HOGAR CONTROLS INDIA PVT LTD vs ANADASU VIJAY KUMAR & ORS.

* IN THE HIGH COURT OF DELHI AT NEW DELHI

Reserved on: 19th December, 2023.
Pronounced on: 29th February, 2024.

+ CS(COMM) 669/2022
HOGAR CONTROLS INDIA PVT. LTD. ….. Plaintiff
Through: Ms. Nancy Roy and Ms. Prakriti Varshney, Advocates.
versus
ANADASU VIJAY KUMAR & ORS. ….. Defendants

Through: Mr. Hemant Daswani, Ms. Saumya Bajpai, Ms. Pranjal and Mr. Kunal Prakash, Advocates.

CORAM:
HON’BLE MR. JUSTICE SANJEEV NARULA

J U D G M E N T

SANJEEV NARULA, J.
I.A. No. 15801/2022 (seeking ex-parte ad-interim injunction u/O 39 Rule 1 and 2, r/w S. 151 of CPC, 1908)

1. The Plaintiff – Hogar Controls Pvt. Ltd. (formerly, Z-Wave India Pvt. Ltd.), a wholly owned subsidiary of Hogar Controls Inc, has brought the present suit to protect their intellectual property associated with the trademarks “HOGAR”, “HOGAR CONTROLS”, and “”, which they allege is being unlawfully usurped by Defendants No. 1 to 3, who are the erstwhile Directors of the Plaintiff.

THE CONSTITUTION, STATUS, AND RELATIONSHIP OF THE PARTIES

2. With the objective of providing home and office electric power automation systems at an affordable cost, the Defendants submit that on 01st July, 2014, Defendant No. 1 established a proprietary firm for conducting the business of home automation and ‘Internet of Things’ [“IoT”] devices. Gradually, the proprietorship concern was transformed into a partnership firm, with Defendants No. 1 to 3 as its partners. Later, on 11th April, 2017, to integrate a more structured business approach, Defendants No. 1 to 3 decided to convert M/s Z-Wave to a private limited company bearing the name Z-Wave India Pvt. Ltd.,1 wherein Defendants No. 1 and 3 were equal shareholders. Defendant No. 4 [Mr. Burri Venkata Surya Narayana] is the cousin of Defendants No. 1 to 3, who is stated to have been involved in Z-Wave’s commercial operations.
3. In March 2017, Defendants No. 1 to 3 were introduced by one Mr. Vijay Raghava Reddy Mukkamalla to his two friends, Mr. Vishnu Vardhan Malikireddy and Mr. Veerabhadra Reddy Malikireddy, both brothers, who are Non-Resident Indians based in the USA. Pursuant to some negotiations, Mr. Vishnu Vardhan Malikireddy agreed to invest in Z-Wave’s business of home automation products and IoT devices. For this purpose, between August 2017 to February 2018, a total of Rs. 2.25 crores was advanced as loans to Z-Wave through loan agreements, by Smt. Santhamma, mother of Mr. Vishnu Vardhan Malikireddy. Consequently, on 22nd August, 2017, Mr. Vishnu Vardhan Malikireddy and Defendant No. 2 were appointed as Directors of Z-Wave. In view of negotiations between parties, Hogar Inc. was incorporated by Mr. Vishnu Vardhan Malikireddy, as the sole shareholder, on 15th September, 2017.
4. Soon thereafter, parties realized that Z-Wave is a communication protocol, akin to the word ‘Bluetooth’, owned by a consortium named Z-Wave based in Houston, Texas, USA. Therefore, to avoid infringement of rights of the consortium, it was mutually decided by the parties to change the name of Z-Wave to Hogar Controls India Pvt. Ltd. (the Plaintiff), which was effected on 07th May, 2018. Given that Mr. Vishnu Vardhan Malikireddy was pre-occupied with his business activities in the USA, Defendant No. 1 was appointed as the Managing Director of the Plaintiff and was entrusted with the day-to-day affairs of the company.
5. On 25th October 2018, Hogar Controls Inc. entered into a Common Stock Purchase Agreement with Mr. Vishnu Vardhan Malikireddy and Defendants No. 1 to 3, whereby Mr. Vishnu Vardhan Malikireddy purchased majority shareholding of Hogar Controls Inc. amounting to 55% of the shares, and the remaining minority shares amounting to 15% each (45% in total), were purchased by Defendants No. 1 to 3. On 26th October 2018, a Shareholders and Subscription Agreement was executed between Defendants No. 1 and 2, Plaintiff, and Hogar Controls Inc.2 Per this Agreement, an amount of approx. Rs. 1.84 crores was invested by Mr. Vishnu Vardhan Malikireddy in the Plaintiff. The shareholding pattern for Plaintiff, post the SSA, stood as under:

S.NO.
NAME
SHAREHOLDING
1.
Anadasu Vijay Kumar (Defendant No. 1)
0.30%
2.
Anadasu Ashwanth Kumar (Defendant No. 3)
0.30%
3.
Hogar Controls Inc.
99.40%

6. Subsequently, on 02nd May, 2019, Mr. Vishnu’s brothers, Mr. Veerabhadra Reddy Malikireddy and Mr. Harsha Vardhan Malikireddy, were also appointed as Directors in Plaintiff, with consent of all the then existing Directors.

CASE SET UP BY THE PLAINTIFF
7. Ms. Nancy Roy, counsel representing the Plaintiff, presented the following facts and contentions:
7.1. Hogar Controls Inc. and the Plaintiff are engaged in manufacturing, marketing, and distribution of high-end smart home devices for residential projects under the trademark/ name “HOGAR” and logo designs represented by “” and “”. Since their inception, both companies have expanded their presence beyond USA and India, to Dubai, Doha, Oman, Singapore, Thailand, London, France, Netherlands, and Lagos.
7.2. By virtue of the SSA, Defendants No. 1 and 2 conveyed all rights, title, and interests, including intellectual property rights, of Z-Wave to the Plaintiff. Therefore, Plaintiff is the owner of the marks “HOGAR” and “HOGAR CONTROLS”. Defendants No. 1 and 2, through their conduct prior to the occurrence of the present controversy, have also acknowledged Plaintiff’s rights over the intellectual property vested in “HOGAR”, “HOGAR CONTROLS”, “” and “”. The domain name “www.hogarcontrols.com” was also transferred to Plaintiff in furtherance of the SSA.
7.3. As evinced from the financial statements of Z-Wave for the financial year 2016-17, prior to the SSA, Defendant No. 1 never expended towards the promotion and development of the brands/ marks “HOGAR” and “HOGAR CONTROLS”. It is the Plaintiff who contributed to business promotion under the “HOGAR” marks and created a place in the sector of home innovation products, which has resulted in an exponential increase in annual sales. The details of the sales turnover from financial years 2017-18 to 2020-21 are provided in paragraph No. 8 of the plaint. The Plaintiff’s products are promoted and advertised worldwide under the HOGAR brand, through print and online media, including their website “www.hogarcontrols.com” (created on 01st March, 2016), Instagram, Twitter, Facebook, and YouTube accounts. The expenses incurred by Plaintiff towards advertising and promoting its products under the mark “HOGAR” from financial years 2017-18 to 2020-21 are detailed in paragraph No. 9 of the plaint. Plaintiff has also designed mobile applications through which customers can operate the smart home devices purchased from the Plaintiff. Further, after taking over the business of Z-Wave, Plaintiff fashioned a new logo for their operations. – from “” and “” to “” and “”.
7.4. The above-noted facts establish that Defendants No. 1 to 3 have no rights over the intellectual property vested in the “HOGAR” brand. In fact, in their capacity as the Directors of Plaintiff, Defendants No. 1 to 3 have marketed the “HOGAR” products at various events, conventions, and exhibitions on Plaintiff’s behalf. Therefore, the benefit of the current goodwill and reputation of the “HOGAR” and “” marks should enure to the Plaintiff’s new management.
7.5. In August 2020, Mr. Vishnu Vardhan Malikireddy engaged the services of an external audit firm, who uncovered that Defendant No. 1, with the aid of Defendants No. 2 and 3, had abused his position as the Managing Director of Plaintiff by transferring company funds and signing cheques for his own benefit, thereby misappropriating nearly Rs. 3.05 crores. The said Defendants also remitted money in the accounts of their friends and family. When confronted, Defendants No. 1 and 2 yielded their positions as Directors and requested Mr. Vishnu Vardhan Malikireddy not to initiate any criminal action against them. With the intent of protecting company’s reputation, Plaintiff did not take recourse to criminal proceedings. However, on the request of Defendant No. 2 and as a benevolent gesture, he was reinstated in service as the Chief Technical Officer of the Plaintiff.
7.6. Despite the above, Defendant No. 1 commenced selling products online under the trade name/ mark “HOGAR” on Amazon, an e-commerce platform, at a lower price. These products were being directly sourced by Defendant No. 1 from one of Plaintiff’s suppliers, M/s Lumi, a Vietnamese Company. However, when the Plaintiff raised an objection, Defendant No. 1 immediately took down these listings. Defendant No. 1 misused his position in the Plaintiff-company and is exploiting Plaintiff’s contacts.
7.7. On 12th June, 2021, through a Software Audit Report, it was brought to Plaintiff’s knowledge that the mobile application of the Plaintiff contained plagiarized source codes and that there was no copyright or proprietary or licensing information in the files. This indicates that Defendants No. 1 to 3 misrepresented and deceived Mr. Vishnu Vardhan Malikireddy in investing substantial sums of money in their business. Following the findings of the Software Audit Report, Defendant No. 3 also resigned on 15th July, 2021. Later, Defendant No. 2 was also terminated. Plaintiff then filed an FIR with the Madhapur Police Station, Hyderabad against Defendants No. 1 to 3 for the financial frauds committed by them.
7.8. Disgruntled by the cessation of their employment, Defendants No. 1 to 3 then undertook a series of cyber-attacks on Plaintiff’s software in collusion with M/s Lumi to hamper the functioning of their online services, thereby impacting and causing security breaches in nearly 3000 homes where Plaintiff’s Home Automation Systems were installed. Plaintiff paid nearly USD 30,000/- to M/s Lumi for gaining control over their software.
7.9. In the meantime, on 18th December, 2021, Plaintiff filed applications for registration of the logo “” in classes 9 and 11 under applications No. 5252181 and 5252182, respectively, claiming use since 01st April, 2018. These applications are currently under objection by the Trademarks Registry, wherein Defendant No. 1’s trademark application No. 3357860 in class 9 and application No. 3357861 in class 11 for the wordmark “HOGAR Controls”,3 have been cited as conflicting marks in the Examination Report. In response to the Examination Report, the Plaintiff’s erstwhile counsel inadvertently submitted that “” is not deceptively and confusingly similar to Defendant No. 1’s mark “HOGAR Controls”. Plaintiff has initiated steps to amend the response.
7.10. Defendant No. 1 filed a suit for passing off against Plaintiff, for use of the mark “HOGAR CONTROLS” before the District Court, Agra, Uttar Pradesh.4 In the said proceedings, on 19th April, 2022, an ex-parte ad-interim injunction was granted in favour of Defendant No.1 and against Plaintiff. In response, Plaintiff filed an application under Order XXXIX Rule 4 of Code of Civil Procedure, 1908 [“CPC”] for revoking the injunction, which was allowed on 31st May, 2022. Defendant No. 1’s appeal against the same [bearing FAFOD No. 521/2022] is presently pending before the High Court of Allahabad. During the subsistence of the ex-parte injunctive order, the Plaintiff was unable to deliver/ dispatch the orders that were already received by them, thereby causing losses amounting to approximately Rs. 3 crores. Defendants No. 1 and 2 also published caution notices in newspapers and on social media platforms, including WhatsApp, parading the aforesaid ex-parte injunction order. These publications are not only defamatory to the Plaintiff, but also misrepresent the facts leading to cessation of employment of Defendants No. 1 to 3 with Plaintiff.
7.11. In the plaint in the Agra Suit, Defendant No. 1 disclosed that he has now partnered with Defendant No. 5 herein [M/s Switch Plus] to conduct business under the “HOGAR CONTROLS” trademark. Invoices and photographs annexed with the Agra suit depict that Defendants No. 1 and 5 have been passing off Plaintiff’s products as their own. Further, Defendants No. 1 to 3 have registered two domain names “www.hogar.one” and “www.z-wave.one” whereon the marks “HOGAR” and “” are prominently displayed. The content, design, and make of the website and the mobile application launched by Defendant No. 1 is nearly identical to Plaintiff’s website and mobile application. Separately, Defendant No. 4, has applied for the registration of Plaintiff’s logo [“”], which stands opposed by the Plaintiff.5
7.12. That apart, in the Agra Suit, Defendant No. 1 has produced a License Agreement dated 09th June, 2017 purportedly executed between Defendant No. 1 and Z-Wave, whereunder Defendant No. 1 granted a license to Z-Wave to use the trademark “HOGAR Controls”.6 The Plaintiff contests the validity of the said document, as the same was never brought to their knowledge prior to the SSA.
7.13. Defendants No. 1 to 3’s impugned activities and their claim of ownership over “HOGAR”/ “HOGAR CONTROLS” is misplaced as the rights stood transmitted in Plaintiff’s favour through the SSA. The transfer of intellectual property is an admission of ownership by way of a written agreement, and not an assignment. Hence, Section 42 of the Trademarks Act, 19997 is not applicable to the facts of the present case.
7.14 Defendants cannot take aid of the valuation report of the year 2021 to submit that the consideration paid under the SSA, dated 26th October, 2018, did not contemplate consideration for transfer of intellectual property. In the year 2021, Plaintiff was already under the majority control of Mr. Vishnu Vardhan Malikireddy and thus, the valuation reports are of no benefit to the Defendants.

THE DEFENDANTS’ CONTENTIONS
8. Mr. Hemant Daswani, counsel for Defendants, fervently disputed the Plaintiff’s assertion of proprietorship over the trademark “HOGAR”, which, in his submission, was not the subject matter of the SSA and thus, is an exclusive asset of Defendant No. 1. Mr. Daswani’s arguments are captured hereinbelow:
8.1. On 07th September, 2016, Defendant No. 1 filed the two trademark applications, in his personal capacity, for registration of “HOGAR Controls” in classes 9 and 11,8 with user claim since 01st July, 2014. Multiple invoices have been produced on record to substantiate the claimed user. Subsequently, on 11th April, 2017, Defendant No. 1 constituted Z-Wave as a private limited company, alongside Defendants No. 2 and 3, who were all equal shareholders and Directors of Z-Wave. Z-Wave was a multi-brand trading business, which included the brand “HOGAR Controls”. When Z-Wave was renamed to Hogar Controls India Pvt. Ltd. (the Plaintiff), the understanding was that Plaintiff would be the sole dealer/ distributor of Defendant No. 1’s “HOGAR Controls” trademark. Even at the time of execution of the SSA, Defendant No. 1 intended to segregate his proprietary rights in the mark “HOGAR Controls” from the business of Z-Wave as also his brothers/ Co-Directors, Defendants No. 2 and 3. There was never a transfer or assignment of the trademark itself. Consequently, a counter-claim is laid by Defendant No. 1, as the owner of “HOGAR Controls” mark, against the Plaintiff’s action of unauthorizedly using “HOGAR” and its formative versions and passing off their goods as that of the Defendants’.
8.2. Defendants No. 1 to 3 were illegally and fraudulently coerced by Mr. Vishnu Vardhan Malikireddy into resigning from their respective posts. Due to this involuntary resignation, and non-receipt of consideration under the SSA, Defendants No. 1 and 2 sent a notice of termination of the SSA on 27th September, 2021. Post his resignation, as Defendant No. 1 retained the ownership of the “HOGAR Controls” mark, he partnered with Defendant No. 5 to expand his business.
8.3. The SSA was entered into for investment; no assignment or transfer of intellectual property was envisaged in the Agreement. There is no separate clause which specifies that intellectual property will be transferred to the Plaintiff, which is a necessary requirement.9 Further, no consideration was paid by Plaintiff or Hogar Controls Inc. for the intellectual property purportedly assigned in their favour. The payment so received was specifically for the transfer of shares, and not any intellectual property. Thus, without payment of consideration, any assignment would be void ab initio. To this end, reference was made to a valuation report of Plaintiff dated 03rd December, 2021 (prepared by Ernst & Young, a third party) which does not include ‘intellectual property’, and the “HOGAR” mark, while valuing the Plaintiff’s assets.
8.4. Plaintiff does not contend that the intellectual property was a part of goodwill of the business. The suit is premised on Plaintiff’s assumption that the intellectual property was also “transferred” alongside the business of Defendants No. 1 and 2/ Z-Wave to them, which, for the reasons noted above, was not the case. This is further bolstered by the fact that Plaintiff did not undertake steps to reflect the purported assignment in the trademark applications filed by Defendant No. 1 for registration of “HOGAR Controls”, as mandated by Section 42 of the TM Act. Due to non-adherence with Section 42, the assignment of intellectual property, if any, has been rendered null and void. In this regard, reliance was placed on the judgment of the High Court of Calcutta in Paul Brothers and Anr. v. Union of India and Ors.10
8.5. The Plaintiff alleges that they were not aware of Defendant No. 1’s ownership of the “HOGAR Controls” mark. They even contest the validity of the License Agreement executed between Defendant No. 1 and Z-Wave, whereunder a license was granted to Z-Wave to use “HOGAR Controls”. However, these claims are belied by the record. Attention is drawn to a No-Objection Certificate [“NOC”] issued by Defendant No. 1 to Mr. Vishnu Vardhan Malikireddy as precondition for the Registrar of Companies [“RoC”] to effect the change of name of Z-Wave to Hogar Controls India Pvt. Ltd. This NOC was sought by RoC as Defendant No. 1 owned the trademark “HOGAR Controls”. The NOC indicates the Plaintiff’s unequivocal knowledge of Defendant No. 1’s ownership of the said mark. As Plaintiff was familiar with Defendant No. 1’s rights at the time of signing of the SSA, their allegation that Defendant No. 1 has violated the indemnification clause and breached the trust by concealing that the trademark was held in his personal capacity, is incorrect. Plaintiff is thus attempting to obtain an injunction on false statements.
8.6. It is a well-accepted principle that property vested in the name of a shareholder/ director, being Defendant No. 1 in the present case, cannot be treated as the property of the company – Z-Wave.11 Defendant No. 1 signed the SSA in his capacity as an authorised signatory of Z-Wave, and as such, it cannot amount to a transfer of Defendant No. 1’s own property. The relief being sought by Plaintiff, at its core relates to an allegation of misrepresentation at the time of execution of a contract, for which, the present suit is not the appropriate recourse.
8.7. The mark was being used by Plaintiff as a licensee. A licensee using a brand name/ mark does not ipso facto acquire ownership rights in the brand and cannot bar the licensor i.e., Defendant No. 1 from using the same. Reliance was placed on judgment of the High Court of Bombay in Cott Beverage Inc. v. Silvassa Bottling Company.12
8.8. In the afore-noted background and given the Plaintiff’s unauthorized use of “HOGAR”, Defendant No. 1 addressed a cease-and-desist notice to the Plaintiff on 08th March, 2022, requiring them to halt all activities under the “HOGAR”/ “HOGAR Controls” marks. However, no response was received thereto and instead, Plaintiff continued violating Defendant No. 1’s intellectual property. Resultantly, Defendant No. 1 was constrained to file the Agra Suit. Admittedly, the said suit was dismissed for default and non-prosecution. However, Defendant No. 1’s application for restoration has been allowed by the District Judge, Agra on 22nd September, 2023, and the suit has been revived.
8.9. The Defendants have arduously worked towards building the “HOGAR Controls” brand, which now carries formidable goodwill and reputation in the market. Plaintiff only applied for registration of “” on 18th December, 2021, whereas Defendant No. 1 has been using the mark since 2014. Plaintiff’s sale of products bearing the “HOGAR” mark without permission of Defendant No. 1 amounts to passing off of Defendant No. 1’s mark.

ANALYSIS AND FINDINGS

9. The dispute before Court hinges on ascertaining which faction – Plaintiff and Hogar Controls Inc., or Defendants No. 1 to 3 – possesses the intellectual property in the mark “HOGAR” and its formative variants. This determination first requires a thorough understanding of the conveyance of proprietary rights contemplated in the SSA, which is deliberated in the forthcoming segment of the judgment.

The Shareholders and Subscription Agreement
10. The relevant clauses of the SSA are reproduced below:
“1.1.15. “Intellectual Property” or “IP” means intellectual property owned, used or licensed by the Company, which relates in any way to the Business, including but not limited to (i) all registered and unregistered trademarks, assumed fictional business names, service marks, trade names, and internet domain names, together with all applications and registrations related to the foregoing; (ii) all patents, patent applications and industrial design registrations or applications, designs, utility models, inventions, ideas and discoveries including but not limited to all those that may be patentable; (iii) all knowhow, trade secrets, confidential information or proprietary information, proprietary processes (including, without limitation, business processes), customer lists, software (including all owned software and all third party software licenses), technical information, data, databases (including but not limited to customer data, sales data, etc.), process technology, plans, formulae, algorithms, models, drawings and blue prints; and (iv) all know-how, concepts, creations, improvements upon, additions or any research effort relating to any of the foregoing.

xx-xx-xx

1.1.24. “Transfer” (including the terms “Transferred” and “Transferability”) shall mean to directly or indirectly, transfer, sell, assign, Encumber in any manner, place in trust (voting or otherwise), exchange, gift or transfer by operation of Law or in any other way subject to any Encumbrance or dispose of, whether or not voluntarily.

xx-xx-xx

7. REPRESENTATIONS AND WARRANTIES
7.2. The Company and the Existing Shareholders each hereby represent and warrant that:
xx-xx-xx

7.2.2. The Company holds all valid rights, title and interest to all the Intellectual Property used or held for use in connection with, necessary for the conduct of, or otherwise material to the business of the Company, free and clear of all Encumbrances.

7.2.3. The Company shall make all efforts to get all available protection for the intellectual property rights by making the necessary applications, including copyright, trademark and/or patent protection.

xx-xx-xx

10. INTELLECTUAL PROPERTY RIGHTS

All the rights in relation to the Intellectual Property arising out of the performance by the Company of its Business and the inputs of the Investor in the course of their association with the Company, shall be owned by the Company and all Parties will assist the Company in securing the same by filing for appropriate protection under applicable laws in the name of the Company. No Party to this Agreement will act in any manner derogatory to the proprietary rights of the Company over such rights.

17. PROPRIETARY RIGHTS
17.1. The Company owns all its Intellectual Property or confidential information without any claims or encumbrances of any manner.
xx-xx-xx

17.3. No Person has been licensed, authorized, or permitted by the Company to use all or part of the name of the Company or any Intellectual Property which is owned by the Company.

xx-xx-xx

17.5. The Company does not use any Intellectual Property of any of its employees made prior to their employment by the Company.

[Emphasis Supplied]

11. The afore-noted stipulations demonstrate the entitlement of the Plaintiff (referred to as ‘the Company’ in the SSA) to the intellectual property concerning their business activities inherited from Z-Wave, which arguably encompasses rights over the trademarks “HOGAR”, “HOGAR Controls” and the associated logos/ devices. The Defendants do not controvert the use of “HOGAR” marks by Plaintiff for their business activities, and have in fact, produced invoices evidencing the same. They however defend their title by contending that no intellectual property was conveyed to the Plaintiff. This argument, in view of Clauses 7.2.2 and 10 of the SSA, which unambiguously endow the Plaintiff with intellectual property rights, does not find favour with the Court. The Plaintiff’s ownership, per the terms and declarations entailed in the SSA, is absolute and carries no encumbrances. This Agreement definitely records the mutual understanding of the parties and dictates the operations of the Company (Plaintiff) post the designation of Hogar Controls Inc. as the majority shareholder (99.40%), and must be honoured by all the signatories.
12. Defendants No. 1 and 2, being parties to the SSA, have assented to all the conditions mentioned therein. They have consciously vested the Plaintiff with an unfettered right over the intellectual property, as has been defined in Clause 1.1.15 of the SSA. In fact, in Clause 7.2 read with Schedule 5 of SSA, the said Defendants have tendered an undertaking affirming the legitimacy of their representations and the information provided therein. Clause 7.2.2. explicitly declares that the Plaintiff holds all valid rights, title, and interest to all the intellectual property used or held for use to conduct the business. If the mark “HOGAR Controls” belonged to Defendant No. 1, and not the company, Defendant No. 1 ought to have reserved his right of ownership, and specify that the Plaintiff’s right to use the said mark is derived from Defendant No. 1. However, no such stipulation finds mention in the SSA. The legality of the Agreement is also not in dispute. Thus, the Court concludes that the SSA contemplated conferment of rights over “HOGAR”/ “HOGAR Controls” marks with the Plaintiff, unburdened with any impediments.

Whether Defendant No. 1 is the owner of “HOGAR Controls”
13. Defendant No. 1 asseverates that the trademark “HOGAR Controls” was first adopted by him to trade in home and office automation systems through a sole proprietorship bearing the name Z-Wave, which was subsequently constituted as a partnership firm to expand business operations. The aforesaid mark, as per Defendant No. 1, was held in his own name and was being used by Z-Wave under the License Agreement. As such, irrespective of the SSA, proprietorship of “HOGAR Controls” remained with Defendant No. 1 alone. On a preliminary assessment of the material presented on record, Defendant No. 1’s assertions remain unfounded. The Defendants have not appended any documents supporting the existence of the supposed sole proprietorship run by Defendant No. 1. On the contrary, Ms. Roy brought to the Court’s notice the Value Added Tax [“VAT”] and Goods and Services Tax [“GST”] registration certificates of Z-Wave as well as the Income Tax Return for the assessment year 2015-16 of Z-Wave,13 which invalidate the case canvassed by Defendant No. 1. As per the Income Tax Return, M/s Z Wave, a partnership firm, was incorporated on 17th April, 2014. The VAT registration certificate of 28th July, 2014 does not disclose the nature of Z-Wave as a proprietorship, whereas the GST certificate dated 24th September, 2017 refers to Z-Wave as a partnership firm.
14. To fortify his claims of ownership, Defendant No. 1 relies fervently on the applications for registration of “HOGAR Controls” mark, which mention his name, trading as one entity Hogar Controls. At this juncture, it is worth highlighting that before the Court, Defendants have, all throughout, averred that the sole proprietorship was run by Defendant No. 1 under the name Z-Wave, however, Defendant No. 1’s trademark application discloses Defendant No. 1’s firm name as “Hogar Controls”. That apart, these applications were filed on 07th September, 2016, without any documentary substantiation of the claimed use since 01st July, 2014 of the mark through the entity Hogar Controls. Similarly, Defendants’ documents filed with the Court to support their use of the mark “HOGAR”/ “HOGAR Controls” do not depict that Defendant No. 1 independently employed the mark to his commercial benefit. Rather, they demonstrate use either through the Plaintiff, or the partnership firm M/s Z-Wave. The existence of a proprietorship under the name Hogar Controls has not been demonstrated at this stage. Thus, taking the date of constitution of the partnership firm as 17th April, 2014, disclosed in the Income Tax Return, there appears to be no reason for Defendant No. 1 to have filed the trademark applications on 07th September, 2016 (i.e., after the partnership firm’s establishment) in his name alleging use from 01st July, 2014 through Hogar Controls firm, which date too, does not precede the partnership firm’s constitution. Defendant No. 1’s stance is further contradicted by his conduct since the execution of the SSA. Admittedly, during the period between the signing of SSA and breakdown of relations between the parties, Defendants had ceased to use the mark “HOGAR Controls” and continued to trade under the newly designed “HOGAR” and “” marks as Plaintiff’s Directors/ employees. Such an interval in the use of the “HOGAR Control” mark serves as an implicit acknowledgement by Defendants of the Plaintiff’s exclusive proprietary rights therein.
15. The above-noted inconsistencies in the Defendants’ position cast doubts on the veracity of their claims. They have not been able to sufficiently establish the existence of a sole proprietorship, which was then converted into a partnership firm bearing the Z-Wave name. Viewed in this background and absent any cogent material, at this juncture, Defendant No. 1’s submission that ownership of the mark “HOGAR Controls” is held by him, does not sustain.
16. The Plaintiff has also questioned the validity of the License Agreement through which Defendant No. 1 claims that he authorized Z-Wave to utilize the mark “HOGAR Controls” as a licensee. According to the Plaintiff, up until the filing of the Agra Suit, this Agreement was never revealed to them. Plaintiff’s challenge to the License Agreement is founded on three grounds: (a) The Agreement was allegedly signed by Defendant No. 3 as an Authorized Signatory of Z-Wave on 09th June, 2017 at Hyderabad, India. However, the travel history of Defendant No. 3 available on the USA Customs and Border Protection website indicates that Defendant No. 3 was in the USA at the time of execution of the License Agreement, (b) There is no mention of royalty in the License Agreement nor is any such transaction reflected in Z-Wave’s balance sheet, and (c) discrepancy in the seal of Z-Wave. In the opinion of the Court, the objections so raised can only be ascertained through a comprehensive trial. However, at the same time, the documents presented to Court trace the earliest use of the “HOGAR Controls” mark by Defendants only through the partnership M/s Z-Wave, and there is no supporting evidence for Defendant No. 1’s claim of using the “HOGAR Controls” mark independently through a sole proprietorship. Thus, in the Court’s prima facie view, the License Agreement lacks credibility.
17. Additionally, Defendants have contended that the instant suit suffers from concealment of facts and misrepresentation to the Court inasmuch as the Plaintiff was fully aware of the existence of the License Agreement. This claim is premised on the fact that in 2018, Mr. Vishnu Vardhan Malikireddy obtained an NOC from Defendant No. 1, clarifying that he assented to the change in name of Z-Wave to Hogar Controls India Pvt. Ltd. It manifests that the RoC had first rejected the request for re-titling the company, citing Defendant No. 1’s pending trademark application. Therefore, in order to facilitate the amendment in RoC’s records, Defendant No. 1 submitted the following NOC:
“No Objection Certificate

I, ANADASU VIJAY KUMAR, S/o A. RAMACHANDER RAO, Proprietor of Hogar controls, Situated at H.No. 1-8-1/A, Ravinder Nagar Colony, Habsiguda, Secunderabad, Hyderabad, TG-500007 do hereby solemnly declare as under:

I’m one of the Promoter cum Director of M/s. ZWAVE INDIA PRIVATE LIMITED. And I have No objection to use the Name as HOGAR CONTROLS to the existing company M/s. ZWAVE INDIA PRIVATE LIMITED.

This no objection certificate is issued for the purposes of change of existing Company name to HOGAR CONTROLS INDIA PRIVATE LIMITED (New proposed name) from ZWAVE INDIA PRIVATE LIMITED (Existing Name).

Here by attached ID and address proof.

ANADASU VIJAY KUMAR

DEPONENT
Date: 16/03/2017
Place: Hyderabad”

18. The RoC’s refusal to approve the name change was predicated on the pending trademark applications of Defendant No. 1, where he was identified as the mark’s proprietor. To overcome this objection, Mr. Vishnu Vardhan Malikireddy sought an NOC from Defendant No. 1. However, as discussed above, there is a lack of evidence furthering the claim that Defendant No. 1 was using the mark through an entity called Hogar Controls since 01st July, 2014, as stated in the application. Mere statement of use since a particular date in a trademark application, without substantiation, would not be sufficient to establish Defendant No. 1’s ownership of the mark. Therefore, the issuance of an NOC by Defendant No. 1 for the use of “HOGAR Controls” in the Plaintiff’s corporate name does not prove Defendant No. 1’s ownership of the trademark. On the contrary, by permitting the Plaintiff to integrate “Hogar Controls” in their corporate name, Defendant No. 1 has recognized Plaintiff’s authority to utilize the brand “HOGAR Controls”/ “HOGAR” for their business activities, particularly, the manufacture and sale of home automation systems. Defendant No. 1 should not be allowed to reverse course and refute the Plaintiff’s entitlement to use the mark at this point.
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. As regards the issue of knowledge of the filing of trademark applications by Defendant No. 1, Defendants have produced an e-mail conversation dated 15th March, 2018 between the parties, discussing the applications. While these communications indicate that the interest-holders of the Plaintiff were aware of these trademark applications, the effect thereof on Plaintiff’s claim remains to be seen. As discussed above, the SSA details neither Defendant No. 1’s alleged rights, nor the License Agreement so as to impose any restrictions on the Plaintiff’s claims. Therefore, at this stage, the Court does not perceive the knowledge of Defendant No. 1’s trademark applications detrimental to the Plaintiff’s entitlement to an interim injunction.

Re: objection under Section 42 of the Trademarks Act
20. Mr. Daswani has sought to invalidate any assignment of the “HOGAR Controls” trademark on the grounds of non-compliance with the stipulations set forth in Section 42 of the TM Act. He contends that the assignment fails to meet the prescribed conditions, notably the obligation to apply to the Registrar of Trademarks for directions regarding the advertisement of the assignment within the specified timelines. He argued that this lapse in adhering to the procedural timelines, as mandated by the provision, invalidates the assignment of the “HOGAR Controls” trademark to the Plaintiff.
21. The aforenoted argument is misconceived for several reasons discussed hereinafter. However, we must first delineate the applicable statutory framework. The Court is concerned with allegations of assignment of an unregistered mark, which is permissible under Section 39 of the TM Act. An unregistered trademark can be assigned with or without the goodwill of the business concerned. The conditions required to be fulfilled before assignment of an unregistered mark are stipulated in Section 42 of the TM Act, which reads as follows:
“42. Conditions for assignment otherwise than in connection with the goodwill of a business – Where an assignment of a trade mark, whether registered or unregistered is made otherwise than in connection with the goodwill of the business in which the mark has been or is used, the assignment shall not take effect unless the assignee, not later than the expiration of six months from the date on which the assignment is made or within such extended period, if any, not exceeding three months in the aggregate, as the Registrar may allow, applies to the Registrar for directions with respect to the advertisement of the assignment, and advertises it in such form and manner and within such period as the Registrar may direct.”

22. The aforenoted provision although applicable to both registered and unregistered marks, would apply only if there is an assignment without the goodwill associated with the business conducted under the concerned trademark, which is also termed as an “assignment-in-gross”. In such instances, the assignee secures the right to utilize the trademark, but does not inherit the established reputation or customer loyalty that accompanies it. This form of assignment typically transpires under circumstances where the trademark is sold independently of the business entity, or when the trademark is acquired with the intention of being used in association with distinct goods or services, thus not perpetuating the business lineage of the assignor.
23. Now, let us discern whether an assignment has ensued in the present case. Here, the Court finds Defendants’ interpretation of the SSA as an Assignment Deed to be fundamentally flawed. By definition, an assignment involves a right holder (the assignor) relinquishing their claim to a mark, allowing another entity (the assignee) to use it, either entirely or for a specific purpose. Contrary to this, the SSA does not fulfil this objective; it simply acknowledges the entity (i.e., the Plaintiff) who will have the exclusive authority to use the intellectual property in question. The purpose of the SSA, as inferred from its provisions, was to clarify the shareholding structure, outline the rights of the parties involved, and establish a framework for the management and governance of the Plaintiff-company. Moreover, the Agreement does not categorize any party as the transferor or transferee, indicating that an assignment was never contemplated. The notion that the Plaintiff acquired intellectual property rights in the subject marks through the SSA, is mistaken. These rights were initially held by Z-Wave, which was simply renamed to the Plaintiff – Hogar Controls India Pvt. Ltd., without any reconstitution. The evidence of such continuity lies in the updated Certificate of Incorporation of Z-Wave/ Plaintiff and the Minutes of the Extraordinary General Meeting of Z-Wave,14 which corroborate the fact that the operation and conduct of the company, after its name change, did not alter, thereby making it inaccurate to claim that the SSA delineated the Plaintiff’s rights. This document merely articulates the Plaintiff’s rights and does not confer new rights upon the parties. Consequently, it should not be construed as an ‘Assignment Deed’ according to legal standards.
24. The TM Act does not stipulate any specific formalities to be completed with the Registrar of Trademarks prior to the execution of an Assignment Deed, except for the requirement that the assignment must be documented in writing.15 As a result, the rights and title, including the authority to initiate legal action against infringement or passing off, as the case may be, are transferred to the assignee immediately upon the execution of the Assignment Deed. Therefore, while compliance with the provisions outlined in Section 42 of the TM Act within the designated timeframe is obligatory, it does not impede the assignee’s right to seek legal protection for the assigned trademark. This is particularly relevant in cases of passing off, which is the primary concern here. This view is supported by the precedent of this Court in Sun Pharmaceuticals Industries Limited v. Cipla Limited.16 In that case, the Court addressed an issue involving the assignment of a registered trademark that had not yet been recorded with the Registrar of Trademarks, as required by Section 45 of the TM Act. The Court concluded that the assignee’s legal standing was not compromised by the fact that the assignment had not been officially registered at the time the lawsuit was initiated. The distinction between the legal effect of executing an assignment deed and the procedural step of registering that assignment with the Registrar of Trademarks is a critical one. The rights bestowed upon the assignee originate directly from the execution of the Assignment Deed, rather than its later registration. This principle has also been echoed in subsequent rulings,17 which underscore the Court’s stance that assignees have the authority to protect their trademark rights based on the execution of the deed alone. Therefore, following this rationale, while the procedural requirements specified in Section 42 of the TM Act pertaining to the assignment of an unregistered trademark without goodwill, are crucial for the formal acknowledgment of trademark assignments, they do not diminish the immediate rights granted through the execution of an Assignment Deed.
25. In light of the legal precedents discussed above, where the absence of registration for an assignment of a registered trademark has not hindered the pursuit of injunctive relief, the Defendants’ argument holds little weight, particularly under the hypothetical application of Section 42 to the instant case. The Plaintiff, therefore, irrespective of non-advertisement of the purported assignment of the “HOGAR CONTROLS” mark and its formative variants, retains the intellectual property rights therein, and is thus not restricted from exercising their common law rights derived from the use of the trademark, should Section 42 be deemed applicable.

Re: Violation of Plaintiff’s intellectual property rights
26. The Court has, for the foregoing reasons, ascertained that the Defendants are not authorized to use the marks “HOGAR CONTROLS”/ “HOGAR”, which are the property of the Plaintiff. The conflicting marks are arguably identical. The Court therefore proceeds to ascertain whether the Defendants are attempting to pass off their goods as that of the Plaintiff’s, applying the three-pronged assessment of Plaintiff’s goodwill, Defendants’ misrepresentation, and consequent damages to the Plaintiff. The annual sales and promotional expenditure record presented before the Court demonstrate that since the SSA, the Plaintiff has cultivated “HOGAR” as a reputable brand with a significant customer base. Their intellectual property is being violated by the Defendants, who are conjointly trading openly under the marks “HOGAR CONTROLS” and “HOGAR” in the market, as well as through online medium. Defendant No. 1 has registered the domain name “www.hogar.one”, the landing page whereof prominently displays “HOGAR”. Even the mobile applications of the contesting parties are designed in a nearly identical manner, excerpts whereof are reproduced below:

Plaintiff’s mobile application
Defendants’ mobile application

27. Similarly, the video advertisements posted by the parties on their respective YouTube channels for comparable products bear little difference, and contravene the Plaintiff’s copyright in the said cinematograph films. The Defendants have acknowledged this similarity; however, they insist that rights therein are held by Defendant No. 1. Such resemblance in the commercial and promotional activities of the parties is likely to cause public confusion as to the source of the concerned goods and services. The prior business relationship of the parties further accentuates the possibility of public deception.

RELIEF
28. In view of the Defendants’ disentitlement to use the trademarks “HOGAR CONTROLS”, “HOGAR” and the associated devices, which belong to the Plaintiff, and the congruity in commercial operations of the parties, this Court finds that the Plaintiff has established a prima facie case in their favour. Balance of convenience lies in favour of the Plaintiff, and irreparable injury would be caused to them if Defendants are not restrained from carrying out the impugned activities.
29. Accordingly, the instant application is allowed and the following reliefs are granted:
29.1. Defendants and any person acting on their behalf, are restrained from using or reproducing or permitting third parties to use or reproduce:
(i) the marks “HOGAR”, “HOGAR CONTROLS” and “” or any other trademark or name similar to the Plaintiff’s trademark “HOGAR”, “HOGAR CONTROLS” and “” as a trademark or part of trademark, tradename or part of tradename, domain name or part of domain name, keyword/ meta tag, or in any other manner so as to pass off their goods as that of Plaintiff.
(ii) the user interface, layout, contents, short description and photographs and all other features of the Plaintiff’s mobile application so as to infringe the copyright in the same, which vests with the Plaintiff.
(iii) the Plaintiff’s advertisements in any form and media, including, but not limited to, digital media and print, so as to infringe the copyright in the cinematographic films owned by the Plaintiff.
(iv) any other indicia whatsoever to show any association or affiliation or connection of with the Plaintiff or their products in any manner whatsoever.
29.2. Defendants are directed to delete the advertisements/ videos of the Plaintiff from their YouTube channel as well as their website and/ or any other digital platform.
30. With the above directions, the application is disposed of.

SANJEEV NARULA, J
FEBRUARY 29, 2024
AS

1 Hereinafter, “Z-Wave”.
2 Hereinafter, “SSA”.
3 Both applications are dated 07th September, 2016 with user claim of 01st July, 2014. The present status of the applications is “Opposed” by a third party.
4 Hereinafter, “Agra Suit”.
5 Under trademark application No. 5099446 in class 9.
6 Hereinafter, “License Agreement”.
7 Hereinafter, “TM Act”.
8 Trademark applications No. 3357860 and 3357861, respectively.
9 Reliance was placed upon Vimlesh Kumari Kulshrestha v. Sambhajirao, (2008) 5 SCC 58.
10 2023 SCC OnLine Cal 1358.
11 Reliance was placed upon Electronics Corp v. Secretary of Revenue Department, (1999) 4 SCC 458.
12 2003 SCC OnLine Bom 965.
13 At pages No. 980, 983, and 1015, respectively, of the Plaintiff’s documents filed under Index IV Vol. 6 dated 22nd September, 2022.
14 Annexed at pages 327-334 of the Plaintiff’s documents filed on 22nd September, 2022.
15 See: Section 2(1)(b) of the TM Act.
16 2009 (108) DRJ 207.
17 Ramaiah Life Style Café v. Eminent Entertainment & Ors., DHC Neutral Citation: 2017:DHC:1545, and M/s Liberty Footwear Company v. Liberty Innovative Outfits Limited, DHC Neutral Citation: 2020:DHC:1979.

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CS(COMM) 669/2022 Page 27 of 31