The present case involves a dispute over the ownership and use of the trademark “Sri Angannan Biriyani Hotel.” The petitioners, K. Mangayarkarasi and K.M. Shreedevi, filed a civil revision petition challenging an order passed by the Commercial Court (District Judge Cadre), Coimbatore, which referred the dispute to arbitration. The petitioners argued that the dispute involved serious allegations of fraud, rendering it non-arbitrable, and that trademark infringement is a matter of public interest, which should be adjudicated by a civil court.
The plaintiffs originally filed a suit in C.O.S. No. 147 of 2023 before the Commercial Court, seeking a permanent injunction restraining the defendants from using the trademarks “Sri Angannan Biriyani Hotel” or “ABH Sri Angannan Hotel” or any other similar name. They also sought damages of INR 20,00,000, alleging that the unauthorised use of the trademark caused financial losses. The first defendant, N.J. Sundaresan, responded by filing an application under I.A. No. 9 of 2024, invoking an arbitration clause and requesting that the case be referred to arbitration. The Commercial Court allowed the application, prompting the plaintiffs to file the present revision petition before the Madras High Court.
The petitioners argued that the arbitration clause relied upon by the defendant was based on a fraudulent assignment deed. According to the plaintiffs, the first defendant had misrepresented facts and fabricated documents to claim ownership of the trademark. They contended that the first petitioner had never agreed to assign the trademark to the first respondent, and the alleged assignment deed dated September 20, 2017, was fraudulent. Since fraud vitiates an agreement, the petitioners argued that the arbitration clause in the deed was also invalid.
Additionally, the petitioners asserted that trademark disputes are inherently non-arbitrable because they involve “rights in rem,” which affect third parties and the public at large. They cited judgments such as Booz Allen & Hamilton Inc. vs. SBI Home Finance Ltd. (2011) and Vidya Drolia vs. Durga Trading Corporation (2020), in which the Supreme Court of India held that disputes concerning intellectual property rights, particularly those relating to infringement and validity, require centralised adjudication and cannot be subject to arbitration.
The plaintiffs also pointed out that they had filed a criminal complaint against the first defendant, alleging cheating and forgery concerning the assignment deed. They contended that a dispute involving criminal fraud could not be resolved through arbitration, as per the Supreme Court’s ruling in Avitel Post Studioz Ltd. vs HSBC PI Holdings (Mauritius) Ltd. (2020), where it was held that if the allegations of fraud permeate the entire contract, rendering it void, then arbitration is not a suitable forum for dispute resolution.
On the other hand, the defendants, led by N.J. Sundaresan, argued that the assignment deed was legally executed and properly attested. They contended that the first petitioner had willingly transferred the trademark rights to the first respondent in consideration of INR 20,000 and that the deed was executed in the presence of witnesses and a notary public. The defendants further argued that the first petitioner and her family members had received multiple payments from the first respondent, supporting the validity of the assignment.
The defendants also asserted that the dispute was purely contractual in nature and did not involve broader public interest concerns. They maintained that the arbitration clause in the assignment deed was valid and binding and that the plaintiffs’ claims of fraud were merely an afterthought to avoid arbitration. The respondents cited Supreme Court precedents, including Hindustan Petroleum Corporation Ltd. vs Pink City Midway Petroleum (2003), where it was held that courts have a mandatory duty to refer disputes to arbitration if a valid arbitration agreement exists.
After examining the arguments and evidence, the Madras High Court upheld the Commercial Court’s decision to refer the matter to arbitration. The court found that the assignment deed had been signed by the first petitioner and that her signature was not in dispute. The court reasoned that if the petitioners had received financial benefits under the deed, their claim that the document was forged was weak. The court also noted that the second petitioner, K.M. Shreedevi, was a co-assignee of the trademark along with the first defendant, making it unlikely that the first petitioner had been misled into signing the document.
Regarding the issue of fraud, the court reiterated the Supreme Court’s ruling in Rashid Raza vs Sadaf Akhtar (2019), which established a test to determine whether fraud claims render a dispute non-arbitrable. According to the test, fraud allegations must either (1) permeate the entire contract, making it void, or (2) affect third-party rights or the public domain. The court concluded that the petitioners’ allegations did not meet either criterion, as the dispute was limited to the parties involved and did not raise issues of public concern.
As for the petitioners’ contention that trademark disputes are non-arbitrable, the court held that this principle applies primarily to cases where the validity of a trademark is in question, not where the dispute concerns contractual rights over an assigned trademark. Since the dispute arose from a private contract rather than a statutory claim under the Trade Marks Act, 1999, it was subject to arbitration. The court distinguished this case from Indian Performing Rights Society Ltd. vs Entertainment Network (India) Ltd. (2016), where the Bombay High Court ruled that copyright disputes involving the public domain could not be arbitrated. In the present case, the arbitration was limited to determining contractual rights between the parties.
The High Court also found that the arbitration clause in the assignment deed was sufficiently broad to cover all disputes arising from the agreement, including issues of enforceability and fraud. It concluded that the Commercial Court had correctly applied Section 8 of the Arbitration and Conciliation Act, 1996, which mandates that courts refer disputes to arbitration when a valid arbitration agreement exists.
In its final ruling, the court dismissed the civil revision petition, affirming that the dispute should be resolved through arbitration. The court emphasised that the arbitration tribunal would have the authority to determine whether the assignment deed was valid, whether fraud had been committed, and whether the first respondent had the right to use the trademark.
By upholding the arbitration agreement, the court reaffirmed that commercial contracts should be enforced according to the terms agreed upon by the parties. This decision provides clarity on the arbitrability of trademark disputes and serves as an important precedent for businesses seeking to resolve similar conflicts through arbitration.