Karnataka High Court: While deciding the instant petition challenging order of the Regional Director, Corporate Affairs which allowed the application filed by Lulu International Shopping Malls Pvt. Ltd., and restrained Coolulu Sports Pvt. Ltd., from using the word “lulu” in the title of its name, the Bench of M. Nagaprasanna*, J., directed the Regional Director, Corporate Affairs to pass a fresh order by recording reasons for the contentions so advanced both by Coolulu Sports and the Lulu Malls, which would “bear the stamp of application of mind”. The Court observed that ‘an order which does not contain any reason is an unreasonable order’ and this phrase became applicable to the impugned order, as there were no reasons indicated qua the contentions of the respective parties as well as the mandate of the statute.
Background: Coolulu Sports has been incorporated in 13-04-2018 under the Companies Act, 2013 and is engaged in sports coaching, sporting events, adult fitness events. Coolulu was established with the aim of fostering athletic inclinations in both children and adults alike, to give sport enthusiasts an opportunity to compete and get recognized. It was claimed that prior to incorporation the brand and logo with the stamp and all other things were checked and then the name was incorporated.
Lulu International Shopping Malls Pvt. Ltd. is engaged in the establishment and operation of several commercial establishments such as malls and super-markets.
Coolulu Sports, though incorporated in the year 2018, this fact was not known to Lulu International Shopping Malls Pvt. Ltd . It was indicated from the petitioner’s side that ‘Lulu’ group has expanded its footprints into the sports retail in India and, therefore, Coolulu wanted to have strategic partnership with ‘Lulu’ as it was a sports Company.
Lulu Malls complained to the competent authority that Coolulu by using the word ‘lulu’ in its incorporated name, is using a name that is too near to the name of the Lulu Malls. A show-cause notice was then issued to Coolulu Sports under Section 16 of Companies Act, 2013.
The Regional Director, Corporate Affairs, upon perusal of the complaint, issued the impugned order dated 30-03-2022 directing Coolulu Sports that it should not use the word ‘Lulu’ in its name and that the name of the Company should be changed within 3 months from the date of the order.
Contentions: Counsels for Coolulu argued that the action that is being taken under the Act is not akin to what is to be taken under the Trademarks Act, 1999. There is a difference between ‘Lulu’ and ‘Coolulu’. Therefore, the order which directs removal of the name ‘Lulu’ from the title name does not bear any application of mind to any of the provisions of law. It is bereft of reasons.
It was further argued that Coolulu Sports Pvt. Ltd. is not identical with Lulu International Shopping Malls Pvt. Ltd., as the words ‘International’; ‘Shopping’ and ‘Malls’ are not a part of Coolulu. Coolulu has the words ‘Sports’ and ‘Entertainment’ in its name
Per contra, representatives for Lulu Malls argued that ‘Lulu Shopping Malls’ is a well-known brand in the world and for a well-known brand, a name that s too identical, cannot exist as per the provisions of Section 16 of Companies Act, 2013.
Court’s Assessment and Decision: Perusing the rival contentions, impugned order and relevant provisions of law (Section 16 of the Companies Act) the Court pointed that the entire fulcrum of the instant dispute lies in Section 16.
Analysing the impugned order, the Court pointed out that no proper consideration was done by the Regional Director. The Court noted that the impugned order did not demonstrate even an impression of application of mind, as no reasons were recorded by way of consideration of the contentions of the parties. “In a paragraph it is opined that the name is likely to create confusion between the two and, therefore, it should be removed. This is not the purport of Section 16. An order which determines rights of parties, in the case at hand is the rights of parties qua their names, it is trite, should bear application of mind”.
The Court further observed that Regional Director, Corporate Affairs has been endowed with the statutory duty that determinations under Section 16, such as in the instant matter, “cannot pass an order which would depict an inscrutable face of the sphinx”.
The Court thus allowed the petition in part and directed the Regional Director to pass fresh but reasoned order in the dispute between Coolulu Sports and Lulu Malls. The impugned order of 30-03-2022 was quashed as well.
[Coolulu Sports Pvt. Ltd. v. Union of India, 2023 SCC OnLine Kar 13, decided on 05-04-2023]
*Order written by Justice M. Nagaprasanna.
Advocates who appeared in this case :
Petitioner- Manu P. Kulkarni, Advocate A/W Shristi Widge, Sharan Balakrishna and Manoj Raikar, Advocates;
Respondents- Anupama Hegde, CGC forR1, R2 and R4;
Aditya Sondhi, Senior Advocate A/W Rashmi Deshpande, Advocate for R3.