Supreme Court Upholds Arbitration in Trademark Dispute: K. Mangayarkarasi vs. N.J. Sundaresan (2025)

Introduction

Date of the Judgment: May 9, 2025

The Supreme Court of India recently addressed the question of whether a dispute involving trademark rights, arising from a contract (specifically, an assignment deed), can be resolved through arbitration. This issue arose in the case of K. Mangayarkarasi & Anr. vs. N.J. Sundaresan & Anr. The core issue was whether the existence of an arbitration clause in the assignment deed necessitates the referral of the dispute to arbitration, even when allegations of fraud are involved.

The judgment was delivered by a bench comprising Justice J.B. Pardiwala and Justice R. Mahadevan.

Case Background

The petitioners, K. Mangayarkarasi and another, filed a suit (C.O.S. No. 147 of 2023) in the Commercial Court seeking a permanent injunction against the first defendant (N.J. Sundaresan) from using the trademark “SRI ANGANNAN BIRIYANI HOTEL” or any similar name. They also sought damages of Rs. 20,00,000 for losses incurred due to the alleged trademark infringement.

The defendants responded by filing an application under Section 8 of the Arbitration and Conciliation Act, 1996, requesting that the matter be referred to arbitration based on an arbitration clause present in the assignment deeds of the trademarks.

Timeline

Course of Proceedings

The Commercial Court allowed the application under Section 8 of the Arbitration and Conciliation Act, 1996, filed by the respondents. The court noted the existence of arbitration clauses in the assignment deeds (Ex.P1 and Ex.P2) and held that the dispute primarily revolved around these contractual arrangements. The Commercial Court also addressed the issue of whether a non-signatory (the 3rd respondent) could be a party to the arbitration, concluding that since the 3rd respondent derived rights from the assignment deeds, she was also subject to the arbitration proceedings.

The High Court rejected the civil revision petition filed by the petitioners, affirming the Commercial Court’s order. The High Court emphasized the presence of a valid arbitration clause in the assignment deeds and noted that the suit was filed by suppressing this clause. It also addressed the petitioners’ contention that the assignment deed was procured fraudulently, stating that the allegations of fraud were not sufficient to avoid arbitration proceedings, especially since the signatures on the deed were admitted, and payments had been made to the petitioners by the 1st respondent.

Legal Framework

The primary legal framework for this case is Section 8 of the Arbitration and Conciliation Act, 1996. This section deals with the power of a judicial authority to refer parties to arbitration when there is an arbitration agreement.

Section 8 of the Arbitration and Conciliation Act, 1996 states:

“8. Power to refer parties to arbitration where there is an arbitration agreement. – (1) A judicial authority, before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party to the arbitration agreement or any person claiming through or under him, so applies not later than the date of submitting his first statement on the substance of the dispute, then, notwithstanding any judgment, decree or order of the Supreme Court or any Court, refer the parties to arbitration unless it finds that prima facie no valid arbitration agreement exists.”

This provision mandates that if a suit is brought before a judicial authority on a matter that is the subject of an arbitration agreement, the court must refer the parties to arbitration unless it finds that no valid arbitration agreement exists.

Arguments

Arguments by the Petitioners:

• Fraudulent Execution of Assignment Deed: The petitioners argued that the Assignment Deed was brought about fraudulently. The 1st Petitioner was allegedly misled into signing blank papers, which the 1st Respondent then filled up by including his name, thus fabricating an irrevocable deed.

• Dispute Involving Trademark Use Not Arbitrable: The petitioners contended that disputes involving the use of a trademark are not arbitrable, relying on a passing reference in Ayyasamy’s case.

Arguments by the Respondents:

• Existence of Valid Arbitration Agreement: The respondents emphasized the existence of a valid arbitration agreement in Clause 15 of the Deed of Assignment of Trade Marks, dated 20.09.2017 and 14.10.2019, which provides for dispute resolution through arbitration.

  “In the event of any dispute, difference or claim arising between the Parties under or in connection with this Agreement, parties agree to get such issues and disputes resolved first through CONCILIATION failing which by ARBITRATION and in the event of not finding a resolution through arbitration, the Court having jurisdiction in Coimbatore to the exclusion of all other Courts.”

• Fraud Allegations Not a Bar to Arbitration: The respondents argued that mere allegations of fraud are insufficient to avoid arbitration proceedings, especially when the fraud is alleged directly between the parties and does not have implications in the public domain.

Issues Framed by the Supreme Court

1. Whether the disputes are capable of adjudication and settlement by arbitration?

2. Whether the disputes are covered by the arbitration agreement?

3. Whether the parties have referred the disputes to arbitration?

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues:

Authorities

The court relied on several cases and legal provisions to support its decision. These authorities are categorized below by the legal point they address:

Arbitrability of Disputes

• Booz Allen and Hamilton Inc. v. SBI Home Finance Limited & Ors., (2011) 5 SCC 532 (Supreme Court of India): This case was cited to define the scope of arbitrability and to distinguish between rights in rem and rights in personam.

  Ratio: Disputes relating to rights in personam are generally considered arbitrable, while disputes relating to rights in rem are typically adjudicated by courts and public tribunals.

• Vidya Drolia v. Durga Trading Corporation, (2021) 2 SCC 1 (Supreme Court of India): This case was referenced to clarify that not all matters related to trademarks are outside the scope of arbitration. Disputes arising from subordinate rights, such as licenses, are arbitrable.

• A. Ayyasamy v. A. Paramasivam & Ors., (2016) 10 SCC 386 (Supreme Court of India): This case was used to discuss the categories of disputes that are generally treated as non-arbitrable, including those involving fraud.

Jurisdiction of Arbitral Tribunal

• Kvaerner Cementation India Ltd. v. Bajranglal Agarwal and Anr., (2012) 5 SCC 214 (Supreme Court of India): This case was cited to emphasize the power of the arbitral tribunal to rule on its own jurisdiction, including objections regarding the existence or validity of the arbitration agreement.

Effect of Fraud Allegations

• SBI General Insurance Co. Ltd. v. Krish Spinning, 2024 SCC OnLine SC 1754 (Supreme Court of India): This recent decision was referred to support the view that allegations of fraud or coercion in obtaining a full and final settlement do not necessarily bar arbitration.

• National Insurance Company Limited v. Boghara Polyfab Private Limited, (2009) 1 SCC 267 (Supreme Court of India): This case was used to support the proposition that a discharge voucher obtained by fraud or coercion is not valid and does not preclude arbitration.

Judgment

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

• Booz Allen and Hamilton Inc. v. SBI Home Finance Limited & Ors., (2011) 5 SCC 532: The Court used this case to define the scope of arbitrability and to distinguish between rights in rem and rights in personam, concluding that the dispute in question primarily involved rights in personam and was thus arbitrable.
• Vidya Drolia v. Durga Trading Corporation, (2021) 2 SCC 1: The Court referenced this case to clarify that not all matters related to trademarks are outside the scope of arbitration, and that disputes arising from subordinate rights, such as licenses, are arbitrable.
• A. Ayyasamy v. A. Paramasivam & Ors., (2016) 10 SCC 386: The Court used this case to discuss the categories of disputes that are generally treated as non-arbitrable, including those involving fraud, but distinguished the present case by noting that the fraud allegations were not significant enough to preclude arbitration.
• Kvaerner Cementation India Ltd. v. Bajranglal Agarwal and Anr., (2012) 5 SCC 214: The Court cited this case to emphasize the power of the arbitral tribunal to rule on its own jurisdiction, including objections regarding the existence or validity of the arbitration agreement.
• SBI General Insurance Co. Ltd. v. Krish Spinning, 2024 SCC OnLine SC 1754: The Court referred to this recent decision to support the view that allegations of fraud or coercion in obtaining a full and final settlement do not necessarily bar arbitration.
• National Insurance Company Limited v. Boghara Polyfab Private Limited, (2009) 1 SCC 267: The Court used this case to support the proposition that a discharge voucher obtained by fraud or coercion is not valid and does not preclude arbitration.

What weighed in the mind of the Court?

The Supreme Court’s decision to uphold the arbitration was influenced by several factors, including the existence of a valid arbitration agreement, the nature of the dispute as primarily contractual, and the assessment that the fraud allegations were not significant enough to preclude arbitration. The Court also emphasized the legislative mandate to encourage arbitration and limit judicial intervention.

Fact vs. Law Ratio

The Court’s decision was influenced by both factual and legal considerations. The factual aspects included the existence of the assignment deeds, the arbitration clause, and the allegations of fraud. The legal aspects involved the interpretation of Section 8 of the Arbitration and Conciliation Act, 1996, and the application of relevant case law.

Logical Reasoning

Key Takeaways

• Arbitration Agreements Enforced: Courts are likely to enforce arbitration agreements in commercial contracts, including those involving trademark rights.

• Limited Judicial Intervention: Courts should limit their intervention in matters covered by arbitration agreements, focusing primarily on the existence and validity of the agreement.

• Fraud Allegations: Mere allegations of fraud may not be sufficient to avoid arbitration, especially if the fraud is alleged directly between the parties and does not have broader public implications.

Development of Law

The ratio decidendi of this case is that disputes arising from contractual agreements involving trademark rights are arbitrable, provided there is a valid arbitration agreement and the allegations of fraud are not significant enough to preclude arbitration. This decision reinforces the pro-arbitration stance of Indian courts and clarifies the scope of arbitrability in intellectual property matters.

Conclusion

In conclusion, the Supreme Court dismissed the special leave petition, upholding the High Court’s decision to refer the parties to arbitration. The Court reaffirmed the importance of adhering to arbitration agreements and limiting judicial intervention in matters that parties have contractually agreed to resolve through arbitration.