under s. 22 of the 1956 Act will be available to the Regional Director. In other cases, the matter would have to go in for a Civil Court adjudication.

Where the name of the respondent company included the registered trade mark of the petitioner company without its consent, the court ordered cancellation of the registration of the respondent company. The court further directed that before cancelling the registration, the Registrar of Companies should permit the change of name of the respondent company, if it applies for the same in accordance with law before him within 16 days from the date of the order, provided the new name as suggested was not violate of the provisions of s. 20 or any other law, for the time being in force.

The power of the Central Government under the section can be exercised within the twelve-month period only. In counting this, the period of any court stay order in the matter would be excluded.   

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