Section 124 of Trademarks Act 1999 is inapplicable to passing off action
Introduction:
In the bustling world of intellectual property disputes, where trademarks and copyrights often clash like titans, the case of Balar Marketing Pvt. Ltd. v. Lakha Ram Sharma Proprietor of Kundan Cable India stands out as a compelling narrative of legal interpretation and judicial reasoning. Decided on March 27, 2025, by the High Court of Delhi, this case delves into the intricate interplay between trademark infringement and passing off actions under Section 124 of the Trade Marks Act, 1999. At its core, the dispute revolves around the use of the "KUNDAN" trademark by two competing entities in the electrical goods market, culminating in a challenge to a Trial Court’s order that stayed multiple suits pending rectification proceedings. This case study explores the factual matrix, procedural twists, legal arguments, and the judiciary’s meticulous analysis, culminating in a ruling that clarifies the scope of stay provisions in trademark litigation.
Detailed Factual Background:
The petitioner, Balar Marketing Pvt. Ltd., is a company engaged in manufacturing and marketing electrical goods under the trademark "KUNDAN" or "KUNDAN CAB," a label it claims to have adopted through its predecessor-in-interest since 1975. The respondent, Lakha Ram Sharma, operating as Kundan Cable India, is similarly involved in producing electrical P.V.C. wires and cables under the "KUNDAN" and "KUNDAN CABLE" trademarks. This overlapping use of the "KUNDAN" mark sparked a series of legal battles between the parties, dating back to the 1990s. The disputes gave rise to multiple suits, each addressing allegations of trademark infringement, passing off, and copyright violations related to the "KUNDAN" label and its artistic representations. The suits, filed between 1994 and 2006, were eventually consolidated for evidence recording, reflecting the intertwined nature of the claims. The petitioner accused the respondent of passing off its goods by mimicking the "KUNDAN" trademark, while the respondent countered with its own claims, asserting prior use and seeking injunctions against the petitioner.
Detailed Procedural Background:
The procedural journey of this case is a labyrinth of filings, orders, and appeals. The litigation began with suits filed in 1994, including TM No. 70 of 2010 (later renumbered as TM No. 968 of 2016) by the respondent against the petitioner for passing off, and a counterclaim (CC No. 07 of 2015, renumbered as TM No. 971 of 2016) by the petitioner for infringement and passing off. Additional suits followed: Suit No. 1371/1994 (renumbered as TM No. 931 of 2016) for copyright infringement and passing off, and Suit No. 1497 of 1995 (renumbered as TM No. 1030 of 2016) seeking an injunction against caution notices and damages. These suits were consolidated for trial. In 2018, the Trial Court dismissed the petitioner’s interim injunction applications, a decision upheld by the Delhi High Court in 2022, which directed the Trial Court to expedite the passing off trial.
However, in January 2025, the respondent filed an application under Section 124 of the Trade Marks Act, 1999, seeking a stay of all proceedings, citing pending rectification petitions before the Madras High Court. On January 18, 2025, the Trial Court, relying on the Division Bench ruling in Amrish Aggarwal Trading as Mahalaxmi Product v. Venus Home Appliances (2024 SCC Online Del 3652), stayed the suits, except for TM No. 931/2016, which involved copyright claims. Aggrieved, the petitioner challenged this order before the Delhi High Court under Article 227 of the Constitution, leading to the present petition, CM(M)-IPD 5/2025.
Issues Involved in the Case:
The central issue before the Delhi High Court was whether the Trial Court erred in staying the suits, particularly those involving passing off claims, under Section 124 of the Trade Marks Act, 1999, based on the Amrish Aggarwal judgment.
This raised subsidiary questions: Did the Division Bench in Amrish Aggarwal intend to mandate a stay of passing off actions alongside infringement suits pending rectification proceedings?
Were the references to "passing off" in Amrish Aggarwal binding precedent or mere obiter dicta? The case also tested the interplay between trademark and copyright claims, as one suit (TM No. 931/2016) involved distinct copyright issues unaffected by the Trade Marks Act.
Detailed Submission of Parties:
Petitioner, argued that the Trial Court misinterpreted Amrish Aggarwal and contended that the Division Bench’s observations on staying passing off actions were obiter dicta, as the case primarily addressed infringement suits. Sibal emphasized that Section 124 applies only to infringement actions, not passing off, and cited the earlier Division Bench ruling in Puma Stationer v. Hindustan Pencils (2010 (43) PTC 479 (Del.) (DB)), which allowed passing off proceedings to continue despite a stay on infringement claims. Petitioner argued that the Trial Court’s reliance on Amrish Aggarwal disrupted a nearly concluded trial, undermining judicial efficiency.
The respondent, defended the Trial Court’s order, asserting that Amrish Aggarwal explicitly extended the stay requirement to passing off actions, as noted in paragraph 44. Respondent conceded the lack of detailed reasoning but maintained that the Division Bench’s findings, even if obiter, were binding on a Single Judge, citing Naseemunisa Begum v. Shaikh Abdul Rehman (2002 (2) Mah.L.J. 115) and Crocs Inc. USA v. Aqualite India Limited (2019 SCC OnLine Del 11957). Respondent highlighted that the petitioner’s argument in Amrish Aggarwal against staying passing off actions was rejected, reinforcing his position.
Detailed Discussion on Judgments Cited by Parties and Their Context:
The parties relied on several precedents, each dissected by the court. Puma Stationer v. Hindustan Pencils (2010 (43) PTC 479 (Del.) (DB)) was pivotal for the petitioner, where the Division Bench stayed infringement proceedings under Section 124 but explicitly permitted passing off actions to proceed, establishing a clear distinction. J.K. Oil Industries v. Adani Wilmar Limited (75 PTC 44 (Del)) similarly supported this bifurcated approach. The respondent’s cornerstone was Amrish Aggarwal Trading as Mahalaxmi Product v. Venus Home Appliances (2024 SCC Online Del 3652), where the Division Bench, addressing a post-IPAB abolition scenario, suggested that both infringement and passing off suits should be stayed pending rectification, though its reasoning focused on infringement. The petitioner countered that this reference to passing off was incidental, citing Mohinder Singh Gill v. Chief Election Commissioner ((1978) 1 SCC 405), where the Supreme Court held obiter dicta non-binding, and State of Orissa v. Sudhansu Sekhar Misra (1967 SCC OnLine SC 17), emphasizing that only what is decided is authoritative. Gudri v. Ram Kishun (1983 SCC OnLine All 415) further supported this, with the Allahabad High Court treating an inadvertent Full Bench remark as non-binding. The respondent’s reliance on Naseemunisa Begum and Crocs Inc. argued for the weight of higher bench observations, but the court found these inapplicable, as the issues in those cases were directly addressed, unlike the passing off reference in Amrish Aggarwal.
Detailed Reasoning and Analysis of Judge:
Court’s reasoning was a masterclass in statutory interpretation and judicial precedent analysis. The began by contextualizing Amrish Aggarwal, noting its origin in a reference questioning the stay of infringement suits post-IPAB abolition, not passing off. Examining paragraph 44 of Amrish Aggarwal, which mentioned "passing off," Bansal found it relied on Puma Stationer, which explicitly allowed passing off actions to continue.
The concluded that Amrish Aggarwal did not intend to overrule this, as no disagreement was expressed. Analyzing Section 124, Bansal noted its exclusive application to infringement suits, reinforced by Section 27(2), which preserves passing off actions outside the Act’s purview. The respondent’s reliance on Amrish Aggarwal’s rejection of the petitioner’s argument (paragraphs 34 and 53) was dismissed, as it addressed a different contention—not a direct challenge to staying passing off suits. The court deemed the "passing off" reference in Amrish Aggarwal an inadvertent obiter dictum, not binding under Mohinder Singh Gill and Sudhansu Sekhar Misra. Court distinguished the respondent’s cases, finding Naseemunisa Begum and Crocs Inc. inapposite due to their context-specific rulings. Balancing judicial efficiency with legal clarity, Bansal ruled that the Trial Court’s blanket stay was erroneous, especially given the advanced trial stage.
Final Decision:
The petition was allowed on March 27, 2025. The impugned Trial Court order of January 18, 2025, was set aside, and all stayed suits (TM Nos. 968/2016, 971/2016, 1030/2016, and 932/2016) were directed to proceed for trial, alongside TM No. 931/2016, which was never stayed. The Trial Court was urged to expedite the proceedings given the suits’ age.
Law Settled in This Case:
This ruling clarified that Section 124 of the Trade Marks Act, 1999, mandates a stay only for infringement suits pending rectification proceedings, not passing off actions. It reaffirmed that obiter dicta from a higher bench, especially if inadvertent or unsupported by reasoning, do not bind a smaller bench, preserving judicial flexibility in interpreting statutory intent.
Case Title: Balar Marketing Pvt. Ltd. Vs. Lakha Ram Sharma Proprietor of Kundan Cable India
Date of Order: March 27, 2025
Case No.: CM(M)-IPD 5/2025
Name of Court: High Court of Delhi at New Delhi
Name of Judge: Hon’ble Mr. Justice Amit Bansal
Disclaimer: The information shared here is intended to serve the public interest by offering insights and perspectives. However, readers are advised to exercise their own discretion when interpreting and applying this information. The content herein is subjective and may contain errors in perception, interpretation, and presentation.
Written By: Advocate Ajay Amitabh Suman, IP Adjutor [Patent and Trademark Attorney], High Court of Delhi
