JUDGMENT
Madan B. Lokur, J.
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1. By this order, I propose to dispose of IA Nos. 6318/2005 and 1644/2006 in Suit No. 1140/2005 and IA No. 7080/2005 in Suit 1276/2005.
2. Suit No. 1140/2005 is filed by Poysha Power Generation Pvt. Ltd. (Poysha) and the two Defendants therein are Doctor Morepen Limited (Dr. Morepen) and Kare Labs Pvt. Limited (Kare).
2.1 The prayer in the plaint is for a permanent injunction restraining the Defendants (Dr. Morepen and Kare) from infringing the trademark BURNOL assigned by Dr. Morepen to Poysha and for recovery of a sum of Rs. 24 lakhs with interest thereon towards royalty and fee payable by Page 1635 Dr. Morepen to Poysha for permitted use of the trademark BURNOL for the period from 19th April, 2004 to 30th April, 2005.
2.2 IA Nos. 6318/2005 and 1644/2006 were filed by Poysha under Order 39 Rules 1 and 2 of the CPC for an injunction restraining both the Defendants (Dr. Morepen and Kare) and those acting on their behalf from infringing the registered trademark BURNOL bearing registration No. 93493, which has been assigned to Poysha by Dr. Morepen.
3. Suit No. 1276/2005 has been filed by Dr. Morepen and Morepen Laboratories Limited (Morepen Labs) and the two Defendants therein are Poysha and Morgan Securities and Credits Pvt. Ltd. (Morgan).
3.1 The prayer in the suit is for a direction canceling the documents executed by Dr. Morepen on 19th April, 2004 It is the contention of Dr. Morepen and Morepen Labs that the documents executed on 19th April, 2004 whereby the registered trademark BURNOL was assigned to Poysha, were not intended to be acted upon or were nominal documents.
3.2 IA No. 7080/2005 was filed by the Plaintiffs (Dr. Morepen and Morepen Labs) under Order 39 Rules 1 and 2 of the CPC for an injunction restraining Morgan (perhaps this is a typing mistake and they intended to say Poysha) from interfering in the use of the brand BURNOL by Dr. Morepen and Morepen Labs.
4. For convenience, the facts as disclosed in Suit No. 1140/2005 will be referred to since learned Counsel for the parties agreed that this may be treated as the main case for the purposes of disposal of the interim applications, which were heard on 3rd, 6th, 7th, 8th and 9th March, 2006 when orders were reserved.
5. Poysha has made out a rather simplistic case in its plaint but Dr. Morepen has filed a rather detailed written statement giving certain antecedent facts and I think it will be appropriate if all the facts, including those disclosed by Dr. Morepen, are narrated.
6. The Boots Company plc of England used to manufacture a cream for treating burns, which was marketed under the trade name BURNOL. On 9th August, 1995 The Boots Company plc assigned the trademark to Knoll AG of Germany for a sum of US $ 100/-.
7. On 4th July, 1998 Knoll AG assigned the trademark BURNOL to Reckitt Piramal Ltd. and on 6th December, 2001 Reckitt Piramal Ltd. assigned the trademark to Dr. Morepen. According to Dr. Morepen several documents were executed at that time, such as an assignment deed, a technology transfer agreement and a marketing know-how agreement. The payment in respect of all these documents amounted to Rs. 8.95 crores.
8. For some of its business operations, Morepen Labs which is a sister company of Dr. Morepen required some finances. Accordingly, Morepen Labs entered into an Inter Corporate Deposit Agreement with Morgan on 19th September, 2002. The Inter Corporate Deposit (ICD) was for a sum of Rs. 5 crores and had rather stringent conditions, but this is not the subject matter of any controversy before me and, therefore, it is not necessary to dwell any further on this loan.
9. As one would expect, the loan was not repaid by Morepen Labs on or before the due date. Since some disputes arose between Morepen Labs Page 1636 and Morgan, the arbitration clause between the parties was invoked by Morgan. During the pendency of the arbitration, a Memorandum of Settlement dated 27th May, 2003 was arrived at between Morepen Labs and Morgan. In terms of the Memorandum of Settlement Morepen Labs furnished certain additional guarantees for repayment as per a fresh schedule. This Memorandum of Settlement dated 27th May, 2003 ultimately formed a part of a consent Award dated 28th June, 2003 between Morepen Labs and Morgan.
10. It appears that Morepen Labs did not adhere to the repayment schedule in terms of the arbitration Award dated 28th June, 2003 and, therefore, Morgan filed Execution Petition No. 13/2004 in this Court for executing the arbitration Award. By an order dated 28th January, 2004 this Court attached the bank accounts of the Judgment Debtors to the extent of about Rs. 6.4 crores, which was the due amount.
11. It appears that on or about 5th April, 2004 Morgan sought to execute the attachment order against Morepen Labs and on that very date the parties entered into an understanding whereby Morepen Labs gave some post dated cheques worth Rs. 6 crores to Morgan towards satisfaction of the decretal amount. It was also agreed between the parties that the cases filed by Morgan against Morepen Labs under Section 138 of the Negotiable Instruments Act would be withdrawn and all necessary steps would be taken for revoking the attachment order passed in Execution Petition No. 13/2004 It was further agreed that the trademark BURNOL would be pledged to Morgan after execution of the decree is kept in abeyance and the pledge would be discharged on receipt of the decretal amount. Morepen Labs mentioned these terms in a letter dated 5th April, 2004 addressed to Morgan.
12. Whether these terms were agreed upon or not, the fact is that the execution petition was not pursued by Morgan for quite some time, but it is said to be still pending disposal.
13. On 19th April, 2004, which is the crucial date, Dr. Morepen unconditionally assigned the trademark BURNOL to Poysha for a sum of Rs. 10 lakhs. The assignment deed acknowledged receipt of the amount by Dr. Morepen and also mentioned that all original documents were handed over by Dr. Morepen to Poysha. On the same date several other documents were executed by Dr. Morepen and these are as follows:-
(a) A General Power of Attorney authorizing Poysha to take steps to apply for registration of the transfer of the trademark BURNOL in the office of Trademark Registry, Bombay.
(b) A technology transfer agreement between Dr. Morepen and Poysha for a sum of Rs. 5 lakhs.
(c) A marketing know-how agreement between Dr. Morepen and Poysha for a sum of Rs. 5 lakhs.
(d) A letter by Dr. Morepen terminating the license agreement with Morepen Labs for marketing the burns cream BURNOL.
(e) A letter by Dr. Morepen terminating the contract manufacturing agreement with Kare.
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(f) A permitted user agreement between Dr. Morepen and Poysha whereby Poysha permitted Dr. Morepen to use the trademark BURNOL as a licensee up to 30th April, 2005 (subject to renewal). The agreement provided that the licensee (Dr. Morepen) would pay a sum of Rs. 2 lakhs per month as royalty, fee, commission or other remuneration to the licensor (Poysha).
14. On the basis of the above documents, Poysha claims to be the lawful assignee of the trademark BURNOL. After the period of the permitted user agreement expired, Poysha filed a suit for a permanent injunction restraining Dr. Morepen from infringing the trademark BURNOL, which was duly assigned to Poysha. It is in this suit that Poysha has filed the two injunction applications bearing IA Nos. 6318/2005 and 1644/2006.
15. The following facts do not seem to be in dispute: Morgan has three directors, that is, Mr. Suresh Chand Goyal, his wife Mrs. Meera Goyal and Mr. Prakash Agarwal. Poysha also has three directors and they are Mr. Suresh Chand Goyal, his wife Mrs. Meera Goyal and Ms. Ritu Agarwal. As such, these two entities appear to be sister companies.
The monthly payment of Rs. 2 lakhs towards royalty, fee, commission or other remuneration payable by Dr. Morepen to Poysha under the permitted user agreement was not paid. Consequently, Poysha also sought recovery of the amount of Rs. 24 lakhs with interest thereon in Suit No. 1140 of 2005.
The payment of Rs. 20 lakhs made by Poysha to Dr. Morepen towards assignment of the trademark BURNOL, execution of the technology transfer agreement and marketing know-how agreement was not encashed by Dr. Morepen.
16. None of the learned Counsel for the parties have been able to show me anything on record to suggest that before 19th April, 2004, when the trademark BURNOL was assigned by Dr. Morepen to Poysha, any discussions or negotiations took place between these two entities for assignment of the trademark and for execution of the other documents. If anything transpired, it was between Morgan (a sister company of Poysha) and Morepen Labs (a sister company of Dr. Morepen) as a result of the ICD, the arbitration Award and the execution petition filed by Morgan against Morepen Labs.
17. According to Poysha, pursuant to the assignment of the trademark BURNOL in its favor, it moved an application on 27th April, 2004 before the Trademarks Registry in Bombay and this application was allowed on 26th July, 2005. As such, according to Poysha it is now the recognized assignee of the trademark BURNOL.
18. In its plaint, Poysha has stated that it had sent several letters to Dr. Morepen including letters dated 23rd July, 2004, 23rd October, 2004, 24th January, 2005 etc. demanding payment of royalty of Rs. 2 lakhs per month with interest but Dr. Morepen did not comply with the demand. Dr. Morepen has denied receipt of these letters.
19. Poysha has stated in its plaint that to add insult to injury, Dr. Morepen continues to use the trademark BURNOL even after the permitted userPage 1638 agreement has lapsed by efflux of time on 30th April, 2005. Poysha advised Dr. Morepen not to exploit the trademark BURNOL but to no effect with the result that Poysha was left with no alternative but to file Suit No. 1140/2005 as mentioned above.
20. On their part, Dr. Morepen and Morepen Labs were of the view that the documents assigning the trademark BURNOL to Poysha was never intended to be acted upon and that they were nominal documents and, therefore, they filed Suit No. 1276/2005 for cancellation of the assignment deed and other related documents executed on 19th April, 2004 by Dr. Morepen.
21. On these broad facts, learned Counsel for Poysha contended that there is no dispute that a series of documents were executed by Dr. Morepen, including a deed assigning the trademark BURNOL to Poysha and that all these documents must be given effect to. The permitted user agreement had come to an end by an efflux of time on 30th April, 2005 and there is no reason why Dr. Morepen should be allowed to continue manufacturing and marketing BURNOL even after expiry of the said agreement. It was further submitted that Dr. Morepen and Kare should be restrained from manufacturing and marketing the burns cream BURNOL since that infringed the trademark of Poysha and violated its statutory rights. It was also submitted it is for the first time in its written statement that Dr. Morepen has come out with a theory that the documents executed on 19th April, 2004 were not intended to be acted upon. It was submitted that there was no basis for this contention and the documents executed should be given their full play.
22. It is true, as held by the Supreme Court in Anand Prasad Agarwalla v. Tarkeshwar Prasad (2001) 5 CC 568 that at the stage of temporary injunction, it would not be appropriate to hold a mini-trial. But at the same time, it cannot be disputed that it is necessary to have all the facts on record to understand the controversy between the parties.
23. In Midas Hygiene Industries (P) Ltd. v. Sudhir Bhatia , it was observed by the Supreme Court that it is well settled that? In cases of infringement either of trademark or of copyright, normally an injunction must follow.? Obviously, there is no doubt about this proposition. There is also no doubt that if the facts of a case reveal that the situation is not ‘normal’, it is not obligatory for an injunction to follow.
24. Learned counsel for Poysha cited Tamil Nadu Electricity Board v. N. Raju Reddiar wherein the Supreme Court observed in paragraph 7 of the Report as follows:- ‘At the outset it must be borne in mind that the agreement between the parties was a written agreement and therefore the parties are bound by Page 1639the terms and conditions of the agreement. Once a contract is reduced to writing by operation of Section 91 of the Evidence Act it is not open to any of the parties to seek to prove the terms of the contract with reference to some oral or other documentary evidence to find out the intention of the parties. Under Section 92 of the Evidence Act where the written instrument appears to contain the whole terms of the contract, then parties to the contract are not entitled to lead any oral evidence to ascertain the terms of the contract. It is only when the written contract does not contain the whole of the agreement between the parties and there is any ambiguity then oral evidence is permissible to prove the other conditions which also must not be inconsistent with the written contract.’
On the basis of the above, it was contended that it was not open to Dr. Morepen to argue that the documents do not actually say what they do.
25. Learned counsel also placed reliance on Roop Kumar v. Mohan Thedani where the Supreme Court discussed the scope and ambit of Section 91 and 92 of the Evidence Act in paragraphs 12 to 15 of the Report.
26. There is no dispute, as indeed there cannot be, about the propositions canvassed by learned Counsel for Poysha inasmuch as they are supported by decisions of the Supreme Court referred to above. Yet, it is not possible to overlook the law laid down by the Supreme Court in respect of nominal transactions or transactions that are not intended to be acted upon.
27. As far back as in 1960 the Supreme Court in Mst. Rukhmabai v. Lala Laxminarayan and Ors. observed in paragraph 5 of the Report as follows:
Though prima facie a document clearly expressing the intention to divide brings about a division in status, it is open to a party to prove that the said document was a sham or a nominal one not intended to be acted upon but was conceived and executed for an ulterior purpose.
28. In Smt. Gangabai v. Smt. Chhabubai the Supreme Court considered the effect of Section 92(1) of the Evidence Act and held in paragraph 11 of the Report as follows:-
The sub-section is not attracted when the case of a party is that the transaction recorded in the document was never intended to be acted upon at all between the parties and that the document is a sham. Such a question arises when the party asserts that there was a different transaction altogether and what is recorded in the document was intended to be of no consequence whatever. For that purpose oral evidence is admissible to show that the document was never intended to operate as an agreement but that some other agreement altogether, not recorded in the document, was entered into between the parties.
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29. In Hindu Public and Anr. v. Rajdhani Puja Samithee and Ors. the Supreme Court observed, in paragraph 20 of the Report, as follows:-
Oral evidence could be adduced to show that recitals in a deed were nominal or were not intended to be acted upon or that they were not meant to alter the existing state of affairs.
30. Similar observations have been made by the Supreme Court in Ishwar Dass Jain v. Sohan Lal where the Supreme Court referred to Gangabai and accepted the position that it is permissible to adduce oral evidence to show that a document is a sham document or a nominal document. However, on the facts of that case it was held that cogent evidence in this regard was lacking.
31. A consideration of the above decisions cited before me would show that it is possible for a party to contend that a document is a nominal document or is not intended to be acted upon; but, obviously the burden would be quite heavy on the party making that allegation. That party would have to show that the intention was to enter into another transaction altogether and that the documents were executed for an ulterior purpose.
32. At the stage of disposal of an application for a temporary injunction, the case set up by such a party would have to be proved on the basis of the documents on record, since oral evidence would not have been led by that time. Appreciating this, learned Counsel for Dr. Morepen (and Morepen Labs) brought several facts to my notice to support his contention that the documents executed on 19th April, 2004 were nominal or not intended to be acted upon.
33. It was firstly pointed out that there is no reason why Dr. Morepen who had purchased the trademark BURNOL for a sum of Rs. 8.95 crores in December 2001 would want to assign it to Poysha in April 2004 for an amount of Rs. 20 lakhs. This was all the more so, according to learned Counsel for Dr. Morepen, since the value of the trademark BURNOL in the market today was about Rs. 12 crores. On the other hand, learned Counsel for Poysha submitted that The Boots Company plc had assigned the trademark BURNOL to Knoll AG in 1985 for a sum of US $ 100/-. Under the circumstances, it is quite possible that Dr. Morepen had assigned the trademark to Poysha for only Rs. 20 lakhs.
33.1 Since the details of the transaction entered into between The Boots Company plc and Knoll AG in 1985 are not before me, it would be inappropriate to comment on it. Moreover, there is nothing to indicate, one way or another, why the trademark BURNOL was assigned for as little as US $ 100/-. Quite clearly, there must be some other consideration about which there is nothing on record. The fact, however, remains that in December, 2001 Reckitt Piramal Ltd. assigned the trademark to Dr. Morepen for Rs. 8.95 crores. It is unthinkable that, all things being equal, Dr. Morepen should assign that trademark barely 2 years later to Poysha for a paltry Page 1641amount of Rs. 20 lakhs. There is nothing on record that has been shown by Poysha to suggest that the value of the trademark has crashed to such an extent. The value of the trademark may not have been increased to Rs. 12 crores as contended by learned Counsel for Dr. Morepen, but in the absence of any material to show that the value had crashed, it must be assumed that the value of the trademark BURNOL remained more or less steady between December, 2001 and April, 2004 If that assumption is correct (and there is nothing to contradict that assumption) it does not stand to reason why Dr. Morepen should assign the trademark to Poysha for only Rs. 20 lakhs.
34. Secondly, there is nothing on record to show that there were any negotiations between Poysha and Dr. Morepen for assignment of the trademark BURNOL. Obviously, the antecedent facts mentioned by Dr. Morepen in its written statement, that is, the transaction between Morepen Labs and Morgan (which has not been disclosed by Poysha in its plaint) have some bearing on the execution of documents on 19th April, 2004 If these antecedent facts are taken into consideration, they reveal a story quite different from what has been pleaded by Poysha.
35. Thirdly, it appears from Execution Petition No. 13/2004 that Morgan claimed, as on 31st December, 2003 a total sum of Rs. 6,24,44,250/- from the Judgment Debtors, that is, Morepen Labs and others against the ICD of Rs. 5 crores. In terms of the arbitration Award dated 28th June, 2003 the ICD was secured by Morepen Labs through a demand promissory note (for whatever it was worth), equity shares of M/s Blue Coasts Hotel and Resort Ltd. pledged by six companies who had executed a letter of pledge dated 7th February, 2003. The shares pledged were 15 lakhs in number and the Memorandum of Settlement that formed the basis of the arbitration Award suggests that the value of the shares was above Rs. 70/- each making it a total of Rs. 10.5 crores. It is over and above this that the trademark BURNOL was assigned by Dr. Morepen to Poysha. It does not stand to reason why, to secure an amount of Rs. 6.24 crores, Morepen Labs provided security worth Rs. 10.5 crores to Morgan, with an additional security of the trademark BURNOL. Obviously, there is something more to it than meets the eye.
37. Fourthly, it is extremely odd that even though Dr. Morepen was to pay a monthly royalty of Rs. 2 lakhs to Poysha in terms of the permitted user agreement valid until 30th April, 2005 no payment was made by Dr. Morepen and Poysha took absolutely no action to prevent a violation of the permitted user agreement for more than a year. If the transaction between the parties was a genuine transaction or a transaction intended to be acted upon, one would have expected Poysha to take far more positive steps during the continuance of the permitted user agreement. The failure of Poysha to enforce the permitted user agreement suggests that it did not intend to act upon the documents executed Page 1642 on 19th April, 2004 This, coupled with the fact that Dr. Morepen did not encash the cheques of Rs. 20 lakhs given by Poysha in terms of the assignment deed, the technology transfer agreement and the marketing know-how agreement clearly suggests that Dr. Morepen also did not intend to act upon the documents executed on 19th April, 2004
37.1 In this regard, Clause 14 of the permitted user agreement is of some relevance and this states as follows:-
The Licensor shall have the right to terminate this Agreement forthwith upon happening of all or any of the following events and without being liable in any way for payment of damages or other compensation whatsoever and in such event all the licenses and rights granted hereunder shall thereupon ceased and determined:-
(i) Any change in the constitution of licensee
(ii) In case of breach by licensee of any term, condition or stipulation contained herein,
(iii) In case of non payment by the licensee of royalty, fee, commission or other remuneration.
(iv) The introduction of any legislation or regulation putting any restrictions or limitations or overriding the terms and conditions of this Agreement.
38. Fifthly, a very significant aspect of the entire transaction is that it has not been disclosed in the annual report or balance sheet of Poysha. In fact the Directors Report of Poysha for the 9th Annual General Meeting to be held on 6th July, 2005 shows the following significant facts:- Under the heading Financial Results, it is stated that Poysha has not started any commercial activity and, therefore, all the expenses incurred so far are appearing as pre-operative expenses and would be capitalized later on. This is reiterated little later when it is stated that Poysha had not engaged in any production activity during the year under report.
In the Annexure to the Auditors Report, there is no mention at all about the monthly royalty due to Poysha from Dr. Morepen nor is there any mention about the fact that cheques worth Rs. 20 lakhs given by the Poysha to Dr. Morepen have not been encashed. In other words, the debtor- creditor relationship between the parties has not even been adverted to.
In the balance sheet as at 31st March, 2005, the trademark BURNOL has not been shown as one of the assets of Poysha.
No outstandings or recoveries in respect of Dr. Morepen have been mentioned in the balance sheet or in any other document filed by Poysha.
39. When all these facts were stated by Dr. Morepen in its written statement, Poysha filed a replication in which the balance sheet as at 30th June, 2005 was filed and it is mentioned therein for the first time that royalty is receivable from Dr. Morepen under the permitted user agreement and that cheques issued by Poysha to Dr. Morepen have not been encashed. I think this is clearly an afterthought, which came about as a result of the written statement filed by Dr. Morepen.
40. Sixthly, Dr. Morepen has been making huge profits from the sale of the cream BURNOL (and it is on that basis that it has valued the trademark at Rs. 12 crores). In the written statement it has been stated that sales figures for 2003-04 are to the extent of Rs. 179.90 lakhs; sales figures for 2004-05 Page 1643are to the extent of Rs. 438.23 lakhs; and for the period 1st April, 2005 to 31st July, 2005 the sales figures are to the extent of Rs. 249.71 lakhs. These sales figures coupled with the fact that Dr. Morepen paid Rs. 8.95 crores to Reckitt Piramal Ltd. for assignment of the trademark BURNOL, make it hard to believe that Dr. Morepen would have assigned that trademark to Poysha for a sum of Rs. 20 lakhs.
41. Finally in the letter dated 5th April, 2004 sent by Morepen Labs to Morgan on 5th April, 2004 it has clearly been stated that the brand BURNOL would be pledged after execution of the decree is kept in abeyance and it shall be discharged on receipt of the decretal amount. What that this means is that the assignment of the trademark BURNOL in favor of Poysha by Dr. Morepen was only a nominal one, perhaps intended to satisfy Poysha and Morgan that Dr. Morepen and Morepen Labs will make all efforts to pay the amounts due to Morgan.
42. After considering all these facts and reasons cumulatively given by learned Counsel for Dr. Morepen which form a part of the record, it does appear to me that Dr. Morepen has been able to discharge the heavy burden cast upon it to show that the transaction entered into on 19th April, 2004 was only a nominal transaction and the purpose of that transaction was entirely different from what it purported to be.
43. This being the position, I am of the view that Poysha has not been able to make out any case for the grant of an injunction in its favor and against Dr. Morepen. In its reply to the injunction applications filed by Poysha, Dr. Morepen has stated that it is maintaining proper accounts of the sale of BURNOL burns cream. Consequently, in the event Poysha succeeds in the suit it will, of course, be entitled to appropriate relief as a result of its prayer for rendition of accounts.
44. The balance of convenience certainly does not lie in favor of Poysha. It has not, on its own showing, commenced any business activity. The burns cream BURNOL is a medicinal product that has been in use in India for the last several years if not more. If its manufacture and production is stalled because of the inability of Poysha to manufacture the product, it will cause irreparable injury to consumers of the burns cream. Consequently, it will be in the interest of consumers, if the position as it exists today is allowed to continue till the disposal of the suit. Poysha has not been able to show how it will suffer any irreparable loss and injury if the injunction prayed for is not granted.
45. Under the circumstances, both the injunction applications filed by Poysha in Suit No. 1140/2005 are dismissed and the application filed by Dr. Morepen in Suit No. 1276/2005 is allowed.
46. Poysha will pay to Dr. Morepen costs of Rs. 20,000/- within a period of four weeks from today. The applications are disposed of accordingly.
47. Needless to say, any expression of opinion is intended only for disposal of the applications and will not bind the parties in the trial of the suit.