From trademark to arbitration law, here are the key court orders

Trademark cannot be assigned to bank

The Supreme Court has ruled that a trademark cannot be assigned to a bank by a borrower who has defaulted on the loan. Such a transaction is against the Trade Marks Act and the Banking Regulation Act, the court stated in its judgment, Canara Bank vs N G Subbaraya Setty. In this case, Setty took a loan from the bank with his son as guarantor. There was default in repayment. When the bank moved the debt recovery tribunal, Setty assigned the trade mark, Eenadu, in incense sticks (agarbathies), in a deed to the bank. Later, the bank cancelled the agreement. This led to litigation. The Karnataka High Court approved the assignment but on appeal by the bank, the Supreme Court ruled that the assignment was against both trade mark and banking laws. The judgment said: “The trademark cannot be said to be property which has come into possession of the bank in satisfaction of any of the claims of the bank. Trademarks are not part of any security for loans or advances.” The court also stated that the assignment was against Sections 6 and 8 of the Banking Regulation Act. A bank cannot use a trademark to sell agarbathies. It cannot step outside its banking business. It can sell goods only to realise the security held by it. It cannot allow third parties to use the trademark and get a royalty. The court noted that the bank manager who accepted the assignment of the trademark was dismissed and prosecuted.

Multiple contracts on arbitration

When there are different agreements on the execution of a single commercial project, the absence of arbitration clause in an ancillary contract would not bar arbitration altogether. In this case, Ameet Shah vs Rishab Enterprises, there were four inter-connected agreements involving several energy firms to build a solar project in Jhansi. Some agreements were for material supply, others for sale and purchase, some others for installation and commission. One agreement did not have an arbitration clause. Disputes arose among the firms and allegations of fraud also flew. One party moved the Delhi High Court for arbitration. It dismissed the request on the ground that one agreement out of four did not have an arbitration clause. On appeal, the Supreme Court underlined that the main agreement did have an arbitration clause. Reversing the high court judgment, the Supreme Court also observed that the High Court erred in refusing to refer the disputes to arbitration on the ground of allegations of fraud. “It is only where serious questions of fraud are involved arbitration can be refused,” the judgment said and added that in this case, the allegations of fraud were not serious enough.

Container depots get tax benefit

The Supreme Court has dismissed the appeal of the revenue authorities and ruled that inland container depots of the Container Corporation of India are ‘inland ports’ and therefore, they are entitled to a deduction of income earned out of these depots. The Income Tax Appellate Tribunal and the Delhi High Court had already declared that the depots are entitled to the deduction but the revenue authorities again appealed arguing that the depots were ports which are not entitled to a deduction under Section 80-IA of the Income Tax Act. It contended the activities at the depots could not be termed infrastructure facility. Rejecting the argument, the Supreme Court, in the case CIT vs Container Corporation, stated these depots were intended to facilitate exports, especially to help industries which are away from seaports. They were part of the development of infrastructure and therefore, they were given certain tax concessions, including a ten-year grace period. The Commerce Ministry has also recognised them as inland ports, the judgment pointed out.

Injunction against pharmaceutical firm

The Delhi High Court last week confirmed the injunction against Midas Healthcare Ltd in a trade mark suit by Procter & Gamble. The allegation was that Midas sought registration of trade marks which were identical or similar to that of P&G, which spends Rs 70 billion in advertisements and Rs 580 million on its pharmaceutical products alone. The rival firm entered the medicine market with imitations of the P&G logos and web names. Moreover, Midas also did not appear in the court to defend its case. Therefore, the P&G suit was decreed with costs.

Diamond firm’s appeal dismissed

The Delhi High Court has dismissed the appeal of a diamond firm which accused a frequent visitor of sending post-dated invalid cheques for credit worth Rs 2.3 million for jewellery taken by her. She maintained that most of the jewellery was returned and the cheques were manipulated by the firm. In this case, SS Diamonds International vs Nameeta Sharma, the complaint filed by the firm under Section 138 of the Negotiable Instruments Act was dismissed by the magistrate. On appeal, the diamond merchants argued the trial was conducted in an arbitrary manner as the woman was not examined and the magistrate accepted photocopies as evidence. The High Court acquitted her, rejecting the allegation that only photocopies were pro­du­ced. On the allegation that the magistrate did not exam­ine the woman under Section 313 of the Criminal Procedure Code, the High Court explained that the provision was to protect the accused and allow her to explain her side. Moreover, under the Negotiable Instruments Act, the standard of proof is “preponderance of probabilities”. In this case, she offered a “probabilised defence” and thus the prosecution failed.

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