Case Title: M. Ramesh Vs V. Balu & Others
Case Number: Appeal (CAD) No. 21 of 2023
Neutral Citation: 2025:MHC:XXXX
Court: High Court of Judicature at Madras
Order Date: 10 October 2025
Hon’ble Judges: Justice Dr. G. Jayachandran and Justice Mummineni Sudheer Kumar
Facts
The case arises out of a commercial dispute between partners of a family-run jewellery firm known as "Sri Valli Vilas M.V. Pavadai Chettiar & Sons." The firm, established under a partnership deed dated 01 April 2012, was engaged in the business of manufacturing and selling bullion, gold, silver, diamond jewellery, and precious stones. The partners jointly obtained trademark registration under the name “Sri Valli Vilas” with label marks in Classes 14 and 35 of the Trade Marks Act, 1999, covering jewellery and showroom services.
Difficulties arose when defendants 4 to 6, who were close relatives of defendants 1 to 3 (all original partners of the firm), formed a private limited company named “Aum Valli Vilas Jewellery Private Limited.” The new entity sought to carry on similar business activities under the name “Aum Valli Vilas.” The plaintiffs, being some of the partners of the original firm, viewed the use of this similar trade name as an attempt to violate their registered trademark “Sri Valli Vilas” and to mislead customers.
Consequently, they filed a commercial suit before the Commercial Court (Principal District Judge, Cuddalore) seeking a permanent injunction to restrain the defendants from using the deceptive trade name “Aum Valli Vilas,” alleging infringement and passing off in violation of their trademark rights under the Trade Marks Act, 1999.
Procedural Details
In the said suit, registered as Commercial O.S. No. 1 of 2023, the defendants 1 to 3 submitted an interlocutory application in I.A. No. 214 of 2023 under Order VII Rule 11(a), (c), and (d) read with Section 151 of the Code of Civil Procedure, praying for rejection of the plaint. They argued that the entire dispute was not maintainable before the civil court because of the arbitration clause (Clause 15) contained in the original partnership deed dated 01.04.2012. They contended that since the plaintiffs and defendants were parties to that deed, any dispute among them must be settled through arbitration, not litigation.
The defendants also raised an objection regarding the pecuniary jurisdiction of the court under Sections 6 and 12(1)(d) of the Commercial Courts Act, 2015, stating that the valuation of the suit was below Rs. 3,00,000, thereby excluding it from the commercial jurisdiction.
The Commercial Court, after hearing both sides, partly accepted the defendants’ contentions. It rejected the objection on pecuniary jurisdiction, affirming that since the matter pertained to trademark infringement governed by the Trade Marks Act, 1999, it fell within its competence. However, it accepted the objection based on the arbitration clause, holding that the existence of a valid arbitration agreement barred the plaintiffs from maintaining a suit. Thus, the plaint was rejected on 31 July 2023.
Aggrieved, the second plaintiff (M. Ramesh) alone filed the present appeal before the High Court of Madras under Section 96 of the Code of Civil Procedure read with Section 13 of the Commercial Courts Act, 2015, seeking to set aside the Commercial Court’s order.
Dispute
The core dispute revolved around the maintainability of a civil suit where an arbitration clause existed. The plaintiffs argued that their claim, based on trademark infringement and passing off under statutory protection, involved rights in rem, which could not be referred to arbitration. They contended that infringement of a registered trademark and protecting goodwill were independent legal rights, enforceable under the Trade Marks Act, 1999, and thus outside the private dispute resolution domain.
The defendants, conversely, claimed that since the plaintiffs and defendants were bound by a partnership deed with a binding arbitration clause, the civil court was barred from proceeding. They contended that the plaintiffs could not bypass their obligation to arbitrate merely by couching the dispute as a trademark infringement when the dispute’s root lay in partner relationship issues and business competition arising among them.
Detailed Reasoning
The Division Bench, led by Justice Mummineni Sudheer Kumar, proceeded to analyze the scope of Order VII Rule 11 CPC, which permits rejection of a plaint if it appears barred by law. The court reiterated that in determining an application under this rule, only the averments in the plaint and the documents filed with it can be considered — not the defence. Hence, even if arbitration existed, the question was whether from the plaint itself it could be conclusively inferred that arbitration ousted judicial jurisdiction at inception.
The court examined the contents of the plaint and noted that the plaintiffs alleged an act of independent trademark infringement by defendants 4 to 7, who were not signatories to the partnership deed. The plaint had specifically averred that while defendants 1 to 3 were former co-partners, defendants 4 to 6 (their family members) had conspired with them to establish a similarly named company — “Aum Valli Vilas Jewellery Private Limited.” This company’s act of adopting a deceptively similar trade name was a fresh infringing act causing harm to the plaintiffs’ registered statutory rights. Thus, while some of the defendants were parties to the partnership deed, the cause of action extended to non-signatories of the arbitration agreement.
The judges referred to and drew guidance from the Supreme Court decisions in Booz Allen & Hamilton Inc. v. SBI Home Finance Ltd. (2011) 5 SCC 532, A. Ayyasamy v. A. Paramasivam (2016) 10 SCC 386, and Vidya Drolia v. Durga Trading Corporation (2021) 2 SCC 1, which classify disputes into arbitrable and non-arbitrable categories. Rights in rem (which affect the public, such as trademark registration and infringement claims) are generally non-arbitrable because they require judicial determination; whereas rights in personam (between private parties) may be referred to arbitration.
Applying this reasoning, the court found that since the substance of the claim related to statutory infringement of a registered trademark, it was not within the scope of the arbitration clause. The act of adopting the infringing mark by a corporate entity newly created was a new wrong — a tortious act affecting proprietary rights, not merely a dispute arising from the partnership agreement.
The court observed that the Commercial Court had mechanically applied the arbitration clause, without analyzing whether the dispute, in substance, fell within its scope. The mere presence of an arbitration clause among some parties could not divest the civil court of jurisdiction in a case involving infringement of intellectual property rights governed by statute.
The Division Bench also underscored the settled principle that the court must preserve access to justice when statutory rights are invaded, citing Vidya Drolia and M/s. Emaar India Ltd. v. Tarun Aggarwal Projects LLP (2022) 6 SCC 282.
Furthermore, the Bench reaffirmed that the Trade Marks Act, 1999, creates enforceable statutory rights recognized under Sections 28 and 29, and violation of these rights, being civil wrongs of public consequence, cannot be ousted from judicial scrutiny merely because some commercial relations among parties are governed by a private arbitration clause.
Decision
The High Court allowed the appeal and set aside the order of the Commercial Court dated 31 July 2023. It restored the original plaint in Commercial O.S. No. 1 of 2023 to the file of the Principal District Judge, Cuddalore, directing that the case be proceeded with on merits.
The Bench held that the Commercial Court had erred in rejecting the plaint solely on the basis of the arbitration clause. It clarified that disputes concerning trademark rights, passing off, and infringement under the Trade Marks Act are not subject to arbitration and must be adjudicated by civil courts. The findings of the Commercial Court on pecuniary jurisdiction remained undisturbed and attained finality.
Accordingly, the matter was remitted back with instructions for expeditious disposal. No order as to costs was made.
Suggested Titles for Publication
Arbitration Clause vs Trademark Rights: The Madras High Court on Non-Arbitrable Commercial Disputes
Family Partnership and Trademark Conflict: Lessons from M. Ramesh v. V. Balu
Arbitration Cannot Override Statutory Rights: A Study of the Sri Valli Vilas Trademark Case
When Commercial Disputes Collide with IP Law: The Madras High Court’s Insightful Ruling
Interplay of Arbitration and Intellectual Property: Dissecting the Valli Vilas Dispute
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Written By: Advocate Ajay Amitabh Suman, IP Adjutor (Patent and Trademark Attorney), High Court of Delhi
