A note on the conflict between Trademarks Act, 1999 and Commercial Courts Act, 2015

In a recent order, a two-judge bench of the Supreme Court (Justices JB Pardiwala and K Vinod Chandran) flagged an apparent inconsistency between the provisions of the Trade Marks Act, 1999 and the Commercial Courts Act, 2015.

The State of Jharkhand has notified commercial courts below the level of the district judge (civil judge, senior division) under Section 3(3) of the 2015 Act. Section 134 of the 1999 Act requires all suits to be instituted only in the district court.

In Raja Soap Factory, in the context of the Trade and Merchandise Marks Act, 1958, it was held that the expression “district court” means the principal civil court of ordinary original civil jurisdiction in a district. A civil judge, senior division is obviously inferior in rank to a district court. Under the 2015 Act, an intellectual property right dispute is classified as a “commercial dispute” under Section 2(1)(c)(xvii) and a commercial court (which includes a civil judge, senior division) is authorised to hear such disputes.

This gives rise to a conflict which essentially boils down to this: can a suit under the Trade Marks Act, 1999, which is required to be instituted in a district court, be instituted in a commercial court (civil judge, senior division) under the Commercial Courts Act, 2015?

The issue bears an eerie resemblance to the conflict between the Arbitration and Conciliation Act, 1996 and the 2015 Act. Under the 1996 Act, all applications are to be made to a “court”, an expression defined in Section 2(1)(e) of the said Act to mean the principal civil court of ordinary original civil jurisdiction in a district or the district court, in cases where the dispute arises out of a domestic arbitration and the High Court where the dispute emanates from an international commercial arbitration. The scope of the definition in Section 2(1)(e) was examined by the Supreme Court in the Atlanta case wherein it was held:

“...the provisions of the Arbitration Act, leave no room for any doubt, that it is the superior-most court exercising original civil jurisdiction, which had been chosen to adjudicate disputes arising out of arbitration agreements, arbitral proceedings and arbitral awards. Undoubtedly, a “Principal Civil Court of Original Jurisdiction in a district”, is the superior-most court exercising original civil jurisdiction in the district over which its jurisdiction extends. It is clear that Section 2(1)(e) of the Arbitration Act having vested jurisdiction in the “Principal Civil Court of Original Jurisdiction in a district”, did not rest the choice of jurisdiction on courts subordinate to that of the District Judge.”

When the Commercial Courts Act, 2015 initially came into force, the creation of commercial courts was envisaged only at the level of the district judge. Subsequently, in 2018, Section 3(3) was amended to provide for the creation of commercial courts below the level of a district judge. Various States have consequently notified commercial courts at the level of the civil judge, senior division. Section 10(3) stipulates that all applications and appeals under the Arbitration and Conciliation Act shall lie only to a commercial court. This gave rise to a direct conflict between Section 2(1)(e) of the 1996 Act and Sections 3(3) and 10(3) of the 2015 Act as applications could now be filed in commercial courts below the level of the district judge, which was contrary to the mandate of Section 2(1)(e) of the 1996 Act.

The High Courts of Bombay and Orissa resolved the controversy in favour of the 2015 Act. The decision of the Orissa High Court was affirmed by a two-judge bench of the Supreme Court in Jaycee Housing. However, in an earlier decision in Kandla Exports, the Supreme Court harmonised the two statutes to hold that the 1996 Act was a special statute vis-à-vis the 2015 Act and that the latter must be left to “operate in spheres other than arbitration.” This decision was cited and approved by two three-judge benches of the Supreme Court in BGS SGS SOMA JV and PASL Wind Solutions. It appears that though Kandla Exports and BGS SGS SOMA JV were cited before the Court in Jaycee, the Court did not address their applicability or otherwise in the course of its discussion.

In the later decision in PASL Wind Solutions, it was contended that there was a head-on conflict between Section 10(3) of the 2015 Act and Section 47 of the 1996 Act. A three-judge bench speaking through Justice RF Nariman held:

“...this Court has made it clear in BGS SGS SOMA JV v. NHPC [BGS SGS SOMA JV v. NHPC, (2020) 4 SCC 234 : (2020) 2 SCC (Civ) 606] (at paras 12 and 13) that the substantive law as to appeals and applications is laid down in the Arbitration Act whereas the procedure governing the same is laid down in the Commercial Courts Act. In this context, it has also been held that the Arbitration Act is a special Act vis-à-vis the Commercial Courts Act which is general, and which applies to the procedure governing appeals and applications in cases other than arbitrations as well.”

PASL Wind Solutions was, however, not noticed in Jaycee Housing. This essentially renders the latter decision per incuriam.

However, it does appear that the three-judge bench decisions in BGS SGS SOMA JV and PASL Wind Solutions were once again not brought to the notice of the learned judges who made the reference. This is clear from the fact that after referring to Kandla Exports and Jaycee Housing. They observe:

“The apparent conflict in the two decisions, according to us, needs to be looked into by a larger bench.”

Be that as it may, the referring bench is clearly right in making the following observation:

“In our humble view too, the Commercial Courts Act deals with the genus of commercial disputes as delineated in clauses (i) to (xxii) of section 2(c) while arbitration is an alternate dispute resolution process, itself a special legislation regulating the procedure. Likewise, intellectual property rights including that of trade marks is only a species [2(c)(xvii)] of the larger genus of commercial disputes. Further the constitution of commercial courts as per Section 3 empowers the High Courts to notify the constitution of Commercial Courts at the District Level, which includes the Higher Judiciary, comprising of the District Courts.”

This view clearly finds support from the three-judge bench decisions in BGS SGS SOMA JV and PASL Wind Solutions. Consequently, all that remains to be done is to declare Jaycee Housing as being incompatible with the ratio of the larger bench decisions. It is hoped that the issue is settled at the earliest opportunity. In matters concerning the jurisdiction of a court, the advice of Lord Macaulay bears repetition:

“Uniformity when you can have it; diversity when you must have it; but in all cases, certainty”.

Sharath Chandran is an advocate practicing before the Madras High Court.