The Delhi High Court has held that a suit for trademark infringement and passing off brought by a licensor against its former licensee and affiliated entities is referable to arbitration under the licence agreement, as the dispute concerns subordinate rights in personam arising from the contractual relationship rather than rights in rem enforceable against the world at large. The Court allowed the Section 8 application, referring parties to arbitration under the SIAC Rules with Singapore as the seat, and disposed of the suit.
Background & Facts
The Dispute
The plaintiff, Utracon Corporation Pte Ltd, a Singapore-incorporated company engaged in construction and infrastructure services, claims to have adopted the trademark "UTRACON" in 1998 and holds registered trademark rights in India under Class 37 since 14.08.2012. It also claims copyright in the artistic features of the UTRACON logo and technical documents. Defendant no.1, formerly Utracon Structural Systems Private Limited (now Ucon PT Structural System Private Limited), was incorporated in Chennai in 2004 as a wholly owned subsidiary of the plaintiff. By virtue of a Licence Agreement dated 22.03.2012, defendant no.1 was granted the right to use the UTRACON Marks and other intellectual property rights pertaining to technical material, pictures, drawings, and designs. Defendant nos.2, 3, and 4 are directors of defendant no.1. Defendant nos.5, 6, and 7 are alleged to be affiliated or sister concerns incorporated using the UTRACON mark. Defendant no.8 is the domain name registrar for "www.utraconindia.com".
Key Facts
- The Licence Agreement was effective from 01.04.2011 for a term of 10 years, expiring on 31.03.2021 by efflux of time.
- On the same date (22.03.2012), the parties executed a Sale of Shares Agreement (SOS Agreement) under which defendant no.2 purchased 90% shares of defendant no.1 from the plaintiff.
- Recitals A to D of the Licence Agreement record that it was executed in furtherance of the SOS Agreement and in relation to all intellectual property rights of the plaintiff used or to be used by defendant no.1.
- Clauses 3.5 and 3.6 of the Licence Agreement oblige defendant no.1 and its affiliates, associates, successors, and subsidiaries to cease use of the marks after the term and not to claim any title to them.
- Clause 8.4 requires defendant no.1 to change its corporate name within 30 days of termination or expiry, notify clients, and publish a public notice.
- Clause 14 of the Licence Agreement provides for arbitration under SIAC Rules with venue at Singapore.
- Clause 18 of the SOS Agreement provides for arbitration at Chennai under the Arbitration and Conciliation Act, 1996.
- Vide letter dated 04.05.2022, defendant no.1 asserted the licence had been extended till 31.03.2022 and sought permission to use the name for a further five years; the plaintiff denies any extension.
- The plaintiff issued a legal notice dated 29.08.2022; defendant no.1 replied on 16.09.2022 and 12.10.2022; the plaintiff replied on 30.01.2023 and published a trademark caution notice on 02.02.2023.
- Defendant no.1 issued legal notices dated 11.02.2023 and 21.02.2023 alleging plaintiff's breach of non-compete under Clause 10.2 of the Licence Agreement.
- In June 2023, defendant no.1 changed its name to Ucon PT Structural System Private Limited.
- In April 2024, defendant no.1 initiated pre-institution mediation before the Tamil Nadu State Legal Services Authority; the plaintiff participated on 30.05.2024 and issued a cease-and-desist notice the same day.
- On 30.07.2024, defendant no.1 invoked arbitration under Clause 14.1 of the Licence Agreement; on 06.08.2024, it recalled this notice.
- The plaintiff instituted the present suit on 07.08.2024; the Court passed an ex parte ad interim injunction restraining defendants 1 to 7 from using the UTRACON Marks.
- Defendant no.1 filed a petition under Section 9 of the A&C Act before the Madras High Court; the plaintiff filed a counter affidavit on 10.09.2024; the petition was dismissed on 09.10.2024.
- Vide order dated 02.04.2025 in Review Applications, the Madras High Court clarified that observations in the dismissal order would not affect or influence arbitration.
- Defendant no.1 invoked arbitration under Clause 18 of the SOS Agreement by notice dated 27.09.2024 and filed a Section 11 petition before the Supreme Court.
- The Supreme Court, vide order dated 30.04.2026, appointed a sole arbitrator for disputes arising out of the SOS Agreement, clarifying that the scope shall be strictly confined to the SOS Agreement and the order shall have no impact on the present suit.
Procedural History
- 07.08.2024: Suit instituted; ex parte ad interim injunction granted
- 30.07.2024: Defendant no.1 invoked arbitration under Licence Agreement Clause 14.1
- 06.08.2024: Defendant no.1 recalled arbitration invocation notice
- 09.10.2024: Madras High Court dismissed Section 9 petition
- 27.09.2024: Defendant no.1 invoked arbitration under SOS Agreement Clause 18
- 30.04.2026: Supreme Court appointed sole arbitrator for SOS Agreement disputes
- 06.08.2026: Delhi High Court took Supreme Court order on record
- 12.10.2026: Judgment reserved
- 28.10.2026: Judgment pronounced
Relief Sought
The plaintiff sought permanent injunction restraining defendants from using UTRACON Marks, delivery up of infringing material, damages, rendition of accounts, transfer of domain name "www.utraconindia.com", withdrawal of trademark applications by defendants, and a declaration that UTRACON is a well-known trademark in India.
The Legal Issue
The central questions were: (1) Whether the subject matter of the suit - trademark infringement, passing off, and copyright claims against an ex-licensee and its affiliates - is covered by the arbitration agreement in the Licence Agreement; (2) Whether such intellectual property disputes are non-arbitrable as rights in rem; (3) Whether the impleadment of non-signatory defendants prevents reference to arbitration; and (4) Whether the Supreme Court's appointment of an arbitrator under the SOS Agreement precludes a separate reference under the Licence Agreement.
Arguments Presented
For the Defendant No.1 / Applicant
Defendant no.1 submitted that the Licence Agreement and SOS Agreement form one composite transaction: the transfer of shares, permitted use of marks, royalty payment, and reciprocal business restrictions. The dispute arises directly from the contractual arrangement - whether the licence was extended, whether post-term obligations survive, and whether either party breached the agreements. The plaintiff cannot avoid arbitration by framing claims as infringement or passing off. Reliance was placed on Vidya Drolia v. Durga Trading Corporation, In Re: Interplay between Arbitration Agreements, Hindustan Petroleum Corporation Ltd. v. Pinkcity Midway Petroleums, Magma Leasing & Finance Ltd. v. Potluri Madhavilata, Sundaram Finance Ltd. v. T. Thankam, and P. Anand Gajapathi Raju v. P.V.G. Raju for the peremptory mandate of Section 8 and the limited prima facie review. The plaintiff's selective reliance on the Licence Agreement for its cause of action while avoiding its arbitration clause is impermissible. The arbitration clause survives expiry of the contract (Magma Leasing). Non-signatory defendants are "persons claiming through or under" defendant no.1, as the plaintiff itself pleaded they function as a "single economic unit" and their rights derive from defendant no.1. The Supreme Court's order on the SOS Agreement does not determine arbitrability under the Licence Agreement.
For the Plaintiff / Respondent
The plaintiff contended that the suit is against all defendants collectively based on statutory and common law rights in the registered UTRACON Marks. The Licence Agreement merely provides background; the causes of action against non-signatory defendants (particularly defendant no.5, incorporated in 2023, two years post-expiry) are distinct and arise from a joint conspiracy. Infringement and passing off assert rights in rem and are non-arbitrable, as only District Courts and High Courts can adjudicate such suits under Section 134 of the Trade Marks Act, 1999. Reliance was placed on J. Nithyanandham v. M/s M.V.S. Gramany & Sons (Madras HC) and Tirupati Vancom Pvt. Ltd. v. James Glendye & Co. Pvt. Ltd. (Calcutta HC) against bifurcation. The two agreements are independent with mutually exclusive arbitration clauses (Singapore vs Chennai). The Licence Agreement expired in 2021; any claim is time-barred. The plaintiff cannot be forced to split its cause of action. The Supreme Court's order limited arbitration to the SOS Agreement and directed it shall not impact the present suit.
The Court's Analysis
The Court began by emphasising the peremptory mandate of Section 8(1) of the A&C Act (as amended in 2016): a judicial authority "shall" refer parties to arbitration unless it finds prima facie no valid arbitration agreement exists. Citing P. Anand Gajapathi Raju, Hindustan Petroleum, Magma Leasing, and the Constitution Bench in SBP & Co. v. Patel Engineering Ltd., the Court held the inquiry is limited to: (a) whether the application was filed by a party to the arbitration agreement before first statement on substance; (b) whether a valid arbitration agreement prima facie exists; and (c) whether the subject matter is covered and not ex facie non-arbitrable. The approach is "when in doubt, do refer" (Vidya Drolia; In Re: Interplay; K. Mangayarkarasi v. N.J. Sundaresan).
On coverage, the Court found the Licence Agreement was executed in furtherance of the SOS Agreement (Recitals A-D). Clause 14 of the Licence Agreement covers "any dispute between them regarding this Agreement." The dispute - whether an ex-licensee may continue using licensed marks post-term and whether it complied with post-term obligations under Clauses 3.5, 3.6, and 8.4 - is plainly a dispute regarding the Licence Agreement. The defendant's application pleaded both agreements; the plaintiff replied on both; no surprise was caused. The recall of the invocation notice does not waive the arbitration agreement. Selective reliance is impermissible: the plaintiff cannot found its case on the Licence Agreement and avoid its dispute resolution clause.
On survival of arbitration clause, the Court applied Magma Leasing: upon termination, the arbitration clause does not perish but survives for resolution of disputes arising out of the contract. The plaintiff's own claim is based on post-term obligations.
On limitation, the Court held questions of limitation turning on disputed facts (defendant's plea of extension till 31.03.2022, plaintiff's plea of continuing cause of action) are pre-eminently for the arbitral tribunal. The referral court declines reference only where the claim is manifestly and ex facie time-barred.
On the Supreme Court order, the Court held it was limited to the SOS Agreement and does not determine whether the suit is referable under the Licence Agreement. The Madras High Court's Section 9 dismissal concerned interim protection and was clarified as not influencing arbitration.
On Section 8 vs Section 45, the Court noted Clause 14.1 provides for SIAC arbitration at Singapore. If foreign-seated, reference would fall under Section 45 (Part II). Both provisions use "shall" and mandate reference subject to prima facie examination. The plaintiff failed to show the agreement is null, void, inoperative, or incapable of performance. The juridical seat and governing rules are for the arbitral tribunal to decide.
On rights in rem vs rights in personam, the Court applied the fourfold test from Vidya Drolia: non-arbitrability arises only when (1) cause of action relates to actions in rem not pertaining to subordinate rights in personam; (2) affects third party rights with erga omnes effect; (3) relates to inalienable sovereign functions; or (4) is expressly non-arbitrable by mandatory statute. Citing Booz Allen & Hamilton Inc. v. SBI Home Finance Ltd., the Court explained that subordinate rights in personam derived from rights in rem are arbitrable. Critically, Vidya Drolia held in terms that "a claim for infringement of copyright against a particular person is arbitrable."
The Court relied on K. Mangayarkarasi where the Supreme Court held: "The assumption that all matters relating to trademarks are outside the scope of arbitration is plainly erroneous... 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." This Court's decisions in Liberty Footwear Co. v. Liberty International, Hero Electric Vehicles (P) Ltd. v. Lectro E-Mobility (P) Ltd., Golden Tobie Pvt. Ltd. v. Golden Tobacco Ltd., and Sanjay Mehra v. Sharad Mehra consistently held that infringement/passing off between identified parties flowing from a contractual arrangement are actions in personam. Section 134 of the Trade Marks Act and Section 62 of the Copyright Act merely specify the court hierarchy; they do not create an exclusive forum or prohibit arbitration (Vidya Drolia para 68; A. Ayyasamy v. A. Paramasivam).
International authorities support this: Mustill and Boyd (approved in Booz Allen and Vidya Drolia) state subordinate rights in personam may be ruled upon by arbitrators; Desputeaux v. Éditions Chouette (1987) Inc. (Supreme Court of Canada) held copyright jurisdiction provisions do not exclude arbitration; 35 U.S.C. § 294(a) expressly permits patent arbitration; Singapore's Intellectual Property (Dispute Resolution) Act, 2019 declares IPR disputes capable of settlement by arbitration between parties.
The Court found the plaint does not seek grant, registration, rectification, or cancellation of any trademark. The reliefs (injunction, delivery up, damages, accounts, domain transfer) are directed against identified defendants. The claim is founded on the contractual arrangement. Prayer (e) (withdrawal of trademark applications) is a personal relief; prayer (k) (well-known declaration) is not foundational. The plaintiff remains free to seek well-known status before the Registrar under Rule 124 of the Trade Marks Rules, 2017.
On non-signatory defendants, the Court applied the 2016 amendment to Section 8(1) enabling "any person claiming through or under" a party to seek reference. Citing Ameet Lalchand Shah v. Rishabh Enterprises (interconnected agreements for single project), Cox and Kings Ltd. v. SAP India (P) Ltd. (Constitution Bench: non-signatory bound by conduct and composite transaction; referral court leaves it to tribunal), and K. Mangayarkarasi (non-signatory bound by assignment deeds), the Court held the plaintiff's own pleadings - that defendants 1-7 function as a "single economic unit," defendants 5-7 are affiliates/sister concerns of defendant no.1, defendants 2-4 are directors who incorporated defendants 5-7 in collusion - establish that defendants 2-7 are prima facie persons claiming through or under defendant no.1. Clauses 3.5 and 3.6 themselves cast obligations on affiliates, associates, successors, subsidiaries. Defendant no.8 is a pro forma party. The entire subject matter arises from the same alleged use and contractual arrangement. The plaintiff cannot defeat arbitration by impleading affiliates and claiming common reliefs. Whether non-signatories are ultimately bound is for the arbitral tribunal (Cox and Kings).
"The plaintiff cannot breach the arbitration agreement merely by the manner in which it frames the suit."
The Verdict
The Court allowed I.A. 41705/2024. The parties are referred to arbitration in accordance with Clause 14 of the Licence Agreement dated 22.03.2012 (SIAC Rules, Singapore seat). The observations are prima facie and confined to the application. The suit, along with all pending applications, stands disposed of. No costs were expressly awarded.
What This Means For Similar Cases
Trademark Licence Disputes Are Arbitrable
- A licensor cannot avoid an arbitration clause in a licence agreement by framing post-termination use of marks as trademark infringement, passing off, or copyright claims.
- The dispute is treated as subordinate rights in personam arising from the contractual relationship, not rights in rem enforceable against the world.
- Practitioners should advise clients that arbitration clauses in IP licences survive expiry/termination and cover post-term infringement claims.
Non-Signatory Affiliates Can Be Bound
- Where a plaintiff pleads that defendants function as a "single economic unit" and their rights derive from the signatory party, they are prima facie persons claiming through or under the signatory under Section 8(1) (post-2016 amendment).
- The referral court will not bifurcate the suit; the entire dispute goes to arbitration, with the tribunal deciding whether non-signatories are bound (Cox and Kings).
- Drafting tip: Include affiliates, associates, successors, and subsidiaries in the arbitration clause or ensure the licence agreement casts post-term obligations on them (as Clauses 3.5 and 3.6 did here).
Section 8 vs Section 45 Distinction Is Immaterial at Referral Stage
- Whether the arbitration is domestic (Section 8) or foreign-seated (Section 45), the mandate is identical: "shall refer" subject to prima facie validity.
- The court will not entertain arguments about circumventing Section 45 by invoking Section 8; the outcome is the same.
- The juridical seat, governing law, and procedural rules are for the arbitral tribunal to determine.
Supreme Court Section 11 Order Does Not Preclude Parallel Reference
- An order appointing an arbitrator under one agreement (SOS Agreement) does not determine arbitrability under a separate but related agreement (Licence Agreement).
- Each arbitration agreement stands on its own; the court examines the agreement covering the subject matter of the suit.
Limitation and Fact-Disputed Defences Are for the Tribunal
- Where the plaintiff pleads continuing cause of action and the defendant pleads extension of licence, limitation is not ex facie established.
- The referral court will not conduct a mini-trial on limitation; it is pre-eminently for the arbitral tribunal.
