Property Owners Association Vs. State of Maharashtra

Introduction:

The settled law that obiter dicta are not binding can be found discussed in the Supreme Court's judgment in Property Owners Association vs. State of Maharashtra (2024), particularly in its analysis of prior rulings like Sanjeev Coke and Ranganatha Reddy. The Court clarified that observations in a judgment which are not part of the ratio decidendi — i.e., not necessary for the decision of the case — do not have binding precedential value.

The Issue of Obiter Dictum:

The issue of obiter dictum arose prominently in the context of the respondents’ reliance on Mafatlal Industries Ltd. v. Union of India (1997) 5 SCC 536, a decision by a nine-judge bench. In Mafatlal, Justice Jeevan Reddy, speaking for the majority, observed that "the material resources of the community are not confined to public resources but include all resources, natural and man-made, public, and private owned." This statement was cited to support the expansive interpretation of Article 39(b) adopted in State of Karnataka v. Ranganatha Reddy (1977) 4 SCC 471 and Sanjeev Coke Manufacturing Co. v. Bharat Coking Coal Ltd. (1983) 1 SCC 147, which included privately owned resources within the ambit of "material resources of the community." The appellants challenged the authority of this observation, arguing that it was obiter dictum, as it was not central to the ratio decidendi of Mafatlal, a case primarily concerned with excise duties rather than property rights or Article 39(b). The respondents countered that the observation, made by a nine-judge bench, carried significant weight and reinforced the settled interpretation of Article 39(b), aligning with the Court’s consistent jurisprudence.

Obiter dictum, as a legal concept, refers to remarks or observations made by a judge that are incidental to the main issue being decided and thus lack binding precedent. Unlike the ratio decidendi—the core reasoning that resolves the case—obiter dicta are persuasive at best, their authority depending on the context, the bench’s composition, and their alignment with established law. In this case, the Supreme Court meticulously examined the Mafatlal observation to determine its legal status. The appellants argued that since Mafatlal did not directly address a challenge to the acquisition of private property under Article 39(b), the remark on material resources was extraneous to the case’s core issue. They contended that endorsing this observation as binding would improperly elevate a passing comment to the status of precedent, especially given its reliance on Ranganatha Reddy’s minority opinion and Sanjeev Coke, which they argued required reconsideration.

The respondents, represented by the Solicitor General, urged the Court to view the Mafatlal observation as authoritative, given the nine-judge bench’s stature and its reference to a line of cases, including Ranganatha Reddy and Sanjeev Coke. They argued that the observation was not merely incidental but reflected a deliberate affirmation of the broad interpretation of Article 39(b), consistent with the Court’s jurisprudence on directive principles. The respondents emphasized that the Court’s repeated endorsements of this interpretation in cases like State of Tamil Nadu v. L. Abu Kavur Bai (1984) 1 SCC 515 and National Textile Corp Ltd. v. Sitaram Mills Ltd. (1986) AIR SC 1234 lent credence to the Mafatlal statement, diminishing any claim that it was obiter dictum.

Chief Justice delivering the judgment, addressed the obiter dictum issue with precision. The Court acknowledged that the Mafatlal observation was made in a context unrelated to the acquisition of private property, as the case dealt with excise duty disputes. Consequently, it classified the remark as obiter dictum, noting that it did not form part of the ratio decidendi necessary to resolve the dispute in Mafatlal. However, the Court did not dismiss its persuasive value outright. It recognized that the observation, emanating from a nine-judge bench, carried significant weight, particularly as it aligned with the expansive interpretation of Article 39(b) in Sanjeev Coke, a five-judge bench decision that adopted the minority view of Justice Krishna Iyer in Ranganatha Reddy. The Court reasoned that while the Mafatlal statement was not binding, its consistency with prior and subsequent judicial interpretations bolstered the argument for including private resources in Article 39(b).

The Court’s analysis extended to the broader context of judicial discipline and precedent. It critiqued the appellants’ reliance on the majority opinion in Ranganatha Reddy, which avoided engaging with Article 39(b), to challenge Sanjeev Coke. The Court clarified that Sanjeev Coke’s adoption of the minority view was a deliberate choice by a five-judge bench, rendering it binding unless overruled by a larger bench. The Mafatlal observation, though obiter, was seen as reinforcing this binding precedent, as it cited Ranganatha Reddy and Sanjeev Coke approvingly. The Court also referenced Central Board of Dawoodi Bohra v. State of Maharashtra (2005) 2 SCC 673, which emphasized that a smaller bench is bound by a larger bench’s decision, underscoring that Sanjeev Coke’s interpretation held sway over any contrary implications from Ranganatha Reddy’s majority.

The reasoning on obiter dictum was further informed by the Court’s commitment to constitutional coherence. The Court noted that directive principles, such as Article 39(b), are integral to the Constitution’s social justice framework, as evidenced by Constituent Assembly debates advocating equitable resource distribution. The Mafatlal observation, while not binding, resonated with this ethos, particularly in light of India’s persistent socio-economic inequalities, as highlighted by the country’s rankings on the Human Development Index and Global Hunger Index. The Court rejected the appellants’ argument that the Mafatlal remark endorsed a specific economic ideology, clarifying that Article 39(b)’s broad language allows legislative flexibility, subject to judicial review for nexus with the common good.

The implications of classifying the Mafatlal observation as obiter dictum were significant. By doing so, the Court preserved the binding authority of Sanjeev Coke while acknowledging the persuasive influence of Mafatlal. This approach maintained judicial flexibility, allowing future benches to reassess the scope of Article 39(b) without being constrained by a non-binding remark. However, the Court’s endorsement of Sanjeev Coke’s interpretation ensured continuity in the law, affirming that privately owned resources could be considered "material resources of the community" when their distribution serves the public interest. The decision underscored the judiciary’s role in balancing the persuasive weight of obiter dicta with the binding force of precedent, particularly in constitutional matters where historical and social contexts are paramount.

In conclusion, the Supreme Court’s treatment of obiter dictum in Property Owners Association v. State of Maharashtra illuminated the nuanced interplay between binding and persuasive judicial statements. By classifying the Mafatlal observation as obiter dictum, the Court upheld the authority of Sanjeev Coke while recognizing the persuasive value of a nine-judge bench’s remarks. This analysis not only clarified the legal status of prior observations but also reinforced the Constitution’s dynamic interpretation, ensuring that directive principles like Article 39(b) remain responsive to India’s evolving socio-economic landscape.

The Highlight of case:

Here’s the specific holding:

“The single-line observation in Mafatlal is obiter dicta” and therefore not binding precedent. Furthermore, the Court noted that Sanjeev Coke erred in relying on the minority view in Ranganatha Reddy, which itself was not endorsed by the majority and thus did not constitute the binding ratio.

This establishes that only the reasoning necessary for the decision (ratio decidendi) is binding, while obiter dicta are merely persuasive at best.

Thus, the settled law is:

Obiter dicta, even if made by a coordinate or larger bench, do not bind subsequent benches unless they form part of the ratio decidendi. 

Case Title:Property Owners Association Vs. State of Maharashtra

Date of Order:November 5, 2024

Case No.:Civil Appeal No. 1012 of 2002 and connected matters

Neutral Citation:2024 INSC 835

Name of Court:Supreme Court of India

Name of Judge:Dr. D.Y. Chandrachud, C.J.I., Hrishikesh Roy, J.B. Pardiwala, Manoj Misra, Rajesh Bindal, S.C. Sharma, Augustine George Masih, B.V. Nagarathna, and Sudhanshu Dhulia, JJ.

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

Cryogas Equipment Private Limited Vs. Inox India Limited

The interplay between copyright and design law in India has long been a fertile ground for legal disputes, particularly when artistic works and industrial designs converge. The Supreme Court of India's judgment in Cryogas Equipment Private Limited v. Inox India Limited, delivered on April 15, 2025, marks a pivotal moment in clarifying this complex intersection. This case, arising from a dispute over the alleged infringement of proprietary engineering drawings and literary works related to cryogenic semi-trailers, addresses the critical question of whether such works are protected under the Copyright Act, 1957, or fall within the ambit of the Designs Act, 2000. By establishing a definitive two-pronged test to distinguish between artistic works and designs, the Supreme Court not only resolves the immediate conflict between Inox India Limited and appellants Cryogas Equipment Private Limited and LNG Express India Private Limited but also sets a robust precedent for harmonizing the Copyright Act and Designs Act. This case study delves into the factual and procedural intricacies, the legal issues, the parties’ arguments, the judicial reasoning, and the broader implications of the judgment, offering a comprehensive analysis of a landmark decision in Indian intellectual property (IP) law.

Detailed Factual Background

The dispute centers on Inox India Limited (Inox), a company engaged in designing and manufacturing cryogenic storage tanks and distribution systems mounted on trailers and semi-trailers for transporting industrial gases, including liquefied natural gas (LNG). Inox claimed proprietary rights over two distinct types of IP: (i) Proprietary Engineering Drawings, which are technical drawings for LNG semi-trailers tailored for Indian roads, and (ii) Literary Works, comprising details, processes, descriptions, and narrations created by Inox employees to develop these drawings. These IPs were allegedly developed to meet specific technical and regulatory requirements for cryogenic semi-trailers. On September 24, 2018, Inox filed Trademark Suit No. 3/2019 before the 4th Additional District Judge at Vadodara (Commercial Court) against Cryogas Equipment Private Limited (Cryogas), LNG Express India Private Limited (LNG Express), and others, alleging that the defendants had infringed its copyrights by using these Proprietary Engineering Drawings and Literary Works without authorization. Inox sought multiple reliefs: a declaration of infringement, a permanent injunction to restrain the defendants from using or reproducing similar drawings or works, an injunction against using associated IP or know-how, an order to surrender infringing materials for destruction, and damages of ₹2 crores. Additionally, Inox filed an application under Order XXXIX Rules 1 and 2 of the Code of Civil Procedure, 1908 (CPC), seeking an ad interim injunction to prevent further infringement during the suit’s pendency. The defendants, Cryogas and LNG Express, countered by alleging that Inox’s Proprietary Engineering Drawings constituted a “design” under Section 2(d) of the Designs Act, 2000, and were thus ineligible for copyright protection under Section 15(2) of the Copyright Act, 1957, due to their industrial application exceeding fifty reproductions. This factual matrix set the stage for a legal battle that would test the boundaries of IP protection in India.

Detailed Procedural Background

The procedural journey of this case reflects a protracted legal tussle across multiple judicial forums. Inox initiated Trademark Suit No. 3/2019 before the Commercial Court on September 24, 2018, accompanied by an application for an ad interim injunction. LNG Express responded by filing an application under Order VII Rule 11 of the CPC, seeking rejection of the plaint on the grounds that the suit was not maintainable under Section 15(2) of the Copyright Act. On April 1, 2022, the Commercial Court allowed LNG Express’s application, rejecting Inox’s plaint and dismissing its injunction application, reasoning that the Proprietary Engineering Drawings were designs under the Designs Act and thus unprotected by copyright law due to industrial reproduction exceeding fifty times.

Inox appealed to the High Court of Gujarat, which, on March 13, 2024, set aside the Commercial Court’s order, remanding the matter for fresh consideration and restoring the suit to its original number. The High Court directed the Commercial Court to adjudicate the pending applications concurrently, issuing separate orders. On May 3, 2024, the Commercial Court, upon reconsideration, reiterated its earlier stance, allowing LNG Express’s application under Order VII Rule 11 and dismissing Inox’s injunction application.

Inox again appealed to the High Court, which, via its impugned judgment on October 22, 2024, set aside the Commercial Court’s orders, rejected LNG Express’s application, restored the suit, and reinstated Inox’s interim injunction application, directing its expeditious adjudication within eight weeks. Aggrieved, Cryogas and LNG Express filed Civil Appeals before the Supreme Court, arising from Special Leave Petitions (C.) Nos. 28062/2024 and 28017/2024. The Supreme Court, after reserving judgment on January 29, 2025, permitted the Commercial Court to hear the interim application but directed it to hold the final order in abeyance. The Supreme Court’s final judgment on April 15, 2025, dismissed the appeals, upholding the High Court’s decision and issuing directions for the Commercial Court to proceed with the trial and interim application.

Issues Involved in the Case

The case presented two core issues for adjudication. First, what are the parameters for determining whether a work or article falls within the limitation set out in Section 15(2) of the Copyright Act, thereby classifying it as a “design” under Section 2(d) of the Designs Act? This issue required the court to delineate the boundaries between artistic works protected under the Copyright Act and designs governed by the Designs Act, particularly in the context of industrial application. Second, did the High Court err in setting aside the Commercial Court’s order, which allowed LNG Express’s application under Order VII Rule 11 of the CPC, thereby rejecting the plaint? This issue necessitated an examination of whether the Commercial Court’s dismissal of the suit at the threshold was justified, given the mixed questions of law and fact involved in determining the nature of Inox’s Proprietary Engineering Drawings and Literary Works.

Detailed Submission of Parties

The appellants, Cryogas and LNG Express argued that the High Court erred in overturning the Commercial Court’s order. They contended that Inox’s Proprietary Engineering Drawings were designs under Section 2(d) of the Designs Act, as they were capable of registration and had been industrially reproduced more than fifty times, triggering the bar under Section 15(2) of the Copyright Act. They asserted that Inox’s claim of ₹122 crores in revenue implied large-scale production of semi-trailers, exceeding the fifty-reproduction threshold. The appellants argued that the drawings’ purpose was industrial, not artistic, and that Inox’s failure to register them under the Designs Act extinguished any copyright protection. They further contended that the drawings adhered to international standards (e.g., ASME, PED) and Indian regulations, limiting their originality and aesthetic appeal. The appellants dismissed Inox’s claim of visual appeal, arguing that the drawings, even if covering external components, were functional and registrable under Class 12-10 of the Designs Act. They also challenged Inox’s claims of confidential information theft, asserting that the plaint lacked specific prayers and that such claims were outside the Commercial Court’s jurisdiction. Citing Shri Mukund Bhavan Trust v. Shrimant Chhatrapati Udayan Raje Pratapsinh Bhonsle (2024 SCC OnLine SC 3844), they argued that Inox’s evasive drafting could not create a valid cause of action.

Inox countered that the suit involved two distinct copyrights: the Proprietary Engineering Drawings and the Literary Works, each requiring independent assessment. They argued that the drawings were artistic works under Section 2(c) of the Copyright Act, as they depicted internal components of cryogenic containers, lacking the visual appeal required for a design under Section 2(d) of the Designs Act. Inox contended that Section 15(2) did not apply, as the drawings were neither registered nor capable of registration under the Designs Act, falling under the exception for “modes or principles of construction” or “mere mechanical devices.” They emphasized that the Literary Works, comprising processes and descriptions, were not subject to Section 15(2) and were wrongly conflated with the drawings by the Commercial Court. Inox also asserted that the theft of confidential information constituted a separate claim, actionable under common law and not barred by Section 15(2). They argued that determining the drawings’ registrability under the Designs Act involved mixed questions of law and fact, unsuitable for resolution under Order VII Rule 11. Inox supported its claims with evidence from a Local Commissioner’s Report (September 26, 2018), which found proprietary materials at the defendants’ premises, substantiating unauthorized use.

Detailed Discussion on Judgments Cited by Parties and Their Context

The Supreme Court and the parties relied on several precedents to navigate the copyright-design interface, each contributing to the legal framework.

Microfibres Inc v. Girdhar, 2006 SCC OnLine Del 60: Cited by Inox and the High Court, this Delhi High Court decision involved a dispute over upholstery fabric patterns. The court held that the plaintiff’s drawings, intended for industrial use, were designs under the Designs Act, not artistic works under the Copyright Act, due to their commercial purpose and lack of independent artistic existence. The court emphasized the shorter protection period under the Designs Act compared to the Copyright Act, reflecting legislative intent to limit copyright protection for industrially applied works. In the present case, Inox used this precedent to argue that the Proprietary Engineering Drawings were artistic works, while the appellants cited it to assert their design status due to industrial application.

Microfibres Inc v. Girdhar and Co, 2009 SCC OnLine Del 1647 (Microfibres II): An appeal from the above decision, this Delhi High Court Division Bench ruling was heavily relied upon by the High Court and Inox. The court clarified that artistic works under Section 2(c) of the Copyright Act have a broad scope, including abstract drawings, but lose copyright protection under Section 15(2) if industrially applied beyond fifty reproductions without design registration. It emphasized that original artistic works retain copyright protection, but designs derived for industrial use are governed by the Designs Act. Inox leveraged this to argue that its drawings were artistic works, while the appellants used it to highlight the industrial application bar.

Dart Industries Inc v. Techno Plast, 2007 SCC OnLine Del 892: Cited by the appellants, this Delhi High Court case involved Tupperware products. The court held that copyright protection ceases once a design is registered under the Designs Act or industrially reproduced beyond fifty times, as per Section 15. The appellants used this to argue that Inox’s drawings, if industrially applied, lost copyright protection, while Inox distinguished it, noting its drawings were unregistered and not necessarily designs.

Mattel, Inc v. Jayant Agarwalla, 2008 SCC OnLine Del 1059: Cited by the appellants, this Delhi High Court case concerned the board game Scrabble. The court denied copyright protection for the game board, a three-dimensional article reproduced over fifty times without design registration, following Microfibres I. The appellants argued that Inox’s semi-trailers, similarly reproduced, were ineligible for copyright protection, while Inox contended that its two-dimensional drawings were distinct artistic works.

Bharat Glass Tube Ltd v. Gopal Glass Works Ltd, (2008) 10 SCC 657: Referenced by the Supreme Court, this case clarified the Designs Act’s purpose of protecting original designs for a limited period (ten years) to reward innovation. The court noted that designs must be new, original, and unpublished to be registrable. The Supreme Court used this to underscore the Designs Act’s focus on commercial exploitation, contrasting it with the Copyright Act’s broader protection for artistic works.

Smithkline Beecham Plc v. Hindustan Lever Ltd, 1999 SCC OnLine Del 965: Cited by the Supreme Court, this Delhi High Court case applied the functional utility test to deny design protection for a toothbrush’s S-shaped design, deemed primarily functional. The court used this to emphasize that functional works are excluded from design protection, supporting Inox’s argument that its drawings lacked aesthetic appeal.

Tractors and Farm Equipment Ltd v. Standard Combines Pvt. Ltd, 2012 SCC OnLine Mad 5470: Referenced by the Supreme Court, this Madras High Court case applied the functional utility test to a tractor design dispute, holding that the plaint could not be rejected at the threshold due to unresolved questions about functionality versus aesthetics. The court used this to support the need for a trial in the present case.

Standard Corporation India Ltd v. Tractors and Farm Equipment Ltd, 2014 SCC OnLine Mad 850: A Division Bench reaffirmation of the above, cited by the Supreme Court to reinforce the functional utility test’s application in distinguishing designs from artistic works.

Mohan Lal v. Sona Paint and Hardwares, 2013 SCC OnLine Del 1980: Cited by the Supreme Court, this Delhi High Court Full Bench decision reaffirmed Smithkline, applying the functional utility test to mirror frames, though primarily addressing passing off claims. It supported the court’s focus on functionality.

Whirlpool of India Ltd v. Videocon Industries Ltd, 2014 SCC OnLine Bom 565: Cited by the Supreme Court, this Bombay High Court case noted that functionality does not preclude design protection if alternative shapes can perform the same function, aiding the court’s analysis of aesthetic versus functional features.

Photoquip India Ltd v. Delhi Photo Store, 2014 SCC OnLine Bom 1088: Referenced by the Supreme Court, this Bombay High Court case adopted a conjunctive approach, interpreting Section 15(2) alongside functional utility. The court held that functional drawings were not designs but could be artistic works, supporting Inox’s claim.

Pranda Jewelry Pvt. Ltd v. Aarya 24 KT, 2015 SCC OnLine Bom 958: Cited by the Supreme Court, this Bombay High Court case followed Microfibres II, reinforcing the distinction between artistic works and designs.

Fun World and Resorts (India) Pvt. Ltd v. Nimil KK, 2020 SCC OnLine Ker 219: Referenced by the Supreme Court, this Kerala High Court case aligned with Microfibres II, affirming the copyright-design distinction.

TTK Prestige Ltd v. KCM Appliances Pvt. Ltd, 2023 SCC OnLine Del 2129: Cited by the Supreme Court, this recent Delhi High Court case reaffirmed the functional utility test’s relevance in design disputes.

Amp v. Utilux, [1972] RPC 103: Cited by the Supreme Court, this House of Lords decision introduced the functional utility test, distinguishing aesthetically appealing designs from purely functional ones, influencing Indian jurisprudence.

Interlego A.G v. Tyco Industries Inc, [1988] UKPC 3: Referenced by the Supreme Court, this Privy Council decision applied the functional utility test, reinforcing the aesthetic-functional distinction.

Mazer v. Stein, 347 U.S. 201, 74 S. Ct. 460, 98 L. Ed. 630 (1954): Cited by the Supreme Court, this U.S. Supreme Court case introduced conceptual separability, allowing copyright protection for artistic features separable from utilitarian functions, paralleling India’s functional utility test.

Esquire, Inc v. Ringer, 591 F.2d 796 (D.C. Cir. 1978): Referenced by the Supreme Court, this U.S. case clarified that utilitarian designs are ineligible for copyright, supporting the functional utility approach.

Kieselstein-Cord v. Accessories by Pearl, Inc, 632 F.2d 989 (2d Cir. 1980): Cited by the Supreme Court, this U.S. case introduced a primary-subsidiary approach to conceptual separability, emphasizing artistic dominance.

Carol Barnhart Inc v. Economy Cover Corp, 773 F.2d 411 (2d Cir. 1985): Referenced by the Supreme Court, this U.S. case refined conceptual separability, requiring artistic features to be non-essential to function.

Brandir International, Inc v. Cascade Pacific Lumber Co, 834 F.2d 1142 (2d Cir. 1987): Cited by the Supreme Court, this U.S. case emphasized artistic expression uninhibited by functional considerations.

Pivot Point Int’l, Inc v. Charlene Prods, Inc, 372 F.3d 913 (7th Cir. 2004): Referenced by the Supreme Court, this U.S. case reinforced the need to exclude industrial designs from copyright protection.

Galiano v. Harrah’s Operating Co, 416 F.3d 411 (5th Cir. 2005): Cited by the Supreme Court, this U.S. case introduced the marketability approach to conceptual separability, focusing on aesthetic marketability.

Star Athletica, L.L.C v. Varsity Brands, Inc, 137 S. Ct. 1002, 197 L. Ed. 2d 354 (2017): Referenced by the Supreme Court, this U.S. Supreme Court case established a clear test for copyright protection of design features, requiring separability and independent artistic value, harmonizing U.S. law and influencing the Indian approach.

Shri Mukund Bhavan Trust v. Shrimant Chhatrapati Udayan Raje Pratapsinh Bhonsle, (2024) SCC OnLine SC 3844: Cited by the appellants, this Supreme Court case was used to argue that evasive drafting cannot create a cause of action, though the court did not extensively engage with it.

Detailed Reasoning and Analysis of Judge

The Supreme Court adopted a comprehensive approach to resolve the dispute, focusing on the interplay between the Copyright Act and Designs Act. The court framed two issues: the parameters for classifying a work under Section 15(2) of the Copyright Act as a design, and the propriety of the High Court’s rejection of the Order VII Rule 11 application. On the first issue, the court conducted a three-part analysis: examining India’s IP statutory framework, evaluating global jurisprudence, and formulating a definitive test. The court noted that the Copyright Act protects artistic works under Section 2(c), including drawings, while the Designs Act under Section 2(d) protects visually appealing features applied industrially, excluding functional devices. Section 15(2) limits copyright protection for unregistered designs reproduced over fifty times industrially, creating a potential overlap. The court reviewed Indian precedents like Microfibres I and II, which distinguished artistic works from designs based on industrial intent and functional utility, and English cases like Amp v. Utilux, which introduced the functional utility test. U.S. cases, particularly Star Athletica, provided the conceptual separability standard, aligning with India’s approach. International treaties like TRIPS reinforced the functional utility test but left harmonization to national laws.

The court formulated a two-pronged test to determine protection: (i) assess whether the work is a purely artistic work under the Copyright Act or a design derived from it and industrially applied, per Section 15(2); (ii) if not copyrightable, apply the functional utility test to determine if the work’s dominant purpose is aesthetic or functional, qualifying it for design protection. This test ensures harmony between the statutes, protecting artistic works while regulating industrial designs. On the second issue, the court upheld the High Court’s rejection of the Order VII Rule 11 application, finding that the Commercial Court erred in summarily dismissing the suit. The court held that determining the drawings’ nature involved mixed questions of law and fact, requiring a trial. The Commercial Court’s assumption that the drawings were designs ignored their potential artistic status and the separate claims for Literary Works and confidential information. Citing Microfibres II, the court emphasized the broad scope of artistic works and the need for detailed inquiry. The court directed the Commercial Court to apply the two-pronged test and independently assess all claims, ensuring a comprehensive resolution.

Final Decision

The Supreme Court dismissed the appeals, upholding the High Court’s decision to reject the Order VII Rule 11 application. It directed the Commercial Court to decide Inox’s interim injunction application within two months and conduct a trial within one year, applying the two-pronged test to ascertain the Proprietary Engineering Drawings’ nature and addressing other IP claims.

Law Settled in This Case

The judgment establishes a clear framework for distinguishing artistic works under the Copyright Act from designs under the Designs Act. It introduces a two-pronged test: first, determining if a work is a purely artistic work or a design derived from it and industrially applied; second, applying the functional utility test to assess aesthetic versus functional dominance for design protection. This harmonizes the Copyright Act and Designs Act, ensuring that artistic works retain copyright protection unless industrially applied beyond fifty reproductions without design registration, while designs are governed by the Designs Act’s shorter protection period. The decision clarifies that such determinations involve mixed questions of law and fact, precluding summary dismissal under Order VII Rule 11, and reinforces the judiciary’s role in balancing IP rights with commercial realities.

Case Title: Cryogas Equipment Private Limited Vs. Inox India Limited and Others

Date of Order: April 15, 2025

Case No.: Special Leave Petition (C.) No. 28062 / 2024

Neutral Citation: 2025 INSC 483

Name of Court: Supreme Court of India

Name of Judges: Hon'ble Justices Surya Kant, Nongmeikapam Kotiswar Singh

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

Azure Hospitality Private Limited Vs Phonographic Performance Limited

The intersection of intellectual property law and commercial interests often gives rise to complex disputes, particularly in the realm of copyright law. The case of Azure Hospitality Private Limited versus Phonographic Performance Limited (PPL) before the High Court of Delhi is a landmark litigation that delves into the intricate provisions of the Copyright Act, 1957, specifically addressing the rights of copyright owners and the regulatory framework governing the licensing of sound recordings. This case study explores the nuances of the dispute, which centers on whether an assignee of copyrighted sound recordings, such as PPL, can issue licenses without being a registered copyright society or a member thereof, as mandated by Section 33 of the Copyright Act. The judgment, delivered on April 15, 2025, not only resolves the immediate conflict but also clarifies critical aspects of copyright law, balancing the rights of copyright owners with the public interest in preventing monopolistic practices.

Detailed Factual Background

Phonographic Performance Limited (PPL), a company registered under the Companies Act, 2013, operates as an assignee of copyrights in sound recordings, holding public performance rights for over 400 music labels and controlling 80 to 90% of all sound recordings in India. These rights were assigned to PPL by the original owners (producers) of the sound recordings under Section 18(1) of the Copyright Act, making PPL the deemed owner of the copyrights under Section 18(2). Azure Hospitality Private Limited, a company operating 86 high-end restaurants with a turnover of ₹161 crores, was found to be playing these copyrighted sound recordings in its outlets without obtaining a license from PPL. On July 20, 2022, PPL issued a cease-and-desist notice to Azure, demanding that it stop exploiting the sound recordings. Azure’s failure to comply prompted PPL to file a suit, CS (Comm) 714/2022, before the Delhi High Court, seeking a permanent injunction to restrain Azure from using PPL’s copyrighted works, along with damages and costs. PPL also filed an application (IA 16777/2022) under Order XXXIX Rules 1 and 2 of the Code of Civil Procedure (CPC) for an interim injunction, while Azure countered with an application (IA 17272/2022) under Order XXXIX Rule 4 to vacate the interim injunction granted on October 14, 2022. The Single Judge’s order on March 3, 2025, granting PPL’s application and dismissing Azure’s, led to the present appeal before the Division Bench of the Delhi High Court.

PPL’s dominance in the sound recording market stems from assignment deeds executed by original copyright owners, granting PPL the right to license public performances of these recordings. Notably, PPL was a registered copyright society from May 7, 1996, to June 21, 2014, under Section 33 of the Copyright Act. However, following the Copyright (Amendment) Act, 2012, which required re-registration of existing copyright societies within one year, PPL’s application for re-registration was rejected, leaving it unregistered as a copyright society at the time of the dispute. Azure argued that PPL’s lack of registration or membership in a registered copyright society, such as the Registered Music Performance Limited (RMPL), barred it from issuing licenses, rendering its suit and injunction application untenable.

Detailed Procedural Background

The procedural journey of this case began with PPL filing CS (Comm) 714/2022 before a Single Judge of the Delhi High Court, accompanied by IA 16777/2022 for an interim injunction to restrain Azure from using PPL’s copyrighted sound recordings. On October 14, 2022, the Single Judge issued summons in the suit and notice in the application, granting an ex parte ad interim injunction in favor of PPL, restraining Azure from exploiting PPL’s copyrighted works until further orders. Azure responded by filing IA 17272/2022 under Order XXXIX Rule 4 of the CPC, seeking to vacate the interim injunction. On March 3, 2025, the Single Judge pronounced a judgment allowing PPL’s application and dismissing Azure’s, thereby continuing the injunction pending the final adjudication of the suit. Aggrieved by this decision, Azure filed an appeal, FAO(OS) (Comm) 41/2025, before the Division Bench of the Delhi High Court, along with associated applications (CAV 106/2025, CM APPL. 16177/2025, CM APPL. 16178/2025, and CM APPL. 16179/2025). The Division Bench, comprising Justices C. Hari Shankar and Ajay Digpaul, reserved the judgment on April 8, 2025, and pronounced it on April 15, 2025, modifying the Single Judge’s order to balance the equities between the parties while addressing the core legal issue.

Issues Involved in the Case

The primary issue in this case was whether PPL, as an assignee of copyrights in sound recordings under Section 18 of the Copyright Act, could issue licenses for their public performance without being a registered copyright society or a member of one, as required by Section 33(1) of the Copyright Act? This issue necessitated an examination of the interplay between Sections 18, 30, and 33 of the Copyright Act, particularly the scope of the first proviso to Section 33(1), which allows a copyright owner to grant licenses in their individual capacity. A related question was whether PPL’s lack of registration or membership in a registered copyright society rendered it incapable of enforcing its copyright through an infringement suit or seeking an injunction. Additionally, the court had to consider whether the Single Judge’s grant of an interim injunction was justified, given the principles of prima facie case, balance of convenience, and irreparable loss, and whether an alternative equitable remedy, such as a deposit, could be imposed pending the suit’s final adjudication.

Detailed Submission of Parties

Azure argued that Section 33(1) of the Copyright Act was designed to prevent cartelization and monopolistic practices by entities like PPL, which control a significant portion of the sound recording market. They contended that the phrase “carrying on the business of issuing or granting licenses” in Section 33(1) applied to PPL, as acknowledged in the Single Judge’s judgment, which noted PPL’s engagement in such business. Azure emphasized that Section 33(1) prohibits any person or association from issuing licenses without registration as a copyright society under Section 33(3) or membership in one, subjecting them to the tariff regime under Section 33A. This regulatory framework, introduced by the Copyright (Amendment) Act, 2012, aims to ensure transparency and prevent exorbitant licensing fees. Azure argued that the first proviso to Section 33(1), which allows a copyright owner to grant licenses in their individual capacity, should not override the main section’s prohibition. The proviso’s requirement that such licenses be “consistent with obligations as a member of a registered copyright society” implies that the copyright owner must be a member of such a society, a condition PPL did not fulfill. Azure further relied on the 227th Report of the Parliamentary Standing Committee (PSC), which highlighted the need for transparency in tariff schemes to curb arbitrary pricing by copyright societies like PPL. Alternatively, Azure proposed that, if an injunction was deemed necessary, the court should direct a deposit based on RMPL’s tariff rates, balancing convenience and preventing irreparable loss.

PPL countered that PPL, as the assignee and deemed owner of copyrights under Section 18(2), had an absolute right under Section 30 to grant licenses on its own terms, unfettered by Section 33(1). He argued that the first proviso to Section 33(1) preserved this right, allowing PPL to license its “own works” without needing to be a registered copyright society or a member thereof. Sibal distinguished between compulsory and voluntary licensing, asserting that PPL’s voluntary licensing under Section 30 was not subject to the regulatory constraints applicable to copyright societies. He relied on precedents like Novex Communication v Lemon Tree Hotels and Novex Communications v Trade Wings Hotel, which held that Section 33(1) does not curtail a copyright owner’s licensing rights under Section 30. Sibal also challenged Azure’s portrayal as a financially strained entity, noting its substantial turnover and arguing that Azure sought to exploit PPL’s sound recordings without payment. He opposed Azure’s deposit proposal, asserting that it undermined PPL’s proprietary rights and that an injunction was the appropriate remedy to protect PPL’s interests pending the suit’s outcome.

Detailed Discussion on Judgments Cited by Parties and Their Context

The parties and the court relied on several judicial precedents to support their interpretations of the Copyright Act, each contributing to the legal discourse on copyright ownership and licensing.

1. Novex Communication v Lemon Tree Hotels, 2019 SCC OnLine Del 6568
   Cited by PPL and the Single Judge, this Delhi High Court decision held that an assignee of copyrights under Section 18, like Novex, could grant licenses under Section 30 without being a registered copyright society. The court reasoned that Section 33(1) does not restrict the owner’s inherent right to license their works, as preserved by the first proviso. In the Azure-PPL case, PPL relied on this precedent to argue that its status as an assignee under Section 18(2) entitled it to license its sound recordings independently of Section 33(1). However, the Division Bench found this interpretation problematic, as it rendered Section 33(1)’s registration requirement redundant, failing to harmonize the proviso with the main section.
2. Novex Communications v Trade Wings Hotel, 2024 SCC OnLine Bom 252
   This Bombay High Court judgment, also cited by PPL and the Single Judge, reinforced the Novex v Lemon Tree holding, stating that Section 33(1) does not curtail the copyright owner’s licensing power under Section 30. The court emphasized that Sections 30 and 33 operate in distinct chapters, with the former granting unfettered licensing rights to owners. PPL leveraged this decision to assert its right to license sound recordings without registration. The Division Bench, however, critiqued this view for overlooking the phrase “or in respect of any other rights conferred by this Act” in Section 33(1), which subjects Section 30 rights to the registration requirement.
3. Entertainment Network India v Super Cassette Industries, (2008) 13 SCC 30
   Cited by both parties, this Supreme Court judgment clarified that the 1994 amendment to the Copyright Act did not divest copyright owners of their licensing rights but provided an option to exploit copyrights through copyright societies. PPL used this to argue that its Section 30 rights remained intact, while Azure highlighted the court’s discussion on compulsory licensing to underscore the regulatory intent behind Section 33. The Division Bench noted that Azure’s reliance on paragraph 88, which dealt with compulsory licensing, was misplaced in the context of PPL’s voluntary licensing but affirmed that the judgment supported the owner’s licensing autonomy, subject to statutory constraints.
4. Phonographic Performance Ltd. v Canvas Communication, Citation Not Provided in Document
   Referenced by the Single Judge, this Delhi High Court decision followed Novex v Lemon Tree, affirming that an assignee could license copyrights without being a copyright society. PPL cited it to bolster its position, but the Division Bench did not engage extensively with this case, focusing instead on the broader statutory interpretation.
5. Director of Supplies and Disposals v Member, Board of Revenue, AIR 1967 SC 1826
   Cited by the Division Bench, this Supreme Court decision defined “carrying on business” as requiring a systematic, profit-motivated activity. The court used this to establish that PPL’s licensing activities constituted a “business” under Section 33(1), triggering the registration requirement.
6. Assistant Commissioner v Hindustan Urban Infrastructure Ltd., (2015) 3 SCC 745
   This Supreme Court case, referenced by the court, expanded the meaning of “carrying on business” to encompass a wide range of activities beyond buying and selling. It supported the court’s view that PPL’s licensing operations fell within Section 33(1)’s ambit.
7. Narain Swadeshi Weaving Mills v Commissioner of Excess Profits Tax, AIR 1955 SC 176
   Cited by the court, this Supreme Court decision defined “business” as a systematic activity with a profit motive, reinforcing PPL’s engagement in the business of licensing under Section 33(1).
8. Barendera Prasad v ITO, AIR 1981 SC 1047
   This Supreme Court case, used by the court, described “business” as a continuous, income-generating activity, further confirming PPL’s activities as a business subject to Section 33(1).
9. Management of Tata Iron and Steel Company Ltd v Chief Inspecting Officer, AIR 2005 SC 1433
   Cited by the court, this decision defined “business” as a commercial enterprise for profit, aligning with the court’s interpretation of PPL’s licensing operations.
10. State of MP v Mukesh, (2006) 13 SCC 197
    Referenced by the court, this Supreme Court case emphasized the continuity aspect of “business,” supporting the application of Section 33(1) to PPL’s ongoing licensing activities.
11. Institute of Chartered Accountants of India v Price Waterhouse, (1997) 6 SCC 312
    Cited by the court, this Supreme Court decision underscored the principle that statutory interpretations should avoid rendering provisions redundant, guiding the court’s rejection of the Novex decisions’ interpretation.
12. Sales Tax Commissioner v B.G. Putal, 1995 Supp (1) SCC 429
    Used by the court, this Supreme Court case held that a proviso cannot dilute the main section’s efficacy, supporting the court’s view that the first proviso to Section 33(1) does not override the registration requirement.

Detailed Reasoning and Analysis of Judge

The Division Bench embarked on a meticulous analysis of the Copyright Act, focusing on Sections 13, 14, 17, 18, 30, and 33, to resolve the central issue. The court began by affirming that sound recordings are a distinct category of copyrightable works under Section 13(1)(c), with the producer as the first owner under Section 17, read with Section 2(d)(v). Section 18(2) unequivocally deemed PPL, as an assignee, the owner of the copyrights in the assigned sound recordings, entitling it to license them under Section 30. However, the court emphasized that Section 16 subjects all copyright rights to the Act’s provisions, setting the stage for examining Section 33(1)’s impact.

Section 33(1) prohibits any person or association from carrying on the business of issuing or granting licenses in copyrighted works except under or in accordance with a registration granted under Section 33(3), which pertains to copyright societies. The court, drawing on Supreme Court precedents like Director of Supplies and Disposals and Narain Swadeshi Weaving Mills, interpreted “carrying on the business” broadly, encompassing PPL’s systematic licensing activities, as admitted in the Single Judge’s judgment. The court noted that PPL’s prior status as a registered copyright society (1996–2014) and its unsuccessful re-registration attempt post-2012 underscored its obligation to comply with Section 33(1).

The first proviso to Section 33(1), allowing a copyright owner to grant licenses in their individual capacity “consistent with obligations as a member of a registered copyright society,” was pivotal. The court rejected PPL’s contention, supported by the Novex decisions, that the proviso exempted it from registration requirements. Instead, it held that the proviso assumes the copyright owner is a member of a registered copyright society, as evidenced by the phrase “consistent with obligations.” This interpretation aligned with the principle that a proviso cannot negate the main section’s intent, as per Sales Tax Commissioner v B.G. Putal. The court found that accepting the Novex decisions’ view would render Section 33(1) and Section 33A’s tariff regime redundant, undermining the legislative intent to regulate bulk copyright holders and prevent monopolistic practices, as highlighted in the 227th PSC Report.

The court further noted that sound recordings constitute a distinct class under Section 2(y)(iii), with RMPL being the sole registered copyright society for such works. PPL, not being a registered society or a member of RMPL, could not issue licenses independently. The court distinguished between the owner’s works (those created by the owner) and assigned works, suggesting that the proviso’s licensing right applies to the former, not the latter, though it left this distinction open for final adjudication. The court also addressed Azure’s argument that PPL’s lack of registration barred it from maintaining the suit but refrained from a conclusive finding, as it was not orally argued.

Balancing equities at the interim stage, the court acknowledged that outright vacating the injunction would allow Azure to exploit PPL’s recordings gratis, which was inequitable. Conversely, upholding the injunction without conditions ignored PPL’s non-compliance with Section 33(1). The court crafted an equitable solution, directing Azure to pay PPL at RMPL’s tariff rates for using PPL’s recordings, as if PPL were a member of RMPL, pending the suit’s outcome. This ensured PPL received compensation while aligning with the regulatory framework, subject to final adjudication in CS (Comm) 714/2022.

Final Decision

The Division Bench allowed Azure’s appeal, modifying the Single Judge’s order. It disposed of IA 16777/2022 by directing Azure to pay PPL for using its sound recordings at RMPL’s tariff rates, as per RMPL’s website terms, with both parties required to submit three-monthly payment statements to the Single Judge. The arrangement was subject to the final outcome of CS (Comm) 714/2022, ensuring interim equity without prejudicing the suit’s merits.

Law Settled in This Case

This judgment clarified that any person or association engaged in the business of issuing or granting licenses for copyrighted sound recordings must comply with Section 33(1) of the Copyright Act by being a registered copyright society or a member thereof. The first proviso to Section 33(1) does not exempt assignees under Section 18(2) from this requirement, as it presupposes membership in a registered copyright society. The decision reinforces the regulatory intent of Sections 33 and 33A to prevent monopolistic practices and ensure transparency in licensing tariffs, harmonizing the owner’s licensing rights under Section 30 with the Act’s broader framework. It also underscores the judiciary’s role in balancing proprietary rights with public interest at the interim stage, pending final adjudication.

Case Title: Azure Hospitality Private Limited Vs Phonographic Performance Limited

Date of Order: April 15, 2025

Case No.: FAO(OS) (Comm) 41/2025

Neutral Citation: 2025:DHC:2562-DB

Name of Court: High Court of Delhi

Name of Judges: Justice C. Hari Shankar, Justice Ajay Digpaul

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

Franco India Pharmaceuticals Pvt. Ltd. Vs. Corona Remedies Pvt. Ltd.

In the dynamic realm of intellectual property law, disputes over trademark validity often spotlight the delicate balance between proprietary rights and fair competition. The case of Franco India Pharmaceuticals Pvt. Ltd. versus Corona Remedies Pvt. Ltd., adjudicated by the Bombay High Court, exemplifies this tension. Centered on the registered trademarks "STIMULIV" and "STIMULET," the case delves into the intricacies of Section 124 of the Trade Marks Act, 1999, exploring the threshold for challenging trademark registration validity in infringement suits. This case study unravels the factual and procedural tapestry, dissects the legal issues, and analyzes the judicial reasoning that shaped the court's decision to frame an issue regarding the validity of the plaintiff’s trademark registration.

Detailed Factual Background

Franco India Pharmaceuticals Pvt. Ltd., the plaintiff, held registered trademarks for "STIMULIV" as both a word mark (Registration No. 297201 in Class 5) and a label mark (Registration No. 490598 in Class 5), with registrations dating back to 1974. These marks were used for an ayurvedic preparation aimed at liver stimulation. The plaintiff alleged that Corona Remedies Pvt. Ltd., the defendant, infringed upon its trademarks by using the registered trademark "STIMULET" for similar pharmaceutical products. The defendant countered, asserting that the plaintiff’s "STIMULIV" mark was invalidly registered due to its descriptive nature and misuse beyond a disclaimer limiting its exclusivity to non-descriptive elements. The dispute escalated when the defendant sought to challenge the validity of the plaintiff’s trademark registrations, invoking Section 124 of the Trade Marks Act, 1999, which allows courts to frame issues regarding trademark validity in infringement suits.

Detailed Procedural Background

The plaintiff initiated a commercial intellectual property suit (Commercial IP Suit No. 105 of 2022) in the Bombay High Court’s Commercial Division, seeking to restrain the defendant from using "STIMULET." On March 1, 2021, a Single Judge granted interim relief, prohibiting the defendant from using its trademark during the suit’s pendency. The defendant appealed, and on January 20, 2023, the Division Bench overturned the interim order, finding no prima facie case of similarity between the marks. The plaintiff’s subsequent challenge before the Supreme Court was dismissed, leaving no interim relief in place. Meanwhile, on April 30, 2024, the court framed an issue regarding the validity of the defendant’s "STIMULET" mark at the plaintiff’s behest, under Section 124(1)(b)(ii). The defendant then pressed for a similar issue concerning the plaintiff’s "STIMULIV" marks, relying on pleadings in paragraphs 18 and 41 of its written statement. This request, opposed by the plaintiff, led to the order dated April 7, 2025, by Justice Manish Pitale, which forms the core of this case study.

Issues Involved in the Case

The primary issue was whether the court should frame an issue under Section 124(1)(b)(ii) of the Trade Marks Act, 1999, regarding the validity of the plaintiff’s "STIMULIV" trademark registrations. Sub-issues included: whether the defendant’s pleadings in paragraphs 18 and 41 of the written statement met the statutory requirement of prima facie tenability? whether the defendant’s alleged mutually inconsistent pleas negated its challenge to the plaintiff’s trademark validity; whether the defendant’s prior filing of a rectification petition disqualified it from invoking Section 124; and the appropriate legal threshold for framing such an issue, particularly in light of judicial precedents defining "prima facie tenability.?

Detailed Submission of Parties

The defendant argued that paragraphs 18 and 41 of its written statement sufficiently challenged the validity of the plaintiff’s "STIMULIV" marks. Paragraph 18 alleged that the plaintiff concealed a disclaimer limiting exclusive rights to non-descriptive elements and misused the mark beyond its ayurvedic scope. Paragraph 41 claimed the mark was descriptive, as it directly referenced liver stimulation, rendering its registration invalid. The defendant relied on Section 124(1)(b)(ii), asserting that these pleadings satisfied the "low threshold prima facie case" test, as elucidated in Patel Field Marshal Agencies v. P. M. Diesels Ltd., (2018) 2 SCC 112. Citing Pepsico Inc. v. Parle Agro Pvt. Ltd. (CS (COMM) 268 of 2021, Delhi High Court, September 18, 2023) and Dharampal Satyapal Ltd. v. Basant Kumar Makhija, 2023 SCC OnLine Del 6598, the defendant emphasized that the court need only form a tentative view of tenability, not delve into merits. The defendant further argued that its alternative pleas under Sections 12, 28(3), and 30(2)(e) were permissible and did not undermine its validity challenge, as it never admitted similarity between the marks. On the rectification petition issue, the defendant cited Resilient Innovations Pvt. Ltd. v. Phonepe Pvt. Ltd., 2023 SCC OnLine Del 2972, advocating that such petitions could be held in abeyance to avoid multiplicity of proceedings.

The plaintiff opposed framing the issue, arguing that the defendant’s prior rectification petition rendered Section 124 jurisdiction inapplicable, as the section contemplates prospective filings within three months of issue framing. The plaintiff contended that the defendant’s pleadings were frivolous, given "STIMULIV’s" 50-year distinctive use and registration under the Trade and Merchandise Marks Act, 1958. Citing Burger King Corporation v. Ranjan Gupta, (2023) 94 PTC 137, the plaintiff argued that the defendant’s descriptive nature claim was untenable. The plaintiff further asserted that the defendant’s reliance on Sections 12, 28(3), and 30(2)(e) admitted mark similarity, creating mutually destructive pleas that disqualified its validity challenge, as per R. N. Gosain v. Yashpal Dhir, (1992) 4 SCC 683, and Neon Laboratories Ltd. v. Themis Medicare Ltd., 2014 SCC OnLine Bom 1087.

Detailed Discussion on Judgments Cited by Parties

The defendant relied on Patel Field Marshal Agencies v. P. M. Diesels Ltd., (2018) 2 SCC 112, where the Supreme Court clarified that Section 124 (pari materia with Section 111 of the 1958 Act) aims to eliminate false, frivolous, or untenable invalidity claims. The court emphasized a two-step test: specific pleadings challenging validity and arguable grounds demonstrating prima facie tenability. This precedent was pivotal in defining the court’s jurisdiction and the low threshold for issue framing. In Pepsico Inc. v. Parle Agro Pvt. Ltd. (CS (COMM) 268 of 2021, Delhi High Court, September 18, 2023), the Delhi High Court held that "tenable" requires only a subjective, tentative assessment of arguability, not a merits-based inquiry. Similarly, Dharampal Satyapal Ltd. v. Basant Kumar Makhija, 2023 SCC OnLine Del 6598, reinforced that the court need not rigidly interpret "tenable," focusing on a preliminary finding. Lupin Ltd. v. Johnson & Johnson, AIR 2015 Bom 50, a Full Bench decision, distinguished the low threshold under Section 124 from the higher threshold for interim relief, using the term "low threshold prima facie case." Resilient Innovations Pvt. Ltd. v. Phonepe Pvt. Ltd., 2023 SCC OnLine Del 2972, supported holding rectification petitions in abeyance to streamline proceedings.

The plaintiff cited Burger King Corporation v. Ranjan Gupta, (2023) 94 PTC 137, where the Delhi High Court rejected a validity challenge due to identical marks and frivolous defenses, but the Bombay High Court distinguished this case due to differing factual contexts. R. N. Gosain v. Yashpal Dhir, (1992) 4 SCC 683, and Neon Laboratories Ltd. v. Themis Medicare Ltd., 2014 SCC OnLine Bom 1087, were invoked to argue against mutually destructive pleas, asserting that the defendant’s reliance on similarity-based defenses contradicted its validity challenge. However, the court found these inapplicable, as the defendant’s alternative pleas were permissible and did not admit similarity.

Detailed Reasoning and Analysis of Judge

Justice Manish Pitale meticulously analyzed the defendant’s pleadings, the plaintiff’s objections, and the legal framework under Section 124. The court applied the two-step test from Patel Field Marshal, first confirming that paragraphs 18 and 41 explicitly challenged the plaintiff’s trademark validity by alleging descriptive use and disclaimer violations. The second step assessed prima facie tenability, adopting the "low threshold prima facie case" test from Lupin Ltd. The court found the defendant’s claims arguable, noting that whether "STIMULIV" was descriptive or misused beyond its disclaimer warranted further scrutiny, without delving into merits.

The plaintiff’s argument on mutually destructive pleas was rejected, as the court recognized the defendant’s right to take alternative defenses. The Division Bench’s prior ruling clarified that the defendant never admitted mark similarity, undermining the plaintiff’s reliance on R. N. Gosain and Neon Laboratories. The court also dismissed the plaintiff’s objection to the defendant’s prior rectification petition, aligning with Resilient Innovations and Pepsico to avoid procedural multiplicity. Emphasizing Patel Field Marshal’s broader interpretation of Section 124, the court held that the section’s heading did not restrict its application to prospective rectification filings. The court concluded that the defendant’s pleas were neither false, frivolous, nor untenable, justifying the framing of an issue on the validity of the plaintiff’s trademarks.

Final Decision

The Bombay High Court, on April 7, 2025, framed the following issue: "Whether the registration of the trademark ‘STIMULIV’ bearing registration No. 297201 in Class 5 and registration of the label mark ‘STIMULIV’ bearing registration No. 490598 in Class 5, in the name of the plaintiff, is valid or not?" The suit’s proceedings were stayed, allowing the defendant to pursue its existing rectification petition. The court rejected the plaintiff’s contentions, affirming the defendant’s right to challenge the plaintiff’s trademark validity under Section 124.

Law Settled in This Case

This case reinforces the "low threshold prima facie case" test for framing issues under Section 124(1)(b)(ii) of the Trade Marks Act, 1999, requiring only specific pleadings" and arguable grounds, not a merits-based inquiry. It clarifies that defendants may raise alternative and mutually inconsistent pleas without undermining a validity challenge, provided no admission of mark similarity exists. The decision also establishes that prior rectification petitions do not preclude Section 124 jurisdiction, with courts favoring procedural efficiency by holding such petitions in abeyance. The ruling underscores the judiciary’s role in filtering false or frivolous claims while facilitating legitimate challenges to trademark registrations.

Case Title:Franco India Pharmaceuticals Pvt. Ltd. Vs. Corona Remedies Pvt. Ltd.
Date of Order:April 7, 2025
Case No.Commercial IP Suit No. 105 of 2022
Name of Court:High Court of Bombay
Name of Judge:Manish Pitale, H.J

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

Johnson & Johnson Vs. Pritamdas Arora

The plaintiff, Johnson & Johnson, is a globally recognized healthcare conglomerate based in New Jersey, USA, with over 230 subsidiaries and operations in more than 60 countries. Through its subsidiary Ethicon, it manufactures and distributes surgical medical devices under registered trademarks such as ‘SURGICEL’, ‘ETHICON’, and ‘LIGACLIP’. These marks have been in use in India since the 1990s and are registered across several jurisdictions including India. Johnson & Johnson’s products are particularly critical for bleeding management during surgery and have a high reputation for sterility, safety, and reliability.

The suit was initiated after a counterfeit ‘SURGICEL’ device was discovered during brain surgery at the University of Kentucky in the USA in 2019. An investigation revealed that over 1,000 counterfeit units were supplied to the university by XS Supply, a U.S.-based entity, which had sourced the devices from Lion Heart Surgical Supply LLC. Lion Heart had, in turn, obtained the products from Pure Care Traders F.Z.E., based in the UAE. Crucially, Pure Care provided documentation identifying Pritamdas Arora, operating through his business M/s Medserve in New Delhi, India, as the original supplier. Johnson & Johnson undertook international legal proceedings including seizures and preliminary injunctions in the U.S., and subsequently filed this suit in India.

The plaintiff’s evidence revealed that counterfeit products originating from the defendants were found to be contaminated and inadequately oxidized, posing severe health risks. Further investigation uncovered a deliberate international distribution network managed by defendant no.1, Mr. Pritamdas Arora, aided by his wife, defendant no.2, Ms. Ritika Arora. Evidence extracted from raids, including WhatsApp chats, emails, and hard drives, showed that the defendants had knowingly manufactured, repackaged, and exported counterfeit surgical devices, including expired goods with falsified expiry labels.

On 11 October 2019, an ad-interim injunction was granted in favour of the plaintiff, and Local Commissioners were appointed to seize infringing goods. Multiple premises were raided, and a vast volume of counterfeit products, shipping records, forged authorization letters, and digital evidence were seized. Defendant no.1 was later found to have forged stamps of Johnson & Johnson and maintained communication with international counterfeit suppliers from Turkey and China. Despite court orders, both defendants absconded and failed to appear before the court, resulting in ex-parte proceedings from 6 December 2022.

In evaluating the evidence, the Court noted that the defendants deliberately engaged in counterfeiting and intellectual property violations on an international scale. The court took serious note of voice messages and transcripts in which the defendant admitted to selling expired goods and instructed associates to falsify documentation to conceal the nature of the products. Financial records revealed proceeds exceeding ₹9.39 crores, and additional evidence of Hawala transactions was also placed on record.

The Court found the defendants liable for trade mark infringement, counterfeiting, passing off, and fraudulent misrepresentation. The Judge stressed that counterfeiting of surgical products posed an egregious threat to public health and could not be viewed merely as commercial infringement. The defendants' conduct was declared calculated, willful, and malicious, necessitating punitive action.

Accordingly, the Hon’ble Court granted a permanent injunction restraining the defendants from using the plaintiff’s marks or dealing in counterfeit medical devices. The plaintiff was authorized to destroy the seized infringing goods. The Court awarded compensatory damages of ₹2,34,82,986/- (calculated at 25% of the established sales of counterfeit goods) and exemplary damages of ₹1,00,00,000/- to deter similar violations in the future. Actual costs were also granted, to be determined upon submission of a bill of costs by the plaintiff under the Delhi High Court (Original Side) Rules, 2018.

This judgment strongly reaffirms the Court's commitment to protecting intellectual property, particularly in the medical domain, and sends a powerful message against those engaged in counterfeiting of life-saving devices. The judgment upholds both statutory and equitable principles, balancing enforcement of trade mark rights with the overriding public interest in health and safety.

Cause Title: Johnson & Johnson Vs. Pritamdas Arora 

Case Number: CS(COMM) 570/2019 

Neutral Citation: [2025:DHC:1585] 

Date of Order: 11 March 2025

Court: High Court of Delhi at New Delhi

Judge: Hon’ble Mr. Justice Amit Bansal

Arddy Engineering Innovations Pvt. Ltd. Vs Heraeus Technologies Indian Pvt. Ltd.

Introduction

In the intricate landscape of intellectual property disputes, the intersection of civil and criminal law often presents complex challenges, particularly when allegations of trademark infringement escalate into accusations of criminal misconduct. The case of Arddy Engineering Innovations Pvt. Ltd. & Ors. v. Heraeus Technologies India Pvt. Ltd., adjudicated by the High Court at Calcutta, exemplifies this convergence. This criminal revisional application, decided on April 16, 2025, addresses the contentious issue of whether a criminal proceeding for cheating, forgery, and criminal conspiracy should be quashed when rooted in a terminated distributorship agreement and alleged trademark misuse. Centered on the misuse of the trademark 'Hydris' for hydrogen sensors critical to railway safety, the case underscores the judiciary’s cautious approach to quashing criminal proceedings at a preliminary stage, emphasizing the need for trial to test serious allegations. The Calcutta High Court’s ruling reinforces the distinction between civil disputes and criminal offenses, offering significant insights for businesses navigating trademark enforcement in India.

Detailed Factual Background

Heraeus Technologies India Pvt. Ltd., the complainant, is a company that owns proprietary trademarks and technologies, including the 'Hydris' hydrogen sensor, uniquely approved by the Research Design and Standard Organization for measuring hydrogen levels in liquid steel, a critical safety component for railway tracks. Arddy Engineering Innovations Pvt. Ltd., along with its managing directors (petitioners 2 and 3), entered into an International Exclusive Distributorship Agreement (IEDA) with Heraeus in 2002, granting Arddy the right to distribute Heraeus’s products, including those bearing the 'Hydris' trademark, for advertising purposes only. This agreement was terminated by Heraeus on October 24, 2013, ending Arddy’s entitlement to use Heraeus’s trademarks.

Heraeus alleged that post-termination, Arddy developed a hydrogen sensor named 'Hysen' and affixed the 'Hydris' trademark to it, falsely representing it as Heraeus’s genuine product. These counterfeit sensors were allegedly supplied to Indian Railways, Bhilai Steel Plant (approximately 7,000–8,000 units in 2014), and other steel factories, deceiving customers and compromising railway and defense safety. Heraeus claimed this caused wrongful loss to its reputation and finances, constituting cheating under Section 415, illustration (b) of the Indian Penal Code (IPC), as well as forgery and criminal conspiracy. Despite a civil court injunction on October 28, 2015, from the District Judge of Sundergarh, prohibiting Arddy from using the 'Hydris' mark, Heraeus alleged that Arddy continued these infringing activities with impunity.

Arddy countered that the 11-year business relationship under the IEDA was unblemished until its termination, negating any initial intent to cheat. They argued that Heraeus’s allegations were a civil dispute over breach of contract, already addressed in a 2015 civil suit where Heraeus obtained the injunction, and a 2013 suit by Arddy for damages against Heraeus for IEDA violations, both pending. Arddy claimed the criminal complaint, filed six years after the civil suit, was a belated attempt to harass them.

Detailed Procedural Background

Heraeus initiated a criminal complaint (Case No. 743 of 2021) before the Judicial Magistrate, 4th Court, Barrackpore, under Sections 420 (cheating), 406 (criminal breach of trust), 461 (breaking open receptacle with intent to commit offense), 471 (using forged document as genuine), 120B (criminal conspiracy), and 34 (common intention) of the IPC. The Magistrate took cognizance on December 29, 2021, and, after examining witnesses under Section 200 of the Code of Criminal Procedure (Cr.P.C.), issued process against Arddy on January 4, 2022, finding a prima facie case.

Arddy challenged this order in a prior revisional application before the Calcutta High Court, arguing that the Magistrate issued process without conducting a mandatory inquiry under Section 202 Cr.P.C., as the accused resided outside the court’s jurisdiction. The High Court directed the Magistrate to order an inquiry by the Officer-in-Charge, Noapara Police Station. The police submitted a report on October 14, 2022, verifying the complainant’s accusations. On November 14, 2022, the Magistrate reissued process under Section 204 Cr.P.C., prompting Arddy to file the present revisional application (CRR 4690 of 2022) with an interim application (CRAN 2 of 2024), seeking to quash the proceedings and the November 14, 2022, order.

The matter was heard on January 29, 2025, by Hon’ble Dr. Justice Ajoy Kumar Mukherjee, with judgment delivered on April 16, 2025, after considering arguments from both parties.

Issues Involved in the Case

The case raised several pivotal issues. First, whether the allegations in the complaint constituted prima facie offenses under Sections 420, 406, 461, 471, 120B, and 34 of the IPC, or were merely a civil dispute over breach of contract? Second, whether the criminal complaint, filed six years after Heraeus’s civil suit, was a malicious attempt to harass Arddy, warranting quashing under Section 482 Cr.P.C? Third, whether the stands taken by Heraeus in the civil and criminal proceedings were contradictory, undermining the criminal case. Fourth, whether specific allegations against petitioners 2 and 3 (managing directors) were sufficient to implicate them, or if they were vicariously targeted. Fifth, whether the Magistrate applied judicial mind in issuing process, or if the order was mechanical, violating procedural norms.

Detailed Submission of Parties

Arddy argued that the complaint failed to establish the ingredients of the alleged IPC offenses. They emphasized the 11-year unblemished business relationship under the IEDA, terminated in 2013, negating any initial intent to cheat under Section 420 IPC. 

The allegations, they contended, amounted to a civil breach of contract, as evidenced by Heraeus’s 2015 civil suit and Arddy’s 2013 damages suit, both pending. The six-year delay in filing the criminal complaint suggested malice, supported by State of Haryana v. Bhajan Lal, 1992 Supp (1) SCC 335, which lists malicious prosecution as a ground for quashing. 

Arddy cited All Cargo Movers India (P) Ltd. v. Dhanesh Badarmal Jain, (2007) 14 SCC 776, arguing that Heraeus’s civil suit claimed breach of IEDA terms, while the criminal complaint alleged counterfeiting, indicating contradictory stands. They relied on Mitesh Kumar J. Shah v. State of Karnataka, (2022) 14 SCC 572, to assert that civil disputes should not be criminalized.

For petitioners 2 and 3, Arddy argued no specific overt acts were alleged, citing Sharad Kumar Sanghi v. Sangita Rane, (2015) 12 SCC 781, and Maksud Saiyed v. State of Gujarat, (2008) 5 SCC 668, which protect directors from vicarious liability without evidence of active involvement. They further contended that the Magistrate’s order was mechanical, lacking judicial application, per Mehmood Ul Rehman v. Khazir Mohammad Tunda, (2015) 12 SCC 420. Arddy relied on admitted documents (civil suit plaint, injunction order) as sterling evidence for quashing under Section 482 Cr.P.C.

Heraeus countered that the complaint clearly alleged cheating under Section 415, illustration (b) IPC, as Arddy affixed the 'Hydris' mark to counterfeit 'Hysen' sensors, deceiving customers like Bhilai Steel Plant. They argued that the Noapara Police inquiry, ordered under Section 202 Cr.P.C., verified these allegations, and the Magistrate’s November 14, 2022, order reflected satisfaction, negating claims of mechanical issuance. Heraeus cited M. Krishnan v. Vijay Singh, (2001) 8 SCC 645, to assert that pending civil suits do not bar criminal proceedings, as civil and criminal actions have distinct yardsticks. They relied on State of Bihar v. P.P. Sharma, 1992 Supp (1) SCC 222, to argue that Arddy’s untested documents (supplementary affidavits) should not be considered at this stage.

Heraeus maintained that their civil and criminal stands were consistent, both alleging Arddy’s unauthorized use of 'Hydris' post-termination, violating the 2015 injunction. They distinguished All Cargo Movers, noting no contradiction, and Mitesh Kumar J. Shah, as factually irrelevant, given Heraeus’s unilateral termination rights under the IEDA. For petitioners 2 and 3, Heraeus pointed to specific allegations in the complaint (paragraphs 4, 6, 13), negating vicarious liability claims, distinguishing Sharad Kumar Sanghi and Maksud Saiyed. They urged the court to allow the trial to proceed, citing the inquiry report’s findings and public safety concerns, and sought expeditious disposal.

Detailed Discussion on Judgments Cited by Parties

The court analyzed several precedents cited by the parties, each shaping its approach to quashing criminal proceedings:

State of Haryana v. Bhajan Lal, 1992 Supp (1) SCC 335: Arddy relied on paragraph 102(7), which lists malicious prosecution with ulterior motives as a ground for quashing under Section 482 Cr.P.C. The court found this inapplicable, as Heraeus’s complaint, supported by the police inquiry, disclosed prima facie offenses, negating claims of malice or personal grudge.

All Cargo Movers India (P) Ltd. v. Dhanesh Badarmal Jain, (2007) 14 SCC 776: Arddy cited this Supreme Court ruling, where contradictory stands in civil and criminal proceedings justified quashing. The court distinguished it, noting that Heraeus’s civil suit (breach of IEDA) and criminal complaint (counterfeiting) were consistent, both alleging unauthorized use of 'Hydris,' as evidenced by the 2015 injunction order.

Mitesh Kumar J. Shah v. State of Karnataka, (2022) 14 SCC 572: Arddy invoked this Supreme Court decision, which cautioned against criminalizing civil disputes. The court deemed it inapplicable, as Heraeus’s allegations of cheating and forgery involved distinct criminal elements (deceptive counterfeiting), not merely contractual breaches, and the IEDA’s termination clause supported Heraeus’s unilateral action.

Sharad Kumar Sanghi v. Sangita Rane, (2015) 12 SCC 781: Arddy relied on this Supreme Court ruling, which protects directors from vicarious liability absent specific allegations. The court distinguished it, noting that Heraeus’s complaint (paragraphs 4, 6, 13) detailed petitioners 2 and 3’s roles, implicating them directly, and the company (petitioner 1) was also a party, unlike in Sanghi.

Maksud Saiyed v. State of Gujarat, (2008) 5 SCC 668: Arddy cited this Supreme Court case, reinforcing that directors require specific allegations for liability. The court found it inapplicable, as Heraeus’s complaint specified individual roles for petitioners 2 and 3, distinguishing it from cases of vicarious implication.

Mehmood Ul Rehman v. Khazir Mohammad Tunda, (2015) 12 SCC 420: Arddy argued that the Magistrate’s order lacked judicial application, per this Supreme Court ruling, which requires magisterial satisfaction for issuing process. Heraeus countered, citing the same case, that no formal speaking order is needed. The court agreed with Heraeus, noting the Magistrate’s reliance on the Section 202 inquiry report, reflecting satisfaction.

M. Krishnan v. Vijay Singh, (2001) 8 SCC 645: Heraeus relied on this Supreme Court decision, which held that pending civil suits do not justify quashing criminal proceedings, as civil and criminal actions have distinct standards. The court found this persuasive, noting that Heraeus’s allegations of cheating and forgery required independent trial adjudication, despite civil litigation.

State of Bihar v. P.P. Sharma, 1992 Supp (1) SCC 222: Heraeus cited this Supreme Court ruling to argue that Arddy’s untested documents should not be considered under Section 482 Cr.P.C. The court agreed, limiting its analysis to the complaint and police report, excluding Arddy’s supplementary affidavits.

Faisal v. State of U.P., (2013) 2 SCC 801: Heraeus referenced this Supreme Court case (though not detailed in the judgment), likely to support the coexistence of civil and criminal proceedings. The court implicitly accepted this, aligning with M. Krishnan.

Hira Lal Hari Lal Bhagwati v. CBI, (2009) 11 SCC 529: Heraeus cited this Supreme Court decision, possibly to emphasize criminal liability for deceptive practices. The court did not elaborate but found Heraeus’s allegations sufficient for trial.

These precedents underscored the court’s reluctance to quash proceedings when prima facie offenses are disclosed, prioritizing trial for evidence testing.

Detailed Reasoning and Analysis of Judge

Court’s analysis was grounded in the principles governing Section 482 Cr.P.C., which allows quashing only when no prima facie case is disclosed or proceedings are an abuse of process. The court focused on the complaint’s allegations, the Section 202 inquiry report, and Section 415, illustration (b) IPC, which defines cheating as deceiving by counterfeit marks to induce purchase.

The court found that Heraeus’s complaint detailed Arddy’s post-termination use of the 'Hydris' mark on 'Hysen' sensors, deceiving customers like Bhilai Steel Plant into believing they were Heraeus’s products. This aligned with illustration (b), establishing a prima facie case of cheating. Specific allegations of supplying 7,000–8,000 counterfeit units in 2014, violating the 2015 injunction, and causing monetary and reputational loss to Heraeus, further supported offenses under Sections 406, 461, 471, 120B, and 34 IPC. The Noapara Police report, following a court-directed inquiry, corroborated these claims, indicating witness examination and verification.

Addressing Arddy’s arguments, the court rejected the claim that the dispute was purely civil. While acknowledging civil elements (breach of IEDA), it relied on M. Krishnan to hold that criminal allegations of cheating and forgery required independent trial adjudication. The six-year delay in filing the complaint was not fatal, as the complaint disclosed ongoing violations post-injunction. The court found no contradiction between Heraeus’s civil and criminal stands, distinguishing All Cargo Movers, as both proceedings targeted Arddy’s unauthorized 'Hydris' use. The 2015 injunction order’s narrative confirmed consistency, undermining Arddy’s reliance on contradictory pleadings.

For petitioners 2 and 3, the court noted specific allegations in the complaint, distinguishing Sharad Kumar Sanghi and Maksud Saiyed, as Heraeus implicated the company and directors directly. On the Magistrate’s order, the court, per Mehmood Ul Rehman, held that the November 14, 2022, process issuance, based on the October 14, 2022, inquiry report, reflected judicial satisfaction, not mechanical action. The court adhered to State of Bihar v. P.P. Sharma, excluding Arddy’s untested documents, limiting analysis to the complaint and police report.

The court dismissed Arddy’s Bhajan Lal argument, finding no evidence of malicious intent, as Heraeus’s allegations were substantiated. Public safety concerns, given the sensors’ railway applications, further justified trial. The court concluded that the complaint disclosed prima facie offenses, and quashing would prematurely halt justice, relegating both parties to prove their case at trial.

Final Decision

The Calcutta High Court dismissed the revisional application (CRR 4690 of 2022) on April 16, 2025, refusing to quash the criminal proceedings (Complaint Case No. 743 of 2021) or the Magistrate’s order dated November 14, 2022. The court directed the Judicial Magistrate, 4th Court, Barrackpore, to expedite the trial, ensuring urgent certified copies of the judgment were provided upon request.

Law Settled in This Case

This case establishes several key principles in Indian criminal and intellectual property law. First, under Section 482 Cr.P.C., courts will not quash criminal proceedings when the complaint discloses prima facie offenses, such as cheating under Section 415 IPC, even if civil disputes coexist, per M. Krishnan v. Vijay Singh. Second, allegations of trademark misuse post-termination of a distributorship agreement can constitute criminal offenses like cheating, forgery, and conspiracy, warranting trial to test evidence. Third, civil and criminal proceedings can proceed concurrently, as they involve distinct legal standards, and pending civil suits do not bar criminal action. Fourth, specific allegations against company directors negate claims of vicarious liability, per Sharad Kumar Sanghi, requiring individual roles to be detailed. Fifth, magisterial orders issuing process under Section 204 Cr.P.C. need not be elaborate, provided satisfaction is reflected, per Mehmood Ul Rehman, especially when supported by a Section 202 inquiry. Finally, untested defense documents are inadmissible under Section 482, limiting analysis to the complaint and inquiry reports, per State of Bihar v. P.P. Sharma.

Final Outcome: CRR 4690 of 2022 dismissed. Complaint proceeding in C. Case No. 743 of 2021 to continue. Trial court directed to expedite trial.

Case Title:Arddy Engineering Innovations Pvt. Ltd. Vs Heraeus Technologies Indian Pvt. Ltd.

Judge: Hon’ble Dr. Justice Ajoy Kumar Mukherjee

Court: High Court at Calcutta 

Case No.CRR 4690 of 2022

Date of Order: 16 April 2025

Name of Judge: Ajoy Kumar Mukherjee

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