The Bombay High Court, in proceedings under Section 9 of the Arbitration and Conciliation Act, 1996, has restrained a former franchisee from using “KIDZEE”, “KIDGEE” or any deceptively or phonetically similar name after the expiry of her franchise agreement with Zee Learn Limited. The Court held that regulatory permission to operate a school under a new name could not override contractual restrictions or revive an expired franchise. The decision highlights the importance of the overall commercial context, prior franchise relationship and likelihood of continued association when assessing the use of a deceptively similar mark.

Background

Zee Learn Limited had granted the Respondent, Beauty Singh, a franchise to operate a KIDZEE centre at Bisunpur, Koderma, under a Franchise Agreement dated 20 January 2014. The six-year agreement expired in January 2020, following which the Respondent was required to cease using the Petitioner’s intellectual property and the KIDZEE trademark.

The Petitioner subsequently alleged continued use of the KIDZEE name and issued a legal notice, followed by a police complaint and FIR. The Respondent thereafter adopted the name “KIDGEE” for the school. Zee Learn contended that the new name was deceptively and phonetically similar to KIDZEE and enabled the Respondent to retain the goodwill and association developed during the franchise period.

The Parties’ Contentions

Zee Learn argued that the Respondent’s right to use KIDZEE and the associated intellectual property was limited to the subsistence of the franchise. Following expiry, the Respondent could neither use the mark nor adopt a similar name suggesting continuing affiliation with the Petitioner.

The Petitioner further emphasised that the Respondent continued to operate from the same locality and for the same educational activity and had adopted KIDGEE after six years of operating under KIDZEE. The similarity between the two names, it was argued, could lead parents and members of the public to believe that the Respondent continued to be associated with Zee Learn.

The Respondent contended that she had ceased using KIDZEE after becoming aware that the franchise had expired and had subsequently obtained Government permission and UDISE (Unified District Information System for Education) registration to operate under the name KIDGEE School. She also argued that “KID” was a common element and that the Petitioner could not claim exclusive rights over it.

Court’s Findings

The Court considered the dispute to be fundamentally contractual, arising from the Respondent’s continued use of KIDZEE or a deceptively similar name after expiry of the Franchise Agreement.

A significant aspect of the decision was the Court’s treatment of the Government permission obtained by the Respondent. The Court held that such permission operated in a different field and could not override the contractual obligations undertaken by the Respondent. Regulatory recognition to operate a school under the name KIDGEE could not revive the expired franchise.

The Court also rejected the suggestion that the presence of the common element “KID” resolved the issue. The assessment had to be made in the context of the overall circumstances, including the similarity between KIDZEE and KIDGEE, the six-year franchise relationship, the same educational activity and the same locality.

The Court found a prima facie case of continuing prejudice. In its view, the adoption of KIDGEE after the Respondent had operated as a KIDZEE franchisee for six years could indicate an intention to retain the earlier association and potentially affect the Petitioner’s goodwill and reputation.

Relief

The Respondent was restrained from using KIDZEE, KIDGEE or any deceptively or phonetically similar name or representation suggesting continuing association with Zee Learn. She was also directed to remove such names from the school premises, advertisements, uniforms, stationery, websites, social media and other materials.

The Court additionally directed preservation and disclosure of relevant admission, fee, financial and promotional records from 20 January 2020 onwards. However, it declined the Petitioner’s request for a ₹7.85 crore bank guarantee and appointment of a Court Receiver, leaving questions of damages and monetary liability for determination by the arbitral tribunal.

Key Takeaways

1. Expiry of a franchise means more than cessation of the licensed mark: A former franchisee may also be prohibited from adopting a similar name which creates an impression of continuing affiliation.
2. Regulatory permission does not override contractual obligations: Government or regulatory approval to operate under a particular name cannot revive an expired franchise or nullify contractual restrictions.
3. Similarity must be examined in context: The Court did not examine “KID” in isolation. The prior six-year franchise relationship, similarity of the names, identical business activity and the locality were relevant to assessing the likelihood of continued association.
4. The surrounding circumstances can be as important as the marks themselves: Where a former franchisee adopts a similar mark immediately after the franchise relationship ends, the history of the relationship may materially influence the Court’s assessment of deceptive similarity and goodwill.

Comment

The decision serves as a useful reminder that a former franchisee cannot necessarily escape post-termination restrictions simply by replacing the franchisor’s mark with a slightly altered name. Where the new name, viewed against the history of the franchise and the nature of the parties’ businesses, is capable of preserving the earlier association, contractual restrictions and trademark-related concerns may continue to have significant consequences even after the franchise itself has expired.