judgement:
l Appeal Nos.
1952 and 1953 of 1966.
Appeals from the judgment and order dated February 25, 1965 of the Punjab High Court, Circuit Bench at Delhi in Letters Patent Appeals Nos.
38 D and 42 D, and 39 D and 43 D of 1963.
section T. Desai and Naunit Lal, for the appellants (in both the appeals).
C. B. Agarwala, K. P. Gupta and R. C. Chadha, for respondent No. 1 (in both the appeals).
The Judgment of the Court was delivered by Shelat, J.
These two appeals, under certificate, are directed against the common judgment and order of the High Court of Punjab, dated February 25, 1965, passed in four Letters Patent appeals filed by the two appellant companies and the respondent company against the judgment and order of a learned Single Judge of the High Court.
The said appeals were the outcome of two applications filed in the High Court under section 111 of the ; XLIII of 1958 (referred to hereinafter as the Act) for rectification of the register in respect of two registered Trade Marks, Nos. 161543 and 161544, registered on November 20, 1953 in respect of cycle bells manufactured by the respondent company.
Registered Trade Mark No. 161543 was the numeral '50 ' and Trade Mark No. 161544 was the figure 'Fifty '.
The two appellant companies carry on business in Kapurthala in Punjab, one of them the National Bell Co. Ltd. claimed to be manufacturing bells with numerals '33 ', '50 ', '51 ' and '40 ' inscribed on them since 1957, and the other M/s Gupta Industrial Corporation since 1947 with numerals, '20 ', '50 ' and '60 ' inscribed on cycle bells manufactured by it.
The two applications for rectification arose out of suits filed in the District Court, Lucknow by the respondent company against the two appellant companies on the ground of infringement of its said registered trade marks, the numeral '50 ' and the figure 'Fifty '.
On April 24, 1961 the District Court stayed the said suits at the instance of the appellant companies giving them time for filing the said rectification applications in the High Court.
The grounds alleged in the applications were (1) that the numeral '50 ' and the word 'Fifty ' were common to the trade at the time of the original registration and were therefore not distinctive of the bells manufactured by the respondent company, Sup.
CI 6 74 (2)that many other manufacturers in the market were using the numeral '50 ' and the word 'Fifty ' on or in relation to cycle bells, and therefore, the distinctiveness of the said marks in relation to the bells manufactured by the respondent company, if any, had been lost, (3) that the respondent company did not get the registration of these marks with any bona fide intention of using them in relation to their cycle bells and that in fact there had been no bona fide use of the said trade marks in relation to their goods before the date of the applications.
They also alleged that the respondent company had fraudulently declared at the time of registration that they were the originators or proprietors of the said two marks '50 ' and 'Fifty '.
Both sides led evidence, oral and documentary, the latter including several price lists from the possession of some of the dealers in cycle spare parts.
The learned Single Judge, who in the first instance tried the applications, found on a consideration of the evidence that cycle bells with different numerals and in particular the numeral '50 ' were being sold in the market before the respondent company put its cycle bells with the numeral '50 ' and the figure 'Fifty ' inscribed on them in the market and continued to be sold right upto 1952 when import of foreign manufactured cycle bells was prohibited, and that despite such prohibition those cycle bells were being sold in the market as late as 1958, presumably from old stocks still lingering in the market, though not from any new imported stock.
The learned Single Judge also found that there was no evidence of the original registration having been fraudulently obtained by the respondent company, that there was no averment by the appellant companies that Lucas or any other concern had obtained registration of any mark either of the numeral '50 ' or the figure 'Fifty ', and that therefore, cl.
(a) of section 32 did not apply.
He further found that cl.
(b) of section 32 also did not apply.
He held, however, that the trade mark, namely, the numeral '50 ' was not at the commencement of the proceedings distinctive of the goods of the respondent company as (a) numerals are prima facie not distinctive except in the case of textile goods as recognised by Part HI of the Trade and Merchandise Marks Rules, 1959, and (b) that the numeral '50 ' was being commonly used by several dealers and manufacturers subsequent to the registration thereof by the respondent company, and that therefore, the registered trade mark, the numeral '50 ', was hit by cl.
(c) of section 32.
So far as the trade mark of the figure 'Fifty was concerned, he held that there was no evidence that it was used by other parties either prior to or after the registration thereof by the respondent company and in that view declined to rectify or expunge the trade mark 'Fifty ' as seven years had already elapsed by the time the rectification proceedings were launched and could not, therefore, be challenged on the ground of absence of distinctiveness as laid down in section 32.
75 The learned Single Judge, on the basis of his aforesaid conclusions, cancelled the trade mark No. 161543, i.e., of the numeral '50 '.
In the appeals filed against the said judgment the Division Bench of the High Court held (1) that though the use of the numeral '50 ' in relation to cycle bells dated back at least 30 years as in the case of Lucas and certain other foreign concerns, the imports of such goods stopped from ;about 1952, though some bells were being sold till 1958 presumably from the remaining previous stock, (2) that the numeral '50 ' in connection with those foreign made bells was never intended as a trade mark but was used only as an indication of the type or quality, and (3) that statements Exs.
R 2, R 3 and R 4 produced by the respondent company showed that sales of its bells with the trade marks '50 ' and 'Fifty ' inscribed on them had risen from the value of Rs. 19,644 in 1949 50 to Rs. 14.83 lacs in 1961 62.
The Division Bench agreed with the Trial Judge that cl.
(a) of section 32 did not apply as there was no question of the original registration having been fraudulently procured in 1953.
It also held that the trade marks in question could not be cancelled merely on the ground that if their registration had been opposed they would not have been registered, and that therefore, the question for determination was whether it was liable to cancellation in view of section 32(c), which lays down that the section would not apply in cases where the trade mark in question was not distinctive at the commencement of the proceedings.
According to the Division Bench, the word "commencement of proceedings" in cl.
(c) of section 32 meant the commencement of the infringement suits filed by the respondent company as the proceedings for cancellation were the off shoots arising from those suits, that therefore, the situation in respect of section 32(c) had to be assessed in the light of the state of affairs existing in 1959.
According to the Division Bench, the earliest use of the mark '50 ' by any concern other than Lucas and other foreign manufacturers was in 1953 by M/s Indian Union Manufacturers Ltd. The respondent company, however, had filed a suit against that company in 1954 which resulted in a compromise dated February 5, 1955 whereunder the said company recognised the exclusive right of the respondent company to the use of the word% 'Fifty ', 'Thirty ' and the numerals '50 ' and '30 ', while the respondent company recognised the right of the said company to the exclusive use of the words and numerals 'Thirty one ', 'Forty one ' and 'Fifty one ' and '31 ', '41 ' and '51 ', that the respondent company had also in 1956 similarly taken action against K. R. Berry & Co. of Jullundur for use by that company of the mark 'Five 50 '.
The suit, however, had to be withdrawn in 1958 on account of lack of jurisdiction of the Banaras court where it was filed that though no fresh suit was 76 filed against that company, the respondent company had opposed an application by that company for registration of the mark 'Five Fifty ' before the Registrar and that application was then pending in 1962, and lastly, that the respondent company had filed in 1959 the two suits against the appellant companies out of which these rectification proceedings arose.
The Division Bench held that though there was some evidence of the use of the numeral '50 ' by certain other concerns after 1953, no importance could be attached to such breaches as there, was hardly any evidence as to when the infringers started manufacturing and the extent of their manufacture and sales, and that the correct principle applicable in such cases was that a few unchallenged, scattered infringements by a number of traders did not render a registered trade mark common.
As regards the earlier use of the word 'Fifty ' and the numeral '50 ' by Lucas and other foreign concerns, the Division Bench held that they were not the registered trade marks of those companies and that those concerns had used those marks as merely type marks.
Though the idea of using '50 ' and 'Fifty ' was not the original idea of the respondent company when it obtained registration in 1953, the foreign concerns had ceased importing the goods and though sales of those bells continued until 1958, such sales were from the stock still remaining unsold.
Such sales could not he in any appreciable bulk.
Even if the idea of using, the two marks might have been conceived by the respondent company from the marks used by Lucas and other foreign concerns, there was no question of any piracy or infringement of those marks as the respondent company was the first to convert what were originally type marks into registered trade marks.
Lastly, it held that the statements of sales produced by the respondent company demonstrated that its sales had been steadily increasing and that some concerns, finding the use by the respondent company of its marks '50 ' and 'Fifty ' highly successful, had sought in recent years to take advantage of am popularity of the cycle bells of respondent company by imitating its marks.
This fact, however,, could not mean that either in 1959 when the respondent company filed the suits or in 1961 when rectification proceedings commenced, the marks had ceased to be .distinctive in relation to the goods of the respondent company or were, therefore, liable to cancellation under section 56 by reason of cl.
(c) of section 32.
Accordingly, the Division Bench allowed the. respondent company 's appeals and set aside the order of the learned Single Judge cancelling the registration of its trade mark No. 161543 in respect of the numeral '50 ' and dismissed the appeals of the appellant companies.
Mr. section T. Desai for the appellant companies contended that the two trade marks in question were liable to cancellation on the grounds that (1) they were common and not distinctive at the 77 date of their registration, and therefore, ought never to have been registered, (2) that in any event, the numeral '50 ' is prima facie not distinctive unless shown to be of such extensive use as to make it distinctive, (3) that there was clear evidence that the respondent company had imitated the use of these marks by Lucas and other manufacturers, and that therefore, these marks would be disentitled to protection in a court of law, and (4) that the said marks were not, at the commencement of the proceedings distinctive, that is, adapted to distinguish the goods of the respondent company.
Mr. Agarwala, on the other hand,, argued that, (1) the two marks having been registered in 1953 and seven years since then having elapsed at the commencement of these proceedings, the question whether they were distinctive at the time of registration was not open to dispute, (2) that that being so, there was no question of any alleged piracy by the respondent company of the marks of Lucas and other concerns, and therefore, the marks could not be said to be disentitled to protection by a court, (3) that the marks had not lost their distinctiveness at the date of these proceedings under section 56, and (4) that the Letter Patent Bench was, therefore, justified in dismissing these proceedings by the appellant companies.
A mark under section 2(j) includes a word, letter or numeral or any combination there of.
A trade mark, as difined in section 2(v) means in relation to Chapter X (i.e. for offences and penalties provided in that chapter) a registered trade mark or a mark used in relation to the goods for the purpose of 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, and in relation to the other provisions of the Act a mark used or proposed to be used in relation to the goods for the purpose of indicating or so as to indicate a connection in the course of trade between the goods and some person having the right, either as proprietor or as registered user, to use the mark and includes a certification trade mark registered as such under the provisions of Chapter VIII.
Under section 9, a trade mark is not registerable in Part A of the register unless it contains or consists of at least one ,of the essential particulars mentioned therein.
One of these particulars in "any other distinctive mark".
(3) of section 9 defines the expression "distinctive" in relation to the goods in respect of which a trade mark is proposed to be registered, as meaning "adapted to distinguish goods with which the proprietor of the trade mark is or may be connected in the course of trade from goods in the case of which no such connection subsists either generally or, where the trade mark is proposed to be registered subject to limitations, in relation to use within the "tent of the registration.
" In determining whether a trade mark is distinctive, regard is to be had whether it is inherently distinctive or is 78 inherently capable of distinguishing and by reason of its use or any other circumstances it is in fact adapted to distinguish or is capable of distinguishing the goods.
section 1 1 prohibits certain trade marks from being registered.
These are marks the use of which would be likely to deceive or cause confusion, or the use of which would be contrary to any law or which comprises or contains scandalous or obscene matters or any matter likely to hurt the religious susceptibilities of any class or section of the citizens, or "(e) which would otherwise be disentitled to protection in a court".
On registration of a trade mark, the registered proprietor gets under section 28 the exclusive right to the use of such trade marks in relation to the goods in respect of which the trade mark is registered and to obtain relief in respect of any infringement of such trade mark.
Under section 31, registration is prima facie evidence of its validity.
The object of the section is obviously to facilitate proof of title by a plaintiff suing for infringement of his trade mark.
He has only to produce the certificate of registra tion of his trade mark and that would be prima facie evidence of his title.
Such registration is prima facie evidence also in rectification applications under section 56, which means that the onus of proof is on the person making such application.
Being prima facie evidence, the evidence afforded by the registration may be rebutted, but in view of section 32 that can be done if seven years have not elapsed since the original registration.
Even where such rebuttal is possible, i.e., where seven years have not elapsed, and it is shown that the mark in question was not registerable under section 9 as no evidence of distinctiveness was submitted to the Registrar, the registration would not be invalid if it is proved that the trade mark had been so used by the registered proprietor or his predecessor in interest as to have become distinctive at the date of registration.
Sec. 32, with which we are immediately concerned, reads as follows : "Subject to the provisions of section 35 and section 46, in all legal proceedings relating to a trade mark registered in Part A of the register (including applications under section 56), the original registration of the trade mark shall, after the expiration of seven years from the date of such registration, be taken to be valid in all respects unless it is proved (a) that the original registration was obtained by fraud; or (b) that the trade mark was registered in contravention of the provisions of section 11 or offends 79 against the provisions of that section on the date of commencement of the proceedings; or (c) that the trade mark was not, at the commencement of the proceedings, distinctive of the goods of the registered proprietor.
" We are not concerned with cl.
(a) as no such case was even averred in the applications as pointed out both by the Trial Judge and the Division Bench.
As regards cl.
(b), it will be at once noticed that the clause relates to facts existing both at the time of and after registration.
If a mark at the time of registration was such that it was likely to deceive or cause confusion or its use would be contrary to any law or contained or consisted of scandalous or obscene matters or matter likely to hurt religious susceptibilities or which would otherwise be disentitled to protection of a court, and therefore, was under section 1 1 prohibited from being registered, cl.
(b) would apply, and the rule as to conclusiveness of the validity of the registration cannot be invoked.
That would also be so, if the trade mark at the date of the rectification proceedings was such as to offend against the provisions of section 11.
But, unlike cl.
(b), cl.
(c) relates to facts which are post registration facts, existing at the date of the commencement of the proceedings.
If the trade mark at such date is not distinctive in relation to the goods of the registered proprietor, the rule as to conclusiveness enunciated in section 32 again would not apply.
It would seem that the word 'distinctive ' in cl.
(c) is presumably used in the same sense in which it is defined in section 9(3), as the definition of that expression therein commences with the words "for the purposes of this Act" and not the words "for the purposes of this section," the intention of the legislature, thus, being to give uniform meaning to that expression all throughout the Act.
section 56 deals with the power to cancel or vary registration and to rectify the register.
Sub section 2 thereof confers a right to any person "aggrieved" by an entry made in the register without sufficient cause or by an entry wrongly remaining in the register to apply to the tribunal for expunging or varying such an entry.
The expression "aggrieved person" has received liberal construction from the courts and includes a person who has, before registration, used the trade mark in question as also a person against whom an infringement action is taken or threatened by the registered proprietor of such a trade mark.
The words "without sufficient cause" in the section have clearly relation to the time of the original registration.
Therefore, a person can apply for cancellation on the ground that the trade mark in question was not at the date of the commencement of the proceedings distinctive in the sense of section 9(3).
The burden of proof, however, in such a case is, as aforesaid, on the applicant applying under section 5 6. 80 The contention was that numerals, such as '50 ', are prima facie not considered distinctive and to be, registerable there must be evidence of extensive use.
The contention was sought to be fortified by showing that contrary to the practice in England, rules 139 and 140 of the Rules of 1959 permit numerals to be registered as trade marks only in the case of textile goods.
But that is permitted on account of a long standing practice in that particular trade of using numerals with a view to distinguish goods of a particular manufacturer or a particular type or quality.
It will, however, be noticed that although in the 8th edition of Kerly on Trade Marks, page 135, it was stated that numerals are considered to be prima facie not distinctive and registerable only upon proof of their extensive use, the 9th edition of the same work does not reproduce that passage.
On the contrary, at p. 284, the learned editor states that numerals are capable of registration and that such marks exist.
For this change the learned editor relies, on the registered trade mark, "4711" for eau de Cologne, which was the subject matter of dispute in Reuter vs Mutblens(1).
In that case, however, no contention was raised as to whether the trade mark consisting of a numeral could be distinctive or not and the court, therefore, was not called upon to decide such a point.
But the parties appear to have proceeded on the assumption that the numeral "471 1 " was validly registered as a trade mark for that particular brand of eau de Cologne by reason of its having gained distinctiveness by extensive use.
It is, therefore, not an inflexible rule and that was also conceded by Mr. Desai, that a mark consisting of a numeral is necessarily not distinctive and is not registerable, except only in the case of textile goods, in spite of proof of extensive use.
section 32 in clear terms provides that the original registration of a trade mark, after expiry of seven years from the date of its registration shall be taken to be valid in all respects in all legal proceedings including those under section 56, except in the three categories of cases mentioned therein.
It follows, therefore, that no objection that the trade mark in question was not distinctive and therefore was not registerable under section 9 can be entertained if such an objection is raised after seven years have lapsed since the date of its registration as in the present came, nor can an objection be entertained that no proof of distinctiveness was adduced or insisted upon at the time of the original registration.
This is clear also from the fact that the three exceptions set out in section 32 against conclusiveness as to the validity of the registration relate to, (1) fraud, (2) contravention of section 11, and (3) absence of distinctiveness at the commencement of the proceedings in question and not at the time of registration.
No contention, therefore, (1) 81 can be raised that the trade marks, '50 ' and 'Fifty ', were not distinctive, i.e., adapted to distinguish the cycle bells of the respondent company at the date of the registration, and therefore, were not registerable as provided by section 9 (cf.
Paine & Co. vs Daniells & Sons ' Breweries Ltd.(1).
But the argument was that the appellant companies were en titled to show under cls.
(b) and (c) in section 32, (1) that these marks were registered in contravention of section 11, or that they offended against the provisions of that section on the date of the commencement of these proceedings, and (2) that they were not distinctive at the date of the commencement of these proceedings.
S.11, as already noticed,, does not, as section 9 does, lay down the requisites for registration, but lays down prohibition against certain marks from being registered.
(b), (c) and (d) of section 1 1 obviously do not apply in the present case but reliance was placed on cls.
(a) and (e), i.e., that the use of these trade marks would be likely to deceive or cause confusion and that they were such that they were otherwise disentitled to protection in a court.
The burden of proof being on the appellant companies, the question is : has that burden been satisfactorily discharged ? The evidence relied on by them was that of dealers in cycle spare parts including bells, certain price lists produced through them and the two representatives of the two appellant companies.
That evidence, no doubt, shows, (1) that for a number of years prior to 1952 bells manufactured by Lucas and certain other foreign concerns with various numerals such as '30 ', '50 ' and 61 ' inscribed either on the belts or on their cartons were in the market, (2) that even after 1952 bells with inscriptions thereon, such as "Berry 50", "National 50", manufactured by one of the appellant companies, "Five 50", "Padam 50", "Balco 50" etc.
were sold in the market, (3) that Gupta Industrial Corporation, one of the appellant companies, claimed to have started the manufacture of bells since 1947, calling them "Gupta 50" and the National Bell Company likewise began to produce bells, calling them "National 50" since 1957.
But both the learned Single Judge and the Division Bench clearly found, (1) that there was no evidence of any fraud having been committed by the respondent company at the time of the registration; (2) that there was no averment by the appellant companies, much less any evidence, that Lucas or any other foreign concerns had obtained registration of trade, marks either of the numeral '50 ' or the word 'Fifty ', that the indication, on the contrary, was that those concerns used the different nume rals, '30 ', '61 ', '50 ' etc.
for distinguishing one type of bell from the other manufactured by them; and (3) that about a year prior (1) , 232. 82 to the registration of the trade marks in question in 1953 foreign bells were prohibited from being imported.
Obviously, therefore, the evidence as to purchases and sales by the dealers examined by the appellant companies related to bells which had remained unsold from out of the stock earlier imported.
As regards the bells called "Gupta 50" said to have been manufactured by one of the appellant companies since 1947, no evidence was led to show either the extent of manufacture or sale between 1947 and 1953 or thereafter from which the High Court could be asked to draw any inference as to the likelihood of deception or confusion.
Though there was some evidence that foreign made bells Such as Lucas "30", "50" and "61" were being sold as late as 1958, such sales must have been few and far between as they could only be from the remaining stock out of the earlier imports.
Such sales could hardly be considered as evidence showing a,likelihood of confusion or deception as contemplated by section 1 1 (a).
In fact, the evidence was that purchasers used to call those bells not by their numerals but simply as Lucas ' bells and those manufactured by the respondent company, as "Asia bells", and in some cases "Asia 50".
As against the voluminous sales by the respondent company shown by the statements filed by it for the years 1949 50 to 1961 62, there was no such corresponding evidence, indicating the sales of other bells with numerals, such as "50" inscribed on them from which any likelihood of confusion or deception could be deduced.
Regarding deception, there was indeed no evidence whatsoever in that regard.
There was no question of piracy also on the part of the respondent company as argued by counsel as there was nothing to show that Lucas or any other foreign concerns used this numeral except for distinguishing one type of bell from another manufactured by them.
In our view, cl.
(a) of section 11, therefore, is clearly not attracted.
The next question is whether the trade mark "50" or "Fifty" is one which would otherwise be disentitled to protection in a court as laid down in cl.
(e) of section 1 1 so as to attract cl.
(b) of section 32.
While construing cl.
(e) of section II, it is necessary to repeat that it deals with prohibition and not with requisites of registration.
Therefore, although a mark cannot be registered, for instance, because it is not distinctive, as provided by section 9, such a mark is not for that reason only one the registration of which is prohibited by section 1 1.
The section lays down positive objection to registration and not to mere lack of qualification.
This is clear from cl.
(e) of section 11, which uses the expression "disentitled to protection", and not the expression "not entitled to protection".
The former contemplates some illegal or other disentitlement inherent in the mark itself.
(see Kerly, 9th ed. 344).
83 In Imperial Tobacco Co. Ltd. vs De Pasqualil & Co.(1) the appellant company was the proprietor of two trade marks con sisting of "Regimental Cigarettes" and "Regimental Tobacco".
The company brought an action for infringement of its trade marks and for passing off against the respondent who sold cigarettes under the name of "Pasquali 's the Regiment" in packets and boxes decorated with regimental crests.
The respondent moved to have the trade marks expunged contending that the word "Regimental" was only a laudatory adjective in on use.
It was proved that for many years it had been the practice of regiments to have their crests stamped on their mess cigrettes which were known as "Regimental Cigarettes".
The appellant company, on the other hand, contended that under section 41 of the Trade Marks Act, 1905 (equivalent to section 32 of our Act) their trade mark could not be expunged and that section 1 1 (equivalent also to our section 11 ) read in conjunction with section 41 was not relevant to the question whether or not a trade mark was registerable.
The Trial Court held against the appellant company stating that if the appellant company 's contention was correct, the combined effect of sections 1 1 and 41 would be to perpetuate as distinctive a trade mark that was incapable of being distinctive and that such a contention was erroneous.
On appeal, the Court of Appeal reversed the judgment and held that section 11 was a qualification of section 9, that sections 1 1 and 41 must be construed together, that the more fact that a mark did not comply with the requisites of section 9 (i.e. not being distinctive and therefore not registerable) did not bring it within section II, that the marks did not offend against section 11 and that under section 41 their registration was valid.
At page 203 of the Report,Swinfen Eady, M.R. observed that section 11 contained a prohibition as to what it shall not be lawful to register and it followed upon section 9 which provided for the essentials of a trade mark.
section 9 laid down what a registerable trade mark must contain and unless it contained one or the other requisites there set out, it was not re gisterable and it was only registerable trade marks which were entitled to registration.
But even if a mark were to fall within, section 9, that alone was not necessarily sufficient to entitle it to registration because it might offend against section 11.
section 11, being a qualification of section 9 and being a provision laying down a prohibition ', it did not contemplate any enquiry on the question whether the, trade mark complied with one or the other requisites enumerated in section 9, e.g., whether it had the quality of being distinctive or not.
Dealing with section 41, he observed that it formed a new departure in dealing with trade marks and differed widely from the earlier Acts.
The present section expressly enacted that the original registration shall, after a lapse of seven years, be taken to 'be valid in all respects, that is to say, whether the mark originally consisted of or (1) 84 contained one or the other essential proofs or not, that cannot be enquired into after the lapse of seven years.
It had to be taken to be valid in all respects and what had to be taken to be valid in all respects was the registration of the trade mark unless it offended against the provisions of section 1 1.
That section was a prohibitive section as to a matter which was disentitled to protection in a court, that is, it was intended to exclude from registration what would, otherwise be included or covered under section 9.
It did not extend to a mark disentitled to protection because originally not containing one of the essential particulars.
It applied to a different set of circumstances such as that its use was likely to deceive or confuse etc.
The words "disentitled to protection", he further observed, were not equivalent to "not entitled to protection", which was the expression used in the earlier Acts.
In other words, they did not mean that a trade mark was not entitled to protection because it ought not originally to have been registered as a valid trade mark falling within section 9.
The construction of cl.
(e) of section 11 contended for on behalf of the appellant companies is, therefore, not correct.
The true construction of cl.
(e) is that even assuming that the trade marks in question were not distinctive and for that reason not registerable as not falling within section 9, that fact by itself would not mean that they became disentitled to the protection in a court.
That being the true import of section 1 1 (e), the rule as to conclusiveness of the validity of registration embodied in section 32 applies even to those cases where if full facts had been ascertained at the time of the registration that registration would not have been allowed provided of course that it does not offend against the provisions of s.11, i.e., by there being a likelihood of deception or confusion or its bring contrary to any law or containing obscene matter etc.
or which would otherwise, i.e., in addition to the matters in cls.(a) to (d) in section 1 1 be disentitled to protection in a court.
Conse quently, the appellant companies cannot bring their case for cancellation of the trade marks in question under cl.
(b) of section 32.
There then remains the question whether cl.
(c) of section 32 applies, i.e., that the trade marks were not at the commencement of the proceedings distinctive of the goods of the respondent company.
The distinctiveness of the trade mark in relation to the goods of a registered proprietor of such a trade mark may be lost in a variety of ways, e.g., by the goods not being capable of being distinguished as the goods of such a proprietor or by extensive piracy so that the marks become publici juris.
The principle underlying cl.
(c) of section 32 is that the property in a trade mark exists so long as it continues to be distinctive of the goods of the registered proprietor in the eyes of the public or a section of the public.
If the proprietor is not in a position to use the mark to 85 distinguish his goods from those of others or has abandoned it or the mark has become so common in the market that it has ceased to connect him with his goods, there would hardly be any justification in retaining it on the register.
The progressive increase in the sales of 'Asia Fifty ' and 'Asia 50 ' bells from 1949 50 and onwards together with the evidence of witnesses examined by the respondent company shows that the said trade marks distinguished the goods of the respondent company from those of other manufacturers in the field.
Under section 32 (c) the marks have to be distinctive at the commencement of the proceedings.
Prima facie, the expression "commencement of the proceedings" would mean the commencement of proceedings in which the question as to the conclusive character of the registration, as laid down in section 32, arises.
Such a question may arise in a suit for infringement of the trade mark in which the registered proprietor may rely on section 32 to prove his title to the registered trade mark as also in rectification proceedings filed as a result of such a suit or otherwise, and the period of seven years would have to be calculated according to the particular proceedings in which the conclusive nature of the validity of registration is relied on.
In the prevent case, whether the crucial date for the purpose of section 32(c) is taken to be 1959 when the suits were filed or 1961 when the appellant companies took out the.
rectification proceedings it makes no difference as it is not possible from the evidence on record to say that the trade marks in question were not or had ceased to be distinctive.
The indication, on the contrary, is that they were distinctive.
That is to be found from the zeal with.
which the respondent company tried to maintain its right in them.
The evidence shows that when the respondent company found in 1954 that M/s Indian Union Manufacturers Ltd., Calcutta had been inscribing the word 'Fifty ' on its bells, it at once filed an infringement action.
The action ended in a compromise by which the said company acknowledged the respondent company 's rights in its trade marks of 'Fifty ' and '50 '.
Again, when the attention of the respondent company was drawn to an advertisement "Five 50", it addressed a notice to the manufacturers of those bells.
The case of the respondent company was that Gupta Industrial Corporation started using the word 'Fifty ' on its bells in 1958 and not in 1948 as contended by Mr. Desai.
In the absence of any evidence as to the extent of manufacture and sale of those bells it would not be possible to say with any certainty that the respondent company did not come to know about it till 1958, and therefore, presumed that Gupta Corporation had started using the word 'Fifty ' on its bells in that year.
According To the appellant National Bell Co., it went into production only in 1957 and in 1959 the respondent company commenced action against it.
A similar notice of infringement followed by a suit was also given to M/s Berry & Co., but the suit became infructuous on account 86 of lack of the jurisdiction of the Court of Banaras where it was filed.
This evidence negatives any abandonment of trade marks or letting infringements go unchallenged or misleading the other manufacturers that the respondent company would not interfere it they were to use the same marks.
Rights in a mark can, of course, be abandoned by its owner but so long as he remains the registered proprietor of the mark and carried on the business to which the mark is attached, a plea of abandonment is difficult to sustain.
It would, however, be a different matter if it is shown that there, were repeated, undisturbed infringements.
The evider in the present case does not show that there were repeated breaches which went unchallenged though known to the proprietor.
Mere neglect to proceed does not necessarily constitute abandonment if it is in respect of infringements which are not sufficient to affect the distinctiveness of the mark even if the proprietor is aware of them.
(see Re. Farina(1) Where neglect to challenge infringements is alleged, the character and extent of the trade of the infringers and their position have to be reckoned in considering whether the registered proprietor is barred by such neglect.
[see Rowland vs Mitchell(2) ].
The plea of common use must fail, for, to establish it the use by other persons should be substantial.
Though evidence was produced by the appellant companies to show that there were other bells in the market with 'Fifty ' or '50 ' inscribed on them, no evidence was led to show that the use of the word 'Fifty ' or the numeral '50 ' was substantial.
In these circumstances, it is impossible to sustain the contention founded on cl.
(c) of section 32.
Under section 56, the power to rectify is undoubtedly discretionary.
Where such discretion has been properly exercised, a court of, appeal would refuse to interfere.
In the present case, however, the Trial Court did not appreciate the principle embodied in sections 32 and 1 1, with the result that the Division Bench was justified in interfering with the discretion exercised by the Trial Court.
In our view, the contentions urged on behalf of the appellant companies cannot be sustained and consequently the two appeals fail and are dismissed with costs.
There will be one hearing fee.
V.P.S. Appeals dismissed.

summary/full:
For a number of years prior to 1952 cycle bells manufactured by Lucas And other foreign concerns bearing the numbers '50 ' and other numerals were in the Indian market.
After 1952, the import of foreign bells was prohibited, and though foreign made bells with the numerals '50 ' were being sold as late as 1958, the sales were from the stock remaining out of the earlier imports and were few and far between.
In 1953, the respondent company got registered two trade marks in respect of cycle bells being the numeral '50 ' and the figure 'Fifty '.
The appellant companies were manufacturers and also dealers in cycle bells and were selling their cycle bells with the numeral '50 ' inscribed on them.
The respondent therefore, filed suits in 1959, against the appellants, alleging infringement of its trade marks.
In 1961, the appellants applied for stay of trial of the suits and filed applications in the High Court for rectification of the register by cancelling the trade marks of the respondent under section 56 of the .
A single Judge of the High Court, refused to expunge the trade mark 'Fifty ' but ordered the cancellation of the trade mark '50 '.
In appeals to the Division Bench of the High Court, the order cancelling the trade mark '50 ' was set aside.
In appeals to this Court, it was contended that : (1) the trade marks in question were common and not distinctive at the date of their registration as required by section 9(3), and therefore, ought never to have been registered; (2) that the numeral '50 ' is not distinctive; (3) that the use of the trade mark was likely to deceive or cause confusion and hence the registration should be cancelled under section 32(b) and section II (a); (4) that the respondent had imitated the use of the marks by Lucas and other foreign concerns that therefore they would be disentitled to protection under section 11(e) and hence the registration should be cancelled under section 32(h); and (5) that the trade marks were not, at the commencement of the proceedings, distinctive 'and hence liable to be cancelled under section 32(c).
HELD : (1) Under section 32(b) and (c) the original registration of the trade mark has, after the expiration of 7 years from the date of registration to be taken to be valid in all respects including in rectification applications under section 56 unless it is proved : (1) the trade mark was registered in contravention of the provisions of section 11 or offends against the provisions of that section on the date of the commencement of the proceeding or (2) that the trade mark was not, at the commencement of the proceedings distinctive of the goods of the registered proprietor.
Section 11(a) prohibits the registration of trade mark which would be likely to deceive or cause confusion, and section 11(e) prohibits the registration of trade marks if they were such that they were otherwise disentitled to protection in a court.
Section 71 56(2) confers a right on any person aggrieved by an entry made in the register without sufficient cause or by an entry wrongly remaining in the register, to apply for expunging or varying such an entry.
Since 'an aggrieved person ' includes a person who has, before registration, used the trade mark, and a person against whom an infringement action is taken, and the words 'without sufficient cause ' relate to the time of original registration,.
the appellant could apply for cancellation on the ground that the trade mark in question was not distinctive within the meaning of section 9(3).
But in view of the language of section 32, no contention could be raised in the present case, that the trade mark '50 ' and 'Fifty ' were not distinctive under section 9(3), that is, adapted to distinguish the cycle bells of the respondent, at the date of registration, as, seven years had elapsed since the date of the Registration.
[78 D F; 79 B H] Paine & Co. vs Doniells & Sons" Breweries Ltd. (1893) R.P.C. 217, 232, referred to.
(2) It is not an inflexible rule that except in the case of textile goods.
a mark consisting of a numeral is necessarily not distinctive and is not registerable.
[80 E] Kerly on Trade Marks, 9th End.
p. 284, and Reuiter vs Hublens, , referred to.
(3) Section 32(b) relates to facts existing both at the time of and after registration.
If the mark at the time of registration was likely to deceive or cause confusion or would otherwise be disentitled to protection of a court, and therefore, was, under section 11 (a) and (e) prohibited from being registered, the rule as to conclusiveness of the validity of the registration in section 32 cannot be invoked and that would also be so, if the trade mark at the date of commencement of rectification proceedings was such as to offend against the provisions of section 11.
[80F H] The sales of foreign bells with numeral '50 ' after 1953 were 'so few that they could hardly be considered as evidence for showing a likelihood of confusion or deception.
In fact the purchasers used to call those bells, not by the numerals, but by the manufacturers ' names.
As regards bells said to have been manufactured by one of the appellant companies since 1947 and bearing the numeral '50 ', no evidence was led to show either the extent of manufacture or sale between 1947 1953 or thereafter from which the High Court could be asked to draw any inference as to the likelihood of deception or confusion.
As against the voluminous sales of the respondent for the years 1949 1962, there was no corresponding evidence on behalf of the appellants indicating sales of their bells with number '50 ' from which any likelihood of confusion or deception could be deduced.
Therefore, section 11(a) was not attracted.[816 C, G H; 82 D F] (4) The true construction of section 11(e) is that even assuming that the trade marks in question were not distinctive and for that reason not registerable as not falling within section 9, that fact, by itself, would not mean that they became disentitled to protection in a court.
That is, although a mark cannot be registered because it is not distinctive as provided by section 9, such a mark is not for that reason only one, the registration of which is prohibited by section 11, because, the section lays down positive objection to registration, and not mere lack of qualification, by using the words disentitled to protection.
Therefore, unless the trade 'mark offends the provisions of section II, that is, offends any of the matters in cls.
(a) to (d) of section 11, or is disentitled to protection in a court under section 11(e), the rule 72 as to conclusiveness of the validity of registration embodied in section 32 applies.
In the present case, in fact, there was no evidence of any, fraud having been committed by the respondent at the time of the registration.
There was neither averment by the appellants nor evidence, that Lucas or any ,other foreign concern had obtained registration of trade marks of '50 ' or 'Fifty '. 'nose concerns merely used various numerals for distinguishing one type of bell from another manufactured by them and there was no question of any piracy by the respondent.
The trade mark had also be,come distinctive with respective to the respondent.
[82 F H; 84 D F] Imperial Tobacco Co. Ltd. vs De Pasquali & Co. 35 R.P.C. 186, referred to.
(5) The principle underlying section 32(c) is that property in a trade mark exists so long as it continues to be distinctive of the goods of the registered proprietor in the eyes of the public or a section of the public.
If the proprietor is not in a position to use the mark to distinguish his goods from those of others or has abandoned it or the mark has become so common in the market that it has ceased to connect him with his goods then there would be no justification for retaining the mark on the register.
Under section 32(c) the marks have to be distinctive at the 'commencement of the proceedings ', that is the proceedings in which the conclusive character of the ' Registration arises.
Therefore, it may be the date when a suit for infringement is filed by the proprietor of the trade mark or the date on which the rectification proceedings ;ire filed as a result of the suit.
Rights in a trade mark could be abandoned by the owner, but when such abandonment is sought to be inferred from the proprietors neglect to challenge infringement the character and extent of the trade of the infringers and their position would have to be reckoned in considering .whether the registered proprietor was barred by such neglect [84 F H; 85 A C, D E] In the present case, the progressive increase of the sales of the respondent 's bells from 1949 together with the evidence of witnesses of the respondent shows that the said trade marks distinguished the goods of the respondent from those of other manufacturers.
Also, whether the crucial date is taken as 1959 or 1961, the date of suit or the date of rectification proceedings, the evidence on record indicates that the trade marks were distinctive.
The respondent has all along been zealously trying to maintain its right, against all infringements.
There were no repeated breaches which went unchallenged by the respondent when known to the respondent.
Mere neglect in a few cases to proceed did not necessarily constitute abandonment, because, it was in respect of infringements which were not sufficient to affect the distinctiveness of the mark.
There was no .evidence to show that the use by others of the word 'Fifty ' or the numeral '50 ' was substantial and the plea that there was common use of the trade marks must fail.
Therefore, it is impossible to sustain the contention founded on section 32(c).
[86 A E] Re.
Farina, and Rowland vs Mitchell, , applied.
(6) The power to rectify under section 56 is discretionary and when such .discretion was properly exercised, a court of appeal would refuse to interfere.
But, in the present case, the single Judge did not appreciate the principles of sections, 11 and 32, and hence, the Division Bench was justified in setting aside his order.


judgement:
Appeals Nos.
2200, 2200A and 2200B of 1968.
Appeals from the judgment and order dated November 30, 1967 of, the Allahabad High Court in Income tax Reference No. 366 of 1963.
M. C. Chagla and P. N. Tiwari, for the appellant (in all the appeals).
B. Sen, G. L. Sharnia and R. N. Sachthey, for the respondent (in all the appeals).
239 The, judgment of the Court was delivered by Hegde J.
In these appeals by certificate the question that falls for decision is whether oil the facts and in the circumstances of the case registration under section 26(A) of the Indian Income Tax Act, 1922 (to be hereinafter referred to as the act) was rightly refused to the appellant firm on the ground that the partnership in question violated the provisions of section 4 of the Indian Companies Act, 1913.
The authorities under the Act as well as the High Court of Allahabad have answered that question in the affirmative.
The assessee challenges that conclusion.
The above appeals relate to different assessment years of the same assessee, the relevant assessment years being 1952 53, 1953 54 and 1954 55.
In all these years the Income Tax Officer had refused to register the appellant firm under section 26A.
All the partnership deeds are, we are told, similar in terms.
We have before us the deed executed on July 7, 1950.
It shows that the firm consists of 18 partners.
Ex facie that deed does not show that any of the partners had joined the deed as representatives of their Hindu Undivided Families.
From the tenor of the document, they appear to be partners in their own right.
The Income Tax Officer, the Appellate Assistant Commissioner and the Tribunal have come to the conclusion that some of them had joined the partnership as Kartas of their respective Hindu Undivided Families.
All the authorities under the Act as well as the High Court have opined that the partnership in question is not lawful in view of section 4(3) of the Indian Companies Act, 1913.
The material portion of that provision reads (4).
(1). (2) No company, association or partnership consisting of more than twenty persons shall be formed for the purpose of carrying on any other business that has for its object the acquisition of gain by the company, association or partnership or by the individual members thereof, unless it is registered as a company under this Act, or is formed in pursuance of an Act of Parliament of the United Kingdom or some other Indian law or Royal Charter or Letters Patent.
(3) This section shall not apply to a joint family carrying on joint family trade or business and where two or more such joint families form a partnership, in computing the number of persons for the purpose of this section, minor members of such families shall be excluded.
240 (4) Every member of a company, association or partnership carrying on business in contravention of this section shall be personally liable for all liabilities incurred in such business.
(5). . . .
The Income Tax Officer, the Appellate Assistant Commissioner as well as the Tribunal were of the opinion that some partners of the assessee firm having entered into the partnership as representatives of their respective Hindu Undivided Families, the adult members of those families should be taken into consideration for determining whether or not the total number of partners exceeded twenty.
On that basis they have arrived at the conclusion that the firm has more than twenty partners and the same having not been registered as a company under the Companies Act, nor having formed 'in pursuance of an Act of Parliament of the United Kingdom or some other Indian law or Royal Charter or Letters Patent, it must be held to be an unlawful partnership.
When the question formulated earlier was referred to the High Court under section 66(1) of the Act, it was heard by Jagdish Sahai and Beg, JJ.
Jagdish Sahai J. was of the opinion that the partnership in question was not lawful.
Beg J. differed from him and answered the question in favour of the assessee.
In view of this difference of opinion, the matter was referred to Takru J.
He agreed with Jagdish Sahai J. By a majority the question referred to the High Court was answered in favour of the revenue.
Hence these appeals.
Mr. Chagla appearing on behalf of the assessee urged that no Hindu joint family as such can Join a partnership and it is now well settled that when a karta of Hindu Undivided Family joins a firm as a partner even if he contributes his share from out of the family funds, the other members of his family do not ipso facto 'become partners of that firm.
So far as the partnership is concerned, he is the only partner though he may be accountable to the members of his family as regards the profits earned.
According to the learned counsel, for the purpose of working out the rights and liabilities of the partners inter se one cannot go behind the partnership deed.
Proceeding further he urged that in considering whether a partnership should be registered under section 26A or not, the Income tax Officer has merely to see, whether the requirements of section 26A of the Act and the relevant rules are complied with or not.
He is not entitled to investigate into the question as to who are beneficially interested in the partnership.
According to him if the requirements of section 26A and the relevant rules are complied with, the Income tax Officer is bound to register the partnership.
The counsel urged that the second limb of section 4(3) of the Indian Companies Act, 1913, proceeds on the erroneous impression that 241 a joint Hindu family can enter into a partnership, which in law it cannot as it has no legal personality.
Mr. B. Sen, learned counsel for the department did not contest the position that when a karta or a member of a Hindu Joint family joins a partnership the other members of his family do not become partners ipso facto.
But according to him it is open to the department to go behind the partnership deed and find out whether the individual who has joined as a partner has joined in his own right or as a representative of any other body.
His contention was that in view of section 4(3) of the Indian Companies Act, 1913, once the Income tax Officer comes to the conclusion that one of the partners of a firm is a representative of a joint family, he must deem that the adult members of that family are also partners of that firm and on that 'basis find out whether the total number of partners exceed twenty.
If they exceed twenty he cannot register the partnership, as such a partnership contravenes section 4 (2) of the Indian Companies Act, 1913, Section 2 (6B) of the Act provides that the expression 'firm ', partner ' and 'partnership ' in the Act have the same meaning respectively as in the .
Section 4 of the Partnership Act, 1932 prescribes "Partnership" is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all.
Persons who have entered into partnership with one another are called individually 'partners" and collectively "a firm" and the name under which their business is carried on is called the 'firm name '.
In view of the aforementioned provision only "persons" can join as partners.
Section 2(42) of the General Clauses Act says a "Person" shall include any company or association or body of individuals whether incorporation or not.
But this definition applies when there is nothing repugnant in the subject or context.
After examining the provisions of the Partnership Act, the Privy Council in SenaJi Kapurchand vs Pannaji Devichand(1) and this Court in Dulichand Laxminarayana vs Commissioner of Income Tax, Nagpur(2) , have held that an association of persons is not a person within the meaning of that expression in the Partnership Act, It is true that section 2(9) of the Act says that unless the context otherwise requires "person" includes Hindu Undivided Family, This definition cannot be imported into the Partnership Act, the provisions of which alone are relevant for finding as to who could join as partners.
It is only partnership constituted according to (1) A.I.R. 1930 P.C. 300.
(2) 242 the provisions of the Partnership Act that can be considered as partnerships under the Act.
The definition of 'person ' in the Act is intended for the purpose of levying income tax and for other cognate matters.
On the basis of certain observations of the Judicial Committee in Lala Lachman Das vs Commissioner of Income Tax(1), it Was contended on behalf of the department that a joint Hindu family can enter into a partnership.
Those observations have to be read in the context in which they were made.
The department in that case had requested the tribunal to refer the question "can there 'be a partnership within the meaning of section 2 sub section
6(B) of the Indian Income tax Act, 1922 between a Hindu Undivided Family as such on the one part and one of its undivided members in his indi vidual capacity on the other part.
" But that question was ultimately not referred as being unnecessary on the facts of the case.
But the following observations of the Judicial Committee in its judgment are relevant : "It is unnecessary to consider in this case the question relating to the validity of a partnership between a Hindu Undivided family as such of the one part and one of its undivided members in his individual capacity of the other.
With reference to the latter kind of partnership there seems to be some authority favouring the view that such a partnership cannot exist under the rules.
of Hindu law but their Lordships do not propose to deal with that question in this case.
" In that case the partnership was between the karta of a joint Hindu family and an undivided member of that family.
Hence the observations in the judgment that the Hindu Undivided family was a partner has really reference to the karta who was a partner as representing the family.
In Commissioner of Income tax,, West Bengal vs Kalu Babu Lal Chand(2), this Court observed that it is now well settled that Hindu Undivided Family cannot as such enter into a contract of partnership with another person or persons.
,Several other decisions have taken the same view.
No decision taking a contrary view was ' brought to our notice.
The concept of a Hindu Undivided Family joining a partnership presents considerable difficulty.
A Hindu Undivided Family is a fleeting body.
Its composition changes by births, deaths, marriages and divorces.
Such a partnership is likely to have a precarious existence.
The assumption in section 4(3) of the Companies ' Act, 1913 that a Hindu Joint family can be a partner in a partnership appears to be based on an erroneous view of the law.
(1) 74.
I.A. 277.
(2) 243 The next question is whether when a deed of partnership does not on the face of it show that any Hindu Undivided Family has joined the partnership, is it open to the Income tax Officer to behind the deed and find out for the purpose of registration under section 26A whether the ostensible partner is the representative of someone else.
The Judicial Committee in P. K. P. section Pichappa Chettiar and Ors.
vs Chokalingam Pillai and Ors.
(1) ruled that where a managing member of a joint family enters into a partnership with a stranger, the other members of the family do not ipso facto become partners in the business so as to clothe them with all the rights and obligations of a partner as defined by Contract Act.
In such a case the family as a unit does not become a partner but daily such of its members as in fact enter into contractual relationship with the stranger.
In Kshetra Mohan Sannyasi Charan Sadhukhan vs Commr. of Excess Profits Tax, West Bengal,(1) this Court laid down that a Hindu Undivided Family is included in the expression "person, as defined in the Indian Income tax Act but it is not a juristic person for all purposes; when two kartas of Hindu Undivided Families.
enter into a partnereship agreement, the partnership though popularly known as one between two Hindu Undivided Families in the eye of the law, it is a partnership between the two kartas and the other members of the families do not ipso facto become partners; there is, however, nothing to prevent the individual members of one Hindu Undivided Family from entering into a partnership with the individual members of another Hindu Undivided Family and in such a case it: is a partnership between the individual members and it is wholly inappropriate to describe such a partnership as one between two Hindu Undivided Families.
In Firm Bhagat Ram Mohan Lal vs Commissioner of Excess Profits Tax, Nagpur and anr.(3), this Court ruled that when the karta of a joint family enters ' into a partnership with the stranger, the members of the family do not ipso facto become partners in that firm.
They have no right to take part in its management or to sue for its dissolution.
The creditors of the firm would no doubt be entitled to proceed against the joint family assets including the shares of the non Partner co parceners for realisation of their debts.
But that is because under the Hindu law, the karta has.
the right when properly carrying on business to pledge the H credit of the joint family to the extent of its assets, and not because the junior members become partners in the business.
The liability (1) A.I.R. 1934, P.C. 192.
(3) (2)(1953) 244 of the latter arises by reason ' of their status as coparceners and not by reason of any contract of partnership by them.
In Commissioner of Income tax, Bombay City vs Nandlal Gandalal(1), this Court again observed that the position in Hindu law with 'regard to a coparcener, even when he is the karta entering into partnership with others in carrying on a business is well settled.
The partnership that is created is a contractual partnership and is governed by the provisions of the .
The partnership is not between the family and the other partners; it is a partnership between the _coparcener individually and his other partners.
The coparcener is undoubtedly accountable to the family for the income received, but the partnership is exclusively one between the contracting members, including the individual coparcener and the strangers.
On the death of the coparcener, the surviving members of the family cannot claim to continue as partners with the others or institute a suit for dissolution of partnership; nor can the stranger partners sue them as partners for the coparcener 's share of the loss.
Therefore, so far as the partnership is concerned, both under partnership law and under Hindu law, the control and management is in the hands of the individual coparcener who is the partner, and not in the family.
In Commissioner of Income tax, Madras vs Bagyalakshmi and Co. Udamalpet(2), this Court observed that contract of partnership has no concern with the obligation of the partners to others in respect of their shares of profit in the partnership.
it only regulates the rights and liabilities of the partners.
A partner may be the karta of a joint Hindu family, he may be a trustee, he may enter into sub partnership with others, he may under an agreement express or implied, be the representative of a group of persons; he may be a benamidar for another.
In all such cases he occupies a dual position qua the partnership, he functions in his personal capacity; qua the third parties in his representative capacity; third parties, whom one of the partner represents, cannot enforce their rights against the other partners nor can the other partners do so against the said third parties.
Their right is only to a share in the profits of their partner representative in accordance with law or in accordance with the terms of the agreement, as the case may be.
The law of partnership and Hindu law function in different fields.
A divided member or some of the divided members of the erstwhile joint family can certainly enter into a partnership, with third parties under some arrangement among the members of the divided family.
Their shares in the partnership depend on the terms of the partnership; the shares of the members of the divided (1) (1960) 40 I.T.R.1.
(2) ; 245 family in the interest of their representative in the partnership depend upon the terms of the partition deed.
From these decisions it follows that for the purpose of finding, out as to who are all partners of.
a firm, one has only to look to the partnership deed and not to go behind it.
Another contention urged by Mr. Chagla was that the scope of the enquiry I under section 26A is a limited one; if the application made for registration complies with the requirements of that section and the rules framed thereunder.
, then it is not open to the income tax Officer to refuse to register the firm.
Section 26A says : (1) Application may be made to the Income7tax officer on behalf of any firm, constituted under an instrument of partnership specifying the individual shares of the partners, for registration for the purposes, of this Act and of any other enactment for the time being in force relating to the Income tax or super tax.
(2) The application shall be made by such person or persons, and at such times and shall contain such particulars and shall be in such form, and be verified in such manner, as may be prescribed and it shall be dealt with by the Income tax Officer in such manner as may be prescribed.
" The conditions of registration prescribed in this section and the relevant rules are : (1) on behalf of the firm, an application ,should be made to the Income tax Officer by such person and at such times and containing such particulars, being in such form and verified in such manner as are prescribed by the rules;, (2) the firm should be constituted under an instrument of partnership; (3) the instrument must specify the individual shares of the part ners and (4) the partnership must be valid and genuine and must actually exist in the terms specified in the instrument.
If all the above conditions are fulfilled, the Income tax Officer is bound to register the firm unless the assessee has contravened section 23(4) of the Act.
In Commissioner of Income Tax, Madras vs Sivakashi Match Exporting Co. (1) this Court held that the combined effect of section 26A and the rules made thereunder was that the Income tax Officer could not reject an application made by a firm if it gave the necessary particulars prescribed by the rules and if there was a firm in existence as shown in the instrument of partnership.
A firm is said to be not in existence if it was a bogus and not a (1) , Sup.
Cl/70 2 246 genuine one or if in law the constitution of the partnership was void.
The jurisdiction if the Income tax Officer was, therefore, confined to ascertaining two facts namely (1) whether the application for registration was in conformity with the rules framed under the Act and (2) whether the firm shown in the document presented for registration was a bogus one or had no legal existence.
Further the discretion conferred on the Income tax Officer under section 26A was a judicial one and he could not refuse to register a firm on mere speculation.
He had to base his conclusion on relevant evidence.
Therein this Court further held that there was no prohibition under the Partnership Act against a partner or partners of other firms combining together to form a separate partnership to carry on a different business.
The fact that such a partner entered into sub partnership with others in respect of his share did not detract from the validity of the partnership; nor was the manner in which he dealt with his share of the profits of any relevance to the question of the validity of the partnership.
In Commissioner of Income Tax Gujarat vs A. Abdul Rahim and Co. (1), this Court ruled that registration of a partnership deed under s.26A of the Act could not 'be refused on the ground that one of the partners was a benamidar for someone else.
Therein this Court observed that it is a settled law that if a partnership is a 'genuine and valid one, the Income tax Officer has no power to reject its registration if the other provisions of s.26A and the rules framed thereunder are complied with.
When a firm makes an application under s.26A for registration, the Income tax Officer can reject the same if he comes to the conclusion that the partnership is not genuine or the instrument of partnership does not specify correctly the individual share of the partners.
But once he comes to the conclusion that the partnership is genuine and a valid one, he cannot refuse registration on the ground that one of the partners is a benamidar of another.
If the partnership is genuine and legal, the share given to the benamidar will be the correct specification of his individual share in the partnership.
The beneficial interest in the income pertaining to the share of the said benamidar may have relevance to the matter of assessment but none in regard to the question of registration.
His beami character does not affect the benaamidar 's capacity as partner or his relationship with the other members of the partnership.
If a partner is only a benamidar for, another, it can only mean that he is accountable to the real owner for the profits earned by him from and out of the partnership.
Therefore a benamidar is a mere trustee of the real owner and he has no beneficial interest in the property or the business of the real owner.
But, in law, just as in the case of a trustee, he can also enter into a partnership with (1) 247 others.
The benamidar of a partner, qua the other partners, has separate And real existence; he is governed by the terms of the partnership deed, his rights and liabilities are governed by the terms of the contract and by the provisions of the partnership Act; his liability to third parties for the acts of the partnership is coequal with that of the other partners; the other partners have no concern with the real owner; they can only look to him for enforcing their rights or discharging their obligations under the partnership deed.
Any internal arrangement between him and ,another is not governed by the terms of the partnership; that arrangement operates only on the profits accruing to the benamidar; it is outside the partnership arrangement.
If a benamidar possesses the legal character to enter into a partnership with another, the fact that he is accountable for his profits to, and has the right to be indemnified for his losses by a third party or even by one of the partners does not discharge him of the said character.
As mentioned earlier, the persons who are shown in the part nership deed with which we are concerned in these appeals as partners, appeared to have joined the same in their individual capacity.
There is nothing in the partnership deed to indicate that they have joined the partnership as kartas of their respective families.
It was not open to the Income tax Officer to go behind the deed and find out, for the purposes of registration under section 26A whether the partners mentioned in the deed have joined the partnership in their own right or as representing others.
Hence the partnership must be held to have been validly formed as law did not at the relevant time prohibit any one, otherwise competent to contract from entering into a contract of partnership even though, the beneficial interest in his share may vest in others.
The application made for registration complies with the requirements of section 26A and the rules framed thereunder.
Therefore the Income tax Officer was bound to register the partnership.
For the reasons mentioned above, we allow these appeals, set aside the order made by the High Court and answer the question referred to the High Court in the negative and in favour of the assessee.
The department shall pay the costs of the assessee in this Court as well as in the High Court.
One hearing fee.
R.K.P.S. Appeals allowed.

dataset_name: IN-Abs

summary/full:
A firm consisted of 18 partners.
The partnership deed did not show that any of the partners joined the deed as representatives of their Hindu Undivided Families.
The firm applied for registration under section 26A of the Income Tax Act, 1922.
The income tax Officer, the Appellate Assistant Commissioner and the Tribunal were of the opinion that some partners of the firm having entered into the partnership as representatives of their respective Hindu undivided families, in view of section 4(3) of the Companies Act, 1913, the adult members of these families should be taken into consideration for determining whether or not the total number of partners exceeded twenty.
On that basis they arrived at the conclusion that the firm had more than 20 partners and the same having not been registered as a company under the Companies Act, the partnership was un lawful.
The High Court answered a reference made to it in favour of the revenue.
In the appeal to this Court it was contended; (i) Section 4(3) of the Companies Act, 1913 proceeded on the erroneous impression that a joint Hindu Family can enter into a partnership which in law it cannot as it has no legal personality; (ii) it was not open to the Income Tax Officer to go behind the deed for the purpose of registration under section 26A and (iii) if the application, for registration complied with the requirements of that section and the rules made thereunder, it was not open to the Income Tax Officer to refuse to register.
Allowing the appeal, HELD : (i) It is only partnership constituted according to the provisions of the partnership Act that can be considered as partnership under the Act.
Under the Partnership Act only "persons" can join as partners.
An association of persons is not a person within the meaning of that expression in the Partnership Act.
The definition of "Person" in the Income Tax Act including within the definition Hindu Undivided Family is intended for levying income tax and other cognate matters and cannot be imported into the Partnership Act, the provisions of which alone are relevant for finding as to who could join as partners.
A Hindu undivided family cannot as such enter into a contact of Partnership with another person or persons.
The concept of a Hindu undivided family joining a partnership presents considerable difficulty.
It is a fleeting body and such a partnership is likely to have a precarious.
existence.
Therefore, the assumption in section 4(3) of the Companies Act, 1913, that a Hindu Joint Family can be a partner in a partnership appear& to be based on an erroneous view of the law.
[241 H 242 G H] 238 Senaji Kapurchand V. Pannaji Devichand, A I.R. 1930 P.C. 300, Dulichand Laxminarayana vs Commissioner of income tax Nagpur, and Commissioner of Income tax West Bengal vs Kalu Babu Lal Chand, , referred to.
Lala Lachman Das vs Commissioner of Income Tax, 74 I.A. 277, distinguished '.
(ii) For the purpose of finding out as to who are all partners of a firm, one has only to look to, the partnership deed and not to go behind it.
It is well settled that when a co parcener, even when he is the Karta, enters into partnership with others the partnership that is created is a contractual partnership; that partnership is not between the family and the other partners, it is a partnership between the coparcener individually and his other partners.
[244 B C] P. K. P. section Pichappa Chettiar vs Chokalingam Pillai.
A.I.R. 1934 P.C. 192, Kshetra Mohan Sannyasi Charan Sadhukhan vs Commr.
of Excess Profits Tax, West Bengal, , Firm Bhagat Ram Mohan Lal vs Commissioner of Excess Profits Tax, Nagpur and And.
and Commissioner of Income tax, Bombay City vs Nandlal Gandalal, , referred to.
(iii) The Income tax Officer has no, power to reject an application for registration under section 26.A if the provisions of the section and the rules framed thereunder are complied with.
The jurisdiction of the Income tax Officer is confined to ascertaining two facts, namely, (1) whether the application for registration is in conformity with the rules framed under the Act and (2) whether the firm shown in the document %,as a bogus one or had no legal existence.
It is not open to the Income tax Officer to go behind the deed and find out for the purpose of registration whether the, partners mentioned in the deed have joined the partnership in their own right or as representing others.
In the present cast the application made for registration complies with the requirements of the section and the rules framed thereunder.
Hence the partnership must be held to have been validly formed as law did not at the relevant time prohibit anyone, otherwise competent to contract from entering into a contract of partnership even though the beneficial interest in his share may vest in others.
[246 A B, 247 E F] Commissioner of Income tax, Madras vs Sivakashi Match Exporting Co. and Commissioner of Income Tax Gujarat vs ,I. Abdul Rahim and Co., , referred to.


judgement:
Appeal No. 615 of 1966.
Appeal by special leave from the judgment and decree dated June, 25, 1962 of the Bombay High Court, Nagpur Bench in Appeal No. 191 of 1956 from original Decree,.
B. R. L. Iyengar, section K. Mehta, for the appellant.
section N. Kherdekar, G. L. Sanghi and A. G. Ratnaparkhi, for respondent No. 1.
The Judgment of the Court was delivered by Hegde, J.
One Prem Sukh was the owner of the suite pro perties.
Parvatibai was his wife They had no children.
Prem Sukh gifted some of his properties to his wife on June 14, 1943.
Dr. Madan Lal 's (1st respondent in this appeal) case is that Prem Sukh adopted him on July 12, 1943.
Thereafter it is said that Prem Sukh adopted on April 10, 1946, the appellant Vallabh Das.
On April 29, 1946, Dr. Madan Lal instituted a suit for a declaration that he is the adopted son of Prem Sukh and for partition and possession of his share in the family properties.
Prem Sukh denied the adoption pleaded by Dr. Madan Lal.
On the other hand he alleged that Vallabh Das was his adopted son.
In view of that allegation, Vallabh Das was added as a supplemental defendant in that suit.
No relief was claimed against him.
During the pendency of that suit Prem Sukh died.
Thereafter Dr. Madan Lal moved the court to withdraw the suit.
He was permitted to withdraw the same with liberty to file a fresh suit on the same cause of action on condition that he pays the defendants ' costs of that suit before instituting a fresh suit.
Thereafter Parvatibai bequeathed her properties to Dr. Madan Lal and died soon after.
The suit from which this appeal arises was brought on November 29, 1951 even before the costs of Vallabh Das (the appellant herein) in the previous suit had been paid.
Vallabh Das resisted the suit on various grounds.
He contended that Dr. Madan Lal was not adopted by Prem Sukh; even if he 213 had been adopted, that adoption was not valid under the Benaras School of Hindu law by which the parties were governed as Madan Lal was a married man on July 12, 1943 and lastly the suit as brought is not maintainable as Dr. Madan Lal had not paid the costs due to him under the order in the previous suit before instituting the present suit.
Both the trial court as well as the High Court in appeal rejected every one of the contentions taken by Vallabh Das and decreed the suit as prayed for.
Thereafter this appeal was brought after obtaining special leave from this Court.
The factum of the adoption has been upheld both by the trial court as well as by the High Court.
There is evidence to support that finding.
No convincing circumstance was brought to our notice requiring us to review the evidence over again.
This Court ordinarily does not interfere with concurrent findings of fact.
We see no justification to disturb the concurrent finding of fact arrived at by the trial court and the High Court.
As regards the validity of the adoption, the contention of Vallabh Das that the adoption was invalid rests on the plea that on July 12, 1943, Dr. Madan Lal was a married man.
This plea has been negatived by the trial court as well as by the High Court.
They have come to the conclusion that Dr, Madan Lal was not a married man on that date and that he was married subsequently.
Here again there is no good ground for us to interfere with the finding of fact reached by those courts.
The only contention that was seriously pressed before us on behalf of the appellant was that the suit under appeal is not maintainable as the condition precedent imposed by the court in the earlier suit namely the payment of defendants ' costs by the plaintiff before bringing a fresh suit on the same cause of action had not been complied with.
We do not think that this contention is well founded.
Rule 1, Order 23, Code of Civil Procedure empowers the courts to permit a plaintiff to withdraw from the suit brought by him with liberty to institute a fresh suit in respect of the subject matter of that suit on such terms as it thinks fit.
The terms imposed on the plaintiff in the previous suit was that before bringing a fresh suit on the same cause of action, he must pay the costs of the defendants.
Therefore we have to see whether that condition governs the institution of the present suit.
For deciding that question we have to see whether the suit from which this appeal arises is in respect of the same subject matter that was in litigation in the, previous suit.
The expression "subject matter" is not defined in the Civil Procedure Code.
It does not mean property.
That expression has a reference to a right in the property 214 which the plaintiff seeks to enforce.
That expression includes the cause of action and the relief claimed.
Unless the cause of action and the relief claimed in the second suit are the same as in the first suit, it cannot be said that the subject matter of the second suit is the same as that in the previous suit.
Now coming to the case before us in the first suit Dr. Madan Lal was seeking to enforce his right to partition and separate possession.
In the present suit he seeks to get possession of the suit properties from a trespasser on the basis of his title.
In the first suit the cause of action was the division of status between Dr. Madan Lal and his adoptive father and the relief claimed was the conversion of joint possession into separate possession.
In the present suit the plaintiff is seeking possession of the suit properties from a trespasser.
In the first case his cause of action arose on the day he got separated from his family.
In the present suit the cause of action, namely, the series of transactions which formed the basis of his title to the suit properties, arose on the death of his adoptive father 'and mother.
It is true that both in the previous suit as well as in the present suit the factum and validity of adoption of Dr. Madan Lal came up for decision.
But that adoption was not the cause of action in the first nor is it the cause of action in the present suit.
It was merely an antecedent even which conferred certain rights on him.
Mere identity of some of the issues in the two suits does not bring about an identity of the subject matter in the two suits.
As observed in Rakhma Bai vs Mahadeo Narayan(1), the expression "subject matter" in Order 23, Rule 1, Code of Civil Procedure means the series of acts or transactions alleged to exist giving rise to the relief claimed.
In other words "subject matter" means the bundle of facts which have to be proved in order to entitle the plaintiff to the relief claimed by him.
We accept as correct the observations of Wallis C.J. in Singa Reddi vs Subba Reddi(2), that where the cause of action and the relief claimed in the second suit are not the same as the cause of action and the relief claimed in the first suit, the second suit cannot be considered to have been brought in respect of the same subject matter as the first suit.
For the reasons mentioned above this appeal fails and the same is dismissed with costs.
G.C. Appeal dismissed.
(1)I.L.R. 42 Bom.1155.

summary/full:
P was the owner of the suit properties.
He had no children.
He gifted some of his properties to his wife on June 14, 1943.
On April 29, 1946 the first 'respondent instituted a suit for a declaration that he was the adopted son of P and for partition and possession of his share in the family property.
The first respondent claimed to have been adopted on July 12, 1943, P denied the said adoption and alleged that in fact he had adopted the appellant on April 10, 1946.
In view of that allegation the appellant was added as a supplemental defendant in the said suit, but no relief was claimed against him.
During the pendency of that suit P died.
Thereafter the first respondent moved the court to withdraw the suit.
He was permitted to withdraw the 'same with liberty to file a fresh suit on the same cause of action on condition that he paid the defendants ' costs of that suit before instituting a fresh suit.
Thereafter P 's widow bequeathed her properties to the first respondent and died soon after.
On November 29, 1951 the first respondent brought a fresh suit without having paid the costs of the appellant in the earlier suit.
The appellant resisted the suit on several grounds.
However the trial court and the High Court decided in favour of the first respondent.
Thereupon by special leave the present appeal was filed by the appellant.
The main question that fell for consideration was whether the suit under appeal was maintainable when the condition precedent imposed by the court in the earlier suit namely, the payment of defendants ' costs by the plaintiff before bringing a fresh suit on the same cause of action had not been complied with.
HELD : (i) Rule 1, 0.
23, Code of Civil Procedure empowers the courts to permit a plaintiff to withdraw from the suit brought by him with liberty to institute a fresh suit in respect of the subject matter of that suit on such terms as it thinks fit.
The expression 'subject matter ' is not defined in the Code.
It does not mean property.
That expression has a reference to a right in the property which the plaintiff seeks to enforce.
That expression includes the cause of action and the relief claimed.
Unless the cause of action and the relief claimed in the second suit are the same as in the first suit it cannot be said that the subject matter of the second suit is the same as in the previous suit.
[213 G 214 B] (ii) The non fulfilment of the condition imposed by the Court at the time of withdrawal of the first suit did not bar the present suit because the subject matter of the two suits was not the same.
In the first suit the first respondent was seeking to enforce his right to partition and separate possession.
In the present suit he sought to get possession of the suit properties from a trespasser on the basis of his, title.
In the first suit the cause of action was the division of status between the first respondent and his adoptive father and the relief claimed was the conversion of joint possession into separate possession.
In the present suit the plaintiff was seeking possession of the suit properties from a trespasser 212 In the first case his cause of action arose on the day he got separated from his family.
In the present suit the cause of action, namely, the series of transactions which formed the basis of the title to the suit properties arose on the death of his adoptive father and mother.
[214 B D] Mere identity of some of the issues in the two suits did not bring about an identity of the subject matter in the two suits.
[214 D E] The appeal must accordingly be dismissed.
Rakhma Bai vs Mahadeo Narayan, I.L.R. and Singa Reddy vs Subba Reddy, I.L.R. , approved and applied.