Supreme Court Reinforces Arbitration Mandate in Trademark Dispute

In a significant ruling, the Supreme Court of India, in the case of K. Mangayarkarasi & Anr. v. N.J. Sundaresan & Anr. (Special Leave Petition (Civil) No. 13012 of 2025), has clearly upheld the primacy of arbitration agreements, even in disputes that involve allegations of fraud and trademark rights. The judgment, delivered by Justice J.B. Pardiwala and Justice R. Mahadevan dismissed a Petition challenging the Madras High Court’s decision to refer a trademark dispute to arbitration, reinforcing the legislative mandate of the Arbitration and Conciliation Act, 1996.

Background of the Dispute

The case originated before the Commercial Court in Coimbatore in a suit filed by K. Mangayarkarasi. The Plaintiff sought the following reliefs:

• Permanent injunction restraining the Defendant from using the trademark “Sri Angannan Biriyani Hotel” or “ABM Sri Angannan Hotel” or any other name signifying “Angannan” for offering, selling, or opening any shop.
• Permanent injunction restraining the Defendant from using or associating with the said marks on any social media or other media platforms until further court orders.
• Damages of Rs. 20,00,000/- for the loss incurred due to the use of the trademark.
• Costs of the suit and any other appropriate orders.

The Defendants filed an application under Section 8 of the Arbitration and Conciliation (Amendment) Act, 2019 arguing that the dispute arose from the “Deed of Assignment of Trade Marks,” which included an arbitration clause.

Arguments by the Petitioners

The Petitioners primarily argued against the referral to arbitration on the following grounds:

• The Petitioners claimed that the assignment deeds, which contained the arbitration clauses, were fabricated.
• The Petitioners alleged that the first Plaintiff’s signature was obtained on blank stamp papers, which were later fraudulently filled to create the assignment deeds.
• The Petitioners contended that the dispute pertained to the scope of trademark registration, which would operate in rem and thus fall outside the jurisdiction of an arbitrator.
• The Petitioners also argued that the presence of fraud allegations should prevent the matter from being referred to arbitration.
• Furthermore, the Petitioners asserted that the third Respondent was not a signatory to the assignment deeds and therefore could not be subjected to arbitration.

Arguments by the Respondents

The Respondents countered the Petitioners’ claims by asserting:

• The existence of valid arbitration clauses within the Deed of Assignment of Trade Marks.
• The Respondent contended that the dispute, despite involving a trademark, primarily emanated from the contractual arrangements (assignment deeds), making it arbitrable.
• The Respondents argued that the right being asserted was not one directly from the Trademark Act, but rather from the assignment deeds, which are contracts.
• In response to the fraud allegations, the Respondents contended that mere pleas of fraud are insufficient to avoid arbitration, especially when the fraud is ‘inter partes’ and has no public domain implication. It was pointed out that the first Petitioner admitted her signatures and had received payments, indicating the validity of the assignment.
• The Respondents argued that even non-signatories could be subjected to arbitration if they claimed “through or under” a party to the arbitration agreement, as the third respondent derived rights from the first respondent through gift deeds.

The Commercial Court and High Court Rulings

The Commercial Court, on February 6, 2024, allowed the Section 8 application, holding that the disputes, though concerning a trademark, primarily emanated from the contractual assignment deeds and thus fell within the arbitrator’s jurisdiction. The court also addressed the argument regarding non-signatories to the arbitration agreement, stating that a party claiming “through or under” a signatory could also be subjected to arbitration.

Aggrieved by the decision of Commercial Court, the Plaintiffs approached the Madras High Court. The High Court, in its impugned judgment dated January 9, 2025, affirmed the Commercial Court’s decision. It noted that the suit was filed by suppressing the Arbitration Clause and that the existence of the agreement was not disputed, even if its execution was. Crucially, the High Court emphasized that mere allegations of fraud, unless they have implications in the public domain, are insufficient to oust the jurisdiction of an arbitration tribunal.

Supreme Court’s Affirmation of Arbitration

The Supreme Court, in its detailed order, meticulously examined the existing jurisprudence on the arbitrability of disputes, particularly those involving allegations of fraud and intellectual property rights.

Key Principles Reiterated:

1. Section 16 of the Arbitration Act: The Court reaffirmed the principle established in Kvaerner Cementation India Ltd. v. Bajranglal Agarwal (2012) 5 SCC 214, stating that an Arbitral Tribunal has the authority to determine its own jurisdiction, including addressing objections regarding the existence or validity of the arbitration agreement. Civil courts should not engage with these issues at the initial stage.

 

2. Non-Arbitrable Disputes: In reference to A. Ayyasamy v. A. Paramasivam & Ors. (2016) 10 SCC 386 and *Booz Allen and Hamilton Inc. v. SBI Home Finance Limited & Ors.* (2011) 5 SCC 532, the Court recognized specific categories of disputes that are non-arbitrable (such as criminal offenses, matrimonial disputes, insolvency, and guardianship). However, it clarified that disputes related to ‘rights in personam’ are generally arbitrable, while ‘rights in rem’ are typically resolved by public forums. The Court emphasized that this is not a rigid rule, and “subordinate rights in personam arising from rights in rem” can indeed be arbitrable.
3. Arbitrability of Intellectual Property Rights (IPR) Disputes: Citing Vidya Drolia v. Durga Trading Corporation (2021) 2 SCC 1, the Supreme Court explained that while the grant and registration of trademarks are sovereign functions with ‘erga omnes’ (applicable to everyone) effect, and disputes arising from ‘subordinate rights’ such as licenses or assignments of trademarks are arbitrable. The Court stressed that the belief that all trademark matters fall outside the realm of arbitration is incorrect.
4. Allegations of Fraud:The Supreme Court decisively addressed the fraud argument, drawing upon a plethora of landmark decisions. The Court held that “mere allegations of fraud are insufficient to prevent arbitration, especially when the fraud is ‘inter partes’ and does not have a public domain implication.” The Court noted that the Petitioners’ claim of fraudulent execution of the assignment deeds, despite the signatures being undisputed, did not constitute serious fraud that would prevent arbitration.
5. Ouster of Civil Court Jurisdiction:The judgment underscored a crucial shift in the approach of civil courts when a Section 8 application is filed. Instead of examining whether the court retains jurisdiction, the civil court must ascertain whether its jurisdiction has been ousted by the special statute which is the Arbitration Act. The principle of ‘generalia specialibus non derogant’  i.e. general law yields to special law was invoked, emphasizing that such an approach prevents delays and unnecessary litigation.

1. Full and Final Settlement: The Court also referenced its recent decision in SBI General Insurance Co. Ltd. v. Krish Spinning 2024 SCC Online SC 1754, where it was held that a discharge voucher or full and final settlement does not bar arbitration if its validity is challenged on grounds of fraud, coercion, or undue influence. Such a challenge itself becomes an arbitrable issue.

Conclusion

The Supreme Court’s decision in K. Mangayarkarasi & Anr. v. N.J. Sundaresan & Anr. serves as a strong reaffirmation of India’s pro-arbitration stance. It clarifies that contractual disputes, even those involving intellectual property rights and allegations of fraud, are generally arbitrable, provided the fraud is not of a public nature. The judgment reinforces the legislative intent behind Section 8 of the Arbitration and Conciliation Act, 1996, compelling judicial authorities to refer parties to arbitration when a valid arbitration agreement exists, for efficient dispute resolution and reducing court pendency.

 

Saharsh Singh,

Intern,

IV Year, National Law Institute University, Bhopal

 

 

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