K. Mangayarkarasi & Anr. vs. N.J. Sundaresan & Anr.

Trademarks Right, Right in Rem and its Arbitrability

Background: The plaintiffs are the proprietors of the trademark associated with "Sri Angannan Biriyani Hotel," a name rooted in their family business since the late 20th century. The first plaintiff inherited the trademark from her father and, later, her husband managed the business until his death in 1990. The first respondent, a relative involved in the family business, claimed an assignment of the trademark through agreements executed in 2017 and 2019. The plaintiffs contended these agreements were fraudulent and sought a permanent injunction and damages. The case raised questions about the arbitrability of disputes involving intellectual property rights and allegations of fraud.

Trademark Ownership: The first plaintiff inherited the trademark "Sri Angannan Biriyani Hotel" after the death of her father in 1986. The business was managed by her husband and later by family members, including the first respondent.

Alleged Assignment of Trademark:The first respondent claimed rights to the trademark through assignment deeds executed in 2017 and 2019, which included an arbitration clause.The plaintiffs alleged these agreements were obtained through fraud and misrepresentation.

Dispute:The plaintiffs filed a suit in the Commercial Court, Coimbatore, seeking to restrain the defendants from using the trademark and for damages of ₹20,00,000.The defendants moved an application to refer the dispute to arbitration, which was allowed by the Commercial Court.

Issues Raised:Whether the dispute regarding the alleged fraudulent assignment of a trademark is arbitrable. Whether the arbitration clause in the assignment deeds is valid and enforceable despite allegations of fraud. Can a trademark dispute, which is argued to involve rights in rem, be referred to arbitration? Did the Commercial Court err in referring the matter to arbitration?

Plaintiffs’ Submissions: The assignment deeds were fraudulent and fabricated, rendering the arbitration clause invalid. Trademark disputes, involving rights in rem, are inherently non-arbitrable. Allegations of fraud fall outside the purview of arbitration and require adjudication by a civil court. Several Supreme Court judgments, including Avitel Post Studioz Ltd. v. HSBC PI Holdings and Vidya Drolia v. Durga Trading Corporation, establish that disputes involving fraud and intellectual property rights are non-arbitrable.

Defendants’ Submissions:The arbitration clause in the assignment deeds is binding, and the dispute should be resolved through arbitration.Mere allegations of fraud are insufficient to oust arbitration jurisdiction, as clarified in Rashid Raza v. Sadaf Akhtar.Trademark assignments are contractual matters and can be referred to arbitration.Payments made to the plaintiffs and the plaintiffs' signature on the agreements validate the assignment.

Judgments Referred and Their Context:

Vidya Drolia v. Durga Trading Corporation:

Established a fourfold test to determine arbitrability, emphasizing that disputes involving rights in rem or public interest are non-arbitrable.

Avitel Post Studioz Ltd. v. HSBC PI Holdings:

Held that serious allegations of fraud affecting the validity of an arbitration agreement render the matter non-arbitrable.

Booz Allen & Hamilton Inc. v. SBI Home Finance Ltd.:

Clarified that disputes involving rights in rem are non-arbitrable, while those involving subordinate rights in personam are arbitrable.

Rashid Raza v. Sadaf Akhtar:

Distinguished between fraud affecting the contract as a whole (non-arbitrable) and fraud specific to internal affairs (arbitrable).

Reasoning of the Judge:

Existence of Arbitration Clause:

The arbitration clause in the assignment deeds is binding unless proven otherwise. The plaintiffs admitted to signing the agreements but contested their validity due to alleged fraud.

Arbitrability of the Dispute:

The dispute arises from a contract (assignment deed) and pertains to the validity and enforceability of the trademark assignment. This is a matter in personam and, therefore, arbitrable.

Allegations of Fraud:

Mere allegations of fraud are insufficient to render a dispute non-arbitrable unless they affect the arbitration agreement's validity or have implications in the public domain.

Trademark Disputes and Rights in Rem:

The judge noted that while trademark disputes often involve rights in rem, the specific issue here concerns contractual rights arising from the assignment deed, making it arbitrable.

Decision:The Madras High Court dismissed the revision petition and upheld the Commercial Court’s decision to refer the dispute to arbitration. It emphasized that the allegations of fraud and the validity of the assignment deed could be addressed by the arbitral tribunal.

Case Title: K. Mangayarkarasi & Anr. vs. N.J. Sundaresan & Anr.

Date of Order: 9th January 2025

Case No.: C.R.P. No. 1272 of 2024

Neutral Citation: Not provided

Court: High Court of Madras

Judge: Hon’ble Mr. Justice M. Nirmal Kumar

Advocate Ajay Amitabh Suman

[Patent and Trademark Attorney]

High Court of Delhi

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