Heard both sides.
2.In this matter, originally, arguments were heard and orders were reserved on 17.06.2009. However, learned counsel for the respondents/defendants mentioned that there was a possibility of settlement and hence may be posted before the court. Accordingly, the matter came to be posted on 28.7.2009. On 06.08.2009, both sides informed that there was no possibility of settlement. The counsel for the defendants stated that the first plaintiff M/s.Nittany Outsourcing Services P. Ltd. had changed their name and had obtained a fresh certificate of incorporation consequent upon the change of name by e4e Healthcare Business Services Private Limited and produced the certificate, dated 27.06.2009. Again, the matter was reserved for orders.
3.A.No.2395 of 2009 is filed by the plaintiffs for ordering arrest of persons, directors and persons in-charge of the day today affairs of the respondent Company and for attachment of properties of the respondents for willful disobedience of the injunction order, dated 06.05.2009 passed by this Court in O.A.No.371 of 2009 in C.S.No.340 of 2009.
4.A.No.2468 of 2009 is filed by the defendants to refer the parties for arbitration as per the agreement, dated 4.5.2005 and to dismiss the suit in C.S.No.340 of 2009.
5.O.A.No.370 of 2009 was filed by the applicants/plaintiffs, seeking for an ad-interim temporary injunction restraining the respondents, its directors/promoters, franchisees, managers, employees, agents and all others acting for, claiming under or through or on their behalf or in concert with them from using, offering for services, advertising or otherwise directly or indirectly dealing in all kinds of services relating to healthcare and allied adjudication services or any kind of healthcare services using NITTANY or any mark similar thereto as a service mark or as part of corporate name/business name/domain name or in any other manner whatsoever in the course of trade, and thereby passing off their services and business as and for the services and business of the first applicant or in any other manner whatsoever pending disposal of the suit.
6.O.A.No.371 of 2009 was filed by the applicants/plaintiffs, seeking for an ad-interim temporary injunction, restraining respondents 6 to 10 or their franchisees, employees, agents and all other acting for, claiming under or through or on their behalf or in concert with them from using, offering for services, advertising or otherwise directly or indirectly dealing in all kinds of services relating to healthcare and allied adjudication services or any kind of healthcare services using NITTANY or any mark similar thereto as a service mark or as part orf corporate name/business name or in any other manner whatsoever in the course of trade and thereby breaching the agreed terms of Composite Transaction Agreement or violating any provisions of the said agreement, pending disposal of the suit.
7.The suit is filed by the plaintiff, seeking for a permanent injunction, restraining the defendants or any one acting on their behalf from using, offering for services, advertising or otherwise directly or indirectly dealing in all kinds of services relating to healthcare and allied adjudication services or any kind of helathcare services using NITTANY or any mark similar thereto as a service mark or as part of corporate name/business name/domain name or in any other manner whatsoever in the course of trade, and thereby passing off their services and business as and for the services and business of the first plaintiff or in any other manner whatsoever and also for a permanent injunction restraining the defendants 6 to 10 or their franchisees, employees, agents and all other acting for, claiming under or through or on their behalf or in concert with them from using, offering for services, advertising or otherwise directly or indirectly dealing in all kinds of services relating to healthcare and allied adjudication services or any kind of healthcare services using NITTANY or any mark similar thereto as a service mark or as part of corporate name/business name or in any other manner whatsoever in the course of trade and thereby breaching the agreed terms of Composite Transaction Agreement or violating any provisions of the said agreement and for a further direction to the defendants to pay to the plaintiffs a sum of Rs.25,00,000/- as damages for passing off its services as and for the first plaintiff's services and also for directing the defendants to surrender to the plaintiffs for destruction the name boards, invoices/bills, prints, dies, blocks, moulds and plates, screen prints, packing and advertising material and any other material in the defendants' possession, which bears the trade name/service mark NITTANY or any other identical mark in any manner whatsoever. Further, a preliminary decree was also sought for in favour of the plaintiffs directing the defendants to render account of profits made by use of the identical trade name/service mark NITTANY amounting passing off and a final decree in favour of the plaintiffs for the amount of profits thus found to have been made by defendants after the latter have rendered the accounts.
8.Pending the suit, two Original Applications in O.A.Nos.370 and 371 of 2009 were taken out.
9.It is the case of the applicants/plaintiffs that the first applicant is a company incorporated under the Companies Act and is providing outsourced healthcare billing and adjudication services for healthcare companies situated in the USA. Prior to May, 2005, all the 90,000 equity shares in the first applicant were held severally by respondents 6 to 10. It is further stated that the entire equity shares in the first applicant were acquired by the second applicant in a phased manner between May, 2005 and November, 2006 pursuant to a Composite Transaction Agreement in May, 2005. The said agreement encompasses the General Covenant Agreement, Transaction Agreement, Shareholders Agreement and Share Sale agreement for purchase of all 90,000 equity shares from the erstwhile shareholders of the first applicant company. The second applicant is a wholly owned subsidiary of the third applicant. Consequently, the first applicant is now a wholly owned subsidiary of the third applicant.
10.It was stated by the first applicant that they are the global leader in outsourcing service and a solution provider with a strong focus on healthcare services. The first applicant provides business services for enterprises for customer support and business process outsourcing services leveraging technology to improve the customer's business processes and performance. The first applicant provides a wide range of revenue cycle management services to hospitals and medical billing companies. The first applicant's business is known as service mark NITTANY, which had acquired distinctiveness in the healthcare service. After acquisition of the first applicant by the second applicant, the applicants have nurtured and nourished the service mark NITTANY and have made it as one of the most trusted service marks in the business of healthcare services.
11.It was further stated that during the course of transfer of shares, it was agreed between the erstwhile shareholders of the first applicant, i.e. respondents 6 to 10, who sold their shares to second applicant that the erstwhile shareholders would be free to use the name of the first applicant NITTANY for any non healthcare business at any time after a period of 12 months with effect from the closing date. The same has also been recorded in terms of Clause 8.7 of the Shareholders Agreement entered into by the first applicant, second applicant and the sellers. The term clearly stipulates that the sellers would be free to use the existing name for any non healthcare business. Therefore, it impliedly stated that the service mark/name NITTANY cannot be used by the sellers for business relating to healthcare. It was also stated that in terms of clause 9 of the Transaction Agreement executed among the parties, the erstwhile shareholders of the first applicant have provided to second and third applicants warranties and representations made in annexure G in the warranties. It was also stated that the agreement upon execution and delivery will be legal and binding obligations of the sellers enforceable in accordance with the terms. The said term is subsisting till date. A combined reading of Clause 8.7 of the shareholder agreement and clause 9 of the Transaction agreement will make it clear that the sellers have bound themselves in using the service mark NITTANY. It was also stated that the Disclosure Schedule I annexed to the transaction agreement was made by the erstwhile shareholders, who are respondents 6 to 10. In the disclosure schedule, the erstwhile shareholder had disclosed only about the existence of two companies, i.e. Nittany Decision Services P. Ltd. and Infoquest Infotech P. Ltd. as companies having business similar to its exclusive business. By this declaration, the erstwhile shareholdera of the first applicant had made it clear that they did not have any interest over the companies dealing in healthcare and allied outsourcing business other then the two disclosed.
12.It was further stated that during March, 2009, the applicants came to know about the existence of some other companies owned, subsidized or promoted by respondents 6 to 10 and are carrying on business in healthcare outsourcing and allied services in breach of agreement. Of these companies, respondents 1,2,4 and 5 were incorporated prior to the closing date of shareholders agreement and respondent No.3 was incorporated on 17.08.2006 after the closing date of the shareholders agreement. Therefore, the erstwhile shareholders are the current shareholders of respondents 1 to 5 and the shareholders and sellers are respondents 6 and 7, who were also directors in respondents 1 to 5. Respondents 1 to 5 are involved in the same line of business using identical trading style in breach of the agreements. It was also stated that respondents 6 to 10 are in one way or other associated either in the formation and promotion of respondents 1 to 5.
13.It was further stated that respondents 6 to 10 in the course of sale had agreed to disclose the details of their equity shares in the other companies dealing in healthcare business as that of the first applicant at the time of execution of the agreement and also agreed to refrain from floating any new company dealing in healthcare business using the name NITTANY. Respondents 6 to 10 have filed to disclose and suppressed the details regarding their equity shareholdings in respondents, who are dealing in healthcare business. They had committed breach of trust and also had played fraud and cheated the applicants. Respondents 6 to 10 were fully aware they were restrained from floating any new company dealing in healthcare business using the name NITTANY. 14.The applicants came to know that respondents have included the third respondent under the head "Nittany Healthcare" under a website and it is creating a confusion and deception in the minds of people. The adoption by the respondents of an identical name for similar business is an outward exercise of passing off and it is a sheer dishonest. The respondents are well aware of the goodwill and reputation of the third applicant and they cannot grab illicit benefit.
15.It was further stated that using the name of NITTANY by the respondents will adversely affect the exclusive rights vest with the applicants. Therefore, they should be restrained by way of temporary injunction in terms of the prayers set out already.
16.The 6th respondent had filed a common counter affidavit on behalf of himself and respondents 1,3, and 7 to 10 also. It was stated that the 6th defendant was holding a Master's Degree from IIT, Mumbai and Post Graduate Degree in Management Studies from IIM, Kolkatta. The first applicant's company was promoted by these respondents in 2003. The applicant, 6th respondent and respondents 7 to 10 originally owned the entire 90,000 equity shares of the first plaintiff company. It was by his sheer hard work, perseverance and sincerity, the first plaintiff's company became a very good profit making company. It was the entire customers of the company was secured by the 6th defendant by rendering good services. The 7th defendant is his wife. Defendants 8 to 10 are the private limited companies promoted and controlled by the 6th defendant. During the year 2004-05, the respondents being the sellers, decided to sell their holdings of entire 90,000 equity shares. The second applicant offered to buy the same. With a view to safeguard the interest as sellers, the parties decided to reduce in writing the terms and conditions of sale including protection and use of the word NITTANY. Therefore, between the parties General Covenants Agreement, Transaction Agreement, Shareholders Agreement and Share sale agreement were entered into.
17.It was further stated that Clause 3 of the General Covenants Agreement, dated 4.5.2005 provides for disputes resolution to the Chairman of the Parent company. If an attempt to bring an amicable settlement failed, a notice shall be given in terms of Clause 3.2 and in terms of Clause 3.3, arbitration proceedings should be held in Bangalore and governed by the Laws in India. In clause 8 of the Shareholders Agreement, dated 4.5.2005, it provides for restriction on use of the name of the company. Clause 8.3 of the agreement reads as follows:
"8.3. Immediately following the expiry of the period of 12 (Twelve) months after Closing Date the co-branding of the name of the Company shall cease and consequently the name of the Company shall cease and consequently the name of the Company shall be changed to reflect only the name of the Parent and all reference to the Company and it's services insofar as it relates to the Exclusive Business."
18.It was further stated in clause 8.7 that after 12 months, the Sellers would be free to use the existing name for any non healthcare business. It was stated that the first applicant was bound by the contractual term to delete the name NITTANY from its name within 12 months from 4.5.2005 in respect of their exclusive business of health care. Therefore, plaintiffs have filed to do so and the suit itself was filed in the name of NITTANY. The first plaintiff having undertaken contractually not to use the name NITTANY or the exclusive name of the company in its business, had breached the term of agreement and their term to use the work NITTANY was available only upto 4.5.2006. It was further stated that since the contractual term provides for arbitration of all disputes, no notice was issued for breach of the term and there was no attempt to solve the dispute by arbitration.
19.It was further stated that the respondents are Indian citizens and Indian companies and the terms of the agreements executed on 4.5.2005 did not prohibit the use of the name NITTANY relating to healthcare business. The respondents in order to protect their rights, had applied and obtained registration of the trade mark NITTANY in the name of the 10th respondent. The 10th defendant is the registered service mark owner of the work NITTANY and are entitled to use the same. For the plaintiffs having bound by Clause 8 of the agreement dated 4.5.2005 to use the word NITTANY, the interpretation placed by the plaintiffs on Clause 8.7 is not acceptable. The 10th respondent is enjoying the statutory right. Though the plaintiffs and the respondents 1,3,6 to 10 are parties to the arbitration agreement, the applicants/plaintiffs have deliberately impleaded respondents 2,4 and 5 without there being any cause of action against them. The respondents never suppressed any facts while making disclosures to the third applicant. The Company Law in India provides for minimum of two shareholders in any company. Accordingly, in case of 100% subsidiaries, a token number of shares are registered in the name of nominee without giving any beneficial rights to such nominee. In these companies, i.e. R2, R4 and R5, 10,000 equity shares were held by the holding company, i.e. with Nittany Decision Services P. Ltd. and 200 shares were registered in the joint names of Nittany Decision Services P. Ltd., Praween Napate and Raju Vasantraj. Therefore, none of the sellers hold any equity interest in those companies by way of shareholding.
20.It was further stated that the applicants have not produced any evidence to show that those companies were carrying on competing business at the time of execution of the transaction agreement. These three companies were dormant companies as on 31.3.2004 and the holding company had fully written off its investments in these companies by 31.3.2004. The respondents have not violated the disclosure clause in the agreement and there was no breach of the terms of the agreement. It was also stated that there is no specific clause in the agreement, which prevents the respondents from doing healthcare business using the service mark NITTANY. The first defendant was never in the business of healthcare until March, 2009. It as further stated that the first applicant is not the registered owner of the copyright/trademark/service mark NITTANY. Therefore, they have no locus-standi to use the service mark NITTANY without the consent owner of the registered owner of the said mark. The third applicant is an unknown brand in the USA as far as the healthcare market is concerned. Having committed breach of agreement, the applicants/plaintiffs have enriched themselves.
21.It was also stated that the agreement was executed at Bangalore, which is outside the jurisdiction of this Court. The first applicant is having office at Kovilambakkam,, which is again outside the jurisdiction of this Court. The other two applicants are having their office outside and therefore, no part of the cause of action arose within the jurisdiction of this Court. Merely because the website of the first defendant can be browsed of accessed from Chennai, it did not mean that it gave rise to a cause of action as the address of the first defendant is admittedly outside the territorial jurisdiction of this court. The defendants did not commit any passing off as alleged by the plaintiffs. The 10th defendant is the registered owner of service mark NITTANY. The plaintiffs' right to use the word NITTANY in the business was limited to a maximum period upto 04.05.2006. There is no question of paying any damages to the plaintiffs. The other reliefs sought for are not maintainable in the eye of Law.
22.Further, the respondents have filed an application (i.e. A.No.2468 of 2009) under
<act id=_LGxPokB_szha0nWKtKy section=8>Section 8 </act>of the Arbitration and Conciliation Act, 1996 without submitting the jurisdiction of this Court. The true copy of the arbitration agreement had also been filed by the plaintiffs and it is relied on by the respondents for the purpose of
<act id=_LGxPokB_szha0nWKtKy section=8>Section 8 </act>application. Hence the applications filed by the plaintiffs are to be dismissed and parties must be relegated to an arbitration.
23.Pending the O.As., this Court, by an order, dated 6.5.2009, issued a direction to respondents 6 to 10 not to issue any publication, utilising the name of NITTANY for healthcare and allied adjudication services and it was restricted till 15.6.2009. Thereafter, the matter was not extended by any further order. It was in the meanwhile, an application in A.No.2395 of 2009 was taken out for the arrest of respondents Directors and also for an order of attachment under Order 39 Rule 2-A CPC.
24.Mr.A.A.Mohan, the learned counsel for the applicants/plaintiffs submitted that the jurisdiction of this court was available since the website put out by the defendants was accessible from Chennai. He also referred to various provisions in the agreement and contended that respondents were bound themselves not to use the word NITTANI as prefix to their services in respect of the healthcare services. Therefore, the applicants/plaintiffs have made out a prima facie case for an injunction and for punishing the respondents. He also wanted the respondents to be punished for violating the order of this court. He had also filed a typed set of papers dated 13.6.2009, showing the letters sent by the respondents and the website of R1 to show that they are continuously using the same even in June, 2009 when the interim order was in force.
25.With reference to the arbitration, it was contended that arbitration clause cannot grant the relief against passing off. Their relief was confined in respect of the respondents using the word NITTANY in healthcare business alone and not in any other business.
26.In this context, the learned counsel placed reliance upon the judgment of this Court in Health & Glow Retailing Pvt. Ltd. Vs. Dhiren Krishna Paul, Trading as Health and Glow Clinic & Anr reported in 2007 (35) PTC 474 (Mad). The said judgment was relied upon for the purpose of exercising power under Order 39 Rule 2-A CPC. It was held therein that Order 39 Rule 2-A is available merely for the purpose of upholding the dignity and majesty of the court, but also to protect the interest of a person in whose favour an interim order was granted or to keep the subject matter of litigation well preserved or maintained during the pendency of the proceedings. In that case, apart from considering the question of jurisdiction of the court to punish for the violation of an interim order, on the question of grant of an injunction, this court found a prima facie case and a balance of convenience in favour of the plaintiff and hence the interim orders were made absolute.
27.The learned counsel further relied upon the judgment of this court in H.G.Oomer Sait and another Vs. O.Aslam Sait reported in 2002 (2) LW 187, wherein this court held that an arbitrator cannot deal with the issue relating to fraud and misrepresentation and they should be left with the remedies through a civil court and an arbitrator was not competent to go into such issues. There is nothing in the Arbitration Act placing total embargo on the civil court to continue the proceedings only because there was an existence of an arbitration clause. There are well known exceptions to general rule of arbitration.
28.The learned counsel also placed reliance upon the judgment of the Supreme Court in Sukanya Holdings (P) Ltd. Vs. Jayesh H.Pandya and another reported in 2003 (5) SCC 531 and placed reliance upon paragraphs 12 to 16 of the said judgment, which are as follows:
"12. For interpretation of
Section 8,Section 5 would have no bearing because it only contemplates that in the matters governed by Part I of the Act, the judicial authority shall not intervene except where so provided in the Act. Except
Section 8, there is no other provision in the Act that in a pending suit, the dispute is required to be referred to the arbitrator. Further, the matter is not required to be referred to the Arbitral Tribunal, if: (1) the parties to the arbitration agreement have not filed any such application for referring the dispute to the arbitrator; (2) in a pending suit, such application is not filed before submitting first statement on the substance of the dispute; or (3) such application is not accompanied by the original arbitration agreement or duly certified copy thereof. This would, therefore, mean that the Arbitration Act does not oust the jurisdiction of the civil court to decide the dispute in a case where parties to the arbitration agreement do not take appropriate steps as contemplated under sub-sections (1) and (2) of
Section 8 of the Act.
13. Secondly, there is no provision in the Act that when the subject-matter of the suit includes subject-matter of the arbitration agreement as well as other disputes, the matter is required to be referred to arbitration. There is also no provision for splitting the cause or parties and referring the subject-matter of the suit to the arbitrators.
14. Thirdly, there is no provision as to what is required to be done in a case where some parties to the suit are not parties to the arbitration agreement. As against this, under
Section 24 of the Arbitration Act, 1940, some of the parties to a suit could apply that the matters in difference between them be referred to arbitration and the court may refer the same to arbitration provided that the same can be separated from the rest of the subject-matter of the suit. The section also provided that the suit would continue so far as it related to parties who have not joined in such application.
15. The relevant language used in
Section 8 is: in a matter which is the subject of an arbitration agreement. The court is required to refer the parties to arbitration. Therefore, the suit should be in respect of a matter which the parties have agreed to refer and which comes within the ambit of arbitration agreement. Where, however, a suit is commenced as to a matter which lies outside the arbitration agreement and is also between some of the parties who are not parties to the arbitration agreement, there is no question of application of
Section 8. The words a matter indicate that the entire subject-matter of the suit should be subject to arbitration agreement.
16. The next question which requires consideration is even if there is no provision for partly referring the dispute to arbitration, whether such a course is possible under
Section 8 of the Act. In our view, it would be difficult to give an interpretation to
Section 8 under which bifurcation of the cause of action, that is to say, the subject-matter of the suit or in some cases bifurcation of the suit between parties who are parties to the arbitration agreement and others is possible. This would be laying down a totally new procedure not contemplated under the Act. If bifurcation of the subject-matter of a suit was contemplated, the legislature would have used appropriate language to permit such a course. Since there is no such indication in the language, it follows that bifurcation of the subject-matter of an action brought before a judicial authority is not allowed."
29.The learned counsel further placed reliance upon the judgment of the Supreme Court in India Household and Healthcare Ltd. Vs. LG Household and Healthcare Ltd. reported in 2007 (5) SCC 510 and referred to the following passages found in paragraphs 20 to 22, which are as follows:
20. Furthermore, the applicant herein has also prayed for inter alia the following reliefs:
c. Whether the issue of use of LG logo is a valid and tenable ground for the termination of agreements between the parties?
d. Whether the petitioner is entitled under the agreements to continue with the production of the products with LG logo as agreed between the parties?
21. The said prayers fall outside the arbitration agreement since LG logo belongs to LG Corporation which is the owner of the trade mark. It is not a party to the arbitration agreement. It allegedly has filed a separate suit. In a case of this nature, a Division Bench of this Court in Sukanya Holdings (P) Ltd. v. Jayesh H. Pandya held: (SCC p.535, para 13) 13. Secondly, there is no provision in the Act that when the subject-matter of the suit includes subject-matter of the arbitration agreement as well as other disputes, the matter is required to be referred to arbitration. There is also no provision for splitting the cause or parties and referring the subject-matter of the suit to the arbitrators. It was further stated: (SCC p.536, paras 16-17) 16. The next question which requires consideration iseven if there is no provision for partly referring the dispute to arbitration, whether such a course is possible under
Section 8 of the Act. In our view, it would be difficult to give an interpretation to
Section 8 under which bifurcation of the cause of action, that is to say, the subject-matter of the suit or in some cases bifurcation of the suit between parties who are parties to the arbitration agreement and others is possible. This would be laying down a totally new procedure not contemplated under the Act. If bifurcation of the subject-matter of a suit was contemplated, the legislature would have used appropriate language to permit such a course. Since there is no such indication in the language, it follows that bifurcation of the subject-matter of an action brought before a judicial authority is not allowed.
17. Secondly, such bifurcation of suit in two parts, one to be decided by the Arbitral Tribunal and the other to be decided by the civil court would inevitably delay the proceedings. The whole purpose of speedy disposal of dispute and decreasing the cost of litigation would be frustrated by such procedure. It would also increase the cost of litigation and harassment to the parties and on occasions there is possibility of conflicting judgments and orders by two different forums.
22. We are, however, not oblivious of the fact that Sukanya Holdings10 has been distinguished in Rashtriya Ispat Nigam Ltd. v. Verma Transport Co. The present case, however, is covered by Sukanya Holdings.
30.Further reliance was placed upon the judgment of the Delhi high Court in The Chancellor Masters and Scholars of the University of Oxford Vs. Orient Longman Private Limited and others reported in 2003 (26) PTC 186 (Del) for the purpose of showing that a negative covenant in the agreement can be enforced and that the doctrine of restraint of trade never applies during the continuance of such contract and it will apply only when the contract comes to an end. It is also stated that the underlying principle governing contracts in restraint of trade is the same and as a matter of fact the courts take a more restricted and less favourable view in respect of a covenant entered into between an employer and an employee as compared to a covenant between a vendor and a purchaser or partnership agreements. Hence it was argued that a negative covenant in the term of the agreement can be enforced against the petitioner.
31.Lastly, the learned counsel relied upon the judgment of the Supreme Court in Laxmikant V.Patel Vs. Chetanbhai Shah and another reported in 2002 (3) SCC 65 and placed reliance upon paragraph 8 of the said judgment, which is as follows:
8. It is common in trade and business for a trader or a businessman to adopt a name and/or mark under which he would carry on his trade or business. According to Kerly (Law of Trade Marks and Trade Names, 12th Edn., para 16.49), the name under which a business trades will almost always be a trade mark (or if the business provides services, a service mark, or both). Independently of questions of trade or service mark, however, the name of a business (a trading business or any other) will normally have attached to it a goodwill that the courts will protect. An action for passing-off will then lie wherever the defendant companys name, or its intended name, is calculated to deceive, and so to divert business from the plaintiff, or to occasion a confusion between the two businesses. If this is not made out there is no case. The ground is not to be limited to the date of the proceedings; the court will have regard to the way in which the business may be carried on in the future, and to its not being carried on precisely as carried on at the date of the proceedings. Where there is probability of confusion in business, an injunction will be granted even though the defendants adopted the name innocently.
Therefore, the learned counsel contended that if there is probability of confusion in business, an injunction will be granted even if the defendants have adopted the name innocently.
32.Per contra, Mr.S.Vasudevan, learned counsel for the respondents/defendants submitted that the prayer in the suit will not apply to defendants 2,4 and 5. It is also stated that even the first plaintiff cannot use the word NITTANY after 12 months. In the present case, they have been using the name and only on 22.6.2009, the name was changed. Having used the name in violation of the agreement, they have no right to file the suit. It was further stated that when the 6th respondent had obtained trade mark in the name of NITTANY, there cannot be any objection in using the name. Further the defendants 2,4 and 5 have become defunct for the last seven years and no suit will lie against them.
33.The learned counsel further stated that the suit cannot be filed on the basis of prior user of a trade mark. Defendants 2,4 and 5 are only nominees and not shareholders. No cause of action will arise on the basis of a website information. The party, which breaks the term of contract, cannot seek an injunction. In clause 8.6 of the shareholder agreement, it was stated that so long as the Company uses the existing name the sellers shall also be entitled to use the existing name for pursuing the artwork business without any restrictions. They are also permitted to use the word NITTANY for other non healthcare business. He further submitted that there was neither a prima facie case nor the balance of convenience was in their favour for the grant of any interim order. There was no material to punish the respondents for the alleged disobedience of the order of this court.
34.In this context, the learned counsel placed reliance upon the judgment of this court in Wonderweld Electrodes (Private) Ltd. Vs. Ahura Welding Electrodes Manufacturing Limited and others reported in 2003 (1) MLJ 386 and contended that the licensee of the name by prior user cannot prevent the use of mark by any other licensee and the licensee cannot restrict the statutory right vested in the registered proprietor of the mark. In that view of the matter, he wanted the applications filed by the applicants/plaintiffs to be dismissed.
35.The learned counsel further placed reliance upon the judgment of this Court in Kotak Mahindra Bank Ltd. Vs. Sundaram Brake Lining Ltd. and 2 others reported in 2008 (4) CTC 1 for contending that (1) the arbitration clause are broad enough to cover the disputes relating to the validity of the contract itself even on the ground of fraud, misrepresentation, etc., in which case the jurisdiction of the arbitral Tribunal is not ousted and (2) if the arbitration clause is not broad enough to cover the disputes, even then the separability doctrine could be invoked to sustain an arbitration except in those exceptional cases pointed out as nagging exceptions in the aforesaid book. The 'broad arbitration clause' principle was accepted by the Supreme Court in ITC Ltd. Vs. G.J.Fernandes reported in AIR 1989 SC 839.
36.In that view of the matter, the learned counsel wanted the three applications filed by the plaintiffs to be dismissed and also to allow the application filed by the defendants for arbitration by the Arbitrator.
37.In view of the rival contentions, it must be seen whether the appropriate reliefs claimed by the parties can be granted or not?
38.Insofar as the two injunction applications are concerned, it is clearly seen that the first applicant has also violated the terms of the agreement by continued use of the term NITTANY as correctly contended by the respondents. It was rectified only by the change of name in the year 2009. Therefore, it is not open to them to enforce the term of agreement, wherein they themselves were breachers of the agreement.
39.It must also be noted that the respondents are having business only in India being Indian companies and the agreement had permitted them to use the word NITTANY in all other business. The agreement has to be seen as a whole and if it provides for arbitration clause, there is no escape for the plaintiffs to file a suit outside the arbitration clause by contending that the arbitrator cannot decide the issues relating to passing off. In such a case, there can be splitting up of the cause of action and hence the arbitration clause cannot be ignored on that account.
40.The 6th respondent had obtained a trade mark in respect of the name NITTANY and no injunction can be granted against the statutory user of the trade mark. In the light of the above, O.A.Nos.370 and 371 of 2009 and A.No.2395 of 2009 stand dismissed.
41.In A.No.2468 of 2009, the defendants/applicants have clearly made out that the disputes between the parties will have to be necessarily referred to the arbitration and there is no escape for the plaintiff to resile from the arbitration agreement by showing that their case falls outside the scope of the arbitration clause in the agreement, which enabled them to file the suit. Such a contention is contrary to the term of the agreement. Therefore, the issue of breach of agreement and enforcement of negative covenant is squarely covered by the broad clause as pointed out by this court in Kotak Mhindra Bank Ltd. case (cited supra). Therefore, application in A.No.2468 of 2009 stands allowed. The parties are relegated to arbitration as provided under the agreement. No costs.
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