National Law Institute University Bhopal

(Session 2010-11)

Law Related to Business Association - II

Project On

“Rectification in the Name of a Company”

Submitted to: Submitted by:

Dr.Kondaiah Jonnalagadda Abhay Raj Singh Chauhan

Professor of Corporate Law Third Year

2008 B.A.LL.B. 04

Table of Contents

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 Introduction 02

 Importance of name under the Companies Act 03

 Change in the name of a Company 05

 Rectification in the name of a Company 05

 Procedure 06

 Case Laws 08

 Conclusion 11

 Bibliography 12

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

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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. No. Key words Required Authorized Capital

1. Corporation INR 50,000,000/-

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

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 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.

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.

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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).

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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

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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.

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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

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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

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

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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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CONCLUSION

A name is a label for a noun, normally used to distinguish one from another. Names can
identify a class or category of things, or a single thing, either uniquely, or within a given
context.1

Hence the name of a company is what which distinguishes it from any other company.
It represents a unique corporate identity of the company and hence any ambiguity with
regard to name of a company should be rectified. It not only protects the interest of
investors but also protects the interest of other companies and their reputation.

1
http://en.wikipedia.org/wiki/Name

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BIBLIOGRAPHY

Websites Referred

 www.lawyersclubindia.com
 www.wikipedia.com
 http://www.referenceforbusiness.com/encyclopedia/Con-Cos/Corporate-
Identity.html

Act Referred

 Companies Act, 1956.

Books Referred

 Dr. Avtar Singh, Mercantile Law, 8th edition, 2006. Eastern Book
Company, Lucknow.

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