Unjha Formulations Ltd. v. Unjha Pharmacy — 1996 DIGILAW 225 (GUJ)

K. R. VYAS, J. ( 1 ) ADMIT. Mr. S. B. Vakil, Mr. Ashwin l. Shah and Mr. Jayant Patel waive service on behalf of the respective respondent in these two appeals. At the request of the learned Advocates these appeals are taken up for final hearing. ( 2 ) UNJHA Formulations Limited (hereinafter referred to as "the Appellant") has filed these two Appeals From Order under section 104 read with Order 43, Rule 1 (r) of the Code of Civil Procedure against the judgment and order dated 21st March, 1996 passed by the learned Chamber Judge, City civil Court, Ahmedabad, allowing the notice of Motion, Exs. 5 and 6 in Civil Suits nos. 1062 and 1063 of 1996 filed by the unjha Pharmacy, a partnership firm and unjha Pharmacy Pvt. Ltd.- the respondents herein granting common relief as prayed for in both the Notice of Motion restraining the appellant-Company from proceeding further with the Public Issue in the name of Unjha Formulations Limited till the hearing of the suits. ( 3 ) PERUSING the plaints, except the change in the name of the plaintiff one filed by a firm and another filed by a Private Limited company the averments are practically the same. To summarise the case of the respondent-plaintiffs in nutshell, respondent- unjha Pharmacy was established in the year 1884 and has been carrying on business of manufacturing various medicines and medical formulations of all kinds at unjha (N. G. ). Its products have acquired high good-will and reputation in the market and they are in great demand. It has a large turnover of business and profits and that the word "unjha" has acquired a distinct meaning in any Ayurvedic medicines or other products sold in the market and the brand name "unjha" is taken as the product manufactured by Unjha Pharmacy. Thus, according to the respondent, it has acquired a special and significant meaning amongst all consumers of its products and such consumers purchase such products only on account of the word "unjha" in the name of the said respondent-Unjha Pharmacy. It is alleged that the appellant-defendant has been registered with the Registrar of companies in using the word "unjha" in its name on or about 2-9-94 for the purpose of manufacturing the products which are being manufactured by the respondents for the last many decades. It is alleged that the appellant-defendant has been registered with the Registrar of companies in using the word "unjha" in its name on or about 2-9-94 for the purpose of manufacturing the products which are being manufactured by the respondents for the last many decades. It is also alleged that the name of the appellant "unjha Formulations limited" closely resembles the name of the respondents and would mislead the consumers in believing that the appellants product are manufactured by the respondents or a sister concern of the respondents. It is further averred by the respondent- plaintiffs that by announcing a Public Issue by the appellant, the public is misled to believe that the appellant-Company is promoted by the respondent-plaintiffs or is a sister concern of the respondent-plaintiffs or is otherwise connected with the respondent-plaintiffs and, therefore, the appellant is not entitled to make use of the word "unjha" in its name. Accordingly the respondent-plaintiffs had given notices dated 19-2-96 and 22-2-96 to the appellant to change its name so as to exclude the word "unjha" from its name. The respondent- plaintiffs, therefore, have filed the aforesaid suits and prayed lor the following reliefs:" (A) It be declared that the defendant No. 1 is not entitled to make use of the word "unjha" in its name; (b) The defendant No. 2 be required to change its name so as to not to include the word "unjha" therein; (c) Defendant No. 2 be required to call upon defendant No. 1 to change its name to such other name so as not to include the said word "unjha" in such name; (d) The defendant No. 1 be restrained by a permanent injunction of this Honble court from using the word "unjha" in its name; (e) The defendant No. 1 be restrained by a permanent injunction from Public Issue of its shares in its present name of Unjha formulations Limited or in any other name containing the word "unjha"; (f) The defendant No. 1 be directed to give an account of the profits made by it in its business carried on by it in its present name and to hand over the same to the plaintiff along with other benefits gained by it by making use of the word "unjha" in its name; (g) Costs of this suit be awarded to the plaintiff; and (h) such other and further reliefs. " ( 4 ) SIMULTANEOUSLY with the filing of both the suits, the respondent-plaintiffs took out notice of Motion, Ex. 5 and Ex 6, praying for interim injunction pending the hearing and final disposal of the suit, restraining the appellant from making Public Issue of its share capital in the name of Unjha formulations Limited. It appears that the appellant appeared by Caveat and, therefore on 28-2-96, the learned Chamber judge adjourned the Notice of Motion for reply and hearing to 6-3-96. ( 5 ) THE appellant contested the applications for injunction contending, inter alia, that the appellant was the leading manufacturer of and merchant in alopathic, veterinary medicines and Ayurvedic medicines since over a period of decade and is marketing its products throughout India to the knowledge of the respondants. The appellant was formerly carrying on business as a partnership firm in the name and style of unjha Formulations Limited and that it announced its Public Issue of 23,57,000 equity Shares of Rs. 10/- each for cash at per aggregating to Rs. 235. 70 lakhs. It is stated by it that the Companys sales ran into crores of rupees and in 1994-95 it exceeded Rs. 348. 50 lakhs and for the half year from 1-4-95 to 30-9-95 it exceeded rs. 199. 08 lakhs. The appellant has further averred that it had assets to the tune of Rs. 535. 12 lakhs and that the companys usable products in the brand name of Gelax has been well established in the market and in the consuming public, it had on hand export orders of over Rs. 30 lacs and the gsfc has sanctioned a term loan of Rs. 100 lakhs in favour of the Company. ( 6 ) AS stated above, the learned Chamber judge by his two separate orders dated 21st march 1996 allowed both the Notice of motion applications and granted interim injunction as prayed for therein restraining the appellant from proceeding further with the Public Issue under the name of Unjha formulations Limited pending the hearing and final disposal of the said suits and, therefore, the present appeals from order are filed. ( 7 ) SINCE the facts averred in the pleading and the questions involved in these two appeals are same, these appeals are disposed of by this common judgment. ( 8 ) MR. ( 7 ) SINCE the facts averred in the pleading and the questions involved in these two appeals are same, these appeals are disposed of by this common judgment. ( 8 ) MR. S. B. Vakil, learned Counsel appearing for the appellants in these two appeals submitted that the learned Chamber judge of the City Civil Court has committed an error in allowing the Notice of Motion Applications granting interim injunction restraining the appellant from proceeding with the Public Issue in the name of Unjha Formulations Limited till the hearing of their suits. In the submissions of Mr. Vakil, even before the learned chamber Judge passed the order, i. e. on 21st March 1996, the appellant announced the Public Issue opened on 7th March and closed on 11th March 1996 in the name of "unjha Formulations Limited". Mr. Vakil submitted that thereafter the said Public issue could not be continued in any other name and as a result of the order of the trial Court the Issue will be totally frustrated in view of the provisions of Section 73 of the Companies Act, 1956. Mr. Vakil also submitted that under the provisions of section 20 of the Companies Act. it is for the Central Government to decide whether the name by which the company applies to be registered is undesirable. In the submission of Mr. Vakil assuming that the Company which is registered is in an undesirable name, the grievance can be only with respect to the name of the company and unless and until the name of the company is changed in accordance with law, there can be no grievance with respect to its right to raise equity share capital by Public issue. Mr. Vakil further submitted that moreover it is for the Central Government to consider whether a name which is identical with or too nearly resembles the name by which the Company is in existence has been previously registered, may be undesirable. Section 20 (2) of the Companies act makes it clear that even a name which is identical with or too nearly resembles the name by which the Company is in existence has been previously registered is not necessarily or per se undesirable. In any case, as submitted by Mr. Section 20 (2) of the Companies act makes it clear that even a name which is identical with or too nearly resembles the name by which the Company is in existence has been previously registered is not necessarily or per se undesirable. In any case, as submitted by Mr. Vakil, the respondent-plaintiffs are not companies which have been previously registered and, therefore, no objection can be raised by the respondent-plaintiffs in the suits against the name of the appellant. Mr. Vakil also submitted that raising of equity share capital by the appellant by Public issue is not an activity of selling of goods and, therefore, the concepts of infringement of Trade Mark or passing of have no application in the context of the Public issue. Mr. Vakil lastly submitted that in view of the gross delay, acquiescence and laches on the part of the respondent-plaintiffs, the learned Chamber Judge ought to have refused the injunction. ( 9 ) ON the other hand, Mr. Ashwin L. Shah, learned Counsel appearing for the respondent-plaintiffs, while refuting the aforesaid submissions, supported the order passed by the learned Chamber Judge in tota. ( 10 ) CONSIDERING the rival submissions advanced by the learned Advocates appearing for the respective parties, the question which is required to be decided in these appeals are, whether the learned Chamber judge is justified in granting the injunction against the appellant restraining it from proceeding further with the Public Issue. It is not out of place to mention at this stage that the learned Chamber Judge has recorded a finding that the name of the appellant is so nearly resembling the names of the respondent-plaintiffs, which is likely to create confusion or deceiption. ( 11 ) REGARDING the submission of Mr. Vakil that the Public Issue could not be continued in any other name and as a result of the order of the learned Chamber Judge, the Issue will be totally frustrated in view of the expiry of the period prescribed under section 73 of the Companies Act, it is necessary to reproduce the material provisions of Section 73 of the Companies Act, 1956. "73 (1 ). "73 (1 ). Every company intending to offer shares or debentures to the public for subscription by the issue of a prospectus shall, before such issue, make an application to one or more recognised stock exchanges for permission for the shares or debentures intending to be so offered to be dealt with in the stock exchange or each such stock exchange. (1a ). Where a prospectus, whether issued generally or not, states that an application under sub-section (1) has been made for permission for the shares or debentures offered thereby to be dealt in one or more recognised stock exchanges, such prospectus shall state the name of the stock exchange or, as the case may be, each such stock exchange, and any allotment made, be void if the permission has not been granted by the stock exchange or each such stock exchange, as the case may be, before the expiry of ten weeks from the date of the closing of the subscription lists : provided that where an appeal against the decision of any recognized stock exchange refusing permission for the shares or debentures to be dealt in on that stock exchange has been preferred under Section 22 of the Securities Contracts (Regulation) act, 1956, (42 of 1956), such allotment shall not be void until the dismissal of the appeal. (2) Where the permission has not been applied under sub-section (1), or such permission having been applied for, has not been granted as aforesaid, the company shall forthwith repay without interest all moneys received from applicants in pursuance of the prospectus, and if any such money is not repaid within eight days after the company becomes liable to repay it, the company and every director of the company who is an officer in default shall, on and from the expiry of the eighth day, be jointly and severally liable to repay that money with interest at such rate, not less than lour per cent and not more than fifteen percent, as may be prescribed, having regard to the length of the period of delay in making the repayment of such money. (3) All moneys received as aforesaid shall be kept in a separate bank account maintained with a Scheduled Bank until the permission has been granted, or where an appeal has been preferred against the refusal to grant such permission, until the disposal of the appeal and the money standing in such separate account shall, where the permission has not been applied for as aforesaid or has not been granted be repaid within the time and in the manner specified in sub-section (2), and if default is made in complying with this sub-section, the company and every officer of the company who is in default, shall be punisshable with fine which may extend to five thousand rupees. (3a) to (7) xx xx xx. " ( 12 ) ON the plain reading of this provision, it appears that every company intending to offer shares or debentures to the public for subscription by the issue of a prospectus is required to make an application, before such issue, to one or more recognized stock exchanges for permission for the shares or debentures intending to be so offered to be dealt with in the stock exchange or each such stock exchange. It further provides that when a permission is sougtht for, whether prospectus issued generally or not, for the shares or debentures offered thereby to be dealt in one or more recognized stock exchanges, such prospectus shall state the name of the stock exchange, or, as the case may be, each such stock exchange, and any allotment made on an application in pursuance of such prospectus shall, whenever made, be void, if the permission has not been granted by the stock exchange or each such stock exchange, as the case may be, before the expiry of ten weeks from the date of the closing of the subscription lists. This is subject to any appeal against the decision of any recognized stock exchange refusing permission for the shares or debentures under Section 22 of the Securities contracts (Regulation) Act, 1956 and in that event such allotment would not be void until the dismissal of the appeal. This is subject to any appeal against the decision of any recognized stock exchange refusing permission for the shares or debentures under Section 22 of the Securities contracts (Regulation) Act, 1956 and in that event such allotment would not be void until the dismissal of the appeal. Sub-Section (2) of Section 73 deals with the case where the permission has not been applied under sub-section (1) or such permission having been applied for has not been granted, the company shall forthwith repay without interest all moneys received from the applicants in pursuance of the prospectus, and, if any such money is not repaid within eight days after the company becomes liable to repay it, the company and every director of the company who is an officer in default shall, on and from the expiry of the eighth day, be jointly and severally liable to repay that money with interest at such rate, not less than four per cent and not more than fifteen per cent as may be prescribed having regard to the length of the period of delay in making the repayment of such money. As per subsection (3) of Section 73, all moneys received would be kept in a separate bank account maintained with a Scheduled Bank until the permission has been granted or where an appeal has been preferred against the refusal to grant such permission, until the disposal of the appeal, and the money standing in such separate account shall, where the permission has not been applied for or has not been granted, be repaid within the time and in the manner specified in sub-section (2), and if default is made in complying with this sub-section, the company and every officer of the company, who is in default, shall be punishable with fine as provided therein. In the instant case, as per the admitted facts, the Public Issue was opened on 7-3-96 and it was closed on 11-3-96. It is also not in dispute that the appellant-Company has issued the prospectus before the permission. Thus, as per the provisions of sub-section (1a) of Section 73, the appellant-Company has to obtain permission from the stock exchange before the expiry of ten weeks from the date of the closing of the subscription lists, i. e. before 20th May, 1996. It is also not in dispute that the appellant-Company has issued the prospectus before the permission. Thus, as per the provisions of sub-section (1a) of Section 73, the appellant-Company has to obtain permission from the stock exchange before the expiry of ten weeks from the date of the closing of the subscription lists, i. e. before 20th May, 1996. It is the case of the appellant, and rightly so, that if such a permission is not obtained from the stock exchange within the prescribed period of ten weeks from the date of closing of the subscription lists, the entire exercise undertaken by the appellant-Company is liable to be declared void, and in that event, whatever money the appellant-Company has received will have to be returned to the subscriber-applicants. The Supreme Court in m/s. Rishvashringa Jewellery Ltd. and another v. The Stock Exchange, Bombay, air 1996 SC 480 has, while interpreting section 73, observed as under:"thus, where the prospectus held out that enlistment of shares would be in more than one stock exchange, the consequence envisaged in sub-section (1a) of Section 73 ensues to render void the entire allotment of shares unless the permission is granted by each and every one or all of the stock exchanges named in the prospectus for enlisting the shares. This is the plain meaning of sub-section (1a) of Section 73. In short, unless permission is granted by each or every one of all the stock exchanges named in the prospectus for listing of shares to which application is made by the company, the consequence is to render the entire allotment void. In other words, if the permission has not been granted by any one of the several stock exchanges named in the prospectus for listing of shares, the consequence by virtue of sub-section (1a) of section 73 is to render the entire allotment void and the grant of permission by one of them is inconsequential. " ( 13 ) MR. Ashwin Shah, however, as against this, submitted that Section 73 cannot deprive the Court from passing appropriate orders in the interest of justice, irrespective of the time prescribed in Section 73 of the Act. I am unable to accept this submission of Mr. " ( 13 ) MR. Ashwin Shah, however, as against this, submitted that Section 73 cannot deprive the Court from passing appropriate orders in the interest of justice, irrespective of the time prescribed in Section 73 of the Act. I am unable to accept this submission of Mr. Shah for the simple reason that no Court can override the express provision of law when specific time limit is prescribed in the statute compelling the authority to act within the prescribed time failing which the entire transaction would become void. ( 14 ) MR. Vaki! rightly invited rny attention to Section 11a of the Central Excise and Salt Act, 1944 and a. similar provision contained hi Section 11a of the Land Acquisition act wherein it is specifically provided that by virtue of the stay order of the court, the period shall be excluded in computing the prescribed period under the provisions of the Act. In view of the said provisions, in my view Section 15 of the limitation Act, which deals with the exclusion of period during the pendency of proceedings, would not be applicable to Section 73 of the Companies Act. As per section 15 of the Limitation Act, it must be shown that the institution of the suit has been stayed by an injunction or order. In other words, the said section requires an order or an injunction which stays the institution of the suit. Assuming that the Court can extend the period of limitation prescribed under Section 73, even in that case, the question which arises is : Why should a company take such a chance? In other words, why the company be exposed to such a risk of waiting for the final order to be passed by the Court ? In view of this, there is no option but to hold that once the prospectus is issued and an application for permission for the shares or debentures is made under sub-section (1) of Section 73 to the stock exchange and if the permission has not been granted by the stock exchange before the expiry of ten week from the dale of closing of the subscription lists, the transaction made becomes void, and the said period of ten weeks cannot be extended by the Court nor the Court can grant further time over-riding the provisions of Section 73. ( 15 ) MR. ( 15 ) MR. Shah suggested that even at this stage, the Court can give appropriate directions directing the company to change its name. Mr. Shah invited my attention to sections 21 and 22 of the Companies Act. Section 21 provides for the change of the name by the company and it states that a company may, by special resolution and with the approval of the Central Government signified in writing, change its name. Section 22 deals with rectification of the same of the company and states that if through inadvertence or otherwise, a company on its first registration or on its registration by a new name, is registered by a name which, in the opinion of the Central government, is identical with or too nearly resembles, the name by which the company in existence has been previously registered, whether under this Act or any previous companies Law, the first mentioned company may, by ordinary resolution and with the previous approval of the Central Government, signified in writing, change its name or new name within a period of three months from the date of the direction or such longer period as the Central Government may think fit to allow. In the submission of Mr. Shah, even during the pendency of the proceedings under Section 73, the appellant-company can change the name. Now, in an appropriate case, if the situation so demands, the Court can, in the interest of justice, direct the concerned party to change its name by following the provisions of the companies Act. But in that case, the Court should always bare in mind and consider the questions, whether at the instance of the concerned party, such a change in the name is necessary; whether it would be proper for the Court to pass such an order at the interim stage when the concerned party is yet to establish its case in the suit, and whether such an order would be in conformity with the provisions of the Act. The court cannot undertake the task of passing any order directing the change in the name, if it and/or there is a slightest possibility of the conflict between the order which it proposes to pass and the relevant provisions of law. The court cannot undertake the task of passing any order directing the change in the name, if it and/or there is a slightest possibility of the conflict between the order which it proposes to pass and the relevant provisions of law. It is true that under Section 21, a company may, by a special resolution and with the approval of the Central Government signified in writing, can change its name. Even for passing a resolution clearly 21 days notice of the general meeting of the company is necessary as per the requirement of Section 171; it is equally true that as per sub-section (2) of Section 171, a general meeting may be called after giving shorter notice than that specified in subsection (1) if consent is accorded thereto. But take a case, when there is a dissenting vote by some members entitled to vote at the meeting against the change of the name of the company, in that case, what would be the situation ? Would it not be in conflict with the order of the Court ? The answer would certainly be in the affirmative. Apart from this, I am of the view that Public Issue cannot be split up in two parts viz. (i) receiving of subscription in one name and (ii) allotment and listing in the stock exchange in another name. Such a situation is not contemplated under the provisions of the Companies Act. Besides, on the eve of going to the public sector, it would not be proper to direct the appellant to change its name. In that view of the matter, I see no merit in the submission of Mr. Shah. ( 16 ) MR. Vakil after inviting my attention to Section 20 submitted that it is the subjective satisfaction of the Central Government whether or not the name by which the company applies to be registered is undesirable. In the submission of Mr. Vakil, the name of the appellant is different from the names of the respondent-plaintiffs and it is not even the case of the respondent-plaintiffs name represented in a special or particular manner. Neither the word "unjha" nor the word "pharmacy" is an invented word and that the word "unjha" has the reference to and in fact is a geographical name and the word "pharmacy" is a generic or a common name. Mr. Neither the word "unjha" nor the word "pharmacy" is an invented word and that the word "unjha" has the reference to and in fact is a geographical name and the word "pharmacy" is a generic or a common name. Mr. Vakil, therefore, submitted that the name of the appellant does not resemble the names of the respondent-plaintiffs which is likely to create confusion or deception. In the alternative, Mr. Vakil pointed out that even assuming that the company has been registered in an undesirable name, the grievance can be only with respect to the name of the company and unless and until the name of the company is changed in accordance with law, there can be no grievance with respect to its right to raise equity share capital by public Issue. Finally, Mr. Vakil submitted that Section 22 of the Companies Act leaves it at the discretion of the Central government to consider whether or not the name of a company in which it was first registered or registered in a new name is identical with or too nearly resembles the name by which a company in existence has been previously registered as Section 22 makes it clear that even a name which is identical with or too nearly resembles the name by which the company in existence and has been previously registered is not necessarily or per se undesirable. ( 17 ) AS against this, Mr. Shah pointed out that the suits filed by the respondent-plaintiffs are not because of any right conferred by Section 20 of the Act. The respondent- plaintiffs have filed the suits as a passing of action under the common law. Mr. Shah has pointed out that it is not open for the respondent-plaintiffs to proceed under Section 22 of the Companies Act requesting the central Government for asking the appellant to change its name. Under the circumstances, Mr. Shah pointed out that the respondent-plaintiffs are entitled to invoke section 21 of the Companies Act and to declare that the registration of the appellant- company is undesirable. This submission of mr. Shah is on the basis that the name of the appellant-company is identical and too nearly resembles the names of the respondent-plaintiffs. In the submission of Mr. Shah even the respondent-plaintiff as a partnership firm can also invoke the provisions of Section 20 of the Companies Act. This submission of mr. Shah is on the basis that the name of the appellant-company is identical and too nearly resembles the names of the respondent-plaintiffs. In the submission of Mr. Shah even the respondent-plaintiff as a partnership firm can also invoke the provisions of Section 20 of the Companies Act. In order to consider the rival submission it is necessary to refer to Sections 20, 21, and 22 of the Companies Act which read as under:"20 (i ). No company shall be registered by a name which, in the opinion of the central Government, is undesirable. (2) Without prejudice to the generality of the foregoing power, a name which is identical with, or too nearly resembles, the name by which a company in existence has been previously registered, may be deemed to be undesirable by the Central Government within the meaning of sub-section (1 ). ( 18 ) A company may, by special resolution and with the approval of the Central government signified in writing, change its name: provided that no such approval shall be required where the only change in the name of a company is the addition thereto or, as the case may be, the deletion therefrom, of the word "private", consequent on the conversion in accordance with the provisions of this Act of a public company into a private company or of a private company into a public company. ( 19 ) (1 ). ( 19 ) (1 ). If, through inadvertence or otherwise, a company on its first registration or on its registration by a new name, is registered by a name which, in the opinion of the Central Government, is identical with, or too nearly resembles, the name by which a company in existence has been previously registered, whether under this act or any previous companies law, the first-mentioned company- (d) may, by ordinary resolution and with the previous approval of the Central government signified in writing, change its name or new name; and (b) shall, if the central Government so directs within twelve months of its first registration or registration by its new name, as the case may be, or within twelve months of the commencement of this Act, whichever is later, by ordinary resolution and with the previous approval of the Central Government, signified in writing, change its name or new name within a period of three months from the date of the direction or such longer period as the Central government may think fit to allow. (2) If a company makes default in complying with any direction given under clause (b) of sub-section (1), the company, and every officer who is in default, shall be punishable with fine which may extend to one hundred rupees for every day during which the default continues. " ( 20 ) READING the provisions of Section 20 of the Companies Act, it appears that the power is vested with the Central Government not to register a company by the name which is undesirable. Reading sub-section (2) of Section 20, it appears that a name which is identical with or too nearly resembles the name by which a company in existence has been previously registered may be deemed to be undesirable by the central Government within the meaning of sub-section (1 ). Since both these provosions are separate, as sub-section (2) does not say for the purpose of sub-section (1) making a company undesirable, Mr. Shah appears to be right when he contended that the respondent being a partnership firm is entitled to file a suit invoking the provisions of Section 21. Since both these provosions are separate, as sub-section (2) does not say for the purpose of sub-section (1) making a company undesirable, Mr. Shah appears to be right when he contended that the respondent being a partnership firm is entitled to file a suit invoking the provisions of Section 21. This is particularly in view of the fact that the respondent-plaintiffs could not have proceeded under Section 22 and requested the Central Government for asking the appellant to change its name as the respondent-plaintiffs are not companies in existence which have been previously registered. However, merely because the respondents are entitled to file suits invoking the provisions of Section 21 of the Companies Act, it does not necessarily mean that there is no burden on the respondents to prove whether the name of the appellant is so identical or too nearly resembles the names of the respondents that it is likely to create confusion or deception and is, therefore, undesirable. In other words, the respondents will have to prove that in passsing off action of business by the appellant in a name so nearly resembling the name of the respondents is likely to be deceived and will create confusion. Unless this is decided by leading appropriate evidence, it is too early for the respondents at this stage to ask for an injunction restraining the appellant from raising equity share capital by Public Issue. . ( 21 ) IT is to be noted that the concept of passing off has no application to the Public issue and, therefore, the respondents would have no cause of action against the appellant in the matter of publication on the ground that the appellant-Companys name includes the word "unjha" or on the ground that albeit imaginary that the public would invest their money in the Public Issue of the appellant-Company under the impression that they are investing in a company which is a sister concern of the respondents. Further, raising of equity share capital by the appellant by Public Issue is not an activity of selling goods and the concepts of infringing of trade mark or passing of have no application in the context of Public Issue. Further, raising of equity share capital by the appellant by Public Issue is not an activity of selling goods and the concepts of infringing of trade mark or passing of have no application in the context of Public Issue. This is particularly in view of the fact that section 2 (1) (v) of the Trade and Merchandise marks Act, 1958 defines "trade mark" to mean a registered trade mark or a mark used in relation to goods for the purpose indicating or so as to indicate a connection in the course of trade between the goods and some person having the right as proprietor to use the mark. An action in passing off also relates to passing off of goods as the goods of another person. It is so to be noted that the respondents have not produced any material showing that they have registered trade mark of the commodities manufactured or sold by them. Similarly the suits filed by the respondents are also not the suits in relation to the use of the appellants name in the course of trade in relation to the goods. Therefore, raising of equity share capital by the company by public Issue is not an activity of selling of goods and the concepts of infringement of trade mark or passing off have no application in the context of Public Issue. In Morgan stanley Mutual Fund v. Kartick Das, (1994) 4 SCC 225 = (1994) 81 Company cases the Supreme Court has held that the shares for which an application is made for allotment can never be goods and that till the allotment of shares takes place, the shares do not exist and that an application for allotment of shares cannot constitute goods and that, therefore, the question of company trading in shares does not arise. Thus, it is clear that the Issue of shares is a mode of raising capital and is for filling up the capital and to raise the capital means making arrangement for carrying on trade and is not a practice relating to the carrying on any trade. Thus, it is clear that the Issue of shares is a mode of raising capital and is for filling up the capital and to raise the capital means making arrangement for carrying on trade and is not a practice relating to the carrying on any trade. Once this finding is recorded that raising of equity share capital by a company by Public Issue is not an activity of selling goods, the cocnepts of infringement of trade mark or passing off have no application in the context of Public issue and there is no question of granting injunction restrining a comapny from proceeding further with the Public Issue. ( 22 ) MR. Shah, however, submitted that the products of the respondent-plaintiff are purchased by the public on account of the use of the word "unjha" in its name and they are purchased on account of the fact that they are manufactured and sold by the respondent-plaintiff namely Unjha Pharmacy in that name and the word "unjha" in the name of Unjha Pharmacy has acquired a special meaning because of usage thereof for more than 100 years and on account of the huge expenses running into crores of rupees incurred by it in the publicity and advertisements of the products in various newspapers and magazines. In substance, the case of the respondent-plaintiff is of passing of goods in the trade name. Mr. Shah, under the circumstances, submitted that passing of action can arise even with respect to Public Issue made in a trade name with respect to which there is passing off. To substantiate his submission, Mr. Shah relied on the decision of this Court in bharat Tiles and Marble Pvt. Ltd. v. Bharat tiles Manufacturing Co. , (1978) XIX Guj. L. R. 518. In that case the suit was filed, inter alia, on the ground that the plaintiff adopted a distinctive Trade Mark "b. T. C. " for identifying their goods so as to distinguish them from those of others and the said Trade Mark was imprinted on each and every tile manufactured by them and they were not passing off their goods under the trade name of the plaintiff vis. "bharat tiles". "bharat tiles". The suit was for perpetual injunction restraining the respondent-firm, from using the trade name "bharat Tiles" as part of the business so as to pass off their goods as the goods of the plaintiff-company and for recovery of damages. The learned Trial Judge in that case at the end of the trial held that the plaintiff company took over the business from its predecessor firm viz. Bharat flooring Tiles Co and that the trade name "bharat Tiles" is associated in the minds of the traders and Architects in particular and public in general with the goods of the plaintiff-company. He also reached the conclusion that the respondent-firm used the trade name "bharat Tiles" in relation to their goods and on the letter-heads, sign boards, advertisements in newspaper etc. In spite of his finding as aforesaid, the learned Judge in that case held that the trade Mark under which the defendant firm carried on the business was "b. T. C. " and, therefore, it was not so distinct that there cannot be any confusion or deceit in the minds of the traders and architects in particular or the public at large in general, inasmuch as the plaintiff had filed to prove by any cogent, evidence that any person was deceived or that the respondent firm was representing that their goods were the goods of the plaintiff. The Trial Court dismissed the suit against which judgment first Appeal was filed in this Court. The learned single Judge of this Court, while reversing the judgment of the Trial Court, held as under :"the relevant principles which the Court should bear in mind in passing off action are well known and settled by the authorities. The name under which a business trades will almost always be a trade mark and it is also considered difficult, if not impossible, to distinguish between the trading business and a trade name. It is no doubt true that where the trade name of an individual businessman is geographically descriptive, the mere fact of adoption of the same or similar grographically descriptive trade name would not by itself establish a cause for the relief in a passing off action. The aggrieved party has to prove that the use by the rival party of his trade style is calculated to lead to the belief that the business of the rival party is the business of the aggrieved party. The aggrieved party has to prove that the use by the rival party of his trade style is calculated to lead to the belief that the business of the rival party is the business of the aggrieved party. Merely because a trade name is geographically descriptive, it cannot the urged successfully that a proprietor of that trade is not entitled to succeed in a passing off action, provided he is able to establish the requisite grounds of deceit by the use of similar name, though it may be relevant consideration when an application for registration is made under Section 9 of the Trade and Mercandise Marks Act, 1966. It is equally significant to note that the name of the business will acquire a good-will in course of time and the Courts always protect them. The passing off action would certainly lie at the instance of a businessman if his rival carries on his business in the name which is calculated to deceive or which may divert the business from the plaintiff to the defendant or it may occasion a confusion between the two businesses. "needless to say, Mr. Shah has relied on this judgment by contending that the respondent has acquired a good-will in the course of time and, therefore, the passing off would lie at the instance of the respondent since the appellant who is rival in the trade has carried on his business by using the name "unjha" which is calculated to deceive or which may divert the business from the respondent to the appellant and that the same may occasion a confusion between the two businesses. Having carefully gone through the judgment of this court in Bharat Tiles case (supra) I am of the opinion that there cannot be any dispute with regard to the principles laid down in the said judgment. However, the fact remains that the said judgment was delivered in the First Appeal which was filed against the judgment passed by the Trial Court, meaning thereby the parties led full evidence and, therefore, this Court was having an advantage of considering and appreciating the evidence while in the instant case the matter is still at the bearing of injunction stage. The parties are still required to prove their case and establish that whether or not the respondent has acquired a goodwill in the course of time. The parties are still required to prove their case and establish that whether or not the respondent has acquired a goodwill in the course of time. Assuming that the respondents have acquired a good-will the said fact by itself is not sufficient, though a relevant consideration, warranting this Court to grant an injunction restraining the appellant from proceeding further with the Public Issue. It is to be noted that this court in the case of Bharat Tiles (supra) not required to consider the question of granting injunction restraining the respondent therein from proceeding further with a public Issue while it is the main question before this Court and for considering the said question, number of factors the Court is required to consider. ( 23 ) THE Supreme Court in Morgan stanley Mutual Funds case (supra) has laid down that as a principle ex parte injunction can be granted only under exceptional circumstances. The Supreme Court has stated the following factors which should weigh with the Court in the grant of ex parte injunction : (A) Whether irreparable or serious mischid will ensue to the plaintiff. (b) Whether the refusal of ex parte injunction would involve greater injunstice than the grant of it would involve. (c) The Court will also consider the time at which the plaintiff first had notice of the act complained of so that the making of improper order against a party in his absence is prevented (d) The Court will consider whether the plaintiff had acquiesced for some time and in such circumstances it will not grant ex parte injunction. (e) The Court would expect a party applying for ex pane injunction to show utmost good faith in making the application. (f) Even if granted, the exparte injunction would be for a limited period of time, and (g) General principles like prima facie case, balance of convenience and irreparable loss would also be considered by the court. The said decision has been followed ,by the Supreme Court in its later decision in bloom Dekor Ltd. v. Subhash Himatlal desai (1994) 6 SCC 322 . It is true that the present case is not a case where ex parte injunction was granted in favour of the respondents as the learned Chamber Judge passed the impugned order after bipartite hearing. It is true that the present case is not a case where ex parte injunction was granted in favour of the respondents as the learned Chamber Judge passed the impugned order after bipartite hearing. However, the question which still arises is whether the respondent-plaintiff have successfully established the ingredients of Order 89, Rules 1 and 2 of the civil Procedure Code ? While considering the question of prima facie case, an important fact which is required to be noted at this stage is that the present suits filed by the respondent-plaintiffs are not the suits for infringement of regitered Trade Mark under the provisions of the Trade and Merchandise marks Act, 1958. The present suits are suits for passing of goods. The respondents have claimed the exclusive right of the use of the word "unjha". Admittedly, it is not the case of the respondents that the appellant is using the names of the respondents. Therefore, the question at this stage which arises is whether the appellant can be prevented at this stage from using the word "unjha" in the Public issue and thereby prevented from proceeding further with the Public Issue which is already announced by it. It is to be noted that even though the respondents in the suits have pleaded that the appellant company is not entitled to use the word "unjha" being the trade name of the respondent- plaintiff, as far as the prayer made in the notice of Motion is concerned, they have prayed for an injunction against the Public issue only. In other words, the respondents are permitting the appellant to continue its trading activities by using the word "unjha" till the disposal of the suit. However, for reasons best known, it has objection against the appellants Public Issue. This really appears strange and fishy. In any case, the allotment of shares is not a trade and that the Public Issue of shares is a mode of raising capital and is not an act of building up capital and, therefore, to raise capital means making arrangement for carrying on the trade and, therefore, there cannot be passing an action for restraining a non- trading activity like raising capital. In other words, there cannot be a passing off action restraining the company in trade activities. " ( 24 ) MR. In other words, there cannot be a passing off action restraining the company in trade activities. " ( 24 ) MR. Shah, however, has invited my attention to the decision of the Delhi High court in K. G. Khosla Compressors v. Khosla Extraktions Ltd. , (1986) 1 Company lj 211. It was a case wherein a public Limited Company filed a suit and prayed for a decree of permanent injunction restraining the defendants from using, trading or carrying on business under the name and style of M/s. Kholsa Extraktion Ltd and/or making Public Issue under this name. The plaintiff in that case claimed that it was a pioneer in the field of air compressors industry in India and having a national and international repute and standard. It was also claimed that the plaintiff was the only company with the word "khosla" in its name and by this name, it was quoted in the Stock Exchanges in India and that the Khosla shares were very active and popular in the capital market. It was stated that whenever the word "khosla" is used in the capital market, it invariably is attributed to the plaintiff. It was, therefore, alleged that having failed to establish the business of a company incorporated by them and with a view to playing fraud and deception on the investing public and encash- the name, reputation and goodwill of the plaintiff, the defendants formed the first defendant company under the name "m/s Khosla Extraktions Ltd. " and got it registered with the Registrar of Companies. The plaintiff, therefore, filed the suit and the application seeking to restrain the defendants from exploiting its reputation and goodwill. The questions which the Delhi high Court was required to consider were, whether the Civil Court had jurisiction in the suit, particularly when the matter was pending before the Central Government under Sections 20 and 22 of the Companies Act, and whether a person is entitled to carry on his business in his own name and that there could not be any restraint on such right. The learned single Judge of the delhi High Court considered these questions and held as under :"it is not disputed and nay it could not be disputed that the Civil Court has jurisdiction in the instant suit. The learned single Judge of the delhi High Court considered these questions and held as under :"it is not disputed and nay it could not be disputed that the Civil Court has jurisdiction in the instant suit. The Central Government has certainly no power to grant any injunction as prayed for in the present suit though persons disobeying the directions issued under sub-section (1) of Section 22 of the Act might entail punishment. The jurisdiction of Civil Court operates in (wo different fields. Further the Central Government has to act within the guidelines laid down under section 20 of the Act, while there are no such limitations on the exercise of jurisdiction by the Civil Court. It is not the law and cannot be the law that a person is entitled to carry on his business in his own name and that there could not be any restraint on that right. He has no such right. The right to incoporate a company in a particular name is a statutory right. Section 20 of the Act prescribes that no company shall be registered by a name which in the opinion of the Central Government is undersirable. Sub-section (2) of section 20 says that if a name which is identical with or too nearly resembles the name by which a company in existence has been previously registered, it may deemed to be undesirable. It cannot be read into section 20 of the Act that whenever a person applied for registration of a company in his name or in the name of his family members, it must be registered. This is not the law and could not be the law. Passing off action need not merely relate to the goods. On the facts, the apprehension of the plaintiff was found to be well founded. Defendants were accordingly restained from entering the capital market and making the public issue under the name of the first defendant. "reading the said decision, it is no doubt true that the Delhi High Court granted injunction on the facts of that case restraining the defendants from entering into the capital market and making Public issue in the name of the company. However, the facts in the present case are quite distinct. As can be seen from the facts of the case before the Delhi High Court, the concept of Public Issue was not there. However, the facts in the present case are quite distinct. As can be seen from the facts of the case before the Delhi High Court, the concept of Public Issue was not there. Even the statement in view (sic lien) of the prospectus was not filed by the defendants and the objects of defendant No. 1 were not till then approved by the Company law Board. In substance, the defendant-company was yet to go for Public issue while that is not the case before this court. At this stage, it would not be out of place to state about the conduct of the respondent-plaintiffs. It is to be noted that on 30th August 1988 the respondents issued a notice to the appellant asking it to delete immediately the word "unjha" from the trading style of Unjha Formulations limited and to give an undertaking to the respondents that henceforth it will not use the word "unjha" in the trading style. In reply to the said notice, the appellant on 8th september, 1988 refuted the claim of the respondents and expressed its inability to comply with the requisition set out in the notice. Surprisingly no action whatsoever was taken by the respondents against the appellant thereafter till the filing of the present suits. It is not in dispute that the appellant got itself incorporated into a company on 2-9-1994 on the same name which was there right from its inception. It is to be boted (sic. noted) that even for this also no action was taken by the respondents for changing the name under Section 20 or section 22 of the Companies Act by approaching the Central Government immediately thereafter. Mr. Shah for the respondents has submitted that this so-called delay, laches or acquiesence on the part of the respondents cannot come in their way as in the opinion of the respondents there was no major threat from the appellant at the earlier stage as the appellant started its manufacturing activity in a very small scale. However, as the appellant has come out with a bang of Public Issue, the time has ripen to apply for the injunction. This explanation would hardly satisfy any judicial conscious. In my view, the long lapse of delay on the part of the respondents in approaching the Court for appropriate relief is sufficient to deny any equitable relief to the respondents. This explanation would hardly satisfy any judicial conscious. In my view, the long lapse of delay on the part of the respondents in approaching the Court for appropriate relief is sufficient to deny any equitable relief to the respondents. It would not be out of place to state that there is a total inaction on the part of the respondents in taking out proceedings against the appellant. In fact, they have allowed the appellant to use the word "unjha" right from 1988 and had not cared to approach the Central Government under Section 20 or Section 22 of the companies Act when the appellant got itself incorporated into a Company in 1994. The respondents have approached the Civil court for appropriate relief only in the year 1996. The fact that in the application for notice of Motion the only relief prayed for by the respondents is to restrain the appellant-Company from proceeding further with the Public Issue. This would further go to show that the respondents are keen to see that the Public Issue is stalled for any reason. ( 25 ) CONSIDERING the question of balance of convenience and irreparable injury, in my view, the same are also in favour of the appellant. The fact that the respondents have slept over their right for a pretty long period of about seven years and had not taken any action against the appellant and in fact permitted the appellant to get itself incorporated as a Company and especially when the appellant tried to enter into the corporate sector by Public Issue and has received huge amount by way of subscription from the investors, I see no reason to restrain the appellant from proceeding further with the Public Issue. Mr. Vakil rightly contended that if the period of ten weeks under Section 73 of the Companies Act is allowed to be lapsed and thereafter if the respondents withdraw the suits, in that case, the entire exercise will be rendered void and the purpose of filing the suits by the respondents would be achieved without even trial thereof. I see quite justification in the apprehension of Mr. Vakil. As stated above, after the receipt of subscription it is neither possible nor feasible to change the name of the appellant-Company in the midstream. I see quite justification in the apprehension of Mr. Vakil. As stated above, after the receipt of subscription it is neither possible nor feasible to change the name of the appellant-Company in the midstream. Even if it is possible, the said resolution would be passed changing the name of the Company in absence of the proposed shareholders who have applied for the shares. In view of the fact that the court can always pass order giving directions to change the name of the company in case the suits are allowed, no relief at the interim stage can be granted. When the parties are required to establish their rival claims, it is not prudent on the part of the court to grant injunction by interfering with the internal functioning of the Company. The Court is also required to consider the question of public interest while granting or refusing injunction. In the instant case, the appellant has already received substantial amount by way of subscription from the public and if the injunction is granted in favour of the respondent- plaintiffs till the suits are decided, assuming that the period is extended, the money so received by way of subscription would be blocked and the people will not get either their shares or the refund at least for a period of 15 to 20 years as that is the usual life of a litigation. Therefore, indirectly the injunction would be against the persons (proposed shareholders) who are not even the parties to the proceedings. On the other hand suppose the suits are decreed in favour of the respondent-plaintiffs, there will not be any question of invalidity of the public Issue and the Court can always give time to change the name and take care of the situation prevailing at that time. In view of this discussion the following principles emerge which should be borne in mind while considering the question of granting injunction in the matter of Public Issue. ( 26 ) THAT no injunction should be granted in the mailer of Public Issue casually or in a routine manner. Arguable points arc bound to be there in every case, but the court should bear in mind the distinction between arguable points and prima facie case. All arguable points do not necessarily constitute prima facie case. ( 26 ) THAT no injunction should be granted in the mailer of Public Issue casually or in a routine manner. Arguable points arc bound to be there in every case, but the court should bear in mind the distinction between arguable points and prima facie case. All arguable points do not necessarily constitute prima facie case. If the Court i feels that an appropriate relief could be granted at the end of the trial in the event of the plaintiff succeeding in the suit, in that event, it would refrain itself from granting order at the interim stage. When the facts are required to be proved by leading evidence, no finding to the effect that a party is likely to prove its case and, therefore, there is a prima facie case in his favour be recorded. Granting injunction being a discretionary power of the Court, the same should be exercised judiciously. The Court should always take into consideration the factors like delay, laches and acquiescence on the part of the party claiming injunction. The suppression of material facts, the conduct and the inaction on the party of the plaintiff are some of the factors which are required to be given due weightage while considering the question of granting injunction. Besides, in the matter of Public Issue, the investors who are thousands in number and who have, invested their hard-earned money, no order prejudicial to their interest should be passed unless their interest is sufficiently protected. Thus, considering the case from all angles, in the instant case the learned Chamber Judge has totally misdirected himself in deciding the questions which are not germane to decide at the interim stage and granted injunction resulting miscarriage of justice. ( 27 ) IN view of the above discussion, these appeals are allowed with no order as to costs. The impugned orders passed by the learned Chambers Judge below Notice of motion Applications, Exs. 5 and 6 in Civil suits Nos. 1062 and 1063 of 1996 granting injunction as prayed for against the appellant are hereby set aside and are vacated. ( 28 ) AT this stage Mr. Shah for the respondents has made an oral application for stay of this order for a period at least upto 5th May 1996. Mr. Vakil, learned Advocate for the appellant, has strongly objected to the said prayer. ( 28 ) AT this stage Mr. Shah for the respondents has made an oral application for stay of this order for a period at least upto 5th May 1996. Mr. Vakil, learned Advocate for the appellant, has strongly objected to the said prayer. Considering the facts and circumstances of this case, it is not possible for me to grant stay of this order as prayed for as the time is running against the appellant. However, considering the fact that the Registry will require some time in furnishing the certified copy of this order, this order is stayed upto 30-4-1996 with a clear understanding that the same will not be extended for any reason and with a further clarification that in the mean time it will be open to the appellant to do all preparatory work upto the stage of allotment of shares. However, it is made clear that till then the appellant will not allot the shares. .