MCA notifies the Companies (Appointment and Qualification of Directors) Second Amendment Rules, 2019
The Ministry of Corporate Affairs (“MCA”) through a notification has notified the Companies (Appointment and Qualification of Directors) Second Amendment Rules, 2019, (“Amendment Rules”), whereby Rule 12B has been inserted in the Companies (Appointment and Qualification of Directors) Rules, 2014.
As per the Amendment Rules, in the event that a company fails to file form e-Form ACTIVE (as is required under the Companies (Incorporation) Second Amendment Rules, 2019) within the stipulated time, the Director Identification Number (“DIN“) allotted to its existing directors, shall be marked as “Director of ACTIVE non-compliant company”.
After the filing of e-form ACTIVE by all such companies, the DIN of such director shall be marked as “Director of ACTIVE compliant company”.
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The Amendment Rules focus on ensuring that companies are compliant with the requirement of filing E-form ACTIVE on time. The Amendment Rules aim to hold directors liable in the event that E-Form ACTIVE is not filed.
However, the Amendment Rules do not mention what are the consequences in the event a director is marked as “Director of ACTIVE non-compliant company”. We will need clarity from the MCA as to what will be the implications on the Director (for example, he/she will not be allowed to continue as a director of any company or he/she will need to pay a certain fine). Without the same, there is no deterrent effect created on the Director which will make him/her ensure that their company files E-Form ACTIVE.
You can read more about E-Form ACTIVE here.
Existence of tortious claims is not a ground to permit a party to opt out of arbitration.
The Delhi High Court, in the case of Kishan Gopal (“Plaintiff”) v. Praveen Rajput (“Defendant”), passed a judgment stating that existence of a tortious claim cannot be a ground to permit a party to opt out of arbitration.
In this case, the Plaintiff filed a petition before the Delhi High Court and sought for compensation, punitive damages and other relief against the defendant following the termination of a agreement executed by and between the parties with respect to the construction of a property.
While the Defendant submitted that the suit was not maintainable owing to an arbitration clause in the agreement, the Plaintiff maintained that a tortious claim to damages is not arbitrable.
The Delhi High Court dismissed the claims of the Plaintiff and held that an arbitration tribunal can decide on matters relating to exemplary/punitive, as long as the claims/disputes arise in respect of the subject matters stipulated in the agreement between the parties. Hence, a party cannot use the existence of a tortious claim as a reason to avoid arbitration if the claims arise out of the agreement itself.
The Delhi High Court further opined that an arbitral tribunal has all the trappings of a civil court, including the power to award all forms of injunctions and damages.
Additionally, the Delhi High Court observed that for an arbitration clause to be waived, there has to be evidence showing the parties have waived the arbitration clause.
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The Court has passed this judgement keeping in mind that if tortious claims are used as a way to escape arbitral proceedings, then each and every party to a contract would escape arbitration claiming damages.
In the past, tortious claims were regarded to be outside the scope of arbitration. However, the Court, in this case, recognised instances where arbitrators have awarded damages for mental agony, harassment etc.
When the terms of an agreements are clearly defined bringing punitive damages within the scope of arbitration clause, an arbitral tribunal will be entitled to award such damages. This reduces misuse of right to claim damages by the parties by unnecessarily moving the civil courts. It also encourages the parties to take all their claims arising out of the agreement to an arbitral tribunal for speedy disposal.
Generic terms and expressions as part of registered trademarks not entitled to exclusive monopoly over usage under Section 28 of the Trademark Act
The Delhi High Court, in the case of Praveen Kumar Jain (“Plaintiff”) v. Ranjan Sethi & Ors (“Defendant”)., passed an interim order declaring that there can be no monopoly over the use of the terms “chur chur naan” and “amristsari chur chur naan” as the same are generic in nature.
In this case, the Plaintiff submitted that he had registered trademarks over the two names which entitles him to enjoyment of exclusive rights under the Trademarks Act, 1999 (“Act”).
The above mentioned sections confer the right of exclusive enjoyment of the trademark and the right to obtain relief due to infringement of the trademark over the registered proprietor.
Owing to this, the Plaintiff prayed for an injunction restraining the Defendants from using the mentioned terms in the course of his services.
The Defendants, on the other hand, submitted that the Plaintiff’s trademarks must be cancelled since they lack distinctiveness. They also proved that the expressions were popularly used by various third parties in the market.
After hearing both the sides, the Court clarified that the exclusive rights granted to the Plaintiff under the Trademarks Act, 1999 are not absolute and are subject to certain exceptions. Consequently, as per Section 35 of the Trademarks Act, 1999, bona fide description of the character or the quality of the services provided does not amount to infringement.
Addressing the particular facts of the case, the Court observed that expressions such as “naan” and “chur chur naan” are used by the public in common parlance to describe food products. Thus, there cannot be any monopoly over the usage of these terms.
The Court, however, clarified that this order was prima facie in nature and was not based on the merits of the case.
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The Court’s order, though interim in nature, reiterates a long-standing principle in Trademark law that generic terms and expressions cannot be granted exclusive monopoly rights. Generic terms are those terms which are commonly used and sometimes, necessary in the usual course of trade in goods and services.
When such terms and expressions are subjected to monopoly in usage by a single participant in the market, it leads to unfair trade practices harming other participants. This, in turn, also negatively affects the market economically.
In certain instances, these common terms may become part of registered trademarks. However, such a registered proprietors cannot prohibit others from using the terms in a bona fide manner necessary to conduct their businesses.
Disclaimer: This post has been prepared for informational purposes only. The information/or observations contained in this post does not constitute legal advice and should not be acted upon in any specific situation without seeking proper legal advice from a practicing attorney.