Monday, August 26, 2013

Two options for secured creditor: Supreme Court

A has two options when the borrower or the guarantor defaults in repaying the loan. Under of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (), the creditor can either take possession of the asset on his own or employ and seek the help of the magistrate to get possession. It is not necessary that the first course should be adopted and having failed, the second course should be resorted to.

This was stated by the Supreme Court last week while allowing the appeals of Standard Chartered Bank and State Bank of India in two appeals against the Madras High Court judgment. The Supreme Court stated that the high court view was wrong and observed: "No doubt that a secured creditor may initially resort to Section 13 and on facing resistance he may still approach the magistrate under Section 14. But it is not mandatory for the creditor to make attempt to obtain possession on his own before approaching the magistrate." The argument that bypassing Section 13 would deprive the borrower of a right to appeal is a misconception of the law, the judgment said.

Lapse of

The Supreme Court ruled last week that an arbitration clause in an agreement lapsed if it was superseded by a later agreement. In a trademark suit between Young Achievers and IMS Learning Resources Ltd over the trademark IMS, the latter moved the Delhi High Court for a permanent injunction restraining infringement of the registered trademark and copyright.

Young Achievers sought arbitration under of the Arbitration and Conciliation Act. The high court stated that the arbitration agreement in the original agreement stood superseded by a contract arrived at by mutual consent later. The appeal against that ruling was dismissed by the Supreme Court.

Running unit can't be acquired

The Supreme Court has held that acquisition of a running industrial unit in the land acquisition proceedings cannot be sustained. The court stated so while allowing the appeal case, V K M Kattha Industries vs state of Haryana, against acquisition of the land containing the industrial unit in Sonepat district. The small-scale industry was into tobacco manufacturing. The government issued notification for acquisition of land including the unit in 2005 for developing an industrial estate. The owners moved the high court but it dismissed the petition.

On appeal, the Supreme Court stated that the acquisition of the land including the unit was illegal and quashed the acquisition proceedings with regard to its property. The court stated that "the company itself was running an industry on the date of the notification, therefore, there was no justification in acquiring a running industrial unit for industrialisation of the area". Some other industries in the area, like Natraj Stationery Products, Moja Shoes and Haryana Coir, have been exempted from the acquisition. However, V K M Kattha was not able to participate in the enquiry, leading to the illegality, the court said.

Insurer can't challenge quantum

The Supreme Court has criticised United India Insurance for raising "untenable" grounds to deprive the mother of a road accident victim challenging the award of compensation. In motor vehicle accident claims, the insurer cannot contest the computation of the compensation, except in limited cases. But in this appeal, Josephine James vs United India Insurance, it appealed against the award of the tribunal, alleging that the award of Rs 13 lakh was excessive for the loss of life of a 21-year-old sole earning member of the family. The Delhi High Court then reduced the quantum further from Rs 13 lakh to Rs 4.2 lakh.

The court stated that the high court was also wrong while applying the principles of law in the Motor Vehicles Act and earlier Supreme Court decisions. The high court committed error again while allowing the insurance company to challenge the amount of compensation, which could not be done in this case. "In the absence of permission obtained by the insurance company from the tribunal to assail the defence of the insured, it is not permitted to contest the case on merits," the judgement said. The rate of interest applied at six per cent was also low. The Supreme Court raised it to nine per cent, based on precedents.

'Encumbrances' defined

The Supreme Court, recently, set aside the judgment of the Allahabad High Court and ruled that the buyer of an industrial unit in auction "free from all encumbrances" is not bound to pay the excise duty arrears of the previous owner. The sale deed in this case included a clause which said that "all these statutory liabilities arising out of the land shall be borne by purchaser". The Supreme Court stated that it was only that statutory liability arising out of the land, building and machinery which is to be discharged by the purchaser.

Excise dues are not statutory liabilities that arise from the land. Statutory liabilities arising from the land and building could be in the form of the property tax or other types of cess relating to property, etc. Likewise, statutory liability arising out of the plant and machinery could be sales tax, etc, payable on the said machinery. As far as dues of the central excise are concerned, they were not related to the property, the court said in the case, Rana Industries vs Union of India.


Sunday, August 25, 2013

Delhi HC decision may give competitive advertising a boost

HUL commercial does not denigrate Colgate product, comparison offers benefits to consumers, says court

The Delhi high court’s decision on the advertising war between Colgate Palmolive India Ltd and Hindustan Unilever Ltd (HUL)could set the tone for brands looking to take on their rivals in an increasingly competitive marketplace, say experts.
On Wednesday, the Delhi high court dismissed the injunction petition filed by Colgate against HUL’s ad for Pepsodent Germicheck toothpaste. The court declined to restrain HUL from advertising its toothpaste, saying that its commercial does not “denigrate” the product of its competitor Colgate. The advertisement in question shows two boys brushing their teeth with the competing brands, clearly on display. The ad goes on to claim that Pepsodent Germicheck has 130% germ attack power as compared to the 100% effectiveness of Colgate Strong Teeth after four hours of brushing.
The court observed that “advertisements that compare the product of a trader with the product of a market leader can offer the consumer better information about the product. They can also help to improve the overall quality of like products in the market and, in that process, the product of the market leader. Advertisements when viewed in a positive light can be seen as challenging the market leader to offer a better product at a competitive price. In the world of marketing, these are acknowledged business strategies adopted by traders having to compete in a market, dominated by one or a few players. The market leader should view this as an opportunity to offer a superior product at a competitive price.”
“The Hon’ble Delhi High Court dismissed on 21 August 2013, the injunction petition filed by Colgate against the Pepsodent Germicheck Superior Power advertisement. We are pleased with the court decision,” a spokesperson for HUL, said in a statement. A Colgate spokesperson said that the company had just received a copy of the judgment. “We are examining the judgment and will take appropriate action.”
The decision by the court could have a direct bearing on competitive advertising in India, said experts. According to K.V. Sridhar, chief creative officer, Indian–subcontinent for advertising agency Leo Burnett, this decision will give confidence to brands to take on the market leaders provided they have a valid claim. “At the end of the day, every judgment is a double-edged sword. Some will use it, others will misuse it,” he said. Aggressive competitive advertising is not new to the industry, however, it is important to ensure that brands explain how such advertising benefits the consumer, he said.
“The consumer is not interested in scientific log tables. They want to know if it means that the toothpaste will help their child brush less or protect their teeth even if they missed brushing their teeth at night.”
While this may change the way competitive advertising is viewed by brands, it is hardly going to set off a flurry of aggressive campaigns, according to Kiran Khalap, co-founder Chlorophyll Brand and Communications Consultancy Pvt. Ltd. He said that even in mature markets, comparative advertising accounts for a very small percentage of the overall advertising probably owing to research that shows it may elicit a negative response.
“When the challenger does compare (itself) with the leader, the advertisement works better if it adopts the tone of a leader,” he said. In the legendary advertising wars between Pepsi and Coca-Cola, Pepsi’s tone was humorous, tongue-in-cheek and confident, rather than desperate as if it were straining to prove its superiority, he said.
To be sure, consumer goods companies have started registering more complaints with regulatory bodies and courts against their rivals making counterclaims through competitive advertising. An earlier Mintreport said that the Advertising Standards Council of India (ASCI) has seen a sevenfold rise in the number of complaints received in fiscal 2013 over fiscal 2012. In 2013, companies raised objections to 784 advertisements, of which 640 were upheld by ASCI.
In the recent past, Hindustan Unilever launched an advertisement for its Vim dish-wash taking potshots at Reckitt Benckiser India Ltd’s extension of its antiseptic and disinfectant brand Dettol into dish-washing with Dettol Healthy Kitchen Gel. Saffola oil maker Marico Ltd moved the Delhi high court, challenging advertisements by Adani Wilmar Ltd’s Fortune rice bran oil that claimed 100% rice bran oil was “the healthiest oil in the world”. Marico later withdrew its plea.
Interestingly, the advertisement for Pepsodent was first aired on 9 August, ahead of a long weekend during which Colgate couldn’t take legal recourse.

Amendment to Trademark Law - China to double the compensation ceiling for trademark infringement

China is expected to double the compensation ceiling for trademark infringement to 2 million yuan (325,400 U.S. dollars), according to the latest draft amendment to the Trademark Law.
Compensation ranging from 20,000 yuan to 2 million yuan shall be paid to the holders of trademark rights in the case of infringement, according to the draft tabled for a second reading at the ongoing four-day bimonthly session of the Standing Committee of the National People's Congress (NPC), China's top legislature.
The first draft amendment set the compensation ceiling at 1 million yuan, up from 500,000 yuan under the current law.
The move aims to better protect exclusive trademark rights and further crack down on infringement, said Xie Jingrong, deputy head of the NPC's law committee.
The second draft deleted a previous article which allowed single colors to be registered as trademarks.
As only about 100 colors can be distinguished by people's eyes, allowing single colors to be registered as trademarks would cause color monopoly and confusion, explained Xie.
Compared with the previous one, the second draft added new clauses to prevent malicious registration of trademarks that are already in use.
Trademark agencies shall inform their clients in case the trademark they apply for cannot be registered according to law. The agencies are not allowed to accept entrustment if they know or should know that their clients are conducting a malicious registration or infringing others' rights of trademarks, according to the draft.
The draft also offers protection for renowned trademarks, giving their owners the right to ban others from registering the trademarks or using similar ones -- even if such trademarks are not registered. But the words "renowned trademark" shall not be used in promotions or advertising.
Trademark registrations will become more efficient under the latest amendment to the law in response to complaints that it takes too long to examine applications.
The initial examination of applications for trademark registration is limited to nine months. The period for seeking public opinions is three months, while verification should be completed within nine months, according to the draft.
The draft was made with a number of significant changes based on the receipt of public comments. The working group also conducted research in the cities of Beijing, Shanghai and east China's Zhejiang Province, Xie said.
China adopted its Trademark Law in 1982 and made amendments in 1993 and 2001.
As of June 2012, China held the world's largest number of registered trademarks and valid trademark registrations, at 7.17 million and 6.09 million respectively, according to the most recent official statistics

Delhi High Court - trademark infringement could be caused by the spoken words and visual depiction

In Hamdard National Foundation v Dalal (CS(OS) 1225/2013) the plaintiffs filed a suit before the Delhi High Court for trademark infringement, passing off, commercial disparagement and tarnishment of goodwill. The plaintiffs alleged that the defendants had depicted the plaintiffs' well-known brand Rooh Afza in a detrimental way through spoken words by the lead actor in the film Yeh Jaawani Hai Deewani.

In the film the contentious scene depicts a mother who is trying to reassure her son that everything will be alright no matter what difficulties he is facing; the son responds by saying that everything can change but Rooh Afza (which he is drinking at the time) will never change and will continue to be awful. The plaintiffs alleged that this defamatory statement was aimed directly towards their product.
The single judge found that the term "use" was to be construed in the context of Section 29(9) of the Trademarks Act 1999 which, for the purpose of infringement, explicitly refers to "the spoken use" of words contained in the mark. The single judge also held that the term "by their visual representation", on a complete reading of the subsection, implied that a visual representation of the spoken word was an infringement of the trademark in question.

The single judge further observed that the test for adjudging infringement in the case at hand would primarily be either the spoken words being a misstatement leading to infringement or causing confusion and deception leading to passing off, or the spoken words leading to infringement by causing dilution of the distinctive character and reputation of the trademark (whether intentional or unintentional).

Application of Bata India Limited v Prakash Jha Productions
The single judge examined the decision and approach taken by the Supreme Court in Bata India Limited v Prakash Jha Productions pertaining to the film Chakravyuh, whereby the Apex Court had observed the lyrics in the film to portray certain business houses (Tata, Birla and Bata) in a bad light, which could have been avoided. Accordingly, the Apex Court directed the film's producers to add a disclaimer indicating that there was no intent to damage the goodwill of those whose interests were likely to be affected.

However, the single judge found the Apex Court's decision in the Bata case to be different to the case at hand. The single judge held that while the lyrics in the Bata case were aimed at a particular class (ie, industrialists), the contested dialogue in the case at hand was aimed directly at a "singular commercial product" which enjoyed a reputation and goodwill in India, thereby affecting its popularity among the public.

Freedom of speech and expression
One of the issues that arose during the case pertained to the right to freedom of speech and expression guaranteed under Article 19(1)(a) of the Constitution, and the limitation and reasonable restrictions imposed on such right by Article 19(2). The single judge, while synchronising the two provisions of the Constitution, held that the right to freedom of views, speech and expression through speech under Article 19(1)(a) is not an absolute right; Article 19(2) safeguards against the exploitation or abuse of such right.

Applying this principle to the case at hand, the single judge held that the law preventing trademark infringement through the spoken word is a commercial law preventing unfair or untrue commercial speech, which may cause injury to the rights holder in order to prevent disparagement. Such law is related to the tort of defamation and thus is an excepted matter under Article 19(2).

Therefore, the single judge held that the offending dialogue in the film was in bad taste and should have been avoided, as it was likely to tarnish the plaintiffs’ reputation.  

In view of these findings, the single judge held that trademark infringement could be caused by the spoken words and visual depiction of the opinion stated in the film. Thus, the single judge held that a prima facie case of infringement and passing off had been established. However, the single judge held that since the film had already been released around the world, no injunction could be granted to the plaintiffs since the balance of convenience and irreparable injury was in favour of the defendants.

Therefore, the single judge held that the only relief which could be accorded to the plaintiffs was prevention of any future infringement by omitting the contested dialogue from the film in any future release to the public. The single judge restrained the defendants and persons acting on their behalf from releasing the film on DVD or any other format, or broadcasting the film on television, containing the contested dialogue. The single judge also made it explicit that this order did not apply to the cinema version of the film that had already been released.