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Terms Of Family Settlement Has To Be Honored

The history of Rathi Family
1942: Parent Company , Rathi Steel Rolling Mills [G.D.Rathi, K.L.Rathi and H.K.Rathi].

1969: Divided into G.D.Rathi Steels Ltd. [family members of G.D.Rathi] and K.L.Rathi Steel Ltd. [ family members of K.L.Rathi and H.K.Rathi].

1970:Sons of G.D.Rathi established Rathi Ispat Limited [Electric Arc Furnace Plant] and Rathi Udyog Limited [Rolling Mill].

1970:Sons of K.L.Rathi and H.K.Rathi established Steel Plant in the name of Rathi Super Limited and Rathi Alloy Steel Limited.

11.10.1975:K.L.Rathi Steel Limited obtained registration for RATHI under No. 309435 in class 06. Rathi foundation was recorded as subsequent proprietor.

1986:G.D.Rathi was divided into G.D.Rathi Steels Ltd.[owned by P.R.Rathi] and Rathi Ispat Limited, Rathi Udyog Limited [owned by Arun Kumar Rathi and Anit Rathi].

The Family Settlement:
24.06.1995: Memorandum of Understanding was entered into. A trust namely Rathi Foundation.
  1. Clause 8: Senior Most Trustee of Group/Sub Group could issue license.
  2. Clause 8.1: Rathi Foundation shall be informed regarding issuance of new license.
  3. Clause 13: Any misuse of clause 9, 9.1 to 9.4 and 10.1 to 10.5 would be deemed violation and such license shall stand cancelled.
  4. Clause 9.1 Such Companies/firms has to be formed by male blood descendants.
  5. Clause 9.2 In case of non-quoted company, the male blood descendants must have not less than 51% of paid-up equity share.
  6. In case later converted into quoted company, the male blood descendants must have not less than 25% of paid-up equity capital share.
  7. In case of other case, 100% capital to be held by group/sub group.
  8. Clause 10.3: Management of unit/company has to be in control of group/sub group.

Group A, B and C of the Patent Family:
Group A : 4 Licenses including its existing company namely Rathi Super Steel Limited and Rathi Alloys and Steel Limited [CR Rathi , substituted by Shanta Bai Lakhotia, Rajesh Rathi, Gaurav Rathi, Lila Devi Rathi]

Group B: 4 Licenses including its existing company namely KL Rathi Steel Ltd., Rathi Steel Ltd and Rathi Rod Mill Ltd. [Deepak Rathi, Dhananjay Rathi, Kshitij Rathi, Rekha Rathi]

Group C1: 4 Licenses including its existing company namely Rathi Udyog Limited [P.C.Rathi, Raj Kumar Rathi and Pradeep Rathi]

Group C2: 2 Licenses [Gaurav Kumar Rathi]

Group C3 : 2 Licenses [Anil Rathi]

Plea of Amba Shakti Steels Limited, the Defendant No.9.

Amba Shakti Steels Limited , the Defendant No.9 contended that the same is bonafide licensee of C 1 sub group.

Defendant No.9 has been given license by C1 group as the Plaintiff namely C3 , Anil Rathi licensed to Shri Rathi Steel Ltd. and Shri Rathi Steel (Dakshin) Limited.

The Observation of Court:

  1. License has been issued by Pradeep Rathi (Member of C1 and Defendant No.11) to Defendant No.9.
  2. Pradeep Rathi, the Defendant No.11, is not the senior most member of C1 sub group.
  3. The stand of Defendant No.9, that license has been granted by Defendant No.11 under the instruction and consent of Defendant No.10, is not convincing.
  4. The Ratification by Defendant No.10 cannot validate the grant of license given under the signature of Defendant No.11.
  5. The Defendant No.4 took the stand that the same is controlling the affairs of Defendant No.9.
  6. The Defendant No.10 ratified the license granted by Defendant No.11 to Defendant No.9 on this presumption that Defendant No.4 has controlling authority in Defendant No.9.
  7. However, the Name of Defendant No.4 has not been shown as a director of Defendant No.9.
  8. In view of the above, the Hon'ble Court observed that mere ratification by Defendant No.10 would not validate the license granted by Defendant No.11.
  9. As per the Memorandum of Understanding, the License has to be in the signature of Defendant No.10, being the senior most member of C1 group.
  10. As it has not been done in the present case, the license granted by Defendant No.11 is not as per the terms of Memorandum of Understanding between the family members.
  11. The Hon'ble Court observed that it is a settled proposition of law that the Family settlement has to be honored.
  12. Its stipulations have to be complied with strictly in accordance with the terms mentioned in the Memo of Understanding.
  13. The License granted by Defendant No.11 to Defendant No.9 is not valid one.
In view of the above, injunction order was passed as the license was not granted to the Defendant No.9 in view of the family Memorandum of understanding.

Case law discussed
Date of Judgment: 15.09.2020
Case No:CS (COMM) No.603 of 2019
Neutral Citation No: NA
Name of Hon'ble Court: Hon'ble High Court of Delhi
Name of Hon'ble Judge: V.Kameshwar Rao, H.J.
Case Title: Anil Rathi trustee Rathi Foundation Vs Sanjog Steels Pvt. Ltd. and Ors

Information contained herein is being shared in the public Interest. The same should not be treated as substitute for legal advice as it is subject to my subjectivity and may contain human errors in perception, interpretation and presentation of the facts and law involved herein.

Written By: Advocate Ajay Amitabh Suman, IP Adjutor - Patent and Trademark Attorney
Email: [email protected], Ph no: 9990389539

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