Delhi High Court Vacates Interim Injunction Against Use Of 'Rathi' Mark By ‘Permitted Users', Imposes Rs 5 Lakh Cost On Plaintiff

The Delhi High Court has vacated the interim injunction against the use of the mark ‘RATHI’ by entities who were granted licenses by the Rathi Research Centre (RRC), in a trademark suit filed by businessman Dhananjay Rathi for permanent injunction against the infringement of the trademark.

Justice Amit Bansal said that the licensees were permitted users and thus, they cannot be said to be infringing the mark ‘RATHI’ by using the same in respect of their goods.

Noting that RRC was the registered proprietor of the mark RATHI, the court observed that Section 2(1)(r) of the Trade Mark Act, 1999 recognizes the ‘permitted use’ by consent of the registered proprietor of a trademark in a written agreement. Further, Section 29(1) of the Act recognizes that there is no infringement when the mark is used by a permitted user of a registered proprietor, the court said.

The bench further remarked that Rathi had obtained an ex parte injunction against the defendant-licensees (defendants 1-3), who were bona fide licensees of the trustees/members of RRC (defendants 13-18), by deliberately not impleading the latter, who could have confirmed the grant of licenses in favour of the licensees.

The court noted that, while granting an ex parte injunction, it had appointed a Local Commissioner who had visited the premises of the defendant-licensees and had seized and sealed their goods worth approximately Rs. 4 crores. The same were, thereafter, permitted to be de-sealed only after the licensees had given an undertaking not to manufacture goods under the mark without a valid license.

The bench held that the said conduct not only caused pecuniary loss and injury to the defendant-licensees, but would also have caused prejudice to their goodwill and reputation in the market. Thus, while vacating the interim-injunction, the court imposed a cost of Rs. 5 Lacs against Rathi in favour of the licensees.

The court was hearing an application filed by the defendant-licensees seeking vacation of the ex parte interim injunction granted against them in the suit filed by Rathi seeking permanent injunction restraining the licensees from using the mark RATHI. Rathi had further sought to restrain the trustees/members of RRC (defendants 13 -18), from issuing licenses to any third party/outsider.

Rathi contended that the members/trustees of RRC issued licenses to use the RATHI mark to third parties, such as the defendants 1-3, in contravention of the Memorandum of Understanding (MoU) executed by the different groups of the Rathi Family. He claimed that the MoU set out the terms and conditions for use of the RATHI mark only by the Rathi Family and their male blood descendants.

The defendant-trustees of RRC, on the other hand, contended that Rathi cannot seek to injunct the defendant-trustees (defendants 13-18), who are the registered proprietors, or the defendant-licensees (defendants 1- 3), who are the ‘permitted users’ of the mark RATHI in terms of Section 2(1)(r) of the Trade Mark Act.

The court noted that the mark RATHI was registered in the name of K.L Rathi Steels Limited and subsequently, in the name of G.D. Rathi Steels Limited, which were owned by different groups of the Rathi Family. Thereafter, in pursuance of the 1^st MoU executed by the different groups of said family, a Trust Deed was executed and the trust Rathi Foundation (RF) was formed, which consisted of 12 lifetime trustees, including the plaintiff, Dhananjay Rathi. Similarly, in pursuance of the 2^nd MoU, a Trust Deed was executed and the trust Rathi Research Centre (RRC) was formed.

The mark RATHI registered in the name of K.L. Rathi and G.D. Rathi was assigned to the respective trusts, i.e., RF and RRC.

“In terms of Section 12 of the Act, the Registrar may permit the registration of the identical or similar marks by more than one proprietor in case of honest concurrent use of the said marks in respect of similar goods. As per Section 28(3) of the Act, when two or more persons are the registered proprietors of the identical trade marks, both of them have the right to use the said trade marks. Further, Section 30(2)(e) of the Act clearly lays down that use of a registered trade mark by one of the registered proprietors shall not amount to infringement of the said trade mark,” the court observed.

The bench thus concluded that both RF as well as RRC, and before that K.L. Rathi and G.D. Rathi, being the registered proprietors of the mark RATHI, have the concurrent right to use the said mark and neither of them can prevent the other from using the said mark.

The court said that K.L. Rathi and G.D. Rathi, and after the execution of Assignment Deeds, their assignees- RF and RRC, had an equal right to use the said mark. “Both the entities had an independent right to use the mark RATHI without any obligation towards each other,” the court said.

The court further observed, “The signatories to MOU-1 and the Trust Deed-1 were not the parties to MOU-2 and the Trust Deed-2, and vice-versa. Therefore, the terms of the MOU-1 and the Trust Deed-1 would be binding only on the signatories thereto and not on the signatories to MOU-2 and Trust Deed-2, and vice-versa.” It thus held that a signatory to the 1^st MOU cannot have a grievance against a signatory to the 2^nd MOU for alleged violation of the terms of the latter.

While considering the plaintiff’s contention that the members of RRC had amended the terms of the 2nd Trust Deed in violation of the MOU, the court observed that under the amended Trust Deed, the rights to use the mark RATHI could be licensed to other entities not owned by the members of Rathi Family, subject to compliance of the necessary terms.

While holding that the 2nd Trust Deed was validly amended by the members/trustees of the RRC in terms of the MOU, the court said, “Even if it is assumed that the defendants no.13 to 18 have violated the terms of the MOU-2, the cause of action, if any, would be in favour of the signatories to the MoU-2 and not in favour of the plaintiff, who is a signatory to MoU-1.”

The court thus concluded that the plaintiff, Dhananjay Rathi, cannot in any manner, control the usage or licensing of the mark RATHI by RRC, as RRC has an independent right to use or license the mark RATHI in accordance with the provisions of the 2nd MOU and the 2nd Trust Deed under consideration.

The court further observed that since Rathi was aware that RRC was also the registered proprietor of the mark RATHI, it ought to have verified whether the mark had been licensed by RRC or its trustees to the defendant-licensees before filing the present suit. 

“Further, the present suit was filed against the defendants no. 1 to 3 without issuance of a cease and desist notice, which would have made clear that the defendants no.1 to 3 were licensees of the defendants no. 13 to 18. Clearly, the objective of the plaintiff was to obtain ex parte ad interim injunction in order to disrupt the business of the defendants no.1 to 3 and cause prejudice to the defendants no.13 to 18,” said the court.

The court further held that prima facie, no case of passing off was made against the defendant-licensees.

Thus, while holding that Rathi had failed to make out a prima facie case for grant of interim injunction, the court vacated the interim injunction passed in its favour and against the licensees.

Case Title: Dhananjay Rathi vs Shree Vasu Steels Private Limited & Ors

Citation: 2023 LiveLaw (Del) 413

Dated: 15.05.2023

Counsel for the Plaintiff: Mr. C.M. Lall, Senior Advocate with Mr. Rupin Bahl, Mr. Karan Bajaj, Ms. Ananya Chug and Ms. Pooja Bhardwaj, Advocates.

Counsel for the Defendants: Mr. Nitinjya Chaudhry and Mr. Gaurav Bahl, Advocates for D-1 to D-3 Mr. Sudhir Chandra and Mr. Jayant Mehta, Senior Advocates with Mr. Rohit Amit, Mr. Ashish Choudhury, Mr. Arpit Choudhury, Mr. P.D.V. Srikar, and Mr. Anand Kamal, Advocates

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