Introduction: In a
significant reaffirmation of judicial discipline and statutory interpretation,
the Delhi High Court in Balar Marketing Pvt. Ltd. v. Lakha Ram Sharma
resolved a pressing question of precedent: can obiter dicta—especially those
made without reasoning—bind a coordinate bench of the same High Court? The
question emerged from a trademark dispute, but its implications stretch far
into how Indian courts must treat passing judicial observations when they
conflict with established law.
Factual Background:The
petitioner, Balar Marketing Pvt. Ltd., has been engaged in manufacturing
electrical goods under the trademark "KUNDAN" and "KUNDAN
CAB" since 1975 through its predecessor-in-interest. The respondent, Lakha
Ram Sharma, trading as Kundan Cable India, also deals in similar electrical
products using the trademarks "KUNDAN" and "KUNDAN CABLE."
This overlap in trademarks led to a series of legal battles dating back to the
1990s, with both parties initiating various suits relating to trademark
infringement and passing off, and in one instance, copyright infringement.
These suits included TM Nos.
968/2016, 971/2016, 1030/2016, 932/2016 and 931/2016, which were consolidated
for the purpose of trial. In 2018, the Trial Court declined to grant interim
injunctions in favor of the petitioner. Subsequently, by an order dated 30 May
2022, the Trial Court allowed the suits to proceed solely on the issue of
passing off, while staying proceedings related to infringement, citing the
precedents in Puma Stationer Pvt. Ltd. & Anr. v. Hindustan Pencils Ltd.,
2010 (43) PTC 479 (Del) (DB) and J.K. Oil Industries v. Adani Wilmar Ltd.,
2007 (75) PTC 44 (Del).
In January 2025, the
respondent sought a stay of the entire proceedings—including those for passing
off—under Section 124 of the Trade Marks Act, 1999, citing a stray reference to
passing off in paragraph 44 of the Division Bench judgment in Amrish
Aggarwal Trading as Mahalaxmi Product v. Venus Home Appliances, 2024 SCC
OnLine Del 3652. The Trial Court allowed this request and stayed all
proceedings except the suit under the Copyright Act. This order prompted the
petitioner to approach the High Court once again.
Submissions of the Parties: Petitioner,
submitted that the reference to "passing off" in Amrish Aggarwal
was a non-binding obiter dicta, made without any analysis, and therefore could
not displace established precedent. He emphasized that Section 124 of the Trade
Marks Act applies only to suits for infringement, not to actions for passing
off, which derive from common law principles and remain independent of
trademark registration. The Petitioner relied on authoritative decisions such
as Mohinder Singh Gill & Anr. v. Chief Election Commissioner, New Delhi
& Ors., (1978) 1 SCC 405, State of Orissa v. Sudhansu Sekhar Misra
& Ors., AIR 1968 SC 647, and Gudri v. Ram Kishun, 1983 SCC OnLine
All 415: AIR 1984 All 5, to argue that judicial observations made in passing,
especially where no issue was raised or decided, do not create binding law.
The respondent, countered that
paragraph 44 of the Division Bench’s ruling in Amrish Aggarwal explicitly
referred to passing off claims being subject to stay, and therefore the Trial
Court was justified in relying on it. Respondent relied on Naseemunisa Begum
v. Shaikh Abdul Rehman, 2002 (2) Mah LJ 115, and Crocs Inc. USA v.
Aqualite India Ltd., 2019 SCC OnLine Del 11957, to assert that even the
obiter dicta of a larger bench ought to be followed by a smaller one.
Judicial Analysis and
Reasoning:Delhi High Court delivered a meticulous opinion that
began by contextualizing the Division Bench’s judgment in Amrish Aggarwal.
The core issue in that case was whether rectification proceedings pending after
the abolition of the IPAB under the Tribunals Reforms Act, 2021, should compel
the stay of infringement suits under Section 124. The High Court held they should.
However, a reference to “passing off” appeared in paragraph 44 of the judgment,
without any analysis or argument on that issue. Justice Bansal examined this in
light of the precedential authority of Puma Stationer, where the
Division Bench had unambiguously held that only infringement actions must be
stayed pending rectification, while passing off claims can proceed.
It was noted that Amrish
Aggarwal did not overrule Puma Stationer, nor did it engage with the
distinction between infringement and passing off. The reference to passing off,
in the absence of any legal reasoning, was determined to be a passing
comment—not binding precedent. Justice Bansal also emphasized the clear
language of Section 124, which applies only to suits for infringement.
Moreover, Section 27(2) of the Trade Marks Act, 1999 explicitly preserves the
right to bring a passing off action irrespective of trademark registration.
In discussing whether the
obiter dicta of a High Court Division Bench binds a coordinate or subordinate
bench, the Court referred to the Constitution Bench ruling in Mohinder Singh
Gill, which clarified that a precedent is binding only for the proposition
of law that it actually decides. In State of Orissa v. Sudhansu Sekhar Misra,
the Supreme Court similarly held that stray observations or casual expressions
in a judgment are not binding authority. The judgment in Gudri v. Ram Kishun
was invoked to show that when a larger bench makes an observation without
actually considering or deciding the issue, it is not binding on a later bench
that must adjudicate the issue directly.
The Court distinguished Crocs
Inc. and Naseemunisa Begum, holding that those judgments dealt with
issues that were squarely raised and decided, whereas in the present case, the
issue of stay of passing off suits was not even under consideration in Amrish
Aggarwal.
Final Decision: The Delhi
High Court allowed the petition, setting aside the Trial Court’s order dated 18
January 2025, which had stayed all proceedings including those concerning
passing off. It held that the reference to passing off in Amrish Aggarwal
was an inadvertent obiter dicta, lacking any binding force. The Court directed
that the consolidated suits, particularly those involving passing off, must
proceed to trial without delay.
Law Declared:This
judgment firmly establishes that Section 124 of the Trade Marks Act, 1999
applies only to suits for infringement and does not affect the trial of passing
off actions. It reaffirms that passing off is a common law remedy not dependent
on trademark registration. Most significantly, it underscores the principle
that obiter dicta—especially those made without analysis or contextual
necessity—do not create binding precedent, even when made by a larger bench of
the same court.
Case Title: Balar Marketing Pvt. Ltd. Vs.
Lakha Ram Sharma , Date of Order: 27th March 2025,Case No.:
CM(M)-IPD 5/2025 ,Neutral Citation: 2025:DHC:2322,Name of Court:
High Court of Delhi at New Delhi,Name of Judge: Hon’ble Mr. Justice Amit
Bansal
Advocate Ajay Amitabh Suman, Patent and Trademark Attorney, Delhi High Court
