Delhi High Court: In a matter concerning the effect of a rectification petition on the stay of suit proceedings as per Section 124 of the Trade Marks Act, 1999 (‘Act’), a Division Bench of Yashwant Varma*, and Ravinder Dudeja, JJ., partly overruled Sana Herbals Pvt. Ltd. v. Mohsin Dehlvi, 2022 SCC OnLine Del 4482 (‘Sana Herbals’) while stating that the obligation to stay proceedings as per Section 124(1) of the Act does not stand obviated as a consequence of the abolition of the Intellectual Property Appellate Board (‘IPAB’).
Background
The issue in the present case arises in the context of Section 124 of the Act which envisages proceedings in a suit for infringement or passing off being stayed if it is found that proceedings for rectification have been initiated or were pending on the date when the suit came to be instituted.
Given the abolishment of the IPAB through the Tribunal Reforms Act, 2021, the Court in Sana Herbals (supra) observed that since both the rectification application as well as the suit would be tried by a High Court, the possibility of any conflict would stand obviated and thus, there would be no requirement of staying the suit proceedings. This view is what is prima facie found to be untenable by the Single Judge.
Previously, an action for infringement and passing off had been instituted before the Additional District Judge and the authority exercising powers of the designated Commercial Court, wherein a challenge was raised to the validity of the trade mark held by the plaintiff. Accordingly, an application was moved with reference to Section 124(1) of the Act, during the pendency of which the application for rectification came to be filed.
The Single Judge clarified that the Court did not intend to rule on the issue of prima facie tenability since that would be an aspect and would have to be necessarily examined by the Commercial Court. The Court further held that only the Commercial Court would be able to answer whether the rectification action merited further consideration.
While trying the aforesaid suit, the Single Judge doubted the correctness of the observations as made in Sana Herbals (supra) and observed that the conclusion drawn in the case was contrary to the plain text of Section 124(2) of the Act. The Single Judge found that the statute did not appear to confer any discretion in a Court to consider staying suit proceedings or refusing to place its proceedings in abeyance. It was also concluded by the Judge that the observations made in Sana Herbals (supra) were contrary to the legal position enunciated in Puma Stationer (P) Ltd. v. Hindustan Pencils Ltd., 2010 SCC OnLine Del 4766 (‘Puma Stationer’).
Analysis and Decision
To holistically examine the issues, the Court thought it appropriate to extract a comparative chart of the provisions in the erstwhile Trade and Merchandise Marks Act, 1958 (‘1958 Act’) and corresponded to Section 124 of the present enactment.
After a perusal of Section 111 of the 1958 Act, the Court noted that the statute provided where a defendant was to plead invalidity of the plaintiff’s trade mark or raise a defense under Section 30(1)(d) of the 1958 Act in response to a challenge by the plaintiff to the validity of the registration of the defendant’s mark in a pending suit for infringement, the Court trying the suit was mandated to place further proceedings in suspension upon being satisfied that the plea of invalidity was prima facie tenable. It was also noted that the matter was to be treated similarly if it was found that the proceedings for rectification were pending either before the Registrar or the High Court.
Further, the Court stated that Section 124 of the Act provides that a Court trying a suit is placed under a legislative mandate to stay proceedings thereon if it is informed that rectification proceedings were initiated before its institution. It was said that the additional qualification that applies is where a plea of invalidity comes to be raised in the course of the proceedings, the Trial Judge would first be obliged to evaluate the prima facie tenability of the plea as raised.
While reiterating what was said by the Supreme Court in Patel Field Marshall Agencies v. P.M. Diesels, (2018) 2 SCC 112 (‘Patel Field Marshall Agencies’), the Court stated that the clear legislative intent was to avoid the multiplicity of proceedings and to ensure that a suit does not proceed parallelly while a petition for rectification was awaited to be considered. The Court also mentioned Puma Stationer (supra) to back the above decision.
Dr. Reddy’s Laboratories Ltd. v. Fast Cure Pharma, 2023 SCC OnLine Del 5409 was given equal importance wherein it was noted that the dynamic effect adopted by the Courts enables an aggrieved party to move any Court within whose jurisdiction the impact of a mark could be discerned or established in juxtaposition with the mandate of Section 124 of the Act.
The Court stated that the clear intent of the statute appears to be of ensuring that rectification challenges are placed exclusively before the Registrar or the High Court and consequently requiring the Trial Judge to stay its hands in any pending action. Further, while referring to Section 124(1)(ii) of the Act, the Court stated that the expression ‘prima facie tenable’ essentially requires the Trial Judge to undertake a preliminary examination of the plea of invalidity as opposed to a definitive determination.
Further, the Court concluded after reading sub-sections (1) and (2) of Section 124 that the Trial Judge is obliged in law to await the outcome of a rectification action validly instituted and to place the suit in a state of repose with proceedings liable to be resumed upon conclusion of rectification proceedings. It was consequently found by the Court that the legal position enunciated by the Single Judge was correct.
The Court further opined that Sana Herbals (supra) erroneously proceeded based on a presumption that a suit for infringement, as well as an action for rectification, would invariably be instituted before a High Court and that the Court in this case failed to bear in consideration that after the abolishment of IPAB, the position pertaining to stay of suit proceedings had reverted to the position as it existed under Section 111 of the 1958 statute.
The Court stated that what the statute primarily mandates is suit proceedings being stayed and awaiting a decision on the rectification action and the mere institution of a rectification action does not result in a self-activating stay of proceedings.
The Court firmly opined that it would be wholly erroneous to interpret Section 124 of the Act as obviating the need for a direction being framed by the suit Court placing further proceedings in suspension. Further, the Court emphasized that since the statute does not contemplate the stay of proceedings as a natural corollary or one which would come into effect by operation of law, the obligation of the Court to frame an order staying further proceedings in the suit is neither dispensed with nor eliminated.
The Court overruled Sana Herbals (supra) to the extent that it was discussed in this case and held that it was incorrectly decided. It was also mentioned that Puma Stationer (supra) was neither noticed nor considered while deciding Sana Herbals and the Supreme Court’s decision in Patel Field Marshall Agencies (supra) was also clearly misconstrued.
[Amrish Aggarwal Trading v. Venus Home Appliances Pvt. Ltd., 2024 SCC OnLine Del 3652, Decided on 17-05-2024]
*Judgment authored by: Justice Yashwant Varma
Advocates who appeared in this case:
For Petitioner — Advocate Ajay Amitabh Suman
For Respondents — None
Counsels assisting the Court — Advocate R.K. Aggarwal, Advocate Ayushi Bansal, Advocate Vinay Padam, Advocate Rohan J. Alva, Senior Advocate Manish Vashisht, Advocate Sameer Vashisht, Advocate Vanshay Kault, Advocate Harshita Nathrani, Advocate Vedansh Vashisht, Advocate Aman Singh, Advocate Anirudh Bakhru, Advocate Umang Tyagi, Advocate Vijay Lakshmi, Advocate Farrukh Khan, Advocate Tanzeela, Advocate Vidhi Jain, Advocate Adarsh Ramanujan, Advocate Arjun Natarajan, Advocate Kamana Pradhan, Advocate Yashi Agrawal
Buy Trade Marks Act, 1999 HERE
This judgment has, of course, put an end to one aspect of Section 124 of the Trade Marks Act, 1999. However, many issues remain unresolved. The Hon’ble Division Bench reiterated the provisions of Section 124 of the Trade Marks Act, 1999. Yet, following the abolition of the Intellectual Property Appellate Board (IPAB) and the enactment of the Intellectual Property Division (IPD) Rules, how procedural matters will be streamlined remains an open question. It is anticipated that, in time, a clearer picture will emerge regarding these procedural adjustments.
Despite the prevailing uncertainty, it is worth noting that I was the sole advocate who supported the Sana Herbal judgment pronounced by Hon’ble Justice Shri Amit Bansal. This particular judgment marked a significant development in trademark jurisprudence, and my support was based on a thorough understanding of its implications for the legal landscape surrounding intellectual property rights.
While the judgment addressed specific issues within the ambit of Section 124, the broader impact of the post-IPAB era and the implementation of the IPD Rules will need careful navigation. Legal practitioners, businesses, and stakeholders in the intellectual property field are eagerly waiting to see how these changes will unfold and affect the processing and adjudication of trademark disputes.
While this judgment has clarified certain aspects of trademark law, it has also highlighted the need for further clarity and procedural streamlining in the wake of significant institutional changes. The future will undoubtedly bring more clarity, and as developments occur, they will be closely monitored and analyzed by those of us engaged in this dynamic area of law.