Section 16: Rectification of name of Company.

Rectification of name of Company.

16. (1) 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,—
(a) in the opinion of the Central Government, is identical with or too nearly resembles the name by which a company in existence had been previously registered, whether under this Act or any previous company law, it may direct the company to change its name and the company shall change its name or new name, as the case may be, within a period of three months from the issue of such direction, after adopting an ordinary resolution for the purpose;
(b) on an application by a registered proprietor of a trade mark that the name is identical with or too nearly resembles to a registered trade mark of such proprietor under the Trade Marks Act, 1999, made to the Central Government within three years of incorporation or registration or change of name of the company, whether under this Act or any previous company law, in the opinion of the Central Government, is identical with or too nearly resembles to an existing trade mark, it may direct the company to change its name and the company shall change its name or new name, as the case may be, within a period of six months from the issue of such direction, after adopting an ordinary resolution for the purpose.
(2) Where a company changes its name or obtains a new name under sub-section (1), it shall within a period of fifteen days from the date of such change, give notice of the change to the Registrar along with the order of the Central Government, who shall carry out necessary changes in the certificate of incorporation and the memorandum.
(3) If a company makes default in complying with any direction given under sub-section (1), the company shall be punishable with fine of one thousand rupees for every day during which the default continues and every officer who is in default shall be punishable with fine which shall not be less than five thousand rupees but which may extend to one lakh rupees.

This provision is covered by Chapter II on INCORPORATION OF COMPANY AND MATTERS INCIDENTAL THERETO [Section 3 to 22].

Section 16 is brought to force from April 01, 2014.
For this chapter, the Companies (Incorporation) Rules, 2014 (‘the Rules’) are notified with effect from April 01, 2014. However no rule is specified under the Rules.

Corresponding provisions of the Companies Act, 1956:
Section 22

Corresponding provisions of the English Companies Act, 2006:
Sections 67, 68 and 69.

Applicability:
This section is applicable to all companies.

Comments:
This section confers power to the Central Government to order companies to rectify its name where the name is allowed to the company through inadvertence or otherwise which in its opinion is identical with or too nearly resembles with the name
(a) by which a company is already incorporated under the 2013 Act or any previous company law; or
(b) of registered trade mark under the Trade Marks Act, 1999.

(a) Where the Central Government suo motu frames an opinion that either through its inadvertence or otherwise, a company is registered by a name or changes its name, which is identical with or too nearly resembles with the name of another company registered under the Companies Act (of 2013 or earlier Company law), then it may (at its discretion) after giving opportunity of hearing to the company, direct it to change its name.

The Central Government necessarily looks at name application of change of name application, as the case may be, and frames  an opinion as to whether name was allowed inadvertently or otherwise, which should not have been allowed.
Upon receipt of order of the Central Government to change the name, the company shall mandatorily change its name within a period of three months by obtaining consent of shareholders by ordinary resolution.

(b) If a company is registered by a name or changes its name, which is allowed by the Central Government either through inadvertence or otherwise, and is identical with or too nearly resembles a registered trade mark under the Trade Marks Act, 1999, then the owner of such a registered trade mark can  apply to the Central Government to direct such company for rectification of its name. Such application shall be made within 3 years of its incorporation or change of name by a company, as the case may be. [Section 16(1)(b)].
Under 1956 Act, such an application could be made within 5 years of coming to notice of registration of company. Thus, under 2013 Act, lesser time is given to owners of registered trade marks to apply the Central Government.

The Central Government, after giving opportunity of hearing to applicant and the company, need to frame an opinion as to whether the name of the company is identical or too nearly resembles with the registered trade mark or not. After hearing, if the Central Government frames such an opinion, then it may direct the company to change its name.

Upon receipt of order of the Central Government to change the name, the company shall mandatorily change its name within a period of six months by obtaining consent of shareholders by ordinary resolution.  [Section 16(1)(b)]. Under 1956 Act, the company was required to change its name within three months of receipt of order of the Central Government.

Where the Central Government frames an opinion that the name of the company is not identical or too nearly resembles the registered trade mark of the applicant, then it may reject the application. In such cases, applicant is left with civil remedies (injunction including ad interim / temporary injunction, stay, damages, appointing commissioner (akin to an “Anton Pillar Order”) to search, seizure (seal) of goods, accounts etc.) as there is no appeal provision under the Companies Act. It is pertinent to note that the Indian trademark law protects the vested rights of a prior user against a registered proprietor which is based on common law principles.

Within 15 days of changing name, the company shall give notice to the Registrar of Companies along with the order of the Central Government and the Registrar shall carry out necessary changes in the certificate of incorporation and the memorandum (name clause of memorandum).

Penalty:
If order of the Central Government is not obeyed,
(i) the company shall be punishable with a fine of Rs.1000/- for every day until the order of the Central Government is obeyed; and
(ii) every officer of the company who is in default shall be punishable with a fine of not less than Rs.5,000/- and which may extend upto Rs.100,000/-.

Adjudication:
Under Section 454, the officer appointed by the Central Government, not below the rank of Registrar of Companies, may adjudicate and impose monetary penalty for violation of this section. However, before imposing penalty, an opportunity of hearing shall be given to the Company and its officers.

Compounding:
It may be noted that under section 441, where offence is punishable with fine only, the same may be compounded by the National Company Law Tribunal or where the fine does not exceed Rs.5,00,000/- by the Regional Director or any other officer authorised by the Central Government.

Summary of forms and records:
No format of application to the Central Government is prescribed.

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