The quandary of Section 124 of the Trademark Act 1999 resolved by Delhi High Court

In India, trademark related proceedings and their respective procedure are governed by the Trade Marks Act, 1999. This Act is a complete code in itself with respect to civil and/ or criminal actions for oppositions, rectifications, cancellations, infringement and passing off of a trademark. Rectification or cancellation proceedings against a registered trademark, originally, could be laid before either the Registrar of Trademarks or the Intellectual Property Appellate Board (in short 'IPAB'), as per the provisions of the Act. A suit for infringement, or for that matter passing-off, of trademark can be instituted only before a Court not below a District Court, which includes the Commercial Court under the Commercial Courts Act, 2015 and also a High Court having ordinary original civil jurisdiction to try such suits.

Section 124 of this Act provided for the stay of an infringement suit where either the plaintiff or the defendant has raised an issue of invalidity of the registration of the defendant's or the plaintiff's trademark, respectively. In such a case, the Court is obliged to summarily assess the tenability or triability of such a plea of invalidity and where it finds such plea to be prima facie tenable, it will frame an issue in that regard and stay the suit proceedings to enable the party, which has raised such plea of invalidity of registration, to initiate the rectification/ cancellation proceedings against such registration before the IPAB. Once such rectification/ cancellation proceeding is initiated before the IPAB, the Court trying such suit has to stay the same pending the decision from the High Court on rectification/ cancellation proceedings. Moreover, this provision goes on to mandate the stay of such infringement suit necessarily, without going on to assess the tenability of such plea, where the Court trying the infringement suit has been apprised that a rectification or cancellation proceeding is already pending before the Registrar of Trademarks, or the IPAB, on the date of filing of such an infringement suit.

The Trade Marks Act, 1999 was amended by the Tribunal Reforms Act, 2021 and through this amendment the IPAB was abolished and its jurisdiction was restored to a High Court, as was the case in the Trade and Merchandise Marks Act, 1958, before the coming into force of the Trade Marks Act, 1999. The IPAB was created through the Trade Marks Act, 1999 only.

A Single Bench ('SB') of Delhi High Court ('DHC') in Sana Herbals Pvt. Ltd. vs. Mohsin Dehlvi [2022 SCCOnline Del 4482] (in short 'Sana Herbals decision') held that after the abolition of the IPAB, there is no need to stay the infringement suit even if a rectification/ cancellation proceeding is pending. In coming to such a conclusion, the SB assumed that the infringement suit as well as the rectification/ cancellation petition will come before the DHC only. Further, the SB took into consideration the Rule 26 of the Delhi High Court Intellectual Property Rights Division Rules, 2022 ('IPD Rules') which provided for discretion in the DHC to consolidate proceedings in Intellectual Property Right matters that pertain to similar disputes, meaning thereby that the DHC can, in its discretion, transfer and consolidate the infringement suit as well as rectification/ cancellation proceedings relating to same trademark, even if they are pending before separate forums.

Another SB of the DHC in the case of Amrish Aggarwal Vs. Venus Home Appliance Pvt. Ltd. did not agree with the decision rendered in Sana Herbals [supra] and referred the question to a Division Bench ('DB') namely:

"Whether the view by the Coordinate Single Bench in para 7 of Sana Herbals, that, after the abolition of the IPAB, there is no requirement of staying a civil suit during pendency of the rectification petition, even where the rectification petition is instituted under Section 124 of the Trade Marks Act, can sustain, in view of Section 124(2)?"

The DB of the DHC overruled the Sana Herbals decision. The DB specifically ruled that the IPD Rules are applicable merely to the original suits brought before it and it would be wholly imprudent to construe Section 124 based on such IPD Rules. The DB further observed that Rule 26 of the IPD Rules would not eliminate the requirement of an order of stay of proceedings. The DB also observed that where the rectification/ cancellation proceedings is already pending before the Registrar, the question of consolidation of proceedings would not arise at all. In the unambiguous words of the DB:

"Notwithstanding the abolition of the IPAB and the power of rectification reverting to the High Court, a Trial Judge would necessarily have to stay its hands once it is apprised of the pendency of a rectification or cancellation action and which may have been initiated prior to the institution of the suit itself."

With respect to plea of invalidity of registration being raised during the infringement suit, the DB clarified that,

"The Trial Judge while trying a suit would have to also necessarily take cognizance of any plea of invalidity that may be raised in the suit proceedings itself. Once the Trial Judge on a prima facie examination of that plea finds the same to raise triable issues, it would be bound to stay further proceedings in the pending suit."

Another question raised before DB during reference proceedings concerned whether the infringement suit shall be automatically stayed in all cases where rectification/ cancellation proceedings has been filed. The DB answered such query in negative by ruling,

"….. that since the statute does not contemplate the stay of proceedings as a natural corollary or one which would come into effect by operation of law, the obligation of the Court (trying the infringement suit) to frame an order staying further proceedings in the suit is neither dispensed with nor eliminated."

The DB, thus, answered the reference in the negative by observing in unequivocal terms that the Act of 1999 provides explicitly that the final orders passed in rectification/ cancellation proceedings would bind the parties and additionally oblige the court (trying the suit) to dispose of the suit itself in conformity with the decision which may have been arrived at in the rectification or cancellation proceedings. The suit court thus clearly stands denuded of the authority or jurisdiction to independently proceed to examine the aspect of validity. The clear intent of the statute appears to be of ensuring that rectification challenges are placed exclusively before the Registrar or the High Court and consequently requiring the trial judge to stay its hands in any pending action. 

It is pertinent to note that after the abolition of the IPAB by the Tribunal Reforms Act, 2021, the issue revolving around Section 124 was debated before various High Courts. The instant judgment in reference will give a sigh of relief for at least one aspect of this provision vis-a-vis stay of suit.

About the authors: Mahua Roy Chowdhury is the Managing Partner at Royzz & Co and Jitendra Bohra is a Partner at the Firm.

If you would like your Deals, Columns, Press Releases to be published on Bar & Bench, please fill in the form available here.