Is There More Than Meets the Eye? Delhi High Court and the Recent Section 124 Dilemmas

[The post is co-authored with SpicyIP Intern Tejaswini Kaushal. Tejaswini is a 3rd-year B.A. LL.B. (Hons.) student at Dr. Ram Manohar Lohiya National Law University, Lucknow. Her previous posts can be accessed here.]

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Recent orders by the Delhi High Court in Nadeem Majid Oomberbhoy v. Gautam Tank and Anr. and Mr. Amrish Aggarwal Trading as M/s Mahalaxmi Product v. M/S Venus Home Appliances Pvt Ltd, delivered by Justice C. Hari Shankar, have spurred debate and discussion around the application and the scope of Section 124 of the Trademarks Act, 1999 (“TM Act”) once again (see here, here, and here for previous discussion on the section). As a quick background, this section prescribes the mechanism that the court has to follow in a suit when pleas challenging the validity of the plaintiff’s or the defendant’s mark are raised by the parties. In such a situation, the court has to stay the proceedings of the infringement suit till such rectification proceedings are finally disposed of, and the section delineates two scenarios to move forward:
(i) When the challenge to registration occurs before the initiation of the infringement suit. Here, the suit is suspended until the cancellation proceedings are concluded;
(ii) When the challenge to registration arises after the infringement suit has already been filed. This second scenario introduces many complexities. In these two recent orders of the Delhi High Court some of these complexities are addressed. 

The Nadeem Order 1: Where Questions Were Raised

In the Nadeem Majid Oomerbhoy v. Sh. Gautam Tank and Ors., order dated 6 September 2023, the court had observed the need for deliberation on the question: Can a section 124 application seeking a stay on the trademark infringement suit be held maintainable when one of its key requirement is not fulfilled?

Taking a step back, the facts of the case highlight an important issue regarding the impact that a trademark prosecution outcome may have on the parallelly running trademark infringement proceedings. The defendant filed an application for registering the impugned mark before the infringement suit was instituted. Later, the plaintiff alleged infringement of its mark and instituted the present suit. Cut to 19 years (!!) from the date of filing the application, the Trademark registry granted a registration to the defendant on the impugned mark. Challenging this registration, the plaintiff filed a Section 124 application. However, the defendants argued that challenging the validity of the defendant’s mark can be done under Section 124(1)(b) only when the defendant has raised registration of their mark as a defense against alleged infringement. In the present case, no such plea was raised by the defendant. Though this led to the court rejecting Section 124 application earlier on August 22, 2023,  Justice C. Hari Shankar pondered the dilemma that if the defendant’s registration were considered, Section 28(3) would prohibit the court from granting an injunction to the plaintiff. This would create a situation where the defendant’s registration would work against the plaintiff’s ability to obtain an injunction, yet the plaintiff would be prevented from challenging the defendant’s mark due to the inapplicability of Section 124. In consequence of the same, the Court appointed two amici, Ms. Swathi Sukumar and Mr. Kaustubh Shakkarwar, to assist the matter further. 

The Nadeem Order 2: Where the Questions Were Answered

Within a few days, the Court passed a subsequent order dated 11 September 2023, where it came up with the supposed “solution” to this problem. Two aspects highlighted in the order demand our attention here.

Firstly, the Court notes that the statutory framework suggests that a rectification petition should only be filed after the court has framed an issue and adjourned the suit for three months. While Section 124 does not explicitly mandate obtaining leave from the court before filing a rectification petition, the procedural sequence outlined in Section 124 clearly implies that such a petition should be filed after the court has framed the issue regarding the validity and after a three-month adjournment of proceedings has taken place.

Secondly, with the aid of the appointed amici, the court contemplated a potential solution where the plaintiff could independently challenge the defendant’s registration under Section 57(4) of the TM Act. On whether this solution stands valid as per the precedent of Patel Field Marshal Agencies v. P.M Diesels (discussed here, here, here, and here), the court expressly clarified that, unlike the present situation, the Patel Field Marshal case concerned the defendant’s challenge to the plaintiff’s mark and thus, will not apply here.  This alternative route to challenge Trademark validity despite the rejection of the plaintiff’s application under Section 124 empowers the court to investigate trademark validity independently.

An (Extremely) Quick Followup: The Amrish v. Venus Case

Merely a few days later, another case gave an opportunity to see these discussed solutions in action. In Mr. Amrish Aggarwal Trading as M/s Mahalaxmi Product v. M/S Venus Home Applicances Pvt Ltd order dated 27 September 2023. One of the matters of contention in this case was the necessity of obtaining leave of court under Section 124(1)(ii) before filing a rectification petition. Delivered by Justice C. Hari Shankar again, the order brought attention to the discussion of the Court on the first aspect of the Nadeem order, mentioned above. The Court noted that Section 124 reads in a manner that strongly suggests that such a petition should be filed after the court has framed the issue of validity and adjourned the proceedings accordingly.  However, the court acknowledged that a Division Bench in Puma Stationer P. Ltd. v. Hindustan Pencil Ltd. had relied on Elofic Industries (India) v. Steel Bird Industries where the rectification petition was filed along with the written statement even before the court had framed any issues in the suit or adjourned the proceedings. However, in Puma, the Bench did not comment on this dilemma of whether the defendant can initiate a rectification petition after filing the suit and before the court addresses the issue of validity and adjourns the matter.  But since the DB relied on Elofic where the rectification petition was filed before the issues were framed, the Single Judge Bench in the present case restrained from relying on its interpretation in the Nadeem Oomerbhoy order, reopening the question of when can such a petition be filed under Section 124.

Apart from the above observation on one aspect of Section 124,  the Amrish Aggarwal order highlights another contentious issue associated with the provision. Earlier, in Sana Herbals Pvt. Ltd. v. Mohsin Dehlvi, the court had held that since, after the abolition of the IPAB, the High Court has the power to decide upon the rectification petition, there is no need for the court to stay the infringement suit as prescribed under Section 124. On this finding, the court expressed its dissatisfaction since no amendments were made to Section 124(2), via the Tribunals Reforms Act, 2021, to connote the above understanding. Thus, the court referred a question to the Division Bench – whether the view that no stay of a civil suit is necessary during the pendency of a rectification petition under Section 124 of the Trade Marks Act, post the abolition of the IPAB is accurate or not.

While discussion on this issue is evolving quickly, the principle of law in question has somehow become more complicated than it was before. Having intended to resolve the dilemma on the application under the Section, the two orders highlight more problematic parts of Section 124, and hopefully, we’ll have a more binding say on these contentious issues. 

In the Nadeem Oomerbhoy case, evidently, the first aspect in this case has failed to give a clear interpretation of the legal proposition, yet it does hold significant importance to have brought the issue to the spotlight. A clarification can be anticipated from the Court in due time since the Court has brought up too significant an issue not to settle.

The second aspect in the case holds more promise. Earlier, the IPAB had jurisdiction over matters pertaining to trademark rectification. However, following its dissolution, the responsibility for adjudicating such matters now squarely lies with the court. The order thus not only expressly identifies the position of the High Court here but also ensures that in such unique cases, the affected party is not rendered remediless. 

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