Delhi High Court
M/S. Golden Tobie Private Limited ... vs M/S. Golden Tobacco Limited on 4 June, 2021
Equivalent citations: AIRONLINE 2021 DEL 782
Author: Jayant Nath
Bench: Jayant Nath
$~
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Reserved on : 21.05.2021
Pronounced on: 04.06.2021
+ CS(COMM) 178/2021
M/S. GOLDEN TOBIE PRIVATE LIMITED (FORMERLY
KNOWN AS GOLDEN TOBIE LIMITED) ..... Plaintiff
Through Mr.Kailash Vasdev, Sr.Adv. with
Ms.Priyadarshi Manish and Ms.Anjali J.Manish,
Advs.
versus
M/S. GOLDEN TOBACCO LIMITED ..... Defendant
Through Mr.Sumeet Verma, Mr.Vijay Kumar
Wadhwa and Mr.Maninder Pratap Singh,
Advocates.
CORAM:
HON'BLE MR. JUSTICE JAYANT NATH
JAYANT NATH, J. (JUDGMENT)
IA No.6080/2021
1. This is an application filed by the defendant under Section 8 of the
Arbitration and Conciliation Act, 1996 for referring the disputes between the
plaintiff and the defendant to arbitration.
2. The plaintiff has filed the present suit seeking the following reliefs:
"(a) Decree for permanent injunction restraining the
Defendant, their partners, directors, shareholders or
proprietor as the case may be, its assigns in business,
franchisees, affiliates, subsidiaries, licensees and agents
from selling, offering for sale, advertising, directly or
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indirectly the exclusive brands as mentioned in Schedule-3
of the Trademark Licence Agreement dated 12.02.2020 and
amendment to Trademark Licence Agreement dated
29.08.2020;
(b) Decree for permanent injunction restraining the
Defendant, their partners, directors, shareholders or
proprietor as the case may be, its assigns in business,
franchisees, affiliates, subsidiaries, licensees and agents
from selling, offering for sale, advertising, directly or
indirectly dealing in any product, or reproducing or using in
any manner whatsoever, the infringing exclusive brands as
mentioned in Schedule-3 of the Trademark Licence
Agreement dated 12.02.2020 and amendment to Trademark
Licence Agreement dated 29.08.2020, which is identical to
and/or deceptively similar;
(c) Decree for permanent injunction restraining the
Defendant, their partners, directors, shareholders or
proprietor as the case may be, its assigns in business,
franchisees, affiliates, subsidiaries, licensees and agents
from selling, offering for sale, advertising, directly or
indirectly dealing in any product, or reproducing or using in
any manner whatsoever, the infringing exclusive brands as
mentioned in Schedule-3 of the trademark licence
agreement dated 12.02.2020 and amendment to trademark
licence agreement dated 29.08.2020, amounting to passing
off of the goods / services and/or business of the Defendant
for those of the Plaintiff, dilution of goodwill and unfair
competition;
(d) A decree for delivery up of all products and material
including stationery, visiting cards, billboards, brochures,
promotional material, letter-heads, cash memos, sign
boards, sign posts, leaflets, cartons or any other items of
whatsoever, bearing the infringing logo mark and the
infringing trade dress, and/or any other mark, logo, device
or trade dress which may be identical and/or deceptively
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similar to the Plaintiffs well-known logomark and trade
dress;
(e) A decree of damages amounting to Rs.16,70,30,721.84
(Rupees Sixteen Crores Seventy Lakhs Thirty Thousand
Seven Hundred Twenty-One and Eighty-Four Paise Only)
or any such amount as found due in favour of the Plaintiff.
The Plaintiff submit that the valuation of damages is an
approximate figure only, and the Plaintiff undertakes to pay
further Court fee as may be determined by this Hon'ble
Court upon the damages that the Plaintiff is able to prove in
the course of trial;
(f) An order for rendition of accounts of profits in favour of
the Plaintiff and against the Defendant to ascertain the
profits made by Defendant through sale of its products or
any other products which bear the infringing logo mark and
the infringing trade dress. The Court fees as and when the
accounts of profit are determined precisely and accurately in
the course of trial, and upon disclosure of profits made by
the Defendants;"
3. It is the case of the plaintiff that the parties entered into a Master Long
Term Supply Agreement dated 16.08.2019 by which the defendant on an
exclusive basis had supplied to the plaintiff the exclusive brands of the
defendant "Golden's Gold Flake, Golden Classic, Taj Chhap, Panama and
Chancellor". The plaintiff was selling, supplying, and distributing
exclusively the said brands in domestic and international market.
Subsequently, the plaintiff entered into a trademark license agreement dated
12.02.2020 and amendment agreement dated 29.08.2020. It is stated that the
plaintiff has been granted exclusive non-assignable, non-transferable license
to manufacture the defendant's product to be manufactured exclusively at
the plaintiff's factory at Noida and were to be marketed and distributed
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accordingly. It is pleaded by the plaintiff that despite huge capital and
operational expenditure made by the plaintiff including on advertisements
and promotional schemes to increase the availability of the defendant's
product, the defendant arbitrarily cancelled the trademark license agreement.
On 14.08.2020 the defendant ignoring the prevailing Pandemic chose to
issue the termination notice stating that as per the trademark license
agreement dated 12.02.2020 the licensor had granted an exclusive non-
transferable and non-assignable license to use the exclusive brands and
blend formulations during the term of the agreement. Since commercial
production had not yet started the agreement was terminated with immediate
effect. It is the case of the plaintiff that the termination communication dated
14.08.2020 was withdrawn and an amendment agreement dated 29.08.2020
was entered into between the parties.
4. Subsequently on 13.02.2021 by another termination notice the
defendant company stated that timely payment had not been made in terms
of the agreement. The defendant terminated the agreement dated 12.02.2020
and amendment agreement dated 29.08.2020 with immediate effect and the
plaintiff was to have no right to manufacture and sell the exclusive brands of
the defendant in the market from that point onwards. Hence the present suit
was filed.
5. In the present application the case of the defendant is that by the
present suit the plaintiff seeks to specifically enforce the trademark license
agreement dated 12.02.2020 and amendment agreement dated 29.08.2020. It
is stated that admittedly both these agreements are determinable and could
be legally terminated under Clause 8 of the agreement dated 12.02.2020 and
Clause 5 of the amended agreement dated 29.08.2020. It is claimed that
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hence the same was legally/ validly terminated by the defendant vide notice
dated 13.02.2021.
6. It is further stated that under Clause 12 of the trademark license
agreement dated 12.02.2020, there exists an arbitration clause between the
parties. This said Clause 12 reads as follow:
"12. ARBITRATION
12.1 If any dispute, claims or differences arise between any of the
Parties hereto or inter se the Parties, during the subsistence or
thereafter, in connection with the validity, interpretation
implementation or alleged material breach of any provision of this
Agreement or regarding any question, including the question as to
whether the termination of this Agreement by one Party hereto has
been legitimate, the disputing Parties hereto shall endeavour to
settle such dispute amicably. The attempt to bring about an
amicable settlement is considered to have failed as soon as one of
the Parties hereto after reasonable attempts which attempt shall
continue for not more than 60 (sixty) days, gives 30 (thirty) days'
notice thereof to the other Party in writing.
12.2 In case of such failure, the dispute shall be referred to a sole
arbitrator to be appointed by mutual agreement of the Parties. The
arbitration shall be conducted in accordance with the Arbitration
and Conciliation Act, 1996. The arbitration proceedings shall be
held in New Delhi and the language of arbitration shall be English.
12.3 The arbitrator's award shall be binding on the Parties subject
to Law, and the award shall be enforceable in any competent court
of law. The arbitrator's award shall be substantiated in writing.
12.4 When any dispute is referred to arbitration, except for the
matter under dispute, the Parties shall he entitled to exercise their
remaining respective rights and shall perform their remaining
respective obligations under this Agreement."
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7. Hence, the present application prays that the disputes between the
plaintiff and the defendant raised in the present suit be referred to a sole
Arbitrator to be appointed in terms of the afore-noted Clause 12 of the
trademark license agreement dated 12.02.2020 and its amendment dated
29.08.2020.
8. I have learned counsel for the applicant/defendant and learned senior
counsel for the plaintiff. Learned counsel for the applicant/defendant has
relied upon the judgment of the Supreme Court in the case of Vidya Drolia
and Ors. vs. Durga Trading Corporation, (2021) 2 SCC 1 and judgment of
a coordinate Bench of this court in Hero Electric Vehicles Pvt. Ltd. & Anr.
vs. Lectro E-Mobility Pvt. Ltd. & Anr., 2021 SCC OnLine Del 1058 to
plead that the dispute in question raised by the plaintiff in the present suit is
an arbitrable dispute and is liable to be referred to arbitration in view of the
arbitration agreement between the parties.
9. Learned senior counsel for the plaintiff has also relied upon
judgments of the Supreme Court in the case of Vidya Drolia and Ors. vs.
Durga Trading Corporation (supra) to claim and contend that in terms of
the agreement dated 12.02.2020 between the parties the defendant has
assigned the trademarks in question in perpetuity to the plaintiff. It is
claimed that the agreement cannot be terminated. Merely because there is
alleged default in payment of royalty the same cannot be a ground to
terminate the present agreement. It is pointed out that pursuant to the said
agreement dated 12.02.2020 due information was sent to SEBI and to the
Trademark Registry. It is also claimed that based on the Agreement that the
plaintiff has set up a factory in question and hence the agreement could not
have been terminated. It has been stressed that as the trademarks have been
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transferred in perpetuity to the plaintiff the dispute is a dispute in rem and
cannot be referred to arbitration.
10. I may first see the legal position in this regard. Reference may be had
to Section 8 of the Arbitration and Conciliation Act which reads as follows:
"8. Power to refer parties to arbitration where there is an
arbitration agreement.--
(1) A judicial authority, before which an action is brought in a
matter which is the subject of an arbitration agreement shall, if a
party to the arbitration agreement or any person claiming through
or under him, so applies not later than the date of submitting his
first statement on the substance of the dispute, then,
notwithstanding any judgment, decree or order of the Supreme
Court or any court, refer the parties to arbitration unless it finds
that prima facie no valid arbitration agreement exists.
(2) The application referred to in sub-section (1) shall not be
entertained unless it is accompanied by the original arbitration
agreement or a duly certified copy thereof.
Provided that where the original arbitration agreement or a
certified copy thereof is not available with the party applying for
reference to arbitration under sub-section (1), and the said
agreement or certified copy is retained by the other party to that
agreement, then, the party so applying shall file such application
along with a copy of the arbitration agreement and a petition
praying the court to call upon the other party to produce the
original arbitration agreement or its duly certified copy before
that court."
(3) Notwithstanding that an application has been made under
sub-section (1) and that the issue is pending before the judicial
authority, an arbitration may be commenced or continued and an
arbitral award made."
11. Reference may be had to the judgement of the Supreme Court in the
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case of Vidya Drolia and Ors. vs. Durga Trading Corporation (supra)
relevant paras of which read as follows:
"76. In view of the above discussion, we would like to propound a
fourfold test for determining when the subject-matter of a dispute
in an arbitration agreement is not arbitrable:
76.1. (1) When cause of action and subject-matter of the dispute
relates to actions in rem, that do not pertain to subordinate rights
in personam that arise from rights in rem.
76.2. (2) When cause of action and subject-matter of the dispute
affects third-party rights; have erga omnes effect; require
centralised adjudication, and mutual adjudication would not be
appropriate and enforceable.
76.3. (3) When cause of action and subject-matter of the dispute
relates to inalienable sovereign and public interest functions of the
State and hence mutual adjudication would be unenforceable.
76.4. (4) When the subject-matter of the dispute is expressly or by
necessary implication non-arbitrable as per mandatory statute(s).
76.5. These tests are not watertight compartments; they dovetail
and overlap, albeit when applied holistically and pragmatically
will help and assist in determining and ascertaining with great
degree of certainty when as per law in India, a dispute or subject-
matter is non-arbitrable. Only when the answer is affirmative that
the subject-matter of the dispute would be non-arbitrable.
76.6. However, the aforesaid principles have to be applied with
care and caution as observed in Olympus Superstructures (P)
Ltd. Olympus Superstructures (P) Ltd. v. Meena Vijay Khetan,
[(1999) 5 SCC 651] : (SCC p. 669, para 35)
"35. ... Reference is made there to certain disputes like
criminal offences of a public nature, disputes arising out
of illegal agreements and disputes relating to status, such
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as divorce, which cannot be referred to arbitration. It has,
however, been held that if in respect of facts relating to a
criminal matter, say, physical injury, if there is a right to
damages for personal injury, then such a dispute can be
referred to arbitration (Keir v. Leeman [115 ER 1315]).
Similarly, it has been held that a husband and a wife may
refer to arbitration the terms on which they shall separate,
because they can make a valid agreement between
themselves on that matter (Soilleux v. Herbst [126 ER
1376] , Wilson v. Wilson [(1848) 1 HL Cas 538]
and Cahill v. Cahill [(1883) LR 8 AC 420 (HL)] )."
77. Applying the above principles to determine non-arbitrability, it
is apparent that insolvency or intracompany disputes have to be
addressed by a centralised forum, be the court or a special forum,
which would be more efficient and has complete jurisdiction to
efficaciously and fully dispose of the entire matter. They are also
actions in rem. Similarly, grant and issue of patents and
registration of trade marks are exclusive matters falling within the
sovereign or government functions and have erga omnes effect.
Such grants confer monopoly rights. They are non-arbitrable.
Criminal cases again are not arbitrable as they relate to sovereign
functions of the State. Further, violations of criminal law are
offences against the State and not just against the victim.
Matrimonial disputes relating to the dissolution of marriage,
restitution of conjugal rights, etc. are not arbitrable as they fall
within the ambit of sovereign functions and do not have any
commercial and economic value. The decisions have erga
omnes effect. Matters relating to probate, testamentary matter, etc.
are actions in rem and are a declaration to the world at large and
hence are non-arbitrable."
8. What follows from the above judgment is that actions in rem
including grant and issue of patents and registration of trademarks are
exclusive matters falling within the sovereign and government functions
and have erga omnes effect. Such grants confer monopolistic rights, and
they are non-arbitrable, as noted above.
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9. Learned senior counsel for the plaintiff has vehemently urged that the
issue involved in the present case pertains to termination of the assignment
of trademarks in favour of the plaintiff. It is urged that termination of the
assignment by the defendant is a dispute in rem and touches upon the issue
of registration of trademarks and is hence part of the sovereign and
government functions. Hence, it is pleaded that the application be
dismissed.
10. A co-ordinate Bench of this court under similar facts and
circumstances has already negated and rejected a plea somewhat similar to
the plea raised by learned senior counsel for the plaintiff. Reference may be
had to the judgment of the co-ordinate Bench of this court in the case of
Hero Electric Vehicles Pvt. Ltd. & Anr. vs. Lectro E-Mobility Pvt. Ltd &
Anr., 2021 SCC OnLine Del 1058. That case also pertained to a suit filed
by the plaintiff seeking a decree of permanent injunction restraining the
defendants from dealing in any manner in electric bikes having a throttle
using "Hero" or any other mark deceptively similar thereto as a trademark,
brand name, trade name or in any other manner. The defendants therein
filed an application under section 8 of the Arbitration & Conciliation Act
seeking reference of disputes forming subject matter of the suit to
arbitration. The court held as follows:-
"41. The following clear principles emerge, from Vidya Drolia,
insofar as Section 8 is concerned:
(i) The ambit of the jurisdiction of the High Court, under
Sections 8 and 11 of the 1996 Act, is identical.
(ii) The parties can be relegated to arbitration, in respect of a
dispute regarding which the suit is pending, only if the entire
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subject matter of the suit is arbitrable under the arbitration
agreement between the parties, who are bound by the said
arbitration agreement. The cause of action in the suit cannot
be bifurcated and referred, in part, to arbitration.
(iii) Section 8 jurisdiction cannot be exercised to compel third
parties, who are not privy to, or bound by, the arbitration
agreement, to submit themselves to arbitral proceedings. This
violates the principle of party autonomy and the consensual
nature of arbitral proceedings.
(iv) The arbitrability of the dispute forming subject matter of
the suit, and the arbitrability of the claim, are different. A
claim may be non-arbitrable because of the scope of the
arbitration agreement, not because the subject matter of the
claim is essentially not amenable to arbitration. On the other
hand, the subject matter of the suit is normally non-arbitrable
only if it is not amenable to resolution by arbitration, in law.
(v) Non-arbitrability may be said to exist
(a) where the cause of action, and the subject matter of
the dispute, related to actions in rem, which do not
pertain to subordinate rights in personam arising from
rights in rem,
(b) where the cause of action and subject matter of the
dispute affects third party rights, or has erga
omnes effect, i.e. affects rights owed to all,
(c) where the cause of action and subject matter of the
dispute require centralised adjudication, and for which
mutual adjudication would not be appropriate or
enforceable,
(d) where the cause of action and subject matter of the
dispute relate to inalienable sovereign and public
interest functions of the State, not amenable to
adjudication by the arbitral process, or
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(e) where the subject matter of the dispute is non-
arbitrable by mandatory statutory fiat.
These principles are, however, not watertight, and have to be
applied with care and caution.
(vi) Specific instances of non-arbitrable disputes are
(a) insolvency disputes,
(b) internal company disputes which have to be
addressed by a centralised forum, which would be more
efficient and have complete jurisdiction to dispose of the
entire matter, being actions in rem,
(c) grant and issue of patents and registration of
trademarks being exclusive matters falling within the
sovereign or government function, having erga
omnes effect, conferring monopoly rights,
(d) criminal cases, as they relate to sovereign functions
of the State,
(e) violations of criminal law, as they are offences
against the State and not just against the victim,
(f) matrimonial disputes relating to dissolution of
marriage, restitution of conjugal rights, etc., which have
no commercial or economic value and have erga
omnes effect, and
(g) matters relating to probate or testamentary
disposition, which are actions in rem, resulting in a
declaration to the world at large.
(vii) Landlord-tenant disputes to be decided as per the
Transfer of Property Act, 1882, are arbitrable, as they
(a) pertain to subordinate rights in personam arising
from rights in rem,
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(b) do not normally affects third party rights, or
have erga omnes effect, requiring centralised
adjudication,
(c) do not relate to inalienable sovereign functions of the
State,
(d) are not excepted from resolution by arbitration, by
the provisions of the Transfer of Property Act, and
(e) result in a resolution which can be executed and
enforced like a decree of a civil court.
(viii) The scope of examination by the Court exercising
jurisdiction under Section 8 or under Section 11, is prima
facie in nature. The Court is not to enter into the merits of the
case between the parties. It is only to examine whether the
dispute is prima facie arbitrable under a valid arbitration
agreement. This prima facie examination is intended to weed
out manifestly and ex facie non-existent or invalid arbitration
agreements or nonarbitrable disputes, thereby cutting the
deadwood and trimming off the side branches, in cases where
the litigation cannot be permitted to proceed. The
proceedings are preliminary and summary in nature and
should not result in a mini-trial. Unless there is a clear case
of non-existence of a valid arbitration agreement, or of the
dispute being ex facie non-arbitrable, tested on the above
parameters, the court should leave these aspects to be
decided by a competently constituted arbitral
tribunal. Relegation to arbitration should be regarded as a
rule, and resolution by the civil court, where a valid
arbitration agreement exists and is sought to be invoked by
one of the parties, as an exception. The expression "chalk and
cheese situation", as used by this Court has, in this
background, been approved by the Supreme Court. "When in
doubt" says Ramana, J., in his concurring opinion, "refer".
(Having said that, the "doubt", in my view, has to be real and
substantial, and not merely an escape route to avoid
examining the issue in perspective.)
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42. Criterion (viii) is, in my view, of pre-eminent significance.
While examining the aspect of arbitrability of the dispute, or the
existence of a valid arbitration agreement binding the parties, in
exercise of its jurisdiction under Section 8, the Court has always
to remain alive to the fact that it is exercising the very same
jurisdiction which the Arbitral Tribunal is empowered to
exercise. Court should not, therefore, exercise jurisdiction, under
Section 8 or Section 11, qua these aspects, in such a manner, as
would completely erode or efface the authority of Arbitral
Tribunal to rule thereon. It is only, therefore, where the Court
finds the case to be "chalk and cheese", and where referring the
matter to the arbitral process would be opposed to public interest
or public policy, and a futility ex facie, that the Court should nip
the request for referring the dispute to arbitration in the bud. Else,
the authority of the Arbitral Tribunal to adjudicate on these
aspects is required to be respected, given the raison d' etre, and
fundamental philosophy, of the 1996 Act.
xxxxx
45. I am unable to agree with Mr. Sudhir Chandra. As has been
correctly pointed out by Mr. Sibal, the dispute, as raised by Mr.
Sudhir Chandra's clients, is almost entirely centred around the
FSA and TMNA. Though the prayer clause, in the suit,
superficially read, seeks remedies against alleged infringement
by the defendants, the infringement is alleged, not on the ground
that the defendants are using deceptively similar trademarks, but
on the ground that the right to use the trademarks, on electric
cycles was conferred, by the FSA and TMNA, not on the F-4
group, but on the F-1 group. The reliance, by Mr. Sibal, on paras
19 to 25 of the plaint, is also well taken. The precise case set up
by the plaintiff, in the said paras, is that the right to use the
trademark "Hero" and its variants, which, prior to the execution
of the FSA and the TMNA, vested in Hero Cycles, was
transferred, by the FSA and the TMNA, to the F-1 group, insofar
as electric cycles were concerned. In using the "Hero" trademark,
on electric cycles and e-cycles, therefore, it was alleged that the
F-4 group was infracting the covenants of the FSA and TMNA.
Even if, in the process, the plaintiffs were to rely on any of the
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provisions of the Trade Marks Act, the essential infraction, as
alleged to have been committed by the defendants, was not of the
provisions of the Trade Marks Act, but of the provisions of the
FSA and TMNA. As against this, the defendants rely on Articles
17.1 and 17.2 of the FSA and Article 3.7 of the TMNA, to
dispute the claim of the plaintiffs. I am in agreement with Mr.
Sibal that the dispute, as thus emerged between the plaintiffs and
the defendants, required a holistic appreciation of the FSA and
the TMNA, their various covenants, and the interplay thereof, in
order to adjudicate on the rights conferred on the various family
groups. Any effective adjudication of the disputes, without
reference to the FSA and the TMNA would, in my view, be
impossible.
46. All disputes arising "out of" or "in connection with" the FSA
being amenable to arbitration under Clause 19.5 thereof, and all
disputes arising "out of" or "in connection with" the TMNA
being amenable to arbitration under Clause 5.6 thereof, the
disputes between the parties before me are, prima facie, covered
by these covenants. They are, therefore, ex facie arbitrable in
nature, seen in the light of the provisions of the FSA and TMNA.
47. Mr. Sudhir Chandra seeks to contend, however, that, being in
the nature of a determination of intellectual property rights,
which would operate in rem, an arbitrator, acting in accordance
with the provisions of the 1996 Act, could not decide the dispute.
He submits, in this context, that rights relating to trademarks and
patents are among those which had specifically been held, by the
Supreme Court, to be incapable of resolution by arbitration by
their very nature, and has invited my attention to the
observations, in that regard, as contained in Booz
Allen and Ayyasamy.
48. Booz Allen and Ayyasamy have both been considered,
comprehensively, in Vidya Drolia, which includes, among the
categories of disputes which cannot be arbitrated upon, "grant
and issue of patents and registration of trade marks", as "they are
exclusive matters falling within the sovereign or government
functions", having "erga omnes effect", resulting in conferment
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of "monopoly rights". The controversy, in the present case, does
not relate to grant, or registration, of trademarks. The trademarks
already stood granted, and registered, prior to the FSA and
TMNA. The dispute is regarding the Family Group to which the
rights to use the said trademarks, in connection with electric
cycles and e-cycles has been assigned, by the FSA and TMNA.
This assignment is by contractual, not statutory, fiat. It does not
involve any exercise of sovereign functions (unless, of course,
the patriarchs of the four Family Groups are, in a limited sense,
to be regarded as "sovereigns"). In any event, no inalienable
exercise of sovereign governmental functions can be said to be
involved, in the assignment, to the various Family Groups, of
their individual rights to use the existing trademarks, in respect of
one, or the other, categories of goods. The dispute does not,
therefore, fall under any of the categories of disputes excepted,
by the Supreme Court, from the arbitral umbrella.
49. Nor am I able to accept Mr. Sudhir Chandra's arguments that
the dispute is in the nature of an action in rem. Mr. Sibal has, in
this context, sought to distinguish between actions in rem and
rights in rem. Though this distinction does, to an extent, manifest
the fallacy in the submission of Mr. Sudhir Chandra, I do not
deem it necessary to enter, for the purpose, into that intricate
jurisprudential thicket. (Avoidance of the temptation to enter into
such thickets is, indeed, one of the cautions that Vidya
Drolia administers.) The right that the plaintiffs seek to assert, in
the plaint, is clearly against the F-4 group, and the F-4 group
alone, and not against the whole world. More precisely put, the
plaintiffs are not seeking a declaration, of their right to use a
particular trademark, against any potential infringer, anywhere in
the world, as is the case with "normal" infringement suits. The
dispute is clearly inter-se amongst two Family Groups, pillowed
on the rights emanating from the FSA and the TMNA, and
essentially alleges infraction of the terms of the FSA and TMNA,
not of the provisions of the Trade Marks Act. The precise case of
the plaintiff is that the defendants have, in using the "Hero"
trademark in respect of electric cycles and e-cycles, infracted the
covenants of the FSA and TMNA. The infraction, consequently,
of the provisions of the Trade Marks Act, even if asserted, is only
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incidental, arising from the fact that the right to use a particular
trademark is statutorily conferred by the said Act. Equally,
therefore, even if it were to be assumed that the declaration, by
the adjudicator, of the Family Group which would be entitled to
use the "Hero" or "Hero Electric" trademark on electric cycles,
or e-cycles, would result in that Family Group being the
repository of the said trademark, qua the said goods, against the
whole world, that by itself would not convert the dispute, as
raised in the plaint, as one in rem, or lend it erga omnes effect.
To reiterate, in this context, the right asserted by the plaintiffs is
not a right that emanates from the Trade Marks Act, but a right
that emanates from the FSA and the TMNA, and is not
asserted vis-à-vis the whole world, but is asserted specifically
vis-à-vis the F-4 Family Group. The argument that the dispute
is in rem and is, therefore, not amenable to the arbitral process,
therefore, fails to impress."
11. It is clear that the aforenoted judgment of the co-ordinate Bench of
this court applies on all fours to the facts of the present case. The court
held that the dispute did not pertain to infringement of a trademark on the
ground that the defendants are using a deceptively similar trademark. The
ground was that the right to use the trademark was conferred by a
particular agreement on a particular group of the family. Even if the
plaintiff in that case were to rely on any provisions of the Trademark Act
the essential infraction as allegedly committed by the defendant was not
the provisions of the Trademark Act but the provisions of the agreements
in question. The dispute which emanates out of the agreement between
the parties was held to be arbitrable. The court also clarified that the
controversy in the said case did not relate to grant or registration of
trademarks. The said trademarks stood granted and registered. It was also
held that assignment of a trademark is by a contract and is not a statutory
fiat. It does not involve any exercise of sovereign functions.
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12. It is manifest from the facts of this case as narrated above that the
dispute in question primarily relates to interpretation of the terms of the
Agreement dated 12.02.2020 and the amendment agreement dated
29.08.2020 executed between the parties and as to whether the termination
of the said agreements by the defendant and cancellation of the
assignment of the trademark in favour of the plaintiffs is legal and valid.
The right that is asserted by the plaintiff is not a right that emanates from
the Trademark Act but a right that emanates from the Agreement dated
12.02.2020 and the amendment agreement dated 29.08.2020. The
assignment of trademark is by a contract and not by a statutory act. It does
not involve any exercise of sovereign functions of the State. It cannot be
said that the disputes are not arbitrable. The pleas of learned senior
counsel for the plaintiff are clearly without merit. The reasons spelt out by
the plaintiff for not referring the matter to arbitration are misplaced and
without merits.
13. The application is accordingly allowed as above. The parties are
referred to Arbitration as per the Arbitration Agreement.
CS(Comm.) 178/2021
The present suit is accordingly disposed of as above. All pending
applications, if any, also stand disposed of.
JAYANT NATH, J.
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