Ownership of trade name

Querist : Anonymous (Querist) 27 April 2020 This query is : Resolved
I started my business in the year 2002 as proprietor of a 'XYZ, in the year 2013 I converted this 'XYZ' Proprietory firm into Partnership by admitting one person. The Partnership business continued till 2018 and thereafter due to dispute among the partners now it is discontinued. Now that another partner claiming my trade name 'XYZ' as his own and pressuring me to resign from the Partnership Firm. My Questions is Who is the legal right to claim this trade name 'XYZ' and further I would like to inform you that there is no specific clause in the partnership regarding this matter, it has been just mentioned in the Partnership Deed that earlier it was in Proprietory firm (me as a proprietor) and converted into Partnership by admitting that other person. Thanks

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Rajendra K Goyal (Expert) 27 April 2020
All the assets / liability of the proprietorship firm was taken over by the Partnership on the decided terms. Not mentioning anything regarding ownership of the trade name it proves that trade name was surrendered as firm’s property. Ownership was decided on mutual, consent details not mentioned in the deed.
Since the partnership deed does not include anything regarding ownership of trade name, fate after dissolution of the partnership, the tradename belongs to all partners. It can be used in future with the consent of all partners or it would not be used.

Raj Kumar Makkad (Expert) 27 April 2020
As you were using the trade name since the day of its inception as a properietorship firm which later on converted as a partnership firm in the same name and style. Now when the partnership firm is going to be dissolved, you have better right to retain the said name of the firm and subsequently inserted partner cannot legally claim for it, however, it depends upon mutual terms and conditions to be arrived at between you. Sometimes the name of the firm is retained by one of the partners against which he pays/compensates another for it. Better amicably settle it otherwise law is in your favour.

Guest (Expert) 27 April 2020
Individually, none of the partner can claim the trade name, as a matter of right, unless decided amicably and the mention of the rightful owner to use that name is duly made in the dissolution deed.

Dr J C Vashista (Expert) 28 April 2020
Whether the partnership is registered or unregistered ?
Whether there is any clause qua distribution of assets and liabilities of the partnership firm at the time of dissolution ? If so, proceed accordingly.
Since all the assets and liabilities of proprietor business were merged in partnership firm, consequently owner of proprietor has lost his right / claim over them.
Name of the partnership firm is asset of both the partners which can be quantified /valued and share be paid by the partner to other partner who wish to retain its "name".

Hemant Agarwal (Expert) 28 April 2020
1. IF you (personally) do not have any Assets /Liability left in the Partnership firm, THEN do not resign or dissolve the partnership firm and do not give up the Trade name. Your other partner CANNOT do anything about it. Let the matter get stale.

2. You, as a Prop., start afresh with a look-alike trade name & register it and "NOBODY" will be able to legally do anything about it.

Keep Smiling .... Hemant Agarwal
VISIT: www.chshelpforum.com

Querist : Anonymous (Querist) 28 April 2020
Thanks for all your replies and I want to furnish below information for your accurate opinion:
1) Our partnership is unregistered one
2) The Partnership is at WILL of the Partners
3) There is no clause in the partnership regarding distribution of assets & liabilities at the time of dissolution of the firm but when matters not specifically provided in the partnership deed, then the Partnership shall be governed by the provisions of the Indian Partnership Act
4) I want to dissolve the above firm and continue as a proprietor of sole concern.
5) The another partner is not agreed to dissolve the firm.
6) The trade name is approved and allotted by ICAI in the year 2002 to me as a proprietor of sole concern.
7) I would like to bring to the kind attention of Experts to section 53 of the Partnership Act, 1932 which reads as below:

Section53 RIGHT TO RESTRAIN FROM USE OF FIRM-NAME OR FIRM-PROPERTY.

After a firm is dissolved, every partner or his representative may, in the absence of a contract between the partners to the contrary, restrain any other partner or his representative from carrying on a similar business in the firm-name or from using any of the property of the firm for his own benefit, until the affairs of the firm have been completely wound up:
Provided that where any partner or his representative has brought the goodwill of the firm, nothing in this section shall affect his right to use the firm-name.

Thanks in advance for all your opinions.

Rajendra K Goyal (Expert) 28 April 2020
You said:
1) Our partnership is unregistered one
Reply:
It is not mandatory to register a Partnership. No illegality in it. Whether the terms were written or not? Whether tax returns are filed showing both partners. Whether ST / GST no. is taken showing both as partners.
You said:
2) The Partnership is at WILL of the Partners
Reply:
You can send registered notice regarding dissolution of the partnership with the terms on which it is dissolved. Get the notice and dissolution be drafted by an expert.

Rajendra K Goyal (Expert) 28 April 2020
You said:
3) There is no clause in the partnership regarding distribution of assets & liabilities at the time of dissolution of the firm but when matters not specifically provided in the partnership deed, then the Partnership shall be governed by the provisions of the Indian Partnership Act

Reply:
The Assets and liability can be distributed equally in such case.

You said:
4) I want to dissolve the above firm and continue as a proprietor of sole concern.

Reply:
You can not continue with the same name and details till both the partners agree to it.

Rajendra K Goyal (Expert) 28 April 2020
You said:
5) The another partner is not agreed to dissolve the firm.
Reply:
You can serve notice, you can not be forced to continue to remain with the partnership on his whim.

You said:
6) The trade name is approved and allotted by ICAI in the year 2002 to me as a proprietor of sole
concern.

Reply:
The same has been given to partnership, it seems this is property of partnership. However show all documents to local lawyer in this regard.

Rajendra K Goyal (Expert) 28 April 2020
You said:
7) I would like to bring to the kind attention of Experts to section 53 of the Partnership Act, 1932 which reads as below:
Reply:
After dissolution of partnership one partner cannot use the trade name till other partner (s) agree to it.

Raj Kumar Makkad (Expert) 28 April 2020
In th elight of the subsequently submitted facts by you, which were required to be posted initially, I am of the firm opinion that your partner cannot create any obstruction in the dissolution of the partnership firm in the light of clause no. 2.

Raj Kumar Makkad (Expert) 29 April 2020
Similarly, as the trade name is already registered in the name of the properitorship firm owned by you and it has never been changed under law in the name of the partnership firm, though, it traded in the same name, hence even on the disolution of the firm, its status shall not be got affected.

Raj Kumar Makkad (Expert) 29 April 2020
As per my opinion the provision as contained in section 53 of Indian Partnership Act, as referred by you in your subsequently posted facts, shall not come in the way as the trade name is not the property of the partnership firm legally. It was nowhere registered in the name of the partnership firm, however, still it is the mutual understanding of the parties to decide, who shall use the same compensating the remaining party.

Guest (Expert) 29 April 2020
You seem to have been testing the knowledge of the experts. What information you posted now should have been posted at the very initial stage in description of your problem.

Anyway, you seem to have tried to become teacher for yourself.

Rajendra K Goyal (Expert) 29 April 2020
Humbly and respectfully differ with the advice of Ld. Expert. The tradename was registered in the name of proprietorship, yet it was used for all purposes (as per partnership deed) by the partnership firm, never was objected. The proprietor was also a partner in the partnership firm. Under the circumstances, it is doubtful, the name still belongs to proprietorship till specially mentioned in the partnership deed as a term on dissolution.

Agree that the author can use this name with the consent of all the partners of dissolved firm.

Rajendra K Goyal (Expert) 29 April 2020
Whether tax returns are filed showing both partners and with firm name.
Whether ST / GST no. is taken showing both as partners in the firm name.

Whether Municipal license, if any, are taken showing both partners and is in the trade name.
Whether partnership deed contained the clause of dissolution, its procedure, and any other details?

Querist : Anonymous (Querist) 29 April 2020
Thanks to Experts for all your opinions and would like to furnish some more information as one on of the Expert asked
1. we have taken Service Tax, GST Registration, Professional Tax and filed Tax Return
2. Dissolution clause is not mentioned at all in the Partnership Deed.
3. Sharing of profit or loss equally.
4. With due respects to the Experts, I think experts have not read thoroughly Section 53 of the Partnership Act and I hope that below proviso has been omitted by some Experts

“Provided that where any partner or his representative has brought the goodwill of the firm, nothing in this section shall affect his right to use the firm-name”.

Therefore form the above provisio it is very much clear that goodwill has been buildup by me by using the trade name for the period from 2002 to 2013 and for the goodwill build up by me the admitting partner has nothing paid to me at the time of admission and I have also given him equal share in profit or loss, even though he is newly admitted to the business and now how I can compensate to another partner under these circumstances.

Guest (Expert) 29 April 2020
A vague query!!

The author makes his own assumptions and tries to teach the experts, when he says, "experts have not read thoroughly Section 53 of Partnership Act", when he had not been supply some definite data in support of his query. On the other hands, the experts have also been replying on the basis of their own presumptions in the absence of the most necessary facts about the firm. Neither the proprietary firm was registered, nor partnership firm, so where is logic of making a claim to the asumed intangible assets after expirey of 8 years (2012 to 2020).

I wonder to know if at any time the ICAI was authorised to register the names of the proprietary firms, as the author has claimed that the name of his firm was approved by the ICAI.

How the author assumes that the goodwill was brought by him, when the issue was not taken care of 8 years before, when the constitution of the firm was changed and not included in the partnership agreement? If he wants to claim now the assumed goodwill of proprietry firm supposed to have earned fron 2002 to 2012, what about the enhanced goodwill for the next five years from 2013 to 2018 the firm earned during the period of partnership. He will also have to evaluate goodwill of that period in comparison to that of the prior period.

Question arises, when the partnership continued till 2018, the firm, itself has become defunct for the last about two years, with conduct of no business transactions.

In nutshell, I am of the firm opinion that the query is merely an academic exercise, not a real problem, where supposedly a student seeks answer to his academic query from the experts. And when not satisfied with the replies of the experts, he used to manufacture and supply the supplementary data in piece meals merely after getting cues from the replies of the experts.

However, if it happens to be a real life problem of the author, he may better discuss in detail with some local lawyer to find the solution after his examination and analysis of the documents that the querist has in his possession, concerning to both the constitutions of the firm.

Raj Kumar Makkad (Expert) 29 April 2020
It is defamatory allegation on your part that experts have not gone through section 53 of partnership Act or you have not been advised after reading the facts of your query. You have rightly been advised by the experts in the light of the facts posted by you.

Rajendra K Goyal (Expert) 30 April 2020
You Said:
1. we have taken Service Tax, GST Registration, Professional Tax and filed Tax Return

Reply:
The registration proves that the trade name belongs to partnership. Registration was done with the consent of all the partners.

Rajendra K Goyal (Expert) 30 April 2020
You Said:
2. Dissolution clause is not mentioned at all in the Partnership Deed.

Reply:
In such case, all assets and liabilities would be equally shared including goodwill, till it is decided otherwise with mutual consent.

Rajendra K Goyal (Expert) 30 April 2020
You Said:
3. Sharing of profit or loss equally.

Reply:
This precedent would be used in case of dissolution in absence of written provisions.

Rajendra K Goyal (Expert) 30 April 2020
You Said:
4. Therefore form the above provisio it is very much clear that goodwill has been buildup by me by using the trade name for the period from 2002 to 2013 and for the goodwill build up by me the admitting partner has nothing paid to me at the time of admission

Reply:
The goodwill of proprietorship and tradename was given to partnership, after this goodwill belonged to partnership.
If you are not satisfied with the interpretation, better consult local lawyer. It seems you are interpreting provisions in the manner beneficial to you. There is no clause in the partnership that the tradename would remain property of previous proprietor.

Rajendra K Goyal (Expert) 30 April 2020
You Said:
5. and I have also given him equal share in profit or loss, even though he is newly admitted to the business and now how I can compensate to another partner under these circumstances.

Reply:
That is not a favor to him at this stage, you have followed the provisions of partnership. You should have claimed the goodwill at the time of starting partnership. Even if you have done any favor previously, it seems other partner is not in a mood to do any favor to you. In such circumstances, mutual consent or decision from court is the way left.