Delhi High Court: The present petition was filed under Section 9 of the Arbitration and Conciliation Act, 1996 seeking an order of interim injunction restraining the respondent from using the Petitioner's “LIBERTY” marks, removing any sign boards/indication/display of any of the “LIBERTY” trademarks from its premises, stationary, invoices, documents, publications, packaging material, websites and withdrawing any advertising/broadcasting/webcasting or third-party publication including any advertising or promotional materials bearing the “LIBERTY” marks. Jyoti Singh, J., dismissed the petition as not maintainable without giving any opinion on the merits of the case and/or the disputes between the parties as the petition filed before the District Court, Karnal under Section 9, being first and prior in point in time, will bar the present Court from entertaining the present petition.
Background
The petitioner was established in 1954 as a registered partnership firm and has been engaged in the business of marketing and manufacturing of footwear and fashion products. It was the first user and proprietor of well-known trademark ‘LIBERTY'. In 2001, Petitioner and Respondent entered into a Registered User Agreement in respect of trademark ‘LIBERTY' granting an exclusive license to use the trademarks globally, on or in connection with goods manufactured or sold by the Respondent, in accordance with Petitioner's minimum quality standards and manufacturing specifications. . The respondent company defaulted on several obligations under the License Agreement relating to delayed license fee payment. From 2019 onwards, Petitioner issued repeated notices and reminders pointing out persistent material breaches. A demand notice was issued to the Respondent under Section 8 of the Insolvency and Bankruptcy Code, 2016 (‘IBC') in respect of license fee due and a petition was filed under IBC before NCLT, Chandigarh on 20-02-2020 for a sum of Rs.9,51,15,334/- in respect of shortfall in license fee paid by the Respondent for the period 2019-20 and the same stands pending.
On 27-09-2022, one of the partners of the petitioner firm issued notice to the respondent to terminate the License Agreement, however the respondent invoked the arbitration agreement. The petitioner replied to the arbitration notice stating that no arbitrable claims had been raised by the respondent and the latter was in breach of the obligations qua payment of license fee. The respondent expressed its intent to continue with the License Agreement contending that its continuance was in compliance of all contractual obligations. Finally, on account of the alleged continuous material breaches of the terms of the License Agreement by the Respondent, the petitioner issued a notice under Clause 9 of the License Agreement, terminating the said Agreement and calling upon the Respondent to forthwith cease use of Petitioner's LIBERTY trademarks. The present petition was thereby filed as the Respondent continues to use ‘LIBERTY' marks, which according to the Petitioner, violates its statutory and common law rights,
Contentions
Counsel for the respondent submitted that the respondent approached the District Court, Karnal, where registered offices of both the parties are situated, under Section 9 of the 1996 Act, seeking interim injunction against the petitioner from taking any unlawful action, including termination of the License Agreement. The District Judge, in the presence of the counsel for the petitioner herein, vide order dated 16-03-2023 directed the parties to maintain status quo with respect to the License Agreement. Despite knowledge of the said interim order, the petitioner chose to file the present petition, though the Court has no jurisdiction to entertain the same.
Analysis, Law, and Decision
The foremost question that was considered by the Court was whether its Court has the jurisdiction to entertain the petition. The Court observed that the registered offices of the parties were at Karnal; both License Agreements were executed and signed at Karnal; and notice of termination was received at Karnal. The mere fact that some office or residence of one of the partners of the Petitioner firm were at Delhi and/or the notice was dispatched from Delhi, does not confer territorial jurisdiction on this Court. The Court stated that since the petition was not an infringement suit and concerns the License Agreement and its termination, the Court where termination has taken effect will have the jurisdiction to rule on the legality or otherwise of termination and its consequences, as clearly held by this Court in Hero Electric Vehicles Private Limited and Another v. Lectro E-Mobility Private Limited and Another, 2021 SCC OnLine Del 1058.
The Court remarked that the District Court, Karnal where the first petition has been filed pertaining to the Agreement in question and that Court alone shall have jurisdiction over the arbitral proceedings and all subsequent applications arising out of the Licence Agreement. No other Court can entertain any subsequent application, present petition was not maintainable and deserves to be dismissed on this ground alone.
The Court opined to have jurisdiction predicated on ‘part cause of action', the first application filed before District Court, Karnal, will anchor arbitration and the petition cannot be entertained. Thus, the petition was dismissed giving liberty to the petitioner to take recourse to appropriate remedies available in law.
The Court made it clear while dismissing the petition that the petition was not maintainable without giving any opinion on the merits of the case and/or the disputes between the parties.
[Liberty Footwear Company v. Liberty Shoes Limited, 2023 SCC OnLine Del 5125, decided on 21-08-2023]
Advocates who appeared in this case :
For the Appellant: Mr. Rajshekhar Rao, Senior Advocate with Mr. Vipul Kumar, Mr. Areeb Amanullah and Ms. Meherunissa A.J., Advocates.
For the Respondents: Mr. Arun Kumar Varma, Senior Advocate with Mr. Ravinder Singhania, Mr. Vikas Goel, Mr. Abhishek Kumar, Mr. Harmandir Singh Sandhu and Ms. Garima Kaul, Advocates.
Buy Arbitration and Conciliation Act, 1996 HERE
