NAME-Abhay singh Rathore

ROLL NO-216002

TOPIC-THE PROBLEMS AND CONCERNS SURROUNDING THE NAME CLAUSE OF

MEMORANDUM OF ASSOCIATION OF A COMPANY
Introduction

We all know that a company is an artificial being and it is mandatory for it to have the name to have
separate existence in the eyes of law. The name clause which is there for the Memorandum of
Association contains the name under which a company or firm is registered. In this paper of mine, I
seek to highlight the issues regarding the name of the company and its different dimensions. In this
project, we shall be discussing different case laws to come to a conclusion and this paper will put the
differences after the amendments between the old and the new act.

Relation between Name and Object clause of the company

The name and object clauses of the company are discussed in details in the section 4 of the 2013 Act.1
The name clause clearly states the name with which the company is enlisted whereas the object clause
tends to limit the scope for company in conducting its activities. It sets out the reason for which the
Company is set up and the explanation behind it constraining the activities of the company.
Frequently, the name of the Company mirrors the principal objects as enshrined in the memorandum
of the company. On account of Cotman v. Brougham2 the sentiment of the House of Lords was that
the name of an organization or company is material while thinking about its fundamental object. On
the off chance that they are in consonance then the Company might be allowed to change its name
with the goal that the broadened extent of the Company can be passed on.3 Section 8(2) (B)4: “The
name shall be considered undesirable if it is not in consonance with the principal objects of
the company as set out in the memorandum of association…Provided that every name need not
be necessarily indicative of the objects of the company, but when there is some indication of
objects in the name, then it shall be in conformity with the objects mentioned in the
memorandum.”

Clearly, it commands that if an organization changes its exercises and the same are not in
consonance with the name, it will have to change its name likewise. Albeit, just demonstrating that
the name is deluding is inadequate, a probability of damage must be proved.5

The statute did not require occasions of individuals being misdirected to demonstrate the similarity.
Nor is it expected to think about specific segments of the general public. For instance, in Association
of Certified Public Accountants of Britain v. Secretary of State for Trade and Industry6 the name "The
Association of Certified Public Accountants of Great Britain" was held not reasonable and therefore
was not allowed to continue with the same name. "I have deduced that it does. I think the word

1
Clauses (1) to (5).
2
(1918) AC 514 (HL)
3
Robert R Pennington, Pennington’s Company Law (6th edn. Butterworths London, 1990)
4
The companies(incorporation) Rules,2014
5
A Ramaiya, Guide to Companies Act (18th edn., Wadhwa and Wadhwa 2014).
6
(1997) 2 BCLC 307.
'certified' demonstrates, or is probably going to show, to a generous number of people, that there is
something impartially critical about the individuals' capability, trainings and experience. I don't
perceive any reason why 'certified' ought to have a similar importance for all organisations." He
additionally said that it hurts people in general as they expect a specific level of ability that they may
not be able to receive.7 The 1956 Act also contained the guidelines which were supposed to be
followed by the central government in matters of changing the name.it stated that government

Even the 1956 Act contained a guideline that the Central Government was to follow
regarding changing of name. It stated that the government will have to check: “Whether the
proposed name is in consonance with the principal objects of the company as set out in its
memorandum of association and with the business actually carried on by it, where such
consideration is relevant”8
This was the standard which was followed previously, however the Amendment Rules brought up by
the Ministry of Corporate Affairs ("MCA") on January 22, 2016 revised the Companies
(Incorporation) Rules, excluded the previously mentioned rule. In this way, promoters have obtained
more flexibility to name the organization as they wish. But what if after the relaxation of rules, has
the previously mentioned "harm principle" been abrogated? The appropriate response would be no
as the MCA have likewise specified that the name shall not be deluding.9 It appears that as far as the
intention isn't to swindle or defraud, such extreme contrasts as the example given above would not
happen and those cases of fraud is the thing that the MCA tries to check.10 However, in the
meantime, it is to be noted that there is no need to prove that there existed the intention to
defraud.11 Indeed, it is adequate in the event that if it can be demonstrated that the normal
purchaser would suffer harm. Along these lines, therefore it is binding on the central government to
follow the S 13(2) and (3) of the 2013 act which shall be read in accordance with the rules newly
formulated.

Another manner by which the name and objects are connected is the point at which they have a
name like that of another enrolled company, the court takes a gander at whether their line of
business is the same to decide whether any disarray can be caused.12 On account of Recketts v.
Advertisement Valoren Factors Ltd.13 For this situation, the name 'Air Equipment' was viewed as
precluded as there was another company enrolled under the name 'Air Component' and both the
organizations worked in a similar sector and managed indistinguishable sort of products as well as
pool of clients. Owing to the similarity in the operations and activities of companies the court in the
present matter arrived at the conclusion that this would create confusion in customers which would
result in harm caused to the customers therefore the name was not allowed.

Along these lines, it can be construed that if the business matter of the organization is unique in
relation to the other complaining party, the perplexity or confusion isn't probably going to arise. On

7
Id.
8
S. 21 (ii), Indian Companies Act, 1956.
9
Nishit Desai Associates, Research and Articles, “Ease of Doing Business – MCA Relaxes Norms for Name
Approval”
10
Id.
11
British Vacuum Cleaner Co. v. New Vacuum Cleaner Co ., (1907) 2 Ch 312
12
Aerators Ltd. v. Tollitt, (1902) 2 Ch 319
13
(2004) 1 BCLC 1(CA)(CA).
account of Dunlop Pneumatic Tire Co. Ltd. v. Dunlop Motor Co. Ltd.14 It was held that since the
respondents carried on a motor repair company and the offended party had a tire producing
company, confusion is probably not going to arise and in this manner a direction of injunction cannot
be given. Another precedent is the situation of Society of Motor Manufacturers and Traders Ltd. v.
Engine Manufacturers and Traders Mutual Insurance Co. Ltd15 where the companies had
comparative names yet one was an insurance agency and the other was a society of trade
protection.

Court’s approach in the matters where company names comprises of unique words.

There are particular registered names which are not given to other Companies and the same
has been laid down to avoid the harm which will be caused to the public at large. This has been
done because of the similarities the names have in common. But,

1. Does a company have hegemony or total monopoly over certain words that are used in
common job or interest?
2. Are the companies allowed to hold the ownership of names which is of people or their
families?

Words in Common parlance

It has been laid down in the landmark case of Ragget v. Findlater16 that a company cannot stop
the other company from using a word that is an ordinary English word which is used in day to
day life. Therefore, no company can stop another company from using the word which is
ordinary in use. In the case of Ragget v Findlater, the plaintiff wanted to bring the injunction
on the use of word “Nourishing” but the honourable court did not allow it citing the reason of
ordinary/common English word. The same decision was laid down in the case of Aerators Ltd
v. Tollitt17 and Lee v. Haley.18 This is nowhere told that words which are invented by a lot of
research and work will get the protection just because it is unique.19 The paramount rule here
is that whether the use of the same word will mislead customers or not?

The Company Act, 2013, is not the only statute that imposes ban on certain names. If we look
at the Section 3 of the Emblems and Names (Prevention of Improper Use) Act, 1950 has also
put down certain words which can’t be used.20 The proscribed names are listed there in the

14
1907 SC (HL) 15
15
(1925) 1 Ch 675
16
[L.R.] 17 Eq. 29.
17
(1902) 2 Ch 319.
18
R 5 Ch 155
19
Re, Exxon Corporation v. Exxon Insurance Consultants International Ltd., (1981) 2 All ER 495
20
S. 3 Emblems and Names (Prevention of Improper Use) Act, 1950.
schedule of the act and the Central Government has the power to add or remove names at their
own will.21 They have been empowered for the same by Section of the aforesaid act.

Words comprising of personal or family names

It has been laid don that by registering a name a company gains total control over the said
word.22 And the court has the power to restrain the other or new company from registering the
name if the words are almost similar and will mislead the general public.23 A person can be
disallowed to name his after him if the name resembles similarity to an existing company.24

In the landmark case of Kriloskar Proprietary v. Kriloskar Dimensions P. Ltd,25 the plaintiff
company was not granted a temporary injunction but the court gave the defendant company 3
months to change the name as the names were too similar and were misleading customers.
This, therefore, tells us that an injunction may not always be granted as it is mostly dependant
on the Civil Procedure Code. In one another case of Manipal Housing Finance Syndicate Ltd.
V. Manipal Stock and Share Brokers Ltd,26 one family was running a company which had the
name Manipal but becuse of some altercation and misunderstanding the company was divided
into two parts. One of the families involved in the business filed for an injunction on the name
Manipal but the honourable Court declined it citing the reason that not all the companies were
using the name Manipal and the aforesaid name was associated with the family and not the
companies.

In the landmark case of Tussaud v. Tussaud,27 the company which owned the Madame
Tussaud’s wax museum filed for an injunction against the Tussaud family as they had
registered for a company named as “Louis Tussaud Ltd” which was made to carry on with the
same business.

21
S. 8 Emblems and Names (Prevention of Improper Use) Act, 1950
22
A Ramaiya, Guide to Companies Act (18th edn., Wadhwa and Wadhwa 2014).
23
K.M. Multani v. Paramount Talkies of India Ltd., (1943) 13 Com Cases 90
24
K.G. Khosla Compressors Ltd. v. Khosla Extraktions Ltd., AIR 1986 Del 151
25
96 Com Cases 726
26
(1999) 98 Com Cases
27
(1890) 44 Ch. D 678.
Conclusion

We can clearly see that the Companies Act, 2013, after the amendments tends to relax the rules
in terms of the object while they have kept this in the mind the general public in no way is to
be deceived. It is quite conspicuous that MCA has utmost no intention to unnecessarily to
trouble the promoters in the garb of name if it doesn’t harm the other party and misleads the
public. After going through a lot of cases, I have come to this conclusion that the honourable
courts have been more liberal when it has come down to the interpretation of the said act or
statute. Old companies and as well as new parties such as start ups have been taken care of
when it has come down to nomenclature. No company can create hegemony or total control
words which are used in daily use. The primary and most important motive of the said rule is
that of protecting the customers from buying the products which they did not wish to buy
because of the similarity of names they had.

BIBLIOGRAPHY

COMMENTARIES
Ramaiya, A. Guide to Companies Act (18th Edn.Wadhwa and Wadhwa 2014).

French, D., Mayson, S., Ryan, C., Mayson, French & Ryan on Company Law (OUP 2010)

ARTICLES

Nishit Desai Associates, Research and Articles, “Ease of Doing Business – MCA Relaxes
Norms for Name Approval”
STATUTES
Indian Companies Act, 2013.
Indian Companies Act, 1956.
The Trade Marks Act, 1999.