| Citation | AIR 2012 SC 892 |
| Year of Judgment | 2 December, 2011 |
| Court | Supreme Court |
| Appelant | Suresh Dhanuka |
| Respondent | Sunita Mohapatra |
| Bench | Altamas Kabir, Surinder Singh Nijjar, Gyan Sudha Misra |
| Referred | Section 9 of the Arbitration and Conciliation Act, 1996, Sections 134 and 135 of the Trade Marks Act, 1999, Section 41 and 42 of the Specific Relief Act, 1963 and Section 27 of the Indian Contract Act, 1872 |
FACTS OF THE CASE
In April 1999, the Appellant and the Respondent entered into an Agreement to jointly carry on a business under the name “Abhilasha.” The agreement initially covered a five-year period, which was later extended until March 2009. The Respondent, prior to this agreement, owned a business named “M/s. Nature Probiocare Inc.” and applied for the registration of the trademark “Naturoma Herbal” in October 1999.
In October 2000, the Respondent executed a Deed of Assignment, assigning 50% of her right, title, and interest in the “Naturoma Herbal” trademark to the Appellant, along with a proportional share of the goodwill associated with the products bearing the trademark.
The Deed of Assignment had several conditions, including that all goods under the “Naturoma Herbal” trademark would be marketed exclusively by the Appellant, and neither party could use or register the trademark independently upon termination of their joint venture. Between 2003 and 2007, sales of products bearing the “Naturoma Herbal” trademark significantly increased, with the Appellant incurring substantial promotional expenses.
A dispute arose when the Appellant and his son formed a company named “Naturoma Herbal (P) Ltd.” in 2006, with the Respondent initially consenting but later declining to participate in its management. In August 2007, the Respondent filed a suit seeking an injunction against the Appellant from using the “Naturoma Herbal” trademark, citing violations of the Trade Marks Act, 1999. Subsequently, the Appellant filed an application under Section 9 of the Arbitration and Conciliation Act, 1996, seeking protection of his rights and an injunction against the Respondent’s actions.
The Respondent terminated the Agreement and the Deed of Assignment, and the Appellant filed a fresh Section 9 application in Khurda. The District Judge, Khurda, issued an interim order in December 2007, restraining the Respondent from selling products bearing the “Naturoma Herbal” trademark except through the Appellant. This order was confirmed in May 2008.
A corrigendum was published in July 2008, indicating the Appellant as a joint proprietor of the trademark, but it was later canceled in September 2008 based on the Respondent’s request.
The High Court allowed the Respondent’s appeal in October 2008, leading to the Appellant’s review application, which was rejected in September 2010.
ISSUES
The issue raised are as follows-
- Whether the Appellant had a valid claim under Section 9 of the Arbitration and Conciliation Act, 1996, for an injunction against the Respondent’s use of the trademark “Naturoma Herbal.”
- Whether the Deed of Assignment’s conditions, particularly the negative covenant regarding trademark use, were enforceable and in compliance with Indian contract law.
- Whether the cancellation of the corrigendum by the Trade Marks Registrar was valid.
ARGUMENTS
Appellant’s Argument:
- The Appellant argued that he had significantly contributed to the promotion and marketing of products under the “Naturoma Herbal” trademark, incurring substantial expenses. He claimed that the Respondent’s unilateral termination of agreements and attempts to sell products directly violated their agreements.
- The Appellant contended that the negative covenant in the Deed of Assignment, preventing either party from using or registering the trademark independently, was enforceable under Section 42 of the Specific Relief Act, 1963. He also challenged the cancellation of the corrigendum.
- The Appellant argued that the Respondent voluntarily transferred 50% of the trademark rights to the Appellant through the Deed of Assignment, and the Respondent’s subsequent revocation of the Deed required adjudication.
- The Appellant maintained that the interim order passed by the District Judge, Khurda, restraining the Respondent from selling products bearing the disputed trademark was justified and protected the rights of both parties during ongoing arbitration proceedings.
- The Appellant contended that the High Court’s decision to allow the Respondent to file an affidavit after the hearing and before the judgment without providing the Appellant an opportunity to respond was inappropriate.
- The Appellant argued that Section 27 of the Indian Contract Act, 1872, which void agreements restraining trade, did not apply in this case because the injunction sought was not to restrain the Respondent from conducting trade but to prevent the use of the disputed trademark.
Respondent’s Arguments:
- The Respondent argued that the Appellant could be adequately compensated with monetary relief, making an injunction unnecessary. They contended that the Deed of Assignment’s negative covenant violated Section 27 of the Indian Contract Act, rendering it void.
- The Respondent claimed that they had Drug and Sales Tax licenses predating the agreements and that the Appellant’s actions, including the formation of a new company, breached their prior agreements. They justified the cancellation of the corrigendum.
- The Respondent claimed that the Deed of Assignment had never been acted upon and was revoked when the joint venture agreement was canceled.
- The Respondent asserted that the Appellant’s creation of “Naturoma Herbals (P) Ltd.” and the trademark registration application by that company were violations of their agreement and necessitated legal action.
- The Respondent argued that the High Court correctly allowed the affidavit to be filed and relied on it to reflect subsequent events, including the cancellation of the corrigendum issued by the Trade Mark Registrar.
- The Respondent suggested that Section 27 of the Indian Contract Act, 1872, rendered any attempt to enforce the negative covenant in the Deed of Assignment void since it restrained trade.
JUDGEMENT
The court considered several key aspects of the case and issued the following judgment:
- Interference with District Judge’s Order: The court found that the District Judge’s order restraining the Respondent from marketing products under the disputed trademark was justified. This order aimed to protect the rights of both parties during ongoing arbitration proceedings, aligning with the purpose of Section 9 of the Arbitration and Conciliation Act, 1996. The District Judge’s order was reinstated.
- Suspension of Appellant’s Rights: The court emphasized that the Deed of Assignment clearly transferred 50% of the trademark rights to the Appellant, and the Respondent’s subsequent revocation of the Deed required adjudication. Therefore, the District Judge’s order was deemed appropriate to maintain the status quo while arbitration resolved the dispute.
- Allowance of Affidavit: The court criticized the High Court for permitting the Respondent to file an affidavit after the hearing and before the judgment without allowing the Appellant an opportunity to respond. This procedural error was acknowledged.
- Enforcement of Negative Covenant: The court ruled that Section 27 of the Indian Contract Act, 1872, which voids agreements restraining trade, did not apply in this case. The injunction sought by the Appellant was not to restrain the Respondent from carrying on trade or business but to prevent the use of the disputed trademark. Therefore, the invocation of Section 42 of the Specific Relief Act, 1963, to enforce the negative covenant in the Deed of Assignment was deemed valid.
In conclusion, the court allowed the appeals, set aside the High Court’s judgment, and reinstated the District Judge’s order in favor of the Appellant. The court also directed the Respondent to furnish a separate account of transactions up to the present day before the arbitrator to aid in resolving the claims of both parties fully. Finally, the parties were instructed to bear their own costs throughout the legal proceedings.
RFERENCES
This Article is written by Anoskaa Barui of Symbiosis Law School, Pune, Intern at Legal Vidhiya.
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