MORGARDSHAMMAR AB Vs. MORGARDSHAMMAR India Pvt. Ltd.

Recently, the Honourable High Court of Delhi has restrained Modi Group’s MORGARDSHAMMAR India, a rolling mill equipment manufacturer, from using the MORGARDSHAMMAR trademark. The Court has granted Plaintiff MORGARDSHAMMAR AB a decree of permanent injunction against the use of its trademarks or trade name by the defendants MORGARDSHAMMAR India.

Justice A.K. Pathak issued a restraining order restraining India’s joint venture firm with Sweden’s MORGARDSHAMMAR AB from using the trademark on the ground that its Swedish partner’s share in the Indian firm has plunged below 40 percent to 8 percent, thereby impeding the Indian firm of the right to exploit the trademark as per the trademark license agreement amid the two companies.

Plaintiff MORGARDSHAMMAR AB is a registered company in Sweden and is engaged in the business of manufacturing, designing, fabricating, and delivering revamps of all sorts of rolling mills including guide system, equipment, and spare parts of the rolling mills.

Plaintiff has widespread business worldwide and has proprietary rights in the trade name ‘MORGARDSHAMMAR’ and trademark ‘MORGARDSHAMMAR (Label)”. Owing to the plaintiff’s prevalent business worldwide they had applied for and obtained registration in India in respect of trademark “MH MORGARDSHAMMAR” bearing Registration no. 393277 in Class 7 with respect to rolling mills machinery, parts thereof, and fittings.

Whilst Defendant MORGARDSHAMMAR India is a joint venture company of Plaintiff MORGARDSHAMMAR AB and Modi Group and was incorporated in 1983 for the purpose of designing, planning, fabricating, constructing, manufacturing, sub-contracting, providing, supplying, installing, commissioning, working, operating, purchase import, exporting, selling and dealing in all kinds of rolling mills including guide systems equipment, spare parts for rolling mills and accessories thereof, acting as consulting engineers, supplier of process know-how and technology in hot and cold rolling of ferrous and nonferrous metals

In September 1984 Plaintiff, vide a non-exclusive Trade Mark License Agreement permitted the defendant to use its trademarks/trade name i.e. ‘MORGARDSHAMMAR’ on the terms and conditions stipulated in the said agreement. As per Clause 15(a) of the aforesaid agreement, the right of permissive user of the aforesaid trademark will come to an end if the shareholding pattern of the Plaintiff falls below 25 percent.

In November 2009, defendant MORGARDSHAMMAR India in connivance and collusion with the majority shareholders allotted 750,000 equity shares of the defendant to the Mr. U.K. Modi of Modi Group, thereby altering the whole shareholding pattern of the Modi Group ensuing in the abridged percentage of shareholding of MORGARDSHAMMAR AB in MORGARDSHAMMAR India from 40 percent to 8 percent. Since the equity shareholding pattern of MORGARDSHAMMAR AB in MORGARDSHAMMAR India has fallen below 25 percent.

Afterward, in December 2009, Plaintiff through their Advocates conducted a search of the records of Registrar of Companies in respect of the Defendant and astonishingly came to know that Defendant without the knowledge of the Plaintiff had allotted its 750,000 equity shares to Mr. U.K. Modi of Modi Group consequently reducing the shareholding of the Plaintiff from 40% to 8%. Therefore, the defendant is liable to cease and desist from using the trademark and trade name.

Plaintiff subsequently issued a notice of cessation of the agreement with the Defendant thus prohibiting the Defendant from using the trademarks/ trade name as per Trade Mark License Agreement whereby Defendant was called upon to stop using the trademarks/ trade name within 21 days of the receipt of the notice.

Defendant’s witness Mr. Brajeshwar Dayal Garg submitted that the shareholding of the Plaintiff has been abridged to less than 25% is not disputed and allotment of 750,000 equity shares of Plaintiff to Mr. U.K. Modi of Modi Group is also not disputed, but it is put forth that the decision to allocate 750,000 equity shares to Mr. U.K. Modi of Modi Group was taken in the Annual General Meeting dated 27^th September 2007. And notwithstanding serving notice of the Annual General Meeting to all the shareholders, Plaintiff chose not to attend the meeting. Subsequently, 750,000 equity shares were allotted to the Defendant in the meeting of the Board of Directors held on 25^th January 2008. Accordingly, Form 2 was filed before the Registrar of Companies in relation to the Board of Director’s meeting.

Although, once the license has been terminated by the plaintiff, the defendant has no right to persist the use of the trademark and trade name and such use is tantamount to infringement under Section 29 of the Trade Mark Act. Furthermore, the defendant can’t even exploit the trademark as its trade name or name of its business concern.

Consequently, the plaintiff MORGARDSHAMMAR AB is entitled to a decree of permanent injunction against use of its trademarks or trade name by the defendant MORGARDSHAMMAR India since as per the Trade Mark Licensing Agreement clause 15(a) was violated according to which the right of the permissive user of the trademark will come to an end if the shareholding pattern of the Plaintiff in the defendant’s company MORGARDSHAMMAR India falls below 25 percent.

About the Author: Mr. Hemant Thadani, Trade Mark Associate at Khurana & Khurana and can be reached at [email protected]