Rectification of the Name of a Company

Rectification of the Name of a Company

S. Lalitha, FCS, Company Secretary in Practice, Chennai.

A name is the most significant aspect of any entity irrespective of its form. It gives a

distinct identity to the entity. The Companies Act, 1956 contains provisions relating to

name. This article besides explaining the importance of name, outlines the procedure

for name change. e-mail :

lalitha.companysecretary@gmail.com

INTRODUCTION

A name is most significant for any firm or entity. It is mainly

through the name that we identify an entity. A Company is

better known by its name. In the course of its operations, the

name becomes synonymous with the Company. In some cases

it becomes a unique trade mark symbol and brand image for

the Company. For example Bata, Reliance, Wipro etc. The

Companies Act, 1956 gives so much importance for the

allotment of Name at the time of incorporation of a Company

to ensure that no confusion arises in future in the minds of the

public. When a person applies for name availability for

incorporation of a new Company, due care should be taken,

so that it does not resemble or sound similar to the name of

any existing Company.

IMPORTANCE OF NAME UNDER THE

COMPANIES ACT, 1956

The name has been given so much importance under the

Companies Act, 1956, that in the memorandum of the

Company, the very first clause is known as name clause. Then

only the situation and objects clauses follow. As per the

guidelines of Ministry of Corporate Affairs, for the approval

of the name clause, the name of the Company should reflect

the object for which the Company is incorporated. A person

can not incorporate the Company, simply by name of the

promoters or by name of place or by any acronym. Originally

names were not approved with Alpha numeric form, for

example Net O2 or in abbreviation form like ITC limited etc.

Now with advent of technology and other developments, the

existing Companies are allowed to change their names and

new Companies are allowed to incorporate in alpha numeric

and abbreviated form also, provided the name reflects the main

object of the Company.

The names under which the Companies are proposed to be

incorporated with certain key words are linked with authorized

capital of the Company, for example the Companies are to be

incorporated with words like Corporation, Enterprise, India,

Bharat, International, Globe etc., the authorized capital of the

Company will vary accordingly. The table below is the guide

line issued by Ministry of Corporate Affairs to be followed

regarding the certain key words to be used in name of the

Company and authorized capital.

The Ministry of Corporate Affairs has laid down guidelines

as regards the use of key words in a Company’s name. In

order to have a key word as part of the Company’s name, the

following minimum authorized share capital requirements have

to be fulfilled.

Sl. Key words Required

No. authorised

capital

1. Corporation INR 50,000,000/-

2. International, Globe, Universal, INR 10,000,000/-

Continental, Inter Continental,

Asiatic, Asia, being the first word

of the name.

3. If any of the words at (2) above is INR 5,000,000/-

used within the name (with or

without brackets).

4. Hindustan, India, Bharat, being the INR 5,000,000/-

first word of the name.

5. If any of the words at (4) above is INR 500,000/-

used within the name (with or

without brackets).

6. Industries/Udyog. INR 10,000,000/-

7. Enterprise, Product, Business, INR 1,000,000/-

manufacturing.

Articles

As per section 20 of the Companies Act, 1956, a Company

cannot be incorporated with an undesirable name or similar

name. The person who desires to incorporate a Company has

to submit a “Name application” for availability of the name.

The Ministry of Corporate Affairs (MCA) after receiving the

“Name application” will scrutinize the desirability of the name,

then it will check for similar names of the existing Companies.

Only when the name is not too similar or closely resembling

any existing name, the MCA will approve the name availability

for incorporation.

CHANGE

Change is different from rectification. Change is voluntary,

Section 21 of the Companies Act, 1956 deals with change of

name by the Companies, which is voluntary act. Here

Companies which desire changing name will voluntarily apply

to MCA under section 20 of the Companies Act, 1956 in Form-

1A and after obtaining the approval from MCA, they have to

follow the procedure prescribed in section 21 of the Companies

Act,1956.

RECTIFICATION

Rectification is not voluntary; it is done through direction by

the Central Government in certain circumstances.

As per section 22 (1) of the Companies Act, 1956, if through

inadvertence or otherwise, a Company on its first registration

or on its registration by a new name, is registered by a name

which,-

(i) in the opinion of the Central Government, is identical

with, or too nearly resembles, the name by which a

Company in existence has been previously registered,

whether under this Act or any previous Companies law,

the first-mentioned Company, or

(ii) on an application by a registered proprietor of a trade

mark, is in the opinion of the Central Government

identical with, or too nearly resembles, a registered trade

mark of such proprietor under the Trade Marks Act,

1999, such Company, -

(a) may, by ordinary resolution and with the previous

approval of the Central Government signified in

writing, change its name or new name; and

(b) shall, if the Central Government so directs within

twelve months of its first registration or registration

by its new name, as the case may be, or within

twelve months of the commencement of this Act,

whichever is later, by ordinary resolution and with

the previous approval of the Central Government

signified in writing, change its name or new name

within a period of three months from the date of

the direction or such longer period as the Central

Government may think fit to allow:

(Provided that no application under clause (ii) made

by a registered proprietor of a trade mark after five

years of coming to notice of registration of the

Company shall be considered by the Central

Government).

PROCEDURE

In spite of all these precautions sometimes, inadvertently it

so happens that some Company names are too similar to the

existing names. In such situations section 22 of the Companies

Act provides for relief. As per section 22(1)(i) if a Company

finds another Company has been incorporated with a name

which is too identical or similar to its own name, then in

order to avoid any confusion and possible hardship to the

General public and also for those who deal with the Company,

can make an application under section 22(1)(i) of the

Companies Act, for the rectification of the same. This

application has to be made to the Central Government. (Now

the power has been delegated to the Regional Director) within

a period of twelve months of Registration of the new Company

with a similar name, along with the evidence of similarity in

name.

Once the application has been received by the Regional

Director, he will send the notice to the respondent Company

asking it to give an explanation for the same. After receiving

an explanation from the respondent Company, a date will be

fixed for hearing the case at the Regional Director’s office.

On the appointed day, the Regional Director will hear both

the parties and based on the evidences submitted by both

parties, he will either direct the new Company to change its

name or he will dismiss the application. This change has to

be effected by the respondent Company (which was directed

to change its name) within the period of 3 months from the

date of direction.

The power vested with the Regional Director for directing a

Company to change its name is within twelve months from

the date of incorporation of the new Company. Suppose the

period is beyond twelve months i.e the application is made

beyond 12 months, the Regional Director has no power to

deal with the case, invariably it has to go to High Court where

the Registered office of the Company is situated.

For Trade marks, the application can be made by proprietor

Rectification of the Name of a Company

Articles

of Registered trade mark, if he finds a Company with a name

which is too identical or similar to the registered trade mark,

then in order to avoid any confusion and possible hardship to

the general public and also for those who will be dealing with

the Company, can make an application under section 22(1)(ii)

of the Companies Act for the rectification of the same.

(Provided that no application under clause (ii) made by a

registered proprietor of a trade mark after five years of coming

to notice of registration of the Company shall be considered

by the Central Government.)

As per section 22 (2) of the Companies Act,1956, if a Company

makes default in complying with any direction given under

clause (b) of sub-section (1), the Company, and every officer

who is in default, shall be punishable with fine which may

extend to (one thousand) rupees for every day during which

the default continues.

SOME CASE LAWS

With regard to Section 22 read with Section 20 of the

Companies Act, 1956, recently Regional Director, Western

Region issued an important order in favour of M/s Clariant

(India) Ltd. In the said case Clariant (India) Ltd. (Applicant

Company) was originally incorporated on 2/01/1947,under

the name Sandoz Products Ltd. and pursuant to Scheme of

arrangement and sanction by High Court, Company’s name

was changed to Clariant (India) Ltd. on 25/03/1996. Further

it has registered the word “Clariant” as a Trade Mark in

Switzerland in 1995. The said Trademark is similarly

registered or applications for registration are pending in about

more than 70 countries including India. This Company enjoys

enormous degree of international goodwill and reputation.

Notwithstanding these facts, another Company with the name

M/s Clariant Organics Pvt. Ltd. (respondent Company) was

incorporated on 18/12/2000 with Registrar of Companies,

Ahmedabad. A lot of confusion and deception was created

since one more Company was also registered with the name

“Clariant” and thus affected the business of the applicant

Company i.e. Clariant (India) Ltd. including misrepresentation

by the respondent Company.

Further the Memorandum and Articles of Association of the

respondent Company revealed that it had more or less same

objects as those of the Applicant Company. These objects are

“manufacture and trading in chemical products, dyes, organic/

inorganic pigments etc.” Hence, the respondent Company using

the word “Clariant” in its corporate name was assumed or

presumed to be belonging to the applicant group of Companies

and thereby the products sold by the respondent Company

created an impression that they have been actually sold by the

applicant Company, which has an established and a renowned

brand name in the market.

Meanwhile in another matter, a consent decree was passed by

the High Court at Mumbai on 22/12/1999 in a similar case

restraining another Company viz. Clariant Laboratories Ltd.

from using the word “Clariant” in its name and/or trading

under the name “Clariant”.

Now, being aggrieved of the registration of a Company under

the name Clariant Organics Pvt. Ltd. with similar or

deceptively similar name, candid and classical representation

was made by Clariant (India) Ltd. before the Regional Director,

Western Region, Mumbai, with a request to invoke the

provisions of Section 22 of the Companies Act, 1956 to issue

directives accordingly.

In exercise of powers conferred upon under section 22(1)(b)

of the Companies Act, 1956, the Regional Director, Western

Region, Mumbai, directed M/s Clariant Organics Pvt. Ltd.

(respondent Company), to change its name within a period of

3 months from the date of direction.

In another matter British Diabetic Association v. The Diabetic

Society, (1995) 4 AII ER 82, the Diabetic society was required

to change its corporate name to something that did not impinge

upon the goodwill of the British Diabetic Association. There

was sufficient similarities between the two names to necessitate

the change.

In the case of Vel Bio Diesel Energy Private Limited v. Sri

Vel Bio Diesel Energy Private Limited another Company with

the name M/s Sri Vel Bio Diesel Energy Private Limited,

(respondent Company) was incorporated on 25.10.2007 with

Registrar of Companies, Tamil Nadu. A lot of confusion and

deception was created, since a Company was already registered

and is in existence with the name “Vel Bio Diesel” and thus

affected the business of applicant Company i.e. Vel Bio Diesel

Energy Private Limited, including misrepresentation by the

respondent Company.

Further the Memorandum and Articles of Association of the

respondent Company revealed that it had more or less same

objects as those of the Applicant Company. These objects are

extraction of the Bio Diesel from vegetable oil, waste oil and

other oils and lubricants. Hence, the respondent Company using

the word “ Vel Bio Diesel” in its corporate name was assumed

or presumed to be belonging to the applicant Company, and

thereby the products sold by the respondent Company created

an impression that they have been actually sold by the applicant

Company.

Rectification of the Name of a Company

Articles

The applicant Company filed application before Regional

Director, Southern Region, Chennai, with a request to invoke

the provisions of Section 22 of the Companies Act, 1956 to

issue directives accordingly. The Regional Director after

hearing both parties concern issued a direction in favour of

M/s. Vel Bio Diesel Energy Private Limited, asking the

respondent Company to change the name within the period of

three months from the date of order i.e 17.07.2008.

It is to be observed that the Regional Director, has decreed

that under the circumstance when there is a close resemblance

in the names there is no need to see in detail the objects of the

said Companies and directed the respondent Company to

change its name, even if its objects are different.

A person cannot be permitted to name a Company even after

his personal name if that name resembles the name of an

existing Company. For instance no one else will be allowed to

incorporate a Company with the name “Parle”, “Godrej” or

“Tata”, since such name is likely to deceive the public.

Under the Companies Act, a company by registering its name

gains a monopoly of the use of that name. Even if the Company

is not registered, the court will restrain the registration under

the Act of a projected new Company, which was intended to

carry on the same business as the unregistered Company and

to bear a name too similar to its name as to be calculated to

mislead the public. Thus the theory of “Corporate Name” gains

momentum. 􀂉

 

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