All Trademark Disputes Aren't Outside Arbitration; In Personam Issues Relating To License Agreement Arbitrable : Supreme Court

The Supreme Court recently held that a mere allegation of fraud or misconduct does not divest an arbitral tribunal of its jurisdiction to adjudicate in personam disputes stemming from contractual relationships governed by an arbitration agreement.“The law is well settled that allegations of fraud or criminal wrongdoing or of statutory violation would not detract from the jurisdiction of the arbitral tribunal to resolve a dispute arising out of a civil or contractual relationship on the basis of the jurisdiction conferred by the arbitration agreement.”, the court observed. The bench comprising Justices JB Pardiwala and R Mahadevan made these observations while dismissing a plea challenging the referral of a trademark dispute to arbitration, reaffirming that contractual disagreements involving intellectual property rights (IPRs) can be resolved through arbitration unless they involve sovereign or public (in rem) rights. The dispute arose between two factions of a Coimbatore-based family over the ownership and usage rights of the popular "Sri Angannan Biriyani Hotel" trademark. The petitioners had filed a civil suit in the Commercial Court, Coimbatore, seeking a permanent injunction against the Respondent/defendant from using the trademark, and ₹20 lakhs in damages for alleged infringement. However, the Respondent argued that the dispute stemmed from the Trademark Assignment Deed, which contained an arbitration clause. Thus, they filed an application under Section 8 of the Arbitration and Conciliation Act, 1996, seeking referral to arbitration. Aggrieved by the Commercial Court's and High Court's decision to refer the dispute to the arbitration, the Appellant/plaintiff moved to the Supreme Court. Affirming the impugned findings, the judgment authored by Justice Pardiwala held that the High Court rightly upheld the commercial court's decision to refer the dispute to arbitration. The judgment noted that subordinate rights in personam arising from rights in rem are arbitrable, as established in Booz Allen and Hamilton Inc. v. SBI Home Finance Ltd. & Ors., (2011) 5 SCC 532. Drawing reference from the case of Vidya Drolia v. Durga Trading Corporation, (2021) 2 SCC 1 the Court rejected the Appellant's blanket claim that all trademark disputes are non-arbitrable, holding instead that disputes such as assignment or passing off, when rooted in a contract and not affecting the public at large, are in the nature of rights in personam and therefore arbitrable. “Prima facie, the nature of disputes sought to be raised by the petitioners cannot be considered as actions in rem. The assumption that all matters relating to trademarks are outside the scope of arbitration is plainly erroneous. There may be disputes that may arise from subordinate rights such as licences granted by the proprietor of a registered trademark. Undisputedly, these disputes, although, involving the right to use trademarks, are arbitrable as they relate to rights and obligations inter se the parties to a licence agreement.”, the court observed.The Court further observed that under Section 11(6A) of the Arbitration Act, the referral court's role is confined to determining the existence of an arbitration agreement. Once such an agreement is found, it would be inappropriate for the referral court to encroach upon the arbitral tribunal's jurisdiction, which is empowered to decide on matters such as the validity of claims, full and final settlement, and issues of frivolity or dishonesty in litigation are areas that fall squarely within the tribunal's domain. (Refer SBI General Insurance Co. Ltd. v. Krish Spinning, 2024 LiveLaw (SC) 489).“Once there is an arbitration agreement between the parties, a judicial authority before whom an action is brought covering the subject-matter of the arbitration agreement is under a positive obligation to refer parties to arbitration by enforcing the terms of the contract. There is no element of discretion left in the court or judicial authority to obviate the legislative mandate of compelling parties to seek recourse to arbitration.”, the court said. Accordingly, the Court dismissed the petition, holding that the trademark disputes between the parties, having arisen under assignment deeds, were arbitrable. Case Title: K. MANGAYARKARASI & ANR. VERSUS N.J. SUNDARESAN & ANR.Citation : 2025 LiveLaw (SC) 597Click here to read/download the judgmentAppearance: For Petitioner(s) : Mr. V. Prakash, Sr. Adv. Mr. Aneesh Renganathan, Adv. Ms. Swadha Gupta, Adv. Mr. Karan Dang, Adv. Mr. Vishwam Mishra, Adv. Mr. Prabhat Kumar, AOR For Respondent(s) :

All Trademark Disputes Aren't Outside Arbitration; In Personam Issues Relating To License Agreement Arbitrable : Supreme Court

Yash Mittal

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