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RAJEEV SAUMITRA vs NEETU SINGH & ORS

FACTS:

The plaintiff is Rajeev Saumitra who began the business of imparting education under the banner of Paramount coaching centre in January 2005 as a sole proprietor. Defendant No.1 is the plaintiff’s wife, Neetu Singh, defendant No.2 is K.D Campus Pvt. Ltd., the One Person Company of defendant No.1 and defendant No.3 is Paramount Coaching Centre Pvt. Ltd.

There is a dispute between the plaintiff and defendant No.1 as to who adopted the mark PARAMOUNT prior in times. However, it is not in dispute that in 2009, the said mark became the property of defendant No.3-Company on its incorporation.

Defendant No.1 came into contact with the plaintiff looking for a job and requested him to let her teach English subject in his coaching institute as she was in dire need of financial assistance. The plaintiff allowed the defendant No.1 to take English Classes in his coaching centre.

Subsequently after 8-9 months, defendant No.1 expressed her willingness to get married with the plaintiff. The plaintiff got married with defendant No.1 on 12th March, 2006. Subsequently the proprietorship concern, namely, Paramount Coaching Centre was converted into a Private Limited Company, i.e. defendant No.3. Defendant No.1 was inducted as a Director of defendant No.3 with an equal shareholding of 50%.

Later into the marriage, plaintiff finds out that defendant No.1 is already married and is the founder and Director of K.D. Campus Pvt. Ltd. (defendant No.2). She just married him with an intention to conspire with her family members to hijack and divert the business, customers and revenue of defendant No.3 into defendant No.2. The plaintiff accuses the defendant no. 1 of using the brand name of the defendant No.3 ‘PARAMOUNT’ for deceiving the customers and clients of defendant No.3 into thinking that defendant No.2 is incorporated and a part of defendant No.3. The defendant accuses the plaintiff of obstructing her from participating in the business of defendant No.3 and embezzling its funds.

CONTENTION OF THE CASE:

  • Whether defendant No.1 is authorised to use the trademark ‘PARAMOUNT’ at her discretion?
  • Whether the defendant No.1 is in violation of her Directorial duties towards defendant No.3?

ARGUMENTS OF PLAINTIFF:

Defendant No.1 has made many statements publically by way of advertisements and messages on mobile phone to the students and other modern media in order to harm the business of defendant No.3 and its goodwill and reputation as well as against the plaintiff which is in violation of section 166 of Companies Act 2013 which states the fiduciary obligations of the Director towards his Company and section 88 of the Trusts Act of 1882.

ARGUMENTS OF THE DEFENDANT NO.1

  • The plaintiff has no right or authority to file such an action. The Company has not authorized the plaintiff to file any such action. The derivative action filed by him is not maintainable.
  • The suit of the plaintiff is without any cause of action, as he has filed the suit as shareholder to the extent of 50% in the shareholding of defendant No.3-Company for violation of his individual membership rights. The remedy for the plaintiff, if any, is a petition under Section 397/398 of the Companies Act, 1956 before Company Law Board.  The suit is impliedly barred by the provisions of Companies Act read with Section 9 of CPC.
  • The share of the defendant No.1 was reduced by 9% in the financial year 2013-14 by the plaintiff by forging the signatures of the defendant No.1 in collusion with the previous account care-taker Mritunjay Singh who had misrepresented himself as C.A.
  • The nature of the facts of the case would establish that the dispute be treated as quasi- partnership dispute.
  • The suit filed by the plaintiff is barred under Order II Rule 2 CPC.

JUDGEMENT:

Examining the pile of evidence produced by the plaintiff, one can easily draw conclusion that the way the defendants No.1 and 2 had been carrying on business since February, 2015, it amounts to completely competing the business of defendant no. 3. The defendant No.1 is in violation of the provisions of Section 166 of Companies Act, 2013. She has failed to assign any valid reason or justification as to why she being the Director of defendant No.3 has started parallel business under the name of defendant No.2. If she had any grievances or the plaintiff is trying to control the business of defendant No.3 or she was ousted as alleged by her, she had the remedy and rightly so, she was availing the remedy, but there is hardly any justification to start parallel/similar to the business of defendant No.3. Normally, the injunction should have been followed; however, as the facts in the present case are peculiar. Therefore, it is to be examined, as to what type of order is required to be passed under the circumstances available in the case.

Considering the entire gamut of the matter and peculiar facts and circumstances of the case, the judge was of the view that there can be three scenarios in order to decide the dispute in hand but as the first two scenarios are not agreeable to the parties, the third scenario seems to be the only solution at hand.

Scenario 1:

That the defendants No.1 and 2 accept the terms and conditions for the purpose of settlement of matter in hand suggested by the plaintiff.

Scenario 2:

As suggested by Mr. Kapur (senior advocate) that all centres of defendant No.2 are merged with defendant No.3 and let the defendant No.3 may run under the name of Paramount in a peaceful manner for which the plaintiff has no objection.

Scenario 3:

The third scenario i.e. the interim application is disposed of with the following directions:

Subject to the condition and by filing of an affidavit of undertaking that (i) the defendants No.1 and 2 shall not use the mark PARAMOUNT, its goodwill in any manner in its Company. Defendant No.2 shall not poach teachers, students or staff members of defendant No.3 and within two weeks shall remove the word PARAMOUNT from all hoardings, advertisements, brochures and other materials and shall not open any new centre within the range of 100 meters where the centre of defendant No.3 already exists; (ii) she shall furnish the true account from February, 2015 till December, 2015 and every quarterly till the decision of the suit; the first statement would be filed by 15th February, 2016; (iii) she will not create any hurdle in smoothly going of defendant No.3 and she shall perform her fiduciary duties under the Act and sign all the requisite papers of the defendant No.3 and shall not create any hindrance of running business of defendant No.3 directly or indirectly.

In case of above said compliance and undertaking, the defendants No.1 and 2 are allowed to continue with the business of defendant No.2. In case of any breach, the plaintiff is entitled to move before Court for modification of order and then the Court may pass any appropriate orders.

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