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Thukral Mechanical Works v. P.M. Diesels Pvt. Ltd.: Can a Trademark Assignment Reset the Clock on Non-Use?
Introduction
Trademarks are among the most valuable commercial assets a business can own. They serve as identifiers of origin, quality, and goodwill. But what happens when a registered trademark is not used by its owner for years, and then the owner assigns it to someone else just as a competitor is about to challenge it for non-use? Does the new owner (the assignee) get a fresh start — a clean slate from the date of assignment — or does the law look back and count the years of non-use by the original owner too?
This is the central question that the Supreme Court of India addressed in the landmark case of Thukral Mechanical Works v. P.M. Diesels Pvt. Ltd. & Anr., decided on 18th December 2008. The judgment, delivered by a bench of Justice S.B. Sinha and Justice Cyriac Joseph, is a key precedent in Indian trademark law, particularly on the interpretation of Section 46(1)(b) of the Trade and Merchandise Marks Act, 1958 — the provision dealing with removal of a trademark from the register on the ground of non-use.
This article explains the background of the dispute, the legal questions involved, how the judges reasoned through them, and what the final decision means in plain language.
Factual and Procedural Background
The story begins with two trademarks sharing the same name — "Field Marshal" — registered in respect of different goods. P.M. Diesels Pvt. Ltd. (the first respondent) was the registered proprietor of the trademark "Field Marshal" for diesel engines since 1964, bearing registration number 228867. Separately, a firm called M/s. Jain Industries had registered the same trademark "Field Marshal" under Class 7 (which covers machinery and mechanical goods), specifically for goods such as flour mills, centrifugal pumps, couplings for machines, pulleys, and valves. Jain Industries diligently renewed its registration multiple times — for the periods 13th May 1972 to 12th May 1979; 13th May 1979 to 12th July 1986; and 13th July 1986 to 12th July 1993.
Thukral Mechanical Works (the appellant) was also manufacturing and selling centrifugal pumps under the mark "Field Marshal." Claiming user since 1963, P.M. Diesels issued a legal notice to Thukral challenging its right to use the mark for centrifugal pumps.
P.M. Diesels then filed Suit No. 2408 of 1985 before the Delhi High Court seeking a permanent injunction for infringement and/or passing off. On 19th December 1985, the High Court granted an ex parte temporary injunction restraining Thukral from manufacturing or selling under the mark "Field Marshal" covering all goods in Class 7.
During the pendency of this suit, M/s. Jain Industries executed a deed of assignment dated 30th May 1986 transferring the trademark "Field Marshal" along with its goodwill to Thukral Mechanical Works — recording that Thukral had been using the mark in respect of centrifugal pumps and valves since 1973. Thukral filed an application (Form TM 24) on 17th June 1986, and by an order dated 10th November 1986, the Assistant Registrar of Trade Marks certified Thukral Mechanical Works as the subsequent registered proprietor of the trademark with effect from 30th May 1986.
P.M. Diesels had already filed a rectification application (C.O. No. 9 of 1986) under Sections 46, 56, and 107 of the Act against Jain Industries, contending that Jain Industries had not used the "Field Marshal" trademark in respect of centrifugal pumps for more than five years and one month, and the mark ought to be taken off the register. On 16th January 1987, when Thukral's counsel disclosed in court that Thukral had become the registered owner, P.M. Diesels sought and obtained permission to withdraw this application and file a fresh one. The fresh application was filed against Thukral — but without impleading Jain Industries as a party.
Meanwhile, in the injunction proceedings, a learned Single Judge of the Delhi High Court vacated the ex parte injunction on 19th January 1988, holding that Thukral having become registered proprietor, no case for injunction was made out. Thukral was permitted to use its mark subject to conditions: not to use P.M. Diesels' logo/style of "Field Marshal" protected under copyright; to mention its name "Thukral Mechanical Works, Sirhind" on every pump; and to maintain sales accounts.
The fresh rectification application was transferred to the Intellectual Property Appellate Board (IPAB), which dismissed it. P.M. Diesels challenged this in a writ petition before the Delhi High Court. The Division Bench allowed the writ petition, set aside the IPAB's order of 27th October 2004, and directed fresh adjudication on merits. This Division Bench order is what came before the Supreme Court.
The Dispute
The core legal question was: Was the rectification application filed by P.M. Diesels against Thukral Mechanical Works under Section 46(1)(b) maintainable at all?
Section 46(1)(b) allows a registered trademark to be taken off the register if, up to a date one month before the application, a continuous period of five years or longer had elapsed during which the trademark was registered but not bona fide used by any proprietor thereof "for the time being."
P.M. Diesels argued that neither Jain Industries nor Thukral had genuinely used the mark for the requisite period, and Thukral's use was not bona fide as it was not authorized by Jain Industries — making Thukral an infringer. Thukral countered that the five-year clock ran only from 30th May 1986 (date of its becoming registered proprietor), making the application filed barely seven and a half months later plainly premature. The IPAB had accepted Thukral's position; the Division Bench of the High Court disagreed and remitted the matter.
Reasoning and Analysis of the Court
The Meaning of "For the Time Being"
The Supreme Court identified that the phrase "for the time being" in Section 46(1)(b) was capable of two readings: referring only to the current proprietor, or encompassing any proprietor across the entire five-year window regardless of changes in ownership. The Court cited Jivendra Nath Kaul v. Collector/District Magistrate and Anr. [MANU/SC/0519/1992 : (1992) 3 SCR 642] and H.H. Maharajadhiraja Madhav Rao Jivaji Rao Scindia Bahadur of Gwalior v. Union of India and Anr. [MANU/SC/0050/1970 : (1971) 3 SCR 9] — both of which showed that "for the time being" can carry different meanings depending on context.
Registration Confers a Valuable Right — Not Lightly Taken Away
The Court strongly emphasized that trademark registration is a valuable commercial right — conferring exclusive use, the right to sue for passing off, and (unlike unregistered trademarks) assignability under Section 36. Because Section 46 takes away this right, it must be treated as a penal provision requiring strict construction. The right is not automatically lost when five years of non-use elapse — there is no "sunset clause." The non-use must be established before a tribunal which must then make a formal removal order.
The Non-Impleadment of Jain Industries: A Fatal Defect
One of the most decisive findings concerned the failure to implead Jain Industries in the fresh application. The Court held that if P.M. Diesels wanted to allege trademark trafficking — that Jain Industries assigned the mark to Thukral purely as a device to defeat non-use — this allegation had to be made and proven in the presence of Jain Industries itself. Jain Industries could not be condemned unheard. The cause of action for non-use against Jain Industries was independent of any cause of action against Thukral, and the two could not be conflated. The fresh application, targeting Thukral alone for cumulative non-use dating back to Jain Industries' tenure, was therefore not maintainable in that form.
The Trafficking Concern and the Bona Fide Assignee
The Court acknowledged the legitimate concern that unscrupulous owners might repeatedly assign marks every five years to defeat rectification applications. However, this concern cannot override due process. Where an assignment is genuinely made for bona fide commercial use, the assignee should not bear the burden of the assignor's non-use. The Court drew a clear line: a collusive or sham assignment must be specifically proven in appropriate proceedings (possibly under the wider Section 56) with all parties before the tribunal — it cannot be presumed to fasten liability on the assignee under the narrower Section 46(1)(b).
Reference to Kabushiki Kaisha Toshiba
The Court relied on its own decision in Kabushiki Kaisha Toshiba v. Tosiba Appliances Co. and Ors. [MANU/SC/2223/2008 : MIPR 2008(2) 195], which had recognized that intermittent non-use caused by special circumstances — including court injunctions — might still engage Section 46(1)(b), and that the Board must evaluate all facts before ordering removal. That case had also relied on Hardie Trading Ltd. and Anr. v. Addisons Paint & Chemicals Ltd. [MANU/SC/0705/2003 : 2003(27) PTC 241 (SC)], which clarified that "person aggrieved" in Section 46 has a different and narrower meaning than in Section 56.
The Commentary of K.C. Kailasam and the Court's Response
The Court addressed the view in K.C. Kailasam's Law of Trade Marks and Geographical Indications that allowing assignment to reset the five-year clock would enable any owner to perpetually defeat non-use challenges by serial assignment. The Court's answer was nuanced: while the concern is valid, trafficking must be specifically alleged and proven. If the assignor's title was not extinguished at the time of assignment, the assignment is valid and the assignee gets the same rights. Trafficking is not presumed — it must be made out in an appropriate proceeding.
Final Decision of the Court
The Supreme Court allowed the appeal, set aside the Division Bench's order of the Delhi High Court, and directed the IPAB to determine P.M. Diesels' application afresh in accordance with the legal principles explained in the judgment. Costs were awarded with counsel's fee assessed at Rs. 1,00,000.
Points of Law Settled
First: Removal of a registered trademark for non-use under Section 46(1)(b) is not automatic. It requires formal adjudication and a tribunal order — there is no automatic extinguishment.
Second: A bona fide assignee of a registered trademark should not ordinarily be penalized for the assignor's non-use. As long as the assignor's title was not extinguished at the time of the assignment, the assignment is valid and the assignee acquires all the same rights.
Third: Trademark trafficking is a serious allegation that must be specifically pleaded and proven with both assignor and assignee as parties — it cannot be presumed.
Fourth: Where non-use spans both the original registrant and the assignee, both must be impleaded. Failure to implead the original registrant is a fatal defect rendering the application unmaintainable against the assignee alone.
Fifth: Section 46, being a penal provision removing a valuable statutory right, attracts strict construction.
Sixth: Sections 46 and 56 operate on different footings. Allegations of speculative or fraudulent assignment are more appropriately addressed under the wider Section 56, not under Section 46(1)(b).
Case Details
Title: Thukral Mechanical Works Vs. P.M. Diesels Pvt. Ltd. and Anr. Date of Order: 18th December 2008 Case Number: Civil Appeal No. 7404 of 2008 (Arising out of SLP (C) No. 6145 of 2006) Neutral Citation: MANU/SC/8485/2008 Equivalent Citations: AIR 2009 SC 1443; JT 2009(2) SC 59; MIPR 2009(1) 1; (2009) 3 MLJ 568 (SC); 2009(39) PTC 193 (SC); 2009(1) SCALE 497; (2009) 2 SCC 768; 2008(1) UJ 105 Name of Court: Supreme Court of India Hon'ble Judges: Justice S.B. Sinha and Justice Cyriac Joseph
Disclaimer: Readers are advised not to treat this as substitute for legal advice as it may contain errors in perception, interpretation, and presentation.
Written By: Advocate Ajay Amitabh Suman, IP Adjutor [Patent and Trademark Attorney], High Court of Delhi
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Headnote: Held: The right of a registered trademark is not lost automatically on the expiry of five years of non-use under Section 46(1)(b) of the Trade and Merchandise Marks Act, 1958. Removal requires adjudication. Where a trademark is validly assigned before the assignor's title has been extinguished under the statute, the assignee derives all the rights of the assignor. A bona fide assignee cannot ordinarily be held responsible for non-use by the assignor. An application for removal based on cumulative non-use spanning both the original registrant and the assignee cannot be maintained against the assignee alone without impleading the original registrant. Allegation of trademark trafficking is a serious matter to be proved in appropriate proceedings with all relevant parties. Section 46 is a penal provision and deserves strict construction. Appeal allowed.
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