Friday, December 23, 2016

Supreme Court rejects HC ruling: No sovereignty for J-K outside Constitution of India

Snubbing the Jammu and Kashmir High Court for asserting the state’s “sovereignty” and “sovereign powers”, the Supreme Court Friday said J&K “has no vestige of sovereignty outside the Constitution of India”. A bench of Justices Kurian Joseph and Rohinton Nariman also rejected the J&K High Court’s view that the J&K Constitution was equal to the Constitution of India.

“It is clear that the state of Jammu & Kashmir has no vestige of sovereignty outside the Constitution of India and its own Constitution, which is subordinate to the Constitution of India… they (residents of state) are governed first by the Constitution of India and also by the Constitution of Jammu & Kashmir,” the bench said, referring to the preamble of the Constitution of J&K, 1957.

The bench called it “disturbing” that various parts of a judgment in appeal by the J&K High Court spoke of the absolute sovereign power of the state. “It is necessary to reiterate that Section 3 of the Constitution of Jammu & Kashmir, which was framed by a Constituent Assembly elected on the basis of universal adult franchise, makes a ringing declaration that the State of Jammu & Kashmir is and shall be an integral part of the Union of India. And this provision is beyond the pale of amendment,” the judges said.

The bench also clarified that J&K residents are “first and foremost” Indian citizens. “It is therefore wholly incorrect to describe it as being sovereign in the sense of its residents constituting a separate and distinct class in themselves. The residents of Jammu & Kashmir, we need to remind the High Court, are first and foremost citizens of India… permanent residents of the state of J&K are citizens of India, and that there is no dual citizenship as is contemplated by some other federal Constitutions in other parts of the world,” it said.

The top court pointed out that it was constrained to observe these because in at least three places, the High Court, in its judgment, “has gone out of its way to refer to a sovereignty which does not exist”.

Underlining that the quasi-federal structure of the Constitution of India continues even with respect to J&K, the bench said: “Article 1 of the Constitution of India and Section 3 of the Jammu & Kashmir Constitution make it clear that India shall be a Union of States, and that the State of Jammu & Kashmir is and shall be an integral part of the Union of India.” It said the J&K Constitution has been made to further define the existing relationship of the state with the Union of India as an integral part thereof.

The court said this while deciding a legal question on whether the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) will be applicable to J&K or the law was outside the legislative competence of Parliament since its provisions would collide with Section 140 of the Transfer of Property Act of J&K.

SARFAESI Act entitles banks to enforce their security interest outside the court’s process by moving a tribunal to take possession of secured assets of the borrower and sell them outside the court process. The High Court had said that the state has absolute sovereign power to legislate in respect of laws touching the rights of its permanent residents qua their immovable properties.

After the State Bank of India appealed against the High Court order, the J&K government submitted in the Supreme Court that this law encroached upon the property rights of permanent residents of the state and must be read down so that it will not be permissible to sell property belonging to a permanent resident of the state to outsiders. It was also argued that Parliamentary legislation would need concurrence of the J&K government before it could apply to the state under Article 370.

But the Supreme Court bench shot down these arguments, saying SARFAESI Act deals with recovery of debts due to banks and financial institutions, which is relatable to a subject under the Union List and parliamentary legislation did not require concurrence of the state government since the Centre had power to make law on this subject.

“Entries 45 and 95 of List I clothe Parliament with exclusive power to make laws with respect to banking… the Act as a whole would necessarily operate in the state,” the bench said, adding that the SARFAESI Act had itself made a special provision for sale of properties in J&K.

The bench, however, made it clear that any provision of the J&K Transfer of Property Act will have to give way to the central law in case the former is found repugnant. “It is clear that anything that comes in the way of SARFAESI by way of a Jammu & Kashmir law must necessarily give way to the said law,” it said, adding that its judgement had no effect on Article 35A, which confers on permanent residents of J&K special rights and privileges regarding acquisition of immovable property in the state.

PayPal opposes registration of Paytm’s new trademark

Global payments major PayPal has filed a complaint opposing the registration of Paytm's trademark in a notice with the local trademark office, which falls under the ministry of commerce. The notice reviewed by TOI, says that PayPal has pointed out that Paytm's trademark is "deceptively and confusingly similar to PayPal" with a similar color scheme.

"The first syllable in each mark is in dark blue colour and second syllable is in light blue colour. Further both marks begin with PAY' which consumers tend to remember more than the second syllable, and the marks are of similar length.These similarities cause likelihood of confusion in the aggregate, specially considering the fame of the opponent's (PayPal) earlier trademark," the notice said.

When contacted, both PayPal and Paytm spokespersons refused to comment on the matter.

The Noida-based Paytm had advertised its trademark registration in July, a mandatory step, after which anyone, if at all, gets a period of four months to raise objections. The timing of PayPal's notice is interesting since it was filed on the last day of the mandatory timeline. Paytm has been one of the biggest beneficiaries of the government's demonetisation plan announced over a month back. It has seen a big jump in new users, transaction volumes due to the cash crunch. PayPal has mentioned in its notice that its brand name has been registered since 1999 across the globe. "It remains to be seen if the matter will reach the courts if they do not find a resolution through this process,".

Pending Companies Act matters to be transferred to NCLT

The Ministry of Corporate Affairs  has issued a notification stating that pending proceedings under the Companies Act – with some exceptions – shall be transferred from the district and high courts to benches of the National Company Law Tribunal, with effect from December 15.

The Centre has taken this step in lieu of its power under Section 434(1)(c) of the Companies Act 2013, under which it was empowered to specify a date on which pending matters relating to arbitration, compromise agreements and reconstruction and winding up of companies would stand transferred to NCLT benches.

Under the Companies (Removal of Difficulties) Fourth Order of 2016, all cases related to winding up pending in high courts wherein petitions have not been served on the respondents, shall be transferred. Moreover, the notification also states that matters other than those relating to winding up, in which orders have been reserved by high courts, shall not be transferred.

The Companies (Transfer of Proceedings) Rules 2016 also states that those cases pending before high courts relating to voluntary winding up of companies shall not be transferred. The Rules also clarify that no fee would be payable for these transfers.

The government has also notified as many as eighteen provision of the 2013 Companies Act to come into force this week. These include variation of shareholder rights, reduction of share capital, compromises, arrangements and amalgamations.

Court finds trademark infringement, but imposes only future prohibition

Guangzhou Hongfu Real Estate Co Ltd is the owner of registered Trademarks 1946396 (September 28 2002) and 1948763 (September 21 2003) comprising combination trademarks STAR RIVER in Chinese characters and device, to be used respectively for the services of "real estate rental, real estate management" in Class 36 and "architecture" in Class 37.

Hongfu assigned the trademarks to Guangzhou Star River Industrial Development Co Ltd, which licensed Hongfu to use the trademarks – enabling Hongfu to bring infringement actions in its own name. Hongfu and its affiliated companies developed several Star River real estate projects in Guangzhou, Beijing, Shanghai and other cities, and won many awards.

In 2000 Jiangsu Weifu Group Construction & Development Co Ltd launched various real estate projects using the names 'Star River Garden', 'Star Garden' and 'Star Scenery Garden' in Nantong – a city in Jiangsu Province. The names of the apartment blocks were approved by the Municipal Civil Affairs Bureau of Nantong.
Star River Co and Hongfu sued Weifu on the grounds of trademark infringement and unfair competition.

The Nantong City Intermediate People's Court ruled that Weifu's use of 'Star River Garden' as the name of its apartment blocks did not constitute trademark infringement, since it did not mislead consumers as to the developer of the buildings. The first-instance court further found that – since Weifu had not intended to free ride and had not caused misidentification among consumers – Weifu's use of 'Star River Garden' did not constitute an act of unfair competition. The court therefore dismissed the claims.

Star River Co and Hongfu appealed to the High People's Court of Jiangsu Province, which upheld the first-instance judgment.

Star River Co and Hongfu then filed a retrial application to the Supreme People's Court.
The Supreme People's Court determined that Weifu's use of 'Star River Garden' as the name of its apartment blocks was likely to cause confusion and misidentification among the relevant public, due to its similarity to the cited marks, which constituted infringement. Consequently, the court overruled the first and second-instance judgments, concluding that Weifu must not use 'Star River' as the name of buildings yet to be developed and sold, and must compensate Star River Co and Hongfu Rmb50,000 for their economic loss.

The case attracted a lot of attention, since it involved the protection of trademarks registered for real estate sale services and liability after a court had found infringement. In the retrial, the Supreme People's Court clarified that when an IP right such as a trademark conflicts with a property right, whether the parties should be ordered to stop using the trademark should be based on the principle of good faith and by taking into account the public interest. The court considered the fact that the name of Weifu's apartment blocks had been approved by the local civil affairs agency. In addition, residents had been living in the complex for many years and there was no evidence to prove whether they knew, upon initial purchase, that the name of the building infringed the cited trademarks. Terminating all use of 'Star River' would have created imbalance between the interests of the trademark owner and those of the public or residents. As a result, the court did not order a complete prohibition against use of 'Star River Garden', but ruled that buildings yet to be developed and sold must not use the name. The verdict protected the trademark owner's interests to the extent allowed by the law, while minimising the harm against the public interest – highlighting the significance of the judicial guidance.

The fact that the infringing products were apartment blocks, with each unit sold individually, created an unusual situation where the final product (the apartment) did not bear the infringed trademark and where the buyer may have been unaware that infringement had been committed. Knowledge of the exact claims submitted by the plaintiffs is essential to assess the significance of this decision. If the plaintiffs requested that the first and second-instance courts affirm the existence of infringement, order the cessation of the infringement and compensate the damages caused, the court's decision did as requested and it was not necessary to rule further. However, if the plaintiffs requested that the courts order the modification of all existing buildings' names, the court's dismissal of the plaintiff's claims may be questioned. Unlike the Patent Law, the Trademark Law contains no reference to the public interest. On the contrary, it is in the interest of consumers not to be confused by an act of infringement, which could happen if the owner of one of the infringing apartments decides to resell.

Seniority is not the ideal norm to determine the appointment of the chief justice of India..

The Department of Justice in the Ministry of Law and Justice issued a terse notification on December 19 saying that by exercising the powers conferred by clause (2) of Article 124 of the constitution of India, the president had appointed Justice Jagdish Singh Khehar, a Supreme Court judge, as the 44th Chief Justice of India (CJI), with effect from January 4, 2017.

The notification, albeit routine, issued ahead of the swearing-in of the new CJI is significant because of what it fails to reveal. Strange as it may seem, clause (2) of Article 124 of the constitution does not confer any such power on the president to appoint the CJI.

The relevant part of clause (2) of Article 124 reads:

“Every judge of the Supreme Court shall be appointed by the president by warrant under his hand and seal after consultation with such of the judges of the Supreme Court and of the high courts in the states as the president may deem necessary for the purpose and shall hold office until he attains the age of 65 years. Provided that in the case of appointment of a judge other than the chief justice, the Chief Justice of India shall always be consulted.”

No doubt, a CJI is also a judge of the Supreme Court and, therefore, it may be suggested that the power to appoint a CJI can be inferred from this provision. Justice Khehar, however, has already been appointed as a Supreme Court judge once and continues to be one till date.

Therefore, without a clarificatory notification, the use of this provision would mean the appointment of the same person twice.

The absurdity of the literal reading of this provision apart, the lack of clarity in clause (2) of Article 124 with regards to the appointment of the CJI might suggest that the framers of the constitution perhaps envisaged the appointment of a person to the post other than the judge of the Supreme Court. Or at the very least, the framers did not envisage the consultation of the president with the judges of the Supreme Court – or the CJI – with regard to the appointment of the incumbent CJI’s successor.

The supersession issue

By appointing Justice Khehar – the senior-most judge in the Supreme Court after outgoing CJI Justice T.S. Thakur – as the next CJI, the president has put to rest the speculations that have been doing the rounds for weeks.

The news must come as a relief to those who could not rule out supersession in the judiciary by the present government, as well as to those who believed that the present government would hesitate to take an unwise step like the supersession of the CJI, ignoring the convention of elevating the senior-most judge in the Supreme Court as the CJI.

The senior most puisne of the Supreme Court has always been appointed as the CJI except on two occasions.

The convention was breached when Justice A.N. Ray was appointed as the CJI on April 25, 1973, by superseding three senior-most judges. The supersession was made on the day following the Supreme Court’s judgment in the Kesavananda Bharati case.

The second supersession took place during the Emergency when Justice M.H. Beg was appointed as the CJI on January 29, 1977, by superseding Justice H.R. Khanna.

During the hearing of the National Judicial Appointments Commission (NJAC) case last year, the government counsel defending the NJAC assured the Supreme Court’s constitution bench that these two instances of breaching the convention should be considered as aberrations.

The bench also took note of the fact that the first prime minister, Jawaharlal Nehru wanted to supersede Justice Patanjali Sastri, who was the senior-most judge of the Supreme Court, when the first CJI, Harilal Kania, died in office on November 6, 1951.

The bench was told – on the basis of reliable records – that all the six judges of the Supreme Court threatened to resign if Sastri was superseded. Sastri only had a few months left until his retirement and the government acceded to the so-called non-existent convention at the time.

The petitioners in the NJAC case, who doubted the government’s bonafides, pointed to the amendment of the constitution inserting the new Article 124(C), which said that the parliament may – by law – regulate the procedure for the appointment of CJI and other judges of the Supreme Court, and the chief justices and other judges of high courts.

The petitioners were aghast that the new provision equated the appointment of the CJI with that of the other judges of the apex court and chief justices and other judges of high courts without taking note of the convention of seniority guiding the appointment of the CJI, which was cast in stone all these years.

The petitioners were also concerned about the vagueness of the term ‘fitness’, used in Section 5 of the NJAC Act, while referring to the fitness of the senior-most judge of the Supreme Court, to be determined by parliament, for the purpose of his elevation as the CJI.

While Attorney General Mukul Rohatgi clarified to the bench that fitness meant physical and mental fitness alone, doubts remained whether the parliament could define “fitness” in a manner subserving the interests of the executive.

The petitioners’ concerns prevailed over the bench, which struck down both the NJAC Act and the Constitution 99th Amendment Act 2014, on grounds that if the parliament has the authority to regulate the procedure for the appointment of judges – including the CJI – by framing laws, it would mean legislative control, which would breach the “independence of the judiciary.”

The convention of appointing the senior-most judge of the Supreme Court as the CJI, following the retirement of the outgoing CJI, was given the stamp of approval in the Second Judges Case in 1993.

In that case, a nine-judge bench had held that “there is no reason to depart from the existing convention and, therefore, any further norm for the working of Article 124(2) in the appointment of Chief Justice of India is unnecessary.”

The appointment of the CJI, by its very nature, was considered distinct from the appointment of other judges of the apex court and the high courts.

The convention has its own justification – there is no provision for consultation in the constitution between the CJI and the president for the appointment of the CJI, unlike in the case of the appointment of other judges and it is for that reason that a healthy convention has developed of appointing the senior-most judge of the court as the CJI.

This convention, the Supreme Court was told in the Second Judges Case, is in keeping with the concept of independence of the judiciary as it excludes the possibility of executive interference in the matter. The Supreme Court’s nine-judge bench accepted this contention and ruled accordingly. No wonder then that in the NJAC case, another five-judge bench of the Supreme Court found this convention inviolable.

Seniority convention has no roots

Abhinav Chandrachud, a scholar and lawyer, however, found little evidence for this convention prior to the establishment of the Supreme Court, specifically in the high courts of Bombay, Calcutta, Madras, Allahabad, Patna, or in the Federal Court of India (FCI).

According to him, the seniority norm for the appointment of the chief justices of these high courts and in the FCI did not prevail. He observed that when viewed as a whole, the seniority convention in the high courts of India was an exception rather than a rule.
He adds that in the1950s, the appointment of the CJIs on the norms of seniority was an aberration, today, however, it is perhaps indispensable in order to safeguard the independence of the judiciary.
Chandrachud cites a few instances of non-judges becoming chief justices in high courts – Basil Scott was an advocate general and he directly became the chief justice of the Bombay high court, while P.V. Rajamannar was made the chief justice of the Madras high court by superseding four judges. William Patrick Spens was appointed as a chief justice of the federal court – a post vacated by his predecessor, Maurice Gwyer – even though he was not a federal court or a high court judge.

India’s first attorney general, M.C. Setalvad, was asked by the then home minister, K.N. Katju, whether he was interested in taking Kania’s place as the CJI – referring to a custom prevalent in England where the attorney general replaces the lord chief justice. Setalvad reminded the home minister that he had already surpassed the retirement age. Setalvad apparently suggested to the home minister that M.C. Chagla, the then chief justice of the Bombay high court, be considered for the post.

There is evidence suggesting that the framers of the Indian constitution contemplated someone other than the Supreme Court judge to become the CJI in order to ensure that the incumbent has a longer term in office than what most CJIs – elevated on the basis of seniority – can hope to have.

It is too late in the day to speculate what could have been the consequence had the six judges of the Supreme Court not threatened to quit in the face of Nehru’s threat to supersede Sastri in 1951. Since then, seniority as the only norm for the appointment of the CJI has become synonymous with the independence of the judiciary.

The rapid succession of the CJIs and the experience of outgoing CJI Thakur – who had just about a year in office as the chief justice before his retirement and was therefore at the receiving end of the government’s indifference to the collegium’s recommendations for filling vacancies of judges in high courts – should tell us that in the absence of fixed minimum tenures, no chief justice can hope to reform the judiciary and thereby ensure its independence from the executive on aspects other than the appointment of the CJIs.

The next CJI, Khehar, who assumes office on January 4, 2017, will retire on August 27, 2017, with a summer vacation lasting for one and a half months.

Seniority is not the ideal norm to determine the appointment of the CJI, but there appears to be no alternative at present with the government’s lack of respect for institutions hitting an all-time low.

Supreme Court stays Delhi HC order on Unitech-home buyers meetings

The Supreme Court on Thursday stayed the Delhi high court order, which had directed realty firm Unitech to hold meetings with home buyers and opening escrow accounts for completion of delayed projects.

A bench of justices, Dipak Misra and Amitava Roy, said the execution proceedings in the cases filed by the home buyers before the NCDRC, which were stayed after the Delhi HC order, will now continue.

The high court had on September 2 granted an opportunity to beleaguered real estate firm to complete its delayed housing projects and hand over possession of flats to the buyers by opening escrow accounts and using the money deposited in it solely for these projects.

The apex court, on November 18, had stayed all the meetings of homebuyers of Unitech Ltd for giving their approval or disapproval to a proposed compromise scheme forwarded by the company to enable it to complete pending projects.

The bench had also issued notice to the company, saying “there is suspicion that it is trying to subvert the order of this court”.

It said that people who were successful at the level of the national consumer commission and are before the apex court, should get their money back from the developer.

The Delhi HC had directed the home buyers across the country to hold meetings for approval or disapproval of proposed scheme of compromise so the company can complete pending projects and hand over the flats.

Justice Sudershan Kumar Misra, who retired on September 6, in his order, said four meetings of home buyers should be held on November 20 in Mohali, Punjab, on November 27 in Chennai, on December 4 in Gurgaon and on December 11 in Noida.

The company had told the high court that it would open escrow accounts in which the amounts received from the buyers and sale of lands would be deposited, and the money would be used solely for completing the delayed housing projects.

The court had put in “abeyance” all the proceedings pending before different forums against Unitech Ltd to enable it to fulfil its commitment towards homebuyers by handing over possession of flats. It also appointed a court commissioner to monitor the functioning of the escrow account.

It had clarified that cases in which directions had been issued or might be issued in future by the apex court to the company in this regard should stand exempted from the scope of the order.

Thursday, December 8, 2016

Seven Towns V. Kiddland: Delhi High Court On Trade Dress Protection

The concept of trade dress, although closely associated with trademarks is not explicitly recognized in Indian legislations unlike its U.S.A. counterpart. In Indian context, upon looking closely at the definitions of "mark" and "package" under S. 2 of the Trade Marks Act, 1999 we see that the trade dresses are also protected.
To define it, trade dress is the visual or sensual experience of a product and is inclusive of the packing, shape and combination of colours used in packaging, such that it distinguished the product from the ones of its competitors. So anything from the wrapping of Cadbury chocolates to the design of flagship stores of Apple Inc. would fall within the ambit of trade dress now.
A landmark case discussing the concept is the case of Walmart Stores v. Samara Brothers[1] where trade dress was defined as "a category that originally included only the packaging, or 'dressing,' of a product, but in recent years has been expanded by many courts of appeals to encompass the design of a product."
However, the case of Vision Sports Inc. v. Melville Corp.[2] draws a distinction as to the protection of trade dress and trademark protection wherein it was held that – In contrast, trade dress involves the total image of a product and may include features such as size, shape, colour combinations, texture, or graphics. Trade dress protection is broader in scope than trademark protection, both because it protects aspects of packaging and product design that cannot be registered for trademark protection and because evaluation of trade dress infringement claims require the court to focus on the plaintiff's entire selling image, rather than the narrower single facet of trademark. This was also reiterated in the case of Colgate Palmolive v. Anchor Health[3].
In the recent case, Seven Towns v. Kiddland[4], the concept of trade dress is discussed in detail along with comments on the previous case laws discussing the same subject matter. The dispute is with regard to infringement of trade dress of the Rubik's cube by the product of the defendant called Rancho's cube, in terms of not only the product in itself but also the packaging and labelling.
Brief Facts of the case:
The plaintiff in this case, Seven Towns and Funskool are the original manufacturers and distributors of the product called "Rubik's cube" which has been sold since 1975, all across the globe. The inventor of the cube, Mr. Rubik had the invention of the toy patented, in addition to the product being trademarked after his own name, after an amendment to the original name of "Magic Cube". The plaintiffs allege that the defendants have used a deceptively similar trade dress to that of their product in order to confuse the consumers and take undue advantage of their goodwill. Hence Plaintiff filed suit for permanent injunction, restraining infringement of copyright, passing off, dilution, and various other reliefs against the defendants along with the application for seeking various interim reliefs against the defendants.
Arguments of the Petitioner:
In order to prove that the defendants have used a deceptively similar trade dress to that of Plaintiff's  product in order to confuse the consumers and take undue advantage of their goodwill, plaintiffs in the form of a table shown the similarities in the packaging of their product with that of the defendant like – copying of the diagonal shape of packaging which gives an impression of a 3D triangle bulging out, the usage of 6 primary colors to denote the product's name, its font and a label that denotes the appropriate age for the product being placed at the lower left hand of the label to name a few. The Plaintiffs did not claim rights over the cube per se, but the expression of the cube i.e. a cube comprised of 36 smaller cubes, 3X3X3 cube with black as its base and green, red, blue, yellow, white and orange being the different colors on each surface of the cube. The petitioners also rely on the fact that they have obtained considerable goodwill and reputation in the market as manufacturers of the cube and how they have been vigilantly acting against any company that infringes their product, in addition to the worldwide recognition and reputation wherein the toy in itself is referred to "Rubik's cube". This petition is thus presented before the High Court against the defendants for the tort of passing off and infringement of trade dress, which has resulted in considerable loss to the plaintiff. The plaintiff further relied on the case law of Ideal Toy Corporation v. Plawner Toy Mfg. Corp.[5] where the U.S. Court of appeals relied on acquired distinctiveness and trade dress serving the purpose of identification of source, apart from determining the trade dress of the plaintiffs and how it was considerably reputed and recognized. Further reliance is also placed on the case law of Heinz Italia v. Dabur India Ltd.[6] which states that an injunction must follow where it prima facie appears that the adoption of the mark in itself was dishonest, thus praying for the interim relief of an injunction against the defendants.
Arguments of the Defendants:
The defendants denied that the trade dress of the plaintiff is distinctive or well recognized and hence, the same cannot acquire goodwill or be reputed. They also claim that the product is not of superior quality and that they have substantially invested in the advertising of their product. A dissimilarity table is produced on behalf of the defendants and reliance is placed on the sale of units, the difference in price to show that the plaintiffs wish to eliminate the serious competition that they fact from the defendants. The defendants also mention the difference in name, in the place of manufacture as points of distinction in addition to stating that the trade dress of the plaintiff fails to be a well known mark as specified under s. 11(6) and s. 2(zg) of the Trade Marks Act, 1999 as the plaintiffs have failed to provide any documentary proof of the same.  The defendants further bring forth the concept of trans-border reputation stating that "The trademark registrations in other countries would show that the trade dress of the Rubik's Cube enjoys statutory protection, recognition and popularity in a significant number of countries worldwide. The goodwill and reputation as part of products of plaintiff No.1 in India and its recognition and popularity has seeped into India on account of transborder reputation."[7] The defendants further rely on several judgments to show that trade dress must be examined in its entirety and not looking at specific elements like L'oreal India Pvt. Ltd. v. Henkal Marketing India Ltd.[8] and Kellogg Company v. Pravin Kumar Bhadabhai[9] and the case law of Frito Lay India v. Uncle Chips Pvt. Ltd.[10]which states that competition must be free. Additionally, reliance is placed on s. 15(2) of the Copyright Act, 1957 and the case of Microfibres Inc v. Girdhar Co.[11] which states that copyright ceases to exist when more than 50 copies of the product are made. In addition to this, the defendants also state that only colors cannot be monopolized as they are not distinctive and lack creative or artistic input, relying on Colgate Palmolive v. Anchor Health.[12] Further, the primary colors of the cube are a functional element of the puzzle and cannot be monopolized. The defendants also allege that the patent to the invention of "Magic Cube" has expired and the product is now in the public domain. Furthermore, reference to the puzzle as "Rubik's Cube" is not an indicative of the reputation and good will that the product carries, quoting the examples of packaged drinking water being known as 'Bisleri' commonly and photocopies being called 'Xerox'. The defendants also rely on Cipla v. M.K. Pharmaceuticals[13] to indicate as to how the trade dress of medicine worked in favour of the second entrant to the market.
Observations & Conclusions of the Court
Manmohan Singh, J. decided the matter on September 6, 2016 making interesting observations with regard to the general nature of trade dress, deciding on the test against which passing off and deceptive similarity must be determined, the extent of unfair trade practice by the second or subsequent entrant in addition to the actual dispute of granting of an interim relief to the plaintiff on the existence of a strong prima facie case.
In the case of Hodgkinsons and Corby v. Wards Mobility[14], the English courts had held that the test for determination of passing off was a 3 step process where – the plaintiff must have considerable goodwill in the market, there must be misrepresentation by the respondent and there must be consequent damage caused to the plaintiff. Justice Singh relies on Microlube India Ltd. v. Rakesh Kumar Trading as Saurabh[15] to state that regardless of subsistence of design right or its exhaustion, a passing off action can lie in given cases and discusses the observations of the case of Laxmikant V. Patel v. Chetanbhat Shah and Another[16], to state that passing off would be when a competitor initiates sale of goods and services in the same name or imitates the name causing injury to the business of the one who has property in that name. While commenting on the general nature of trade dress and thus what would comprise of passing off, Justice Singh uses the case of William Grant and Sons v. McDowell & Co. Ltd.[17]which further states for injunction there must be material disclosing that the public associates the object in question only with the plaintiffs. The case of William Edge & Sons Limited v. William Niccolls & Sons Limited[18] is relied on to explain that simply naming a product that was previously unnamed but had considerable popularity in the market as belonging to the subsequent entrant would not be distinguishing of the goods but would give the impression as belonging to the original manufactures and hence, passing off. The case of Anglo Dutch Paint Colour and Varnish Works Pvt. Ltd. v. Indian Trading House[19] is also reiterated to explain that the subsequent entrant had no reason to use the applicant's color arrangements save as with the improper motive of benefitting from his good will and the essential question that needs to be asked is why the same colours would be used but to attract the plaintiff's goodwill and trade reputation which would amount to passing off. Justice Singh also uses the case law ofReckitt & Colman Products Ltd. v. Borden Inc. & Ors.[20] to reiterate that the question that needs to be asked here is not whether the plaintiff can sell his product the way he does but why the defendant would deliberately adopt the same and the case of Colgate Palmolive v. Anchor Health[21] which states that "Trade dress is the soul of identification of a product" and the test for passing off is likelihood of confusion or deceptiveness and it is the duty of the subsequent comer to avoid unfair competition and become unjustly rich. This is also explained in the case of Cadbury v. Neeraj Food Products[22]where it is stated that deception is the essence of the tort of passing off.
Justice Singh clarifies the position with respect to where similarities or dissimilarities are to be considered in the case of the tort of passing off, stating that it was the points of similarity that need to be considered rather than the points of dissimilarity thus taking into consideration the judgments of S.M.Dyechem v. CadburyIndia Ltd.[23]and Cadila Healthcare Ltd. v. Cadila Pharmaceuticals Ltd[24]. Relying on the judgment of Sanjay Kapur v. Dev Agri Farms[25] and several other judgments cited within the case, the learned judge in this judgment states that affixing their own label does not amount to exclusive trade dress capable of distinction and there must be clear distinctions and the duty lies on the second entrant to ensure that he is not indulging in unfair trade practices or free riding the goodwill and reputation of an existing competitor. Justice Singh also states that monopoly over a single colour can surely not be enjoyed but that is certainly not the case here as it is the combination of colours that the plaintiff allege as infringed and is protected as their trademark. There exists considerable goodwill on the side of the plaintiff and they do have a huge reputation in the market, thus ensuring that the mark is well known under s. 11(6) of the Trade Marks Act. In arguendo, although the defendants claim that they can change the shape of the cubes to make them distinctive of the plaintiff's product, Justice Singh states that this question can be answered later, when such case arises. The defendants relying on the case of Cipla v. M.K. Pharmaceuticals[26] is also declared as wrong as the purchase of toys is distinct from that of medicines which is elaborated in the judgment.
Therefore, the Delhi High Court in this case ruled in favour of the plaintiff finding a prima facie case and granted them an injunction against the product of the defendants while also clarifying significant changes with respect to trade dress protection. This case is certainly an essential to understand the concept of trade dress and the extent of protection in the light of monopoly over colours, the test of similarities and labeling products if indicative of distinctiveness. However, Hon'ble Court has also specifically mentioned that the findings are tentative in nature and the same shall not have any bearing when the same would be decided on merits. It would be interesting to note the final outcome of the suit.
  1. Wal-Mart Stores vs. Samara Bros., 529 U.S. 205, 120 S. Ct. 1339 (2000).
  2. Vision Sports, Inc. v. Melville Corp. 12 USPQ 2d 1740.
  3. Colgate Palmolive v. Anchor Health, 108 (2003) DLT 51.
  4. Seven Towns v. Kiddland, I.A. No.13750/2010 in CS(OS) No.2101/2010, as decided on September 06, 2016.
  5. Ideal Toy Corporation v. Plawner Toy Mfg. Corp, 685 F.2d 78 (3rd Cir. 1982).
  6. Heinz Italia v. Dabur India Ltd., (2007) 6 SCC 1.
  7. Seven Towns v. Kiddland, Para 16.
  8. L'oreal India Pvt. Ltd. v. Henkal Marketing India Ltd, 2005 (6) BomCR 77.
  9. Kellogg Company v. Pravin Kumar Bhadabhai, 1996 (36) DRJ 509.
  10. Frito Lay India v. Uncle Chips Pvt. Ltd., (2000) 86 DLT 31.
  11. Microfibres Inc v. Girdhar Co, (2006) 128 DLT 238.
  12. Colgate Palmolive v. Anchor Health, 108 (2003) DLT 51.
  13. Cipla v. M.K. Pharmaceuticals, MIPR 2007 (3) 170.
  14. Hodgkinsons and Corby v. Wards Mobility, [1997] FSR 178.
  15. Microlube India Ltd. v. Rakesh Kumar Trading as Saurabh, (2013) 198 PTC 120.
  16. Laxmikant V. Patel v. Chetanbhat Shah and Another, (2002) 3 SCC 65.
  17. William Grant and Sons v. McDowell & Co. Ltd., 55 (1994) DLT 80.
  18. William Edge & Sons Limited v. William Niccolls & Sons Limited, (1911) AC 693 at 709.
  19. Anglo Dutch Paint Colour and Varnish Works Pvt. Ltd. v. Indian Trading House, AIR 1977 Delhi 41.
  20. Reckitt & Colman Products Ltd. v. Borden Inc. & Ors., 1990 R.P.C. 341 at page Nos.414 to 416, 422, 426.
  21. Colgate Palmolive v. Anchor Health, 108 (2003) DLT 51.
  22. Cadbury India Ltd. v. Neeraj Food Products, 142 (2007) DLT 724.
  23. S.M.Dyechem v. Cadbury India Ltd., (2000) 5 SCC 574.
  24. Cadila Healthcare Ltd. v. Cadila Pharmaceuticals Ltd., (2001) 5 SCC 783.
  25. Sanjay Kapur v. Dev Agri Farms, 2014 (59) PTC 93 (Del).
  26. Cipla v. M.K. Pharmaceuticals, MIPR 2007 (3) 170.


NGT sword on vintage car rally

Every December, enthusiasts wait for the high-profile car rally organised by the Constitution Club of India. But this year, it's likely to be a lacklustre affair, with the vintage cars of the MPs not being allowed in the rally due to the stipulations of the National Green Tribunal (NGT). However, the vintage cars will be put in display for the visitors.

This is followed by NGT's order that bans running vintage cars on Delhi roads. However, experts told Mail Today, that the green tribunal allows vintage car rallies when permission is sought. "The Constitution Club organises just a car rally in which there can be vintage cars. In earlier editions of the rally, such vintage cars did participate," said Tutu Dhawan, auto analyst and organiser of the CCI car rally. Vintage cars have been major attractions of this car rally. It was pioneered by the present Punjab governor VP Singh Badnore, who was the convener of the CCI car rally when he was a Rajya Sabha member. The old cars earned praises from all quarters, including Vice President Hamid Ansari.

"Vintage cars never fail to attract because of their classic looks. Each one of them has an identity and an equally amazing history," Dhawan added. With this car rally, the Parliamentarians also try to spread the message of safe driving. "This year, the car rally will be held on December 11. The theme of the rally is road safety," a CCI official said. "The rise in number of road accidents leading to loss of life is a serious concern. Our politicians spend a lot of time travelling on the roads while campaigning and meeting people. Safety and discipline on roads is very important. We are attempting to convey the message of road safety by organising a car rally every year," said organising committee member Shahnawaz Hussain. The rally is expected to be attended by people from across the social spectrum.

AskMe Ashok Rajagopal gets interim bail

Ashok Rajagopal, former director of defunct e-commerce firm AskMe who represented the majority investor Malaysia’s Astro on the board, got interim bail on a case filed by one of the online sellers My Limo Trading Company. The seller had accused AskMe of not paying the company the money the latter had collected on its behalf from buyers for goods sold on the e-commerce platform.

Though Rajagopal was not in charge of day-to-day affairs at AskMe, My Limo filed a case against him since he had represented Astro, the 98.5% stakeholder in Getit Infoservice Pvt Ltd, the company that ran AskMe. Rajagopal had sought anticipatory bail in this case in the court of district and sessions judge, Patiala House, New Delhi, after a first information report (FIR) was registered against him on complaints filed by My Limo Trading Company.

My Limo claims AskMe owes the former around Rs 1.5 crore.

The court has ordered not to take any coercive action against Rajagopal till 8 January, when the bail application would again be considered. Rajagopal and Astro spokesperson did not respond to queries regarding the legal proceedings.

The legal imbroglio involving Astro and AskMe is getting more complex with another FIR being registered against former AskMe board members on a case filed by My Limo’s affiliate company EBiz International seeking Rs 2.5 crore of defaulted payments.

AskMe suspended operations and top management led by CEO Sanjiv Gupta left the company in August when Astro stopped funding the company. A number of sellers are now filing cases against former directors while Gupta and the investor Malaysian conglomerate Astro are slugging it out at the National Company Law Tribunal (NCLT).

NCLT has scheduled for hearing on the winding down petition moved by Astro along with several other petitions related to this matter for 12 December.  Various parties including hundreds of online sellers and 4,000 unpaid employees of AskMe are awaiting the conclusion of the legal battle that was set off end-August following the collapse of talks regarding a management buyout.

Corporate Insolvency - National Company Law Tribunal

On November 25 2016, the provisions of the Sick Industrial Companies (Special Provisions) Repeal Act, 2003 (SICA Repealing Act) were notified with effect from 1 December 2016. This means that the Sick Industrial Companies (Special Provisions) Act 1985 stands repealed and consequently, the Board for Industrial and Financial Reconstruction (BIFR) and the Appellate Authority for Industrial and Financial Reconstruction (Appellate Authority) are dissolved. On the same day, Section 4(b) of the SICA Repealing Act, as substituted by the Eighth Schedule of the Insolvency and Bankruptcy Code 2016 (Code), was also notified with effect from 1 December 2016. It seems that as a corollary to these notifications and possibly to avoid creating a vacuum in the legal process, the Government of India decided to notify substantive parts of the Code relating to corporate insolvency resolution process on 30 November 2016, effective from 1 December 2016.

In our Ergo Newsflash of 25 November 2016 we had outlined that the Code was being notified in phases and that the provisions dealing with intermediaries had been notified into law on 27 November 2016. In May 2016, we had shared our thoughts on the broad contours of the Code with you. In addition to these, we provide below in FAQ format (i) a brief outline of what has been notified; and (ii) the implication of notifying the SICA Repealing Act on the Code.

The Code is here; long live the Code

What provisions of the Code have been notified?

Per the latest notification issued on 30 November 2016, the provisions relating to corporate insolvency have been notified into law, namely:

Sections 4 to 32: These deal with the substantive as well as procedural aspects of initiating a corporate insolvency resolution process, moratorium, constitution of the committee of creditors, and appointing of insolvency professionals, etc.;

Sections 60 to 77: These deal with offences and penalties for various actions;

Section 198: This allows the National Company Law Tribunal (NCLT) to condone any delay by the Board for reasons recorded in writing;

Section 231: The section bars the jurisdiction of civil courts in respect of any matter which the NCLT is empowered to pass orders on;

Sections 236 to 238: These sections (i) empower the special courts created under the Companies Act 2013 to try offences under the Code; (ii) empower the High Court to hear appeals and revisions from the special court; and (iii) make clear that the Code overrides all other laws in India;

Sections 239(2)(a) to (f): These sections empower the Central Government to make rules for various purposes; and

Sections 246 to 248 and 250 to 255: These sections amend various other laws and were notified prior to 1 December 2016.

In addition, the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations 2016 were also notified with effect from 1 December 2016. These regulations are substantive guidelines which outline how a corporate insolvency resolution process can be triggered, what constitutes proof of claim, the governance of the committee of creditors, and the power of the insolvency professional, amongst other things.

Impact of the notification of the SICA Repealing Act

What does notifying the SICA Repealing Act and, inter alia, Part II (Chapter 1 and 2) of the Code (both effective from today, 1 December 2016) mean for pending cases under the erstwhile SICA?

Section 252 of the Code, notified on 1 November 2016, amended the SICA Repealing Act by substituting Section 4(b) therein with the Eighth Schedule of the Code. This was later followed by the notification on 25 November 2016 notifying the SICA Repealing Act itself with effect from 1 December 2016. The net effect of this is that BIFR and the Appellate Authority are, as of today functus officio (ie defunct). In terms of the Eighth Schedule of the Code, it means that any appeal preferred to the Appellate Authority or any reference made to the BIFR or any inquiry pending before the BIFR or any other authority or any proceeding of whatever nature pending before the Appellate Authority or the BIFR immediately before the commencement of the SICA Repealing Act stand abated. Any company in respect of which such an appeal or reference or inquiry stands abated has been given an option to make an application to the NCLT under the Code within 180 (One hundred and eighty) days from the commencement of the Code in accordance with the provisions therein. The provisions of the Code giving such an option have come into force from 1 December 2016.
What is the impact of the SICA Repealing Act on the orders passed either under Section 22 of SICA or scheme sanctioning order or any other order affecting the rights of the parties therein?

As stated above, the SICA Repealing Act read together with Section 252 of the Code, does state that all proceedings pending before the BIFR or Appellate Authority, shall stand abated with effect from 1 December 2016. However, the SICA Repealing Act also contains a "savings" section. The way this section is drafted, it intends to "save" any rights and obligations which have vested in a party under SICA upon its repeal. Given the substantive nature of the above orders passed under SICA, it may be argued by some that these orders are saved. Having said this, considering that the criteria for reference to NCLT and declaration of moratorium under the Code are substantively different from what was prescribed under SICA, it remains to be seen if such an interpretation is maintainable and merits a clarification from the Government to remove ambiguity.

Do the notified provisions of the Code apply to all companies (and not just industrial companies)? What is the test for "sickness" under the Code?

The Code is a significant change from the erstwhile SICA regime, particularly on this point. As a remedy, the Code is available for and against all companies and partnerships in India, but as of now only against companies and limited liability partnerships. Further, as a remedy it is available not just to scheduled commercial banks in India but to all financial creditors (ie lenders or beneficiaries of corporate guarantees) and operational creditors (ie trade creditors).

Furthermore, the balance sheet test under SICA for determination of "sickness" has been replaced with a low threshold cash flow test. Where a corporate debtor has committed a default of INR 100,000 (Indian Rupees One lakh) or more, an operational creditor or a financial creditor or corporate applicant itself may initiate a corporate insolvency resolution process.